Saturday, November 22, 2014


Can't spell "Smother" without "Mother".

The report is out about the Sandy Hook Elementary shooter, Adam Lanza, and all fingers are pointing to his Mom.   Many were quick to blame the ready access in our society to high-power firearms - and there are some arguments to be made there, for sure.   But in this instance, it was Mr. Lanza's Mother, knowing he had deep emotional problems, who introduced him to the world of firearms, took him to the shooting range, and kept multiple firearms in the house - knowing there was a mentally disturbed person living there.

Sadly, the pattern I see with Mrs. Lanza is one I have seen many times before - Mothers who want to control every aspect of their children's lives - and also to indulge their children rather than seek help.  The warning signs were there.  She knew there was something wrong with her child.   She even took him to Yale's renown child psychology department - and then proceeded to ignore every recommendation they made.

Why was this?  Because if she followed their advice, she would have given up control over her son.   And we can't have that, now, can we?   After all, every Mom needs a hobby, and you son's mental illness is a hobby many women indulge themselves in.

So no medication ("Adam doesn't like that!") and no socialization or treatment ("he'd rather spend time at home!") and towards the end, he was living in his room with plastic over the windows, for months on end, eating sporadically and spending all day on the Internet - in mass-murder discussion groups.

And still she saw nothing wrong - no reason to get firearms out of the house.  No need for further treatment.   Just, "Adam - want to go to the shooting range with me?"

It becomes clear why her husband left this marriage.  No doubt arguments ensued about the raising of their son - and his treatment.   And Dad saw the train going off the track.

Of course, Mrs. Lanza was the first victim of Adam's rage - shot with her own gun (as so many are).  And actually, that is a very reliable statistic - if you keep a firearm in the house for "protection" you are 22 times more likely to shoot yourself or someone you love (or be shot by them) than to stop an "intruder".

And when you throw mental health issues into the mix, well the odds go even higher.

There are a lot of Nancy Lanzas out there.  I've met quite a few during my life.  And their kids came out OK not because of their parent's guidance, but in spite of it.   As I noted in The Parent Trap, there are parents galore out there who love to lord over the ruined lives of their children, while simultaneously nailing themselves to the cross - and boring all their friends about the "troubles" they have with their kids.

Rather than try to "launch" their children, they want to keep them close by, controlled, and having a life of limited scope.   It is not only sad and pathetic, it is dangerous as well.   If you are a parent, try to launch your child - and then ask yourself hard questions about your own enabling behavior.  Are you keeping the kid in your basement, just so you can bitch about it to your friends?   It is a hard thing to confront.

And if you are a "kid" of 18 (which we used to call "adults") get out of the house!   Living in your parent's basement is not something that is desirable.  It is not living a full live.  It is damaging to your mental health.  It is a dead-end.

And it goes without saying, if you have a child with mental health issues - or have them yourself, don't be afraid to seek professional help.   There is nothing shameful about mental illness - except when you make it shameful by denying it exists or by failing to seek help.

One wonders how many other Adam Lanzas are living in their childhood bedrooms, with black plastic taped over the windows, spending all hours of the night on paranoid conspiracy theory websites, slowly starving themselves to death and making plans for massacres.   There has to be more than one.

Friday, November 21, 2014

Chasing Technolgy (Programmable Thermostats)

You probably own a programmable thermostat.  Do you program it?

Quick Question:  How many of you have a programmable thermostat in your home?  1..2..3... - about 80% of you.  They are pretty standard on most home heating systems these days.

Second Question:  How many of you have actually programmed it?   A lot less, I see.  Maybe 10%.

This technology was popularized during the first energy crises in the 1970's.  The idea was, during the day, you could program the thermostat to a lower temperature, to save on heating costs, and then have it heat up during the evening hours - perhaps dropping off a bit a night.

But a lot of people - myself included - found that programming the thing was a pain in the ass, and often it would lose its programming during power failures, or if an internal battery went dead.   When we lost the program we stopped programming it.  It was just too much a pain in the ass, and it didn't seem to accomplish much, anyway.

Do they save energy?   Well, if you cold-soak your house during the day, you have to re-heat it at night.   Arguably, the savings in energy are pretty slim - for a well-insulated home that retains heat anyway.   Also, during the day, the house picks up solar heat, and if it is a well-insulated house in a temperate climate, may heat itself anyway.   Programming the furnace to shut down may be redundant, as it may not come on during the middle of the day when the weather is warm and the sun is shining.

Want to save energy?  Turn it down to 65 or less and wear warmer clothes.  Explore insulating your house and/or replacing your windows (on tap for 2015!).  Simple things like that will save more energy than complicated pieces of technology will.

Today, we are being offered Internet thermostats, such as that offered by Nest.  We are told that in the near future, we will be able to control all of our home appliances via the internet, or even by voice commands.   While part of me admires the Buck-Rodgers Sci-Fi aspects of this, another part wonders if this isn't just more unnecessary chasing of technology - for technology's sake.

For example, I have one of those $1200 three-door refrigerators with all the bells and whistles.  It has digital displays and will beep if you leave the door open.   And that is a good thing, because these fancy three-door latch mechanisms tend not to latch, and if they don't, all your food gets warm.   Progress, it seems.   Meanwhile, the basic two-door no frills refrigerator costs about $250 at the big-box store, and you can add an icemaker to it for not a lot of money.   No digital displays, no gee-whiz-bang features (and fancy crispers whose doors break - or at least my neighbor's did).  No nothing.  Just a reliable, inexpensive refrigerator.    You could buy two of them and put them side-by side, for about half the cost of the gee-whiz-bang model.

We spend a lot of time chasing technology for technology's sake, it seems.   We want gadgets and gimcracks that all are supposed to make our lives easier, but often end up consuming more time - and certainly more money.   Dishwashers, for example, I think are basically worthless appliances.  It takes only seconds to wash off dishes and put them in the rack.   It seems a major chore to empty the dishwasher.  Fancy dishwashers with membrane switches just break down expensively.

Clothes washers are another area where complexity seems to offer no real advantage other than to empty your wallet.  The basic GE top-loader hasn't changed its design in 40 years, and can be had for cheap and then thrown away when it breaks.  These $1000 side-loader jobs are a nightmare to repair (and you spent so much that you feel you need to repair them).   And let's not talk about the mold issues. And tell me, do you really use all those esoteric cycles they offer?  Delicate?   Or do you just toss in your clothes and soap and let 'er rip?   Are you getting four times as much washer for $1000 than you are for $250?

Unnecessary complication just makes our lives more costly and more difficult.   When I bought a house with a hydronic heating system, I was at first impressed with the gee-whiz-bang aspect of the technology.  It had so many shiny copper pipes that people thought I had an organ in the basement!  But when parts - expensive parts - started to fail, and I realized that the limited number of suppliers, dealers, and mechanics meant repairs would be far more expensive than conventional systems, I realized I was merely chasing technology for technology's sake, without getting any real reward in terms of efficiency, comfort, or convenience.

Or take condensing furnaces.   They were all the rage, as they were 99% efficient.   But they have a whole secondary system to condense furnace gases, which makes them more costly to buy, and also more complex and costly to repair when they break.   When it came time to replace furnaces, at our home or a rental property, we chose to go with conventional equipment that was "only" 89% efficient.  The payback, in terms of energy savings, just wasn't there.   The reduced hassle was, however.

We like to complicate our lives, thinking we are simplifying them.  We think machinery will make our lives easier, but instead it just makes it more complex and puts us into debt.  But simple, basic machinery costs a lot less to own and lasts a lot longer in the real world.   When I was a kid, you'd see a lot of basic stripped Chevies tooling down the road after 10 or 15 years.  Their fancier brethren with electric windows and more chrome trim, on the other hand, seemed to go to the junkyard sooner.   And you see this today with expensive cars.  No one wants to buy an old 7-series BMW as they are a nightmare to repair.   But old Chevy Colbalts can be seen cruising around still. 

This is why I sold the BMW X5 and bought a Nissan.   No, it doesn't have heated leather power seats.  But let me ask you this - have you ever had to repair a heated leather power seat on a BMW?   I have, and it isn't too bad, but it is just one more damn thing - and you might not be able to repair such things yourself, as I could.

Computers, cell phones, cordless phones, televisions, DVD and DVR players, laptops, pads, cameras, and all sorts of junk clutters our lives.  And much of it is obsolete within a few years.   VHS players, tube televisions - even CD players - are all deemed junk today.  We own so much technology these days - and much of it is just a pain in the ass.  I am not sure I need to add an internet thermostat to the list just yet.

Our lives become more technologically complex by default.   You can buy the simplest car made today, and it is a nightmare of wiring and control systems compared to the cars of the 1960's or even 1970's.  You can't escape the increasing amount of technology in our lives and the increasing complexity of it.

However, you do have choices as to how much of this technology to consume.  Buying complex or "top of the range" appliances, cars, and machinery, just for the sake of having the best or for status may be short-sighted.   Your life is complicated enough as it is - why complicate it more?

And here's a dirty little secret of the appliance business (and computer business):   A lot of these esoteric features often simply don't work.   Manufacturers put them on in order to "me too!" the competition.   But often, they are underdeveloped features, as the manufacturer knows they will be little used by the end customer.

So no, I don't need or want to access my refrigerator via the Internet.  I don't want my refrigerator to make shopping lists for me and text them to my smart phone.   It really is just easier to jot down some things on a piece of scrap paper.

Bankrupt Millionare Athletes

Did this guy's parents make bad decisions, or is he using them as scapegoats?

Jack Johnson, a hockey player, is declaring bankruptcy to get out from under debts acquired by his parents.  According to his side of events, he turned over his income to his parents to invest, and they made a number of poor financial decisions.

One has to wonder why.

In nine years in Hockey, he has been paid $18 Million.   Hard to feel sorry for him.   Supposedly the mistakes his parents made were legion.   First, they monetized his contract by taking out high-interest loans.  In other words, they borrowed against his future earnings.   I am guessing the thinking was, "Gee, if we had all that money now, we could invest it and make a ton of dough and then pay it back later!"

Tina Johnson borrowed at least $15 million in her son’s name against his future earnings, sources told The Dispatch, taking out a series of high-interest loans — perhaps as many as 18 — from nonconventional lenders that resulted in a series of defaults.

Maurice Taylor, a star basketball player at Michigan from 1994 to ’97 who was later disassociated by the school after a string of NCAA violations, steered Johnson and his family toward Simon Vo, who was to serve as Johnson’s business manager after Johnson fired Brisson, the agent.
Johnson had been paid relatively modest salaries early in his career, earning a high of $1.6 million in his fourth season in the league.

In the months leading up to his $30.5 million deal with the Kings, however, Vo and Steve Miller, who owned a mortgage company in Los Angeles, began discussing with Johnson’s parents the idea of “monetizing” Johnson’s contract, sources said.

“Monetizing” — that is, borrowing against guaranteed future salaries — has led to the financial woes of many professional athletes.

One prominent NHL agent, asked whether he would ever advise his clients to monetize a contract, responded: “Never, never, never.”

The parents are portrayed as the bad guys in this deal, as their names are on the loans.  But presumably Mr. Johnson's Ferrari is in his name.   It may be the parents are used as scapegoats - but it sounds like his business manager had a hand in things as well - as well as the mortgage broker.

It is odd - that someone could make more money than most people could spend in a lifetime - and be dead broke before age 30.   At this point in his career, he has to really hope he doesn't have a debilitating knee injury that keeps him out of the game for the rest of his life.

I mean, what was he thinking?  There are no old hockey players out there.   You get paid a lot, in part, because the game is intense and you can only play it for a few short years.

Sadly, poor people get caught in the same trap.   There are ads in the back of military magazines offering to "monetize" pensions the same way.   You pledge your monthly pension amount, for say, ten years, and they hand you a lump sum of cash.   But of course, this is at a high interest rate, so the lump sum is far less than the amount you would have gotten from your pension.

Why people do this is anyone's guess.  The deal with loans is, they have to be paid back - and borrowing money is never a good idea if you can pay cash.   And if you are making an average of $2 Million a year, you can afford to pay cash.

But you know the drill.  No doubt the mortgage broker told them to buy a big house - as the more money you spend on a house, the more you can deduct from your taxes!   And to a 20-something, it all seems very confusing (it was to me) and older people seem to know what they are doing.  They certainly do!

"Miller was the first lender, extending a $1.56 million loan on March 9, 2011, that Johnson’s parents used to buy the home in Manhattan Beach, a third of a mile from their son’s residence, while he played for the Kings.

Johnson, a source said, believed that his parents took out a mortgage using money left to them in the will of a relative who had recently died.

The loan — which carried a 12 percent interest rate, almost three times the market rate — quickly went into default because it called for an initial payment of more than $1 million. (The contract extension Johnson signed with the Kings didn’t kick in until the following season, and he didn’t have that much in the bank.)"
It is the same old mentality - people think a million dollars is "a lot of money" and that their ship has come in - so it doesn't matter if they spend 12% in interest on a funny-money loan.   They deserve a new house, right?   But as it turns out, a million bucks ain't a lot, particularly when you have to pay taxes, and you only get that money in little paychecks every month.
"One day after the home loan was signed, on March 10, 2011, the Johnsons borrowed $2 million at an interest rate of 12 percent from a software developer in Iowa named Rodney L. Blum, who this month won a seat in the U.S. House.

Blum’s office did not respond to interview requests left with Blum’s spokesman by The Dispatch. It’s unclear how Johnson’s family came to know him or why he was making a personal loan at a high interest rate."
 Rodney L. Blum  - another "free market" Republican at work! 
"Barely a month later, on April 14, 2011, the Johnsons borrowed $3 million — at 24 percent — from Pro Player Funding in upstate New York, a company that “monetized” several NFL players’ contracts during a work stoppage. Former NFL stars Vince Young, who went bankrupt, and Bryant McKinnie, who was sued for default, were among the company’s clients.

Johnson was sued by both Blum and Pro Player Funding within a month of the loans being signed. He signed settlements, according to court documents, without appearing in court to contest the lawsuits.
To settle Blum’s suit, Johnson had $41,800 — or 25 percent — garnisheed from his bimonthly Blue Jackets paychecks over much of the past two seasons.

The next two years brought additional loans and additional defaults, sources said, but the next loan that ended up in the court system was extended on Sept. 13, 2013: a $400,000 loan at 18 percent from EOT Advisors in Tarrant County, Texas."

The classic pattern - get into money trouble, and you dig yourself deeper trying to get out.  I almost forgot about the "who cares about hockey?" strike when the NHL went on strike and no one gave a shit.   These guys really think they are worth millions - but when given millions, they spend it like water.

It is hard to feel sorry for Mr. Johnson.  He has $5 million left on his current contract.   At that point, he will be 32 years old and it is possible his career will be all but over by then.  Five million dollars, of course, is a lot of money - more than enough for most of us to live quite comfortably for the rest of our lives.
But I think he will need to trim his sails a bit.  Dump the Ferrari, keep the BMW - get rid of high-priced and high-taxed Real Estate.   Cut back on the expensive lifestyle.   The goal should be to bank as much of the remaining $5 million as possible - bearing in mind that the Judge may nick him for some of that in bankruptcy court.

Mr. Gorbachev, Tear Down This Mall! (Fads)

We thought these would last forever.....

When I was a kid, there were no malls.  None.  Zero.  Zilch.   My parents took me to one of the first shopping malls on the planet, near Chicago Illinois.  I remember it vividly, because everything was inside and that was just so cool.   In fact, a lot of people went just out of curiosity.   Tellingly, we didn't buy anything.   We gawked and then left.

By the mid 1970's, malls were everywhere.  And they seemed like the wave of the future - America's new downtown.   And in the frigid North, they made a lot of sense.   You could park your car, walk inside, and be warm and snow-free.   Shopping was an experience now, and you could visit your favorite department store, have lunch or even dinner, and stop by the many small gift stores and shops.

Oldsters would go there to go "Mall Walking" in a safe, secure, warm, and friendly environment.   Young teens (Mall Rats) would "hang out" until rousted by security guards.    And as a teenager, a mall was a place you went to get that first after-school job.

Malls were big.   They were expensive.  And they seemed a permanent part of the landscape.   If you told me, back in 1977, that someday the mall would be bulldozed down - in fact in about 20 years - I would have laughed in your face.   All this?   It's made of concrete!  And look at all the cars in the parking lot!   They are making money hand-over-fist here, buddy!   Next thing you'll tell me is that GM will go bankrupt!   Right, like that could happen.

Immersed in the present, we cannot see beyond our current reality.  We assume that things that have been around for a few years are now "institutions" and will last forever.   But history has shown us that this is not the case.   We thought AOL had staying power - that the online juggernaut, which had captured the lion's share of the dial-up market, would be around a long, long time as a major "media company".   They even swallowed up Time Warner.  It's day in the sun, however, was less than a decade.

What killed off the malls?   There are plenty of explanations.   This New Yorker article discusses some of the causes, but misses the point.   Shopping online didn't kill off the shopping mall - they were dead long before that.   The mall where I worked at the Olde Tyme Gaslight Restaurant was converted to a strip mall in the 1990's.   A nearby strip mall (Shoppingtown) was enclosed and converted into a mall in the early 1980's - and then remodeled back into a strip mall in the 1990's - lasting hardly a decade as an enclosed mall.

Maybe the New Yorker article mentions why malls died - and entirely missed the point:
"When the Woodville Mall opened, in 1969, in Northwood, Ohio, a suburb of Toledo, its developers bragged about the mall’s million square feet of enclosed space; its anchor tenants, which included Sears and J. C. Penney; and its air-conditioning—seventy-two degrees, year-round!"
Sears?  J.C. Penney?   Houston, I think we found the problem.   Our generation, I think, is less inclined to shop in "Department Stores" in general.   And I think mid-level, middle-class- America chains like Sears and J.C. Penny in particular, are viewed as "lame" by most people today.  Both are teetering on the edge of bankruptcy.  I don't expect either to teeter for much longer.

But that's not entirely it, either.  Our shopping habits have changed over the years, and my experience since childhood spans the entire spectrum, from small town stores to online. 

When I was very young, we lived in a small town, which had a downtown section with storefronts facing Main Street.   There was the druggist, a 5-and-dime, the barber shop, a shoe store, a clothing store, a store for women's "notions" (whatever those were) and a gift shop or stationary store sprinkled in here and there.   When you went shopping, you parked downtown and went from store to store to buy things from local merchants.   Prices were fairly high and selection was limited.

Shopping in my home town, in the old days.

But of course, this was a holdover from the pre-war days - already dying out.   We all had cars and the big city was only 20 miles away.   When Mother really wanted something special, she would drive to the big city to go to Dey Brother's Department store or Chappell's (back then, each city had its own department store brands, and for some reason, they were always run by Jews.  This is not an anti-Semitic statement, just a statement of fact.)  I remember, as a fidgety kid, spending what seemed like hours in these overheated buildings that always smelled of carpet and fabric.

But the selection and prices were better than the local merchants in our small town.   And of course, the excitement of going "downtown" was great.  Mother might drop us at the movie theater (one of those great old palaces that is now a landmark) while she went shopping.   One day she surprised us by picking us up in a 1970 Fiat Spider she had just bought from the foreign car dealer.  Those were heady times.

But by the 1970's, downtowns in big cities were starting to look a little shabby.  Crime was on the rise, parking was difficult, and the hassle of driving "all the way in" to the city (with the traffic!) didn't seem worthwhile - particularly when there was not one, but two bright shiny new suburban shopping malls that were right nearby!  So the malls took off, and downtown slid into further decline.  And the small stores in my hometown found it even harder to compete.

In the 1980's we discovered a new form of shopping - the discount store.   During the recession of 1980, money was tight.  Gas was rationed, peanut butter and coffee were scarce (sounds like WW II, don't it?) and inflation was raging at 10%.   The middle-class started its slide down the economic ladder.   Discount stores like K-mart, Wal-Mart, Caldors, Ames, and the like, popped up in strip malls, often dedicated locations.  These were not in small towns.  They were not downtown.  They were not in malls.  They were in strip malls, which were cheap to build and easy to get to.  The strip mall boom started.  As I noted before, one of the local malls went from strip mall, to mall, and back to strip mall, following this trend.

Today, all of these shopping venues are gone.   The clothing store and shoe store in my hometown finally went under in the 1980's or thereabouts - no doubt victims of the malls.   All the stores on main street are restaurants now (since no one knows how to cook anymore) or gift shoppes, coffee shops, or art galleries.   It is considered an "upscale" town now, and people come there to see the old storefronts and then have a vegetarian wrap and a gourmet coffee.

The stores downtown are all boarded up.   Dey Brothers is no more.  Downtown is now a scary, depressing place to visit, where most of the buildings are boarded up, run down, and habituated by homeless people.   And the great malls of the 1970's are gone as well - either torn down or converted to strip malls.   And most of the discount stores are gone, too - wiped off the face of the earth by the colossus that has become Wal-Mart. 

Wal-Mart killed the malls long before online shopping ever did.   But what really killed the malls was the decline of the middle class.   With money tight, we spend more carefully today.  And why pay extra for something, just to buy it in a fancy building?

And yes, today, we shop online more and more.  You can find whatever you want online, at prices that are very competitive (and would have been unheard of, in earlier years).  And this is a good thing.  It saves on gas, it reduces pollution, and it provides the consumer with greater selection, better prices, and thus a better life.  It isn't going to change, either.  We aren't "going back" to the old days.

This has been a consistent trend, I think, over the years, to cut out useless middle-men and distributors, and provide bulk products at lower prices.   We have low prices today on so many things - and far more things than in the past.  This has come at a cost.   The nice man who ran the shoe store in my home town, went out of business.   He bought shoes from a local distributor, who in turn bought them from a regional distributor, who in turn bought them from a national distributor, who in turn bought them from a factory in the United States, employing Union-wage workers, using machines built before WW II.   Shoes were expensive.   Today, they make them in China for $2.99 a pair and sell them here for $50.

And over the years, many have decried the fate of "the little man" - saying that we should "go back" to those "good old days".  In Japan, they actually had laws against discount stores.  In order to create jobs after the war, there was a byzantine distribution network of national, regional, and local wholesalers, and then neighborhood shops.  They even had "elevator ladies" in the elevators, who would push the buttons for you - all make-work jobs.  If you wanted to buy a television, you went to Mr. Nakamura's shop and bought one, at the standard retail price.  Japanese were actually flying to the United States to buy Japanese electronics, and then having them shipped back to Japan - it was that much cheaper.   But when we were there in the 1990's, discount stores were starting to open up and it was the beginning of the end for that sort of nonsense.

Of course, this sort of wasteful distribution chain still exists today in the US in the form of car dealers.   Elion Musk has tried to buck this trend by selling his Tesla cars directly to the public.  Corrupt Rust-belt States like New Jersey and Michigan have passed laws against this, but I think that is just the last, dying gasps of old-school retailing, not a retrenchment against the new ways.  Mr. Musk is on the right side of history and has a lot of momentum behind him.  His ideas will win in the end.   No one has warm and fuzzy feelings for car dealers.  No one.

We can't go back to the old days and the old ways of doing things - just as we can't go back to trollies and Zeppelins.  Nor should we want to, when self-driving electric cars are right around the corner - or who knows what.   We should move forward and respect the past, but not try to re-live it.

But the point of this posting is this:  Don't expect stasis in your life.   Things that seem permanent, like factories, shopping malls, big corporations, huge retail stores, expressways, and forms of transportation, can all go by the wayside in a real hurry - within decades, sometimes within years.   More ephemeral things like websites, can be gone in days.  Investing for the long-term can be tricky, as the long-term can turn out to be surprisingly short.

There is a statistic bandied about that of the companies making up the DJIA from 50 years ago, only a handful are around today.   This may be true, but often what happens is that companies morph and change and come back as something else - much as our local mall morphed from strip mall, to mall, and back to strip mall, with the times.  These morphings, however, can leave you with nothing - much as the GM bankruptcy did to many.

Ten or Twenty years from now, who knows what the world would be like?  Wal-Mart could be falling apart like Sears is today.   People will be communicating with built-in implants or God-knows-what.   Cars may be self-driving (although I doubt they will ever fly).  Predicting the future is an uncertain business.

The only thing you can consistently predict is that what seems permanent today, is likely to be gone - or morphed into something else - tomorrow.

Thursday, November 20, 2014

Mutual Fund Expense Ratios

How do Mutual Funds make money - for the fund companies?

A lot of people like to think banks are charities.  There is a famous sketch on Saturday Night Live, about the "change bank" that just makes change.   How do they make a profit doing this?  Volume.

And people believe that.  It isn't true.  

A lot of folks believe their funds are "no load" or "no fees" which may be true, but it doesn't mean there are no expenses in the operation of the fund.  The mutual fund company takes a slice of the pie and it is often a pretty big slice (particularly compared to today's rates of return) and often they take this slice even as the fund loses money.

"Fund managers charge management fees, which are generally pretty small, often less than 1.5% of the money you invest. This small percentage, however, is enough to be profitable for the fund company, since so many people are investing so much money"
In an era of 3% rates of return, 1.5% is a pretty big deal.   It also explains why many investment advisers want you to sell your mutual fund with company X and buy one with their company Y.  They get money this way.  It's called churning your account.

Let's take a look at one traded Mutual Fund, the Vanguard Lifestrategy Income Fund (VASIX).  I had a SIMPLE IRA for a few years and put a few thousand into this fund.  A reader alerted me that Vanguard funds had low overhead ratios.  At first, if you go to any financial page website, it appears that Vanguard is running a charity:

Fees & Expenses

Front load  0.00%
Deferred load  0.00%
Max. redemption fee 0.00%
Total expense ratio 0.00
This is good, of course.  Some funds, such as the troubled "Growth Fund of America" charge a 5.75% load in addition to management fees (expense ratio) of 0.66%.  Ouch!  (My Dad sold me some of this turd, when I first started investing.  I am glad I got out of it!).

But of course, these are just fees tacked on, in addition to management fees.  What exactly are the management fees for this fund?

From Vanguard's site, these tidbits of data: "On average, Vanguard mutual fund expense ratios are 82% less than the industry average." - but what are the actual amounts?  This page claims that Vanguard's  average expense ratio is 0.19%, while the Industry average expense ratio is 1.08%

Now, for some reason, my Fidelity adviser tried to get me out of Vanguard funds, claiming they had high expense ratios.  I am not sure what he was talking about there.  I think moving away from Fidelity might not be such a bad idea.  It would seem I am not getting great advice there.

This Vanguard page, has the data for VASIX fund: LifeStrategy Income Fund: 0.14% Average expense ratio of similar funds: 0.83% 

That is not a bad ratio.   But what about equivalent funds from Fidelity?   Morningstar (whose stock has done very well, by the way) rates VASIX as a "Conservative Allocation" fund.  My Fidelity manager has put me into the following funds with the corresponding expense ratios.
FGMNX:  0.45%
FDGFX:  0.56%
FLPSX:  0.82%  Redemption fee:  1.50%  (!!!)
FSCRX:  1.01%  Redemption fee:  1.50%  (!!!)
FSICX:  0.69%
OAKIX:  0.98%
PTTDX:  0.75%
YAFFX:  1.26%  Max Redemption fee:  2.0% (ouch!)

By the way, these numbers are not easy to find.  On the Fidelity site, you have to click on the fund in question, get a quote and then click on the RESEARCH button, and then look through the data to find the expense ratio.  You have to know what to look for, too - the term "expense ratio".

Now are small expense ratios always a good thing?   Well, it depends on the fund type.  Obviously, a fund that invests in government bonds shouldn't have a very high ratio, for two reasons.  First, there is not a lot of brainpower needed to buy government bonds.   Second, the yields are so poor these days that even a tiny expense ratio can wipe out any earnings from government bonds.

Perhaps for more esoteric investments - such as high-tech stocks, foreign investments, emerging markets, and that sort of thing, require more legwork and brainwork to invest in - and generate higher rates of return as well.   As a result, you'd expect to pay more in management fees across the board.

HOWEVER, it pays to compare funds that invest in similar investments.  For example, the VASIX fund is a very conservative, mostly bond fund.  The Fidelity FTBTX is a bond fund as well.  However, its expense ratio is 0.45%, over three times that of Vanguard.

Is that a lot?  Well it does add up, over time, due to compound interest.  Say you invested $1000 at age 20 in a fund that paid an average 5% interest and had an expense ratio of 0.15%.   After 45 years, you'd have $8,425.19.   If the expense ratio was 0.5% you might end up with only $7,248.25.  It does make a difference.

Sadly, I never investigated expense ratios, that is until now.  This would have done me a lot more good 20 years ago than today.   But back then, I was naive and thought that all these companies charged about the same amount in fees and that was that.   And as I noted before, when you ask pointed questions about these things, the investment advisers tend to waffle and waver.   They never come right out and say what their fees are and whether these are competitive with the industry.

And this is what Fidelity gets for changing its website.  I probably never would have researched this, until they got me thinking about it.  1.26% pays for a lot of HTML programmers - ones that I don't want to pay for!  And how much did I pay Fidelity?   That is an interesting question.   Based on all the assets we have with them, as well as the expense ratios, you are looking at about $4000 to $6500, I believe.  Bear in mind that each dollar reinvested has its own nick of the "expense ratio" as well.

Granted, using expense ratios is not always the best way to choose a mutual fund!  A fund that is losing money is no bargain.   A fund with a high ratio can be great - if it makes a lot of money.   However, this link discusses which funds have the lowest fees.  Vanguard tops the list.

Hello, Vanguard.

NOTE:  Different types of accounts may be better or worse off at different investment houses.  For Trading accounts, where you are buying and selling stocks, you might want to go to an account where the trading costs are low or free.   For a mutual fund account, you might want to go to an account where the funds have a low expense ratio.   I think I may switch to Vanguard for mutual funds, however, this would mean paying the management "expense ratio" on each fund that I buy.
Once you are locked into an investment, it is expensive to switch.

Rocking Your World.....NOT!

Externalizing is a powerful marketing tool.   If you've ever watched an infomerical, and really paid attention, you'll understand what I mean.

The major premise of these informercials is that if you buy product X, your whole life will change.   You will look at your life as two parts - the dark, dreary, grey period, before you bought the "Abdominaizer," and the sunny, bright future you now have, having had bought it.

Or it could be a juicing machine, or one of those rotisserie ovens, or whatever.  Your life will be so much easier now that you can seal-a-meal and what's more, you'll save so much money that you'll become a millionaire.

Now, this isn't what they explicitly state in the video, but what is implied.  Everything from the tone of voice of the announcer, to the tone of the music, to the lighting and shading of the images (particularly "before" and "after" images) is setup to show the world in two radically different views.   The lady stupidly using a real knife to cut a tomato is shown struggling and trembling, in a nearly black-and-white photo.   The lady with the Ginzu knife is confidently cutting through a penny, in an image that has the colors saturated to comic-book levels.

And the same is true for any purchase.  Imagine how great your life will be with that new Camaro!  Or the Jet Ski!  Wow Jet Ski Guy!  You're Amazing!   The ladies will be all over you, right?  Maybe not.  Maybe you'll be the same old schmuck you were before, but with a Jet Ski (and more debt, which the ladies really find sexy).

This is how they try to persuade us.   But it doesn't begin and end with our friends at Ronco.  Many people fall into this trap, and I have written about it before.   Politics, for example, uses the same imagery and techniques to sell you the idea that 'if only' you elect candidate X, the world would  become a heaven-on-earth and none of us would have work anymore or pay taxes or whatever.

And people believe this.   They believe that the world would change if we elected Barack Obama.   That it would change again, if we elected Mitt Romney.   We are told, time and time again, that "if only" one political party could assume all power, that our country's "problems" would all be solved, magically, overnight.

Because, you know, all of our country's problems are caused by the government, right?   That is the premise.  You and I had nothing to do with it.  External forces and forces of nature are not accountable.  If only we could elect Party X, we could pass a law rounding off Pi to 3.

The reality is, of course, that while politicians can really screw things up, more often it is our own malfeasance that causes real problems.   What caused the recession of 2009?  If you are a Democrat, you'd say it was George Bush.  If you are a Republican, you'd try to argue it was Bill Clinton (out of office for 8 years) and the "Community Reinvestment Act".  Both are pretty tortured arguments.

And of course, both would be wrong.   It was 330 million people deciding that their homes were gold mines - and mining them accordingly with refinance loans and a buy-and-flip mentality.

Actually, gold mines is an apt analogy, as people tend to go beserk over gold every so often, and light out for places unknown (Sutter's Mill, the Yukon) and go hunting for gold.   The only ones who make money are the fellows selling them blue jeans and shovels (Mr. Levi Strauss, of course, which feeds that whole Jewish conspiracy thing, right?).

In my previous posting, I also alluded to this with regard to trollies, Zeppelins, and trains (and monorails or whatever).   "If only..." people say, "we could bring back those high-wheel bicycles, then the world would be a paradise on earth!"   But of course, this isn't true.   Our problems with urban blight, pollution, energy usage, and the like, are not going to be solved by replacing a few buses with a horrifically expensive "light rail" line.   It just will spend your money and profit the company selling the equipment - and saddle local government with an expense that will have to be paid into perpetuity.   Watch the Simpsons "Monorail" episode, it pretty much tells the story.

These are all forms of externalizing, and they are not helpful to you personally.  Pining for the days of the Zeppelins isn't going to help your personal life.   "Fighting for a Living Wage!" isn't going to get you one, so much as going to Medical School will.    Protesting banks isn't going to pay off your student loans - a better bet is to not take them out in the first place, or to study something of merit.

It is easy - it is weak thinking to believe (and it is belief, which is dangerous) that "if only" they would pass a staggering bond issue and put in a trolly line, the crack addicts and homeless would go away.   "If Only" they would legalize marijuana, life would be perfect! (from what I can tell, living in places like Aurora Colorado still pretty much sucks, even if pot is legal).

And it doesn't matter what the "if only they would..." thing is.   These things are usually traps for weak thinkers, who concentrate more on external problems in their lives than the internal ones.

You do have choices.   And those choices make all the difference in the world.  Or at the very least they make more of a difference than these externalized deals do.

For example, if you read my last three postings, you realize I am pissed off at Fidelity.  I got mad and vented some steam.   But then I realized that no matter how pissed off I am, they are not going to change their behavior.   My only choice is to do business with them or not do business with them.  And that is where my energies should be directed - to researching, really for the first time in my life, how these investment firms really work.   It is a fascinating subject!

But you'd be surprised how many people fail to see that.   They try to salvage bad deals from bad vendors, rather than give up and move on to someone who is honest and decent.   You have to know when to walk away and not look back.

By concentrating on the choices you do have and the actions you can take you can accomplish so much more than if you waste emotional energy trying to "fight the system" or get things to change, when in reality, you really can't change them.

Sure, you should vote.  You should contribute to a political campaign you believe in - in an amount you can easily afford.  Those things do make a difference.   Worrying about who will get elected, however, and blathering on about it, really doesn't accomplish so much.

Take action in life - pull the levers in your own life, and worry less about "larger issues at stake".

Advice I need to keep reminding myself of.  Which is why I started this blog.

Know a Good Investment House?

Where do you invest your money and why did you pick that company?

I guess I never really gave much thought to what companies I invested with, until now.   Usually, you ask friends and family what company they use, and then go with that.  Or maybe you know someone who works for the company, or you sit down with an advisor and you like that person.   These seem, to me, to be unscientific ways to choose how to invest.  Yet we all do it - and did it.   How you ended up with "That nice man at Madoff funds" is an interesting question.

Of course part of the problem, in addition to mutual fund yields, is the fees they charge to manage your money - or more precisely the fees you never seem to see that they charge to manage your money.  One reason I am a little disenchanted about Fidelity is that when I ask our "investment adviser" what fees Fidelity charges, I get only evasive answers.

And there are fees, somewhere, sometime, down the line.  They aren't running a charity.   He told me that he thought my Vanguard funds had high fees.  But when I asked him about Fidelity's fees, all I got was a vague answer that that were "lower".

So we want a place with low fees.   We also want a place with a good Internet presence, so I don't have to deal with paper statements and calling brain-dead-Becky on the phone and trying to play "telephone operator" with her when I want to change something on my account.

I am not sure I need investment advice as the only advice all of the counselors I talked to seem to say is, "Give me your money".  Do I really need an investment adviser or just a place to park my investments?  There is a big difference.

My Dad, by the way, had a brief stint as an investment adviser, after he was ceremoniously booted from his job, running a rustbelt factory.  He sold a plan or two, including a retirement plan, to a small company down the road.  He mentioned that he got little checks from that company, for making that sale, over the years.   So these guys make money at this - but how they are compensated is a well-kept secret.  The customers have no idea how much the "plan adviser" takes off the top.

I recounted the horrific experience with State Farm - how they wanted me to even cash in paid-up life policies, so that the agent could skim a cool 5% off the top.   So I think that leaves State Farm out of our search.   And the Northwestern Mutual Life "Financial Network" I think falls along the same lines.

In fact, I am thinking of shying away from places with brick-and-mortar retail shops.   It costs a lot of money to maintain and staff these, and that money goes into overhead, and as a result, well, you pay for it.

I tried contacting some local 'investment advisers' which pretty much turned me off from the idea of using a brick-and-mortar establishment.

I contacted Raymond James, and their website has a cute "locator" you can use to contact a local agent (there is one less than 20 miles away).   So I filled out the form and entered the CAPTCHA numbers and.... it bombed out.   I tried again, seven times, and each time, it said I did the CAPTCHA wrong.  So I tried the audio version (for the vision impaired) and got the same result.

Pretty pathetic when your first contact with a company results in the site bombing out.  This does not bode well for their Internet presence.   I called their main number and explained the problem, and was transferred to a bored who-gives-a-shit employee who agreed that having the site bomb on the "contact" page was pretty freaking embarrassing.   They said they would "look into it" but I am not holding my breath, it sounds like no one there gives a rat's ass about anything.

The other problem with storefront investment firms is that they really want the big players - people with millions to invest, not just a million.   So they often don't want to talk to you, or act like they are doing you a favor by even acknowledging your existence.  this is called power-shifting, and I have written about it before.

For example, our "adviser" at Fidelity tells us that even though we have nearly three-quarters of a million dollars invested with them - and want to add another $250,000 to the pile, that his services are really reserved for "people with well over a million dollars invested".   In other words, he is doing us a favor by stooping down to talk to us plebes and we'd better kiss his ass.   Uh, no sale.

The oddly named Edward Jones (which sounds like the lost love-child of A.G. Edwards and Raymond James) has been popping up all over the place.   They are minting new agents faster than State Farm is minting theirs.  There are a whopping five agents in four offices within 20 miles of my home.  Check your inbox, you may already be an Edward Jones investment adviser!

I called a couple of them and the results were predictable - they have a "receptionist" (who can afford this shit these days?  Must be a lucrative business!) who asks, "Who's calling, please?" and after I give them my life story, they say, "and who are you with?"

Who am I with?  What an odd question to ask.   And I called more than one office and they both went through the same script.   Of course, if I wanted to talk to the oh-so-important agent, I would have to wait for a call-back.  And since I wasn't "with" anyone, well, my name goes to the bottom of the pile.   Classic power-shifting game.   Please hold for the queen of England!  My NML agent did this bullshit (and State Farm agents do it all the time) and anyway, he's no longer my NML agent.

You can see the game they are playing here.  Their time is so, so valuable, and your are not worth squat.   It is a privilege to even be allowed into "their royal presence" and perhaps, if you are lucky, after they have dined on your life's savings, they will save you some table scraps. 

So I am leaning away from the agency model of investment houses.  Why?  Because all those offices and receptionists and agents cost and awful lot of money.   You're looking at a quarter to half-million dollars per year per office just to keep up a storefront.   And that's assuming the agent is making only a hundred grand or so.

Agent-less investment firms are another alternative.  I have had e-Trade and Ameritrade accounts (and still do) and they seem pretty interchangeable, in terms of user friendliness.  With a few clicks of a mouse, I can setup an account on either site, download the forms necessary to transfer funds, and within a week or so, have my data available to me online, where I can access it without all the flash animation and bullshit.

Merrill Lynch "EDGE" has a linkup with Bank of America, and they allow you to access your Merrill account through the BoA website.   It is an interesting alternative, but the trustworthiness of BoA and Merrill have been called into question lately.  They offer a cash bonus if you transfer funds to one of their accounts.   They have online chat and a 1-888 number that, unlike Fidelity was not on musical hold for 10 minutes.

The Merill system is pretty interesting.  They offer free trades (up to 100 a month) if you have a balance over $20,000.   That beats Fidelity's $6.99 per trade and Ameritrade's $9.99 per trade.  They also offer free banking at BoA (which I already have) and better rates on money market accounts, etc.   It is a pretty compelling offer.   And their online presence is, well a little nicer than Fidelity's new Gee-Whiz-Bang "Like us on Facebook!" approach.

There is one disadvantage to moving mutual funds - if you want to reinvest dividends in those funds or invest more into them, this may not be possible.  Thus, for example, you can hold shares in a some Fidelity funds, you just might not be able to add to them.

I'll keep searching.   I think I have narrowed my choices to places that don't have storefront offices (just as I no longer use such places for insurance - I use GEICO instead).   Lower overhead means lower costs, which means they can offer better benefits.

And I think I will diversify into different investment houses as well.  The only real genius thing my Fidelity adviser advised me to do was to close all my accounts (spread through five investment houses) and put all the money with him.   In retrospect, I should have seen this as a warning sign of things to come.

UPDATE A reader writes: 
"I saw your Fidelity post.  Fidelity is good but nobody tops Vanguard.  Vanguard is owned by everyone who invests through Vanguard, so the natural push is to always lower fees and improve services.  Unique business model.  This is the reason Vanguard has more assets under management than anyone else.  Also, they have a simple website with robust info and tools."     
Thanks.  Funny how the Fidelity guy said that Vanguard sucked.
It is hard to get really hard data on the fees they charge.  All you really know, with mutual funds, is that they invest your money, pay you some back, and keep some.  How much, we are never told.
Even a Mutual company (which is what you are describing, owned by the investors) has overhead.   Those guys with the suits, Acuras, and walnut desks aren't working for free.
So there is overhead. If I could just figure out what the amounts were and was able to compare them!

How to Drive Customers Away

When you give your customer an excuse to check out the competition, chances are, they won't be back.

Car salesmen know the routine.   If you have a prospect on the lot, and if they say they are going to "go home and think about it" or "want to check out the competition across town" then you are not going to make a sale.   Why?  Because once they are off the lot, they're gone.   They'll buy from the last place they go to, not the first.   So you have to close the sale and not give them an excuse to shop around. Otherwise, you are just handing your business to your competitor.

Similarly, if you don't offer one-stop shopping, you may be giving your customers away.   For example, if you remodel kitchens but tell your clients, "I don't do the plumbing part, you'll have to find someone else for that" then they will be forced to shop around for a plumber, who may suggest another contractor or offer to do the whole kitchen himself.   You don't want to give the client an excuse to search elsewhere.  If you do, they will start to re-think their whole relationship with you.

As I noted in another posting, I used to have over a dozen policies with State Farm - life (4), home (5), umbrella (1), cars (5), and boats (2).   When I moved to Coastal Georgia, they told me they could not write a policy on a barrier island and suggested I talk to Nationwide instead.   Bad Move.  Because now I was "shopping insurance" instead of just making a phone call to "my" insurance company.   And shop I did.  Today, we have two policies with State farm, one life, and one for the condo.

You never want to give your customers an excuse to shop around.   It is just basic common sense and good salesmanship and good business.   As soon as they start shopping, chances are, you will never see them again - unless you are one of the few suppliers who have either (a) a unique product that cannot be found elsewhere or (b) screamingly low prices that no one else can match.   Few of us have either to offer.

I am currently shopping around for a new investment company to park my assets in.   We have a trading account and four IRA accounts, which will soon be augmented by some new monies coming in.   Ordinarily, I would have just sent this money to Fidelity, but Fidelity has been dropping the ball lately (see my previous posting) which is forcing me to look around for alternatives.

I have tried to communicate with Fidelity regarding an inherited IRA, and the only thing I got from them was an e-mail with a URL link to "setup a new account" - no explanation as to how the account would be set up (why not roll it over into an existing account?) or how I was to initiate the transfer.   There were two Fidelity agents involved, one with the previous account and one for our account. I asked them to coordinate this transfer, and never heard from them again.   Poor communication.

Then, they crammed this new website down my throat.  I got a call today from a manager, who explained that, like it or not, the old site goes dark in May and we will be forced to use the new one.   The new site does not display any data that is not on the old site, but it just does it in an annoying manner using flash animation which crashes my computer.

It also, I now realize, is designed to appeal to the social networking crowd by making your investments look like Tweets or Facebook postings.   I am not sure why I need to pay for this (and I pay for this, with the money Fidelity takes off the top of all these investments I make with them).  Fidelity has a lot of offices and a lot of managers and apparently, too many web designers.

Maybe I should shop around.   Fidelity isn't giving me a choice with their website, so the only choice I have is to leave.

So, they've forced me to shop around.   And maybe I'll find that when I shop around, I'll find a better deal somewhere else.

Stay tuned.

If It Ain't Broke, Don't Fix It!

If it ain't broke, don't fix it, Fidelity!
Fidelity gets high marks on many ratings sites as one of the best investment firms, in terms of their service as well as their online presence.

They're about the screw the pooch, however, big-time.   As as I have some substantial sums invested with them, this makes me nervous.   Has someone taken over the company with a new agenda (e.g., screw the clients?).

They have brought out a "New Accounts & Trade Experience!!!" which is a fancier way of saying a "New Website" and it has - you guessed it - all sorts of nasty flash animation and busy graphics for our short-attention span generation.

The problem is, as you might guess, that instead of just loading the data for your account and displaying the numbers, you get these "LOADING" hourglasses for minutes at a time.   Then, usually, Firefox bombs out and says "Firefox Not Responding" and then the screen goes grey and locks up.  You either have to reboot Firefox or sometimes reboot the computer.

Meanwhile, the old site works fine.   I was asked to "rate my experience" and you can guess what I told them.  IT Professionals should be shot like dogs!

Except of course, that I like dogs.   I don't like IT busybodies who feel they need to "fix" something by completely tossing it out and replacing it with a bunch of flashy crap that really tells me nothing, but clogs up my computer.

How about fixing the existing site, to say, tell me my dividend income instead of obsessing about share price?   Just a thought.

I sent them an e-mail on this, and of course, they say the problem is my computer.   But my computer loads every other website just fine, of course, including the "legacy" Fidelity website.  Firefox is updated, so is the Adobe Flash.   The problem is on their end - they develop these sites using their own computers, which have super-fast connections.  They don't understand that the users might have slower connections or older computers.   Can you imagine how this would have played out if I was using WiFi?   It would have taken hours to load!

Of course, you know the drill on this bullshit.   The new site is in "Beta Testing" right now, but eventually, they will roll it out and I will be forced to use it, whether I want to or not.
Well, actually, not "forced" per se, as there are many other investment firms out there to choose from, and I can (and will) move my funds from Fidelity after over 20 years with them.

There are some other problems as well.   Getting ahold of your "adviser" is hard to do.   You can't call them, but they can call you.  Ditto for e-mail.  I had an inherited IRA to roll over as well as an inherited house we are selling - hoping to put the proceeds into Fidelity.  We're talking a quarter-million dollars, here.   I never got a response to my phone calls or e-mails, other than an unhelpful response from another agent to "go online and open a new account" (!!!).

Perhaps I will do just that - with another firm!

They've screwed the pooch.   If I can't go online and check my balances in this day and age, what's the point of using them?  If they are not responsive, what's the point of doing business with them?

Wednesday, November 19, 2014

That Idiot, Warren Buffet

Why this guy doesn't wise up and invest in Facebook is anyone's guess.

The press is at it again, pillorying Warren Buffet for buying Duracell Batteries.   What a chump!  Why anyone can see that the disposable battery business is dead, dead, dead - just like the newspaper businesses that he bought!  What an idiot!   Financial Journalists (themselves all successful investors) know the score - Buffet has lost his edge.

But of course, the old fox is craftier than he looks.   And Financial Journalists are not very bright, and paid to write sensationalist click-bait, not real, sound, financial advice.

You see, there is value even in an old "legacy" battery brand like Duracell.  And what the profitability of the company is, is not as important than what you paid for it.   Disposable batteries will be with us for some time to come - they are in most remote controls, flashlights, and other small appliances.   And people will continue to buy them, perhaps in declining numbers, as the years progress.  But there is a solid business there, and if bought for the right price it can be a profitable one.

In a way, it is like tanker stocks, which I wrote about before.   You buy stock in a tanker and you literally are buying a part of a ship.   The company pays out all profits as dividends, over the years, until the tanker is scrapped and you get pennies back on the dollar for the stock.   You lost money, right?   Not exactly - over the years, you got back more in dividends that you paid for the stock.  Stock price isn't everything - profitability is.   The financial news people concentrate on stock price alone - which is a very misleading indicator of value.

The second half of the equation is while Lithium-Ion rechargeable batteries are replacing disposables in many applications, this does not mean the disposable battery people are asleep at the switch.   You can, today, buy a rechargeable replacement for your disposable battery.  However, they are expensive, and most people (such as myself) find it a hassle to remove batteries from a mouse or a remote control, plug it into a charging station, and then re-insert it into the device.   For things like remotes, mice, smoke detectors, etc., it is just easier to replace them once a year.

And even if rechargables replace disposables over time, Duracell will be in a good position to attack that market, having the technological base and a solid brand name.   There is value in these old-line companies, even if they are not as sexy as tech stocks.

Just as there is value in newspapers.   People still read them, particularly in small towns, where you can't get local "news" off a website.   There is a market for papers, albeit a declining one.  Advertisers still love papers - car dealers still run their full-page ads.  Here on the island, the real estate agents run their full-page ads on our little island rag sheet.   If you buy a paper for cheap, your investment is small, and if it makes money for you, well, was that such a bad investment?

The key to making money on an investment is not whether it is trendy like a tech stock or a website, or whether it is sexy or interesting.   The best investments are often companies you never heard of, who continue to crank out products every year, pay dividends, employ people, and do all that old-fashioned money-making.   Not very interesting, sexy, trendy, or topical.   But profitable.

Some of my best investments (with what little stock-picking I do) have been along these lines.  United Technologies - making of jet engines and air conditioners.  An old rust-belt company if there every was one.   Or take Stanley Tool - pays a nice dividend, and the stock price just slowly floats up.   Even dogs like Frontier Communications have their day.   Turns out, some folks still stubbornly use those old landlines out the country.

And Avis car rental - a business that is 100 years old.   Their stock went up 3000% since I bough it.   Those who "invested" in ZipCar lost 50% of their investment.  Avis ended up buying that company.   Which was a better investment - the dowdy old company that everyone thought would go bankrupt with its "old school" ways?  Or the trendy new company with its new business model, lots of press and hemorrhaging cash flows?

The list goes on and on.  The winners are people who make car parts (Magna) or Cars (BMW) or tractors or aluminum or cheese or other stupid things we all need.   The losers?  Trendy high-tech stocks that were hyped in the paper - CREE, Syntroleum, and that sort of thing.

This is not to say that old-line stocks are always a good deal.   Let me tell you about my "investment" in GM!   But those can be the exception rather than the rule.  My Ford stock, on the other hand, has done well.

The key is profitability, not trendiness.  And to understand profitability, you need to understand how the company works.    How do you do this?   You can't.   We don't have access to the analysts that Warren Buffet has, nor the data and information he can accumulate about a company.   We don't have his experience to comprehend what it all means.   Most of us rely instead on the shouting guy on TeeVee - and he has a track record worse than a monkey and a dart-board.

Of course, you can buy a piece of Buffet.  His Bershire-Hathaway Class B stock is available for plebes to buy.  Up 80% since I bought it in 2010 (and people were saying Buffet was through then!).

Stock picking is for chumps.   And chumps are the first to run down folks like Warren Buffet.   But for the time being, I'll give him the benefit of the doubt.

Because I just bought a 40-pack of Duracell AA batteries last week - and already have used four of them!