Monday, November 29, 2010

Do You Want to Buy a Jeep? Probably Not.

A Jeep is a capable off-road vehicle.  But is it really practical as your daily ride to work in the city?  Pictured above is my 1948 Willys on the day I sold it.  It was a lot of fun, but certainly not practical!

We recently looked at buying another Jeep, and decided against it.  While they are a romantic vehicle and certainly make an image statement, as a practical vehicle, they really are not well suited to general transportation.

Before we hear howls of protest from off-roaders, I am not talking about off-roading.  And most Jeep owners, rarely, if ever, take their Jeeps off-road.  In fact, going off-road becomes a pretext for owning the vehicle, often after it is purchased.

Yes, they are a lot of fun - off road.  Yes, they are an "image" vehicle.  But no, they are not comfortable, practical or useful for most people.

And I say this from experience, having owned a Jeep, a Samurai, and a number of 4x4 vehicles over time.

Consider the following:

1.  Ride:  Although newer Jeeps have better ride quality than in the past, the short wheel base means it will never ride as well as a car.  So you will get a bumpy ride, and there is not much you can do about it.  While this is a sacrifice worth making to go off-road, probably 75-90% of all Jeeps never are taken off-road.  So is it a sacrifice worth making?

2.  Noise:  These are not quiet cars, and if you have the cloth top, there will be a lot of wind noise and flapping as you go down the road?  What's that you say?  Speak up, I can't hear you over the wind noise!  Oh, a hard top!  Yes, that helps, a bit.  But it also defeats the main fun aspect of a Jeep - that it is an open air vehicle.  Yes, the hard top comes off, with tools, and you have to have a place to store it, too.

3.  Room:  These are not large vehicles, so there is not a lot of room to store your "stuff" in them.  Want to pick up a piece of furniture?  A station wagon might be easier and more useful.  And there is no place to lock your stuff once you put in in there - a Jeep is incredibly easy to break into with a soft top.

4.  Gas Mileage:  This is where Jeeps really fall down.  15 city, 19 highway.  Ouch.  Crappy gas mileage for such a small vehicle.  We saw one on the dealer lot parked next to a new Tahoe - guess which got the better gas mileage?  Not the Jeep.  Why this is, I do not know.  Perhaps pushing a brick against the wind is part of it.  Perhaps the gearing.  Perhaps the resistance from the 4x4 drivetrain.  All I know is, for the size of the vehicle, they are gas hogs.

5.  Pricing:  For what you get, these are amazingly expensive vehicles, and quite profitable for Chrysler.  A stripped Jeep, new is $22,000 and if you pay $21,000, consider yourself lucky, as there are few rebates, discounts, sales, or other price reductions.  For that amount, you can buy a pretty well loaded Camry with an automatic, A/C, power locks, and windows.  The Jeep doesn't even have A/C (a $900 option!).    You want one loaded?  You can option up a basic Jeep to $35,000 and still have a soft top!  And you want to take leather off-road?  You are paying a lot of money for basically an empty, noisy, tin box with four wheel drive.  Used Jeeps are no bargain either, as while they do hold their value, this means they also are no bargains.  Most cars depreciate 50% in 5 years.  Many folks have 100,000 mile clunkers 10 years old, and are asking 50% of new car prices.  to me, this is an inflated value for a vehicle that has more than half its service life behind it.

6.  Tow Capacity:  You'd think a small truck like this, with a V-6 (on the newer models) and crappy gas mileage, would have a good tow rating.  Think again - 2,000 lbs, and that's it.  Even the larger 4-door model is not rated to tow much.   These trucklets don't haul a lot of stuff inside, or by towing.

Tellingly, a LOT of jeeps these days are sold with hard tops, in four door models, with leather appointments and other luxury options.  The four-door models are even available in 2WD only, which tells you how often they expect to go off-roading.  These are image cars, sold to people who want to project an image of ruggedness and adventure, even if the only adventure they make is driving to ChiChi's on the weekend.

If you really have a NEED for a four-wheel-drive (as opposed to concocting one by unnecessarily going off-road for "pleasure" and just damaging the wilderness) then a Jeep might be the ticket.  If you live in a wilderness area, on a ranch, or whatever, a Jeep might be useful.  If you are a recreational hobbyist and go rock climbing or mud bogging, then a highly modified Jeep might be useful.  If you dwell in a cubicle and want to impress people with your manly prowess, who are you kidding?

The reason we looked at the Jeep is that yes, they are FUN cars.  And we live on an island and go to the beach a lot, and it seemed like a good sized vehicle to take two people, the dog, and our beach chairs to the beach, with the top down (or a bikini top).  Of course, to fit all that in, we'd have to remove the rear seat, so right off the bat, some of the practicality of the vehicle is lost (forget passengers!).

But the idea of owing not one, but TWO four wheel drive vehicles (again) as our only source of transportation is troubling to me.  Also troubling is the idea of owning two sub-20-mpg cars in an era of uncertain gas prices and potential inflation.

My first 4x4 was a Samurai.  It was a tinny piece of junk, although it was fun.  But at highway speeds, the flapping of the canvas top was annoying, and the short wheelbase meant you were rocked back and forth by even the smallest bumps.  And it had no amenities.  It barely had carpeting.  I sold it and bought a used Camry with air conditioning, power windows and locks, a smooth running, powerful and quiet engine, and a comfortable ride.  For driving to work, going to the store (with a lockable trunk) and carrying three friends around, it was a far more practical car.  And it got good mileage, too.

Yes, on the five occasions when I could drive off-road, I missed the old Samurai.  But owning an off-road vehicle when you rarely, if ever, go off-road, makes no sense.

Similarly, we bought the 1948 Willys to travel down our private road and go off-road at the farm.  Now there was a REAL Jeep, not some plastic imitation they sell today.  It was also a lot of fun to drive, but you would never want to take those early Jeeps in the highway - they topped out at 45 mph!  Later Jeeps were a little more practical, although we all remember the CJ5 fiasco.  Narrow track, leaf springs, and a sales promotional campaign aiming them at the average consumer ended up causing a world of woe for many.

And if you plan on going off-road, seriously, you'd better be prepared to spend thousands of dollars modifying your Jeep accordingly, even if it has a "trail rated" sticker on it.  And every piece of off-road gear you add to the Jeep makes it that much less enticing to drive on the road.  Pretty soon, you are commuting to work in the equivalent of a tractor.

Like I said, they are a lot of fun.  But I am not sure they are the most practical of vehicles for most folks.  In terms of cost of ownership, gas mileage, functionality, and even insurance rates, they lag behind more pedestrian vehicles.  It may seem like a keen idea to own an off-road vehicle as your daily ride.  But the noise and discomfort do get to you after a while.  And for the money involved, you can buy a sedan or wagon with a LOT of features and a quiet and comfortable ride - and pay less at the gas pump.

Jeeps are not for everyone!

Sell Your Stock in AT&T



I recently ordered AT&T's VoiceMail service.  A more schitzophrenic company, I do not know.  They sent me the user manual above, to access the service.  Look carefully at the key codes.... Does your phone have these symbols on it?


This is hilarious.  I decided to get a land line for my home, after going wireless for five years.  We are settling down in one place, so why not?  Cell service sucks here anyway.

I ordered the land line and the guy at AT&T in sales was great.  After a couple of weeks, I decided to get the VoiceMail service as well.  I called the guy back and he activated it (he gave me his direct line - nice dude!).

A week later, they sent me the "user guide" for AT&T Voice Mail and other services.  Look carefully at the image above.  Somewhere, in translation, the instructions were garbled.  And no one did a proofread before sending this guide out to hundreds of thousands of customers!

You can sort of figure out what happened, I guess.  The keystrokes shown are computer keystrokes - left arrow, right arrow, tab, etc.  But of course, those keys don't exist on a regular phone.  The one I like best appears to be a misunderstanding of the word "pound sign" which leads me to believe the manual was typeset or printed in India.

It is pretty embarrassing, really.  Can you imagine if Chevrolet delivered 100,000 cars with an owner's manual  entirely in Swedish?  The hue and cry would be pretty fantastic.

Fortunately, the Voicemail instructions are available online, and you can also access * codes at this site.  Other calling features for AT&T are shown here.

OK, so everyone goes online for this stuff now.  No one reads the f-ing manual anymore, except me.  But it is pretty freaking embarrassing when you send out something like this without proofing it.

FYI, from what I can determine, you can decode the manual above as follows:

ESC = *
Scroll up ^ = 5
Page up = 6
CR = 7
Left Arrow <- = 8
Right Arrow -> = 9
British Pound Sign = # (pound sign)

Pretty Freaking Embarrassing!  AT&T is not keeping their eye on the ball.  The services are sloppily done, and it is like three companies that hate each other (landline, wireless, and DSL) all working together under one roof.

I am sitting here, speechless, that some idiot didn't get fired over this.  Probably promoted!

Needless to say, I'm not buying stock in AT&T anytime soon.

When it is Time to Move On....

When a vehicle or possession is no longer practical in your life, it is time to move on...

Ordinarily, I would recommend buying a car and keeping it a long time - a decade or more, as that is the most economical use of any vehicle.   But what happens when a car you buy no longer fits your lifestyle?  That big pickup truck doesn't fit in the parking garage of your condo, or your sports car doesn't have room for a child seat?  When that happens, it is time to sell and move on.

I am going to sell my 1999 BMW M Roadster on eBay shortly.  It was a fun ride, but living on an island where the speed limit is 35 mph (25 in most places) and people drive golf carts on the road, having a car that has a speedometer calibrated to 160 mph makes little sense.  Plus, it was never a practical car to begin with, as it holds very little - two people and your wallet, basically.  You can't even take it grocery shopping.  So on to eBay it goes. Only 28,000 miles on it, too.

Many people "hang on" to cars like this, far longer than they should.  And within a three block radius, I know men my age and older, who are hanging on to hobby cars they bought as youths, but have since lost interest in, but manly pride prevents them from selling.  When you are 30, a Jaguar convertible, a Mercedes Roadster, or a Pontiac Trans-Am might seem like the "ultimate dream car" that you always wanted as a kid - and now you can afford it!

So you buy it, and quickly realize that while it may be the "ultimate car" for a 20-year-old, as you age, such things lose their allure.  They are just cars, after all.  The mighty M Roadster might seem like "the ultimate driving machine" unless, like me, you are an Automotive Engineer.

Don't get me wrong, it is a heck of a car.  But underneath the sheet metal and the hype, lies a parts-bin special that BMW created to use up their inventory of 318ti parts (an E36 front end, and an E30 rear) for their Spartenburg plant.  Like any other car, it was built to a design budget, and there are limitations to it.  And like any limited-production car, it has its quirks, too.

So while to a kid, it seems like the "Ultimate Driving Machine", to an adult, it is just another car in a long line of cars.  And an impractical car at that.

Like I said, I know a few men within rock-throwing distance of me, who have such cars, in their garages, un-driven, some with the batteries dead.  One is about ready to sell, but is still going through the gyrations of convincing himself to do so.  The resale value on these cars is pitiful, compared to their glorious prices when new.  The $44,000 M Roadster above will likely trade around $10,000 or so, as a decade-old used car.  It takes some courage and swallowing your pride to "let go" and sell.  And a lot of men simply refuse to do so.

Another neighbor has two such collector cars, under tarps, which have not run in months.  If the car is never even looked at, what is the point?  And of course, none of these cars will likely be "collectible" in our lifetimes.  And even if collectible, they are less likely to be so, if not in running condition or driven regularly.

And trust me when I say that you don't want to own a collector car.  Such cars can't be driven much, otherwise they lose their collectible value.  And since they sit a lot, they tend to develop funky car problems related to long periods of inactivity.  Even though the car above has only 28,000 miles on it, it has several "punch list" repair items I have to attend to, before I can sell it.  I just had the air conditioning overhauled, for example.  And that is not cheap.

Modern cars, as I have noted before, are like fresh fruit.  Use them in a normal manner, and they will provide many miles of good service.  But after 150,000 miles or 15 years, things start to go wrong.  And time, as well as mileage, is a big factor.  So the guy who puts 300,000 miles on a car in 10 years is not doing anything amazing - he is simply driving the wheels off it.  Putting 300,000 miles on a car in 20 years is a lot harder.  In 30, damn near impossible.  You have to "use up" a car before it ages too much, if you want to get optimal mileage out of it.

And therein lies the problem with collector cars.  At the Amelia Island Concours, I was surprised to see so many million-dollar collector cars fire their engines up and burn huge clouds of oil.  One participant told me that most are never driven enough to properly seat the rings, so after their million-dollar restorations, then end up as oil burners - for life.  That is pretty sad - but illustrates the problem with the collector car, which is more museum piece than transportation device.

For you and me - Joe Middle Class, trying to have a collector car is even more difficult.  For starters, we can't really afford anything that will be truly collectible.  Our pedestrian rides may hold their value after a time, but for the most part, the mass-produced iron that we collect rarely increases in price - at least in our lifetimes.

So why do people do this?  Men in particular?  I think it is a chance to be immortal.  You restore an old car, and you convince yourself that a disposable consumer good can be made to last forever.  But in most cases, it can't and won't.  Your '66 Chevelle might end up in a museum, or be ratted out by some kid.  It all depends.

Cars are a fun hobby, but when you stop using them, it is time to sell and move on.  In fact, the trick is to sell before you stop using them - while they are still driven regularly and run, and still have a resale value.

My friends with their dead battery "garage queens" will find it harder to sell those cars, as they are not in running condition and haven't run in months or years (and were not properly mothballed, but rather left to sit, on the premise that "I'll get to that someday").  The M Roadster is still driven daily and is in overall good shape.  And I can still get some good money for it - enough to buy a car to drive around the island in, haul the dog and our beach chairs, and perhaps some groceries.  In other words, a car that will be more practical for island life.

And again, living on "retirement island" has been very instructive to me, as I am learning from my elders, oftentimes from their mistakes, not successes.  I look around the island and see rotting collector or trophy cars, sitting in garages, unused, or under tarps in side yards.  In addition to the rides noted above, I've seen old Corvettes (covered with mildew), Thunderbirds, a 1973 El Camino, an MG Midget, a fake MG kit car, a fake Ford Model A kit car, an old Mustang, etc.   In most cases, the cars are either rarely driven or never driven, and molder under car covers most of the time.  It other cases, the cars are driven, but are showing signs of their use and abuse - sitting outside, unwaxed by their elderly owners.  They might at least be enjoyed, but they are depreciating into a mound of rust in the salt air. 

I don't want to fall into that trap.

Time to sell and move on.  And that's OK, too.

Sunday, November 28, 2010

Food and Beverage Budget


What should you expect to pay for food and beverages?  How does this compare to the average American?  Are there ways to save on food and beverages without resorting to extremes?

Once you are debt-free and own your own home free and clear, and you are totally out of debt, your remaining budget items are fairly limited:

  1. Income Taxes
  2. Property Taxes
  3. Automobile Expenses
  4. Food and Beverages
  5. Clothing
  6. Other
This is what retirement will look like.  Suddenly, food can become a large part of your budget.  What is a reasonable budget for food?  It is hard to tell, as costs are all over the map, and it depends a great deal on what you eat.  You can eat very cheaply if all you eat is rice or cheap pasta dishes.  But such carbo-centric meals are not very healthy, of course.  And as a result, you tend to notice that poor people tend toward obesity, as they buy a lot of starchy and sugary foods, which are cheap.

Gourmet and specialty foods are fairly expensive, as are flavorful foods.  Sauces and spices are not cheap, so if you like bland (ugh!) you end up spending less.  Compounding this problem is that many people don't really track their food purchases, so they tend to under-estimate what they spend and thus under-report their food spending.

People may say they spend "only  $100 a week" at the grocery store, just as they say they pay off the balance on their credit cards every month.  But we know better, don't we?  People lie - mostly to themselves.

And the statistics out there are not very helpful.  The Bureau of Labor Statistics has some data, averaging food cost per reporting "consumer unit".  However, these "consumer units" could be anything from a single person to a family of eight.  So the data is not really helpful for the individual, but might be useful for people tracking spending from the meta view.  This link, has a visual view of that data.

By the way, when you wake up tomorrow morning, take a good look in the mirror and then say "Good morning, Consumer Unit!"  Yes, that is how the Bureau of Labor Statistics views you.

The Bureau of Labor Statistics data also appears to be self-reported as well, so the data may be highly suspect.   People will under-report their alcohol purchases, lest they appear to be a lushes.  $457 a year doesn't buy a lot of light beer, does it?

Some couponing sites have self-reported spending data, but this is also suspect.  I find it hard to believe, for example, that you can feed a family of four very well on $200 a month, as one poster on that site claims.  That works out to $1.67 per day per person, or about 55 cents a meal.  If this person is being honest, they are the most efficient homemaker on the planet!  However, they may be realistic in this self-reporting if most of their meals are taken out at restaurants (and thus not counted toward the "grocery" budget).  So they may spend "only" $200 a month on food at home, and $1000 a month at Applebee's.

And that is a problem right there - many people separate (mentally) their grocery and their restaurant budgets, and thus congratulate themselves for spending little on groceries, when they are eating out five nights a week at chain restaurants.  They are easily spending 5-10 times as much on restaurant food as home cooking.  And as the Bureau of Labor Statistics numbers show, most Americans "consumer units" spend as much on restaurant food (if not more) than on groceries.

I have been tracking my spending using Quickbooks since January 2009.  While the data might not be accurate to the penny (many cash transactions are not entered, and there may be some transactions that are mis-classified, it is an ongoing effort!), the results do produce some startling data:


            Average Spending, Per Month

     YEAR                      2009                 2010

     Groceries:                   $531              $576

     Beer, Wine, Liquor:   $202              $362

     Restaurants:                $167              $316


Some observations here.  First, in 2009, the shit was really hitting the fan, economically, and we cut way back on spending.  In 2010, things seemed to be looking up (or we lost the discipline to cut back on spending) and expenses increased.  The increase between 2009 and 2010 may also be due to better tracking of expenses, as well.  Note also that the restaurant expenses do not include deductible business meals (which are only partially deductible, and a deduction is still an expense!).

A second note is that our grocery spending is above the average "Consumer Unit" reported by the Bureau of Labor Statistics, and far above the data self-reported on the couponing site.  However, couponers are more likely to be people scrimping to get by, so it is not surprising we spend more.  And we tend to buy more upper-end foods, even at Wal-Mart (which has a fine selection of food, even gourmet and specialty items!).  We also eat out less in restaurants than most people (maybe once or twice a week, at most) so we spend less there.

We also traveled more this year, by car, (as opposed to the RV) and ended up eating in restaurants more, hence the increase in that budget.

When we do eat out at restaurants, however, we tend to go to middle- to upper- range restaurants, not fast food outlets or other "bargain" type restaurants, where portion size and price are king.  So we tend to spend more there.

Our liquor budget is staggering - almost 10 times the Bureau of Labor Statistics average.  There are a number of reasons for this.  First, we drink a lot.  Second, our friends all drink a lot.  Third, we do host a number of parties where a lot of alcohol is consumed.  Fourth, we used to buy a lot of expensive wines from local wineries when we lived in Central New York for the summer ($20 to $40 a bottle) instead of more prosaic but serviceable wines, such as the "Oak Leaf" line from Wal Mart ($2.97 a bottle!).  And our scrimping last year is reflected in the liquor budget.  In 2009, we bought far less booze from local wineries and more from discount liquor stores.  In 2010, we went back to buying local wines, often costing $300 a case or more.  It is a habit that we will probably break, now that the house in Central New York has been sold.

The point of this blog is to live well on less, not to scrimp and sacrifice and live like a monk.  So "saving money" by eating bland piles of pasta or drinking cheap lite beer or eating at McDonald's is not in the cards, unless we were forced to do so by circumstance.  However, it is possible to shop more carefully on price and quality, obtaining the same goods for better prices, by going to wholesale outlets or to Wal-Mart, rather than to "boutique" grocery stores.  And not every bottle of wine need be $20.  Table wine, for daily consumption, can be more prosaic.

Of course, for many people, there is little choice in the matter.  They live on Social Security, Welfare, or food stamps, and have to feed a family on a mere pittance a day.  This blogsite, for example, attempted to feed a family of four on $227 a month in food stamps - and still provide nutritious food.  I am not sure that can be easily done.  The only way to get enough calories on such a limited budget is to go with cheap carbs and other badly balanced diets.  That's a lot of ramen noodles, my friend!  A budget like that assumes you can make three meals a day, for four people, for 63 cents a meal.  That is a very thin budget.  Even the USDA doesn't expect people to do that, but instead assumes the recipient will supplement that with $300 of their own money, for a monthly budget of $527 a month for food.

Um, $527 a month is what we spend, on average.  So we are not too far off, I think.

Last year, our food and beverage expenses averaged about $900 a month.  This year, they have jumped to $1200 a month, mostly because of increased liquor costs and increased restaurant spending.  Our goal for 2011 will be to get that number back down  below $1000 and then see how much lower we can make it.  If we can save a couple thousand dollars a year, that means more money for retirement, and also the ability to live on less when we retire.

To accomplish this, we are going to set up a separate checking account (with debit card) just for household food and beverage spending (and restaurant meals).  We will fund this account by $1000 a month, and my partner will track the expenses in Quickbooks.  It will be a good learning experience for him (someone has to balance the checkbook if I die) and it will force us to think about food spending more closely.  In this manner, we will know right off the bat if we are going over our budget or not.

What is your food budget?  Do you track these expenses on Quicken or Quickbooks?  If not, I suspect, like the ladies on the couponing site, you may be deluding yourself in terms of actual spending.  Many people, like the lady who posted she feeds a family of four for $200 a month, might be deluding themselves if they are not including all spending, including cash purchases at the local 7-11, various grocery trips for quarts of milk, and the like.  It is easy to say "Well, the last time I was there, we spent a couple hundred bucks, so that must be what we spend a month" when in fact, it is what you spend a week or every other week.

Again, the only way to find out is to TRACK IT.  And if you are ever, ever, going to be financially free and independent, you need to figure out where you money is going - and why.  Once you can do that, you can live a better life on less money.

Living better on less.  That is the point of this blog!

Bed, Bath, & Beyond


We recently made a trip to Bed, Bath, & Beyond, and didn't buy a single thing.  The store was repulsive.

My partner used to work at Linens 'n Things before they went bankrupt (the store was well parodied on Glee as "Sheets 'n Things").  Bed, Bath, & Beyond (BB&B) was their No. 1 Competition and apparently "won" the battle of the sheets and towels stores.  Or did they?

For some reason, BB&B has decided to morph their stores into the equivalent of a snake-oil salesman.  The aisles are no longer clear, the stores are no longer clean and well organized.  Instead, the center aisles are crammed to the gills with gadgets and junk that is heavily advertised on television.  And in case you missed the point, each display has a television blaring the ad for the product, showing you how the robotic mop will change your life forever.

I enjoyed the robotic mop video immensely, watching it in a trance no fewer than 10 times.  The fat white chick sits on her lazy ass drinking coffee in the middle of the day (bitch don't have a job, I guess) while the tireless robot scrubs her floor for her.  You know, when those robots have an uprising, she'll be the first one to go.  When the revolution comes.

Most of the rest of the store was the same way - useless gadgets and "gift ideas" and poorly made products.  We are looking to buy a bar stool (not the reason we went there) and just on a whim I looked at their selection.  Everything was poorly made flat-pack junk from China that you assemble with little Allen wrenches.  Even the display units were falling apart.

And some of the specialty items were ridiculous.  A plastic container designed "especially" to make pasta in your microwave!  $10 for a Tupperware bucket, basically.  You know, boiling pasta in a pot ain't all that hard!

And yet, the slack-jawed mouth-breathing locals were wandering around in a daze, snatching everything they could carry off the shelves.  After all, it was the day after "Black Friday" and the TeeVee says that everyone, yes everyone MUST SHOP!

We went there to take back a cocktail strainer we bought for our now sold vacation home (see my posting "TAKE IT BACK!") and the girl at the counter gave us cash for it - retail price.  So we made $5 on the deal, as we used one of those ubiquitous coupons that BB&B plasters all over the place, for $5 off, 10% off, 15% off, or whatever.  If you ever pay full price for anything there, you are an idiot.

We were going to find some cheap stick-on spice jar holders to put on the inside of a door of a cupboard, but they stopped selling them, apparently.  So we left empty-handed.  We also looked at a magnetic knife holder, but at $15.95 it seemed kind of pricey.  I guess with the coupon it might not have been so bad.  But by that point, we were so nauseated by the crowds of "shoppers" (why do so many people feel the need to douse themselves in perfumes?) and the whole nauseating layout of the store with its hucksterism and TeeVee displays, that we had to leave.

BB&B is sort of the white-trash version of Williams Sonoma (where my partner also worked).  Not quite as bad as "Dollar Store" but close enough (they need to get that funky "Dollar Store" smell going to make the transition complete).

And yea, that sounds "elitist" but I've reached a point in my life where the last thing I need is another cheap-ass plastic "gadget" made in China that will be broken before I get it back to the car.  There is nothing at BB&B that I want to buy that I can't find elsewhere that has a better price and better quality.

And as a "shopping experience" it is something that is disorienting and nauseating.  I just dislike going there, intensely.

Throw in their coupon madness (just lower the prices, for chrissakes!) and you have a retailing nightmare trifecta.

Judging by the number of po' white trash folks buying crapola and handing over their entire paychecks to the cashier with blubbering thanks, I suspect they may stay in business for some time.  And it appears that their market strategy of moving downscale is working.

"Shopping" works as it encourages people to over-spend on junk without comparing prices, as they are making impulse purchases.  If you try to compete on staples like towels and sheets, well, that is hard to do, as people actually make thoughtful purchases of these, comparing price and quality.  Rarely does someone impulse buy a bath towel set or a sheet set.  So they go with hucksterism junk, as it is profitable.

Hechingers, before it went bankrupt, tried this route - pushing highly profitable small appliances in a desperate attempt to bring up sales.  But as a lumber yard, they failed, not stocking enough lumber.  So people went elsewhere and the chain folded like a cheap tent.

Perhaps the same will happen to BB&B.  If they lose focus on the main products (linens, towels, bath accessories) people will stop going there for that.  If the entire store devolves into a gadget shack, who will go there?  Remember what happened to Sharper Image.  People eventually tire of "must have" gadgets that never quite work as advertised.  Eventually, even the dumbest amongst us stop buying.

But for me personally, going there is akin to having a root canal.  It is just not pleasant.   So if I needed towels or sheets, I think I would look elsewhere first.

Fortunately, we have on-line shopping these days.  I found the spice racks online on Amazon.

That is the future of retailing.

Saturday, November 27, 2010

Kickback Schemes




Rewards Cards are becoming an increasingly annoying hassle to deal with.  You are better off shopping with a merchant that offers lower prices and fewer gimmicks.

Frequent Flyer Miles.  Customer Rewards Club.  Frequent Shopper Club.  Cash Back.  Bonus Reward Coupons.  S&H Greenstamps.  The list goes on and on.  Everyone, it seems, wants you to "sign up for savings!" by joining some customer loyalty "rewards" program.

There are many reasons merchants use these cards and schemes, and none of them work in your favor:

1.  Customer loyalty


2.  Selling Demographic Data


3.  Distracting the Consumer from the Basic Bargain

4.  Most Consumers Never Take Advantage of the Schemes


Let's take a look at each of these and understand why they work against you as a consumer.

1.  Customer Loyalty:  At first, this seems like a win-win for both the consumer and the retailer.  If you are loyal to one airline, they cut you a break in prices, and you end up getting a better deal than you would have, if you had to cross-shop airlines all the time.  But the problem is, the use of "frequent flyer miles" and other loyalty programs end up causing you to shop price less and thus avoid bargain-seeking, which is what a "loyalty" program hopes to accomplish.   So you buy an airline ticket for $250, because it is with "your" airline and they give you "miles".  But that means you forego a similar flight on a competing airline for $99.  Is loyalty such a good thing?

Similarly, if they can prevent you from shopping at a competing grocery store by offering you minimal benefits in a loyalty program, it will prevent you from comparing price and quality, but instead merely accepting prices at the store of your choice.

They throw pennies at you, hoping you will spend dollars in bad bargains.  Being "Loyal" to one supplier can be handy, but often if you become captive to that supplier, they will end up abusing you.  It is only when you have one foot out the door that they will offer you real bargains.


2.  Selling Demographic Data:  Many of these loyalty programs have a hidden agenda.  When you swipe that "loyalty card" it logs who you are, where you live, and what you bought.  Did you buy baby food?  They can infer you have children.  Did you buy dog food?  They can infer you have a pet.  Both bits of data are valuable and salable.

Is this such a bad thing?  That if you buy baby food, you will end up getting a subscription offer to Parenting magazine in the mail?  Perhaps not.  But it underscores that the retailer is no longer keeping their eye on the ball - the main deal being selling the products they are selling.  Instead, they now run a demographic sales office on the side.

WalMart and other low-cost chains eschew these tactics.  To them, the only demographic data of interest is what is selling in their stores.  In other words, they are only interested in sales data for their own use - not as a sideline data marketing service.  And since they don't have to manage and operate these sort of schemes, they keep their eye on the ball - retailing - and offer low prices to everyone on the same basis - loyalty or not.


3.  Distracting the Consumer from the Basic Bargain:   In any economic transaction, the more complicated you can make a deal, the easier it is to rip off the customer.  And one sure way to do this is to take a basic economic transaction and tie it in with some other, unrelated transaction.  So you open a savings account, and the bank gives you a toaster.  A toaster?  What gives?  The idea of getting something for "free" might distract you from the fact that the bank's interest rates are lower than the competitors.

Similarly, grocery stores offer pennies off on the price of gas if you buy a certain amount of groceries there.  So you dick around with saving receipts, swiping "loyalty cards" and spending hundreds of dollars in groceries at a store to get..... 50 cents off on 10 gallons of gas.  Big deal.

But that is the nature of these beasts.  Again, they throw pennies at us, hoping we spend dollars.  So you get caught up in getting "cash back" on a credit card, not realizing that one month's interest on the debt is more than the "cash back" from a year's worth of purchases.  Or you get the equivalent of a $99 plane ticket after spending tends of thousands of dollars on a "miles" credit card, with an interest rate of 20% or more.  If you miss even one payment, that $99 flight is very, very costly indeed.

If you can distract the consumer from the basic bargain by dangling out something unrelated, chances are, they will not as carefully scrutinize the basic bargain.  One car dealer recently made headlines by offering a free automatic rifle with the purchase of a pickup truck.  Of course, the rifle is not "free" but folded into the cost of the truck.  But many people fall for this sort of thing, thinking they are getting something-for-nothing, and thus do not negotiate as sharply as they would, because they are distracted by the free item being dangled out of their reach, like a carrot or a distracting baby toy.

The overall cost of the truck with the "free" rifle ends up being more than if you bought the truck from a competing dealer and strongly negotiated the price, and then bought the same rifle at a gun shop after negotiating strongly on price.  By combining two disparate items, they hope to confuse you into making a bad bargain.



4.  Most Consumers Never Take Advantage of the Schemes:   Retailers count on the fact that most consumers will never take advantage of all the discounts rebates, coupons, cash back, or free flights they offer.  So they can offer these things knowing full well that half of them (or more) will never be redeemed.

I have a separate wallet just for loyalty cards.  I have three for pet stores, three for office supply stores, and maybe four for grocery chains.  One for an RV store, and two for boating stores, one for a gas station.  If you buy anything at these stores, you have to use these loyalty cards or be overcharged by a few cents to a few dollars, depending on the size of the purchase, or miss out on "bonus points" credited to you for each purchase.  It is an enormous hassle to remember to bring these cards and use them.  And in most cases, people forget.

Some, like Camper World, SELL the loyalty card (the "President's Club") and the cost of the card is such that unless you spend a few hundred dollars a year there, chances are, you are not recouping the cost of the card.

People forget to bring their cards, so they fail to take advantage of sale prices or get credit toward their free 10 cents of gas.  Or the rules for redeeming "loyalty points" are so convoluted and obtuse that most folks never figure them out or bother to redeem them.

For example, with Discover, you can only redeem your "bonus cash" in increments of $50 or more.  And they don't exactly beat you over the head to tell you that you have bonus cash to redeem.  It is incumbent on you to go to the website and request the redemption - or redeem it as a gift card in conjunction with one of their "partnered" retailers.  Gift cards, of course, being an inducement to get you to shop at that store and buy more goods (in excess of the gift card amount).   Why not just automatically apply the cash back to your card balance?  Well that would be no fun - for the Discover people!

Or maybe you shop at a store so infrequently that you never accumulate enough points to get anything on their loyalty scheme.  I have a card for the Flying J gas station and I am not sure why I use it or what the benefits are.  I have never received a penny from it, as far as I can tell.

Or, with the airlines, the miles "expire" over time, so you end up never accumulating enough for that trip to Dubuque you've always dreamed of.   You fly a few trips a year and your miles expire as fast as you accumulate them.  You are loyal to an airline and you get nothing in return
  
And because of all this, perhaps half of all these frequent flyer miles, rewards points, cash-back deals, loyalty discounts, or whatever, are never redeemed.  The merchants can offer a bargain, and most folks will never receive it.  They can play like they are the guys in the white hats, but in most cases, the bargains are illusory.


* * * *

So what, as a consumer, can you do?  Well, in most cases, belonging to loyalty clubs and the like is never a really good bargain.  In most cases, the most expensive merchants uses these clubs to ensnare consumers with higher-priced bargains.

For example, for many years, I was a member of the "Hertz #1 Club" which is a bit of an ego trip, as you get driven on the bus directly to your car, which has your name in bright lights listed above it, with the trunk open, no less.  You are a special person!  Of course, the rental rate is no real bargain.

When I ran my own business, I found that an off-airport generic car rental place could rent me a basic ride for less than 1/3 the price.  And since the money was coming out of my pocket (you can't deduct your way to wealth!) it made more sense to shop for the best bargain than to go with the "loyalty" program.

Similarly, discount airlines like Southwest offer flights for alarmingly low prices.  But different airlines offer different fares on different routes.  So it makes sense to shop airfares for each flight than to just pick the airline you are "loyal" to.  A friend of mine always flies Delta, because they are members of the frequent flier program.  So they pay $250 to take a flight that I would pay $99 for on US Airways, out of "loyalty" to a program.  That makes no financial sense.

In most cases, I try to shop with merchants that don't require or use these sorts of programs.  Tracking and monitoring a dozen "loyalty" programs makes little or no sense, in terms of time management.  And the "rewards" from these various programs are a mixed bag.  In most cases, the benefits are very, very small.

And yet, I see "smart" people regale me about how they belong to this or that loyalty program, and how they will get cash back or a free flight out of it.  They spend hours of their time monitoring these programs, and hundreds of their dollars in excess charges at the high-priced merchant.  But tell the same person they could save $250 by shopping their homeowners insurance, and they will say they have no time.

Free flights are sexy, cutting costs from your personal budget is not  Getting "cash back" on a credit card sounds like a bargain.  Cutting out $100 in the monthly cable bill does not.  So people find time to screw around with these penny bargains while walking away from dollar savings on the grounds that the latter is too difficult and/or too time consuming.

And in most cases, the "bargains" they get are de minimis.

For the Discover, card, for example, I've received $100 "cash back" on over $30,000 worth of credit card charges.  And since I carried a balance on more than one occasion, the "cash back" was more than offset by the interest charges.  I would have preferred a simpler card with a lower interest rate (which is what I have now) than to have a "gimmick" distracting me from the fact that a credit card is indeed a debt instrument.

Frequent Flyer programs are an example of always putting the carrot just out of reach.  It seems that every time I try to buy tickets on US Airways using frequent flyer miles, I am always a few thousand miles short (but I can "buy more miles" for only a hundred dollars or so) or that the flights are "blocked out".  In many cases, it turns out that my partner and I cannot fly on the same flight.  And because the miles "expire" over time, if you do not fly regularly (and use the miles regularly) there is little point in even playing the game.  You are better off just booking a cheap flight with a discount airline.  Upgrades to First Class were the only use I ever found for frequent flyer miles, and this was just an example of the airline selling something it was going to throw away anyway (an empty seat) in exchange for miles.

As for other "Loyalty" cards, I am not sure I have received anything of value at all, over time.  Walgreens promises a 10% discount - on store-branded items, but the discount is applied not to the purchase, but only to the next item you purchase, which makes no sense (but gets you to come back and buy more!)

In most cases, the discounts offered are fairly trivial and not much better than what you would get shopping at a discount store.  WalMart doesn't have a "loyalty program" yet (and I hope they never will!) and it is one reason I like to shop there.  Everyone pays the same prices - there is no secret club or anything that gives you a special discount.  No cards to carry, no programs to monitor.

And it goes without saying that buying things online is a good way to save, and the best Internet merchants do not have these crackpot "loyalty" schemes that you have to screw around with.

Again, the more complicated you can make a simple financial transaction, the easier it is to deceive the consumer.  Loyalty programs, hidden discounts, coupons, frequent shopper cards, airline miles, cash back bonuses - all serve to distract the consumer from the basic bargain and also obscure what is the ultimate price for the goods.  Most people, when told they are getting a "discount" will go all ga-ga and fail to realize that the pennies extra they are paying on each item in the store negate the free toaster they get from the S&H Greenstamps.

Of course, as a consumer, you cannot walk away from money on the table.  If there is such a program at a store that you ordinarily would shop at anyway then it makes sense to participate.  But if your favorite merchant uses such schemes, perhaps that is a sure sign they are overcharging you.  Check out prices with competitors that do not uses these schemes, or check out prices online.  Remaining "loyal" to one merchant usually does not work out in your favor, but instead in theirs.

The retailer that presents a basic bargain - a good for sale at a marked, standard price - gets my business.  Cash back, loyalty card, frequent flier miles, whatever gimmick they come up with next - those will always be my second or tertiary choice.  If the choice is between a simple, understandable bargain, and a difficult, convoluted one, I pick the simple one every time, as it is usually the real bargain.

And real bargains are simple.  Complicated deals rarely work out in the consumer's favor.  That is why merchants make them complicated!

Somthing For Nothing...



The idea that you can get something for nothing pervades our society, and is the cause of much misery to people, on a personal level.

The picture above is of scumbag ordinaire, Matthew Lesko, who runs informercials and sells books that tout the idea that "everyone" is getting free money from the government, so why not you?

Lesko's books (and there are a LOT of them) have made a lot of money for Lesko, but the idea that there is a ton of free government money out there for the taking is, well, to say the least, overstated.

Yes, you can go on welfare or collect food stamps.  But you have to qualify.  And in order to qualify, you have to be poor.  A friend of mine told her grand-daughter to apply for food stamps while she was in college.  The girl went down to the welfare office, and after nearly a day of waiting, filling out forms, and talking to government clerks, was told that she would qualify for $10 a month in food stamps.  And since then, her income has risen to the point where she no longer qualifies for that.

And yes, there are Pell grants and other types of student aid out there, but for the most part, these are available only if you are a student - and the money is usually paid directly to the school you are attending. You can't just show up and have them hand you a basket full of money.

Other government programs are out there that grant money for an extraordinary variety of activities.  But usually, you have to do something in return for this money.  So yes, you can get a National Endowment for the Arts grant for doing something artistic, but you have to be a bona fide artist and actually do something in exchange for the money.

The list goes on and on, but the bottom line is, there is little in the way of "free money" from the government that you are missing out on.

And in a way, Lesko is no worse than any of the self-appointed "financial gurus" like "Sooze" Orman, with her books, seminars, and TeeVee shows, that promise to make you wealthier, or at least "approve" you for the purchase of a new SeaRay or Buick.  People get rich selling books telling people how to get rich.  You make everyone $39.95 poorer, and yourself a LOT richer in the process.

So how do the Matthew Leskos of the world succeed?  Well, many people like to believe in easy answers - that you can accumulate wealth without working, you can make something for nothing, transmute tin into gold, create a carburetor that causes a car to get 100 mpg, or get "free money" from the government.

And in many cases, serious con men use this sort of lazy thinking to their advantage by selling "money system" seminars or various sorts of investment schemes and cons.  Or they get you to believe that your invention will make you a million bucks without any effort on your part.  The common denominator is that you can create wealth from nothing, and everyone else is doing it, and you'd better get in on it before you "miss out"!

People like Lesko might ding you for the cost of a book, and nothing more.  So you don't get too badly hurt there.  And perhaps if you learn from that mistake, his book might actually be instructive.  But I think for the most part, the "true believers" keep searching, like Diogenes, for the "real deal" even when they have been scammed over and over again.  And then send off larger sums of money to con artists and flim-flam operators and get ripped off for more than the cost of a book.

These are the sort of folks who "invest" in an MLM scheme, get ripped off, and then invest in yet another one, which advertises itself is "not just another MLM rip-off scheme!"

These are the sorts of folks who answer ads online about how you can buy "Gov't seized drug vehicles for $50!" thinking they are going to get a blinged-out Mercedes for fifty bucks.

Or the sort of folks who answer e-mails claiming that unclaimed monies are laying about in their name.  Give us a processing fee of $100 and we'll get that check right off to you!

Or worse, the idea that a Nigerian Oil minister has millions of dollars he wants you to handle, for a minor processing fee of a few thousand dollars, in advance, please.

In short, they are the raging "true believers" who are willing to suspend disbelief on a daily basis and hand over their paychecks with blubbering thanks to the first slick-looking con man to come into town.

The something-for-nothing mentality ends up hurting the individual in the long run, as there is little in the way of something-for-nothing out there.  So instead of working, saving, and creating real wealth, the something-for-nothing mentality causes people to squander their wealth in search of easy money - and they end up with nothing.  All that energy put into schemes could have made the individual really wealthy, but instead, they end up poorer.

And as a society as a whole, it has a corrosive effect.  As one commentator noted, promoting this idea of "free money" from the government serves to foster the mentality of dependency on the government, or to look at the government as a source of largess and swag.  It is that sort of 'bread and circuses' mentality that lead to the downfall of Rome.

And increasingly, our country is becoming dominated by people who believe these sort of sweet lies.  Chelsea Clinton's father-in-law was recently convicted of fraud, after he stole money from his clients to make up for losses in a classic Nigerian scam.  It is hard to believe that college-educated, upper-class people fall for this sort of thing, but it happens.

In short, cons and scams are no longer just the purvey of the trailer park set, but have gone mainstream.  And in part this is because more and more Americans are buying into something-for-nothing.

I know of at least a dozen people who buy into the idea that you can "make money at gambling" (or at least that having a compulsive gambling habit "isn't that bad").  And I know many middle-class or upper-middle-class people who have fallen hard for day-trading stock schemes.

For these folks, it is not enough that their income or wealth places them in the top 10% of the United States - or top 1% of the world.  No, they want more - they want the "free money" that everyone ELSE is getting in on.  So order today and get your stock trading kit!  The casino boat is sailing, and every night there is a sure winner!

And oftentimes, these folks end up pissing away a lifetime of work - money that took painful years of hard work to accumulate is squandered away in get-rich-quick schemes.

This is sad, in a way.  The idea of succeeding through hard work, thrift, saving, and investing has been supplanted by a lottery mentality - or a mentality that everyone is "entitled" to riches without work, and all we need do is petition the government for it.

Perhaps there is not much you and I can do to change this mentality in the world.  But on a personal level, you can protect yourself by not falling for it.  Living in reality can be harsh and difficult, to be sure.  But when you succeed in reality, as opposed to living in a fantasy world, you end up much happier in the long run.

Friday, November 26, 2010

On-Line Bill Payment


Online bill payment is safer, easier, and cheaper than mailing checks.

Living here on retirement island, I hear the phrase "dagnabbit!" a lot, either literally or metaphorically.  I was talking with an oldster the other day, and they said, "Dagnabbit!  I don't like this online bill payment idea!  Suppose the computers go haywire?"

Haywire.  That's  the mentality I am dealing with here.  Yes, old Univac will go beserk, saying "This does not compute!  This does not compute!"

Thanks for playing, gramps.  Sure its not time for a nice dirt nap?

Yes, back in the 1990's, I was skeptical of online bill payment.  But back then, getting on the Internet was, for many of us, a hassle of dial-up modems and slow net speeds.  And only a few merchants had online bill payment and the techniques were pretty crude.

Today, almost everyone can be paid online - even people who are not online.  You can instruct your bank to mail a check to someone, free of charge, simply by clicking a mouse.

Electronic billing allows you to receive your bills electronically, view them online, and also download them, if you want to (why bother).  And you can instruct your bank to pay the bill the day it is due, and not one day before or after.  It is a very easy to use system.

But what about the old-fashioned way?  If the utility company mails you a bill, there is a chance  (a small one) it may get lost in the mail, or delayed.  If so, you won't get the bill on time, and you may be socked with late fees.  In addition, if you are away on vacation, you may miss these bills as well, resulting in late fees or other problems.  Electronic billing, on the other hand, doesn't rely on the post office for delivery, and you can check your bills anywhere there is a computer - at a hotel, friend's home, even the local public library.

But what about the safety and security of sending a check?  It is illusory.  First of all, the same postal service problems apply with mailing checks - they can be lost or delayed, resulting in late fees.  For a credit card, this can mean "rate jacking" which is no laughing matter.  Or, if you usually pay off your balance, a late payment could mean interest fees being applied.

But second of all, under Check-21, a check is no longer a "paper trail" of payment, but instead a request for an electronic transfer of money.  If you handed me a piece of paper with the name of a payee on it, and the amount they were to be paid, and asked me to go online and pay them, well, that is basically the same thing as a check these days.  Banks no longer save and return checks, but shred them instead.  So there is no "paper trail" of payment anymore.  In fact, many stores, such as WalMart, when presented with a check, simply scan it and hand it back to you.  You might as well just use a debit card.

And what about cost?  A first class stamp is like what, 44 cents these days?  Say you pay five bills a month.  That comes out to $26.40 a year - enough to buy you a nice lunch with a beer at a fairly nice restaurant.  Hmmm... free meal, I'll take that!

But wait, there's more!  Many companies, in an effort to get you to use electronic statements, will offer discounts in fees and prices if you agree to go paperless.  So you get reduced or waived bank fees if you get your statements online instead of by paper.  So there are savings on both ends of the deal.

Online billing and bill payment has put a serious dent in the Post Office's business, and this is to be expected.  But it is the wave of the future.  No, actually the wave of the present.  Probably less than half of the people out there are using paper billing and payments these days, and the number is decreasing rapidly.

As for record-keeping, it is true that your checkbook register or carbons do provide a record of your transactions.  But you should be using some sort of financial software, like Quickbooks, to balance your accounts and keep track of your spending.  Such records will help you track bills and payments far easier than any checkbook registers or carbons ever will.  Some banks even offer services whereby you can "snyc" programs like Quicken with your bank account online, to balance your accounts.

If you are still paying bills by paper check and mail, not only are you not as secure as a person paying online, you are less so.   And, you are spending more money, not to mention time, doing so.  You are better off just going electronic, as it is faster, cheaper, easier, and allows you to track your spending and budget a lot easier.

And if you say "Dagnabbit!" to that idea, well, rest assured that you won't have to deal with the issue for long, as you likely already have one foot in the grave, gramps.

Thursday, November 25, 2010

Why I have no Thanksgiving Posting (my Thanksgiving Posting)

Note: This is a cross-posting from my Losing Weight Now! Blog




Hey Everybody!  Let's all do the same thing at the same time!  On second thought, no, let's not.

At this time of year, most blogs dealing with food feel obligated to do a Thanksgiving posting.  They either have to share recipes or tips for the "Big Turkey Day" or talk about diet tips to "cope" with the event.   And of course, they have to use dorky phrases like "Mr. Tom Turkey!" or "T-Day" which about make me vomit.

This is my non-Thanksgiving posting.

I got off the holiday bandwagon a long time ago, for a number of reasons.

First, holidays in our house were not a happy time, but one fraught with stress and angst.  My Mother was stressed-out, trying to make the "perfect holiday" with her limited homemaking skills, and she thought every holiday was a judgment of her value as a person.  And she was right, too.  In our society, holidays become these judgmental times, where the person preparing a meal ends up screwed no matter what they do.  Your turkey is too dry, I'm afraid.  So holidays were never a happy time.

Second, Thanksgiving, as an event, sucks.  You sit around with relatives all day, then gorge yourself on food and then watch football or get bored to death.  Heavy consumption of alcohol is the only refuge, and that usually leads to trouble in most households.  You have a four-day weekend, and what to you end up doing?  Sitting around on your ass, overeating, watching TeeVee, or shopping.  All activities I detest.  That and visiting with psychotic relatives.  Thanksgiving really needs a makeover - perhaps fireworks, or a water slide, or something.  It is just as boring and dry as the turkey served.

Third, once you do something, like 20-30 times, the allure wears off.   I disagree violently with the idea that we should be forced to do something, over and over again, simply because "society" says we should.  And once you've done something every year for most of your life, it no longer is as much fun as it could be.  It is like birthdays - once you are over 10 years old, they are no longer exciting.

And let's face it, the fun in Thanksgiving probably was old hat by the time you were ten years old.   The Hallmark people like to make it seem like children can't wait until "Tom Turkey Day" and lick their lips thinking about all that good food!  Maybe that was true in 1910, when most people had trouble making their daily calorie quota, but trust me when I say that today, kids would rather go to McDonald's, and the idea of food being some special treat is lost on them.

And no, kids don't pine for candied yams any more than they do for "sugar plums" at Christmas.  We really need to stop living in the 1800's.

Fourth, I like to time-shift.  I learned long ago, while living in the Washington, DC area, that if you did things at times different from everyone else, you could enjoy life a lot more.  So I worked weekends and took time off during the week.  I didn't commute, but drove only during off-peak hours.  To me, the Nation's Capitol was still a sleepy small Southern town with no traffic, uncrowded stores, and abandoned parks.  To most "Normal" Washingtonians, it was a place where, no matter where you went or what you did, the rest of the population of the city was right there, trying to do the same damn thing.

So the idea of "Hey, let's all drive to work at the same time!" and "Let's all go shopping at the same time!" and "Let's all go on vacation at the same time!" became readily apparent for the idiocy it entailed.  And yet most Americans this weekend are traveling together, eating the exact same foods at the exact same times together, watching the same TeeVee shows, and shopping in the same malls.

Not very original, is it?

So how do I celebrate Thanksgiving?  Well, I don't.  I enjoy the day as with any other, and that's it.  I don't feel the need to cook a turkey or invite people over, or whatever.  I may work, I may relax, but I don't feel compelled to do what society says I should.  I am liberated from those silly expectations.

And if you think about it, the entire holiday is a fraud from the get-go.  The Pilgrims were an odd lot.  They fled religious tyranny in Europe, only to set up a religious tyranny of their own in the US.  Their religious beliefs would be alien to most Americans.  And it was their descendants who held the famous Salem Witch Trials.  And of course, while they suffered from religious intolerance in their home country, in the New World, they practiced religious intolerance of their own.  Frankly, I don't think I would have fit in well in the Pilgrim world.

And of course, the giving of thanks must be bitter-sweet for Native Americans, who saved the Pilgrims' lives that first cold winter and showed them how to survive in a harsh, new world, only to have their lands taken from them, in the start of what would be a Continent-wide genocide.

So historically, Thanksgiving is as suspect as Columbus Day.  And what it has morphed into - sort of a practice run for Christmas, is even worse.  Food, Football, and Shopping.  What's not to like?

As with Christmas, I think a better approach than trying to re-create a Norman Rockwell nightmare (and failing badly at it) is to look at the time off from work (if you are a cubicle dweller) as an opportunity for a vacation.  Fly down to the Caribbean and sit on a warm sandy beach, while a handsome waiter brings you tropical drinks.  Screw sitting around with your relatives - often the people you'd least want to spend time with, ever - eating the same old bad food and doing nothing for four days, other than maxing out your credit cards on "gifts" for the next holiday.

Some friends of ours came over for Thanksgiving a few years ago and were horrified to hear we were not serving turkey.  Nothing against turkey, other than it is a greasy mess to prepare and takes hours.  They literally were having a panic attack.  They felt that Jesus would come down from heaven and kick their ass for being sacrilegious on Thanksgiving.  And I guess if Thanksgiving were a religious holiday, he probably would, as we served tacos.


But contrary to popular belief, it is not a religious holiday, but a secular one, created during the civil war by Abraham Lincoln.  The trappings about the Pilgrims and all, are sort of tacked on history to give it some weight.  No, Jesus did not celebrate thanksgiving.

There are many alternatives to getting sucked into the "let's all do what society says we should" mentality, including doing nothing.  Taking a trip to an island paradise is what I would do, except I already live on an island, so I will do what I do every day - walk on the beach, take a bike ride, do a little work, perhaps, and just enjoy the unstructured time that is my life.

But perhaps that is too threatening for many people, who need the regimentation and structure of a daily schedule to live.  They need boundaries and rules and to be told what to do.  So they practice a "Traditional Thanksgiving" as that is what they have been told to do, and it makes them comfortable to know they are doing "what they are supposed to be doing".  And it scares them to death to do anything different.

I guess that works for some people.  Not for me, thanks.  And that is what I am thankful for!

Wednesday, November 24, 2010

Where's the money? (Asset Allocation)


Where is all the money invested?

As I lurch toward retirement, I wonder where my money is invested and whether it is properly invested - you know, the same fears and paranoia that we all have.

I recently constructed the pie chart above, as a personal exercise, which lists all my assets and shows them as a percentage of my overall "estate".  I made it in Microsoft WORD using the insert-object, microsoft chart, option, and then ctrl-printscreen'ed it into PAINT to make a .jpeg out of it.  It took about 10 minutes, only because I do calculate my net worth about four times a year.  You have to do that, if you want to know where your estate is headed!

The largest chunk is (cyrillion) Real Estate, nearly half my portfolio.  This includes my personal residence and one investment property.  Some financial experts claim that including your personal residence in your net worth calculation is cheating.  But if I could sell it and cash it out, it is an asset, isn't it?

While Real Estate has taken a beating recently, it is now chugging along at a good pace, and should remain flat, or perhaps appreciate 2-3% per year for the next decade.  Even if the market collapses, these properties will not drop down to zero in value, as both can be used, if necessary, as rental income properties, and thus have some inherent value.

Our house is on Jekyll Island, which has somewhat depressed prices right now (maybe down 10%).  However, the island is in the midst of a major renovation, with new hotels, retail, and a conference center being built.  The Authority has also extended our leases by 40 years.  So I think in the long run, it will hold its value and perhaps increase over time.  That new X-men movie will no doubt make the place famous.

Our rental condo is next to a metro station in Washington DC and is slated to be demolished and re-developed, once we can find a developer to take on the project. It is revenue-neutral for the time being, but could be a huge capital gain "problem" down the road.

The next biggest chunk (yellow) is in a SEP plan through Northwestern Mutal (American Funds) and is too large for my comfort level.  I don't like have all my eggs in a basket that size, so for the last two years, I have been contributing more to other funds, to try to grow those, instead.

Life Insurance (dark blue) is the next largest chunk, which comprises four policies through Northwestern and State Farm.  I recently converted several of these policies to "paid up" status.  Two whole life policies are still taking premiums, but these are offset by a 3x gain in cash value, so they are "keepers" to be sure.

My E*trade account is next (parchment).  This was an experiment that has been a mixed bag.  While the account has not increased in value dramatically, neither has it decreased, either.  So I can't complain, in this economy.

I have a small Vanguard account (burgundy), part of a 401(k) plan I had for only a short period.  Perhaps I should think about combining this with another fund.  Perhaps not.

Next is after-tax savings, in stocks (orange), which is enough money for me to live on for six months, followed by a savings account (brown) which is about the same.

As for personal effects, our cars (blue), Stickley furniture (grey) and personal effects (purple) are all about the same in value.  This is one areas where our portfolio may be different that others.  For many people, what is parked in their driveway is a major asset.  For us, our furniture is worth more.  Guess which one depreciates and which holds its value?

Again, financial experts pooh-pooh including personal effects in your net worth calculation.  However, in the last year, I have sold off more than $50,000 of personal effects, including antiques, vehicles, furniture, and various other toys.  So the crap you accumulate in life does have a residual value.  The secret is, to accumulate less of it.

So what do I glean from this chart?  Well, for starters, about half my money, at age 50, is in fairly safe investments.  50% at age 50, so that is a good plan.  I may be over-represented in Real Estate, but it is an investment area that has made me a lot of money over the years, and one that I am comfortable with.

The other investments are fairly diversified, but do rely heavily on mutual funds, and thus may end up being cross-invested in the same stocks and perhaps less diversified than one might think.  Also, the fees and loads from these funds are something I have no idea how to begin to calculate.

My after-tax savings, in terms of stock, as well as savings accounts, need to be a bit larger.  If an emergency should occur, I should be able to rely on something other than credit cards (ouch!) to survive.

One goal I have had for the last 25 years is to be financially independent - to have my own money and not be reliant on others.  I didn't want to end up, in retirement, waiting for a parent to die, so I could inherit my wealth.  And yet, I saw this happen to a number of friends and family members on multiple occasions.  Buying yourself is the most expensive purchase you can make.  But it is totally worth it.  Not being beholden to others is a wonderful thing.

My goal for the next 5 years is to increase after-tax investments, as well as increase some of the other mutual fund investments, to make the Ameritrade portion of the chart more in line with the other wedges.

But overall, for a 50-year-old, I'm not doing too badly.  Not getting rich, but not starving, either.  Three-cent stamp, as they say on Fargo.

By the way, this is the sort of financial analysis I was hoping a financial adviser could give me.  But most of them just want to sell you another fund, not talk about asset allocation.  But most financial advisers out there are just crooks, it seems.

How Closely Should You Follow the Market?


Many folks like to watch the market on a day-to-day basis, encouraged by the moronic reporting on the TeeVee, which touts the ups and downs of the " Dow"  as the pulse of the nation.  You are better off standing back from these fluctuations and thinking long-term.

How closely should you follow the market?  The short answer is, not very.  For most younger people, contributing to their 401(k) or IRA, life is too busy to check their account balances on a day-to-day basis, and since they are investing for the long run, they rarely try to figure out what is going on, other than to read their quarterly or annual Statements.

Yet some folks follow the Dow Jones Industrial Average on a day-to-day basis, as if this somehow made them "more informed" or allowed them to better manage their portfolio.  But doing so is a waste of time - and perhaps a dangerous one.  Trying to time the market or trading based on daily fluctuations is never a good idea - and a good way to churn your account down to nothing in no time.

As I have noted before, so-called "Day Trading" schemes are little more than Casino gambling, and for both forms of gambling, there are idiots out there who will claim you can "make money" this way.  You and I, being rational human beings, scratch our heads and think, "I must be missing something there, how can you make money buying and selling a stock the same day?"

And no, you aren't missing anything.  Compulsive gamblers, of the day-trading variety or the casino variety are total idiots.  Just walk away from people like that, as they are nothing but trouble, and will, like clockwork, eventually hit you up for money after they have gambled all theirs away.

There is money to be made in gambling - if you RUN a Casino, or you SELL a "Day-Trading System".  But otherwise, it is just a game for chumps.

I have checked the balance on my E*Trade Account a few days in a row, now.  What is interesting is that the account balance can vary by several thousand dollars a day, and a stock that is "up" one day can be "down" the next.  Oftentimes, these pricing variations are due to events in the news (North Korea attacking South Korea, for example) or due to quarterly profit reports, a company getting a lucrative contract, or whatever.  Or it could be just that someone decided to sell a lot of shares one day, which depressed prices, or someone else decided to buy, inflating prices.  For small cap companies, this latter effect can be huge, which is why the con-artists out there are always trying to get your to buy penny stocks.

Taking a long view and not micro-managing (or churning) your own investment accounts is a far better approach to investing than checking things on a day-to-day basis.  If you over-manage your investment accounts, there will be a temptation to "do something" to prevent losses, or do something else to obtain gains.

Usually, this means people selling stocks that are taking a nose-dive and then buying stocks they see on the rise.  This is the classic case of Buying High and Selling Low and a sure way to go broke in no time.  As I have noted previously, a lot of very stupid people panicked during the crash of 2008 and sold all their stocks and bought bonds, on the premise that they could not "afford to lose any more!"

But of course, the market recovered within about a year - to its previous levels.  The rest of us who held on to our investments, got most of the losses back.  Those who panicked and sold, locked in their losses and are now only half as wealthy as they once were.  Fear and Greed - what drives the Stock market and what causes the "buy high, sell low" mentality.

When you retire, you have a lot more time on your hands, and the temptation is to start managing your investments more closely.  But again, other than long-term strategies, you should not be thinking of buying and selling individual stocks or funds based on the day-to-day or week-to-week operation of the market.

And yes, I am aware that all the financial shows on TeeVee advise just that - often shouting at you to buy or sell such a stock as if you could create wealth this way.  Usually it doesn't work out, other than for the trading firm, which collects fees on every trade (the house always wins, no?).

A better approach, when you reach retirement, is to think about your long-term goals and security.  By age 65, you should have earned all the money you need to retire.  You should not have to rely on market returns to fund your retirement at that stage in life, although many people do.

The long-term strategy is to take money from risky investments, as you get older, and put them into risk-free ones.  So, for example, when you withdraw money every year from your 401(k) or IRA, as you are required to do, put some of it aside into a government backed security or other instrument where the principle is guaranteed not to decrease in value.

Stock picking, on the other hand, is just legalized gambling.  And while some people claim they make money at it, for the most part, people lose money - often a lot.  Like gamblers, most live in denial, remembering the big wins from their trades, and conveniently forgetting their huge losses.

I have a number of friends who have tried to "play the market" with various schemes, from day trading, to futures investing, to short-selling.  In all cases, they ended up in fairly serious financial trouble down the road, even after some initial successes.  Age 70 is not a fun time to be starting over in life, to be sure.

There Ain't No Such Thing As A Free Lunch.  Yes, there are people who "make it big" in the stock market, and they are basically just lucky - but believe their luck to be some sort of insight into the market.   This is unfortunate, as it leads them to make bad decisions later on.  The fellow who pulls the handle on the million-dollar slot machine doesn't believe he knows anything more about slots than anyone else, but a stock picker will tend to think his rewards are a function of his skill.  (Note:  There are some people who do believe that there is a technique to playing slots, which are just raw probability machines.  We call these people idiots.  They flunked math).

And that is the problem with stock picking.  You make some good choices, and you start to think you are a genius, and that is dangerous thinking.

Back in 2009, I bought Avis stock for 74 cents a share, when the market tanked and rumors abounded that they were teetering on the brink of bankruptcy.  The stock rebounded in six months - by 1600%, netting me over $10,000 for a $750 investment.

Am I a stock genius?  Hardly.  If you bought nearly any stock back in February 2008 (other than GM, Fannie Mae, Bank of America, or Fleetwood Enterprises, all of which I also bought) you would have made money.  Those other stocks I mention, they too, teetered on the verge of bankruptcy.  Some went, others didn't, but they all tanked.   No, I am no "genius" - my "stock pick" of Avis only offset my losses in other other stocks.  Never confuse getting lucky with being brilliant.

A little humble pie is a good diet for any investor - on a regular basis.

One of my best investments, I made by accident.  I was trying to buy stock in the company that makes Morningstar Farms products, which of course, is Kellogg.  Instead, I ended up investing in a company called Morningstar, which ironically, provides investment advice and software for investors.  It has done remarkably well, increasing in value by over 50% (I sold my original investment amount, and kept the rest, a practice I usually do when a stock spikes upward).  Kellogg, in contrast, has gone up only about 2-3% in the same time period.

That's pretty embarrassing to admit, but it illustrates the Monkey-and-a-Dartboard effect of the market.  As reported regularly in the press, randomly picked stocks often end up doing better than market guru's picks, over time.  You are better off just picking stocks at random, than to listen to the shouting guy on TeeVee, although I would not recommend either.

So.. don't obsess about the day-to-day fluctuations in the market.  Diversify your portfolio, put an increasing amount of money into "safe" investments over time, and don't try to time the market on a day-to-day basis.  For the small investor, that's about all you can do.

When Poets were Rock Stars

Sidney Lanier was a famous poet for whom one the largest lakes in the State of Georgia, as well as the largest bridge, are named after.  At one time in this country, poets were treated like rock stars - with autograph seekers, fans, and even groupies.


The culture of celebrity is nothing new in this country, or any other.  Long before we had drug-addicted rock-star celebrities, we had laudanum-addicted poets.  It is hard to believe, today, but in the era before recorded music, poetry was quite popular, and was considered an acceptable pursuit for a man to take on.

Oddly enough, today, in our "liberated" society, the art of poetry has fallen by the wayside, it would seem, and becoming a professional poet is not something one hears of often.  And oddly enough, a man is more likely to be castigated and snickered at for being a "poet" today than back in the 1800's.

Walt Whitman, Longfellow, Emerson, all household names back in the day, but hardly heard of today in most quarters.  And I have read in various publications as to how such poets were besieged at times, with hangers-on, autograph seekers, and fans or one sort of another.

Perhaps the writing of rock lyrics is the new poetry of today.  Or, God Forbid, "rap" rhymes.  If so, what a sad legacy we are leaving behind.

Sidney Lanier is an interesting fellow, famous for his poetry back in the day, and famous for his "Marshes of Glynn" epic, a planned part of a series of poems that he never completed before he died of tuberculosis.  While a Georgia native, much of his life was spent in Baltimore.  Yet he made quite an impression on the people of the State of Georiga.  Both Lake Lanier and the Lanier Bridge are named after him.

It is interesting to me that as late as the 1950's, his reputation was such that both the bridge span and lake would be named after him  (the original lift bridge was built in 1956, and Lake Lanier completed about the same time).  Today, I am not sure a poet would be chosen for the name of either, but rather, we would have the Senator Claghorn Bridge, or Lake Sonny Perdue (our former colorful Governor).

No, this has nothing to do with economics.  Just something I was thinking about.  When poets were rocks stars....


The Marshes of Glynn

    GLOOMS of the live-oaks, beautiful-braided and woven
    With intricate shades of the vines that myriad-cloven
      Clamber the forks of the multiform boughs,--
                            Emerald twilights,--
                            Virginal shy lights,
    Wrought of the leaves to allure to the whisper of vows,
    When lovers pace timidly down through the green colonnades
    Of the dim sweet woods, of the dear dark woods,
      Of the heavenly woods and glades,
    That run to the radiant marginal sand-beach within
            The wide sea-marshes of Glynn;--
    Beautiful glooms, soft dusks in the noon-day fire,--
    Wildwood privacies, closets of lone desire,
    Chamber from chamber parted with wavering arras of leaves,--
    Cells for the passionate pleasure of prayer to the soul that grieves,
    Pure with a sense of the passing of saints through the wood,
    Cool for the dutiful weighing of ill with good;--
    O braided dusks of the oak and woven shades of the vine,
    While the riotous noon-day sun of the June-day long did shine
    Ye held me fast in your heart and I held you fast in mine;
    But now when the noon is no more, and riot is rest,
    And the sun is a-wait at the ponderous gate of the West,
    And the slant yellow beam down the wood-aisle doth seem
    Like a lane into heaven that leads from a dream,--
    Ay, now, when my soul all day hath drunken the soul of the oak,
    And my heart is at ease from men, and the wearisome sound of the stroke
      Of the scythe of time and the trowel of trade is low,
      And belief overmasters doubt, and I know that I know,
      And my spirit is grown to a lordly great compass within,
    That the length and the breadth and the sweep of the marshes of Glynn
    Will work me no fear like the fear they have wrought me of yore
    When length was fatigue, and when breadth was but bitterness sore,
    And when terror and shrinking and dreary unnamable pain
    Drew over me out of the merciless miles of the plain,--
    Oh, now, unafraid, I am fain to face
      The vast sweet visage of space.
    To the edge of the wood I am drawn, I am drawn,
    Where the gray beach glimmering runs, as a belt of the dawn,
      For a mete and a mark
        To the forest-dark:--
                            So:
    Affable live-oak, leaning low,--
    Thus--with your favor--soft, with a reverent hand,
    (Not lightly touching your person, Lord of the land!)
    Bending your beauty aside, with a step I stand
    On the firm-packed sand,
                            Free
    By a world of marsh that borders a world of sea.
      Sinuous southward and sinuous northward the shimmering band
      Of the sand-beach fastens the fringe of the marsh to the folds of the land.
    Inward and outward to northward and southward the beach-lines linger and curl
    As a silver-wrought garment that clings to and follows
        the firm sweet limbs of a girl.
    Vanishing, swerving, evermore curving again into sight,
    Softly the sand-beach wavers away to a dim gray looping of light.
    And what if behind me to westward the wall of the woods stands high?
    The world lies east: how ample, the marsh and the sea and the sky!
    A league and a league of marsh-grass, waist-high, broad in the blade,
    Green, and all of a height, and unflecked with a light or a shade,
    Stretch leisurely off, in a pleasant plain,
    To the terminal blue of the main.
    Oh, what is abroad in the marsh and the terminal sea?
      Somehow my soul seems suddenly free
    From the weighing of fate and the sad discussion of sin,
    By the length and the breadth and the sweep of the marshes of Glynn.
    Ye marshes, how candid and simple and nothing-withholding and free
    Ye publish yourselves to the sky and offer yourselves to the sea!
    Tolerant plains, that suffer the sea and the rains and the sun,
    Ye spread and span like the catholic man who hath mightily won
    God out of knowledge and good out of infinite pain
    And sight out of blindness and purity out of a stain.
    As the marsh-hen secretly builds on the watery sod,
    Behold I will build me a nest on the greatness of God:
    I will fly in the greatness of God as the marsh-hen flies
    In the freedom that fills all the space 'twixt the marsh and the skies:
    By so many roots as the marsh-grass sends in the sod
    I will heartily lay me a-hold on the greatness of God:
    Oh, like to the greatness of God is the greatness within
    The range of the marshes, the liberal marshes of Glynn.
    And the sea lends large, as the marsh: lo, out of his plenty the sea
    Pours fast: full soon the time of the flood-tide must be:
    Look how the grace of the sea doth go
    About and about through the intricate channels that flow
            Here and there,
                            Everywhere,
    Till his waters have flooded the uttermost creeks and the low-lying lanes,
    And the marsh is meshed with a million veins,
    That like as with rosy and silvery essences flow
      In the rose-and-silver evening glow.
                            Farewell, my lord Sun!
    The creeks overflow: a thousand rivulets run
    'Twixt the roots of the sod; the blades of the marsh-grass stir;
    Passeth a hurrying sound of wings that westward whirr;
    Passeth, and all is still; and the currents cease to run;
    And the sea and the marsh are one.
    How still the plains of the waters be!
    The tide is in his ecstasy.
    The tide is at his highest height:
                            And it is night.
    And now from the Vast of the Lord will the waters of sleep
    Roll in on the souls of men,
    But who will reveal to our waking ken
    The forms that swim and the shapes that creep
                            Under the waters of sleep?
    And I would I could know what swimmeth below when the tide comes in
    On the length and the breadth of the marvellous marshes of Glynn.
     
    Sidney Lanier