Wednesday, November 30, 2011

GoPhone - after a year

It has been about a year since I dumped my 'minutes' plan and went to AT&T GoPhone for 10 cents a minute.  Has this been a good idea?  Yes, it has.

Back in February, I noticed that I was using only a few minutes a month of my AT&T cell phone plan.  I was paying for 450 minutes a month, at a cost of about $65 a month for two phones.  It was working out to about $4 a minute, since I used the phone so little.  And since the unused minutes "rolled over," I had over 5000 unused rollover minutes, with more accumulating every month. Clearly, I was paying for more cell phone usage than I needed.

The old plan, like I said, was costing me about $780 a year, usually slightly more, because of those wacky additional charges you can never make sense of, on a phone bill.  Some bills were $62, other were $76.  But $780 is a good average amount.

For two cell phones, 1000 minutes at 10 cents a minute, for one year, was $100 each, or $200.  So the annual savings were $580 - not chump change.

But, has it been practical - and are 1000 minutes per phone enough?  That does work out to about 83 minutes per month.  And additional minutes can be bought if you go over, of course.

Well, heading into December, with two months left on the plan, I have $39 on my phone, and Mark has $25 on his.  So it looks like we used less than 1000 minutes for the year.

Coverage has been good - perhaps not as widespread as the AT&T network, but pretty close.  There have been few places where we don't get service.

In Canada, there is service, but only in areas served by Rodgers wireless.  The rate is 65 cents a minute there, reflecting the high cost of everything in Canada.

In Mexico, the phone worked fine, and at a lower 35 cents a minute.  To dial internationally, you have to dial 001 first (not 1011 as you would in the States).  Just remember 001 as 007's younger brother and you'll have no problems.

So it works OK, and has plenty of minutes for the occasional user.  Setup was a breeze, over the phone, and there was no need to change phones or SIM cards or anything.  And I can go online to check my balance or add more minutes to the phones - it is all pretty painless and a good example of good HTML programming.  Someone is on the ball at AT&T.

Is $580 a lot of money to save?  Yea, it is.  Cutting your personal overhead by $50 a month is a big deal, even if you are making "good money." 

Is this a good plan for everyone?  Not everyone.  If you use your phone a lot, for work for example, you may need more minutes.  If you use your phone a lot as an obsessive-compulsive addiction, perhaps you should rethink that.

But overall, this has worked out to be a good bargain - one of those good deals that turns out to actually be a good deal - without some sort of catch or hook.

When Being Handy Can Save You Money

Fixing a broken alternator cost me about $300.  If I had taken it to the dealer, the cost could have been as high as $2000, including labor.  This is one reason I say, if you are not handy with tools, you don't want to own an older BMW - or most any car, for that matter.


Increasingly, we are living in a Cargo Cult society - where we have staggering levels of technology available to us, and yet most of us are totally incapable of changing even a flat tire on our car.

And I kid you not on this.  Yesterday, I was driving down I-95 to Jacksonville, and I saw someone on the side of the road.  They had to call a tow truck to change their tire.  And there was the tow truck driver, putting the doughnut spare on their car.  What ever happened to self-reliance?

Or even more amusingly (or frighteningly) I see people evolving home-brewed solutions to technical problems, based on little more than trial and error or superstition.  I was using my credit card at a swipe terminal the other day, and the clerk swiped the card rapidly, and of course it did not read.  So she wrapped it in a plastic bag and did it again - this time more slowly.  Of course the card read now, but she was convinced that the plastic bag somehow made the magnetically encoded stripe more readable.

Increasingly, I find that people are using good-luck charms or home-spun cures for their technological woes.  And of course, many folks just give up and toss usable computers and cars in favor of new ones that are under warranty.  Or they buy extended warranties which are overpriced and provide little in the way of real "peace of mind" but at a staggering cost.

And it is sad, as only a few years ago, we were a nation of doers.  If your car broke down, you fixed it.  Today, people don't even try, convinced that computers are too complicated and fuel injection is too mysterious.  But to me, as an Engineer, I find cars today far easier to work on.  After all, the horrible analog features of a carburetor never quite work right, even when "in tune".  Electronic fuel injection either works, or it don't.  And chances are, replacing some inexpensive sensor or part usually fixes the darn thing - which lasts far longer than any carburetor ever did.

During our trip to Labrador, our alternator died on the X5.  This is not unusual, after all the car is 10 years old and has 125,000 miles on it.  Of course, today, alternators are far more expensive than the old GM/Delco "one wire" alternators we used to use back in the day.  A rebuilt alternator for an "old school" car can run you as little as $35.  Today, a Korean-Made alternator for a GM Product can run $175, even on Amazon or eBay.

But of course, for a BMW, everything is twice that, if not more.  One reason I favor the inline-6 model of BMW is that it is far simpler than their V-8 models and more reliable.  The V-8 models use a water cooled alternator  if you can believe that, which is very pricey.

How pricey?  Well, I called the Halifax BMW dealer in Nova Scotia and they wanted nearly $900 for a rebuilt alternator for my car.  The water-cooled V-8 model can run close to $2000 at some dealers!

Needless to say, paying $900 for a rebuilt alternator for a $9000 car seemed rather foolish.  The local NAPA store had one for "only" $300 which is still outrageously high, but far less than what the dealer charges, at least.

Now, bear in mind, that is just the charge for the part.  Installing it is a whole another deal.  The dealer would have wanted to tow the car in ($500, as my AAA towing doesn't cover Canada) keep the car for at least a few days, and charge $150 an hour shop labor, for at least two hours.  We are talking an overall bill of $2000 or more, if I had no clue how to fix the car myself.

In contrast to this, $300 and a couple of hours of my time seems like a pretty good bargain.  The hardest part of the deal was getting the main power wire off, as it had welded itself in place after a decade.  Other than that, two bolts, one plug, and of course the serpentine belt.  And of course, I had to remove the intake to get at it - and the skid plate.

And it struck me that most folks would be in the situation where they would be helpless as the person having their tire changed for them by the side of the road.  Many folks today, particularly younger folks, don't have any real skills, and moreover don't want to learn them.  They view learning practical things as somehow lower-class - as if dirtying their hands would sentence them to a life of poverty.  No, no, none of that!  Just a nice clean, white-collar job for me, thanks.  Preferably something in human resources.

The problem with the ignorance mode of operation is that you will be continually paying more for everything.  Ignorance, in any field, rarely works to your advantage.  And with ignorance comes fear.  And fear causes people to do strange things like leasing cars or buying extended warranties - as they are afraid of an expensive repair, only because today, car repairs have taken on the costs of medical procedures, particularly at car dealers, for no apparent reason.

Note that having even a little smarts can be helpful.  For example, even if you aren't prepared to get your hands dirty, understanding what that little battery light on your dashboard means (dead alternator, usually) is a big first step.  Knowing to take your car to an independent mechanic (whose labor costs are often half that of the dealer) is a good second step.  Those two things alone would cut the cost of the repair from $2000 at the dealer to less than $1000 at an independent shop - perhaps far less.

Skills are valuable things to have.  And yet, I see people claim they cannot do things, and they don't even really try to learn.  How many of you are clueless about your own computers - computers you have been using for 10 or 20 years now?  And if you think about it, you probably will be using computers for the rest of your life - maybe another 40 years or more.

Just an idea, but maybe it would be worthwhile to understand how to run Spybot and how to defrag your hard drive, considering you plan on doing this for several decades.  But few want to learn, and even if you teach them, they seem to have a knack for unlearning in a matter of minutes - mostly, I think because of their internal prejudices that "I can't do this" or "I don't understand this" or "I don't have the skill" or, worst of all, "I'm afraid I might break it".  Good old fear again, causing us no end of troubles.

Fear is something to overcome.  If you talk to most mechanics, even professionals, they will tell you that it is par for the course to break things, when you are trying to fix things.  Bolts snap off, wires break, all heck breaks loose.  You often end up having to fix your fixes.  But if you live in fear of this, you will never accomplish anything - and thus be at the mercy of people with no fear.

And I guess that is what it gets down to - conquering fear.  If we let fear dominate our lives, we end up as passive consumers, lead to the slaughter.  And as a result, we get all the raw deals possible.

The Positive Aspects of Debt - And Religion

Jesus wants you to have that new car!

I write a lot here about how bad debt is - and how it can cripple people.  But I have also written about how debt can be useful - to businesses and corporations, as a means of spreading out risk and raising capital.  In countries where it is hard to borrow money, it is hard to expand a business, as you have to pay cash for all your improvements and expansions, which means theses come very slowly, if at all.

And mortgages, while capable of wiping out people if they are not careful, can be useful in helping people buy housing.  In Mexico, until recently, mortgages were not available.  When we drove down there in the early 2000's (mental note:  Do Not Do) we saw many folks living in half-finished houses.  Unable to get a loan to build a home, they would bring home one cinder block, every day, and mix up a bucket of cement, and put it into place.  This way, over a period of years, if not decades, they could build a house.

Today, Mexicans can get mortgages, and many of the folks working here illegally (or legally) are paying off a mortgage for their family "back home" so that when they retire, they can move back and have a place to live.

But debt, like money, is very powerful, and like a loaded handgun, can kill or wound you or someone you love, if you use it improperly. And today, we are seeing the fallout from excessive debt - and also the problems when loans are harder to obtain.  We have been see-sawed in both directions - swimming in a see of funny money one minute, and then left high and dry at low tide the next.

But debt has another "useful" social function - and one that cuts against your own personal interests.  Debt keeps people in line, better than any laws, police force, or societal norms.  Kids today protesting this and that can afford to camp out and sit-in, because they don't have mortgages (but do have staggering student loan debts - but no way to repay them).  And 50 years go, kids did the same thing - for a while, until they started getting jobs and taking on debts.  Yippies become Yuppies, like clockwork, over time.

Once you "buy into the system" of debt - by getting a mortgage, a car loan, some credit cards, etc., you are now a stake-holder in the whole concept of debt.  And rather than think about what a raw deal you are getting, you run faster in faster to stay in place, to keep playing the debt game, hoping that you come out ahead in the end.  Usually, you never do.

When I worked for GM and UTC, and the Government, and even law firms, my bosses were always happy when I took on more debt.  If I bought a car, or a house, they were happy, as they knew I was that much less likely to quit, and moreover, had a compelling reason not to call in sick or use my vacation time I had accrued.

In fact, they knew that once I needed that paycheck to service my staggering debts, they had me by the balls.  They could give me a hard time and treat me like dirt and all I could do is gulp and think, "Gee, only 59 more payments and I can quit my job!"

And to some extent, this is a social good.  It creates a social glue that holds people together.  Let's face it, if not for their jet-ski and monster truck payments, most rednecks would never show up for work at all.  And if you are hiring someone, you never, ever, want to hire a young man with no debts and a hunting and/or fishing license.  Once deer season starts, you will not see him - for days, perhaps weeks.

No, what you want is the young man with the shiny pickup truck and a 72-month loan, a trailer home with a string of mortgage payments, and hopefully a pregnant wife.  That guy will show up for work, and you can piss all over him.

And yea, that sounds evil, but debt is a little evil - sometimes a lot.  But on a larger scale, debt acts as social glue for all of us.  A merchant is in debt to a supplier.  His customers are in debt to him.  Everyone owes someone else, and it creates a round-robin of mutual dependency, to some extent.  Except, of course, for the guy at the top of the heap, who actually owns money and is making interest income on all these debts.  But even for him, it is a matter of mutual dependency.  You can't make money as a loan shark, unless you have customers willing to borrow.  Those that have the wealth have nothing, if we don't have the need for money.  It is a two-way street.

Religion works in similar way.  And religion can be very evil - and is, most of the time.  And in the past, I have written about this - The Religion Trap.  But religion also has a positive social aspect.  Religion is what gets Billy-Bob to stop drinking and gets him on the "straight and narrow".  Maybe we find fundamentalist Christianity to be a bit stupid and naive (and missing the message of Jesus Christ by about 1000 miles), but it does keep the plebes in line.

And it also keeps people civilized, to some extent.   Religion is often the one thing that keeps a man from stealing, even when he knows he can get away with it.  It is often the one thing that keeps him married - even when he feels he wants something else.  It is often the only thing that keeps people doing things that are a benefit to greater society, even if it is a detriment to themselves.

And perhaps that is a definition of Religion right there - people sacrificing for the greater good.  It is sort of a common theme of most major religions.

So from a societal aspect, we want to see other people in debt and we want other people to be religious.  And that may sound a bit Machiavellian, but so be it.  If you can see through the smokescreens of both institutions (debt and religion) you can easily come out ahead in life.

And note that it may be very useful to you, on a personal level to appear to be in debt, and appear to be religious, lest people think you are a financial or religious heretic.  As recent events illustrate, being wealthy only generates resentment, so if you can appear to be middle-class, like everyone else, you lower your profile somewhat.  It is never worthwhile to die for a religion or an idea, as Galileo was smart enough to figure out.
"Whenever the locals rub blue mud in their navels, I rub blue mud in mine just as solemnly." --Lazarus Long, Time Enough For Love, pg 46.

Tuesday, November 29, 2011

Hubris of the Seas

Is the world's largest cruise ship too large?

"I thought when you went on a cruise, it was supposed to be so relaxing and they wait on you hand and foot!" a friend of mine remarked.  "Don't you just sit back in a lounge chair and they bring you tropical drinks?"

I hadn't really thought of it that way, but that really is supposed to be how a cruise should work, right?  But in reality, it is nothing like that.  And aboard the Allure of the Seas, it is anything but.  The ship is so big, and the staff so few that you have to fight to get a table, fight to get your food, fight to get a drink, and then fight with the customer service to make sure the bill is right.

Rather than being a relaxing vacation, it is more akin to struggling through a crowded shopping mall on Black Friday, trying to get the last "Tickle-Me Elmo" doll for your niece.  Bring Pepper Spray - or better yet, a taser!

And that is the ambiance of the place - a floating shopping mall, quite literally.  Stores and retail opportunities abound, and almost everything you do includes a spending opportunity.  And since everything you do involves paying using a magnetically encoded card, buying anything is a major hassle.  A waiter has to disappear with your card, run it though a machine, and then return with paper slips for you to sign.  Often, this take 15 minutes or more.  Apparently the wireless credit card terminal, so popular in Europe, is unknown to them.

Of course, this assumes that you can even find a waiter half the time.  Every time you order a drink, there is a 15% mandatory added gratuity added in.  Of course, this is not a "gratuity" if it is mandatory.  Rather, it is a commission that the wait staff works on, and the more drinks they "sell" the more money they make.  So, rather than wait on people, the wait staff tries to take as many orders as possible - often for five to ten people at a time, and then make one trip to the bar, returning with dozens of drinks at a time.  This can take 15-20 minutes or more.  It improves their efficiency and their commission rates, but it means you are not really being waited on, so much as you are being served en masse.

The magnetic cards sound like they would be easy to use and painless.  But again, since the waiter has to swipe these one at a time (and one some terminals, manually enter data!) it takes forever.  If they are serving several drink orders at once, it can take a very long time.  And as they do multiple drink orders like this, there is every opportunity for someone Else's drink order to end up on your bill, as happened to me.

So, you have to go to customer service every day and print out a list of your charges and compare it to your pocketful of receipts and invariably, there is a discrepancy.  You have to watch them like hawks, and this is not a way to have a relaxing, fun time.

And unfortunately, every aspect of cruising on Royal Caribbean is not a very relaxing or enjoyable experience.  As I noted earlier, their website is a nightmare of confusing and slow-loading HTML pages.  If you are on a group tour and/or use a travel agent, it gets even worse, as you cannot access half the data, and/or have to deal with three different customer service groups - the main one, the group one, and your travel agent.

And guess what? They play the old game of finger-pointed at each other.  "Oh, you'll have to talk to the groups section" the customer service rep coos.  So you call them and they say, "You need to talk to your travel agent!"   And of course the travel agent, who is making bubkis on this, says, "Go to the Royal Caribbean website!" - but of course, the website is problematic, so you call customer service.  Repeat ad infinitum.

After two cruises with Royal Caribbean, I have decided that cruising is not my bag. But rather than complain about it, I would rather like to offer some practical suggestions for anyone going on this boat - or indeed any other.
1. Do NOT pre-pay gratuities. There are so many restaurants on this ship, you may find, as we did, that you end up not using the main dining room at all. Tipping a head waiter, a waiter, and an assistant waiter than you never used, makes no sense at all. Since you don't know ahead of time where you will eat, tipping ahead of time makes no sense - if it ever did! Of course, if you do not pre-pay the gratuities, you don't qualify for "My Time Dining" - but that is no great loss, as you should...

2. Avoid "My Time Dining" - as another reviewer noted, it is a fiasco. You end up eating basically at about one of the same fixed times anyway, after waiting in line. And while you are waiting in line, other cruisers will cut in front of you, arguing that as "gold members" they don't have to wait, or whatever. It is unpleasant. The lines are not well marked and it is, well, very much like being in a cattle yard. The dining room was very large and noisy. The good news is, there are so many other dining choices - Samabas, the Sushi bar, and Windjammers, for example, the latter of which had far better food than the dining room and was FREE - and was far less crowded.

3. Get an OUTSIDE STATE ROOM. This was the best part of the cruise - the outside staterooms are large and comfortable (compared to say, the Monarch of the Seas inside Staterooms) and the best time we had was just sitting on our balcony, watching the ocean and enjoying a glass of wine and room service. We are boating people, not cruise people, and the outside balcony was as close as you can get to boating, other than walking the cramped promenade deck. The inside balcony staterooms are noisy, and you have a view of someone else's stateroom and central park or the aqua theater. The entire cruise, I saw barely 1 or 2 people using their inside balconies, whereas I could look over the side of the ship and see dozens of people using the outside ones. RC promotes the inside staterooms as they are harder to sell. But they are very noisy - particularly in the rear, where the aqua shows and midnight movies will force you to close your curtains all the time. BTW, the vaunted "loft" suites all face the rear and provide no great views. Save your money there and get an outside suite, if you want a suite. Better view and quieter and more private.

4. Get off the boat - even an inexpensive shore excursion can be fun. At Cozumel, we went to Playa Mia, and for $29, sat on the beach and had free drinks handed to us for several hours, and a nice, inexpensive Mexican lunch. That was what I was looking for! Labadee is the same way, although you have to pay for drinks. I did not go ashore in Jamaica, but wish I did! Many folks never leave the boat, which is akin to staying in a shopping mall for seven days. Ugh!

5. Ask your stateroom attendant to REMOVE all the mini-bar materials and return them after you leave. It was an ongoing battle with customer service over this - as they kept claiming I was using the mini-bar (bottled water) when I wasn't. I bought the bottled water package (a case of water) and wine package, and cleaned out the mini-bar, put all that junk in a drawer, and filled the fridge with water and wine. The stateroom attendant or whoever saw this and erroneously assumed we can consumed items from the mini-bar. It was a hassle, and vacations should not be a hassle.
Mini-bars are cheesy and low-rent, in my opinion. But that is just me. Really high-end hotels don't have them. But casinos and wanna-be hotels use them. And I think their revenue stream is in charging people for things they DIDN'T consumer and assuming that most people won't check or contest the charges.

Modern cruising is not about visiting exotic destinations.  Rather, it is like staying in a fancy Marriott hotel, and waking up, every other day, in a different place, with mere hours to "explore" that place.  Needless to say, you don't really get a chance to explore a foreign port, if all you have is a few hours to do so.


Kelly's take on cruises - from The Onion.


So, if spending a week locked in a hotel sounds like fun to you - then by all means, go on a cruise.  If spending a week in a shopping mall in Paramus, New Jersey is your cup ' tea, then man-o-man, is the Allure of the Seas the boat for you!  If being trapped with 6,000 pushy strangers sounds like a fun time, you will have a ball!

To me, however, it seems that you could actually go somewhere for a week, sit on a beautiful beach an be waited on, hand and foot, for a lot less money, and no chance of sea sickness.  But maybe that's just me.

Like I said, I am not a cruise person, and seven days on the "Hubris of the Seas" convinced me of this. But if you do decide to go, the five items above would be my suggestions - for what its worth! Good Luck! 

UPDATE:  Royal Carribean decided that having the two largest cruise ships wasn't enough and launched an even larger one.   Bigger is not better and in fact, is horrific.  I think the new ship is called Norovirus of the Seas.

Your Goal - Bring Down the Cost of Living




Thoughts I had tonight while walking the dog....


When I was young, I had a fairly low-paying job, and a fairly cheap place to live, and a secondhand car.  Then I got a better paying job, lived in a more expensive place, and of course, bought a nicer car.

As I made more money, I spent more, first on Cable TV, then on one of those new "car phones" (built-in to your car, no less!).

And so on and so on and so on.

It is funny, but when you are young, money in your pocket is money to spend, and getting a lot of neat shit seems like the end-all to life.

But, eventually we get older and realize that working forever ain't in the cards.  We wish we had more money in the bank to live off of, and less overhead to deal with.

Wouldn't it be nice to live with the overhead of a 20-year-old and the income of a 50-year-old?

Wouldn't it be nice to be able to say, "I don't work because I have to, but because I choose to!"

And yet, for most middle-class Americans, this is entirely possible, within their reach.  And it is a highly desirable thing to have - the most desirable thing to have - and yet few bother to even try for it.

Why is this?

Simple.  We become distracted by the now and by the media, which pushes the now.  Get a cell phone with a $100 a month family plan!  Everyone has one, and let's face it, you can't have your children as the only ones in Kindergarten without a cell phone!  It would be like sending your kid to school with no shoes!

And everyone has a TeeVee in every room - with 500 channels of cable, of course!  Why not?  They are so cheap these days, if you are willing to pepper-spray people in Wal-Mart to get one.

It struck me, tonight, as I was walking the dog, that what I had done for most of my life - and what most middle-class Americans do, is not try to live within their means and accumulate wealth, but rather live up to the limits of their income and then borrow more to live on that as well.  We expand our lifestyle to create apparent wealth based on transitory income, not real wealth.

A recent article in the Savannah newspaper describes the plight of a couple in Atlanta, who were each making $100,000 annually, as Real Estate Agents.  They saved none of it, spent all of it, and are now unemployed, broke, selling off their few possessions for pennies on the dollar, trying to sell an upside-down house in the suburbs of Atlanta, and wondering what the "F" they are going to do now.

It is easy to feel sorry for them - after all, the piece was written as a tear-jerker number about "how bad things are".

But, in reality, the Real Estate Boom of the 2000's was not a "normal" condition and today's economy an aberration.  Today is the norm, the bloated Real Estate prices and hyperactive market of the 2000's was the abomination.

And the couple interviewed failed to understand that it was so - they thought that they would make their current income for the rest of their life and thus could spend as though that were so.  After all, they wished it to be so, so that wish would come true.

But such is not the case - for anyone, really.  It is all too typical for people to be laid off these days, in their 50's, and see their income plummet.  And the tragedy is not that these folks lose their jobs (that is a predicable given, not an anomaly) but that the folks in question assumed, naively, that their job would go on forever at their given income.

They counted themselves as "rich" based on income, not real accumulated wealth.  And since they had a high income they assumed there was no need to accumulate real wealth.  Why bother when the income would provide a lifestyle - based on credit - of a wealthy person?

But all that changes, eventually, for all of us.  As I wind down the last 1/3 of my life, I realize that my career has a finite number of days left to it.  And thus my income will shrink, over time, and then one day, vanish.  And hopefully, when that time comes, I will have enough income from investments to pay my bills and support me in some level of comfort.

And for our 401(k) generation, this is the only option available to us - we do not have fat teacher's pensions to rely on, no Union pension to count on every month, rain or shine.  We are even told not to expect any Social Security!

So, many of us wonder how this will all play out - and many of us just have another drink and hope for the best.  Or we try to save now, so late in life (better than never at all!) to make up for lost time.

But we look back and think, "Gee, if only I could have put aside 5% or 10% of my income - that's not a lot to ask, is it?  And if I had, I could have retired at age 50, if I had to!  But I had to have that new electronic gadget instead!"

And it is advice lost on a younger generation, who sees having it all as far more important than having real money.

But the lesson is there, for anyone who cares to learn it.  If you can keep your cost of living low  - avoid the pitfalls and traps of our consumer society - you can become financially independent.  Nearly anyone can do it.

Or you can have new bling rims for your car.  Your choice.

Truly, consumerism is a form of voluntary slavery!

What Happened to Phone Calls?

This simple device was once the primary means of electronic communication in the USA.  It was supplanted by cell phones and today, by text and e-mail.  Why does no one talk anymore?

I get an e-mail from a client.  "Is it OK if I call you on the phone?  How about 3:00 tomorrow?"

How weird.  We now make appointments for phone calls.  At one time, you just picked up the phone and called someone.  Today, things are different.

If you are of a certain age, you remember a few things that younger people might find weird:

1.  When you called someone, you let the phone ring 10 times, so they had time to get it.  Today, when you see this in an old movie, it is hard to suppress the urge to say to Jimmy Stewart, "pick up the phone! Before it bounces to VoiceMail!"

2.  In the olden days, you didn't have to dial the area code with every call, just the last seven digits.  And sometimes, just the last five digits!   I am not old enough to remember getting the operator on the line for every call - but my parents did that.

3.  Answering machines were a newfangled invention and everyone hated them.  "I hate talking to those machines!" folks would say.  Or people would be nervous making the recording for the machine.  Folks felt they were being "on stage" and got stage fright.  I kid you not!

4.  Before answering machines, if you called someone and they weren't there, it just rang.  After 10 rings you hung up and called them back later.  No instant gratification, no messages left.  Life was slower back then!

5.  For some reason, they used two-letter codes for the first two digits of a phone number.  So, for example, my old phone number of 655-3253 was OLeander 5-3253.  As in "operator, get me OLeander 5-3253!" which you might hear in the old movies.   Or you might give out your phone number as OL5-3253.   Why this was better than just the digits was beyond me!

6. Dial phones took forever to dial!  Can you imagine dialing 911 back then?  That dial would spin around so slowly.  But of course...

7.  We didn't have 911 back then.  You dialed "O" for Operator and someone answered on the first ring.  "Operator!  Get me the Police!" was what you would say.  And the Operator would connect you with directory assistance, repair, or place long distance "person-to-person" calls.  Today, you get a recording when you dial "O".

Yea, it was a simpler time back then.  Slower.  Perhaps dumber.  But today, we have instant communication, which in some instances is better.  I can compose an e-mail and sent it to Slovenia, and they can get it the next morning and reply - without using stamps, waiting weeks for letters, sending faxes, or trying to call overseas.

Of course, this often means we send MORE messages rather than carefully consider a single message.  When you lower the cost of a communications channel, the bandwidth gets filled up pretty quickly.  It is like Boyle's law - only for data, not gases.  Data expands to fill the available bandwidth of a given channel.

And texting and instant messaging - favored by the younger generation 10:1 over voice communication - takes this to the logical conclusion.  A lot of data transmitted back and forth, but most of it trivial or outright noise.  How R U?  Fine, U?  Kewl!  ;)

For a brief time, between the years of 2000 and 2008 or so, talking on the cell phone did supplant talking on the landline phone.  And in fact, the number and length of calls probably went up.  As "unlimited" minutes plans came into being, more and more people starting talking, well, in an unlimited manner.  And usually, this was among people of the lower classes.

And you've seen these sort of people before, but less and less so, today.  You are in Wal Mart or some other store, and you see some lower-class person with a cell phone glued to their ear.  They are talking on the phone when they enter the store, they are talking on the phone while they are shopping, they are talking on the phone when they check out.  They are talking on the phone on the way to the car.  They are talking on the phone while driving away.  You would think the cell phone was part of their body.

And oftentimes, all of their talking is one long continuous phone call that lasts an hour or more.  And since they are yakking loudly on the damn thing, you can't help but "overhear" one side of the conversation.  And it is not really anything important - just the sort of trailer-park gossip which has now been elevated to high culture in our society.  "No, really, she said whaaaaat?  That bitch!  I hope he slapped her down good!" - that sort of thing.

Perhaps it is because of that image that texting is taking over.  Yakking on the cell phone, like smoking, is increasingly viewed as a lower-class activity.  And people are status conscious above all else.  And this is fascinating to me, as when cell phones were first introduced, they were viewed as an upper-class item, as they were expensive and the plans were dear.  Many folks, back in the day, would mount fake cell phone antennas on their car (often 3-4 of them!) in a trailer-park mimicry of what they were seeing on the rich folks cars.

But now, cell phones have worked their way down the food chain, and just like naming your child "Mercedes" it has no class left whatsoever.  So texting, I guess, seemed like a more discrete and better way of communicating.  And after all, since texting plans cost extra it seemed like a natural status symbol to be furiously working your hands in your lap - with your cell phone, of course.

But just as Lurleen at Wal-Mart has nothing important to say in her hour-long phone call, and just as she is loud and annoying to others and dangerous behind the wheel of a car, texing is falling into a similar pattern - and rather quickly.  Text messages rarely have any real content - they are just short, often cryptic and meaningless messages - ambiguous messages that are the hallmark of passive-aggressiveness.

And quickly, texting is working its way down the food chain, as plans are coming down in price (a real joke on the consumer if ever there was one - phone companies were charging EXTRA to send a few ASCII characters - consuming negligable bandwidth compared to voice!) and now Lurleen is texting in Wal-Mart instead of yakking.  And she is doing it while driving, with predictable results.  Even truckers are texting these days - I've seen it, usually as they wander out of their lane and threaten to crush my car.  People are indeed, truly idiots!

It goes without saying that latching onto these latest fads is really just a huge waste of your time and money.  Yakking for hours on the phone about trivia is not really enhancing your personal or business life.  You can't make money by texting.  And spending $100 or more a month on a cell phone plan isn't really 'saving' you money, even if they phone company claims it is offering you some discount.  Unplugging from this latest-and-greatest crap is one key to personal financial well-being as well as emotional well-being.  You ain't missing anything by not having the latest electronic toy, unless it is a pacemaker!

But of course, these communications cycles get shorter and shorter over time.  The era of the standard phone call lasted a Century.  VoiceMail and Faxes maybe 50 years.  Talking on the cell phone, maybe 20.  Texting, less than 10.  What's next?

Well, it is hard to put a name on it, but "Smart Phoning" seems to be the Next Big Thing - as phones become more sophisticated and are increasingly linked to the net.  You can access web pages from cell phones, and even record and send pictures and video, far easier than before.  The novelty of walking-and-talking has worn off.  The novelty of sending short messages with emoticons from your phone has worn off.  Perhaps sending video, photos, and HTML is the next big thing.

Or who knows?  Maybe people will start talking - really talking - to one another.

I'm ready.  I still have my dial phone!

Sunday, November 27, 2011

Should you use a PAWN SHOP (No.)

Pawn shops offer no bargains, either for buyers or borrowers.

Pawn Shops are in the news today, and in general, they have been thriving in recent years.  Back in the day, one only saw pawn shops in old "film noir" movies, where Private Detectives would go to hock their gun.

But today, they are more popular and visible than ever, and many offer to pawn anything, including your car.

So, what is the deal with pawn shops?  Are they a good place to go to borrow money?  Are they a good place to buy merchandise for cheap?  The answer is generally no to both.

To begin with, you would think that with a loan secured by the item pawned, the interest rate would be fairly competitive.  After all, if you don't pay back the loan, the pawn shop owner gets to keep your collateral, sell it, and make back his money.  From the pawn shop's perspective, it is a pretty risk-free transaction - or so one would think.

But the loan interest rates can be as high as 20 percent per month, which is an astounding 240% a year.  Clearly, this is not a good place to borrow money.

And as a result, only poor and stupid people would use a pawn shop - or very, very desperate people.  And you don't want to be poor, stupid, or desperate, do you? 

And this is why, of course, Pawn Shops are always in poor neighborhoods - because only poor people engage in such poverty financing tricks, which in turn is why they are poor.

So, just don't borrow from a Pawn Shop, period.  If you are hocking your watch or gold ring or whatever, to get a small amount of money at 20% interest, perhaps you should think instead about selling the item you can clearly do without, and use that money instead, interest-free.  Or think about owning less crap you can pawn, and borrow money against, instead of having a lot of crap and paying a lot of money in interest to buy it back from the pawn shop, over and over again.

Title Pawn loans work the same way, except that the car title is used as collateral.  You can still "keep" your car, of course, but now you've signed up for some onerous interest payments, which in many cases, might never be paid off.  Again, no one in their right mind would borrow money on such terms, which is why people who do this sort of thing are not very bright, which in turn leads to them being pretty poor, which then feeds into a cycle of poverty and debt.

But what about buying stuff from the pawn shop?  A friend of mine, many years back, swore by pawn shops as great places to buy used merchandise.  But in the few I have been in over the years, I have not seen any great bargains for sale.  Perhaps they were not interested in selling stuff so much as "other" businesses, I do not know.  All I know is, the prices they quoted for used merchandise were not far off the new prices from retailers.

And again, this fits a pattern.  Shops and stores in poor neighborhoods offer the worst sort of bargains imaginable.  You would think that poor people, having less money, would demand lower prices and that they would get the best deals.  And you would think the rich, having tons of money, would not mind paying more for merchandise, and thus pay higher prices.

But the opposite is true.  The car dealers in our small, impoverished town offer scandalously high prices for automobiles - both new and used.  Drive an hour to Hilton Head, and prices are easily 10-20% lower.  The smarter consumer will not pay more than market value for an item, and the smarter consumer ends up as a richer consumer.

In a way, it is an interesting effect, as it reverses Adam Smith's "invisible hand" theory, which dictates that products always find the best possible price in the competitive marketplace.  It also refutes a lot of nonsense about optimal pricing strategies, which claim that the rich are willing to pay more, rather than less.

But it also illustrates another axiom you have probably heard in life:  the richest man in town is often the most miserly.  And the reason he is rich is that he is careful with money.  Middle-class people spend money like water, and the poor, like it is air.  As a result, they continually strike bad or non-optimal bargains.

So pawn shops, by definition, being poverty-think enterprises, of course will not provide the best prices.

Again, becoming successful in America is not really a big deal.  There is no "trick" to real wealth, you just have to avoid all the clamoring voices trying to induce you into poverty.  We all have the opportunity to accumulate some wealth in life.  Few of us exercise that option, choosing instead, one bad deal after another - usually trading off our long-term security for immediate gratification.

Just say "no" to pawn shops, title loans, payday loans, slimy used car dealers, and the rest of the entire poverty industry that exists to fleece the lowest segments of our society of the few dollars they have.

Just say NO.

Renouncing Materialism? Where Have I Heard That Before?

Will the Occupy Protesters be Yuppies in 20 years?  You Betcha!

A funny thing happened on the way to the revolution.  The Hippies and Yippies of the 1960's, who renounced materialism, capitalism, and all forms of modern American consumption, became the Yuppies of the 1980's and took consumption to a whole new level of excess.

It is one thing to get older and say, "Gee, the naive idealistic notions of our youth were not so realistic to apply in the modern world, let's modify them slightly to be more practical."

It is another thing entirely to say, "Screw that commie-crap, I want a BMW and a new espresso maker!"

And by the late 1970's, the Hippie movement - if it ever existed as a movement at all - had split irrevocably.  I remember, with my older Brother and Sister, visiting some family friends in Boston.  Their parents were so proud!  Their Daughter was the manager of a Pier One store and had a new BMW 318i.  And she and her husband were fixing up an old row house, in the style of "This Old House" - which was just starting to air on PBS.

My Brother, of course, living on a commune, was livid.  How could these people "sell out to the man?"  Perhaps he felt they had betrayed the cause.  Or perhaps he was starting to wonder if living in an unheated barn in Vermont, in the winter, was all it was cracked up to be.

But more and more of that generation gravitated toward materialism, particularly once they started having children.  And besides, you could "change the world" through consumerism - simply by making better choices - paper or plastic, or perhaps "fair trade" coffee!

But of course those early, underpowered 3-series BMWs lead to more sophisticated and powerful 5-series.  And at they garnered promotions and pay raises, suddenly it seemed that they "needed" more toys and things, and of course larger homes.  And before you knew it, the Baby Boomer generation was pretty much indistinguishable from their parent's generation, except that they have far nicer shit and far more of it.

So will the same thing happen to today's "Occupier" crowd?  Well, again, never confuse a news story with a "movement".  The "Occupy" people represent a tiny minority of public opinion.  It is just a loud minority and one that has good visuals for the TeeVee Nooze.  But even among people named "Rainbow" and "Ketchup" change is in the air, and change they would vehemently deny at this stage in their lives.

Yes, there will be some Commie true-believers who will actually think everyone is serious about this anarchy crap.  And they will feel cheated, when, 10 years from now, when everyone shows up for the "Occupy" anniversary party, how many folks will be driving luxury cars.

But people get older and they get jobs and the settle down and have kids.  And they realize that the "system" isn't going away anytime soon, and moreover that it ain't such a bad system, considering the alternatives.  And moreover they realize that they are the system and that they can change the system from within.

And yes, while the Hippies became Yuppies, times have a-changed since 1968.  Opportunity for minorities and particularly women have increased dramatically.  If you doubt me, watch some old television commercials or shows from that era.  Back then, it was a big joke on the "Tonight" show, if you had one of those "Lady Doctors".  Today they make up about half the profession.  We have come a long way, baby.

And the "evil corporate world" has changed as well.   This was brought home to me when I visited a client in Austin, Texas.   Everyone wore blue jeans and casual clothes.   Rock and roll bands played in the lobby.   I thought to myself, "This is a long way from what IBM was like in 1970!"   Our generation took over - and changed the world - from within.   The next generation will do the same to their world.

So, yea, changes will occur.  I am certain that our current tax system, which favors the wealthy to a great extent (our progressive tax rates are negated by the regressive nature of the Social Security tax, plus the availability of deductions in the higher brackets) will be "reformed" by allowing the Bush era tax cuts for the wealthy to die.  And that right there could make all the difference in the world, in terms of distribution of wealth.

Saturday, November 26, 2011

The Price of Tires

The price of tires has skyrocketed in recent years.   Not a few years ago, most tires were under $100 each.  Today, tires as high as $300-$400 apiece are not unusual.  What is going on here?

I recently ordered a set of Yokohama tires from The Tire Rack.   It was a hard decision to make, what with all the tire makes, models, and sizes.  I had been using Michelins on the X5, and they have lasted 50,000 to 60,000 miles each, but at $321 a tire, retail, (P255/55 R18) they are very expensive tires, indeed, and the price has increased by nearly $100 a tire since I put the last set on, less than five years ago.

(The price, at WalMart, of all places, is a staggering $361 per tire, plus mounting and balancing.  Always the low price?  I think not!).

So I decided to go with a less expensive tire, which hopefully won't be a bad mistake.  I had a set of Yokohamas on the SHO and they worked well.  They have a good tread life rating, good traction rating, and best of all, they were about $154 apiece, as opposed to the $268 that the Michelins would run, at the Tire Rack.  And likely these will be the last tires I put on this car, as it creeps up toward the 200,000 mile mark.  For longer trips, I think I will get a newer, less esoteric car in a few years.

I have had good luck with The Tire Rack, by the way, and while there are cheaper tires out there on the net (no-name brands from China, usually sold to the Bling Rim crowd), Tire Rack prices are very competitive and they the Amazon.com of tires (and Amazon sells tires, too, by the way).  Plus they have people working there you can talk to who are very knowledgeable.  Shipping was very reasonable, about $59.80 or about $15 per tire.

By the way, the consumer reviews on the site are all over the map, and parsing the reviews was hard to do.   As one reviewer noted, nearly all the tires had stellar reviews ("these are the best tires ever!") and crappy ones ("these went bald in 9,000 miles!").    Some of the reviews were suspect - for example, I can't imagine a set of Michelins going bald in 9,000 miles, unless you had severe front end problems.  Other reviewers complained about "cupping" wear, which is caused by bad shocks, not bad tires.  Filtering out those reviews, as well as the ones with bad grammar and poor spelling, you can sort of parse out what is going on.

I chose the Yokohamas as they seemed to be the best balance between treadwear, price, and review ratings.  We'll see if this was a bad choice or a good one.  But the bottom line was this:  I didn't want to spend $1200 on a set of tires for a $9000 car.  It just doesn't make any sense.

On the other hand, there were cheaper tires out there, but their treadwear ratings were in the low 300's.  While I don't expect the Yokos to go 50,000 miles, they probably will be on the car when I sell it.

And I can see, in the near future, that people may end up junking a car because the replacement cost of the tires exceeds the book value.  Oh, brave new world!

So why are tires so expensive these days?  I think a number of reasons:



1.  Proliferation of Tire Sizes:  In the olden days, we had three tires sizes:  13", 14", and 15", which were usually for compact, mid-sized, and full-sized cars, respectively.  Few sizes meant that volume production could lower prices.  And since dealers needed only to stock a few sizes, they could cut overhead as well.  Today, we have so many Prescription Tire Sizes that it isn't funny!

2.  China Tariff:  The Obama Administration signed a Tariff Order recommended by the ITC which added a 35-55% tariff to Chinese Tires.  While this "only" affected the price of Chinese tires directly, the net effect is to reduce price pressure across the board.  Since cheap Chinese tires are no longer cheap, other manufacturers don't need to cut tire prices to stay competitive.  By the way, if you think slapping import duties on Chinese goods is a good way to "save jobs", go shopping for tires sometime.  Imagine everything you buy going up in price by 50% in just a few years.  Fun, eh?"


3.  Price of Oil:  Oil is a component in tire construction, and the price of oil has gone up in recent years.

4.  Rubber Shortage:  Apparently, there is a rubber shortage in India.

5.  Demand for Cars in China:  The Chinese are buying cars like mad, and it is the world's fastest growing car market.  And all those cars need tires.  So the demand for tires is skyrocketing, worldwide, as well.


So what can you do, to avoid sticker shock at the tire store?  A number of things:

1.  Get a car with standard tire sizes:  Esoteric tires sizes or "sport" package high-performance tires are always more expensive than standard passenger car sizes.  15" tires were the most common size, until a few years ago.  16" and 17" are now becoming the norm.  18" is an oddball size, and 19" and 20"+ sizes are also more esoteric.  Ultra-low profile and "staggered" and unidirectional tires are also harder to find and thus more expensive.  When shopping for a car, avoid oddball tires and high-performance tires.  Most people don't need or want them!

2.  Rotate your tires regularly and check for unusual wear:  Many cars wear tires in one spot or another, and rotating tires will even wear and extend tire life.  If you find the front tires are "scrubbing" on the inside or outside, have your alignment checked. Cupping or other unusual wear is often a sign of suspension problems and can eat up perfectly good tires in short order.

3.  Check Inflation regularly:  Even though new cars have tire pressure monitors, be sure to check your tire pressures regularly and make sure they are to factory spec.  Under-inflation is the #1 tire killer!

4. Shop Around and Shop Online:  Online tire sites like Tire Rack have prices that are far below the "come on" prices that many tire shops charge.  Most chain stores won't quote you a price until they have your car up on the rack - they hope to "persuade" you to buy whatever they have in stock, rather than let you shop around.

5. Avoid Super-Cheap Tires:  Modern tires have tread wear ratings, which are not an exact science.  However, they give you an idea of the tread life of a tire.  Unless you are really in the market for performance tires, look for a tire with a decent tread life and tread warranty.  More expensive tires may be less expensive, in the long run, if they provide more miles of service.  Cheap tires that last barely 30,000 miles are often not worth it.

Myself, well, when I go shopping for my next car, it will be a car that does not require prescription tires, prescription oil (and the X5 takes nearly 8 quarts of it!) a filter that only a few places have, high-octane gas, and parts that are available on a catch-as-catch-can basis.  BMWs have been a fun trip, but I am more interested, at this point in my life, in doing things rather than owning things.

Death of Defined Pensions and Motorhome Sales

If you retire with a fat pension, the monthly payments on this beast might seem 'affordable'.  If you had to pay cash for it, on the other hand, it would look like a pretty scary purchase.

The RV industry has taken a big hit since 2007.  It is starting to recover, slowly.  But I wonder if the glory days of $250,000 to $500,000 Bus Motor-homes are behind us for good.  And I wonder if the death of defined-pension benefits is to blame.

Simply stated, back in the day, if you retired from a "good job" you might get a pension equal to 75% of your salary.  Some teachers get 90% of their last year's salary, which can be over $100,000!

That is a lot of money to have in retirement, to be sure.  But as our economy changes and as a younger generation moves toward retirement, those days may be gone, for good.  Bloated pensions are no longer affordable.  Rhode Island is the latest government entity to cut pension plans.  The government workers are threatening to oust the elected leaders, but as one put it, "there are still more taxpayers than government workers in Rhode Island" - the threat by the unions can only go so far.

And most of the younger generation has 401(k) plans, not defined benefit pensions.  What are we to do when we retire?  How much money is "enough" to retire on?  It is a much harder question to answer than "how much do you need per month to retire?"

When you look at retirement as a series of guaranteed monthly payments, from your pension and Social Security, well, a lot of things look affordable. Want to buy an expensive motor-home?  So long as the monthly payments are less than your monthly surplus, it is a practical proposition.  So, paying $2500 a month for a $250,000 motor-home seems rational, if you are taking in $8,000 a month in pension and Social Security.  You have more than enough left over to live on.

But, to us 401(k) people, the proposition is not based on monthly payment, but overall cost.  If we have saved up a million dollars (!!!) for our retirement, we might end up taking home about $75,000 a year, if we get $35,000 in Social Security (ha-ha) and withdraw $40,000 a year using the "4% Rule".  It is better to be a retired schoolteacher than a millionaire - in retirement!

But since us 401(k) people are not guaranteed a monthly income, the idea of taking on $2500 a month payments seems a lot scarier.  Values of stocks and investments can go up or down, and we can find ourselves broke in short order.  Our retirement will not be as relaxing as for the defined-pension generation!

And the idea of buying a rapidly-depreciating asset like a motor-home or boat, that is equivalent to one-quarter of our entire wealth just seems utterly idiotic.  Only a fool would spend such a huge percentage of his remaining wealth on a vehicle.  And yet, some will, of course.

But, I think our generation will be less inclined to do so - looking instead at the overall cost of the transaction and not just the monthly payments.

Since the recession of 2008, Motor-home and RV sales have tanked.  Many motor-home manufacturers have gone out of business and many of the remaining ones are hurting.  Sales are starting to edge up a few percentage points here and there.  But tellingly, the lower-end of the market - Class C motor-homes, less-expensive Class-A units, as well as towables and Class-B's are doing better overall.

The RV industry won't wither and die, of course.  But I suspect it will be a long, long time before we go back to the excesses of the late 1990's and early 2000's, where owning your own bus seemed like a rational proposition.

UPDATE:  March 2012.  A recent story on NPR discusses how RV sales on edging up again.  Sales are now topping 250,00, up 100,000 from the nadir in 2008-9.    This is not nearly as high as 300,000+ sold at the peak, prior to the recession.

However, a lot of these sales are in lower-priced units - towables and $100,000 and less Class A and Class-C units.  The days of the half-million dollar coach may be far behind us - at least for most folks.

The problem is, if you are an average middle-class American and retire with $250,000 to $500,000 in your 401(k) account, does it make sense to spend that much on an RV - and then live off Social Security?  Or to take on a loan at that age?  (one wonders whether LEASING will be offered for these monsters). 

For most sane, rational people, the answer is NO, although I've seen people spend their very last pennies on an expensive motor-home and then have to struggle to fill it with gas, on their Social Security alone.  People make bad choices.

But what about the very rich?  People with millions and millions of dollars?  Well, they likely aren't going to want to sleep in a campground or even a fancy "RV Resort" if they can just buy a condo on the water or stay in a 5-star hotel.  Granted, there are a few lottery winners out there who might think that owning a half-million dollar RV is the cat's ass.  But that is the exception, not the rule.

I think the 401(k) is going to make selling these beasts harder - people look more at overall cost, and the idea of getting loan payments in retirement is going to seem less and less appealing.

It is not that people will stop RVing, but perhaps look for less expensive ways to do it - and less expensive trailers and coaches are one answer.

And of course, there is a glut of used upper-end coaches on the market that can be had, all day long, for less than half their original purchase price, often far less.....

Gotcha Questions




Herman Cain is my name,
And I'm a Pizza Man.....

Herman Cain made headlines the other day for flubbing a question about Libya.  Now, there is no doubt in my mind that this man is an intellectual lightweight.  After all, who in their right mind decides to enter politics by running for the White House as their first political experience?  Other than Ralph "moonbat" Nader, of course.  For those sort of folks, it is the whole enchilada (or calzone, in Cain's case) or nothing.

But all that being said, was he set-up with the question?

The question had me stymied as well:

"So, do you agree with President Obama on Libya or not?"

What an odd way to phrase a question, and if you think about it, it is a very vague and open-ended question.  It is a form of passive-aggression, to be vague like that. And if a reporter wants to trip-up a candidate, asking vague questions like this is one sure way to do it!

Cain made the mistake of trying to answer the question.  I would have shot back and asked for clarification.

What kind of question is that?  "on Libya?"  What does that even mean?

Does it mean his policy of letting NATO take the lead in the air war?

Does it mean his policy on recognizing the rebels?

Does it mean his policy on kissing up to Ghadaffi in the months before the uprising?

Does it mean his policy with regard to sanctions, impounding Libyan bank accounts and assets?

What?

And why phrase the question as "Do you agree with President Obama?"

And of course, the answer is simple.  By phrasing the question that way, they are baiting Cain into saying that he does not agree with President Obama - after all, Republicans hate everything Obama stands for, right?

So the knee-jerk answer is to say "I disagree with Obama" because you don't want to make it sound like you agree with Obama.  Because if you do, the follow-up question is sure to be...

"Well, if you agree with Obama, then why should people vote for Herman Cain?"

So the question was a set-up, and Cain stepped right into it.

Another Conservative Intellectual Lightweight - Sarah Palin - was also nailed using this vague, open-ended technique, when Charles Gibson asked her whether she "agreed with the Bush Doctrine."

I am no big fan of Sarah Palin, who is a walking-talking example of why women should go back to cooking and making babies.  I mean, if this is the best women can do, then break out the burkas!  OK, just kidding.  But she is such a Barbie-doll and an airhead.  She has actually set back the woman's movement by a decade or more, at least.  I think most women actually cringe when they hear her talk, just as Blacks cringe when they see old videos of "Amos and Andy".

But seriously, Gibson was being passive-aggressive with that question.  Why?

Well, it is a baiting question to be sure.  Since Sarah Palin is the rah-rah Conservative, she has to support President Bush and everything he stands for.  So, of course, she supports the Bush Doctrine - whatever the heck that is!  But she also knows, that if she says "Yes, I do" the next question will be, "In what way?"

And here is where the question is a trick:  There is no such thing as the Bush Doctrine, except as a catch-all label tacked on to a number of Bush policies by the media.  Bush did not announce anything as his "doctrine" - rather, that was a media label:

The Bush Doctrine is a phrase used to describe various related foreign policy principles of former United States president George W. Bush. The phrase was first used by Charles Krauthammer in June 2001 to describe the Bush Administration's unilateral withdrawals from the ABM treaty and the Kyoto Protocol. The phrase initially described the policy that the United States had the right to secure itself against countries that harbor or give aid to terrorist groups, which was used to justify the 2001 invasion of Afghanistan.


Different pundits would attribute different meanings to "the Bush Doctrine", as it came to describe other elements, including the controversial policy of preventive war, which held that the United States should depose foreign regimes that represented a potential or perceived threat to the security of the United States, even if that threat was not immediate; a policy of spreading democracy around the world, especially in the Middle East, as a strategy for combating terrorism; and a willingness to unilaterally pursue U.S. military interests. Some of these policies were codified in a National Security Council text entitled the National Security Strategy of the United States published on September 20, 2002.

The phrase "Bush Doctrine" was rarely used by members of the Bush administration. The expression was used at least once, though by Vice President Dick Cheney, in a June 2003 speech in which he said, "If there is anyone in the world today who doubts the seriousness of the Bush Doctrine, I would urge that person to consider the fate of the Taliban in Afghanistan, and of Saddam Hussein's regime in Iraq."
And of course, Sarah Palin supports all of those interpretations of what is the "Bush Doctrine" - she has made such policy announcements on numerous occasions.  If anything, she thinks Bush was a wimp for not going far enough in invading countries, breaking treaties, and torturing prisoners.

But that was not Gibson's question.  Gibson's question was, "I am going to throw out an ambiguous term that we use in the media and see if I can get you to look foolish."

She can't ask for a clarification without looking stupid, and she can't say she agrees without looking stupid.  No matter how you slice it, it was a "gotcha" question.  Sarah Palin was right about that.   But then again, a stopped clock is right - twice a day.

Because, if you think about it, only Democrats talk in terms of the "Bush Doctrine", not Republicans.  And since there is no announced definition of the term, the question is vague and open-ended as "Do you agree with President Obama on Libya?"

"Yes, Charlie, I agree with President Obama that there is a country called Libya and it exists in time and space.  Next question?"

Answer a vague question with a vague answer!

Home Improvement Nightmares


Home Improvement is a huge industry and has spawned a number of television shows, including even a sit com of the same name.

In Real Estate, the three biggest factors are Location, Location, and Location.  While that may sound like a pat "one size fits all" kind of rule, it is invariably true.  In any given neighborhood, the most expensive house on the street and the lowest priced house on the street are never very far in off in price.  And chances are, the most expensive house has a better lot (location) than the cheapest one.

But regardless, the underlying value of the home is not based on the amenities inside it, or indeed, even outside.  Yes, a gourmet kitchen, a showplace bathroom, and a "man cave" garage may add some value to a home, but often far less than the cost of adding such items to the home.

Basically, for every dollar spent "improving" a home, you might get back 50 cents, if you are lucky.  So think long and hard before throwing money at a house.

Home improvement stores, of course, sell you on the idea of "upgrading" your home by adding stuff to it.  But in most cases, these additions will do little than to run up your credit card debt.

Even small things, like installing cabinets in your laundry room, or closet organizers, can, cumulatively, add up to a lot of money over time.  $100 here and $100 there, and pretty soon, you've spend thousands of dollars trying to make your home "more convenient" when in fact, you have just created cubbies to accumulate junk.

We went through this at one house.  I was always frustrated with my garage, which as a nightmare of tools, boxes, junk and "stuff" that accumulates in garages, to the point where you can barely fit the cars in.  Some people give up and put the cars outside, until the garage looks like a storage locker.  So I installed cabinets, the cheap kind from Home Depot, all around the wall.  Now I had a place to put all my tools and stuff, where I would not lose them!

Problem was, I ended up losing things, anyway.  Once I had a cabinet for car cleaning products, it started to fill up in short order.   Before I knew it, I had jars and cans and bottles of waxes and cleaners, not to mention rags and sponges and all sorts of cleaning gear.  And often, I would forget what was in that cabinet (out of sight, out of mind!) and just go out and buy more.  Rather than eliminate clutter, it just allowed me to accumulate more.  And that dried-up can of bumper polish was "too good" to throw out, of course.

Closet organizers work the same way - they don't organize your closet and eliminate clutter.  Throwing out clothes you no longer wear (or donating them to charity) is the sure way to eliminate clutter in your closet.  Adding another clothes bar just allows you to say, "Well, I'll keep that shirt, even though it is faded and has a tear in it, I might use it when I paint the house!"

Over the years, we have spent literally tens of thousands of dollars at Home Depot and Lowes.  In fact, I think I can say, without hesitation, that we've spent well over $100,000 just in small purchases at home improvement stores over the last two decades.  This is a lot of money, to be sure.

The real home improvement trap doesn't necessarily involve spending thousands of dollars at a time on a basement remodeling or a bathroom overhaul.  Rather, it is the slow bleeding to death that occurs when we spend, over a period of decades, a little here and a little there, which cumulatively adds up to tens of thousands of dollars.

How do you avoid the home improvement trap?  Just don't go.  If your garage, closet, or kitchen is cluttered or disorganized, adding more cabinets and organizers isn't the answer - getting rid of stuff is.  Having 5 whisks isn't handy, it is just clutter.  Keep one or two and sell the rest at a garage sale.  Having 30 pairs of shoes is nonsense, particularly when some are worn out or rarely worn.

Spending $200 to buy a cabinet to house your $30 worth of used shoes makes no sense at all.   And yet, we all do it, to some extent.  It sounds like a good idea - wouldn't it be convenient to have a shelf to put all those shoes on?

We are going through this right now - thinking about "organizing" our garage so that inexpensive beach gear will have a place to reside.  But again, is it worth spending $200 on cabinets for $39 of beach chairs?

Perhaps not.  Perhaps a nail on the wall works just as well....

Friday, November 25, 2011

Death Spiral

Spatial Disorientation remains a big problem for both commercial and general aviation aircraft, when a pilot tries to fly in IFR by the seat of the pants.  In a similar manner, financial disorientation can distract a person from their personal financial situation until it is too late.


If you read NTSB reports, they tend to sound about the same, over time.  In far too many cases, people become disoriented and crash their own planes.  Even commercial airliners fall out of the sky when pilots become confused or distracted and either stall the plane, or fly it right into the ground.

And when this spatial disorientation occurs, the pilot is often unaware anything is wrong, until it is too late.  Since the plane enters a smooth 1-G "death spiral" they feel, flying by the "seat of the pants" that the plane is straight and level.  Until, that is, a wing tears off or they fly into the ground.

And in every case, the Ground Proximity Warning System is the last thing heard on the voice recorder.  "Terrain, Terrain!  Pull Up!"

What causes these "death spirals" in aviation?  What causes us, as individuals, to ignore warning signs of impending financial doom and fly into the side of a mountain - figuratively speaking?

Inexperience is part of the problem.  Oftentimes, we fail to recognize the symptoms of the death spiral, unless we've be caught in it before - and managed to survive.  But even folks who have had a "close call" often fail to learn from it and repeat the process over and over again, until they finally do it one time too often and crash.

And the problem is, during the "death spiral" everything seems normal and "feels" right.  How can the plane be crashing when my coffee isn't even spilling?  We can't be upside down, right?  A 1-G turn can do that.

In a similar manner, people's personal finances can go into a "death spiral" and they won't be aware of it until it is too late.  By the time our Ground Proximity Warning System kicks in, you have only seconds left to breathe.

How does this happen?  Well, our system of debt, aided by the poor normative cues from television (a broken flight instrument, if there ever was one!) can distract a "pilot" from what is really going on.  And this trap, just as it happens to a lot of experienced pilots, happens to a lot of experienced adults - often people making good money, too.

For example, Joe and Suzie Suburbia live near the Capital City and own a nice home.  They have brand new cars and put the kids in a private school.  They eat lunch out every day, and each drives to work separately, for convenience, even though they work only blocks apart in Capital City.  Suzie gets a designer coffee every day on the way to to work.

The whole family has cell phones with an unlimited texting plans.  The kids all have the latest video games and Aeropostal t-shirts.  And they have 500 channels of cable-TV, and a TV in every room of the house. Every three years, Joe and Suzie lease new cars.

Joe and Suzie think this is all just fine - they are living the American dream, after all, and are both making "good money" at their jobs - over $200,000 combined income.  And every month, they are able to pay all the bills on time.  They are not funding their 401(k) as they would like to, but hey, they are young, and have time to do that later, right?

The one thing that nags Joe like a faulty air speed indicator, is their increasing credit card debt.  Years ago, they "paid off the balance every month" and felt that they were doing OK - what with the frequent flyer miles they were accumulating.  One year, they cashed in the frequent flyer miles and made a family trip to Disney World.  The cost of the trip was a little more than they figured on, and for the first time, they did not pay off the entire balance on the credit card.  The interest charges were  pretty staggering.

And within a year or so, their credit card debts started to snowball into the tens of thousands of dollars.  They were making good money, getting raises, so they spent more.  Take out meals, delivery pizza, dinners at chain restaurants, gifts for the kids, small vacations, large vacations, and of course, new electronic toys.

One day, Joe was perturbed to realize they had close to $50,000 in credit card debt.  This sounds outrageous to some folks, but seriously, I know personally, several Joes with this level of debt - including myself at one time.  Joe and Suzie cut back on their savings and their 401(k) contributions, "temporarily" to help get this debt down.  But the debt is so huge and the interest so high, it is hard to do little more than chip away at the debt.

So, Joe and Suzie decide to refinance their house, pay off their debts, and "get a little breathing room" to get around what they perceive to be a one-time "difficulty" or aberration in their finances.  They pay off the credit cards, but do not close the accounts.  And the credit card companies "reward" their financial acumen by increasing their credit lines, announced cheerfully by cover letters sent to them that contain lots of exclamation points!!!

Joe and Suzie want to believe that they are pretty smart people, and so they think of themselves as being "smart" and financially responsible, and moreover "rich" compared to their neighbor across the street who - if you can believe this - has been driving the same old Camry for 10 years now!  Poor people, they are so pathetic!

But Joe and Suzie's personal finances are losing altitude quickly, but they fail to realize it.  They intentionally ignore all the other warning signs - convinced that those gauges are broken and that their stuck altimeter is "right" - after all, no one is foreclosing on them today and they still have credit left on their credit cards, right?  And they are still making all the minimum monthly payments - right?

What they are doing, though, is taking on more and more debt, over time.  So their personal net worth is actually decreasing.  And worst yet, it is decreasing on paper, as their net worth is based on some pretty specious valuations of Real Estate and Stocks in their 401(k) plan.  But all seems well, so why bother taking action now?

And they can't be doing anything "wrong" in piloting their personal finances - after all, according to the television, their lifestyle is "typical" - and all of their friends are living a similar lifestyle as well!

And they can go on like this, for years, sometimes.  They get into the death spiral, and then pull up at the last minute - refinancing everything in yet another home equity loan.  But they are losing altitude with each loop.

And then, one day, they hit the side of a mountain.  The economy wobbles and becomes unstable.  Housing values drop - cutting off their funding options.  Their 401(k) value drops. One or more of them loses their job - which is akin to losing an engine in flight.  Or worse yet, they delude themselves into thinking they are doing so well that one of them quits their job.

The subsequent crash is inevitable.  Since they have no altitude (savings) to trade-off for speed, they can do little more than auger into the ground in a glorious fireball.  Another couple bankrupt, foreclosed upon, and likely divorced.  And yet, they were making well over $200,000 a year!

How can we avoid spatial disorientation?  For starters, maintain your altitude.  If you see your savings dropping, or your rate of savings drop, take this as a warning sign to be taken seriously.  And while your altitude over the ocean may be 10,000 feet, bear in mind that when you fly over a 10,000 foot mountain, your altitude drops to an effective zero.  And savings and investments work the same way - you can have a hefty balance in your 401(k), but it can drop off rapidly if the market goes south.  You can't be too rich or too thin - or have too much altitude.

Second, don't be distracted by broken gauges and erroneous instrument readings.  The television is not a good instrument for IFR - it does not provide you with good solid data on where you stand, financially.  And in fact, if you use the media as your artificial horizon, you will likely crash.  The TeeVee is one glass cockpit display you should avoid at all costs!  Stop taking your normative cues about spending from the TeeVee.  I cannot emphasize this enough.  Best to just stop watching it, period!

Third, don't be so distracted by one instrument reading that you ignore all others.  In more than one case, airline pilots have flown planes right into the ocean, convinced that a chorus of alarms and warnings are all "wrong" while they blindly assume that the one broken instrument in the cockpit must be right.  The altimeter says they are at 10,000 feet and their speed is increasing.  The Ground Proximity Warning System is saying they are about to crash and the stick shaker says they are about to stall.  Not understanding how the instruments work, the pilots blithely ignore good data and accept bad, not realizing that a 2" strip of duct tape over the pitot holes can cause both the altimeter and air speed indicator to go berserk.

Similarly, most middle-class consumers will believe themselves to be fiscally solvent if they can pay all their bills every month.  They ignore warnings signs, such as increasing debt load, deceasing savings and savings rates, increasing spending, and increases in interest payments.  Everything is fine, because that one instrument - the checking account balance - is above zero.  So they must be climbing, right? 

Wrong.

Fourth -  don't try to fly by the seat of your pants!  That is the last nail in the coffin for most pilots.  The airplane can actually be inverted - flying upside down in a spiral loop, approach a "VNE" speed where the wings tear off at the root - and yet there is no vibration, no acceleration, no disturbance - your coffee cup remains right side up and doesn't even slosh out.  And yet, you are in extreme peril, but don't feel it.

Financially, most of us start out life flying by the seat of our pants - which is fine for VFR flying.  So long as you can see the horizon, everything is fine.  Fly into a dark, cloudy night, and you end up like that Kennedy kid in short order.  But we all do it, when young.  We want a lot of eye candy and electronic crapola, and of course new cars, take-out pizza, cable TV, and cocktails at singles bars.  We spend and spend until we are broke, and for many, this is the first experience with the death spiral - which most of us pull out of and say, "We'll never do THAT again!"

And yet, we do.  In many Spatial Disorientation accidents, the pilot in trouble becomes disoriented again and again.  In one accident, a VFR pilot found himself in the clouds, became disoriented, and ended up in the "death spiral" dive, which he pulled out of at the last moment, as he exited the clouds and realized he was inverted and headed toward the earth.  So what does he do?  He rights the plane, climbs back up into the clouds and does the same thing all over again.  Six times.  Eventually, the poor plane can't take it anymore and a wing snaps off.  End of story.

Breaking this cycle of bad behavior is the key.  And hopefully you won't have to have a Spatial Disorientation incident to learn the lesson.   Because it is a very painful and often deadly lesson - most do not survive Spatial Disorientation incidents.  Financially, most of us can't afford to.