Monday, December 18, 2017

You Can't Make Something From Nothing

What will cause the next recession?   Companies with flawed business models that lose money, but the stock market is presently going ga-ga over.   Eventually, reality will set in.

This morning, an article in Forbes about an "ex-con who is now a billionaire!" that gushes how a guy with some sketchy connections to Charles Keating is now a "success"story with his used-car mega-dealership.   He's a billionaire!

On, paper, that is.  Likely your paper.

You see, he owns Drive Time, a car dealership that sells used cars to subprime borrowers.  He also is a primary shareholder in Carvana, an "e-commerce" used car dealership that (you guessed it) did an IPO and whose stock shot way up.   They have some trendy eye-candy things going on, like "used car vending machines" in a couple of cities - the sort of thing the plebe investors lap up.

The problem is, of course, Carvana is hemorrhaging cash, and a lot of people are short-selling the stock.  The company simply isn't making any money and doesn't appear to have any plans to.  On the Drive Time side, while there is a lot of money to be made in sub-prime auto lending, there is a lot of money to lose as well.  And with sub-prime loan rates going up (and 1/3 of Americans delinquent on their loans in general), the entire mess could blow up in their faces, much as the sub-prime mortgage fiasco did.

The problem is, when you loan money to a lot of insolvent people, they tend not to pay it back.   And when you have hundreds, thousands, tens of thousands, hundreds of thousands  - maybe millions - of these loans, well, it will be very, very hard to claw that money back.  The logistics of even repossessing the cars staggers the imagination.

Subprime borrowers - like payday loan borrowers - usually always end up in default, and it ain't hard to see why.   With the payday loan people, they borrow money and then borrow more money to pay back the earlier loan.  The process continues until loans are being used to pay back loans used to pay back loans..... etc.   It is like a reverse Ponzi-scheme.   Eventually, the borrower can't pay even the tiniest fraction of what is owed, and they end up in bankruptcy court.

The same is true for sub-prime auto lending.   You've seen these types of dealers - the "buy here, pay here" used car lots that advertise the weekly cost of a car.  Or weekly leases - which require you to have the car repaired at that dealer.   All horrible rip-offs of the poor.   They over-pay for the car, over-pay for the interest, and over-pay for the insurance.   They pay 2-3 times as much for a used car as I would for a new one.

Once again, the snowball effect comes into play.  The wealthier client gets the 0% financing, the best prices (because they are smart enough to go online and shop around), and pays the least for insurance (because they don't "drive it like they stole it" like poor people do).   The poor, on the other hand, have the reverse snowball - costs pile upon costs.  Interest rates are in the double-digits.  Cars that have loan balances higher than their resale value are costly to insure - because the owner has all the incentive in the world to set fire to the car.

And often - almost all the time, in fact - these types of buyers end up trading in their car, usually when they've blow the engine - and folding the negative equity from a previous loan into a new one.  I knew a young girl who did this - three times in fact - until it became so costly, she let the re-po man have the keys, declared bankruptcy, and then started taking the bus.   Yes, drugs were involved.

It is not a matter of if  but when with this type of borrower.   And as a business model, you can make a lot of money in the short-term by writing these risky loans, and show enormous profits as the borrower can make the first few payments.   But eventually, when the loans start going South, the initial huge returns evaporate.   And I suspect that is what will happen to Drive Time.  There is a reason these fly-by-night used car dealers fly-by-night.  They don't stay in business very long because they can't.   Either they have so much bad paper they go under, or people get wise and stop doing business with them.

On the internet side, Carvana isn't even making money - hemorrhaging cash like any good "dot com" business.  The problem for Carvana is the same problem all these "tech-that-aren't-tech" companies face - they are not "technology" but mere merchants, selling fungible products in an industry that is deadly competitive.   Maybe a "car vending machine" might attract a customer or two, but frankly, I think most people are less interested in the "sales experience" than they are in the long-term value and use of a car.

And the used car business is already crowded with used car dealers - including mega-dealers like CarMax, which has been "vending" used cars for some time now.   What is it that Carvana has that none of these other companies have or could have?   And no, "car vending machines" isn't the correct answer.

These are flawed business models - not sustainable ones, in my opinion.   If they don't make money consistently and for the long haul, then they are just flash-in-the-pan, making money in the short term, or in the case of Carvana, not making money at all.

And it seems that a lot of the companies that are talked about today in the financial press fall along the same lines.   And since it appears there are not a lot of stocks left to invest in, since so many companies have gone "private", the small investor increasingly looks to these hyped stocks as the next "sure thing" that will life them from poverty to billionaire status overnight.

A reader continually chastises me that saving money, investing wisely, diversifying investments, and investing for the long haul will "never make you rich" but only make you comfortably middle-class.   Maybe that is true, but long-shot oddball hyped investments are more likely to make you dirt poor than they are to make you a billionaire.

The only ones who get rich from schemes like that are the people running them, not the people investing in them.   And when the guy running a scheme is an ex-con who went to jail for financial fraud, well, you should know what to expect and have no one but yourself to blame when it all goes horribly wrong.   I mean, how much more do you have to advertise this as a raw deal?

Sadly, Forbes posits this as a rags-to-riches story, rather than a flim-flam man selling the latest flim-flam.

You know, comfortably middle-class ain't so bad, really.   Compared to poverty and old age.

Sunday, December 17, 2017

All News is Fake News? A WTF Story from the Wall Street Journal

Merle Haggard allegedly wrote this song while he and his band were smoking dope on the band bus, driving down the Interstate by Muskogee, Oklahoma.  One band member remarked, "I bet they don't smoke marijuana on Muskogee" and the rest was history.  Sadly, not many recognized it as parody, and the far-right took it on as an anthem.
We don't make a party out of lovin
'We like holdin' hands and pitchin' woo
We don't let our hair grow long and shaggy
Like the hippies out in San Francisco do
A recent story in the Wall Street Journal has me scratching my head.   I just couldn't figure out what the point of the story was, until the last paragraphs of the article.  But then again, I knew going into this where the story might go.   You see, today, every media outlet is basically fake news.   None are objective, but all have a narrative to sell.

The Washington Post, for example, is owned by Jeff Bezos, and is a liberal paper that publishes a lot of articles about how keen Amazon is.   By the way, the other day, I mentioned how things are often cheaper on eBay than Amazon.  I ordered a new rechargeable cordless drill on eBay.  It was processed and packed by Amazon, shipped through UPS and delivered by the United States Postal Service.   It seems the boundaries between these companies are blurring these days.   But I digress.

The New York Times is, well, just off-the-wall these days.  Far, far left, it specializes in panicky articles about Trump - gossipy pieces about how he threw tantrums or who is going to be fired this week - like reporting on an episode of The Apprentice.  Real substance is lacking.

The Wall Street Journal, like Fox News is owned by Rupert Murdoch, and is right-leaning - well more than just leaning of course.   So you know what to expect from them as well - smirky articles that blame Clinton (either one) or Obama for anything that has gone wrong in America.

This latest article, however, gives me pause.  It is about a young woman, Cathy Cronkhite, who leaves her small town in Indiana to seek fame and fortune in California.   In a sort of Road-to-Damascus or maybe Wizard-of-Oz kind of drama, she realizes that there's "no place like home" and that the people in "San Francisco" are mocking her small-town upbringing.   So she returns home, even though the locals there are mad at her for leaving.

The "moral" of this story is curious.  Never leave home?  People who live in San Francisco are evil?  What?   I find it odd that the entire story judges the values of every resident of the State of California based on some comments by jerks in a bar.   One home-town resident opines that he has been working "12-15 hours a day" to "feed all those jerks in their coffee bars" on the coast.  Hmmmm.... he should check his math on that - California is one of the largest agricultural States in the nation.   If anything, they feed us, not vice-versa.

But I digress, again.

It struck me that this "news story" wasn't really news, but just another attempt at division - pitting the rural Midwest against the coasts.

In my previous story about Guilt Politics, I received a number of complaints from readers that I just didn't get it.  Hillary didn't stand for schoolmarmish prudery!   And of course she didn't - she had to put up with Bill, remember?   The point is, the opposition painted her as such - a woman (boo! hiss!) would would enact regulations and laws that would take away your guns and prevent you from "rolling coal" with your belligerent truck.  Take that, you latte-sipping Prius drivers from San Francisco!  (In politics today, words like San Francisco are like coded dog-whistles.)

This is a narrative that sold well in places like Pennsylvania, Indiana, Wisconsin, et al.   These are places where young white men feel left out, where flying the confederate flag isn't viewed as ironic (or idiotic) as you drive by the Civil War memorial in the center of your town (commemorating the losses of the North).

This is the demographic that Trump taps into, and tapped into, to win the election.   And this is the reason behind the article in the Wall Street Journal - to paint people on the coasts as out-of-touch with "reality" and also being condescending to cultural values of "country folks."

Of course, the story did mention how many people in her small home town with "family values" were overdosing on opiates.   At least they didn't gloss over that.

But the story really isn't news - in fact, nothing in the story is newsworthy at all.   An obscure individual returns to their small home town after striking out in the big city.   Yet it was at the top of the U.S. news page on the MSN news app this morning.

This isn't news.   It's fake news.

UPDATE:  The more I think of this story, the more it disturbs me as being inauthentic and basically class-warfare bait.  Rural people are the first to engage in self-depreciating humor.  I was fortunate enough to see Minne Pearl at the Grand Ole Opry before she passed.   How-Dee!  This idea that country folks take themselves so deadly serious, just doesn't ring true.   Rednecks are the first to make fun of rednecks.

Also, the idea that "those people in San Francisco" don't know what a Cracker Barrel is, is well, ludicrous.   People do travel, you know!

UPDATE:  A reader writes that they don't have Cracker Barrel in California - although one is opening up soon in the State.   They do have In-and-Out burger, though.   We don't have In-and-Out burger on the East Coast, but I have heard of it.  Because I've been to Utah.

The more I think about this story, the more appalled I am.  The moral of the story seems to be, "never leave your hometown" which could be crippling advice.  The other narrative is that the only two choices are some depressed town in the Midwest or the most expensive city to live in, in the United States.   No in-between!

This is a class-warfare story, plain and simple, pitting the "honest decent folks" of the Midwest against those latte-sipping bastards on the coasts.   Shame on the Wall Street Journal.  And what the fuck does this story have to do with Wall Street?  Or anything for that matter.   Just another mouthpiece for Trumpism.

Saturday, December 16, 2017

The Death of Guilt Politics?

Trump won because a lot of Americans are tired of feeling guilty about everything.

Today on National People's Radio, a sob-story about Eskimos in Alaska who are upset that the permafrost is melting and that the graves of their loved ones are sinking out of sight.   At first, when I heard the headline, I thought it was going to be the opposite - ancient coffins bobbing to the surface.  Of the two, I think sinking is the better option.

But it was one of these weepy pieces that NPR likes, and full of Indian (excuse me, Native American) mojo.   You could hear the tom-toms beating in the background almost.   We are supposed to feel guilty about the Indians, because we "stole their land" it is said.   Although I never stole anyone's land, and no Indian alive today had his land stolen - at least not by me, anyway.   We are supposed to feel guilty about historical events we had no control over.

And if you are white, middle-class, and worse yet, male, in this country, you are suppose to be atoning for a lot of bad shit you did, or you are responsible for by dint of your ancestry.   The whole slavery thing, natch, is your fault, of course.   You are to blame for the mistreatment of any minority group - it goes without saying.   And as a big-bad evil male, you are by definition, a sexual predator.

The latest aspect of this is, of course, the hysteria we are going through with regard to sexual harassment.   Now, granted, sexual harassment isn't a good thing.  Neither is bullying.  Both have been around a long while.   We seem to like talking about them, but rarely do anything about them.  Today, sexual harassment is just another thing added to the list of guilt politics for which white men should be ashamed of.

But is this the dawn of a new era of liberation, or merely the last dying throes of guilt politics?   I think it could go either way.   And how this will play out we will know in the next few months.  Because while a lot of people who did horrible things are being taken to task, a lot of other people who did less horrible things - or things that 30 years ago were not considered horrible at all - are being pilloried for no reason.

If you look at a lot of old movies from the dawn of the movie era until fairly recently, there is a consistent trope if you will.  The man pursues the woman, the woman resists the man, he finally grabs her and forces a kiss on her.  At that point, one of two things happens.   If he is a cad or a bounder, she pulls away and slaps him across the face, as illustrated above.   Or, if she really wanted him all along, she melts in his arms and stops resisting his advances.   Either way, the normative cue that the movies were selling was that if you want to score with women, you have to force yourself on them

Sean Connery, as James Bond, was king of the forced kiss.   Today, would this be allowed?

Today, this of course, would be deemed heresy.   And I wonder if we will have to go back through all those old movies and censor them or something - or at least put warnings on them.   Standards have changed in 30 years, to be sure.

And yes, maybe this is a good thing, as no one should feel pressured to have sex, or have rude comments made about them, or be forced-kissed in the office.  Maybe this is progress.

But on the other hand, I can see a different outcome.   The reason why Trump was elected President, I believe is that - at least in part - many people felt fed-up by this narrative put forth by the Democrats that we all need to feel guilty about something.   In addition to all the standard guilt-trips I described above, we are told that as Americans we need to feel guilty about the rest of the world in general, and of course global warming, which of course, is all our fault.

And while we have screwed up a lot of things in this world, so have a lot of other people.   Yes, our intervention in Central and South America has resulted in the installation of brutal dictatorships.  Our intervention in Iraq didn't really make life better for many - and the resulting "Arab Spring" and our inaction there, resulted in more suffering.   But we are not alone in this world.   Russia was in Afghanistan long before we were - and continues to meddle all over the world.   They only wish they had the reach we did.   And China pumps out far more pollution and carbon that we do, yet gets a pass on Paris climate talks.   If there is a guilt here, it is a collective guilt.

But even assuming all this guilt-talk is true - that Americans should feel guilty about the world in general, and that white, male, heterosexual men (boo! hiss!) should feel the guiltiest of all - where does this sort of politics lead us?   And by the way, I don't think any of this is necessarily always true - that this guilt-trip is based on a lot of bullshit, and yes, Russian trolls use this against us.

But where does this lead us?  Into the abyss, I think.  Because eventually people get tired of feeling guilty all the time.   And they will vote for the first charismatic leader who comes along and tells them they are not guilty but instead should feel good about themselves.   And history has proven this to be true.  Whether it is Putin in Russia, Duarte in the Philippines, or Hitler in Germany, leaders who sell national pride end up getting elected (or otherwise take power)

The stereotype of the Trump supporter is that of some right-wing under-educated redneck, who drives a monster truck, has a cache of guns, and harbors some racist and misogynist feelings.   The mainstream political parties tell him he is a bad person and moreover, that his situation in life is all his own damn fault.   And along comes Trump, who tells him that he is beautiful and moreover, all the problems in his life are the result of someone else's evildoing.

It is a heady and toxic cocktail that the masses will gulp down, one red solo cup at a time.   He is telling them what they want to hear, to be sure - the oldest game in politics.   But better yet, he is telling them - giving them permission - not to feel guilty all the time.

Now look at what the Democrats are selling.   Like some chastising old schoolmarm, they are telling everyone they are bad, bad, bad.   Even if you never did anything wrong in your life, spent every waking hour helping the homeless (another thing you are guilty of creating, by the way) and donating every nickel you make to charity, you are still guilty, just by dint of being an American.   Maybe - maybe - if you were a transgender Lesbian homeless Eskimo "indigenous person" in the middle of a "transition" you might get a pass and not have to ride the guilt train.   Of course, if you transition to male, then oppression of women is now all your fault.   Think hard before you go under the knife!

I am not sure where this is going, other than I think the idea that the Democrats are going to "take over" in the 2018 elections is a lot of wishful thinking.   The Democratic party is moving further Left to appease a person who isn't even a Democrat - Bernie Sanders.   Meanwhile, the men are being hounded out of the party and more and more women are being nominated.   The castration of the Democratic party is nearly complete.

The problem is, America just isn't that liberal.   Sure, a majority of Americans support some form of gun control or background checks - they also support the right to bear arms.   Americans are compassionate and support various forms of public assistance - but only for people in real need.  Americans are very tolerant of people of different races, religions and backgrounds - but that doesn't mean they support "Black Lives Matter," Islamic fundamentalism, or the right for little Johnny to "transition" in the third grade.

Americans will vote for a Republican candidate who they perceive to be moderate for the most part.  The only mistake the GOP has made is the same one the Democrats are making - embracing the extremes and forgetting about the "silent majority" of the middle-of-the-road middle-class.

Guilt Politics won't win in the long run.   Rather, it will result in more extremism in the future.  It is how we ended up with Trump in the first place.

People Are Idiots - Paying For Ringtones

People used to pay for ringtones for their phones, and at one time, paid for texting.   Why was this?

Years ago, I used to write Patent Applications for some pretty odious businesses - the cell phone companies, the cable television business, you name it.   It is not that the inventors were bad people or even the companies were bad, but that the industries had a money-grabbing aspect to them, where they felt they needed to go after every last nickle a consumer had - by selling a compulsive-addictive product.

Yes, long before Facebook figured out how we would get high on dopamine from "likes" and comments, the Cable Companies knew how we would obsessively channel-surf, and the cell phone companies knew we would obsessively talk - and later text - on the phone.   Find something people obsess about, sell the product, profit.

And before then, it was liquor and cigarettes.   This shit never ends, really.

But getting back to cell phones, one thing that appalled me in the 1990's was how texting was marketed.   Texting was almost an afterthought of the cell phone business - originally devised as a way of sending ancillary digital data.   The bandwidth required was really de minimus and as a result, texting really cost the phone company nothing to provide.

But as I noted in earlier posts, companies sell perceived value, not actual value.   When they make a car, they don't add up the cost of materials, labor and overhead and tack on a "reasonable profit" and that becomes the selling price.   Yes, a lot of naive college kids think things like that, too.   Rather, they sell what the market will bear.   So a popular SUV sells for twice as much as a plebeian unloved sedan, even if both cost about the same to make.  Guess which is the better value?

The same was true for outboard motors when I was a kid.   Johnson (OMC) made a V-4 outboard in 85, 100, and 115 HP models.   Each had the same number of parts and cost the same to build, but each had a different price.  They were selling horsepower, not engine parts.   Ditto for my work at Carrier - we sold chillers in different capacities, often being of the same frame size.  The costs were largely the same to make, but we sold them based on capacity, not cost-to-build.   GM used to sell the same small-block Chevy V-8 in most of its cars in the 1970's in a number of configurations - as a 305 or a 350, with two or four-barrel carburetion.  Same number of parts, same cost of construction, we sold them based on horsepower, not how much they cost to build.

So the telcos sold texting plans based on the perceived value to the consumer.   And back then, people paid pennies per text and actually signed up for texting plans and paid extra above and beyond their voice plan so they could communicate in a more cumbersome and less effective manner.   I just didn't see it, and never signed up.   And that's probably one reason I don't text today or have a texting plan on my phone.

Others.... well, they couldn't wait to pay extra for this sort of stuff.   And back then, we also sold ringtones.  You may not recall this, but back in the day, people would pay dollars for ringtones, often several dollars at a time.  Some folks actually would change their ringtones weekly, paying for the privilege of having a "special" ringtone on their phone - once again, status rearing its ugly head.   It was idiotic, it was madness, and people did it in droves.

Today, well, less so.   A friend of mine is a Neil Diamond fan, and lamented that her new smart phone wouldn't play "Sweet Caroline" as her old flip-phone did.   I grabbed her phone and managed to link it with mine (don't ask me how, it was one of those dealies in the setup menu you never use).   I downloaded the song from the SIM in my phone to hers, and then selected it as a ringtone.  The phone even has a feature where they will select an optimal part of the song to use as the ringtone.   All of this - for free.   It took about five minutes to do, and she was very pleased.

Today, there are kids young adults who never heard of the idea of paying for ringtones - or paying pennies for texts.  They get all of this "bundled" into their data plan, even if they are using something as plebeian as our GoPhone pay-as-you-go plan (which Mark has) which provides unlimited texting and 3GB of data, and of course, unlimited phone calls in the US and Canada for $40.75 a month.

Now, some might argue that back in the "good old days" we also paid by-the-minute for long distance service (a term alien to today's youth as well).   And it wasn't cheap.   Call your Grandma in California from New York, during peak rates in the middle of the day, and that phone call could cost several dollars.   Dad would scream when he got the bill at the end of the month - no, the phone didn't have a display telling you how much each call cost, either.   But back then, regulations, forced phone companies to offer basic phone service for cheap, which they made up for with long-distance services.  And long-distance did have an extra cost to the telcos, as they had to pay for all that switching gear and long-distance lines and the operators to run them.   Today, less so.

But unlike texting or ringtones, the cost wasn't essentially zero.    And of course, over time, the free market took over.  Since the cost of ringtones was basically nothing (other than copyright claims for some music) and since texting uses leftover data bandwidth, companies had little costs for these items, and could offer them for free or "unlimited" as part of a monthly subscription service - much as Netflix lets you watch all you want or rent all the DVDs (remember those?) you want for one monthly fee, instead of paying by the eaches.

But it begs the question - what sort of unnecessary bullshit are we paying for today that really costs nothing to make and is really not essential to our daily living?  Maybe it is $1000 smart phones or $70,000 pickup trucks.  Maybe it is designer coffees or upscale burritos or "craft cocktails."  It is something to think about.  We ratchet up our daily expenses, a penny at a time, and then later on wonder why we are broke.

Because it is all-too-easy to go broke, one ringtone or one text at a time - or whatever the modern equivalent is.

Friday, December 15, 2017

Them that's got, shall get (God bless the child that's got his own)

Them that's got, shall get
Them that's not, shall lose
So the Bible said, and it still is news
Mama may have, and papa may have
God bless' the child,
That's got his own
That's got his own
Yes the strong seem to get more
While the weak ones fade
Empty pockets don't
Ever make the grade
As mama may have
And papa may have
God bless' the child
That's got his own
That's got his own.
Billie Holiday said it best - them that's got, shall get.   In the mail today a letter from Capital One.  I have a credit card with them - actually two, one for Mark and one for myself.  It has a low interest rate of 8.15% and no "perks" other than if you travel overseas (or even to Canada) they don't charge a currency conversion fee, unlike Bank of America.
But the pitch today was for a "Money Market 360" account with a paltry 1.3% interest rate (annual yield).  Not very exciting, but if you deposit $10,000 by the end of the year, they will give you a $200 bonus, after 60 days.  No need to maintain a balance after that.   $200 for parking $10,000 for 60 days - that works out to an annualized rate of 12%.  Of course, you can only sign up once for this deal - but hey, I don't plan on using that money for 60 days, so sure, give me $200.  The money was sitting in a non-interest-bearing account anyway.
This is not a bad deal, provided you have $10,000 laying around.   I have $10,000 laying around, now that I am off the money train.
These types of deals are nice and all.  It is like when Merrill Edge offered $600 if I moved some IRA accounts to their platform.   This didn't cost me anything, and in fact, saved me money, as I was paying $9.99 a trade with eTrade at the time - and Merrill has free trades.
If you have money, you can make money.   If you don't have money (which means you need a deal like this more than I do!) then go fuck yourself.  Not only will you not get cash bonuses and preferred interest rates and so forth and so on, odds are you will be socked with banking fees, late fees, bounced check fees, and so forth.
The snowball effect works in both directions.   Once you start saving up money and "own money" and acquire wealth, the best deals in the world are offered to you.   Once you start circling the drain, however, they accelerate the process of your demise in every way imaginable.
And I've been on both ends of this deal, and can tell you it is better to be on the upside.   Once you start missing payments, your credit is shot and you get the worst offers and highest interest rates.   Late fees accumulate, bounced check fees occur.  If you are late on your taxes (payroll, personal, property, whatever) penalties and interest accrue.  If you have a commercial loan, your banker may call it and run you out of business.  Circling the drain sucks.
And for some folks, it is not a matter of choice.  According to a recent CBS article, 1/3 of Americans are delinquent on their debts, and 1/5 have medical debt in collections.  Now in many cases, these folks are not "at fault" for their situation.   In other cases, well, they decided buying a new motorcycle was a better bet than buying health insurance.   Hard to feel sorry for that group - particularly when the rest of us end up paying their medical bills.

But in other situations - such as mine, and maybe yours - my debts were not a result of some unforeseen circumstance or string of bad "luck" but rather just the plain old boring spending more than I made.  I bought a lot of "stuff" that I thought I could afford, and over time, my income went down (thanks to the recession and a general decline in the business).  But the debt load remained the same.

And that is the problem with debt - and something I wish someone explained to me when I was younger.   When you sign papers obligating yourself to a string of debt payments for 5, 10, 20, 30 years or a lifetime, you create this constant drag on your finances that simply will not go away until paid off or you declare bankruptcy.   In the case of student loan debt, even bankruptcy isn't always an option.

It is sad that the system works this way.   If you think about it, in a just world, it would work the other way - the rich would pay the highest rates and the highest fees, while the poor would be offered all sorts of decent bargains.   But alas, the world isn't that way, and probably for very good reasons - we want to encourage thrift and savings and discourage poor financial practices.

But "fair" or not, it is how the world works.   You can rail against it, or work with it.   I found the latter to be far more profitable in the long run.

UPDATE:  I told Mark about this offer, and his reaction was, "Cool, can I do one, too?"  Smart man!

Wishy-Washy Thinking

Companies often destroy excess inventory for very good business reasons.

A recent article in Snopes highlights how some folks are weak thinkers.   The story in question is nothing new.   A young person decries a major store chain for destroying excess clothing inventory when "homeless people are freezing to death!"   Of course, some "homeless" people are less freezing than others, including the guy with no shoes, who has shoes - and an apartment - but begs with no shoes on, because it is good for business.

Like I said, the story is nothing new, as I recall reading a similar story a decade ago about a shoe company that slashed unsold shoes before throwing them in a dumpster.   "Homeless people could have used those shoes!" people cried.   And indeed they could have - by returning them for a full refund and then spending the money on drugs.

And that is the reality of it.   In the case of Eddie Bauer, they offer a lifetime warranty on their clothing.   Now suppose you fish a jacket out of the dumpster behind Eddie Bauer that is in perfect condition.   You've got a free jacket - for life - and you paid nothing for it.   Not only did Eddie Bauer not make any money on this deal, they lost money, as they paid to have the jacket made and shipped to the store, as well as paid for store overhead and employee salaries.

When you throw away "perfectly good" product, be it clothing, shoes, food, or whatever, people end up taking it and often trying to return it for a refund or store credit.   And since stores today have generous refund policies, one could empty a dumpster behind a Shoe-Max or whatever, and then walk into the store (or another branch) and demand a refund or store credit for 100 pairs of shoes.

Now, arguably, maybe there are other ways they could donate these clothes and avoid the return problem.   Removing the labels from the clothes might be one way - cutting of the neck tag and requiring the neck tag to be there for a refund to be given - is one way around it.   And donating clothing might give the company a tax write-off as well as favorable publicity, so it might be better than slashing and throwing in a dumpster.

But getting back to weak thinking, the young lady in the story decries this as an example of "the excesses of capitalism" - which I think was really more of her lament that she couldn't score free dumpster clothing.   But her thinking is flawed and weak in a number of ways.

To begin with, there is no clothing shortage in this country, even among the homeless.  Go to any Salvation Army, Goodwill, or other type of thrift store, and you will see racks and racks of clothing there at prices that are beyond cheap.   I go there all the time - the money they raise is used for charity, so you are doing good by saving money.

Have no money?  Most thrift stores will give you clothing and other things if you ask.   In fact, that is often their mission, to help the homeless, hungry, and whatnot.   As I have noted before, you really have to work at it, in this country, to be unclothed or malnourished.  We have so many programs available to help people.   You would have to intentionally not take advantage of them to starve.   As the "shoeless" man example illustrates, even a "homeless" man can get food stamps, a government stipend, and an apartment to live in.   Begging on the street provides him with extra cash, of course.

The reality of homelessness in America is that those folks living under the bridge and defecating on your lawn are not "poor" but mentally ill and drug addicts or alcoholics,  They don't need money, or shoes, or blankets or designer jackets, they need mental health facilities, drug rehab centers, and someone to manage their lives for them.   Since we choose not to do this for a number of reasons - the costs involved and our ideas about "freedom" (for some, not for the people cleaning up their messes, of course) we end up with homelessness.    Not long ago in this country, we had institutions to help the mentally ill.  Then we decided that cost too much and giving them pills was a better idea.   It did not end well.

The other side of the coin is, in a free country, people are free to do with their possessions as they wish.   If I want to buy 500 containers of cheaply made Chinese clothing and blankets and then put it all in a pile and set it on fire, that is my right to do so, provided I am not violating any environmental laws, of course.   It is a scary road we go down if some college kid gets to decide what people can and cannot do with their personal property - regardless if those people work for a corporation or are disposing of their personal trash.   It is not up to some college kid to judge the rest of us by what we throw away.

If we go down this road, it will only be a matter of time before the dumpster police start checking on what we are throwing away and whether we can or not.   And this is already starting to happen in this country, with recycling laws and deposit laws, and overseas.   In Paris, they passed a well-meaning but ill-informed law that restaurants cannot throw away food.  As a result, if you order a meal in Paris, and don't finish it, they hand the remains to you in a Styrofoam clamshell and make you take it home.   No homeless were fed, and now we have more landfill waste.   Great intentions lead to bad outcomes, in many cases.

Mark ran into this with the food store he ran.   As I noted in another posting, giving away the day-old bread has a lot of issues.   The shelters wanted a guaranteed delivery of X loaves of identical bread or pastries.   If a mixed-lot of items was sent, the "clients" of the shelter (homeless bums) would start a knife fight, because one bum got an apple danish, and the other got cheese.   Beggars can be choosers, in America!

The other problem, of course, was liability.   You give away food that is expired or about to expire, you run the risk of someone claiming food poisoning.   So you end up being sued for something that you were not only doing for free, but at a loss, when you consider all the manpower it takes to "give away" things.

And then there is the issue of homeless people lining up behind your store, expecting a handout.   If they handed out "leftover" food to homeless people in the neighborhood, you would end up with a homeless encampment next to the store - and homeless people sleeping in the parking garage, begging for money and harassing the customers.   Again, these are mostly mentally ill people or folks with drug habits, or both.   Not the sort of neighbors you want to have.   It is nice to be sympathetic to such folks, but self-preservation has a place as well.   Talk to anyone who works with the homeless and they will tell you they can be very dangerous.   This ain't a place for amateur hour.

But again, just as there is no clothing shortage in this country, there is hardly a food shortage either.  In fact, we are the most obese country on the planet, maybe outside of Tonga.   We have the fattest poor people in the world - and the fattest homeless as well.   And please, don't bore me with "well, they eat poor quality food!" arguments.   They eat, which is more than a poor person in Africa can expect.   We need to put our "problems" in perspective.

There are other reasons companies destroy products.   The French pottery company Quimper, makes a line of upscale unique pottery.  And outside of the factory, is an area where they smash the defective plates and bowls.   Smashing "perfectly good" china that could be used for the homeless to eat from!  Such a scandal!   But there is a method to this madness.   If they allowed "factory seconds" onto the marketplace, it would create the return problem that the shoe and clothing companies have.   People would return pieces for new ones, effectively getting a perfect product for the cost of a defective one.   And not only that, the "factory second" product would bring down the reputation of the primary product.   So, like most china producers, they smash the plates and bowls with minor defects in the glazing.

And in fact, every industry does this - the scrap rate in some production lines can be alarming.   For every LCD panel made, back in the day, maybe four or five had to be scrapped - which is why they were so expensive.   LCD televisions are cheaper today because this scrap rate has dropped down.  Defective and unpopular products and products past their "sell by" date often have to be disposed of, whether it is the infamous "E.T." video game, a pair of ugly shoes, a loaf of bread, or a designer jacket.  And the decision to dispose of the item rests with the owner of it, in a free country.

Will Eddie Bauer change its disposal policies as a result of this kid's activism?   Maybe, but really not.   They realize that they need to do damage control on a situation with poor optics.   And giving away a bunch of clothes to a homeless shelter on Christmas eve (with the neck labels removed, to prevent instant returns, of course) would be one solution.

But that beggars another problem.   Eddie Bauer is a designer label - albeit one whose time in the sun has come and gone.   You don't sell upscale clothing brands by putting your clothes on homeless bums.   One reason Pontiac went out of business is that they made the colossal blunder of giving away dozens of the cars on Oprah to homeless people - which backfired in a big way as the homeless could not afford to pay the income taxes, sales taxes, registration fees, or insurance, much less the cost of maintenance and fuel on a brand-new car.

But worse yet, Pontiac was now tagged as "the car of homeless moms" which is not really going to sell well to the general public, who you are trying to convince that the car is nicer and costs more than the Chevy hiding underneath the plastic cladding.   When you give something away for free, people don't perceive it as having value.   Why pay $15,000 for a car that others get for free?   In marketing, you want people to covet your product, not think of it as cheap.

So there are probably very good reasons why Eddie Bauer won't be making a huge donation of unsold jackets to the homeless this year, even if some college kid complains after dumpster-diving that all the clothes were slashed.  No one has a "right" to tell other people how to dispose of their property.  We go down that road, we subject ourselves to tyranny.

Sorry, but no sale.  There are legitimate and rational reasons why companies destroy products, no matter if it doesn't make sense to college kids.

Brexit Regret And Representative Democracy

Is direct democracy a good idea?

One of the worst ideas of the 20th century was the public referendum. The idea of a representative democracy is not that each person gets to vote on every damn thing that comes down the pike, but that the people vote for Representatives who then in turn craft legislation and decide what's best for all of us, even if it would not necessarily be something that we would vote for ourselves.

Representative democracy acts as a handbrake on Mob Rule.  And our bicameral legislative branch provides particular stops to prevent democracy for running away with itself. Our House of Representatives, like the British House of Commons, provides more direct representation of the people.  As they are elected every two years, they could be quickly voted out of office for making unpopular choices.  This is the voice of the rabble.

Our Senate, which was originally made up of wealthy landowners who were appointed by their States, provided a more long-term and balanced view of government.   The Senate was considered the more grown-up deliberative body, akin to the British House of Lords.  Since they were only elected or appointed every six years, they could take the long view on things, and make choices that might not be popular in the moment, but were the right thing to do for the country.

And for both legislative bodies, it was true that representatives and senators could vote against the popular will of their people, if they felt strongly enough that what they were voting for was best for the country overall, even if it meant sacrificing their political careers.  And in a few heroic instances, some members of Congress have done just that.  Whether or not we agree with their decisions, they should be lauded for taking a stand.

Sadly, many people believe we should have a more direct representative government.  However experiments with this sort of thing has brought out the flaws of the idea.  California, for example has this crazy proposition system where people can petition to have propositions put on the ballot and people vote their own laws into existence.

The problem with these propositions, is that things that seem popular at one moment might turn out to be bad ideas later on and they are awfully hard to undo.  While it may seem to some that this is the best way to enact direct democratic government, with one man and one vote, it also means that whatever the mob finds interesting or popular at one moment can end be end up being enacted into law fairly permanently.

Given the chance to vote down any taxes, taxpayers will do so, even to their own detriment.

There are basically two scenarios that play out with this proposition system.  For people paying taxes, the gut instinct is to vote down any kind of spending whatsoever, even spending on things they may need, like infrastructure or schools.  It is like this scene from The Simpsons where the school board meets to vote on various pending items and the attending members shout down every piece of spending as they don't want to spend any money or raise their property taxes.

The second scenario that plays out is it when people believe that you can get free stuff from the government and not have to pay for it.  If enough people are convinced they can get free money and someone else will pay for it, they will vote for this. And democracy fails when everyone starts to believe they can vote themselves a raise.

Of course, the worst scenario is the combination of the two - where voters shout down taxes and then vote themselves free stuff, the cognitive dissonance apparently not affecting them much.

Our founding fathers foresaw this, having seen various types of governments struggle for centuries. They knew that direct democracy was unworkable as it would devolve into mob rule.  In fact, what many people laud as our "great democracy" really was not very democratic in its origins.  As I noted earlier, Senators were usually wealthy property owners who were appointed by the States and not directly elected by the people.  And in the early days of our country it was only property holders that were allowed to vote -  and a course those were white male property owners.

Our founding fathers worried about entrusting unemployed people or hobos or ne'er-do-wells to steer our ship of State.  They feared - and rightfully so - that the lower classes, if given a chance to vote, would vote to take money away from the upper classes.  And it was those upper classes - the landowners and the slave owners - who instigated and fought our revolution to be independent from Britain, to be free to make even more money.  They weren't about to give this up for the rabble.

It is interesting to watch what is going on in Britain right now with the Brexit disaster.  Britain seems to be dragging its feet on Brexit negotiations, and I get the impression that maybe a lot of people are having a Brexit hangover and wondering what the hell it is they voted for.  They held a nationwide referendum which, oddly enough, was non-binding and after the Brexit vote won by a very narrow majority, they decided to go ahead and separate from the European Union.

I think a lot of people in the UK are starting to realize the folly of putting national identity up to a vote.  If the British Monarchy were put up to a vote, right after Princess Diana was killed in that car accident, would Queen Elizabeth be on the throne today?  Or would she be on the dole today?  The problem with a referendum, is that it can be based on popular opinion, and popular opinions change over time, which is why people do opinion polls in the first place.  What seems like a good idea one day, might be a shitty idea the next.

As I noted, our condominium is voting to dissolve itself and have the entire 22-acre complex torn down and sold to a developer and made into high rise apartments, condos, and offices.  This is a pretty major decision for the property owners and the condominium documents require an 80% vote in order to dissolve the condominium - a very high threshold to achieve.

Thus, I'm appalled that it requires an 80% vote to dissolve our Condominium Association, but Britain requires only a simple majority to dissolve itself from the European Union.  What on earth were the British people thinking, particularly since it was a non-binding referendum?  It seems that once the voters indicated - by a bare majority - that they wanted to drive the car off the cliff, British politicians felt duty-bound to take the wheel and steer toward the Grand Canyon.  "Give the voters what they want!"  Jolly good fun.

Democracy was never intended to be real-time, one-man, one-vote democracy where we each are polled on our opinions on topics of the day.  The reasons for this, even our founding fathers in the 1700's knew.  They knew that we could be swayed buy events or propaganda or trends.  They knew that we, as a whole, could act like a mob and be stampeded in one direction or another, and regret it later on. They knew also that government should be a deliberative process, where people take the time to figure things out and not just rashly jump on some bandwagon and impulsively pass laws.

And as it turns out, it's a pretty well-designed little clockwork they made for us.  As we see today, president Trump struggles to get his legislative agenda through, as the proposals he is making are often not very well thought out.  We are discovering that legislation requires compromise and accommodation as well as contemplation.  While a President can make bold promises, Congress realizes they have to be reelected every two (or six) years and are more accountable to their voters.

It is a system that works pretty well, even with all its flaws.  Maybe it can't always spring into action on a moment's notice, but perhaps that is a good thing.  Radical change in any society is usually detrimental to the majority of members of that society.

The entire Brexit fiasco should be fair warning to the rest of the world.  Representative democracy is just that, democracy by representation, not by direct vote.  When you let people vote directly on law-making, the results you may later regret.

Thursday, December 14, 2017

The Monetization Experiment - Final Chapter

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My experiment with monetization was interesting, but hardly profitable.  I could make it more profitable by turning this blog into something different.

After year of monetizing my blog, I am now $2585.79 wealthier than I was before.  This works out to about $215 a month, on average, or about $7 a day.   With an average of one blog posting a day, each taking maybe an hour to write (maybe - some readers have taken me to task for my plethora of typos and hurried writing lately) this works out to minimum wage.   I could make more money working down at the Circle-K.

And although I had a lot of hits early on (during the campaign season) where some months the lucre was over $300, the payoff has been less and less lately, dropping down to under $200, with last month's take being a paltry $149.

One reason my blog doesn't make money is the click-through rate is shitty.  And this is probably because I routinely decry the sort of "bargains" advertised on the Internet, if I do not in fact say outright not to click on the ads on my site.   I could make a lot more money blogging, if I promoted things like payday loans, leasing cars, airline miles cards, Bitcoin, or refinancing your house.  If I suggested shitty financial practices, my click-rate would soar, as only idiots would read my blog.

Bitcoin - don't get me started.  So many of the ads on my site were for Bitcoin.  Anything advertised on the Internet is a raw deal.  Bitcoin is heavily advertised on the Internet (or companies wanting to "train" you on how to use it, or whatever).  Do the math - it's all a scam!

A reader opines that I could make serious coin at blogging - a hundred grand a year or more.   Maybe that is true, maybe not.  It was not what I set out to do.  I just wanted to write about personal finances, at a time when the economy was in peril and my own financial situation was, if not in peril, at least pretty screwed up.

And I have been able to turn my own financial life around.   When I started this blog, I had two mortgages, six cars, two boats, and a need to stay on The Money Train to keep it all going.   And I had this sense that the money train was going to stop pretty soon.   My job skills were rapidly becoming obsolete and my brain and body were aging.   In Patent Law, you have to keep up on the latest changes and developments - which is why law firms competed to hire me after I had two years experience at the USPTO and why I was a hot property after graduation.

The law business in general is staffed by alarmingly young people.  Supreme Court decisions aren't written by the Justices, but by the law clerks - many of whom are fresh from law school.   Once you get older, you either end up as a Partner, supervising those young associates who make all the money for the firm, or you find something else to do.  But I digress.

I was able to re-structure my finances and learn to live with less (but still a very comfortable lifestyle) and retire early with enough money in the bank to live comfortably, but not extravagantly, for at least 30 years.  Not a bad "happily ever after" to be sure.

I never thought that others would read my blog, and indeed, today even blogging is sort of quaint and obsolete, like my legal education.   The hot thing now is to tweet bullshit at 140 characters-per-second.  What people want is outrage and controversy.   What they want is simple, pat answers to complex problems.  What they want is for me to say, "You're Approved!" to lease a new Buick. 

And I can't do that.

Sure, I could gin up the numbers in a number of ways.   I could SEO (Search Engine Optimize) my blog entries by putting in more keywords, putting links to my site on other people's sites.   You go to other sites and enter the URL in the comments section, for example.   I could enable comments, which would allow for more user interaction and thus more "engagement" as the evil marketers like to call it.

I could start shilling for products.    Yes, people will actually be more attracted to a blog that gushes over how such-and-such a product is really keen and how you really need to buy it.   I don't do that, and my numbers are down as a result.

I could also start censoring myself.

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I have received a number of threatening e-mails from Google, claiming that my blog will be taken down or something, because of an innocuous post I made which argues (correctly) that the sex drive is the one primal urge or program in our brain that drives all out other urges.   Understanding this, and you understand yourself.   It was hardly "porn" in any sense, other than the R-rated photo at the top of the page. 

But Google threatened me, so I put the posting into "draft" mode.   I found myself censoring myself.   And I also found myself thinking about what posts would generate more clicks and thus more money, even on a subliminal level.

With monetization comes corruption.   Readers accused me of shilling for Wal-Mart or various products I had used and talked about.   It is not hard to understand why they think this - every other site out there does it.

It isn't that I am better than others, just that I'm too damn tired to do all of that, and it literally smacks of effort.   For example the "Mr. Money Beard" guy claims to have "retired" at 30 or some such nonsense, and he gets quoted in the paper now and then.   But he runs a blogsite with ads and a curated comments section.   That has to take more than an hour a day to do, right?   So he really isn't retired, is he?

When you engage in any pastime in exchange for money, you are, by definition, not retired.   But that doesn't sell blog views and click-through revenue as much as "I retired at 30!  Read my blog and see how you can, too!"

Not interested.   Retirement is retirement, and anything else is working.   This blog is a hobby not a job, and the monetization experiment was just that - an experiment to see how monetization affected how I wrote things and what it lead to.

And experiment, I am happy to say, is over.

This is not to say that ads won't appear with my content - that is another bugaboo about this whole thing.   You see, others simply copy my content and then throw up shitblogs with my postings.   Trying to get these taken down is like playing whack-a-mole, as for each blogsite taken down, ten more pop up.   And Google doesn't give a shit, as they get a cut of the ad revenue for each of those sites.

And taking down copycat sites is an arduous process.   Google requires you send them the URL for every single blog posting, which means having to cut and past over 3000 URLs, if you want the whole copycat site taken down.   I suppose if I was making serious coin on this blog, that might be worthwhile.   But then again, it would be a full-time job, and I would have to hire someone to do this - and that is what the big-money bloggers do, too.

They have whole staffs of editors and researchers and "copy writers".   One reader suggested I hire an "editor" to review my postings.   At $149 a month, I can see that is a distinct possibility!   I just write stuff that comes into my head.  I am not interested in being the next Sooze Orman or Mr. Money Beard or whatever.

Besides, that sort of shit has already been done.   And I'm retired.  Not fake-retired, real-retired.  Shuffleboard and all!

* * *

If ads still appear on this site, please let me know.   For some "funny" reason, Google AdSense, like any good Casino, makes it easy as falling off a log to get in, but obfuscates how you get out.   It appears the ads are no longer appearing on my site, but then again, maybe Adblocker plus is just blocking them (as it should, and you should use it, or another ad blocker program!).  So, please let me know.

UPDATE:  When I try to remove ads from my site, the following message appears:

We apologize for the inconvenience, but we are unable to process your request at this time. Our engineers have been notified of this problem and will work to resolve it.

When I use the "layout" page to remove AdSense "gadgets" the gadgets do not appear on the layout (but do appear on the "preview") so I can't remove them there, either!

Google AdSense is very, very tricky - and sticky!

UPDATE:  Removing Google AdSense "gadgets" isn't intuitive.  They do not appear on the layout screen as Google's Help page suggests.  However, if you click on "view blog" the ads appear with a little toolbox logo next to them.  Click on the logo and then scroll down to "remove" the gadget.   Google's adsense "help" pages are all woefully out of date.  The page that comes up with the Number 1 hit on "how do I remove ads" gives advice that is flat-out wrong and instead leads you to a page to ADD MORE ADS!

I also cancelled my AdSense account.   The fact that it was so fucking hard to remove AdSense (it is like a virus!) just confirmed in my mind that I needed to remove it.  I can say "fucking" now, too, without harsh words from Google.

You watch, now, they will simply close down my blog.   That's how the system works!

Never fear, though, some Indian copycat site will keep my stolen content alive.....  :(

P.S. - sidebar and banner ads are just fucking annoying, don't you agree?  Mom's hate them!  Click here for this one simple trick!