Thursday, July 20, 2017

Should You Hold Physical Stock Certificates? (DRiP Investing)

Holding physical stock certificates is not necessarily safer or more convenient than having them in "book" form.

I mentioned before that "back in the day" my Mother used to buy stocks and keep the certificates in her safe deposit box, and reinvest the dividends.  She told me two things, which were among the plethora of things that she told me that I found out were dead wrong, or at the very least, sadly outdated, and that was to hold physical stock certificates and reinvest dividends.

Are these bad ideas?   Maybe in her day they made sense.  Today, less so or not at all.

As I noted in an early posting, one way I got started investing was by subscribing to The Money Paper.  Back then, we didn't have your fancy-schamcy Internets to do business on.  So you got this physical paper in the mail, and one thing they allowed you to do was buy one share of stock in a select list of companies that allow for shareholder investment.  They charged I think, a flat fee service charge to buy this one share, which you received in the mail.   I would frame these and put them around my home office - it was a good way of encouraging myself in the investment process.   Kind of impressive, too - let's face it, we all seek status!

But what this allowed you to do was DRiP investing - the Dividend Reinvestment Plan - that many companies offer to their shareholders.   Once you own that one share of stock, you can then buy additional shares for a nominal service charge.   You can set it up so every month you automatically buy $50 or $100 of ACME stock, and they would charge you a $1 service fee.   And dividends would be automatically re-invested over time.

Now bear in mind this was years before E*Trade and Ameritrade and low-fee or no-fee investing.   Back in the bad old days, you had to go to a licensed broker and pay like $30 a trade or more!   And I am not talking about 1930, but 1990.   Times have changed - rather rapidly.

Now, not all companies do DRiP investing, and some require you own more than one share to be a DRiP investor, for example 50 or even 100 shares.   The companies that do DRiP investing tend to be old line blue-chip dividend paying companies, not your stupid dumb-ass IPO tech nonsense that the media says will make you rich (but does the opposite, of course).   This is not a vehicle to speculate in stocks or gamble in the market - it is a means for small investors to build up a stock portfolio over time.

As I have noted in other postings, one problem for the small investor - the 20-something starting out with nothing in the bank - is that an "investment advisor" will say, "Well, I can set you up with a mutual fund, if you have about $5000 to start with!"   But of course, when we are in our 20's we don't have $5000 lying around - or at least I known i didn't.

So, for example, I started out putting $100 a month into Stanley Tool Stock (Now Stanley Black & Decker).   It has been a pretty stable company over the years, cranking out dividends like clockwork and gradually increasing in price over time.   And the end of the year, I had $1200 invested, and maybe $1500 in stock, with dividend reinvestment and gains in stock price.   The next year, I added another stock, such as AT&T or whatever - another blue chip, old line dividend payer.   By the end of the next year, I had over $3000 in stocks.

What this allowed me to do was adjust my spending in order to invest.  The big mistake I see people make (and I did it myself, once) is to sign up for the maximum 401(k) allotment, or make some big splashy investment, without figuring out where the money is coming from first.   A hundred dollars a month isn't going to materialize out of thin air, just because you decided to "invest".   You have to take that money from somewhere else in your budget.   Cut the cable bill, or maybe fewer of those $29 family meals from Chik-Fil-A.   Saving money is a lot more fun when the sacrifices you make are directly connected to doing something good for yourself.

If you don't figure out where the money is coming from, well, you can end up in deep trouble.   You'll start using credit cards to make ends meet, and well, we know where that ends up - your own personal credit card crises.   Going into debt while investing is idiotic.

Getting back to stocks, over the years, companies have moved their DRiP programs online and farmed them out to companies like Computershare.   Computershare operates these DRiP programs and also allows you to buy stocks through their website.   You can set up an account and have money debited from your checking account and used to buy shares periodically.  There are small fees for this, of course, but often far less than other online platforms.

Yes, I get free trades with Merrill Edge, but you have to have a minimum balance of $100,000 or so, and like I said, I didn't have that when I started out at zero.

So today, the need to have physical shares in your possession is unnecessary, even for DRiP investors.   And I found out the hard way, it can be a pain in the ass as well.   I had 70 shares of Stanley stock in my office and somehow it got lost when we moved.   This is not a good thing.   Of course, you can get your shares back, by signing an affidavit and paying a fee - which came to about $150.   It is sort of like if you lost a physical savings bond.   You don't have to worry about losing your investment, but it can be a pain in the ass to get it back.

Most stock holdings today are kept in "book" form - that is to say on the books of the company you have invested in.   So there is no need for physical shares to be issued and for you to keep them.   In fact, I suspect that physical stock shares will go the way of the buggy-whip in due course, if it has not already.   And that would be too bad, as they were often real works of art and kind of cool to look at.

DRiP investing is still around, and while I would not suggest you put all your eggs in this one basket (or indeed any basket) as your 401(k) and IRA are often better options, it is a good way to build up an after-tax portfolio which you will need as a buffer against possible downturns in life (layoffs, unexpected bills, etc.).   It is also a good way to get you to think about your portfolio, investing, and where your life is going.   When I started DRiP investing, I started tracking my net worth, and that made a huge difference in my finances, over time.

Getting back to the second thing my mother said that was wrong - should you reinvest dividends?   Back in the day, this made sense, as it was a very low-cost way to buy shares.  Your dividends were used to buy shares (or fractional shares) of stock for a nominal fee.   And when you are starting out, maybe this is a good thing do to to build your portfolio.   But once you have a large enough portfolio to generate hundreds of dollars of dividends a year (or more) it makes more sense to me, in this day and age, to take these as cash, in your trading account, and when the amount gets large enough (over $1000) use the money to buy another stock - thus diversifying your portfolio.

Again, my Mother's advice was not so much wrong as it was outdated.   If she wanted to diversify her portfolio, the stockbroker fees and transaction costs were very, very steep.  It was less costly to reinvest dividends, even if it meant that she had all her eggs in one basket, or at the very least, a small number of baskets.   With low-fee or no-fee trading today,  you can create your own "stock fund" with dozens of stocks, and not a lot invested in any one stock.   My stock account has more than 30 stocks, and no single one having a value more than $5000.  One stock crashing isn't going to take me out.

Today, I still have many of the stocks that I bought while DRiP investing - but I have them in a no-fee trade Merrill Edge account instead.    The $100 a month I put into various shares is now worth over $100,000.   And over the years, I have cashed in some of those stocks when I needed money for various reasons.   Financially, I came out ahead (as opposed to, say, putting $100 a month into cable TV) and psychologically as well.   When you have money in the bank, it helps with your mental health and well-being, that goes without saying.

Wednesday, July 19, 2017

Chik-Fil-A $29 Family Meals?

Is this a good deal for $29 plus tax?  I don't think so.

Convenience foods are a big deal today.   People claim they are "too busy" to cook or even shop, so they stop at a chain restaurant and buy bags of food for "takeaway" and the go home and much it all down.   Yes, it is convenient, no it isn't very cost-effective.

$30 a meal, with tax, for a family of four is more than double the price of making a meal yourself, or even buying a semi-prepared meal.   Chik-Fil-A is jumping into the "takeaway" market to tap into the lucrative dinner trade.   We see the cars lined up around Chik-Fil-A at lunchtime.  But at dinner time, less so.  People are less likely to have "fast food" for dinner than they are at lunch, so many fast-food restaurants are trying to move up-market to the "fast casual" or "family dining" space.   You can understand why Chik-Fil-A is making this move - or at least this experiment.  There is money to be made here.

As I noted in my meal kit mathematics posting, you can make at home, a meal that Blue Apron sells for $10 a serving, for under $5.  So for a family of four, you are talking $20 or less, about 2/3 what Chik-Fil-A wants for dinner.

And if you think saving $10 a day is chicken-feed, add that up over time - it comes out to hundreds of thousands of dollars, if invested ($368,916.60 to be precise, if invested for 30 years at 7%).   If you are underfunding your retirement and buying convenience foods, well, you have no one to blame but yourself, right?  Oh, right, you want your meal-to-go today and the government (meaning me, as a taxpayer) to bail you out later on.  Sorry, no sale.

Not only that, the prices I quoted are for the fancy Blue Apron meal, which you can probably beat in preparing an equivalent Chik-Fil-A meal - with about as much convenience.   You can buy a whole roasted chicken for $4.99 at Wal-Mart, that you can take home and serve.   Mac and Cheese?  This is one of the most inexpensive foods in the United States - and easiest to prepare, if you can boil water.  Heating a can of beans?  How hard is that?  A package of dinner rolls?   A buck at most.

It is funny, though, when you say "$29 dinner" it sounds like a lot of money - at least to me.   But if you look at the "ticket" on most people going through the Chik-Fil-A drive through, odds are they are spending close to $10 each for lunch, if not more.

Let's do the math on this, using the Internet for price comparison:

Chik-Fil-A "family meal"
One entree (chose ONE):
12 chicken strips
four chicken breasts
30 chicken nuggets
 Two sides (choose TWO):
bacon baked beans
mac and cheese
a fruit cup
a side salad
kale and broccolini
 Eight mini rolls.
Total cost:  $29 without restaurant meal tax (!!) or $7.25 per serving.
Now consider stopping at your Neighborhood Market and spending as much time as you'd spend in line at Chick-Fil-A, picking up a basket of items:
Whole roasted Wal-Mart rotissery chicken $4.99
Baked Beans, 16oz.  $1.48
Fancy Premade Salad Mix - $3.63 
Hawaiian Rolls (8)  - $1.88

Total cost:  $11.98 without grocery tax (far less than restaurant tax!) or $2.95 per serving.
Hell, for that price, you could buy two whole chickens and a bottle of wine and still be less than Chik-Fil-A.   You'd probably have better and more food as well.   I chose a fancy salad "kit" and Hawaiian rolls.  You can buy rolls for less than what I am showing and a more plebian salad.  Or if you went with mac-and-cheese (as shown in the photo), well, that is ridiculously cheap.

The "hassle factor"?   Well, you have to nuke the beans, serve the chicken, pour the salad into bowls.  About the same amount of labor you'd have to do with take-out food, unless you are just going to gorge yourself in the car on the way home (you laugh, I am certain there are people who do this - eating a meal for four by themselves).

So in terms of work involved, you can eat for a lot less for about the same amount of "hassle" it takes to wait in line at a busy fast-food restaurant and schlep food home.

If you want to hassle, you could buy chicken breasts at SAMs club, freeze most of them and cut your chicken cost in half.   You could prepare your own salad from individual ingredients, or your own kale and brocollini or whatever.   The point is, home-prepared foods, even quasi-convenience foods prepared at home, beat restaurant meals by more than 2:1 in terms of cost.   And yes, this is a lot of money, for the middle class.

And don't tell me "you can afford it" because if you are really rich, you have your own live-in chef, and aren't eating dreck from Chik-Fil-A.  Please, don't pull pretend rich on me.  I've seen it too much.

Are all take out foods a raw deal?  Well, of course they are - no one can buy ingredients, pay people to prepare them, pay overhead on a store, and make food for less than you could.  This is not to say that I never, ever get take-out foods, but only that I rarely do.  I'd save the take-out for foods that are more difficult to prepare at home.  Indian cuisine or American Chinese or Thai.   Fun things you do once in a while as a treat.   Grilled chicken breasts and baked beans?   I don't think that warrants $29.   Not in my book, anyway.

Americans - going broke one credit card charge at a time, using restaurants as their kitchens!


Should you join a Frat?  Probably not.

Fraternities have been in the news a lot in the last few years due to a number of high-profile incidents involving date rape, gang rape, and drugging of young coeds.  In addition, there have been a number of hazing incidents, some of  which have resulted in the injury or death of young pledges.  Fraternities, what's not to like?

Some schools have actually banned fraternities and private clubs entirely.  Harvard is trying to tamp down the import of fraternities and private clubs and perhaps effectively outlaw them by preventing students from participating in certain sanctioned school activities if they belong to some of these clubs or fraternities.

It's interesting how these organizations work.  In the past, if you became a member of one of these frats, clubs, or secret societies, it was supposedly going to open up opportunities to you later in life. Famous clubs at Harvard and Yale mimic the club tradition of schools in England such as Cambridge and Oxford.

And many famous people have been members of some of these clubs leading to the speculation or more precisely, the self-fulfilling prophecy that if you join one of these clubs you will become rich and powerful.  For example, the Skull and Bones Club at Yale counts as its alumni a number of presidents including both Bill Clinton and George W. Bush.

The top club at Harvard was the Porcellian club, and one prerequisite to joining was to come from inherited wealth.  Franklin Delano Roosevelt desperately wanted to join the Porcellian club but was blackballed by an existing member.  Somehow he managed to do okay in life without the club membership.

It may be true that joining one of these clubs or fraternity may open up opportunities to you in life, but the converse is not true, namely that if you don't belong to a club or fraternity you will be shut out from all opportunities in life.  And increasingly in our society, your success is dependent more on your performance than who you know or what fraternity or club you belonged to in college.  In fact, for many very wealthy people in country, college is almost irrelevant.

Many famous and wealthy people drop out of college because he quickly reached a point in their life where they figure out that they would make more money and become more successful outside of academia, and that obtaining a degree was really unnecessary for them.  Again, the example of Roosevelt - who became a lawyer even though he never completed law school.  Yes, back then being a lawyer met passing bar exam but did not require a law degree.  Today almost every State requires you obtain a law degree, although in Virginia you can still "read the law" and sit for the bar exam.

Should these fraternities and clubs and secret societies be shut down or discouraged?  That's more of a political question than a personal one, and you can debate that in your mind or with your friends. Some argue that these clubs are misogynist as many are all-male. Others argue there also they are racist as they limit membership, or used to limit membership to people of a certain race, namely whites-only.  And indeed, many are ore were antisemitic as well in that they did exclud Jews from membership.

From personal standpoint, I think that joining fraternities can be a major distraction in your college years.  The vaunted advantages of social and business connections through your fraternity ring are wildly overstated.

When I was at GMI, I pledged Sigma Chi, mostly because my father went to Sigma Chi and I thought that would make him happy.  I realized that doing things in life to please my parents, once I was out of elementary school, was sort of pointless.  And then I started living my own life rather than living to their expectations.

My dad was a sort of guy who would fit in really well in a fraternity.  He was also the sort of guy who would try to use fraternity connections to get ahead in life, which I think probably just annoyed fellow fraternity members.  Even late in life, he traveled across country, staying in the homes of former fraternity "brothers", which I'm sure pissed off their wives.  After 50 or 60 years, you really don't have much in common with people you went to college with.  And your spouse doesn't need somebody they've never met sleeping on your couch.

That was the first thing about fraternities I found was false.  You are put together in a group of people who really are not your real friends.  And oftentimes your fellow "brothers" can be real jerks.  There was one fellow at the fraternity, who is sort of almost psychotic.  He took an instant dislike into me, and I'm sure if the black ball tradition was still in the fact he would have prevented me from joining. There were a few others who seemed like good fellows, and I enjoyed hanging out with them.  But a lot of the other guys were really just strangers to me, and I didn't feel any affinity or need to join. So I took a pass.

About this time, the movie Animal House come out. Prior to that time, fraternities were in steep decline in America.  To the 1960's hippie generation, the idea of fraternities and sororities seemed rather retrograde - a relic from the 1950.  The hipsters of the 60's didn't join Greek organizations but rather hung out in crash pads with their girlfriends and had sex every night. Gender-specific organizations seemed, well, quaint and old fashioned, representing the "establishment" of their parents they were rebelling against.

Then Animal House came out and everybody decided that fraternities with the greatest party in the world and wanted to be just like Bluto.  Fraternities now had a waiting list of people wanting to join and they could back to their old selective techniques of carefully screening candidates and blackballing those they didn't want.

At GMI, we had more fraternities than we had students.  So it was kind of laughable in that every student got invitations to pledge at least two or three fraternities, as they needed warm bodies to fill the beds and pay the mortgage on the fraternity houses.  The idea that fraternities could be selective or turn away candidates was laughable.

And maybe this was why our fraternity "brothers" were such a disparate group.  It was really more of a housing arrangement than anything else.  And in that regard, some of the fraternities on campus would rent out rooms to people in order to make money to pay their mortgage.  I ended up staying at another fraternity, known for its heavy partying, and saw another example of the underside of fraternities.  One of the "brothers" had a girlfriend who he would beat up with on a regular basis. They would argue constantly and get into fights and then she would have a black eye.

When I asked one of the "brothers"e about this, he replied then a brother doesn't get into the another brother's business.  So not only did they not try to break up these fights they certainly didn't call 911. Fortunately, he didn't put her in the hospital or kill her, and eventually I think they broke up.

But the experience left a bad taste in my mouth about fraternities.  When I transferred to Syracuse University, the situation was entirely different.  Again, the Animal House movie had come out, and here was a school with 20,000 some students and the same number of fraternities that we had at GMI, which only had three thousand students.

As a older returning student, I was more interested in getting my degree and learning, not in socializing on campus.  Not only that, I was commuting to campus from house that I owned, thus I didn't really need a place to stay.

It was humorous to me how some of the younger students seemed obsessed with pledging fraternities and getting in to the right fraternity, as if it were the point of college, not the course work.  A friend of mine who was a very brilliant student in high school and a great draftsman who would spend hours doing mechanical drawings or drawing pictures of cars, ended up joining a fraternity.  He was in the Engineering program and we all thought he would go very far as Engineer.  Coming from a very strict family, he was very inexperienced in the ways of the world.  As a young pledge he discovered his new friend, alcohol, and drank his way out of his first semester of school.

And that happens to more fraternity pledges than you would like to think.  Drinking games and parties are often encouraged, and pledges are often forced to consume large amounts alcohol.  It's hard to maintain your studies when you are constantly getting drunk. In the old days, the "old money" would go to school and never study very hard and get what was called a "Gentleman's C". This is a tradition that dates back to our British friends at schools like Oxford and Cambridge. Gentleman didn't study hard, only those strivers from the lower classes tried to get good grades.

The fraternities would maintain files of past exams as well as research papers which could be copied by the fraternity members and thus skate through classes with as little effort as possible, concentrating instead on the social scene, partying, and making social connections.

Back in the 1800's and early 1900's, perhaps this made sense.  You came from a family of robber barons and you wanted to make connections at school to make future business deals in life.  College was also an opportunity for a young man to make romantic connections with people of their same class, as well as potential spouses of their social class.  It was also an opportunity for young men to obtain sexual experience which was condoned at the time.  Women were expected to remain chaste, of course.

Sadly, a lot of those values are still present in the fraternity system today, a holdover from an earlier era where the double standard for men and women was the norm, and social class was more important than actual knowledge.  Today, however you actually need to know something, and you have to get good grades and study something worthwhile in order to get ahead.

In that regard, these fraternities and social clubs and other organizations can be a big distraction from your college experience.  Maybe there are still a few areas of employment left today where who you know is more important than what you can do.  However I highly doubt this is the case anymore.  We live in a bottom-line society where performance is paramount.  Companies can't afford to hire people who are superfluous and don't pull their own weight.

In fields like engineering, it is put up or shut up.  If you have no idea what you're doing, the company has no use for you. Granted, much of what you learn as an engineer you learn on the job or by doing and not necessarily in coursework.  In some regards, engineering education are laughably outdated, as much as what is taught in school has no real application in life.  But the old club tie and fraternity handshake are no longer necessarily the keys to employment - after all, the hiring committee may have come from different frats.  Not only that, if you make the play for the old school tie, it sort of telegraphs that otherwise they wouldn't hire you, and thus you are not a viable candidate.

Should you pledge a fraternity? That's a personal question that's up to you. However, there is a definite risk to you if you pledge a fraternity you could end up dropping out of school or even dead as the result of hazing and pledging activities. Your reputation and life could be ruined if one of the your fellow brothers close quotes is accused of raping a young coed. There's a lot of potential downside to joining a fraternity, and not much upside unless you like to drink yourself Blotto.

The idea that some fraternity or secret club membership is going to open doors to you in the world is probably a little overstated in this day and age.  The sort of Good Old Boy networkand secret handshake thing has largely died out.  But even if it hasn't, it's still a little club that you can't join unless you come from old money.

And even if you come from old money, they might not let you join their little club as Franklin Roosevelt and found out.  What the Roosevelt example proves, however, is that not being a member of their little Club doesn't necessarily prevent you from succeeding in life.

Fraternities?  I'd take a pass.  The kind of people attracted to that sort of thing are, well, kind of jerks.  Ladies, take note.

Tuesday, July 18, 2017

Lending Club and Personal Credit Card Debt Crises

An astonishing number of people are mired in debt and there is no reason for this.
Lending Club is back in the news again as their disgraced former founder is also in the news, starting a new business venture.  He was asked to resign by the board of directors of Lending Club apparently for some minor malfeasance, failing to report that there were issues with some financial statements. The stock in the company has dropped to 70% of its IPO value which means it was not a very good investment for most people.

I wrote about Lending Club before and other peer-to-peer lending sites.  They were sort of a product of the tight credit era following the market crash of 2009.  Back then, few people could get loans, particularly unsecured loans, and interest rates on credit cards were skyrocketing.  In the meantime, investors were finding they were not earning much in the way of returns from traditional investments. Lending Club stepped in with a new model that connected investors directly with borrowers in a social network kind of environment.

Like so many other of these so-called disruptors in the marketplace today, they eventually have to grow up and become part of the mainstream, and that's when problems begin.  Uber and Lyft started out as ride-sharing services to allow college students to cadge a ride from friends on the way home from school.  They have morphed into an unlicensed taxi service, raising the ire of local and state regulators as well as taxi licensing commissions across the globe.

Lending Club faced similar issues. It had to file an S-1 with the SEC and position itself more as a traditional lender than as a social networking site.  And of course, eventually it did an IPO so the people who invested early on could cash out on the stock.

The problem they're having today, is that there are fewer people are desperate to borrow money - or at least fewer people with good credit scores.  There are also fewer people willing to invest in the scheme, as returns on traditional investments have improved since 2009.  The average rate of return of 6-9% on Lending Club isn't very competitive with more traditional investments which may also be far less risky.

But what struck me is interesting about Lending Club was the borrowers.  According to this Wikipedia article, the average borrower has an income of almost $75,000 a year, which is well above both the median and average income for the United States.  The average borrower has a credit score of about 700, which is below prime lending status but still somewhat respectable.

What is most fascinating to me was that the average borrower was borrowing about $15,000 and using it to pay off credit card debts.  This is a familiar story to me and to millions of others.

I've talked about personal credit card crises before, and some readers have taken me to task saying such things don't exist.  But they do, and they affect almost every American at one time in their lives or another.  Usually this occurs when we are younger and more naive about financial matters.  We get our first credit card and think that this is a sign that we are being recognized for our financial acumen.  What it is, in reality, is a well-baited trap.

The credit card companies are hoping that we will go out and spend more money than we have, not taking into account things like interest rates, payment due dates, minimum payments, and whatnot. While most of us promise to pay off the entire balance every month, very quickly this resolution goes by the wayside.  Again, according to surveys taken of individuals, 70% of people surveyed self-reported that they pay off the credit card balance every month.  According to the credit card industry which has computers which keep track of these things, 70% of people carry a balance every month.  We lie to ourselves about finances - a lot.

And credit card debt can be insidious.  The problem is, once you start using the credit card it is hard to stop using it.  The balance creeps up and you pay interest on that balance each month and it gets harder and harder to pay off the entire balance as the balance may exceed your income for that month.  You try to make a payment on the credit card, and that drains your bank account dry.  Thus in order to buy groceries and gasoline, you end up using the credit card, thus adding to the balance.  It becomes a vicious circle.

Compounding this is the way revolving credit works. When you borrow money for a car loan or a boat loan or even an unsecured personal loan, the balance on the loan always goes down over time. The interest on the loan is calculated based on the remaining balance.  Credit cards work a little differently.  If you fail to pay off the balance on your credit card, the interest on the amount owed is calculated retroactivly back to the date of purchase.

And every payment you make on the credit card balance doesn't pay off the oldest part of the debt, but rather merely reduces the monthly balance by the payment amount.  Interest keeps accruing and interest is being paid on interest.

Not only that, the interest rates can be staggering.  Most credit card sites glowingly report that a credit card has a "good" interest rate if it is "only" around 14%.  This is somewhat appalling in an era of 5% mortgages and negligible inflation.  Most credit cards have a penalty rate of 22-25% and some as high as 30%, which can be triggered if a payment is it even one day late or the minimum balance is not paid.

Once the penalty rates kick in, it could be nearly impossible to get out from underneath the credit card debt.  Again, this is something that doesn't happen with a car loan or even an unsecured personal loan.  Usually with such loans, if you're a day late with a payment you are assessed additional interest, and perhaps a late payment penalty of a few dollars.  With credit cards, it resets the entire terms of the loan and not to your advantage.

And I know all this because when I was younger I did all the same stupid things.  When I got a credit card I thought it was a sign of my financial acumen and that I was doing well.  I didn't pay much attention to the interest rate as I felt that I would "pay off the balance every month" like a responsible adult.  Of course, that didn't happen.

And back in the days of mailing in checks to pay your credit card bill, it was all too easy to have a payment arrive even one day late and kick in the penalty interest rate.  Once that happened, you were basically behind the 8-ball, with no realistic way to possibly off the debt.

Of course, the consumer would then be offered balance transfer offers from competing credit cards, which seemed like a lifeline out of the debt problem.   These were like your local pot dealer offering you heroin.  Usually these had reduced rates for a certain number of months, although usually you had to pay 4% of the balance right off the top - which is a significant amount.  The problem with balance transfers is that you pay off an entire credit card and feel that you've gotten a fresh start and fall right back into the same habits.

Debt consolidation loans and home equity loans had the same problem.  People refinance their house, take out $10,000 to $30,000 to pay off credit card debt and then start all over again running up more debt, essentially mortgaging their future to live today.

And this is why I'm a little skeptical of Lending Club and its ilk.  The people borrowing the money are going to do the same exact thing they did before.  They will borrow money, pay off their credit cards and then run up more credit card debt, leading to a risk of default of both the credit card and the Lending Club loan.  Exact numbers are hard to come by, but doesn't seem the default rate at Lending Club is all that high, although it does exist.

For the borrower, it can be a life ring thrown to prevent them from drowning.  However if they keep go on spending as they did before, it could be a life ring made of lead, pulling them to the bottom.

If you are borrowing money to pay off debts, this should be a five-alarm wake up call there something is seriously wrong with your finances.  It is a five-alarm wake up call that I have set the snooze bar on many times.  At least I had a good job and high-income and was able to do well with my real estate investments to overcome this problem eventually, and eventually became debt-free.  But when I think of all the money I wasted on interest payments - and for what?  So I wouldn't have to pay a bill for a few years?  Doubling the amount due just so I could have something today, instead of tomorrow?  Pretty idiotic when you think about it.

But for people in the middle class or particularly the lower classes, this can be a deadly cycle of perpetual debt.  Debt consolidation loans, home equity loans, or Lending Club loans just lead to more spending and more debt and eventually the borrower physically cannot pay all this debt back even if it was refinanced at a low rate.   Bankruptcy is inevitable.

And under new bankruptcy laws, much of this debt cannot be wiped out, as it was in the past.   Thus the debtor has to continue to make payments on these debts while struggling to get by with a poor credit rating.  And for many, the fun doesn't stop just there.  They then turn to shady credit lending places like Buy-Here-Pay-Here used cars, check cashing stores, payday loans, and title pawn loans to borrow even more money, at interest rates as high as 300%.

If you look at this from a mathematical point of view, you end up scratching your head.  If I make a dollar a week, and borrow more money, I end up with less wealth overall.  For every dollar I borrow I have to pay back $1.10.  In other words, if I borrow money, I don't come ahead, I end up behind.  My dollar becomes ninety cents.  If I borrow money then I will end up less wealthy and a banker becomes more wealthy.

When interest rates go up to 25-30% or more - or 300% as with some payday loans - you end up giving all of your money to bankers and keeping very little for yourselfIt becomes debt-slavery, self-induced and self-inflicted.

It is idiotic, but some of the left argue that living on minimum wage or at or near the poverty line is so difficult that borrowing money is the only way out.  However this argument makes absolutely no mathematical sense whatsoever.  Borrowing money merely makes you poorer.

As I illustrated in another posting, you can work a minimum wage job for 40 hours a week and still get by even supporting a family if you have access to food stamps and other government programs. However, if a big chunk of your income is going to pay interest on ill-conceived loans or pay back debts in bankruptcy, then your life situation is indeed going to suck.  And I suspect this is what's happening to a lot of poor people in our country.  It's not that they don't have access to money, but that they tend to squander it badly.

And increasingly, the middle class is doing the same thing, which I can speak to from personal experience.  Our generation seems to love having its toys and accessories and wants it all now and would rather pay for it later, or preferably not at all.  We've trained an entire generation to think that college should be free and student loans don't need to be paid back.  That you can go to college and have a fun time at party U. and then complain about how unfair it is that you actually have to pay for it.

And I don't disagree that it's scandalous that we are offering eighteen-year-olds obscene loan obligations on onerous terms at an age where they don't fully understand what they're signing.  But I think it's just a scandalous that we're encouraging them to do this and at the same time encouraging them to think that somehow the system is crooked and they should be given a get-out-of-jail-free card.  You sign a loan document, you are obligated to perform.  That is law as old as the hills.   For some reason it is not being taught in schools.

It took me a long time to figure this out - about 40 years in fact.  It took me a long time to figure out that the financial media and the powers that be want you to be in debt and that being debt-free and is one of the greatest things you can be in life.  It took me a long time to figure out that it wasn't an impossible to do, by wanting fewer things in life and more security, instead.

And yet this basic simple premise is shouted down by many.  Readers write to tell me that having a mortgage is a great thing because you get a tax deduction and you don't miss out on the opportunity cost of investing.  Others tell me that it's better to buy a brand new car because you get 0% interest as opposed to buying a well cared-for second-hand car.

The debt mentality is so thoroughly ingrained into our culture that it is almost impossible to shake. And if you stand up and argue that debt is a bad thing, you will be shouted down as a heretic, perhaps even crucified.

And is this Lending Club example illustrates, there are an awful lot of people - I believe an overwhelming majority - in this country who end up in these credit card debt crises at more than one point in their life.  So this is something we all experience and we're all intimately familiar with and yet we are all in vehement denial about it.

Debt is just bad, period.   Stop defending your abusers by saying that "some debts are smart" or "it's OK to be in debt, everyone is!"   These are the words of victims of battered debtor syndrome.

Monday, July 17, 2017

Preston Tucker

In 1948, Preston Tucker introduced a revolutionary car, with rear-wheel drive, an air-cooled, aluminum block, horizontally opposed engine, and a streamlined body that would revolutionize the auto industry.

Whoops. Wrong Car.

In a previous posting, I mentioned offhand that many people like to make a saint or hero out of Preston Tucker and his quirky car.   It turns out that the car was really not that innovative or special.  In fact, one wonders if the idea of the car came to him after he saw Volkswagens after World War two or perhaps before.  Or maybe got the idea from the Czech Tatra 87 - another rear-engined aerodynamically designed car.

One thing is clear, though, the Tucker car was neither original or unique.  It used a flat "pancake" motor, in this case, a helicopter engine made by the Franklin Corporation of Syracuse, New York, which he bought as part of his scheme.   Franklin, like most aircraft engine manufacturers, was struggling after war as demand for aircraft engines plummeted.  It didn't help that Franklin's reputation was not the greatest, compared to Continental and Lycoming.

Some would argue that Tucker drove the Franklin company into the ground with his scheme - cancelling all existing aircraft contracts so the company could "concentrate" on building engines for his car.

But a flat-engine, aluminum block, air-cooled car? (Note: later converted to water-cooled, without much success).  Not really a "new idea" but one that Ferdinand Porsche and Adolf Hitler had in the 1930's.   And the parallels don't end there.   Many people like to tout the Tucker's "advances and innovations" which were really not innovations at all.   Fully independent suspension?  Again, the VW had this, and many German and European cars featured independent suspension well before the war.

The "safety" features of the car were laughable by today's standards.   Tucker put a large footwell in front of the passenger seat, with the idea that when an accident was imminent, the passenger could "duck" into this "safety zone" during the wreck.   The reality of course is, that accidents take place in milliseconds, and no one in a car has time to duck, brace, or otherwise react to an impact.  This is why we have airbags today.

Even the center "swivel" headlamp wasn't a Tucker innovation.  Again, the Czech Tatra had this feature and it was even available on US cars in the 1920's.  For some reason, people want to believe in Tucker and thus attribute these "innovations" to him.   But you can't "innovate" something invented by someone else, decades earlier.

So the Tucker wasn't a revolutionary design at all, really.  Maybe for the US his European ideas seemed "far out" but they not inventions of his.

Where Tucker failed, Volkswagen succeeded.   And by the 1960's, VW had established itself as a player in the United States, and today is one of the largest manufacturers (sometimes the largest) in the world.  Oh, right, the "big-3" automakers were in a conspiracy to suppress the Tucker.  Funny how they let the VW slip right through their net!

And VW didn't have it very easy.  After the war, the ruined remains of the VW factory were offered to Ford Motor Company, who turned it down.  They literally had to start over from zero, to build up into the powerhouse they are today.   Tucker, on the other hand, had an entire factory nearly given to him for the asking.   No bombed out facilities to start from scratch.   And yet Tucker could not make a go of it, without all of these disadvantages.

In the car-starved market of the postwar era, one wonders why.   Why not raise funds using conventional means - a stock offering, for example.   But instead, he relied to dealer franchises, and deposits on cars yet to be made - selling "future owners" radios for cars they would never own.

The story sounds familiar.   Whether a wild-eyed dreamer or a con man, the end result was the same - you can't develop a radically new concept car on a shoestring budget.  It just can't be done.  And even if the SEC investigation hadn't sealed the deal, odds are that by the mid 1950's or the 1960's at the latest, Tucker would have gone the way of Hudson, Studebaker, Kaiser, Frasier, Willys, Packard, Crosley, and a number of other small-time marques that eventually faded into history (including American Motors, LaSalle, Pontiac, Oldsmobile, and Mercury, among others).

So why do so many people want to believe the myth of Preston Tucker?  Why did Francis Ford Coppola make a movie about him?   And the answer lies in the question:  Belief.   Belief can be an evil thing, blinding people to actual facts, hard data, and numerical analysis.   If the Tucker car was such a great innovation, people would keep making them.   Recall that after the Studebaker plant closed and the company got out of the car business, the Avanti stayed in production for decades.   A number of people stepped up to buy the rights to make the car and made and sold them, which is more than can be said for the Tucker or the Bricklin, or any one of a number of "dream cars" that turned into nightmares.

Of course the punchline is that the VW Beetle was a horrific car - if you lived in that era you remember this.  It was tinny and cheap and was a deathtrap to anyone who drove or rode in one.  VW stopped making them because of this.  I have friends who have been injured or burned severely in VW accidents.   It was a very successful car because of its low price for the time.  But in today's litigious climate?   You could not sell a one.

So when you hear about "visionary dreamers" trying to sell commodities like cars, you have to wonder what the heck is going on.  After all, it takes millions, if not billions, to develop a new car, and this takes the resources of not one, but often two or three major corporations working in concert.   Consolidation of the car industry has been the result of this - the huge amount of money needed to R&D a new car.  And many smaller automakers are teaming with their opponents to develop niche cars, much as BMW had done with Toyota in development of the new Z-series car.

Preston Tucker?  Not a man and his dream, but a man and a nightmare.   It is sad to see he went down this path, perhaps deluding himself that he could beat the odds and bring a car into production, with so little money to work with.   And maybe he knew all along it wasn't possible, or at some point realized it wouldn't work out and went for the stock fraud instead.  Who knows?  The end result is the same.

But today?   What excuse do we, as investors or "depositors" have to be so naive?

Commercial versus Residential Electric

As residential customers we pay for the amount of electricity we use.  Commercial customers often pay for peak usage.  Why is this?

Most people aren't aware of how commercial electric bills are metered versus residential bills.  Many people probably assume that a big factory or large retail establishment pays for electricity the same way we do, by the kilowatt-hour.  However such is not the case.  As I learned the hard way with my office building, most commercial accounts are charged by peak demand usage.

The reasoning is somewhat non-intuitive.  When you run a regulated utility company, you have fixed costs and then are guaranteed a modest profit by the utility regulatory commission.  For an electrical utility, you have three main costs.  The first is capital equipment, the electrical generating facilities that generate electricity for your grid. These can include coal and gas-fired power plants, nuclear reactors, hydroelectric dams, even solar cells and wind turbines.  The cost of these facilities is pretty staggering, compared to the cost of the fuel they use.  If you think about it, it is similar to the fact that the cost of the fuel that you use in the lifetime of your car is probably less than the purchase price of your car. 

The second cost is the labor and overhead of running the utility.  You have to hire all of these linemen to install the power lines and maintain them as well as established service at various residential and commercial properties as well as read the meters, which the latter of which is increasingly done electronically.  One reason the utilities are going to smart meters in smart grid is to reduce the cost of human labor in maintaining and monitoring the grid and reading meters.  Of course, the unions have been against this and have fought electronic metering for some time now.  Sort of like the buggy-whip manufacturers complaining about the automobile.

Of course fuel is also a significant cost in generating electricity.  Whether it is diesel oil, coal, nuclear fuel, or natural gas, utilities to have to pay for fuel to run their power plants unless of course they are wind, solar, or hydroelectric.

But these three major costs don't take into account another factor, that is peak demand and load. When demand for electricity rises, for example on a hot summer day when everybody turns on their air conditioner, the utility company often has to scramble to generate the additional capacity.  Either they have to fire up older generating plants which are less efficient, or they have to buy electricity from somewhere else on the grid.  Both are very expensive options.  Thus, it is in their best interest to keep the peak demand on the grid as low as possible.  It is less of an incentive for individual homeowners to consume one kilowatt-hour less than they normally do.

During the naive optimism of the early nuclear age, people felt that electricity generated nuclear power would be "too cheap to meter" which might not necessarily mean that power would be free, Only that you would pay a flat monthly fee for electricity and use all that you could.  Back then, you would see houses being built with little or no insulation, huge single pane glass windows in the Bauhaus style, with the assumption that cheap electrical power would be a good substitute for insulation and sound building practice.  The "mid-century modern" home was often very poorly insulated and an energy hog.

The reason why you and I pay for electricity by the kilowatt-hour has more to do with utility commissions than any logic or common sense.  We are used to paying for what we consume, therefore most people would reject a peak metering type of scheme.

When I bought my office on Duke Street in Alexandria, I was chagrined to find out that it was classified as "commercial space" and thus I had to sign up for a commercial electric account.  If I could have characterized the property as residential, which it formerly was before it was remodeled into office space, I could have paid residential rates which would have been much less.

Not only that, I had to pay a hefty down payment as a deposit for my electric bill, which was refunded after a year of regular payments.  Because electricity is a regulated utility, most residential users are not required to make these onerous down payments.  In addition, with a commercial account my electricity could be disconnected on a moment's notice if I didn't pay my bill, whereas residential unit users have a number of additional rights.

At the time, the local utility, Dominion Resources (Virginia Power) was changing over to electronically read meters.  These are meters that did not send signals upstream through the grid or communicate by cellular telephone, but rather used a local wireless network so that the meter reader could drive by the properties and read the meters.  For some reason they never replaced my meter and for three months my meter was not read.

I should have thought something was suspicious when for three months, especially during the summer, my utility bill was a flat amount every month, the base price for my electricity.  Then, in September, they finally realized that the meter hadn't been read, or more precisely the computer kicked out the fact that meter hadn't been read, they send somebody out to read the meter, billing me in one month for three months worth of electricity.

Since I had a commercial account, my account was based on peak demand, and this showed an enormous demand for electricity for the month of September and I received an electric bill in excess of $2,000. In fact, the amount electricity they claimed I used for the month of September was more than the wiring in the building could possibly handle.

I called the electric company and after arguing with them on the phone, they agreed to look into it and we reached a compromise agreement.  Since it was no way we could actually figure out what my Peak demand was for each individual month, they had to estimate a number which was about $1,000 for the three months.

Peak rate can create other problems for commercial users.  A friend of mine with the electrical utility in central New York tells me story about a former GE facility near Auburn which was contaminated with PCBs.  The property sat empty for a long time with a "For Sale" sign on it.  A prospective buyer contacted the real estate agent asking to see the property.  They went inside and the prospective buyer wanted to turn the lights on to see what the property looked like.  However the moment they hit that main service connect and burned even one kilowatt-hour of electricity, the minimum billing amount kicked in for that month, which came to over $6,000 for that factory, according to my friend at the utility.

So you can see, that peak demand billing can produce some odd results for companies.  Companies still have an incentive to save energy, but more in terms of cutting their peak load demand. For example, a company can hook up much of its equipment to computers and monitor the load and demand, and selectively shut off equipment when the peak is approached.  Thus, for example, lights in offices can be shut down or air conditioning can be turned up automatically to avoid going over certain peak thresholds and thus keep the demand bill from hitting a cutoff target.  And these cutoffs are exponentially higher in price, which is why my office bill was so high, when it billed three months into one.   You pay a penalty for exceeding peak load limits - a steep penalty.

Other techniques involve load shifting, shifting peak loads off-hours when most electricity generating equipment is less used.  Utility companies may actually offer incentives to companies to use electricity during off-hours by offering lower rates during these off-peak periods.  One way to do this for example as an ice storage system for air conditioning.  During the night, compressors run refrigeration systems to make enormous blocks of ice 20 or 30 ft tall and 15 ft in diameter, in giant containers that resemble oversize garbage cans with plastic tubes in them.  During the day, these are melted to create chilled water to run air conditioning units.

There's also other advantages to this technique, is it requires smaller chillers, which means less capital investment on the part of the industry.  Churches used similar techniques in the past to run small compressors during the week to make ice which was in melted on Sunday to run air conditioning equipment.  This meant that a very small chiller could be used to make this ice, lowering the need for a huge chiller large enough to cool an entire church.  It also meant that their daily electric bill was much smaller, lowering peak consumption.

So what is this all have to do with the price of tea in China?  Perhaps nothing, only that is helpful to understand how electric metering rates work.  Commercial users account for the vast majority of the income that electrical utilities receive.  Residential unit users on the other hand use very little power, but the extensive network of residential grid is far more expensive to maintain.

It also illustrates why electrical utilities are pushing to abolish requirements to repurchase electricity from home solar users at retail prices.  Not only are retail residential prices far higher than the wholesale costs that the utilities ordinarily pay for electricity, most of the surplus power from residential solar occurs at times when the utility has little use for it.

In most residential solar installations, at peak usage, which would be on the hottest days of the year in the middle of the day, the solar panels to generate a lot of electricity but perhaps not enough to cover all of the power usage in the house.  Thus, at a time when the utility needs additional generating capacity, the home solar user probably doesn't have excess electricity to sell back to the utility.

The times when the home solar panel does generate surplus electricity are going to be on sunny but cool days when the home load is low and the solar panels are operating at high efficiency.  During these periods, the utility companies have less need for excess power generating capability.  Thus, they are being forced buy electricity at the highest possible rates at a time when they don't need additional generating capacity.

And while this didn't make much of a difference to electric companies when home solar installations were mostly limited to hobbyists and experimenters, with the wide-spread implementation of leased panel installations using low-cost Chinese-made solar panels, the situation has changed.

It remains to be seen whether Elon Musk will be successful with his solar designs.  His idea is to use a solar tile on the roof and use it to charge a lithium ion battery pack which would be placed in the garage or basement of the home or perhaps as an external module much like your air conditioning condensing unit, outside the home.

During the day, the solar panels would charge the battery which would then provide power during the night and also additional power during peak usage periods when the solar panels are unable to keep up with load.  Since the user is paying residential rates (currently about $0.10 a kilowatt-hour), the user is basically storing energy and selling it back to himself at a rate that hopefully is lower than the utility companies rates.

However the cost of such an insulation could easily be two to three times or more than that of a traditional solar roof.  And with the glut of cheap natural gas keeping utility prices low, it's going to be a very tough sell for Mr. Musk.

Don't get me wrong, as an Engineer I think these ideas are fascinating.  It also reminds me of science fiction stories I read as a youth, which posited that in the future we would all be living in solar homes with energy cells in our basement.  It's just that the economic realities seem to keep pushing electric vehicles and solar power just out of our reach, at least without tax incentives or other subsidies.  And our current administration seems hell-bent on limiting these tax credits and subsidies.

The good news for Mr. Musk is that there may be a ready audience for these products in other parts of the world.  In Europe, which is dependent on the Middle East and Russia for its energy needs, solar panels and energy storage cells may find a wider audience, along with electric cars.  Developing countries might also find this technology very attractive, particularly in countries where corruption and incompetence have resulted in the intermittent and unreliable electrical grids.

It is interesting, but many of these developing countries tend to leap frog technology.  After the Vietnam War ended, the infrastructure in that country was pretty much shattered.  Rather than try to rebuild a traditional telephone network, the Vietnamese skipped that entire generation of technology and moved directly to cellular service.  That turned out to be a good move.  Perhaps countries such as that would move to solar power more readily than the United States., as they are already paying more for electricity making such a installation more cost-effective, and of course far more reliable.

And maybe, once these technologies have been proven in emerging markets, where they make more economic sense, they may finally be adopted here.

Sunday, July 16, 2017

Magic Bullets

 Wouldn't it be great if there were Magic Bullets? But there aren't, and believing in them is a sure way to end up miserable.
What do I mean by Magic Bullets?  These are basically simple answers to complex problems, that people want to believe in, even when they are proven to be false again and again.  The term stems from the idea that a single bullet can magically hit its target the first time, often without aiming.  It has come to mean something that cures everything with one simple technique - often without much effort required.

Quack doctors will push magic cures for serious diseases like cancer and fleece patients for millions of dollars for things like laetrile.  Not only are they stealing money from their patients, they are offering a cruel hoax of a cure,which of course does not work.

But desperate people want to believe.  Not only that, people want to believe there are simple solutions to all complex problems.  That one pill or one drug or technique or secret can miraculously cure everything all at once, without effort.

Or take weight loss.  Losing weight means having to exercise more and eating less, both things which are tedious and difficult and take a long time to see any results.  People prefer to take a magic pill or eat a magic food or do one thing that would cause them to lose weight without effort.  And nobody has ever gone broke selling such cockamamie schemes to the public.

You even see this in auto repair.  People sell a magic mystery oil or fluid or gasoline additive or fuel line magnet and promise that it will make their car run better and fix all of the chronic problems their car may have.  But a car that is blowing oil and that has a burnt valve isn't going to be fixed with some sort of gasoline additive.  Life just isn't that simple.

In politics, the same is true.  Both sides of the political spectrum are convinced that simple one-size-fits-all answers will solve all of our problems miraculously.  If only we would cut taxes or enact socialist policies our economy and our woes would suddenly and miraculously be cured overnight . All it takes is a simple solution - flat taxes or tax the rich take your pick, but of course neither would work.  Balancing the budget means protracted negotiations, difficult choices, and sacrifice, something no one wants to do.

In finances we see the same thing.  People want a quick and easy solution not only to solve their debt problems but also to become fantastically rich overnight.  And the world is full of people selling these simple solutions that never work.  Get-out-of-debt companies promise Magic Bullets to erase your debt overnight, but instead they actually add to your debts and woes. Other sell investment schemes guaranteed to make you a millionaire, but actually they just make you a little more broke.

Believing in Magic Bullets is what often gets people into trouble in the first place.  If there is a Magic Bullet in life it is this: don't believe in Magic Bullets.

Saturday, July 15, 2017

A Nation of Whiny Little Bitches

When both Left and Right start to think that the government "creates jobs" or that somehow the world should be brought to their door, something has drastically gone wrong with America.

You might get the impression that I am a conservative from some of my recent writings.  But frankly, both the Left and Right appall me lately.  And lately, it seems they are just team names we root for (Hooray for our team, boo for the other guy!) and not really political philosophies of any real import.  Oh, sure, people say they have some underlying philosophy of small government or big government, until that is, the government intersects their lives, and then all bets are off.

This article from the USA-Bashing far-left British tabloid The Guardian is a case in point.   The article concerns a small town called Nuclea, which wants to reopen its uranium mine, even though it can't make money on less than $50 a ton for the ore (which is currently at $19 a ton).   Not only that, a neighboring town which had such a mine had to be bulldozed and shredded and placed in a concrete tomb when it was discovered that the entire place was contaminated.  Uranium mining, what's not to like?   In an era of cheap natural gas and fracking, both coal and uranium make no sense - at least for the time being.

They also closed down a coal-fired power plant, not because "liberals" made them, but because fracking has made us the Saudi Arabia of natural gas.   Gas is king today, coal is dead.  And it is a pattern you see in the mining business since the 1700's - mines give out, or new processes are developed.   Ghost towns dot the west where mines became obsolete.  Coal and Uranium are just the latest casualties in this economic progression.  Coal ain't coming back, no matter what Donald Trump says - because gas is so much cheaper, not to mention cleaner and easier.

The residents - like those The Guardian profiled in West Virginia, have to drive an hour to get groceries (this appalls The Guardian, as in the UK, you can basically drive across the country in that amount of time - Brits have no idea how large our country is!).   They also recoil at the suggestion that maybe they should move somewhere where there are jobs, instead of trying to revive a money-losing mine that produces toxic waste.
Richard Craig, a former Nucla town board member, recalled a comment by a member of an environmental group saying during one of the contentious hearings: “Well, I don’t see why they don’t want to go live in the city.”
“It’s almost like – I hate using this word, it’s being used so often – it’s almost like a conspiracy: ‘We need to move everybody out of rural areas and go live in the cities and suburbs,’” Craig said.
Mr. Craig, city or country, it doesn't matter.   You have two choices - move to where the jobs are or find work where you are.   You can't complain about life sucking where you are if you aren't going to either create wealth there, or go somewhere where there are jobs to be had.  It could be a city, it could be the fracking fields of Texas.   It probably isn't Nuclea, Colorado.  But you don't want to move, that's fine too, you just can't whine about how awful things are.  You are no better than the whiny residents of Flint, Michigan.

No one has a "right" to a job, nor a "right" to a Wal-Mart across the street.   If you don't like where you live, move.  Don't whine about it - that accomplishes nothing.

This is what is appalling to me.   I get it that leftists and socialists think the government should build them a new Wal-Mart and create fake jobs for everyone.   It's bullshit crazy talk, but at least they are consistent.   But when "Libertarians" and people on the right make the same kind of noises, well, we're utterly fucked is what we are.

The problems for small towns like Nuclea aren't the Chardonnay-sipping liberals in Telluride, but the fact that the people of Nuclea don't want to confront their own problems and take responsibility for their own situation, but instead blame a convenient and nearby foe (and the government, it goes without saying).

Things suck in your small town?  You have two choices - try to make things better, or move to another place where you can make money and prosper.   Pining for the government or Wal-Mart to bail  you out or blaming "liberals" for your problems is just being a whiny little bitch.

I moved.  I lived in a small, depressed town near a burned-out rust-belt city.  There were no opportunities for me there - or very little opportunities.   Dream no small dreams.   I moved to the city, got my law degree, opened my own practice, invested in Real Estate, and became a millionaire, all in about a decade. 

And then I moved away again.  You see, the city is a good place to seek your fortune, the country is often a better place to spend it.   I never in my life felt "entitled" to have jobs or retail brought to me, or felt that the government should pay to revive our town.  That was our job.   And we failed at it because we voted for more regulations and unions, and tolerated corruption in high places.  I realized that the rust-belt wasn't about to change, given how rampant the corruption and unions were, so I moved.  Staying in some shitty place and sacrificing my well-being would have been idiotic.

Similarly, there are few opportunities in the ghetto or the rural trailer park, unless you want to start a drug gang (and I don't recommend this).   Get out, find someplace where you can thrive and then... thrive.

Externalizing is never a good idea.   And it is interesting to me that The Guardian runs two articles, days apart, where they show how people in rural America, on both the Left and Right are willing to blame their personal problems on the government, Wal-Mart, liberals, or any other group other than themselves.  Externalizing is a popular game - anyone can play.

This is a far cry from the days of self-reliance and self-sufficiency that founded this country, and indeed, founded towns like Nuclea, Colorado, which created itself out of nothing by digging a ditch through the desert.  Today?  It sounds like that pioneer spirit has been bred out of the citizenry.

Sadly, I am beginning to think we have turned some kind of corner here, if rugged individuals of the old West are such whiny little bitches these days.

It may be too late for America.

Fake News? How the Washington Post Went Off the Deep End

The Washington Post was always a left-leaning newspaper.  Since it was acquired by ultra-capitalist Jeff Bezos, it has gone full-on communist.  What is up with that?

New owners of a paper often claim they will keep their mitts off the editorial content.   But when Rupert Murdoch bought the Wall Street Journal, it wasn't long before that right-leaning newspaper went into full Hillary-hate mode, becoming a mouthpiece of the far-right.   Sadly, the same seems to be happening to the Washington Post as of late - the paper has abandoned all pretense of journalistic neutrality in favor of becoming the Pravda of the Left.

Consider this piece about the blackout of 1977.   We had a huge blackout on the East Coast back in 1965, and it was memorable for the way that New Yorkers came together and soldiered on without power.  I was there at the time, and remember it clearly, even though I was very young.  Crime and looting were not significantly worse than in non-blackout conditions.   But by 1977, something had changed.   People became like animals once the power went off, going on a rampage of looting and crime.   Ordinary citizens were disgusted.

And of course, it was all the fault of the rich and the whites, at least according to the Washington Post.  Consider this innocuous sentence slipped in under-the-radar:
"Not everyone thought the solution to blackout looting was simply locking up those who had taken food, diapers, and consumer goods."
Now look at the image above - do you see anyone stealing food or diapers?  Or "consumer goods" whatever those are?  Oh, right, jewelry and money.   Disposable diapers were not that popular in 1977, by the way.  The Non-woven spun fabrics that made them popular in the marketplace were not introduced until 1980.

But the author of the piece was an infant at that time, so she wouldn't know.  I do know.  I remember these things.  And New York City in 1977 was indeed a dangerous place - with rampant crime and subways that were little more than graffiti-covered urinals.  To her, Pampers have always existed and bottle deposit laws are a new thing, not the default mode of operation until the mid-1960's.   Kids today - sheesh!

But the author doesn't stop there.   The fault for these riots wasn't that some people had no moral compunction about stealing or that the soft-on-crime approach of the post-Miranda era had made criminality more attractive, but that white people and rich people were to blame by cutting the city budget.
"In 1977, New York was still reeling under the impact of the steep budget cuts of the previous few years, as the city government closed hospitals, fire stations, health clinics, and schools. The city university began to charge tuition for the first time. Public employment — long a path to greater economic stability, especially for African American and Latino New Yorkers [cite? source?  made up?]— shriveled by tens of thousands of jobs — more than 20 percent — over the five years that followed the 1975 fiscal crisis. Even before the blackout, the mounting anger toward austerity was palpable [how does she know? cite? source? shitty journalism?]. Over 1975 and 1976, neighborhoods from Williamsburg to the South Bronx were rocked by community protests against the cuts."
New York was teetering on bankruptcy in the 1970's and had to cut back on spending.   Thousands of superfluous city jobs were eliminated.  The author argues that these government jobs were the only path for minorities to move up to the middle-class.    Cut those jobs, and well, you can't blame people for raping, looting, mugging, and murdering.   It's not their fault, it's yours!

Consider this not-too-subtle bit of propaganda from the piece:
"The experience of the blackout helped to legitimate a tough-on-crime conservatism in New York, one that leveraged fear to build support for policies such as stop-and-frisk and “broken windows” policing, while also insisting that poverty primarily reflected the bad choices of poor people [and this isn't true because?]. The road to Rudolph W. Giuliani’s New York [which of course is a bad thing, it goes without saying, right?], in other words, begins at the 1977 blackout."
In other words, enforcing laws is a bad thing.  The broken window policing technique (in quotes here, to disparage it) is just bad policy - never mind that the crime rate in New York City is at all-time lows.  Never mind that Time Square back then was a seedy place of porn theaters and routine muggings and today is a place people bring their children to see the Lion King.

Never mind all that, because the author wasn't alive back then, and thus pines for a time-gone-by that was in reality, a horror.   Again, pining for the "Good Old Days" - on either the Left or Right is a bad idea.

What is so sad about this piece, is that it was written by someone who is writing a "History of New York in the 1970's" but wasn't even alive during that time period.   This would not seem so unusual if she were writing about the 1800's or the 1700's - there are no people from that time period who remember it first-hand.   And instead of going to live sources of information, she seems to be more content to selectively quote from newspaper articles that favor her preconceived notion that the fault of crime lies not with criminals but society.

If this premise is true, then explain why crime rates across America are at all-time lows compared to the dark days of 1977.   Are we that much better a society today?   If so, then maybe we should be studying why our society is so much better than New York City, circa 1977.   "Giuliani's New York" is a better place that Abraham Beame's was.

In 1977, I drove to New York to see the Talking Heads at CBGB's.   She wasn't there.  She was shitting her non-disposable diapers that her parents didn't loot.   Yet she has the balls to tell us who were there what was "wrong" with New York City back then - or even what it was like.    Go rent a cop movie from that era, such as The French Connection or Serpico.   Yes, that is what New York was like - gritty, dirty, covered with filth, graffitti, and crime running rampant in the street.   Abandoned and stripped cars littered the streets.  I recall seeing an early 1970's Ford LTD wagon, on its roof, stripped of all usable parts, in the median on the FDR drive beneath the UN Building.

Crime wasn't just in the South Bronx or Harlem - it was everywhere.  And Brooklyn wasn't some hipster yuppie enclave, it was a fucking ghetto where you could get killed.  No one wanted to live in Park Slope, which is why my Grandfather left, selling the family home for a pittance.

That was New York in the 1970's.   And no, it wasn't that people were restive and upset, but that they felt they could get away with looting in an era where the police were often corrupt, and when not corrupt, ineffectual.  And often they were ineffectual because our country started feeling sorry for criminals and not for their victims.

We don't need to go back to those bad-old-days.   I only wish I could put the author of this piece into a time machine and send her back to Times Square, July 13, 1977 at 9:30 PM.  If she were to came back at all, maybe her perspective would be different.

Sorry, but no sale.  It is liberal racism to posit that crime is "just what black people do" or that it is "justified" by social injustices.   This is what keeps minorities down - when you tell them that criminality is expected of them.   And in particular it is what keeps black people down, as we don't send other minorities the same message.

Shame on the Washington Post and the author of that article!