Living Stingy

Change the Rules of the Game?

2012-01-28T17:56:00.000-08:00

Should we change the rules of the game, or just keep playing and enforce the rules we have?

Reform is a word on everyone's mind right now. Everyone, it seems has an idea on how we can throw out all the old rules and start over with a new game. Herman Cain, he of Presidential Timber, had a "9-9-9" plan for reforming our taxes, which would have been a radical overhaul of our tax system. Is this what we need? Or a flat tax? Or a national sales tax? Or something else?

The problem with changing the rules of the game, once everyone is playing, is that some folks rightly feel that they are doing pretty good at the game, and don't see why the rules should be changed, just because they ended up with Boardwalk and Park Place - with hotels on both. To them, the game is going pretty good. And maybe you have Marvin Gardens and Atlantic Avenue - and are hoping to get Ventnor. Starting with new rules at this point sort of throws your plans into a flux.

Perhaps we just need to enforce the rules we have. It always pisses me off that people make up new Rules for Monopoly - so-called "house rules" such as "Free Parking" - and usually it is white trash that does this, as they want to make the game "more fair" or more like a lottery, and less like a game of skill. So they create a rule that all the money from Community Chest and Chance, or get-out-of-jail fines, goes into a "Free Parking" pot, and whoever lands on "free parking" wins it all. It ain't in the official rules, but probably half my friends liked to play the game that way.

It's like changing how the pieces move in Chess - you may still have a game, but it ain't Chess. Or one of your annoying friends who makes up weird rules of Poker - where there are so many wild cards and aces are high and, well, you get the idea - no one knows how to play the freaking game, and then your friend throws down a "sampler" hand of random cards and says "Royal Flush! - See, the two's and seven's are wild, and the diamonds and hearts are counted as the same suit, and since aces are high, my two-seven-jack-king-ace hand is a royal flush!"

At this point, everyone groans and decides to call it a night. And it is one reason I don't bother playing poker anymore. Stick to the rules!

And you know, I think whether or not you play the "Free Parking" house rule in Monopoly says a lot about who you are and your character. People who like the "Free Parking" house rule, tend to want to make things "fair" and "give everyone a chance to win" and perhaps favor redistribution of the wealth. Folks who prefer to play the Official Rules, want to play strategy and work to get ahead, and don't want someone who doesn't take the game seriously to just win at the last minute by landing on "Free Parking."

You either are a Free Parking person, or you are not. It is as simple as that. And if you like to play the "Free Parking" house rule, chances are, you end up in a lot of financial trouble in life. In real life, there is no "get out jail free" card - and there is no pot of cash waiting for you in Free Parking. The something for nothing or lottery mentality of life ends up causing more grief than joy, for those who engage in such thinking.

In our economy, it is tempting at times to throw out the rule book and try to "start over" with a new one - to make things fair and "give everyone a chance to win!" - But rarely does it work out well. And in fact, over time, the new rules tend to morph to be a lot like the old ones. But funny thing - the guy who suggested all the new rules - like my crazy poker friend - somehow end up winning all the chips in the interim.

In the 1930's, a lot of people suggested that Capitalism was broken and should be discarded. And a lot of Americans started to embrace Socialism, Communism, and other leftist causes as the "cure" for Capitalism. We could not reform our existing system - no, it needed to be discarded and a new one put in its place.

Rarely does this work out well - whether it is the French Revolution or the Russian Revolution, the new forms of society are often not stable, and usually end up reverting back to their old forms in short order. The American Revolution was successful in that it did not substitute a radically new form of government, but rather just replaced who ran things. Once we tossed out the British, it was back to business-as-usual, including that whole slavery thing. So much for holding truths to be self-evident.

Today we are seeing similar calls to overhaul or replace our system. Some are contemplative ideas that suggest ways our economic system can be tweaked to make it more stable and to eliminate the excesses caused by various bubbles in housing, electronics, oil, minerals, and the like. Others want to directly redistribute the wealth through more socialistic means.

And still others just have silly half-assed ideas that are more style statements than anything else. When you see some suburb-raised 20-something with a bandanna over his face, smashing a Starbucks and shouting "Anarchy Now!" you know you've met a really deep thinker.

Most of the major problems in our economy do not come from a lack of rules, but from a lack of enforcement of a lot of existing rules, and also an utter lack of common sense in the populace. We create financial instruments that are designed to fail - and then we buy them without vetting them properly. We build houses and sell them for fantastic sums using dubious financial instruments - and we buy these houses and sign the loan documents without thinking very hard about them or what they mean.

Companies cook their books and accounting firms give them stellar ratings - violating many laws in the process, and no one bothers to look more closely at the specifics of the transactions involved. The shouting guy, or the fellow in the jester suit, on the TeeVee says "buy stocks!" and we buy, and then grouse when the go down in value.

You bought stocks based on the advice of a guy in a clown suit and you wonder why it all went horribly wrong? Whose fault is it? His, yours, or the company whose stock you bought? Call me a radical, but I think when you take financial advice from crazy people on the television, it is YOU who are to blame when it goes wrong.

What it boils down to, in the end, is personal responsibility. The folks who are "hurting" now in the recession - who bought overwrought and overpriced (and poorly built) mini-mansions that they could not afford - using toxic loan instruments - were not "victimized" by anyone but themselves. If you buy crack cocaine, you can try to blame the dealer for selling it to you, but the upshot is, you decided you like crack.

No one forced you to buy it. No one forced you to buy a house like that - you were merely greedy and thought you could afford a fancy house and not have to pay for it - and you could "flip" it and make money. And now your dreams of avarice are gone and it has to be someone Else's fault, dammit!

Don't get me wrong, I am all in favor of credit card reform, student loan reform, mortgage reform, Wall Street reform - and so on. But like legalizing marijuana, (or colonizing the moon) it ain't likely to happen in my lifetime, at least not to the extent that people still won't be safe from victimizing themselves.

In the very end, it comes down to you. Changing the rules of the game isn't going to save you from making bad choices, in the end. We need to stop making bad choices - that is the fastest and most direct way to improving your own lot in life. Railing against the unfairness of it all rarely accomplishes anything.

Google Chrome and Google Docs (Wither Apple?)

2012-01-27T17:02:00.000-08:00

Google Chrome has some interesting features, and Google's suite of web applications is pretty interesting.

I am backing up my hard drive, as it is acting up again. I have six computers, so instead of doing "backups" I merely copy all my important files to the hard drives of all six, plus a portable hard drive. It is hextuple redundancy, and it means I generally don't lose data, unless I want to.

Cloud computing, of course, is supposedly the wave of the future. With a robust internet connection, in theory you could run applications from servers on the Internet and even store data there. It is an idea that has been bandied about for decades. Back in the day, we called it "thin client" and it never seemed to go anywhere then.

I think people like to have control over their own data and not be reliant on an Internet connection to be able to use their computer.

But cloud computing does have some advantages - and running TurboTax, for example, online, is far better than trying to run in on a program on your computer. The data is stored in their servers, and the program runs as an HTML website, so you can access your data anywhere.

I have been a Google "customer" (not sure if that terms if applicable, as I have not sent them any money) for a few years now. I use gmail, blogger, google sites (for my web site), picasa web (for photos) and of course, their search engine. I have not tried Google+, their social networking site - but as you can see, they have their hands in a lot of thing these days. Similarly, since I think smart phones are dumb (or at least smarter than their owners) I do not have a Google Android product. Google has a primitive shareware Operating System - Chrome O/S - although no one really seems to be using it quite yet, at least outside the netbook arena. They also have something called "Google Docs" which basically allows you to have a virtual hard drive on the Internet.

You can upload documents one at a time, or if you are using the Chrome browser, folder at a time. The process is slow, but if you run it as a background job, you can do other things. You can also save documents that arrive attached to e-mails, display them in Google Documents, and even create new documents in Google Docs, using a primitive word processor.

Google Docs will display Word documents and PDF files. I have occasionally noticed artifacts in the latter, as the site "converts" the document to their own proprietary format before displaying. However, you can save documents there in any format you choose.

In order to use the folder upload feature, I had to run Google Chrome. I have always been a Firefox kind of person, but I tried Chrome, and it seems to run a bit faster and is a little less cluttered than Firefox.

Note then when uploading documents, be sure to UNCHECK the "convert to Google Documents format" box, otherwise your documents will be converted from their native formats.

If you are looking to store some files, give Google Docs a try. The price (free) is pretty good. And you never know - those six hard drives could all crash at once!

There are, of course, some caveats.

For example, Netflix may have trouble running on some machines using Google Chrome. Why? Because Netflix chose Microsoft Silverlight as the plug-in to run its video. And for some funny reason, Silverlight runs best on Internet Explorer, but not as well on non-Microsoft products. A little Corporate Hegemony? Perhaps.

It seems that these companies want us to pledge loyalty to their own brands and suites of products, which is one reason why I am a little nervous about using so many Google products. But they are free and easy to use, which makes them compelling. I just wish they'd stop "upgrading" so many of these products all the time. "Click here for our NEW version of e-mail, where the background is in annoying shades of pastels, we've hidden all the controls from you, and everything is grouped into Twitter-like "conversations"!!

No, I'll keep the old view, thanks.

And all you Apple people out there, well, your company is rapidly becoming the worst of them. Apple used to be the "alternative" company that wasn't involved in the monopoly practices of Microsoft. Now we discover that they really wanted to all the time, but just didn't have the product popularity. Apple, like Microsoft, wants you to remain all-Apple, and once you sign on to their sealed-box, closed architecture philosophy, they sort of have you. Want your computer fixed? Better call an Apple "Genius" at $400 an hour. Want to replace the battery in your iPod? Ship it back to the factory and pay more to fix it than you paid to buy it.

And with nearly $50 Billion in the bank (literally in low-yield treasury funds) Apple is embarrassingly rich - yet they rely on well-publicized sweatshop labor in China to built all those nice toys you like to play with. While once the company of the politically correct, Apple has morphed into the cold, heartless, and ruthless IBM of yesteryear. "Don't be evil" doesn't carry much currency there, apparently.

So it is interesting, to me anyway, that a fight is taking place on our desktop. A fight for the "hearts and minds" of the general public, to win us over to an operating system, a suite of software, products, a philosophy, whatever. And these little games of product incompatibility are being played out - intentionally, I believe - to get us to remain "loyal" to one provider or another.

They want you to have their computer, operating system, phone, music player, game station, search engine, word processor, blogsite, e-mail account, website hosting, social networking site - just about everything, it seems. And you sort of get tired of it all, after a while.

But what about Mozilla? What about it? Shareware is an interesting option, but in my experience, it tends to be a big buggy at times. I use a lot of shareware products - from OpenOffice (to open those annoying DOCX documents) to Spybot, to Malwarebytes, to CutePDF, to Firefox. They work pretty well, although Firefox seems to be annoying in how you configure it, and the more I use it, the less and less enamored of it I get.

I am not a "fan" of Google, like some people are "fans" of Apple, Being a fan of a major corporation or its products is stupid. As I noted before, while you may wear a hat that says "Chevy" on it, the people at GM don't wear hats that say "Bubba" on them. You may be a fan of a company, but trust me, they are not fans of YOU.

But it does seem like Google has a lot of free and easy-to-use products - software products - that make my life easier. Apple wants to tie us to particular hardware, which is a strategy that has backfired in the past. Bill Gates taught us that computers were commodities, and the software was where the money was at. In the early days of computing, getting software and hardware from one place meant that you had a robust and compatible system that worked well. And in the early days, Apple sold a lot of computers. But the open architecture of the PC dominated over time, due to lower costs. I wonder if the same will hold true for Apple and the iPhone and iPad - that an open architecture phone, running software such Android or Windows Phone, will dominate over time. It will matter less which phone you buy, as to what operating system run on or what network.

If so, Apple better hang on to that $50 Billion it has in the bank.

And that is the rub for Apple. With nearly 1/4 of its stock price represented by cash-on-hand, the company is ripe for a buyout or takeover. Shareholders are pushing for a stock buy-back, dividends, or some form of payback to the owners. Some are saying the stock price could go as high as $700 a share (from today's $400 range). Such talk is never a good sign - just as talk of Gold going to $5000 a share is bad - it usually means you need to get out.

Many analysts point out that Google has the largest share of the smartphone market. And many folks think that as RIM (Blackberry) fades from view, Microsoft will gobble up the other portion. There could be a scenario where Apple could go from HOT to NOT nearly overnight - losing its share of the smartphone market, which basically is propping up the company right now (despite the popularity of the iPhone and iPad, the Mac remains a niche product).

Sounds far-fetched? Well, being old, I remember the last time Apple was the big player - in 1980 or so - in the Personal Computer market. Before there was the IBM-PC, there was the Apple - and a host of no-name or wanna-be CP/M based-machines. Apple had the market sewn up, so it seemed, until IBM introduced its PC, with "IBM-DOS" from a little-known company in Redmond, Washington.

Within a few years, Apple went from top of the market, to struggling. While trading at nearly $8 a share in 1983, it dropped to less than $2 in 1985. Granted, if you had kept that stock for 25 more years, you would be very rich. But investors back then were looking at a major loss - 3/4 of their share value wiped out, as the market for the Apple II declined and the Macintosh computer showed itself early on not to be a serious or cost-effective machine for business use.

So not only could the same thing happen today, it is in fact, likely to. People are platform agnostic, as evidenced by the popularity of the Android O/S (nearly twice the market share of Apple). Yet, no one proudly whips out their Android phone and says "check this out" - the way they do with an iPhone. Then again, no one was "proud" of their PC the way Mac fanatics were of their machines, back in the 1980's. Who won that battle?

Good News is Not Considered "News"

2012-01-26T12:06:00.000-08:00

The Dow has risen steadily since December. But the news media does not report this as 'news'.

I was doing my monthly net worth calculation to see how things were going. Now that we are out of debt, it is an easier calculation to make. And as I have noted before, it can be a dangerous number to look at. If your investments do well, you may end up thinking you are "rich" and go out and spend money - or worse yet, borrow it - and end up in trouble.

That WAS one cause of the "meltdown" of the last decade - we all saw our portfolios and home values go up, up, up, and thought, "well, I've got money, why not spend some?" But since our money was tied up in houses and 401(k) plans, we borrowed to spend. We did not spend the actual money. So when it all went horribly wrong, we were in debt and our paper "assets" were worth less (but not worthless).

But I digress... yet once again.

What was interesting to me was the fact that all my accounts were way up - by enough to buy a nice new Camry, with a leather interior. Hybrid.

Still down from April 2011, where we were flying really high. But way up from December. And yet, well, why hasn't the media reported this? We hear all the gloom-and-doom about how the market tanked in December (see chart above). But the bounce-back in the last month has been pretty spectacular.

Yet, when I think about the news over the last four weeks, all I recall is "Dow ends the week down" and other negative headlines. I only recall a few positive headlines, for example, about the year-end rally (which looks pretty podunk, in retrospect). All you hear is "Dow Down" it seems.

As I noted before, long-term trends that are gradual are not news and not noticed. You put aside $50 a week, and by age 65 are a millionaire. No one notices. You win a million dollars in the lottery, and it is headline news in your home town.

Long-term, slow trends, are rarely reported by the news. Bad news and sudden occurrences, are. Getting your information from the news is thus a really bad idea, as all you get exposed to is sensationalistic events and bad news trends. You do not see the whole picture.

The Town Clerk Who Wasn't

2012-01-26T10:01:00.000-08:00

Central New York can be beautiful in the summer months.
But the place is so political that it kind of is a buzz-kill.

We recently sold our home in Central New York, on Cayuga Lake. It was located in the Town of Ledyard, in Cayuga County, a very economically depressed area. The town recently made the news when the town clerk refused to sign the marriage license of two Lesbians, supposedly for religious reasons. And she ran for office again, and was re-elected. You'd think if she objected to the duties involved, she would step down.

To me, this makes no sense. It would be like a Hindu applying for a job with the USDA as a Meat Inspector, and then insisting that they not be required to inspect meat - as it violated their religious beliefs! But that is the nonsense we deal with today - everyone has rights, and no one has responsibilities.

When you read a news story that you know the details about, it is interesting. I knew this lady - she was our town clerk, and we met her on numerous occasions, and joked with her. She even asked me about trademark issues for her cheese business. I felt like this was a nice person. Who knew she was seething with resentment the whole time?

Or was she? I have no way of knowing. Funny thing is, though, in retrospect, when we went to get our building permit, there was always some reason why the assistant town clerk had to help us, not her. And when we sold the house, and needed a copy of the Certificate of Occupancy for the bank, she claimed it was not on file and had never been issued. Then she claimed she could not find the file.

A day before closing, we called, and she said she was "too busy" to look for it. We drove there, pulled open the file cabinet, and right there in front was our file. It took two seconds to locate this "lost file" that she was "too busy" to find - and which would have delayed our closing by a week or more!

Were her religious beliefs behind this as well? At least subliminally? Or was she just a crappy town clerk? I am beginning to think both. And the problem with scenarios like this, is that you can get paranoid about them, as you start second-guessing other people's motives. You start to understand how minorities feel.

It is like that bit from Annie Hall, where Woody Allen gets paranoid that his friends are making subliminal anti-Semitic statements:

“You know, I was having lunch with some guys from NBC, so I said, ‘Did you eat yet or what?’ And Tom Christie said, ‘No, JEW?’ Not ‘Did you?’…JEW eat? JEW? You get it? JEW eat? Not ‘did you eat…’” –Woody Allen in Annie Hall

Oddly enough, while the farming communities there are fairly conservative, New York is clearly a "Blue State" and moreover, the local village of Aurora is something a little short of a Socialist Paradise. It is full of left-wing crackpots, who also hated us for being "too conservative". Between the "Rush is Right!" Republicans and the Looney-Leftists, we did not feel we fit in very well. People in Ledyard would glare at you for being too Liberal, and folks in Aurora would burn you in effigy (I am not exaggerating) for being too Conservative.

Some lady came to town and spent a ton of her own money donating to the local failing college and fixing up the historic buildings. Out of her own pocket! She lost millions! And yet the looney leftists hated her, claiming she was somehow "making a profit" on donating money to the college. They hung her in effigy and to this day, maintain a website with all sorts of nasty stuff about her and how rotten she was.

She finally left town, but they still hated her - and then they focused their hatred on each other - starting fights over the smallest thing. One poor lady who ran a wine and cheese shop was threatened because she was carrying the town clerk's cheese for a while. It was not a big seller and she stopped carrying it months before - but that was not enough to stop the "boycott"!

The freaking place was a madhouse. And a bummer as well. We sold the house and got the heck out. It was not a fun, inviting place to live. I would not recommend living in the Festering Hell-Hole that is Central New York.

Just down the road was Ithaca, New York, home of the ultra-looney left. Here, you see people driving $40,000 Volvos with 4-foot-wide bumper stickers (where do you buy these?) saying, "Fight For A Living Wage!" Irony is lost on these folks.

But the problems in Central New York mirror those across the country. People today wear their political opinions - and their religions, which are often indistinguishable - on their sleeves. Everything - and I mean EVERYTHING - is viewed through the polarizing filter of politics.

You say, "Good Day" to a Liberal, and they reply, "How can it be a good day, with global warming ruining the environment - you destroyer of nature!" And then they spit on you and set fire to your SUV.

Or you say "Good Day" to a Conservative, and they reply, "How can it be a good day with a SOCIALIST in the White House, creating a welfare state and bankrupting our country!"

And usually, these wild opinions are not based on fact, but fantasies. As I have tried to point out again and again, most of this stuff, you can look up online and debunk. 50,000,000 people on welfare? I don't think so. Big Macs deforesting the Amazon? Guess again.

And even political leaders buy into this stuff - and spread it further. The Republican response to the State of the Union address (why do we have to have "responses" to these again? We didn't when I was a kid!) put out the specious statistic that Steve Jobs created more Jobs than the Stimulus Package. Turns out, that is not even close - 64,000 jobs versus 1.4 Million, it is no contest - not even close.

We used to call that "Lying" but today, no one dare say that. And the idiot who said that, doesn't even say "I'm sorry I lied."

And moreover, he fails to understand that anyone with half a brain figures out he lied and then it discredits the rest of his message - which may have had some salient points.

But what am I saying? People today argue with me that Payday Loans are a good deal, and hey, leasing a car makes sense! So they believe whatever the TeeVee says, and if a politician says the Negro President is no good, well, they believe it, particularly if they hate Negros, which many do.

So what is the reality of all this political bullshit?

Well, first of all, there is no big difference in policy decisions between Democrats and Republicans. If you think Obama's policies on Iraq, Afghanistan, and Gitmo are any different than Bush's, you'd better guess again - as he has done mostly the same things that Bush did - and on Bush's announced timetable.

Fiscally, there are little different, other than Bush cut the very wealthiest people's taxes by 2%. And yet, in this world of "believe whatever you want, that makes it true!" people making $30,000 a year tell me that "Bush cut my taxes!"

So what's the answer here? We need to calm down, people!

Someone isn't "evil" because they drive a Hummer - just perhaps making poor choices. But that is no reason to set fire to it.

And if you are elected Town Clerk, you have to do the duties of Town Clerk - even if that means signing some Lesbian Marriage License. How does that on earth hurt you? No one is asking you to officiate at the wedding - all you have to do is sign a piece of paper. Sheesh! You ain't going to Hell over that.

We have become a nation of extremists - extremists over NOTHING of consequence.

The reality is, of course, that a large number of us are not extremists - the majority, in fact. And we are starting to get pissed off that the media gives such attention to such loud minorities of extreme political views, as they are "newsworthy" and get people to watch - and get them all riled up, as well.

But eventually, one tires of being in a state of perpetual outrage. And one tires of the forwarded e-mails from the "true believers" replete with truths, half-truths, and outright lies (usually the latter, followed by, "The MSM never reports THIS!!").

Political silly-season, it seems, has become a way of life.

Decent Poor People Who Aren't Very Bright

2012-01-25T15:28:00.000-08:00

Why do we allow our society to exploit the poor? Why do we stand for this?

Shouldn't we protect the interests of people who are not smart enough or powerful enough to protect their own? Isn't that sort of the definition of civilization?

Decades ago, when I lived in a poor neighborhood and worked at various odd jobs, such as Pizza Delivery Driver and Teamster, there was a couple a few doors down from me who befriended me. They were nice people and all, but, let's face it, they were dumb as posts.

I don't mean that in a mean way - it is just a statement of fact.   They were gentle and decent people, who worked hard and did what they were told to do, but were just not very bright.

The husband was semi-retired. He had served in the Navy, working on a supply ship. Even the Navy recognized that he would probably best work out in a position where there was not a lot of stress and simple, defined duties. Think Forest Gump.

After the Navy, he worked as a custodian at the local church and received a modest pension and Social Security.   His wife never worked outside the home, but was a fastidious housekeeper, and kept herself busy with many crafts projects.

They never hurt anyone. They never were belligerent, or stole things or were loud or obnoxious.   They were a cute couple, clearly in love with one another, but more than a little baffled and confused by the complex world at large.

And interestingly enough, they had developed a bit of a support network through their church. When his car broke down, a car salesman at the local car dealer found him a reliable Chevy Nova to drive, at a reasonable price.

And in fact, when they invited me over for dinner, some of their church friends made sure to "check me out" to make sure I was not trying to take advantage of them - as they were so easy to take advantage of, and often were.

I often think of them. And I am sure both are long dead, now. They lived very simple, dignified lives, and although they were not rocket scientists, they never harmed anyone, never asked for more out of life than they earned, never asked for handouts, welfare, or special treatment.   All they wanted to do was work for a living, and live and enjoy life.

Doesn't sound like a lot to ask for, does it?

I rail on a lot here about how the poor today often victimize themselves with raw deals - payday loans, buy-here-pay-here used cars, lottery tickets, gambling, pawn shops, title loans, high-interest credit cards - the list goes on and on.

The poor are often victims of their own poor choices - in both senses of the word. Without proper financial acumen, many folks - including middle-class and even upper-middle-class people, end up making very, very bad choices.

My friends from down the block at least had a support network through their church (apparently not one of those hatey-kind of religions) and thus had someone to look out for them, and steer them away from bad bargains.

But also, back then, in 1982, we didn't have payday loans, title pawn places, rent-to-own furniture, buy-here-pay-here used cars, lottery tickets - and all the other bad bargains for the poor we have today.

What changed? Well, back then, a lot of that shit was illegal. You could not charge 30% interest on a loan - you would go to jail for usury. During the high inflation times of the late 1970's, such laws were modified or overturned. In recent years, they have been tossed out, entirely.

The logic, we are told, is that government has no business regulating private transactions. That business is business, and everyone knows what is and is not a good deal - and no one should spoil the party by making high-interest loans and other rip-offs illegal.

So, you can basically do whatever you want to the poor nowadays, and get away with it. It's all perfectly legal. And moreover, morally, we seem to have no qualms about it, either.

And while the church protected my friends back then, today, new churches and new religions have jumped on the bandwagon of exploiting the poor - often asking for 10% of pre-tax income, plus other special tithing. If they try to protect their parishioners from bad financial deals at all (by hiring Dave Ramsey to give a seminar, for example) it is only done so out of a need to cut out the competition - the Holy Roller End-Times Cathedral doesn't want you giving money to VISA, but to them.

Maybe this is the new era we live in. Maybe this is the way things should be or are going to be. Maybe it can't be changed. After all, a simple consumer protection bureau was shot down by the GOP on the grounds that it "stifled business".

Or maybe it can be changed - before we end up like Mexico, with all the wealth in the hands of a few and go fuck yourself, buddy. The wealthy and even moderately wealthy, living in walled compounds, and in perpetual fear of their own fellow citizens, as well as armed criminal gangs, who have nothing, and thus nothing to lose.

We need to think carefully about our future and where we want this country to go. If we let people - like my two friends - go down, we don't deserve to occupy space on this planet.

The New Car Trap

2012-01-25T07:25:00.000-08:00

Any idiot can buy a new car - even with bad credit, no credit, or whatever. It takes no talent to pick out a car, write a check, and sign up for the worst financial deal of a lifetime. And yet many folks act like buying a car is some sort of personal accomplishment. It is no more of an accomplishment than excretion. But then again, we teach children in this country that excretion is a major accomplishment that should be rewarded, so go figure.

Another example of faux financial acumen that you will see a lot in the media and online is the "tips to be a savvy car shopper!" kind of article, which touts to teach you all the tricks to "beating the salesman at his own game!" or how to "get the best bargains when buying a new car!"

You read the article and there is no "there" there - just a bunch of platitudes about how exciting and fun it is to buy a new car, and how you should negotiate on price and "get a good deal!". But trying to "negotiate" with a salesman is merely playing their game - which you will lose. Your only option is to not play at all.

It is like those stupid articles about "tips to win big at the casinos!" - you can't win, period. Just don't go.

Why is buying a brand-new car such a raw deal? Several reasons. And many young people buy a brand-new car in their 20's, and live to regret it - if they realize what they have done.   Others continue to buy new cars, convinced that it is "fun" and "cool" to have a new car every few years. Such folks are not terribly bright - the sort of folks who find Jet-Skiing to be hours of entertainment.

There is nothing special or unique about owning a brand-new car. They come off the assembly line every few seconds in this country. Yet many folks consider it a sign of status or class to be able to buy a brand-new car, rather than a used one - even when the car in question is some cheaply made economy model.

In fact, most new cars sold are very inexpensive models, and young people are often targeted as the market for such cars. Toyota came up with a whole brand - Scion - to market to young people. Many older people end up buying the cars, of course, proving the old adage true - "You can sell a young man's car to an older man, but not an older man's car to a younger man."

Young people want things - they are starting out in life, and everything seems exciting and new. Moreover, they are coming from an environment where it seems everyone (adults) have lots of nice "stuff" but they are constantly denied all the things they want in life. They graduate from college, get a job that pays what seems like a lot of money, and suddenly, they can choose to have whatever they want.

And often, they choose to have everything they want, and end up spending a decade or two bailing themselves out of a debt crises that started in their 20's but did not metastasize until well into their 30's. Or, as in my case, I went on to make more and more money over time, but by age 30, I literally had nothing to show for all the labor of my 20's, other than some student loan bills. Imagine that, working an entire decade and not even being able to save $500 in the bank! And yet my experience is typical, not an anomaly.

The scenario usually plays out as follows. John is a composite of a number of young people I know, including myself.

James is 23years old, recently graduated from college and has landed an entry-level job with a company. He is making pretty good money, or so he thinks, as his only comparison is the money he was making in high school. He can afford an apartment - or to share an apartment with friends - and has the usual collection of toys, such as cell phones, cable TV, video games, computers and the like. He and his friends spend their non-working, non-sleeping hours figuring out ways to have fun and spend money - usually going to bars or "hanging out" and drinking beer, or going to the mall and spending money, usually with credit cards.

James has the same car he had in college - his Mother's old Honda - which is now many years old and the butt of jokes by his buddies. He tried "modding" it with some bolt-on accessories, like a cone filter and a "fart muffler", but all they did was make the car loud and annoying. All his buddies, it seemed, had "nice rides" and James wanted one, too.

On the way by the car dealer, he spies a small fastback coupe that looks sporty. It was designed with James in mind - it is small and looks sporty, but is really just another economy car with sporty sheet metal work. James assumes he "can't afford it" and he is right. But one day, he stops by and looks at it, and the sticker price of "only" $18,000 seems pretty reasonable. A salesman sees him eyeing the car and steps up to talk to him.

James is no fool - he won't fall prey to a new car salesman! But the salesman sizes James up and says, "I can show you how you can AFFORD this car!". Intrigued, James goes along with it, figuring there is no harm in finding out what the "numbers" will be.

And here, the salesman snookers James using a panoply of techniques.   First, he runs James' credit, while they are talking and looking at cars. He distracts James by showing him other cars or just makes him wait in the waiting room. The more James waits, the more he has "invested" in the process and the longer he will wait. James will be there for about 5-6 hours.

The salesman quickly figures out how much he can charge James for a car, based on James' income and credit rating - and sets out to sell him the least amount of car for the most money. Perhaps he will first tell James that the small coupe in "GT" trim is out of his price range - but that the stripped down "SE" model (which is assures, is really the same car and a better bargain) is. Or, if James is making good money, he may try to "upsell" him into a larger or more expensive car. But since James is young and dumb, the best bet is to sell him the Sally Stripper at the GT price.

Next, is the trade-in. James' clapped-out Honda with the cone filter and coffee-can muffler is worth little, but the salesman knows that James will be upset unless he "gets good money for it" - so the salesman offers him a hefty price in trade-in - more than James would get for selling it outright. The car will be sold at auction for $200, so the excess trade-in price is folded into the new car.

Financing is next.   The salesman will recommend a five- to seven-year loan, so that the monthly payments, even at an astronomical interest rate, will be "affordable". Since James has no good credit, he will easily pay in the double-digits for the loan interest rate. James does not qualify for so-called "0% financing" or low-interest financing - few people do, actually.

If necessary, the salesman will pitch leasing as the solution - to keep the monthly payment down and to allow him to pad more price into the car. James may fall for this, as it gets him the car to drive home, but within a payment plan that he thinks he can "afford". Yes, James is at that point in life where he looks at money as something he gets every two weeks - and spends as quickly. A few hundred bucks a month sounds "affordable" - but the overall cost of the transaction is never considered.

Leasing has an added bonus for the car dealer and manufacturer in that it forces the buyer to come back in 3-5 years to turn in the car, which becomes and opportunity to lease them a new one - creating a perpetual new-car buyer for the company - at least for a few years, until the cost of this is felt and the customer goes bust or figures out they have been had.

James signs onto this onerous deal, buying the car, sold on 72 monthly payments. The salesman of course, will throw in the "closing" bits - the rust-proofing and undercoating, selling James the floor mats that came with the car, or paint sealer, or extended warranty, or whatever. If James is particularly foolish, he will sign up for these add-ons. At this point, James has no idea what he paid for the car, and chances are, it is close to - or indeed, over - the sticker price.

But, it is nearly 10:00 at night, and James drives home with the new car, with temp tags on it. He is proud to show it off to his buddies, who mostly say nice things about it, except for his one snarky friend who says, "Whoa, dude, why didn't ya buy the GT model? The SE is lame!"

But James takes the slight in stride. He is an adult now - able to buy a new car, with his own money! This car is a sign of his success and wealth. And it has cool features, like a remote hatch release, a CD player with speakers that light up! And cruise control and a working air conditioner!

The next day, he is excited to drive his new car to work, and is convinced that everyone is looking at him in his new car.   If he is particularly tacky, he leaves the window sticker on for a few days, so everyone will know he has a "new car". But in traffic, he is cut off by another young man in the GT model, and James wonders how that fellow could afford the upgraded version (Hint: He bought it used).

All day at work, he is distracted by thinking about his car, and when he leaves work, he is excited to see HIS shiny new car in the parking lot. And he enjoys driving it home.

There are a few major flies in the ointment. The first is insurance. His agent wrote a "binder" on the car, based on the amount James had paid for the insurance on his older car. But the Agent calls the next day with bad news - the cost of collision insurance on the car will be very high, thanks to some tickets James got, and in addition, the comprehensive will be higher, as the coupe is classified as a "sporty" model with higher premiums. The insurance will cost a couple hundred per month for the car - nearly as high as the car payment.

The other problem with the scenario is that James thought that "a few hundred" a month was affordable, but did not "do the math" to figure out where the money would come from. As it was, he was spending every penny he made every month, on rent, beer, and partying. He thought that he would "save money" by not having to pay for repairs on his old Honda (which needed new tires, just last month!) and maybe cut back on some other personal expenses.

But that sort of financial acumen is rather faulty - the idea that you can add hundreds of dollars per month to your budget and "somehow" economize to afford it. Needless to say, James was very quickly running out of money every month.   The jacked-up insurance rates only added fuel to the fire. Very quickly, his credit card balance started increasing. He not only took on a staggering debt load with the new car, but was increasing his debt load with the credit cards. His net worth, including student loans, was astoundingly negative.

Only 71 months of payments left to go! James would be nearly 30 before the car was paid off.

What was worse, is that James had no way out of this situation, other than to work for six years and pay off the debt - and hope in vain that his salary increases over time would make things easier. Yes, he was upside-down on the car, and would remain so, for the life of the loan. He would not be able to sell the car for what he owed on the loan, for many years, as the onerous terms of financing meant that the car was depreciating faster than the loan balance was decreasing.

Right off the bat, the car was worth 10-20% less than he paid for it, the moment he drove it off the lot. Within 3-5 years, it was worth 50% less than its purchase price. From a depreciation standpoint, a new car is a horrible financial transaction. But James never looked at the deal in terms of overall price, overall cost over time, and overall cost-per-mile, in terms of transportation. He just looked at that inviting low monthly payment.

"The Road to Middle-Class Poverty is Paved with New Car Payments" - as one famous author (me) once said. And many a young person has been snookered into buying a brand-new car, and then can't understand why they are not saving money or can't balance their budget every month. It can't be the car, right? Not the car! Everyone has new cars, right? RIGHT?

Wrong. And often the "monthly payment" mentality fails to address the overall cost. So James is broke now, and living "paycheck to paycheck" and the cause of his financial difficulty is parked out front.

A decision he made one night, under pressure from a salesman, when he was 23 years old, will affect him for an entire decade. Five years into this deal, he has a used economy car that is out of date, out of style, and starting to show signs of wear - and incurring repair costs. The fun part of driving a new car with temp tags lasted a week.   The financial effects lasted a decade or more.

More - because at age 30, he wants to settle down and get married, but he has nothing to show for the last decade of his existence on planet earth, other than a clapped-out economy car, and some electronic gadgets - and few grand in credit card debt. Getting a mortgage to buy a home will be hard. He can only hope that his future spouse was smarter about money that he was - or comes from a wealthy family.

The new car showroom is a trap for young people - a trap that can suck the money out of your wallet for years and years. Your 20's should be a time for fun, frolic, dating, and experiencing all the joy of life as an adult for the first time.   But that excitement alone is fun - you don't need to enhance it buy owning shiny new crap. Trust me that it is far more fun to drive Mom's clapped-out Honda and have $20 in your pocket, than to have a new econo-box and be broke all the time.

And it is even more fun to be putting money in your 401(k) in your 20's, so that age 30, you have a down payment for a home, should you decide to buy one. Financial security is not sexy or flashy, but it is really calming and reassuring, in the long run.

So what could James have done differently? Well, he could have kept driving the Honda for a few more years, enduring the ribbing of his pals (who ironically, all want to ride in it, when they go somewhere as a group, as their economy coupes do not comfortably seat more than two). He could have put the hundreds of dollars a month of savings into a savings account, and when the Honda finally blows a head gasket at 250,000 miles, he could have afforded to buy a secondhand GT coupe, from the original owner, five years old, for CASH - and saved a ton of dough in both interest, insurance, and depreciation.

And moreover, he would not have been broke all the time, or felt the pressure and strain of "having to make money" in order to pay bills - bills of his own creation.

* * *

The story of James is not made-up. I know a lot of James' out there - and am one myself. I bought a new car, at age 23, when I had a perfectly good used car that would have given me five more years of service - easily - with proper care. With the cost of insurance and car payments, the price of ownership was astounding - hundreds of dollars a month, in an era where mortgage payments or rent was not much more.

By my late 20's, even though I had been working for a decade, contributing to a 401(k) plan at two companies, making a fairly decent salary, and even buying and selling a home and pocketing several thousand dollars in cash, I was in fact, flat broke. And what did I do at that point? You guessed it - I went out and bought another new car.

The only smart thing I did do, was to get an eduction, which in turn qualified me for a better job with more pay. But like most young people - or people in general - I merely made things worse by going out and increasing my debt load and monthly bills to the point where I was treading water - running hard to stay in one place. Rather than capitalize on my gains, I was just staying in place, if not in fact falling behind.

It was not until I first sat down and calculated my net worth that I realized that a decade of hard work had come to naught. I had not been able to save up even a few hundred dollars over that entire time period!

And, at that point in my life, I decided I needed to change things. And to be sure, it took decades more to figure things out - there would be more cars, more onerous deals, more debt, and more stupidity before I realized that such a lifestyle was not sustainable in the long run. Eventually, we all have to retire and live off our savings - so learning to accumulate wealth and live on less is not really an option, but a dire necessity.

And living in debt all the time wears on your soul and even your body. The stress of debt leads to physical ailments and to drinking, drug use, and escapism. Many people today are very unhappy and take anti-depressants, and wonder why, while living in the richest country in the world, they are so miserable.

And often the reason why is parked in their driveway. They have lots of nice stuff, but also lots of debt. So they feel powerless and weak, instead of empowered and wealthy.

It is hard to break free of this cycle of debt-and-owning-things. And it cannot be changed overnight, particularly when you have signed up for years of onerous debt. It takes only the stroke of a pen - mere seconds, to bind you for decades. But you can turn things around, over time. And it is worthwhile to do so.

And yet, many people, not seeing results right away, say, "screw this, I'm buying a new Camaro!"

And the cycles continues...

What is Normal?

2012-01-24T21:12:00.000-08:00

Advertisers try to sell you on what is 'normal' by providing poor normative cues. Oftentimes, we only realize after decades, that we have been sold a bill of goods. Getting your normative cues from the media, particularly advertising, is a bad idea.

I lost weight last year after going on a diet - well not really going on a diet, just watching what I ate, and consuming no more than 2000 calories a day and making sure I exercised. Calories in, calories out - just like balancing your checkbook. If you consume 2000 calories in food, you'd better burn 2000 calories in energy, or you gain wait. Simple as that - no "trick to the tiny belly" or any of that shit.

But I gained some of that weight back this year. How? Not by doing anything unusual, like gorging on Little Debbie cakes (ugh!) or other foods. And that is the stereotype of the "fat person" - someone who gorges on food.

No, instead, I just did what most people do - eat restaurant-sized portions of food and not keep track of my caloric intake, and over time - a long time, you gain weight. Simple as that. Nothing dramatic - just a little bit, over time.

It is like finances. You don't balance your checkbook, track your spending, and you spend just a wee bit more than you make, and one day, you wake up with a $5000 credit card bill you can never seem to pay off. How did you get here? It seemed to happen suddenly, but it built up over time. And of course, you want an instant solution - the "trick to getting out of credit card debt" - which you can file right there with the "trick of the tiny belly" - under "CS" for Chicken Shit.

But they don't exist.

So why are so many Americans so fat - and in debt? It is not that they are doing weird things like burning $100 bills in their front yard, or gorging on 50-pound vats of pasta. No, what they are doing is what seems "normal" to them - as reinforced by Society and by the Television. What is "normal" is, however, very wrong.

Can so many people be so wrong? Yup. All the time, in fact.

You go to a restaurant and they have an entree. You order an appetizer (250 calories), a salad (150 calories mostly in dressing and croutons), and maybe even have soup (200 calories). Then you get the entree - which may be 1000 calories or more in and of itself. Take it all together, along with dessert (400 calories) and maybe a glass of wine (150 calories), and you are looking at a 2000 calorie meal or more - enough calories for an entire day!

Even if you order "just the entree", chances are you are overeating, unless you had a 500 calorie breakfast, a 500 calorie lunch, and no snacks or soda pop in-between.

But then again, is another "norm" - soda pop. Some folks drink 5-6 servings a day, a 100-200 calories apiece. And they wonder why, at age 50, they are diabetic. And diabetes is an epidemic in this country.

Can so many people be so wrong? You bet.

"Normal" behavior in our society is excess - overeating, overspending, over-consuming.   It is easy to "act normal" in our country and end up fat, broke, in debt, and with a house full of junk. And you wonder why you got here - after all, you do all the things "everyone else" does, right? You must be big-boned and just unlucky with money - or perhaps it is all Obama's fault.

And it takes a staggering amount of courage to say, "No, what everybody does these days is not normal!" because you are going against humanity itself.

So, many folks watch TeeVee and read the paper and think, "Hmmm... Leasing a new car must be 'normal behavior' because it seems everyone is doing it! Look at all the ads!"

And they go to a TGI McChotchke's and thing, "The 1500-calorie Jalapeno Popper Texas Cheese-em-up Fried Bacon Nachos sounds like a reasonable appetizer! I'll wash that down with a 'bottomless' glass of Soda-Pop!"

And they wonder, after 20 years, why they broke, in debt, overweight, and have type-2 diabetes.

It is not that they are bad people, only that they believed that a lot of bad, self-destructive behavior was "normal" - and we all fall for this.

I know I did. I took my normative cues from the TeeVee and thought "A New Car!" was the greatest thing you could buy, that the latest electronic gadget was cool, and that owning a home was the end-all of humanity. And I believed that a 44-ounce big-gulp at 7-11 was a "fun refreshing drink!" and that delivery pizza was a legitimate option - after all, its what's for dinner, right?

That's what advertisers do - they take behavior that is bad for you (and good for their clients) and convince you that it is a normal thing to do.   After all, after a hard day at surgery, most doctors smoke Camels! They sooth the "Y-zone" and aid in digestion!

And yea, people believed that.

Normative cues sneak into your life, very stealthily. We see a friend or neighbor doing something, and we subconsciously mimic the behavior. Sometimes this is good - when our friends are healthy, intelligent, and constructive people.   On the other hand, if your friends are crackheads, well, it won't be long before you think it is normal to smoke crack.

I am trying to get back on the bandwagon losing weight. It takes a lot of time and effort, and it is hard to do when you go to a restaurant, and the menu sets forth a set of normative cues that top 2000 calories.

But it can be done. You just have to be willing to be different.

Manufactured Housing

2012-01-24T15:39:00.000-08:00

At one time in this country, you could buy a complete home as a kit from Sears, and then have shipped to you by railcar. Today, we have gone back to "stick building" homes from raw lumber. Mobile Homes (Manufactured Homes) and Modular Homes are becoming more popular, but face barriers to acceptance. Why is this?

Note: this posting is in response to a comment made by a reader.

A friend of mine in Central New York met with a company in Canada that sells "panelized" homes - homes that are build as prefabricated panels that are then assembled on-site in a short period of time and can be built inexpensively. They were enthusiastic about the idea, and contacted a local contractor to assemble the home for them.

The bad news came: The contractor wanted MORE to assemble the panelized home that he would have charged to built it from sticks of lumber. Why is this?

Well, the simple answer is that the building trades are a bit of a guild, and the guild protects it own. Houses are expensive to build, because the tradesmen have an unwritten agreement to make them expensive to build - and staggeringly expensive to remodel. And once they start building your home, they "have you" in terms of cost overrruns. Only bulk home builders can rein in these sorts of costs by building 100 houses at a time.   For the solo homeowner, building your own home (paying someone to build it) is often a money-losing proposition.

My friend was disappointed. In Central New York, it costs more to build a house than the resale value of the home. If you have a house built, it will be worth less than you paid for it, for many years. If you remodel a home there, you lose money as well.   We lost $100,000 when we sold our home in Central New York. Owning a home is not all it is cracked up to be!

But what about mass production - the assembly line, the factory - the promise of cheap consumer goods for less? Why haven't they been applied to housing?

A very good question. A very, very good question, indeed.

The Sears houses of the turn-of-the-century are no longer available. But the houses built from those kits were well made - and in fact often command a premium price today. And they range from elegant Victorians with servants quarters to cozy craftsman-style bungalows. How come we could do that in 1910 but not today?

Good question - a very good question.

The "manufactured home" market thrives today, but these types of homes are often limited in style and actually depreciate in value over time, unlike a conventional home. Their heritage started in the trailer business - the types that were towed. And indeed, many come equipped with a ball hitch at the front, three axles and taillights. In some jurisdictions, their ability to be towed makes them exempt from certain zoning laws. In some places, you have to keep a license plate on them, even if they never are moved.

But the trailer home has morphed into the double-wide and even triple-wide.   These are still looked down upon as lower-class housing, and while they are inexpensive to buy, they often wear out and again, depreciate like a car.

Modular housing is sort of the next step in manufactured homes, and many are built by trailer-home manufacturers, while others have more upscale origins. Modular homes are made from a number of modules - as many as 6-10 - that are assembled onsite and often have characteristics that make them look "stick built" rather than manufactured.

However, since they comprise a number of long modules that can be trailered to the site, they tend to have odd features inside that give them away as modulars.   For example, one we looked at - a Victorian home, complete with turret and hydronic heating, had very thick walls where the modules joined together. And in the basement, you could see the modular construction and how it worked.

Was it a bad house? It did have cheap cabinets, cheap trim, and cheap carpet.   But those are optional items that can be upgraded. The Real Estate Agent and the Bank both warned us that it was a modular home and made us sign a disclaimer, so we made it clear we knew it was modular. I don't think it would have depreciated, like a trailer home, other than how the market has depreciated anyway.

We didn't buy the home, which turned out to be a blessing, as it was vastly overpriced. But these sorts of modulars are popular in Central New York, where labor costs are high, and resale values on homes are low.

Even a well-built modular home has a stigma of trailerism about it - as evidenced by the disclaimer we were forced to sign before making an offer on that house. There is a perception in the industry that a "stick built" home - even a tract home that is identical to 100 of its neighbors, and poorly built at that - is somehow "better" than a manufactured home.

And part of this was largely because most manufactured homes in years past used cheaper components. Many used plastic (polybutylene) plumbing that would later break or explode under pressure. Most used specific "mobile home" fittings - water heaters, furnaces, air conditioners, bath fixtrues - even doors and door knobs! Some even had 2"x3" construction, and most used cheap paneling on the inside and cheap aluminum on the outside. As a result, over time, a trailer home, like a RV, simply wears out, and people trade them in, like cars, for new ones.

Clearly, this sort of business model won't work, if manufactured housing is to go mainstream.

Some companies have attempted to "go upscale" with modular housing. My parent's neighbor had a Nanticoke home build on a 5-acre parcel on the Chesapeake Bay. It was at least seven modules and it was a spectacular house - or it would have been.

The contractor assembling the house decided to quit early to go fishing on a Friday, and left the roof off. They put a plastic tarp over the house.   That weekend, it rained spectacularly, and the pre-finished hardwood floors, the oak trim, the pre-installed wallpaper - everything - was ruined. They ended up gutting the shell and rebuilding it from scratch.

Say, you don't suppose that old Bubba sabotaged the deal from the get-go, so as to punish the Nanticoke people to "taking away jobs" from local carpenters, do you?

The net result was, Nanticoke Homes went bankrupt.

There are modular home builders who are still trying to work the concept. But one further "barrier to entry" is zoning.

Zoning laws vary from State to State and even municipality to municipality. As a result, a home that passes muster in one district may not get a Certificate of Occupancy in another. And if you modify the design to pass muster in one place, that very modification may make it fail in some other.

And local zoning inspectors often are not well versed in modular design and may question some construction techniques which are sound, but that they are not familiar with.

And then there is plain old prejudice. Local Town Boards may say, "We don't want a trailer park here!" and deny your permit to build a modular, on the grounds that it is a "trailer."

And indeed, even covenants on the property may limit you as well.   Our home in Central New York came with a covenant that a modular home could not be built on the property, even though most of the homes in the small lakeside development were indistinguishable from modular homes.   Indeed, a modular would have been a major upgrade for some of those lakeside camps.

But prejudices are hard to shake.

I think, moving forward, you will see more modular and pre-fabricated homes available on the market. But one thing killing these products is the Real Estate Meltdown, which has driven demand down, as there are so many existing homes and foreclosures for sale - for cheap - right now. Why build, when you can buy someone Else's nightmare for cheap?

So once again, the manufactured housing business faces a steep obstacle.

For many retirees, a form of manufactured home known as the Park Model - which is about the size of a one-bedroom apartment - makes a fine retirement or vacation home. Park models are cheap, well-made, clean and neat, and often can be had with interesting design features. Retirement communities which feature these units are low-cost, but safe, clean, and devoid of the "trailer trash" stigma that most "trailer parks" have.

I would gladly live in a Park Model, as I get older - it is less space to clean and maintain, and a lot less expense!

But in the meantime, modular or manufactured housing still seems to be facing an uphill battle to gain acceptance from the general population.

White Space

2012-01-24T14:49:00.000-08:00

USING WHITE SPACE - An Overview Using White Space is important in writing. Many folks worry about what to write or in what style to write it, without thinking about formatting and presentation. However, text that is hard to read is also hard to understand. Figuring out how not to cover the page with text is as important as the text you use to cover the page. There are a number of features of white space, and you should carefully consider them all when writing anything from a personal letter, to a technical document, to a blog posting. Margins are the first consideration. Many an important document has been trivialized by poor margin choices. Providing white space at the sides, top, and bottom of each page is easier on the eye and makes reading more pleasant. As a practical effect, it also insures that copies of documents made will not have portions truncated, if they are too close to the edge of the page. Most folks use single-spacing for their text, and this makes the text look like an impenetrable jumble of black spiders. No wonder so many kids are Dyslexic! They are presented with poorly formatted texts. Use line-and-a-half or 18 point spacing (for 12-point type) to make lines easy to read and easy to distinguish from one another. When you finish a paragraph, hit "Enter" twice, to put a blank line between your paragraphs. If you fail to do this, separate paragraphs can look like single long units, making them harder to read. So get in the habit, at the end of a paragraph, of "period, paragraph, enter, enter." Paragraphs should be about 3-4 sentences at most. I know, all the great authors wrote paragraph-long sentences and paragraphs that went on for pages. But you are not Herman Melville, so don't get fancy. Short, direct sentences, grouped into paragraphs of three to five sentences that make a coherent point are far better than run-on sentences or runaway paragraphs. This sounds silly, but after a period, put two spaces. Most folks miss this, and indeed, many grammar checkers online may point this out as an error. But "period, space, space" is a better way to go, and subtly lets the reader know the sentence has ended. White space is part of writing - whether it is English or Japanese or Sanskrit. The spacing between letters, sentences, paragraphs, as well as margins and the like, tell as much sometimes as the words themselves. I have formatted this article in three different formats - one with no white space whatsoever, one with some white space (what most people think is OK) and one with generous white space. Which is the easiest to read?

* * *

USING WHITE SPACE - An Overview

Using White Space is important in writing. Many folks worry about what to write or in what style to write it, without thinking about formatting and presentation. However, text that is hard to read is also hard to understand. Figuring out how not to cover the page with text is as important as the text you use to cover the page. There are a number of features of white space, and you should carefully consider them all when writing anything from a personal letter, to a technical document, to a blog posting.

Margins are the first consideration. Many an important document has been trivialized by poor margin choices. Providing white space at the sides, top, and bottom of each page is easier on the eye and makes reading more pleasant. As a practical effect, it also insures that copies of documents made will not have portions truncated, if they are too close to the edge of the page. Most folks use single-spacing for their text, and this makes the text look like an impenetrable jumble of black spiders. No wonder so many kids are Dyslexic! They are presented with poorly formatted texts. Use line-and-a-half or 18 point spacing (for 12-point type) to make lines easy to read and easy to distinguish from one another. Single-spacing is generally a poor choice.

When you finish a paragraph, hit "Enter" twice, to put a blank line between your paragraphs. If you fail to do this, separate paragraphs can look like single long units, making them harder to read. So get in the habit, at the end of a paragraph, of "period, paragraph, enter, enter." Paragraphs should be about 3-4 sentences at most. I know, all the great authors wrote paragraph-long sentences and paragraphs that went on for pages. But you are not Herman Melville, so don't get fancy. Short, direct sentences, grouped into paragraphs of three to five sentences that make a coherent point are far better than run-on sentences or runaway paragraphs.

This sounds silly, but after a period, put two spaces. Most folks miss this, and indeed, many grammar checkers online may point this out as an error. But "period, space, space" is a better way to go, and subtly lets the reader know the sentence has ended. White space is part of writing - whether it is English or Japanese or Sanskrit. The spacing between letters, sentences, paragraphs, as well as margins and the like, tell as much sometimes as the words themselves. I have formatted this article in three different formats - one with no white space whatsoever, one with some white space (what most people think is OK) and one with generous white space. Which is the easiest to read?

* * *

USING WHITE SPACE - AN OVERVIEW

INTRODUCTION

Using White Space is important in writing. Many folks worry about what to write or in what style to write it, without thinking about formatting and presentation.   However, text that is hard to read is also hard to understand. Figuring out how not to cover the page with text is as important as the text you use to cover the page.

There are a number of features of white space, and you should carefully consider them all when writing anything from a personal letter, to a technical document, to a blog posting.

MARGINS

Margins are the first consideration. Many an important document has been trivialized by poor margin choices. Providing white space at the sides, top, and bottom of each page is easier on the eye and makes reading more pleasant. As a practical effect, it also insures that copies of documents made will not have portions truncated, if they are too close to the edge of the page.

LINE SPACING

Most folks use single-spacing for their text, and this makes the text look like an impenetrable jumble of black spiders. No wonder so many kids are Dyslexic! They are presented with poorly formatted texts. Use line-and-a-half or 18 point spacing (for 12-point type) to make lines easy to read and easy to distinguish from one another. Single-spacing is generally a poor choice.

SPACES BETWEEN PARAGRAPHS, HEADERS

When you finish a paragraph, hit "Enter" twice, to put a blank line between your paragraphs.   If you fail to do this, separate paragraphs can look like single long units, making them harder to read. So get in the habit, at the end of a paragraph, of "period, paragraph, enter, enter."

PARAGRAPH SIZES

Paragraphs should be about 3-4 sentences at most.   I know, all the great authors wrote paragraph-long sentences and paragraphs that went on for pages.   But you are not Herman Melville, so don't get fancy. Short, direct sentences, grouped into paragraphs of three to five sentences that make a coherent point are far better than run-on sentences or runaway paragraphs.

SPACE BETWEEN SENTENCES

This sounds silly, but after a period, put two spaces. Most folks miss this, and indeed, many grammar checkers online may point this out as an error. But "period, space, space" is a better way to go, and subtly lets the reader know the sentence has ended.

CONCLUSION

White space is part of writing - whether it is English or Japanese or Sanskrit. The spacing between letters, sentences, paragraphs, as well as margins and the like, tell as much sometimes as the words themselves. I have formatted this article in three different formats - one with no white space whatsoever, one with some white space (what most people think is OK) and one with generous white space. Which is the easiest to read?

Calling the Horse Race - Why the Media is Irrelevant

2012-01-22T09:01:00.000-08:00

Why does the media turn the Presidential election into a horse-race every four years, after promising, every four years, not to do so?

People often ask me, "If you don't watch TeeVee, how could you possibly stay informed?"

To which I reply, "By watching TeeVee, how could you possibly stay informed?"

The television is not information - it is anti-information disguising itself in the cloak of authority.

And the recent primary race for the GOP is case in point.

Every four years, the media, in a spate of hand-wringing, promises, once again, not to turn the election into a "horse race" - trying to call the winners and losers early on, but instead promises to focus on "the issues" and present a fair picture to everyone, so they can decide who will be President.

And every four years, just as Charlie Brown falls for Lucy's football trick, we believe them. But about 10 minutes into the race, the media says, "Fuck it, let's do the horse-race thing, as it is far easier to do and garners better ratings!"

I guess we like horse-races.

So coming out of the Iowa Caucuses, we are told that Mitt Romney is the presumptive nominee. Why? No offense to Iowans, but your State is largely unpopulated, and the few parts that are, are populated by people who are largely unrepresentative of the rest of the USA. Iowa is a bellweather of nothing.

And here is where it gets weird. Romney barely won Iowa, at least from initial reports. But it was reported as a "clear win" for Romney, which would provide him with "Momentum" into New Hampshire. Them, a few weeks later, a funny thing happens:

Results for Iowa Republican Caucus (U.S. Presidential Primary)

Jan 03, 2012 (>99% of precincts reporting)

Rick Santorum	29,839	24.6%
Mitt Romney	29,805	24.5%
Ron Paul	26,036	21.4%
Newt Gingrich	16,163	13.3%
Rick Perry	12,557	10.3%
Michele Bachmann	6,046	5%
Jon Huntsman	739	0.6%
Other	316	0.3%

He didn't win. Some guy named Rick Santorum did. But the media, never willing to admit it was wrong, still claims that Romney has "momentum" as it Iowa caucuses were basically a "tie" and thus a "win" for Romney.

Huh? Did I miss something here? A tie is a "win" for Romney, but when Romney is a few votes ahead, the same "tie" is a "loss" for Santorum?

The deal is, the narrative they wanted to sell us was Romney - that was the "story" and what the media does is fit the facts to the story.

So, on to New Hampshire - another unusual and small State that is hardly representative of the USA (and another largely all-white State, as well). Now, Mitt Romney was Governor of the neighboring State of Massachusetts and thus would be considered a "home town boy" in New Hampshire. And early on, most people correctly predicted that this familiarity would give Romney a huge New Hampshire win. Which it did:

Results for New Hampshire Republican Primary (U.S. Presidential Primary)

Jan 10, 2012 (100% of precincts reporting)

Mitt Romney	97,532	39.3%
Ron Paul	56,848	22.9%
Jon Huntsman	41,945	16.9%
Newt Gingrich	23,411	9.4%
Rick Santorum	23,362	9.4%
Rick Perry	1,766	0.7%
Other	3,621	1.5%

So, now the narrative is complete - Romney is on a roll, and polls show he will take South Carolina, and the media calls the horse race for Romney. After two oddball, all-white tiny States vote, it is all over - we are told. In the middle of this coronation, however, the news breaks out that Romney actually lost Iowa, which sort of is buzz-kill to the narrative, so the spin doctors - in the media, not the campaigns - quickly come up with this "a tie for Romney is a win for Romney" bit, as they don't want to be seen as calling the horse-race wrongly.

So Romney is crowned king and we can all rest easy until the late Summer, when the really loathsome attack ads begin (thankfully, I won't be watching TeeVee). It's all wrapped up! Then a funny thing happens. People vote for who they want, not what the media says:

Results for South Carolina Republican Primary (U.S. Presidential Primary)

Jan 21, 2012 (100% of precincts reporting)

Newt Gingrich	243,153	40.4%
Mitt Romney	167,279	27.8%
Rick Santorum	102,055	17%
Ron Paul	77,993	13%
Rick Perry	2,494	0.4%
Other	8,192	1.4%

Whoops! The Romney narrative is shot. All this "historical precedent" crapola is down the toilet ("Every Republican nominee in the last 10 elections who won both Iowa and New Hampshire go on to win the nomination!" - a "trend" about as silly and irrelevant as the Lincoln/Kennedy "coincidences" Statistics should be taught in grade school, with no one allowed to graduate until then can recognize specious statistics!).

Wow. So what does this all mean? That Gingrich will win? Or will Romney come from behind? It means neither. It means nothing. And even asking the question shows that you are still in the "horse-race" mentality.

This whole "momentum" garbage is just that - garbage. And these oddball statistics are just crap - like the Washington Redskins "predicting" the Presidential race. It is confusing correlation with causation.

If you don't understand the difference yourself, then read this scary tome on the dangers of bread.

So what's the point, then?

The point is, watching television is an utter waste of your time and brain. It teaches you nothing and tells you nothing. And in fact, if you start to believe what you see on the TeeVee as "true" you are headed for a world of woe.

And the television is so selective in what it wants to tell you. For example, you might notice that Ron Paul is pretty consistently showing strong numbers in the three races so far - and yet, he gets less mention in the media that other candidates with even less favorable numbers. I am not a Ron Paul fan, but it is interesting, nevertheless, how the media has written him off from the get-go. Not like they are telling you who to vote for or anything, right?

Of course, the electoral silly-season will continue as usual, with more stories about "momentum" and how every Republican nominee who carried States with odd-numbered election days ends up winning the Presidency, on alternate leap years or the year of the Rat, on the Chinese calendar, but only if they have a water Zodiac sign. And if you watch that shit, you might actually start believing it - or worse yet, the attack ads.

Not watching television is the first step toward reclaiming your life and learning to think on your own. Believe it or not, there are other sources of information out there than the TeeVee. And by this, I don't mean right-wing blogs or conspiracy-theory websites. Rather than watch the horse-race, think about the candidates positions and how they will not only affect you personally, but how they will affect the country, and then make your own independent decision.

And don't limit this to a once-every-four-years kind of thing. Because, quite frankly, who is elected as Mayor of your home town, or State Representative, or Congressman, is often far more important than who is President.

But if you listen to the TeeVee, you might get the opposite impression.

The Closing of the Rust Belt Factories

2012-01-22T08:29:00.000-08:00

At one time in this country, we made things like this. Today, manufacturing represents a smaller and smaller part of our economy.

The antics of Mitt Romney and Bain Capital were part of an overall larger trend that extended from 1980 until about today, but is fading out fast. These companies, and others, would make money killing off the last remnants of old rust-belt factories, often making money in the process. Today, few of these factories are left, and the opportunities for Venture Capitalists are getting more difficult and marginal.

There is little money to be made in "turning around" a modern company with modern factories, running at peak efficiency. You can't buy, groom, spin-off, re-sell, and shut down like in the good old days - the markets are getting better at valuating companies. And often, companies themselves are the ones who groom themselves for takeover, as in the case of Winn Dixie.

My Dad ran one such rust-belt factory - a small shop with mostly WW II-era equipment, that could not compete with other U.S. Companies, much less the Japanese and Germans. And today, the plant is closed, the people laid-off, and the buildings bulldozed to the ground. They threw around some grass-seed and a few ugly sculptures and called it an "art park" which sounded so much nicer than "Hazmat cleanup site."

But how did these companies come to fail? To understand this, you have to go back to before WW II, as events from that era started the trends that are finally sputtering to a halt, today.

Before World War II, we were a large manufacturing country, to be sure, but not as much of a powerhouse as we were in the postwar era. At the breakout of the war, our leaders were shocked to discover, for instance, that we had no domestic capacity for making instrument bearings. These are tiny ball bearings, that are the size of grains of sand.    The outer race of such bearings is about the diameter of a pencil lead. These are used in the artificial horizons that, until fairly recently, were operated by gyros driven by engine vacuum. Each airplane needs one or more of these instruments, and as you can imagine, with thousands of warplanes coming off the assembly line, the need for such bearings was acute.

I worked for the company that made these bearings - New-Departure-Hyatt Bearings division of General Motors, located in Bristol, Connecticut. NDH, as it was called, was exemplary of what was called, in the 1930's, the Sloan vertical integration system - the expansion of a company to include all of the parts makers that supplied the parts to the cars. At GM we made every part for the car, except the tires, oil, and gasoline. But from sparkplugs, to batteries, to headlamps to wheel bearings, we made it all, pretty much. And this vertical-integration model worked - in the 1930's. In the postwar era, it would end up being GM's undoing, as well as Ford's and Chrysler's.

But thanks to the war effort, most manufacturers expanded rapidly, building new plants, hiring more workers, buying new machinery. At NDH, they started a crash program to start making these instrument bearings . And of course, they increased production of other types of bearings needed for aircraft, military vehicles, railroads, and whatever.

Incidentally, it was no coincidence that a bearing company would be located in Connecticut. Connecticut was the home of the inveterate Yankee Tinkerers - the clockmakers and inventors who built machines that were sold nationwide, in the 1800's.   I had one such clock, made with wooden gears (until recently, when I realized that while an ugly old broken clock is cool to look at, having cash and one more thing not to own was even cooler). Mark Twain wrote a book about these sort of folks - A Connecticut Yankee in King Arthur's Court.

So, there you have it, at the beginning of the war, the Connecticut clock-makers squaring off against the Black Forest Cuckoo-Clock makers, the latter of which certainly had more technical expertise. Often, our ball-grinding equipment and other tools were in fact, German imports.

Rapid expansion due to the war meant that existing buildings were added on to, piecemeal, and new buildings thrown up, in short order. Many of these buildings followed pre-war design themes, and had multiple stories and were not very large in scale. When the war ended, the resulting buildings were scattered across acres of land, an indeed across several towns. It was not atypical for a factory then to comprise of a number of discrete buildings, often located miles apart. The inefficiencies of transporting materials across town by truck are self-evident.

In Germany and Japan, the factories were bombed flat, and they started over - with new factory designs and new, more efficient machinery. They also started anew with a workforce that was desperate to make a few nickels to buy food. The single-floor factory plan, in a single building, was more efficient and less costly than the old brick multi-story factories of the past. The Germans and Japanese entered the 1950's with a good foundation for future competition.

We had no war to level our plants - that would take decades more. In the late 1960's, GM decided to modernize the NDH plant and abandon all the old 1920's-era structures and build one new, single-level 22-acre building outside of town, where land was cheap and the rail line and trucks would have easy access. Having a factory "downtown" no longer made sense - there was no need to be near water power, and workers now drove to work, instead of walking to the plant gates with their lunch pails in hand.

22 acres under one roof - it was an enormous building. But inside was largely the same old equipment from the original factory.   Some machinery I worked on there had tags riveted to them saying, "This is a WAR machine, built to WAR standards" - whatever that meant (usually, the ornate finishes of the machinery of the past was omitted). The plant never made money for GM, and likely never paid back its investment. And if you multiply this mistake by all the parts suppliers for GM - Delco, Guide Lamp, AC, Frigidaire, Fisher Body, etc. - it comes out to a lot of money.

Meanwhile, the Japanese started entering our market - using an industrial model radically different than our own. Instead of vertical-integration, they used a Keritsu system of captive parts suppliers, each profitable in its own right. Japan's parts suppliers were not loss-leaders, but profit makers. They did not drag down the parent company, because they simply were not part of the parent company.

The Japanese also developed an efficient system of "just in time" inventory - supplying parts as they were needed, and not a moment before or after. In the U.S., we made warehouses of parts, stored them, and then pulled them from the shelves and shipped them, upon request.   As a result, we incurred not only the huge warehousing and labor costs, but also had to run expensive inventory controls and actually pay taxes on inventory (at least in Connecticut). And boy-howdy, did we have inventory!

The American factory system was antiquated, dated, obsolete, inefficient, and ready for an overhaul. But in the prosperity of post-war America, no one wanted to rock the boat. The unions demanded steep wage increases - and management placated them with empty promises of future benefits that were severely underfunded - pension plans, medical plans, and the like. The cost of doing business increased, but still, many companies remained profitable. No one could see any reason to restructure the business system at the time - why bother bailing out your boat, when there is only a "little" water in the bilge and you are still making headway?

But the cancer that would kill off these industries had metastasized, and it was only a matter of time - a decade or two, before these companies started dropping like flies. My Dad's plant - which made truck parts - closed in the early 1980's. The factory I worked in - NDH Bristol - followed suit shortly thereafter. 22 acres of factory - over 8,000 employees - all reduced to little more than a warehouse. And at the time, many workers said, "They will never close this place! GM is too big to fail!"

And yet, while they were saying this, a large flatbed rail car sat on the siding next to the forge plant, while workers pulled another 10" upsetter out of the ground - an enormous forging machine with a 22-foot diameter flywheel that smashed railroad bearing rings out of bars of white-hot steel the size of telephone poles. The machines were twice as wide as the rail cars they sat on, and special clearances needed to be obtained to get them from the plant down to the sea - where they would be loaded onto cargo ships (likely older Liberty or Victory ships, built for the war, in another layer of irony) to be shipped to their new owners in India.

A 5-inch upsetter. Most of the machine is not visible, as it sits in a 'pit' below ground.

"Oh, sure," one worker said, "They're selling off the forging business and shipping it all to India. But that was a money-loser. The rest of the plant will stay intact!"

But one of my classmates at GMI submitted, as his Senior Thesis, a plant to outsource ball production, so that we would only make rings and then assemble the bearings. Not only did he get an "A" in his thesis, the plan was approved and, soon, our German-made ball machines were offered for auction and then shipped out as well.

A ball-grinding machine, now made in India.

Ball-grinding, by the way, is a messy business. Water/Oil based lubricants are used to grind the balls, and a fine mixture of metals ends up in this grinding fluid. Recycling or disposing of this fluid is often problematic and expensive.

I asked him, "If you thesis is correct, and buying Japanese and German balls is cheaper than making our own, them why not just buy the inner and outer rings from them as well? And the cages?   Why not cut to the chase and simply buy the whole assembled bearing from them?"

He just smiled and said, "You're getting the idea."

I started to realize that a career in that plant would be one of unwinding it, not building it up. Due to the Union contract, it would be hard to close the plant in one fell swoop. But doing it piecemeal, that could work. And eventually, the whole plant was shuttered, pretty much in this fashion, as GM could no longer afford to be making things other than cars, or even the car parts.

Now repeat this scenario thousands and thousands of times across the land and you can start to understand what happened to American Manufacturing in the last few decades. Old and obsolete plants, high labor cost structures, and tough competition from overseas meant that many of these old businesses were headed to the scrapyard in short order.

Enter the Vulture Capitalist. While these plants were old and obsolete, the labor contracts uncompetitive, the pensions underfunded, there were still ways to make money taking these places apart - legally, illegally, morally or immorally. As I noted in my earlier post, a lot of people can make money by busting out a business - it is not exactly legal or moral. But there are legal ways as well - perhaps not moral, but that is your judgement to make.

For example, you buy an old rustbelt company that has a bleak future.   The equipment is old and obsolete, the workforce is older and has high health care costs. The pension plan is underfunded. Maybe the company is breaking even, running at a small loss, or whatever. The owners unload it onto you with a sigh of relief, and take the money and move to Florida, to sit in the sand and no longer have nightmares about HazMat cleanups, Union Strikes, and the underfunded pension plan. It no longer is their problem.

The new owners quickly take charge and the first thing they do is spin-off any divisions that might be profitable. As a part of a money-losing company, such divisions are propping up the older, cash-hemorrhaging divisions. But as stand-alones, they could be profitable enterprises. So you sell off Frigidaire, Terex, Electromotive, EDS, and other "non-core" businesses, and then pocket the cash. Suddenly, the company is showing a huge profit - a one-time profit, but nevertheless a profit. As the new owner of the company, you put a lot of that in your pocket. Or as the manager of the Capital company investing in it, you collect millions in fees.

What about the core business? Well, you go in and slash costs - eliminate maintenance. Eliminate buying new machinery. Take a time-honored design and gut the content until it is so cheaply made that no one would want it.   But it will take market a few years to figure this out - and people will continue to pay top price for the product, assuming it had the same quality as in years past.   It is like what AMF did, when it bought Harley-Davidson.

So, again, you show a short-term profit, and you make a ton of money, but it not only is a one-time deal, it is the death-knell for the company.   You rake in a lot of dough, in the short-term, but the customers are screwed by substandard products and the workers are screwed by the fact the plant will be closing sooner than expected.

Sooner than expected - and that is the key.   Again, these sorts of factories are riddled with cancer - they are going to die anyway, or at least that is the logic. It would be like if you Mom had cancer and you sold her Oxycontin on the street for $20 a pill. She's going to die anyway, so you might as well make a little money from it, right? And as odious as that sounds, that did indeed happen to a friend of mine. Her son would have a fine career at Bain Capital.

So, now, the company is stripped down to its bare essentials. The factory is in bad shape, not a nickel has been put into maintenance or improvements (Sort of like Sears) but gee, these old factories take a long time to kill, don't they? And in the interim, some jackass small investors are buying your stock, after seeing the stellar profit picture for the last two years. They figure that you must have some grand plan of rebuilding the place and making money, and are not in fact just the undertaker pulling all the gold teeth out of the corpse.

God, I love a good metaphor!

So you can make even more money manipulating the stock price this way, unless of course, you took the company private. But either way, there is still money to be made, flogging the corpse. You run up debt to suppliers while still selling product.   Since you are not paying your suppliers, your ordinarily money-losing company appears profitable. Maybe you go to the debt market and load up the company with debt, thus showing more short-term profits but creating more long-term problems. Shame on the folks willing to loan you that money, but most of them are "institutional investors" and are clueless as to what you are up to.

And of course, you stopped funding the pension plan ages ago. While it was underfunded when you bought the place, it is really screwed now. And yet, your hourly workers spend their lunch hours dreaming of their Florida retirement homes and how much they will get from their pensions. Some have already retired and situated themselves in scenarios that require a steady cash-flow from the pension plan to pay for their retirement homes and leased cars. Boy, are they in for a rude awakening!   You have a good chuckle every time you think about it.

And perhaps this is the one area where there is some questions about legality and certainly morality. Is it legal to intentionally 'gut' a company while underfunding the pension plan? Is it moral? Should people promise lavish pensions to workers when they have no real intention of paying them later on?

Of course, the point may be moot today - Defined Benefit Pension Plans are largely a thing of the past. It is hard to 'underfund' a 401(k) plan without someone noticing it. But it is one good reason why, when you leave a job, you should roll-over your 401(k) to an IRA.

When the company is finally leveraged to the hilt - up to its eyeballs in debt, and suppliers no longer willing to ship parts without cash-in-hand, you close the place down. Maybe you get lucky and the union stupidly decides to go out on strike - they still have no clue what you are up to, do they?

So, off to bankruptcy court you go, and the Judge looks at the mess you've made of the books and realizes there is no "there" there - they cannot reorganize this place and make money under any circumstances. So they liquidate the place - or try to .   No one wants to buy the run-down factory and its HazMat liabilities. So it sits abandoned. What little machinery that is of any value is sold off. Much of it is sold as scrap metal, to be cut up and shipped to China to be made into products to be sold back to America.

The workers are sent home to collect unemployment and perhaps try early retirement. But since the company is bankrupt, the Pension Benefit Guaranty Corporation - a government agency - has taken over the tattered remnants of the pension plan, and doles out what little is left of the pie to the retirees - often less than half of what they were expecting. "Make the pie bigger," some Republicans like to say - but not in this instance.

So, another rust-belt factory is closed. And the suppliers to that factory take huge hits, not only in unpaid invoices, but in the loss of a good customer. The town the factory is located in will struggle until it finds a new "anchor". Bristol, Connecticut found ESPN (or vice-versa) in a classic move from a manufacturing-based to an information-based economy. But many other towns and cities, like Flint Michigan, never recover, and people move away, stores close, and pretty soon, the entire town is pretty much abandoned and full of welfare recipients. The overall cost to us all, is fairly high, as our tax dollars end up subsidizing these folks. And if you lived in such a town, you lose what little equity you had in your home or business.

Now to be fair, as I noted earlier, these rust-belt factories were destined to fail. They are the sick and lame gazelles in the herd, and the predators - the leopards, cheetahs, lions, take them down and feast on the remains. Is this a bad thing? The gazelle would have died anyway, and simply rotted in the sun.

Could these rust-belt factories have been saved? Maybe. The fact that new factories have been built in this country - often by our foreign competitors - and thrive, is an indication that manufacturing is not, in fact, dead. And the recent growth in manufacturing and manufacturing hiring in this country is one sign that perhaps we have reached a nadir point and are poised to recover.

A new economy with a cheaper labor force - and a heavier use of automation and robotics - will be more efficient and profitable. Millions of people left the family farm in the 1800's and 1900's and sought manufacturing jobs in the cities, as farming required fewer and fewer man-hours of labor, particularly once the tractor was invented. Today's mega-tractors can plow and harvest acres of land in a small fraction of the time required to do so by horse-drawn plow.

Similarly, today's factories require far fewer laborers to run machines - but more trained mechanics to repair, program, and maintain the machines. The labor contracts of old - which often stipulated the number of workers in a plant - were a death sentence to many factories, as they negated any savings due to automation and strangled the capital necessary to invest in automation.

So, economically, one could make the argument that the Bain Capital's of the world, like the Lions of the Serengeti, or the Sharks of the reef, are scavengers who clean up the ecosystem, by culling the weak, diseased, and dying, from the herd, pack, or school. And while this may make economic sense, it is little comfort to the gazelle being disemboweled while still alive.

Could any of these old rust-belt factories been saved? Perhaps, but it would have taken a vision and fortitude that were largely lacking in the 1950's and 1960's. A factory is a place where everyone - from worker, to management, to shareholder, to supplier, to customer, to debt-holder, to even the local tax collector - hopes to take money or value from. And usually, given our human nature, none of us is willing to make sacrifices on our own, unless catastrophic circumstances are about to occur (sort of sounds like our budget and debt crises, no?). It is catastrophe theory in real-life, driven by our human needs.

A far-sighted management and union leadership could have seen the eventual scenario coming down and chosen, instead of short-term gains in terms of salaries and benefits, to invest in new manufacturing plants and more rational labor contracts and management pay. And perhaps, in a profit-sharing plan, all could have profited more in the long run.   But in the short run, the plant across the street, which is playing the race-to-the-bottom, is paying more, so you can expect to lose your top talent to them.

So, perhaps all of this was inevitable. And you can "blame" a Vulture Capitalist for picking at a company's corpse, or view it as an inevitable part of the food chain. Either way, the companies involved would still not be with us, today.

I guess it wouldn't be so bad if they didn't appear to be enjoying it so much...

UPDATE: This link describes how one VC firm bought the Friendly's restaurant chain, drove it into bankruptcy, spun off the pension liability to the PBGC, and then took back the chain, now stripped of pension liability, that they can then build back up and re-sell at a profit. Neat, eh?

Sparkle Pony

2012-01-21T13:55:00.000-08:00

What is a Sparkle Pony?

According to the Urban Dictionary, a Sparkle Pony is defined as follows:

A high maintenance person at the Burning Man Festival who is unprepared for the harsh camping environment and becomes a burden to their camp-mates.

Burner #1: "Can you believe that Sparkle Pony over there brought 60 costumes but only 2 gallons of water and some ramen noodles?"

Burner#2: "Yeah. They asked me where the food court was located."

Another definition is helpful:

A high maintenance person who is unprepared for a harsh work environment and becomes a burden to their teammates. You may keep them around because they make you feel good about yourself, but they are the target of verbal abuse and the butt of jokes.

We all have Sparkle Ponies in our lives - and are sometimes Sparkle Ponies ourselves. Sparkle Ponies look pretty or make us feel better or happy, but are often useless or a pain-in-the-ass. You constantly have to bail them out and fix things for them. They seem utterly incapable of taking care of themselves.

But they are very good at looking cute, helpless, and defenseless, and thus appeal to some inner need we all have to nurture.

The problem with being a Sparkle Pony is that eventually, people get tired of your "Perils of Penelope" scenario, where you constantly have to be rescued from one situation or another - just as they tire of the Friend with the Perpetual Problem. And over time, you will lose your allure of helplessness and cuteness, as a layer of crass manipulation reveals itself.

It is a far better approach, I think, rather than to rely on others to bail you out, to try to fend for yourself. Frankly, it often is a lot less work.

The problem with having Sparkle Ponies in your life is that they often take up a lot of your emotional energy, time, money, and physical effort. And while you may have a natural desire to "help those in need" - this desire can be hijacked by a Sparkle Pony in short order.

Sparkle Ponies are pretty. Sparkle Ponies are fun - for a while at least. But they are best viewed from a distance, I think....

Dry-Vit Synthetic Stucco - selling the sizzle

2012-01-21T12:53:00.000-08:00

A house like this might look expensive from a distance, but that is just the miracle of Dry-Vit, the developer's friend. On closer examination, if you know what to look for, you might realize that while this is a large home, it was built on a fairly modest budget.

I first noticed Dry-Vit when I was walking by a storefront in Old Town Alexandria, Virginia. A contractor was working on the place, and he turned it from a drab old rundown 1950's exterior into a modern storefront, complete with stone-looking columns and fascia. He had three Mexicans and several buckets of Dry-Vit brand synthetic stucco.

As an Engineer, I was fascinated. In about a day, he had turned the store from a dump to a palace - and it looked like it was made of stone from George Washington's time. OK, well, maybe not on close examination. But it was cool, nevertheless.

What is Dry-Vit? It is a stucco-like material that can make the exterior of a building look like anything from stucco to sandstone. It looks expensive and upscale, but it usually isn't. In fact, it is a fairly cheap way to cover a building, and if done properly, can be very long lasting.

If not done properly? Well, it peels off in sheets, as happened to a friend of mine who bought a condo in Crystal City, Virginia. If the surface prep isn't done right, it all comes off in short order, and you end up with a very expensive repair, and possibly water ingress and mold issues. The foam underlayment may also be susceptible to termites.

Usually,the material is installed over foam - either exterior insulation Styrofoam sheets applied to the outside of the house, or so-called "Architectural Foam" used in many commercial buildings. The latter is often the fancy "stone" cornices, columns, and decorative trim you see on office buildings and condo high-rises these days. It looks expensive - like stone - when it is first built, but since it is basically foam, it sometimes doesn't last long. Birds can peck at it and make nests in the holes - as has happened to a friend of mine who bought a condo in Florida. Storms literally blow off the trim and land it in the street (at least in South Florida, after a good Hurricane). And the foam insulation can wick up water into the house, causing rot, if not properly caulked or landscaped.

Is this a bad material? Not really - if installed properly. But the problem with it is than when first complete, it does look like a million dollars - or at least a million dollar home. And many people over-pay for cracker-box houses that are styled like Jed Clampett's house, but are not real mansions - based on this external appearance. In fact, you might say Dry-Vit (and its competing products) were one of the causes of the housing meltdown - as people overpaid for houses that looked expensive but actually weren't.

These are houses that are large in size, but often poorly insulated. The windows are large and fancy, but are really just cheap vinyl windows - not that there is anything wrong with vinyl windows, just that I would not pay much for them.

In fact, a developer can take an old "dog" of a house, slather it with Dry-Vit, throw in sound granite counter-tops and stainless steel appliances, some Travertine marble, and a garden tub, slather the inside with "knock-down" and have it come out looking like a mansion. These before and after photos are a clear example of the idea. You can update a house and improve its "curb appeal" for not a lot of money.

Again, this is not a bad product, but don't be confused by an exterior treatment into paying too much for a house. While the house may look more expensive, in reality, it is just the same old house underneath, with just a few thousand dollars of Dry-Vit and some Mexican labor added.

If you are looking to "buy and flip" a house, then Dry-Vit is your friend. Put Dry-Vit on an older home, and it will update and modernize the look, and make the house sell a lot faster.

If you are looking at a house that is covered with Dry-Vit, I would highly suggest getting a home inspector familiar with the material to go through it and look for examples of improper installation, caulking failure, water ingress, termite problems, and the like. These are not problems unique to Dry-Vit, of course. But these problems can hide themselves behind all that stucco, and not be noticed until years later, when costly repairs will be needed.

And if you are looking at such a house, don't be blown away by the luxurious appearance of the house. Use a jaundiced eye and see if the stucco and stainless appliances are not in fact distracting you from the more plebeian "bones" of the place. A tract home is a tract home, no matter how fancy it looks. The fact that there are 100 more homes just like it in the development should tip you off that you are not buying something precious, unique, or expensive.

Developers love this stuff as it is easy to apply, and Mexicans, being familiar with stucco and concrete work from their home country, can put it up in short order. You can build a home and make it look rich with materials like this.

That, and what I call the "Rich People's Roof" - the steep hip roofs used today on many of these mini-mansion developments. They may look expensive, until you realize they are covered with 15-year shingles. They will be expensive to re-roof, about 10 years down the road.

An example of a 'Rich People's Roof' this time on an actual rich person's house (note the use of real brick, not Dry-Vit). Developers like to copy this type of roofline on less expensive homes, to make them appear to be more upscale.

We all like to claim we are not affected by status or the desire to appear more important than we are. But the folks that sell houses and cars know better - they know that we want to have impressive goods that have the appearance of wealth, even if they are not all that expensive. So they can put baubles and gimcracks onto consumer items, and we will pay extra for them.

Don't be fooled by the fascia. Don't buy the sizzle. Because a few years down the road, you may realize you overpaid for what appeared to be a fancy house, but what is in fact, a rather typical home, styled to look expensive.

PayPal "Buy Now" Button

2012-01-21T08:02:00.000-08:00

A merchant account allows you to accept credit cards as payments. Unfortunately, most Merchant Account providers ask for $30 a month in a flat fee, in addition to per-transaction fees as well as a percentage of each transaction. Is there a better solution for the small business that rarely uses credit cards?

Until recently, I had a Merchant Account with TransFirst ePay which worked well for the better part of a decade. They charged me $15 a month to have the account, and took a percentage (about 2.5%) of each transaction, when I processed a credit card payment.

Why do I need this? Well, I do work for the Government, and they like to pay by credit card, as it avoids the need for purchase orders and a lot of paperwork. So accepting government credit cards is necessary to accept government business. I also get paid by credit card from a few clients on occasion, as well as a few clients from overseas who wish to use credit cards.

But on average, I might do one transaction a month - or every other month - for a few thousand dollars. Paying $15 a month for the option to do this seemed kind of steep. And as time has progressed, I am seeing less and less credit card payments to justify the expense.

But then TransFirst raised the monthly fee to nearly $30 and then started tacking on quarterly fees, as well as "Internet Insurance fees" and suddenly, I am paying $300 to $500 a year for the privilege of being able to take credit cards, even as my volume of credit card business drops off.

I closed my TransFirst Account and started looking for other options.

PayPal seemed like one option. My relationship with PayPal goes way back - to the wild west business of the early Internet days, when PayPal was sort of a loose cannon. But since those days, they have cleaned up their act, and hopefully are not "too evil" anymore.

PayPal virtual terminal seemed like one option - but an expensive one - they also wanted $30 a month to set up an account.

But PayPal does have another option - which has no monthly fee - which allows you to set up a "Buy Now" button (which I changed to "Pay Now") on your website to accept payments for items, for fees, for subscriptions, for recurring expenses, and even for donations. The great thing is, there is no monthly fee for installing this button on your website:

All our costs are out in the open. You pay a fixed percentage and a low transaction fee on every sale. No hidden charges.
No monthly fee
No monthly minimum
No setup charge
No cancellation charge
Pricing
Yes, you might see lower rates published elsewhere. But keep in mind that with PayPal there are no extra costs like setup charges, monthly fees, downgrade penalties, or cancellation charges.

YOUR MONTHLY SALES YOUR FEE PER TRANSACTION EXAMPLES

$0.00 USD to $3,000.00 USD 2.9% + $0.30 USD $3.20 USD fee on a $100.00 USD sale
$3,000.01 USD to $10,000.00 USD 2.5% + $0.30 USD* $2.80 USD fee on a $100.00 USD sale
$10,000.01 USD to $100,000.00 USD 2.2% + $0.30 USD* $2.50 USD fee on a $100.00 USD sale
> $100,000.00 USD Call 1-888-818-3928

The only downside, is that the buttons only come in a number of flavors - "Buy Now", "Add to Cart", and "Donate". The first two have fixed prices for individual items or a limited number of items - so it is hard to take payments for odd amounts.

The "Donate" button works for any amount the user chooses to enter, and since you can change the button appearance, you can change it to say something other than "donate". However, when the user clicks on the button, it goes to a page asking them how much they wish to donate.

The "Buy Now" button could be a real asset to someone selling individual items on the web, particularly if they do so only occasionally, and want to be able to accept credit cards.

In all three cases, the button takes the user to the PayPal site, which then asks them to log in. The user has to click on "Pay by Credit Card" if they wish to use that, instead of PayPal. The charge then appears on the client's statement as "PayPal-YOURNAME".

It is a bit of a kludge fix, but at a savings of at least $400 a year in fees, one that I think is worthwhile. I am going to try it, anyway, at least for the time being.

Why should it be so hard to transfer money from one person to another - and why should it cost so much?

If you have a PayPal account, it takes literally a few minutes to set this up. You select the button you want, edit it, if necessary (you can change it later on, add more buttons, whatever) and then PayPal generates the HTML code necessary to insert the button.   Cut and Paste this using Windows.

Using your HTML editor, you can then insert the button into your web page or even a blog page. And that's it. You are in business and can accept credit card payments. Not hard to do.

One interesting note: I use Google sites for my website.   It is cheap, easy to use and free - all things I like. However, when I embed the PayPal "gadget" into the google site, the google site "corrects" the HTML so that the pay button doesn't work. Funny how that works.

Google does helpfully offer to embed the Google "Pay Now" gadget, however. Don't be evil? Perhaps Google needs a new motto - "Don't be Evil, unless you are trying to screw a competitor."

Oddly enough, I can embed the button in a Blogger page - and Blogger is owned by Google.   Go Figure!

Anyway, I'll try this for a few months and report back as to how it works. Saving $400 a year or more is something I like.

When Cooperation Becomes Competition

2012-01-20T14:59:00.000-08:00

Even in a commune, there is a hierarchy of order. I wonder what happened to these folks?

As I noted in a previous posting, Tom Shadyac made a movie called I Am in which he explored, among other things, the different aspects of human nature - Cooperation and Competition. He seemed to posit that our Western society is too enamored of Competition and has shunned Cooperation.

But I think he has simplified the matter too much.   Often Cooperation becomes Competition, in short order. As I noted in the previous posting, even organizations, such as communes, religious communities, the Amish, or socialist countries, quickly devolve into competition for power, resources, favor, and status.

In the hippie commune, there is a definite hierarchy, even if it is unstated. There is usually a charismatic leader or leaders, and usually there is jockeying for position by the members as to who is most favored by the leader or leaders.   And often, there are spectacular splits or power struggles, even amongst the hippie-dippy. I've seen it happen.

Many religious communities fell victim to the same problems. In the 1800's many such communities flourished, such as Quaker communities and the Oneida community. And struggles for leadership, among other "competition" issues, often ended up sinking such communities.

Every single major religion has developed sects or rifts or split-offs over the centuries - to the point where people are willing to kill each other over something as silly as, well, who had the proper succession for power after Mohammed died.

Even the peaceful Amish have their share of issues, and violence in the Amish community happens - but is often covered up - making outside police investigation difficult, if not impossible. Some fellow right now is running around assaulting his fellow Amish and cutting off their beards, and since no one presses charges, nothing can be done about it.   What does he want? Power and control - that messy old competition thing.

And of course dozens of countries have tried to experiment with socialism or communism, with disastrous results. The fabled dictatorship of the proletariat never materialized, but instead devolved into a dictatorship of the dictator or dictators. And often, this has devolved further into an almost monarchy-based government, such as we have in North Korea, where power is handed down from Father to son, two times now.

Even in your daily life, cooperation often devolves into competition - it is our human nature. You go out to dinner with a friend and your other friend gets jealous that they weren't invited. Everyone jockeys for position even among something as innocuous as friendship.

It's in our nature, people! We can't help it.

And that is why when people wave signs saying "Give Peace a Chance" or "War is Not the Answer" I have to laugh at their naivety.

You see, even if you could get all the billions of the people of the world to live "in peace" and equality, all it would take is some idiot - just one - to punch his neighbor in the face and take his wallet. And right off the bat there, is the end of world peace and the beginning of war. From schoolyard bullies to Adolph Hitler, it is all the same thing - people will push to see what they can get away with, and if you let them, they will take it all.

So is Shadyac dreaming here? Well, he did make the movie after falling off his bicycle and landing on his head. Perhaps that explains much.

But for better or worse, I think both Cooperation and Competition are with us and part of us, and both work together in our psyches.

Buy Here - Pay Here - Leasing Used Cars

2012-01-20T14:37:00.000-08:00

Dealers who offer these deals to the poor are really ripping them off. The latest gag is leasing used cars to the poor. Should we be outraged by this? Or shake our heads at the stupidity of the poor and understand why they remain poor? Tough call.

In a recent NPR article, they discussed Buy Here, Pay Here (BHPH) used car lots and the new trend of leasing used cars through such lots. From the tone of the discussion, you would think they were talking about Cricket scores or something. I was appalled by the lack of outrage.

In case you missed it, not only are these bad deals, they are horribly bad deals, offering clapped-out used cars to the very poor, at prices that are above book value and at interest rates that are often DOUBLE or TRIPLE what the local credit union will offer.   Some offer interest rates as high as 35%!

They target the poor, who often screw the pooch by not paying their bills, and thus have bad credit. And all these BHPH places do is screw the poor even further. Even if you pay off such a "loan", since the payment is not reported to the credit reporting agencies, it does little to "repair" your credit - as they often promise.

And typically, such cars are in bad shape and poorly maintained and the buyer is so overwhelmed by the pricing that they let the car go to repossession - which does get reported to the credit agencies. Some of these cars may be sold - and re-sold - by the same dealer, three, four, or five times.

And since these cars are upside-down on loan financing, getting collision insurance is often difficult, if not impossible - and even if possible, the terms are onerous. The driver may pay more for insurance than they do for the car payment!

But as if that wasn't enough, these same BHPH scumbags have moved into leasing their clapped-out junkers. By positing the sale as a "lease" they can wrap the interest rate into the document, so that the buyer doesn't even realize how much he is paying in interest. All the buyer looks at is monthly - or weekly - payment terms.

Buyers are attracted to these deals, as they are often little or nothing-down deals. There may be a processing fee (which is the profit paid to the salesman) and then the payments start. But unlike a new car, which is under warranty for four or five years, a used car needs repair. And thus the "owner" of the car has to maintain it - and often unscrupulous dealers insist the lessee bring the car only to them for service.

And yea, if you go on the internet and google this nonsense, you will find shill sites telling you what a great deal these are. Needless to say, an online article authored by a car dealer, is not the best source for information on buy-here pay-here (BHPH) financing.

So, what's the big deal?   Anyone with an 8th grade education can see this is poverty financing at its worst.   And yea, the BHPH car dealers are right next door to the title pawn loan places, the payday loan places, the check cashing stores, the pawn shops, and all the other raw deals we foist off on the poor.

And you talk to the Jethro going into such joints, and he will rationalize why these deals are good ones - after all, he puts "nothing down" on the hoop-de of his dreams!

So, does government need to protect people from themselves? Or do we let people screw themselves and then sit idly by while they go bankrupt and cry out for government assistance?

The latter scenario illustrates why perhaps these sort of odious financial deals affect all of us.   When a poor person is screwed out of his last dollar by these con artists, he ends up bankrupt, destitute, and first in line for food stamps, SSI, Welfare, Unemployment, Medicaid, and whatever other safety-net largess we hand out these days.

So far from being a victimless crime - or a crime limited to only those players who chose to play - these odious financial deals impact us all - as we the taxpayer have to foot the bill for the bailout.

It is like, for example, when Bain Capital guts a company, collects millions in fees, underfunds the Pension and health care plans and then walks away saying "Gee, sorry, it didn't work out!". We the taxpayer end up paying more to cover the needs of those people who worked there and got screwed in the process.

This sort of "Free Enterprise" is not creating wealth, but merely redistributing it - mostly from the government to the people running these schemes - by way of their impoverished victims. It is like casinos - they create no real wealth, they just rearrange it.

And unfortunately, it seems our economy has devolved to this - we are stripping out the copper wire and plumbing in the abandoned factories and selling it for scrap - making a little money for the salvage operators, but insuring that that factory (our economy) will never be productive again.

I said it before and I will say it again. When Al Gore said we are moving from a manufacturing-based economy to an information-based economy, I predicted that eventually, we will morph into a fraud-based economy - as more and more people spend their days trying to con the last remaining dollars left in the economy out of the two or three people who still have them.

This sort of nonsense is not sustainable nor does it create real wealth. And it savages the lives of the people victimized by it.

Yet, I doubt government has the courage to do much to shut these sorts of places down.   Which means you, the consumer, are on your own here.

Get the word out. When you drive by a BHPH car lot, lean out the window and scream "RIPOFF!" loud enough for the customers to hear.

It is a shame the "OWS" crowd doesn't occupy these sorts of places.

Mean People Suck, Part II

2012-01-20T10:42:00.000-08:00

People hate you if you are mean. They despise you if you are nice.

I started writing this blog two years ago in an effort to understand my own financial behavior over the years, as well as how our financial system is structured. I never expected anyone to actually read it. But over the last two years, I have learned a lot - often painfully hard lessons. And a few hardy souls have actually read my ramblings.

Some of my postings - most of them, in fact - may come across as mean-spirited or hard-hearted. I am sorry for that, as it is not my intention to hurt anyone's feelings. But if I say you are an idiot for leasing a car, and you have a leased car in your driveway, well, what should I say? Should I say you are a nice idiot? Or should I qualify things and waffle, and say, "well, maybe leasing isn't so bad after all!" and end up like Sooze Orman - just telling you what you want to hear and validating your bad choices?

And in the examples I use, if you self-identify with the hypothetical, am I really being mean, or are you merely projecting your own life into the fact scenario? I can't help it if I say that Joe Blow is a fool for getting a payday loan, and you happen to think you are a lot like Joe Blow.

I would like to be "nice" - but going down that road only serves to take the edges off of ideas until they are watered down into bland platitudes. Pretty soon, saying things like "Frequent Flyer Miles SUCK!" turns into, "Well, I guess they aren't all THAT bad, if you get lucky and all."

Pretty soon, you aren't saying anything at all - just mumbling to yourself and hoping not to offend anyone.

And that is the problem with the media today.   They don't want to offend. They don't want to get sued. They don't want to piss off advertisers or even NPR or PBS "sponsors". In a recent piece on NPR about "Buy Here, Pay Here" leasing (the subject of my next post), the commentator and the guest discuss the situation in such oblique and bland terms as to lead you believe that this is not such a bad deal.

Me, on the other hand, would think that they should be screaming into the microphone what a horribly lousy rotten deal these things are, how they target the poor and minorities, and how the scumbags who offer these deals should be tarred and feathered and run out of town on a rail. But instead, the radio drones on about "unattractive interest rates" of 35% or more.

Where is the outrage?   They are screwing the poor and you act nonplussed.

That is the problem with our society. No one wants to say anything out loud anymore, for fear of offending. Whether it is political correctness, fear of lawsuits, or fear of making enemies - everyone holds back and says nothing. We avoid discussing politics with anyone, because no one can have a civil discussion anymore. So we say nothing - or worse, remain quiet when some crackpot drones on, at a cocktail party about how Obama is a Socialist or how Bush is plotting to take over America.

And as I have noted before, silence is the greatest friend the con artist has. So long as you are silent about your own embarrassing credit card fiascoes, the credit card industry has an ally in you. So long as you are silent about the rip-offs and bad bargains you have fallen for, the people selling these things will continue to prosper. So long as you remain quiet, the noisy people can take over.   And the noisy people do not have your best interests at heart.

The noisy people - the advertisers blaring their bad-deals on the TeeVee at twice the volume of the programming.   The shouting guy on the investment channel, telling you to BUY and SELL stocks, when in fact, his picks are worse than a monkey with a dartboard. The political hacks who scream in attack ads about what a rotten guy the other fellow is, as if his moral character were the only credential to office, and his political views secondary, if that.

And the screamers say all sorts of outlandish things - they make claims about financial instruments in their ads that just aren't true. They make claims in their political ads that are easily debunked as lies.

But we don't even have the balls to call them lies because the legal department said that would be slander. No, instead we say they are "inaccurate" or "not entirely true" which already takes the edge off what was once a sharp blade. The lie still stands, slightly tarnished, but not discredited.

And while we hate people for being mean, we often despise folks for being too nice. No one likes the fellow who tries to mediate and make kissy-face between opposing parties. No one heaps accolades on the fellow who is wishy-washy and waters down his own vitriol until it is utterly lacking in strength and power.

If anyone reads this blog, I think it is because I don't hold back. I don't say, "Well, maybe both sides have a point. Let's all get along!" Because there is nothing to be learned there, I think. There is no value in wishy-washy platitudes.

So if I say that leasing a car is idiotic, and only a fool would go for a high-interest rate "rewards" card, I really mean it. And if that offends you, well, too bad. These bad financial deals hurt people, day in and day out, and it is irresponsible to argue that "sometimes" they make sense - not when there are other deals out there that "all the time" make sense, anyway.

Because bad financial deals are bad financial deals. You can't "spin" numbers like political positions.

But the industries that thrive off your financial weaknesses surely would like to!

So, sorry if I hurt anyone's feelings. If you don't like it - don't read it!

Competition versus Cooperation

2012-01-20T08:10:00.000-08:00

Tom Shadyac's greatest contribution to American culture was probably this Preppy poster. He also directed some Jim Carey movies, which arguably is his greatest sin against American culture.

A reader recently told me about the movie I Am which was made by the fellow who directed all those Jim Carey movies, Tom Shadyac. He had an epiphany when he wiped out on his mountain bike (sans helmet) and had a severe head injury. He gave away all the money he made and set out on a spiritual journey to figure out the meaning of life and what we are doing on this planet.

Perhaps he felt he should atone for directing all those Jim Cary movies.

The movie is interesting for the first half-hour or so, in that it discusses the innate parts of our human nature - to Compete and to Cooperate, and how perhaps in Western society, competition has started to edge out cooperation.

The second half of the movie, however, is buzz-kill, as he starts to go off the deep end with fake science theories, such as "noetic science" and the "heartmath institute" - the latter of which appears to be saying that the heart is a thinking organ (and not just muscle tissue) and moreover can predict the future! If so, then my heart should be buying lottery tickets.

But overall, the first half of the movie was interesting, and one of the interesting parts was how Shadyac, when he became successful, found little comfort in owning lots of houses, fancy cars, and the like.

As one of the interviewees points out, once your basic needs in life are satisfied, you are generally happy.   You have a roof over your head, food in your belly, and clothes on your back. Maybe a little companionship and sex thrown in. Happy. But having twice, three times, or 100 times as much food, or house, or clothes or sex doesn't make you twice, three times, or 100 times as happy. And surveys have shown, again and again, that very wealthy people are often not very happy ones.

And my experiences growing up in wealthy communities verifies this - the very rich are often very unhappy, and their children are often in fact, miserable.

The other interesting aspect of the movie is his theories about Competition versus Cooperation. He makes some good points here, but again, like "noetic science" I am not sure I go along with drinking the Kool-Aid, at least entirely.

Shadyac engages in the popular sport of America-bashing, or at least Western Culture-bashing here, arguing that somehow, we Westerners have gone off the deep end by embracing Competition over Cooperation, to the point where it is tearing down our society.

While I think he has a point, I am not sure this sin is limited to the West, but in fact is embraced by people of all nations. Folks in America - particularly Hollywood - love to embrace far-off religions as being more holistic, cooperative, or pure, without really understanding how they work, how they are organized, or how very much like Western religions they are.

For example, I have written before about the Dali Lama - who many folks think is this peace-nik hippie dude who is all love and daisies - after all, he wears a robe, right? But in reality, he and his brother are both CIA agents who are on the U.S. Government payroll and have been training Monks in terrorist tactics at CIA-run training camps. Betcha didn't see that one coming, eh? And don't get me started on Mother Theresa.

Are we really evil people who triumph competition over cooperation? Perhaps, but I think this is a trend - and an ongoing one - that has plagued the world since we first fell out of trees. Competition and Cooperation are the Ying and Yang of our psyches, it seems. And I am not sure that mankind can have one without the other.

Cooperation is what makes people work together toward common goals - to achieve great things, like building pyramids or landing on the moon. Competition is what often encourages people to achieve such communal goals. And the pyramids are a great example of both. For many years, people assumed these were built with slave labor. But in fact, groups of workers would take turns building parts of the pyramids, in teams, as a communal effort and to show respect for their Pharaoh. And these teams would compete against each other to see who could move the most stone or whatever.

In a way, it is like the sports teams of today. They cooperate, within the team, to achieve a common goal. But they compete - against the other teams - to win the championship. And even when competing against each other, they cooperate - agreeing on a common set of rules, referees, rules enforcement, and the like. Even the Superbowl is not unbridled competition, but rather a delicate ballet of cooperation withing a strict set of agreed-upon guidelines.

If it weren't, there would be no game, no championship. If there was no cooperation or agreed-upon rules of the game, it would devolve into anarchy. And ironically, some of the young people today think that anarchy is the solution - and not the problem.

And the same is true - or used to be true - within our capitalistic marketplace. We competed within the marketplace fiercely, but had also a set of established rules for competition. You didn't sell stocks for companies that didn't exist - that would be fraud. You didn't cook the books and deceive investors. You didn't cheat, in essence, because when people cheated, it took down the entire structure of the game, hurting all the players. There had to be an agreed-upon set of rules.

Various reforms in our economic system have occurred through the ages when events occurred that hurt the competitive market. Competitors came together to agree on Marquis of Queensberry rules of competition.   The Federal Reserve was established, right here on Jekyll Island, after J.P. Morgan got tired of (yet again) bailing out the markets after each speculative bubble and crash. In the 1930's, many banking reforms were enacted (which my Grandfather, Platt Kissam Wiggins, had a hand in) to prevent the abuses of the roaring 20's from happening again.

Today, we are seeing calls for new regulations - in the credit card industry, in the home mortgage industry, in the student loan industry - to curtail abuses. And while some in these industries decry these regulations as onerous or unnecessary, it really is in their best interests to see some sort of rational regulation applied. After all, the alternative is that people stop borrowing money, simply because the instruments are too toxic and the industries are not trusted.

Establishing trust again, and eliminating Fear are useful goals, even for competitive industries.

But one thing I think that is disturbing, is the long-term trend to co-opt cooperation with competition - disguising raw competition with the trappings of cooperation. We see this all the time on the Internet - where sites are faked up with phoney "user reviews" on goods and services, to pitch the idea that some odious financial transaction is, in fact, a good deal.

The credit card companies, we are told, are our friends, with our best interests at heart - offering us cash back and free bonus miles! The car leasing companies are offering to help us - by cutting the cost of owning a car! We are deceived and tricked into thinking that brutal competition is in fact, gentle cooperation.

And if you have any misconceptions about this, try being a day late with your credit card payment, or bring back a leased car with 5 miles over the agreed-upon limits or a tiny scratch in the door.   You will realize very quickly that these people are not your friends. They morph from Hello Kitty to a Cujo in a heartbeat.

However, the idea that somehow we can morph from Competition to Cooperation is, I think, a bit naive. Both are part of our nature. And in societies based on Cooperation, Competition always rears its ugly head, whether it is a hippie commune, an Amish farm community, or a Socialist Republic. Somehow, the same-old, same-old starts up, once one fellow decides that things ain't right and he should be in charge.

One other aspect of the film that was interesting was Shadyac's observation about how our society promotes the individual over the group - how we live alone, in modern society, rather than in cooperative groups. While this is a valid point, again, I think both types of living - as an individual and as part of a larger group - are part of our human nature and are, in fact, essential to survival of the species.

And as our society has become industrialized, the concept of living in tightly-knit family-based communities has largely fallen by the wayside. Economic opportunity is located all over the globe today - you can't wait for it to come to Squirrel Hollow where you were born. Of course, perhaps the Internet is changing this. And perhaps that is why Social Networking sites like Facebook are so popular - they allow people to form communities online, to work in cooperation. But I guess, too, they allow people to cyber-bully each other as well.

Regardless, the individual often achieves, on his own, in an area where the group shies away.   The fabled silicon-valley garage start-up is an example of individual achievement, while corporate organizations such as IBM, an example of group-think. And over time, the garage start-up ends up supplanting the old organization and becomes the new group-think. Apple is the new IBM, basically.

There is validity and safety in herd-thinking, but herd-thinking usually results only in ameliorating losses, not in making real gains. By grouping into a herd, the herd insures that only the old and lame stragglers are picked off by predators, while the majority of the herd stays safe. A good plan, but cold comfort for the old and lame.

And as I have noted before, herds can be stampeded into doing really dumb things - like running off a cliff - which is how the Indians slaughtered buffaloes by the hundreds, before they were shown more efficient ways by the white man. Herds can also be lead to the slaughterhouse.

There is value in rugged individualism. The center of the herd is safer, but the grass is trampled down and pooped upon. At the leading edge, however, the grass is sweet and plentiful, even if the danger is greater. At the trailing edge, the grass is non-existent and the danger even greater. The trick is to be able to distinguish between the leading edge and trailing edge. Being a rugged individualist is great, being an oddball kook, not so good.

And that is why I say it is a good idea to shy away from conspiracy theories. Nothing there but trampled-down grass and poop.

I am not so sure I could recommend this movie, because to of the flaky quasi-science that surrounds the second half. A guy with a self-anointed degree in noetic science, standing in front of a rack of broken irrelevant electronics doesn't really impress me that much. But then again, it is that pesky actually knowing something that always gets in the way of fun. You can't pull that Hoo-Doo shit on an Electrical Engineer. Sorry.

But I think it is a good thing that Shadyac is at least trying to atone for Bruce Almighty. It's about time....

The Closed Bar

2012-01-19T11:55:00.000-08:00

People once waited in line for hours for a chance to get into the fabled nightclub. But eventually, all the hot spots close, and you wonder, in retrospect, what the fuss was all about.

There is nothing sadder than a closed bar or nightclub. The tattered sign out front, the broken bar stools inside - the falling-down butcher paper on the window - the dried-up layers of puke in the parking lot.

And it is funny to think back to times when everyone vied to get inside some vaunted "in" place - to see and be seen. To spend hours in line with the hope that the bouncer behind the velvet rope would chose you for admission to the fabled "club" - where you would have the privilege of paying $10 or more for a beer.

And when you are young, this is an easy narrative to sell - that a night club is "exclusive" and an institution that is permanent or long-lasting. But in a few short years, what was "hot" goes quickly to "not" - and not only is it easy to get into the club now, you likely don't want to go.

And it is funny how that works - how a successful nightclub owner can sell the sizzle, so to speak, and get people to pay top dollar to be let into what basically is a dark, dank industrial building selling watered-down and overpriced drinks.

It is all a matter of perspective and perception. As a youth we perceive these sorts of places as long-lasting institutions that have local social stature. We are unaware that perhaps they opened only a few years earlier, simply because we weren't around then.

But in a few short years, the place you used to pay a $10 cover charge to get into, is now a battered and abandoned building. You sort of wonder what the fuss was all about, or why, as a youth, you thought it was important.

Well, it was important because they told you it was important - and you believed it. You heard the ads on the radio, you saw the ads in the local 'alternative' newspaper. You heard your friends talk about it. And they set up a line and a velvet rope, and people stood in the line - and that made you believe that it was an important place to go to. After all, if people are being kept out, then there must be a good reason to go in, right? People want what they can't have or is hard to get.

It is a marketing tactic that is as old as the hills - create demand simply by denying supply. Once you convince people that something is rare and coveted, they will desire it and want to acquire it. Diamonds, Gold, Cabbage-Patch Dolls, Tickle-Me Elmos, White iPhones - whatever. If you can sell people on the idea that the item is coveted, people will covet it.

And of course, the media is your best friend in selling this narrative. They will gleefully report about the long lines to get into your disco - or the fist-fights breaking out between people trying to buy a doll or a cell phone. Once you get the hype going, people who had no interest in the product will become interested.

In a way, it is like Yesterday's Dream Car - the car that maybe you had a poster of, above your bed, when you were a teen. A Ferrari 308 GTS - like Magnum, P.I. had. Once an unobtainable dream car, it now can be had for the price of a loaded Camry. And once it heads off for the junkyard, you wonder what all the fuss was about. After all, it was just a car. It no longer has much status, though.

Status sells. And when people can convince you that you desire something - that you need to have something, then they have you. And even convincing other people that something is desirable is useful in selling something to you. Why else would anyone buy a Cadilliac Escalade - when it is just an overwrought GMC Yukon? Because they perceive that others desire it, and thus it is desirable.

It's funny, going back home and seeing the old club, now abandoned. You think about it and you wonder how, as a youngster, you were so taken in by it all...

How Consumerism Is Destroying the American Family (long)

2012-01-19T07:22:00.000-08:00

There is a lot of talk today about the demise of the American Family. Many on the right blame this on progressive liberal values. But are other forces perhaps at work here? I think so.

There is a lot of talk these days about the demise of the American Family. People want to blame our permissive culture, or perhaps the media, or perhaps Gay Marriage. But the real reason our Families are falling apart is consumerism, plain and simple.   We are training generations to believe that owning things is better than doing things, and that your family is a success if they own a lot of crap, not if they actually like each other.

Take Joey. He is a typical kid of today, born in 1985 when Ronald Reagan was President. His parents both have careers, so they could have enough money to buy all the things that they felt their family should have. Nice cars, a nice house in an antiseptic suburb, cable TV, cell phones, and the like. But since both his parents worked, he never saw them as much as he would have liked, and when he did, they were very harried and stressed about paying all the bills.

Joey was raised by sitters, day care providers, after school programs, his teachers, and mostly his peers. His buddies in grammar school, middle school, and high school were the biggest influence on his adolescent years, and like most suburban kids of today, he would spend hours at one friend's or another, playing video games, listening to music, skateboarding, and later on, trying to scarf beers and maybe smoke some weed. They would talk for hours about bitching cars they would have, and which girls in school might be "easy" and which ones were "hot".

Joey's parents took him to every extracurricular activity possible, when he was younger. Soccer practice, three times as week, that sort of thing. They stressed to him that school was very important and that he had to "get good grades" to get into college, because getting a college education was absolutely essential, if he was to aspire to the lifestyle they were leading. No pressure here, Joey! Succeed in school - or else!

And of course he increasingly questioned the value of all this. He wanted consumer goods, just as his parents did - perhaps more so. He would read car magazines all day long and dream about tricking out a Honda Civic with gull-wing doors and a bitchin' stereo. The idea of that throwing thousands of dollars at an economy car was kind of dumb, never occurred to him.

When he was in middle-school, his parents divorced. It was a traumatic experience for him - as it is for any kid, but it was hardly a unique one in this day and age. Joey found himself bounced from parental home to parental home, spending weekends with "weekend Dad" - and his Dad's new girlfriend, and weekdays with Mom and her new Husband ("Don't call me Dad, call me Frank"). Joey was very confused.

And once his Father remarried and started a new family, and his Mother and Frank started having kids, Joey found himself on the outside looking in - a relic of a former relationship, a half-brother and a step-son in two homes. At home in two places, but at home in neither. If people think that sort of thing doesn't mess with a young kids mind, I don't know what they are thinking.

Of course, the cost of maintaining two homes and two-and-a-half families is not cheap. But since both Joey's parents worked and made good money, they could afford it. And one reason Joey's Dad divorced his Mom was that it was economically feasible. Driven by normative cues touted by the media that a marriage should be "perfect" and that any setback or act of infidelity was unforgivable (thank you very much, daytime talk shows), divorce was not only an option, but a predictable eventuality.

When he was older, Joey got a part-time job after school and his Mom gave him her old Civic, and he spent every last dollar trying to trick it out like the cars in the magazines, with mixed results.

He had a girlfriend, of course. But like the car or his Xbox or his stereo, she was just another acquisition, and an opportunity to lose his virginity.   Relationships, as he had been taught by his parents, were disposable commodities. You got married, and then got divorced, if the marriage was too much of a hassle. People were to be used as you saw fit, then disposed of. Frankly, it is amazing to me that we are not raising a nation of sociopaths.

But, these were the salad days, ironically. Joey had a "hot car" and all the games and toys he wanted, little responsibilities, a little pocket money, and the allure of sex and drugs to keep the mystery alive. High school was a lot of fun, and by playing his parents off against one another, he could keep the booty and largess coming.

Despite his parent's pressure - or because of it - his grades were mediocre, and after graduation, he went off to the local Community College.

In his second year at school, he got his girlfriend pregnant. What should have been a joyous occasion - an opportunity to start a family - was instead an awkward moment in his life. Should he marry her? Or just pay for an abortion. They chose to get married instead.

With mediocre grades, and by now, staggering credit card debt from the junk he bought to bolt on to the now-decaying Honda, Joey was not happy with life. His wife was constantly complaining about money issues, and with his education, getting a good-paying job was difficult. It seemed that just a few years ago, life was sweet! After all, he could hang with his buds and smoke dope and play Grand Theft Auto all day long. Now, at the ripe old age of 25, it seemed kind of old. The mystery was gone.

What went wrong here? Why is Joey's life a hollow shell instead of a rich and rewarding existence? What happened to the American Family? How did it turn from Leave it to Beaver into this sort of gross exercise in excess?

Consumerism, I think is the key. Joey's parents were obsessed with being successful and making lots of money to have things like fancy cars and cable-TV, instead of being content with less and enjoying the family more. Joey, as it turned out, was just another possession they acquired - and then disposed of. A leased car, to be traded in, when the time was right.

And Joey bought into the same false dream - the idea that having a bitching car and lots of money would be sweet! - but not having any real practical means of obtaining such things. The idea that he could be happy with non-material things never occurred to him.

And why would it? Joey had been parked in front of the TeeVee since nearly birth. His normative cues were all about consumerism and buying things. He had been programmed to believe that owning things or even just wanting things was the same as happiness.

A wedding should be the happiest day of your life. The birth of your child should fill you with joy. Marriage should be a wonderful journey through life. But for Joey - or his parents - none of these things were true. Obsessing about the material, they rejected the greatest gifts God could bestow. Within a few years, he was divorced, just has his parents had been.

What will happen to Joey's son? It is tragic to think about it. Being raised in poverty, but always wanting - not food and basic shelter, but consumer goods, cars, drugs, money, and "bling" - he will end up a lot like his Father, only perhaps worse off. While Joey slid far down the economic ladder from his parent's level, his son will slide even further.

And the sad thing is, it didn't have to be this way. If Joey's parents gave him less of their money and more of their time, he might have done better in school - and spent less time with his peers and the television, absorbing poor normative cues. And perhaps if Joey's parents were less obsessed about him getting into college, he could have viewed his career options in a more rational light.   Maybe he was destined for college - maybe not. But one this is for sure, together, he and his parents, working together as a team, could have prepared him for life.

And perhaps instead of wanting things like a car, he could have wanted experiences more. Maybe viewed his girlfriend as something more than an opportunity to get laid. Perhaps viewed his wedding day as something to look forward to, rather than something he was trapped into doing.

Is Joey a real person? He is an amalgam of a number of young folks I know or have met over the years. Young people who came from "good homes" - middle-class families with lots of money, lots of things, but not lots of love. The outcome of such family unions is pretty predictable, actually. When acquisition of things and money becomes the primary goal of any family, the family quickly devolves into a race to the bottom - where each family member, from husband and wife, to the children and even grandchildren, vie to see who can get the most out of the relationship, for the least amount of work.

And ironically, any family unit, whether it is just a husband and wife, or a large family with children, or an extended dynasty of children and grandchildren, is indeed an economic unit that has ties that are economic as well as emotional. And one reason we see the decay in the American family, I think, is not that we have too little money, but indeed, too much of it. We are a wealthy nation - we can afford divorce. We can afford day care and dual incomes. Or at least we could.

Joey and his family are representative of a typical suburban family today, that has children from multiple marriages. Each child has two sets of parents - a Mother and a Father, a step-Mother and a step-Father. They spend time in two homes, have two bedrooms, and two sets of possessions. The driveways are filled with cars - one for each member of the family. Everyone has their own television, their own computer, their own cell phone. No one knows what the other is doing. Parents have little or no idea what their children are downloading, reading, watching, playing - or who they are doing this with.

It is only when the Police knock on the door that the parents realize they are living with strangers - often dangerous ones. The Columbine High School kids were not an anomaly and their parents were no outliers of irresponsibility. They were just typical products of a suburban nightmare that is unfolding in America, largely unnoticed by most folks.

Money and economic co-dependency is often the glue that holds relationships together - and can also be the lubricant to help tear them apart.   Not long ago in this country, it was unusual for even a middle-class family to have more than two cars, one or two telephones, and more than one television. Families were forced to interact with each other out of necessity. Sharing and joint experiences were the norm, not the exception.

Even in my deeply dysfunctional family, group experiences were the norm. With only one television, we had to compromise on which of the three channels of programming we would watch - together as a family unit. Variety shows were popular back then, as they appealed to a larger audience within the family home. If you didn't like one segment, perhaps your Parents did, and it was short enough to sit through.

Today, everyone has their own television, so everyone watches their own channels. Even here on retirement island, we see the flickering blue glow of the TeeVee at each end of all our neighbor's houses, as husband and wife separate every night to watch their own shows. People living apart while living together.

Or take the telephone. We had one wall phone in the kitchen (and yes, it had a dial, and no, this was not that long ago) and as an added luxury, my parents had one in the bedroom. If you were on the phone, no one else could call in (busy signal, no voice mail) and no one else could call out. So you had to share the phone, and that meant not hogging it too much.

Today, even the youngest in the family has a cell phone, and everyone can talk or text all they want, without ever having to interact with one another. You see this all the time - families together on vacation, each attached to their own electronic device, communicating with others - but not with each other.

Or take the "family car" - which was usually Mom's.   If you wanted to go anywhere, you had to ask permission to borrow the car. Sounds pretty quaint and Norman Rockwell, but back then, few teenagers had the money to buy a car, and few parents had the money to buy cars for their teenagers. When you went away to college, freshmen were not allowed to keep cars on campus, as it was felt that it would be too distracting from their studies.

Today, the average suburban household has a driveway full of cars - one for each family member, and then some. The idea of not having your own car, for the average middle-class teen, is shocking. And many middle-class kids expect a car as a matter of right, not privilege, once they turn 16.   And many expect a car - often a brand-new car - to go off to college in.

We are a far wealthier nation today than we were 30 years ago. Much has changed, and much of this change has been so gradual as to go unnoticed. Our increase in apparent wealth has changed the way the family dynamic works, and often this has not been a change for the better.

My parents didn't get divorced largely because they could not afford to. Even with an upper-middle class lifestyle (of the time), the amount of money needed to maintain two homes, pay child support, and all the other attendant expenses would have been staggering for them. They would have have to sold the family home and lived on far less money, and this was largely because my Mother had no separate income of her own.

Divorce was rare in my generation not because of moral values but because of monetary ones.

So what does this mean for the future?   Is there any way to recapture the "old family values" of the past - without resorting to the child labor ideas of Newt Gingrich? Is banning Gay Marriage going to be the bulwark that shores up "traditional marriage" and brings down the divorce rate? What about outlawing abortion? In both cases, I think not.

The recent recession perhaps gives us a clue into human behavior, and how our emotional relationships of family, friends, and even lovers, are often more economically-based than we would like to think. During the recession the divorce rate declined.    And I think this is in part due to the fact that many people can no longer afford to play the "Weekend Dad" game - maintaining two households and shuttling children back and forth. I have met people who have agreed to get divorced, and yet remain in the same household - for economic reasons alone - as they cannot stand each other, but cannot afford to separate. Economic glue can hold relationships together.

And oftentimes, in relationships, economic glue can hold people together long enough for them to sort out arguments and calm down a bit. Everyone fights on occasion. If husband and wife have separate bank accounts, separate cars, separate retirement accounts, separate phone numbers, and separate careers, it is far easier to escalate a simple argument into a "That's it, I'm outta here!" situation.

But I think, too, there are "values" issues here as well, but not the "family values" issues that the far-right would like to tout. The divorce rate has been declining since 1981, in a long-term trend. And I think this is in part due to the larger number of people willing to "live in sin" without getting married, and as a result, their breakups are not chronicled or counted in the statistics.

But I think too, that many children of divorced households have chosen their spouses more carefully, and chosen to live together for years, before getting married - often doing so only when deciding to have children.   They tell me that they don't want to make the same mistake their parents did and inflict the emotional distress of divorce on their own children. So it is not atypical today to see a couple living together for a decade before marrying, and then doing so for the express purpose of raising a family.

Now, some "family values" types might see this as heresy. After all, living together outside the sanctity of marriage is a major sin! But if the resultant marriage is stronger and better, is this such a bad thing? I think not.

Another advantage of this scenario is that, after having both lived together for an extended period, and having saved up enough money, they can afford to raise a family on a single income - allowing them to have one parent at home to raise the children, instead of having to rely on daycare and after-school activities - as well as peers - to raise the children. Again, this would seem to be a better "family value" to most folks, but again, not to the far-right.

No, the far-right would still have the Joey's of the world getting married at age 18, rather than living in sin, and end up getting divorced. And perhaps that is one reason why Evangelicals have a higher divorce rate than most folks - according to a survey by a prominent Evangelical Christian. And - you guessed it - Atheists seem to have the lowest divorce rate of any group.

So much for family values, eh? It is the lack of Prayer in the classroom and God in the town square that is leading to high divorce rates, right?

Perhaps not.

I think instead, it is a lack of real values of the soul - the emphasis even among those of faith that God will smile down upon you and buy you a new Chevy Impala SS, if only you believe hard enough. It is the emphasis of the television and the cell phone - the texting and yakking and distraction from real life and real communication. It is the distraction of blaming all our woes on various minority groups, such as immigrants or Mexicans or Gays, rather than looking inward at our own failings.

And I don't think this trend is irreversible. However, the people who are pushing for "family values" the hardest, seem to have the least of them in real life. And their sponsors are the marketers and corporate shills who want to sell you happiness in installments. And this leads to unhappiness in the consumer-family, as the vaunted rewards, as-seen-on-TV, never seem to quite materialize.

Maybe less is more. Maybe living with less junk and more experiences is an answer.

The Stripper Pole News

2012-01-17T08:57:00.000-08:00

Hi! My name is Candy, and here are tonight's top stories...

Watching TeeVee after a hiatus of a decade is interesting. They've changed a lot of things in the interim. There are a lot more ads, and more and more of them are for odious financial deals or prescription medications. But the news programs are really bizarre. For some reason, the news networks, particularly CNN, have fired all their anchors and replaced them with strippers.

I am not kidding, either. These new anchorwomen are very young, have enormous breasts and are showing a little cleavage to the viewers. Some of them sound dumber than a post. They actually giggle. You've come a long way, baby. Maybe not.

Fox News preaches moral values and decries the decline of the family. But that doesn't prevent them from playing titty peek-a-boo on the air.

What is going on here? Well, it is obvious, of course. They want to get you to watch, and one way to get that male 15-35 demographic - which the advertisers love - is to fling titties in their faces. And they will tune in, night after night - to watch ads for all sorts of bad bargains.

One Canadian Broadcaster has apparently decided to cut to the chase, and just feature real strippers, who remove their clothes with every news item.

Cutting to the chase, one Canadian company is turning the news into a strip show.

“Our intention at Naked News is to be a global media source, much like CNN or BBC World. We are looking forward to expanding into other languages as well, because there is definitely a market demanding our brand of infotainment,” Naked News founder David Warga said in a press release.

Fox clearly is behind the 8-ball, here.

Bizarre Sinks

2012-01-16T19:55:00.000-08:00

They look like works of art, but as practical sinks, they are largely worthless.

We are at a hotel in Atlanta which has recently been remodeled. They put in new, high-tech looking fixtures which are very cool looking, but kind of useless. Form here, does not follow function.

For example, a square sink from Kohler looks cool, being under-mounted and all. But since it has a perfectly flat bottom on it, if you dump a cold cup of coffee in it, it takes about four gallons of water to rinse it all out - it does not drain naturally, having a flat bottom.

The moderne faucet fixture from Fortis is keen looking, but dumps most of its water on the counter, wetting down anything you've placed there. Not very practical.

And the list goes on. We rented a vacation home with one of those "bowl" sinks (like shown above) that look so cool. But the perfectly round shape of it, combined with the placement of the artistic looking faucet, caused it to shoot a geyser of water into your lap, when you turned it on - the water went into the bowl and then right out the other side.

And since these bowl sinks sit on top of the counter, they collect dirt underneath. And they are very easy to shatter or break. What's not to like?

And then there is the cost. They sound reasonably priced, at the home improvement store, where you can buy them, usually as a special order. But they are, in reality, 3-5 times more in cost than a standard modern sink.

And a standard sink has a shape that has evolved over the eons - a shape that drains easily and doesn't act like a ski-jump for water. Funny how that works - how simple shapes have evolved over the years to be usable and practical.

You see this effect in simple, everyday things - for example, the bucket. Yes, the bucket. You might think that after a few thousand years, the bucket has been pretty much optimized for design size and shape. And you'd be right about that. A typical bucket holds enough water to be useful, but not so much that you can' usefully carry it.

And it is tapered in shape, so that, ironically, it tips over easily - you can "kick the bucket" as we say, and knock over a pail of milk or water. Why is this? It would seem to be a design flaw, at first.

With the advent of plastics, however, it was possible to make buckets in different shapes and sizes. And quickly, the 5-gallon bucket became very popular, for carrying everything from pickles to sheetrocking compound. The five-gallon size is larger than traditional buckets, which works well for shipping in this modern, motorized world. But lifting one? A generation of bad backs attests to the poor thought of the design.

And the straight sides of the bucket resist tipping - a feature which initially seems to be an improvement. But, as it turns out, straight-sided tall buckets are baby-drowners. Leave one outside your trailer home, let it fill with rainwater, and your baby or toddler will wander over to it, fall in, and drown. The straight sides prevent it from tipping. The tapered buckets of yore, would have tipped over, if a baby went in headfirst. As it turns out, tippiness is a design feature we want - or one that evolved over time. No doubt, in the middle ages, a non-tapered bucket would be viewed as evil, wicked, or possessed.

Modern design is not always an upgrade, and even with the simplest things. Composite headlights or HID lights may seem really cool, until you have to replace them, and then suddenly realize that instead of paying $8.95 for a new sealed-beam light, you are looking at $1300 for a new HID assembly available only from the dealer. Progress? Perhaps - for the manufacturer.

Design should be useful, reasonably priced, functional, and an improvement over previous designs. I had the privilege of doing a Patent for Phillippe Starck who designs everything from furniture to appliances. Form follows function is one of his mantras, and yet, his designs are elegant, functional, easy to use, reasonably priced and durable.

You can have attractive things that are reasonably priced, durable, functional, useful, and still be works of art. But a lot of arty crap out there these days is just the opposite, and these ridiculous sinks are a case in point.

How Weird is Status?

2012-01-14T08:54:00.000-08:00

Status is usually not as obvious as this. And we all play the game.

For a lot of people, status means a fancy car and a look-at-me house. And while those are obvious status symbols, there are so many others out there, that it isn't funny. In everyday life, we grade and judge ourselves and others based on status. And it can be something as stupid as whether you are first in line or not, at a restaurant, or whether your car is a year older than your neighbor's, or even what floor you are on, in a hotel.

And often the marketers will sell us this kind of faux status. A local "dirty paper" here in Atlanta is advertising a "Bourbon, Beer, and Barbecue" festival with all-you-can-drink and eat (Hint: Bring a Mormon friend as a designated driver). What was odd, to me, about the advertisement was that it said, "Open 12-6 for VIP tickets, open 2-6 for general admission."

Several things jumped out at me here. First, the concept of a "Very Important Person" or VIP used to applied to heads of State or only the most famous of movie stars. Today, it is used to apply to someone who wins a contest for backstage passes, pays extra for a platinum card, or just pays more for a ticket to a booze, beer, and barbecue orgy.

Second, the whole idea of paying more to be first in line struck me as odd. I am guessing that the thinking is, if you arrive at 2pm with all those general admission scumbags, the barbecue will be cold and picked-over and they will be out of beer. So, something as simple as a barbecue festival has two levels of seating. I can only assume skyboxes are next.

What is going on with Status in our society, and why are we seeing it more important today than in the past?

While in ages past, we stratified our society into distinct class levels (first class, second class, third class, and steerage) the more recent trend has been - or was - toward a more classless society. Single-class cruise ships used to be the norm, but increasingly, many are offering upgraded "suites" and diamond preferred status, to allow some folks to lord over others.

Single-class airlines like SouthWest are still popular, but the two- or even three-class airlines are still doing a robust business. American Airlines now advertises first-class service in its tiny regional jets, although it is not clear to me what sort of "upgrade" you could offer anyone on one of those tin cans. The physical advantage is probably less than the psychological one - being "first to board" on a plane that seats 20 has no real advantage, other than to let 19 people you will never see again in your life, know that you are special.

But we are all victims to status, whether we like it or not. I am staying in a hotel in Atlanta, and last time, we had a room on the 17th floor. And when you saw the plebes get on the elevator and push "3", you secretly thought to yourself, "Well, I got a better room that they did - with a view of something other than the dumpster!"

But this time around, I am on the 5th floor, and I can swear I hear the people who push "20" snicker when I press my plebeian five.

But of course, the assignment of the rooms is based less on status than on availability and random chance. But there is a status factor there as well - if you talk to front desk clerks when they are off-duty. Oftentimes, clerks set aside the better rooms (and some are marginally better than others - better view, newer furniture) and steer general clients toward the less desirable rooms. People who don't make a fuss get the crappiest room, while the pain-in-the-ass type people get the better ones. Why? Because it is often less hassle for the clerk to give the better room to the "high maintenance" type of client, whereas a tired businessman probably doesn't give a shit.

The status game continues as you exit the building. Having your car valet parked is a big deal, and costs extra. It also takes longer and is a bigger hassle, too. But people do it, so their car can be driven out front and everyone can watch them embark and disembark in grand style. And if your car is deemed "nice" by the valet staff, it may be parked out front, as a talisman of the class and style of the hotel. A new Audi sports car sits proudly out front, no doubt making its owner happy - that is, until it rains.

But often, we covet and flaunt status, even when it costs us nothing. We get a "free upgrade" and feel that we are somehow special or unique, even though the upgrade doesn't represent an accomplishment of our own, or even something we paid for. But since we get to go to the head of the line, we believe we are special.

So why is it we all want to be VIPs? To have special backstage access, or be in with the in crowd, or to be seen prominently? It is an odd question, to be sure. Status gives us nothing, in real terms, but often costs a lot. You can't eat status. It doesn't make your wallet fatter or your bank account richer. In fact, it does just the opposite - often costing staggering amounts of money, merely to provide transient bragging rights.

And for all you OWS protesters and patchouli-stink hippies, don't think this doesn't apply to you, too. Because I've seen you-all in the commune, vying for status over one another - whether it can be who is the most politically correct, to who has the best dreadlocks or tie-dyed shirt, or to who has ingratiated themselves the most to the spiritual leader. Yes, even among die-hard commies and leftists, status exists, and in fact, you might argue, it is even stronger.

So what is the point of all this? Well as I noted in an earlier posting, status is big business. You can get people to consume more or pay more, if you sell them status. You can train consumers to reject products and services based on status alone. "Only a schmuck would drive a car like that!" a consumer might remark. They say this to validate their spending thousands more, for basically the same car.

And status, being purely psychological, costs you nothing to add to a product. Once you convince people that the mere buying of your product makes them part of the "smart set" your product will sell itself. For years, many folks bought Japanese cars, mostly because they didn't want to be seen as idiots for buying some warmed-over Buick. Today, the U.S. marketers have finally caught on, and are trying to sell their cars as a "smart buy" over their Japanese counterparts. Suddenly, buying a Toyota or a Honda, once viewed as an intelligent choice, is marked as a chump option. And oddly enough the underlying cars are largely the same for both U.S. and foreign makers.

There is perhaps something inherent in our psychology that causes us to seek status. And I guess it is the need to feel special, different, or unique from others. On the cruise ship, the fellow in the windowless cabin might not have the luxuries of the top deck suite, but since he "got a special deal" on the price of the plain cabin, he feels that he scored something special - a bargain - and thus feels "smarter" than the chump who paid full-fare for the suite. It is not that he feels superior, in wealth or whatever, but smarter and unique.

And you can sell unique. BMW has a little-known program called the BMW Individual program. Some dealers claim it doesn't exist, but others specialize in the program. For an appropriate fee, you can order a car, custom-made, with your own choice of unique color or interior fabrics, or options that are not available to the general public. And you can even arrange to pick up the car at the factory, having a special presentation ceremony, where the car is brought up from the vault via a hydraulic stage, complete with spotlights an inspiring music, while you descend a grand spiral staircase in one of those "This-Is-Your-Life" kind of moments.

No really, they actually do that.

And while it might be interesting to have a new 3-series, painted smoked purple with a green plaid interior, does it really say anything about you as a person that you own such a car? And yet, we think that might be kind of fun, to be treated special and to be queen-for-a-day. Sure, why not? I mean, other than the staggering expense involved.....

Status is a tricky beast, and it lurks in everyone's mind. Taming that beast and understanding it is one of the most important things you can do, in terms of turning around your own finances.

Prepaid Debit Cards? No.

2012-01-14T07:03:00.000-08:00

Having one of these in your wallet surely marks you as a total loser. What's not to like?

I wrote before about prepaid credit/debit cards. These are cards that charge pretty high fees to let you have what basically is a debit card without a bank account attached to it. The fees sound pretty small, but cumulatively, they can add up to a lot, particularly to a person who is already short on money.

How do they work?   You put money on the card and then you can charge until the money runs out. But there is usually a $3 fee to get the card, another fee to add money, another fee to check your balance, another fee if you go over your limit, and so on and so on.

What makes these a crappy deal is that the fees are higher than zero, and zero is what you would pay for a debit card from your credit union, or even big, bad, mean old Bank of America (why are they bad again? For some reason, they never charge me any fees whatsoever, for a debit card, ATM card, checking account, whatever. Zero. Bubkis. Nothing).   Even an intelligently obtained credit card with a low interest rate and low credit limit (like from Simmons First) is a better deal than a pre-paid debit card.

And yet, people go for bad economic deals, convinced they are worthy of little else. And yet, the number of people living off the grid these days - people who do not use traditional banks - continues to rise. For millions of Americans (and our legal and illegal immigrants) thinks like prepaid debit cards, Western Union moneygrams, and money orders continue to be used in lieu of regular banks. And the reason for this is often psychological, not legal. Many people - even people who are U.S. Citizens or are here legally, are convinced that banks are "not for them" but for someone else. So they spend 2-3 times as much on these half-assed poverty financing deals.

The internationally acclaimed financial guru Suze "Sooze" Orman is at it again, offering a debit card to her loyal but misguided fans. Sooze started out pretty straightforward, telling people to save more and spend less, but that sort of advice doesn't go over well with the people who run the media.   There is nothing to sell with such advice, is there?

So, before long, Sooze decided that advice like "buy a late model secondhand car and then keep it for a decade" was wrong and "lease a new Buick!" was right, particularly after the checks from Buick started clearing her bank account.

And of course, advice like "buying a boat can be a financial nightmare for the middle class" gave way to "Gee, those new SeaRay Sundancers are keen!" after SeaRay gave her a $300,000 boat.

Funny how that works, eh?

Initially, the news story was spun that Sooze had a new debit card, and hey, the fees are not so bad, are they? But an unnecessary fee is an unnecessary fee in life, and if you can do better by using, say, a regular debit card, why pay fees to use Soozy's card?

Well, the answer is, of course, is that it makes money for Ms. Orman. And right there is the problem. There is something odious and wrong about giving financial advice to people, ostensiously to help them with their problems, when in fact you profit from the advice. Ms. Orman no longer has clean motives here - but is motivated by her own greed to sell a debit card.

This is no better than the odious Glenn Back telling people the world is going to end and then hawking gold to them - from a company that pays him. Hey, Glenn, how's the end times working out? How's your TeeVee show on Fox doing? I thought so.

So, after a couple of days in the news with no blowback, a few financial page folks and a lot of bloggers are saying, "wait a minute, this is a crappy deal! And this from the lady who claims to have your back?"

And prepaid debit cards are no real bargain for the poor - not when free alternatives are available. What is next? A chain of Suze Orman payday loan companies? Their 300% interest loans are no worse than most payday loan places, so it can't be a ripoff, right? And as Sooze says, sometimes its handy to have access to instant cash!

Just wait for it, it will happen.

Now, just to anticipate the naysayers, yes, it is possible to avoid most of the fees with this card, provided you set it up for automatic deposit. And yea, there are a lot of people who are afraid of banks, and for some reason would rather dick around with this sort of poverty financing than go to a credit union or traditional bank. But I am not sure either are good excuses for going to prepaid debit cards.

Like with airline miles cards, where yes, it is possible to avoid paying interest by paying off the balance every month. But people slip up and fail, and end up paying a lot. And the same is true with these prepaid debit cards - you don't follow the rules to the letter, these fees kick in, and for the very poor, who might have a balance of $100 or so, three dollars a month is a lot of money. A dollar just to see your balance is a lot of money.

And how is this better than paying cash? I don't get it.

So, it comes as no surprise that she jumps on the bandwagon of celebrity pre-paid debit cards, on the heels of the Kardashian Sister's card (who exactly are they again?) only this time without the outrageous fees the Sister's tried. Sooze is just content with the fees charged by, say, Wal-Mart, which are not outrageous, just rageous.

It is sad that so many people are desperately searching for financial advice, and that a whole industry of Suze Ormans and Dave Ramsey's have sprung up to cater to this demand. But often the advice is poor if not just outright bad.

There are no financial secrets or tricks. Just spend less than you make, and seek out the best, simplest, and least complicated deals.

A basic bank account debit cardes is free and has few rules, and is the simplest, lest complicated deal. suze Orman's debit card is only a good deal for Suze Orman.

Financial gurus are all pushing their own agendas - to their own benefit, not yours. As soon as they ask for money, or tell you to give 10% to a church (that pays them to put on a seminar for parishioners) you have to quickly come to the conclusion that the only real advice they have is, "give me your money."

Establish your own agenda and follow that, instead.

Gold Quietly Gets Hammered

2012-01-12T04:54:00.000-08:00

The price of gold drops more than $200 an ounce in December and no one notices.

In the news this morning, a small note that Factory Job hiring is up, for the first time in a decade and that hiring is the highest it has been in 14 years. 14 years - that would be the last time a Democrat was in Office.

Funny how that works.

Funny how the media says it in an "Oh, by the way" kind of thing, instead of "OMG! Can you BELIEVE this! The recession is ending!"

Unemployment numbers are down, growth is up, inflation is still low, interest rates are low, our exchange rate with the Euro is rocking - the U.S. seems poised to lead the world out of recession. The rest of the world seems poised to enter it.

Every bit of good news hammers minerals.

But a funny thing - the media only likes to report sudden rises in Gold prices - they rarely report the fall.

What is weirder is that the media loves to talk about the Dow "plummeting" but they rarely talk about it going up (as it has in the last few weeks).

The simple reason is that sudden market changes are "news" while slow, long-term trends are not.

Guess which is more relevant to you, the investor?

Yea, whatever CNN is NOT reporting on.

The eye-candy news is rarely of any use to anyone.

Will gold continue to drop? As the economy recovers, yes. And as it drops, more people will bail out of it, as they realize that gold pays no dividends, gold has no new products to sell, gold has no growth potential, and gold is being dug out of the ground every day, increasing the supply.

Gold is not an end, but a parking place for money. As an investment, it is a dead-end. And all the gold bubbles burst, over time, as people realize this.

Pricing Things Realistically

2012-01-11T10:08:00.000-08:00

People often overvalue things they want to sell. As a result, they don't sell.

I wrote before about how people put obscene prices on things and then wonder why they don't sell. The neighbor's boat, for sale for a fourth year now, at 50% over book value. No takers - I wonder why. Or the fellow with the four-cylinder Firebird, convinced it is a "rare collectable" and worth more than a new Camry - for sale for three years, now. Or take the perpetual "for sale" house that is undistinguished, but has an asking price 30% above the neighbor's house.

The list goes on and one - people suck at selling things, mostly because they overprice them. They think their worn out crap is priceless - even though they would not pay much for it themselves.

And now there is some scientific data backing this up.   A Yale professor ran a study, using students and ordinary everyday items, and discovered that in most cases, the people surveyed would put different prices on these items based on what they would pay, versus what other people would pay. And the ratio is startlingly consistent - about 1.4:1. People consistently overprice items by about 40%

A student opines that he would pay $4 for a pound of jelly beans, but that "others" would pay $7.50. Why is this? Why do we assume that we are astute consumers and that everyone else is a chump? I guess because we think we are "smart consumers" and everyone else is stupid.   But the reality is, overpricing our own goods is not a smart move.

Fred tries to sell his car. He goes online to KBB.com and gets a price for it. He is shocked that the trade-in value or private party sale is so low! But, he "reasons", his car is special and different and thus worth more, so he puts it on Craigslist for $1000 over KBB retail.

Months pass, with no takers. Finally, he takes it to the car dealer, who agrees to take it in trade at Fred's crazy price - and does so by padding the price of a new car Fred is buying. Fred thinks he is being "smart" by getting more in trade than he could sell outright.

But for some reason, the basic logic of the deal escapes Fred. The dealer has to sell the car, at a profit, which means they can't take more in trade than they could get for retail.   But those messy details don't clog his mind.

Overpricing is dangerous in other ways.   A boat, house, or car that sits on the market for years is often costing you real money.   Eventually, you will have to lower the price to the market value (chumps being in short supply these days).   And when you do, you will come out behind, as the cost of "carrying" a car, boat, or house often means you get less for the item.

For example, my former neighbor who rolls out his boat every year and puts a "for sale" sign on it (and for all I know, he is still doing it) will never get his crazy price for it. His widow will sell it, to a dealer, for a few hundred dollars. And the sad thing is, if he sold it the first year, for $300 less than he was asking, he would have gotten pretty good money for it. But he had to "get my price!" on it, so he gets nothing.

Or take a house. In addition to property taxes, insurance, utilities, and the like, you have those staggering mortgage payments to make. We sold our house in Central New York - where the average "time on market" is measured in years - in only a week or so. How? We priced it attractively - about $50,000 under market value.

Did we "lose money?" - No. I figured that the cost of carrying the house another year would be about $35,000 or more, in interest payments, insurance, taxes, repairs, utilities, and the like. And to get that last penny out of the house, we would have to have it in top shape, too.   While we had already put a new roof, furnace, deck, driveway, etc. on it, to get the "top dollar" for it would require thousands more for siding or a paint job. And since the economy is so fragile, there is no guarantee we would even have a buyer a year later, in that depressed area of the country.

So, selling a year early saved at least $35,000 in overhead by not listing it for a year. And we crammed down the agent's commission by another $12,000. Did we lose money? If anything, we broke even, and got a sure thing instead of a "what if?" down the road.

Or take my boat - please. It cost over $3000 a year in storage fees and insurance - even if you never drove it.   And when I listed it for sale, some folks said "you're selling it too cheaply! You could get more for it!"

And guess what? Those were people with the same make and model boat who thought their tired old fiberglass was worth a ton of money - because they paid a lot of theirs, new. The real value of their boat was threatening to them, and drove home the fact that spending $100,000 on a brand-new boat is probably the dumbest thing anyone can do, financially, when a used one is half that price.

And similarly, the people who complained we "undersold" our home were neighbors who thought they had half-million dollar homes, when in fact the houses were more in the market range of $250,000 to $400,000 - which are still expensive homes by any middle-class standard.

Recently, Mark had a pottery show and some folks complained he has listed his pots "too cheap." And by too cheap, I mean asking $75 for a pot instead of $95. But, funny thing, he sold 2/3 of his wares in the first week of the show. Most other artists are lucky to sell one or two pieces, at higher prices.

Again, we assume that others will pay more than we will. But others are just like us - and this pricing phenomenon illustrates how many people have no empathy for other people at all.   Many folks assume that other people are little more than idiotic robots who will pay whatever price you put on things. We rarely think, "Well, maybe that fellow is just like me and is looking for a good deal, not a stick-in-the-eye!"

And again, people feel threatened by pricing like that - because it calls into question their valuations. And as a result, people can be outright hostile, and even violent. How dare you sell for so cheap! It is folks like you who caused the housing meltdown! No, really, people believe and say idiotic things like that.

The way to avoid this trap is to price things attractively and make them go away fast, rather than try to get every last dollar out of something. Think about what you would pay for something and than use that as a starting point.

Auctions can be a good deal for a seller, as the market determines the price of something, relieving you of the burden of pricing. But even then, people often overprice things on eBay.    A box of souvenir Air Force One M&Ms from the Clinton Era isn't worth much - but several people are asking $20 or even $35 for a $1 box of candy. One fellow wants $20 for the crumpled empty discarded box - that is more than a decade old!

I put mine on at $10 and it sold.   And no, no one bid higher than $10. It wasn't "worth" $20, or someone would have bid at least $15.    Price it to sell, make it go away, and then keep the cash. Folks who try to get every last dime, often end up getting nothing.

The Three Kinds of Learning

2012-01-11T07:05:00.000-08:00

If the only way you can learn is through direct experience, your life will be one difficult struggle after another.

Note: this is a revised version of a September 1, 2009 posting

There are three kinds of learning that we, as humans, use. We can learn through Direct Experience, Indirect Experience, or through Projected Experience.   What are these terms and what do they mean? Let me explain.

First, I am not sure if I read this somewhere, or heard it or what. Probably no idea is original to anyone, anyway. And perhaps this is so obvious that you will say, "Well, Duh!"

But I think it bears expounding upon as it is a powerful and basic concept that underlies our entire human existence.

There are three kinds of learning and which kind you use largely determines your economic and social status in life.

What do I mean? Let me explain.

1. Direct Experience

For the descriptions of these different types of learning, I will use the example of a child and the hot stove, as illustrated above. At some time in our lives, we all learn not to put our hands on a hot stove (well, most of us learn this, some put their hands there again and again and never learn).

For many of us, this education comes from direct experience - we put our hand on the hot stove and get burned. The brain is trained directly from this experience: Stoves are hot and can burn. Ouch, that hurts!

You learn DIRECTLY that hot stoves burn, and it is a direct and powerful lesson. While such lessons are STRONG, they are expensive. But probably most of our learning is based on direct learning.

Most all of us learn from direct learning (except the few that bang their heads into the wall or touch hot stoves repeatedly). And many are capable of learning no other way.

The very poor, uneducated, and unsophisticated, for example, learn only from direct experience, and often, not even from that. They make poor financial deals and get "burned" and often go back to the stove again and again to get burned some more.

But most of us, burned once or twice, start to catch on, even if our heads are particularly thick.

2. Indirect Experience

Indirect Experience requires a higher level of intellect and cognitive ability to process.   If you can learn from indirect experience, chances are, you will end up with a college education and also be fairly well off and middle-class. Yes, sadly, so many people are incapable of this.

Getting back to our example, suppose you see your brother put his hand on the hot stove and then scream out in pain? You learn indirectly that hot stoves can burn. His screams of agony are a powerful reminder to your brain of one simple thing: Stoves can be hot and dangerous and painful.

This is trickier form of learning, but a lot less painful (and thus less expensive). It is also less powerful in terms of brain-programming value. While seeing your brother burning his hand is a compelling image, it is not as compelling as the direct experience of pain on your own body.

If you are smart, you learn from the experiences of others through indirect learning, so that you don't have to go through such painful experiences yourself.

Fewer of us are capable of indirect learning, as it requires some intellect on the part of the student to make the connection between the bad experiences of others and our own selves.   And there are a number of barriers to indirect experience:

1. We may initially use the poor planning of others to validate our own poor planning. Our neighbor goes into debt buying a new Hummer, a jet ski, a snowmobile, and a bass boat. They can make the payments on all this junk, but the end result is poverty in retirement, if not bankruptcy and repossession in a few years. However, if all we see is a neighbor with a lot of junk on his lawn, we might get the wrong message: "Hey, he can afford all that crap, I guess I can, too!"

2. We may deny the experience of others applies to us. Our neighbor finally goes belly-up, loses the house, loses the cars and the jet skis and the other crapola and ends up in bankruptcy court. A valuable and powerful lesson, if you are willing to learn from it. Instead, many folks think, "Well, he wasn't very fiscally sound - that could never happen to me! I clip coupons, after all!" The reality is, of course, it hasn't happened yet but refusing to learn doesn't mean it won't.

3. Bad data or no data may make applying indirect experience possible. We see a neighbor struggle with bills and debt and should learn from that experience not to spend so much - or we would, if people were not so secretive and ashamed of how much they make and how much they spend (think about it - people will tell you the most intimate details of their sex lives before they tell you their salary or mortgage payment!). Lack of data (or bad data) is often the largest block to Indirect Experience - and the credit industry is all-too-happy to provide you with misleading data, and is all-too-happy that you may be too ashamed to be up-front about your own bad experiences with others.

Indirect experience can be a powerful tool, if you let it into your life and use it properly - to learn harsh new lessons, instead of merely re-validating preconceived notions. Unfortunately, too many of us use indirect experience to follow the herd, rather than to learn anything of value.

3. Projected Experience

The most difficult an intellectual form of learning is projected learning. Very few of us are capable of this type of learning, as it requires some mental effort and the ability to connect different facts together. If you can learn this way, you could become very wealthy, or very smart, or both.

Particle Physicists and other scientists use this form of projected experience to theorize what would happen, if, say they collided some subatomic particles at high speed. They then go back and verify these results with direct experience experiments - which often involve using cyclotrons or particle accelerators which are staggeringly expensive. Thought experiments (Projected Experience) are very cheap, particle accelerators (Direct Experience) are staggeringly expensive.

Using our stove example, let's look at an example of projected learning:

1. We learn that hot things can burn us.

2. We know that burning hurts.

3. We know that stoves get hot.

4. Ergo, if you put your hand on a hot stove, you will get burned.

As you can see, the resultant learning is only an unproven theory. The only way to test the theory is to go back to direct learning and put your hand on the stove. You go first.

However, if your logic is sound, you should be able to project reliably, the correct answer, without having to verify it through a painful and expensive experiment or lesson that is direct experience.

Again, very few of us are capable of this sort of learning, or even indirect experience. We ignore the advice of others, assuming it does not apply to us. We refuse to connect the dots between disparate facts and come up with reliable conclusions.

As a result, we experience far more pain and discomfort in life than we need to, because we refuse to go beyond direct experience.

* * *

As I said at the get-go of this blog, the idea behind it is to figure out how to live a better life with less effort, not how to recycle pocket lint.

The ideas posted here are an attempt at indirect and even projective experience. If you can learn from the experiences posted here (and not assume, falsely, that they somehow don't apply to you) then you can live an easier and less costly life, and thus work less and enjoy more.

If you can take the information here and project it to your own circumstances (rather than assuming it is irrelevant, because it does not fit your circumstances exactly) you may be able to extract some useful information.

However, if you insist on learning only by placing your hand on the hot stove, you will end up in a life of financial misery.

Just a thought.

The Twinkie Goes Bankrupt - Again

2012-01-11T06:26:00.000-08:00

Another day, another Bankruptcy in America. What is going on with these bankruptcies? The answer is simple: Bankruptcy is one way to get out of onerous labor contracts.

More bad news for organized labor. Hostess Brands, Inc., formerly Interstate Bakery, Inc. (before the last bankruptcy) is going bankrupt yet again. What does this mean?

To many, Bankruptcy means you are going out of business - a failure in the business world, or in your personal financial world. Of course, it means no such thing. Bankruptcy, once you strip away the fear and paranoia that surround it, is not the end of the world.

In fact, until fairly recently, Bankruptcy was a pretty sweet deal for Joe Consumer. You could run up all sorts of debts, including student loan debt, and then get it all discharged in bankruptcy. And you could keep your primary residence (house), your car, and your "tools of the trade" - whatever you could convince a Judge those were.

But alas, those glory days are behind us, and today, for the consumer bankruptcy is no panacea to get out of debt. Often, debts are restructured and a repayment plan is worked out. But the old days of walking away from consumer debt and starting over are, well, over.

For consumers, anyway.

For Corporations, bankruptcy is still a fun option - one that allows you to stiff all your suppliers, your shareholders, and your employees, while keeping the corporate culture largely intact. Oh, sure, maybe the CEO will have to be driven off into retirement, with his golden parachute. But most of the organization remains largely intact, and now refreshed and often in a better position than their competitors.

For example, GM, through the bailout, was able to slash hourly worker's salaries in half - for new hires. They also were able to shed their retirement liabilities by foisting off a token amount of money to the Union. And after closing unprofitable plants (a long-term trend at GM) and stiffing suppliers for Billions - not to mention bond holders and shareholders - they emerge from bankruptcy with their only debts on the books being low-interest government loans, which have largely been repaid. They can now afford to re-content cars and sell them with a real profit margin.

Meanwhile, Toyota, Honda, and Nissan, struggling from the effects of a tsunami, has to cut costs and cheapen product content. Without the benefit of bankruptcy, they have to struggle to pay suppliers, bondholders, and dividends to shareholders - as well as pay full wages and benefits to labor. Folks like to crow about how great the "American" car companies (such as Fiat-Chrysler) are doing, but they fail to realize that these companies are running the race on performance-enhancing drugs while their competitors have been kneecapped. Down the road, well, things can change.

For Hostess, things will change yet again. After the last bankruptcy, they reorganized as a private concern, and shuttered plants, reduced workforce, and removed themselves from certain markets. One would think the core brands would be a strong market value, but inroads by the likes of Little Debbie have cut into their market share. It doesn't help, I am sure, that some of the company's products, such as the Twinkie, are the source of so many urban legends.

Does this mean the Twinkie is going away? Hardly. Under Chapter 11, the company will reorganize, and debtors may be converted to shareholders and shareholders may be told to piss off. But the core management of the company may remain. And with a host of strong brands, no doubt the company, stripped of debt, union labor contracts, and other baggage, can regroup and compete effectively in the marketplace - undercutting their competition on price initially, to recoup market share.

And so on, down the line. That is one problem with Corporations - they are designed to make money for shareholders, bondholders, management, and the "workers". Everyone wants to drag out of that factory, as big a wheelbarrow of money as they can. And often, when too many people are taking too much out, there ain't much left to go after. A union contract that doubles or triples wages above the norms for a community (which pretty much describes any union contact) may be a fine thing - in the short-term.

But in the long-term, it often means that the company cannot afford to keep up, invest in technology and improvements, and remain competitive. And often, the union contracts - by stipulating a number of "workers" per plant, act to retard competitiveness in the marketplace. When your labor contract stipulates you have to hire X number of people, it is hard to show a cost savings by investing in more advanced and automated equipment. As a result, you end up investing in inefficiency, and your product becomes outdated, outmoded, and horrendously costly.

So be careful of what you wish for. When the union man comes into town with his sweet promises of high pay and benefits - if you only give him thousands of dollars in union dues - you may well wonder if it sounds "too good to be true". You may make out in the short-term, but that defined benefit pension and health care may be gone by the time you retire, and the plant shuttered and your children out of work.

Hostess will emerge from bankruptcy and the Twinkie will survive. Less clear is whether the union pension plan will - as Hostess had suspended payments into this under-funded defined-benefit-pension deal. Likely, the Pension Benefit Guarantee Corporation - a U.S. Government Agency will be called in to straighten out the pension mess - and retirees will get 40 cents on the dollar of their pension funds, as many airline and steelworkers did. Another screw-job for the "worker" I'm afraid. But then again, why would you let a union run your pension plan? I mean, after Jimmy Hoffa, that is.

You could argue that these sorts of bankruptcies and reorganizations are a healthy thing - pruning back the vines to allow new growth to occur, economically. And that is probably true, but cold comfort to the person being "pruned" back. What this means, for many, is a second career that often pays a lot less that what you are used to.

And even though this scenario has been played out in American businesses (particularly in the so-called rust-belt) for several decades now, a lot of people act shocked and surprised when they are shown the door at age 50 and have to start off in a job that pays near minimum-wage.

Again, you can rail about the unfairness of it all. You can occupy Wall Street or whatever. Or you can take action in your own life and not be complacent and "assume" you will have another 10-20 years to save for retirement or that it is OK to buy a $50,000 car because you can afford the payments.

Regardless of whether life is "fair" or not (it never has been and never will be) luck favors the prepared. Be ready for bad things to happen, and maybe you can come out the other end in better shape. And if bad things don't happen, so much the better.

Empowerment - Why Wealth Is All In Your Head

2012-01-10T08:29:00.000-08:00

What makes one person a success and another a failure? It is mostly mental?

Americans like to whine a lot - about what a rotten deal they got out of life, how their cell phone provider sucks, and how long they had to wait in line to go fly 400 mph on a jet airplane. And of course, two-thirds of us complain about being overweight. We are so used to the good life here that we fail to realize how obscene our complaints are, on a global scale.

But it is true that our life outcomes vary greatly in the U.S. - from abject poverty and homelessness all the way to multi-Billionaire status. How far you can rise - or fall - in this country is quite dramatic. And often, people of similar backgrounds or opportunities end up with radically different outcomes. Moreover, people can end up changing their lot in life often through their own efforts.

And a lot of it has to do with your mental attitude. Yea, I know what you are going to say - that some folks start out life with a head-start. If you come from wealth, or at least a middle-class background, you will likely end up wealthy, or wealthier, or at least fairly well-off. And yes, this is true, but not determinative. There a lot of folks who start well-off and work their way down.

But there are also folks who come from humble beginnings and end up successful, or at least more successful their their peers. I've met such folks in my travels, and they are not as rare as you might think. And I know firsthand, many a young man or women who came from a life of privilege, and yet managed to throw it all away in an orgy of alcohol, drugs, low-self-esteem, and teen pregnancy.

What makes one person a homeless bum, and another - from the same background, with the same opportunities, and the same education and intellect - a Wall Street tycoon? How can one college graduate be an "OWS protester" - unemployed and living in a tent in a park, while his former college roommate is working a dozen floors above, at a Wall Street firm, making over $100,000 a year?

Both had the same or similar opportunities. Why the different outcomes?

Over the years, I have met a lot of people who have gone from "rags to riches" in the USA, and it is possible to do. The hardest thing, of course, was wanting to do it. And along the way, I met a lot of people who went from riches to rags. What sets these folks apart? Mental attitude, for the most part. Here are some of their stories. Their names have been changed for obvious reasons.

1. Suzie was born in raised in South Philadelphia. She lived in a rough neighborhood, where the crime rate was high, and the success rate was low. More than half the students at her local high school never graduated. Most of the boys gravitated toward street life early on, posturing as tough "gangsta's" who called their girlfriends "bitches" and "hos". Two-thirds of her classmates ended up getting pregnant, some in junior high school. Many dropped out. Drug and alcohol abuse was rampant. And many of the girls ended up becoming prostitutes, to pay for their drug habits.

Suzie told me that she saw this going on around her and decided that she didn't want to end up the same way. Getting out of South Philly was the first step. Getting an eduction, the second. She signed up for, and joined the Navy, and left Philadelphia right after high school.   It was an opportunity - to get away and to get an education.

Not only did they pay for her to attend college, they also paid her way through law school. I met her when she was working on her Law Masters degree. She had a great career at that point, was financially successful and happy.

2. Billy came from a rural farm in Maine. He was a good student at his local school, but most of his fellow students would end up never traveling more than 100 miles from home. Many would be married, with children on the way, before they left high school.   In a way, Billy's environment was not too dissimilar than Suzie's - only more rural (most people living in poverty live in rural areas, contrary to stereotypes about the inner-city). Employment opportunities were limited and drug and alcohol abuse were fairly rampant in his high school.

Billy was able to get a scholarship and leave Maine to go to college. He did well and after graduation, moved into an apartment with an older man who became his lover. But Billy resented being kept as a pet, and decided that he wanted more in life. He applied for, and was accepted into, an Ivy League law school.

He excelled in school and got a coveted summer job with a big New York law firm, who made him an offer to become an Associate upon graduation. He worked hard at the firm, earning big money and is now a partner in that firm. He now lives in downtown Manhattan in a beautiful condo with a view of the city. It is a long way from milking cows on his father's farm, to be sure. And he lives today in a world that most of this classmates would find incomprehensible.

3. Sharon grew up in a very impoverished part of West Virginia. Her father left her when she was three years old, and her Mother had to earn a living as an over-the-road truck driver. Sharon was raised mostly by her Grandmother, seeing her Mom only on weekends or whenever her trucking route took her through town.

Most of Sharon's friends in high school were going nowhere fast. Drugs, particularly amphetamines, were prevalent, and many of her girlfriends were pregnant before the 10th grade.

Sharon wanted more out of life than a child and a trailer home and an abusive drunken spouse with a low income. She would look at the pictures of the dream homes in the magazines in the library at school and wonder why she, too, couldn't have that lifestyle.

She did well in school and managed to avoid the advances of the sweaty beer-soaked sons of coal miners and thus avoided a teen pregnancy. She got a small scholarship to an art college to study interior design. Upon graduation, she moved to the big city and got a low-paying job with a design studio. She changed her name to a more artistic sounding one and had business cards printed up. Before long, she was doing interior design consulting work on the side, and eventually, it became a full-time job.

She married a nice young man who owned a computer consulting business and they had two daughters.   She and her husband bought a nice home in the suburbs, which she decorated as she always dreamed of, during her childhood.

She still stayed in touch with her Mother, who was now retired, and also very proud of her daughter's success. She had gone from the trailer park to Architectural Digest, within the span of 20 years. It was quite an accomplishment.

* * *

These are just three stories. I have met many more folks like this, who came from backgrounds of modest means and modest opportunities, to become wildly successful in their own right. And there are many, many more that might not become wild successes, but nevertheless become successful and happy, when many of their peers fall back into poverty. What are the common denominators in these stories?

1. Attitude - You have to have a desire to want to improve your life, to get ahead, to be financially independent.

2. Avoiding the teen pregnancy trap - when you knock up some girl (or get knocked up yourself) at an early age and then quit school to support the baby, it basically shoots down your career for at least 20 years. You are fiscally behind the 8-ball and will be playing catch-up the rest of your life.

3. Avoiding the drug/alcohol trap - You can't get ahead if you just want to get shitfaced and stoned all day. People like to say they are "functional" alcoholics or drug users, but the truth is, you can't succeed when you are stoned all the time - ambition is the first thing sacrificed on the altar of the almighty ganja.

4 Avoiding the mental illness and depression trap - Granted, this is not something you always have a choice about, but the drugs and alcohol often feed this. If you are depressed and feel worthless, chances are you are not going to succeed. And similarly, merely having delusions of grandeur is not the same as having a plan to succeed.

5. Moving Away - If there are no job opportunities in the Ghetto, or in Rural Maine, or in the Coal-Mining Regions of West (by God) Virginia, then move to where there are some. This very simple concept eludes about 90% of the population, who, for some reason feels the need to stay on the same acre that their mother spit them out on, a couple of decades earlier. Move. It is often your best bet.

Now, let's look at the other end of the spectrum - people who came from wealth and then squandered it all. Is there a pattern here as well? Here are some typical stories of people I know. Sad to say, I know more people who have moved down the economic ladder than moved up. The names have been changed and some of these stories are composites of a number of people, to protect the identity of the individuals.

1. Tim came from a family of strivers. His Father had gone to college and worked his way up the Corporate ladder, which was quite an accomplishment for a family that was only a few generations removed from the Irish Potato Famine. Tim's Father had to struggle to get ahead, and to him, the struggle was worth it. "I want my kids to have the things I never had," his Dad would say, "And not to have to struggle as I did."

So Tim was pampered, comparatively speaking, and not pushed or challenged in any way. It was assumed by his Dad that Tim would be a star quarterback on the football team - or at least a valuable player - and get good grades, get into college, join his Dad's Fraternity, and then graduate to a career in business, climbing the corporate ladder, to heights even his Father never achieved.

It didn't quite work out that way. An introspective lad, Tim never was much for football, and his academics were a mixed bag. His mental health was in a precarious state - and it didn't help any that his parents drank heavily and argued all the time. Mental illness, depression, alcoholism, and suicide ran in the family. Tim easily slipped into the world of alcohol and drugs, which were readily available to a high school student at that time. Before long, he was getting stoned every day - and pretty much all day long.

In his late teenage years, Tim started developing the signs of incipient schizophrenia and had to be hospitalized once. Alarmed, his parents sent him to a psychiatrist who put him on medication. Tim's Dad was disappointed that his son was not to be the football star and man-on-campus he had hoped for. This only made Tim feel worse.

But Tim still had opportunities. His parents could afford to send him to whatever college he was accepted at - and grad school as well. He didn't have to worry about feeding himself or providing a roof over his head or paying tuition - a true luxury, for most folks.

After many brushes with the law, Tim managed to get a job and support himself. However, he lead a lifelong struggle with substance abuse, mental illness, and depression. While he didn't end up homeless or insane, his standard of living was a slip down the scale from the heights his parents had reached - and certainly not the level he could have achieved, given the opportunities he had.

2. Jimmy's father was an Engineer at a local company, and they had a comfortable life in an affluent suburb. Jimmy, like most of the kids at his high school, was pretty spoiled. The kids at his school all had cars and disposable income from after-school jobs. When he turned 16, his Dad bought him a secondhand Camaro, and he was a big man on campus.

Jim's Father hoped that Jim would go on college and perhaps become an Engineer like himself. And Jim's Father could afford to pay the full price for tuition, room and board, which back then was a lot less onerous than it is today.

But the temptations of teen life in the affluent suburbs of the big city were many - sex, drugs, alcohol. And before long, he was spending weekends with his buddies, cruising around in the Camaro, drinking beer and smoking pot. He had a run-in with the law and a DUI. And Saturday nights were spent in the back seat of his Camaro, with his girlfriend, who promptly became pregnant.

College suddenly was out of the question. He was a teenaged Father now, much to the embarrassment of his parents, who were then shunned from the cocktail circuit as being low-rent white trash. He got a job at a local factory, and he and his wife rented a cheap apartment above a bar. He continued the lifestyle he lead as a teenager - hanging out with his friends, drinking beer, smoking pot, and having sex. It was not an ideal environment to raise a daughter. Eventually, he and his wife divorced.

3. Billy's Parents were Millionaires. I met Billy and the likes of him in Prep School, where his parents sent him starting in grade 7. Billy really didn't have to try very hard in life. His parents had money, and if he just hung around until they died, he would inherit enough money, even after dividing it with his three siblings, to get by.

So, even though he had his way paid through a prestigious prep school, and the opportunity to go to any college he could choose, Billy decided instead to drink beer and smoke pot and do as little as possible. And one reason for this was the mental health issues in the family. His parents were a little odd, and his older brother was schizophrenic and suicidal - and eventually killed himself shortly after his 21st birthday.

This had a profound effect on Billy, who took to drinking and drugs with a new vigor. His parents, alarmed and shattered by the suicide of their other son, left Billy largely alone, blaming themselves for "pushing" his brother to succeed.

So, Billy just hung out. His parents gave him a small allowance and bought him a succession of inexpensive economy cars to drive. He would do odd chores for them, such as mowing the lawn or painting the house. He became their live-in handyman. And Billy just waited - waited for his parents to die, so he could inherit.

Unfortunately for Billy, his parents were remarkably robust and long-lived. He would be over 50 years old before he would inherit. When the will was finally read, he was shocked to discover that his share of the estate would barely leave him enough money to live on, the rest of his life. While his parents lived as millionaires, Billy would end up dying in poverty.

* * *

What do you see here as a pattern? People with opportunity who fall down the economic ladder due to emotional illness, alcoholism, drug use, and teen pregnancy. Granted, perhaps one can't control mental illness, but the other aspects are, to some extent, controllable. Not smoking pot, not being a beer-soaked 20-something party boy, not getting a girl pregnant (or not getting pregnant yourself) are key to getting ahead.

And these three examples have one other thing in common: The people refused to move away to find better opportunities, choosing instead to live in their home towns, near their parents, where they felt secure and comfortable. They chose not to push the envelope, or push themselves.

Now, what about my story? It is sort of a hybrid of all of these. I cam from a family of strivers - and a family with a history of mental health issues, suicide, depression, alcoholism, drug abuse, schizophrenia. And also I came from a family where money was not an issue - at least initially. My siblings all had their way paid through prep school and college. When it was my turn, the money started drying up - which, as it turns out, was the key.

Forced to work for a living - and to work my way through school - my attitude toward college was different. I started to really appreciate how expensive and precious a college education was. It was not just some continuation of high school where I could drift for four more years without direction. It cost serious money - much of which I had to borrow.

And I fell into the drug and alcohol trap at an early age - but thankfully did not get any girls pregnant (that I am aware of). My friends - many profiled in the composites above - liked to drown their sorrows in pot and alcohol, and they wanted companions to take down with them. And, if I hadn't changed my course, I would still be living in my home town, drinking beer with them today.

But one day, I woke up, literally and figuratively, and thought to myself where this was all headed. Did I want to end up like them? Living on the margins and hoping to be able to borrow money to buy a Jet Ski? Always broke, always looking for pot and beer? Or did I want more out of life?

And I made a decision, right then, to give up drinking and drugs and put my life back on track. It was a matter of mental attitude, nothing else. What changed my life was not an inheritance or winning the lottery, but changing my attitude toward life - becoming proactive instead of passive - of grabbing opportunity instead of letting them pass by.

When I was with my drug friends, the idea of being a Lawyer someday was as alien as the man-from-Mars. My self-esteem and mental attitude at the time was that Law School was "hard" (Remember "The Paper Chase"? Law school is nothing like that) and that only "Smart People" could get in.   Of course, I was fairly smart - and a lot smarter than some of the idiots out there who are practicing law.

Suddenly, I was able to finish my Engineering degree. I moved out of a depressed area and moved to an area where there were jobs and opportunity. Not only was I accepted into Law School, my employer offered to pay my way! And these were not once-in-a-lifetime opportunities offered to a precious few, but rather fairly easily obtainable opportunities that anyone with a modicum of smarts could achieve.

Yet few even try. It is all a matter of mental attitude. Seriously.

Now, I am not saying Engineering or the Law is the right path for you (please stop being reactionary, I hate that!) but that in everyone's life there are opportunities, and what prevents people from going after them is low-self-esteem. What people often chase after instead are bad ideas - consumer spending, borrowing, and the like, convinced that getting a loan is a "great opportunity" or a privilege, and that having a shiny new car in the driveway is the equivalent of success.

What I am saying is that mental attitude is the key to taking advantage of whatever opportunities are thrown your way. And if you are too beaten up by life to grab hold of the controls, chances are, you won't make the effort. It is a phenomenon called Learned Helplessness, and I have written about it before. Breaking free of Learned Helplessness is very, very hard to do - and most people aren't even aware they are victims of it.

Now, in response to this posting, some Wacky Liberals will shout back, "Well the whole system is stacked against the workers, and people don't have opportunities like you had! We need to redistribute the wealth to make everyone equal!" - and other sorts of whiny things like that.

Now, before you flame, please read. Wacky Liberals are different from Liberals - there is nothing wrong with being Liberal, but there is everything wrong with being a Wacky Liberal. Liberals want to see a society with equal opportunity - which is a fine and noble goal.   Wacky Liberals want a society with equal outcomes which simply is not a sustainable model, as the former Soviet Union has proven.

Wacky Liberals are victims of Learned Helplessness and want to perpetuate it. In their world view, nothing you can do in your own life makes any difference. The first three examples above - of people born into poverty with limited opportunities who nevertheless became successful, are nothing but bizarre aberrations or people who "got lucky." You have no choices in life, they argue, so don't bother trying. Let the government help you out - and punish those that try, in order to pay for it all.

And that is why Wacky Liberals refer to the poor as The Less Fortunate, as if life were a casino, we all place our bets, and some win, and some lose. And not surprisingly, a lot of Wacky Liberals are basically casino winners - people who inherited money or who earn obscene sums for doing little or nothing of value - and thus feel guilty they are so fortunate in life. In their world-view, effort or attitude mean nothing - it is all a matter of winning or losing the lottery of life.

But as the above examples illustrate, you can throw money at people all day long, and in many cases, it has the opposite effect - if they don't have to strive, they won't strive. Helping people out is one thing, telling them "game over, give up" is another.   Even giving a needy person a free car can be problematic and cause more grief than good. Unearned wealth corrupts at all levels.

And that is why altruism can be very evil - you hand someone everything they ever wanted in life, and well, they stop living life. Life is the struggle - that is what gives it meaning. And that is why winning $300 million in the lottery can make you very unhappy. Suddenly, everything you have struggled for is meaningless - overnight.

The struggle gives life meaning. A life without struggle is meaningless - which is why people who live perpetually on public assistance are not happy-go-lucky, but miserable. Life without purpose is misery. A life without a job, a purpose, a contribution, is a recipe for disaster. And oftentimes, the difference between success and failure in life is the choice - the choice - to struggle or not. To make the mental decision to try for more than you have.

And that makes all the difference in the world.

Phone Costs - and the one-year promotion

2012-01-09T17:16:00.000-08:00

Keeping telecommunications costs down is an ongoing battle.

One annoying thing about telephone deregulation is that it is hard to get a straight answer on phone costs. Everything is offered on a promotional basis - the price is good for one year, after which the pricing goes back to "regular" levels, which are often astronomic.

For example, a year ago, I signed up for a "bundle" service that included unlimited long distance, as well as a number of calling "features" as well as mid-level DSL service and a VoiceMail box. The monthly cost was about $65. Last month, the deal expired, and the phone bill bumped up to its "normal" level of $90 a month.

This may sound like a trivial amount of money to some folks, or a staggering number to others. It is $1000 a year, and this is a lot of money to any middle-class person. After all, even if you are making $100,000 a year, chances are, your disposable income is only 10% of that, and thus $1000 is 10% of your disposable income and well worth investigating for cost cuts.

Many folks have both a landline and a cell phone, and thus the overall costs of having both (and DSL service) can top $2000 a year. Or, if they have cable TV and cable modem, as well as a cell phone, the costs could be close to $3000 a year, particularly if they have a land-line as well. For a family with multiple cell phones, texting and data plans, a sport package Cable TV connection (with HBO and other premium channels) and a land-line and DSL, the bill for communications could easily reach $300 to $400 a month. And people wonder why they are broke all the time.

For most individuals, all of this is not really necessary. Many young folks were raised on cell phones, and the idea of the land-line seems quaint and antiquated to them. Why bother having a land-line when you can have just a cell phone and then have (a) one phone number, (b) one voice-mail (usually free) and (c) one low monthly bill?

And for many folks, this is a solution that makes sense. If you are in college, a cell phone may be the only phone you need, as you are moving a lot and a land line is just a hassle. And chances are, you are getting Internet service in the dorm, or you are sharing it with roomates, so the cost of the additional land-line (DSL) or Cable service (Cable Modem) is shared as well. Or you can just use free Internet access at a WiFi hotspot on campus or at a local coffee shop.

Internet access, of course, is a necessity for many of us who do business over the internet. For many folks, it is an expensive luxury. I know some folks who have high-level DSL or Cable Modem access, and spend $50-$100 a month or more on just that service, all so they can check their bank balances and e-mail photos to their grandchildren. If this describes your internet access usage, then perhaps you could save quite a few bucks by going to the local library or internet cafe once a week or so. Even a cheap dial-up service might suffice.

But of course, more and more, people are using the Internet for Entertainment - such as downloading movies from Netflix, which, despite all the negative press, is still fun. For that, you need at least a medium speed Internet connection.

For me, my requirements are fairly simple, although perhaps more than that of the average person - but different from that of say, a college student:

1. I need a DSL connection to upload and download documents online and do business online.

2. I need a clear, static-free phone connection that will not drop calls in the middle of a five-way conference call.

3. I need a voice-mail that will answer the phone when I am on the line (busy) or not available (no one answers). Busy signals are not an option.

4. I need a cell phone for very occasional use to mostly check voice mail and return calls.

What I do not need are:

1. Cable TV

2. Texting or data plans for my cell phone.

3. Lots of airtime for my cell phone.

4. A smart phone.

So far, what has worked well for me is a DSL service hooked to a land-line. Landlines may be archaic, but DSL with a land-line provides me with a clean, reliable connection for telephone conference calls. My cell connection, until recently, was "iffy" here on the island, even with a cell phone antenna and amplifier. Recently, however, they have installed several new antennas on the water towers and cell service has improved.

I have been using the AT&T GoPhone plan for a year now - which costs $100 a year (no taxes or fees added!) for each phone for 1000 minutes. About a month from now, the plan is up for renewal, and we have about $15-25 left on each phone. It has worked well and is easy to control and predict costs.

The local cable company is offering land-line service, cable TV and Cable Modem Internet, "starting at $69.99 a month!" which sounds attractive, until you realize that is the come-on promotional price that is good for "new customers only" for 12 months (after which it goes to $89.99 a month), and doesn't include a voice line. From what I can read from their site, you can get a voice line, or Internet, but not both. Of course, you could piggyback phone service off the cable modem, using Vonage or Magic Jack, but the latter often sounds like hollering down a well, and both require additional fees as well.

Nevertheless, that is an option, a "Plan B" if you will, but isn't it interesting how, in this age of deregulated communications, both options come out to about $100 a month when all is said and done (quote prices do not include local excise taxes, island access taxes, 911 charge, federal whozitswhatzis tax, and of course the tax-tax, that all add $10-20 to the price of any communications package).

Of course, one could argue that you could switch from an AT&T bundle (which are available with satellite TeeVee) to a Comcast Bundle and then go back and forth and take advantage of these "new customer" pricing deals. But the catch is, they usually require to you keep service for 24 months to get the lower price, and also there may be connect and disconnect fees due when you switch (at least from the cable company), not to mention equipment fees. So it might be an exercise in futility.

The point of these "bundle" deals is not to give you a package of great services at a low price. No, that is the bait that they are using to snare you, the idiot consumer, into signing up for a very expensive telecommunications package, for the long term. People say, "Well, I'll take the bundle and then when the price goes up, switch to a cheaper service!" but if you read the fine print (and it is very fine print) on the Comcast site, you'll note that you can't just do that, for at least a year after the price goes up.

Nice try - sort of like trying to beat the banks at the credit card game.

There are some other options I could use, of course. I pay $7 a month for an AT&T voice-mail box, and that is sort of redundant when I have an answering machine with my cordless phone as well as a free voice-mail with the AT&T GoPhone plan (which can be accessed without using minutes). So I dumped the AT&T Voicemail plan and programmed the land-line phone to "go to" the cell phone if no one answers the land-line or if the land-line is busy.

It may not sound like much, but $7 a month is $84 a year, or about one month's service, and by taking five minutes to make such a change, I save $84 a year, or an effective hourly rate for my labor of about $1008 an hour....

Another option, which I used when I was snowbirding, was to use basic "poverty line" service for my land line, which runs about $25 a month. This meant I had no long distance service, but an AT&T calling card, which charges by the minute, ended up being a better deal overall (I still use this for overseas calls, as paying for an overseas plan is pretty futile, unless you call Slovenia on a daily basis). Yes, the bundled "unlimited long distance" ends up being pretty much a wash, unless you make a lot of phone calls. For a family, it might be a good deal. For someone who rarely makes phone calls, not so much. I have this service, which I will examine down the road, to see if it is really worthwhile or not.

The problem with the poverty land-line is that it has no calling features - no forwarding when busy, no caller ID, no nothing. So if you want to use these * features, the poverty land-line is not an option. But if you just need a phone to call locally, it could be a good deal.

With the poverty land-line, I used my cell phone as my primary number and then had it call-forward to the land-line, which insured good signal at the home, as well as a single number for both homes. It worked well, and since I hardly used any of my minutes anyway, it didn't cost much, in terms of cell phone charges. But now that I am in one place, it made more sense to dump the cell phone minutes and apply that money to the land line instead.

Overall, my goal is to keep the overall telecommunications bill (Cable, Internet, Phone, Cell Phone) to under $100 a month. So far, I think we have been successful at this, but it still galls me that I have to spend as much as we do, just for communications.

We'll see how this works out. If I didn't need Internet service, I would dump the land line completely.

But I would be interested to hear how others deal with this. What are your communications needs? And what options do you use to achieve these goals? And how much does it cost (the actual bill, not the promotional numbers bandied about that never include all those taxes and fees)?

Because to me, $100 a month is far too much, but I am not sure there are any realistically cheaper options.

50 Million Americans on Welfare? Not Really...

2012-01-09T13:36:00.000-08:00

Kelly's satiric take on the traditional view of Welfare Queens, from The Onion.

One number bandied about by conservatives is that "50 Million Americans are on Welfare!" which is an alarming statistic, because if true, means that 1 in 6 Americans isn't working, but instead staying home and watching TeeVee all day long.

But like so much else, it isn't really true. And when you have to resort to lying and deception to make your point, what exactly was your point again? And that is sad, too, as getting people "off the dole" is a good idea. But your good idea loses currency when it is clearly based on distortions.

What is "Welfare" anyway? That is the first problem to address, and if you include everyone who gets a check from Uncle Sam, then the number may be far higher than 50 Million. Of course, all those conservative retirees collecting Social Security can't be counted as being "on Welfare" because they paid into the system, right? And their Medicare was all paid for too, right?

Well, not exactly. Most retirees end up taking out more than they put in, and the system is funded by current income, not money squirreled away in the Scrooge McDuck Money Vault by the Social Security Administration.

Exhibit A: The Scrooge McDuck Money Vault. Most people believe that 'their' Social Security money is being kept for them, here. No really, they believe that.

So, right off the bat, we don't count the millions of Social Security recipients because if we did, that would add another 50 million to the count. And the voter demographic we want to get at in order to cut off all those "Welfare Queens" is that 50 million older people on Social Security. We want them, who are receiving a government check, to cut off the government checks of others - so the taxes of the very rich can be kept low.

Makes sense, in a sick sort of way. But how many people really are on "Welfare" as we know it? 50- million like the conservatives say?

Try 4.4 million.

Who! How did 50 million shrink to 4.4 million? Well the conservatives have a very inclusive definition of "Welfare" as being any sort of government check you may receive other than social security of course!

They count medicaid, which is a program, like medicare, but which provides medical assistance for the very poor. 50 Million people are on medicaid, and that is a scary number. And it is costing us hundreds of Billions a year. But of course, this is much better than "Socialized Medicine" or "Obamacare" and donchuforgetit!

50 Million Americans on Welfare? Try 4.4 Million instead. Counting the working poor who receive food stamps and Medicaid as being "on welfare" is more than a little disingenuous. It is an outright lie.

But these 50 million in medicaid are not all on "Welfare" but may in fact be working or retired as well or receiving Social Security Supplemental Income (SSI - the Welfare for the elderly, about 5 Million people). So of these 50 Million, clearly most of them are the working poor, not "Welfare Queens".

Similarly, there are 40 million people on food stamps, which again is not "Welfare" in the sense of a check you get for not working but an assistance, again mostly to the working poor or elderly. These are people trying to get by on $20,000 a year or less - often far less. But they are earning income and they are working - not lazing about waiting for their gub-ment cheese.

So, what does this all mean? Well, the idea that 1 in 6 Americans is "living off" the hard work of the other 5 is sort of silly. More like 1 in 75 Americans is on what we traditionally call "Welfare". And, oddly enough, this number has not risen much in the last few years. The number of welfare recipients has stuck pretty much at around 4 million.

This is a far cry from 50 Million and not nearly as alarming. But that is the point, isn't it? To get people all riled up about "50 Million on Welfare!!"

The number of people collecting Unemployment Insurance, on the other hand, has recently risen pretty dramatically to 10 million and above, which is not too surprising, considering how the economy has been. However, unemployment benefits are temporary in nature (unless Congress keeps opting to extend them, again and again) and thus not part of a long-term "Welfare State" trend. This does not keep conservatives from throwing their numbers in the mix, however. And of course, letting unemployment benefits expire - as they were designed to do - is one way to get this number down, and get people back to work.

So, why do Conservatives lie about these Welfare numbers? The real numbers are alarming enough - 50 million people on Medicaid, 40 million on food stamps. But those are the working poor, and you can't get the 50 million people collecting Social Security all riled up about welfare if you set them against the working poor - or use the real number of 4.4 million. But if you can convince them that "Welfare Queens" are all buying Cadillacs - well, you've got 'em.

And like I said, this is a shame, as it prevents a real discussion from taking place. If all you have to offer is lies and deception, then what else ya got? Not much, as it turns out. And one lie invalidates all of your other arguments.

So, the next time Newt Gingrich tells you that 50 million people are on Welfare, call him out on it - and ask him why he isn't counting Social Security recipients in this math.

How to Drive a Company Bankrupt for Fun and Profit

2012-01-09T08:29:00.000-08:00

Mitt Romney with his campaign staff, at a recent press conference. Whoops! Wrong Caption!

In one of the episodes of The Sopranos, a local sporting-goods store owner gets into a gambling debt problem with Tony Soprano. Tony realizes the fellow is getting in over his head, and lets him - knowing full well how the game will play out.

When the fellow can't pay off his debts, Tony and the gang take over his sporting goods store and then run it into the ground - a "bust out." It is a fairly simple formula, and it happens all the time in American Business, particularly the retail and restaurant businesses.

Tony and the boys make money by not paying any of the businesses' bills - the rent, the light, the suppliers, the payroll, the withholding, etc. But they keep selling inventory - and ordering more, using the store's credit - and then pocketing the cash, tax-free. Any business that is tax-free ends up being pretty profitable, which is probably the only reason drug-dealing has any profit at all - no overhead, no taxes.

But since they are basically selling off the inventory at 100% profit, they can take hundreds of thousands of dollars out of the business, before the suppliers get wise and start cutting off shipments to the company. Eventually, they have run the business into the ground, walked away with all the money, and left the owner a bitter and broken man.

And to the outside world, it appears just as another "small businessman gone bust!" and everyone shakes their head at how poorly managed the place must have been.

Restaurants work the same way, and I recounted before the tale of the young fellow (a cook) who used his inheritance to start a restaurant with his "connected" Uncle from Utica. The Uncle had run a number of restaurants, many of which mysteriously caught fire. All went out of business - and yet the Uncle was quite wealthy. Suppliers went unpaid, tax withholding payments never got to the IRS, and paychecks started to bounce. Yet the Uncle had a new Cadillac.

Needless to say, the Old Tyme Gaslight Restaurant went the same way as the other restaurants the Uncle had a hand in, and the young cook, distraught over his failure, shot himself one night in the kitchen. As dishwasher, my last task was to mop up the floor, before I clocked out for the last time.   I never got my last paycheck.

Personable Presidential Candidate Mitt Romney has made recent news for his connection to Bain Capital, an investment firm that, among other things, did what Tony Soprano did, only, of course, perfectly legally. Many companies are often offered for sale at prices that are very low - often less than the liquidation value. Such companies are viewed as "dogs" as the equipment may be old and worn out and, in order to be competitive again, they would need to invest millions, if not billions, in new equipment and technology. And they may also have unfunded pension and health care liabilities for the current and retired workers. And they may have years of Hazmat cleanup issues. No one wants such money-losing propositions, and they are often sold for cheap.

A rusty old steel mill is a case in point. This sort of technology - rolling steel one slab at a time - dates back to the early part of the last Century. And indeed, many of these mills have equipment that predated World War II. I interviewed for a job at one such mill. They used a room full of clattering relay logic to run the mill, which had dirt floors and ancient rolling equipment. Management had ill-advisedly bought out the company from the owners, using highly leveraged junk bonds (this was, after all, the 1980's). They were struggling to make the payments on the debt from the income of the place. Since then, they have reorganized, yet again, and are still in business, mostly because they make specialty steels - high-tech and high-priced steels that the foreign market has yet to tap into.

Other mills are not so lucky. High-volume steel production has largely shifted overseas. Instead of dirt-floored environmental nightmares, where the same bar of steel is heated, reheated, and then rolled, rolled, rolled, over and over again (with the impurities being ground off between rollings), modern antiseptic factories in Japan and elsewhere use "continuous mills" which intake raw materials at one end and turn out neat shiny rolls of sheet steel at the other, in a machine that looks like a big brother to the newspaper press. The bulk market for sheet metal, for appliances, cars, and the like, is met by these new, modern plants.

And the old plants can't compete. They will go under, eventually, without huge investments in materials and equipment - investments that no sane investor would make, as they would still be marginally competitive with overseas plants. You'd be smarter to just start fresh and build a new mill and a new company, than to pay good money for an old rolling mill.

But, there might be money still to be made running the existing place into the ground, particularly during an economic boom time, where some small profits may yet be made. You can sell the steel, take out cash, and continue to under-fund the place, spending nothing on infrastructure, repair, or anything else. Sort of like, well, what Sears is doing.

Since you didn't pay a lot for the place, every nickle you take out of it is pretty much profit. So you make a nice pile of money, in the short-term, running the place into the ground. When the end comes, you throw up your hands and say, "Gee, it didn't work out - the equipment was too old, and the foreign competition was murder! And those unfunded pension liabilities! We never did get around to making that up!"

So another company goes under - a company that arguably would have gone under anyway, and perhaps should have shuttered its doors years earlier and taken the cash to fund the pension fund. But the Pension Benefit Guaranty Corporation takes up the slack, slashing the retiree's pensions and making up the difference from its own assets.

Is this legal? Yes. Going out of business has never been against the law, in the United States. However, I suppose you might be able to make out a conspiracy or fraud charge, if you could prove it was their intent to gut the company and leave the government on the hook for the pension liabilities (and screw the pensioners). But it would be a hard case to prove.

This is not to say, of course, that a political case can't be made.

Because, just like the Sopranos example above, when you go out of business, it ain't against the law. And unless you can prove intentional malfeasance, it is a hard case to make.   And in many cases, the same scenario plays out with a number of companies you might be invested in.

Are you a culpable as Tony Soprano or Mitt Romney, because you bought stock in GM? GM paid out dividends, even as it was losing market share. They rode the company "all the way down" and then refinanced it, in bankruptcy, courtesy of a government bailout. Who suffered? Well, some employees who are now getting paid a lot loss, and some retirees, whose pensions are going to be funded from a lump sum which is now in the hands of the Union (that won't end well, I promise you that!).

And some economists might argue, rationally, that when you strip away all the emotional baggage about the workers (a favorite phrase of both Karl Marx and NPR) that what companies like Bain Capital were doing, was in fact, an economically useful function.

Sharks and other predators are feared - and rightly so. And they usually pick off the lame, crippled, and elderly prey - which are easier to catch. But predators are necessary to any ecosystem, as we've discovered in environments where we've wiped out the predator class of species. Without predators, the prey species often overpopulates - often becomes weaker as a result - and is prone to diseases and sudden die-offs.

Creaky old steel mills and lame and ailing gazelles have one thing in common - they need to be taken down. You can wait for the inevitable disease and decay to set in, or finish them off in one bloody flash of violence. And no, Darwinism isn't pretty nor neat. And many folks don't have the stomach to witness this process. And perhaps that is one reason why the folks who specialize in shutting down companies and laying everyone off are so highly paid in our society - few people have the stomach for this sort of thing.

But that is harsh reality, and not many folks like to live in reality - but instead prefer a fantasy world, where the lion lays down with the lamb, and hopelessly outdated an inefficient businesses are kept alive by government subsidy, forever. But neither is a realistic option. The lion eventually gets hungry, and you can't keep money-losing businesses afloat forever - in denial of economic reality. Great Britain tried that, and it didn't work.

But even in these sorts of scenarios, where the "worker" feels pushed about by greater powers than himself, one does have choices to make in life.   And while you can argue all day long about the "unfairness" of the closing of the steel mill, it won't reopen it - ever, ever - nor will it get you any satisfaction, either emotionally or fiscally.

The main problem "the workers" face in a situation like this is that their defined benefit pensions are based on promises made by the management, and often the union as well, and thus are little more than paper promises that cannot be enforced, if the money is not there. A full retirement from GM back in 1980 was a good deal, as the company was still solvent.   But you have to hope the company stays solvent for your pension checks to keep coming.

As many Eastern Airlines Pilots discovered, even pushing your employer to fund the pension plan is no real solution. They accepted a cut in pay in return for full-funding of their pensions, only to have the money taken away during bankruptcy proceedings and pooled with the underfunded pensions of the other unions. United Airlines employees fared little better.

For most of us in the younger generation, this is not even an issue. Defined-Benefits Pension Plans are a fairy-tale. We have to fund our own retirements, which may turn out to be a better deal. If properly funded, you may end up better off than with a Defined-Benefit Pension Plan that ends up being taken over by the Government.

Incidentally, it is amazing to me how so many people are fiscally illiterate on this subject. The other day, I was discussing Defined-Benefit Pension Plans with a retiree (who is receiving such a pension, from a company that is teetering on the verge of bankruptcy) and they asked, "What is a Defined-Benefit Pension Plan?" - they had no clue. And unfortunately, they have no clue how their lifestyle will be affected once the company supporting the plan goes belly-up and their pension check is cut by more than half.   Only three more years on their new car loan, too. Ouch.

And that right there is where you can take action in your own life. Live on less, spend less, save more. Just because ACME corporation promises you 75% of your last year's pay in perpetuity as a pension, don't count on it as your sole source of retirement income. Because there is a very real and finite possibility that it won't be there for you - or that at least part of it will go into the ether, if the company becomes insolvent.

And in retirement, it pays to keep an eye on your pension - if you have one - and understand the finances of the company supporting it, and whether they will be there to pay it, down the road. If you are offered a lump sum payout, it might be an option worth exploring, as you at least have that money in your hands, and are not counting on the whims of future management, future markets, and other uncertainties in operating a business.

Of course, one question a lot of people have is, "Why do they let these companies underfund their pensions?" and the answers are very complex.   Pension liabilities are always the last thing to be paid, just as many people, individually, fail to fund their own 401(k).   It always seems there is something more pressing to be paid now, and that retirement can be funded later. And many executives make the same argument - we need to fund new products to keep the company in business, so we can fund the pension plan down the road.

But like the failing restaurant scenario (where the restauranteur stops paying withholding in order to buy meat), the lack of funding for the pension is like the miner's canary, and should be a wake-up call to management that perhaps they would be better off just shuttering the place, paying everyone off, funding the pension plan, and calling it a day. Because that is what ends up happening, anyway. Knowing when to quit, is key.

After 9/11, laws were passed relaxing the already relaxed standards for pension funding. Airline and Steel industries were targeted as being particularly vulnerable to bankruptcy, and it was thought that relieving these businesses of some of their pension liabilities would help them stay solvent.

Of course, it didn't work, did it? The companies went bankrupt anyway, a few years later, and since the pensions were even more underfunded than before, the "workers" were screwed even worse. You have to wonder - if you believed in conspiracy theories - whether it was all a set-up from the get-go, and that these Bain Capital people didn't actually push for the more relaxed pension-funding standards (or knew they were on the horizon) and realized there would be cash to be extracted from a failing business.

Like Tony Soprano, they let the "mark" gamble more, knowing full well the end result would be a "bust out".

The only way to avoid this scenario, is to simply not play the game. Save money, spend less, and don't rely on a defined-benefits pension as your sole source of income.

Bi-Lo buys Winn Dixie for Lo.

2012-01-07T10:40:00.000-08:00

Winn Dixie is being bought by Bi-Lo. Is this a good deal for shareholders?

I noted in an earlier posting that Winn-Dixie has really spiffed up their stores and improved product, price and profitability. Bi-Lo has made an offer to buy the company, for $9.50 a share, cash. Since I paid about $7 a share, I guess I can't complain. But what is going on behind this deal?

Winn-Dixie, in retrospect, appears to have been grooming the company for such a buyout. And this is not necessarily a bad thing. They took a money-losing chain that was fresh from Bankruptcy, and spun off or closed down the manufacturing end (they actually made their own soda-pop) and then took that money to refresh the stores. The result was an improved chain that didn't look like a place refugees from Wal-Mart might shop.

Bi-Lo, in offering $9.50 a share might be getting a bargain. And some shareholders are not happy and have filed suit to block the sale.   These were likely the people who paid nearly $10 a share back in July. The price has since dropped a bit.

But is Bi-Lo getting a steal on the company? Perhaps. Oddly, the Board signed an agreement that they would forfeit $19.6 Million if the deal didn't go through, effectively preventing them from shopping the chain to other companies or considering other offers.

On the other hand, perhaps there are no other offers, and the shareholder filing suit is just hoping to make a quick kill, get some cash and then walk away. To make the deal go away, Bi-Lo and/or Winn-Dixie will pay off such shareholder suits, as they throw a wrench in the works.   In fact, strategically, when a buyout or takeover is in the works is a good time to file a lawsuit. Got a Patent case? Bring it the eve of a takeover.   They will pay you to go away, no questions asked.

And who wins? The Lawyers, of course. For both sides.

I am not sure that Bi-Lo is underpaying for Winn Dixie. The market price of the stock has hovered around $6-7 a share for the last year or so, peaking briefly in July of 2011at nearly $10 a share.   The company emerged from bankruptcy in 2006 and the share price was as high as $30 a share at one time. Folks who paid $30 a share no doubt are really pissed.

But then the market crash of February 2009 occurred (OMG! We have a Black President! Sell it All!) and the Bush recession took hold. The stock went down and pretty much stayed down.

These sorts of deals illustrate, however, how you, as a small investor, really have little or no voice in what goes on in these sorts of deals.   As a minority shareholder of a fractional percentage of the company, you don't really get to say what happens, and even your proxy vote is pretty meaningless. Shareholder derivative suits are one way shareholders can seek justice, but like class-action lawsuits, they generally don't result in much satisfaction for the class member, but a new Yacht for the lawyer who brings the suit.

Buying individual stocks is buying a pig-in-a-poke. You really have no idea what the Board of Directors is up to, or what the overall management plan is, or what their finances are really like. Annual reports and balance sheets, which are supposed to communicate this information are largely incomprehensible to even accountants and experts. After all, Enron was showing a healthy balance sheet right up toward the end.

In this case, since I bought the stock for $7 a share, I made about 35.7% rate of return since April of this year, or an annualized rate of return of 53.55%. I have no complaints here and will not likely join the shareholder suit.

But in this case, I got lucky. And you should never confuse luck with brilliance.

What the Heck Happened to Wal-Mart?

2012-01-06T19:28:00.000-08:00

Wal-Mart has lost its way since Sam Walton died. During the recession of 2009, they moved from "always the low price, always" to "Live Better" and started selling more upscale products at very good prices. They were going after the Target shoppers, and it was working.

Then something happened. The bottom-feeders who shopped there all fled for the Dollar Store, Dollar Tree, Family Dollar, and Dollar General. These are the people who buy utter crap, so long as it is cheap. It doesn't matter if the stuff is broken before you can get it out to the car - they don't care, price is king.

These are the people who buy shoes with cardboard soles, convinced they are "bargain" at half the price of real shoes, not realizing that they won't last even one quarter as long.

So, Wal-Mart dumped the "Live Better" promotion and put the cheapest Chinese-made crapola back on the shelves. And the prices? Not really all that great. As I illustrated in two recent tire shopping experiences, their prices on tires are mediocre at best. You can get a name-brand tire from The Tire Rack online for less than what they would charge for a set of Wang Ding Radials.

What's the point of going? The store is dirty, there is merchandise scattered all over. It looks more like a hoarder's house than a real retail store. And the selection of goods is, well, very limited.

It is very sad, as they really were on to something. But it seems they want to cater to the lowest common denominator crowd, rather than compete with real retailers.

And the prices? Well for some reason, they have decided to sell crap and than jack the prices. I went looking for a cheap poster frame the other day, to frame a glaze chart for the pottery studio. $16.99 was the cheapest they had. I was a bit surprised, frankly.

I'm afraid there are no bargains to be had at Wal-Mart. If you want a big-screen TV, there are better prices at the wholesale club (not Sam's club, a real one). And if you want tires or other auto parts, you likewise can do better elsewhere.

It just isn't worth going, which is why we stopped going, about a year ago.

Maybe time to unload the stock? It still pays a dividend, but the Walton children haven't done much for the stock price.

Best and Worst College Degrees?

2012-01-06T07:21:00.000-08:00

College is not for everyone. Many degrees in bullshit studies are worthless, in terms of employment in the field as well as eventual salary. Education for education's sake is a fine thing, but when it costs $50,000 to $100,000, it is just a recipe for financial hardship for the middle and lower classes.

On MSNBC - the news site with in-depth analysis (Warning: The Sarcasm Light is ON), an article about the best and worst college degrees. Well, not really. The article is a three paragraph summary that misses the point, and then throws up one slide from a PDF document in such tiny resolution as to be unreadable. Their only conclusion? Don't be an architect.

Wrong answer.

The "Nooze" once again misses the point, and if you go to the source document, the data is much more complex than that. Unemployment among recent architecture grads is high, as the building boom is over. But careers span more than blips in the economy, and I think you have to look at long-term trends, as well as salaries.

Another report, from that great source of information, Time magazine (again, the sarcasm light is LIT), sets forth "top careers" without analyzing long and short-term trends. Mining engineer might be hot right now, with gold being dug up everywhere, but once the bubble bursts, where are the jobs going to be? If you picked your career based on this report, you might be unemployed and underemployed, 5-10 years from now. This is not to say it is a bad major, only that its status at the top of the list will likely be fleeting.

Another example, from the MSNBC article, illustrates that unemployment in education is low - right now. But that doesn't mean you are going to make a lot of money as a teacher. Plus, as our population of school-age people flattens out, this may be a low-growth area. In addition, with the skyrocketing cost of property taxes, many States are pushing for cuts to education - including salaries and benefits. Short answer? If you want to be a teacher, be a teacher. But don't get into the field for the money, because you'll likely be disappointed (and that is true for any field, by the way).

But some of the worst fields imaginable are not on the chart on the MSNBC article, because the unemployment rate for recent graduates was unreported. This does not mean it is zero! It just means they have no data, and in this regard, the report in question has a lot of blank spots.

And in some cases, the jobs with the lowest unemployment rates for recent grads have salaries that are nothing short of pathetic. For example, for Anthropology, the unemployment rate for recent grads is over 10%, and those lucky enough to find a job are making a paltry $28,000 a year. This assumes they are working in the field - I am guessing many are not and never will. You might be better off spending $5000 on bar-tending school than $50,000 on an anthropology degree.

Fine arts is another field - unemployment for graduates is 12% and those lucky enough to find a job are earning $30,000 a year. It might be hard to live on that and pay back 50 grand in student loans, particularly if you are near an arts mecca like New York City. This is not to say you should not be an artist, only that spending huge amounts on student loans to become one, might not be the best route.

To be sure, in some of these fields, there literally are no jobs for someone with just an undergraduate degree. A graduate degree is required in many fields of endeavor, and even then, the number of jobs may be limited. A B.S. in Physics, for example, is not very useful, while a B.S. in Electrical Engineering will land you a job. And the irony is, many of the same courses may be required for both degrees.

A CBS report is a little more succinct and illuminating, as it reports the lowest paying college degrees in 2011. What is interesting about this list is that it is a little less trendy that the Georgetown report (highlighted on MSNBC) or the TIME report, discussed above. Most of the fields listed there are low-paying and have historically been so. You can't go for a degree in theology or religious studies and then act shocked when the pay sucks - it always has and always will. Congregations are notorious penny-pinchers.

Again, this is not to say you should pick your career based on what will make you the most money. People who chase after the almighty dollar are usually disappointed with both the job and the money. Do what you love and hope to get paid for it.

But when choosing a career, go into it knowing what it will pay and how this will affect your lifestyle. Spending $50,000 to $100,000 on a college education to qualify for a job that pays $30,000 to start with a possible promotion, over many years, to $50,000, may be short sighted. Spending that much on a degree that qualified you for no job whatsoever is kind of silly.

One adviser in this field argues that you should not borrow more than your first year's salary, and that certainly sounds like sound advice to me. Borrow as little as you can, is my mantra. It all has to be paid back - with interest!

The colleges and universities have done this to themselves - and are screwing the students in the process. They have jacked up costs by 2-3 times the rate of inflation for the last 20 years. And the middle class, desperate to hang on to what little they have, is obsessed about sending their kids to college, as some last talisman of their social status. Colleges, sensing this desperation, have priced their educations accordingly.

Heck, folks in New York spend 20 grand a year to send their kids to preschool and then sue the school if their kid doesn't get into Harvard. That is how desperate people are today to get ahead. And they see "Kollege" as the way to do it.

College is a serious life choice. My suggestion would be to find the way to do it, while spending the least amount of money possible. I really have little or no sympathy for these "OWS" types who rang up a lot of student loan debt, studying for degrees that, with a little research, they would have know would take them nowhere.

After all, aren't college-educated people supposed to be smart? Yes, the sarcasm light is still on...

Tire Treadwear Ratings

2012-01-05T17:06:00.000-08:00

Tires are so freaking expensive these days that you can't afford to be blase about buying them.

A friend is looking for tires for his Mercedes. It is a decade old with over 100,000 miles on the clock. And since it is shod with P225/55 R16 prescription tires, the rubber ain't cheap.   Actually, tires aren't cheap period, anymore, as I noted in an earlier post. The days of the $25 tire are long behind us.

Once again, the local Wal-Mart has no real bargains - only one tire in stock, a no-name for $150 a tire.   They can order a Chinese tire for $100.   No real deals.

The Tire rack has a plethora of tires for the car, from $82 to $200. Which one to get? Ironically, the most expensive tire, a Pirelli, has the shortest tread life rating - a lousy 180 - as it is a high-performance "sticky" tire designed for lateral grip (cornering) not service life.

By the way, it is tempting, if you are a boy-racer, to put sticky tires on your car and then drive it like a maniac. The problem with this model is that the 4,000 lbs of car, being pushed against the suspension components, laterally at 1.0 G will break things - expensive things - in the suspension. Ball joints and wheel bearings come to mind. Horsing around with a street car can be fun and all, but it wears on the car fast, and since it was not designed for racing, it can also be dangerous. Want a race car? Build one and take it to the track. But don't kid yourself that a street car is a "racing machine" and you are Speed Racer. But I digress.....

We are fortunate in that in addition to price, we now have these tread-wear ratings to use in selecting tires. Until these came along, you really were buying a pig-in-a-poke when it came to tires. You could go by brand and price, but that was about it. Some tires lasted longer that others, but you'd have no way of knowing ahead of time.

There is a trade-off between traction and tread-wear, usually. The higher the traction, the lower the tread-wear. Soft compound tires don't last long, and some racing slicks are so soft as to be actually sticky. Oddly enough, though, this trade-off is not reflected in the tread-wear guides, as the traction portion of the rating is based on wet road performance.

The rating is referred to as the Uniform Tire Quality Grading Standards or UTQG rating. This rating comprises a three digit number, usually in the range of 100 to 800, following by two letter designations, usually A's or B's.

The first part is the tread life rating. The number is based on how long the tire lasts on a government mandated test course. It is not an exact science, but a tire with a tread-wear rating of 200 should last twice as long as one rate for 100 - depending on a number of conditions, of course, including load, tire pressure, driving habits, temperature, road condition, etc.

From what I can see, most reasonable, non-performance tires rate at least 300, and many are well over 400. A few top 600 or more. Obviously, if tread-wear is your only criterion, you are looking for the higher number.

The first letter represents the traction grade, and ranges from highest to lowest, in four ranges: AA, A, B and C. This letter represents the tire's ability to stop on wet pavement as measured under controlled conditions on specified government test surfaces of asphalt and concrete. The testing does not take into account cornering, hydroplaning or acceleration.

From what I can see, most tires are rated in the A category, a few AA, but very few are B and I have never seen a C listed. This is most likely due to legal reasons - a C-rated tire would be worthless in the rain and kill people. I think I would shy away from anything less than A. Most tires are A and a few are AA.

The second letter is the temperature grade, which, from highest to lowest, includes A, B and C. These represent the tire's resistance to the generation of heat. Again, very few I have seen are below A - maybe a few Bs, but that's it. I have yet to see a "C" tire, but again, such a poorly made tire would likely create legal problems for its maker.

Most tires I've seen are rate A A or higher (AA A for example). I see a few A B listings but not many. Thus, this designation is less helpful, as most tires are A A or higher. I would not buy a tire below A A if I could help it.

In terms of treadwear, I would look for 400 and higher, at least, if all you are looking for is a passenger car tire with long tread life.

And let's face it, with the price of tires these days, who can afford low-mileage sticky performance tires? Spending over $1000 on a set of Pirellis that won't last 20,000 miles makes no sense unless you are racing.

So what does this mean? Well the best tire value might not necessarily be the most expensive tire.   Consider these two tires from thetirerack.com:

Bridgestone Turanza Serenity (Grand Touring All-Season)
	8.1 Reviewer's Avg. Rating:	Size: 225/55R16 Sidewall Style: Blackwall Serv. Desc: 95H UTQG: 740 A A Price: $128.00 (each) Estimated Availability: In Stock Qty: Optional Road Hazard Program: Add $13.46 per tire	Add Road Hazard: $53.84 Set of 4: $512.00
	8.1 Reviewer's Avg. Rating:		Add Road Hazard: $53.84 Set of 4: $512.00

Pirelli P6000 (High Performance Summer)
	7.1 Reviewer's Avg. Rating:	Size: 225/55ZR16 Sidewall Style: Blackwall Serv. Desc: 95W UTQG: 180 A A Price: $292.00 (each) Closeout Estimated Availability: Fewer than 7, Special Order Available Qty: Optional Road Hazard Program: Add $24.94 per tire	Add Road Hazard: $99.76 Set of 4: $1168.00

The first tire is a good all-around touring tire with a staggering 740 AA treadwear rating and a modest price of $128 each. For a passenger car used for going to and from work, this could be a tire that would provide many years of good service, and not surprisingly, it is warranted for 70,000 miles.

The Pirelli, on the other hand, is clearly a high-performance tire, and is rated with a very low 180 AA tread-wear rating. Not surprisingly, it comes with a zero tread-life warranty. This is a tire for serious performance - for people who don't mind swapping tires every 20,000 miles because they want sticky, dry pavement performance and extreme cornering.

Note that the wet-traction rating of both tires is the same - A. High performance racing tires are often no better than passenger car tires when the rain comes - and are often worse.

But beyond comparing ultra-high-performance tires to street tires, the tread-wear ratings are illuminating when comparing to other passenger car tires. For example, the various Michelins I found in this size, ranged from "no rating" to a maximum of 500. Needless to say, they were far more expensive than the Bridgestones.

Are these tread-wear guides exact? No. As they say, "your mileage may vary". You can ruin a new set of tires in an afternoon, if you put your mind to it. Do a few burnouts and such, and you can burn the rubber right off them. Hard cornering is going to wear on them as well. The more gently you drive, the longer the tires are going to wear (and the car) and of course, the less likely you are to get into an accident or get a ticket. (I pay $15 a month for car insurance. I'd like to keep it that way!).

The Tire Rack site has a reviews section. Like all on-line reviews, you have to take them with a grain of salt. When someone posts that a new set of Michelins last only 10,000 miles, you know that either they are lying, they do burnouts, or their car has horrible alignment. Even the crappiest tires will go 10,000 miles, unless they are bicycle tires. So I would toss out reviews like that.

But I would take the time to research your tire purchase. Just going to the local tire store and buying "whatever they have in stock" is not only going to be very expensive, but chances are, you may end up with a tire you don't like and doesn't last very long. Price is only one aspect of a tire - tread-life and quality are the other side of the coin.

I am fortunate that now the X5 is re-shod, I am set for tires, at least for a few more years. By the time I need another set, no doubt I will be in for an even greater "sticker shock" on tire prices!

Has the Daily Show Jumped the Shark?

2012-01-05T08:58:00.000-08:00

Success can be a curse.

The Daily Show used to be funny. You can watch it, on the Internet, even if you don't have a television. But funny thing, they no longer show it commercial-free. And in fact, it is now just one long commercial and pretty much Daily-Show-Free.

The format is becoming pretty tired and rote. First, there are at least 2-3 advertisements, and what the ads are for are telling. Last night it was for a smart phone, a sexual lubricant, and an Irish Whiskey. What does this say about the demographic of the audience?

But again, I am not in the market for smart phones, sexual lubricants, and trendy drinks. That is the 18-35 demographic, and who the marketers are hoping to snare. So the show isn't aimed at me, anyway.

The irony was, of course, that Stewart in that episode, went on a rant about ads above urinals, saying, "I hate whoever the f*&% put this here!" - apparently oblivious to the saturation advertising on his own show, including product placements.

And yes, on his show, the ads are twice as loud as the commercials - apparently watching online gets around those pesky FCC regulations.

After his intro bit - which is the best part - in which he discusses the news of the day, he cuts to more commercials - the whiskey and sex lube again, and more smart phones, and then comes back with the comedy "sketches". It starts to drag here, as some of the sketches are like the ones relegated to the latter half of Saturday Night Live. You just think, "O.K., I get the premise, but please God, let this end! It stopped being funny several minutes ago!" The audience laughs nervously - they are tired of it as well.

If I made it that far, I usually turn it off before the next commercial. Why? Because the last half of the program is usually a huge product placement. A "guest" comes on and talks about their new book, new movie, new video, or whatever. And I presume they pay for these guest slots. Last night was the worst - Charles Barkley, the basketball player, comes on to promote his new status as the spokesperson for a weight-loss plan. Oddly enough, it didn't look like he had lost so much weight, so much as he wore a very large and loose suit. I didn't bother watching this - what's the point of a 10 minute advertisement?

The humor, too, is starting to drag. Stewart's staple, like so many talk-show hosts before him (Thank you very much, Johnny Carson!) is Gay Jokes. Yes, Gays are still the Stepin-Fetchit of the humor business, and nothing garners laughs more than homosexual innuendo. Of course, Stewart dresses it up in self-depreciating humor, implying, in the jokes, that he has same-sex attractions. But that is just to make the humor more politically palatable. So long as the joke is nominally about yourself it is deemed acceptable, even though the same joke, if told about others would be deemed offensive.

But I still think it is offensive, as Stewart is just putting on black-face here, pretending to be Gay, to get a laugh. And in that regard, it is twice as offensive, not less so.

His other form of ethnic humor is Jewish jokes, which would be very offensive, if told by a gentile. But the rule in the humor business these days seems to be that if you are Jewish (or even partially Jewish, like Louis C.K.) it is OK to tell these sorts of jokes. It's like the rule about black people being allowed to use the "N-word." It's funny if they do it, but offensive if a white person does.

I am not sure that ethnic humor was ever very funny - nor that stereotypes are less harmful when propagated by a person nominally of that ethnic group. Both Amos 'n Andy and Stepin' Fetchit perpetuate negative stereotypes - it is not really helpful that the latter was actually black.

And of course, he resorts to swearing, which is the last refuge of the unfunny comedian. Using the F-bomb (bleeped to protect your precious ears) is featured in nearly every bit he does - and usually gratuitously. It is one way to make an unfunny joke appear funny.

Is he still funny? Well, yea, he is a funny guy. But increasingly, I am finding the payoff to be less and less for the hassle involved. The numerous commercials are very annoying. And a funny thing - if you try to mute them using the mute feature on your media player, when you try to turn the volume up once the ads are over, you can't hear a thing. Is this by accident or by design? I presume the latter, and it is an insult to the intelligence of the viewer.

All of this reminds me of why I gave up watching television in the first place. Watching it on the Internet isn't any better, it seems, and perhaps worse. The best solution is to not watch at all.

Crime and Economics

2012-01-05T08:24:00.000-08:00

Do criminals made economic analysis of their crimes? Do they weigh the value of the crime versus the risk of being caught - and the punishment? You bet they do!

As I noted in an earlier post, the mind is an incredibly complex neural network, capable of solving very complex problems. And although people may claim they cannot do fractions or geometry or algebra or calculus, their brains solve problems of that order at a level that is far below the conscious.

And this is true in all daily activities, whether you are evaluating the price of butter at the store or buying a used car. If someone can skew your brain with false values - usually through emotional cues - they can get you to do things against your own best interests, of course. They can reprogram your brain.   But what is amazing is that in many cases, people do seek out and get some good deals, although they are often quite perverse, if viewed in the abstract.

And nowhere is this more true than in the world of crime. To many, crime is an irrational act, which makes no sense and is unprofitable as well. And to some extent, this is true.   Many crimes are acts of passion - emotionally based responses - that provide no gain to the criminal. Getting into a bar fight, assaulting your wife, vandalizing things - these are crimes that are emotionally driven and do no good for anyone involved. The neural network is overwhelmed by irrational, emotional cues.

Although one could argue that the emotional payout is what the criminal is looking for, half the time.    Teenagers, for example, will commit what appear to be senseless crimes - vandalizing things, spray painting graffiti, and even beating homeless men to death with baseball bats.* What gain is there in any of that?

And the answer is, of course, the adrenaline rush of committing a crime. For bored suburban white kids, raised on TeeVee violence and video games, their "real life" seems pretty boring. Doing a Social Studies report just doesn't cut it, when they have seen, on television, hundreds of thousands of violent crimes over their lifetimes - and literally killed thousands themselves, in violent video games.

So when a friend comes over and suggests they steal beer and break into the church, it sounds, well, a lot more exciting than what is going on in their "real lives."

And the consequences of such actions are basically nil. The odds of getting caught, for any criminal, are about 1 in 10, in most cases, somethings far higher. The police just can't be everywhere and do not have the resources to investigate all crimes, and "property crimes" have the lowest priority of all.

And teenagers know, particularly if they are white kids from the suburbs, that even if they are caught, they will be tried in juvenile or family court, and given probation and a good talking-to from the judge and their parents. And this is not really a big deal to them, and in fact, provides them with more thrills and attention that they are craving. Plus, once caught, they will get a reputation at school as bad-ass bad boys, and the other kids will be impressed.

Which is, of course, one reason teenagers get caught at crimes like this - they want to get caught, in many cases.

So, from their point of view, a senseless act of vandalism has nothing but an upside for a teen. And perhaps, if they break into the church, there may be sacramental wine, some money in the poor box, and a P.A. system to steal.   You never know! And besides, it's fun to break all those fancy stained glass windows, right?

Well, that is the thinking, when you are drunk on sacramental wine.

For inner city gangs, the calculations are even more hard-edged. In recent years, very young men - boys, really, have been recruited as gang members and given the task of assassinations and enforcement. The street gangs have made the very real calculation that an 18-year-old faces the death penalty or life in prison, if caught, while a 13-year-old can be tried as a juvenile, and released at age 21, even after a conviction for premeditated murder.

For adult criminals, the calculus is more exact. The odds of being caught are about 1 in 10, if you are stealing car stereos or breaking and entering. And with experience, the good criminal knows which houses to hit, and when, as well as which cars to break into. And many crimes are ones of opportunity - opportunities that they are constantly on the lookout for. If you see someone trying car doors in the parking lot, they are not an amateur criminal, but a professional just on his way to work.

The penalties for crimes are factored into the crimes themselves. And, unfortunately, this means that "getting tough on crime" can backfire in a big way. Over the last few decades, we have tried to "get tough on crime" and fight a "war on drugs" by making sentences harsher and harsher, until they are literally insane. A person can go to jail for a longer time for selling drugs than they can for shooting a cop dead.

Re-read that last sentence, and then do the math on it. If shooting a cop gets you 20 years, and selling crack gets you 30, what does that say? If a cop approaches you and says, "halt in the name of the law!" and you have a gun in your pocket - as well as 300 vials of crack - what are your options?

One option is to surrender, go to jail for a long time on drug and weapons charges.

Another option is to shoot the cop, and perhaps get away. If you are caught, the sentence you get might be about the same as the drug charges you would have faced. Likely, since they won't have 100% concrete evidence to convict you (you disposed of the gun and got rid of the drugs) they will offer you a plea bargain - for less time than you would have faced for selling the drugs (where they would have had a solid case, with a police officer as a witness, as well as the physical evidence).

People do the math on this, which is why it is a hard job to be a cop. Stopping a car on a dark, lonely road, by yourself, could just be another traffic stop, or a quick shot to the gut and slowly dying by the side of the road. How many roads and bridges are named for dead cops these days?

So, in a way, by escalating the war on drugs, we have escalated the violence.   And since the drugs are worth so much now, it is worthwhile to kill other drug dealers and steal their drugs.   After all, the punishment for killing a drug dealer - assuming you get caught - is not much more than the punishment for selling the drugs.

And guess what? The police don't spend much effort investigating the murder of drug dealers.

Of course, white collar crime and fraud are the most profitable forms of crime - and the risks of getting caught and the possible punishments even smaller. And weekends in white-collar prison are certainly no real punishment, compared to hard time in a real lock-up.

Given that, you'd wonder why more folks don't engage in the white-collar crime, instead of the more blue-collar variety. And this is where emotions kick in. People often don't succeed in life because they don't feel entitled to success. They have a mental block of low-self-esteem that makes them think, "This is all I am good for, no more." So the street criminal engages in petty larcenies, because he thinks that is all he is capable of. The criminal with more self-esteem moves up the criminal ladder further.

Similarly, the OWS protester rails against the machine, while in an office 30 stories above him, one of his former classmates is watching the hubbub below and wondering where he can get his Lexus detailed. The both had the same opportunities, the same educational experiences, but one feels empowered and one feels powerless. Why is this? Well, that is probably the subject for another posting.

So what prevents us all from becoming criminals? Well, even while the odds of getting caught are 1 in 10, eventually, the odds catch up with you.   You get caught, you go to jail, and life sucks in short order. And in many cases, most criminals, particularly the street-level variety, don't make a lot of money. The street criminal or petty criminal is the minimum-wager slacker of the criminal world.

But since their normative cues are skewed, many criminals don't do the math on this and realize that a life crime really has no great long-term payoff. The short-term gains reinforce the behavior, and that is all they see. It is no different from the ordinary citizen going horribly into debt - the short-term gain is a shiny SUV and a fancy house. The horrible end game, 20 years later, is not perceived at the time.

And for many of us, the stress and worry about being caught as a criminal are not worth the effort. After all, if it is simpler and easier to not be a criminal wouldn't you do that? And that is an interesting observation, in a society where more and more of our actions are under the threat of being criminalized, or we are constantly bludgeoned with the threat of criminal prosecution.

The flat-taxers, for example, really are not worried about tax justice - if they were, they would not be proposing something as absurd as a flat-tax, which would raise their own tax rates and provide a huge tax cut to the very rich. Rather, they want the system simplified. They are weary of being under what they perceive to be a life-long threat of audit and prosecution for filling out their complex tax forms wrongly.

Similarly, one problem with the criminality of drug use, like prohibition, is that it creates a very large criminal class in our country. When everyone is a criminal, what does that say about your society's laws? Prohibition collapsed simply because you could not criminalize the behavior of a large portion of the population to appease the moral values of a tiny minority. And the end result of criminalizing everyday behavior is not less crime, but in fact, more.

Again, that economic evaluation. Most people do not want to be criminals. But if buying booze or pot is a crime, well then, they've already crossed the Rubicon. Other crimes now seem possible, and in fact, less onerous.

Economics plays a role in enforcement, too.   Police go after low-hanging fruit, because it is easier to pick. And you can arrest a tax-paying citizen a lot easier than a real criminal. A guy with a real name, a registered car, a home address, and a job, is a lot easier to catch than someone using a phoney name who is fly-by-night. It is easy to go after "citizens" but hard to go after criminals.

For example, I live on an island with 600 homes (many of them vacation homes, so the actual population is pretty small) and our own State Police Substation.   At any given time, we have two State Troopers on duty. We are very well policed, to the point of harassment.

The speed limit on the island is 35 - and 25 in some spots. People are routinely pulled over for rolling stop signs, speeding, and not wearing seat belts. In a given month, they issue over 350 tickets and warnings, about 2-3 DUIs, and investigate 2-3 accidents. That is at least 10-15 people a day they are pulling over, which is a staggering number for such a tiny place.

Do we have real crime on the island? Not much, but occasionally a tourist's car is broken into by a "smash and grab" opportunist, who sees a purse or iPod or GPS on the front seat of a car. They throw a rock through the window, grab what they can, and then run off.   Do they get caught? No, but the Police are happy to write up a report and then lecture you for leaving "valuables in plain sight".

And as you leave the crime scene, they will pull you over for not wearing your seat belt. And yes, I have seen this happen - to a friend of mine.

So more police is not necessarily a good thing. To justify their existence, they have to pull over nearly everyone on our island. I was pulled over the other day because the officer "couldn't tell if I was wearing my seat belt or not" - which is not "probable cause" under Terry v. Ohio.   Yea, that is what it comes down to - he gets a "credit" for issuing a warning, which helps him meet quota. But just randomly pulling people over because you are not certain or not they are breaking the law? That is a little scary to me. But then again, on the other hand, when they are really running low on quota, they just set up a "safety roadblock" and start pulling everyone over.

But of course, the police do not have quotas for issuing tickets! Remember that. Unless of course, you are a cop. See how long your career lasts if, after a month, you return your ticket book with all pages intact.

(And as you can imagine, I come to a full-and-complete stop at every stop sign, and obey the speed limit to the letter, using my GPS. Frankly, I think I should get one of those dash cameras, as it is only a matter of time before they start just issuing tickets for the hell of it. And yea, I have seen cops do that - even lie under oath in court. Not all of them are saints!)

But that's the economics of law enforcement. It is a lot easier to go after Joe Citizen and nail him for a traffic violation or a DUI than it is to go after a con artist who bilked some grandmother out of her life's savings or the guy who put a gun in your face and took your wallet.

And that's why, if you ever drive through Georgia, all you folks from Ontario and Quebec, on the way to Florida with your hubcaps missing (what is up with that? Do you think we steal them?) be sure to obey the speed limit here in the Peach State.   Because Barney is going to get you with his Radar Gun, to be sure. Speeding Canadians are the ultimate in low-hanging fruit....

__________________________________

* If you ever want to get really depressed, Google "teenagers beat homeless man" - it goes on for pages and pages, in nearly every city in the country, and often the crimes are unsolved. And people make jokes about this - including Jon Stewart, who made a joke on his show about thrill-killing a bum with a golf club. He is rapidly becoming my least favorite funnyman.

The Complexities of Pricing

2012-01-04T09:00:00.000-08:00

How do merchants price items? Why are they offered 'on sale' sometimes? Why are rebates and discounts offered? The answers are very complex.

In basic consumer economics, people miss the point that retailers discount prices to do one thing: sell products. And when they discount prices, oftentimes this is a sign the product is not desirable in the marketplace. Or the discount is a phoney discount from a price the product never sells for.

Pricing of a product is not an exact science. Many people actually believe that there is a "price" on everything, and that price is handed down from God himself. Or they think the merchant carefully adds up the cost of making and selling the product, adds on a "reasonable profit" and then sells at that price. Guess again.

The real answer is that prices are determined by the market, and retailers get what they can get for what they are selling. If a product is popular, they raise the price. If it stinks, they lower the price, substantially, to move it out the door.

And a lot of inferior products get sold this way, too. Before you look at a product for which there is a sale price, or rebate, think about this carefully.   Are they lowering the price to move a substandard product? Or perhaps they are not lowing the price at all? Maybe their "lower price" is the real price, and the "suggested retail price" is just a made-up number.

The following are some commonly held beliefs about pricing. And in the abstract, they sound silly. But chances are, at least subconsciously, you've held these beliefs at one time or another - I know I have!

1. They are offering a rebate or sale price as a favor: No, really, people believe this. Companies are kind-hearted and want to see you get ahead, so they are holding a sale as a thank-you to consumers.

2. They are offering a rebate or sale price to get you to try a product: No, not really. When a product doesn't sell well, they cut the price. You lower the price, product moves. They are not interested in trying to "win you over" to a shampoo or detergent brand. They just know that your price point is below their nominal price, and that they can move product if they offer it to you at your price point.

3. They are offering a rebate or sale price to move out product at the end of the model year to "make way for the new models!": No, again. A popular product sells out, and there is no "leftover" at the end of the year, unless the leftovers are the undesirable versions (the brown car with green interior).

4. At certain times of the year, such as President's day, they lower prices because, well, prices are just lower then, that's all! The day after President's day, the cost of a car increases mysteriously. So you'd better sign the papers on that deal today or lose out forever! If you can't see this transparent attempt to pressure you, forgetaboutit!

5. The sale price is really a lower price that what others ordinarily pay: The car makers have really shot themselves in the foot with this one. No one pays "sticker" price on a car anymore. And while some car makers are more realistic about sticker prices, they still are just placeholders and not actual prices. When someone offers you "$10,000 off!" a new pickup truck, you have to come to the conclusion that the sticker price is a sad joke. No, the "sales price" is no great bargain, just closer to what you should expect to pay for the commodity.

Pricing is a very interesting and complex thing that seems deceptively simple. Many folks think that it involves little more than simple mathematics, when in fact, serious Calculus is involved. The retailer wants to get every last penny from each consumer - selling to each consumer the product at the highest price they would pay.

And that is why car prices are so flexible, and why there are rebates, coupons, and other gimmicks out there, designed to get people who ordinarily would think a product is "too expensive" to buy that last marginal quantity.

Does this mean you should shun sales prices, rebates, or coupons? Again, don't be reactionary, it really annoys me. No, what this means is that you should look at these things with a jaundiced eye. Are they trying to entice you to spend-up by offering an apparent discount? Are they touting the "savings" more than they are the price? Are you buying something that you don't need or want or would otherwise buy, but for the fact it is "on sale" or has a rebate?

And oftentimes we buy this way.   At the wholesale club, you see a big box of consumer goods at a ridiculously low price - so you buy it. "At this price, how can you afford not to buy it ?" is the battle-cry. But if you don't need it, even if it is only 50 cents, it is 50 cents you wasted.

The mall works the same way. A couple of years back, we went to the local mall with a friend (haven't been back since) and we bought a pair of pajama bottoms - marked down from $70 to $12! Now, think about this for a minute - who buys pajama bottoms for $70, made of cotton? Silk, maybe I could see the whole set. But a pair of cheaply made pajama bottoms from China? $12? They still made $10 on the deal, if not only $5.

And that was a good lesson for me. We bought them not because I needed them (I have a drawer stuffed full of this kind of stuff) but only because it appeared to be an apparent bargain and it appeared to be a small amount of money.   But $12 is twelve bucks, and if you spend that way, it becomes a hundred bucks, and over time, intractable credit card debt.

Or take the wine I bought at the wholesale club the other day.   Yea, I got roped into the "instant rebate" deal on the wine. I bought two bottles of wine that I might not have considered, because it was labeled with "instant rebate" coupons, and that caught my eye - and my subconscious. Here was a chance to get a $9.99 bottle of wine for $5.99! (inexplicably, the cash register rang up the $4 off coupon, twice). I was getting an upgrade!

Well, probably not. I bought a $5.99 bottle of wine, plain and simple.   And if the price goes back up to $9.99, I probably will buy other, cheaper wines instead. They have a good Argentinian Malbec blend for $4.99 every day. Why pay more?

And in fact, these come-ons can backfire for retailers. If I was looking for a $9.99 bottle of wine (which I am wont to do) I might buy that bottle, at the $9.99 price, perceiving it to be a little better quality, something to serve to the neighbors at supper. But since I've had it for $5.99, my perception of it might change. And when they remove the promotional pricing, I may be more inclined to view it as "overpriced $5.99 wine" rather than "a good $9.99 wine".

Pricing of a product is anything but simple - it falls within the intersection of mathematics, algebra, calculus, differential equations, advanced psychology, group psychology, and even quantum theory. Just picking a price point for an article is a major science, not some off-the-cuff calculation. Books have been written on this stuff. People do their PhD. dissertations on it. People make careers in it.

And here we are, lost sheep in the marketplace, thinking we can outsmart them by getting a 'bargain'.

And this is just for basic pricing.   Once you throw in the complexities of coupons, rebates, instant coupons, reward cards, loyalty cards, flyer miles, BoGos, and other promotions, well, the complexity of pricing rises by an exponential factor.

So, how do you, as a consumer, who likely didn't take much math in High School (and didn't do well at that) deal with all this? Well, first of all, you do, in a remarkable way - the brain is a complex neural network that can be programmed, or more correctly trained to solve incredibly complex problems. It is, in fact, your secret weapon, if you chose to use it properly.

The housewife who navigates the supermarket and seeks out the best price on soap may be solving some third order differential equation in her brain, without even knowing it. And one way she "trains" on this is through trial-and-error. The bargain brand soap may seem appealing, but provides fewer loads of laundry. The premium brand gives more loads, but at a higher cost-per-load. Through trial-and-error (training the neural network) she settles on the optimal outcome, which may be a middle-priced brand.

And this illustrates why it is so, so important not to be afraid to make mistakes and to make mistakes and learn from them.   Your neural network learns nothing from risk-avoidance and learns even less from denial, blame-shifting, or externalizing your problems. Train your brain and it will serve you well.

But of course, our friends in the marketing department hate this. They would rather reprogram your brain with some poor normative cues - these are skewed weighting factors for your network nodes that will alter the outcome of your thinking. And oftentimes, you only have to "tweak" the weighting factor of a node or two, to change a purchasing decision or brand loyalty - or political affiliation.

So they try to trick you, with a lot of distracting noise and bullshit like coupons and rebates, and come-ons. They want you to stop thinking about the basic transaction and go chasing after more complicated deals.

And that is where you have them, right there. Go for the simpler deals, and 9 times out of 10, you come out ahead. The regular bottle of wine for $5.99 is a better wine and a better deal than the $9.99 with the $4 rebate gag. The more complicated deal is not a better deal, even if on its surface appears to be a savings. But it is not.

But how can you get simple, basic deals, in a world chock full of rebates and loyalty cards? It isn't easy, but it can be done.

For example, Nissan was offering a $2000 rebate on its Frontier 4-door pickup truck, which put it at an attractive $21,500 price, nicely loaded, at the volume dealer in Savannah. But, now that sales are up, and the recession is "over", the rebate is gone, and now the truck is selling for $23,500. What happened in six months to make the truck cost 10% more? Nothing, other than demand went up.

And this illustrates why merchants keep prices flexible, so they can adjust them to meet supply and demand. It is much easier to offer a "rebate" than to adjust sticker prices on all the trucks in the lot. Besides, people get pissed off when you raise prices. And a rebate allows you to alter the price on a product, once it is already in the product pipeline.

So how do you avoid this game? Look for the same vehicle, about 1-3 years old, with low miles, for sale from an individual who garaged it, changed the oil, and kept all service records. They are out there, but few people look for them (no really, most idiots march off to a used car dealer instead!) The overall cost could be 20% less or more. By the time the vehicle is 5 years old, perhaps 50% less. And the overall cost-per-mile is a lot less than buying brand new.

And a lot of this has to do with the fact that you are not drawn into the horrendous pricing games that retailers like to play. When dealing with an individual, there are no rebates to deal with, no coupons or cash-back. If there were, you'd think that was pretty freaky, wouldn't you? So why do you accept this as the norm at a retailer?

Of course, not buying at all is even a better option, and in the overheated car market of the last three months, sitting it out might be a good idea. When everyone decides to buy, prices are not their best. Wait for a lull in the market, before buying.

But it is interesting, is it not, how we are all herd animals?   In March of 2011, you could not give away a new or used car.   But in November of 2011, they are in high demand. Is traveling with the herd going to get you the best deal possible?

Likely not....