Saturday, May 29, 2010

Some eBay tips

eBay can have great bargains and be a great place to sell, but there are subtle nuances to it.

Buying and selling things on eBay is not something that you can learn in five minutes. Most of the precautions are common sense, and others are just following your gut instincts. If it sounds too good to be true, it probably is.

But here are some other hints that I have been recently thinking about:

1. Feedback less than 100%: bear in mind that anything less than 100% positive feedback is problematic. Anything less than 95% is dangerous. It is not like being graded in school, where a "C" was 70%, a "B" 80%, and an "A" anything over 90%.

No, on eBay, anything less than 100% is suspect, and anything less than 95% disastrous, as it means that more than one person has been pissed off by the buyer/seller.

READING feedback is important, as it tells you volumes. If someone leaves negative feedback and the other person doesn't respond, what does that say? Or if their response is a personal attack on the person leaving the negative feedback, what does that say?

Also, if someone is a "power seller" and has 5,000 transactions to their name, well, you have to expect that someone will be unreasonable and leave negative feedback. If you have 98% positive feedback after 5,000 transactions, well, you're doing something right.

2. Zero or low feedback: A bidder or seller with a (0) feedback is a newbie. We all have to start somewhere, right? Or, it means that they had horrible negative feedback and decided to start a new eBay ID to wipe the slate clean. Yes, eBay allows sellers to do this. You can block bidders on your auctions with (0) feedback. And as a buyer, you can simply not bid on (0) feedback auctions.

3. End the Auction Early, etc: I commented on this in an earlier post. You want to sell your late Grandma's collectible Hummel figurines. So you put them on eBay. Someone e-mails you asking for a "buy it now" price or to end the auction early. Don't fall for it. They want to buy from you for cheap, so they can re-sell at a profit. Plus, they are not playing by the rules, so you know right off the bat how honest they are. Remember what I said about "gut instinct"?

4. Endless Time-Wasting e-Mails: Along this line are people who send you endless number of time-wasting e-mails. They want difficult to obtain information or "more information" and of course, they are "serious about bidding". Often these are also the "end the auction early" people, and the purpose of their questions is to run down your item, so you feel lucky to sell it to them for half-price. People who send endless question e-mails rarely, if ever, bid on the actual item. Send short responses or no responses at all, particularly if the information they requested is already in the listing. This latter type of "question" is most annoying, as you list all the information, and they don't bother to read it. Or, perhaps, their "question" is an inroad to some sort of con, such as the "end the auction early and sell to me outside of eBay" gag.

3. Blocking Bidders: If someone gives you the heebie-jeebies, you can block them as a bidder. Simply click on the block bidder list (search eBay help, if necessary) and add their screen name to the list (the list comprises screen names, separated by commas). And you can configure your listing to block zero feedback bidders and low feedback bidders as well. Use these tools to your advantage and save yourself a lot of time.

4. Use PayPal: In the old days, PayPal was a PITA to use. But today, it is very easy to use and set up. Use it, as it is the easiest way to transfer money. Anyone can forge a cashier's check and personal checks are almost worthless. PayPal or Cash, those are my two options. Most people choose PayPal.

5. No Overseas Transactions: In some limited circumstances, it is worthwhile to buy from overseas. But in many cases, there is no savings in buying from China or Latvia, and your recourse, if the transaction is less than expected, is bubkis. Similarly, selling items overseas presents a royal PITA for you to pack and ship items and to deal with customs forms. Many overseas buyers want you to list the contents of your package as "gift" so they can avoid duty on an item. Hmmmm.... fraud. You know up-front how honest they are, so why expect things to improve? Leave the international transactions to the power sellers who don't mind dealing with that sort of thing. The whole point of selling on eBay is to avoid a hassle, not create one.

And as for buying from overseas, I've had a couple of positive experiences, but they were for small-dollar items where the risk was low. I'm not about to spend $1000 on a car stereo from Latvia. Probably stolen, anyway.

6. Prices too good to be True! eBay tries to police auctions to spot fraud. But you have to be vigilant, as they can't be everywhere. The typical fraud auction shows up with only hours left, selling a desirable consumer good for less than half its market value. Sounds too good to be true - and it is. The seller asks you to contact them directly, to 'buy it now' and when you do, you are treated to a convoluted story about how the product is overseas, but they will ship it air freight (ship a car by air freight? Sure, that makes sense) if you send them the money by Western Union.

Sounds stupid? Well thousands of people fall for it every year, and they also list on Craigslist and other outlets.

Know the market value of the goods you are bidding on. eBay has good deals, yes. But no one is selling a 2005 M5 for $5000 these days. If it sounds too good to be true, it is, period.

7. Sell items SEPARATELY: In many cases, if you are selling an item that has multiple parts, you can make more money selling the items separately. For example, I recently sold my tractor, which I sold with a six foot finish mower. Now there are people in the market for a tractor, and there are people in the market for a mower. But there are not many people in the market for a tractor AND a mower. So some bidders were bidding only on the tractor, and I was essentially giving the mower away.

If I had listed the mower separately, I could have gotten an additional $500 for it. Lesson learned.

Or, for example, I am selling a used CD-changer out of my car, which includes the cartridge. Someone wanting a replacement CD-changer to replace a broken one doesn't need the cartridge. Someone buying a used car where the cartridge missing doesn't need the CD-changer. You can make more selling them separately.

Similarly, with my convertibles, it makes much more sense to sell the hard top separately than to sell it with the car. In many cases, the person buying the car doesn't need or want the hard top, and will just sell it once you give it to them. While someone wanting the hard top might pay you $500 to $1000 for it. The sales price of the car without the hard top is about the same either way.

Similarly, a collection of coins, Hummel figurines, or whatever, will likely fetch more when sold as individual items than as a collection. People will pay more for an individual item to complete their collection. Collectors already have a collection, and would rather not buy yours. But they will buy an item or two (and bid fiercely) to complete the missing hole in their collection.

So, as much as it pains one to break up items, it is often better to sell things separately online, as each component will find a better market and also a better price.

However, don't take this to extremes - selling items that should not be broken up. People will just think you are being cheap.

* * * * *

Those are just a few things that come to mind after a couple of recent auctions I ran. The "what do you want to end the auction now?" people are most annoying. I just ignore those folks or send a simple reply. It's an auction, if you want to bid, bid. But don't ask me to end the auction early.

Tuesday, May 25, 2010

Should you heat with WOOD?

Outdoor Wood Furnaces are becoming popular in some Northern parts of the country. But does heating with wood make economic sense? Like anything else, you have to "do the math".

In the North country, a lot of people heat with wood.  And the trend is nothing new.  Since the first energy crises of 1973, people have been turning toward this apparently cheap energy source.  But is it cheaper than other fuels?  And is the hassle worth the savings?

Back in the 1970's, before the Internet, people used to pass around a photocopy of a humorous story about heating with wood.  The story included a list of all the expenses of heating with wood, starting with the stove, stove pipe, ceiling fan, chain saw, cord of wood, etc. The list then goes on to buying a wood lot, a pickup truck, a log splitter, trip to the emergency room, replacing the living room carpet, and of course, burning down the house - and the eventual divorce!

It was a funny story, but it illustrated even back then that a lot of people were starting to question the economics of buying a new heating plant and then spending all your spare time cutting and chopping wood, not to mention feeding the wood stove, just to save a few hundred dollars.   And with some of the ancillary expenses, the savings might not be there.

Every Summer, we return to Central New York, and every Summer, there is yet another house we see that burned down over the winter due to a wood stove fire.   Because of the prevalence of these fires, many people have opted for the outdoor wood furnace pictured above.

But such furnaces cost thousands of dollars (even over $10,000!) and even more money to install. Trenches need to be dug and piping run to the house. It is not a cheap project. For the $5,000 to $15,000 involved, you can pay a lot of utility bills.

And the cost of wood is not really "free" - even if you cut down your own.  Owning a chainsaw, a truck or trailer, and log splitting equipment is necessary.  And your time is worth something.  Hours spent cutting wood is hours spent away from other activities that could be more profitable.  Cutting wood is only worthwhile if your time is worthless.

From a safety standpoint, you are more likely to injure yourself or others while cutting wood.  And there is always the risk of a house fire with an indoor wood stove.   Insurance companies charge higher premiums for such installations as a result.

The outdoor wood fireplace solves some of the safety issues, but is a hassle to go outside and stock occasionally (particularly in inclement weather) and also tends to "smoke out" you and your neighbors, since most have very short chimneys.

And one of the charms of wood heating is having a fire in a fireplace.  Many "energy-efficient" stoves have closed-off faces, so you do not enjoy the ambiance of a fire.  And outdoor fireplaces remove that ambience entirely from the premises.

Some folks claim that heating with wood is "environmentally friendly" as they are merely converting downed trees to CO2 - and those trees would just rotted anyway and released CO2 over time.  I don't buy the argument on several grounds.   To begin with, it takes decades for a tree to totally compose, but only about a month or less to burn it in your wood stove.  So you are accelerating the release of CO2. Second, when a tree rots away in the woods, it breaks down into various components which nourish the soil and product a nice layer of forest mulch.  Remove the tree, and you remove those nutrients. So there is a negative environmental impact to wood burning - at best it is no better than fossil fuels.

Some others are coming to the same conclusion - burning wood is just burning, which makes smog, smoke, and CO2.

And if you are still not convinced, stand downwind of your neighbor's wood furnace for an hour - then blow your nose.  The black soot coming out should tell you something about the local air quality.

Many people who heat with wood have older homes that are poorly insulated.   So they switch to a wood furnace to avoid "high heating bills".  But the high heating bills are more of a function of poor insulation, old windows, and a drafty old house.

The money spent on a Wood Furnace would probably pay itself back faster in terms of buying insulation, vinyl clad windows, new siding and roof, and a more efficient, more modern heating plant.

And many people who heat with wood turn the temperature up in their house to 80 degrees, on the premise that the wood is "free" (it isn't) and thus they can "afford" to be snuggly warm.   Living in an overheated environment isn't good for you, I think.   Moreover, wasting energy, even wood energy, is just wasteful, period.

I think a better approach to heating you home is to make your home tighter and more efficient, and keep it at a reasonable temperature.   Rather than buying $10,000 worth of equipment and spending hours (days) every fall chopping wood, make your house energy efficient.

We live in a NYSEG certified energy efficient house (UPDATE:  it has been sold!).  It has 6" of insulation in the walls and another inch of foam on the outside.   It is like a thermos bottle.  During the day, even in the depths of winter, the sunlight coming in will heat the house sufficiently that no heating is needed.   Our energy bills are trivial.

Americans have been raised to solve every problem by adding more energy.  So rather than live in a house with a Southern exposure, proper insulation, tight windows, etc., people intentionally build energy-hog homes and then try to solve the problem by throwing energy at it.  As a result, their heating bills are astronomical.

You can't "solve" a heating problem like that with wood.  All you are doing is spending the money in a different place.

Thanks, but no thanks.  I'll take a pass on wood heating.

12 Months Same as Cash?

It is a tempting offer, but should you take it?

As noted in a consumer blog, these "same as cash" deals can be dangerous to the unwary:
Here's how most of these deals work. If you borrow $1,000 on a 12 month same as cash plan, you have to pay it back within 12 months to avoid interest. That much is obvious. However, the term "same as cash" is very misleading because most of these so called deals are actually deferred interest payment plans. So, if you borrow $1,000 and pay $950 of it in 12 months and still owe $50, you will be charged interest on $1,000, not on $50! In other words, you will be charged back interest on the full amount regardless of the amount you paid on the loan during the 12 month "same as cash" period.

What's even worse is that consumers rarely think about the interest they will have to pay if they can't pay the full amount within the allotted time. We're not talking about 12.5% or even 20% interest. The annual percentage rates on these "same as cash" deals can be as high as 40% or 50%.
In other words, taking one of these "12 months same as cash"deals is a lot like playing with a loaded handgun. You had better be sure the safety is ON and there is no bullet in the chamber, before you start tossing it around.

But if you really want to be safe, don't play with loaded handguns at all. That's the best and safest option.

Now some folks who are gun enthusiasts will note that if you are careful and responsible with a gun, they can be perfectly safe. And they are right. But you have to be mature.

And I often compare credit card debt and revolving interest debt to handguns, as in both instances, if handled carefully and in a mature manner, they can be "safe" to the user. But handled recklessly or immaturely, well, they can injure you, badly.

Human nature being what it is - and we are all status-seekers of one form or another - the temptation to spend more now and pay later is too great. And the credit card companies know this and will play to your human weaknesses.

As I noted in an earlier blog, I once used one of these "90 days same as cash" deals when I was 25 to buy furniture. On the 89th day, I drove to the finance office (Household Finance Company, or HFC) and paid off the entire balance in full.

Boy, did that piss them off! The lady at the office told me that "You know, you can just 'roll this over' and pay the minimum amount every month, if you want - that way you'll have more to spend now!"

But of course, that would mean I would already owe 90 days of interest, compounded, which back in those days was already a sizable chunk of the original balance. I said "no thanks". She pleaded and entreated and argued, but finally gave in. And I made sure I had a receipt for the balance paid when I left. They lost money on that deal, and lost a huge potential profit opportunity as well.

I recently did a "12 months same as cash" deal at Lowes in order to buy materials to remodel my basement. I thought it would be an interesting experiment. Again, this is a loaded handgun waiting to go off. When the loan materials arrived in the mail, I made sure to go online, check the balance every month, and then set up automatic payments on my bank account to pay off the balance over 11 months, so that the entire balance will be paid off more than a month before the 12 month deadline. And every month, I go online and check the balance to be sure they received my payment and are not playing games with me, like the "we never received your payment" gag. I then reconcile the account on Quickbooks as well. I also set a reminder on my computer calendar to check the balance monthly. Like any credit card account, you have to watch it like a hawk - and redundantly.

12-months-same-as-cash is particularly deadly, as if you are even a day late with that last payment, you owe an entire year's worth of interest - at 22-28%. This can be equal to over 1/4 of the original loan amount. If you make the "minimum payment" as they suggest, you could end up paying nearly double for the item financed, by the time you pay off the balance. So not only are you playing with a loaded gun, it is .50 caliber and will blow your head clean off, if it misfires.

For those reasons, I would never suggest to ANYONE that they sign up for one of these deals. The danger of getting into real financial trouble in a real hurry. For most consumers, who don't have financial discipline and maturity, such easy credit terms are just too tempting. And most credit agencies knowingly lend money in this manner to consumers they know will never have the cash in time to make the payoff deadline.

Like the lady at HFC, the folks at Lowes are not happy that I am paying off the balance on time. They send letters and e-mails encouraging me to take on new debt. "Specials" that are offered for a limited time. If only I would charge MORE on that credit card, so there will be a balance at the end of the 12 months! Otherwise, not only do they not make money off of me - they lose money in the process.

Avoiding the temptation is the key. Everyone likes to think they have the financial resolve to not spend. But we all are weak from time to time. Just saying "NO" to deals like this, is often the best option.

These sorts of deals are like airline miles cards, which temp you with offers of free flights to Hawaii (which rarely materialize in real life). A great deal if you "pay off the balance every month." But woe be to the poor consumer who gets behind on his bills for even a month! The interest will accumulate and compound quickly, to the point where bankruptcy can be a real possibility.

Just walk away from funny money deals. When my Lowes account is paid off in three months, I plan on closing it - and never again opening one of these types of accounts.

  One other thing to watch out for with "12 months same as cash" or "Six months same as cash" is that you may be required to make minimum payments on the loan for the six or twelve month period. If you fail to make the minimum payments on time every month, the entire amount may come due, and the interest (at a very high rate) comes due as well.

So, for example, you borrow $3000 using "six months same as cash" and you make four payments, once per month, of $250, every month, and plan on paying off the balance by the due date. But on the fifth month, you are late with a payment by one day, and now, all that interest is due, for six months at 25% interest, your credit report is trashed, and you have to pay the full amount NOW.

If you go on the website of the credit provider, there is NO prominent listing of the due date of each payment. It is on the STATEMENT that you have to download, and if you miss it, well.....

So, if you play Russian roulette with one of these deals, be careful. Mark the due dates of ALL payments in your calendar, and then make sure you can pay the entire balance by the end of the six or 12-month period.

Is it worth it? I don't think so...

UPDATE 2020:   A reader writes, "Well, what about the benefits of these deals?  After all, you are 'saving' 22% interest if you do 12 months same-as-cash!" This is what is known as a false comparison.   The most you might be "saving" is the opportunity to get 3% interest on a CD or something, over those 12 months.   And no, comparing the "opportunity cost" of making money in the stock market is also a false comparison - apples and oranges.   Besides, suppose you lost your shirt in the stock market on that money and now could not pay off  the balance on the loan?  Now you are proper fucked.

It is, in a way, like folks who borrowed heavily on their houses while at the same time investing in sketchy things.   Their "investments" blew up in 2008 and the mortgage on their house was still due -and the had no way of paying it.

It is a risk/reward analysis.  The "reward" of possibly making a few dollars in interest over six or twelve months isn't worth the risk of having to pay 22% interest or more on the whole balance.

Monday, May 24, 2010

Where did all the money go?

When housing prices went bust, where did all that equity go? Nowhere, it turns out.

James Surowiecki, in his recent column in the New Yorker, made a gaffe that surprised me. He said something to the effect that as a result of the housing bust, trillions of dollars "evaporated" overnight.

For the average Joe to think this is one thing. But for an economist? Shocking.

Here's the deal: That money didn't exist and never did. Like the price of stocks, what the last buyer is willing to pay does not represent the real value of the entire outstanding shares. If you sell off all the shares of a company at once, they will not likely yield the touted "Market Cap" calculated by multiplying the number of outstanding shares by the last share price.

No no, the actual value will be less than half that. And the same is true for housing.

One fellow, on a CNN report, whined about how he lost "all that equity" in his home, as if it were some sort of real money. He bought a house for $250,000. It shot up in value to $500,000, and then dropped back to $250,000. How exactly did he lose money? If anything he is dead even.

And in terms of real value, his house is worth the same as before. If he wanted to sell it for $250,000, chances are, he could buy a similar house for $250,000. In terms of comparing its value to other, similar houses, nothing has changed. His house is worth a house - what other houses are worth in his neighborhood. The "value" hasn't changed, only the dollar value.

Unless you create a realization event, and "cash out" all that equity, it ain't yours. If your home goes up in value, and you don't want to sell, then you have not "made" any money. You have only a potential to make money - an unrealized potential.

Potential is an interesting word. In Electrical Engineering, it refers to voltage. If you stand next to a high voltage line, but don't actually touch it (or have it arc to your body) you don't get electrocuted. If you turn off the electricity to that line, your condition stays the same. And unless you actually touch that high voltage wire, you will not know the difference between when it is "hot" or "dead", without some kind of instrumentation.

So to NOT SELL your house is like standing next to that wire and not touching it. You can't say "I nearly made a million bucks" just as you can't say "I nearly was electrocuted!" You either are, or you aren't. And complaining about money you "might have made" is akin to regretting not buying Microsoft in 1983. You might as well say "I could have been a millionaire, if only I bought those winning lottery tickets!"

In other words, like any other financial transaction, you can't whine about "lost equity" any more than you can't whine about making bad investment choices - or not selling your car the day before the transmission went kaput. Coulda been, shoulda been, but wasn't.

So there were no "Trillions" in evaporated money. Most folks, during the peak of the market, were not interested in selling. Many argued there was no point in selling, as if they sold, they would likely buy another house - and since all houses were priced alike, they would not "cash out". And of course, another reason many people didn't sell when prices were high was that they were convinced that prices would go even higher.  The same thing will prevent the gold-bugs from getting out in time, before that market too, collapses.

And bubbles always collapse. It's a law of nature.

The smart thing to do, in retrospect, was to sell out and then rent for a year or two. But few were willing to do that, as they feared being "priced out of the market". If they timed it wrong (suppose housing prices went even higher?) they could find themselves never able to afford a home again! Or, at least that was the theory. In retrospect, a pretty stupid theory. Why on earth would housing prices ever go to a point were no one could afford them? It made no sense.

A few smart people and a few lucky people (based on circumstance) did cash out and make real money. But many of the people who made tons of money doing the "buy and flip" ended up losing it all (or losing a lot of it) when the music stopped and they were still standing up. The problem with that crowd was that once they got hooked on the "buy and flip" drug, they couldn't quit - afraid to pay capital gains taxes on their rollover profits.

And yes, some average folks did get burned and lost tens of thousands of dollars in the process. The losses to the last people who bought in were very real, just as they are to the guy who bought the last share of Enron before it crashed. But their losses were not as great as the raw numbers might indicate.

Johnny-come-lately who bought a mini-mansion in 2005, putting little or nothing down, signing a "liar's loan" (no docs) lost very little - and got to live a nice house, until they threw his ass out. Those folks whine about how they "lost their homes" but the real loss was to the mortgage company, who took hundreds of thousands of dollars in losses - which were passed on to the rest of us, in the form of mortgage backed securities losses which were reflected in the balance of our IRAs and 401(k)s.

But the "phantom equity" of an overheated market was never "lost" for those who stayed put and could afford their homes. Most of those people, in their homes for 5-10 years, had enough real equity that when the housing prices went bust, they still had positive equity in their homes. They did not "lose" anything, they just did make as much as they could have.

So where did all that phantom equity money go? Nowhere, because prices and market values of homes don't represent real money, except for homes actually sold. A house just sitting there, which rises dramatically in price, does not create "wealth" unless the owner sells it.

For those homes, there was no money lost - merely a potential to make money was lost. And dollar bills don't represent potential wealth, they represent real wealth.

So no, the money didn't go anywhere. Some folks got burned badly, to be sure. We all took a hit in our investment portfolios. Many walked away from homes and declared bankruptcy. For the majority of us, however, we merely saw unrealized gains decrease. And many people still made a decent rate of return on their homes, even with the bubble bursting.

In a way, it is like the Stock market. I had one account with $100,000 in it. It went up to $120,000 and then sank to $80,000. Did I "lose money" in this account? Not really, considering that I invested $20,000 in it, ten years ago. a 400% gain in a decade is still one helluva ride, even with the "phantom losses" of last year.

The people who sold out before the crash realized those phantom gains. Those who sold after the crash locked them in.

But for the rest of us, there was no, and will never be, a "loss" from the market events of last year, as our portfolios are still worth more than we paid for them. You can't count your chickens before they hatch. And you can't realize gains or losses without a realization event.

The money didn't go anywhere. And James Surowiecki of all people should know that.

Was Tom Cruise Right?

It is easy to paint someone who jumps on sofas as a nut. But maybe he is just happy, and you are jealous?

Tom Cruise gets a lot of press lately, and not the sort he really wants. The general public has painted him to be a kook or a Scientology nut. He was lambasted for suggesting that perhaps America's fascination with pharmacopoeia and obsession with anti-depressants might have a dark side.

But to some extent, he does have a point.

Again, I am no big fan of Scientology. Thanks, but no thanks, I'm not following the Outer Thetans anytime soon. And if I am to join some fabulously wealthy religious organization, well, the only condition I have is that I be made Pope or Head Thetan, or whatever, so I get all the money. Actually, from a Scientology point of view (as I best understand it) that would make the most amount of sense. Hey, I deserve to be in charge!

But since no religion is ready to make me an Imam or even Altar Boy, it looks like I'll have to take a pass on all of them.

But aside from his religious beliefs, what is the controversy about? Americas pharmaceutical industry is very large and powerful - more powerful than the Church of Scientology. And yet there are few websites devoted to "debunking" the chemical answer to life that the pharms provide.

In addition to metal illnesses, the pharmaceutical companies now offer solutions to problems you never knew you had. Restless leg syndrome? We gotta a pill. Small bladder? We gotta pill. No boner? We gotta pill! Oh boy, do we gotta pill and it's made us billions!

And some things they offer pills for, it is hard to even tell what they are curing! You see ads in the papers, magazines, the Internet, and yes, on television, for pills that don't really describe what they are curing. "Ask your Doctor is Nexium is right for you!" blare the ads, while failing to really state what it is trying to cure. PMS? High Blood Pressure? Post-Partum disorder? What? I guess I'd better ask my doctor!

Advertising of prescription drugs, like advertising for Lawyers, has generally been a bad thing all around. We have sacrificed our society on the altar of "Free Speech" and the consequences are devastating both personally and nationally.

People more than ever look at a pill as a solution to every problem in their lives. And the problem with advertising pills is that when you suggest a problem to people, they tend to believe they might have it. It is a psychosomatic effect. You read all about ticks and Lyme disease, and pretty soon you are convinced you have it. Feeling old and tired? You probably have "chronic fatigue" or "fibromyalgia". Or maybe you are just old and tired.

Depressed? No need to be. Take a pill, and you'll be happy, happy, happy. And increasingly, Americans are opting for pill-based solutions to their personal problems.

And the funny thing is, years ago, we didn't have these pills. Oh, I wonder, how did we ever, ever cope? Must have been hard.

But life is hard. It is difficult, messy, and a daily struggle, until you wake up one day and keel over dead. But hey, cheer up, there is a little fun tucked in there along the way.

Now granted, there ARE some diseases, both physical and mental, that medicine can help. And there ARE some people who need to "take their meds" regularly (and ironically, usually the first one to "go off their meds"). But for most of us, pills should be a LAST resort, not a first.

I take Allopurinol for Gout. And I hate to take it. And I avoided taking it for a year or so. I would rather do anything that be chained to a pill for the rest of my life. I am trying to change my diet and hope that I can eventually go off the drug. So far, lifestyle changes seem to be arresting the rate of the illness. Perhaps in a year or two, it will recede.

But others are not so fussy. "Is there a pill for it? Great, I'll take it!" - that's what most people say. So forget about changing your diet, losing weight, or whatever, just get me on those pills!

Depression is a terrible thing, of course, and anti-depressants can be useful for people with severe depression. But as a life-long commitment? Ouch. And increasingly, many more people are taking anti-depressants even though they are only mildly depressed or have one depressive episode.

As I have noted before, Depression occurs to everyone. In many cases, it is nature's way of saying "Change Your Life!" Whether it is move to a new town, get a new job, a new spouse, or just a new haircut, change often can be a cure.

Many people feel trapped in jobs and relationships with no way out. They have a staggering amount of debt to pay for shiny things - the shiny things that the TELEVISION says should make them happy. But things rarely do. And the disconnect between the TV and societal norms and internal happiness can lead to depression. I should be happy, right? Society says I have all the bright shiny! But internal happiness often comes from other things.

And in many cases, pharmaceutical solutions to personal problems don't work - or don't work very well. You are in a bad situation, for example, in a job you hate, or a relationship you are not happy in. The best answer is to get a different job, work on your relationship, or find a new mate. Taking action is the best solution. Changing your life to make yourself happier is the best answer.

But many folks convince themselves that there is something wrong with them. And as such, they need to be "fixed" or "cured" of their disease. Anti-depressants work, but like marijuana, have a stasis effect. You are no longer dreadfully unhappy, but not exactly happy, either. And you haven't taken the steps necessary to change your life. So you sit there, like a deer in the headlights, taking your happy pills while life passes you by.

For some folks, the medicines end up just locking them into a moderately unhappy state, for life. Or as one person told me, "they make me functional, at least".

Functional. What an epitaph. "Here lies John Brown, he was functional, at least". That's a life? Not for me, thanks. I'd rather have the ups and downs of daily existence and
take action in my life, when I can, and live it to the fullest. I guess I'm lucky that I have that option, you might say. Or was it entirely luck? Or was it making decisions, rather than remaining in stasis?

So Tom Cruise did have a point, to some extent.. But unfortunately, his point was shouted down with cries of "Scientologist!" and "Kook!" and baleful looks from Maria Schriver.

And of course, I don't think joining Scientology is necessarily an alternative to pharmacopoeia.

Sometimes the cure is worse the the disease!

Sunday, May 23, 2010

Some eBay Tips - Never "end the auction early!"

I have listed this tractor on eBay, and after three listings, it sold. But in the meantime, I had every sort of yahoo wanting me to "end the auction early." Don't fall for that!

When selling something on eBay, you are contracting with the eBay auction service to list your item for a fee.  When the item sells, you have contracted to pay eBay a final value fee for the sale.  It is a simple contractual agreement. If you violate the terms of the contract, well, that is cheating.

Don't cheat. It's bad. And bad things happen to people who cheat.  The temptation to think you are clever and can get ahead in life by cheating is great.  After all, it seems like everyone who gets ahead cheats. But in reality, when you cheat, or try to cheat, most times you end up getting burned - and not because you get caught cheating, either.  Remember, the greatest cons are based on making the "Mark" think he is cheating.

The Nigerian scam is a classic example.  The victims think they are getting involved in an illegal money laundering scam and then cry "foul" when they are conned out of their life savings.  Hard to feel sorry for someone who thought they could make millions in money laundering, isn't it?

So when someone asks you to cheat, chances are, it is because they want to cheat YOU.   Keep that in mind at all times - in with regard to all aspects of life, not just eBay.

But getting back to eBay, when you sell an item, you may be contacted by people who ask you to "end the auction early" and then sell them the item outside of eBay. They will tell you that instead of risking the item not selling at auction, or selling for less than you'd like, you can get a "sure thing" by selling to them directly.  Or, they argue, you could sell to them and avoid paying eBay's final value fees.  Don't fall for this scam.

To begin with, it is cheating.  And you have to ask yourself, the fellow who is asking you to cheat the system, is he all that honest?  If he is proposing you cheat eBay, then you really have no cause to complain when he cheats you.

eBay originally was founded on the honor system, and to some extent, it still works that way. You buy something online and then hope the people send you the goods.  In the old days, doing things that were not Kosher was considered to be not "eBaysian".  Today, most users don't understand what that term means.

It meant you didn't misrepresent your goods.  You didn't bid and then not buy. You did not withdraw items from an auction when it didn't meet your price.   And you didn't cheat eBay, either.  Today, as eBay has become more popular, more people who never were there during the earlier days have no clue about proper etiquette.  So they think of eBay as a classified ad system, where you find a product, ask them to end the auction early, and then buy it outside the system.

So, you say, eBay makes a ton of dough.  Why is this a bad idea?   So eBay doesn't get paid, big deal!

Well, to begin with, a lot of frauds and con artists try to use eBay as a means of snaring victims and then attempt to consummate the transaction outside of eBay to avoid what little checks and balances there are. So when someone says "I have a car for sale, but if you send me the money by Western Union, I can avoid paying the eBay final value fees" watch out, because they likely are a con artist, and there is no car. You send the money and that's it. You are out the money and you have no recourse.

When selling, similar things can happen, but not necessarily from professional con artists. For example, one persistent fellow kept e-mailing me and saying "End the auction early and I'll drive up and pay you $3000 for the tractor!" So, you say, what's wrong with that?

Well, typically, the way these deals work, if you fall for them (and I haven't, thank you) is the guy shows up and then says "Well, there's a scratch on this side you never mentioned. I'm not sure I want it anymore!"

So there you are, having ended the auction, wasted a week on the market, and no buyer.   But of course, the guy will say, "But, I'll overlook the scratch if you drop the price $500."

And that was the gag all along. They want to put you at a disadvantage and then take advantage of you.

Another fellow wanted me to "end the auction early" and then "meet him halfway" in Pennsylvania. Talk about a disadvantage.   After driving four hours (and renting a trailer) I end up meeting some Joe in a parking lot in PA, only to have him try to haggle me on the price.  Since I have so much invested in driving there, I would be motivated to fall for his machinations.

I told both "buyers" that if they wanted to bid on the tractor, then bid.  Play the game by the rules, not make up new ones as you go along.  Of course, both "buyers" had ZERO feedback, meaning that they never had done a deal on eBay.   And I programmed my auction sites to not accept zero feedback bidders.

And the funny thing is, in every case where someone asked me to "end the auction early" and sell to them for a fixed price, that person never bid on the item - even when it eventually sold for LESS than what they proposed to pay in the proposed outside-of-eBay transaction. What does that tell you about their real motivations?  Volumes!

In other cases, I have had people e-mail me telling me an item was "overpriced" but that they would "do me a favor" and buy it for less than the minimum bid, if I would "end the auction early". These types of people are like the "early birds" at garage sales.  They prey upon your insecurities and try to buy things for below market value by implying that they will never sell otherwise.   "Sell it to me now," they are implying, "or lose your only hope of ever selling it!"

Again, the best solution is to "Stay the course" and go through the normal channels of commerce. Rigging all these outside deals is just not worth it. They become complicated and difficult, even if the buyer is "honest" (a word I would use with trepidation) as you can't use PayPal and the other normal means of completing the transaction.  From the standpoint of "Hassle" alone, the "end the auction early" deal just isn't worth it.

I re-listed the tractor, each time dropping the price $500. It finally found bidders, perhaps not at the price I wanted, but at a respectable amount.

I listed the tractor and mower together, and in retrospect, I probably should have sold them separately. Some folks were interested in the tractor, others might want a mower. Selling them separately targets larger markets for both and generates more money.   Something to bear in mind when selling items that contain multiple components.

I also went on some tractor websites and posted links to the auction. This is probably a little cheeky, but it does generate interest. If you are selling an Alfa Romeo, putting a note on an Alfa website might generate more traffic for your auction. But, beware - many such discussion groups, etc. frown upon such postings. You may get some flames on the message board. However, since you are selling your Alfa anyway, chances are, you won't be visiting the message board ever again. And if it sells your Alfa....

eBay is a great way to get rid of things you are no longer using - converting physical assets to cash, which can, in turn, be converted to things you need. It is not a way of "making money" unless you want to make a business of it. But if you have things of value you want to get rid of, it is a useful place to convert them to cash.

UPDATE DECEMBER 2015:  I have sold a number of boats, cars, campers, etc. on eBay and every time, someone early on asks to "end the auction early" and offers a low-ball price.  In some instances, I have ended up getting more than three times these offers!

There is a pattern to these people:

1. They send endless e-mails asking for more information - information that is often in the listing.


3.  They tell you that you are asking too much or ask "what would you take to end the auction early?"

In many cases, these are Nigerian scammers, who want you to "end the auction early" send you a forged cashier's check for more than the sale amount and then have you wire money to someone else.  You end up not only NOT selling your car, you are now out the $3000 you wired to a "shipping company" that doesn't exist.

See also:

The "end the auction early" people are either scam artists or just want to get you to sell cheaply.  Bear in mind that bidding really doesn't heat up until the last day of the auction, often the last MINUTES.  Just because the bids are low after day 1, doesn't mean it won't sell for a good price.

Thursday, May 20, 2010

Constipated Commerce

For Sale: 1992 Geo Metro. 150,000 miles. Doesn't start or run. Won't pass inspection. Needs work. Nice car. Good on Gas! Fuel-Sipper! $5000 obo.

In poor areas of the country, commerce grinds to a halt, as people believe their meager possessions are priceless, while at the same time believing that other's are worthless.

We lived in the summer in Upstate New York.   I grew up in this area, and when I left, I noticed a definite difference in attitude in other, more affluent areas of the country.   If you want to buy a used car, go to Washington DC or some other Southern city, where there are rust-free cars galore at very low prices.  To people down there, a used car is not something you hang on to or value highly.  You sell it and make it go away.  Commerce gets done.

But in Upstate New York, Clem is selling his rusted-out POS Chevy for $1000 over book value. What gives?

When I returned to this area, I realized the phenomenon more thoroughly.   Buying and selling the most basic items is an onerous chore.   Prices are high and no one is willing to pay.  Want to sell a house?   Expect to wait a year, perhaps two, for the "right buyer" to come along.

And that's the mentality.   People put boats, cars, and other consumer goods on the market, often parking them on their front lawn, and then let them sit there - often for YEARS, mowing around them, waiting for "the right person to come along" so they can "get their price" on a clapped out Firebird.

And it becomes almost comical.   When spring arrives, people put out their lawn furniture, mow the grass, and then push their perpetual "for sale" car or boat out of the garage and onto the lawn.  No where else in the country does it take two or three years to sell a car or an old day-sailor.

You read that right.   Two years, sometimes three.  We see the same clapped-out crap for sale, year after year.  And even though these are depreciating assets, worth less as times goes on, the prices never drop, and in fact, often go up.  (UPDATE:  We returned to Central New York years after writing this posting and say the same damn sailboat for sale five years after we left, and nearly seven years since it first was put on the front lawn for sale!).

Apparently, these people never heard of eBay.   List it there, BAM! it's gone in 7 days.   Or maybe autotrader.  Or maybe looking up the book value on something and pricing it accordingly.

No, no, they have to "get their price" and will wait for the "right person to come along".

You see this in many poor neighborhoods - the over-valuing of junk.  As I noted in my Used Tires post, overpriced things seem to be the norm in poorer neighborhoods.  Pawn shops are another example.   I went to one once on the advice of a friend who claimed there were great deals to be had. But what I saw was very used things for sale for nearly 3/4 of the price of new.

You see, as I have noted before, one reason people stay poor is that they make bad economic decisions.   And one of these is paying too much for things.   Shafty used car dealers thrive in poor neighborhoods because they get poor people to believe that a clapped-out minivan is worth nearly double book value.

Part of this is ignorance of economic data and lack of access to it.  If you are undereducated, have no access to a computer, then chances are, you aren't checking the three book values (Edmunds, KBB, NADA) on a car before buying it.  So your pricing information is sketchy at best.

And under-educated people don't understand how equipment and things work.  So to them, a shiny used car is nearly as valuable as a new one - they look nearly the same, right?  What they don't appreciate is that these are disposable appliances with a finite design and service life - more like a roll of tape than an anvil.  If you buy a roll of tape and half the tape has been used, well, it is only worth half as much, right?  The same is true with cars and other consumer goods.

So they overpay for things, and when it comes time to sell, they ask too much, not understanding that the fact they made a bad economic decision (overpaying) doesn't mean everyone else has to make one as well.

The problem with this type of economic behavior is that it grinds commerce to a halt in these sorts of impoverished areas. And it has a snowball effect.  As money becomes scarcer, fewer and fewer economic transactions occur.  Because of the scarcity of money, people demand more when selling their own goods.  So you see cars for sale for years, because "I'm not just going to give it away" and "I want to get MY price for it!"

This sort of impoverished mentality creates a situation where people end up with mountains of junk and obsolete crap around their homes.  You've see the houses in the country with the old cars parked around them.  Cars that are worth nothing.  Why keep an old, rusted out Chevy Malibu with a seized engine?  Because they want to "get their price" for it.

When scrap prices recently spiked, and dealers were paying as much as $200-400 for junked cars, some of these junk collectors stood to make thousands, if not tens of thousands of dollars, selling their piles of rust.  But many refused, saying "I want to get my price" - convinced that any day now a "rich car collector from the big city" was going to pay them thousands of dollars for their old Chevette or Vega.  I kid you not, they really believe this sort of thing.

We have run into the same thing on Craigslist.   People post ads nominally offering to sell something. You call them or e-mail them.  They don't get back to you.  Or if they do, they won't give you a phone number, an address, a time to come look at the item and buy it.  Then they say "Well, maybe my Brother-In-Law might buy it, I'm not sure" (I have actually heard this!).   They can't bear to actually consummate a deal. Constipated Commerce.

Up in this neck of the woods, people "think" about transactions a lot, but they rarely make good bargains, for themselves or others.   A person drives by a used car for sale on the way to work for six months, before finally stopping to look at it.  Three or four weeks of dickering and haggling, and he ends up the proud owner of a rusted-out 1979 Jaguar sedan.  Constipated Commerce.

It is important to liquidate physical assets that are no longer in use.   The capital you free up this way, no matter how trivial, adds to your bottom line.  And the sooner you sell a worn or unused asset, the more money you will get for it.  Wasting time - years even - trying to sell a $1500 boat for $3000 - is not cost-effective.  This is time you could put to better use.   And getting $1500 for that old boat is better than letting it rot behind the barn, out of spite when no one would "pay your price".

And of course, your home is worth more without garbage around it.   Junked and wrecked cars, old boats, and the like, will all have to go away eventually - when you sell your home or when your children sell it after you die.  At that point, your "precious collectibles" will be sold off to a junk dealer for the lowest amount possible.

And its important not to overpay for goods.  Buying Clem's clapped out '92 Ford for $3500 is no bargain, no matter how you try to convince yourself it is.  And convince themselves they do.  And when it is time to sell, they want an equally staggering amount for the rust-bucket as well. So the cycle continues......

Constipated Commerce!

Wednesday, May 19, 2010

Investing in STOCKS

What are you buying when you buy Stocks?

Should you invest in stocks? Well, chances are, you already have. If you have a 401(k) or IRA or other investment account, it probably is invested in a Mutual Fund, which, in turn, is mostly invested in stocks or as they like to call them,  "Equities."   And which stocks you are invested in, well, you might not even know.

And like most Americans, you wonder sometimes whether these things are worth anything, or, if in fact, the whole game is rigged.

Stocks can have a higher rate of return than other investments, it is true, but unlike other investments, they can drop down in value to ZERO in a real hurry, and stay that way.

Even if you bought a condo in Las Vegas and paid cash for it, chances are, it is still worth about half what you paid for it. And you could still rent it out to a Casino worker for some amount of money. It is not worth "Zero" now.

But if you bought GM stock a few years back, well, it ain't worth bubkis these days - not even enough to justify paying a discount brokerage to sell it.  In fact, today, it is worth ZERO.

And yet, for many people, their only investment is a stock portfolio.   Is this a good idea? Probably not.   There are a number of reasons why you should Diversify your portfolio, so you are not totally invested in "all one thing."   If one investment goes "bust" then you still have something else to rely upon.

The problems with stocks themselves are numerous, but mostly the problem is that they lack transparency, and as such, we tend to value them by how much other people think they are worth. Let me explain.

1. Stocks Prices are often confusing and misleading. People like to say things like "Bill Gates is worth Upteen Billion Dollars" basing this on his number of Microsoft shares, multiplied by the share price.  But of course, if he sold his huge chunk of that company, the share price would plummet. He would not get the "full retail" value of his "investment."   So who pays that top dollar for the last share sold? Well, chumps like you and me, who get in on these deals last.

"Market Capitalization" is another phony number thrown around, calculated by multiplying the share price by the number of outstanding shares. For some companies with wildly over-valued stocks, this number merely points out the ridiculousness of the share price, as the "Market Capitalization" exceeds the GDP of some countries. The only value in that number is to illustrate how overpriced a stock can be. If someone started selling off a big chunk of a company, the share price would drop precipitously. It is only the small investors, buying that last share, that drive prices up so high.

2. Many people own stock and never pay for it - or pay much for it. Founding shareholders in a company put in a little cash, their "sweat equity" and maybe ideas and get huge chunks of stock. They pay little or nothing for it. They wait for people like you and me to "invest" and then ride the wave. Others, who work for the company, have "stock options" which grant them the right to buy shares at little or no cost. More on that later.

3. Like the Government, they can always print more. Want to raise capital? Print more stock shares. Of course, this dilutes everyone Else's investment. How do you think the company comes up with those shares for the stock options? They don't buy them on the open market, they just print more!

4. Whose looting the company? A lack of transparency in most companies makes it easy for executives to loot the company and walk away with most of the cash. And you'll find out about it in the papers, most likely. Sure, the SEC will investigate, and maybe someone will go to jail. But how does that help you?

5. Ratings agencies and Analysts know little more than you and I. Up until the moment Enron went belly-up, most stocka analysts were ga-ga about the stock and very few people were sounding the warning bells. The lack of transparency made it difficult for them to know what was going on.

6. Markets can change dramatically, rendering a company worthless overnight. Technology changes and markets change. What was a hot product one day is yesterday's news the next. Often a company has little or nothing in the way of tangible assets to back up the price of the stock. Once liquidated, there is little left to pay back investors.

7. Most Companies are wildly over-valued: When a company is liquidated and assets returned to investors, most get pennies on the dollar. The value of the physical assets and even intellectual property are not worth all that much, it turns out. Rusty old factories and office leases just aren't worth much to anyone. When buying an "Equity" you really are just buying the right to receive dividends, and for many companies, which pay no dividends, there really is no "there" there, other than the premise that some other person will pay you even more later on for your shares.

8. Stock Values are largely based on what other people think. We buy and sell shares at the market price. The market price is based on a consensus of what everyone thinks the stock is worth. To some extent, this is a false value. We assume that people smarter than us are setting the stock price, no doubt based on some detailed analysis. And you'd assume wrong. In terms of price to earnings ratios, most stocks are wildly over-valued. The amount that the pay in dividends compared to the stock price is paltry - you'd do better in a savings account. People assume that the share price will go up over time and that someone else will pay them more for the stock. Sometimes this happens, sometimes not.

9. The value of the Stock is often just in control. One way to cash out in a stock investment is when some other company takes over the company you are invested in. Stocks represent the ownership of the company, and thus the control over it. So you may be "bought out" as an investor by another company. But guess what they are going to pay you in? That's right - more stock! So Acme Corporation buys Widgets International, and pays for it by printing up a fresh batch of shares, which they exchange for your Widget shares. You just have to hope that the Acme stock is worth something to someone else.

10. Stock Options force executives to pump up share prices. If the bulk of your income is in Stock Options, then your number one goal in life is to make the share price of your company as high as possible. Screw real profits. Screw dividends. If you can get people to think the company is worth trillions, you can sell your Stock Options for a ton of dough - often millions or even billions of dollars. The problem with this model, as we all know too well, is that it moves an executive's focus from running the business to running the share price. And the underlying business suffers as a result. It encourages poor management, if not outright fraud.

So given all that, why do people invest in stocks and why do most investment gurus tout equities? Well the answer is pretty simple.  When you go to the store and all they are selling is horseshit, what else are you going to buy?  And if all the investment "gurus" can advise you on is horseshit, what else are they going to say?

If your only tool is a hammer, well, every problem looks like a nail, as they say.

During the 1990's a group of young people formed "Motley Fool" and made a name for themselves by appearing on financial programs in jester suits, telling everyone to invest in Stocks. Stocks, Stocks, Stocks, they chanted, like a mantra. And in the go-go 1990's, it all made "sense."

No one bothered to think about why they were taking serious financial advice from a guy in a clown suit.  They are still around, but I don't see them wearing the clown suit much these days.

Investment gurus have to advise you to invest in stocks, for the simple reason is that it is the only game in town.  As I have noted before, in order to make a name for yourself as an investment guru, you need to offer some startling or unorthodox advice.  You have to sell the sizzle, as they say.   And that ain't gonna happen if you say "invest in savings bonds" or "pay off your mortgage."  You'd be laughed out of the millionaire investment-guru booksellers club.

And similarly, investment gurus can't say things like "buy Real Estate" even during the Real Estate boom, as it was a local phenomenon and they had little actual experience with it.  Being a landlord and stuff? Messy.  Takes Work.  Takes TALENT.   Buying stock?  Takes a click of the mouse.  Makes you look like a genius.

So all the financial shows concentrate on stocks like it was the only game in town, because it is - for them.  And they want you to think so, too.  The day-to-day pulse of the DOW is touted like it was the financial heartbeat of the country.  Buy this, sell that, watch this.  You should be looking at stocks all day long and studying their trends and movements.

They are selling the premise that you can make money from nothing. T hat you can create real wealth without work, labor, or effort. That merely watching numbers on a screen and making choices is a way of creating wealth.  But the reality is, the most you can reasonably hope for in an investment is a reasonable rate of return.  The idea that you can get "rich" buying and selling stocks is largely illusory.

Some folks invest this way and some gurus sell investment systems - looking at graphs and charts as though they can tell you the underlying value of the company - without bothering to actually understand what the company is about or how it is run.  All that matters to them is the trending in pricing.  This sort of "analysis" totally misses the boat most of the time, as important trends in pricing are often determined by the operations of the company.

And others are more number-oriented, concentrating on company profits, dividends paid, and the like.  Quarterly reports are their mantra, and what the company did last month is more important than overall trends.  So long as the company reports record earnings, they will shout "BUY" to their viewers. And that sort of mentality is why Enron kept reporting phony profit reports.

And Joe Citizen buys into this, reading financial pages that talk about nothing but Stocks, watching financial news programs that talk about nothing but Stocks, buying financial advice books that talk about little but Stocks. Stocks are sexy, Stocks are in, Stocks are dramatic. Even when the financial news shows (or networks, now) cover things like bonds, they tend to treat it as a boring topic - with the story usually assigned to the intern or the bond geek you never see.

Yes, there are people who become billionaires in "the market". But the Warren Buffets of the world do more than simply buy and sell stocks. They buy and sell companies, often re-working them, spinning off divisions that management was too lazy to realize were a hindrance or would be worth more as a separate entity. Or they merge to marginal businesses to make one profitable one. They really are adding (or trying to add) value to the equation. These sort of "investors" are not just clicking a mouse and buying or selling a share, they are running a company (or ruining it, depending).

Does this mean you should NEVER invest in stocks? Don't be an extremist. It only means that if all your assets are tied up in one thing, you could be in for a world of trouble. And for personal investing - the money that you will need to live on for the rest of your life, having it all in Stocks could be a big mistake, particularly as you get older.

And the irony is, most older people in this country are the ones who watch the financial channels and read the financial pages. The people who should have the least interest in the market are the ones watching it most closely. If you are watching a financial channel and monitoring stock prices when you are 70, something is seriously wrong with your portfolio. By that age, you should have only 30% of your investments in Stocks, and even that small percentage should be in safe, dividend-paying blue chip companies.

At age 50, I have about half my investments in pretty safe things. Some bonds, some life insurance, and a big chunk of un-mortgaged Real Estate. Yes they can go down in value, particularly Real Estate, as we have seen. But they won't drop off to NOTHING overnight, or perhaps ever. Unless a huge plague hits America and kills off half the population, people will still need a place to live.

But Stocks? I have some in my portfolio that went from $50 a share to ZERO and stayed that way. Granted, others skyrocketed, but those are few and far between. And every skyrocket has an apogee and then a messy re-entry.

FDIC insured savings is another good place to park money as you get older. Not exciting. Nothing to "advise" people about. No ticker or stock chart to watch. No "Buy" or "Sell" decisions to make - nothing, in short, for a guru to advise you about. Nothing to talk about on TeeVee. No books to sell. But as you get older, a sizable part of your portfolio should be in something that cannot go away, no matter what.

Many folks are investing in Gold right now, convinced it is a stable investment. It is true that Gold will never "go away" as an investment, like stocks can do. But you can still lose nearly half your investment in a big hurry, when commodity prices plummet. I suspect once the market stabilizes and people realize that life will go on as before, that Gold will drop in value to about $600 an ounce, and those folks who paid $1200 will be crying. There is a LOT of Gold in the world, and the supply will increase accordingly, when prices are so high.

Again, this is not to say minerals are a bad investment, just that buying them when they are high is probably not a smart move. They were a good investment to make - five years ago. Today, you should be selling, in my opinion.

So, should you invest in Stocks?   Sure.  But don't put everything there.  And as you get older, you should be in the market less and less.

Tuesday, May 18, 2010

Should You Unplug From the Grid? (Part Deux)

Can you go all-solar? Not cheaply. Yet.

In this recent article on CNN, a fellow in Florida shows off his alternative-energy lifestyle. It is an interesting article and the fellow is resourceful. But is this a practical lifestyle for most of us?

Probably not, and not yet. Let me explain why.

To begin with, in terms of cost, most of these gadgets cost far more than conventional electricity generation. Solar panels have a finite lifespan, and over their lifetime, will generate electricity at a cost over double, perhaps triple that of conventional electrical rates.

Compounding the problem is that to store this energy, for use when the sun goes down, you have to have a bank of batteries in your home. These are wildly expensive and need regular maintenance, and need to be replaced about every 5-10 years. The "battery problem" multiplies the cost per kW-hour several times again.

So, a the present time, going solar isn't practical for the everyman. For hobbyists and enthusiasts, who are basically experimenting, it can be a fun game to play, but not a cheap one. And the massive amounts of technology involved have an energy cost of their own.

And the amount of work needed to build, install, and maintain such systems can be staggering. Again, for a hobbyist, it may be worthwhile. But for most of us, the labor involved to keep all that equipment running is just too much.

Yes, someday solar and wind power might become so cost-effective that that are in widespread use - even without tax incentives. And when that happens, you can bet the local utility companies will be the first to jump on the bandwagon. Because if the cost is lower, they will move to that technology.

Of course, the irony is, if enough people move away from oil as an energy source, demand for oil will drop. When demand drops, prices will drop. And suddenly, oil becomes "affordable" again and solar and wind power are "too expensive."

Funny how that works, eh?

UPDATE 2021:  In a decade much has changed, but going solar is still problematic at this time.  The utility companies have pushed through regulation reforms so that they no longer have to pay retail prices for electricity generated from homes.  This makes the payback for solar very difficult.

Even with cheap panels from China, companies are not pushing solar installs for homes these days - the labor to install is the big problem.  Panel lease deals used to be attractive, but what happens when you sell the home?  Does the new owner take over the lease?  This has already happened to a friend of mine.

And as others note, tax incentives are nice and all, but unfair to apartment dwellers and others who cannot take advantage of them. In fact, they end up being a windfall to the middle and upper-classes who can afford to invest in solar panels for the long-term payout.

I hope that solar becomes affordable down the road, but that road keeps getting longer and longer.  It is like self-driving cars - coming soon, next year!  Next year is always a good timeline, as you never need to update it.

The Cheap Vacuum Cleaner

We've had more expensive vacuums than this, but they have not worked better.

Vacuum cleaners are an interesting market. You would think they pretty much would have reached a design zenith ages ago. You'd think they would be pretty reliable, too. And moreover, you'd think they be pretty cheap. And you'd be wrong on all counts.

We've had a number of vacuum cleaners over the years, some expensive, some not. And the funny thing is, some of the best and longest lasting have been the less expensive models.

We had a Kirby, which was a hand-me-down. As you may recall, my hapless brother became a salesman for the brand and made one sale - to my Mother. It was a big, heavy, clunky thing that weighed a ton and cost over $300 back in 1980, which was a lot of money back then, and even today.

It worked well and lived up to its reputation, but the dust bag was, well, dusty. And when it eventually died, well, we let it go, rather than have it "rebuilt" at the factory as the Kirby people will do. Too many complex moving parts, attachments, and things. Commercial vacuums for hotels are similar in design, but made with fewer attachments and gizmos, and probably last longer.

We had a consumer-grade Hoover upright for many years after that. It worked OK, but the thing to remember about consumer-grade appliances is that you have to treat them as though they were made of plastic - because they are. Our cleaning lady would yank the plug out of the wall from across the room and slam the thing into furniture, breaking off bits and pieces of it, and then complain, "Senor Robert, the Vacuum no est bueno!"

So we paid a lot of money for an Electrolux. In the old days, the Electrolux canister was THE vacuum cleaner to have, and chances are, your Mother had it serviced by a local vacuum cleaner repair guy who worked out of a converted garage in his back yard. They were made out of stamped steel and built like tanks. As a boy, I would ride it around the house like a wagon, it was that durable.

Fast forward 30 years and the new Electroluxes are made of - you guessed it - plastic. It was not a badly made vacuum cleaner, just very expensive for what was now a consumer-grade appliance. Vacuum cleaner stores still existed when we bought it. By the time it died (about five years later) the vacuum cleaner store was closed.

What to replace it with? A trip to the local "big box" store revealed a line of Dyson "ball" vacuums that promise to liberate you from the bag. They are advertised on TV by a guy with a British Accent, and well, you know, anything with a British accent is classy and better.

But British technological prowess has taken a beating in the last few decades. Ask anyone who has owned a British car over the years, and well, you know how that works. Expensive, esoteric, breaks down often, expensive to repair.

And the Dyson cleaners were a lot of money - $300 or more, some much more. I was not sure I wanted to gamble my money based on a clever advertising campaign based on the American instinct to view anything vaguely British as classy and superior.

Instead, we bought a GE 2-motor canister vacuum, model 106766 at Wal-Mart for about $100, basically because it was about the cheapest thing they had on the shelf. They are about $150 now and harder to find. We ended up buying a second one for the lake house. And for the money, it has been a darn good vacuum cleaner.

Now that we don't have a cleaning lady, wear and tear is reduced considerably. Again, treat these like the consumer-grade products they are, and they will last for years. Ours have lasted over five years so far, a pretty good track record compared to the more expensive models.

The only problem I have had is that the connector for the power head (at the wand) came loose on one, and then arc'ed, causing corrosion and blackening. The power head stopped working. This is apparently somewhat common, as it is mentioned on many online sites. But it is not hard to fix, either, by cleaning the contacts and applying dielectric grease.

These units should provide a decade of good service, with reasonable care. It is a shame that we went through so many other vacuums over the years - most lasting only 2-5 years before breaking.

And the nice thing about a cheap vacuum cleaner, is that if it does break, well, you can just toss it away. But amazingly, parts for this machine are indeed available online. So if it does break, it can be repaired, if you are handy with tools.

Fancy expensive consumer goods are fine and all, but often they provide no better performance or service life than less expensive, mass-market items.

In vacuum cleaners, like coffee makers, oftentimes the cheaper model is the better bargain.

Now, like anything else, there is probably a point where too cheap is no bargain, either. Wal-Mart has a line of vacuum cleaners, mostly Dirt Devils, that are little more than $50. I doubt they would work as well or last as long. Sometimes there is such a thing as too cheap!

NOTE:  Cheap bags for the GE CN-1 can be found at the Online VacShop for about a dollar apiece.