Monday, August 29, 2011

Cell Phone Insurance? Are you joking?

Never own anything portable that you can't afford to lose.

Here in Canada, my 10-cents-a-minute GoPhone plan works only intermittently (Rodgers Wireless recognizes it, Bell Canada and Telus do not).

I went to the local cell phone store to inquire about a throw-away SIM card for my phone.  It turns out not to be feasible, unless I unlock my decade-old battered Motorola.  And in the four weeks we've been gone, I've received exactly two phone calls - both from people advising me they were sending an e-mail. So much for needing a phone!  Besides, unlike the USA, Canada actually has pay phones, and my ATT long distance card works just fine here.

While I was in the shop, two Canadians came in and asked about getting cell phone insurance on their new smart phones.   It seems they were so paranoid about scratching, denting, losing, or destroying their new smart phones that they were willing to shell out even more money for an "insurance" plan on the phone.

Bad idea.  A better idea is just to not own anything you can't afford to lose.  Period.

$5000 watches are fine and all, if you are very wealthy and think $5000 is a pitiful amount of money.  If you are rich and your expensive watch falls off your arm while out Yachting, well, no big deal.  But wanna-be middle-class folks who shell out that kind of dough to impress people - they are a different animal.  They cannot afford to lose a watch that cost more than their car.  They really shouldn't own something that expensive.

Fancy cell phones are a similar deal.   If you live in fear of losing your new smart phone, maybe owning something so small, expensive, and fragile (and easily stolen) is not a good idea in the first place.  It is just another cosmic burden on your brain, basically.

While in many cases these phones can be inexpensive - if purchased as part of a contract plan - if they are lost, damaged, or stolen, they are very expensive to replace.  The first phone is subsidized by the monthly fees of the plan.  The subsequent phone, well, you have to pay full price for that.

And like any other insurance policy, the people writing the policy are the one's that make out.  You pay them $40 or whatever, and they bank on the fact that you won't likely lose your phone, or if you do, you won't qualify for a free replacement under some "Catch-22" part of the plan.

Or if they do replace it, they will give you a used one (yes, some cell companies do that, providing a "comparable" phone which is actually a used one from another customer who is upgrading).  Be sure to look into this, if you are foolish enough to buy an expensive cell phone and even more foolish to insure it.

The customers who were asking about the plan were chagrined to discover that it could not be obtained more than 45 days after purchase, and moreover, if the phone was scratched or dented at all, it could not be insured.  Both customers, I think, had scratched theirs, and hoped to "pull a fast one" on the phone company and get a free phone out of the deal.  More faux financial acumen at work, I'm afraid - people thinking they can come out ahead in dealing with a major corporation that does more transactions in an hour than you would do in a lifetime.  Yea, they might give you a free phone - they are, after all, stupid, which is how they became huge international conglomerates.

But overall, I was struck by how these folks were paranoid about losing what should be, after all, a minor asset in their lives.  Again, people obsess with insuring the shiny objects in their driveway (or their electronic gizmos) and forget about things like funding retirement or insuring against catastrophic liabilities.

For me, a far better approach is to walk away from expensive toys, particularly ones with expensive monthly fees and contracts attached to them.  You don't need a smart phone.   And if you are worried about it being lost or stolen all the time, chances are, you really can't afford it, in real terms of your life.

Time versus Money

For some folks, this is a once-a-year dream vacation.   For me, this is just life.  If you want a lot of things in your life, you have to give up your time.   If you can live with less, you can have more time.  Your choice.

The other day, we were driving in Newfoundland and saw a trail by the side of the road.  We walked up it a kilometer and came to the end of the trail - the Appalachian Trail, as it turns out.  The view was spectacular and it was a very unexpected treat.  Now I can say I have walked the Appalachian Trail, or at least the last kilometer of it.

On the way back, we met two young Canadian lads on vacation and told them about the trail, and they were very enthusiastic to walk it.   We were comparing notes about our vacations.   We were spending two and a half months exploring Newfoundland, Labrador, the Gaspesie Peninsula, as well as Maine, and the Blue Ridge Parkway (and Mistletoe State Park, shown above, in Georgia).

They were flabbergasted.  "What sort of job do you have where you can take over two months off from work?"  They had to be back in Ontario in a week's time to get back  to their high-paying and important jobs.  But of course, they had nice clothes, expensive watches, the latest cell plans, a nice apartment in a trendy neighborhood, brand new cars, etc.  And they could afford to fly out to Newfoundland and rent a car - as they had limited time. 

We drove a 10-year-old car and a 15-year-old camper.  We are doing without income for a month or so (although I managed to file a Patent on the road and make a thousand bucks).  It is a matter of choices - a half-million dollar motor coach and no time to drive it, or a battered old BMW and all the time in the world.

And yet, most people chose the former.  And yes, it  is a choice.  We all delude ourselves into thinking that we "need to work" to "pay all the bills" - and then anesthetize ourselves to the drudgery of our lives by buying new cars and electronic toys to distract us from the fact that our lives are slipping away, weekend at a time, while we work, work, work, to have things we largely don't need.

Tonight, I met a fellow who is about my age.   He worked in a gold mine in Canada, and at age 55 quit his job.  By the way, he confirmed that their cost of production at the mine is about $450 an ounce.  Why are people paying $1700 or more?  Bubble, period.

He decided to quit his job and spend a year in his RV.  Why not?  He has a basic 18-foot model he tows with a Toyota.  He parks it in gravel pits and on "Crown Land" which is free and permitted here in Newfoundland.  It doesn't cost much, and when he is done, there is always another mine to work in.  As he put it, why wait until age 65 or 75 when you are too old to actually DO anything?  Too old to Kayak, or hike, or even walk, in some cases?  Take time to enjoy life now, and get off the things bandwagon.

Doing things is better than owning things.   And as I tear through the remaining 1/3 of my life, this message is being driven home more and more.  I may regret many things in life, but I will never regret going out and doing things.  I will regret the times when I stayed home, convincing myself that it was more important to work to make money to make payments on things and services, than to go out and do what I really wanted to do in life.

It is a choice, even if we don't perceive it to be one...

Monday, August 22, 2011

What is Wealth, Anyway?

Most people see this as wealth, when it really isn't.  Money is just one aspect or representation of wealth.

If you asked most people what wealth was, they would give you a blank look and say, "well, money, of course!"

To us working-class schmucks, that is what we perceive as wealth - after all, money is what we chase most of our lives and we view people with a lot of it as "wealthy".

But money is, as I have noted before, an invention of mankind, and it is an idea - a symbol - that represents power and control - or basically power.  Wealth is not in owning "things" - it just allows you to do so - or more precisely, control things.  It is the control of things - and people - that is real wealth.

Consider the corporate executive who has a jet provided for him by his company.   He does not "own" the jet, and if you added up his balance sheet, that very expensive asset would not appear there.  Similarly, the corporate apartment they keep for him in the City may not be his - or the corporate condo.   But since he has control over these things, he in effect owns them - but by not owning them, he doesn't have to pay taxes on them.

Only chumps like you and me think in terms of actually owning things.  Or perhaps, if we think we are real clever and engage in some faux financial acumen, we think about leasing things.   But the bottom line is, for you and me, owning "stuff" is not wealth, but dissipation of it.

What wealth allows you to do is to make people do things for you - whether it is to clean your bathroom, cut your hair, or build you a moon rocket. When you have wealth or power - which are the same thing, really - you can control the actions of others around you.

Money, while an indicia of wealth, is not wealth itself, or even a good way of "keeping score" of wealth. Many very powerful - and thus wealthy - people have little in the way of personal wealth, but can control vast amounts of people and equipment and natural resources.   Consider the President, for example.  He can jet off to China in his own 747, or command a standing army.  It is a form of power - or wealth, if you will - that far outstrips his pitiful personal wealth or Presidential salary.

What does this have to do with personal finances? Not much,  Maybe a lot.   We all chase after wealth in this world, convinced it will make us happy.  But real wealth lies in the control of our own lives - as well as the ability to control (in a limited sense) the lives of others.  With a dollar bill, I can induce a farmer to plant a crop, harvest it, and bring it to market.  It is a powerful thing to have in your hand.

But most of us squander this wealth, myself included, to use that power to obtain things that we really don't need in life - or more things than we really need or want.

While having a fancy car, boat, house, or cell phone may appear to be an indicia of wealth, it really is an indicia of dissipation of wealth.  And for every "thing" we buy in life - and for every debt we take on to buy these things - we have to work harder and harder to keep up with the cost of these things.

Suddenly, it seems, we are the ones dancing to the tune played by the man with the dollar.   We are the ones being induced, like the farmer, to work at someone Else's beck and call.  And all so we can have some more "stuff" to park in our yard or clutter up our homes.

Being able to live with less is a form of power - a form of power that is available to more of us than things like corporate jets or the ability to invade other countries.   If you can live on less, you can be self-employed, work less, play more, do things, go places.  If you want to have a brand new car every three years, you have to have a job that provides only two weeks of vacation.

Who is wealthier?   The guy making all the money who has to be a slave to a job he hates so he can buy stuff to impress strangers with this apparent wealth?  Or the guy who can take time off when he wants to, because he has no onerous mortgage or car payments to make or cell phone bill to pay?

If you think of wealth in terms of stacks of dollar bills, or worse yet, cash flow, you might be inclined to think the first guy is wealthy and the second guy is poor.   But if you think in terms of what wealth really means - control over your own life and a means to an end, not an end in and of itself, well, then, the second guy is rich and the working stiff is poor.

Wealth is not stacks of dollar bills.  Wealth is power and control - starting with the power and control over your own life.

Many Americans, myself included, jumped on the bandwagon of consumption, thinking it was wealth itself, when in fact, it was a poor avatar.  While having things and paying for them through loans had the appearance of wealth, it was not real wealth.   So long as you had less and less control over your life for each new toy or obligation you took on, you were not really getting richer, but in fact, poorer and poorer.

For some folks, during the recent Real  Estate meltdown, this became a monetary reality as well as a philosophical one.  Once the housing market tanked, these folks found themselves heavily in debt on a home that would never, in their lifetimes, recover its value.   And thanks to onerous repayment terms, they could never afford to wait out the market in any event.   Suddenly, the frailty of the "apparent wealth" lifestyle became all-too-apparent.

The person with real wealth - little or no debts and little or no monetary obligations - didn't have to worry much about recessions and market meltdowns.   If you can live on little, a little is all you need to live on.  And that is a form of real wealth that is far easier to achieve and far easier for most of us to achieve in our lifetimes.

Saturday, August 20, 2011

Good Debt versus Bad Debt

 Is debt an inherently a good or bad thing?  It depends.

lately in the popular press, people have been coming out against debt.  And in this blog, I have noted many times that personal debt can be a bad thing, particularly consumer debt.  But not all debt is bad, and there are instances where debt can be constructive and necessary for the functioning of a society.

Bad debts - and by this I don't mean unpaid ones, but rather bad reasons for going into debt, include most consumer debt for what are really unnecessary expenses:

1.  Car loans or leases.
2.  Jet Skiis.
3.  Rent to own furniture
4.  Home improvements.
5.  Consumer Electronics
6.  Look-at-me homes

Any type of debt that does not generate wealth for you is basically bad debt.  And by extension, this means that just about all consumer debt is bad debt to take on.  Why is this?  Because it does nothing for you, other than spend your money increase your monthly cash-flow requirements, and place you in a precarious situation if you should ever lose your job or have your income stream interrupted.

But wait, you say, what about the home mortgage?  Yes, the home mortgage - which has caused so much heartbreak in the last decade, can be very, very bad debt - if you are using it to buy more home than you need or can afford.

If you can buy a home for a less effective monthly cost than you are presently paying in rent, then yes, a mortgage can be "good debt".  But beware, as I have noted in the past, if you don't plan on staying in the same place for at least five years, chances are, you will lose money on the deal, if you have to sell, as the transaction costs will exceed the savings by owning a home.

The danger of the home mortgage is that people think that since it is a good deal, then more mortgage is even a better deal.  So they buy more home than they can afford, and suddenly, they are spending more to own than they would pay to rent, on the premise that they are "making money" which of course, they are not.

But what about car loans?  Consumer loans?  Doesn't everyone get those?  Actually, not.  And the danger of the consumer loan is that by offering "low monthly terms" to consumers, people end up over-consuming.  Spending an extra $5000 on a car doesn't seem so bad, when it is pitched as being only an additional $25 a month.  If you have to pay cash, you'd be surprised how those decisions are affected.

So what is good debt?  Good debt is something that is used as a vehicle to make money.   It is a means of spreading risk and also spreading out payments for a project that, if done piecemeal, would cost more.

So for example, buying or leasing a car is probably a bad deal for a consumer.   But if you are a taxi driver and want to buy a taxi cab - and the monthly car payments would be more than offset by the income it would produce, then yes, a car loan is a good debt.  But of course, if you could afford to buy a car outright, paying cash, you would come out further ahead.  But many taxi drivers don't have that kind of cash, and owning your own cab might be more profitable, even after making loan payments, than working for another cab company.

Similarly, borrowing money for Corporate bonds and the like can be good debt, if the money is used to invest in the company and create wealth for the company - as opposed to borrowing to prop up a failing enterprise or just to pay off older debts.

So that leads us to government debt.   Is government debt bad?  The GOP certainly wants you to think so - after helping run up a huge chunk of our current debt (Obama is tagged as increasing our national debt, however, stimulus spending in a time of recession has been shown, time and time again, to shorten recessions.  Cutting spending at this time in our economy will lengthen the recession into the next election cycle, which of course, is convenient for the GOP).

It was only a few short years ago that we had a balanced budget and actually a surplus under the Clinton Administration.  There was talk back then that the government would be so cash-rich as to be an enormous influence in markets.  Funny how things change so quickly.

But of course, Bill Clinton was not a magician who waved his debt wand and balanced the budget.  Rather, during a period of economic prosperity, tax revenues shot up, which made possible budget surpluses and also decreased the national debt - as a percentage of GDP.

Today, the national debt, as a percentage of GDP is huge - because our GDP is down.  Tax revenues are down, because of the recession, and also because we cut tax rates for more than a decade.  So, over time, our debt has increased, and with the recession, increased even more, and a percentage of GDP, it looks alarming.

So, is government debt good or bad?  If it is used to buy something substantial, that makes money or allows the economy to grow, I would say it is good debt.   A small town floats bonds to build a sewage treatment plant.  The plant could not be financed with tax dollars alone, and once built, the increased capacity allows more people to move to the town, increasing the tax base.  Over time, it pays for itself, including interest.

Or the government borrows money to build a bridge.  The bridge allows people to travel, ship goods, and engage in commerce.   While the bridge alone might not make money (unless tolls are charged) it does provide a benefit to everyone - a benefit that far outweighs its cost and the interest on the loan.

I think the key is whether the benefit last longer than the terms of the loan.  Perpetual debt just to cover operating expenses or to pay people welfare is probably a bad idea.   Just as a company that borrows money to cover operating expenses is headed for the trash heap, a country doing the same thing is headed the same way.

And this is where the GOP arguments fall flat.  During the Bush era, money was borrowed - like we were drunken sailors - on basic operating expenses of our government.  We incurred more debt not to build things or do things, but instead to satisfy a mantra of "no new taxes".  We did not even raise taxes or sell bonds to pay for a very, very expensive war.  And that was a missed opportunity, too, as people wanted to so something patriotic to help in the war effort.  As one commentator noted during WWII, paying taxes was a patriotic responsibility and a privilege - when so many others are dying or being wounded.

But as Americans, we were not even exhorted to buy war bonds during the Iraq war or the war in Afghanistan.  Instead, we were told to consume more and more.

In contrast, the stimulus money spend under the Obama administration has gone to build roadways, bridges, and other infrastructure - which are things that may last a generation or more and increase our productivity.

So, all debt is not bad, and not all government debt is bad, either.  As our economy improves, tax revenues will increase, decreasing our budget deficit and making our debt - as a percentage of GDP - less.  But the idea that the government should be debt-free is probably a fantasy and also dangerous thinking - as it is used be demagogues to advance personal interests.

History will reflect that the recession of the 2010's was exasperated by the ill-advised attempts to reduce debt and to cut spending, at a time when the economy needs more spending, not less.  As we cut back on government spending, it will have a ripple effect throughout the economy.  As government workers and contractors are laid off, they will spend less and consumption will go down.  And as we draw down our military operations, it will compound the effect.  In short, it will cause the recession to extend, not contract.

The GOP's position on debt is not a bad one - if it was made in 2000 instead of 2010.  While the GOP talks a good game about cutting the budget and cutting debt, when they had the opportunity to do so in a real and substantial manner, they chose to do the opposite - cutting taxes, increasing deficits and increasing debt.  Now, a decade later, this debt is "Obama's fault" and we are being told that while debt was good in 2000, it is bad in 2010.  And most people, reeling from the effects of personal indebtedness, are quick to believe this sort of talk.   After all, their personal debt problems are the same as the governments, right?


Wednesday, August 17, 2011


Unplugging from the media nightmare circus is important, if you want to learn to think for yourself.

Traveling to the remote maritime provinces of Canada, we have been out of reach of the cell phone and Internet for days at a time.   For some people, this is unthinkable.   How can you possibly live without your smartphone apps?  Without your texting?  Instant messaging?  Facebook?  Or the 24/7 News Channels, who fling fecal matter at your face all day long?

The answer is, of course, surprisingly well, and in fact, better than with all that electronic crapola in your life.

As I have noted before, electronic devices often act as a barrier to living - filtering life through the viewfinder of a video camera, digital camera, or cell phone.  You see things in terms of 140-word tweets or in Facebook updates, and not in terms of a personal, real experience.

And the television news is the worst of all - the sort of "Hey everybody, look at this!" kind-of-guy at parties who is oh-so-annoying.  Maybe we don't want to look.  Maybe we shouldn't all be thinking the same things and looking at the same stories - it doesn't expand our experiences much.

The latest thing, of course, are these flash mob riots, both in the UK and in the USA.   Social media, we are told, is now a weapon for violence and destruction - with people texting each other as to when and where to vandalize, destroy, and even kill.  It is being "plugged in" in the most evil sort of way.

The folks who participate in such actions - which are contrary to their own self-interests as well as society as a whole, are overly plugged-in to this electronic world.  To them, what is going on in a virtual world is more important than what is going on in real life.  And the person being beaten to death is not "real" to them, but just another avatar in a violent video game.

Electronic life is a dead-end, both personally, intellectually, and fiscally.   You cannot get ahead, financially, by being plugged in all the time.   At some point, you have to interface with the real world.  You cannot make a living in Linden dollars or Bitcoins.

The funny thing about being "unplugged" is how little we miss it - and how little the virtual world misses us.  We finally got cell service in Nova Scotia, and after two weeks, there was only one missed call and one voice-mail message - by a client alerting me that he was sending an e-mail.

And most of the e-mails in my inbox were of the "delete" variety.  Most of the others were things that could be put off for a week, a month, or even a few months.  In short, nothing online was really demanding our attention.

And as for the news?  Logging into was interesting after listening to the CBC for two weeks,  What seems important to Americans seems somewhat superficial and silly.   Celebrity news, trends and fashions, alarming or humorous videos, that sort of thing.   Very little of what is "news" is really news.   And in many cases, a "hot story" is designated to oblivion after a week or two or even a day or an hour.   If you did not hear the original story when it aired, you will never hear it later on.  It's almost like, well, it didn't happen at all.

Which is an insight.  What happens to someone across the planet on any given news day may be interesting - in that lurid sort of slow-down-to-gawk-at-an-accident sort of way, but not really useful information on a personal level, other than to depress you just a little more and get you to think the world is an awful place and why bother trying.

Unplugging from the data stream is a good thing.  And I look forward to doing it more.  I hope they have really shitty Internet and Cell service in Labrador....

Saturday, August 13, 2011

Battered Old Laptop

A decade in the computer business is a lifetime.   Yet nearly 10 years later, this old Dell laptop soldiers on.  Do I need to buy a Mac Air to impress people I don't know?  No.

I am typing this on an old Dell laptop that I use when I travel.   It is nearly a decade old and keeps running, so I keep using it.   The hard drive died two years ago and I was ready to chuck it then.  But I found a used hard drive on eBay for $25 and after installing it, formatting it, and re-installing windows, well, we're back in business.

Since then, I have added a 500 GB external drive, which allows me to swap data with my other computers more easily (and back up all my data more easily).  So the computer has yet new life.

The only problem I have had with it was that the display was going odd at times.   I removed the cover plate on the hinge and found that the display wires were crimped when they were installed.   I re-routed them correctly and, well, it keeps on running.

A new, fancy laptop is a nice thing, no doubt.  But anything portable can be dropped, lost, or stolen, and spending thousands of dollars on something that can be destroyed or lost in an instant does not make sense to me.

You see, like an older car, one of the joys of this computer is that I don't have to worry about it at all.  I just use it.  If it gets lost, dropped, or stolen, it is no big deal.   The data on it is worth more than the computer itself.

And these old Dell's are built tough.  No overheating Nvidia cards like with an HP machine.   The lifespan of this thing speaks for itself.

Laptops are the most expensive computers you can buy, in terms of performance for the dollar.   Everything, from memory, to hard drive, to screen, is miniaturized and specialized for laptop use and thus is more expensive.   In addition, laptops are harder to upgrade, as memory modules and hard drives are usually made in proprietary formats.  It is only when they get old that you can find used parts for cheap on eBay.

So having a "state of the art" laptop may impress all the people at the airport when you whip it out (and play computer solitaire, as I saw nearly everyone doing on one flight), it really is not more useful for answering e-mails, typing documents, or making blog entries.

And in most cases, you spend more time on your home or office PC anyway - so why spend thousands of dollars for the "latest and greatest" MacBook or high-end PC laptop?

Well, people do it for the same reason they spend $10,000 on a handbag......  Status.

UPDATE 2020:  The Dell finally died, and years ago, I bought a Toshiba Satellite at Walmart for $300.  Five years later, I bought another one on eBay for $150.  They keep chugging along, both on their second hard drive, and now maxed out with memory (cheap, in retrospect).  I replaced the keyboard on one, as I spilled (yet again) a martini on it.  Parts for obsolete equipment are dirt cheap - for the time being.

(Maybe I should buy five more of these laptops - they sell for a few dollars. Just kidding.)

They too, are about ten years old, but function well.  The big bottleneck isn't processor speed, but internet access.  Unless I am prepared to buy a fiber-to-home solution, it makes no sense to have a faster machine. And since I travel, it makes no sense.

I will update eventually, as these will eventually fail (Windows 7 Ultimate, I will miss you!).   They cannot really edit video in real-time, which is a pain-in-the-ass, but other than that, they work OK.

Wednesday, August 10, 2011

The Time-Line

              U R HERE

Your life will last, on average, about 80 years.  Looking at your personal timeline, on a regular basis is illustrative.

Time is the one thing we all have in common.   We swim in a sea of time.  We live it, we breathe it, and yet we seldom appreciate it for what it is, or even think about how it underlies our very existence.

We have a finite amount of time on this Earth, and yet we fail to appreciate that.   And at the other extreme, we tend to obsess about the now, without thinking of the long-term.

For example, in High School, many young kids end up troubled in one form or another.   High School sucks, period, and the best thing about it is leaving it and never going back.  It is only four years of your life, often the worst four years (not the "best years of your lives" as some idiots posit).  But to a kid who is only 14, it seems like an eternity.

Time is non-linear.   That is an easy observation, and yet one that few make.  Time flows only in one direction for us mortals, but it speeds up as we get older.  Why is this?  The simple reason that increments of time, in proportion to our overall existence, become smaller.

For example, at age 10, one year is 10% of your life.  A year seems like a long time - a school year is an eternity, and it seems like Christmas will never come.   By age 20, however, this same year is only 5% of your life, and thus passes more swiftly.

By age 50, a year is 2% of your life and the years flip by like pages riffled in a book.  There never seems to be enough time to get things done, and it seems that each week, month, season, and year is passing faster than the previous one.

And you start to realize that your time is indeed finite and it is running out, quickly.

But to a teenager, the opposite problem occurs.  High School seems like an eternity, not just four years.    And this is because four years is about 1/4 of your life at that point (and maybe 1/2 of your conscious adult life at that point).  So it seems permanent, serious, and of course, long.  But, in a few short years, you will leave the hallowed halls of your local High School, and likely never go back.  What seemed to important then will seem trivial, stupid, and silly, just a few years later.

And yet, many young people, despondent over High School life, do stupid things like drop out, kill themselves, or kill others - all because they cannot see that four years from now, life will be a lot, lot, different.

And as adults, many of us blithely assume that "this will go on forever" and that "I will save for retirement when I am older".  On a Canadian radio broadcast today, I heard a 33-year-old "investor" say that he planned to retire at age 45, but that 12 years was "a long way off" and he had plenty of time to save for an early retirement.

I laughed.  The years between 40 and 50 snapped by in a flash.  A decade is hardly enough time to save up enough to retire on, particularly if you plan on retiring at age 45 and have to wait 20 more years just to collect Social Security or to tap into your 401(k).   We all make bold promises at age 30, don't we?

Unfortunately, the nature of time escapes most of us, or we don't really understand it until we are drawing our last breaths.

Do You Need Apps?

Suddenly, these images are appearing everywhere.  What are they and do you need a fancy smart phone to read them? 

I write Patents for a living and a lot of the technology I end up protecting I never use, personally.  And often, I hear about these things years, or even decades before they hit the market.

I don't do a lot of cell phone cases anymore, but you'd have to be dead or living under a rock not to hear the media's constant harping and hyping of smart phones these days.  And these 2-D bar codes (shown above) are appearing everywhere from ads in newspapers (remember those?) to even the sides of cars.  What is up with this?  And are you missing out?

Not really.  It is just the latest extension of the same old thing.  Back in the 1980's,  suddenly everyone had an "AOL KEYWORD" on their ad, so you could run off to your IBM PC Jr. and log into AOL via dial-up and then load their version of a web page.  In the 1990's, this morphed into URLs for  websites.  Today, it is "follow me on Twitter" or "follow me on Facebook" or these ubiquitous bar codes, which you can photograph (scan) with your smart phone, which in turn will load an "app" (application) or web page.

It is pretty cool technology? Yea.  Do you desperately need it?  Probably not.  Most "apps" out there are interesting and useful, but hardly game changers.  For example, you can download an "open table" app and scan restaurants for reservations and make them, with the click of a smart phone.   Sounds great, eh?  Yes, but it does limit you to restaurants that choose to participate in the program - a small, out-of-the-way French Bistro isn't going to appear there - only people who pay to be part of the service.  And exclusive restaurants aren't going to let you in, just because you had an "app" or something.

But that is the key thing right there - it is a marketing gimmick.   You download the "app" for restaurant reservations, and it steers you to restaurants that are part of the scheme.   Suddenly, your world shrinks to choices that are basically being sold to you.  You are being marketed to, plain and simple.  It is a form of advertising.

A lot of other apps are along the lines of "hey, that's kind of cool, but do I really need it?"  For example, you drive by a house and it has a 2-D bar code on the "for sale" sign.  You can scan this in using your smart phone camera and get a copy of the listing on your smart phone.  Or, you could get out of the car and get a copy of the listing information from the sign, or you could call the agent, or you could go to or any one of other options.  It is nice, it is convenient, and when it works as advertised, useful.   But necessary?  Perhaps not.

And there is a real cost with owning a smart phone.   Generally you have to buy these units, which are not cheap, even with subsidies from the phone companies.  Even a "free" phone isn't free if you have to sign a three-year contract.  So there is a real cost for the device itself.

And then there is the contract.  A simple data and texting plan, with even the minimum number of minutes of airtime, can cost $80-100 a month or more - often far more.  So now you've added over $1000 a year to your overhead, which to a middle-class American, is a lot of money.

And for that $1000 a year or more (often far more) what do you get?  $1000 in savings?  Or just the opportunity to be marketed to yet more and to be induced to spend more?  And do the "apps" really save you time, or just waste it?

When you are young, toys like this seem great.  Having the latest technology and toys is a very 20-something and 30-something kind of thing.  After all, "everyone" has these things, right?  It is only when you get older that you realize that having a little money put away and low overhead (so you don't have to run the hamster wheel the rest of your life) is more important.

I am 50-some-odd years old.  That is not old, but according to the actuarial tables, it means that I am beyond "middle-aged".  In fact, two-thirds of my life is used up at this point, and only a third remains.  My working years are winding down - and may in fact end without warning - as happens to so many people these days.  Having money and less overhead is more important than having an electronic toy.

I managed to survive a half-century without a smart phone.  I expect that the remaining quarter-century allotted me will pass without the compelling need for one.  Perhaps one day I will have such a thing, when it is $6.95 at Wal-Mart and the monthly service plan is 10 cents.   But it seems the opposite is occurring in telecommunications - data plans are getting more and more expensive (and are charging by the MegaByte) and costs are going ever-higher.

There reaches a point where you have to say, "Do I really need this?  Or is it some time-wasting gadget?"

And that is the other problem with electronic toys - they are time bandits.  I recounted the other day, the young 30-something at the Post Office, showing off his new iPhone.   He asked "there are two water parks on this island?" and I said no, there is just one.   "But my iPhone shows there are two!"

He was convinced that since an Apple product said it was so, it must be so.  And reality would have to adjust to Steve Jobs, not vice-versa.  I tried to explain to him that he would be better off just turning the phone off while on our 7-mile-long island, as the GPS database is outdated by a decade or more and the roads have been moved, closed, or renamed since then.  But, like any Apple "true believer" he would have none of it - and would dick around with his iPhone until he could "get it to work".

No doubt, he is still looking for that second phantom water park to this day.  Maybe Apple will build it for him.

And I have fell for the same gag myself, in the past, with electronics - spending countless hours trying to get them to work right, only to be frustrated when the siren song promise of the manufacturer turns out to be a sweet lie in the real world.   How many of us have driven to an address location on our GPS or on MapQuest or Google Maps, only to find that the place is non-existent?  Or to be told by the same software that the place we are looking for does not exist, when in fact we are standing in front of it?   Technology can be a useful tool, or turn you into a useless one.

The idiot media reports the competition between the smart phone manufacturers with breathless wonderment.   When is the new white iPhone coming out?  What about the version 5?  And how will this affect Android?  And will everyone line up for days to buy one?  Stay tuned to find out!

Or perhaps not.

Perhaps all the hype about smart phones is just another example of the marketing machine that is aimed at your head like a shotgun.  And any idiot who sleeps out overnight at an Apple store just to be the first in line to have the "privilege" to hand over cash money to buy a consumer good made on an assembly line, is well, an idiot, first-class.

Unplug from the hype and hoopla.  Unplug from the TeeVee, the cell phone, the texting device, the smart phone, and all that electronic crapola - as much as you can.  There is no happiness to be found there.  And no wealth, either!

Tuesday, August 9, 2011

Crank up the FEAR!

The GOP is using FEAR to get elected in 2012.  To do this, they are systematically destroying our own economy.

In the last week, people have panicked and sold out their stocks.  Panic is never a good idea when it comes to investing, but as more and more "little people" get into the market via 401(k) and IRAs, the market becomes more volatile, as little people tend to panic, when they see their portfolio drop in value by more than what they just paid for a car.

Three weeks ago, we were in the midst of a mild recovery from the worst recession in 30 years.  Jobs are being created, unemployment is dropping slowly, inflation is low, housing prices are stabilizing, and well, everything was going OK.

Suddenly, three weeks later, it all goes to hell in a handbasket.  What happened?  Were we living in a fool's paradise, or is the market presently in a mass hysteria?

The latter.

The GOP, by holding the country hostage for two weeks over the debt ceiling impasse, caused people to panic.  And panic sells newspapers.  Suddenly, out from under every rock is a financial "expert" on the TeeVee or radio, predicting doom-and-gloom.  Our budget is out of control, we are told, today, but it was fine three weeks ago, apparently.

One self-appointed Guru gets on TeeVee and says that Social Security is a "Pyramid Scheme" and that any day now, millions of baby boomers are going to retire and be paid "$40,000 a year, each" and we cannot afford this.

I wrote of the impending retirement debacle a while back.  While it will be bad, it won't be as bad as the naysayers say.  Why is this?   Well, for starters, people like me (Joe Middle Class) will collect maybe $15,000 a year in Social Security, not $40,000.  In fact, I think it is about impossible to collect 40 grand, unless you made $100,000 a year for 40 years.  And my medicare costs will not make up the difference, either.   So these nightmare scenarios are a bit overstated.

But hey, bad news sells, and it is ratings sweeps week, so why not join in the "bash America" party and make a quick profit or get elected?

The GOP is leading the doom-and-gloom bandwagon, of course.  You don't get elected to office when things are doing OK, so you have to convince people that the end of the world is nigh.  So you stage a little political theater - a debt-ceiling standoff, or a Reichstag fire.  Either way, you convince people that things are spinning out of control and that only you and your party can straighten out this mess.

And people buy this crap, too - wholesale and retail.  Many Americans are now convinced that the current recession was caused by President Obama, and not his predecessor, George Bush.  No, really, their memory doesn't go back more than 24 months.  So the great pre-election economic debacle of 2008 and the $5-a-gallon gasoline summer is forgotten.  No, it all happened under Obama's watch, right?

And speaking of which, why does the price of gas go up mysteriously before elections?   And more importantly, who owns and runs Standard and Poor's and what is their political affiliation?  Does downgrading American debt play into the hands of the GOP?  And was this by design?  Interesting questions, but as I noted before, I don't believe in conspiracy theories.

Once the nervous cattle investors realize that the world has not ended just yet - that today they will go off to work as before, but food, buy gas, and maybe look at a new car - that life will go on for the staggering majority of people in this country -  that selling off stocks that pay dividends and have P/E ratios below 10 makes little or no sense at all.

Should you have sold all your stocks three weeks ago?  Well, in hindsight, yes.  But hindsight is a poor investment guide, and selling it all once the decline starts only insures that you are falling into the pattern of "buying high, selling low" that KILLS the small investor.

I went to a presentation by Raymond James the other day, and one slide they showed was alarming.   The average investor in stocks ends up making about 1.5% rate of return, because they panic when stocks go low, and become euphoric when they go high.   They jump on the buy bandwagon when stocks are going up and jump off a bridge when they go down.  Institutional investors make 7% or more, buying the same stocks, because they don't panic.

It is like the Gold Bubble.  Yes, using hindsight (the worst investment guide, besides the tax code) you should have bought gold in 2005.  But even then, it maybe doubled in value.  Using the same hindsight, you should have bought AVIS stock in February 2009 - it went up 2600% in a year - far outperforming Gold.  But again, hindsight is not a realistic investment guide.

So if you sold it all three weeks ago, you would have avoided losses and you could buy it all back  again today and make money.  But few people do that.   Instead, they sell it all TODAY, convinced that "it will go even lower and I need to sell out!" and they sell low and buy Gold at $1700 an ounce.  Then a month later, gold goes down and they sell that and buy the same stocks back.

If you are invested in quality investments and have a good long-term strategy, you needn't worry about trying to "time the market" - because you can't time the market, and trying to do so will bankrupt you in short order.  And yet, most investment shows and gurus teach just that thing - that you can make money by timing your trades.  It ain't gonna work, chump!

The best strategy for the small investor is to diversify your portfolio.  Don't invest in trendy stocks like Facebook or other nonsense.  Don't try to time the market, day-trade, or some other scheme.  Move toward safer investments as you get older.  You may not become a Billionaire this way, but you will have a good shot a Millionaire.

On the other hand, if you listen to the fear-mongers and the TeeVee, you will be perpetually broke, in debt, and angry about how you got ripped off.

Don't let FEAR dominate your life.  Don't let yourself be lead around by the nose by some politicians who want to sell you a load of horseshit. 

Sunday, August 7, 2011

Work Where You Live, Live Where You Work

Running a small business can be profitable, if you can keep your overhead low.

I am typing this from the Mt. Wellington Market near Cooperstown, New York, home of the Glimmerglass Opera.  We stopped by here last night and saw Medea on a whim (reminded me too much of Mother and her knife play, frankly.  Thank God she never saw this opera!

The market here is a nice operation - they have free WiFi (natch) and good coffee, local beers, and something called a doughnut sandwich, which sounds gross, but isn't all that bad.

What makes a small business like this work is that the proprietors live above the store, the way people did back in the 1800's and even into the 1900's.  With low personal overhead, you can run an operation like this, which is largely seasonal, and make money.   If you try to own a "look at me!" house AND pay rent on store space, you'll go bankrupt.

And this seems to be a growing trend in this country, particularly the way the economy is trending.   Paying money for buildings that are empty most of the time, so you can say you have a "workplace" makes little or no sense.  Home offices are becoming not only commonplace, but the norm.

Or, in my case, the RV Office, as I can open up shop anywhere my battered Dell Laptop takes me.  Going Mobile, so to speak.....