Thursday, November 29, 2012

Neil Young and Lionel Trains

Neil Young bought a portion of Lionel Trains back in 1992.   He is listed as a co-inventor on seven Patents assigned to the company.   Yes, that Neil Young.

If you make a lot of money, you have to spend it.  And one way is to get into the hobby of model trains.  And if that doesn't spend the money fast enough, you can buy the company, I suppose.

And if it really is your passion, you can invent new accessories for the trains and create new products for the company you just bought.   And Neil Young has done just that.  Yea, the guy with the guitar.

1 8,025,545 Full-Text System and method for substantially synchronizing sound and smoke in a model vehicle
2 7,880,414 Full-Text Control and motor arrangement for use in model train
3 7,656,110 Full-Text Control and motor arrangement for use in model train
4 7,364,122 Full-Text Control for operating features of a model vehicle
5 7,307,394 Full-Text Control and motor arrangement for use in model train
6 7,298,103 Full-Text Control and motor arrangement for use in model train
7 7,264,208 Full-Text Control for operating features of a model vehicle
8 7,211,976 Full-Text Control and motor arrangement for use in model train
9 6,765,356 Full-Text Control and motor arrangement for use in model train
10 6,441,570 Full-Text Controller for a model toy train set

Unfortunately for Young, the company, Lionel LLC,  ended up in Bankruptcy, after a couple of legal battles with competitors, and due to the decline in interest in model trains among the young (I had a Lionel 027 Santa Fe "Vista Dome" set, circa 1969, after the company had switched to cheaper plastic parts).  Hobbyists seem to gravitate to HO and smaller scale sets, over time, as these took up less space than the massive O-gauge Lionel sets.

Today, Young is still a consultant to the company, but it is not clear whether he owns an interest in it.

Everyone has to have a hobby, I guess!


Comments are not always appreciated.

In response to a number of SPAM, TROLLING, and HATEFUL comments, I have changed the comments section here to limit to people who are "members" of the blog, whatever that means.  I need a break from "Comments" for a while, as they are getting to be too much work, and frankly, many of them are problematic.

A lot of the comments I receive fall into a number of troublesome categories:

1. Hateful Comments:  Some people send nasty hateful messages.   Need I say more?  Just take that shit somewhere else.

2.  Grooming Comments:  There are companies that, for a fee, will "groom" your reputation on the Internet.  They do this in a number of ways.  They try to drown out bad reviews of products and services by putting up 500 shill reviews, for example.  Or they threaten legal action if you don't take down a criticism of a product or service. 
If they can't do either of those, they will try to ameliorate the damage by making comments on a site that call into question the poster's motivations, or say things like, "Well, granted there are problems with [product or service] but on the other hand...." 
They also use other techniques, such as personal attacks, or trolling.  The point is, if you can take a well-written and concise essay and water it down with 15 pages of bizarre comments and responses, you have done a lot to damage control your client's reputation.   "Yea, there are criticisms of my client's products, but look at the comments section!  Nothing but crazy people believe that!"

3.  Trolling Comments:   Trolling is always a problem, as people who troll think they are "clever" and what they do is try to make a comment that seems relevant enough to be taken seriously, but is just weird enough to get you off-balance.  The goal of the troll is to get you to "bite" on some piece of bizarreness and then laugh at you for taking them seriously. 
Trolls are sick people with too much time on their hands.  But again, they could be professional trolls, trolling with the idea of grooming a product or service.

4.  Off-The-Wall Comments:  These could be the result of grooming as well.  If you can hijack a discussion about Long Distance Service Providers, for example, and turn it into a debate about the future of Cuba, you can water-down the impact of an article considerably.  So off-the-wall stuff might be intentional. 
On the other hand, there are just crazy people who just free-associate and riff on things and take an issue and push it off into a tangential direction.   These comments are not helpful.

5.  Missing the Point Comments:  These are folks who don't read, or read only the first few lines of a posting and then fire off a response.  Or they read the post and just miss the point.  I point out how dangerous Credit Cards are to consumers, particularly those high-interest cards baited with points or rewards, and readers respond with, "Well, you know, you can make money on those rewards points!" 
The point is, 70% of people with credit cards carry a balance, and at those interest rates, the rewards are pretty much negated - big time.  Getting 3% back on a purchase is nothing when you are paying 15% revolving interest at the same time. 
Again, these could be grooming posts, as the idea is to sell "rewards" cards to the plebes.  They throw pennies at us, hoping we spend dollars
I received a litany of such comments after posting about Staple's Rewards Program.  They were all so similarly worded as to lead me to believe they were professional grooming posts.   The Staple's Reward program - like all reward programs - sucks.  You can do better by shopping online.  And no, you can't get thousands of dollars of "free  software" by gaming a rewards program.  Just give it up!  Major corporations are not handing out free money samples this week - or ever!

6.  "You are not entitled to an opinion, but I am!" Comments:  Blog is short for "web log" and it started out as a way for people to write a diary of sorts, with their opinions on everything from the price of hot dogs at Yankee Staduim, to the value of collectable Hummel figurines, to political opinions, to, well, whatever.  You write what you want to write. 
Some people don't seem to "get" this and think that I am obligated to offer "equal time" to their crackpot views, or that somehow I have to present a "fair and balanced" perspective, which to them means validating their radical opinions.

From their perspective, I am not permitted - by law - from presenting any type of opinion, other than theirs.
This is just idiotic.  If they want to start their own blog, they should do so.  But they can't tell me how to write mine, or what opinions I should have.

7.  SPAM comments:  These are usually comments that are very vague and oddly worded - probably written by non-English speakers in the 3rd world as part of a marketing campaign to "get traffic to your site!"   They say things like, "That is a very useful and informative post!  Thanks for sharing the information! Car Repair in Birmingham."   The last part, of course, being a hotlink to someone's commercial website.

These were fairly infrequent at first, but started to become more common, to the point where there were five or six a day.  And unfortunately, Blogger does not display the links until you POST the comment, at which point you then have to go in and manually delete comments.   It was just too much hassle.

* * * 

As you can see, there is more heat than light here, and while I appreciate sincere comments, it seems lately I am getting more chaff than wheat.  The only way to fix this is to just limit comments to members only.

As I approach my 2,000th blog posting, also, I realize I have said about all that I have to say.  My goal in this blog was to figure out how I was spending money and how to save it.  And in that regard, I have succeeded - cutting my monthly expenses by thousands of dollars, becoming totally debt free and fully funding my retirement.

I pretty much have done everything I have set out to do here.  So as 2012 winds down, I may publish the last 100-odd postings I have in draft form, from over the years, and then let it go.

We'll see....

Wednesday, November 28, 2012

Pining for the End Times...

Why do so many people seem to want the world to end?

End times theology.  Mayan Calendar predictions.   The meltdown of the world economic order.  Succession and Civil War!   People seem to love to fantasize about the world ending.  Why is this?

And you see it everywhere, in all walks of life.   Rednecks wearing Real-Tree Camo have bumper stickers on their cars saying  "A Country Boy Can Survive!" (which was also the name of a popular song from our last recession, in 1982).  The idea is, civilization is going to hell in a hand-basket, but black-powder rifle country boys will live on squirrel and deer and keep the race going.

The end-times people, who may overlap with the rednecks, are convinced that Jesus is coming back next week, and this time he is pissed!  (and by that, I don't mean drunk).   All the "True Christians" will fly up to heaven, and the world will turn to anarchy in short order.   The odd thing about this fantasy, is that much of the end-times literature, such as "left behind" is told from the point of view of people who are, well, left behind.   I thought you were all supposed to fly up in the air? (Which is why Real Christians always buy cars with sunroofs).

Mayan Calendar people, UFO nuts, apocalyptic crazies, and the like all have different scenarios, from massive floods, to climate change, mega-volcanos, meteor strikes, alien invasions, shifts in the Earth's crust, to well, whatever.  They make movies about these fantasies, and at the end, the hero and heroine survey the wreckage from a mountaintop and then restart civilization (the heroine is usually pregnant at this point).

Why do people indulge in these fantasies?   Are they just mindless escapism or are they harmful to your mental health?

The answer to the first is pretty straightforward.   Most folks who indulge in this crap are depressed people and as I noted before, depressed people are evil.   They struggle to get by in the world, because they make a lot of foolish choices in life.  They spend too much, they eat too much, they don't pay attention in school - or at work - and then they wonder why they can't be Billionaires overnight.  It is all so unfair!

So like a child overturning a Monopoly board when they land on your Hotels on Park Place, they secretly hope that it will all just go away and some other, horrific scenario take its place.   It is, in fact a death wish, a suicide attempt.   But instead of just wanting to do away with themselves, they want to take the whole planet with them.  If they can't win, well then nobody should.

It is stupid, it is infantile, it is sick, and it is ridiculous.  And yet at one time or another in our lives, we all secretly engage in this fantasy - that the end times are a-comin' and the world is going to hell in a hand-basket.

But is this harmful?  I think so, and let me tell you why.  While we all may engage in this fantasy briefly at one time in our lives, many folks are making the "end of the world" the centerpiece of their lives.

For example, a friend of mine returns from Bible Study at the local Presbyterian Church.   A lady there bends her ear for an hour about the Book of Revelations and how the end times are here and all the prophesied "signs" have come true.  The world will end in our lifetimes, she says to my friend.   I tell my friend to find a new Bible-Study group, one not quite so chock full of crazy.

But this is not an isolated incident.  Another friend is estranged from their son, as he has signed on to this end times fantasy as well.   He is convinced that the world will end in his lifetime, and nothing you can say will convince him otherwise.   So how does this affect his decisions in life?   He is raising children, which is scary.  "Hey honey, don't bother studying hard in school or anything, you'll be dead before you're 30 anyway!"

Not surprisingly, he is not very successful in his own life.  His career has been marked with one setback after another, and he frequently asks his parents for money - that is until he decided they were "sinners" and not worth talking to anymore (which coincidentally, happened right after they decided to stop sending him money - funny how that works).

It is easier and more comforting, ironically, to just give up on life and hope for the end of the world.   It is a human tendency - emotional thinking - just as sometimes it feels good to feel bad.   It is a human tendency, but that doesn't mean you should wallow in it.  Fight it.

The same part of the brain that makes you root for the end times is the same part that says, "Screw it all, let's become crack addicts instead!"   It is a self-destructive impulse that is unhealthy.

Pop Stocks, Again

You don't have to be Warren Buffet to call Groupon as a hyped stock.   And as I predicted, it pretty much has tanked and likely will stay tanked for a good long time.

Groupon is in the news again, and not in a good way.  The CEO is likely to be asked to step down.  The share price is in the toilet, there have been questions about accounting practices, you know, the usual shit.

And I called this when it went public, a year ago.   Groupon was a fad that was fading fast.  It had no protect-able business plan - anyone could start a similar site, and did.  And its model for making money made no sense - for the business, the customers, and the consumers.

And already, its pervasive and disturbing ads are disappearing from the Internet.  You just don't see Groupon ads anymore.   One day, it seems it was everywhere - discussed on the financial news channels, talked about with your friends, and then..... nothing.

And maybe if you were foolish enough to believe the hype, you bought the stock at $20 a share or more, and are wondering "where all the money went".  And if you are a raging true believer, maybe you think it will "come back" and are hanging on to it.

This sort of thing happens all the time.  The News is the worst place to get investment advice.  Why?  Because as I noted before, only sudden events are deemed newsworthy.   Hitler invades Poland - that makes headlines.   Hitler slowly accumulates power over a ten-year period?  That barely makes Page 2.

Or take the housing market.  The bubble bursting makes headlines.  The buildup and the warnings of the bubble bursting?  Maybe a human interest story on the inside page of the Real Estate section, qualified with a "well, you never know what will happen" kind of thing.  Sort of the same way the news waffled about Hitler at the time.

Whatever is "in the news" at a given moment is probably a bad bet.   You can just count on that.

And I know this because when I was younger, I foolishly bought Martha Stewart's stock, Martha Stewart Omnimedia.  I recently rented the movie Martha Stewart, Inc. on Netflix.  And brought back to me all the fact surrounding that case.   Martha knew all about stock manipulation, as she was a former broker, who hyped Levitz Furniture stock, which bubbled and burst, and was the subject of an investigation and, well, Martha had to find a new job after that.

And in retrospect, the idea that a "Media Empire" made out of a cooking show and a magazine could be worth a Billion dollars is kind of idiotic.   Was it worth something?  Yes.  But not a Billion.   And as some pointed out, the entire brand was based on one person, and if that one person was missing from the picture (for example, disgraced and in jail) then the entire media empire could collapse.

I made the mistake of buying a stock I didn't understand.   What I was buying was a minority share in a company, whose only assets were basically intellectual property - much like Groupon and Facebook.  And it was a fad, to some extent, that was already being bashed by the time the stock was offered.   But I confused popularity with substance - a name mentioned often in the media with success and profitability.  The two are not the same.

(By the way, MSO is still around, but is hemorrhaging cash, just like Groupon.  Companies cannot stay in business for long with negative earnings.)

So, when the Groupon IPO came out, I saw the writing on the wall.   Ditto for ZipCar and Facebook.   Highly touted companies that get a lot of mention in the media, but have no real money-making plan, or at least not one to justify the sky-high stock prices.

And yea, on page 2, there is a waffling piece where they quote some crank like me saying it is a lousy deal, which they qualify with a "well, you never know!  Only time will tell!" kind of ending.

Recently, two stocks have gotten a lot of mention in the press.  The first is Green Mountain Coffee, which shot up 25% for no apparent reason.  This stock was the darling of the press for a while, too.  Since their Keurig coffee makers are no doubt in the break rooms of the media conglomerates, the writers thought, "Gee, maybe the company that makes this is a good bet!"   And that is why they tout iPhones, too.  Whatever is on the desk of the person writing articles for CNNMoney ends up being a good buy.

But, alas, there was some financial tomfoolery about, and some questioned their financial accounting.  The Chairman was forced to step down when it turned out that he was leveraging his shared on stock options.  Like Martha and Zuckerberg, he had a lot of wealth - on paper - but no real cash.   Market Cap may sound fantastic, but when you try to cash it in, it evaporates like ether.

Why Green Mountain would shoot up in value by 25% is anyone's guess.  But if you invest in this company (or invested in it) based on the news reports of the day, chances are you will lose your shirt.  At least the company is earning money - that is if you believe their accounting practices, which have been called into question in the past.

Another example of hyped investing is the recent little scam involving ICOA, a tiny, money-losing wireless provider from Rhode Island (the only State owned outright by the Mafia) which has been trading on the "pink slips" penny stocks market.  This company was de-listed from the NASDAQ and at 0.0001 per share, you can see why.

A press release mysteriously appeared on saying that Google had agreed to pay $400 Million for the company.  The current market cap is $848,000 - less than a million bucks.  It was a classic penny stock pump-n-dump - the sort of thing made famous by a high school kid in New Jersey, who found that suckers - Raging True Believers - would buy any stock if you just sent out an e-mail saying that it was poised to go wild.

The true believers never bothered to ask why someone would anonymously just tell them this, but instead went out and bought the stock, watched it go up, and then crash hard.  No one lost a lot of money this way, just a little bit.  But whoever put up that fake Press Release no doubt raked in thousands, tens of thousands and maybe hundreds of thousands of dollars.

It is a scam, of course, and an obvious one.   But ask yourself this - in what way is it different from Groupon, Facebook, ZipCar, Martha Stewart Omnimedia, Green Mountain Coffee, or a whole host of other hyped companies that skyrocket in price and then crash to the ground?

And the answer is, it isn't.  The only difference is that in most cases, the big companies you read about and invest in are never charged with doing anything "illegal" in most cases (Even Martha Stewart, who was arrested and sent to jail, was not prosecuted for anything related to her own company).

Hyped stocks are never a good idea.  And the best way to avoid hyped stocks is to stop watching the financial channels, stop listening to the shouting guy, and stop being a Raging True Believer.   There is no "secret" to investing, losing weight, or living.  There is no "insider" who is going to let you in on the "real deal".

Just walk away from that mentality altogether.

Tuesday, November 27, 2012

Worth Fixing?

So many things are made so cheaply these days in China, that fixing things is sort of a waste of time.

Today I was riding my bike around the island and the chain is slipping badly.   The fact that I ride it on the beach and it loads up with sand doesn't help, of course.

When I got home, I cranked up the Karcher Pressure washer and blasted the grease off the chain.  I used a lot of degreaser and then washed it all off with Gel Gloss, which made it shine like new.

I then went online to see if I could find a new chain for it.   The problem is, what kind of chain?  What length, width, pitch, etc?

I looked at the chain that was on it, and it said "KAZ" and "H 8" but that was it.  It was about 7.8 mm wide.  The sprockets on the rear cassette are definitely worn - the trailing edge of each tooth is mashed slightly.  It has had a hard life.
I looked for the owner's manual and receipt for the bike - and found it, strangely enough.  I keep all that stuff in a big binder (appliance manuals, etc.) and it was in there.

Turns out it was a 1999 Trek, and cost me nearly $500 back in the day,  13 years ago.  Since then, I have ridden it until the tires are nearly bald (I guess that will be next).  The owner's manual is generic and worthless.  How do I figure out what chain I should use?

Fortunately, BikePedia to the rescue.  BikePedia has a listing of all bikes (or a lot of them) and what components they are built with.  The data seems pretty accurate, although it doesn't list "RED" as an available color, and I can tell you for certain it was available in that color in 1999, as I have two of them.

1999 TREK 6000

Bicycle TypeMountain bike, front suspension
MSRP (new)$899.99
Sizes13", 16.5", 18", 19.5", 21", 22.5"
ColorsDragonfly Yellow, Team Blue
Item ID86952

Frame & Fork
Frame ConstructionTIG-welded
Frame Tubing MaterialAlpha aluminum
Fork Brand & ModelRock Shox Jett T2, 2.5" travel
Fork MaterialAluminum/magnesium, triple-clamp crown
Rear ShockNot applicable

Component GroupMountain Mix
BrakesetLee Chi TX22 brakes, Lee Chi LV77E levers
Shift LeversShimano Alivio RapidFire SL
Front DerailleurShimano Acera, top-pull/bottom bracket mount
Rear DerailleurShimano Deore LX SGS
CranksetShimano AceraX, 22/32/42 teeth
PedalsResin body/aluminum cage w/clips & straps
Bottom BracketShimano BB-LP27E, 113mm spindle
BB Shell Width73mm English
Rear Cogs8-speed, 11 - 30 teeth
ChainKAZ LR900, 1/2 x 3/32"
SeatpostAluminum micro-adjust, 27.2mm diameter
HandlebarICON 6061
Handlebar ExtensionsNot included
Handlebar StemAlloy Ahead type
Headset1 1/8" threadless Aheadset SE-1

HubsFront: Kung Ten W55F, Rear: Kung Ten W5ER
RimsBontrager Corvair, 32-hole
Tires26 x 2.10" IRC Mythos XC
Spoke BrandStainless steel, 1.8mm straight gauge
Spoke NipplesBrass nipples 

I search online for a KAZ 900 chain and find the "Surplus Center" which has 125 in stock.  Shipping costs more than the chain.

A quick trip to eBay and I find a chain breaker for $4 from China.  So for $20 we are back in business.

Problem is, a new bike, similar to this one, can be had for about $200 these days.   Spending 1/10th of the purchase price of a new bike to repair an old one is, well, questionable - particularly if it doesn't fix the chain skipping problem.

At least, since I am doing all the work myself, it will cost only $20.   Over on Rich People's Island, they have one of these boutique bike stores.  You know the kind, that sells bikes for twice what they are worth, and does things like fix a flat tire and charges you $50.

And I see people take bicycles there to get fixed - paying $100 for a "bike tuneup" or $50 to fix a flat - for a bicycle that might be worth $50 to $100 on a good day.

And that is the conundrum with cheap products from China.   You can buy a decent consumer grade bike for $200 or so, that will last you a few years - and then you throw it away.  Heck, you can buy a ride-able bike for as little as $100, if all you plan on doing is tooling around the neighborhood once in a while.

I'll put a new chain on the Trek and see where it goes.  I am not sure I want to replace the rear cassette, as that would be just throwing more money at it.   If the chain still skips under load, I may retire the old Trek and buy than 29" (!!) mountain bike I saw at Wal Mart the other day.  $229 and take it home.

Or this monster 29" crusier bike they have for $135:

UPDATE:  The new chain arrives and when I compare it to the old one, at first it seems the wrong size.  Then I realize the old chain had stretched four whole links over time (Mr. torque pedal!).  The chain went on, and works fine, except when the front chainring is in the middle gear - the one I use most - and it slips when I apply torque.

I remove the front crankset and chainring and inspect.  The center ring teeth are worn to points and the chain slips off when I apply torque.

Back to eBay and I find a new crank set for $29.95, but it may not be the correct offset.  The crank set on this bike is the Shimano FC-M330.  I can download the spec sheet, but the chainring set is a welded together (cheap) one-piece unit (serious bikers have individually bolted chainrings). 

Or, since I am on a flat island, maybe I will just not use the center gear....  or maybe convert the bike to one-speed by removing the derailleurs and cutting the chain to length.

I found a Shimano FC-M340 crankset, which appears to be compatible with the FC-M330, although it is better made (separate bolted-on gears).  It has the 110 spindle length on a 50cm centerline and 175 mm cranks.  Unfortunately, the seller wants $59.95 for it and $12 shipping.  The part is NOS circa 2003.

So that would make $72 more I am throwing at a 14-year-old, $500 bike.

Maybe it is time to retire the Trek....  When a new bike is $250 at Wal-Mart, maybe the old one "ain't worth fixing"

So much of our technology today is disposable, it seems....

UPDATE:  The FC-M340 crankset arrived and fit perfectly.  I had to use a gear puller to get the old crank out.  But it even looks nice (black) and has bolted-on chainwheels, not welded together.

The problem is, of course, I can't get the pedals off the old crank.  So back to eBay for new pedals (the old ones were wearing out anyway).   Another $23 with shipping.

So, a simple "worn chain" problem has now cost me (with shipping):

Chain:  Chain and Chain Breaker:  $20
Crankset with Chainwheels:  $72
Pedals:  $20

Total:  $112

That is a lot of money to throw at a 13-year-old bike that cost $500 new!  You could argue that, "Well, it lasted 13 years, so now maybe you'll get 13 more years out of it" - and that is how people end up throwing money at cars that should be junked.

And bear in mind, this is doing the labor myself.  If I had to pay the designer bike store to fix it?  Forgetaboutit!

It is likely I will need to replace the tires soon, and perhaps even the seat.   Things wear out, over time.  And I have not ridden this bike as much as some folks ride theirs!

Mark has the same bike, but rode his a lot less (I commuted in mine, for a time) so it appears to be in much better shape, chain-wise.

$112 would go a long way to buying a newer bike.  And that is the rub, right there.  Most people (myself included) throw money at something trying to "fix" it and then end up breaking down and buying new.

Sometimes it is easier to just cut to the chase...

UPDATE: Eventually, we had to replace the tires as they dry rotted. We also replaced the seats which lasted about five years and then replace them yet again. I also found a pair of used wheels on eBay as I was breaking spokes on one wheel and it was starting to get bent out of shape.   Yes, I found some spokes on eBay and re-spoked the bent rim and I'm keeping it as a spare. We still use these bikes to go camping is they can be taken apart and fit on the bike rack. The cruiser bikes are better suited for riding around the island.

UPDATE:  I bought the Genesis GS7 cruiser bike and a "Margaritaville Special" for Mark (On sale for $79!).  Both have baskets and seven speeds, perfect for an island with a maximum elevation of 12 feet.   We kept the TREK bikes (now with new-used wheels on mine, and new seats - a second set) for camping, as they are lightweight, easy to carry on the truck, and easy to lift and suitable for off-road and on-road use.

Ten Rules for Credit Cards

For many, a credit card is a necessary evil in our culture.  If you have to have a Credit Card, you have to be very careful with it!

The following are ten simple rules for having a Credit Card.  These are rules that I learned - often the hard way - over the years.  Every "mistake" I made profited VISA and MASTERCARD enormously.  But of course, these were not really "mistakes" but rather expected outcomes - the credit card companies are hoping you fall into these well-laid traps.

Anyway, here's the Rules:

1.  Lowest Interest Rate:  Get the lowest rate card possible, period.  A credit card is a debt instrument, and getting a higher rate card on the premise you will get "rewards" is nothing but a trap.  A bear trap, waiting for you to step in it.   And no, there are no exceptions to this rule, so please don't try to debate me on this.

2.  Low Balance Limit:  Pick a limit that you can realistically pay off within a month or two, based on your income level.  The credit card companies will want to offer you more than this - often $10,000, $20,000 or more (at one time, I had three cards with $20,000 limits - enough to buy a brand new BMW!).  $5,000 or less is a good idea, if you make $100,000 a year.  $2000 or less is even better, if you make $50,000 a year.  Less than $50,000 a year?  Maybe you don't need a credit card!

2.  No Annual Fee:  It goes without saying that you should not pay for the privilege of having a credit card.  They make a lot of money on your purchases - a lot.  Cards with annual fees often have bonus miles or cash back rewards.  Usually, the annual fee is equal to the reward you receive.  Just walk away from any card with an annual fee.

3.  Set up Auto Pay:  You may have to call to do this, but increasingly, Credit Card companies are offering to do this online.  If you set up autopay, the minimum payment will be made, on time, from your checking account, even if you "forget".   This is important, as the penalty for missing even one payment can be the "penalty" interest rate - often 25-30%.  They don't call it a "penalty" rate for nothing - it is like being kneecapped.

4.  Opt Out of Cash Advance: You may have to call to do this as well.   The credit card company will send you little checks, hoping you are desperate for money one month, and will cash them.  They come with the highest interest rates possible - near payday loan levels.  And if they are stolen from your mail, you will have a nightmare of a time trying to unwind it all.  Call and say, "NO" to cash advance checks.  Note that the better credit card companies do not send these at all.

5.  Opt Out of Automatic Credit Limit Increases:   You may have to call to do this as well.  You make regular payments on your credit card and they send you a letter saying "Congratulations!  We've raised your credit limit!"  This is a trap in two ways.  First, they are hoping you will spend more - spend until you are stuck with a high balance at a high rate, and no way to pay it off.  Second, by raising your credit limit, they damage your credit score (in terms of available credit) so you can't borrow from someone else.   Thus, if you later want to refinance your house or rollover your balance to a lower card, you can't - they have your credit blocked out with their high limit.

6.  Know Your Statement Date:  Mark this on your calendar, so you know when your statement comes out.  Check it carefully.  You should be checking it online (see below) anyway. 

7.  Get Your Statements Electronically:  Opt for online statements, so you don't have to worry about lost or stolen mail, or traveling.

8.  Know Your Payment Due Date:  Again, mark this on your calendar.  You need to make a payment before that date, or the "penalty" interest will kick in.  Make sure you make a payment before the due date to avoid penalties - or pay off the balance to avoid interest altogether.

9.  Pay Online:  Probably no one writes checks anymore, but a surprising number of old people tell me they like to "feel the paper check".  Bad idea.  Your check may get lost in the mail, and as a result, the "penalty" interest rate will kick in.

10.  Check Your Balance Often:  Setup your account with the Credit Card provider's website so you can log in every day and balance the account, if you want to.  Bookmark the page.  I log in to my credit card account nearly every day, check recent purchases and the overall balance, and make payments.  I never let the balance be a "surprise" at the end of the month.

* * *

This all may seem like a lot of hassle, but you have to treat a credit card like it is nitroglycerine and ready to "go off" in your wallet at any time.

No one intentionally sets out to get into Credit Card Debt.  No one says, "Gee, I think I will run up $20,000 in debts at 25% interest, that sounds swell!"

On the contrary - everyone, and I mean everyone starts off saying, "Oh, I'll just pay off the balance every month!"  But that never works out - 70% of the time, according to the Credit Card industry itself.

What happens is, people get a card, think they can "handle it" and their spending creeps up.  They start charging everything in their lives, and as a consequence, stop looking at how much things cost.   And at the end of the month, the balance due on the card is always more than they think.

"Gee, I forgot about that charge at the restaurant!" they say, and "I didn't realize I spent so much on gas!"

If you don't check the balance weekly - or more often - it can sneak up on you like that, and at the end of the month, well, you've got an unpleasant surprise:  A balance that you can't pay off in one month.

And that starts the snowball rolling.  Because you make a partial payment and promise to catch up "next month".  But next month never comes, as you can't pay that balance either.  And now interest charges are kicking in - high interest charges because you opted for "rewards" rather than a low interest rate.

There is no way to avoid personal weakness, just as there is no way to avoid economic downturns or job layoffs.   Rather than to structure your finances on best case scenarios happening, it is a better idea to structure your finances expecting bad things to happen so that your financial situation is robust.

Taking on a credit card with the idea that you will never succumb to weakness or make a mistake - ever - is just idiotic.   You are better off taking on a credit card that - in a worst case scenario - can't hurt you.
A $20,000-limit 'miles' card with a 25% interest rate and a 30% penalty rate can bankrupt you, literally.  On the other hand, a 7.15% Capital One card with a $1500 limit will do little more than nick you for a few dollars in interest.   One is a loaded handgun, the other a toy popgun.   Both are pointed at your head when they go off.

Which do you prefer?

Will The Economy Sag? Do You Care?

Will the economy falter in 2013?  Should you Care?

The Greek Debt Crises.  The looming Fiscal Cliff.  Lingering unemployment.  Slow growth.  Rising inflation.   There are a lot of things to worry about, in the financial markets, and the Nooze organizations spend most of their day making you anxious about these things.

Should you be worried?   After all, the networks and media say you should - just as they say you should care whether General Petraeus got a blowjob or not.   They tell you it is important because they said it was important.   And that is no reason to believe them.

But if you have structured your finances properly, you should expect occasional economic downturns, whether personal (laid off) or national (recession) and you should be prepared for them.  Few are.

As I noted in an earlier posting, most Americans live the cash-flow lifestyle, spending every penny they have and borrowing more.  Their financial lives are a house of cards, ready to collapse on a moment's notice.   One blip in the cash-flow and it all falls apart - in a hurry.

A friend of mine stopped by the other day.  He was refinancing his house.   With only a few years left in the loan, he owes $50,000 on a house worth possibly a half-million dollars.  At this stage in the game, even with a high-interest loan, most of every payment was going toward principal, and in five years, the balance would be paid off.

Yet he felt he needed to refinance the place, adding $5000 in closing costs and fees to the balance and stretching out the payments for another 15 years, in order to get his monthly costs down so he would have more money to spend.   I looked over at his house, with its brand-new satellite dish mounted on the side, the sprinkler system, and all the lawn ornaments, and wondered why he couldn't find a little more cash-savings in other things.

But instead of cutting back on bad television and cement yard donkeys, he decided to get more debt instead.  Because having debt was "normal" and not having 500 channels of Cable TeeVee wasn't.

Of course, the problem with the re-fi is that while it solved his short-term cash-flow problem, it did so at a staggering overall cost to his net worth.  It leaves him with 15 years of mortgage payments to make now, and adds to the balance on the loan.    And even though he is refinancing at all-time low rates, he will end up paying more interest, over the balance of the loan, than he would have just paying off the balance normally.

Or as I put it, "$50,000?  Why not just write a check?"  Because as his age and station in life, he should have that much money in the bank.

People put themselves in peril this way - and then worry themselves to death as a result.   And when I was younger, I did the same thing.   I bought cars, a house, and "stuff" and then loaded up on monthly subscription services and credit card debt, until one day I woke up and realized that if I lost my job - even for a week - I would be screwed royally.

I had no savings, no safety net, no real wealth.  I had a huge monkey on my back, though, in terms of a high-buck lifestyle that I had to pay for every month, whether I wanted to or not.  And like most Americans, I started to resent my job, instead of enjoying it, as I had to go to work every day, instead of wanting to go to work every day.   And there is a big difference, let me tell you.

When we lived in Washington, DC (Virginia, actually) people put humorous bumper stickers on their cars that said, "I owe, I owe, so it's off to work I go!" as if being in debt and chained to a desk was funny.  And it reminded me of my Dad, who was angry all the time and apparently didn't like his job, as he constantly reminded us that life was full of stuff "you didn't want to do" and we all had to buckle down and do our jobs.   "Do you think I like going off to work every day?" he would say, "I have to - I have to support you kids!"

And with that kind of attitude, one can end up resenting your job - and your kids.   And let's face it, your kids won't like you, either.

But getting back to Mayan Calendar end-of-times nonsense, if your economic house is in order, you won't have much to worry about, in terms of a "double-dip" recession or a tax increase.   On the other hand, if you are living hand-to-mouth, then chances are, stuff like this keeps you up at night.

And there is the choice, right there.  Anxiety and depression, offset by a new iPhone and Cable TeeVee, or low stress and relaxation - and no electronic junk in your life.

Most Americans choose the former, and it is not hard to figure out why.   TeeVee is the gateway drug in all of this - the marketing tool that gets you to believe that you "need" an iPhone and you "need" a larger TeeVee, as well as a leased car and a platinum "rewards" card.   And it gets you to think this is all normal and moreover, being up to your eyeballs in debt is normal as well (and being stressed all the time about it is, well, that's just normal life).   But no worries, the man on the TeeVee says you can refinance, right?

I am not worried about the fiscal cliff, a double-dip recession, or Greece leaving the Eurozone.  Bring it on!   While I might lose some money in my investments, temporarily, I am not at risk of losing my house, my car, or whatever, as they are all paid for.   And since I have stripped-down my lifestyle to the minimum, I can get by on very little money, as the past three years have demonstrated.

And that is a very relaxing feeling - the knowledge that you can survive and prosper, even in a down economy, simply because you got off the money-train and have your financial house in order.

And frankly, this is the way we all should live - prepared for the worst, but hoping for the best.   Instead it seems, we live precariously these days, requiring a best case scenario just to make ends meet.

Monday, November 26, 2012

Shopping Health Insurance - Yet Again

It pays to shop your health insurance now and then.

I have written before about insurance.   It can be hugely expensive, and most folks buy far too much of it.  People are paranoid about having a dent in their car, a broken window, or a broken leg.  They are scared of car repairs, even.   They insure and warranty everything in their lives, and if you see how most people live, you can understand why.

The average "salary slave" gets a paycheck and when he gets home, he has pretty much spent every last penny of it on crap.   They divide up the paycheck into little pie-sliced wedges, with some going to housing (as much as they can afford) and some to car payments, and some to utilities, and some to food, and some to cable TeeVee, and so on.   There is nothing left when they are done, as every bit of the paycheck has been sliced and diced up into little pie wedges.

And some folks think this is financial acumen.   They go on websites like Mint, and see little pie-charts of their spending and assume this is how you manage finances - by figuring out how to spend money.  It ain't so.

And you can see why folks are paranoid about "unexpected expenses" such as a car repair, a broken leg, or a broken window on their house.   Their finances are so stresses - living "paycheck to paycheck" this way, that any tiny disruption in the flow of cash can cause a nightmarish breakdown of the whole system.  Even an unexpected expense of $1000 or so can throw them into bankruptcy, as bills remain unpaid, and credit card balances creep up and climb, until this small event causes a catastrophic meltdown.

In chaos theory, this is called the "butterfly effect".

So, as I noted before, a friend of mine pays $12,000 a year for health insurance with a $250 deductible.  I told him I have a $10,000 a year deductible, and he said "You're crazy!  Suppose you get sick!  Where will you get the $10,000 for the deductible!"

To which I replied, "the same place you get the $10,000 a year that you pay in excess premiums!"

My original Blue Cross plan cost me about $99 a month when I was in my 40's.  Mark had a similar plan for $79 a month.   It was a cheap plan with a high deductible.   We only wanted to cover catastrophic events, not Band-Aids and Asprins.  But even then, the plan covered two doctor's visits a year (with a $40 co-pay) and had some prescription coverage.

And - and this is the big deal - if you do get sick, you are billed at the pre-negotiated Blue Cross rates, not the staggering "retail" rates that Hospitals charge.  So, for example, a Colonscopy which retails for $3000 is billed at $1200.   That's a savings of $1800 over having no insurance, and you can see that even a $99 a month policy is better than none - far better.

But of course, over time, premiums creep up.  $99 morphed to $125, and then to $150.  And it finally broke $200 when I was about 48.  By age 50 it was $250 and this year, I received a notice that the premiums would top $350 a month - just for me.  Ouch.

They helpfully included a note that I could call and look at a different policy that might be more cost-effective.   I was on a "group" policy, and with these policies, the costs are based on how many people are in the group and what the group experience is, in terms of costs.   As any group ages, more people get sick and prices go up.   The healthier people leave the policy and the group gets smaller and sicker - and premiums skyrocket.

It is one of those sick things I just don't get about insurance, and one that I hope the Obamacare plan will address.   If we just make one group out of everyone then the costs won't go up as much, and moreover, it will not incentivize people to leave the group.

Instead, we have this system where the insurance companies chase after healthy people and offer them low rates.  A great system, if you are healthy.  A sucky system, if you are not.  And while you do have a lot of control over your health care costs (yes, you do), there are some folks who get cancer or get hit by a bus and get sick through no fault of their own.

A sucky system, but one we are stuck with, unless Obamacare changes it - and I am skeptical that it will change it much.

So anyway, I call in and the fellow says that they can put me in a new plan with the same deductible, for about $240 a month - for two people.   This represents a cost savings of over 50%.

So needless to say, I signed on to it.

The savings should neatly offset the increase in the payroll tax that kicks in next year.  ;)

Sunday, November 25, 2012

Can You Live on the Median Income? Well, Duh!

 Some folks have trouble understanding basic math.

On MSNBC back in 2011 was a series of articles chronicling how the unfortunate "little people" in America are struggling to get by on "only" $50,000 a year.   It was one of those whiny series where they made it out like someone living on $50,000 a year had to resort to home-dentistry to get by.   It was an odd idea for a series, as $50,000 is the median income in America, which means that half of us are living on that or less, every day.

So yea, it is possible to live on $50,000 a year - people do it all the time.  But the media is run by and hires people who live in major metropolitan areas.  And they are all very highly paid, even on NPR, where executives rake in millions every year - and even reporters take in hundreds of thousands of dollars.

And of course, these sorts of folks spend even more - on fancy cars, houses in Herndon or Larchmont, and iPhones, private schools, and child support payments, and they wonder, how could anyone possibly live on less than $100,000 a year?  After all, their Starbucks bill is more than that!

But of course, the problem is, the media has a skewed view of reality, as the people running it are all from the upper classes.  So they look in horror at the idea of making "only" $50,000 a year as if it was some starvation salary.

But of course, of you are careful with money and don't fall into the trap of buying everything that the media touts (the folks ON TeeVee can afford this, you and I can't!) then yea, you can live quite comfortably on $50,000 or less.

Which is good news to most of us, because half us have to live on this - or less - anyway.  Mathematically that is certain.  And if you throw in people making a little more than $50,000 - say, up to $100,000, well you are talking about 83% of the population, which is to say, most of us.

Yes, there is a remarkable spread between the hyper-rich, making millions of dollars a year, and the super-poor, scraping by on assistance.  But the interesting thing is, the spread between the top 90% or so and the median is only about 2x or 3x income.

And the difference between making $50,000 a year and $100,000 a year, while it may seem large to the guy making $50,000 a year, isn't as great as you'd think.   To begin with, that 25% bracket kicks in for household income over $70,700.  And of course, the higher earner usually squanders his advantage by spending more.  So all that excess income gets sucked up into consumer goods and luxury cars in short order.  Both the $50,000 a year person and the $100,000 a year person can claim they are living "paycheck to paycheck" - the latter, however, does it mostly as a matter of choice, not necessity.

From the point of view of the media, however, we are all just poor white trash.  Remember that, whenever you watch television.  Everyone you see on the TeeVee is making far and above the average income in America.  And yet they tout, as normative cues, all sorts of poor spending habits.

I mentioned this before, once, how in the movies and on TeeVee, that they depict us "little people" as living fantastic lives.  In a spy thriller, some GS-7 Secretary is shown living in a fabulous Georgetown row house, for example.  This is, of course, laughable, as even the Kennedy's can't afford these anymore.  But to a movie producer or a Television presenter, well, this would seem to be the norm.  Doesn't everyone live as they do?

The long and the short of it is this:  You have to live on the income you earn.  You can protest Wall Street and the 99% whatever, but in the next six months, unless you win the lottery, your income will likely remain about the same.  In fact, for your lifetime, your income potential is pretty well established by your educational level and career choices.  Get used to living on your income, rather than railing about the unfairness of it all.

And if you stop and think about it, we have very good incomes in this country - and goods are very attractively priced.  If you doubt this, spend a few weeks in Canada - where goods are all 50% higher in price, and people's expectations are far lower.  Canada is a fine place and all, but even Canadians cross the border to get the bargains in the USA.

The secret, of course is not necessarily living on Raman noodles and recycling pocket lint, but to carefully choose what you want to spend your money on, rather than trying to "have it all".  And the things most people spend money on, are really rather foolish and unnecessary - and often detract from their lives rather than add to it.

Cable TeeVee sounds cheap at "only" $100 a month, but over time, it adds up to a ton of money.  Worse yet, it programs your brain to want more and more consumer goods, and turns you into a fat turd of a human being who spends 8 hours a day on the couch.  Doing without this "necessity" not only saves you money - it makes your life better.

Similarly, obsessively yakking on cell phones or obsessively texting on them isn't enhancing anyone's life.  But it is costing you real money and it will cause you to wreck your car.

The list goes on and on.  A lot of the things we think we "need" we not only don't "need" but in fact are killing us, slowly, over time.  Walking away from these things is not privation, but rather an enhancement.

Can you live on $50,000 a year?  Well, duh.  The odds are that you already do.   The trick is to live well on $50,000 a year.  And it is not a difficult trick - spend less than you make.  Few chose to do it.

Too Much Technology?

Tech toys are lots of fun when they are new, but as they age, they can be problematic.  A car with a lot of technology built into it - unnecessary technology - can be a nightmare to repair when it gets older.

A reader recently wrote to express his concerns with owning a BMW that was about to exit warranty.  He confided that while it is a nice car, perhaps it was more car than he should have bought.  And I hear this a lot from BMW owners, although not as honestly.

Many folks buy these technologically complex cars (and Mercedes, Audis, Porches, Cadillacs, whatever) on the basis they can "afford the payments" and that they deserve a status car, as they are doing well in life.

But of course, with the race only half-won, it is a little premature to start breaking out the champagne.   But that doesn't stop most of us.   And it is only five years later, when the last car payment is made, that the owner realizes that (a) they paid $60,000 for a car, and (b) it is worth maybe $30,000 at this point, if that, and (c) it is out of warranty, and every trip to the dealer for repair results in a bill with a comma in it.

They realize, consciously or unconsciously, that they could have bought a simpler and cheaper $30,000 car, and had $30,000 more in their retirement account.  And being five years closer to retirement, they suddenly realize they would have preferred that.

And since these cars are complex, they are hard to service yourself, and even finding independent mechanics to work on the electrical bits, is hard to do.  And the dealer wants a ton of money for any repair.   Extended warranties are one option, but they are very expensive and often don't cover much.  Anything other than a factory extended warranty, in my opinion, is worthless - those con artists just go bankrupt and you warranty is void.

So the purchaser is left with a lot of anxiety and a conundrum.   Does he trade in the car, thus spending more money in transaction costs and signing up for five more years of payments, or does he keep driving it and hope it doesn't break?  Does he buy an extended warranty and spend more money that way?

And what ends up happening, and I see this all the time, is that these expensive toys do break and the owner takes them to the dealer and gets a huge bill, and suddenly his "dream car" is a nightmare.   And legions of these folks go on discussion boards and say was pieces of crap these cars are and how we should all sue the manufacturer because they broke out of warranty and they had to pay to fix it.

What they are really saying is what my reader was honest enough to say, "Maybe I bought more car than I needed or could really afford."

But again, no one wants do admit to that - it is easier to externalize your problems and blame others, in this case, the car manufacturer.

Of course, cars like this do soldier on and are sold to people like me, who have the tools and inclination to repair them on the cheap.  And this is how I owed four BMWs at one time, by doing all the repairs myself.   It was fun, but it was also a lot of work.

And today, I am not sure I would want to buy another one.   While I was able to remove the malfunctioning navigation system from my X5 and replace it with an aftermarket unit (and actually make money on the deal) today, this would be very hard to do.    Integrated controller systems like BMW's idrive tie in the HVAC controls, lighting controls, and radio and navigation controls, into one central control panel and monitor.   Removing such a system and installing an aftermarket one is just not an option - or not an easy option, anyway.

And of course, this is not by accident.   Since the 1990's car makers have been trying to integrate radios and other components into a car so as to make it hard to go aftermarket.   In the 1980's, no one bought a "factory radio" with their car, if they had any common sense.  You would get the stock AM radio or go with a "radio delete" option and then take the car to the stereo store and have a real radio put in. 

Why?  Because factory radios were overpriced crap.  That's why.

Today, they are far better than in those days.  Harmon-Kardon Amplifiers, Bose sound systems, you-name-it.   But they are built into the car and often difficult to modify or change.

And this is a problem, as the design life of electronics is about 1-2 years before they are obsolete, whereas a car can last a decade or more - or should.

So you end up in a situation like I was in, with a 10-year-old car, with a busted and outdated navigation system.  The car is good for 100,000 more miles, but the electronics are just a joke (I mean, a cassette deck?  What was BMW thinking?).  Fortunately, I was able to retrofit a more modern navigation system with bluetooth and a DVD player and all that crap.  But that was one of the last cars BMW made without idrive.

Today, more and more cars are coming from the factory with built-in nav systems, and even a Pandora interface.   To use most of this stuff, you have to pay extra for a monthly service, unless it can interface with your smart phone.   But sure as the sun rises, in five years, whatever is in your dashboard will not interface with the iPhone 20, and when this stuff breaks, well, replacing it will be nightmarishly expensive (the display in my X5 retailed for $3000 at the dealer.  And that is only one of five components that make up the audio/nav system!).

So what choice does the consumer have?   Well, one option is to not buy more technology than you need or can afford.    All that built-in consumer electronic crap is fine and all, but it does make your car a candidate for premature obsolesce.    Finding a simpler car with fewer electronic frills on it might be a better idea.

And this is not a new trend, either.   When I was a kid, Cadilliacs were real pieces of shit.   They came from the factory with all the electronic toys - power windows, locks, seats, antenna, and silly stuff like "twilight sentinel" and the "autronic eye".  They even had a little thermometer mounted on the rear view mirror, so you could look outside and see what the temperature was.  And they came with a primitive "climate control" systems, with a knob to adjust temperature.

Within five years, most of this crap was broken.   Your typical used Caddy would have one busted power door lock, an antenna that was up all the time (or stuck down) and the little thermometer was stuck on 50 degrees.    Repairing any of it was a nightmare, and the resale value of the cars were so low than few bothered to do so.  And as the vinyl roof started to peel off, well, it looked like holy hell in short order.  So much for the "Standard of the World".

But a basic Chevy, with manual windows and doors would soldier on far longer.  Without all that plastic trim to fall off, the car looked better, longer.  And the simpler construction meant it was easier to service and repair.  For long-term ownership, a simple vehicle is a better proposition.

And this is true today as well.   I read a recent article in the Roundel, the magazine of the BMW Car Club of America.  A man wrote in about his aging 7-series, 740iL, which was the top of the line car back in the day.   It was starting to have more and more mechanical problems, and the cost of parts and labor was very dear.   The author of the column wrote back that in his experience, what happens to such cars is that the mechanic buys them, puts his tool box in the trunk, and drives them home.   He is the only one who can really contend with all those aging and failing systems, in any sort of economical manner.

And that is how I have been able to own these older, complex cars.   It is not something I would suggest for others, of course.   A good used Camry is a better choice for most folks.   And as I get older and less inclined to disassemble navigation systems, power seat motors, suspension components, and al;l that crap, I think a very simple car is in store for me as well.

Technology sings its siren song to consumers - promising them enriching experiences and of course, status, if only they upgrade to the next level, or buy the latest thing.    However, technology isn't an end in and of itself, and it can be a trap - a financial trap - for the unwary.

The secret to getting ahead isn't spending up to your level of income, but rather living below your level of income, and banking the difference.