Wednesday, April 29, 2015

Why Life Hacks don't exist.

Everyone wants a shortcut to success or a "secret" to easy living.  There aren't any.  If you want to know where all you money is going, look in the mirror.

Some folks read my blog and expect to find hints on how to recycle pocket lint, to save money.  They like postings like "how to fix your garage door opener" and stuff like that.   But they dislike - intensely - any posting which says, "Stop feeling the victim, take control of your own life, and stop blaming others for your circumstances!"

Even if you are a "victim of circumstance" (saddled with medical bills, for example) you may not be as much of a victim as you think you are.  A lot of the pile of shit you got into in life is largely a result of your own actions (or inactions) and not that of others.

But first, let me take a moment to let you know how much I despise the term "hack".   Hacking computers is a time-worn tradition, to be sure.  We did it back in the 1970's with primitive dial-up systems (and yes, back then, administrators set their password to "password").  But the term has become over used and overwrought.

And folks are making fun of it as well - and luring people into hunting snipes as a result.  For example, the old gag of "did you know that inside a 6 volt lantern battery is like 100 AA batteries wired together?"  Well, no, there isn't.  But it illustrates how people can be really gullible.

But life hacks - do they really exist?   Well, for the most part, no.  Sure, you can use a dustpan to fill a bucket of water from your sink.  Oh, wait, you don't have that kind of dustpan with an open handle.  Whoops!  Life hacks don't always work - if they ever do!

And yea, a rubber band across a paint can could, I suppose, be handy for cleaning a paintbrush of excess paint.  Or maybe just a pain-in-the-ass when you are trying to paint.   Some of these sort of things fall under the "Hints from Heloise" kinds of deals - neat ideas that sound really cool, but you forget about them ten minutes later, so why bother?

And you know, every time I have tried to get a key on (or off) a keyring, a staple remover just wasn't handy.  Hell, in 10 years, staple removers won't exist, along with staplers and paper.

We all want life hacks to exist.  We all want to believe in the "one trick to the tiny belly" or the "one tip to making money in the stock market!"

We all want easy answers to complex questions.   If only the government would give more money to the peeople, the world would be better!  Or if only the government would stop taxing us, we would live in Shangri-La.  Right?

There has to be a tip or a trick or an in-the-know clue that gets you to the head of the line at Space Mountain at Disney, or the buffet on the cruise ship.  Right?  Because that is what life is all about - getting that insider knowledge to beating the system!

Those chumps who choose to consume less and save more - hell, they're just beating their head against the wall, right?

Well, no.  Wrong.

And I guess that is why I don't think "life hacks" exist, in reality.  Sure, there is some obscure tip to opening a stuck jar lid that may come in handy some day.   Chances are, you won't remember it as you struggle with those pickles.

But on a larger scale, I think the concept of "life hacks" is a dangerous one - the idea that there are shortcuts to life, and that if you only had the "insider information" you would come out ahead.

In fact, it is this myth that marketers use to sell us crap.

For example, I mentioned cruise ships.  I have friends who love to go on cruises - dozens of them over their lifespan.   And they regale me with the "secret insider tips and knowledge" that allow them to score an extra half-a-shot of liquor in their sugary-sweet blender drink at the Tiki Bar, or to get three places ahead in line at the all-you-can-eat buffet.

Is that what going on a cruise is all about?  Living in a cattle car and then congratulating yourself on getting three additional grains of feed as a "gold member"?

Or is that just falling for the trap they have laid?  And it is a trap - not too much different than "freemium" gaming.

The credit card companies are in on this gig as well.  I don't know how many people e-mail me telling me I am full of shit for not latching onto "reward bonus miles points rebates" on a 20% interest rate credit card (with a penalty rate of 30%!).   To them, I am "missing the point" as the "name of the game" is to score a 2% rebate on every purchase and come out ahead!

Name of the game - an interesting phrase.  As it is gaming - and game theory - at play here (or at work).   They distract you with their little giveaways, while entrapping you in a high interest rate card that someday - someday soon - will entrap you in a mire of credit card debt, much as mastodons were entrapped in the tar pits at La Brea.

Similarly, the gold bugs and stock pickers tell me I am missing the point.  There is a "life hack" to beating the stock market - secret insider information that people "in the know" (just a few hundred million of us) can use to beat the odds!   Buying and holding?  That's for idiots!  Day-trading is the secret to success!

Sadly, this "life hacker" mentality pervades our society today, and it is just an extension of an older con game that has been played through the centuries.  The name of the con?  The idea you can get something for nothing and that there are shortcuts to success and that hard work and saving is for chumps.

"Life Hacks" are just an extension of this age-old con.   Don't fall for it.   Life cannot be hacked.

It can only be lived.

Tuesday, April 28, 2015

The Dangers of Privitizing Welfare

Dwight D. Eisenhower warned against the dangers of the Military-Industrial Complex.   An additional danger today exists in the privatization of Welfare.

A disclaimer:  I am a registered Defense Contractor and Government Contractor, and used to nurse at the teat of Uncle Sugar myself.  However, I think that makes me even more qualified to speak on this subject.

Dwight D. Eisenhower, our 34th President, once gave a speech that warned Americans that the alliance between defense contractors and the military could impinge upon our liberties:
"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.  The potential for the disastrous rise of misplaced power exists and will persist.  We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted.  Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.  Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.  In this revolution, research has become central; it also becomes more formalized, complex, and costly.  A steadily increasing share is conducted for, by, or at the direction of, the Federal government."
It is not hard to understand why Eisenhower was alarmed.   Defense spending is about 1/4 to 1/3 of our budget, and much of it goes to esoteric weapons systems of dubious value that cost millions or billions apiece.  We are in the midst of building a next generation "joint strike fighter" (after just spending billions on a "next generation fighter) in an era where cheap and disposable drones seems to be the future of warfare.

And the problem is, the people who are promoting these expensive programs in the Pentagon are often in cahoots with the contractors.  They serve in the military for a few years, and then go through the "revolving door" and work for a defense contractor.   The debacle with the procurement proceedings for the next generation air tanker are a case in point - outright bribery was used by Boeing to influence the Pentagon to steer the contract their way.   Act Shocked.

But another danger lies on the horizon - or is already here - in the form of privatized welfare programs.

What exactly am I talking about?   Well, increasingly, more and more Federal programs are being "farmed out" to government contractors.   And once you farm things like this out, well, the contractor has a vested interest in making sure the program keeps going.   In the defense industry, the name of the game is to make sure that each component of a high-tech weapons system is made in a different State and congressional district.   That way, if any Congressman so much as threatens to cut back on a defense project, you can claim they are not only "weak on defense" but are "losing jobs" for their district.  The result has been, well, the system we have today.   We spend more on defense than the next 10 largest spending countries combined.

Privatization of welfare has the potential to create a similarly entrenched network of government contractors and interlocking relationships with elected officials.   And in addition to contractors administrating traditional welfare programs, we also have some novel benefits today in which the entire ecosystem - from collecting taxes to paying out benefits, is administered privately.
Consider, for example, the so-called "Obamaphone" which has its roots in the Reagan era.   Back then, people were losing their jobs and their phone lines were being cut off for non-payment.   In a few notable instances, some folks actually died because they could not summon 911 help in time.   So a program was created to provide low-cost phone service for the poor - just basic local calls and emergency service.   Each President since has expanded the program, and today, you can qualify for a free phone, 250 minutes a month service, provided you are on some other kind of public assistance, such as food stamps.

So what's the harm?  Well, the cellular telephone industry loves this program.   It is not funded by taxpayer dollars through the government, but by the "universal service access fee" that appears on your cell phone.   So you do pay for it, in a form of a tax, if you have a regular cell phone plan.  It is one of those annoying fees that makes  a "$30 flat-rate plan!" into a $47.95 a month phone bill.  So yes, it is funded by taxpayer dollars, in effect, except the collection of the tax in this instance has been privatized to the wireless companies - collecting this "tax" from your cell phone bill.  And the wireless companies manage the redistribution of the wealth as well - handing out "Obamaphones" over the Internet to anyone who is willing to fill out the form and certify they are entitled to them.   Not a lot of checks and balances there, nor any incentive to provide them.

What's next?  Do we task the oil companies with assessing us with a "universal access fuel charge" with every gallon of gas, and then allow poor folks free gas every month?   If you think about it, it really is the same sort of thing.

Disturbingly, it seems that other forms of government welfare are also being privatized, with administration of some programs being "farmed out" to private contractors, in some instances, defense contractors as noted in the article linked above as well as this article.

But the administration of programs is just scratching the surface.   The programs themselves, while nominally helping the poor, also serve to help major corporations.   For years, food stamps (now called the SNAP program) was always tied to the farm bill.  The GOP, in a rare moment of lucidity, has tried to separate farm subsidies from food stamps - which is one way to insure you won't get elected in both rural and urban areas.   Food stamps, it turns out, are also a subsidy to food producers, as if people have more money to spend on food, this in turn helps food producers.

Think about it.  Suppose the government gave every poor family a subsidy to buy a car, with the amount based on a complex formula based on income or whatever.   Would this help the poor buy cars?   Would it help your local car dealer?   The answer is, of course, yes to both.  And during the recession of 2009, we did have a program called "cash for clunkers" which was a boon to people with older broken-down cars, and also to car dealers and manufacturers, for whom the program was designed.  Any welfare program helps the person to whom you give the money to, and the person who operates the business where they spend it.  Both become constituencies for the program.

As I have noted before, wage subsidies, in the form of housing subsidies, food stamps, medicaid, and the like, not only benefit the wage-earner, but their employer as well.  It is not accident that low-wage employers like Wal-Mart and McDonald's have, on their employee websites, explicit instructions on how to apply for government benefits.  They expect their employees to supplement their income through government subsidies.

For Wal-Mart it is a win-win scenario, as many low-wage employees cash their paycheck at Wal-Mart's service desk (which has kiosks for the unbanked to pay bills).  They then spend their income at Wal-Mart, in addition to any SNAP money they may receive.  Hell, Wal-Mart will even sell them an Obamaphone or give one away for free.  And they certainly want their employees to fill their prescriptions under Obamacare at the Wal-Mart pharmacy, right?   Maybe we don't have a Socialist State just yet, but we have a form of Corporate Socialism - funded in part by the government this time around.

Maybe this is a bad thing.  Maybe it is not.  Perhaps, one could argue, that this is a blending of the best of the Capitalist model with the best of the Socialist.   We still have an employment market, and people are free to find work in the private sector - and indeed, encouraged to do so, as traditional "welfare" as we once knew it, is gone (TANF provides only five years of support for your lifetime).  But once in the employment market, particularly at the lower end, your income is still subsidized by the government, which in turn allows employers to cut their labor costs and hire more people.   One could argue that wage subsidies lower effective wages to employers and they allow low-wage employers to hire more people.

If the SEIU gets it way and raises the minimum wage to $15 an hour, do you think Wal-Mart will keep all those slackers you see there on duty?  Or will they cut back on the number of employees?   Will McDonald's continue to staff the registers or go to an automated kiosk as they do now in Europe?  It is an interesting question.

The downside of this economic model is obvious.   We end up more reliant on the government for our income, and more and more of us (including myself) end up suckling at the government teat for at least some of our wealth.  The problem is, the government has to get money from somewhere, and that means other people - who don't qualify for subsidies - end up shouldering much of this burden.

And I see this as a major problem.   To some extent, we are a pretty classless society, up to a certain point.  Oh, yes, there are those "1%'ers" or the 1% of the 1% who have their own helicopters and several homes and armies of servants and whatnot.    But the bulk of America makes a lot less money than that.   We have the "working poor" who as I noted before, can do all right if they can collect all that government swag.   We also have the "middle class" who doesn't really make a lot more than the working poor.  What distinguishes the middle class from the working poor is that the middle class doesn't make really stupid bonehead decisions like taking out payday loans and whatnot.

And then we have the upper middle class - people who are professionals or quasi-professionals.  They might make twice as much as the middle-class person, maybe three or four times.   But not 100 or 1,000 times as much, like the super-rich.   These upper middle-class "strivers" are the ones who blow all their money on bling, trying to ape the behaviors of the really rich, and going broke one lease payment at a time.  These are the people who really get socked with a lot of taxes, in that they are not far enough above the Social Security cutoff amount ($108,000 or so) for it to make a difference.  And they are smack dab in the middle of the highest marginal rates - while not making enough to afford the really tricky games the ultra-rich use to avoid paying taxes, or pay only a capital gains rates of 15% (which the lower-middle classes pay, ironically).

So, in a way, we have created a fairly egalitarian society - for the most part.   At the low end of the spectrum, you have people who make, either through their own earnings or a combination of that and government subsidy, about the same amount of money - or no more than 2x, 3x, or 4x, this amount.   And then you have a few folks who are just obscenely rich - Billionaires.

And maybe egalitarianism is a good thing.  Maybe not.   One problem with this model is, well, it provides less of an incentive to succeed.   The uber-Billionaires, let's face it, got there by sheer luck.  If you know the real story of Bill Gates, you know that he was in the right place at the right time, and not some computer genius or guru who had a vision for Windows (indeed, he could barely code, having to farm DOS out to a friend!).

But what remains as an incentive for someone to become a Doctor or a Lawyer, or to enter some other profession?  Or start their own business?   Where is the payback?   Why bother if all your are going to make is "a little bit" more than someone on the dole?   With the staggering cost of college these days, does it make sense to seek out a higher paying profession, when our tax system and welfare system end up "leveling out" your income?   Factor in a lifetime of student loan payments, and for many folks, college is a non-starter for many.

A lawyer should make more than a UPS driver.  An Engineer should make more than the guy working on the assembly line.  There should be some reward for hard work, studying hard, and taking the hard courses.  This privatized socialism model - the welfare-industrial complex - raises effective wages for low-wage workers, while taking some of the wage burden off employers.   A side effect, unfortunately, is that it makes higher-paying jobs not all that higher-paying, and thus less attractive.

The sad thing is, I am not sure there is much that can be done about it as this point, any more than we can unwind our defense industry - it is so heavily entrenched politically.   States play games with food stamp rules to make sure more of their citizens qualify (UPDATE:  Maine has announced a new program forcing those receiving assistance to do some form of community service - maybe there is hope).  And with government contractors administering more and more programs, well, now these programs will become really entrenched.   Do you want to be the congressman who shuts down the welfare office and thus "cost us jobs!"?

Monday, April 27, 2015

How Democrats Exploit the Poor

The GOP promises to preserve "moral values".  The Democrats promise you "more money".  Either way, you are being manipulated.

In an earlier posting ("The $4000 Sofa"), I mentioned, offhand:
"And sadly, I can guarantee you that the folks profiled in this story likely voted Republican, because of "family values" or religious values issues or because "Obama is a Muslim" or whatnot.   It is a perfect little con, if you think about it - you get your own victims to vote for the government that exploits them.  And until these folks wise up, well, should we really feel sorry for them?   I wonder sometimes, particularly when it is folks like this, living in trailer parks, who would be the first to stuff me in the oven, if they had the chance."
And that is largely true.   The GOP uses "social issues" to get very poor white people to vote Republican, even though their main party planks (cutting taxes for the rich) really don't help the poor very much.

And yes, I have had poor rednecks tell me that "thanks to Bush" their taxes were lowered, or that they won't have to pay a "death tax" in order to leave their trailer to their kids.   When you try to point out that their marginal rates stayed the same, or that there is a $5 Million exemption to the Gifts and Estates tax, their eyes glaze over.   They have no idea what a marginal rate is, and they don't understand the Gifts and Estates tax, either.  All they know is Obama raised their taxes!

Which of course, is not true.  Actually, under Obama, our Social Security taxes were temporarily lowered, which in retrospect, was probably not a very good idea, with so many people reaching retirement age all at once.

So the GOP uses these social issues - abortion, the war on Christmas, gay marriage, Obama is a Muslim, terrorists are going to attack your trailer park, etc.-  to get people at the very bottom of the totem pole to vote for politicians who help those at the top.

Do Democrats do the same thing?  You bet.  Everyone exploits the poor!  It is a fun game!  Join in!

The poor the Democrats exploit, of course, is a different demographic.   The GOP goes after the white rural poor, and plays them against more ethnic urban poor, in a classic game of divide and conquer.   The Democrats go after the more ethnic urban poor, and often use racism as bait to get them to vote Democratic.   The implied promise is, of course, that if you vote Democratic, all of the disadvantages you have in life, based on race, will be eliminated.   And this promise has been made, in one form or another since the mid-1960's, when the Democratic party switched from the party of the Klan and Southern racism, to the party of Northern liberalism (and the GOP went from the Northern party of freeing the slaves to the Southern party of racism).

The ways in which Democrats exploit the poor, however, are a little more subtle.   Under the rubric of "protecting the poor" they often take actions which in fact, make their lives more miserable.   During the riots of 1968, much of the retail district serving the inner city poor was destroyed in Washington, DC, leaving only a few very high-cost small businesses (convenience stores and the like) insuring that the very poor in the city would pay the highest costs for goods and services.

When Wal-Mart proposed putting stores in the DC area, many "Community Activists" and locally elected officials opposed the plan.   Their argument was that Wal-Mart didn't pay workers enough money, and that the low-wage jobs weren't enough to "support a family of four" on (which as we know, is guaranteed in the Constitution).   Of course, the fact that many of these locally elected officials were funded by the same small businessmen who were exploiting their constituents, was of no consequence.

The good news is, that was a long time ago, and Washington DC now has three Wal-Marts, so poor people can get the same low prices as rich folks in the suburbs.  This may sound like a trivial thing to the suburbanite who spends his paycheck at Whole Foods, but when you are poor, every nickel counts.

Similarly, the promise, or the implied promise that many Democrats make to the poor, is that if you vote for them, your share of government swag will go up.  More welfare, more food stamps, more Obamaphones, and whatnot.   Of course, the bulk of this swag does go to white folks in the rural trailer parks, but let's not let that get in the way of a good narrative.

And of course, as some would note, giving away "free" government money to people might help them in the short-term, but hurt them in the long-term.   When people start to expect to be supported by the government, the incentive to work hard and save diminishes.   And these types of wage subsidies end up being subsidies to low-wager payers.   Wal-Mart makes more from social welfare programs than the recipients do.

But one area where the Democrats have a clear lead is what I call the "Stuffin in the Oven" issue.   Yes, we are all well aware of how brutal human nature can be, as was exhibited many times during the last century, and indeed, in this one.   People, it seems, just love to kill other people simply because they believe in a different religion, are of a different race, or are from a different place.   And it goes without saying that folks love to kill people who have sexual practices different than their own.   Indeed, today, in many parts of the world, rape is condoned, but adultery is a crime punishable by death.  People are crazy.

Of the two parties (and in the United States, there are only two, so get over it) the Republicans come out way behind on this issue.   The GOP courts the votes of the intolerant, the bigoted, the racist, and the homophobic.   Go to any white supremacy rally and ask how they vote - nary a Democrat in the bunch.   Of course, the GOP claims that they are revolted by such opinions, but nevertheless they send the code words in the media that stoke such desires.    You don't need a secret decoder ring to understand that when the GOP talks about "Welfare queens" they are talking about black people.

So for me, it comes down to a simple choice.    Would I want to live in a Socialist nightmare where the government runs everything and we are all on the dole?   Or would I rather be lynched in some Libertarian nightmare where everyone has guns, there are no laws, and racism and bigotry are the order of the day?    Which would you choose?  Life or Death?

It is a pretty simple litmus test.   One side hates, the other does not.   Both manipulate their "base" demographic to get elected.   But as to which is more evil, well, that is not hard to figure out.  And so long as the GOP continues down this path of intolerance, well, they are not going to get my vote - and that of many others.

Saturday, April 25, 2015

Social Media - the Television of the Internet

Is social media simply a continuation of the broad-casting model invented by David Sarnoff?  It does take an interactive media and makes it more passive.

In the early days of radio, back in the late teens and early 20's, you could go out and buy a radio set, and set it up in your home.   It was a bit of a pain in the butt, as it required extensive aerials, batteries, and headphones to use.  Loudspeakers and A/C power were not as common as they are today, and if you wanted a "Marconi Set" you had to be a hard-core experimenter.  You had to learn Morse code, if you wanted to hear half the messages on the air.  Audio signals back then were a real novelty.

(Around that time, a small company called Motor-ola developed an adapter that allowed people to plug their battery-powered radios into AC wall current! )

In a way, it was like the early days of personal computers.   Back in the 1970's, if you wanted a personal computer, you had to built one, from a kit.  You subscribed to BYTE magazine, which was printed on a dot-matrix printer, and you bought components for your computer, put them together, and started experimenting.   It was a pretty small and hard-core group of people.

Radio changed dramatically in the 1920's, when a young Russian Immigrant named David Sarnoff took radio to the next level.   Until that time, radio was the province of government, the military, and mariners - who used this two-way medium to communicate from point to point, much as HAM radio operators do today.

Sarnoff saw a huge potential for this invention - not as two-way communication between people, but as a mass-media device, where a few broad-cast networks would send powerful signals to millions of inexpensive passive receivers - and create media content for consumers to consume, paid for by advertising, of course.  He created the Radio Corporation of America  - RCA - which not only made affordable radio receivers, but created the first radio networks.

And in a few short years, every home had a radio - not the cumbersome battery-powered devices with headphones, but a simple receiver with a loudspeaker that you could plug right into the wall socket and get stations off the air with just the flick of a dial.   You didn't have to be an experimenter or an Electrical Engineer to enjoy radio.

The personal computer followed a similar path, although there was no David Sarnoff to guide its course from interactive machine to passive consumption device.  Or is there?  Computers standardized after 1981, with the introduction of the IBM-PC.   Now, you could go to the store and just buy a computer off-the-shelf and use it.   And instead of spending hours writing software for the machine, you could buy programs "off the shelf" and just use them, without having to understand how the computer worked (other than in rudimentary terms) and without having written a line of code.  The PC was on its way to becoming a radio receiver.

In the 1990's, networking started to take off.  Again, experimenters lead the way with primitive networks such as FidoNet and BBS dialup sites.   AOL started one of the first successful dialup networks (as did Prodigy) where people could "go online" and interact with others.   And at the time, people thought that AOL was the RCA of its day - but that turned out not to be.

The Internet, which had been around for quite a while, supplanted AOL, and like the public airwaves, the Internet was available to all - up to a point.   In a way, this was a step backward for the marketers and advertisers, as the anarchy of the Internet was difficult to corral and control.  The original Internet, like the original radio, was a two-way affair, with each person on the network contributing content, as well as consuming it.   It was chaos, to be sure - unbridled, uncontrolled, and largely unregulated, other than the self-imposed etiquette used by online nerds.

But, thanks to the profusion of SPAM on Internet "News Groups" and the evolving "World Wide Web", people online started gravitating towards websites, instead of text-oriented "newsgroups" and primitive PoP server e-mails.   By decades' end, the original Internet was pretty much dead, and websites had taken over from the News Groups.  Companies fought to get lucrative www addresses (domain names) which were viewed as the television channels of the future.

The problem with this model still, was that there were just too many websites, and no way to control or steer people to a few specific pages.   You can't mass-market to an audience if the audience is splintered amongst a million different sites.

Enter Google.   I still remember the first time I used Google - and someone mentioning it on an Internet Newsgroup.   A site that indexed the Internet!   How amazing is that!   And this was back when the content of the Internet was 1/100th of what it is today - if not even smaller.

Since then, Google has leveraged its position and can steer and control how people use the Internet, to some extent - and also gather data on what people are searching for - and sell that data and use it to tailor advertisements.   It isn't quite broadcasting, but something like it.

Enter Social Media - the television of the Internet.   And perhaps this is a good time to briefly talk about television.  When television came about, it was an extension of radio - it was radio with pictures, the ubiquitous "talking lamp" that is now in everyone's living room.   Television was never conceived as a two-way communications device, as radio (or "wireless telegraph") initially was.  It went directly from laboratory to commercial broadcast, as an upgrade to existing radio networks.   And the existing radio networks changed.  Gone was the programming of yesteryear (the "golden days of radio") and in was a new format - music played 24/7, with "top hits" marketed to a new young generation.

With only three television channels in most major markets (and some fuzzy Public Television on UHF, if your set even HAD that!) we all watched the same drivel - I Dream of Genie and Gilligan's Island.   Despite our diversity, we were a remarkably homogenous nation, in terms of media consumption.

Social media seems poised to do the same for the Internet.   Today many folks carry around a smart phone, and obsessively update their Facebook pages, tweet their friends (or read tweets of others) and text-message each other over, and over again.   Trends on the Internet "go viral" - sometimes by design.  The name of the game is to titillate, shock, and amaze - to find "interesting stuff" for people to look at - and the media companies of yore - and a whole host of new ones - are finding newer and better ways to "snag eyeballs" by using provocative headlines and even misleading stories to snag "hits" on their pages.

To be sure, it isn't quite the same as the old days of broad-casting.   Just as cable television morphed TV from a simple three-channel deal to a confusing panoply of over 500 channels (most of them dreck), the Internet has limitless "channels" for users to access.   There has to be a way for the average person to navigate all of this.

Social media, in the form of Facebook (for the moment, at least) seems to be doing just this.   For many people, Facebook is their default sign-in page, their window into the Internet, and how they view nearly everything online.   Website owners scrambled to create a presence on Facebook, as people no longer feel compelled to type in URLs anymore.

But the sad thing about this trend, is that we are becoming more passive as a result.   We no longer create content online, but merely consume it - from fewer and fewer websites.   Facebook provides only a few limited activities on its site (compared to the unlimited possibilities of the Internet).  You can post pictures with captions, you can "like" things, you can "friend" people, and you can make short little postings about your "status".   You don't get into any real discussions or do any real reading or writing.   It is as superficial as a re-run of "My Mother the Car", or worse yet, "The Mothers in Law".

And the reason for this was the same as the reason radio evolved from an interactive media to a passive one.   Passive people make excellent consumers, and what the marketing people want is a way to get people to buy things.  You don't want people creating content of their own - you want them to consume.   So you limit their content creation to a "like" of something, and encourage them to consume more.   After all, their almighty opinion about things is really the most important thing in their lives - right?   What you consume, we are told, defines who you are.  What brand car you drive, what brand of clothes you wear, liquor you consume, what shows you watch, and of course, websites you visit.

It is sad, in a way.   And you can tell what I call "Facebook people" from real people pretty quickly.   Most Facebook folks are rather superficial, helpless in their personal lives, not very productive (after all, they spend all day on Facebook) and usually have their nose pressed to a smart phone as they text away about some triviality.

I don't know a lot of Facebook people, and the few that I do know, well, are kind of shallow and depressing.   Like good little depressed consumers, they spend a lot of time worrying about what other people think of them - and spend a lot of time gossiping about other folks (fed no doubt, by reality television, another part of this matrix of lies and deceit).

It is sad to me that many people think of the Internet, which is the largest database of information in the history of mankind, only in terms of Facebook.   It is akin to watching an IMAX movie through a tiny peephole.

Thursday, April 23, 2015

Merrill Edge Net Worth Calculator

Merrill Edge has a Net Worth Calculator  - it is worthwhile using?

As I have noted time and time again, you have to calculate your net worth fairly frequently and then think about every financial transaction in terms of how it will affect your net worth.  Of all the "gauges" of your financial situation, your net worth is the most important.  Yet most people are flying blind, with regard to their net worth - looking at life in terms of monthly payments only.

I use a simple WORD document with a spreadsheet table embedded, to calculate net worth.  I can enter the values of each account or asset and then it totals up the sum (subtracting debt, if any).  It is a little cumbersome, but worthwhile doing.   You could just use a pen and paper.

I always envisioned that some day in the future, you could look at your smartwatch and it would display your net worth in real time.  When you went to work, it would go up.  When you take a break and buy lunch at a restaurant, it would go down, like an electric meter keeping track of energy used.   If people could see this in real time it would really make them think about consumption.  But it is funny, the electric company doesn't want you to be looking at your meter in real-time, and I guess our retailer overlords wouldn't like you to monitor your net worth in real time, either.

Merrill Edge has an online net worth calculator.  This is sort of like MINT in that in order to use it, you have to give the folks at Merrill your usernames and passwords to all of your accounts.   If they get hacked, well, you're toast.   Oh, sure, they encrypt everything and all, but still - is it worthwhile handing over the family jewels to get a number you can calculate yourself?

Well, I thought I would try it, and it works, kinda sorta.   Most accounts import (particularly those from Bank of America or Merrill).  But accounts that are more paranoid about security (Computershare, NMFN, State Farm) either won't let Merrill in, or won't let them in more than once (they keep asking the security questions, and the Merrill platform is set up to answer only one security question).

So, some accounts, you have to manually enter the balance on the account.  Others will log in, once, and then give a "failure" message when it tries to update.   And when you go to the "manage accounts" page, there is no way to update the security questions - it just gives you a spinning wheel and then bombs out.  The only way to fix this is to either delete the account and re-enter it (and let it bomb out again) or covert it into a manually entered data amount.

Once nice feature is that Real Estate can be entered and it will calculate property values based on Zillow.   The values seemed pretty close.  I had estimated our house being worth $400,000 but Zillow says $365,000 and when I looked at comps online, they may be closer to reality.   The condo, they valued at $135,000 which seemed high (based on a recent appraisal of $120,000) or could be too low (based on a buyout offer of $175,000).

Like anything else, sometimes there is a fudge factor.

You can also enter "other assets" like your cars and personal property if you want.   All in  all, it calculated a pretty accurate net worth that was only off by about $100,000 from my calculation (about 5%) and that has more to do with the real estate valuations than anything.

Sadly, since so many accounts  "bombed out" after the first use, it does not seem like a useful tool for calculating net worth in real time.  They also have a "budgeting" feature, which is like MINT in that it tries to use your credit card purchase data to determine how much you are spending on groceries, restaurants, etc.    If you pay a lot of bills online or use cash a lot, this is less than helpful, as the pie chart just shows "checks" as your biggest expense.

Since I enter all my expenditures into Quickbooks, I can find more accurate data there.

So, maybe my Science Fiction idea of a real-time net worth calculation is still a ways off - maybe decades.   And frankly, there is no financial motivation to provide one.  Retailers don't want you thinking about your Starbucks purchase in terms of how it affects your net worth.   Bankers, well, maybe they might want you to save, but they don't see the connection between the product and sales of investment products.   So, such net worth calculators will always be under-coded and under-funded.

It was an interesting experiment.  Not excuse me, as I have to go change all the passwords on all of my banking and investment accounts.....


Wednesday, April 22, 2015

Why Do So Many Defend Criminals and Terrorists?

Looks like they fit pretty well to me!

A funny thing you see on the Internet and in real life is how so many people are quick to rush to judgement in favor of criminals and terrorists.  The picture above is from the O.J. trial.   When that nonsense was going on, I ran into a lot of otherwise rational people who spent hours watching the trial on "Court TV" or some other godforsaken cable channel.  After watching all of this, they said to me, "Well, you know, he could be innocent!"

Of course, since then, we've learned that OJ has a bit of an anger management problem and is in jail for other violent crimes.  The idea that a former football player could commit murder seems, well, a lot less far-fetched than it did back in the 1990's.

But it is funny, people tend to take the side of criminals these days - or terrorists - willing to give them the benefit of the doubt, while discounting mountains of evidence to the contrary.  According to some folks, everyone in jail is innocent and was just railroaded.   And of course, the Police are just bad guys - that goes without saying, right?  Wrong.

If a terrorist is jailed, and he raises allegations of abuse, a lot of folks are quick to believe him, without any corroborating evidence.  No one stops to think, "Gee, maybe as a terrorist, he has a vested interest in getting us to distrust our own Police!"

Why do people think like this?  I think there are a number of factors going on:
1.  People are afraid of the police because they feel guilty about something.   You speed on the way to work, and you run a stop sign.  You break the law every day.   And you get caught for this, of course, and the cop giving you the ticket is the "bad guy" - right?   So you tend to think the Police are evil and that anyone caught doing something bad is probably innocent, because you were caught doing something bad, and of course, you are not guilty of anything, right?

Right.   Wrong.   It takes maturity to see that when you speed, you are breaking the law, and if you get pulled over and are given a ticket, it is not the fault of the cop, but your own fault.   You have to man up to these things and assume responsibility for them.   Americans, even though they love to be macho and belligerent, are really like small children.  Nothing is their fault, right?

2.  People feel guilty about having so much.  One problem for a lot of Americans, particularly educated ones, is that they make a lot of money at jobs that really aren't all that important.   There is a disconnect between how much they earn and what they actually do.   And they really don't know anything - how their car works, or how the world works.   And they realize their standard of living, compared to the rest of the world, is obscene.  So they feel guilty about their apparent wealth and tend to root for the underdog.   Deep down inside, they think that maybe the Taliban is right and we Americans are a bunch of bad guys who need to be taken down a notch.   Some folks call this "Limousine Liberalism".

3.  People like to posit themselves as victims.   While we have it easy in America - easier than most everywhere else in the world.   So they feel guilty (see #2) about it.  So open way of dealing with this is to say that we live in a "Police State" and that we incarcerate too many people, or whatnot.

4.  We root for the underdog.   General Patton once said that Americans love a winner and will not tolerate a loser.   General Patton never met a Cubs fan.  We tend to root for the disadvantaged, the underdog.  The guy who makes it from the bottom to the top, in spite of adversity.   So when we hear about a criminal "wrongly convicted" we are more than willing to throw out all the evidence and testimony in court, in favor of some wild theories put forth by an attorney.

5. We are fascinated by criminals.  The success of The Sopranos and every Martin Scorsese movie ever made is testament to America's fascination with criminals and criminality.   Let's face it, at one point or another, you fantasized about being like Tony Soprano and just not taking shit from anyone, right?   That would be sweet, well, at least for a little while.   Psychologists even say that many people who want to be Police officers tend to identify with criminals - but for various ethical reasons can't go that route.  Catching criminals is the next best thing!
For whatever reason, though, it seems that a large part of the population is willing to engage skepticism whenever a criminal is arrested or convicted.  For some folks, it is a knee-jerk reaction.  Someone gets busted, and they just assume it was a set-up.  For many parents, this is the default mode, when their kids get into trouble.

Is there any harm in this?  Well, yea, there is.  Glorifying criminals and criminality only encourages that sort of thing.   We have already lost an entire generation of young black men to the allure of being a "gangsta" or whatever..  And sadly, many suburban white teens fall into this trap as well.  Being a criminal is a dead-end career.  And criminals - large and small - erode the very substrate of our civilization.

Before you expend a lot of emotional energy defending drug users or shoplifters, think about the last time someone broke into your car, or someone swiped your stuff.   Think about why you have to lock up your bicycle, even when you are just running into the store for a few minutes.   Are these people really worth your time and effort? 

Myself, I just don't get it.

Car Fever

We all lust for fancy cars, thinking to ourselves how cool we will look, tooling down the boulevard in our fancy wheels.   It is sort of stupid of course, but we all do it.

Car Fever.  A reader writes they are suffering from it.  They want to sell a year-old car they have financed, wrap the negative equity into a new loan, and buy a used Toyota FJ.   If you are not familiar with the car, relax.  Not many people are.  Some are saying the car is "collectible" as a result.  Others say it is so unpopular, they had to stop making it.  The truth is somewhere between, probably more of the latter.  (UPDATE:  The FJ turned out not to be collectible, but just another used car).

Toyota made a Jeep-like car that was the original FJ40 "Land Cruiser" back in the 1960's and 1970's.  It is not to be confused with the pimp barge they sell today under the "Land Cruiser" name.   It was an OK Jeep, but outside of California, they rusted to death in short order.  Out West, they developed a cult following, and more than one fellow makes a living rebuilding these old classics. 

So, Toyota, jumping on the "retro" bandwagon, did a concept car on the Tacoma/4Runner frame and it was popular at the auto shows.  "Build it!" everyone cried.  People say "build it!" but that doesn't mean they are going to buy it as Toyota found out.  More than one car maker has been caught in this trap - building a show car because fan-boys said they wanted one, only to never see those fan-boys appear in the showroom to actually buy one (think: Plymouth Prowler, Chevrolet SSR - two other "retro" showcars that were made into slow-selling production models).

The retro craze in car design has largely petered out.  The PT cruiser is gone, as is the HHR, the SSR, and the Plymouth Prowler.  The "New" retro Mustang has been replaced with something less retro and more modern.  Only the Challenger and the Camaro carry on the retro theme these days - and for how long is anyone's guess.  And of course, there is the Mini, but they are quickly bastardizing that into an SUV and an ugly fastback.

The problem, for car designers, is where do you go with retro?  Since you are locked into a design "look" from the 1960's or whatever, you can't really change the design much.  It gets to be boring and people lose interest and as a design theme, it is a dead-end.  So designers revolt and "retro" goes into the trash.

The first two years of production, Toyota sold 50,000 FJs a year.  Not bad, but a niche product even at that level.  Since then, sales dropped to about 10,000 a year, ending in 2014.  To give a comparison, BMW sold nearly 300,000 of the Z3 roadster, which is considered a "boutique" level of production.  The FJ maxed out at 200,000 worldwide.

Toyota can't afford that, and likely lost money on every FJ sold.   Just certifying a vehicle for sale in the US (and California) costs millions of dollars, as cars have to be crushed, smashed, and run to death to certify for emissions and crash safety.   So if you are going to sell a car these days, it had better be high volume (That, in short, is why cars are so bland today).

And the FJ design was a bit odd.  With a huge rear quarter panel, there was no rear view.  Huge truck-like mirrors blocked the front view.  The rear "suicide" doors could not open by themselves (the front door had to open first) and the tinted windows in the rear did not even roll down.  It was a dark and claustrophobic ride for the people in the back.

Given the choice, most people not enamored with "the look" went for a 4-Runner instead.  Same car, about the same price, but four doors with windows that rolled down.  For the hard-core off-road set, a real Jeep (for which they make a boatload of aftermarket parts) is probably a better bet, as it has live axles both front and rear (the IFS setup on the Toyota, which I had in my 1988 4x4, was not loved by the off-road set).

But given the limited number of sales, the resale prices were very high - at first.  In fact, some blue book companies claim the FJ has the highest resale value of any SUV - perhaps any car.  To be sure, some folks have built a mystique around the car, much as 40 years later, people have fond feelings for the original FJ-40.

But a car is a car.   And used cars do depreciate over time, as they wear out.  A "garage queen" kept in a garage and never driven might hold its value more, but then again, it just becomes a 4,000 lb paperweight at that point, not a car you can use.

And I've seen this firsthand.  I have a 1999 M Roadster, of which only a few thousand were made.  It is more than boutique, it is like bespoke, hand-crafted level of production.   But it is just a car, made in a factory, with the front suspension from a E36 BMW and the back end of a E30.   It doesn't fly or travel through time, although it does corner like it is on rails.

But it sold new for $44,000.  I bought it four years later, with 7,000 miles on the clock, for $29,000 - still the most expensive car I've ever bought.  Today, it is 16 years old, and has 54,000 miles on it, and the book value might be around $12,000.   It depreciates like any used car.

Why is this?  Well, they came out with the Z4, and then the Z4M, and then the Z4 hardtop convertible, which is pretty slick, and the twin-turbo 3.0 puts out 300 HP in stock form.  The new M version?  I hesitate to ask.   In other words, they now make better cars.   Actually much better, as the suspension was designed from the ground up, not warmed over from leftover 318ti parts.

And the same is true with the FJ.   They will keep making newer and better cars.   And  once the FJs out there have 50,000 or 100,000 miles or more, people will not want to pay top dollar for them, when they can buy something brand-new for less.  Will it be a cult car?  Perhaps.   The production levels are low enough.

But a "collectors item"?  Maybe in 20-30 years or more - far longer than most owners will plan on keeping them.   Why is this?  It is just is the way it works with old cars.   It takes a LONG TIME for a car to actually appreciate in value.   Even a Ferrari follows the depreciation curve, particularly mass-market models like the Testarossa or the old 308 "Magnum" GTB - both of which are just now starting to tick up in value after three decades.

But the reader admitted that the real reason he wanted this particular car was that it was "cool" with the people in his age group, and he fantasized about driving around with everyone admiring him for his ability to go into debt to finance a car. 

Well, that is the fantasy.   But at least he was up front about it - he desired to impress people he didn't even know, with the car he drove, as if picking out a car is akin to actually designing and building it.  But in reality of course, anyone can have a "fancy ride" if they are willing to go into debt.

And to trade in a year-old car with a loan balance to do this is, well, not a smart choice, financially.

That is the point of this blog, which is sometimes missed by some readers.  I am not blame-shifting here.  I am not saying the poor "deserve their fate" or that the shrinking middle class "had it coming" or that somehow I am above the fray.

Rather, my point is (and I did have one) is that we all succumb to these kinds of feelings - craving status, to be exact.   We all try to impress people we don't even know - which in an odd way, makes sense.  You can't really impress your friends with a fancy new car - they know how broke you really are.  But strangers?  We can make them think we are rich by merit of a fine ride.  Or so we think. And this why having a bitchin' ride is so coveted in the ghetto, and the middle-class drives silver or beige Camrys. The middle-class has a 401(k) and doesn't need to impress people they don't know - as much.

The so-called "vanishing middle class"?   They are the folks who chased status instead of security.  No one "took away" their money, they gave it, willingly, to banks and finance companies, and now want a do-over for free.  Sounds like a good plan - for them.   For those of us living within our means, it sounds like a raw deal.

And that is why wealthier people tend to look down on those who drive flashy cars as being nouveau riche or gauche.  And they are probably right about that.   I remember growing up, a neighbor down the street had a Porsche 356.  He beat his wife, and his kids were sent to reform school.  They had money, but they didn't have much in the way of common sense. They were shunned by the neighbors.  They were Lake Forest trailer trash.  It happens.

Some of the biggest financial mistakes I have made in my life revolve around cars.  There are cars that I wish I had kept a few more years, others that I regretted selling (but sometimes had to sell, nevertheless) and others that I definitely regretted buying.   In most cases, the show-off "look at me!" cars were the worst sort of bargains.    The more plebeian rides, ironically, gave better satisfaction.   The most fun cars I had were broken down old clunkers I worked on - with the working on being the fun part, not the driving around and showing off.

I had a nice Camry which I though was a nice car.  It was the first car I ever owned with power windows and air conditioning!  I stupidly traded it for a Taurus SHO which fell apart on the dealer lot and depreciated down to nothing in no time.   For the few years I had the Taurus, I could have driven the Camry that much longer.  The amount squandered?  $25,000 at least - enough to buy a nice secondhand 3-Series BMW!

The M Roadster might get sold someday soon, perhaps (UPDATE: sold!)  The only reason we've kept it, is that it has so few miles on it (54K) and its resale value has sort of flattened out.   But it is not a comfortable car (indeed, many have 50,000 miles or less, even after a decade-and-a-half) and increasingly, even hard to get in and out of.  In terms of cost per mile and depreciation, we're looking at about 33 cents a mile, double what the X5 was (18 cents) or the F150 (15 cents).   And as you get older, you want less of a "look at me!" car so much as you want a "don't look at me!" car.   Urban camouflage sometimes is handy.  If you want to rob a bank, use a beige Malibu as a getaway car.

Blending in can be handy, if you are robbing a bank...

But kudos to our reader for understanding, at least, his own motivations.   We all fantasize about "looking cool" with the latest sneaker, or Abercrombie shirt, or cool car or truck or boat or whatever.  Our marketing overlords know this, and pitch these things to us accordingly.   How many fancy vacation packages are sold on the perceived status?  No one will admit it, but part of going on an expensive vacation is posting all those pix to Facebook, so everyone will be envious, right?   Well, no one admits to that out loud, but then why do people post shit on Facebook?   Funny thing, when you post something on Facebook, they call that your "Status" - the word has two meanings, and perhaps Facebook uses both.

And really, not many people are exempt from this.  Even my stinking pot-smoking hippie brother ended up buying a monster SUV (according to his last voicemail, we don't talk).   And maybe those hippies compete to see who has the coolest tie-dye or best patchouli stink or who is the most politically correct or whatever (UPDATE:  Yes, they actually do this).

It's human nature, human weakness.  We all do it.   To get ahead in life, realize when you are status-seeking, and either squelch the behavior by "doing the math" and realizing how broke status will make you, or find a way to do status-on-the-cheap.

But the more you can walk away from status, the wealthier you will be in life.  It is a lesson that takes most of us a lifetime to learn, if we ever learn it at all....

Annuities, Revisited

Let's crank some numbers on Annuity Contracts.

I discussed annuities in a previous posting, and today, I was looking at investments and thought about how nice it would be to have "guaranteed income" for life, with an annuity.  I realized, however, that I had not really cranked the numbers on Annuity contracts.

Vanguard has a site to calculate and compare annuity contracts.   They can also e-mail you customized quotes.  They did this for me, comparing three insurance companies, and the prices were all within a few thousand of each other.

Vanguard, by the way, was very professional, and did not hype or push annuities, even going to far as to say they do not recommend putting more than half your portfolio into one.   Myself, I cannot see putting more than 10% into one.

The scenario we presented was as follows:
Married Couple, age 55 & 50
Retiring in 10 years.
Monthly Payment, $1000
Purchase cost:  $160,000
This is a joint life annuity that would pay out until the last spouse died, $1000 a month.

Is this a good deal, or not?   Well, as with everything else, "do the math".

Using our compound interest calculator  we can crank the future value of $160,000 after ten years:
At 3% = $215,026.62

At 5% = $260,623.14

At 7% = $314,744.22
Let's assume a rate of return of 5%.  If we decided to invest this money, instead of buying an annuity, by age 65, we would have $260,000 or $100,000 more than we have today (yea, compound interest!!).  And that's only a mere decade from now.

Now, how much monthly income would $260,000 generate?  Using the 4% or 5% rule,  this would generate about $10,400 to $13,000 for about 30 years or so, factoring in an inflation value of a few percent.  As we can see, this is akin to what the Annuity company would pay out ($12,000 a year) without any inflation factor.

Of  course, there are some differences between the scenarios - we are comparing apples to oranges.   The annuity pays out until you die, which could be age 90 or more, for many people today (let's assume, for the moment, that living to 100 isn't in the cards - it still is a relatively rare event these days).

If we assume age 90, then the annuity pays out for 30 years (age of youngest spouse is 60 when payout starts).  But even if you live to 100, which seems unlikely, the amount of money you've paid into this annuity is still a lot more than you'd get out, if you merely invested it at 5%.

But of course, no one is guaranteed a rate of return of 5% are they? And this is where an annuity provides some security - provided the company backing the annuity is solvent, and if not, that the State where you lived when you signed the contract insures annuities, and then only for a certain amount.  For Georgia, this is $300,000 per annuitant or $250,000 in cash surrender value.

Now, if you want an inflation rider, the costs escalate rapidly.   For a 3% inflation rider, or for one tied to the CPI, the amount, oddly enough, was about the same (I am guessing the underwriters are not afraid of inflation).  The amount jumps to about $245,000.  Ouch.

Now again, using the 4% or 5% rule, we saw that if we had about $260,000 at retirement, this would be sufficient to provide about $1000 a month for 30 years or so, which is the about the life expectancy we can realistically expect.  So this is no real bargain, in my opinion.

This calculator, from Bankrate, helps you compare Annuities to Investments.   In this instance, the amount of $260,000, invested at a paltry 3% rate of return, would last for 35 years with $1000 a month being withdrawn.  At 5%, it goes off the charts.  And this is where it gets interesting.  As an oldster, you can't afford to risk investing in high-rate-of-return investments.  But the annuity company can, as they can invest for the long-haul (longer than you will be around).

So why do people buy annuities?  Well, there is the "peace of mind" factor - and as I have always said, when someone tries to sell you "peace of mind" you should keep one hand on your wallet.  In this case, the insurance company is taking a big piece of pie off the top, which is to be expected.  They are also assuming risk that they can make rates of return that are consistent, and that some miracle aging cure won't be discovered in your lifetime (if people lived to be 120, they'd go bankrupt!).

There is another aspect of annuities - and the Vanguard people were very clear on this - once you buy one, it may be hard to say, "You know, I've changed my mind, I'd rather have the money back!" - at least without paying a penalty.   Some annuities do have a cash surrender value.   I suppose you could try mortgaging an annuity through a structured settlement company, but you'd end up losing your shirt, as they would want another "taste" of your money.   So before you put money into an annuity, make sure you won't need it down the road, say, to buy a house or something.

My conclusion?  I don't think it is necessarily a great investment.   I suppose I might put half ($80,000) into one or something.  But then it would pay out a paltry $500 a month and what would be the point of that?

With a diversified portfolio, even a low rate of return will probably beat an annuity in the long run.  But we'll see.