Tuesday, June 30, 2015

San Francisco Housing Bubble, Part XXIV

If you raise rents high enough, tenants will move out.  And vacancy kills, if you are a landlord.

The San Francisco Chronicle chronicles the plight of many renters in the bay area - rents are going up to outrageous levels, and many people simply cannot afford to live in the city.   Of course, like most media articles, you have to read the fine print: 72 percent of the SF apartment stock is rent-controlled.  However, condos and single-family homes are exempt from rent control, and people who aren't in rent-controlled apartments are paying dearly for rent.

(I will leave aside the arguments against rent-control.   One could argue that from an economist's perspective, that it is the preponderance of rent-controlled units that is partially to blame for driving up the cost of non-rent-controlled units.   If all rental units were rented at market rates, the overall rate of rent increase would be far less.   Instead, a few lucky people get below-market rates, while a lot of people pay well over-market rates.   But only an economist would understand that theory, the rest of you would shout it down as Capitalist heresy.   But it is true - fixing prices serves only to distort markets).

The story is nothing new to me.  Having worked for silicon valley companies for decades now, I have heard the sob stories of bay area homeowners as the price of housing skyrocketed and then plummeted, again and again, over the years.

To be sure, living in the bay area has never been cheap, at least in recent memory - since the explosion of the tech industry.   But there seems to be a pattern, where one industry becomes dominant, they hire lots of young engineers (today, coders) and the price of housing goes through the roof. 

It becomes a cycle.  The companies now have to pay top dollar to attract good help.  I turned down a job offer for $125,000 back in the late 1990's, as the cost of housing was exorbitant back then - a two-bedroom house in a run-down gang-infested neighborhood, an hour from work, would have cost more than my house in Alexandria, Va.   It was a quality-of-life issue, and the quality of life they were selling sucked, quite frankly.

Companies got tired of paying huge salaries and realized that places like Arizona, Texas, and Colorado had a much lower cost of living, and that they could relocate to such areas, pay their employees far less, and they could enjoy life a lot more.  So they did.  And not by choice.  By then, the hardware business had taken a hit - hardware became a commodity, not a value-added product, and lowest possible cost and low overhead were the name of the game.   So silicon valley emptied out, and house prices plummeted.  The folks who bought at the peak got creamed.

Today, it is companies like Google and Apple (who can get away with charging a premium for hardware, at least for the time being) that are dominating the valley.  Coders, not Engineers, are the rock stars of the hour.   And again, housing prices are spiraling up, and salaries are too.   And you've read the stories in the paper about how the low-lifes in the bay area are throwing rocks at the Google buses which carry employees to work (because as we know, mass transit sucks, and these folks should all be commuting in individual cars, right?).   It is creating social strife, as it is creating a two-class system:  People working ordinary jobs, and those working tech jobs.

Now, a lot of people are alarmed by this, but having seen this cycle before, I predict the inevitable will eventually occur.   You can't keep raising the price of real estate indefinitely, as people will eventually be unable to pay.  We saw this in Northern Virginia in 1989.   We saw it again in South Florida in 2009.  We've seen it hit the bay area any number of times.   Tech crashes are as routine as cable car rides.   We'll see one again, in San Francisco, in the not-too-distant future.

And how do I know this?  Well, the family profiled in this weepy-piece did what was utterly predictable - they moved out.  The rent was too high, and they simply found other alternatives for their young family:
For now, Dwyer will keep her city job and suffer the brutal commute on Interstate 80. A sliver of good news: For a monthly mortgage of $2,400, the family was able to buy a house in Vacaville with four bedrooms and a front yard and backyard. And, to the chagrin of the urbanite, cows on the corner.
So the story does have a happy ending.   I suspect the Dwyers will find living in Vacaville more to their liking, and appreciate the lower cost of owning a home as compared to renting one.   They also will appreciate the better school systems, lower crime rates, etc.  The will probably find jobs there, too, as companies also flee the high-cost of downtown real estate.   It happens in every city, and has happened in the bay area again and again.  A new "edge city" is formed, as people flee the expensive and crowded urban areas.

When enough people do this - which according to the Chronicle article they are - then rents will have to go down.   You can't just set arbitrary rental prices and expect people to pay whatever you decide you want to charge.   There is competition, and there are other places to live, other places to work, other places to retire.  People do have choices, as the article illustrates.

Some folks - both landlords and tenants - may choose not to believe this.  But it is the God's honest truth.

Monday, June 29, 2015

Bad Luck or Predictable Outcomes?

Getting old, getting sick, and dying is not "bad luck" but what will happen to all of us, eventually.  It is a predictable outcome, not some struck-by-lightning oddball event.

Our Canadian friends published an article recently, chock full of the "let's all feel sorry for ourselves because we are all victims here" mentality.  The the thrust of the article is that a lot of Canadian retirees are declaring bankruptcy and running out of money.  So much for the Socialist State!  Don't they all get dole checks up there?  I guess not.

What is infuriating about the article is that all the things that happened to the spotlighted couple were chalked up to "a run of bad luck" (and I am quoting verbatim here) but are actually events that are quite predictable, particularly for older people.

The couple, nearing retirement age decided to start their own business.   Most small businesses fail, and starting a business is a very risky venture.  The wife quit her job to work on the business.   You can guess what happened.  Things went South in a hurry.   They sold off their Condo to pay debts, trying to plug leaks in their rowboat by chopping off their fingers.  Always a bad plan.

But the most infuriating part of the article was this quote:
"Then, the unthinkable: Vic was diagnosed with dementia and could no longer work."
UNTHINKABLE?  At age 67?  Getting old and sick and dying is some sort of UNTHINKABLE consequence in life?

I guess in Canada, people live forever.  They have the fountain of youth up there, and "but for" a car wreck or something, everyone would be the Methuselah.   Right?

You see, I live on retirement island.  The average age here is 74.   Every day, the ambulance drives by, and like a bunch of nervous horses, we all sigh and say, "Thank God it's not me they are dragging out feet-first to take to the knackers!"

Death and illness are as common as rainfall where I live.   And dementia or Alzheimers?   Most of my friends or their spouses have one or the other - or will have, in short order.  It is not some unpredictable tragedy among the old, but as predictable as Grandma breaking her hip (or starting a toaster oven fire).

These are not UNTHINKABLE events, but PREDICTABLE OUTCOMES for people who live to be over 60.   Yea, sure, the oldest person in the world is like 114.  Whoops, they died.  Who's the new one - this week?  By the time you reach age 60, your life is mostly over.  You may have 20-26 years or so left, on average.  You should know what to expect.

Living to 100 is not in the cards for most of us.   People routinely kick the bucket in their 60's, 70's, and 80's.   It is not some weird freaky anomaly.   In fact, it can be a blessing.   Mark's Grandmother lived to be 93.  But the last decade of her life was largely confined to a bed.  Her quality of life was, well, shitty.  She was in pain most of the time - when she was aware of anything going on around her at all.

No, no, I'd rather go like one of my neighbors - take a nap and never wake up.

Sadly, the media likes to paint a portrait of retirement as an age of continued work, well into the 70's and 80's - spotlighting spry oldsters who are hard at work at age 85.  Guess what?  That ain't likely to be you.  Yes, Frank Lloyd Wright worked right up until age 91 when he died.   You are not Frank Lloyd Wright.  Few of us are.  People like him are the exception, not the rule.  Most of us will kick off long before that - and be infirm and unable to work long before even that.  It is a predictable outcome in life.  Prepare for it.

But getting back to the story, yes it is sad these people are having a shitty end-of-life experience.   But on the other hand, this is not due to a "a run of bad luck" more than it is due to "a run of horrific retirement planning" or actually utter lack of retirement planning.  Their hope, I guess, was that the business would someday make money and everything would turn out OK.   I don't think that is a good plan, for that age.   By age 60, you should be able to retire.  Hell, you should be able to retire by age 55 - because you likely will be tossed out on your ass by then.  Prepare for the inevitable, or the predictable.

Instead, the couple tried to open a new business very close to retirement age - an age where there are no "do overs" in life.  I started my law practice when I was 34.  If it failed, I could go to work for another law firm, or go back to work for the Patent Office.  I had backup plans.  I had another 30 years to play with.  Today, the risky business ventures I engaged in at that age would be unthinkable to me now.   Start a business?  No way!   Better off to coast to the finish line.

And I never - ever - let my business go into massive debt.   Many business people think that having an onerous debt to pay off is just part of owning a business.  But if you don't have a business that can generate a positive cash-flow, maybe it is time to re-think "being your own boss" and all that.

Sadly, this story has an ending I see all-too-often:  The husband dies and leaves the wife to clean up the financial mess.   I saw this with the friend who died, leaving a motorhome with a $160,000 loan balance and a resale price of $90,000.   We saw this the other day online, with the husband who took out a reverse mortgage (and didn't tell his wife) and when he died, she is left homeless.   I saw this with my Grandfather, who saved up nothing in 55 years of living, and left his wife to find a new career and fund her own retirement.  Men, it seems, tend to screw their wives financially.

The thrust of the article, however, had little or nothing to do with the couple spotlighted.   The couple made some poor choices and failed to anticipate the obvious - that they would get old and sick and need money to care for themselves.

The article, on the other hand, laments the tendency among today's retirees, to retire with massive debts and mortgages - and no realistic way to pay them off.  The reduced income of the retiree isn't enough to service these debts, while living a relaxing lifestyle.  Throw in a health crises, and it's all over.

Being retired is a bad time to take on debt - you have limited resources and limited time to pay it back.   Less debt is a better idea.  No debt at all is the best idea, particularly for our generation, who is less likely to have a pension.

Today, in our country, retirees living on 401(k)/IRA savings are forced to take out too much, too soon, and pay higher tax rates to service this debt.   They seriously run the risk of running out of money before they die.

Sadly, there will be many more of these "Senior Bankruptcy" stories in the paper, before too long.

Sunday, June 28, 2015

Are Corporations Evil? Or Just People?

Are corporations evil?  Or the people who run them?  What about the people who work for them?

In a previous posting, I noted that folks who whine on about how "corporations are evil, man!" between bong hits are really losers.  But it goes without saying that Corporations often end up doing very evil things, over time.  And of course, we as individuals do evil things as well.   But more often than not, it is the banality of evil that allows evil to occur, as we shall see.   And often this is not necessarily because some wicked person at the head of the Corporation wants to do bad things, but that so many "little people" go along with really bad ideas, convinced that if they speak up or speak out, they will lose their jobs, and that losing their job is more important that people being gassed to death as happened Bhopal, India.

Consider evil on a personal level.   You drive your car late at night.  You are tired.  You fall asleep at the wheel and drive off the road, wrecking your car.    Were you evil, or just careless?   You may still be charged with inattentive driving or whatnot, and your insurance company will punish you with higher rates.

Now suppose there was a hitch hiker at the side of the road, and when you fell asleep, you ran him over.   Does this make you evil now?   You may be charged with manslaughter or worse.   And certainly, society will treat you differently.  Yet the only difference between the two scenarios was happenstance.

Now, suppose you were drunk when you drove off the road?  The consequences are far more serious, as it is deemed an intentional act to get drunk and get behind the wheel.  And if you run over that hitch hiker as a result, the charges would be far more serious than manslaughter.   Intent tends to trump happenstance, every time.

In other words, whether you were "evil" or not has more to do with your intentions than "shit that just happened."

With large corporations, there is, to be sure, a lot of "shit that just happened" for which they are still responsible for.   But in many cases, there are people along the line who saw bad things coming, and failed to act or speak out, because they felt they might lose their job, and they put themselves in a situation where losing their job was more important than speaking out.  And often, it is these lower-level employees who saw the danger in time and chose not to act.  Who is the evil actor?  The manager at the top who ruthlessly cut maintenance costs?  Or the Engineer who saw this was a bad idea, but refused to speak out because his wife wanted to go on vacation to Aruba this year? 

Take the Exxon Valdez, the Deepwater Horizon, or the toxic gas leak in Bhopal, India.  All three industrial accidents have one thing in common:  Someone along the line knew or should have known that proper safety practices were not being followed.    And those same people refused to speak out, out of fear of losing their jobs.  And often this fear was based on losing their house, their monster truck, and their jet ski.   Since they were in debt up to their eyeballs, they could not afford to speak their piece.

In the case of Bhopal, the results were deadly - thousands of people died.   And the cause was simply sloppy maintenance and poor management.  Someone had to know this was going on, but at the same time, refused to say anything.   Or take the crew of the Exxon Valdez.  They had to know their Captain was a drunk, but again, were afraid to speak out.   The crew of the Deepwater Horizon knew that safety procedures were not being followed, in order to speed up drilling.   But no one said, "Hey, this is crazy, I'm not doing this shit!  I want the next chopper out!   I'm not dying on a flaming drilling rig!"

And in each instance, these industrial accidents cost the companies millions if not billions of dollars (although with Bhopal, the victims received little in the way of compensation).   Clearly these "evil corporations" would rather these accidents did not occur, if nothing else because they were hugely unprofitable.

But who is to blame?  The manager who said, "Get that well drilled!" or "Get that tanker out to sea!" or "defer maintenance on that gas plant!"?   Or was it the banality of evil of the faceless and nameless lower-level employees who chose not to say anything, because they still had six payments to make on their Chevette?   People who were so far into debt that they felt they could not "rock the boat" even when lives were at stake?  Low-level employees like you and me?

And that is the conundrum.   Despite the stereotype of Montgomery Burns on The Simpsons,  people at the top of most major corporations don't sit around doing Satanic rites and scheming on how to be as evil as possible.   It often seems that way, though, doesn't it?  Who came up with the "negative option" renewal plan - some corporate big-wig, or some low-level schmuck in marketing?   And how many people continue to work for such crooked companies, rather than quit and find a new job?

It is a relevant question.   As I noted in an earlier posting, I quit a law firm over what I considered to be unethical practice.   The firm was an up-and-up growing concern with legitimate clients and reasonable prices.  If left to grow organically, it might have ended up as a powerhouse firm, down the road.   But the partners decided to cut some corners, and take on representation of an "invention broker" firm that got into trouble with the Patent Office.   We knew this deal stank to high heaven - to the point where we were listed as "unnamed co-counsel" to the client, so that the firm's name wouldn't be dragged through the mud.

I left.   I saw the writing on the wall.   Others had car payments to make - or felt that making car payments was forcing them to hold their nose and do anything the partners said.   And some partners felt that they could "force" associates to do their bidding.   I recall one particularly marginal partner asking me to draft a non-infringement opinion based on some pretty specious data and arguments.   I pointed  out the folly of such an opinion, and he told me to write it anyway, which I did.   I set the signature block for his signature, as I pointed out that I did not believe these arguments.   He re-drafted the opinion for my signature, and told me I had to sign it.  When I refused, he forged my signature on the opinion.   

Others would have simply signed the opinion.   They felt their precious spot in the "partnership track" was worth doing anything for.  And today, many young attorneys still feel this way.  I feel sorry for them.  No matter how much money they make in life, they will still be slaves and never own themselves.

That is why I harp on the idea, in this blog, of owning yourself.  Of not being so far into debt for bling that you are afraid to speak out or run your own life.   Yes, having your own opinions and being able to speak freely might not seem as sexy as having a jet ski - at least at first.  But then you realize you have utter freedom - a freedom that skimming the water at 70 mph on your way to hitting a boat smack first with your head, simply doesn't match.

I had a potential client call the other day.  I talked on the phone with them and they said they would get back to me.  I never heard from them again.   I believe they read my blog and decided I was some kind of nutter.   Better they should know that in advance!   But at this point in my life, I don't desperately need clients and in fact, I never have.  I have turned away representation all through my career, when it was readily apparent that the client in question would be a problem client.

I can say what I want to in this blog, and if someone doesn't like it, they don't have to hire me.   That's fine.  I don't need their money, and I don't need the work.  (In case you missed it, work is hard and you should be well-paid for it.  It is not a privilege to have a job, or at least you shouldn't look at it that way).

It is an utterly different paradigm.   Most attorneys I've met want to know "how do I get clients?  I need clients!  More clients!  More and more clients!  I need to pay rent on my fancy office and my big-titty secretary!  I have two ex-wives and a Mercedes mechanic to support!  Clients! Clients!  Clients!"

And when they tell me this, they act shocked when I say that fewer clients is better and making less money is more.  Because when you have a few decent clients who really appreciate your work, your life is a whole lot less hassle, stress, and working as a lawyer certainly isn't like being a POW.

So, getting back to the main point, are corporations evil?   Well, even if the Supreme Court says corporations are "people" they certainly don't have a soul or independent thought - yet.   People have to run corporations.   And maybe some people at the top are evil - or just neglectful, or just thoughtless.   But often, they get away with horrific things because no one down the chain who knew better said, "You know, if you drill at this rate, this whole rig is likely to blow up!"   No one down the chain said that, out of fear of losing a "job" which they felt was more important than their lives, literally.

The phrase "banality of evil" arose in describing the events leading up to the Holocaust.   The Nazi Party (the original evil corporation if there ever was one) was founded on antisemitism, as well as hatred of a host of other minority groups.   They exterminated people in a ruthlessly efficient corporate manner.   And after the war, thousands of people who were involved said the same thing, "I was just following orders."    The people at the top giving those orders were clearly evil.  But does this excuse the actions of the thousands or millions of lower-level employees who "went along" with the plan without question - out of fear? 

It is a relevant question, as evil succeeds not when a few people at the top decide to be evil, but when a whole lot of people choose to look the other way out of fear of losing their position or possessions.

So in a way, blaming "evil corporations" for all the woes in the world is a cop-out, particularly if you work for one of those evil corporations and are so far into debt to Mastercard and Visa, that you feel that you don't own your own life.

Being financially independent is more than just a chance to fund your 401(k) and retire.   It is a chance to be a real human being - owned free and clear - and be able to think for yourself and speak out and say what you think.

Otherwise, you are an indentured servant, and no matter how much money you make, you will always be a slave.   If so, I pity you.

Saturday, June 27, 2015

The Advice Trap

Why do people ask for advice?  I never do.

As I noted in another posting, this is not an advice column.  I don't give advice.  Why?  I'll go into that shortly.  If you find something here of interest, good for you.  However, I reserve the right to be totally and utterly wrong about everything - we all often are, you know.    I don't give advice.  Here are some ideas that have worked for my life.  It is up to you to see if they apply to your life and how, if at all, they would apply.

Advice is an interesting thing.   While I tend to research things and ask questions, I tend to come up with my own solutions based on this research.   I never go to someone and say, "I want your advice, what kind of car should I buy?"   Rather, I look at about 100 cars, research their pricing, features, and reliability online, talk to people who have owned a similar car, and then make up my own mind.

It seems that others want to cut to the chase and say, "Just tell me what to do!" which I find both appalling and alarming.

Asking for advice is often a passive-aggressive game.  It is also a way of seeking attention.  Let me explain what I mean by these two things.

For example, with regard to the first, a friend asks if they should rent a house or buy one.   They tell me just enough information to steer me to the decision they have already made.   This is the first aspect of passive-aggressive behavior.  

As an Attorney, I see this all the time. People call me up and give me a fact scenario that is obviously biased to come to one certain conclusion.  They don't so much want my legal advice as they want me to validate the decision they have already made.   But sadly, as an Attorney, I am trained to look for this sort of thing.  I ask questions, pick at the edges of their "stories" and get at the truth, which often exposes a lot of information that indicates they are making a poor choice.   This often frustrates the client, who wanted me to agree with their foregone conclusion.  I usually decline to represent such clients as they are deceiving me and themselves, and their legal matters are headed for the rocks and when they do, well, they won't be blaming themselves for their woes, believe me!

On a personal level, I see the same thing.  Getting back to my friend who wants to rent or buy, they tell me it will cost $750 to rent and $650 to buy.  Sounds like a no-brainer with this limited data available.   But as I explain to them, as an owner, they have to maintain the house, so they will have to budget for a new roof, furnace, and major appliances, every 15 years.  That could easily eat up that $100 delta in the price advantage department.   Also, they are taking a risk that the housing market will go up in their area.  Finally, they are getting an adjustable-rate mortgage, which is risky.  Also, they still own their old home, which they hope to sell to pay off the mortgage on the new home - which is another risk, if they can't sell it right away.  I tell them all of these things.

Their response?  "Well, since you advised me to buy this house, I guess I had better do it!"

But I never advised them to do anything, other than to consider all the angles and possible outcomes.

You see how the game is played.  Passive-aggressive behavior.   They buy the house, and if it all goes horribly wrong (needs a new roof and furnace, interest rate goes up, they can't sell their old house, etc.) they can then blame me for "advising them" to buy it, even when I said no such thing.

I merely pointed out the pros and cons of such a transaction - they took it from there.

And I guess that is why people play this "advice" game.  They don't want to make a decision on their own (scary! scary! run away!) and it is a lot easier to externalize these decisions and foist them off on friends and family or acquaintances, and thus be able to blame them when it all goes wrong.  "I was poorly advised" is a common refrain heard through our passive-aggressive land.

It is, also, a way of seeking attention, I guess.   Consider the fellow in a previous posting, who decided for one reason or another that health insurance was not necessary, even though he could clearly afford it, as he had nearly a half-million in the bank (!!).   Part of his query, I think, was an effort to attract attention.  After all, dozens, if not hundreds of people responded, all concerned about his situation!  He is suddenly the center of attention!   And let's face it, we all like to be the center of attention on occasion.

So asking for advice is one way to get attention - from friends, family, co-workers, etc.  It is a way to get talked to, talked about, and to talk with.   Hey, we all get lonely.  Just ask for advice, and you'll have friends!   And serial advice-askers end up being the friend with the perpetual problem in short order, as they keep asking for advice about the same problem over and over again, and never take any advice or even try to come up with their own solution.   It gets old, really fast.  It ends up driving people away from you.

And it is human instinct to want to help by giving advice - an instinct we should all squelch as strongly as possible, as it is a trap.   As I noted above, you give advice, thinking you are being "helpful" and you'll end up being blamed when the advice goes wrong.   And it often does, because the person asking for advice failed to mention several important factors to consider in the situation, and did this on purpose, as they wanted you to give the answer they wanted to hear in the first place.

The upshot is that you are draining your emotional energy listening to other people's problems.  It is tempting to intervene in other folks' lives, but it is far more important to take care of your own life before you go rushing off to help people in need.  Chances are, the person most in need in your life is you and the person asking for advice really just needs to work things out for themselves.

So what do you do when someone asks for advice?   Well, in the law, we do something called "issue spotting".   This is what you do to pass law school exams - spot the issues.   You needn't provide the correct answer to the legal problem, so much as spot what the issues are and then give the arguments for and against.   After all, it is judges and juries that provide the answers.  Lawyers can only spot the issues and argue them.

Similarly, if someone asks for advice, the best thing you can do is spot issues that maybe they haven't considered (such as advising my home-buying friend to consider maintenance in their ownership math, as well as the risks involved) and then encouraging them to figure it out for themselves.

But as my experience there illustrates, even these oblique comments will be construed as the advice they wanted to hear all along which in this case was "yes, absolutely, you should buy this house before you sell your old one, what could possibly go wrong?"  But that's not what I said.

So, you have friends who play this passive-aggressive game with you.  What do you do?   Well, find new friends is the only answer I have.  Because when someone asks you for advice, and you tell them you don't give advice and they take than answer as advice and tell all their friends, "Bob told me to buy this house!" then they really are not being your friend, are they?   Limit contacts.   Move on with life.  There are 330 million people in this country.   You won't be lonely for long.

It is far better to have friends who have their shit together enough to figure shit out on their own.   It is fine to talk about opinions and ideas, of course.  But when folks come to you and ask for a "how to" life hack, run away as fast as possible - that's all I can say!

Do You Need to Be Smart to Succeed?

Success in life often has less to do with intelligence than one would think.

In a previous posting, I pointed out that making stupid decisions can be costly.   For example, if you buy a $500,000 motorhome, it will be worth $250,000 in five years.  And if you owe $350,000 on it, well, you've made a stupid decision.  And a surprising number of people do this, every year.

But note there is a difference between being stupid and making stupid choices.   The person whose scenario I profiled in that piece admitted (heroically) that "arrogance and stupidity" lead him to make a very dangerous life choice.   But clearly he isn't stupid.  At age 34 he has nearly a half-million dollars in his retirement account, and has paid down his mortgage considerably.   Obviously, this is a smart guy.

But it begs the question - do you have to be smart to succeed in life?   And the answer is complex.   Some very stupid people end up very successful in life.  Every time Donald Trump opens his mouth, we are reminded of this.   Although part of me is certain this is part of an act - right down to his accent.   He long ago failed as a "Real Estate Mogul" and now carries on as a reality show star and a brand-name, playing the part of a "rich guy".   And perhaps this "Presidential Campaign" which has no hope of ever succeeding, is part and parcel of maintaining that brand identity.    I am sure one of the Ducky Dynasty people will run next - what better way to keep a failing brand in the spotlight?

But the reality is (and reality, not reality television) that you don't need to be a freaking genius to succeed in this world, particularly in America.   And the converse is true, too.  You can be a freaking genius in this county and end up an utter failure if your thinking is skewed.  In fact, a lot of really smart people end up failing in life, mostly because they are too smart for their own good and literally think too much.

So if you've been thrown out of college or even high school, don't sweat it.  I was, and look at me now.  Bill Gates dropped out of college.  A lot of people who are successful did.  In fact, people whose college skills are really good, often end up failing in real life, as real life is not high school, nor is it college.   We really don't teach the right skills in this country, sadly.

The key to success (in my opinion, of course) is to have a modicum of ambition (obviously) and also to think rationally, not emotionally.

In the book The Millionaire Next Door, they profile the "average" millionaire in this country as more likely to be someone owning a chain of car washes than someone who is an investment banker (the former are far more common).   Maybe in the Billionaire range, it is all investment bankers and whatnot.  But that doesn't mean you can't be successful at less esoteric endeavors.   These millionaires next door are not PhDs or rocket scientists.

Chances are, a lot of them didn't do very well in school.   But they can add up a column of numbers on a piece of paper, and moreover be able to really appreciate numbers without thinking about it.   I have a friend, for example, who can look at a building and tell you exactly how many 2 x 4's you'd need to build it, with an error of less than one percent.  And this is not after scratching with paper and pencil and a calculator, but just after looking for a few moments.  Myself, I would spend hours trying to do it the "scientific" way, and probably not be as accurate.

In other words, the third aspect of being successful is to have some modicum of skills that are useful.   And by skills, I mean real-world skills that are useful in the real world.   A lot of very smart people in this country go to college and get degrees in "communications" or "anthropology" or "theater history" and end up underemployed or marginally employed, throughout their lives.   They are (fairly) smart people, but they really have no real skills, or at least not the skills they were taught in college.   And this is why college is such a bad bargain these days, particularly for useless degrees obtained at exorbitant prices.

But what about those earlier factors I talked about?   A modicum of ambition and thinking rationally?  Let's examine these more closely and realize they are connected.

When I was a kid, my elders were all smoking pot and protesting.   Today, a lot of kids are doing the same thing.   They decried ambition as "evil" and shouted down anyone who was successful in life as a "sellout to the man".   This still goes on today, in all types of communities.   Stoner college kids decry the "evil corporations."   Young black men intimidate their peers who are successful and claim they are "acting white".    It is a common thread, throughout the history of our country that we admire success and at the same time decry it.   If you want to be successful in life, expect to see a lot of your friends, family, and peers try to pull you down.

No one likes the smart kid in class who knows all the answers - I can testify to that.    But the "solution" - becoming a stoner and not knowing anything was of course, the wrong answer.   Marijuana, which I have written about many times here, is an ambition-killer.   And many a career and even life has been sacrificed on the holy altar of the gange.   And it is literally like a religion (or is a religion) to many - and the common denominator is shouting down success.

So if you want to get ahead in life, and can't figure out why it ain't happening, and you are smoking pot, well, there's a hint for you.   But it is a hint you won't take, as I know all too well.   People have to come to these things on their own accord.

But if you are not smoking pot but harbor a lot of ill-conceived ideas that "corporations are evil" and that anyone with more than two nickels to rub together is a "sellout" - you might want to reconsider those ideas as well.   People without ambition decry it in others.  

And this is not to say you need to become a ruthless stock trader or evil landlord - evicting tenants on a whim and ripping off little old ladies' stock portfolios.   No, all you need is a modicum of ambition, such as the urge to improve yourself and your life.   Sadly, most people (stoners in particular) see only two extremes as being possible - utter sloth and utter rapaciousness.   There is a happy medium.

But this feeds into the second part of the equation - thinking rationally and not emotionally.   When someone blathers on about how awful America is, or how the "big corporations" are "evil" they are not really thinking rationally, but instead indulging themselves in emotional thinking.  Wallowing in it, actually.   It is fun to externalize and blame all your problems (and student loans) on Wall Street or Obama or whoever your piñata is this week.

And this is the sad part.  A lot of really smart people fall into the trap of decrying success and thinking emotionally and thus end up screwing themselves in life.   And when they see a lot of people who are dumber than they are becoming more successful, well, they somehow feel life has cheated them.

And I can see this in my own family.  My late sister was not an idiot.   But she chose to go to an all-girls "finishing school" instead of studying things that were hard.   She decided to marry someone whose religions and political views were opposite hers (and who had only a high school education) and then wondered why they never made any money or got along.   She stayed married to him to "prove a point" to my Dad.   Pretty stupid thing to do, for a smart person.

And when she saw nearly brain-dead people making good money and driving nice cars, no doubt this pissed her off.  So she doubled-down her bet and bought into the whole success-is-evil and the corporations and Republicans are taking over bit, which just made her short life all that much more bitter and angry.

On the flip side, I know a lot of people who are as dumb as a stone, who end up making a lot of money in life.   They work hard, save their money, and then invest it in their business (a real business, not some fantasy pipe-dream).  A guy who starts out as a welder or a pipefitter or even a truck driver, can end up owning his own small business - if he works hard, has a little luck, and doesn't do stupid things.

Sadly, most people who work in the trades never get ahead, because each paycheck is promised to the finance company for another bass boat, jet ski, or monster truck payment.   The man running the lawn service doesn't invest his surplus income in new equipment, but rather in useless bling rims for his work truck.   It is pathetic.

By the way, and this is off-topic, if you are hiring a tradesman, take a close look at his work truck.   If he has a no-nonsense truck that is designed for work and reasonably taken care of, chances are, he has his eye on the ball.  On the other hand, if he has bozo tires and bling rims on it, this is a guy who is not responsible with money, is likely in debt, and odds are will try to solve his financial problems by making them yours (by overcharging you).

And I guess that really isn't off-topic, but ties into emotional thinking.  The guy with the bling rims on this painting van is thinking emotionally - that somehow putting crappy Chinese rims and tires on what is a tool for working is a good idea.   The guy with the steel wheels and high-mileage tires is thinking logically.  Guess who gets ahead in the end?

So the point of all of this is what?   Simple.  Don't think that because you aren't a genius in school that you won't succeed in life.  Success has more to do with being ambitious, thinking rationally, and having at least some skills in life.   None of these three things are taught in school.

And on the other hand, you can be a real genius in school and fail miserably in life.  It happens more often than not.   And if this is happening to you, maybe a better idea than railing against the unfairness of it all, is to look to see what successful folks are doing, and then copy that.

I have achieved more success in life than many folks I know - folks who got better grades in school than I did.   The difference was, of course, that they were smart academically, but failed in real world 101.  And conversely, there are people a lot dumber than I am who are far more successful.   And the reason for that is simple:  I wasted a lot of my life thinking emotionally and feeling sorry for myself, rather than thinking rationally about how to get ahead.

Friday, June 26, 2015

Happy Father's Day

And you think you have issues with your Dad....

I know this posting is a week late.  So what.   Some of the postings here that seem to resonate with readers here involve family relationships.   Getting over family issues is important to getting ahead in life, as you will always be behind the eight-ball if you are constantly trying to please your parents instead of yourself, or let your older siblings succeed in destroying your self-esteem.

What sort of things am I talking about?   Well, for example, a friend of mine just went on his annual vacation from hell.   Every year, he feels obligated to go visit his children and his in-laws.  And every year, he has a miserable time, and shouting matches ensue, and they come home days early.   And every year, he repeats the process.

Why, oh why, would someone do this to themselves?   Why does it happen?   The latter question is easier to answer.   Once you are a parent, it is very hard to shed the parent attitude, even after your children are older than you were when they were born.   You are now peers, as adults, but you still treat them like children - and they react as children.   So arguments ensue as the perpetual conflict between parental authority and children chafing against it, is repeated over and over again.   Only this time, of course, the "children" who are now adults, rightfully feel they should not be treated as chattel.

So my friend goes through this from both ends.   He visits his kids, they chafe at the authoritarian comments he makes, arguments ensue.  He then goes and visits his in-laws, who in turn treat him like a child and this time he is on the other end of the stick.

The same problem can occur in adult relationships between siblings.   I know all-too-many big brothers or big sisters who think they still are smarter than their younger siblings.   Hey, when they were in in 7th grade, and their kid sister was in 3rd grade, they were so much smarter, right?   So it still must be true, right?   And sadly, many a younger sibling has fallen into this trap, thinking, often subconsciously, that their older siblings must be smarter than they are.

I was lucky, in a way, that my older siblings were drug-addled morons and/or were mentally ill.  And ditto for my parents, although their drug of choice was alcohol.   It was a lot easier, for me, to say, "Gee, I used to look up to these people, but their personal lives are utter wrecks.  Maybe they don't know it all.  Maybe I shouldn't be taking advice from them!"

For others, it is harder.   And I have seen this firsthand.  The son of a rich and famous doctor, for example, feels intimidated by the success of his parents.  They have achieved so much, and he has done nothing yet with his life - and moreover, it doesn't seem he would ever achieve the success of his parents - something they continually remind him of.   So he lives down to their expectations.   It happens.

So, how do you "fix" this?  The short answer is, you can't.   Parents will always be parents.  Children will always be children.   And older siblings will be real jerks and steal your paper route money to buy drugs.

My friend, for example, is almost old enough to be my Dad.   I am hardly older than his children.  Yet he and I get along really well.  Why is this?   Simple answer:  He's not my Dad.   I never sprang from his loins.  We don't have a half-century of history together, and moreover, when we interact, it is on a peer-to-peer relationship.  I respect his abilities, and he respects mine.   He doesn't try to tell me how to run my life, my career, my finances, or my choice in spouse.  Parents, on the other hand, will try to do all of that, even if they don't do it consciously.

Trying to establish that peer-to-peer relationship with a parent is downright difficult, if not impossible.   Many parents (or older siblings) simply cannot "give up" on what they perceive to be power in the relationship.

So trying to "fix" this is likely to be futile.  If you try to establish a peer-to-peer relationship with your older siblings or parents, it will be rejected, outright.  It is human nature.  It cannot be done.   It violates the first and third laws of thermodynamics.

However, what you can do is manage these relationships so that these types of visits don't devolve into shouting matches.

My friend goes for several weeks to visit his children, in-laws, and other relatives, often staying in the houses of these relatives, in order to "save money."   I know other folks who fly to visit relatives, get picked up at the airport, and then stay in their childhood bedroom.   All of these are bad ideas.  Here are some better ones:
 1. Stay in a Motel:   Yes, your Mom and Dad bought a five-bedroom retirement home so you would all come to visit.  Stay in a Motel anyway.  And Mom and Dad?  Save yourself the money and buy a retirement home with one bedroom and no pull-out sofa.   It is cheaper to put your kids up in a Motel than to pay for the extra Real Estate.   If you aren't sleeping, eating, showering, and shitting in someone else's house, the amount of tension is a lot, lot, less.   Plus, you have time alone with your spouse and less time spent with relatives.

2.  Limit Exposure:  With my late alcoholic Mother, I found a two-hour visit was optimal.   Anything longer than that, well, she'd be in the bag and start raging.   If you have to travel a long distance to visit, stay in a Motel or Hotel, and visit relatives only for two hour intervals or so.   Beg off on the grounds that the spouse needs a nap, or you always wanted to visit the Toothpick Museum nearby.  Anything - anything - other than laying around the house for hours on end with relatives.

3.  Have Your Escape Pod:  Never ride in the back of your parent's car, once you are an adult.   Bring your own or rent one.  That way you can get away without a hassle.   Staying in the house and not having a car means you are trapped with crazy relatives and bad things will happen.
4. Be Prepared to Walk Away:  If you have relatives who abuse you physically, sexually, emotionally, or financially, just be prepared to walk away and move on with your life.   Your childhood family really ends when you turn 18 years old and reach the age of majority.  At that point, you should be living your own life and starting your own family.  For some reason, our generation seems "stuck" in Brady Bunch mode, and unwilling to move on, even 20 or 30 years after they have left home (of course, some never leave home!).
Of course, this presumes you really want to change things, and don't just secretly enjoy talking about your family problems in order to get attention.  And yet, sadly, many folks do just that, regaling their friends for hours on end on how awful they have it, as adults, because their parents or siblings are mean to them.   You can just walk away, you know.  Just as you wouldn't hang out with "friends" who were mean to you (who by definition are not friends) why would one hang out with family members - as an adult - who try to push you around?

But sadly, some folks simply cannot see this, and they keep going back to the well again and again, their whole lives long, being miserable and as a result, often making poor financial choices as part of the bargain.

It is sad.  And what makes it really sad is that it is so unnecessary.

The Price of Stupidity

Being stupid is very, very expensive!

On Reddit the other day, this interesting plea for help:

  • laid off from job end of January 2015
  • I am 34, wife is 29. I am a US Citizen. Wife is Thai National with US residency
  • wife was diagnosed with signet ring adenocarcinoma cancer one week ago
  • did not sign up for ACA when we had the chance (reason: arrogance & stupidity)
  • we live in Missouri
  • zero debt
  • $99,000 left on mortgage
  • ~450,000 in cash savings, investments, retirement
  • currently receiving $1800 per month in unemployment insurance until Aug 2015

You have to hand it to this guy, admitting to "arrogance and stupidity" - albeit a bit too late.   That took some courage to admit.

I did not see the explanation for his odd life choice, but I suspect it may have been one of those "I'm not signing up for O-BUM-A Care, just to show the Gub-ment what for!" kind of deals.  (They do, after all, live in Missouri).

And sadly, a lot of people - egged on by conservative talk-show hosts and their peers - are making the same stupid life choice.   They are going to go without insurance "just to make a point" and risk a tax lien on their bank account, by not paying the "fine" for not having insurance.  It is just being stupid for the sake of being stupid.

Regardless of his reasoning, it turned out to be a stupid life choice, and one that could have bankrupted him and his wife.

Fortunately, this story has a happy ending:
EDIT - As of 2:49 AM CST on 6/25/2015 - I just got off the phone with someone very kind on the ACA helpline. We figured out together that losing my unemployment insurance in August counts as a life changing event and therefore as of August 1 I am able to enroll myself and my wife into a plan. She is eligible for the full subsidy and will have almost 100% coverage for $40 per month. I am so happy that I'm crying.
Wow, the people at the ACA are actually nice.  Fox News has been telling us for years that they are all jack-booted thugs who can't wait to have Grandma euthanized!

I wonder if he'll still vote Republican in the fall - knowing that if they win the White House and Congress, his wife's insurance will go bye-bye.    In other words, the jury is still out on his "arrogance and stupidity" and by 2017, his insurance could be cancelled, unless Hillary wins the White House.

Those are the real stakes in this political game.  Really.  It is literally life-or-death.

On another front, the Supreme Court said that same-sex marriage is legal nationwide.  "Not so fast!" says Alabama - whose Supreme Court Judge vows not to recognize such a decision.   Some counties in Alabama are just abolishing their marriage licensing completely, forcing couples to marry out-of-State or at least in the next County.   That's really got to piss off the local wedding planners, eh?

Roll Tide!

An Australian couple, apparently desperate for attention, claim they will get divorced if same-sex marriage is legalized in that country.   A nice political statement, but one that could really cost you a lot of money, in terms of taxes and legal fees.  And let's not forget child custody issues.  

At least here in the States, the main impetus behind gay marriage is not to get the Baptist Church to recognize same-sex couples, but to get the IRS and the Social Security Administration to.    It comes down to money - quite a lot of it.  That is the impetus behind these laws and legal challenges.

Simply stated, if you are not legally married and your "spouse" dies, and you inherit their IRA, you may have to pay about half of it, right away, in Federal and State taxes.   This could really put a damper on your retirement plans.  If you are legally married, then the IRA may roll over into yours, and you may only pay about 15% in taxes, when you take money out to spend.   It means a big, big difference.

So, if you are thinking of getting divorced to "make a protest" about same-sex marriage, think it over carefully.   If you are not signing up for the ACA as some sort of "protest against the government" then think hard about what happens when you or your wife gets sick.

Because, quite frankly, people won't feel sorry for you when you make stupid life choices.

Thursday, June 25, 2015

Heritage, Not Hate..... Right?

It's all about Heritage, not Hate, right?   Maybe not.

Stuttgart - the German ZDF network announced today they are launching a new television show, the "Dukes of Saxony" - an adventure/comedy program featuring two strapping young Aryan youth, 'Dolf and Einrich Gefährlich, who travel the back roads of Saxony in their hopped-up vintage Mercedes 6.3 sedan, affectionately named "The General Rommel" - whose horn plays the first few bars of Deutschland, über alles.   Adorned with a Nazi flag on the roof and the "Heil Hitler" number 88 on the side, the vehicle honors the sacrifices of German soldiers who fought for "the lost cause" in World War II.

Of course, since the use of Nazi symbols has been outlawed in Germany since World War II, the show is causing some controversy over the use of Nazi imagery.   However, co-star Ben Dover, who plays the part of happy-go-lucky towtruck driver "Plätzchen" - and who runs a gift shop selling "Dukes of Saxony" merchandise, had this to say about the controversy:
"I think all of the German Nation understands that the Nazi flag is the symbol that represents the indomitable spirit of independence which keeps us 'makin' our way the only way we know how.'

That Nazi flag on top of the General Rommel made a statement that the values of rural Germany were the values of courage and family and good times.

Our beloved symbol is now being attacked in a wave of political correctness that is unprecedented in our nation of free speech and free expression. Activists and politicians are vilifying German culture and our heritage as being bigoted and racist.  We know that this is not the case.  And we know that in Germany, there was never any racism.

Though the Nazi flag has been removed from such places as the Reichstag and the Brandenburg Gate, it will never be removed from any of our Plätzchen's stores and museums.  We are all the same good people today that we were last week and last year and we are not going to be shamed into turning our backs on our heritage and our convictions.

We are not racists. We despise racism and bigotry. and we think the people who are creating this 'cultural cleansing' are the real bigots in this story.

When we say our flag stands for 'heritage, not hate' and 'pride, not prejudice', we mean it.  And we believe that old saying, 'you can't know where you are going if you forget where you came from.'

Plätzchen's is going to continue to sell our German symbols as long as there is a Plätzchen's.  I will fight these people until hell freezes over, and then I will fight them on the ice."
 * * *

Pretty Ridiculous, no?  And yet the quote above is taken directly from former actor Ben Jones, who played a minor role in the Dukes of Hazzard series (but is listed as a "star" in articles quoting him).   Yes, I changed "the South" to --Germany--  and "Confederate Battle Flag" to --Nazi Flag--.  But that's about it.

The most ridiculous thing in the original Ben Jones quote is this:
"And we know that in Hazzard County there was never any racism."
Well, since Hazzard County is a fictitious place, I guess he has us there.   Problem is, the fictitious Hazzard County is supposed to be in Georgia, and Georgia was and is rife with racism.  This is a State with a history of slavery, Jim Crow laws, the KKK, and of course, lynchings - about 450 in Georgia alone.

The Civil war killed more Americans than every other war America has been in, combined.    The Germans enslaved Jews, Slavs, Poles, and others, forced them to work long hours for no pay, and then exterminated them at will.  Southerners did the same thing to Blacks.

And long before there were the horrors of Auschwitz, those lovely Confederate "heros" invented the horrors of Andersonville and other Civil War Concentration Camps.   The "Southern Gentlemen" of the Confederacy showed their real gentlemanly colors there.

Slavery is nothing to be proud of.  Fighting for intolerance and slavery is nothing to be proud of either.  It is time we put this "Rebel Pride" crap to rest, once and for all.   There is no pride in atrocities. 

And let's face it, the folks claiming this "heritage" are about as far removed from it as I am.   Yes, my great, great, great grandfather, Colonel Robert A. Thompson fought for the "lost cause."  And yes, he was a slave-owner of some magnitude, having his own plantation in Alabama.   When the war was lost, he moved to Texas and started over.  My racist Southern relatives (and yes, they were and are racist) waxed poetically about how lucky those slaves were, and how they loved the Colonel so much - that they followed him to Texas.

Of course the reality was, if they didn't follow Col. Thompson to Texas, they likely would have been swinging from a tree in short order - as so many did.

And that is one reason why the Civil War really isn't over.    Long after the hostilities ceased, the covert war against Blacks in the South went on - for another 100 years.   The KKK peaked in popularity in  the 1920's.   Lynchings were regular occurrences until after WW II.  Segregation was around until 1950.   And young civil rights workers were being murdered in the 1960's.

Today, these symbols are flouted on the excuse that they "honor the courage of the fallen" - but we all know they are just a continuation of this underground war.   They are a way of intimidating the majority with the will of the minority - those bigoted and racist elements in our country who feel that "but for" the "special rights" given to racial minorities, they would all be rich.  (Oddly enough, racial minorities don't seem to be cleaning up on these "special rights" very well).

In Germany, they passed laws against the display of Nazi symbols.   We, of course, have different ideas about free speech.  It is written into our Constitution.    Mr. Ben Jones can "fight them on the ice" all he wants to, but he will find no one there to fight.   He has a right, in our county, to sell "Dukes of Hazzard" accessories, provided he has the licensing rights to do so.  No one will stop him.

So his brave words ring very hollow - and sound more like those of someone who wants a lot of free publicity for his "Cooter Museum" which frankly, you and I never heard of until now.

However, we, as a nation do have the right to decide what symbols will be on our State and National flags, on our license plates and whatnot.  And if the majority of people in a State vote (through their representatives) to ditch these hateful symbols, that is not a "suppression of free speech" or any such nonsense.

And if major corporations like Wal-Mart or Sears decide that displaying KKK accessories is bad for business, they have a right to do so, just as they might decide that perhaps, well, I don't know, selling Nazi regalia might offend some of their customers as well.

Once again, we have the far-right claiming to be nailed to the cross, when in fact, they have little more than a splinter in their finger, if that.   

What is sad, is that in response to the shooting of nine people in Charleston, we still can't have a discussion on how to keep guns out of the hands of the mentally ill, such as the young man who committed this crime, the one in Aurora, or the one in Connecticut.  That is off the table.

Removing the Confederate Battle Flag and other symbols of the KKK seems to be sort of the booby prize, a stalking horse, if you will, for the real issues involved.

Monday, June 22, 2015

The Coming Tech Crash

Predicting a Tech Crash isn't hard.  They happen ever 5-10 years like clockwork.

We are due for a correction in the tech sector.  I can say this and sound like a genius, but really it means nothing.  New technology stocks always follow a pattern of initiation, growth, euphoria, overbuilding, and correction.   And this has been going on for hundreds of years.

Railroads were the first "tech" stocks.   You might not think of railroads as sexy high-technology, but back in the day, they were pretty amazing.  It used to take days to ride or sail from New York to Boston - now it could be done in a day, or overnight.   It was like Captain Kirk's transporter beam, to people in the 19th Century.

After the Civil War, railroads expanded, across the continent, and while some were highly solvent and profit-making enterprises, it didn't take long before overbuilding occurred.  People started up railroads that went from nowhere to nowhere, and there simply weren't enough paying passengers to justify the cost of the lines.  Before long, the market crashed.   The stronger railroads bought up the assets of the weaker, and there was a huge consolidation of lines.   Life went on, some made money, a lot more lost it.

Automobiles followed a similar tech boom/bust cycle, with hundreds, if not thousands of companies starting up to build cars, and after a huge bust, only a few major players soldiering on (even GM almost went bankrupt - for the first time - during those early years).  If you invested in the Briggs Detroiter, chances are, you lost your shirt.

Airplanes were another example of gee-whiz high tech.  And it is a lot less harder to explain why flying through the air seemed like a pretty amazing thing to do, for earthbound humans of the early 20th Century.  As Neil Shute Norway illustrated in his book Slide Rule, perfectly successful companies can go on for years and years losing money and not returning profits to shareholder, before they eventually go bust and are bought out by a competitor.   As he illustrated, his company Airspeed never really made any money, and the original investors, if they had hung on for the full thirty-year ride, would have gotten their money back (and not much else) when the company was sold.   Given the amount of inflation, one wonders why anyone would invest in such a company.

The personal computer business was booming for many years, but by the late 1980's, companies like Apple were hurting - they even fired Steve Jobs and suspended their dividend!   Hard to believe that is the same company that today, people think rules the world.

In 1995, we saw a lot of hardware companies collapse, as they geared up to sell components for the new computers expected to be sold when Windows 95 came out.  Problem was, most people thought Windows 95 was over-rated and there was no rush to change out old computers for new ones - at least not right away.

We also found out that hardware (everything from displays to disc drives to processors and memory) were commodity items and as such, profit margins started to get thinner and thinner as computer prices plummeted.   A $499 Dell computer had $99 worth of Microsoft Software in it - the largest and most expensive single component, whose incremental cost of production was nearly zero.   To those from the era of big mainframes, where the cost of components was the big deal, this was a wake-up call.   Electronics have almost reached the disposable stage, if not already so, and software is where the money is at.

The first "dot com" collapse occurred about a decade ago, when things like Pets.com went bust and in a big way.   We all thought that these "websites" were a big deal, but it turned out, no one was making any money at them, and the stocks were highly over-valued.

Fast forward another decade, and now online companies are the "next big thing!" with Social Media leading the way.   We are a Facebook and Twitter generation we are told, but oddly enough, most of these new era companies are either losing money, not making much money, or not making enough to justify their sky-high stock prices.

Amazon, for example, the 600-lb. gorilla of online retailing, has a stock price of over $435 but is losing about a buck a share every year.  And this is one of the more successful Internet companies out there.   In order to justify this stock price, Amazon would have to from losing a buck a share to making twenty.  This is indeed a tall order.   Amazon may make money in the future, perhaps the near future.  But to go to 20 dollars a share?   Maybe not anytime soon.  And the reason is simple:  Anyone can play the online retailing game, the costs of entry are the six-pack of beer you have to buy some broken-down IT guy to setup your website.  

Don't get me wrong, Amazon is a great company. I buy shit there all the time.  The stock is just wildly overpriced.

On the social networking side, Linked-In is at least making money - or was making money for a while.  Today, they are losing 37 cents a share and there has been a bit of mild sell-off, lowing the share price to about $216.   Motley Fool says to hang on to your Linked-In stock, which is a sure sign to sell it (when in doubt, do the opposite of whatever the Motley Fool says).  Again, to have a rational P/E ratio, Linked in would have to go from losing money to making ten bucks a share at this price.   But I think their site has plateaued in users and relevance.  If they can't make money at this yet, when will they?

Apple is both a hardware and software maker, and they realized that you can charge five times or more for a product, if you can make your product the "must have" status accessory. At about $127 a share and a P/E ratio of 15.77 and a dividend rate of 1.64%......  might not be a bad buy!     It is interesting that the company is finally making a reasonable profit (relative to the share price) and even paying dividends.  However, perhaps the market is saying Apple has nowhere to go at this point - and that the iWatch might not be a big seller.  Today, it is a good value stock, despite my misgivings about the company.  But tomorrow?  That is the kicker.  So long as people will keep paying for that Apple logo on their smart phones and Apple can get $600 a phone, it's all good.   The moment it stops, or people realize a similar phone can be had for $99, well, things might go South in a hurry.  And it has happened before to Apple, back in the 1980's, as I noted above.

Facebook, of course, is the big daddy of social networking, and it is profitable.  The share price is presently about $85 a share, and with profits of about a buck a share, has a P/E ratio of 85 as well.   For a social networking company, this is as good as it gets.  But like with Sir Nevil Shute's Airspeed, you won't make any money in the long haul, as it pays no dividends.   In order for the share price to be rational (a P/E ratio of around 20 or so) they would have to quadruple or quintuple profits, which is problematic, as the more you try to wring money out of social networking, the more you lose users.  And Facebook is losing users - the young demographic in particular - which is troubling for the long run.  These things are like fads, and many folks, other than the hard core users, get bored and move on with life - or get creeped out by how intrusive, fake, and weird social networking really is.

Twitter is always talked about in the media.  Sadly, usually this in the context of someone saying something really stupid on Twitter and then getting fired or having to go on the talk show apology tour.  It sells for $35 a share and loses a buck a share every year.  If they could make $1.75 a share, the stock price would be rational.  Sadly, they just fired their CEO in an apparent shuffle, claiming that he is not doing enough to keep the brand fresh and expand the number of users.   While the media hypes Twitter (people who work in the media like to use it) the number of users is really quite small, maybe a quarter billion, based on self-reported data (so cut that number in half, for the real deal).

Netflix is another darling of the tech set, and at $675 a share, is wildly overpriced, with a P/E ratio of over 175.  They are making about $4 a share right now, but would have to expand to a mind-boggling $33.75 a share to make the current share price make any sense.  The problems for Netflix are multifold,  They made good money starting out, as the only online movie streaming service, and with a huge library courtesy of the STARZ contract (a loophole akin to Bill Gates' IBM DOS agreement) they had a great product at a very low price.

But regulations and market conditions could wipe out Netflix overnight.   The studios and other content creators are pulling back on content, or starting their own sites.  Hulu and YouTube are not sitting idly by - you can stream video from both, and YouTube now rents major movies for a couple of bucks each.  First to market is often last in the marketplace.

In response to this, Netflix has gone into the move/television business, creating its own content out of necessity, sometimes hitting it big with things like "House of Cards" and other times, well, spending a lot of money for nothing.  But this is the way they will have to morph, to survive.  Unfortunately, competing studios and television networks will be less likely to license content to what is now a competitor in their field, not just an adjunct to ie.

On the plus side, Netflix finally improved their user interface, which was slow, buggy, and annoying.  It is far less annoying, now, slightly faster, and less buggy.   But the stock is still wildly overpriced and the future of the service is anything but clear.

Angie's List, with a share price of $6.33 and earnings of minus seven cents, has been on everyone's death watch list for some time.   Don't let these small numbers fool you - they are in the same boat as many of the others above.  They would have to go from -7 cents to +32 cents to make the share price make sense.  In other words, they are about in the same shoes as Twitter and Linked-In, but without such a compelling "must have" rating site.   Free sites like Yelp and Trip Adviser and whatnot, obviously are far more popular than this pay-to-play site, and the criticisms of their business practices are legion.

The list goes on and on, of course.  These are just a few major players you have heard of - the ones that should be at the top of their game, but are just barely getting by.  Other players, such as Groupon, Zynga, and ZipCar have already arguably bit the dust. 

There are some oddballs out there, such as King, who sells the Candy Crush Saga game, trading at $14, with a P/E ratio of about 7 (!!) and actually paying dividends and earning money.  But the low share price might be the market's way of saying this one-trick pony may soon lose it all, as people morph to "the next big thing!" in online games (and if you doubt this, tell me where all the angry birds went, or for that matter, the people in Farmville).  This exception proves (tests) the rule, and perhaps points out that P/E ratios and dividend yields aren't everything, except when you have no profits, in which case they are.

So what will happen to these companies?  Will they go out of business?  Bankrupt and close their doors?  Hardly.  But I suspect the share prices could "adjust" in the future (when is anyone's guess, of course) unless profits increase dramatically, which I doubt they will.   A lot of these companies, like most tech companies, or like Airspeed, will likely never make money for the long-haul investor.   People who gamble on the share price - which is set by public sentiment and little else - may be able to buy low and sell high.  But for every lucky gambler, there are bound to be three losers.  The house always wins.

The point is, for the small investor, these are not "investments" and you aren't "missing the boat" by not plowing your money into these wildly speculative and over-valued investments.   

So why are the share prices so high?  Well, think about it.  When you turn on the television, go to a news website, or read the paper, what do they talk about?   Do they talk about Stanley Tool, which has a P/E ratio of 22 and a dividend yield of nearly 2%?  Hell, no.  That's an old and boring company that just "makes things" and makes profits, year-in and year-out, and then cranks out dividends.   If you bought the stock years ago (as I did) you have doubled your money by now - and had a tasty dividend on top of that.

But you'll never hear the media talk about boring stocks like that.  Exciting stocks - who do IPOs and whose share price goes up and down dramatically - are always talked about.  And anything "high tech" is talked about, because it feeds this (bad) idea that you can "get in on the ground floor" on a new technology.

But as I noted in my last posting, there was no "big idea" at Microsoft back in 1980, and few people would have wanted to "get in on the ground floor" on a small software company that had a lucrative contract land in its lap.  It just isn't that easy to spot winners in the marketplace, without a working time machine.

If you want to gamble on these stocks, fine.  Just realize it is gambling, and than you could literally lose all of your investment.  It makes no sense to put more than a token amount of money into any newly emerging tech sector.   Picking the winners is very, very hard to do!