Monday, November 30, 2015

Bloody Golf Car Accident

Golf carts were never intended to be a means of general transportation.

Getting old sucks.   But getting old and not having a plan on how to handle getting old is even worse.   And I'm seeing a lot of bad planning going on right now.

An alarming number of people are simply not saving for retirement and just figure that whoever that old dude is they become later on, well, fuck him.   And they properly have, as trying to eke out an existence on meager Social Security will be no fun at all.

But others fail to plan for eventualities - getting infirm, losing sight, losing hearing, losing their minds.   And here on "retirement island" this is particularly true.  It is an eye-opening education for me, to be sure.

You see, our retirement island is a fine place to retire to, provided you are ambulatory, cognizant, have some money (or a steady retirement income), and are able to drive.   For someone aged 60-80, this can work out as you can play golf and tennis, go biking or jogging or whatever.   There is a lot to do and a lot to keep you busy.

But unfortunately, unlike many planned retirement communities there is little or nothing in the way of "end game" planning here.   And when people hit 90 or so, a lot of bad things can happen, with little or nothing in the way of support structure for the elderly.   This is a great place to retire.  It is a lousy place to get old.

Since many people are removed by over 1,000 miles from their family members, they have no support infrastructure to rely on to help them in their old age.  Simple things like getting groceries and keeping the house clean, can become a real chore.

In a planned retirement community, this is not an issue.  You can move from a house to an apartment, to an assisted living center to a nursing home - often on the same campus - such as Shellpoint in Florida.   Here, we have no options.   You either live in a four-bedroom 2,000 square foot house, or leave.   There is no "senior bus" to take you to the Wal-Mart once a week.   There is no realistic taxi service.   Hell, we don't even have Uber.

So what happens when people get old and infirm?   Bad things.   And in most cases, people often don't leave the island until a lot of bad things have happened.   And like nervous cattle at the slaughterhouse, the oldsters pretend nothing is happening - as Suzie from Bridge Club is given the captured-bolt gun and hung up to bleed out in the abattoir.  Just deal her out of the next hand and move on.

Let me give you some examples of just a few people I know and how the "end game" doesn't work out, when plans are not made in advance:

1.  Wilma's (not her real name) husband died almost a decade ago, which is typical among married couples, as men do not live as long as women do, and men generally marry younger women.   Wilma lived alone in the house she and her husband bought here, as she felt no reason to move away.   After all, she had the Bridge Club, the Garden Club, and all her friends here, and it made sense to stay and keep active in her social circle.

Of course, it got harder and harder as she got older.  The 4 bedroom, 2-bath house was a lot of work to keep clean and tidy.   And it needed work and updating as time went on - things she could not afford to do.

But her mind started to go South.  She slipped a cog in the gears, and things started to make less and less sense.   One day, she inadvertently locked herself out of the house.   Stuck in the garage, she had no way to get back inside.

Now this is where it gets weird - and sad.   Convinced that if she went for help to a neighbor, she would be viewed as crazy or demented, and that her children or the County would have her sent to a "home".   So instead, she lived in her car for a few days, eating some crackers and other food she found in the glove box.

A few days later, feeling faint, she went to the drugstore and asked the pharmacist for a loan of a few dollars so "she could get something to eat."   Sensing trouble, the pharmacist asked a few pointed questions and parsed out what was going on.   He called her children, as well as a locksmith, and she was able to get back into the house.

Of course, it was clear to everyone that she should not be living there alone at this point, and they found an assisted living center off the island.   Her fears were realized, oddly enough.  If she had just called a locksmith, it would not have been a problem.   But when your mind starts to go, the world is a scary place.

Sadly, we no longer have a pharmacy, and the pharmacist has passed away.   Back then, there was an informal network of people who tried to "look out" for older folks.   But sadly, this network is not really very strong, and as more and more people get older and pass away, it sort of is falling apart.
Her story also illustrates the irrational fear that older people have of going to an assisted living, retirement home, retirement community or anything that smacks of being "institutionalized."   Living in your garage is a whole lot worse!

2.   Cindy had a history of mental health issues.  Her husband had physical health issues, and they both liked to drink and smoke - a lot.   Over the years they spent a lot of money - not on any one thing, but just living larger than they maybe they should have, eating out a lot and the like.   They started to run out of money as a result of their spending and also as a result of a lot of irrational decisions.

During her frequent "fugue" states, she would buy things like cars or other appliances, on eBay, sometimes as gifts for others - although she could hardly afford to do so.  This ran up a lot of debt.

Her husband died one day.  He was exhausted and had lung problems.  And her mental health issues took their toll on him.   She was now living alone.

A young family approached her and befriended her, which she liked, as her erratic behavior had driven away a lot of other people.   Within a month, these gypsies had moved in, and stuff started to disappear from the house.

Alarmed, Cindy called the Police, and was in a frantic fugue state when they arrived (the new "roommates" of course had persuaded her to stop taking her medications).  The Police did nothing, convinced that Cindy was imagining things.   She was taken away to a mental hospital - more than once - leaving her "friends" in charge of the house.   Not only did they sell off more of her possessions (and drive her cars) they also were dealing drugs out of her home.

Cindy finally died - mentally ill people often don't live very long.   It took nearly a month for her children to evict the gypsies living in her house, and after they left, the place was in a shambles.

I felt bad for Cindy - and was horrified as well.   What a way to end your life, alone, with dangerous strangers living in your home stealing all your stuff, with everyone thinking you're crazy.  How sad.

3.  Martha also lost her husband (that sort of thing is common here!) and was having trouble getting around.   She was losing her sight and also getting confused.   She was pretty well off, and could afford to buy a new car every few years.   Sadly, she tried to put diesel fuel in her new car, even though it burned gas.   Fortunately a young man stopped her and showed her where the correct pump was.  Mark is a nice guy.

But her driving became more and more erratic.   And on an island where you have to drive to get to anything, not having a car and a license simply wasn't an option.   So she drove - badly.   Often going less than 20 mph even in a 35 mph zone, she would tend to lock on the brakes and stop dead in the road if she saw another car coming.  Sometimes she would drive off the road.  She would get lost. She pulled out in front of cars, often leading to near-miss situations and screeching brakes.

Her children wanted her to move near their home, so they could take care of her.  But she refused.  After wrecking her car and getting numerous tickets, she lost her license (due to the eye exam now required for anyone over 70).

Her solution?  Get a golf cart.   Sounded like a great idea, but driving a flimsy fiberglass vehicle on the streets (as it is legal to do here) with speeding rednecks in huge pickup trucks is probably a very, very bad idea.

Her solution to that was to drive on the sidewalk or at least the bike path, which is not legal here (this ain't The Villages, folks!).   And today, she nearly wrecked the golf cart when she dodged out into traffic without looking or stopping.  Thankfully, the hamster has really good brakes.  We did leave a 20-foot skid mark, though.

The problem is, she is making poor decisions at a time in her life that her decision-making skills perhaps are not the best.   She will end up in a wreck in that golf cart, eventually, and it will not be pretty, I assure you.   A 5,000 lb pickup truck versus a 500 lb golf cart will be a bloody and likely fatal wreck.  I also predict that if not her, someone will be in a bloody golf cart wreck here on the island, very soon.  I just hope I'm not involved in it, as I nearly was today.

So how do we avoid these scenarios?  Again, like with my Jamaican Lottery Scam posting, I am not sure there is an easy answer.   But one thing is clear to me, the best time to make these decisions is before they are necessary.   By the time you are trying to figure stuff like this out, your decision-making skills are impaired, or your options may be limited.

Seniors don't want to give up on their homes - often clinging to them and ending up living in their own squalor.  They don't want to be seen as "giving up" by their peers.   If you leave the island, people believe you've surrendered to old age (and death) and no one will talk to you again.  But eventually, most do just that, under circumstances that are messy, unpleasant, and painful - often for everyone involved.

Mark's Grandmother sold her house in Florida and moved to Shell Point, a retirement community, where she had an apartment and lived independently.   Indeed, you could have a house there, play golf all day, or keep your yacht tied up.  It is hardly the County rest home.  

Many relatives said she went "too early" as she was only a little over 70.   But the apartment allowed her more freedom to do things rather than own things and she was able to travel and enjoy life, rather than clean rooms and worry about leaking roofs.  When driving became too much of a chore, she used the provided shuttle bus to go into town to shop or whatever.

And when the time came - as it will for all of us - a decade later, she was able to transition to an on-site extended care apartment, which provided meals (which is important, as many elderly stop eating because they forget or they just go crazy) and some supervision.   And a decade after that, she was able to transition to a full-care nursing home type environment - all on-site, all pre-arranged, with no intervention required by her family and not even much on her part.   It was a pretty good arrangement.

For me, seeing this all go down here on the island, it leaves me with questions as to how I want to proceed.   I do not have children to intervene in my life (and why should they have to, if I had them?  Shouldn't people take care of themselves - as Mark's Grandmother did - as part of the Unwritten Social Contract?).   So the idea of slowly losing my health, my eyesight, my hearing (whoops, too late) and my sanity, while wallowing around in a big house with a big lawn, just doesn't appeal to me.   It would be a sad way to end my life or to spend my remaining years.

Of course, we haven't found the answer just yet.  And it is a hard answer to find.  Many "retirement communities" are very expensive and unaffordable, even for middle-class and upper middle-class people.  And even "retirement communities" like The Villages are not really set up for long-term care needs.   And that is a shame, too.

It seems the decision of where you want to end up and how you end up is often left to fate, or the hands of others, or whatever expedient option is available at the time things go horribly wrong.   Getting old, as they say, is no fun - but better than the alternative.   But I don't think that means that it isn't possible to plan some sort of exit strategy to optimize your comfort and your outcome.

Living in denial of old age and eventual death, on the other hand, is probably the worst possible strategy that anyone could come up with.  Sadly, it seems to be the most popular one.

The Jamaican Lottery and Self-Determination

What is it in our brains that makes us think we won a lottery we never entered?

In a previous posting, I mentioned that somehow, the United States Government managed to actually catch one of these people running a Jamaican Lottery Scam (an 876 scam, named after the area code for Jamaica) and then sentence them to 20 years in jail.   This is not the norm.  Usually, these sort of scammers operate overseas with impunity.

In case you were late for class, these scams work as follows.   An offshore scammer, usually in Jamaica or Nigeria, e-mails a person in the United States, telling them they won the lottery.   Usually they send out an e-mail "blast" to a list of harvested names, with the usual bullshit story - that the person has won the "Microsoft Lottery" or some such nonsense.   Then they entice the victim to contact them and provide name, address, and telephone number.

Once they have the phone number, they start relentlessly calling the person, hoping to find someone who is preferably older, has some money, and is starting to lose their faculties.   They spin an elaborate story about how the victim won some lottery and they are going to get millions of dollars in just a few short weeks.

The only problem is, of course, that the "taxes" need to be paid first, and on such a large payout, the taxes could be tens or hundreds of thousands of dollars - or however much the victim has in their bank account.

They persuade the victim, over the course of a series of phone calls, to wire money to an offshore account, and the scam is then completed.  Or sometimes not.  The victim may still believe they are going to get money, so the scammer may make a second dip in the well, and say that "processing fees" or other charges are due - and get even more money from the victim.

The victim often still believes that their big check is only days or weeks away.  And even when family members intervene and show the victim that they were scammed, they will vehemently denounce the family members and still insist that riches are only moments away.

When Chris Poland, his 53-year-old son, heard of it he was furious. He wanted to know why his dad, who had spent his life working at a factory, was giving his hard-earned money away.

Albert Poland, an ordained deacon and long-time Sunday School teacher, took his own life the following day. 

In his suicide note, the father and grandfather of two urged his family not to spend a lot of money on his funeral service and said he hoped he would be vindicated once his $2.5million lottery prize arrived.
It is very sad, but this sort of thing goes on a lot.    As I noted in another posting, Chelsea Clinton's father-in-law got caught up in Nigerian scam, stole money from his clients, and ended up in jail.  These are often smart people who get caught up in these things - smart people who maybe slip a cog a bit.

I mentioned this to a friend of mine and they said they had read an article (source?) that a particular part of the brain in the frontal lobe is to blame for this.  When this part is damaged, by disease or whatever, it causes the victim to believe that mysterious big payouts are coming due to them.

I suspect it is the same thing that causes the "free energy" nuts to believe that "free energy" is just around the corner.  It may be related to conspiracy theories.

In my business - inventions - I've seen it strike older men on a regular basis.  I often get calls from people who believe they can Patent an invention and make a million dollars from it.   I try to talk them out of these Patents, and for the most part, I am successful.    However, I realize that if I tell someone something isn't Patentable, they likely will keep calling other attorneys - and "invention brokers" until someone tells them what they want to hear - that they are going to be millionaires.

In a way it is like the story I related before about a medicine that was prescribed for Parkinson's disease:
Recently, it was discovered that a drug prescribed for Parkinson's disease patients was causing them to go berserk and gamble their life's savings away.
It was a tragic scenario, as businessmen who had amassed over a million dollars in life's savings, suddenly became compulsive gamblers and gambled every last dime away. Once they were taken off this drug, they realized what they had done, to their horror.
It begs the question - is self-determination an illusion?   Do we think we have original thoughts and ideas, but in reality are just a bag of chemicals and predetermined outcomes?

In some ways yes, in others no.   Yes, if you affect a certain part of the brain with chemicals, disease, or other agent, your behavior will change.   But also, our brains are a programmable array of synapses and nodes which can be reprogrammed by our experiences and feedback.   But this delicate programming, of course, will be overwhelmed by physical changes to the brain - or predispositions that are strongly enforced by feedback.

So, no, you can't will your way out of Dementia.   Maybe you can bring yourself back from the brink of crazytown (it's been done).  But the real problem for most folks is that when the brain starts to go South, we aren't aware of what is going on.

For young people, this of course, will never happen.   They believe (secretly) that they will never get old and turn into the "old codgers" that are their parents and grandparents.   However, as I can personally attest, this is not a good strategy.  Old age creeps up on you and one day it is just there.   So blaming the victim is not really the answer.

And oftentimes people do this.  I see it all the time here on the island.   Wives scolding and shouting at their deaf and demented husbands, as if they intended to lose their hearing and minds and all they need is a "good talking to" and being embarrassed in front of 100 people to straighten them out.  Screaming at a deaf person won't make them less deaf.   Ridiculing a person with dementia won't make them suddenly cogent.  It is just cruel, but then again, the wife often has the same issues, perhaps at a different stage.

So, what are the answers?

We could try to shut down every Jamaican and Nigerian scammer in the world, but that simply isn't realistic.   Like whack-a-mole, another will pop up to take the place of the one you caught - presuming you can even catch people living in other countries.

We can try to raise awareness of these scams.  One problem we have with scammers is that their victims remain silent - afraid if they say anything that they will be ridiculed or institutionalized.  Family members also often remain silent, thinking that having dementia or Alzheimer's is somehow shameful.   Yes, the stigma of mental illness in the USA has hardly gone away.

We can try to structure our lives so that as we get older, there is someone - a family member or guardian - to look after us and make sure we aren't wiring $100,000 to Jamaica.    That is a really good idea, but most folks don't want to hand over control of their lives to others while they are still cogent - because they fear that family members or others may in fact steal from them (and when it comes to being scammed when you are elderly, your own family is the most likely to scam you!).

There are not a lot of options, if you are getting older, to protect yourself, other than to be poor as dirt.

For family members, it is important to have someone appointed as Guardian or Conservator, the moment you get wind that an elderly family member is involved in one of these scams.    Although this can be a difficult procedure, and the standard of proof is rather high, I would think that showing that Grandma is sending money off to Jamaica via Western Union is a sure sign she is not in her right mind and shouldn't be allowed to control the checkbook.   

It is tempting to use other, non-legal, half-assed solutions to this problem.  For example, a family decided to warn the local bank manager and have them intervene if Grandma tried to wire money to Jamaica.    Grandma simply closed the account (as was her right) and opened a new one at another bank, where no questions would be asked when she sent money overseas.   Too late - Grandma is now destitute.

Better to nip this in the bud and have someone appointed as Guardian - to control spending and prevent her from withdrawing money from her savings - than to try some half-assed solution like warning the bank manager (and hoping the bank manager is always on duty!).

That example illustrates how crafty the victims of these scams can get, once people try to steer them away from the scam.   Not only do they not believe it, they will vehemently oppose any efforts to rein them in.

Some folks will put a daughter or son or other relative as a joint owner of the primary checking account.   This might be helpful in that the son or daughter can at least monitor spending.   However, if money is wired out of investment accounts, it may be too late to retrieve it, and being a joint owner on the account really isn't going to help at that point.

No, there are really only two choices for family members - start guardianship proceedings as soon as possible, the moment you get a whiff that they are sending money overseas, or simply walk away and let the family member squander their money.

The latter may sound like harsh advice, but in many situations, the real motivation of the family members isn't to preserve Grandma's money for her own upkeep and care, but to preserve their inheritance for later on, when Granny dies.   You see, $100,000 isn't a lot of money, really.   Maybe only enough for an additional $5,000 to $10,000 in income per year.  If Grandma has to go to the home, it will all get spent by Medicaid anyway.   Odds are, she isn't living on that money, but rather on a pension and Social Security.   Yes, having that money would have made her more comfortable.   No, she isn't going to starve to death without it.

So, analyze what your real motives are, and if you are more upset that "your" money is being squandered by Grandma than the fact she is flat broke now, then maybe it is best to just walk away.  Besides, once she has sent off all the money, there is little you can do anyway.

For someone getting older, it is even harder to figure out how to protect yourself from this sort of thing, other than to structure your finances so you don't have $100,000 lying around in the bank.   It might help to get rid of landlines as you get older, and perhaps spend less time (or none) on the Internet.   Maybe blocking calls from area code 876 might be helpful as well.

But sadly, there doesn't seem to be any easy solution to this problem.   And as America ages and a huge baby-boomer population retires with hefty 401(k) balances, you will hear more and more sad stories like this.

Thursday, November 26, 2015

Sometimes.... The Good Guys Win!

On Thanksgiving, something to be thankful for!
This guy is in jail - for 20 years!

From ABC News:

A federal judge in North Dakota sentenced a Jamaican man to 20 years in prison on Tuesday for a lottery scam that authorities say cost victims around the country millions of dollars.

A jury in May convicted 26-year-old Sanjay Williams, of Montego Bay, Jamaica, of 35 counts of conspiracy, wire fraud and money laundering. U.S. District Court Judge Daniel Hovland sentenced Williams during a 2 ½ hour court appearance, during which Williams was defiant and often argumentative with the Bismarck-based judge.

Williams said the allegations against him were "fictitious" and the "jury failed to use their common sense" when convicting him.

Investigators describe Williams and Lavrick Willocks as leaders of two separate scamming operations based in Jamaica.

Frank Gasper, a Bismarck-based FBI agent, said more than 80 of the victims of Willocks and Williams have been identified and their losses are more than $5.6 million. Willocks has been charged but not extradited to the United States.

Prosecutors said the case came to light four years ago when Edna Schmeets, 86, of Harvey, North Dakota, received a call from a man who told her she had won $19 million and a new car, and needed only to pay taxes and fees. The process dragged on until the widow's savings were wiped out, a sum of more than $300,000.

A teary Schmeets told Hovland that she "lost everything" and has been "hurt not only financially but emotionally."

Schmeets said she shared her story with the judge so that others would not be taken by scammers.
"It's hard to think you could fall for this stuff," Schmeets told Hovland. "I don't know how they get you, but they do. It's almost like they hypnotize you."

Marlow McMahan, of Salt Lake City, Utah, traveled to North Dakota to see Williams sentenced "and put where he can't hurt anyone again."

McMahan, 84, did not say how much he lost in the scam, though he told the judge he was forced to borrow from banks and friends to claim a bogus multimillion dollar prize.

"I come from a time when your word was your word and when somebody tells me I won millions of dollars, I believe them," McMahan told the judge.

Assistant U.S. Attorney Clare Hochhalter, the lead prosecutor in the case, also posted on a video screen a suicide letter from a 72-year-old woman who was taken in by the scam.

In recent years, estimates by U.S. officials put the yearly take by Jamaican fraudsters at $300 million, but some American authorities suspected the total was far higher. In 2012, C. Steven Baker, a Chicago-based director with the U.S. Federal Trade Commission, told The Associated Press that Jamaica's scammers could be bilking Americans out of $1 billion a year.

Restaurants as Kitchens

Are Americans eating out more than ever?  I think so.

One of the things I harp on in this blog (and I do harp a lot) is the use of a restaurant as your kitchen.   I know a lot of people who do this - many of my friends, for example.  They eat out four or even five nights a week, eat lunch at a restaurant and sometimes even breakfast.   For some folks, eating a home-cooked meal at home is a "special treat" and eating at a restaurant is the norm.   Time was, things were the other way around.

Why is eating in restaurants all the time such a bad thing?   It is bad for your pocketbook.  It is bad for your health.  It is bad for your soul.   Let's look at these things one at a time and you'll see what I mean.   And bear in mind, I am talking about eating in restaurants all the time - as in 4-5 times a week at least.   There is nothing wrong with the occasional meal at a restaurant as a special treat or occasion.   But when restaurants replace your kitchen as your primary source of nourishment, you are on a one-way ticket to broke, fat, depression-town, with little or no hope of return.
1.  Bad for Your Pocketbook:   This is a real no-brainer, unless of course, you have no brain.   In the highly flawed movie Supersize Me, they did make one valid point - a lot of people, particularly middle-class or lower-middle-class and of course the poor, think that fast-food is a "value".  A lady and her family are shown idling their monster SUV in the driver-through window of McDonald's.   When they take her to a grocery store and she is shown a head of broccoli, her only remark is, "Well, I can buy an entire Big Mac for this much money!"
But as I illustrated in another posting, you can make meals at home for a little as 1/4 the cost of dining out.  So even a "cheap" fast food meal costs 4X what it would cost you to buy ingredients and make the same thing (only better) at home.   And with fancier restaurants, the savings are even greater.

Your food budget can be a big part of your overall budget.   The government tells us the average "household" (whatever that is) spends about $600 a month on groceries.   If you instead eat at restaurants, expect to multiply this by four times, at least.   That's a lot of money!

2.  Bad for Your Health:  As Anthony Bourdain illustrated in his book, Kitchen Confidential, the "secret ingredient" that restaurants use to make food taste better is butter and lots of it.   They put butter on steaks and they taste juicier and saltier.   But high fat and salt content isn't the half of it.   The mounds of carbohydrates in everything from the traditional (in America) "bread basket" to the mountain of fries or mashed potatoes, or rice, or pasta, or grits or whatever, drives the calorie count off the charts.

And then there is portion size.   Every restaurant serves enormous portions, trying to show "value" for your money - and most of these portions are puffed up with cheap carbs.   A typical restaurant meal is easily 1000 calories or more - sometimes far more - enough to cover more than half (and sometimes all) of your dietary requirements for the day.   You eat like this, you will fatter and unhealthy over time.

3.  Bad for Your Soul:   Eating at restaurants all the time is a sign of depression and a cause of it as well.  Being pampered is bad for your soul, ironically.  Doing things yourself and creating things is good for it.   One sure way to fight off depression is to do things, be active, and be creative.   When a monkey realizes he can alter his environment with his actions, he is less depressed.

You can spot the chronic restaurant eater as they are also chronic complainers.  It is the only thing they can do, as they are completely passive in this transaction.   Their only "action" in their lives is selecting things from a menu and then complaining about them or the service, and of course, putting it all on Yelp!

This is a natural result of being pampered and having nothing to do all day but be passive and be waited on.  When you create your own meals - when you create anything - you will be less depressed and happier.   Your brain is hard-wired to want to do things and alter the environment it is in.  When you can manipulate your environment and change it, you realize you have power over your life (to some extent) and this builds a feeling of self-worth.  (And this is why teaching "self-esteem" in school will never work - it has to be earned, not taught).

On the other hand, if you are lazy and just order your meals all the time, well, the only way you can change your environment is to complain a lot and maybe get a free meal.   It is the same with people who do nothing but shop all the time.   It is a passive act of being pampered, not an active act of creating.  Being pampered leads to depression.  Being active is the way out.

So, all that being said, are people eating out more than before?  It seems to me they are, just based on anecdotal evidence since I was a kid.  Back before 1970, there were few McDonald's in the nation, and I remember that going to one near Chicago was a "special treat" - not something we did on a daily or weekly basis.   Eating in restaurants was also very special - maybe monthly at most for us kids, maybe weekly for our parents - if that.   And our parents were fairly well off, so it was not a matter of poverty that prevented them from dining out all the time - it just wasn't done.

Since those days a lot of things have changed.  McDonald's is everywhere now, as are Burger King, Wendy's, Arby's, and a host of other fast-food chains (most of which didn't exist when I was a kid).   So-called "Casual dining" chains have sprung up and taken over the nation's strip malls.  These places simply didn't exist in 1970, other than perhaps the "Bonanza Steak House" and their ilk.

Pizza delivery, once limited to college campuses, went mainstream, with blaring ads on the television and delivery to every suburb.   And the number of chains and stores has expanded accordingly.

Now granted, some restaurant segments have shrunk during this period.   In my hometown, we had a "Chocolate Shop" just like out of Archie Comics - where you could get breakfast, lunch, or dinner, served on Syracuse or Buffalo China.   Diners and small-town "greasy spoons" largely went by the wayside, the victims of fast-food breakfasts and eating in your car.

But has restaurant spending gone up?  And has it gone up at a greater rate than the population?   According to the chart at the top, people spent about $42.5 Billion on restaurant meals in 1970.   Adjusted for inflation, this would be $259 Billion today.  And yet, today, we spend over $700 Billion on restaurant meals - more than we do on groceries for the home, according to the middle chart.

Of course, the population of the USA has increased since then, almost linearly:

If we assume around 205 million people in 1970, that comes to about $1263 in inflation-adjusted 2015 dollars per person back in 1970, spent on restaurant meals.   If we assume around 320 million people today, that number comes to $2216 per person, or a near doubling of what we spend in restaurants since 1970.  No word on whether this data includes take-out or delivery items.

Of course, our obesity epidemic can be traced to this as well - starting around the mid-1970's and increasing gradually until today.   Some blame high-fructose corn syrup.   Maybe it was all those stoners getting the munchies.   Maybe it was an increased reliance on restaurant foods.   Maybe it is a combination of all three.

The biggest growth area in recent years has been what some are calling "fast casual" foods.  These are restaurants which are not fast-food, but not really sit-down places where you will spend a lot of time.  Some are calling this the "Chipotle Effect" after the so-called "Tex-Mex" restaurant which serves burritos the size of your head.

Whatever the cause, it seems that people are eating out far more often than in previous generations, and spending a lot more money in the process, often putting these meals on a credit card and then wondering, like deer in the headlights, why years later they are broke, fat, and in debt to their eyeballs.

Now to be sure, an average of $2216 per person doesn't sound like a lot of money from your budget.  Or does it?   Again, if you have an income of $100,000 a year, after taxes, mortgage, car payments, and whatever, you may have a "disposable" income of only $10,000 or so.  If you can cut your restaurant bill to $1000 a year, well, that is a 10% increase in your disposable income.

And of course, averages can be deceiving, as they lump together the spending of the very poor with the very rich.   With most restaurant "tickets" being $50 or more (or over $100) per couple, $2216 could be reached very quickly.

And this is where it gets tricky - and people end up in trouble.   Since it seems "all your friends" are going out to T.J. McChotckey's Onion Chili Outback Neighborhood Grill (where everyone is family, doncha know!) you go with them, and put it all on a credit card.   And over time, your credit card debt load starts to ratchet up, and you can't figure out why both your credit card balance and waistline are growing.

Don't get me wrong.   Eating at a restaurant can be a fantastically great time - with good food, drink, and friends to share it with (and good service, too!).  But only a small child says, "again!  again!" as if repeating the same experience over and over again would actually enhance it, instead of detracting from it.

Only small children - and Teletubbies - find the same experience, repeated endlessly - to be satisfying.

And it seems that many folks "dining out" these days are not going out for social reasons, but merely to refuel their bodies.   Couples dine in silence, each ordering mounds of food and spending the meal on their cell phones, texting.  They take home half the meal in clamshells.  Dining alone seems to be on the rise, at least from what I can see - and others are seeing it as well.  This is not a "dining experience" this is a gas-station for your stomach.

Today is Thanksgiving.   In the past, most restaurants would be closed today, because it is a holiday, and since everyone would be at home, making Turkey or Ham or whatever, there would be no restaurant business.   But today, many restaurants are open, serving Thanksgiving feasts for people who are "too tired to cook" and don't want to go through "all that hassle" of making a meal.

And yea, for some folks, this probably is a very handy thing, particularly if you are elderly and can't even lift a Turkey, much less cook it.   But this is part and parcel of this trend of using restaurants as our kitchens.   And I am not sure it is a good thing.

* * * 

Now, when I have mentioned this topic before, some have tried to cloud the issue.   They try to argue that restaurant meals are cheaper than ones prepared at home.   This is, of course, almost never the case, unless you go to a very cheap restaurant, use a coupon or something, and then don't tip.   That is not a valid comparison.

The second argument is "opportunity cost".   The thinking is, if you are a hotshot young (attorney, doctor, IT professional, whatever) you are making X dollars an hour, and thus spending time making your own food is wasteful, as you could pay someone to make the food for you, for less money.  This same argument is used to justify hiring a maid, a lawn service, a dog-walking service, or buying or leasing a new car (so you don't waste time having it repaired, etc.).

But again, "opportunity cost" arguments make little sense in real life, as you really can't just work more hours to pay for these things - at least in most cases.

There are situations, of course, where it may make sense.  You are working on a rush project and are spending 12 hours a day at the lab or whatever.  Sending out for a meal allows the staff to work longer - but usually a smart manager pays for this.   Or you are an intern working at a hospital on a 24 hour shift (or longer, as they used to be).   You may not have a choice.

But for the rest of us mere mortals, however, it doesn't make much sense.

Another argument which is interesting is the idea that automation and mass-production should lower costs to the point where it is indeed cheaper to buy food prepared at a place that specializes in preparing food (i.e., a restaurant) just as it is cheaper to buy a car made on an assembly line at a factory than it is to rebuild one from the ground up, in your garage.

That argument would seem to have some merit, but it does seem to fall flat.   The material costs for making a meal are the same for the restaurateur and the homeowner - with the restaurateur getting only minimal discounts on the cost of foodstuffs.  He's not getting steaks and lobster tails for a dollar a pound or anything like that.   Throw in the cost of labor and the overhead of the restaurant space itself, and you have a cost that is 4X what you would pay at home.   And other items, such as liquor, wine, and beer, are usually sold at a rate 4-10X what a consumer would pay at home.   The restaurant is not a very efficient "factory" for making and serving food, not even the fast-food type.

No, I'm sorry, it just doesn't add up.   Eating in restaurants is fine and all.  When it becomes a nearly daily thing, think about where that is taking you, in terms of your diet, finances, and mental health. 

Wednesday, November 25, 2015

Riding On the Hide-A-Spare (Doughnut)

These mini "doughnut" spares are meant to take you to the nearest tire store.  Where I live, people use them as regular tires, with predictable results.  Why do they do this?  Poverty of the Spirit.

We were at a restaurant the other day - a small Irish pub that was closing down to open a new location here on our island.  The food is cheap and the beer is cold, so it is nice to go there once in a while (as opposed to four times a week, as our friends do).

We talked with the waitress and asked if she was going to move over to the new restaurant on our island and she said she was looking forward to it.  Trying to be helpful, we mentioned that there is  $6 toll to get onto the island, but if you spend $45 on an annual pass, you don't have to pay the toll.   It pays for itself in short order.

She wrinkled her brow and said, "Well, I guess I'll have to wait until next payday to buy the pass, as I don't have $45 to spend!"

This flummoxed me considerably.   If we assume they are paid bi-weekly and she is halfway through a pay cycle, she may spend $30 or more on daily passes, before she breaks down and spends $45 to buy an annual pass.  She is wasting $30 in the process because of poor cash-flow management.   I was kind of dumbstruck that a waitress making $5 to $10 per table in tips, could not budget for a $45 expense or even put it on a credit card.

And of course, I saw her pulling her smart phone out of her apron more than once to check on text messages, while we ate.   She has the money, she just chooses to spend it on other things.  Such as her tattoos, for example.  And piercings.

But where we live, the poverty of the spirit is well-imbued in the populace.   And nowhere is this more readily apparent by the number of people driving around on their doughnut spare tires!

In case you weren't aware, those "temporary" spare tires, which are common on most cars today, are good for only 50/50 usage.   They are designed to go 50 miles at no more than 50 miles per hour, tops.

If you need to use your temporary spare tire, it should be for the express purpose of driving to the nearest tire store and buying a new tire to replace your blown-out one.   No more, no less.

And speaking of blowouts, guess what the number one cause of them is?  Low tire pressure.  And yea, around here, I see a lot of cars driving around on tires that are nearly flat and will blow out within minutes of entering a freeway.   I used to try to warn the drivers of such cars, but was either met with indifference ("Yea, I gotta put air in that someday...") or outright hostility ("Mind your own fucking business!").

Funny thing, but when tire pressure went low on one of my trailer tires and someone honked and waved, I thanked them for warning me.   And I drove to the nearest Wal-Mart and bought a new tire, as the tire was nearly flat, no doubt sidewall damaged, and a new one was only $90.  Better safe than sorry.
But around here, people blow out tires with regularity.  They put the "doughnut" spare on and then drive on them for weeks at a time, passing me doing 70 on the freeway - with predictable results.  The doughnut spare blows out, and now they are stuck by the side of the road.

They miss a day's work, which cost them far more than the cost of a new tire, and now that have to call a tow truck (because they "couldn't afford" to pay $40 a year for AAA) and end up paying hundreds of dollars for a repair that could have cost as little as $75.

And then they wonder why they are "living paycheck to paycheck" all the time.   It is not poverty so much as it is poor planning and stupidity and yes, drugs are often involved, most of the time.  Almost all the time.

Poor financial planning is what makes people poor - or poorer than they need to be.   The payday loan place isn't an "answer" to your financial problems, but the cause of them.   If you are "short on cash" at the end of the week, borrowing money at 300% interest isn't going to help much - in fact, it is going to make things worse.

Yet to the poverty mindset, money is like the weather - raining down buckets on payday and dry as a drought the next week - for no apparent reason.   And because of poor planning, the poor tend to make poor choices, which in turn makes things a whole lot worse.

And I know this because I used to do stupid things like that.   I never ran on the doughnut, of course, because I have too much respect for cars, and since I always check my tire pressures, I have rarely had a blowout or even flat tire in 40 years of driving.

But I did other stupid things when I was that waitress' age.  I would run out of money before the next payday, and then bounce a check to buy beer and pretzels (and pot).   I could have made different choices, such as not buying beer and pretzels and pot.   I could have budgeted for things in my life, instead of just spending willy-nilly.    But being young and dumb (redundant) I just wrote checks until I got a phone call from the bank.  And that meant the $15 I spent on beer and pretzels cost me another $15 in bounce fees.  Eventually the bank asked me to take my business elsewhere.

Should we feel sorry for the waitress who can't "afford" a $45 parking permit, but can afford to waste $30 on daily passes?

Should we feel sorry for the person whose car is parked by the side of the road with a blown-out doughnut spare for a week (until it is towed and impounded)?  They can't "afford" to go to Wal-Mart and buy a cheap tire for $75, so they instead end up paying $250 or more with towing charges and more with lost wages.

Should you feel sorry for the 25-year-old me who bounced checks to buy beer?  Is that any different than the folks who ride around on the doughnut spare while paying a $100-a-month cable bill or smartphone bill? 

Or what about the hopped-up "hoop-de" on the side of the road, with $3000 of rented "bling rims" and a blown-out doughnut spare tire?   Do we feel sorry for them because they are poor or because they made really idiotic life choices?

This is not a  matter of being poor so much as thinking poor.   It is a matter of spreading your finances so thin (when they are thin to begin with) that there is no headroom for unexpected expenses - which are actually, to be expected over time.

It is a matter of making poor choices which in turn make you poor or poorer.

And riding around on the doughnut spare is one of these choices.   And it is a choice, too.   Regardless of whether you "don't have the money to buy a new tire right now" it was your choice not to save money for such an inevitability - or to even check tire pressures on a regular basis and avoid such a problem.

* * * 

You know, it is funny, but if I was to be hiring people today, I would ask to see their car.   If I saw it was dirty and unkept, I might be inclined not to hire that person (they are irresponsible, don't take care of things, and are sloppy - they would do the same at my place of business).

If it was hopped up with questionable "mods" like a lime-green giant wing and cheaply made bling rims, I might similarly walk away.   You have a young person who has no respect for money and is living in a dream world where their Mom's old car can be made into a Formula 1 racer, one paycheck at a time.

And if I saw the doughnut spare on the car - with most of the tread worn off - I would just run away as fast as possible.   Here is someone with a drug habit, who likely won't show up to work, on the busiest days, on more than one occasion.

It is an interesting thought.   What someone's car looks like, no matter what their income range is, can tell you a lot about the person.

Tuesday, November 24, 2015

Debt-to-Equity Ratio

Stock-Picking is for Chumps!   Sadly, our current financial system forces us all to be investors, whether we want to be or not.

I have noted time and time again that stock picking is for chumps.   I have most of my invested assets in mutual funds, and they do OK.   I have bought some stocks, and done well with some - mostly conservative blue-chip type of investments.  Stocks for companies that actually make and do things (as opposed to Internet IPOs) and generate dividends and increase in value over time.

Some other stock picks - well, not so good.   Particularly in the early days, when I would do dumb things like watch a financial channel and listen to some "guru" tell me that XYZ stock is going to go up.   And I figured that since he was just telling me (and just a few hundred million other people) this "insider" information, I would be smart to invest in that stock!

Eventually, I stopped doing that.   And I started to ask myself what stocks were all about and what made one worth more than another.   And I realized there are a lot of variables at work, in addition to all the emotional freight.   The latter is how some folks make a lot of money in the market.   Whether it is a teenage boy in suburban New Jersey hyping penny stocks on the Internet, or some Wall Street hot-shot hyping a stock and then dumping it, the effect is the same.   People are sheep, people are uneducated, people are stupid, and people are emotional and all convinced they are going to make big bucks on "the next big thing" so if you drop a hint about some stock, the plebes will go after it like mad, which in turn drives the price up, confirming to the plebes that they made a smart choice.   And then it tanks - like all bubbles do - and they lose their shirts.

That is the emotional aspect of it - or one example, anyway.   The market is full of undue exuberance and pessimism.   Stocks overshoot in price and undershoot as well.  As in any human endeavor, it is not an exact science.

But speaking of science, surely there has to be a way to rationally evaluate the value of a stock, right?   I mean, we can't be party to insider information - the introduction of a new product, or the coming reports of lower earnings, or a pending lawsuit that could cost the company millions.   That sort of thing, unless you had a time machine or inside information, is not available to us. 

But let's assume a company is running a steady-state condition.   Acme company makes widgets, and is not facing a lawsuit by disgruntled customers who find that widgets cut their fingers off.  Similarly, there is no new widget 6.0 coming out next Thursday.  The company isn't about to report a drop in earnings.   Surely, there must be a way to quantify how much this company is worth in real dollars and cents, right?

And maybe there is.  But it ain't easy.   A lot of people use various "metrics" to measure the value of a company.   The obvious things are share price and number of outstanding shares, which when multiplied together, generate this fictitious number called "Market Cap" which as I have noted before, is utter bullshit.   The problem with Market Cap is that it assumes that all shares of a company are equal in value, which they may be, in a buyout situation.   But when purchased initially, each shareholder pays a different amount and values their stock differently.  Some shares (usually the majority with an Internet IPO) belong to insiders who paid little or nothing for them.    And if you sold all those shares at once, well, the stock price would plummet.   So it really doesn't represent a realistic valuation of the company - at least in my opinion.

Things like earnings per share (EPS), dividend per share, Dividend Yield, and Price to Earnings Ratio (P/E Ratio) tell a little more of the story.   Not the whole story, but more of it. 

For example, let's assume ACME has 100,000 shares of stock outstanding at $10 each.  So the company has a "Market Cap" of a million dollars - which may be more than the plant, inventory, equipment, trade secrets, intellectual property, brand, and goodwill are worth - or possibly less.   Market Cap is just a number, and not a very accurate way to valuate anything.

Now suppose Acme earns $1 per share every year (EPS: $1) which means for every share of stock outstanding, they earn (profit) by $1.   Now, for the sake of simplicity I won't go into EBITA (Earnings before Interest , Taxes, and Amortization) which might be an interesting number to look into later on.    That number, as you might expect, will be a lot higher.   Now if earning $1 a share, Acme is pulling in  $100,000 a year in profits, which is about 10% of the company's worth, and that's not a bad performance.

Now, let's also assume the company decides to keep half that money (as retained earnings) and pay out half in dividends, or a dividend of 50 cents a share.   That would generate a dividend yield of 5%, which in this economy would be considered a pretty good dividend.   You buy a share for $10 and you earn 50 cents - in effect 5% interest on your investment.   Since the company is retaining the other half of the earnings, it is assumed the company is now worth 5% more, and the stock price should reflect this.

This also means the company has a P/E ratio of 10 (the price, $10 divided by the earnings, $1) which would be a very low P/E ratio indeed.   Generally, most folks think that a P/E ratio of around 20 or so is nice (a 5% profit) but some wags opine that with certain sectors (read: Internet Stocks), it is OK to have a P/E ratio of 100 or even 1000.

Some folks look at P/E ratio as the number of years you'd have to wait - at that rate of earnings - to make your money back on the stock.   With a P/E ratio of 10, you'd earn back your stock price in 10 years (assuming the price of the stock appreciates 5% a year and you earn 5% dividends in our Acme example).  And that would be pretty good, as most economists say an investment should double in value every 7-10 years, in a normal market.

Linked-In, last year had a P/E ratio of 2092, which means you could live as long a time as from the time of Christ until today, and still not make your money back.   For this year, they are projecting a negative P/E ratio, which of course means they are losing money.   Some stock sites don't show negative P/E ratios, but rather just a "--" meaning the company is losing money.  It depends on the site.  Not all sites report metrics the same way, as we shall see.

So anyway, our Acme Corporation seems to be doing well.  It is making a profit (which they have to pay corporate income tax on).  After all, it is churning out a regular dividend (which is taxed to you as ordinary income) and also retaining earnings which should cause the stock price to going up accordingly (which you will have to pay capital gains tax on, when you sell the stock). 

Note how the same profits are often taxed twice in the United States, once at the corporate level and again at the shareholder level.  The next time a Wall-Street protester whines to you about "Corporations not paying taxes" you might want to point this out to them (and the fact that we are one of the few industrialized countries that double-tax corporations).   But then again, save your breath.  They won't understand the concept because they are predisposed not to.   So just smile and move on.

So is Acme Corporation a good stock to buy?   Well, in addition to the "what ifs" we talked about above (the nature of the market, risk of failures or lawsuits, new products, competition, and so forth) there are other aspects as well.

For example, the management of Acme Corporation might be hollowing out the place with debt.   Management is paid in stock options which allow them to buy company stock at a fixed price, regardless of the market price later on.   So for example, Fred Mertz is the CEO of the company, and when he was hired ten years ago, he was given a stock option at $5 a share, which could be executed five years later (the terms of stock options vary based on a number of terms and who the option is being given to).   So today, Fred can exercise this option, and buy 1,000 shares of Acme for $5 and instantly double his money.  In the real world, of course, the Mertz's make millions of dollars with these options - sometimes tens of millions or more.

So Fred has a big incentive to crank up the stock price.   He has less incentive to crank up the dividend rate, other than how the dividend rate affects stock price.  And there are a number of ways he can spike the share prices.   Buying back stock, as I discussed before, is one way to hike the share price.  If there are 100,000 shares outstanding and the company buys back half of them, then each share is arguably worth twice was it was before - $20 a share.   Fred obviously would like to do this.  But how?  There isn't enough money in the kitty to make such a purchase.

Fred could borrow the money - from a bank, from investors, or by issuing corporate bonds.  He loads the company up with debt, in this case, $500,000 of Acme Corporate Bonds, and buys back half the stock.  Now companies can do this, and as I noted before, there are many ways a company can get funding to operate and buy equipment, etc.  They can issue stock, they can issue bonds, or they can borrow from banks or other lenders.

Stocks are neat in that you can issue stock and you don't have to pay back your shareholders, unless they are expecting dividends over the years.  With a loan or a bond, you have to pay back the lender or bondholder, plus interest over time.   So you can see, debt is a greater burden to a company, as it has to be paid back (just as we have to pay back our debts but we seldom think about that).

The problem with debt, for a company, is that the repayment terms are pretty inflexible.  You have to pay back the loan with X payments over Y years, including principal and interest.  With a bond, it is the same deal - you have to pay interest (in those detachable coupons of yore) and when the bond matures, you have to pay the face value back.   

With stocks, well, you pay the shareholders dividends only if you are making money.  If you hit hard times, well, you might cut the dividend or suspend it entirely.   And you never have to pay back the shareholders what they paid for their stocks, unless you decide you want to buy back stocks, and even then, only at market value, which may be less than what the shareholder paid!

Now to be sure, some companies fold over their debts over and over again into new loans or new Bonds.   They are perpetually in debt, having to borrow to buy new widget-making machines or whatnot.  And unfortunately this creates another risk for the company, as the rates at which you can borrow depend on interest rates (which today are very low, but in the past were as high as 10% or more).  The rates you pay also depend on the perceived risk, so if your company is having hard times, your lenders will ask you to pay more, and that in turn will make your hard times even harder.

For example, Fred has issued $500,000 in bonds and bought-back half the Acme stock.  The interest rate on the loan is 10%.  So every year, he has to pay $50,000 in interest, which is about half their annual earnings.  This sort of cuts into the profit picture.   Moreover, this "leveraging" of the company puts the company at risk - for insolvency and bankruptcy.   If lenders perceive that Fred is not doing a good job running Acme, they may cut off his credit lines.  Bond buyers may shy away from his C- rated junk bonds.  The cost of lending could escalate quickly - to the point where interest expenses start to become some of the largest expenses the company has every year.

Our old friend Mitt Romney was in this business.  They would buy failing rust-belt companies, like old steel mills, which had Hazmat cleanup problems (unfunded) and employee pension and health plans (underfunded) that the current owners just wanted to unload.   They would borrow money in the name of the company they were buying in order to purchase the stock - sort of a snake eating its own tail.   Then they would spin off the liabilities into smaller designed-to-fail companies and then sell off the rest and make a profit - leaving the Federal government with a Hazmat cleanup problem, and retired employees with their pensions cut in half.  And if it all blew up in their face, well, they might walk away with out a scratch, as it was someone else's money anyway.   Or, if they were the bondholders, they could end up as shareholders in reorganization - as the fellow who owned Friendly's restaurants did.   Nice work if you can get it.
And this is where Debt-to-Equity ratio comes in.  As the name implies, it is just a fraction, with the numerator the amount of debt a company has, and the denominator the amount of equity the shareholders have.   It can get a lot more complicated that that, and some folks multiply it by 100 to make it a percentage for some reason.  The link above has a more detailed description of the term.   But generally speaking, the higher the D/E ratio is, the more the company is leveraged with debt.

So, for example, at Acme, we have a debt of  $500,000 and equity (the vaunted "market cap") of $1M, so our D/E ratio is now 0.5 (or 50, if expressed as a percentage) which would be very, very low for many industries.    Of course, shareholders read annual reports (well some of them do, anyway) and they see this debt piling up on the company ledgers.   So they think, "Well, with all this debt, maybe the company is worth less" and the market value of the stock may decline.  Like anything else with stocks, it is not an exact science, and even with this "simple" example, it is hard to quantify anything with certainty.  Of course, if the stock value declines, the fraction gets larger, so the D/E goes up even more.  It can be a vicious circle.

What got me started on this was a small piece of Stock-picking I did the other day (I know, only idiots are stock pickers - I'm an idiot, first class!).   I bought some Ryder stock - not a lot, and thanks to FREE TRADES, a small investor can afford to buy a small amount of stock (e.g., on the order of $1000 to $5000) and thus not risk a lot on any one trade.   Ryder seemed like a good company with good metrics.  The P/E ratio was around 10-14, which is astonishing, and dividend yield of about 2.5% which in this economy is better than what banks are paying.  Since then, however, the stock has dropped about 20% in price, which is kind of depressing.

What is going on that is making the stock worth less (but not worthless)?   Well, although their profits are up, revenue is pretty flat, and they are cranking out dividends like clockwork, their debt-to-equity ratio has been going up during the last year.  Total debt has gone from 4.7 Billion in 2014 to 5.4 Billion in 2015, and I guess the market has noticed this.

Annual reports or quarterly reports are boring to read.   But this little tidbit explains what is going on:
Total debt as of September 30, 2015 increased by $720 million compared with year-end 2014, due to investments in vehicles to fund growth. Debt to equity as of September 30, 2015 was 279% compared with 260% at year-end 2014. Debt to equity increased due to investments to fund growth and foreign exchange impacts. Due to the increase in leverage, the Company elected to temporarily pause the anti-dilutive share repurchase program early in the year. The Company will evaluate resumption of the program in 2016. Total debt to equity was slightly above Ryder’s long-term target range of 225% to 275%; however, this metric is expected to be within the target range at year end. 

So they borrowed more money, to buy new equipment.  But that also meant they had to suspect their stock buy-back program, which was jacking up the stock price a bit.   Note how they show the Debt-to-Equity ratio here as a percentage (279%) versus the fractional value (2.79).   Not only is the D/E ratio important in evaluating a stock, but the trend of the D/E ratio as well.   If the D/E ratio is going up, that may mean more debt on the books.  It may also mean the share price has gone down, as it is a fraction.

If D/E is trending downward, it means the debt load may be going down and/or share price is going up, both of which are good news for investors.   GE, for example - everyone's favorite whipping boy - has seen its D/E ratio go from over 4.0 to about 2.2 today.   And not surprisingly, the stock has been going up in value.  Arguably this is a good trend.

So, does this mean Ryder is in trouble?  Should I dump my shares and take a loss?   Or double-down my bet and buy more?   Well, this is where stock picking becomes more like gambling.   Maybe not so much as in playing roulette, but more like picking the ponies - trying to divine from bloodlines and racing history what is going on and how is going to win.  With a very low P/E ratio, solid profits (that seem stable anyway) and new investment in hardware, some analysts are predicting that the company will prosper even further in 2016.   And perhaps also, the market has over-reacted to the drop in share price.   Some people, when they see a stock dropping, will sell, which drives the stock price even lower.

And debt can serve a purpose.   In this case, they claim the debt is being used to purchase new vehicles, and over time, these new vehicles will generate new revenue, which in turn will generate more profits and help pay down debt.   The report goes on to further state their leasing business is increasing, with deliveries of leased vehicles (that they buy) in 2016.   So perhaps this is where some of the debt is going.

I guess we'll have to wait-and-see.

By the way, the D/E ratio and its trends are not always readily visible on most financial sites.  Most site hawk the share price and its trends - as if anything could be divined about the health of a company from share price alone.   Some of the better ones show P/E ratio and Dividend Yield.   But you may have to search on "Acme D/E Ratio" to see charts of the trends.

And yes, you may have to actually read the company's quarterly and annual reports, as boring as they are.

Like I said, stock-picking is for chumps.   And it can be a painful learning experience!

Monday, November 23, 2015

How the Media Works Today - Frightening!

At one time in this country, journalism was an honorable profession.   Woodward and Bernstein investigating Watergate.  Today, journalism is all about capturing eyeballs to sell to advertisers.

Once in a while, Reddit is not just SPAM advertisements for Fallout 4 (which apparently turned out to be over-hyped - I hope the same is not true for Star Wars, but I fear it will be) or something called Rhonda Ramsey (which is a toothpaste, I think).   Every so often, they let something slip through the cracks - something that sort of illustrates how Reddit actually works.   This posting was in response to a question as to why "scientific breakthroughs" reported in the press are never followed up by real scientific progress:
"When I was a 'journo' I'd use sources like to find nice stories that I could rewrite so they were unique and then promote them on social media sites.  Eurekalert is already Buzzfeedy in its headlines, and you can tell when you read a little deeper into the article that the research was not as groundbreaking as the headline makes it appear. It might be a mouse model, it might be just a survey of 2000 people, it might be a study involving 20 people.
Then when I wrote it up, I would purposefully try to avoid anything that highlighted how meaningless the study was, and I'd try to write something even more Buzzfeedy than the actual article. AIDS cure 'around the corner', 'Study: AIDS can be cured by bananas'. If I put some of the headline in 'snatch quotes', i.e. apostrophes, or put a colon indicating that someone had said something, i.e. 'Cameron: Fuck Daesh', then I would have covered my ass from misrepresenting the topic, provided I didn't totally misrepresent it.
And I was churning out 5,000 words a day, often researching and spinning a 200-word article in 20 minutes. I would honestly just skimread the original source, I'd only actually read it to fully understand it if I was personally interested in the research. Furthermore, my understanding of complicated science is nowhere near good enough to be able to criticise a scientific study, all I'd do is 'spin' it. Churnalism, it's called.
Shockingly, one of my skills is being able to push things to the top of Google search results. Quite often, when writing something more meaty, my research would be reading whatever was at the top of Google search results, which I know full well is written by someone who's just as big a moron as me and who's just as pressed for time as me.
The internet is a tapestry of bullshit

Here's an example, in fact if I was spending 20 minutes on 200 words I would've spent 5 of them on Facebook.
See it's all full of confusing stuff but I might think 'this is the kind of thing people will read'. This doesn't comply with all the rules of news writing but it's pretty close:
Could e-cigarette users face a higher cancer risk than smokers?
Alternatives to tobacco, such as e-cigarettes, have become increasingly popular in recent years, and are much-touted for their health benefits.  However, a new study, which found that smokeless tobacco users have higher levels of carcinogens than smokers, could end any claims that alternatives to cigarettes are better for you than cigarettes themselves.
The research, which was published in Cancer Epidemiology, Biomarkers & Prevention, a journal of the American Association for Cancer Research, found people who use smokeless tobacco have higher levels of tobacco constituents cotinine, NNAL and other deadly toxins than people who exclusively smoked cigarettes.
Brian Rostron, PhD, an epidemiologist in the Center for Tobacco Products at the U.S. Food and Drug Administration, said that these biomarkers show that smokeless tobacco users face "adverse health effects, including cancer".
"Our findings demonstrate the need for continuing study of the toxic constituents of smokeless tobacco as well as their health effects on the individuals who use them," he added.
As well as e-cigarettes, other popular nicotine-replacement devices include snus, snuff and chewing tobacco.
PS it's all bullshit man, the study's about smokeless tobacco products, and I strongly assume that this means snuff and snus and chewing tobacco and that ecigs don't even count. But nobody's gonna sue me and it's the kinda thing people would share."
Scary stuff, no?   But it illustrates how "journalism" today works.  Say something catchy that captures eyeballs, generates click-through revenue, and whatnot.   You want an article that says something contrary or controversial, so that Joe Lunchbucket has something to talk about by the water cooler the next day.  "Say Bill, did you hear that those e-cigarettes are actually worse for you than regular ones?  I'm going back to filter-less Camels right away!"

In the health field, this is particularly scary, as it illustrates why most lay people will say things like, "Those scientists don't know nothing!  One day they tell us eggs are bad for you and the next day they are good for you!  Why don't they make up their minds???"

But of course, most "scientists" (nutritionists?) made up their minds a long time ago.  Too much of any one thing is bad for you.   But a lot of what gets reported gets twisted around.   Some say a high-fat diet is bad for your heart.  Somehow this gets translated into lay-speak as "low fat foods will help you lose weight"   They won't.  They can't.  Not now, not ever, and no, scientists aren't confused about this, lay people are.

Folks like to take tidbits of information - which are often distorted by the media for sensationalist purposes - and then twist them around even further.   I am sure it is a matter of time before people start to think that "gluten-free" foods are going to help them lose weight.  Just wait for it.  Oh, wait, we are already there.   Here's an article along the lines of the one written above.

And once again, we are given a headline with a question in it, and the answer is "No."   A fellow named Betteridge noted this trend and today it is called Betteridge's law:  If a title to an article has a question in it, the answer is usually "No".   As a corollary, you can save a lot of time by simply not reading such articles as they contain no useful information.

And another corollary is that articles that are titled, "You are never going to believe...." are about things that you likely will have no trouble believing.   Or titles about "incredible" things will turn out to be fairly ordinary.

To a young person today, of course, this may all seem quite normal, as this sort of "click-bait" behavior has been around for more than a decade.   But I would like to think that in the past, it wasn't as common.   And I can point to almost an exact point in my lifetime, where the change occurred.

Back in the 1960's, we had television news.   It was a 22-minute format, and all three networks (there was no Fox) put the news on at the same time, about 6:00 PM every evening and 11:00 every night.  There was no 24-hour news "cycle" or endless news reporting.  There was no Fox News.

Newspapers like the Wall Street Journal (which is now owned by Murdoch) were pretty staid and stuffy.  While conservative, they did not rely on sensationalist headlines to sell copy.   Today, the Murdoch empire owns National Geographic and this is the sort of headline they use:

The Murdoch-ization of the news.

This is not to say that Rupert Murdoch is to blame for this trend.  I saw the start of it in the late 1970's, when television started advertising television.   The first time this happened it was like, whoa, did that just really happen?   Television stations started using "teasers" to get people to watch programs later on.   And one way to get people to stay up until 11:00 for the "news" was to use a teaser like "Snow in the forecast?  Stay tuned for news at 11:00!"

But of course, they could have just said, "No snow forecast" or "30% chance of snow forecast" in the same amount of time.   But that would be responsible journalism.   They wanted to increase ratings, attract eyeballs, and then sell them to advertisers.  News departments became part of the entertainment divisions of their networks, and it all went downhill from there.

And then Fox appeared on the scene - willing to do just about any outrageous thing to get ratings.  Early television shows like "Married....with children" celebrated the breakdown of American family life.   Then Fox News would come on, and decry television shows which....celebrated the breakdown of American family life.  The irony was lost on most folks.

Somewhere along the way, from three channels and one fuzzy UHF, to 500 channels of crap, we went from providing entertainment with sponsors, to capturing and "selling eyeballs" to commercial interests (as was explained to me by a Cable TV executive).  The name of the game was to manipulate and confuse people and no matter what, get them to keep watching.   Coming up next!  Hitler's home movies!  In Color!   90 minutes later, you still haven't seen them.   That's how the History Channel works.

The Internet is just an extension of this.   Only now, we can sell people's eyeballs one click at a time.   No more relying on messy and inaccurate Nielsen ratings to see how many people bite on an ad.   You can count the suckers one at a time, and even divine their demographic information.

And this is how most people today get their '"information".   Much of it is outright faked-up data.   It makes a big splash in the press or online, but the retraction or refutation or clarification comes only days later and is never read - or read by few.   People say they are "informed" by being "plugged in" to the media, but in reality, the more they are plugged in, the less informed they are.

And this is not only sad - it is dangerous.   You need to be able to perceive reality as it really is in order to make rational decisions in life.  Act rationally in an irrational world, someone once said, and you'll end up wealthy.   But if all the data you receive in life is skewed - skewed to favor marketers and salesmen and companies trying to sell you things - how can you make rational decisions in life?

When it comes to more important national issues, how are we supposed to be able to parse out who to vote for, when sensationalism carries the day?   People put Trump at the top of the polls because he says outrageous things - things that people click on, or like to watch on television.   The media loves Trump, because love him or hate him, you'll watch - and watch the ads.   Meanwhile, the more "Presidential" candidates who are more reserved, languish in the polls, until they too, say something stupid to get in the limelight.  This is the system we have created for ourselves.

Oddly enough, as I was thinking about this, the folks at South Park created an episode (and story line) about the same thing.   Entitled "Sponsored Content", the episode explores how getting Internet news online can be a frustrating experience.  "It's as if I am chasing the news rather than reading it, clicking on one page after another...." - this struck me as particularly relevant.   The episode also illustrated how embedded content and product placement can be used to subtly influence people's perceptions, and how only a few people are able to see what is an ad and what is not.

We like to think we are sophisticated and astute.  We are not.   We like to think we have original ideas.   We don't.   We hear about things online, in the paper, on television, or from friends.   So we start to think, "Gee, maybe I need to be buying [fill in the blank]" and before we know it, we are.   Hey, there's a line around the block for the latest iPhone - better get yours now!  And be sure to obsessively use it, too!

Maybe our world was always thus.   Maybe not.   Because I remember a time when product placements were quite obvious.   The announce would say "brought to you by...." or Dinah Shore would step to one side the stage and sing the praises of the new Chevrolet.   You were aware that you were being marketed to.    When you watched Efrem Zimbalist, Jr. in "The FBI" you knew the presence of all those Ford cars was no accident, as it was plainly listed in the credits in large letters.   Today, you watch an episode of "Blue Bloods" and notice that for some reason, everyone is driving a new Nissan in this episode.   What's up with that?

There was a time when newspaper ads were clearly ads, and the word "advertisement" didn't have to appear on the pages of newspapers and magazines to let people know that the cleverly formatted "article" is just a paid ad.    But those days are long gone.  Newspapers and Magazines are dying off in droves.   Many have morphed to the Internet - taking on Internet journalism values at the same time.   Something fundamental has changed in our society, and it is not a change for the better.

Advertising has become a lot more subtle.   And the way we are steered to it is to use sensationalist headlines and eye-grabbing graphics.   Because that's the name of the game - grabbing eyeballs, one pair at a time!