Wednesday, June 30, 2021

Finances And Health

One reason I stopped posting to my weight loss blog was I realized I was posting about the same thing in both blogs.

A reader writes asking me about my weight loss blog, which I put on hiatus long ago.  Keeping up two blogs a day turned out to be too much.  To recap, we started measuring what we ate every day, and counting the resulting calories and keeping track of them in the blog.  We also started walking and bicycling every day and keeping track of that as well.  And most importantly, we started weighing ourselves every day and keeping track of that.  And not surprisingly, we lost weight, over time - about 30 pounds for me - which made us feel better.

A reader wrote that you cannot control that which you do not track.  Seems like an obvious thing, at least to an Engineer.  How can you avoid speeding in your car, if your speedometer is broken?  I guess you could go with the traffic flow, but if everyone else is speeding (which isn't atypical on most highways today) then you end up speeding, too.  And no, "broken speedometer" isn't a valid excuse to avoid a ticket.

It struck me then, that these are not similar things, but identical things in terms of how the human brain works.  With our finances, we tend to drive along without a working speedometer - or I know I did.  I would charge things I wanted on a credit card and then glance at the monthly "statement" and pay off part of the balance, never realizing how much interest I was paying.  By most accounts, about 70% of Americans do this at one time in their lives or another.   I never looked at prices much, and did just what I pleased, until the money ran out and the credit limits were reached.  But hey, no problem!  You can do a cash-out re-fi and pay off those pesky credit cards and start over again!  Financial GENIUS!

The same is true with eating.  And by the way, only in America do we complain about having too much good food and too much money to spend.  People in the third-world reading my blog must think we are a bunch of crybabies.  They're right.  But getting back to food, we go to the "fast-casual" restaurant we saw advertised on the Tee-Vee and have a heapin' helpin' of brown food - everything fried and in massive portions.  Hey, might as well have an "appetizer" of fried mayonnaise balls beforehand, right?

Once again, we are mystified as to why our lives suck. We followed the herd, why are we getting a speeding ticket (and why is our insurance so high?).  We ate "normal" portions of food - like everyone else - so why are we gaining weight?   We spent money like all our other suburban neighbors did, so why are we "living paycheck to paycheck"?    We did everything right, we did what everyone else was doing, why did it go so horribly wrong?

Oh, and where's my government bailout? Pay off my student loans! Guaranteed annual income!  Guaranteed Jobs!  Mortgage "adjustments"!  I did nothing wrong, I only did what the TeeVee said to do!  Make all the bad stuff go away and fix it all for me!  Waaaaah!

Then, I realized the common denominator in all of these (and many more) behaviors - following the herd and looking to your brain-dead "friends" for ideas as to what is "normal" behavior is a really, really bad idea.  Because most of your friends are morons - let's face it - albeit some of the nicest morons in the world, to be sure!  But their ideas of responsible eating, driving, (politics) and finances are, well, mostly coming from the TeeVee that dominates their living room - and their lives.  If the are under 40, well, it is the smart phone they pray to, rather than the living room wall-screen altar.

Giving up television and other forms of media was the first step in losing weight, getting my finances together and getting my insurance rates down.  And getting older made this a lot easier to do.  When you get older, it becomes harder and harder to over-eat.  It literally makes you feel like crap, as you are putting foreign materials into your body, whose digestive system can no longer handle masses of foreign matter.  There is a reason Grandma got so skinny - like an old cat - as she got older.  You don't see a lot of obese people over 90 years old, only the skin-and-bones kind.   They lose their appetite over time.

Similarly, you lose your appetite for dangerous driving, as your sight and hearing start to recede.  Not only that, having seen a few wrecks, been in a few (which you will, if you are an average American) and knowing people who were maimed or even killed in auto accidents, you will learn, over time, that cutting off five people by driving on the shoulder, 20MPH over the limit, so you can get to a Taco Bell ten seconds faster (no kidding, I saw this just the other day) doesn't really make much sense.   If you get a ticket doing it, even less so.  If you get into a wreck or kill a pedestrian or bicyclist..... what then?

With finances, once you reach a certain age, you realize the amount of money you will earn in life is a very finite number as well as the number of years you have left to earn that money, not to mention the number of years you have left, period.   These are all sobering thoughts.  For us, the revelation came fairly soon - at a time when we could repair (or avoid) the damage from idiotic behaviors.  For others, well, it never happens - they spend money and overeat until they keel over dead of a heart attack, while behind the wheel of their leased car.  And while that might sound like an optimal outcome to some people (no really, some think that) the reality is, such folks are bitterly unhappy for decades with that lifestyle.

The problem is our brains.  Our neural network - that is our brain - rewards us with dopamine or whatever, whenever we do something that enhances not only our survival, but that of our species.  So you have sex, and your brain rewards you with pleasure.  You eat a donut, you get this little rush of dopamine.  You buy a new shirt in the mall, you are high as a kite on the stuff.   Problem is, the rush of acquiring things, for our ancestors, was pretty much cost-free.  A mastodon hide was there for the taking, provided you killed the mastodon first.  You didn't have to put it on a VISA card and pay for it for the rest of your life.

The other problem with dopamine is that it feeds addiction.  You eat that donut and you get a dopamine hit.  So you eat a second donut.  Your brain only releases half as much dopamine this time around, as your body is satiated with food.  So you eat two donuts to get the same dopamine rush, but by then, the brain is starting to hand out the dopamine in smaller and smaller portions, plus the effect it has becomes weaker the more you are stimulated by it.   Pretty soon, you are stuffing your face, trying to re-create that initial "high" but to no avail.   This is the same thing that drives gambling, drug abuse, and other forms of addictive and compulsive behavior.   These are not similar things, they are identical things.

For example, you know, in the back of your mind, when you are being irresponsible.  If you are over-eating, you know it, and feel a little guilty, perhaps a little naughty.  Same with drinking, drugs, fast driving, and spending too much.  It leaves you feeling bad about yourself, as well as slightly bloated and worried about what you've done.  There is also the effect you see when you flop in front of the TeeVee with a big bowl of popcorn.  A few minutes later, you look down and the bowl is empty.  You ate the whole damn thing and didn't even realize you were doing it.  I called it the "conveyor belt" in my weight-loss blog, and the only way to avoid this, is to avoid situations where food portions are not portion-controlled.

If you open a jumbo "family-sized" bag of chips, odds are, you will gorge on them, mindlessly, until you realize what you have done.  Those little 100-calorie bags of chips can be a better idea, provided you don't just eat 10 of those, instead.  Not buying chips at all is the best idea, just as staying out of casinos is a good idea as well. NOT Putting yourself into situations where you will over-spend, over-consume, or engage in self-destructive behavior is the best idea.  That's why alcoholics give up drinking entirely - it is hard to "drink responsibly" when you tend to just guzzle the booze.

But getting back to weight loss, the idea of measuring food portions, exercise portions, and daily weight actually works - just as monitoring your spending, budgeting, and balancing your accounts (and paying off your credit card) daily avoided a lot of financial trouble.   But over time, old habits started to creep in.  Our "FitBits" which tracked exercise, died, one by one.  The Fitbit "Aria" scale turned out to be a piece of junk.  We stopped doing daily weight measures, we stopped measuring food portions, and we stopped measuring exercise - and gained back about half the weight we lost.   Or course, CoVid didn't help, right?  What will we blame our foibles on, now that the pandemic is over?  Have to have some other excuse, for sure.

Well, I noticed my weight was going back up, and moreover, I was starting to feel like crap.  So we went back to the old ways - daily weighing and exercise. I charted this on paper at first, but then realized my new Samsung Galaxy 7 "Active" had an exercise monitor and weight monitor in the "Samsung Health" app.  Mark got a new "Fitbit" from Huewei, so Ding Chow Ping knows all about us.  And a funny thing happened - we lost weight again!  Funny how that works, eh?

But this also illustrates how easy it is to get on and then fall off the wagon - of whatever addictive behavior that is making you unhappy (and that's all we are, I guess, a bundle of addictions).  You might get the impression - a wrong impression - that I am some sort of financial "expert" or hold myself out to be one - like Mr. Money Beard, or Financial Kung Fu Guy.   But I'm just a schmuck like you, trying to figure out this thing called "life" before it quickly comes to a conclusion - and have some fun and moreover, comfort, along the way.

We all make mistakes, and this is to be expected.  You can improve your financial condition, just as you can lose weight.  But that doesn't mean you will be perfect at it, or never make a mistake.  You will spend too much on something stupid, but at least you will realize it and regret it, and maybe program your brain for "next time" to do better.  It is akin to over-eating that extra slice of pizza and realizing, not ten minutes later, that you are bloated and just blew off all the weight loss you had for the last few days.  You just have to pick yourself up and move on.

You have to stay a little bit hungry - fiscally and physically.  We are trying to eat less, by preparing smaller portions, or if we make a lot of food, immediately putting most of it into tupperware containers and freezing it for the next day or week or whatever (which also solves the "too tired to cook, let's order a pizza!" conundrum).   I have learned - or am trying to learn - that it is OK to be a little bit hungry and just because you have a little hunger is no reason to raid the refrigerator for "just a little something".   On the other hand, I have learned to listen to my body (and mind) and realize when my blood sugar or hydration level is going low, and to eat a little something rather than starve myself until mealtime and then over-eat.

However, you can't starve yourself - that's a fat chick trick.   People try to go on radical diets and expect to lose pounds in days, which you can do, if you just become dehydrated.  Water weights eight pounds a gallon, so one easy way to lose a pound in minutes is to go pee.  It is not a effective long-term solution, however.   Fad diets just don't work, and neither do fad finances.  Those "get out of debt!" sites sell the same snake-oil as the "diet" sites with their books and weight-loss-shakes.   Again, this isn't a similar thing but an identical thing, appealing to the same parts of your brain and the same set of neuroses.

Turning around your financial situation can take time - months, years, even a decade or more.  But if you stick with it, and make not dramatic, but small, effective, and permanent changes in your life (which are far easier to do than dramatic gestures that mean nothing) you will eventually succeed.  Putting aside $5 a day (by not going to the gourmet coffee shop with your brain-dead friends every day) can put another $100,000 in your 401(k) over 30 years.  But it takes time, and as I noted before, most people (including me, at age 21) put $500 in their 401(k) and then check the balance the next day, mystified as to why they aren't millionaires already.  So they take the money out and spend it.  Duh!

Similarly, the best and most effective weight-loss strategies are not to starve yourself and then binge eat later on.   You might lose dramatic amounts of weight by starvation techniques, but the losses are never permanent and the effect on your health is awful.   You are better off - as I am still learning - to learn new behaviors - not dramatic behaviors - that improve your life.  What I have learned is that just eating a little less will result in weight maintenance, and a wee bit less than that, weight loss, over months, not days.   It is a lot easier to live with that, than some weird diet where you eat all-of-this and none-of-that or some sort of product sold to you by a company.

Similarly, it isn't all that hard to spend a little less over time.  We shop on price today, whereas in the past we went to the fancy grocery store and bought brand names and never looked at prices.  And the prices can be dramatically different.  A hambuger bun (which makes a great breakfast sandwich, btw) can be eight for 88 cents at Walmart, or $2.98 for for the same sized package at the fancy store.  Some places sell "gourmet" buns for a buck apiece.  Sure, once in a while, it is fun to try these things, but for everyday use, well, you can save a lot and by-the-way, the calorie count is a lot less with the 88-cent package than the fancy Brioche.

Being hungry is hard to do - whether it is "doing without" snack foods, or "doing without" the latest smart phone or video game or whatever.  It always amazes me, how when I talk to someone who is complaining about being broke all the time (and how it is the government's fault) that they have the new Smart Phone XXIV or the latest video game, or "did you see my new tattoo?" or whatever.  It is not that these thing are inherently evil, only that, if you want to get ahead in life, you have to learn to live without at least some of them - or seek less-expensive alternatives.

It is sad, but I know retirees who have combined pensions well over $100,000 a year but live a lifestyle that arguably is worse than mine at $30,000 a year.  They have the latest smartphone, sure - but is it any better than the four-year-old one I have?  I mean, really?    Does their leased car drive any better than my paid-for one?   And is going out to restaurants almost every night of the week and having forgettable meals really better than making really good, memorable meals at home?   I think not.  Sometimes, indeed, Less is more.  Sometimes it is better to stay hungry - and usually a helluva lot more fun.

I digress, but one way I have of reviewing a restaurant is to try to remember what I had there.  If I can't remember what I ate at a restaurant or whether it was any good, odds are, it wasn't very good.  Restaurant meals should be a treat, and memorable.  Too many people use them as a filling station for their stomach - a place to get calories.   In those terms, it is an expensive place to get calories - like paying $10 a gallon for gas.   So why bother?   You can make unmemorable meals at home for less.  But I digress.

Some of the happiest times in my life were when I had nothing or at least very little.  Low-wage jobs and a college class to go to - riding there on my bicycle on the Erie Canal towpath, taking along the lunch I made that morning.  In a way, it was freedom - free from want, and much of what causes want in America is wanting - wanting "things" like electronics, cars, restaurant meals, fancy clothes, and status items.  We buy these things until our paycheck is spent, and place ourselves in financial peril over nothing.  It is akin to becoming overweight by eating crappy food - you don't even get a good meal out of the deal!  But most Americans do this - obesity is an epidemic here.  Again, foreigners look at us and scratch their heads.  We complain about having too much.

Today, I have that same liberating feeling.  Not having debt is its own reward.  You might not realize it, but the nagging nature of debt does wear on your soul, over time.  Sure, you made the mortgage payment this month - and the car payment, and your student loan payment and, well some of the credit card bill.   But you have to do it again next month, like a trained monkey, and for how long can you pull off this stunt?  It wears on you, and I enjoy having less and having it all paid for in addition to the financial benefits of paying less taxes and paying less interest.   It is akin to the mental benefit of losing weight - you feel better physically and feel better about yourself.   But that feeling is a delayed gratification, compared to the immediate dopamine rush of the donut or leased car.

I meander.  But that is one reason I stopped doing the weight loss blog.  I realized I was blogging about the same topic, twice.  Controlling finances and controlling weight are the same thing. They take constant, long-term effort, but not dramatic or difficult effort, just small changes in behavior over time.  What most people want, instead, is instant gratification, dramatic weight loss and instant debt relief.  And I suppose liposuction and bankruptcy might provide those things, but there are far less dramatic and intrusive ways of achieving life's goals.

Saturday, June 26, 2021

Trump L'oeil - Fool The Eye (And The Brain!)

It is possible to fool all of the people, some of the time and some of the people all of the time.

We are driving through rural Georgia, and right downtown, in a small town, is a huge mural, 40 feet high, with a giant red-white-and-blue "Q" and the words, "Where we go one, we go all!" which is a totally nonsense phrase that means nothing but sounds cool to clueless people.  How can so many people be snookered by what is an obvious jape?

Turns out, it ain't hard to do.  It isn't hard to convince people, via a television advertisement, that renting-to-own furniture is a good deal, because you get all this "good stuff" now and pay later.  What could possibly be wrong with that?

It isn't hard, via the Internet, to set a young teenager off on a holy Jihad or to become a bride-of-ISIS, if they think it is cool and daring and gets them out of their "boring" life in suburbia.  With a little more persuasion, you can get them to strap on a suicide vest.  It ain't hard to do - it goes on all the time.

And it went on before.   You may recall the idiots in "Jonestown" Guyana who were dumb enough to blindly follow a "guru" even to the point of drinking poison and feeding it to their kids.  Or the Manson "family" - a little drugs and some mystic nonsense, and you've got followers.  Or remember that cult of web designers who all killed themselves, convinced an alien spacecraft was going to pick them up?  Or what about David Koresh and his wacked-out clan of followers?

The list goes on and on, and way back through history.   That is why Abraham Lincoln made that famous quote about fooling people.  And speaking of which, the belief in the "lost cause" of the South was certainly nonsense for the poor white-trash farmers who fought to preserve slavery - even though they owned no slaves of their own, and in fact, were competing against slave labor on their tenant farms.   Hmm.... Their descendants are probably the ones who put up that Q mural.

It is far easier to convince people of utter nonsense than absolute truths.   I get a lot of push-back - as so many do - when I say that a Timeshare is a rotten deal and that MLM schemes are a scam.  It is like trying to "argue" with an anti-vaxxer or a flat-earther - two of the latest manifestations of this incredible insanity that seems to be part of the human condition.

Act rationally in an irrational world has been the mantra of this blog.  You don't need to become a raging true-believer to get ahead in life, just one of the fewer and fewer remaining rational actors.  So many people I run into are convinced there is a "secret to wealth!" that they can obtain, if only they pay for it.   The idea that there is no secret, but rather just spending less than you make, paying your bills on time, and investing the surplus, is an anathema to them.   That's hard work!  There has to be an easier way!  After all, all those "other people" have so much money and never had to work for it!

It is, in a way, kind of insulting.  I recounted before a friend of mine who said, without irony, that I was "lucky" because I had money (it just fell from the sky!) while we rode around in their $50,000 leased pickup truck.  Fourteen years of night school, struggling with shitty, minimum-wage jobs, staring my own law practice, sheet-rocking an investment property at midnight, so I can go to work the next day.  It was all dumb luck, I tell you!

But a lot of people believe it - that some are "more fortunate" than others, and it has nothing to do with hard work or being smart or just not believing in utter nonsense.  And it is funny, but the common denominator of all these nonsense theories and cults and whatnot, is that they are detrimental to your own finances, mental health, and physical health.   Sitting in front of the television (or a computer) for four to six hours a day, whether it is watching "reality" shows or "the news" or a video game, isn't really helping your bottom line.  And no, don't bore me about "some guy" you know who won big on Fortenite.  Every casino has one winner - and a plethora of losers.   Casinos - another form of cult!

The image above is a Trompe L'oeil painting - a French phrase for "fool the eye."   When done well, it can be hard to tell which window is real and which is a painting.   Many people get taken in by the fake.  It struck me, thinking of this phrase, how it applies to our ex-President, who has fooled some of the people all of the time, and all of the people, some of the time, with this plaintive cries of "election fraud!" and "stop the steal!"   It is the same shit, different day.  And funny how the word "Trump" is a homophone of "Trompe" in French, which translates into "deceived."

How ironic, eh?

It is one reason why I rail against conspiracy theories in this blog - and get push-back from "true believers" who e-mail me and say, "well whatabout all the inconsistencies in the official story?"  But of course, many, if not all of those are made-up, or just irrelevant.  A typographical error isn't proof of a conspiracy, just proof that humans are error-prone.

But let's play a thought experiment here.  Suppose, for the sake of argument, that every conspiracy theory is true?  Vaccines cause autism, the world is flat, the moon landing was faked, and so on and so forth.  Highly improbably and indeed, in my mind impossible.  But let's assume this wacked-out world view was actually correct in some parallel universe.

How does that help you in funding your 401(k) or paying off your credit card debts?

The answer is, not only does it not help, it detracts.   Believing in conspiracy theories is a sign you are suffering from mental depression, and are using these theories to distract yourself from what is really going on in life - because the "real" game of life is a lot harder to play, and let's face it, you're losing badly at it.  But on the conspiracy theory website, you're a king!  And that, in short, is why people invest their lives in this Qanonsense bullshit, as their own lives are a trainwreck - heavily in debt, with no savings and no real future.  But a conspiracy gives their live meaning - a false meaning, of course, and one that will eventually come crashing down around them - until they latch onto a new conspiracy or scam the next time around.  It is no coincidence that the average Qanon person also was sucked in MLM and is likely an anti-vaxxer.   Where we go one, indeed!

The problem with Trompe L'oeil is that while the false image may look convincing  from a distance, if you try to drive into a Trome L'oeil tunnel, you will go smack-dab into a concrete wall.  Ask Wile E. Coyote about that!

It is sad, but in my own life, I have seen friends and family members fall down this Trompe L'oeil rabbit hole.  It started out innocently enough with an Eric Von Danekin book, and slowly worked its way to gun paranoia and government conspiracy theories.  Yes, drugs were involved, as well as mental health issues.  It is tragic to see, someone who you liked or even admired, slowly dissolve before your eyes, turning into a raving lunatic holding forth on the evils of the world for hours on end, while unable to hold a job (because of same).

But even if someone doesn't go from mild to wild, in the mental illness department, there are still ways to destroy, or at least degrade your life by becoming a causista while neglecting your own well-being.  No, it isn't "selfish" to fund your own retirement and pay down your debts instead of worrying about conspiracy theories or even routine politics or the "greater issues at stake!" - it is part of the unwritten social contract.  When you do good for yourself, you do good for society, by not being a burden to others and by paying into the system.  You want to improve the world?  Get a job and pay taxes - much of that money goes to help people.  Being broke and destitute just means you become one of those people the rest of us has to help - sort of defeats the whole "saving the world" concept, doesn't it?

Sadly, it seems we live in an age of unreason. But I think this, too, will pass, but not without more disruption.  Every time a new form of mass communication comes along, there is conflict and often violence, as people get riled up by these things.  The printing press put bibles in the hands of everyman - in their own language no less.  This broke the monopoly the Catholic Church had on Christianity, and it lead to centuries of warfare and death.

The radio allowed belligerent strong-men to broad-cast their messages of hate to the masses.  Hitler and Mussolini would not have succeeded as they did, without the radio and other mass-media and "propaganda" to sell themselves to ordinary people - to make their extremism seem normal.

Today, the same.  The Internet is a new form of communication and it - and the smart phone - have literally changed the way we think.  We no longer go down to the library to research things, we click on a link, and on the Internet, everything looks equally plausible, particularly to unsophisticated people or folks born after the Internet era started.  The fact that "respectable" news sites are often biased one way or another - or have eliminated reporters and fact-checkers to cut costs, doesn't help matters any.  People don't know what to believe, anymore.  And so, it is much easier for our former deceiver-in-chief to succeed in spreading lies and hate.

But just as you can spot a raw deal from 100 paces, without having to "investigate" all the details, you can spot a conspiracy theory or cult belief system - or other time-waster - just from the way it is presented.  Does whatever it is they are selling sound convenient to you? Does it ultimately detract from your life - financially, emotionally, or physically?   Pining for the end times or "guaranteed basic income" or whatever have two things in common:  they ain't gonna happen, and it doesn't really benefit you one iota to believe in either or squander your precious resources promoting them.  And yes, you time is your most precious resource.

Eventually, most people come to their senses - but as President Lincoln famously noted, not all of them.  In Germany today (and indeed, in the USA) there are a small minority of people who think "Hitler was Right!" and just misunderstood.   But the vast majority of his supporters changed their minds about him, when they saw what his policies did to their own country, not to mention what it did to others.

There will always be true believers, and years from now, there will still be Trumpers who will bore you about how Trump will rise from the grave (his death was faked, you know, like Elvis') and come back to rule us like a God - turning the entire United States into one big bankrupt casino.

Hey, it could happen!  But only if we let it.

Friday, June 25, 2021


People don't think about rebar until it is too late.

A condo building in Miami collapsed the other day in a tragic incident that may have killed as many as 100 people. And while it is too early to discover what caused the tragedy, I suspect it may have been a case of rusty rebar.  But of course, only time will tell.

When we lived in South Florida, we loved to drive down A1A in our convertible and marvel at all the high-rise apartments and condos with their colorful tropical names. But occasionally, we would see one building slathered in plywood with construction equipment all around.  We ran into one of the owners, and he told us his tale of woe - which was a cautionary tale for anyone wanting to buy real estate.  At the time, the South Florida housing bubble was in full swing, and people were paying top dollar for just about anything, and often ignoring the realities of owning a house or condo - that it is just a thing, a machine for living, that can be very expensive to repair when things go wrong.

The Romans supposedly invented concrete, or at least made good use of it.  The problem was - and is - that concrete has good strength in compression, but very little tensile strength.  If you sit on it, it is hard as a rock.  If you try to pull it apart, it snaps like rotted wood.  For centuries, people lived with this, designing concrete structures such that there was no concrete in tension.   But then rebar was invented.  It was figured out that if you put steel bars embedded in the concrete - reinforcing bar, or "rebar" - concrete could have good tensile strength.  And as a result, we could build amazing things, such as bridges, highways, and buildings out of concrete, and they wouldn't fall down.

That is to say, provided the rebar holds up.  A subway bridge collapsed recently in Mexico City due to rebar failure.  The bridge was not properly constructed and the rebar was not attached properly, or more precisely, metal "studs" welded to the beams were not attached, which weakened the structure, which collapsed.   The steel alone or the concrete alone cannot support the bridge - they have to work together.   Carlos Slim strikes again.

But getting back to South Florida, our condo owner friend explained why his condo building looked like a hurricane hit it - and why he was living in a motel room.   Turns out that the building, which was erected in the 1970's, had rebar problems.  The metal reinforcing bars in the concrete had started to rust, and this weakened the structure to the point where there was a risk of collapse.   Concrete is porous, and moisture can wick into it.  A raw concrete swimming pool would leak out all its water in a day or two - which is why such pools are lined with water-proof plaster.  High-rise buildings on the beach get a constant supply of salty spray and moisture.   If the concrete isn't painted regularly, it may wick up this moisture.  If Edna Kravetz has her hubby drill a hole in the concrete balcony so she can put up a hanging plant, it may allow moisture to come in.

Not only does rust weaken the rebar, it causes it to expand, which in turn cracks the concrete, which in turn reduces the strength of the slab down to zero - or less.  Cracks also let in more water, accelerating the process.  The weight of the slab becomes dead weight, with no structural support, and as a result, puts more load on the lower floors. 

Fixing this isn't easy.  You have to move the occupants out, in most cases, and then jackhammer the concrete to expose the rebar.  You follow the rusty rebar with your jackhammer, until you get to at least a foot long length of "clean" rust-free rebar.  So, for example, you start jackhammering on the balcony (where most of these failures are first noticed) and end up in the middle of the living room, jackhammering into the floor and into the unit below.  Peek-a-boo!  Now you see why removing the occupants is the first step in this renovation process.

So, next, you get an oxy-acetylene torch and cut away the rusty rebar and weld in new, "clean" rebar.  Then you make forms - out of plywood - which have to be propped into position, and then pour new concrete into the gap you formed by jackhammering.

It is a messy, expensive, time-consuming process that often takes far longer and costs far more than initially anticipated.  You start jackhammering and then realize the rusted rebar is far more extensive than you thought it was.

We have personal experience with this as well, with our condo, which is slated for demolition, in part, due to this problem.  About a decade ago, one of the balconies in this three-story garden apartment fell off and fortunately no one was hurt or killed.  The buildings were made of pre-cast concrete slabs, which of course have rebar in them, otherwise the the whole thing would have collapsed the day it was built.  The balconies had a cantilevered section of these pre-cast slabs, with pre-cast concrete balustrades making a wall for the balcony.

As you might guess, the rebar rusted and the weight of these concrete "railings" caused the one balcony to crack and fall down.   There was much agonizing by the residents, as no one wanted to pay for repairs.  What we ended up doing is removing the heavy concrete balustrades and replacing them with lightweight aluminum railings.  Then we got serious about dissolving the condominium and selling the place to a developer to tear down and start over.  Buildings are not forever!

What caused the rebar to rust?  Well, the concrete was unpainted, so it was porous.  But also, condo owners put plastic indoor-outdoor carpet on these balconies, which retained water.  Worse yet, people were in the habit of drilling holes in the balcony above them to put in hooks to hang their potted plants.  These holes often went into the rebar and were not sealed, and let water in.  Once the water got in, the rebar rusted, and over 20 years, it "popped" the concrete, forming cracks, which let more water in and... you can guess the rest.

Could a similar thing have happened in Miami?  I'd bet on it - or at least it is a possibility. But regardless of the actual cause, things like this are something to think about before you get all starry-eyed about owning real estate. During the South Florida Bubble, people were bidding against each other for the privilege of owning a condo in a 40-year-old building, and didn't pay too much attention to things like maintenance and such.  When they found out, a year later, that their unit would require a $50,000 "special assessment" or something, they freaked out.  When they realized their unit would become uninhabitable for a year or so, they went ballistic.   But such is the joy of owning any home.  Ask the fellow who just had his house "tented" for termites, for example.  Bad shit can happen to these expensive machines.

The problem is, of course, that no one wants to pay for repairs or even maintenance. So the Condo board votes to delay painting for a year or two, and peeling paint exposes bare concrete. Or they are aware of bulging, cracking concrete on some balconies, not realizing that, like rust on a car, it represents only about 10% of the problem - the remainder being hidden.  Investors want the condo fee low, so they can buy-and-flip units.  Retirees on "a fixed income" can't afford condo fee increases or special assessments, so they vote down maintenance and repair.  It happens - a lot.

Florida actually passed laws about this - that condo associations have to set aside a certain amount of money for major repairs such as roofs and whatnot.  It is the law!  But it is a law that is hard to enforce, as there is no agency that I am aware of, who goes through the books of the hundreds of thousands of condo associations in Florida to check that they are being administered properly.  Even if such an agency exists, I doubt they have much of a budget.  It is something to pay attention to, when buying a condo.  A low condo fee isn't always a sign of an efficiently managed condo community, but often quite the opposite.

Which is why I wrote the blog entry "Never Buy A Condo!" - because often these associations are run in a half-assed manner and there isn't much you can do about it.  And these sorts of things goes on and on.  A friend of mine in Florida, who knows nothing about construction or indeed, technology of any sort (you know the type - actually knowing something, to them, is only something plebes and tradesmen do!   They know all about the great authors!) got starry-eyed about a condo with a balcony facing the ocean. When we went to visit them, the cracks and bulges in the concrete were very, very noticeable.  One bulge was three feet long and caused your chair to wobble if you tried to sit on the balcony.   I am not sure why they bother with these balconies on high-rises - the wind is so horrific that you never sit out there and you can't leave anything out there as it will blow away.  Drive by one of these "dream" buildings and see if anyone is out on their balcony.  Chances are, they aren't.

Anyway, last time I checked, their condo association was still dilly-dallying about the situation, which could turn critical at any moment.  Let's commission another study - maybe the Engineer we hired last time, who said the building needed millions of dollars in repairs, was wrong!  And like shopping for a doctor, you can opinion-shop with structural Engineers.

But do you want to be the guy on the condo board who voted down repairs, after people have died?   I  hope that's not the case in this situation in Miami, but I suspect it may be something like that.   Like I said, time will tell.  Maybe it was something else.

Before you get all starry-eyed about real estate, though, think hard about what it really is and really means.  Right now, people are getting into bidding wars for the privilege of buying houses and condos, and not thinking about how much more money they may have to plow into an older home, just to keep it up.

On our little island, the houses are all built on a concrete slab, with the water pipes embedded in the slab.   50 years later, guess what?  You get a $1500 water bill (as happened to a friend of mine) and discover that your pipes have burst, under the house.  Gee, I wonder where all that water went?  And I wonder what it did to all that sand under the foundation?   Anyway, a few thousand dollars later and all the new pipes are run through the attic.  But of course, several walls need to be sheet-rocked and re-painted.  It is a messy business!

And yes, my house still has some pipes running through the slab.  That's why we turn off the water when we leave, and why I keep a sharp eye on the water bill.  I have already sketched out where I want to run the new water lines when the inevitable happens.  Fortunately, it seems that every sink, shower, and toilet backs up to a closet, so the destruction will at least be hidden from view and minimal.

Gee, owning a house is fun!  Why on earth do people think it is like 1000 Disney Orgasms combined?  Oh, right, because every damn politician drones on about the "American Dream of Home Ownership" which is a bastardized version of the real American Dream.

And as we see in Miami, the "Dream of Home Ownership" can turn into a nightmare in a real hurry.

UPDATE:  A recent article claims that the Miami condo was sinking into the sand from the day it was made.  So this could be a foundation issue, not a rebar issue.  Or it could be a combination of both.  But nevertheless, it illustrates how owning a condo or house is just owning a "thing" - it is not a dream or a  status symbol, or a "home" or at the very least, if you think it is, you may end up getting burned.

UPDATE:  It seems that re-bar was an issue, and that owners, not wanting to pay, delayed again and again.  Meanwhile, a building inspector said the building was "sound" (which was not his job - building inspectors do not certify buildings as "sound" but only point out defects).  So the condo owners were confused.  Why do all these repairs when the guy says it's fine?

The Re-bar in this case appears to be in an area under the pool (!!) in the parking garage.  Chlorine is a bitch and it will eat through solid steel.  Just the fumes will erode metal, which I learned firsthand, when I left my circular saw in the pump room of our pool for a week.  So leaking pool water (bad) rusted the rebar, which caused the garage to collapse, which caused the building to collapse.  Sadly, several people heard the pool collapse and called 911 but didn't evacuate the building in time.

How sad, but often tragedies like this are needed to wake people up who have been sleeping.  We have lifeboats for every passenger on a ship today, because of the Titanic.  Suppose the Titanic had missed that iceberg by a few inches and made it to New York? 

Wednesday, June 23, 2021

Bad Time To Buy - So Why Buy?

I am sure glad we bought our camper when we did.  If we hadn't, I wouldn't be buying one today!

People are sheep, that's for sure.  We all like to follow the herd, as we think it is safe and the herd knows what it is doing.  But at the center of the herd, the grass is all trampled down and pooped on, and at the trailing edge of the herd, well, really trampled down and pooped upon - and the edge of the herd is never a safe place to be.  The leading edge is just as dangerous, but the grass is a lot more lush - and no poop!

But it is a funny thing that we as species, all want to do the same things at the same time.   Right now, we are seeing staggering inflation, because of pent-up demand, and because of artificial shortages caused by an artificial labor shortage and chip shortage, all of which are inter-related and short-term.  No, there will not be a perpetual shortage of cars or trucks - not with the world's auto manufacturing capacity exceeding even the highest demand by 50-100% or perhaps more.

It's like the so-called toilet-paper shortage, which never really existed (did you run out?  Neither did I.  Those big packages from the wholesale club - that I bought before the pandemic - lasted me through the entire pandemic).  Like I said at the time, there will never be a shortage of toilet paper - or any paper product - if Georgia-Pacific has anything to say about it.   But people are sheeple.

I have several friends right now who are desperate to buy a new camper or car or truck, even though prices are through the roof and today, dealers are paying more at wholesale than what some used vehicles sold for, brand-new, just two or three years ago.  I could sell my pickup truck that I bought used, three years ago, for more than I paid for it.  It is insanity - or "temporary insanity" as they say in the law.

Given all that, why would anyone in their right mind buy a car, truck, RV, or other big-ticket item right now?   With the lumber shortage (which is apparently abating and prices are in free-fall, according to some sources) and the labor shortage, why spend tens or hundreds of thousands of dollars remodeling your house right now?

A lot of it is pent-up demand.  People have been doing without for so long and they want out of the house, a new car, a new RV, a Disney vacation, a cruise trip and they want it NOW.   My two (separate) friends who are desperate to buy a Class-B Motorhome (the kind on a Mercedes-like van chassis) have owned RVs in the past and hated it.  For some reason, they are convinced that this time it will be different, and what's more, they need to - have to - buy one right now, at top price.  And we're talking about a $100,000+ purchase. One friend has gone through four RVs already, each one being unsatisfactory to his spouse.  But this time, for sure!

OK, fine.  But why not wait until next year, when the "shortage" abates and prices drop - and many of the "CoVid Campers" who ran out to buy RVs discover that they really don't like RVing and sell these land-yachts for cheap?   I mean, in terms of strategy, you want to buy low, sell high, not buy high, sell low - right?

Same for cars and trucks and SUVs.   If dealers are paying more for a three-year-old used truck than the sticker price it sold for, new, there can't really be many bargains out there, can there?  We're talking thousands and thousands of dollars in excess charges for what is a commodity item.   Why would anyone in their right mind be buying now?   Granted, there are those who might need a car, as theirs was wrecked or stolen or caught fire.  But on the other hand, if you are merely trading-in, why not wait a year?

Oh, right, leasing.  Another reason leasing sucks - it forces you to buy and sell your car (and you are buying and selling, not "renting") at a time and place not of your choosing.  During the height of the pandemic, when car dealers were closed, they weren't accepting lease turn-ins, and lessees were being charged late fees (!!) by the car companies.  Nice Folks.   If your lease expires today, well, expect to be bent over the desk if you want to lease a new car (nice try finding one!).  Buying the car you are turning in (at the inflated residual price) may actually be a better deal - but not a good deal in any normal market.  Leasing sucks, on so many levels.

But I think there are other things driving the market.  One friend is desperate to buy an RV as they want to go on a trip this summer and forgot what happened a few summers ago, when their previous RV trip turned into disaster.   I think one factor is FOMO - fear of missing out.   This is a bubble market with bubble prices, and by this time next year, the bubble will burst, as manufacturers ramp-up production and people get tired of buying.  But my friend has this nagging feeling that maybe the bubble won't burst and they will be left behind!  If they don't buy NOW, well, maybe next year they will regret not buying!  Here, Mr. Dealer, take all my money, please!

It is the thinking that drives all bubbles.  We saw this in Ft. Lauderdale in 2005 or so.  "Buy now, before you are priced out of the market, forever and ever amen!" the Real Estate Agents all said.  And Mr. And Mrs. Homebuyer, decided to wait-and-see. But after two or three years, prices were still going up!  Maybe the naysayers were wrong - they should buy now, before prices go so high they will be renters for life!  So they wait, and wait, and wait, and then finally "pull the trigger" in 2007 or so, with a funny-money payment-optional, adjustable ARM, toxic explody-o-do mortgage guaranteed to take them out financially.  But hey, all their friends are doing it, so it must be good, right?

Classic trailing edge of the herd mentality.  It's like getting to Nome, Alaska, just as the gold rush ends, having spend your very last dime getting there and buying all shiny new mining equipment. 

Well, you know what happened to Mr. and Mrs. Homebuyer.  They lost that house to foreclosure, and if they bothered to think about it for ten minutes, would have realized that the monthly cost of buying that house was double that of renting it.  But they became so obsessed about changing their last name from "Homebuyer" to "Homeowner" so that some bitchy friend of theirs won't make snide remarks about them renting anymore.

And yes, people really think this way.

Whether inflation is here to stay or will abate is anyone's guess.  My gut reaction is that we will see more inflation, because we are printing more money.  The idea that the inflation today is high only in comparison to the low inflation of this time last year might have some merit.  The idea that the inflation due to shortages is also temporary is also sound.  But I think so long as we keep handing out free money, we will see wages rise, and that will feed the inflation monster.

That doesn't mean, though, that this idea that cars will appreciate in value will go on forever.  In the 1980's, for a few brief years (or year) you could buy a new Honda Accord and sell it the next year for more than you paid for it.  But that was a one-off anomoly.  The Honda became wildly popular around that time, and we had some inflation issues as well. The Honda people also started to raise prices - that was about the time when Japanese cars went from being "cheap" to costing more than American cars.

The Japanese realized they could raise prices, as people now perceived their cars as a greater value because they lasted longer. A whole generation has been raised thinking that Japanese cars were always more expensive than American cars.  At one time, however, they were dirt cheap - and the wily early adaptors raked the benefits of the FUD being spread by the "buy American!" set, who dismissed those early Japanese cars as "crap".

But I digress.  People said the same things about Korean cars - some still do.  I always love it when some doofus in a Buick says something like "KIA?  Doesn't that mean killed in action?  Haw Haw!"  And he's driving a 1996 Buick.   But the joke is on him, even Buicks are made in South Korea now, So howabout that?

But I digress yet again.

If prices are through the roof, why buy?   And by buying today, you only ensure that prices will go even higher.  Again - and this is fundamental - prices are not determined by taking the cost of production, labor, materials, and shipping and then adding on a "reasonable profit."   Rather, the law of supply-and-demand determines prices.  If there is a shortage of product, there is no point in putting it on sale.  In fact, you should raise the price until market equilibrium is achieved.

With every hurricane or natural disaster, some blowhard governor (are there any other kind?  Particularly in Florida?) gets on the TeeVee and promises to clamp down on "price gouging."   But of course, he never promises to go after the hoarders who are buying gallons and gallons of gas and storing it in their garage (as we saw in the DC area during the brief pipeline shutdown - leading to shortages in that panicked area only).  If you just raise prices - as cruel as it may seem - people will stop buying, or at least cut back on buying, and prices will come back down.   Trying to artificially control markets is about as effective as trying to hold back the hurricane.  There is no such thing as "black markets" - just markets.  "Black" is just a pejorative label (and maybe another example of subtle racism?  Who knows?).

We have some home improvement projects that we will need to do, but don't need to do them now, fortunately.   Our roof is getting old and will have to be replaced in a few years.  But not today - not with every roofer booked for a year out and shingles in short supply. Our dishwasher will have to be replaced, but not today - not at today's prices, anyway.  I will keep nursing it along and treat it gently and it may last a few more years.  I am not worried about "missing out" right now, or that they will stop making dishwashers.   And in fact, I can wash dishes in the sink, if I had to.

So we are making the conscious choice not to consume, now more than ever.   It never pays to buy more crap than you really need.  It pays even less to buy things during these boom times.  And we see this during even "normal" times (whatever that is anymore -  I guess when there is not a worldwide pandemic and people storming the Capitol). The cycle of car buying, for examples, goes in ups and downs.  It seems some years, everyone has to have a new car.  Then a year or two later, the car dealers are hurting for business.   If you can spoof this cycle and buy during the off-year, you can snag a bargain.   On the other hand, if you follow the herd....

Investing is the same way.  We see, over and over again, how people buy a stock or a commodity because they read about it in the newspaper (or today, online). The media reports sudden events - a major car accident, a plant explosion, a major storm. They don't report long-term or slow-moving trends.  This is why the guy who puts a gun in your face and demands your money goes to jail, while the guy who embezzles for 20 years gets away with a slap on the wrist.  We don't see long-term trends, only sudden changes.  Or at least that is all that seems to interest us.

So people hear about gold going up in price and then buy gold at the higher price.  Don't want to miss out, right?  Some tech stock goes up in price after a big product announcement, and Joe Plebe decides to buy-in after the big gains.  It is human nature, and it is one reason why buy-and-hold and "blind investing" in mutual funds, often out-performs, in the long-run, stock-picking based on the news of the day.

The real worry to me is that we are seeing and hearing all the same noises we heard in 2009 and in 1988 with regard to houses.  "Buy now before you are priced out of the market!" was the mantra of those two previous bubbles.  It is what we are hearing today.  People are just panic-buying properties.  I get phone calls and letters from individuals asking me if I want to sell or if I know anyone who wants to sell.  A friend reads the obituaries, trying to find a family who wants to unload Mom and Dad's house.

But what's worse, is we are seeing this same behavior with cars, trucks, RVs, and even lumber for chrissakes.   Buy that 2x4 before you are priced out of the market forever!    Or maybe not.  Prices are dropping, but still higher than before the pandemic.  We'll just have to see.   A lot of Trump's trade wars still need to be unwound, and recall that it was trade wars and restrictive tariffs that really made the Great Depression, great.

And sadly, tariffs are quick and easy to enact, but can take years - decades even - to remove, if they are ever removed at all.  The "Chicken Tax" from the 1960's on imported trucks is still in effect.  Ford imports vans from Turkey with windows and seats, and then at the port of Baltimore, rips the seats and windows out and shreds them, to avoid the 25% import duty on cargo vans.  It makes no freaking sense, and is wasteful.   It's been decades now, and no one in Congress has the balls to even propose removing this tariff.   When even the domestic automakers are doing an end-run on this, you have to ask yourself why.  And not one penny in tax has been collected, ever, from this tariff.

Expect it to take years, not months, for Biden to ease us away from these tariffs.  And if you think lumber is going to get even cheaper, well, you need to pay attention to the softwood lumber wars going on between the US and Canada - that have been going on for over a decade now, fought out at the International Trade Commission at 4th and D streets.

And don't let that first article confuse you - tariffs always raise prices to consumers.  When you slap a tariff on imported goods, it means that domestic suppliers can safely raise prices, as evidenced by the spike in tire prices during Obama's tire wars.  And God forbid, it Trump was re-elected in 2024 and starts the tariff wars all over again.

But hey, that's not interesting, is it?  Not the stuff of click-bait news, even if it is just right out there in the open, if people bothered to look for it.

Sunday, June 20, 2021

Hysteresis and the Fed

The Fed controls interest rates and often is too late when making corrections, or over-corrects.

The stock market is off lately, after being on a tear for so long.   The Fed is making noise about raising interest rates, which sort of will put a damper on the party for the banks, as well as the housing industry, which is on a tear due to ultra-low mortgage rates.

Traditionally, interest rates were used as a "lever" in the economy to control growth and inflation.  If the economy was lagging, the theory went, you lower the interest rates and people will borrow more money, buy stuff and invest in new businesses and then hire people and the economy will grow.  If the economy becomes over-heated - where people and corporations are borrowing too much money and inflation is taking off - you raise interest rates to slow things down.  Sort of like turning on the overhead fluorescent lights at the disco at 2AM to get everyone to leave.

Inflation is always an issue.  You want some inflation, a predictable amount, but not so much that it ruins an economy by devaluing the currency to the point where it is worthless, particularly if you are trading with other countries that use other currencies.

The problem with this theory of interest rates and inflation, is that it has been proven wrong and doesn't always apply.  In the distant past, it seemed to work pretty well, as a "cruise control" for the economy.  You set the interest rates and adjusted them to speed up or slow down the economy to maintain a steady speed.  But then the Arab oil embargo and OPEC happened, and suddenly, these ideas had no merit.

Simply stated, we realized that our economy was dependent entirely on energy (which most modern, or indeed, even ancient economies are) and over the years, "energy" came to mean oil.  We had relied on coal-fired trains and powerplants and even coil gas to light lamps in our cities.   Of course, back then, many cities were black with dust from coal fires - so much so that animals even adapted to this change.

The switch from coal to oil was inevitable, however.  Not only was oil cleaner, it didn't need armies of  firemen to shovel coal into furnaces.   You just pumped it in.  Re-fueling a coal-fired ocean liner or freighter could take days and was a horrifically messy business - and one reason, some say, ocean liners were painted black back then - to hide the messy stains that resulted.   But of course, cars needed oil to run - you can't run a car on coal, although I am sure Trump, had he been re-elected, would have fueled (sorry, pun!) research in to a coal-fired car - he's just a steampunk kind of guy.

So overnight, the cost of energy nearly doubled, and shortages ensued.   As the cost of energy was part of the cost of everything, prices for everything soared.  As one of my professors at GMI put it, to make a glass of milk, you would need to use a half-a-glass of oil, to make the fertilizers to grow the feed, to run the milking machines and lights and fans in the barns, the refrigeration to keep the milk fresh, the fuel for trucks to ship it to stores and so on and so forth.  I suspect he was not far off the mark.

Compounding this problem was that many people had "cost of living adjustments" in their wage contracts (or went on strike to get such raises) and many pensions and Social Security had such adjustments as well.   So the cost of goods goes up, the workers go on strike for more money, which in turn causes the cost of goods to go up.  It is a feedback loop, and like your drunken cousin taking the mike at your Sister's wedding, the resulting squeal is deafening.

So, the government raises interest rates - that will dampen inflation!  The idea being that people will stop borrowing money and less will be in circulation.  Hence, the theory goes, money will be worth more - it will be more dear - and people will spend less.  Retailers will have to lower prices and inflation will abate.  That's the theory, anyway.

But since the cost of energy was out of our control - and a big component of most products - manufacturers and retailers couldn't cut costs much, particularly when the employees were demanding higher wages to pay for higher-priced products.  And that is why, when you look back to the late 1970's, you see such high prices for products and such low content.

We've been watching old episodes of The Price is Right which for some reason is on YouTube.   It is interesting to see the price of a refrigerator was close to $900 back in the late 1970's - what we paid for our refrigerator back in 2008!   If you factor in inflation, that would mean that refrigerator, in the late 1970's, would cost $2500 or more today.  Pretty scary numbers!

But that was the way things were, back then, in the Good Old Days - we learned to live with less and products were pretty stripped, in terms of options and accessories.  Yes, things like air conditioning, power windows, power seats, power door locks and whatnot were available, but no one actually ordered them.  You went to your local car dealer and most of the cars on the lot had power steering and power brakes.  Who could afford more than that?   We have no idea how lucky we are today - but I digress.

Raising interest rates, of course, raised the cost of borrowing.  People didn't stop borrowing money just because interest rates went up.  If you wanted to buy a house, you had to get a mortgage.  Housing prices were fairly stagnant, but still they weren't free.   So your monthly house payment went up, and again, you demand more money from your employer to pay for it all.   Maybe housing prices didn't skyrocket during that era, but the monthly cost of owning a home, did.

So this feedback loop took off and inflation went to 10% or more.  Mortgage rates were as high as 14%. As late as 1989, we had a 11-5/8% mortgage.  Those were crazy times.   So what happened?

Well, they started lowering interest rates.  Clearly, the old mechanism wasn't working.  Raising rates didn't dampen the inflation, as inflation wasn't due to low interest rates, but due to high energy costs.  Over time, things got better as rates dropped.  And as rates dropped, people refinanced their 12% mortgages and had more money to spend and the economy took off.   Of course, this also meant that housing prices took off, too, as the monthly payment at 6% would buy a helluva lot more house.  So we had the housing bubble of 1989.  But again, I digress.

The situation we are in now is different.  Shortages of materials, often driven by shortages of labor, driven by free money handed out, is causing prices to rise.  When you have 100 F150's parked at your dealership (which was not atypical a year or so ago) you offered discounts and bargains.  When you have six (which is typical today) you sell for above manufacturer's suggested retail price.

Inflation is driven by other factors as well.  When you "print money" - that is to say, increase the money supply by borrowing - you devalue the currency.  This is what is happening in Venezuela and other third-world countries. El Presidente decides to "solve" his economic problems and pay off foreign debts by printing more money.  It never works.  The foreign debts are denoted in dollars, not Bolivars, and as a result, you are just swimming in place, when you devalue your own currency.

We've done the same thing here, borrowing huge amounts of money during the Bush years to fund his little wars, and then borrowing more during the Obama years (but not as much as he wanted to) to try to get the economy moving.  Trump took office and promised to cut back on spending and pay off the national debt (!!) and of course, wallowed in the swamp like the rest of them, borrowing even more money than Obama did in his eight years, and that's before the pandemic started.   Biden looks to want to borrow even more and more giveaway programs are suggested.

People have all this "free money" and they spend it.  Since it is unearned income, they don't spend it very carefully - and stop looking at prices.  Not only that, since all their neighbors are spending that same stimulus money, demand for products increases, which of course, increases prices - it is Ying and Yang.

The problem is, of course, that the Fed is always just a little too late when it comes to stepping on the brakes, and when they do, often they jam them on.  Rather than a nice steady cruise control, they drive like some of the old people here on the island, alternately pumping the gas and brake pedals, as if they were pedals on a bicycle.  You hear them all the time, going down the road, their engines racing, Voom! Voom! and sometimes even the brake lights pulsing like a disco.

Raising interest rates could help slow the economy and ease inflation.  But like with the energy crises, there are other actors in the equation.  The interest rate lever doesn't "work" when inflation is caused by an Arab Oil Embargo - an outside force that Fed rate can't affect.  And in our situation, raising interest rates won't "work" unless we rein-in government spending and giveaway programs.  So long as we pay people not to work, the cost of labor will continue to skyrocket, shortages will continue to exist, and prices will continue to go up.

It is not just extended unemployment which is to blame - although that is a big part of it, and some on the Left are arguing that enhanced unemployment benefits should be extended another year.  It is insanity, when there are "help wanted!" signs all over the place.   But years ago, I predicted a labor shortage could occur - because of demographics.  There are a lot of retired people today and the next generations are smaller than the retired generation.   Throw in the restrictive immigration policies of the Trump era, and we have a perfect storm.

Funny thing, though, I was driving through rural Georgia and saw an old school bus, painted green, with the sign, "Gomez Harvesting Services" on the side.  I talked to a local, and apparently, to get around ICE raids and fines for hiring undocumented workers, the farmers set up a local green-card recipient in business, where he hires undocumented aliens and then leases them out to harvest crops and do other farm labor.  The farmers are hiring a contractor and not hiring illegal immigrants and thus can feign ignorance when the immigration authorities show up.   And since the aliens aren't living on the farm, well, they are a little harder to find.  Sounds like an opportunity for those aliens to be exploited, though.

But I digress.

Yes, the Fed should raise rates.  They should have done this a year ago or more.  The stupidly low rates we had for so many years (near zero or zero) were just ridiculous.  Some countries even went to negative rates, if you can believe that.  It is not a sustainable model.   The Fed perhaps isn't like the old drivers pumping the pedals, but more like a drunk driver, weaving from one side of the road to the other, waiting until one tire is in the ditch before making a correction.

Or maybe, like the video above, like an imbalanced trailer, without enough weight on the tongue, swinging wildly from one extreme to another, with each input from the driver only making things worse.

I was in a situation like that once with our first trailer - had it up on one wheel.  All you can do is hold the steering wheel tight, apply the trailer brakes, and let up on the gas gently.  Sudden movements and attempts to counteract the sway only make things worse.   I was lucky that the sway dampened down  and we didn't roll over.

I hope our economy is as lucky!

Saturday, June 19, 2021

The Profit In Politics & Pandering


Who is behind all these political organizations which keep SPAMing me and telling me I've already joined their cause?

I noted in a very early posting that most organizations go into self-preservation mode early on, and serve the needs of the founders and employees.  There's a lot of profit in non-profit!  And in most cases, folks don't look too closely at the accounting.

PACs and other political organizations are particularly troublesome.  You donate to a PAC and some of that money goes to people working there, others goes to media companies to prepare online or television ads.  Some actually goes to candidates!  Some goes to other PACs which in turn starts the whole thing over again.  It becomes a real trip down the rabbit-hole trying to figure out what these people are doing with your money.

Today, in the e-mail, I get this latest plea.  Now, I am not picking on this particular PAC, because I have received literally dozens of such pleas in recent months, all from organizations of various names, each claiming I have "joined" their cause, and of course, each asking for yet more money.  I just used this one because it arrived today;

You're on the team! 
Welcome to Integrity First PAC! 
We’re a digital-first grassroots organization dedicated to holding Republicans in Congress accountable and supporting Democratic leaders who put their integrity first. 
You’re joining a nationwide organization with over 300,000 supporters taking action to advance a Democratic agenda. In 2020, we had major success thanks to supporters like you. Here’s what we accomplished:

Now, with Joe Biden’s administration, we’re dedicated to helping advance progress on all the critical issues of our day.

And when the GOP obstructs or attacks, we’ll be there to fight back. Thanks for joining us. Be sure to follow us on Facebook and Twitter to get in on all the action.

-- Integrity First PAC

Like I said, I am not picking on this one PAC, they just happened to be the one that e-mailed me today.  They all suck, in my opinion, as they all claim I have joined their cause, when in fact, they merely bought my name from an e-mail list, which was sold to them by Democratic candidates I contributed to.   Lesson learned - don't do that again!  Just kidding, but..... it is something to think about and something candidates should think about, too.

But why should I donate money to this pathetic PAC?  I mean, raising a million dollars isn't squat these days, particularly from 300,000 people (an average of $3.33 per person!).  And if you spelunk their financial data, it turns out a minority of this money actually went to candidates.  What's more, only one officer of the PAC is listed.  I think this guy is running the whole deal from his living room.

Weirder still, it seems that about a third of the million dollars they raised went to an internet media company, which according to their profile, is apparently staffed entirely by seventh-graders.  Or maybe everyone looks young to me these days, living as I do, on old people island.

But that is the nature of these deals.  I donate money to this PAC and where it goes, well, I have no idea.  Some goes to a media company, who draws salaries to make online ads, I guess.  And judging from the number of employees they have, a lot of salaries.  So the PAC in question acts as a "feeder" to plow money into this media company.  Build up a few dozen PACs and your media company is fully funded - or that's the way it appears, anyway.  Or it would be a good strategy.

The problem I have with this model - besides the insulting technique of congratulating me for joining a cause I have yet to join - is that they make vague promises of what they are going to do with my money.  "Integrity" they say, without irony.  Apparently, they turned Arizona blue and spent only a million bucks doing so.  I guess I should give them my money, as after all, they are very efficient with it.  Flip a whole State for a lousy million!  The NRA should take lessons from them!

Are these PACs all scams? I never said that. The people running them are no doubt politically motivated, but then again, some are drawing salaries, and the PACs are donating money to organizations which hire people who draw salaries - and often not insubstantial ones. I stopped donating money to Public Broadcasting when I realized that the CEOs of these content companies like NPR were taking home millions of dollars a year - at the expense of local public broadcasting.  They fire the local announcer for "Afternoon Classics" and pay the franchise fee for "Performance Today" - the Casey Kasem of classical music.  Public Broadcasting is no longer public, but basically a for-profit (salary) enterprise for huge media conglomerates.  These PACs - maybe more of the same thing?

If I want to donate money to a candidate, I should just send that candidate money.  PACs are fine and all for Billionaires who want to skirt the election finance laws - you can donate to a PAC all you want to (Citizens United) and they can direct money to the media companies for attack ads and whatnot.  But for the small donor like me - the guy sending in $10 or $100 or even $1000, donating directly to a campaign is probably a more efficient use of my donation.  There are fewer layers of people between me and the candidate.

I just wish the candidate didn't sell my name to these PAC mailing lists.

But this brings us to our second topic - Pandering.  Both sides of the political spectrum pander to ludicrous far-out whack-jobs with weird proposals and even weirder beliefs.  The whole Qanonsense thing is just bizarre, but it generates a lot of money for people who sell books and t-shirts and put on seminars or radio shows or whatnot.  And Republican politicians realize that it doesn't pay to denounce Qanonsense, and in fact, you are better off dog-whistling to it, so with a wink and a nod, the "true believers" know you are "one of them" and will be the first to hang Hillary when the time comes.  Send in your money!

I noted before that the worst thing you can do, as a politician, is actually solve one of these intractable problems.  If you abolish Obamacare, you have to come up with an alternative.  So instead, you cook up designed-to-fail lawsuits and laws, and then shrug your shoulders and hope the constituents forgot all about your promises by them.  But of course, by then, half the rebel-flag waving supporters in the trailer park are on Obamacare, but of course they won't admit it. "It's the Affordable Care Act!" they say.

Ditto for abortion - you want a nice festering issue that the local pastor can rail against from the pulpit.  But woe be to the politician who actually outlaws abortion and thus removes this issue from the debate.  It is akin to the gay marriage issue, which is why a conservative Supreme Court legalized it - to pull the rug out from under the Democrats (while giving Republican lawmakers cover).  Democrats, flummoxed by not having that issue to run on, move on to "transgender pronouns" which makes them look ridiculous.  Nice move SCOTUS!

So Democrats talk about "Slave Reparations" every decade, and make quite a show about "doing a study" on it, or setting up a committee to investigate it.  But they know it is a non-starter.  They can count votes in the House and Senate.  Most Americans can't - they secretly believe the President rules by fiat - and by that, I don't mean an Italian car. There simply are not enough votes for slave reparations, free college, blanket student loan forgiveness, and basic free money or whatever.  They also know that voting for these things is political suicide.  It is only if you can get the money people on board, that you can pass such things.  And banks don't profit from student loan forgiveness.

Many on the Left complain about Obamacare - preferring a "single payer" government-run insurance plan instead, such as "Medicare for All".  And who knows?  Maybe that would work.  Medicare certainly works for Seniors.  But before you jump on that bandwagon, go ask your Granddad about his "Medicare Supplemental Insurance" premiums, particularly the "Part D" for prescriptions.  They can get pretty pricey!  And if you miss the arbitrary government deadlines (just like Obamacare) you are pretty much screwed.  But the point is moot - unless you can count the votes, pining for such solutions is just pointless.

The point is - and I did have one - is that Obamacare succeeded because it was a huge handout to the insurance companies and the medical industry.  My "healthcare provider" (insurance company) pesters me to get a colonoscopy, as under Obamacare, these things are covered.  And maybe this is a good thing - encouraging people to eat right and take better care of themselves and reduce medical costs in the long run.  But in the short run, well, the premiums went through the roof.  Funny thing, but when you tell people medical care is free, they tend to seek out more of it - whether needed or not.  And I know a plethora of people who seek out sleep studies and CPAP machines but would never dream of giving up on fast food, snack cakes, or heaven forbid, drinking.  Patient, heal thyself.  But why bother when we have developed a whole new science of obesity medicine!

I digress, yet again.  But pandering to voters is an old game - saying you support (or better yet, implying you support) causes and ideas that will never come to fruition, by design - in order to get the plebes to vote for you.  Meanwhile, the bread-and-butter business of government goes on as before, with hardly anyone noticing what is going on, other than the people (and corporations, who are people too, right?) who often benefit from such actions. While we pine and protest for nonsense, the real workings of government go on, not behind closed doors, but right out in the open.

That's how you get the rebel-flag flying redneck in the trailer park to vote against his own Social Security raise or to cancel his health insurance or food stamps.  It's how you get the wealthy urban liberal to vote to increase his taxes.  You use these never-ending "window-dressing" issues to distract - like any good magician - while you do the real business, right there in the open, if anyone bothered to look.

And the media is a big help here, as they love to publish articles about these pie-in-the-sky ideas, as they generate click revenue.  No one will click on an article about pork subsidies in the latest farm bill, even if it affects them more and is actual legislation that will pass.  They will click on anything with Bernie Sanders ugly grimace on it - whether they love him or hate him.  He's the Howard Stern of Politics!

So what's the answer?  There isn't one.  And why do you keep asking me?   This sort of nonsense has been going on since time began and won't end anytime soon,, because it works so well.  On a personal level, my only suggestion is to obsess less about politics and just discard wacky ideas that have no hope of going anywhere.  This stuff doesn't profit you personally and it may, in fact, drive people away.

I know several couples on our island who lose friends over politics.  I'm still friends with them, even though the husband tries to provoke me with shit like, "Well, I saw in the paper today that your President did something stupid again...." as if I had sworn eternal loyalty to Biden by voting for him, and not just making a pragmatic decision not to vote for a clearly insane person.  Funny thing that, he never talks about the crazy crap Trump does.  Usually his wife "shushes" him, though, after he says shit like this, and I try not to rise to the bait.  But then I ask myself, why do I need friends who bait me?

Obsessing about politics is a loser's game.  Just vote and leave it at that.