Managing Our Money…

If I am known for anything here at RJsCorner is it my contrarian view of many things. Managing my money is one of them.  I know there are many blogs out their that strongly advise us to seek out financial planners to manage our money.  Supposedly they take a percentage of our assets each year in order to invest our money where it will get the highest earnings. But the quotes above and many other places paint a different picture.

Very quietly, the way that many Americans invest their money is changing. And it’s changing in a way that could upend the way Wall Street does business….

Why is passive management increasingly popular? Because research has largely confirmed Bogle’s argument that the average investor is better off just riding the market. Most active managers don’t make more money for their clients compared to index funds once fees are accounted for. And a January report from S&P pointed out that even the managers who do beat the market can’t sustain the success for long.

Source: Why are Americans suddenly so passive when managing money?

I admit that for the seventeenth year of my retirement from the corporate world I have yet to use a financial planner.  One of the reasons is cited in the quote above. In the end none of them have been able to beat the market.  Index funds don’t even try and that is where a significant portion of my assets are. But a good portion of them also reside in Treasury bonds and other less risky things.  This strategy has paid off for me in that my 401k has increased in value year after year.  It is considerably higher than it was when I first left corporate America.

I don’t have any heirs so I don’t plan on leaving any of my estate to someone else, even if I believed in such a thing which I don’t.  I think all of us should make our own way in the world instead of depending on someone else to do it for us.  I would love to be able to spend my last dime on my deathbed but since that is not possible I will leave what I have left to an organization that will use it to promote the common good in our country.

To me depending on a financial planner for my future is not where I want to go.  If they know so much about it how come they are still going to a 9-5 job?🙂

But that is just my way of thinking…

Innovation…

The main crux of this post is about whether a company can remain innovative as it ages. I want to use Sears and Amazon as study points. Being a U.S. history buff I can’t help but draw a parallel between Sears in the early 20th century and Amazon a hundred years later.  Here with the help of Wiki here is a little history of Sears:

2016-07-17_15-51-55.png Farmers did business in small rural towns. Before the Sears catalog, farmers typically bought supplies (often at high prices and on credit) from local general stores with narrow selections of goods.   Prices were negotiated, and depended on the storekeeper’s estimate of a customer’s creditworthiness. Sears took advantage of this by publishing catalogs offering customers a wider selection of products at clearly stated prices. The business grew quickly. The first Sears catalog was published in 1888.   By 1895, the company was producing a 532-page catalog. Sales were greater than $400,000 in 1893 and more than $750,000 two years later. …

In 1993, Sears terminated its famous general merchandise catalog because of sinking sales and profits…

Source: Sears – Wikipedia, the free encyclopedia

The parallels between Amazon and Sears startups are quite striking.  Jeff Bezos started the company in 1995 with the idea to sell books on-line. It quickly grew in both sales and product offerings so that today it is by far the number one retailer on-line.

2016-07-17_15-53-10.pngAccording to recent industry figures, Amazon is the leading e-retailer in the United States with more than 107 billion U.S. dollars in 2015 net sales. The majority of the company’s revenues are generated through the sale of electronics and other products, followed by media and other activities. As of the fourth quarter of 2015, the e-retailer reported more than 304 million active customer accounts worldwide. Due to Amazon’s global scope and reach, it is also considered one of the most valuable brands worldwide.

Source: Amazon – Statistics & Facts | Statista

One of the striking things about Amazon beside their explosive product line is the speed at which they deliver their products. For $79/year you can get unlimited 2 day delivery at no cost.  I must admit I am a major customer who places orders probably 30+ times a year for the last several years.

Because it wasn’t available on-line I recently ordered a drawer unit for my micro-RV remodel from Sears.  I was told that it would take 2 – 3 weeks for delivery. In Amazon time which is now the norm for me that is an outrageously long. Somewhere along the line Sears just lost their innovative edge. The Sears store in Bloomington just closed down so now I have to travel about 50 miles to pick up my cabinet.  It is either that or pay $70 to have it delivered!

I find it ironic that just as Sears was terminating their catalog sales a young Jeff Bezos was planning on starting one on-line.  For 2015 Sears revenue decreased by $6.1 billion to $25 billion while Amazon revenues were $107 billion.   I wonder what would have happened in 1993 if Sears had decided to aggressively take their catalog on-line instead of abandoning it?  I am personally convinced that on-line sales is the wave of the future.  Why do I need to get in the car, drive to a store, and lug my purchases home when all I have to do instead is just click a few buttons and in two days it appears on my doorstep.

The Real Republican Party..

2016-05-05_09-30-12.pngNow that Donald Trump is on the verge of being official face of the Republican party there are many saying that he does not represent the “real” party. I kind of think he does, or at least what is left of the party.  Over the years the GOP has gone about alienating one group after another in order to maintain party “purity”. During that time more and more people have been shedding themselves of the Republican label such that their is not much left.

The Evangelical vote, or maybe more appropriately the anti-abortion vote, has been splintering away for years now.  What is left are mainly those who willing to strip away the core foundations of their faith in order to concentrate on that one sub-agenda.  Even the term Evangelical is an easily attachable tag that doesn’t come with many qualifying conditions. Anyone can call themselves Evangelical and many now do.  The real Christians have quietly migrated into the Independent category of American politics.

Those of us who used to call ourselves Republicans because of our fiscally conservative views have watched the old GOP actually do worse than the Democrats when it comes to deficit spending and reducing the size of government.  We have watched one Republican president after another get us into wars and the resulting vast increase in military spending and want to make up the difference on the backs of the poor in our society. While we may be fiscally conservative we still maintain our firm belief in the necessity of a societal safety net.  So we have quietly migrated into the Independent category of American politics.

Those of us who believe in limited government who used to call ourselves Republicans have seen the GOP make every effort to strip the power of government beyond what is safe in order to maintain some form of civility and governance. We have watched the current GOP majority in congress strip away safeguards that keep the totally greedy among us from gobbling up the wealth of our country.  We have seen them viciously trying to take away affordable healthcare from millions of our citizens in the name of limited government.  We who believe in limited government know that there are many places that can be reigned in to reduce our deficits but the current crop of GOP have an agenda that is not compatible with finding these real savings.  So we have quietly migrated to the Independent category of American politics.

What is left after all these migrations are two fundamentally different groups. One are the people who have been left behind in the 21st century economy due to one reason or another.  They look back and see where opportunity was much easier to grab on to than it is today. They lament that it now takes more effort to join the middle class than they have been able, or maybe willing to give.  They have a mentality that if they are not doing good then they want to push everyone else down to their level. They want to basically destroy America of opportunity because they did not get their expected share.

The second group are those at the other end of the spectrum who seek power primarily at the expense of the rest of us. They don’t like rules that get in the way of accomplishing their personal agendas. For the most part they are self serving narcissists who don’t have any concern for others. They are concentrated total on themselves and their accumulation of wealth.

So here we are today with an extreme narcissist in control of a bitterly divided GOP. Given the past few decades it is hard to imagine it otherwise.

Shared Equity vs Pure Capitalism…

But, first, let’s look at an unusual way of running a business, by having your employees own the company. One popular craft brewery has made a name for itself in part by going that route, with strong results so far….

One of things that we think is a big societal issue is this widening gap between the haves and the have-nots. And we realized that we had an opportunity to support people owning something that was increasing in value. Shared equity has been an incredibly powerful engine for us….

The better I do, the better we do, and I personally take that to every day of my job, and it really does inspire us all to go above and beyond in a way that I haven’t experienced at other employers….

Source: Brewery workers pour their hearts into business when given a stake

Shared equity vs pure capitalism is a very thought provoking idea to me. Especially in the circumstances where we find that today’s capitalism returns are overwhelmingly skewed to the top 1% of our citizens. It is just not being shared by the people who are actually creating the wealth as it once was.  Will shared equity become the new capitalism in the future?  I can only hope so; it would indeed solve many of the social issues of our times.

In my day “the three legged stool” was the symbol for a successful enterprise. The three legs were Owner/Employees/Customers. Each had equal weight in corporate prosperity. If something is beneficial to all three then it was quickly implemented.  Over the years the Customer leg has been shortened. If something can be made for a penny less and the product will still last at least through its warranty period it is cost reduced. Product longevity and quality is missing from far to many capitalist institutions.

The Employee leg of the stool has been ruthlessly amputated. As profits rise they are never shared by those who generate them. In fact brutal downsizing has become the mantra. The median income for U.S. families has actually decreased significantly while profits sour.

The only leg getting attention now is the Owner or stockholder. He is the king of capitalism as shown by the massive increase in wealth of the ultra-rich in our society. It seems the only way to straighten out the three legs is to make the employees the owners. With shared equity another thing that diminishes is the constant need to grow profits. The new owners will usually be satisfied with a constant income and not be obsessed with more and more. It is obvious that many business fail because they tried to grow too fast.

Our industrial society started out as a cottage  industry. Small businesses were built based on local needs. Maybe it is time to start heading back in that direction. If you ask me “Too Big To Fail” is a formula for the implosion of capitalism. How to make shared equity once again happen is the question of the day.  The first answer is probably to force  politicians to join Bernie Sanders and Elizabeth Warren in realizing that shared equity appears to be our only viable future.

 

The case for more tax brackets

The “simplicity” argument for fewer brackets is flawed on its own terms. Figuring out what bracket your income falls into takes five minutes of paperwork and some high school arithmetic. The crushing complexity of the tax code comes before that step, when you have to actually define your income — that’s when the avalanche of loopholes, deductions, credits, and carve-outs piles atop you. Brackets aren’t the problem. Indeed, as Chang showed with a very slick interactive graphic, for the vast majority of the 20th century, the U.S. income tax code featured way more brackets than it does now.

Source: The case for more tax brackets

There are a lot of improvements waiting to be made in our national tax structure but as the source above says reducing tax brackets should be a very low priority in the work. The loop holes put into the structure over the years needs immediate changes.  It’s time to throw them all out and start over again and only add them back with a lot of restraint!  It is a simple as that… But, how to accomplish that is the gargantuan problem especially with a gridlocked congress and all the special interest groups tugging at them.

Obviously from the graph above the largest portion of loopholes have been carved out for the wealthiest among us. I would like to see this graph continued through 2015. I’m sure that the top 1% are now getting a much greater share than they even did in 2008.  That must be so since the middle class is getting less and less. I think I read somewhere that the 1% are not approaching 50% of the total income.

It is interesting to see that the accumulated wealth of the top 1% is now greater than it was just prior to the Great Depression of 1929. I wonder if this is a harbinger of things to come?

I know there are a variety of different approaches to simplifying our tax code. I just hope that whoever finally manages to accomplish this gargantuan feat has the wisdom to do it correctly and to not put in increased burden on those who are struggling the most.

 

Death of the American middle class??

2015-12-30_11-02-50.pngBut maybe the “death of the middle class” conclusion isn’t obvious at all. And perhaps there is more to the Donald Trump phenomenon. Yes, the modern left instinctively sees such studies as further confirmation that inequality is the nation’s premier economic challenge. Much of the media agrees. The rich are gobbling up more and more of the economy’s bounty, leaving less for everyone else. Case closed.

The Pew results are more complex and nuanced than that, however. One reason the middle class — say, three-person households making between $42,000 to $126,000 annually — share is declining is that the upper class is expanding. Back in 1971, 14 percent of households were upper class, and 61 percent were middle class. Today it’s 21 percent upper, 50 percent middle….

Now, none of this is to downplay the particular economic strain on lower-income Americans, especially those without a college degree. There is evidence that real wages for male workers without college degrees have been stagnant or falling for decades. And those are Trump’s biggest supporters. But the billionaire is competitive even among the better educated. When growth goes away or even recedes a bit, bad things happen to the American psyche.  Now combine that with fears college is becoming more necessary and more unaffordable in a time of expanding automation. The emergence of Trump or some populist like him seems inevitable.

SOURCE:  The American middle class is doing better than you think.

This is a very interesting Pew study that kind of confirms what I have thought all along. That is that there are still plenty of households who have more than enough discretionary spending to keep the economy going. If there wasn’t then who are the targets for all the extravagance shown by most cable TV shows.

If you are to believe what you see on TV then all of us should be striving or at least dreaming of backyards filled with fire pits, outside dining and living areas and covered with expensive slate. If there is no discretionary spending left then who are all these people? After all a billionaire only needs so many fire pits.

I have to admit that when I was making close to a six figure income I didn’t consider myself well off. Maybe that was because of my continuing penny pinching from my poorer years. I just couldn’t see constantly spending more and more.  When I retired in 2000 we bought a 1928 farmhouse that had gone through a couple of badly done rehabs. We spent about 70% of the original purchase price in renovations. Since that time our only expenses have been repairs. We are satisfied with the way things are and don’t have much desire for all the latest “improvement” so many say we must have.

Getting back to the original thoughts here, yes the middle class is definitely shrinking but still, as shown above, it accounts for half of all American families. Only about 20% of us really worry if we can put food on the nightly table but that is 20% too many. Then there is that 1% whose power has grown exponentially and have more money than they could ever spend but still savagely seek more and more.  And they are getting it thanks to decreases in taxes beyond sanity…

Were We Wrong??

From the title it is hard to determine where this post is going. We can be wrong about almost anything in this life and there seems to always be someone around to alert us of that fact. If we get something set in our minds that just isn’t true then we are the worst kind of wrong. But… that is not where this post is going.🙂

2015-12-27_12-48-23.pngFinally, here is the full question,  were we wrong to separate from mother England, especially through  violence?

Looking back with hindsight it is always easy to judge the past by today’s criteria.  I will try not to do that but will use the wisdom of what came next to speculate how we might be different if we had not collectively made the decision we did.

It seems that the primary reason for our revolt against the mother country was money.  We simply didn’t like being taxed, especially since we had no say in where those taxes would come from. Of course the other primary reason was probably the arrogance of a king and the nobles who depended on him for their lifestyles.  They saw America as a source for income and not much else. When that income started dwindling they just raised taxes even more.

Was this reason enough to go to war over? Like most wars our revolution was an ongoing thing. One thing led to another. The Boston massacre might have started it but then a tit for tat scrimmages escalated it.  Initially there was little thought of becoming an independent nation. We simply wanted to keep more of our income to ourselves instead of shipping it off to people we knew little about.

Even when the war became official with our “Declaration of Independence” barely half of us agreed with that document. Raising an army to go against the toughest in the world was by no means a sure thing.  But soon the you kill us and we will kill you mentality took over.

In the overall scheme of the world we are still a relatively new country. Less than three hundred years of existence where many are ten times that old.  Most countries have little or no idea about how they came about because they seem to have been always there.

What would have happened if we had not rebelled? A likely scenario would be Canada. Yes, they are independent of their mother country but did so by peaceful means about a hundred years later than us.

On my visits to our northern neighbors I have realized a basic difference between us and them. They, for the most part are much less belligerent than we are. They spend on the military about the same percentage as the rest of the world whereas we spend almost a hundred times more.  Is part of this aggressiveness on our part associated with our founding? Is our obsession with guns and the NRA part of it too?

Canada, who for the most part have the same lineage as us took a very different track to world affairs. Would we be more like them if we had not rushed to war in 1776?  That is an idea certainly interesting to ponder…

 

Clinton-Bush Fatique

2015-03-10_08-45-45Have you ever felt as if a mysterious black cloud of despair was rising from the great depths of the universe? That it was cresting over the horizons of your life, blotting out all sunlight as it closes in and paralyzes you in fear? And maybe you felt that this slow-motion tsunami of dread was a deserved punishment for you personally, and humanity in general. And you realized, as I have, that this unstoppable, groaning wave was a natural outgrowth of your own moral torpor — the listlessness you had demonstrated over and over again, allowing injustices, petty cruelties, and incompetence to extend their reign over everything you loved, until finally it crashed on you, plunging you into a darkness beyond the reach of light, hope, and redemption…. The inevitable Bush-Clinton presidential campaign is gathering itself along the horizon. It will be a boring, substance-less grind that turns on just which candidate’s operation can direct slightly more of the public’s disgust over the worst parts of the last two decades at the other candidate.

SOURCE:  Why a Clinton-Bush presidential race fills me with nothing but despair.

I remember a time, way back thirty years ago before President Reagan when there was not Clinton or Bush on the national scene. But for the last almost twenty years those two families seem to have dominated the news and as a result I have severe Clinton-Bush Fatigue. I am simply totally exhausted with all the vitriol ranting that has taken place in our country since these two families have been battling for the supreme Monarchy of the USA.  About two-hundred and fifty years ago we went to war to rid ourselves of a monarch and as far as I am concerned I don’t want to return to that state.

There is so much baggage surrounding these names that if they are nominated by the parties it will surely be the most dirty mud-slinging presidential election in our history. To me it would come down to which would cause the least harm to our country and right now that is probably a close call. Our country needs to get away from all this hatred surrounding us lately and Bush and Clinton are the source for much of it.  Surely the two parties can at least give us voters an alternative to these two but given that money pretty much controls all of our political processes now who becomes the candidates will probably be a done deal before we have our say.

Sadly because we have made running for public office such a rancid experience I’m not sure that any really qualified candidate can make it anymore or even want to make it for that matter. We are just stuck with the ones we get (sigh)… I hope not…

2015-03-10_08-53-13   2015-03-10_13-12-34

America’s broken promise

2014-11-16_08-44-26All that lovely wealth isn’t trickling down. The country’s median income hit a high of $56,080 in 1999, went into slow decline, dropped to $53,644 after the 2008 economic meltdown — and five years later, was lower still, at $52,100. Raises remain tiny. Many newly created jobs pay a pittance. For tens of millions of people, the economic recovery is an illusion. The voters are right: Wage stagnation — and the resulting erosion of the middle class — is this country’s biggest problem. When hard work no longer produces upward mobility for workers who lack elite skills, America’s implicit promise is broken. At National Review, conservative Maggie Gallagher complains that “for more than a decade Americans have been losing ground financially, and the GOP has yet to address the issue.” In The Washington Post, liberal Harold Meyerson grouses that “the Democrats have had precious little to say about how to re-create…widely shared prosperity.” Perhaps that’s because the standard liberal and conservative nostrums (Tax the rich! Eliminate regulations!) won’t address the fundamental problem: Globalization and technology have devalued both labor and workers, and made companies more ruthlessly competitive. Here’s a scary thought: Neither party is offering a remedy because there isn’t one. SOURCE:  America’s broken promise – The Week.

The two hundred words above from my friends over at the Week seem to cut to the bone as the primary reason so many people are upset about how this country is proceeding.  The guy/gal who gets up every morning and puts in an eight to ten hour day working for someone else is falling further and further behind. So many people have seen their paychecks and any benefits they might have had go down for the last fifteen years while all those “rich cats” continue to rake in vulgar profits on their unearned income.  There seems to be a fundamental breakdown in our society.

As the article states this is a problem that can’t seem to be addressed by the old methods even if the GOP allowed them to happen. Democrats can’t throw enough money at this problem to make it go away and the Republican’s trickle down obviously after fifteen years is not got to happen. I will admit that globalization has a lot to do with this dilemma. So much of the rest of the world is in much worse shape economically than we are. It will be years, probably generations, before that is balanced. The old solutions just don’t work anymore.

New approaches to strengthening the large middle segment of wage earners is drastically needed. The problem is neither party in Washington seems capable of any degree of new thought. They are too busy blaming each other to find new pathways to overall prosperity. Somethings got to give sooner or later.

For all the problems that the middle have those on the margins of our society have it worse. The unemployment rate for them is astronomical. The safety net continues to erode so little or no help is seen on the horizon. Somethings got to give and I am afraid that when it does it will have some serious consequences for all of us.

Common Sense…..

2014-07-25_08-48-31Call them the invisible rich. How do they do it? Sure, money like that sometimes comes from an inheritance or another fortuitous break, but more likely it’s the result of diligence, smart choices and, well, deferred gratification. SOURCE: Wealth-building secrets of the millionaire next door – Yahoo Finance.

Wealth-building secrets of the millionaire next door

It seems like there are thousands of articles and books lately to tell you how to become rich. But do any of them actually have anything unique to say? I am not going to go into the details about the above article other than to give you the topic titles.

* They Don’t Spend Beyond Their Means

* They Educate Themselves

* They Pick the Right Field

* They Save (and Invest) Early

* They Don’t Swing for the Fences

* They Keep Themselves Covered

* They’re Wise About Windfalls

* They Hang Onto Their Cars (and Houses)

* They Avoid Debt

To this old Midwestern boy all these things just seem like common sense. Sure some like picking the right field are more luck than anything, but most are achievable by most of us if we just stick to it.  I really don’t know what keeping myself covered has to do with anything but I figure I must have done a good job at it since I am pretty well covered today.🙂

Never had a windfall except for the new fishing reel I got as a young boy from my grandfathers estate. Now I am not a millionaire but I think I do have enough to keep me going for the final years of my life. But to me the point of life is not financial wealth building (easy for someone to say who has enough) but more along the lines of morality building and trying to treat the other guy with respect whether he deserves it or not.

But given the statistics lately it seems that most just can’t seem to live by the standards above. Maybe they should be teaching more about that in our school systems? I don’t know about wealth-building but I think I have done a pretty fair job of paying forward for all the good fortune I have had in my life. I might have had it tough in some regards, losing my mother in early life and losing hearing at mid-life was no joyride, but I had it a lot easier than many folks I came across in life….

 

Buying a Thousand Pillows…

Two colorful pillows over whiteYeah. So it is true that rich people can spend more money than middle class people, but there’s this upper limit on what we can spend. I drive a very nice car, but it’s only one car. I don’t own a thousand, even though I earn a thousand times the median wage. I have a few jackets, not a few thousand. My family can afford to go out to eat more than most American families, but not more than three times a day. We can’t go out 3,000 times a day. So if you concentrate wealth in the hands of a very few people, you break down this feedback loop between customers and businesses. My family, among other businesses, owns a pillow company, and the pillow business is tough because fewer and fewer people can afford to buy pillows. Again, I may earn a thousand times the median wage, but I don’t sleep on a thousand pillows. You need everyone to be able to afford a pillow every year in order to have a successful pillow business, and concentrating wealth at the top essentially creates a death spiral of falling demand. SOURCE: Why capitalism has nothing to do with supply and demand | Making Sen$e | PBS NewsHour.

To me it just seems common sense that if you want an economy to thrive you put money in the hands of people who will spend it. Putting it in the hands of those who will simply stash it away with an already absurd bank account does nothing for the good of the country or its citizens.

Trickle down is still the mantra of many in the GOP, especially Mr. Ryan. If they get their way all social services would cease to exist and everyone would be left to themselves. Ayn Rand, who is Mr. Ryan’s hero, believed that altruism, that is caring for humanity, is a weakness and not a strength and it needs to be driven out of any truly successful society. That mentality seems to permeate those who are at the very conservative margins of our country now days.

It seems there are basically two distinctively different types of people in the U.S. There are those who love and care about everyone at least on some level and this  includes people they don’t know. Then sadly there are those who care seemingly only care about themselves and maybe their immediate families. Everyone else is to be feared on some level or simply of no or little consequence to them.

Trickle down does not nor has it ever worked. Raising the minimum wage and giving workers their fair share of the rewards benefits everyone, even those who believe in trickle down.

Why???

2014-09-15_20-26-03I have a question for my Republican friends. Yes, that sounds like the setup for a smackdown, but though the question is pointed, it is also in earnest. I’d seriously like to know: If Republican fiscal policies really are the key to prosperity, if the GOP formula of low taxes and little regulation really does unleash economic growth, then why has the country fared better under Democratic presidents than Republican ones and why are red states the poorest states in the country?… Yet, every election season the party nevertheless makes those claims. It will surely do so again this fall. So it seems fair to ask: Where are the numbers that support the assertion? Why is Texas only middling in terms of per capita income? Why is Mississippi not a roaring engine of economic growth? How are liberal Connecticut and Massachusetts doing so well?… It seems to suggest Republican claims are, at best, overblown. If that’s not the case, I’d appreciate it if some Republican would explain why. Otherwise, I have another earnest, but pointed question for my Democratic friends: How in the world do they get away with this? SOURCE:  If GOP is right, why are red states so far behind? – Leonard Pitts – Newsday.

Why is probably my favorite word in the English language. Everyone should use it many times a day. If we don’t questions things in our lives then we leave the door open for others to determine how we live.

Why do we let others, particularly the politicians, say almost anything they want without questions? The above example is a biggie for me. If the Republican mantra of low taxes, no regulation, and small or maybe no government at all is the answer then why are so many of the red States so poor. With their iron-fisted control of their State governments why are so many “liberal” States so much better off then the red ones?

Theoretically it is possible to replace over 85% of our representative in congress in the coming months. So, if as the polls suggest, we are all so disgusted with those folks why will we return the vast majority of them to a job that they seem utterly unqualified for?

Are we just too lazy to take the necessary actions to turn our totally dysfunctional government around?  What we have to do is really not that difficult; just a couple of button pushes in early November. Out with the old and in with the new. The new couldn’t be any worse so why not give it a try?  Why??

One final question I have is why is my home State of Indiana a red one when all our surrounding neighbors are so blue? For the life of me I can’t figure that one out.🙂

 

The Worst President Ever….

I laughed out loud. Couldn’t help it; I had just overheard Mr. Newport Beach say something about how Obamacare is an unmitigated disaster despite how, of course, it’s not, and if America were to somehow actually develop a health care system similar to, say, Canada’s, that would be the end of America for certain; we’d never recover from such a devastating blow. Or something. And then came the [president is the] “worst thing to ever happen” quip, and I couldn’t hold back They didn’t hear me, of course; the orgasmic thrum of their perfect lives drowned out my chuckle, and as I turned and looked at this beautifully entitled, happy crew from my vantage point only a few feet away but a million light years in perspective, we all shared one of the most spectacular, envied locales in the world and all of us sipped superb regional grape and not a single one of us suffered the slightest personal, social or economic indignity, every first-world need instantly met, every crab cake perfectly formed, the sunshine as flawless as Jesus on toast and no lines at the restroom and lots of free parking for his Lexus SUV…..

Even so, I desperately wanted to ask Mr. Newport Beach what his stock portfolio looked like a mere six or seven years ago, when Bush & Co. ravaged the country and led us into one of the deepest, most brutal social and economic pits in modern history. Did he lose half his net worth? More? Was he worried he couldn’t feed his family or pay his mortgage? Did he lose his house? His job? Did he blame Bush? Clinton? Islam? The gays? And by the way, how does he like the recovery so far? Which of his three perfect, multimillion-dollar homes was he on his way to, right now? I also wanted to know, when Bush/Cheney lied to the world, openly violated the tragedy of 9/11 and invaded Iraq, killing tens of thousands, was he furious? What about now, when even Fox News is calling out Cheney and declaring Iraq invasion a colossal mistake, a lie from which we’re still unable to extricate ourselves?

SOURCE:  The Best Worst President Ever | Mark Morford.

Mark Morford has become an instant hero of mine. This post says almost exactly how I feel about those rich guys who are so much against making healthcare a right instead of a privilege for all America’s citizens. I agree exactly with his amazement of calling our current president the worst ever while he is benefiting from all the massive recovery, at least for those who own a lot of stocks, that has occurred under this president.

I agree completely that it totally confuses me how this rich guy can completely ignore the disastrous condition that the previous president left the country in after eight years in office and how he put us in a $trillion+ off the books wars that the current president had to dig his way out of.  Compared to his predecessor the current president deserves  top three status in the presidential list.  How can this rich jerk even swallow the vitriol words that spews from his mouth.

But then I have to step back and recognize that this rich guy probably doesn’t represent most in his financial category. Or at least I hope he doesn’t? The hypocrisy of this rich guys words strike me as being one of the root causes for the trouble this country still has.  Thanks Mark for getting the words just right…..

Personal Finance Classes???

Americans tend to score poorly on financial literacy tests, but it’s not entirely their fault: School systems don’t generally require personal finance classes, and many parents feel ill-equipped to pass on big lessons about spending, saving and investing to their kids. Here are ten basic tenants you should know in order to navigate today’s financial world: You have to earn more than you spend. SOURCE: 10 Things Everyone Should Know About Money – Yahoo News.

When I was in high school many decades ago we had various life skills courses that we were expected to take.  I don’t specifically remember a course on home finance but I do remembers some lessons about that subject. Credit cards were not very available to the masses back then so if you didn’t have the money you didn’t buy the item.

But I do remember that when I graduated college at least a half-dozen credit cards were automatically sent to me in the mail. They didn’t need permission to give you a credit card as they do today. I have always been a pretty frugal guy so I didn’t see a need for them. They usually ended up in a drawer someplace.

Now days it seems that every institution has its own credit card and who can blame them.  Most of the items that we buy today have a low profit margin, while credit cards charge an outrageous interest rate. The money you might manage to save gets you less than 1% interest and  credit cards are at 10- 20% interest!  That was called usury in my day and it was illegal. I don’t know when that changed.

Getting back to the subject of this post I can understand how kids today are ill-equipped when it comes to credit card debt.  Our capitalist system depends on consumer spending so it is drilled into us that we can have it all now and pay for it later. Of course for too many that means huge debt that will inevitably come back to destroy many people.

Without some parental guidance, either from parents or teachers, that teach you that you have to earn more than you spend, kids can too easily get into financial trouble. Why isn’t this topic covered in our school system?

I Don’t Have Anything Against Rich Guys….

2014-07-05_11-00-20A stagnant economy has undoubtedly put a lot of financial stress on the middle class. And that is bumming out America’s 1 percenters. “Our country is rapidly becoming less a capitalist society and more a feudal society,” entrepreneur Nick Hanauer wrote recently in Politico, in an open letter to “my fellow zillionaires…. “If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us,” he writes. “One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there’s no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand.”… The economic trends Hanauer identifies are, in fact, real problems. America as a whole will suffer if the fortunes of the middle class don’t improve. There are solutions, however, and they’ll probably materialize in the usual American way — right before disaster strikes. It’s nearly inevitable there will be government spending cuts and, yes, tax hikes, when the government’s finances become unsustainable, which could take a decade or more. When it happens, the politicians in Washington will find ways to spread the pain around and America will muddle through. The rich will have to pay more, but they’ll still be rich. And they still won’t have to worry about pitchforks. SOURCE:  The rich can stop worrying about a middle-class revolution | Daily Ticker – Yahoo Finance.

This is an interesting article about the words of a rich guy and the income inequality.  If you want to skip the commentary and go to the original article click here.

I think to some degree Mr. Hanauer has it right. He talks about things that need to be done to stifle a possible revolution against people like him and that includes returning to pre-Raegan tax rates for his segment of society. We as a country have at least in the past  been able to avert crisis right before disaster strikes but I kind of think if we count on that strategy working every time we are might be in for a severe disappointment.

It might appear otherwise from some of my posts  but I personally don’t have anything against rich guys, at least those who earned their riches themselves. I do have a certain degree of disdain for those who came by their wealth through the work of others, even family members. To me that is unearned income and should be very thoroughly taxed as such.

People like Bill Gates become rich by discovering a “better mousetrap”. He gave us a means to quickly advance our business technology.  I grew up near the Army Finance Center at Fort Benjamin in Indianapolis. The building was a huge complex. It took hundreds of thousands of square feet of desks for thousands of workers to process and pay military wages. Today, thanks to Mr. Gates and others that task is now handled by a mere handful of working using computers. Mr. Gates deserves every penny, minus taxes of course, that he earned.

 

 

Unfortunate Realities….

2014-06-29_08-08-44

1. You will spend your life chasing a net worth number you think you will make you happy, but never get there. People talk about their “number,” or the amount of money they think will make them happy and content. I’m convinced these numbers are what most people live for. But they’re dangerous. People are bad at forecasting almost everything, but trying to predict how you’ll feel in the future is a whole different level of delusion….

2. A lot of what you know is wrong, incomplete, distorted, and subject to revision There’s a bias called the “end of history illusion.” It says that people think changes in taste, new ideas, and learning in general occurred in the past, but today we’ve got it all figured out. The truth is we’re always learning how wrong we were in the past…..

3. People are less impressed by your success than you think Most people in the developed world are about as comfortable and safe as they’re going to get in their lives. Their incentive to get richer is to impress other people. But while people spend their lives trying to impress their friends, a trait they find most attractive in those friends is humility. Few of us ever connect these dots…. SOURCE: Unfortunate Realities You Should Get Used To.

The folks over at Motley Fool have struck another chord with me. Here is a post about worrying on your wealth. Let’s take them a number at a time.

Number 1 – I don’t think I have ever spent any time chasing my net worth number. Money has just not been an important a topic with me. But of course that is probably because I had a fairly good career path and put away enough to now be comfortable. Now don’t get me wrong, I am not some closet millionaire but I am pretty sure I have enough to last out my years.

Yeah, people are usually very bad at forecasting anything. I am a planner at heart and of course most of those plans change because of circumstances. Nothing ever goes as planned. The ability to adapt is what is important.

Number 2 – I don’t know how many times in my life that I figured that I now had all the needed knowledge of life. Of course that was, and will continue to be, just naive thinking. I am still learning many of life’s basic lessons when I was sure I would have it all figured out by now. Learning how wrong we were in the past, how true that is.

Number 3 – I am a contrarian and in this regard because I am just not impressed with the wealth of a person. At least in monetary terms.  Personally, trying to impress others with wealth is way way down on my radar screen and anyone who IS impressed by wealth is usually not going to be much of a friend of mine. Humility  and how you treat others is way further up there for me….

Why You Shouldn’t Regret Taking Benefits at 62

2014-06-29_08-08-44Consider this headline from a recent survey of retirees: “Many Regret Decision to Take Social Security Early.” Sounds ominous, right? Well, the problem is that the title isn’t entirely supported by the survey’s actual results, which found that only 38% of respondents “say they wish they would have waited” longer before taking benefits. According to this, in other words, somewhere along the lines of 62% of respondents, or a large majority, evidently don’t regret the decision.And why should you? As Motley Fool contributor John Maxfield explains in the following video, the Social Security Administration has designed the benefit formula to pay the same amount of total benefits over the life of a typical person irrespective of when they elect to take them. Additionally, as John goes on to discuss, taking benefits sooner rather than later can facilitate an earlier retirement, which allows retirees to escape the physical and psychological wear and tear associated with many jobs. SOURCE: Social Security: Why You Shouldn’t Regret Taking Benefits at 62.

The source of this article is “Motley Fool”. I readily admit that they are on my daily read list. They, like me, have a somewhat contrarian philosophy. Maybe that is what draws me to them.  I don’t know why the topic of the article isn’t talked about much. Since I know that many of my readers are approaching or are in retirement, I thought I would talk about this again.

The fact is if you have a relatively normal or shorter life line in your genealogy then it makes good sense to take Social Security early. As the article mentions SSA has a formula that basically gives you the same overall amount independent of when you take it. I think the calculated age at death is currently 78. If you die before this age you will come out ahead if you take social security early. If you live longer than you may come out ahead if you wait.

The other thing that even this source article doesn’t mention is that if you take it early and  are able to invest the money profitably you will bank even more. Now I know in the age of almost zero percent bond rates and very fluctuating markets investing anything for a substantial profit takes work and some risk but even a small return will allow you to come out ahead.

In my case I look at the family tree and I see parents, grand parents, and great grand parents dying before the 78 year mark so I took it early and like usual I am not looking back on that decision.  I am among those 62% who don’t regret that early decision. It allowed me to bank about an additional $75,000 that is still growing today six years later.  If I live to be an old ornery fool of ninety I  would have been better to wait but at  ninety I probably won’t even be able to appreciate that fact.🙂

Direct From The Manufacturer….

Tesla’s campaign to sell its electric cars directly to consumers shifted into high gear this week as state lawmakers debated Tesla-related bills while powerful auto lobbyists braced for a fight. In New York, a measure designed to ban Tesla from opening new stores passed a key hurdle, while in Arizona, lawmakers pushed a bill to make it easier for Tesla to sell its cars without establishing a dealer network.

The escalating conflict underscores Tesla’s role as a disruptive force in the U.S. auto industry, not only because the company’s cars don’t use gasoline engines, but also because Tesla is trying to upend the dealership-franchise model that has underpinned the automobile industry for decades. That model — and laws protecting it — emerged in the 1930s as a way for automakers to build a national sales and service force and help foster local economic growth. SOURCE: Tesla’s War With the States Shifts Into Overdrive | TIME.com.

I have mixed feelings about the above topic.  This is kind of like a David/Goliath type thing. The little dealership guys are being squeezed out by the big corporations the same way as WalMart is squeezing out local retailers.  But size is a relative thing. Yeah Telsa is probably bigger then most auto dealerships but it is very small compared to its other automotive competitors. It is also pretty easy to see that those who own local or regional auto dealerships are usually much wealthier than the rest of us.  It is not uncommon to see mufti-millionaires auto dealer owners.  So David/Goliath is a relative thing.

Realtors are also in this type of corundum. When I sold my house in New Jersey it never actually went on the market. My realtor happened to have someone waiting for my type of house. When we closed on the house the realtor received a check from me for almost $18,000 for two hours work or so.  The only ones who even come close to that hourly wage are big time surgeons and some CEOs 🙂

The other example in my part of the country is in liquor distributorships. If you can land one you are assured a big annual paycheck. They are given out mostly as a political favor by State level politicians.

I don’t know but it seems like these sort of things need fixing. We should be able to buy direct and bargain with others for what are currently set as “standard” fees. Wages for most of us haven’t changed much in the last decade or more so the little guy needs all the help he can get in today’s world even as a consumer.

 

If companies shared their cash with employees

2014-02-17_11-16-13What they haven’t been doing is giving extra cash to employees, despite s a year of solid – and often record – profits and huge cash hoards. A survey by Aon Hewitt on compensation trends for 2014 shows that companies plan to raise salaries by just 3% this year – the highest since 2008, when the average raise was 3.7%. Economist Ed Yardeni notes that employee compensation and capital spending as a percentage of GDP has been the lowest since the mid-1950s.

But suppose each company with $1 billion in cash took 5% of that stash and give it to employees as a bonus. Unlike a raise, which is an ongoing cost, a bonus is simply a one-time payout – a way of thinking workers for a good year. What would each employee get?

SOURCE: If companies shared their cash with employees.

What happened to the idea of the three legged stool concept of corporate governance? It used to be that there were three pretty equal priorities for American business: Owners, Customers, Employees.  All were considered of equal importance to the well being of an American corporation. It seems in the last thirty years that the owners have become far and away the only leg. Of course this trend is also analogous to the accumulation of wealth at the top end of the economic scale.

I can remember in the 1970s getting year end bonuses. They were never even close to approaching the ones given out on Wall Street and board rooms today but it was always a good feeling to know that we got a little extra for our contribution to our company’s economic health. It made us feel we were appreciated.

There are thousands of companies today that have mammoth stockpiles of cash sitting in company coffers.  Their employees have worked hard and made the company a success. Why aren’t they thanked the same way as those who buy their stocks? If that were to happen maybe at least a small amount of company loyalty would return to American business.  Everyone likes to know that their contributions to any effort are appreciated. A little pat on the back both physically and economically will go a long ways.

The source article goes on after the above quote to show that it would mean about $3,000 to each of the S&P 500 companies. It would mean about $270 for each McDonald’s employee. That is almost the equivalent of one week’s pay at the typical minimum wage that most earn. Wouldn’t it be nice to know that you are appreciated even for flipping hamburgers?

Dual Income Requirements…

We know that the majority of households now require both spouses to work outside the home. That fact has contributed significantly to the number of seniors in nursing homes and other assisted care facilities. Simply put there is just no one at home to care for aging parents or grand-parents anymore. As a result more seniors are institutionalized than ever before.

Of course this is just another example of the problem with the gross income inequality here in this country and even around the world to maybe a lesser degree. Just when our population above 65 starts to explode there are fewer and fewer of us who will be able to stay with our families.  I know from personal experiences with my parents, nursing homes are very expensive. They quickly zap whatever wealth might have been accumulated. After that personal wealth is gone then Medicaid often takes over the expenses and that of course raises taxes for all of us. That seems to be the major Catch-22 of this early century.

When a mother is required to work outside the home she often only adds a small percentage increase to the family income since her children are now forced into childcare outside the home. That eats up much of the income gained. I wonder if anyone has ever done an economic analysis of these type situations?

I suspect that we are actually doing more damage to our society by continuing to squelch income at the bottom end of the scale.  While history shows us that when we raise the minimum wage the threat of losing a significant number of jobs does not materialize, that argument continues to be made today. I realize that raising the minimum wage is not an answer to all our problems but maybe it solves more problems than are realized.  Raising education levels to meet the requirements of 21st century jobs is also an important part of the solution. But then again, there will always be the need for someone to do the things that are now minimum wage jobs. Those jobs will not suddenly disappear with an educated population or be replaced by a robot. Minimum wage jobs will always be part of our world. We need to make sure that anyone who is working full time has at least the minimum income to sustain sustenance.

To Avoid Taxes…..

ZURICH (Reuters) – Two more Swiss banks said they would work with U.S. officials in a crackdown on wealthy Americans evading taxes through hidden offshore accounts, a trickle that could rise to about one third of the country’s private banks.

SOURCE: Two more Swiss banks join U.S. tax deal: Fidelity.

It sure would be nice if we could get the rich to somehow pay their fair share of taxes.  Swiss banks prosper because they help them hide money to avoid taxes. As the article says still less than one-third of them have joined this new procedure.  I think those that are resisting see the writing on the wall that the 1%ers will simply move their money someplace else if they can’t hide it in their banks.

Will Rogers had a lot to say about bankers and financial people during his day and not much of it was good. I wonder what he would say about today’s world in that regard?

Narcissism And The 1%….

Angry driverRecent studies show, for example, that wealthier people are more likely to cut people off in traffic and to behave unethically in simulated business and charity scenarios. Earlier this year, statistics on charitable giving revealed that while the wealthy donate about 1.3% of their income to charity, the poorest actually give more than twice as much as a proportion of their earnings — 3.2%.

“There’s this idea that the more you have, the less entitled and more grateful you feel; and the less you have, the more you feel you deserve. That’s not what we find,” says author Paul Piff, a psychologist at the University of California, Berkeley. “This seems to be the opposite of noblesse oblige.”

(MORE: Why the Rich Are Less Ethical: They See Greed as Good) In five different experiments involving several hundred undergraduates and 100 adults recruited from online communities, the researchers found higher levels of both narcissism and entitlement among those of higher income and social class.

SOURCE:  The Rich Have Higher Levels of Narcissism and Entitlement, Study Shows | TIME.com.

I have had some pretty harrowing experiences with narcissists in my life. I just can’t image someone being so self-focused especially those who call themselves religious. Almost all of religions spiritual documents take a very firm stand against that trait.  My definition of a narcissist is someone who has their head stuck so far up their rear-end that they can see nothing but themselves. I simply have no patience or compassion for a narcissist. I know I am told to love them but, with only a few exceptions, I find it almost impossible to manage that feat.

One of the things that often comes with any degree of success in the financial world is ego and that seems be often be a major trait of most narcissists. Those who manage to make a few bucks soon convince themselves that they are the greatest person in the world and that no one knows more about real life than they do.  Now before you start piling on I will freely admit that not all, or probably even most, successful money gatherers are narcissists or have infinite egos and thank heavens for that. But I am convinced that they have their inordinate share and the source above seems to re-enforce that belief.

As the study says the wealthier you are the more likely you are to treat others poorly or to donate  any significant percentage of your income to charitable causes.  I know Mr. Romney ranted about how the 47% of us feel entitled to take money from the real wealth makers but according to this study he simply got it bass-ackwards and the electorate let him know that…..

U.S. Expansion Poised for Longevity…

While the cyclical outlook looks bright, the U.S. will be hampered in the longer term by such structural headwinds as an aging population, a plateauing of educational achievement and increased inequality, Gordon said.

Source: U.S. Expansion Poised for Longevity – Bloomberg.

I have always found it strange that my more conservative friends seem to want to see all Democratic administrations fail in one regard to another. They always say that their Republican heroes did it better than any Democrat ever could.  When they mention this I just love to pull out the statistic that shows if you invest $1000 in only Republican administrations since 1940 you would now have about  $1400 but if you had invested in only Democratic administration it would be  $10,000.

I am getting off topic here. What I really intend this post to be about is this very slight quote from the article. Here again some financial author over at Bloomberg want to blame us old folks for keeping our economy from blooming. They say an aging population is partly to blame.  I could see that if they went further to say that the reason for this is that all those people who really understand how to create prosperity are retiring and there is no one qualified enough to replace them.  Now, before all you guys start jumping on me for this statement please realize that it is said in jest but I expect there is an ounce of truth in that statement. The younger generations just haven’t been tempered as much as we were.

The other reason given is the plateauing of educational achievement. What that really means is that the kids today are just not going into the necessary advanced fields of education to achieve real prosperity. And of course the last thing on the list above is a very serious one for me. Increase inequality is something that has gotten me very fearful of the future.  The one thing that I am convinced has made the U.S. great over the last century is equality of condition.  That is, there is no aristocracy that gobbles up the majority of our produced wealth.  Of course we all know that has been changing greatly over the last thirty years or so.  If we can’t turn that around we may just all be in trouble when it comes to our longevity. Teddy Roosevelt took down the robber barons a century ago but there just doesn’t seem to be anyone like him to be found this time around. At least not yet….

Not Paying Their Share…..

Banner -In The News

IRSThe difference between what is legally owed the federal government and what it actually collects in taxes each year is called the “tax gap,” which the IRS recently estimated reached $385 billion in 2006. Other studies have placed that figure higher — at upwards of $600 billion.

So who owes this money and why? The single biggest contributor to the tax gap — accounting for 84% of it — are people who simply under-report their income. This doesn’t usually happen to folks whose employers withholds taxes from their paychecks, as 99% of people in that position end up paying their income taxes in full and on time. The biggest headache for the IRS is collecting business income from the self employed, who must voluntarily report their earnings…

Source:  The $600 Billion the IRS Can’t Collect | TIME.com.

This being Tax Day our current system of taxation is on my mind. When I was self-employed for six years I paid taxes on all the money coming in. I believed I had an obligation to pay my “fair share”.  I didn’t want to be a free-loader on society. But I will admit that I took advantage of several tax loopholes offered for small business owner that pretty drastically reduced what I  owed.

I don’t think I am the only one who thinks that our tax system in the country is completely haywire. After decades of special interest loopholes have been added turning the tax code into a 10,000 page document its time to pretty much throw out what we have and replace it with a new system. The simpler system the better.  There are all kinds of proposals around but which would be the best? To find that out we need to understand just who is championing each new idea.

It is no secret that lobbies pretty much run the country now. If you have enough money/influence/power you can get just about anything turned into law. (because of that influence it is almost a good thing that our government is in such gridlock).  Whatever replaces those thousands of pages of current tax code must be a moral document. It must be seen as fair and compassionate for all of us.  Of course there will always be those who are anti-everything that will scream about the government stealing their hard-earned gains. We can do nothing to appease them but for most of  the rest of us we know it is our duty to support our government and especially our shared infrastructure. It is important for us to give our fair share.

Here is an excerpt from the New Yorker magazine about this:

Behavioral economists call the cultural tendency to pay duties, “tax morale.” As James Suroweicki of The New Yorker defines it:

We don’t pay our taxes just because we’re afraid of getting caught; we also feel a responsibility to contribute to the common good. But that sense of responsibility comes with conditions . . . we’ll chip in as long as we have faith that our fellow-citizens are doing the same, and that our government is basically legitimate. Countries where people feel that they have some say in how the state acts, and where there are high levels of trust, tend to have high rates of tax compliance. That may be why Americans, despite being virulently anti-tax in their rhetoric, are notably compliant taxpayers.”

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