Thursday, August 25, 2016

Is China "taking all our jobs"?

Assembly of a car in the 1970's took twice as many people as it does today, even though cars today are far more complex.  Are the Chinese "taking our jobs away" or are we losing them to automation?

Watching the video above, I was amazed how many people worked at union plants back in the 1970's, many of them sort of just standing around.   It is the way I remembered it during my days at GM.   Just the painting scenes give pause, as about a half-dozen workers are involved in painting each car, even with some primitive automated painting systems in place.

Today, cars are painted robotically using a number of robots but very few actual workers.  The end result is not just a better paintjob, but a car that lasts far longer and rusts less.  Also, less paint is wasted to the atmosphere, improving plant emissions.

American factories today look like ghost towns compared to the past.   Fewer people are needed to assemble cars than in the past - less than half as many.

So, where did the jobs go?   Well, there are still jobs to be had, of course, assembling cars.  But the wages aren't what they used to be.   Foreign car makers - nearly all of them - have factories in the US, but pay non-union wages.   Nissan pays as little as $15.50 an hour in Mississippi for part-time labor.   Before you howl in anger, bear in mind that is about $31,000 a year annualized, and that's a pretty damn good wage in Mississippi these days.

It is, of course, what we were paying UAW workers at GM back in 1978 when I worked there.

The reality is, the idea you could graduate from high school and then go down to the factory and get a "good paying job" and then be set for life is no longer the case.   And in  fact, that sort of lifestyle was present only for a brief blip in our nation's history.

Unions, using extortion, were able to blackmail companies into paying wages that were anywhere from 3X to 10X the local labor rates for unskilled labor.   And by padding the payroll with excess workers, they raked in millions in union dues and pension funds.   It was organized crime basically, and this is the "good old days" that some folks want to go back to.   Crappy overpriced goods were the only choice for most Americans back in the "good old days" where buying a television set was a big a deal as buying a car - and often cost as much.

Think carefully before you pine for the good old days.

And those union jobs were not for everyone, either.   In most cases, you had to have a friend, a relative, or some other connection down at the Union Hall in order to get a cushy union job.   If you had no connections, well then, go fuck yourself.

Still pining for the "good old days"?

There is a lot of ink spilled about the "disappearing American Middle Class" and maybe to some extent this is true.  Then again, a lot of this hand-wringing is based on our definition of "Middle Class" which has been distorted lately.   If you drive through America, you still see our cities ringed with hundreds of miles of suburbs, all nice houses which apparently someone is buying as they are building even more of them as we speak.

The problem is, I think, we define "middle class" in terms of a median between the very rich and the very poor, and there are a helluva lot more very rich these days, or at least the very rich have a helluva lot more, or at least according to some people, they do.   This tends to skew our perception of what "middle class" means.

Most Americans, I think, would define "Middle Class" as having a nice 4-bedroom house with a two-car garage, at least 3-4 cars in the driveway, a smart phone for every member of the family, all the cable channels, and of course, the vaunted six-figure income.   And there are a lot of folks out there who are living this lifestyle, along with a mountain of debt, and then wondering "where it all went" and then blaming the politicians for their woes.

Simply stated, we live a better lifestyle today than in the past.   A "poor person" today arguably has a better lifestyle or at least better crap than a middle-class person did back in the day.   My Father bought his first color television in 1975 - long after my "poor" friends had them (color television was largely the norm by the mid-1960's).   Today, even folks in the ghetto have a nicer flat-screen television than my parents could have dreamed of in the 1970's.

The man at the Trump rally holding the sign saying "Make America Great Again!" and whining about how awful he has things likely drove there in a $50,000+ pickup truck that seats six people.   Irony is lost on these folks.

Did his job go to China though?   Maybe, maybe not.   Automation took a lot of these brain-dead jobs away long ago.   Unionism took away the rest of them.   Companies forced to spend all of their capital on wages cannot compete long in the marketplace before failing.   And that is what happened to a lot of those old-line companies.

And factories are not forever, either.   Drive through New England and you will see thousands of old factories dating back to the 1800's, now converted to lofts or offices for high-tech firms.   The idea that you can bring back the old looms and water-wheels of that era is, of course, laughable.   Their time in the sun came - and went.   And that is a natural part of business.

The idea that we can "go back" to an earlier era is not only flawed, but dangerous.    We cannot simply revert to earlier times and values - it is impossible to do.   But even if we could, it would not be desirable to do so.   What the "Make America Great" again folks fail to remember is the stag-flation and failing economy of the 1970's and 1980's (yes, even during the Reagan wonder years).   And part of this problem was that union workers were holding American industry hostage.

It is a populist message, to be sure - and it is telling people what they want to hear.  And what a young white man with no more than a high school education wants to hear is that high-paying jobs are his for the asking and that unskilled labor has a high value in the marketplace.    The fact that he has no marketable skills or much economic value is not a message any politician wants to make.

So we blame the Chinese and the Muslims, and whoever "other" is a convenient whipping boy today.

But the reality is, there are a lot of high-paying jobs in this country  - or even just decent-paying jobs - going unfilled for lack of qualified candidates.   Maybe learning a skill is a better option than waiting for a political overhaul and a return to yesteryear that will never happen.

* * *

NOTE:  Some will be quick to point out that "skilled" jobs such as IT related jobs are being outsourced to India.  I would disagree that managing a bunch of PCs and servers is a "skilled job" and moreover, when you make a shitty product and charge too much, you encourage your customer (or bosses) to automate and outsource.    Consider the "IT professional" at your office.  A slovenly lad who spends all day long on Reddit or playing computer games, who uses his limited powers and knowledge to leverage himself into a position of indispensability to the company.   As with the union assembly-line worker, they are not being "outsourced" so much as they gave their jobs away.

Monday, August 22, 2016

Mental Health, Prosperity and Urban Legends

People who are losers in life tend to spend a lot of time and energy on conspiracy theories, urban legends, and belief - at the expense of reasoning, rationality, and analysis.  As a result, they tend to be unhappy people who fall down the economic ladder.

In an earlier posting, I noted that "Mental Hygiene is like Physical Hygiene - you have to work at it!"  And by this I meant that it is possible to drive yourself crazy by indulging in weak thinking.  Of course, this becomes one of those correlation/causation issues.   Does believing in crazy bullshit make you crazy, or does being crazy make you believe in crazy bullshit?

I think it is a matter of both answers being right.   Full-on batshit crazy people will believe in and propagate conspiracy theories, such as this poor fellow who killed himself last week after writing a dozen tomes attacking the Clintons, denying the holocaust, and claiming 9-11 was an inside job.   Clearly he was an unhappy person, but was that what drove him to far-right hate-speech, or did indulging in such theories drive him to be unhappy?   You decide.

But on a more mundane day-to-day level for the rest of us, I think the tendency to want to indulge in weak thinking can indeed drive you a bit batty and also cause you to fall down the economic ladder.

The other day, a friend of mine told me this story, which is a hoary old Urban Legend that has been long debunked on Snopes:
"A couple of guys from New York City came up here once to go deer hunting.  Those city folks are so dumb that they shot what they thought was a deer and then tied it to the fender of their car.   Only later on when they were stopped by the game warden did they find out they had show a farmer's cow!  Haw-haw!" 
I smiled nicely and changed the subject.  Did my friend really believe this story or was he just baiting me?  After all, it is so easy to debunk.   Even if you are a "city slicker" you no doubt saw the movie Bambi and know what a deer looks like.  Even in the suburbs, you see deer.  They are quite common.   You may have seen pictures of one in a book.   It is hard to imagine someone not knowing what a deer looks like, and yet at the same time wanting to go hunting.

Moreover, of course, a cow can weigh hundreds of pounds - over 1,000 in some instances - and it would be hard to lift or carry a dead cow without a crane or forklift.   And people stopped strapping deer to the hood of their cars years ago (now that we all drive pickup trucks).   And a cow would crush the fender of a modern car - and obscure all forward vision as well.   The story is more than improbable - it is impossible.

But the telling of the story is telling.   What the real message is, is one of lack of empowerment.   Those "city folks" with their six-figure salaries, fancy foreign cars, and expensive loafers are not smarter than us "country folks" but rather just plain idiots.   It is a way for people who are unempowered to feel better about themselves by running down folks who clearly are more successful than they are.   Those city folks may have lots of money, but when the economy breaks down, we country boys will survive by hunting deer!  Yesirree!

I guess it is harmless fun and a way of mentally making yourself feel better about your station in life.  Maybe so, but it also is harmful in that it allows you to indulge in weak thinking.   When you posit that your disadvantages in life are actually advantages then there is little reason to change your station in life, is there?

When I was younger and poorer and working as a technician, I engaged in such thinking - as did many of my peers.   Folks who made money, did well, got an education, got good jobs, well, they were "sell outs to the man" or whatever.   Not only was being poor and stoned all the time not so bad, it was actually better as we were morally superior to richer folks for some obscure reason I can't remember right now.

The irony is, of course, that the real stories about deer hunting mostly paint the "redneck" in a bad light, and that is mostly because "city slickers" have little interest in leaving the city to go shoot deer.  On our little island, some local fellows decided to go hunting, but failed to shoot any cows:
On 01/08/2013 at about 11:00pm, the State Patrol received a call about shots fired at the soccer complex on Jekyll Island and sent a Trooper to investigate. The trooper saw a vehicle in the area driving erratically. When he stopped the truck he immediately noticed several dead deer in the back of the truck. He then called RFC John Evans and Sgt. Chris Hodge to the scene to investigate the incident. After the investigation the driver and passenger were charged with hunting deer at night, hunting from a vehicle, and hunting from a public road. The driver was also charged by the trooper for driving on a suspended license and driving under the influence. The passenger was a convicted felon and was charged with possession of a firearm by a convicted felon. Both suspects were taken and booked into the Glynn County detention center. They had killed a total of 5 deer. The deer were turned over to a local processor who was willing to come out and clean them and then turn the meat over to a local food bank.
Sadly for these "country boys" hunting is not allowed in a State Park, and certainly taking five deer is more than the limit.  Unfortunately, this is not the only such incident to occur on our island. 

But getting back to urban legends and conspiracy theories, are they really harmful to your mental health?  Well, yes, they are.  I think once you go down the rabbit-hole of weak thinking and indulge in more and more in belief and not reason, the world becomes distorted.   Since your world-view is constantly skewed with regard to the real-world, you tend to indulge in more and more bizarre beliefs in order to square things up.  The reason the Federal Reserve is controlling your life is, well, Aliens, right?

It may start out as a simple urban legend, or even some religious belief, but it can quickly devolve into some sort of scary world conspiracy in short order.   After all, if one urban legend conflicts with reality, the only plausible explanation is that some even greater conspiracy is afoot to suppress the truth.

And I think this is how conspiracy nutters end up where they do - encompassing everything from Holocaust denial to aliens in area 51 to whatever, into one grand "Illuminati" scheme of one sort or another.  If someone points out the flaws in your thinking, well, they must be part of the conspiracy, too!

(And to all you conspiracy nutters, as I have freely admitted before, I am part of the conspiracy as well - the Illuminati, the inside circle, and so forth.  Buhaawahaha!)

Of course, that brings the question:  If there is some sort of "insider" Illuminati who are running everything and whatnot, why not simply join them and share in the riches of this grand scheme?   Well, it is possible to do so, of course, simply by engaging in real society.   You see, if there is an "secret inside" cabal of people running the world, it really isn't all that secret.  All you have to do to join is to get an education, get a good job, work hard, and put away some money.  Bingo!  You're in the Illuminati!

And it is a very egalitarian system, too.  Anyone can join, but how far you advance is based on your native intelligence and how hard you are willing to work.   Step 1 to membership is just denouncing conspiracy theories, weak thinking, urban legends, belief and other nonsense and instead engage in rationality, clear thinking and believing in yourself.

But you see how this works to the paranoid conspiracy theorist.   Since they refuse to engage in rational society, they feel they are being "excluded" by an inside cabal when in fact they are simply excluding themselves from society in general.

But beyond whack-job conspiracy theorists, the same theory also applies.  If you are protesting for Bernie and think that your student loans should be "forgiven" or that college should be free, maybe you are not living in a rational, real world.   Not only are these things not likely to happen, they aren't going to improve your lot in life.   If you let your student loans go into default, it will seriously harm your financial record, make it hard to get a job or an apartment or anything you may want out of life.   Blaming your student loans on someone else might make you feel good (just as the hunter/cow story makes folks feel better about themselves) but it does little to make your own life really better.   In fact, it makes it far worse.

Or if you think electing Trump is going to get you a good paying job when they "throw out all those Mexicans and Arabs" maybe you need to think again, unless you think a job as a day-laborer or landscaper is a "good paying job".   And all those tech jobs are not going to come your way without a tech degree.  Companies hire H8 visa techs simply because not enough Americans want to bother getting the proper education to take such jobs.   Xenophobia isn't going to get you a six-figure job.   And when Donald Trump collapses the economy, well what job you have today will likely go away.

And so on down the line.  Indulging in weak thinking rarely amounts to much.

Trade and Technology

Can Elon Musk change the way the world does business?

The rise of the British Empire can be traced to free trade.  Well, free trade for the British Empire, anyway.   They used a clever system to grow opium in India, then trade it with China in exchange for trade goods, and more importantly, silver, to fill their coffers in London.   It is no coincidence that the British currency is known as a "pound sterling" as it was based on silver.

Prior to that time, the situation was reversed - British traders bought goods in China, paying in silver, while the Chinese failed to buy any foreign goods.   By altering the trade balance, the British altered the flow of wealth from outward to inward.

So long as that trade pattern continued, the British Empire remained an empire.  But eventually China became tired of playing this game - seeing its people turned into drug addicts and its coffers emptied.   And in a post-war era, new trade patterns emerged, and the UK became a debtor nation.   When trade patterns change, fortunes are made and lost.

Today we do business with some pretty odious people in the world, just to get oil to run our economy.   We are dependent on oil for almost everything, or so we think.   A lot of people are starting to wonder whether this is really true.   There are reports that Israel is trying to get to an oil-free economy or at least an economy less dependent on oil, as they must trade with hated neighbors (who hate them as well) in order to obtain this needed energy resource (recent discoveries of natural gas and the collapse of an electric car company seem to have put these plans on hold, however).

For years, people talked about solar and wind power as an alternative to an oil-based economy, and for years, this was largely a fantasy.  Solar panels were so expensive and cumbersome that they didn't make economic sense.  The same was true for wind power.  And since both depended on the weather to operate, they were not a complete answer for our energy needs.

Similarly, electric cars were mostly in the realm of hobbyists or experimenters or as show cars trotted out by the car companies to show their environmental credentials.   Reliant on lead-acid batteries, they were slow and had limited range.

But that has changed, and a lot more may change soon.  Lithium-Ion batteries have largely solved the problem of energy density, and as a result the range and power issues with electric cars.  Solar panels are now more efficient and cheaper, although not quite on a par with other energy sources.  For a while, with tax breaks and with the utility companies buying back solar power from homeowners at retail rates, they actually made a profit.   But tax breaks can expire and more and more States are dropping requirements that utility companies buy back solar power at retail rates (which makes sense, if you think about it) but instead at wholesale rates, which they pay for other energy sources.

But, suppose you could take the power company out of the equation?   Besides the oil companies and Arab oil States, the local utility companies are probably most hated by the average consumer.   Since we are dependent on electricity, we have to buy it from them, at standardized rates that guarantee them a profit.   Since their profit is guaranteed, they have little incentive to be efficient or cheap.  They have us over a barrel, just like the oil producers.

Musk's plan is simple:  Provide solar panels to consumers combined with home-based "energy banks" of Lithium-Ion (or even more advanced technology) batteries so that a homeowner could basically own his own utility company.   During the day, the power bank charges and at night it can be used to charge up your car or run home appliances.   Since you are not selling back excess power to the utility company, you are, in effect, getting "retail" value for your Kilowatt-hours.

Could it work?  Sure, from a technical standpoint, there is nothing blocking the way.  No new breakthrough in technology is required.   It simply is a matter of cost.   And that is the sticking point.  We live today in an era of cheap oil, and perhaps not by coincidence.   As I noted in another posting, the biggest enemy to the electric car or the hybrid car is cheap gas.   And if everyone goes to electric or hybrid cars, the cost of gas will drop as demand drops.    And as demand drops and prices drop, the economic value of electric or hybrid cars drops, creating a vicious circle.    Theoretically, electric cars will never be viable as a result, unless the world actually and truly runs out of oil.

And that may be a problem for Musk as well.   His energy system should work, but how many people can afford to buy it?  Solar City, which he recently acquired, leased panels to home owners and then reaped benefits from the energy sold back to utility companies at retail rates.   Once the utility commission re-set these rates, the entire business model was no longer viable.    A home-based energy bank may be a solution, but a costly one for most homeowners.   Even if sold on installments or leased, the cost may rival or exceed the monthly cost of a standard utility bill from the electric company.   Consumers may be simply trading one form of monthly payment for another.

There is also the issue of maintenance and repair of such a complicated system.   Granted, homeowners today typically own a fairly complicated HVAC system, hot water system, refrigerators, and other appliances.  Some even go nuts with hydronic heating and wood furnaces and whatnot, which require miles of piping, pumps, and controllers.  Arguably, a home energy system like Musk proposes might not be much more complicated and in fact may be simpler - merely a plug-and-play black box (albeit a large one) that is simply set in the garage or basement (or even outdoors in a weathertight enclosure).

Complexity and cost is one reason I haven't made the switch to solar.  I looked into buying a solar hot water heater, as hot water is one large part of our energy bill.  However, the number of pumps and controllers involved, plus the plumbing and panel (and drilling holes in the roof) made me pause.  The staggering cost didn't seem justifiable over time.   Finally, the prospect of a tree limb from the decaying pine trees surrounding my house shattering the expensive solar panel sealed the deal.  It just didn't make economic sense to me.

Similarly, putting solar electric panels on the roof might be problematic for me in terms of amount of light available and tree limb damage.   Solar power promises to be a boon for people in new developments in the suburbs who have large roofs and clear Southern views.   It will be less useful to city dwellers, condo or townhouse dwellers, or people who live in matured, treed neighborhoods.

Still, it is exciting technology, and I for one would like to see it work.   Sadly, there are people out there who not only think it won't work, but will go out of their way to insure it doesn't.

I wrote before about NEV - neighborhood electric vehicles.  I concluded that even though they are legal on our little island, they make no economic sense - for the price involved, I can drive my existing car an additional 1200 miles a year that the typical NEV travels.   But since I wrote that posting, the State of Georgia put the nail in the coffin of NEVs by adding a $200 registration fee.   They argued that since "electric cars" don't pay road taxes, they were getting a "free ride" on the backs of gas-burning cars.   Maybe this is true for a standard electric car, but these little golf-cart like NEVs hardly travel more than a thousand miles a year, and they hardly "wear" on the roadways.

However, like with anything else, there is a loophole.  We are still allowed to drive modified golf carts - and even NEVs  - on our island, and avoid paying the fee provided you don't bother to register them as motor vehicles.   I am sure the oil lobby will close that loophole soon enough.

Like I said, it would be neat if the technology worked.   But by "worked" I mean to the point where the decision to buy an electric car is a no-brainer - that the cost is so much lower than a gas-burning car that only a fool would pay extra to burn gas.  Sadly, that might not happen in my lifetime, but we are getting closer than ever before - almost every major automaker today has an electric car in their showrooms right now, for you to buy if you want one.  This is a far cry from days gone by when electric cars for largely for experimenters, hobbyists, and kooks.

But an argument could be made, and a sound one, that subsidies for solar panels and electric cars might be a good thing.   If our demand for oil was substantially or even marginally curtailed through the use of electric cars and solar panels, our reliance on oil from odious sources (those damn Canadians!) would decline.  Like with the British and their trade with China, we could reverse the flow of money or at least attenuate it somewhat.   More importantly, we would not have to intervene in Middle East politics as we frankly would no longer care about their internal matters.

So good luck, Mr. Musk.  You might end up changing the world.

Election 2016 - Emotional Thinking versus Rational Thinking

Our political system today isn't divided into Republicans versus Democrats, or Liberals versus Conservatives, but rather emotional thinkers versus rational thinkers.   Sadly, the latter are in short supply.  Pictured here, a tea party rally.

In Quebec it is interesting to hear how French Canadians view the election in the US.  Given all the press Donald Trump gets (and he gets a lot of press, but it seems that as of a month ago, the press "turned" on him and the love-fest is over) many Canadians assume he will win the election and that all Americans are infatuated with the Donald.

This reflects a nightmare most of the rest of the world has.   America by accident or design, is the only world superpower.   We spend more on our military than the next ten largest countries combined (or eight, depending on which source you cite).   We have fleets of aircraft carriers, while Russia has one, China is trying to finish its first (a rusty Russian hand-me-down) and the UK has none.

And despite all the hoopla you hear about China, their economy is not doing as well as ours is - in fact, our economy is the most robust on the planet, which is why investors worldwide flock to invest in things as lame as Treasury bills.  China doesn't "hold" a lot of our debt to blackmail us, they hold our debt because they perceive it as a safe harbor to invest in - safer than their own markets.

So America is the 600-lb gorilla, and the rest of the world simply hopes that we have some rationality and common sense not to wreck things more than we ordinarily do.   Some have called the post-war years the Pax Americana although during this Pax a lot of regional wars have been fought and millions have died.   But we've avoided a nuclear conflagration, so I guess that is something.

But in Donald Trump, the world sees trouble.   America might be abandoning what little rational thinking and intellectualism it had left.   We would not longer be the good guys in the white hats - to the extent we ever were - but rather self-interested take-all-you-can conquerors who would just look out for their own self-interest rather than the global interest.   And you see this attitude at Trump rallies, with supporters saying things like we should nuke the middle east and take all the oil that "rightfully belongs to us".

Trump supporters are like that - classic externalizes who view their personal problems as being the fault of unseen or vaguely defined "others" who are a threat to them.   And not surprisingly, most of these supporters are younger white men with no college education.   Their options in life are limited, as in a technological society you need to have a technical education to succeed.    As unskilled laborers, their value in the economy is not very high.    Unless they can acquire technical skills, they will not be able to climb the economic ladder.   And of course, this has to be someone else's fault.   

The fact they didn't pay attention in school or try to at least learn a trade is not their own fault, but the fault of "Liberals" or terrorists or the gays or whatever target-du-jour is being bashed.   "If only..." we could eliminate those bad people, the world would be a paradise-on-earth.   It is a message that resonates throughout the ages, with demagogues rallying the young, the dumb, and the poor with their message of "if only..."   Huey Long, Adolf Hitler, or Rodrigo Duterte, the message is the same.

And it is not a conservative message or a liberal one, a Republican one or a Democratic one.  Indeed, every aspect of the political spectrum has employed this form of emotional thinking to try to get into power.   Venezuela is using this sort of nonsense to prop up their failed government.   Communism would work, they argue, "if only" we could get rid of those rightists and profiteers.    Same old shit, different day.

Or take Bernie.   Both Trump and Bernie supporters are alike in that they are emotionally engaged with their candidate.  They fill rallies, they shout slogans, they are passionate about their candidate.   And both candidates promised a heaven-on-earth to downtrodden people who made bad decisions in their personal lives "if only" we could get rid of Muslim immigrants or the big banks or whatever.

Hillary, on the other hand, doesn't generate much excitement.   People don't put bumper stickers on their cars or get really emotionally engaged with her.   She represents the establishment and a continuation of the policies of the last eight years - policies which have resulted in steady economic growth and stable economy in an era where most countries are melting down.   Sure, she will change some things.  I hope she can fix the problems with Obamacare (instead of just abolishing it and leaving us all with nothing).  But no one really gets emotionally involved with a person who is the ultimate policy wonk.

This is a good thing,  trust me.

Every four years, the press plays to our emotional side and tries to portray the candidates in terms of emotional factors - kissing babies and whatnot.  Which candidate would we want to have a beer with?  That sort of bullshit.    I am not sure I want to have a beer with Hillary Clinton, although I would be fascinated to sit down and listen to her talk about policy issues.   Which is more important?

The election of 2016 will go down in history as one of the strangest of all time.   Unless Hillary has a nervous breakdown, it doesn't appear Donald Trump has a snowball's chance in hell of winning.  Even Georgia seems to be in play for Hillary (and you can bet I will be back in the State by November to vote!).

The Republican party, hopefully, will look at this debacle as an opportunity to re-think its strategy.  And many in the party are trying to do just that, but getting it all wrong.   They continue to seek out emotional issues as the backbone of their platform.   They fail to realize that being the party of "Just say No to everything" like some petulant child hasn't accomplished much in the eyes of the voters.   Rather than being against everything, they need to stand for something.

In the past, this was the case.  In the past, the GOP was the party of rationality, in terms of standing for sound government, balanced budgets, and limited government.   These were rational factors to argue, even if you didn't personally agree with some of them.  The Democrats, on the other hand, were more of the emotional thinking party, making arguments (as Bernie did) about how awful it was that the other fellows bank account was bigger than yours.

Somewhere along the way, the positions of the two parties changed.   It started with Nixon's "Southern Strategy" and his "Law and Order" campaign.   It matured with Reagan's "morning in America" and his appeal to evangelical voters.   No longer was the party about balanced budgets and limited government.  Instead, the GOP became the party of social issues - abortion, gay rights, women's rights, voting rights, and so forth - all in the "NO" column, of course.   Rather than a liasssez-faire approach to government, Republicans started campaigning on being "job creators".   And instead of balancing budgets, Republicans started running up deficits - even in times of economic prosperity, such as the Bush years.

As a result, the party started to splinter.   And the "big tent" of the GOP was suddenly full of people shouting "RINO" - and trying to force out anyone who didn't subscribe to their form of emotional thinking - failing to make the rational argument that forcing people out of the party isn't how one wins elections.

But it got worse.  The entire "Tea Party" movement was more like the Mad Hatter's tea party - a movement without purpose or direct, other than to wreck, delay, destroy, and usurp.   Nothing much was accomplished by the tea party candidates - many lost their re-election bids or failed to stand for re-election (that whole promise of one-term kind of backfired in a big way, as most emotional arguments do).   While ostensibly about taxes ("Taxed Enough Already" was their mantra) they were really a haven for anti-Obama and racist thinking, as evidenced by the signs and slogans at their rallies.   Taxes, it turns out, were just a cover story for what was really an emotional social agenda.   They were more interested in transgender bathroom issues than in tax policy wonking - as evidenced by their insane and unworkable tax proposals, most of which would have been a sop to the very rich.

There was a time in this country where we didn't view the government as the "enemy".   And we thought that government could be well-managed and well-run.   It was, after all, our government that managed to put a man on the moon within ten years of really starting a space program.   Back in those days, we thought that if proper scientific management techniques were applied to government, that government could be both efficient and effective.

We seem to have lost that thought somewhere down the line.   It became more convenient for us to blame our problems on the government rather than try to solve them.

Perhaps, once again, I digress.   What is the point of all this?   Well, the only real conclusion I can draw is that when there are two candidates up for office, and one tries to appeal to my emotional side by using emotional issues (greed, fear, externalizing) and the other candidate wants to talk policy until the whole audience is asleep, I have no trouble deciding which candidate is the better choice.

Emotional thinking is a dead-end.


Friday, August 12, 2016


Boating is like RVing, but some folks think it classier.

We are looking at boats with the idea of selling the RV and then living on the boat for the summer for a few years.  Boating is an interesting endeavor as there are all sorts of boaters, just as there are all sorts of RV'ers.   And like with RV's you can get into a lot of trouble with a boat very easily, and it can be hard to get out of it.

As I noted in the casino effect, there are a lot of financial transactions in this world that are easy to get into and very, very hard to get out of, just like a casino.   When we were in Las Vegas, the Caesar's Palace casino had a conveyor belt to haul people in from the sidewalk, just like a slaughter house.   Once inside, however, getting out required us to walk nearly a 1/4 mile through successive rooms of bright flashing lights, loud sounds, and noisy distractions.   The exits were not clearly marked - intentionally.

You can buy a boat, lease a car, sign a student loan, or get a 20-year note on an RV like falling off a log.  An hour in the "closing room" at the dealer or the registrar's office is all it takes.   Then it takes a lifetime to pay off the note - as often you are "upside down" on the car, RV, boat, or education, for decades.  Easy to get into, hard to get out of.  That is the casino effect.

One boat we looked at, a hoary old Sea Ray, was sitting on blocks at a marina.  The owner admitted that he hadn't had it in the water for over two years.   His ex-wife wanted it sold, but he "had to get" $35,000 for it as that is how much he owed the bank.   You see this all the time with boats, cars, jet-skis, or whatever - people thinking they are entitled to the balance on the bank loan, just because they owe that much.  You try to explain to them market values, and they are deaf.  You also try to explain to them that a boat that has high hours, shitty maintenance, and several major defects isn't worth squat, but don't bother.  The owner wants to pay off the note, and he thinks he is entitled to this, just as a millennial with $50,000 in student loans thinks he is entitled to a six-figure salary and a corner office.

And as I noted in the upside-down boat, there are millions of boats, RVs, cars, motorcycles, jet skis, and snowmobiles rotting in side yards across America, as their owners continue to pay on the loans on these items which are worth less than the balance on the note - and the owners have long since lost interest in them.  You can make expensive mistakes in life, very easily, in a matter of a few hours and a few signaturesLeave your pen at home.

Boating is particularly weird in that many people own boats and rarely go boating.   We've visited several marinas where people have made encampments on the dock next to their boats, with barbecue grills, refrigerators, entertainment systems, and a "nest" of chairs.  They drive 2-3 hours every weekend to sit next to their boat and drink cocktails with the other boat owners, occasionally washing and waxing the boat, but rarely ever leaving the dock with it.   This struck me as rather absurd, but it is what a lot of boat owners do.

For example, one boat we looked at had 400 hours on the engines (gas engines, which are good for about 1500 hours before a rebuild) since it was built in 1993.  The owners drove from Rochester, New York to the 1000 Islands every weekend for 12 years to "hang out" on their boat, but they rarely left the dock with it.   I can't in my own mind, justify such an expense for something used so intermittently.  If I have a boat, I want to be using it, not every weekend, but nearly every day.

RV'ers are no different.   Many will keep an RV at a campground all "season" and then visit it on the weekends only, hanging out with friends and drinking, but rarely, if ever, traveling in the RV itself.   One wonders why they don't just buy a cabin or at least a park model.   Buying a motorhome and then never driving it anywhere seems kind of silly, but I guess I am the only one to think that way.

One problem with these sorts of purchases - or any sort of purchase - as that few of us think of them in terms of the "end game".   If you buy something, how do you get rid of it down the road?   You want that shiny new cell phone, but fail to think about the five or six old cell phones you bought in years past that are not rotting in a drawer or closet somewhere because you can bring yourself to throw them away.   Everything you buy has an "end game" associated with it, and planning this end game is essential.

That is one reason some folks like leasing cars or "upgrading" to new cell phones every few years.   You get a new toy every so often and the old one goes away without fuss or bother.   Well, there is a fuss and bother, but it is in your bank account - you get dinged for "turn-in fees" on the car, or you pay far too much for the new cell phone.  But it illustrates how much people are willing to pay for convenience or perceived convenience.

Our plan in buying a boat is not to have one "forever" but for maybe 3-5 years.   And as such, we have to be cognizant of how to get rid of it later on.  After five years, you can expect the boat to depreciate by as much as half the price you paid for it.   Financing such things on 10-year notes is dangerous as your are likely to be upside-down on the note for at least 7 years.   Not only that, but you will pay as much in interest as you do in principal on the note.   And yet, that is how most people pay for things.

Paying cash avoids this problem, but many folks will make specious arguments that paying cash forgoes the "opportunity cost" to make money in the stock market.   Yet, if I borrow money at 4.5% on a boat loan (and pay almost 100% interest payments the first year) am I really coming out ahead?   What investment out there promises a guaranteed 4.5% rate of return on my money?   Moreover, if I decide I want to sell the boat, I don't have to worry about being "upside down" on it.

A boat like this can be had for about $30,000 with low hours and in good condition.   Since few people can pay cash for older boats, prices are low.

 In the age and price range we are looking at there are very good bargains to be had, as boats of this age are difficult to finance.   Joe Paycheck can get a loan on a brand-new boat at the dealer, who has a relationship with a local finance company.   But older boats are harder to finance and as such (like older cars) the price drops off accordingly. 

But as I have noted in the past, when you buy an older boat, car, RV or whatever, you really are just buying the repair rights.   Once you own the item in question, you have to pay for the upkeep.   And with larger boats, the upkeep can be expensive.  Just for docking, storage, winterizing, annual maintenance and the like, the costs can be $5000 to $8000 a year depending on the boat size, the marina in question, and the type of storage and docking.   Keeping a large boat clean is a major chore and many owners hire locals to wash and "detail" their boats on a weekly basis.   The actual cost of purchase will be quickly exceeded by the maintenance and fuel costs within a few years.  Add to that the cost of transient docking, if you want to travel at all - and don't want to anchor out every night.

And this is assuming you don't have any major repair problems such as a bent propeller or shaft, repowering, or whatnot.   Everything associated with boats is expensive, and often what would be a simple repair in a car is a major headache in a boat, particularly in some models which have engines located in remarkably inaccessible places.

So, are we going to buy a boat or what?   Maybe.  Maybe not.  Our timeline is the next two years, so we have plenty of time to do more research.  Since we can pay cash, we are in a position to make a deal when the time is right - for example in February when the boat is in storage and the owner needs to get out from under it in a hurry.

But it may turn out we don't want to own a boat at all.   You can rent boats in many places, and our immediate plan for next year is to rent a boat or houseboat on the Erie Canal and the Rideau Canal (in Canada) for a week or more and figure out whether owning a boat is worthwhile.   It may be that after a few weeks of renting a boat, we decide we've "been there done that" or that renting is a far better alternative than spending a pile of money on a rapidly depreciating asset and maintenance.

I also still like the idea of a boat I can maintain and haul myself.  One problem with larger boats is that it can cost $150 to $300 just to have it hauled out of the water.  And once out of the water, you are often at the mercy of the mechanic at the marina closest to where it broke down.   A trailerable boat may be smaller, but you have more choices in terms of storage, repair, and general maintenance.  The cost of "hauling out" a trailerable boat is often free.   And boats of 30 feet or more can still be trailered (although you'd better have a good trailer and truck to haul it with).

Traveling long distances by boat is often boring and sometimes dangerous, if the weather changes suddenly.   Our boats got maybe 1-2 miles per gallon and had a top speed of 30 miles per hour or so.   On the trailer, however, they were getting 10 miles per gallon and capable of 70 miles per hour.   Many States have free boat launch ramps (or ramps with modest fees) and free trailer/truck parking.   It may make more sense to buy a 28 foot cabin cruiser and trailer it than to own a 35 footer and never go anywhere.

But we have all the time in the world to decide, and we need a boat like we need a hole in the head.   Once you decide you "have to have" something, it is all over for you.   We are enjoying retirement and don't want to fuck it up with something as stupid as a boat purchase.

Wednesday, July 27, 2016

Retirement in the Animal Kingdom

Your retirement plan in the animal kingdom often involves being eaten alive.

We have been camping out in the wilderness, which many folks think is a relaxing and peaceful environment.   Nothing could be further from the truth, of course.   The wilderness is full of murder, mayhem, violence, and death.

Every creature in the wild depends on some other living creature in order to survive.  Your life is marked by birth and death, and death comes when you become too old to evade predators and end up being someone else's lunch.

A deer or gazelle can keep running away from predators for only so long before they become old and tired and lame and slow.   At that point, they are singled out as prey by the wolves or hyenas or whatever, and then are ruthlessly hunted down and mauled to death, often having their guts eaten while still breathing.   Your former friends and even family members run away, glad that it is not them who are on the menu today.

Humans, it seems, are alone in the animal kingdom in having a sense of decorum about death.   We started burying our dead to prevent animals and predators from eating our loved ones.   We supported our elders in their later years when they were too old to hunt or farm.   Few other animals, if any, do this.

It is funny to some extent how we decry violence in the human world and decry our tendency towards war, terrorism, murder and mayhem.   Yet if we look to the animal kingdom, we see that this is the norm, not the exception.   Our instinct towards niceness and kindness is not some natural phenomenon, other that it is perhaps a survival instinct that has allowed our species to advance and survive.   Our other baser instincts, however, still remain intact.

In Australia recently, a photo was circulated of a pair of kangaroos.  The mother kangaroo had been hit by a "lorry" and was lying dead on the side of the road.   The father kangaroo was holding vigil over her body, or at least that was what some people thought at first.   We anthropomorphize human behavior to animals, assuming that they feel and think as we do.

But a naturalist pointed out that kangaroos do not mate for life, but like deer fight for the right to mate with as many females as possible.  They are also opportunistic mating partners, who try to mate with whatever female is available.   The males do not take part in raising the young, but rather mate and flee.  The "father" kangaroo in the photo wasn't trying to console his fallen mate, but rather was trying to mate with her dead corpse.

We forget that animals are animals.   We try to keep chimpanzees as pets and then forget they will literally eat your face off if they get angry and aggressive.   We try to keep tigers as pets and then they bite your neck in half.   Animals are animals and they behave differently than we do, even if we are descended from the same DNA strands.

So what is the point of this?   I don't know, other than it struck me that we are very lucky or smart not to be eaten to death, at least in some instances.   In some third world countries today, if you get old and have no children to support you, you may literally starve to death.  This was particularly true for widows in rural India, who were tossed out onto the street once their husband died.

The modern concept of retirement is a relatively recent one and a Western one.   Retirement as we know it didn't exist, largely, until after World War II when people actually lived long enough to retire and also had the Social Security, Medicare, and the pension plans necessary to fund such a luxury.  In the history of mankind, or indeed, the history of life on Earth, the concept of retirement and leisure is one that has existed for only a blip in time, the last 50 years at most.

For the rest of the world, the rest of time, and the rest of species, it has been literally dog-eat-dog.

And this gets to the point that our society and our intelligence have achieved something that hasn't existed until recent times - the concept of leisure, peace, contemplation, and relaxation.   I guess you could call this "civilization" and it is indeed the highest achievement of mankind.   Maybe a bunch of old people playing golf in The Villages doesn't seem as great an accomplishment as the moon landing, but if you think about it, it is a startling development compared to our historical past.

And the question going forward is, do we want to retain this standard of living or revert back to a more primitive past?   It would seem there are forces in the world who thirst for blood and violence and wish to return to an earlier era.   It is still possible we could be carried off by hawks.

Tuesday, July 26, 2016

Retirement and Decisions

Deciding when to retire isn't easy - if you even get to make the decision yourself.   But then again, most decisions in life are hard, and making hard decisions is often the right choice.

First of all, thanks for all the e-mails and messages asking where I have been.  I don't have time to respond to every e-mail I receive, so my apologies for not responding. 

In response to my retirement posting, I received some interesting messages.  One fellow told me that retiring early was a mistake as I would have "nothing to look forward to except death" which was hard to parse.   I guess if you keep working you never die and that is a good reason to keep working?

Others were generally supportive, but wondered what on earth I would do to keep busy?  After all, without work, I would be "bored to death".    Well, so far, no boredom or death just yet.

I have spend the last two weeks camping on the Blue Ridge Parkway and traveling in the Central New York Finger Lakes region.  We are headed to the Adirondacks, then to Montreal, Vermont, Maine, and then back down through Cape Cod, Virginia, and the Blue Ridge again.  It may take a few months.   Oh, and it is as boring as all get-out.   Not really.

It is interesting traveling in that people ask you where you are from and where you are going.  When you start to rattle of a list of destinations, they get upset.  After all, the point of "vacation" is to spend a week traveling from point A to point B and then a second week traveling back.   You have to have a "destination" and a time limit.   It is funny to watch people's brains melt down when you try to explain to them that working all day long isn't necessarily a requirement in life.

But the guy I am talking to has a new 35' Fifth wheel, bass boat, jet ski, and monster truck - all parked in the campground - and is still making payments on all of it.  He has to get back to work to pay for it all, so he can use it for two weeks of the year.  He laughs at my tiny camper which is "paid-for" and doesn't understand that there is another way to live.   He might, eventually, if he can retire.  But sadly, the line of payments he has will stretch well into his 60's (and let's not talk about the mortgage!).

And I do marvel at these folks who have so much "stuff" and yet appear so young.   I mean, how can a 30-year-old afford a $65,000 pickup truck?  And the answer is, only a 30-year-old can.   Old people, having to live on a fixed income, are often forced to eschew such nonsense or risk going broke or running out of money.   It is like the States - they have to balance their budgets, while the Federal Government can engage in deficit spending, at least for a while.

Anyway, once again I digress.   One reason we are in Central New York is to look at boats.  Yes, boats again.   We were thinking that after taking the Casita to Alaska in 2017 (aboard a ferry from Seattle to Anchorage along the inside passage) it will be 20 years old and pretty wrung out.   We might sell it and buy a used cabin cruiser and cruise the Erie canal, the finger lakes (Seneca and Cayuga anyway), the thousand islands (St. Lawrence river), lake Champlain, and the Hudson.   There is a lot to explore here by water, and it is a lot cheaper than owning a vacation home!

It is an idea, anyway, and we are still in the infant research stages, looking at boats, places to go, places to stay and the costs involved.  We might nix the whole idea and do something else.   The nice thing is, a fresh water boat up here can be in very good shape and for not a lot of money.   In fact, we likely would spend more on fuel than on the boat itself, over a period of years.  We might decide it isn't worth it, though.

But speaking of decisions, the point of this blog entry was about the decision to retire.  One reason I decided to retire is that I no longer enjoy my work as much (another posting about that later) as it seems the Patent system has sort of gone off the rails.  People who actually invent things make no money from their inventions, while others with "paper Patents" and clever lawyers can rake in millions.   Attempts to fix this problem over the years have only made it worse - the solo inventor is really screwed today, while the trolls march on.  The only real function served by the system is to arbitrate disputes between giant multinationals, and even then, the result is often a tie.   But more about that later.

Also, I find as I get older, it seems my anxiety levels are higher.   I am not sure if this is just part of getting older and more conservative (risk-taking is a young man's game) or something else.   Either way, the anxiety of work is outweighing the enjoyment of it.

I look back at times in my life when I made momentous decisions and wonder who that person was.   I had a lot of balls back then, it seems in retrospect, to go to college for 14 years and get other people to pay for it.   To go to law school and get a job with a firm and prosper - only to chuck it all in a few short years and actually start my own law practice.   What the heck was I thinking?   That's far too much a risk to take!

And then to get into Real Estate and buy properties and fix them up and rent them - the risk of being a landlord is far to scary to me today (although technically, I still am one, for one remaining property).   Borrowing hundreds of thousands of dollars - well over a million in fact - to speculate on the market.  It could have gone horribly wrong, and in fact did for many Americans.   And then the decision to sell out when the market was at its peak - and move to the country.  What was I thinking?

I feel that today, I can't make such decisions as they make me too anxious.   But then I think again - I just made what is arguably the ballsiest decision of my life - to retire early.   So maybe I haven't lost my touch just yet.   And over the years, I have found that the decisions based on "gut instinct" that seem irrational to others are often the best decisions I have made.   Time will tell if early retirement is one of them.  In the meantime, I am enjoying the shit out of it.

Thursday, July 7, 2016

Age of Credit History?

Does it make sense to keep old credit accounts open to improve your credit score?   Not really.

There is a lot of mythology out there about credit reports and credit scores.   People will tell you they can improve your credit report or credit score as if it was some sort of cosmetic thing not based on your actual behavior.

Usually these sorts of folks are after your money.   And it is sort of sad how poor people will hand them over tons of money and often absolutely destroy their credit ratings by going to an agency that promises to "fix their credit".   Some of these places actually tell you to stop paying your bills and instead give the money to them and that they will "negotiate" with the lenders to lower your debts and remove negative reports from your credit.   Of course, lenders are not idiots and they don't go along with these schemes, so the borrower ends up bankrupt and further in debt.   Preying on the poor, what's not to like?

The local car dealer promises "credit amnesty" for low-score borrowers.   But of course "amnesty" only means paying horrific interest rates on a car loan - payments so high that default and repossession are almost guaranteed.   Again, the borrower is left broke and destitute and in worse shape than before he was granted "amnesty."

When someone tells you something too-good-to-be-true, it usually is.

Financial sites and discussion groups are full of "advice" on how to "game your credit score" to bring it up a few points.  Some of these techniques work, most are merely urban legends.   Some work, but only bring your score up a few points - which might be helpful if you are at 768 and want to make the vaunted 770 which qualifies you for all the better credit offers.    Others might work, but since you can't change the data on your report that easily, they don't really provide any meaningful help, unless you had a time machine and could go back and change your behavior in the past.

Once piece of advice often offered online is that you should keep your oldest accounts open, as they will improve your credit score.   Thus, if you got a Sears charge-plate back in 1979, you should keep that account open, as it will improve your score.   Is this true?  Does it make any sense?   Yes and no.

It is true that average length of your open credit accounts is one factor in determining your credit score.   But it is not a dominant factor.   If you have a 20-year average of open accounts, that's a fine thing, but if you are delinquent on your payments, it will wipe out that advantage in short order.   One late payment on a mortgage is all it takes to tank your credit score.  If you declared bankruptcy, it really doesn't matter than you have an open account from 1979.

Average age of credit history is only one factor - and arguably the least important - in determining your credit score.  (Click to enlarge)

The other problem with age of credit history is that it is based on the average of your credit accounts.   So, for example, you move to a new town and buy a house.   Your mortgage is only months old.   You buy a car.  The car loan is only months old.   You decide to get a new credit card with your local credit union.  That credit card is only months old.   As a result, you have a lot of "new credit" and maybe only one or two older credit accounts.   Your "average age" of open accounts is now lowered.

You can see why this factor is used.   If someone stays in the same house and pays on the same mortgage for 20 years, their average age of credit will be very high.   This tends to show a stable person who stays in the same place for a long time and has long-term credit relations.   It is one indicia of stability in a borrower.

But credit scores are not an exact science.   And that is why this factor is just one of many factors, and really not a major one.  And as the images above illustrate, your credit score is really not affected all that much by average length of open accounts.  It is possible to have a score well over 800 even if your "average age" of credit is low.

What is really astounding of course, is that credit score can be a really, really poor indication of someone's credit-worthiness.   Since I am largely debt-free at this stage in my life, you would think I would have a perfect credit score.   However, since I am not borrowing money anymore, the system doesn't know what to think of me.   I have no mortgage - so I must be renting, right?   And since I don't have lots of open credit accounts from years gone by, I must be a poor risk, right?

As the image above illustrates, the holy trinity of credit score is (in no particular order) credit card utilization, payment history, and derogatory remarks.  If your credit card utilization (percentage of balance to balance limit) is high, odds are you are living paycheck-to-paycheck and not paying off the balance every month.   If your payment history is spotty (late payments) then odds are you are on the brink of a full-blown credit card crises.   If you have derogatory remarks on the report (bad debt, late payments, and so on) well, you've gone over the edge.

These indicia are based more on your financial solvency than anything else, and there isn't really much you can do to change them, with some exceptions.

With regard to credit cards, I try to pay off any credit card debt before the payment is actually due and thus keep my balance low in relation to the credit limit (and I abhor having high-limit cards as they can be a lethal trap).    So you can "game your score" a bit by making multiple payments every month and thus keep your balance/limit ratio low, raising this factor.

Payment history and derogatory comments is harder to parse.   If you've really been delinquent on your payments, there isn't much you can do to fix this.   But sometimes spurious data appears on your report and it can be fixed with just a phone call or a letter.  Two examples come to mind.

When we obtained our first mortgage together, it turned out that Mark had a "sent to collections" comment on his credit report.   It seems when he left college, his drug-addled roommates had promised to pay the last phone bill (this in the ear of land-lines and before credit scores existed) and have the phone disconnected.   They did neither.

So the phone company kept sending bills until they pulled the plug on the phone.   Since the bill went to a now-empty apartment, Mark never got it.  And the total amount was about $230 as I recall.   The mortgage broker indicated this was not helping our credit report.   I called the phone company, explained the situation, and then wrote them a letter with a check for the full amount and a month later the derogatory data was removed from the report.

In a second instance, I had a late mortgage payment reported on my credit.   We had a mortgage through a local bank (Riggs) which in turn sold it to Key Bank.  I had just signed up for auto-pay on the mortgage, thinking this would prevent any late payments.  But just as I signed up they sold the note to Key Bank and then the next month's payment was marked "late" as it took more than a month for the auto-payment to be forwarded.  Again, a phone call solved the problem.   The operator at the company (whose name was Bell, oddly enough) checked the records and apologized and removed the negative data from my report.   It does take a few weeks to a month for this correction to appear, though.

I am told that since those days, most mortgage companies will not report late payments when a mortgage is sold because of the possibility of payments being mailed to the wrong address or electronic payments being forwarded late to the new lender.   This is not an excuse to make a late payment intentionally, though.   As I found out the hard way, a late mortgage payment will "tank" your credit score in short order.  Of the "holy trinity" a late mortgage payment is the ultimate sin.

Now, on the other hand, if you have been late on your credit card payments for the last two years, a phone call or a letter to the company isn't going to fix things.   They have no reason to correct data that is correct already.  So the idea that you can "fix" a shitty credit report when the shittiness is your own damn fault, is flawed.   The idea that you can pay someone to do this is also flawed.

Will keeping your oldest line of credit open increase your score?   Again, maybe, a few points.   But again, it is a "time machine" piece of advice.   If you've already closed those accounts, what's the point of the advice?

Also, I think you should base your financial behavior on sound financial practices, rather than gaming a credit score.   I closed my Sears account (which I opened in 1981, as I recall) simply because I was no longer using it.   The idea of a dormant account floating around with bills being send to previous addresses frankly scared me to death.   And it is interesting how they handled credit accounts back in the day.   I was buying a DieHard battery there once and the clerk asked me if I had an account with them.  I said, "Oh, yea, years ago, but I closed it."    He asked for my driver's license, typed in a few commands and said, "Oh, your account is still active, and I can put this battery purchase on it right now!"  Even without the "charge plate" I could still charge on the account.   This struck me as kind of dangerous, so I closed the account.   Besides, I don't need to finance a battery anymore.

Making your finances more complicated than they need to be is never a good idea in my opinion.  Doing so to "game" your credit score is, in my opinion, totally idiotic.   I have a good credit score simply because I don't need credit anymore.   That is how it works - to get a loan you first have to prove you don't need the money.   It is an old joke, but a truism nevertheless.

If you pay your bills on time, that has a far more serious impact on your credit score than playing games with account age.   If you keep your debts as low as possible, that has far more impact on your credit score as well.

Of course, today, credit scores are a big deal.  They can determine whether you get a job, a house, a car, or even a spouse.   Not long ago, credit scores didn't even exist.   But today, at least, we can readily view these online, as a free service from our Credit Card provider, through CreditKarma (which will make you all sorts of shitty credit offers) or the like.   You can view your actual report, of course, through which is the only really free legitimate government-sanctioned credit reporting site.

In the not-too-distant past, credit reports and credit scores were a mystery to most consumers.   You only found out about negative credit information only after you applied for a loan, and even then, the lenders were reluctant to let you see your own credit report.  They finally passed a law making it mandatory that you had a right to see your credit report but only if you were refused credit and you made a request in writing.  They finally passed a law saying you had a right to see your credit report, but only once a year by going to the site.   Credit scores, however, were deemed "proprietary information" that you had to pay for.

In the last few years, the credit industry had just let its pants down and let everyone see their credit score through a number of means.   Paying money (such as through Soozie's "FICA Score Kit!") to see your score is kind of dumb these days.   So it is a good thing that consumers at least can see how they are being evaluated and why.   And the reason the industry didn't want us to see these scores and data was that they were concerned that people would try to "game" their scores, which you sort of can do, at least a few points one way or another.

But you can't "game" a 580 to an 800.   It just isn't possible.

Sunday, July 3, 2016

How Weird is Status?

How did stainless steel appliances morph from commercial kitchens to status items?
Status is an odd thing and I talk about it a lot here, as it has a way of draining your bank account for no real apparent reason.   We spend two or three or ten times as much money on things in order to impress people we don't even know.

Now, granted, it is nice to have a house with "nice things" in it.   A house that is calming and peaceful and beautiful.   But oddly enough, status items are often just the opposite - garish and ugly and loud and stress-inducing.    And they are particularly stress-inducing when you stress yourself financially to have them.

But what is a "status item" and how do they become one?    It is odd, but we as humans often ape (poorly) the actions of others to obtain perceived status.   And most of the junk you may crave as status items has its roots in ridiculousness.

For example, take the stainless-steel $3000 refrigerator.   You can spend thousands of dollars today on a refrigerator, and that's not even getting one with a television in it, or WiFi, or a little camera that shows whats inside it (I kid you not!).    They don't refrigerate food better, of course, and often they are far less reliable and don't last as long.   A basic two-door refrigerator can last decades.   These high-end fancy appliances with digital readouts go to the junkyard when their electronic control panels fail.

But all that aside, why did stainless steel become a "thing" in the first place?    Historically, commerical kitchens used stainless as it was easy to clean, lasted a long time, and was considered sanitary.   It didn't rust or corrode and held up to the severe use of a commercial kitchen.

Back in the 1960's or 1970's even rich folks had white appliances.   But a few of the very wealthy - who had servants - had in-house commerical kitchens in their mansions, as they would occasionally host 200-person parties that needed to be catered.   I recall when growing up, going to a rich friend's house and they had a kitchen larger than my living room, complete with a HOBART commercial dishwasher, the giant stainless-steel Wolf range, and built-in SubZero refrigerators.   It was a restaurant kitchen, basically.   Practical for an 12-bedroom mansion with servant's quarters, perhaps.   Not so useful for the three-bedroom tract home.

In the 1980's, people started reading these home magazines that showcased expensive homes.  Prior to that, magazines like "Better Homes and Gardens" were less about mansions and estates than about middle-America and its tastes.   Today, it is all about designer homes, of course.   And as the plebes read magazines like "Veranda" and saw the insides of the estates of the "Rich and Famous" on television, they would see these commercial kitchens and think, "Gee, I would like to have stainless steel appliances just like the rich people have!"   And Norm and Dave on This Old House reinforced this notion by showing how you could afford an ordinary refrigerator made in stainless steel.

And pretty soon, it became a "thing".

Even stuff as lowly and practical as a bicycle is subject to this sort of aping of status.   When I was a kid, you had a bicycle and it had one speed, or maybe a three-speed hub.   It had fenders to keep the rain off you, and a basket to carry your crap.   They were heavy, dumb, cheap, and pretty durable.

But the racers in Europe had lightweight bikes with no fenders, 10 speeds, and "rams head" handlebars.   And it wasn't long before they became popular in America.   But the versions that the plebes bought at Sears or Western Auto were hardly racing bikes, with cheap riveted derailleurs and welded steel frames.  They were just bikes styled to look like racing bikes and as practical means of transportation they left a lot to be desired.   Cheap steel rims bent easily and there was no place to store your gear.   Hit a puddle and you were sprayed with water.   But we all had to have them, because, well, status.   You wouldn't want to be caught dead with some old English 3-speed bike, no matter how practical it was.

Today, the same is true with Mountain bikes.   At least their wide tires and soft suspensions provide some advantages for the average rider.   But most are just bikes styled to look like mountain bikes and not really equipped to handle a downhill ride.

A Wal-Mart "mountain bike" may be OK for riding local flat trails, but certainly is not a serious bike for going down the side of a mountain.

Once again, we are victims of style and status.   More appropriate bikes for daily use do exist, but we eschew them in favor of the look of a serious mountain bike, even if it leaves you with a posture that is uncomfortable for daily riding (there are ways of fixing that, of course).

It is what I call the "Z28 Effect".   Back in the 1960's, General Motors offered on the Camaro, a special racing option for Can Am racing, known as option Z28 (GM's option sheet uses letters and numbers to designate options for their cars).   It featured a 5-liter engine (not the largest available), no heater or radio, no automatic transmission, no air conditioning, no sound deadening, and not even nice wheels (dog-dish hubcaps on steel wheels).   A set of headers was thrown in the trunk for dealer installation.

It was meant for racers only, but soon word got out that the ultimate and rarest of Camaros was a Z28.   And pretty soon, people were clamoring to have this rare and unique car, even though it was not a very comfortable car for daily driving.   "I want a Z28!" the buyers would say, "But with air conditioning, automatic transmission, and an AM/FM radio!"

And General Motors, sensing a market opportunity, did just that, offering fully pimped Camaros with the Z/28 moniker (now with a slash) to the masses.  What was once an option package designation became a model brand.   And once again, consumers are aping the actions of others, without really understanding why they are doing so.

Name a status item, and chances are, it is subject to this effect, in one way or another, usually by design.   By now, you should know that diamonds are carefully marketed and the supply controlled to create demand for them as "luxury" items.   The diamond industry invented the diamond engagement ring and created the myth that diamonds are rare and coveted, when in reality they are plentiful and useful only for industry.   In terms of attractiveness, they are rather ugly compared to colored stones.   But we are all convinced they are desirable, so they are.

The joke is, of course, that today we even covet costume jewelry.   When I was a kid, rhinestones were considered the ultimate in tackiness.   They were called paste, glass, or costume jewelry.   And folks who wore such trash were looked down upon.  Today, we call them "Swarovski Crystals" and they are considered the height of luxury, at least by some, who actually pay a premium for them.

Others, however, realize that from more than a few inches away, a piece of glass and a piece of diamond look pretty much the same, and they embrace "costume" jewelry for its appearance, not its status, value, or collectability.

Cars are a prime example.   The whole "SUV" thing exploded from the 1980's when four-wheel-drive became a "thing" and ordinary people decided they needed a rugged "off road" vehicle to drive to work every day.   People would think they were having radical off-road adventures every weekend!  Those lamers in their sedans don't know what they're missing!

But of course, the SUV buyers quickly tired of rough suspensions, live axles, and plebeian interiors.   And pretty soon, nearly every car made was called an "SUV" and came with (or was available with) some kind of all-wheel-drive (without those messy and hard-to-use levers, of course!) and leather seats and soft rides and whatnot.   Since none of them ever went off-road, it really didn't matter if they didn't have any off-road prowess.

And so on down the line.   People buy an iPhone or a Macbook because of the Apple logo on the back.   They are worth twice to ten times as much as other brands, we are told, because they are.   But try running half the programs available for a PC on a Mac - you just can't, particularly games.  There is really no inherent advantage to a Macbook or an iPhone just as there is no real advantage to owning a stainless steel refrigerator.   All you have are bragging rights, which are worth nothing.

So, why do we do this?   And we all do it, so let's be honest right there.   Even if we are paddling in a canoe, we look down our noses at those in a rowboat - never mind the 50-foot yacht next door.   It is human nature to want to be unique, different, special, and above the soiled masses.   We all do this, go get over it.

Even being anti-consumption is a status symbol, or can be.   And when it comes to status symbols, the reality is, it doesn't matter whether other people perceive you to have status, so long as you believe it to be so.

So what is the point in all of this?   Well a few things.   First, realize when you are buying status or worse yet, aping status.  Because status costs you money, and if you can avoid that, you can save yourself a lot of dough, even if the housewives on your street will snicker at you for having a plain white refrigerator or an ordinary sedan.

Second, you can save a boatload of money if you can avoid status, or at least seek out things others are overlooking because of status.   Right now, automakers are giving away cars because everyone wants an SUV, even though most SUVs never, ever, ever go off-road.   If you really look at your automotive needs rather than status desires you can score a better deal on a vehicle that costs less to buy and gets better gas mileage to boot (and won't have expensive AWD repairs down the road).

And it is not like you will be living a deprived life, either.   Rather, you just won't have bragging rights with your brain-dead neighbors, as they sip their Starbucks while texting on their iPhone while driving their overwrought SUV - all while hopelessly in debt.   In the long run, who is really better off, you or them?

Because that is the real problem with status - people strive for status and often bankrupt themselves doing it, either literally or morally.   Even if they can "make all the payments" on their collection of overpriced junk, they are under-funding their retirement or working harder than they should, just to have "things" they never have a chance to use.

And I say this from experience.   Having fancy things is indeed nice.  But when you have to work long hours to have them and never have a chance to enjoy them, what exactly is the point?