Thursday, June 22, 2017

Profit Taking

Sometimes it is OK to sell something that is doing well.

I sold half my interest in Berkshire-Hathaway today.   50 whole shares of class-B, as I am a big-time investor.  I bought this stock a couple of years back for $8000 and it remained flat for a while.  Today it is worth $16,000.   So I did OK.   I am selling half of it to lock in my gains.

The temptation is, of course, to say, "Keep it!  It will double again in value soon!" and that is the logic many people use to "ride it all the way down" with a stock.   But I have qualms about the "Oracle of Omaha" for a number of reasons.

First of all, he is getting old and will die some day, and no apparent successor is in the wings.  There was one, but he got bounced.   And when Buffet dies, well, the stock will take a nose-dive until the succession thing settles.  He could die tomorrow, for all we know.  It may rebound, of course, but be prepared for a bumpy ride.

Second, was a piece in the news that Buffet is investing in troubled Canadian mortgage company.  If you've been astute, you've heard the rumblings about how the Canadian real estate market is getting overheated and the denials from everyone that it is a bubble.   Having been down this road before, one sure sign of a bubble is articles (usually from Real Estate agents) saying it isn't a bubble.

People also like to say, "Well, if it is a bubble, why doesn't it burst?"   Bubbles are elastic, and they tend to overshoot a market due to hysteresis.  Hence they are bubbles.  If housing prices tracked reality in real-time, there were never, ever be bubbles - nor in the stock market.   People get ahead of themselves.

I got out of the Real Estate business in the USA in 2005.  The bubble didn't burst until 2008.   My timing was off, but better two years early than two years too late.    What kept the bubble going was funnier and funnier loans, culminating in the "payment optional" buydown ARM liar's loans that went toxic in a matter of months.   The low payments made the houses "affordable" but the terms of the loan insured eventual default.

Time will tell whether this company Buffet is investing in is the next Countrywide.  You remember Countrywide.  Bank of America thought it was "smart" to buy that troubled mortgage company (are there any other kind besides troubled?).   It blew up in their face and nearly bankrupted BoA.  It also gave them a black eye as people blamed the bank for the shitty loans than Countrywide made.   If anything, Bank of America was another victim in this scenario - being sold a bill of goods like the rest of us.

Funny thing is, the financial press is silent on why this Canadian company is "troubled: because they misreported some issues about mortgage fraud.    I have written about this before, and most people don't get it, so I wrote about it again.  It is not fraud against the borrower, but against the bank.   So $2 Billion in bad loans are made, the criminals paid by the loans (sellers of homes with padded prices) take the money and run.  The bank is stuck with a home worth less than half the value of the loan.  This to me is another sure sign of a bubble-in-the making.  It is Ft. Lauderdale, 2008 all over again.

By the way, the complexities of mortgage fraud and people's unwillingness to learn about it and unwillingness to even understand it when explained to them is why I say never invest in something you don't understand.   And we don't understand much in this world, as the press reports things at an 8th grade level, if that.   Details are deemed "boring" and "messy" and will turn off readers and viewers.   You still sure you want to get your info from the financial press?

But the third reason is profit-taking.   It is OK if you've made a lot of money in something to sell it.   When I made a staggering sum (for my investment) in AVIS, I quickly sold half of it.  And indeed, over time, the stock has dropped somewhat (from a high of a 7000% gain to "only" 2400% today).   When my friend's bank stock doubled in value - I sold half of it.   And when it doubled in value again - and again, and again, each time I sold half.

Should I have kept that stock and earned even more profits?  Well, if I had a time machine, I could go back and do that.   But the time machine conundrum again - using backward-looking statistics to invest is a really shitty idea.  Coulda, woulda, shoulda is a horrible way to invest.  "I could have made a lot of money if I had held on!  Next time I'm keeping that stock!"

But next time, the stock tanks.  History doesn't repeat itself - exactly, anyway.

This leads to the fourth reason - diversifying.   If I sell half this stock, I can invest in something else.   By doing so, I end up with a portfolio of different stocks over time.  And in fact, this account started with about four or five stocks and and has expanded to about 30 or so.   I used dividends to invest in different stocks (or bonds) over time, or I take profits and use the money to invest in different stocks (or bonds) over time.  I am less dependent on any one stock or bond or other investment going South as a result.

Security is more important than wild profits, particularly as you get older and older.   As a 20-something maybe I could afford to hold on to this stock and see where it goes.  As someone who is pushing 60, I need the money to live on, not gamble on.   So I take profits, invest in other things, and slowly over time move money into safer and safer harbors.

This insures that my retirement is secure and I won't run out of money.

Of course, if I was a stockbroker and gambling with someone else's money that would be a different story!

Manipulated Markets

One problem for the small investor is that big investors can manipulate markets and screw you.

A reader writes in response to a previous posting that many believe the collapse of the "urethra" crypto-currency market was the result of manipulation.   Of course, you invest in something called "urethra" you should expect to be pissed on, right?

The problem is, as I noted in that posting, that as a new currency that is not widely traded, it is easier to manipulate the price.   A sudden large sale depresses prices and you could then go in and snap up the stuff for far less than market value, since other holders sales (which are borrowed shares) are triggered by automated sell orders.   And as for your million-dollar sale, you don't have to worry, as you are buying your own crypto-currency back at the lower price.   You lose nothing.  At least in theory.

Manipulating markets isn't easy to do, even if you are mega-rich.  The Hunt Brothers tried this back in the 1970's with silver - trying to corner the market and drive up prices.  They drove up prices for a while, but then it all collapsed and they went bankrupt and no one felt sorry for them.  And other people have tried this with stocks, copper, and other commodities and investments - and in many cases, also lost their shirts.

The problem is, not only do these people lose their shirts, many small investors lose their shirts as well.   Since the market values are manipulated, unless you buy before they try to corner the market, and sell before it collapses (you need a time machine, once again) you risk losing a lot of money.   And typically what the clueless small investor does is buy after the financial media reports the price is going up when it is too late to get on the bandwagon.  They hang on until after it collapses and lose everything - or at least a lot.

Like Homer Simpson in the video above, you don't want to be holding pumpkin futures on November 1st.   But most of us are like Homer Simpson - we don't really understand the markets or why something is going up in value or down.   We hear about people who make money in the market, but no one talks about their losses.  Heard anyone admit to buying gold at $1800 an ounce?  Someone did.  It is like gamblers - they remember the big wins, but forget all those small (or not-so-small) losses.

Rather than trying to ride these waves of speculation a more sure thing is to invest in a company that actually does things - creates wealth - and makes a profit and pays dividends and then use time to make money for you.   Speculating on a company that is showing little or no profit on the premise that someday it might is just gambling.   Speculating on minerals or other commodities on the premise that the price might go up just because it you think it should is just gambling as well.

Dividend stocks overall tend to do better than non-dividend stocks.  One earns income, the other is often mere speculation.

Time has shown that dividend stocks tend to out-perform speculative stocks as a whole - which is not to say that just any old stock that pays a dividend is a good investment - you still have to crank the numbers.  And there other things to invest in besides stocks - bonds, government bonds, real estate, whatever.   The idea that you can "time the market" or get a "hot tip" and make it big is an illusion - usually an illusion fueled by people who want to take your money away from you.

The guy promoting the stock on the television or in the financial pages already bought his shares.   Once you buy, and drive the price up, he sells.   And apparently, this is perfectly legal, provided he doesn't lie about the company.  He's just sharing what he thinks is a good investment, right?  Caveat Emptor.

But this effect of cornering the market also illustrates why you don't want to be a minority investor in a thinly traded stock.   Say, for example, you buy stock in a company where 51% of the stock is owned by family members of the founder, or investment bankers, while only a small minority is owned by chumps like you.   They can control the company and make decisions - and manipulate the price of the stock as well.

Small family-owned companies are the worst, as they will pad the payroll with their relatives and take money out of the company and leave you with nothing.   Oh, yea, they have a fiduciary duty and all, but all that leaves you with is the right to sue.

IPO stocks are not much better.  Many of these famous dot-com IPOs of recent years sold off only 5-10% of the company.  Some even were so ballsy as to limit voting rights of IPO shareholders.   You are feasting on the crumbs at the table here, while the founders gorge themselves on roast beef.

"But Bob!" people say, "All those other people are getting rich!  I want to get rich too!"   But you won't get rich playing their game.   They make money selling this crap to chumpsters like you and me.   And they hype, in the financial pages, just enough stories about Johnny Lunchbucket striking it rich to get you to think, "Gee, that could be me!"

Casinos use the same strategy.   So do personal injury law firms.   So do a lot of rip-offs in the world.  Ever seen a billboard for a payday loan place, with the lady with the fan of $20 bills?   This, too, could be you!   No one talks about or advertises the down side.

Gambling is not Investing.   If you want to "Strike it rich!" then good luck.   But this blog is not for you.   Because that kind of mentality is the exact opposite of what I believe in.

And no, I'm not about to change my mind.

The Secret to Investing is.... No Secret.

Succeeding as a small investor means only that you should avoid swimming with the sharks.

Lots of people want to believe in the tooth fairy.  They desperately want to believe in something-for-nothing or easy riches and wealth.   After all, the read about "rich people" in the paper all the time, and surely they didn't work to get wealthy, right?  Movies reinforce this mentality - that in order to succeed in life, you have to cheat or do something underhanded.   And sadly, this mentality takes hold in American's minds.

And hucksters galore will sell you "the money system" or a seminar or something, because the rubes think there is a "secret" to wealth and that you can buy this secret.   But they never bother to figure out that if there was such a secret, no one would tell it to you or sell it to you, because, well, then it ain't a secret.

But there is no secret.   Yea, some people get lucky and make millions or billions.  Some work hard and get lucky and make millions or billions.  Most people who are "wealthy" worked hard, saved money, invested it in rational things, and did well over time.   Little people who get crushed by our financial system are the ones that gamble - literally in casinos, or figuratively in sketchy "investments."

The "secret" to getting ahead is not really a secret.  Spend less, save more.  Invest in rational, normal things.  Stay away from futures trading, commodities trading, stocks, IPOs, or any other huckster-type deal that is promoted on the Tee-Vee or worse yet, the Internet.   Diversify your portfolio so if one investment goes bad (and more than one will!) you are not wiped out financially. 

This is simple, basic advice that all the rational actors in the marketplace give free of charge.  Most folks take it - those folks you think of as "rich" follow this advice.   Others don't and get fleeced.

In this special report from Reuters, they mention offhand, the experience of this one farmer:
In three years of managing investments for North Dakota farmer Richard Haus, Long Island stock broker Mike McMahon and his colleagues charged their client $267,567 in fees and interest - while losing him $261,441 on the trades, Haus said.
McMahon and others at National Securities Corporation, for instance, bought or sold between 200 and 900 shares of Apple stock for Haus nine times in about a year - racking up $27,000 in fees, according to a 2015 complaint Haus filed with the Financial Industry Regulatory Authority (FINRA). 
Haus alerted the regulator to what he called improper “churning” of his account to harvest excessive fees. But the allegation could hardly have come as a surprise to FINRA, the industry’s self-regulating body, which is charged by Congress with protecting investors from unscrupulous brokers.
The story was about unscrupulous brokers.   But they don't bother to go into too much detail as to why a farmer from the mid-west is losing a half-million dollars in trading fees and churning.   That's more money that most Americans hope to save up for their entire lives.   The answer is, of course, that the "brokerage" likely cold-called this guy and told him they could make him tons of money.   And he didn't bother to investigate this too much or think to himself, "Gee, if these guys can make lots of money investing, why don't they invest their own money?  Why are they calling me?"

And they were calling him because they likely can't make a lot of money investing, but rather they make a lot of money churning other people's accounts.   And shitty deals like this abound in our free-market economy.   People tout gold bars on Fox News (I saw it in a bar last night - sound off, thank God).   People push and IPO stocks on the financial channels.   The shouting guy is still on the air even though he has been repeatedly exposed as a charlatan.

And yet, every day, another small-time "investor" jumps into the deep end of the shark tank and ends up as chum.   Why?  Because they don't know where to invest their money, so they look around and think about what could be the next big thing.   They want to "win" at all costs - in a game where they don't even know the rules.

And I say this from experience, as when I was younger, I thought, "Yea, I want to make big money in the stock market!" and proceeded to lose my shirt.   It was only a few thousand dollars, but it was an expensive tuition for a lesson well-learned.   I stopped looking for "the next big thing!" or the "big stock tip!" and started thinking about more prosaic, steady investments that earned profits and paid dividends, and over time went up in value almost uniformly.

You see, as small investors, we'd like to "win" of course, but we can't afford to lose.   Maybe a Billionaire venture capitalists can afford to throw a few million or hundred million at some "start up" company and hope to hit it big.   They don't have to worry about retiring on catfood.   We do.   We cannot afford to "lose it all" and start over.

Have I taken some big risks that paid off?   Yes, but in small amounts.   $750 invested in Avis on a whim went up several thousand percent.   If I had invested my entire portfolio, I would be a multi-millionaire.   I could not afford to invest my entire portfolio in a company that could have just as likely gone bankrupt.   I invested in a bank started by some friends.   That more than quintupled in value.  I did not invest much - not more than I could afford to lose.

I also did dumb things like buy GM stock before it went bankrupt, or Martha Stewart, thinking a cookbook and television show was a "media empire".   It was not.

I also learned that trying to time the market was nearly impossible.   Unless you have your hand on the pulse of something, it is very damn hard, using the same data everyone else is getting to understand whether a stock is going to go up or down.   Taking someone else's advice in this, is even worse.  I got out of Real Estate in time, only because I was immersed in that market and saw that it was going crazy.   People who didn't understand real estate kept buying, right up to the very end. 

Never invest in things you don't understand.  And when someone tries to sell you an investment and you are skeptical and don't "get it" maybe you should back away.  When the person trying to sell you such a turd condescendingly tells you that you just don't appreciate how it works, run away.

You are going to make money on some investments and lose money on others.   Overall, after 30-40 years, you will do OK.   If you try to "hit the jackpot" you likely will lose everything you've worked for.   You might as well just go to the casino and gamble - at least they give you free drinks there. 

Stay in the shallow end.  The water is just fine.

Why Commodities Are Not An "Investment"

Gold has shot up in value fairly recently, after being stagnant for two decades.

A reader asks if commodities are a good long-term investment.  I think you need to look at the track record of commodities and understand what they are to figure this out.

For example, while the media hyped the snot out of gold after it went up in value, no one talked about it between 1982 and 2002 (20 years!!) when it stayed flat in value (see chart above) and if you adjust for inflation, lost value.   And I suspect gold might do this again, remaining around $1000 an ounce for many years to come.   But that's just my guess.   And guessing isn't the same as investing.

Sure, you can show huge "gains" with any commodity over time, and you can also show huge losses, depending on your start and end-points.   But overall, over time, commodities don't outperform equities, as even recent history shows.

As I noted in other postings, gold is no different than other metals, minerals, or commodities.   Gold-bugs chant "gold is different!" but it is no different than aluminum, zinc, or even ordinary dirt.   It is a commodity, plain and simple, whose "value" fluctuates based on supply and demand.   Commodities don't earn income but merely vary in price over time, upward or downward.

This is not investing, it is gambling.   You might as well buy Elvis Collector Plates - they are a commodity as well.

So why do people trade commodities?   Well the key word is trade.   People don't buy-and-hold physical objects hoping they make money over long periods of time.   They usually don't.   Whether it is collector cars or antiques or whatever, in most cases, these things rarely appreciate much faster than the rate of inflation.  Most people lose their shirts.

Like Bitcoin or indeed any currency, people often buy gold as a means of parking money or exchanging money (indeed the definition of currency).   But hanging on to it makes no sense at all, any more than hoarding dollar bills would make sense.

Investing means putting money to work at an enterprise where the money is invested and used to create wealth.   A factory is built, people are hired, raw materials are bought.  Manufactured goods are made, and they are worth more than the sum of the parts.   Profits are earned, dividends are paid.   It need not be a factory, it could be some other enterprise, a loan, a bond, or whatever.   The point is, the money earns money - it makes money.   Commodities just sit there earning nothing, their value changing only due to their perceived scarcity.

I used the example of aluminum before.   Before new processes were discovered to make aluminum cheaply, it was one of the most valuable metals on earth - far more valuable than platinum and gold.   Overnight, it became nearly worthless in comparison.  Indeed, we throw away aluminum cans by the side of the road today.   If you could travel back in time to 1850 with a six-pack of lite beer, you'd be a millionaire.   Or at least very rich, anyway.

Oil is another example, and right now we are seeing how its value has fluctuated just in a few short years.   I was told at GMI that by 2000 or so we'd run out of oil and it was scarce.  Then the Canadians started tar sands.  We started fracking.   Suddenly, the world is in an oil glut.   That is the nature of commodities - subject to the whims of supply and demand, in this case, a glut of supply.

Or take demand.  Another "virtual currency" crashed last night as someone tried to sell off a huge chunk of it on an "exchange".   Since the number of people wanting to buy the currency is limited, the price started to drop off as this huge sale went through.   And that can occur in a lot of markets - including stock.   Again, we like to say that Bill Gates is a "Billionaire" based on his Microsoft stock shares, multiplied by the current share price.   But what do you think would happen to the share price if this morning, he put it all up for sale at once?   This is why "market cap" is bullshit.

Anyway, eventually, demand caught up with supply and this "virtual currency" recovered somewhat.  But it illustrates how volatile commodities can be.   Whether it is gold, oil, bitcoin, pork bellies, soybean futures or whatever, prices can change dramatically.   And this makes "investing" in this stuff little more than gambling, for the ordinary middle-class investor.   Yes, a lot of people get rich buying and selling commodities, you are not going to be one of them.   Rather, you will be the one who loses his money so the smart guy makes money.   The way to get ahead in the world is not to try to out-smart the smart people, but to simply not play their game.

So why do people buy and sell commodities?   Well, as noted before, it can be a way of parking money (in gold) during economic upheaval.   It can be a way of transferring money (Bitcoin) usually for illegal transactions.    And it can be a way of hedging risk.   A farmer grows a crop and hopes to make money.   But he is at the mercy of weather, insects, plant disease, drought, and fickle markets.   He might actually beat all the former but fail at the latter.  He has a bumper crop of corn, but then again so does everyone else - the market is saturated and prices plummet, to the point he is losing money on each bushel sold.

He can sell off his crop before it is even harvested as a commodities future and let some gambler bet on whether crop prices will go up or down in the interim.   The farmer gets an assured price, the gambler might clean up in the market later on.   It is a tricky business and you have to know these markets intimately - have studied and traded in them for years and years.

Which is why it is so suspicious that Hillary got into commodities, made $100,000 in three months, trading on the advice of a former executive for Tyson's foods (who was trying to settle an environmental claim with the Arkansas governor, her husband) and then got out of commodities trading and never went back.   The odds are..... well, long, to say the least.   Maybe that's why she lost the election, in part.  But I digress....

Commodities are not for amateurs.   The financial media hypes things that go up in value suddenly, and amateurs figure, "Hey, it must be poised to go up further!" and lose their shirt.

Succeeding as an amateur investor means understanding that you are an amateur.   You are a little girl with a floaty, swimming in a shark tank.   Stay in the shallow end or get eaten alive.   No, you might not "make out like a bandit" but you can prosper and do well - and not end up broke, bitter, and depressed.    Small-time investors who think they can "strike it rich" are the types who end up living in a van and then railing against society.

Wednesday, June 21, 2017

New Technologies, New Crimes

Will new technologies help deter crime, or will criminals just find new ways to commit crimes?

A reader writes opining that perhaps new technologies, such as near-field, will cut down on shoplifting and reduce crime.   I am not so sure.  It seems each new technology might cut down on one particular kind of crime but often creates terrifying new kinds of crime that are even harder to suppress.

I wrote before about my debit card being stolen.  It was a fascinating trip down the rabbit-hole as I learned how a complex con was being put on, with my debit card being one cog in a giant wheel of deception.   And it involved the Internet, Western Union wire transfers, VoIP phone lines, and pre-paid debit cards - three of those technologies being relatively recent in nature.   The con, run out of Russia, would not have been possible in earlier days, as the criminals would have no way of reaching their victims.

The Internet, of course, has created whole new kinds of crimes - legions of them.  Everything from the basic Nigeran scam (which dates back to the days of fax machines and even letters), to Craigslist scams, to reputation blackmail, keylogging scams (to steal banking information) to ransomware, to - well whatever they've thought up this week in Russia or China, or Nigeria or wherever.   The Internet has created whole new classes of crimes that are nearly impossible to police.

Or take a simple technology like steering column locks.   In the 1960's car thefts were legion, and Congress passed legislation mandating steering column locks (something that was on the Model-A Ford!) to reduce theft and thus reduce insurance costs, which were getting out of hand.   Of course, thieves found ways around this (a simple dent-puller could remove the lock cylinder and you could start the car with a screwdriver).   So car alarms were next, and thieves found out how to disable those, or just ignored them, as people simply didn't pay attention to sirens going off in the big city.   Car disablement devices (common on BMWs) or "immobilizers" were next.  Thieves would just flat-bed the car away.

Of course, the easiest way around all of these theft-prevention devices is to simply carjack.   Put a gun in the owner's face and demand he get out of the car.   You drive away with the keys.   Of course, with car titles, it is harder to register and use such a car - or sell it.   But some thieves found that even VIN numbers could be swapped with an identical wrecked car bought at auction, as illustrated in the prologue of the 1970's movie, gone in 60 seconds.

Many thieves found that with expensive cars, it was more profitable to just "chop" them and sell the parts - and they parts were harder to trace.  Car makers put VIN numbers on fenders and doors and even window glass.   It made no difference - people would simply remove the stickers or grind off the numbers.   It is like a game of chess, one side makes a move, and the other a counter-move.

And yes, car theft is way down today.   But still people steal cars and drive them to Mexico to sell, and kids still joy-ride if they can either find and older car with an easier to defeat ignition.   Or they carjack.

And sometimes technology enables crime.   We were supposed to get a new air traffic control system decades ago.  Our existing system relies on radar to track planes, with each plane providing a "transponder" which broadcasts its identification and altitude in response to being hit by the radar beam.   A proposed new system, ADS-B would rely on GPS, with each plan broadcasting its position as well as altitude, speed, and other data.   It seemed like a good deal until 9/11.

After that, well, someone pointed out that it would not be hard to "spoof" the system by altering the ADS-B system on a plane so that it reported a different location, altitude, speed, or identification.   The system might not realize a plane was off-course until something very bad happened.   Changes have been made to provide redundancy and perhaps ADS-B will become a reality in the near future.  The point is, you have to think like a criminal - or a terrorist - to find the holes in new technology and find new opportunities for crime.

Even something as stupid as a $10 laser-pointer can be used to try to blind a pilot and down an aircraft.   Our massive Interstate highway system is a modern marvel of transportation, until a 14-year-old decides to drop bricks off the overpass and kills some Mother on her way home from work.   New technologies, new terrors.  And it has been going on for some time now.  Bonnie and Clyde wouldn't have succeeded as long as they did without the Ford Model A and the flathead V-8.  He even wrote a letter to Henry Ford, praising the car for its getaway uses.

In the UK they have cameras everywhere which helps them fight crime, or at least catch people once the crime has been committed.   We don't have so many of these in the US because of "privacy concerns" - apparently what street you walk down is a state secret here.   But terrorists are not deterred by police cameras - they only provide the horrific documentation of a terrorist attack, which actually helps their cause, as people are terrorized by such after-the-fact videos.   Suicide bombers are not worried about being "caught" unless it is before they can carry out their crimes.

The RFID and near-field technologies would seem to help deter shoplifting and crime.   The clever "stealth" shoplifter who conceals items on his clothing and slips out of a store - only to return the merchandise for cash or store credit, is having a harder time as I discussed.  Store cameras catch him in the act, and store security can tap him on the shoulder and detain him.

But that doesn't stop the "brute force" attack.   People grab armloads of goods and simply run out of the store.   Store security doesn't chase the thieves as if the thief knocks down a customer the customer will sue the store for injuries.  Or even the thief will sue.  So the "smash and grab" technique has become very popular with shoplifters.  Stealth and deception are out, brute force is in.   And all this high-tech doesn't deter brute force.

And I think some of this "tech" could backfire in a big way.   For example, some cell phones rely on your finger print to activate.   If someone steals your cell phone, they can't use it without your finger.   Of course, some thieves might just decide to cut off your finger or hold a gun to your head and force you to unlock the phone.   The same is true for ATMs.   Again, all the high-tech in the world might deter the pickpocket who uses stealth, but not the criminal who puts a gun in your face.

And of course, many if not most crimes are not for profit but crimes of passion.   Technology might help us catch such criminals, but not stop such crimes.  Someone shoots their spouse or lover or rival or foe, and there isn't much you can do to stop this.  You can only clean up after the fact, collect evidence, take witness statements and try to find the perpetrator.   Usually its the guy standing over the body with the gun.

Self-driving cars might put an end to speeders, reckless drivers, texters, drunk drivers, as well as reduce the number of accidents.   But again, thieves and terrorists will figure out new ways to spoof technology to create crimes or horror.   A terrorist could fill a self-driving car with explosives (or plant them under the hood) and set it off to a crowded destination.   Suicide bombers without the suicide.   And if you programmed 10 or 20 or 100 to go off around the same time.....

So how do you fix that?  Put cameras in the cars?  Motion detectors?   Would people stand for that?   Surely someone is thinking about these things.

A self-driving car could be used as a getaway vehicle, I suppose, but computers would have to be programmed to track the paths of cars (again, privacy concerns).   A bank-robber gets into a self-driving car and speeds away.  No one gets the license number.   How do you track it?  Under today's laws, you'd have to go to a judge and get a search warrant for Uber's data files, hire five programmers to go through it and find out where the car went.   By then the crooks are long gone.   And if they changed cars several times en route, well that could complicate things.

This isn't hard to do.

What about drones?  Couldn't the police use them to deter crime?  Sure they can.  And criminals and terrorists can use them to cause crime.   Drone-mounted guns are already a thing, and could be used to rob or murder someone by remote control.  How can you outrun an armed drone?  You can't.  You just hand over your wallet, perhaps to a second drone and hope for the best.  Terrorists are already dropping bombs via drones.   People are dropping drugs and other contraband into prisons via drone.  This new technology may create more crimes than it deters.

If technology is to deter crime it is in providing a better standard of living for everyone.   Crime decreases when people are better-off, which is one reason crime has dropped so dramatically since the 1970's in America.   But this also means we have to look at new technologies and think to ourselves, what would an evil person do with this?   And then figure out ways to prevent such technology from being used for evil purposes.

I am not encouraged.   The Internet today is used as a recruitment tool for ISIS and other terrorist groups.   For some reason, we are unable to police ISIS videos on the Internet, although we seem to be able to shut down other illegal activities such as copyright infringement, drug sales, and child porn.  I am not sure why a beheading video is protected "free speech" at all.   Maybe we are taking our "rights" a little too far.

And therein lies the rub.  Technology creates all sorts of human problems and the easiest way to curb these abuses is to limit our freedoms - our right to privacy being the first casualty, our right to free speech being the second.   That in turn ties our hands, as people get up in arms about "surveillance" as the NSA tries to track terrorists and other types of criminals.   To some extent, these concerns are valid, in other cases, less so.   To hear some people tell it, people have a right to commit crimes, provided they are not caught.   I'm not so sure I'd go along with that one.

How Point-Of-Sale Has Changed And Is Changing.

Automation is going to take away even more jobs at your local grocery store.
But not all of them.

Checkout procedures at grocery stores have changed dramatically since I was a kid.   Back in the 1960's and 1970's, young men and women, sometimes high school kids, would work at grocery stores "pricing" items.   A tape gun with pricing labels would be used to attach a price sticker to every item in the store, which was a tedious task.  And if one item was missing a sticker, the store had to do a "price check" and have some other clerk run back and see how much the item cost, so it could be rung up. ("Price Check" is phrase you'll never hear at Dollar Tree!).

It was a primitive system, with little in the way of controls.   You could only guess at how much product you sold, based on what you ordered and what your inventory was like after the fact.   How much you lost to shrinkage (theft) was anyone's guess.   You bought stuff, priced it, sold it, and hoped that there was more money in the till at the end of the day than what you paid for product, rent, labor, and utilities.  The customer's receipt was just a list of numbers and maybe category indications (grocery, produce, meats, frozen, etc.).

In the 1970's, they started putting little slices on the stickers, as shoppers realized they could peel off a sticker that said "$1.99" and put it on a product that cost $3.99 and then check out.   The new stickers would fall apart if you tried to peel them off.   This was high-tech retailing, circa 1975!

All that changed dramatically with the Universal Product Code or UPC with its numbers and bar codes.   Items didn't need to be "priced" but instead a label could be placed on the shelf telling shoppers what items cost.   A bar-code scanner at the register would then ring up the purchase, providing a detailed receipt of what was purchased, and also deduct the item from the store inventory on the computer.  The system could even be programmed to reorder items automatically, as they were purchased.   Now you could know, with precision, what you ordered, what was sold, and how much was being stolen.

It took a while for stores to buy the new registers with the laser scanners, as well as time for food producers to put UPC codes on their products.   For a long while, many grocers had to create their own UPC codes (and some niche retailers still do) for un-coded products, and manually place stickers on items, still.   The technology was around for a long time before enough installed base and customer acceptance occurred and it truly became a "universal" product code.

Of course, many people freaked out when price stickers went away.  How would you know how much something cost?   Some were outraged, but over time, people got used to it.  There was some bruhaha initially when some stores changed prices in the computers during business hours.   You would pickup a can of peas for 69 cents and by the time you got to the register, it was 79 cents.   Laws in some States put an end to this practice - today, prices are usually only changed overnight when the store is closed.

The new system stayed pretty static for a number of years.   But over time, retailers started exploring new ways of checking out.   And again, you may be reading about this stuff today and thinking it is all "high tech" stuff, but I was writing Patents on this crap literally decades ago.   The technology has been around a long, long time, but getting social acceptance and an installed base are keys to implementing such technology.  And sadly for inventors, often the Patents have long expired by the time some types of technology become commonplace.

UPC codes had other uses as well.  For example, you may see these "coupon printers" at the checkout, usually from Catalina Marketing - although they are pretty old-tech these days and falling out of favor.   Using the UPC data, the coupon printer could generate coupons tailored to the customer's shopping habits.  You buy cat food and the machine cranks out a coupon for cat litter.   Buy baby formula, it cranks out a coupon for diapers.   Hey, they know you'll need one, if you bought the other, right?  Shits got to go somewhere. 

Self-checkout was the next thing to come down the pike.   And again, many people resisted this and some still do.  I know people who vehemently refuse to use self-checkout, even if they have only three items and there is a line at the regular register.   They will wait 20 minutes in line at a register rather than use self-checkout.  These are the same people who can't be bothered to come to a full stop at a stop sign, because they're "in a hurry."    Of course, while they wait in line, they line-hump.  People are very selective about what they are in a hurry about, it seems.

Self-checkout doesn't eliminate the cashier, of course, but allows one cashier to monitor four to eight self-checkout kiosks, which reduces labor cost by a factor of four to eight (most stores have self-checkouts in pods of four, Wal-Mart is more aggressive, and usually has six to eight).   Between bar coding and self-checkout, retail stores have eliminated a lot of labor from their overhead.   They still need people to stock shelves and help customers (customer service, of course becoming scarcer and scarcer) and they still need someone to monitor the self-checkout stands.  And they need security to monitor shoplifting, although lately this is a dicey proposition as shoplifters have "rights" and shopkeepers have none - other than the right to be sued for detaining a shoplifter.

Scan-and-go was another idea from many years back that is starting to hit the stores.  Sam's club has an app for it.  I'm sure other stores do as well - or will.   Again, the roadblock to implementation wasn't the technological side, but the social.   Once smart phone implementation was near 100%, it was possible to enable these types of technologies.    Before then, not so easy.

The technology isn't difficult.  You use the "app" to scan the bar codes on items you buy as you put them in your basket.   When you leave the store, you just walk out and put the items in your car.  Your credit card or other payment option is debited by the amount you bought.   Like self-checkout, it is somewhat based on the honor system (although self-checkout scales tend to keep pilfering to a minimum).   But again, you have someone at the door who checks your purchases as you leave (as they do at most wholesale clubs) and you have store security keeping an eye on you as well - with numerous cameras throughout the store - welcome to 1984!

One problem with this model of scanning is that it is all-too-easy for shoppers to innocently "forget" to scan an item, and thus end up as unwitting thieves.   And I am sure that more than one shopper has forgotten this way, and if they are caught, made to look like shoplifters, when they did not intend to steal.  This could limit acceptance and implementation of this technology.

Enter RFID and "Near-field" communications, which are related technologies.   Again, a decade ago, my inbox was filled with this stuff - people wanting to use "near field" in retail checkout.  The technology isn't all that new - RFID (Radio Frequency Identification) chips have been around for decades.  Those metal loops at the exit of the store generate radio waves which are picked up by small antennas in these little chips.  They read a code on the chip and rebroadcast it to the antennas.  If you didn't "deactivate" (reprogram) the chip when you bought the item, an alarm will sound and you will hear that voice say, "Please return to the checkout area!" which is embarrassing.

I had a pair of sandals once that had these chips embedded in the soles.   Every time I went to Home Depot, the system would accuse me of being a shoplifter, until a helpful clerk "scanned" my shoes and deactivated the RFID chips!

RFID also allows retailers to assign a serial number to individual items.  So unlike bar codes, not only do you know what the item is and its price, but which of the ten items you have in stock it is.   I saw a young lady try to return an expensive faucet (without receipt) at Lowe's one day - many years ago - and the manager told her, "I can't take this back as our computer shows it is still in inventory!" - what he was saying was that the item was in fact, shoplifted.  He let her leave the store with the $200 faucet, but without $200 in cash.  As he put it, "It isn't worth it to prosecute, but when people realize they can't get cash for these shoplifted items, they stop shoplifting, at least here, anyway."

So this technology has been around for decades.   But only more recent smart phones have the ability to use this RFID or "near field" communications technology.  Supposedly my Galaxy 4 has some beta version of it, but I suspect I would have to buy a newer phone to use near-field apps.  Not only can this technology read RFID chips, but it can communicate with Point of Sale (POS) terminals to process credit or debit card transactions or other forms of payment.

Amazon has such an app, called Amazon Go.   And people think Amazon invented near-field or something as a result.  This technology is even better than the scan-and-go from SAMs club as it used the near-field data to automatically scan what you put in your cart.   Early Patents on this idea that I've seen had special carts with antenna and receivers, as back then, no one had smart phones much less smart phones with near field on them.   The idea never took off as the shopping carts were expensive and people could spoof them by damaging the antenna, and of course, people steal shopping carts, and if you have $200 in electronics on each cart, well that gets expensive.  Plus, you'd have to regularly recharge batteries on each cart, which would be cumbersome.

By the way, what happens when the battery on your smart phone dies in the middle of a shopping trip?   Just asking.  I'm sure it will happen - and be awkward.   It is like an incident a friend of mine reported - he was glad his flight was delayed as his iPhone battery went dead and his boarding pass was on his iPhone.   He was able to recharge the phone by the time the plane arrived and all worked out well.   For others, maybe not so well.   First-world problems!

Again, the idea has been around for a decade or longer, it just took the installed base of near-field phones to come along to make it practical.  And along the way, a number of Patents have been issued on these various technologies.   A lot of people don't understand how Patents work and think that, for example, "Apple has the Patent on the iPhone!" when in fact there are hundreds, if not thousands of Patents on various components and arrangement of components, and even things well-embedded into software, firmware, or hardware that are so subtle that you might not even be aware they exist.

So I am sure Amazon has a few Patents on near-field - as do a number of other people.  Whether any one player in the marketplace can lay claim to owning this concept remains to be seen.   What usually happens is that one or two players try to make this claim and end up in court and no one really wins.  It does keep the smaller competitors out of the game, of course.   And of course, a patent troll will file a claim against the winners in the marketplace, hoping to score a quick victory and run off with a few million dollars - as someone did with bar codes.

Will the checkout-less store be the wave of the future?  Perhaps, and in the very near future.  Amazon Go is only open in one store, as a Beta test at the present time, and only Amazon employees can use it.  Like Amazon's vaunted "drone delivery" it is more press-release than reality.  So apparently it is not ready for prime-time as the Sam's Club scan-and-go app already is.   And I suspect there will be teething troubles with both applications, as well as those from other parties.   Like I said, near-field is the buzzword today, or more precisely was the buzzword about five years ago.  Blockchain is the buzzword today - eat your media kibble and stop complaining.

Near-field will also be able to do weird, creepy things that, like bar codes and the demise of pricing labels, will alarm many people.  If you walk by a retail display, your phone may read the near-field code of an item, and based on some complex algorithm, vibrate your phone and display a virtual coupon or some other incentive.   So for example, the company "knows" you buy brand X toilet paper, but when you walk by brand Y, a coupon for it will appear on your phone.  Brand Y, of course, pays the grocer to do this, hoping for a "conquest" sale.

And of course, this means that moreso than even today, computers will keep track of everything you buy or even everything you look at, pick up, examine and even put back.   The phone can keep track of where you pause in the aisle.  Cameras can track your eye movements.  It starts to get a little Big Brother in a real hurry, which alarms a lot of people.

But of course, this presumes that "brick and mortar" retail will continue to thrive for years to come.   Some prognosticators are bloviating that "Amazon is putting traditional retailers out of business," even as Amazon represents about 1/4 of the sales of Wal-Mart.   Sears isn't going bankrupt because of Amazon.  The main reason is Wal-Mart, which is driving a lot of retailers under.   And no one weeps for the demise of overheated malls with overpriced stores and harassing "mall rats" either.

I am skeptical that "shopping" will die off entirely.  As one analyst put it, the death of malls may "de-gentrify" retailing, opening up opportunities for niche retailers and mom-and-pop stores.  On our little island here, we have a small shopping district that sells resort wear and other notions.   People still like to go into stores and "shop" for things like clothes and souvenir t-shirts.   And if you are in the need of a beach umbrella and suntan lotion, you can't wait for Amazon Prime to deliver it to you by UPS.  And no, drones are not going to bring these things to you at the beach.  That's a nice fantasy and nice ad copy (e.g., clickbait articles), but it doesn't represent a practical and economical way of delivering things.  Bear in mind most of these drones have ranges measured in feet and minutes, not miles and hours.

And people will still want to buy food in-person, even as home delivery grocery "apps" have flourished.  A friend of mine in Northern Virginia reports their neighbors have some sort of food delivery through Amazon or Whole Foods (Peapod was another such endeavor).  They are, of course, the kind of people who never leave the house and have their curtains closed all the time.   I am not sure that agoraphobics are a large enough market to sustain this business model, as others have noted.

People still like to thump cantelopes and be exposed to different products in a store.   It is hard to "shop" online unless you know what you want ahead of time.   And if Google-type algorithms are used to steer your shopping habits, well, like with my knitting experiment, once you click on "pork rinds" you will be lead to believe that that is all the store has in stock.

In short, things are changing, but also remaining the same.   The hyperbole in the financial media that a "sea change" is at hand and that fresh kale will be winging its way to your home via drone, are more than a little overstated.  What ever did happen to the Washington Post, anyway, and why did they go all Dan Rather on us (Democracy Dies In the Darkness!  Courage!).   According to the Post, the reason why the Democrats are losing elections is that they aren't liberal enough.   I have stopped reading the Post as it no longer makes any sense.  But I digress.

I guess the point is, once again, to ignore about half the things (or more) that you read in the press, particularly the financial press, as most of it is utter bullshit.   The Washington Post hypes Amazon because it is a trendy "tech" company and liberal-friendly.  They hype Whole Foods because that's where yuppie left-wing journalists buy their asparagus water.  They disparage Wal-Mart because it is run by anti-union Republicans who know how to make a profit in the traditional business of retailing.   It is all about heroes and villains, damning and shaming.  It isn't about reality and what is really happening in the world.

And that, to me, is kind of sad.

UPDATE:  A reader reminds me that Jeff Bozos the founder of Amazon also owns the Washington Post, a fact they usually mention in their articles.   Seems lately, his private newspaper is now a private megaphone for his business.   Sort of a Trumpy kind of thing to do.

401(k) or IRA like a Cayman Islands Account?

The 401(k) and IRA provide the middle-class with a means of accumulating money which cannot be attached by creditors.

One thing we see in the financial press are stories about poor people who sign shitty financial deals (loans) that later bite them on the ass.   They try to pay back these loans, no doubt fueled by "moral" obligations infused by their religious upbringing.  Too late in the game, they finally declare bankruptcy, only to discover under new bankruptcy laws, that they still have to make "best efforts" to pay off the debts, usually over five years or so.

Meanwhile, Mr. and Mrs. Middle America can duck out on these debts and not risk their "nest egg" as 401(k) or IRA investments, along with other retirement accounts are insulated from bankruptcy.  It is like having an un-attachable offshore account for the middle class.   If you are not shielding your assets in an IRA, ask yourself why.  You can shield about $1.2 million from creditors in an IRA.

Arguably this is even better than a pension, as retirement income can be attached to pay creditors (above and beyond what is needed for your support).  If you are not drawing from your IRA (which is not mandatory until age 70-1/2) the money may be safe.

Now at first, this may seem very unfair.   Some have argued that the 401(k) is partially responsible for wealth inequality in the United States.   I disagree, at least in part.   The very, very wealthy aren't dicking around with IRAs and 401(k)s as they are investors (and not employees) and thus don't qualify for a 401(k) in the company they own as they don't draw a salary.   The self-funded retirement plan did force the middle-class to become investors which in turn has driven the stock market and thus made a lot of money for people at the top.   But unless you "invested" most of your retirement money in ill-conceived IPO tech stocks, odds are you haven't handed over too much money to those evil 1%'ers (and globally, of course, you are one).

The reason retirement plans were placed off-limits in bankruptcy is obvious - we don't want a nation of impoverished old people who have nothing left to live on, after they declare bankruptcy.   I am not advocating that we change this law - that would only benefit the credit card companies and loan providers.

Rather, what I am trying to point out is, the poor are once again left out of a good deal, as most of them cannot afford to contribute to a 401(k) or IRA, and if they do, they don't get the vaunted tax advantages to the extent someone in the higher brackets does.  Since they can't shield assets this way, what little they have, in terms of assets and income, are attachable in bankruptcy court.

But it does illustrate that if you are in the middle class you have no excuse to fall down the financial ladder, as the tax and bankruptcy laws are stacked in your favor.   You have the home mortgage interest deduction, the tax advantages of an IRA or 401(k) - and the bankruptcy shield of the said same.   (And indeed, one reason often given by high earners for mortgaging their house to the hilt is that they are protected in bankruptcy.   They may lose the house in bankruptcy, but they won't lose any equity in it, as it was fully mortgaged).

When I read as story like the one about the lady above, who bought a rattle-trap car from a shady used car dealer, overpaid for it, and now is still paying it off, long after repossession, I feel for these people.  They are financially unsophisticated - to the point that they don't even consider bankruptcy as a means of getting out from under these crappy loans.   But I am not surprised by these stories - poor people don't "just become poor" through accident, but rather they are unsophisticated in financial matters and thus make poor financial choices.   And other than to outlaw shitty deals (as was once the case in this country) there isn't much you can do about it.  And sadly, the Trump administration is set to strip away what little consumer protections have been enacted under Obama.

What really irks me, though, are middle-class people who make lots of money - often in the six-figures, who whine about what a rotten deal they got in life as they are living "paycheck to paycheck" and can't seem to get ahead or save money.   And it isn't that they signed a toxic car loan deal, but that they just spend more than they make on crap, like restaurant meals, designer coffees, leased cars, cable TV, private schools, and other "keep up with the Joneses" type spending.

They have been handed a wonderful life - a good job with a good income and a house in a good neighborhood with good schools.   And the tax code has been bent in their favor, giving them deductions and credits that the very rich and very poor are not able to use.   But still, they muck it up.  And that's sad.   But what's worse is that they whine so much about what a rotten deal they got in life.

So in a way, they are not unlike the lady in the article cited above, who made a shitty financial deal and is facing the consequences.   The only difference is, the middle class just makes larger shitty financial deals.   That, and the fact they should know better.

A 401(k) and IRA are like an un-attachable offshore bank account for the middle class.   There is really no reason to underfund it.  In fact, it should be the first place you stash your money.

Tuesday, June 20, 2017

The Rise of Far-Center Politics

What is happening in France might be a harbinger of good things to come.
Some Gallic good looks there!

The recent elections in France are quite interesting.   Even though the press gave a lot of coverage to far-Left and especially far-Right politicians, the French elected, with a huge majority, a centrist candidate and a centrist legislature.   The practical French rejected radical politics in favor of getting things done, along with consensus and compromise.   Despite all the hoopla over Le Pen, the French decided that radical politics were not the future.

Meanwhile in Virginia, a governor's race is brewing.   "Red State" Virginia, which went for Obama, twice and also for Hillary, has a pragmatic centrist Democratic governor.   And in the recent primary, people rejected the "progressive" Democratic candidate (read: Comrade Sanders) in favor of a more centrist politician.

In the UK, Prime Minister Theresa May beat out Elmo and Lord Buckethead to win re-election, albeit without a clear majority.  Clearly, far-right politics have lost some momentum in the UK.   Maybe they can re-think this Brexit thing while they are at it?

Could it be that people are tired of extremist politics and want a return to normalcy?   And were does the media fit into this picture?

Like its brother, the financial media, the political media loves controversy and heat.  Sound and fury signifying nothing.   They love candidates who say outrageous things or get into outrageous controversies, as it sells newspapers or in today's lingo, generates clicks.  Marie Le Pen was popular in the press because she was controversial and people wanted to hear "what outrageous thing she said today" - the same reason people listened to Howard Stern.   People who hated Howard Stern listened to him more than people who liked him.

And of course, this is the reason the New York Times and The Washington Post are in hand-wringing Trump meltdown mode.  The more they can convince people that Trump is a threat to our national sovereignty, the more newspapers (or clicks) they sell.   And this was true before the election and doubly true today.  I am not a fan of Trump, but the republic will survive his Presidency.   Why?  Because our founding fathers were smart enough to create three branches of government, and the two other branches have already shown a propensity to keep the Executive branch in check.

Maybe a lot of bad things will happen in the next four years - and already are.  People are being deported and families are being torn apart.   Marijuana users who voted for Trump are going to have a pleasant surprise when the DEA busts down their door.   A lot of regulations in the banking industry will be repealed and people will be allowed to borrow more money than they should, and go broke.   And cronies of the President will profit.

But in four years there will be another election.   And if people decide these changes in our society are swell, Trump will be re-elected.   But maybe something else will happen.   Sadly, the media loves to tout "progressive" candidates with their wacky theories of government (give more money away, raise taxes, increase the deficit, etc.) which likely will insure a second Trump victory.  The only thing Americans fear more than fascism is communism, which really are both the same thing.

What 90% of Americans really want is a centrist candidate - someone who can appeal, at least in a limited amount, to both parties and work across the aisle.   But since our primary system favors extreme candidates, this is what we get.   And sadly, the parties cow-tow and cater to the extremes, convinced that their "base" is in the radicals and that they will not win office unless they pay homage to the tea-partiers and progressives.

But is this really true?  Or are we seeing movement in a different direction?   Sure, the Washington Post and the New York Times both hype the progressive movement as the wave of the future, even as this same movement derailed Hillary's campaign.    Like the Republicans before them, when they lost a major election, the consensus seems to be, "Let's become even more extreme!   Moderation is what cost us the election!"

But I think the opposite is true.   Sure, extremists can win elections.   A Tea-Partier can win in a Red State only because a Democrat doesn't have a chance.   But the moderate Republicans don't necessarily vote for extremists - they just stay home, instead.    Winners of such elections - on both sides - claim to have a "mandate" even when, in many cases, less than 50% of the eligible voters even showed up to vote, or if they did, the winning candidate had less then 50% of the population of eligible voters vote for him or her.

Sadly, it seems extremists on both sides of the aisle have captured the fancy of the press, and the rank-and-file Republicans and Democrats are getting a short shrift.   We hear a lot from the loudmouths on both sides of the aisle, as well as the erratic tweets of our Commander-in-Chief.   But we never hear from more moderate, sensible minds, on either side of the debate.

Maybe it is time to change, and maybe people worldwide are ready for such a change.   After all, we've seen where radical politics get us - nowhere.

UPDATE:  The centrist candidate in Georgia's special election was despised by both Trump and Sanders, which to me, is an endorsement.   He lost by a pretty good margin, which illustrates that it is hard to win, as a Democrat, in a red district in a red state.   Of course, the Washington Post has a different angle on this - he wasn't liberal enough!  If only he had embraced Bernie Sanders and communist principals, the Republicans in his district would have voted for him!   The world is a delusional place and the Post has lost its collective mind.

Three-Wheeled Cars (Again)

Why has the three-wheeled car been so popular in history and yet never succeeded?

The year is 1980, and we are sitting in the elaborate three-story "tree house" behind the Sigma Chi fraternity at General Motors Institute in Flint, Michigan, smoking an awful lot of pot.   The topic is cars, of course, and given than the economy is in the toilet, gas is available only on even and odd days, and the 1980 Corvette 305 "California" is maybe cranking out a pitiful 180 HP on a good day, it seems that the days of high-performance cars are behind us.   The Chevette is one of GM's best-selling cars at the time.

"What about a three-wheeled car?" someone says, exhaling marijuana smoke.  And no, his name wasn't Elio, but maybe he had the same conversation in the same tree-house, a decade later, when he also went to GMI.   The speaker passes the bong, and a marijuana-fueled discussion ensues.

The appeal of the three-wheeled car is very simple.   Emissions controls and safety standards meant that cars of that era got shitty gas mileage, had poor performance, and cost a lot of money to build and buy.   A three-wheeled car would sell like hotcakes in the recession era of 1980!

A three-wheeled car, which could be registered as a motorcycle, would avoid emissions and safety standards, and thus be very cheap to make, have good performance, and get fantastic gas mileage.   For simple commuting and going to the grocery store, it would make a good second car.   A few more bong hits, and it starts to sound like a viable idea.  The bong hits being the key.

The Reliant Robin was made in the UK until 2001, as severe taxes on cars made three-wheelers far less expensive to own.   However changing economic conditions and regulations put an end to the three-wheelers for the most part.  As the UK slides into depression following Brexit, perhaps the new Nissan plant there can crank out these poverty-mobiles once again.

And it is an idea whose time has come and gone, time and time again.   Whenever a recession hits - or a depression - or government regulations make building an ordinary car too expensive, people start thinking about three-wheeled cars.   And a lot of them have been made over the years.   Probably the largest market was in England, where three-wheeled cars were taxed far less than ordinary cars, and thus a lot were made and sold for many years.  They also had three-wheeled "motorized wheelchairs" which were leased to handicapped people for a minimal cost, so they could get around.   For an island that is so small you can walk  drive across it in a day, such vehicles might make sense on low-speed secondary roads.

The Queen next to an "invalid car" which were leased to handicapped people in the UK to help them get around.   Few exist today, and likely many handicapped people ended up dead or further handicapped if they got into an accident in one of these deathtraps.

In other markets, not so much.   After World War II, shattered economies in Germany, Japan, and Italy turned to three-wheeled cars (or tiny four-wheeled microcars) as their solution to the problem of no work, no money, and no gas.  In Italy, the Vespa scooter was born.  These cars are poverty-mobiles that become popular when an economy crashes.  They were even briefly popular (in concept if not in execution) in postwar America, when new cars were in high demand and factories couldn't make them fast enough.   The Davis Divan, (shown at the top of the page) sat four across and was developed during the post-war car shortage - but quickly faded from the scene.   The Tucker was also born during this era.

As you can see, transitional economic conditions often result the development of oddball cars.   The problem is, of course, that recessions end.   People make more money and they no longer want poverty-cars.   In the 1970's, maybe such a "car" would have sold, in limited numbers.  And yes, people tried back then to build three-wheeled cars - it turned out to be a scam.   But by the mid 1980's, when the economy started to recover, sales would taper off to nothing.   In a way, it is like the recession of 1958, which spawned the Chevy II, the Falcon, and the Valiant (and put VW on the map in the USA).  Small, cheap cars started to sell well in America, then, but by the mid-1960's, everyone wanted a big-block "Muscle Car".   When the oil crises hit in 1973, we got the Vega and the Pinto.  The car business is cyclical this way.  Remember how many Honda Fits were sold in 2009 - and how many monster SUVs have been sold since then?

By the way, if you want to see a collection of three-wheeled cars and microcars, check out the Lane Museum in Nashville, Tennessee (yet another good reason to go there!).   Sadly, the Bruce Weiner Microcar Museum here in Georgia closed a few years ago and the collection was auctioned off.   You can still "virtually" visit that museum online, though.   As you can see, the idea of a simple basic mico-car or a three-wheeled car is one that has been popular many, many times in the past, usually in response to harsh economic conditions.  And in nearly all instances, such poverty-mobiles had a brief heyday in the sun, or were utter failures in the marketplace.   They never really took off for the long haul.

So why, other than in the heavily regulated UK, did three-wheeled cars not succeed in the marketplace?   There are a number of reasons, used cars being one of them.   No matter how cheaply you think a three-wheeled car can be made (and they are more expensive than you think), they are not competing with conventional brand-new four-wheeled cars, but inexpensive used four-wheeled cars.   Why would you buy an Elio for $8000 when for the same money you could buy a pretty lightly used Toyota Corolla?   And let's face it, the Elio is never going to be made, and if it was, it would cost more than $8000 to make, particularly as presently envisioned.

The vaunted advantage of the three-wheeler is that it avoids nasty environmental and safety regulations (which actually protect you and the environment).   As a motorcycle, you'd have to wear a helmet and obtain a motorcycle driver's license - a barrier to customers who might not want to have to take a motorcycle driver's test (and might not be able to pass it) in some States.   But if you could avoid airbags and pollution controls?   That would be sweet!  You could make one of these cars for cheap, right?

The problem is, you are one government regulator away from going out of business.  If you made a car with three-wheels, the government might argue it is a car and thus has to meet all the appropriate safety standards.   There goes your cost-savings right there.

More puzzling still, the vaunted Elio car is said to be equipped (in theory, anyway, none have been built, other than rough prototypes) with airbags, pollution controls, etc., negating the cost advantages of the three-wheeler.   If you equip such a car with all of that stuff, you might as well cut to the chase and add the fourth wheel and just make a regular car.   Airbags aren't cheap, and neither are emissions controls.

Will we see three-wheeled cars in our future?   Probably not.   The Elio seems to be slowly fading from view, as each date for production or other goals comes and goes with no activity in their used Hummer plant happening (other than, apparently, selling off the machinery!).  And economic conditions worldwide are getting better, overall, not worse, even if it seems that a recession is on the horizon.  Even in India (especially in India), Tata motors  is trying to wean the public of the "tuk-tuk" type three wheelers in favor of their new four-wheel nano car.  When people have a choice and they can afford to do so, they favor a more traditional four-wheeled car.   Three-wheeled cars are usually not a choice but something people are forced into buying.

Sadly, like with the Tucker, or the Bricklin, or whatever, there are always a few rabid "true believers" who are willing to suspend disbelief to put a religious-like fervor into a vehicle or other product, for no apparent valid reason.  And often these sort of folks lose their shirts as a result.   Never make a consumer good into a religion or believe it will change the world.   Don't invest - or put down payments on - wild-eyed dreams.   Sadly, the people who are losing money on these sorts of deals are people who can least afford to lose what little money they have.   But then again, they have no one but themselves to blame for being so blind to the obvious.

I realized, even back in 1980, that the three-wheeled car was little more than a marijuana-fueled fantasy.   It made a lot of sense after a number of bong-hits, but then you sober up and realize that it really makes no sense, economically or environmentally or from a safety standard.   And maybe right there is a good reason to give up on pot and pot-fueled fantasies.

The Bricklin car was going to revolutionize the car business and provide much-needed jobs for New Brunswick.  Sadly, not only was the car a piece of crap (the few that were made, anyway) but a lot of people lost a lot of money in the deal and the politicians who backed it lost their jobs.   A lot of elected officials in Shreveport, Louisiana are no doubt sweating right now.