Perry Glasser

Archive for March, 2014|Monthly archive page

MINIMUM WAGE AND JOBS – PITY THE WEASELS!

In Business, Economics, Economy, EDUCATION, Finance, Political Economy, Politics, TAXES on March 29, 2014 at 10:59 am
FINANCIAL RHETORIC

FINANCIAL RHETORIC

Business leaders and their in-pocket legislators are raising their voices to crescendo levels about how a rise in minimum wage laws will destroy jobs. This contempt for logic once again brings Dollar$ to the keyboard to dispel the fog of self-serving rhetoric.

Raising the minimum wage reduces profit; it has nothing to do with the number of jobs. Dollar$ knows of no successful business operated as a public service to create employment opportunities.

Weasels are chasing their tails in fits of anxiety. On the one hand, all those underpaid Citizens vote, on the other hand, Buccaneers fund re-election campaigns.

What to do, O what to do?

Pity the poor Weasels!

This Weasel is so terrified of exposure, it is disguises as a  mongoose.

This Weasel is so terrified of exposure, it is disguises as a mongoose.

Minimum Wage

Minimum wage laws are safeguards against worker exploitation, allegedly set at a level that guarantees a living wage. What constitutes a living wage is open to debate, but whatever that may be, it stands to reason that over time, as inflation makes the cost of living rise, minimum wages must rise to keep pace. They are regional, as they should be, matters of state law. Federal guidelines for federal workers set a benchmark. The current federal minimum wage for non-military projects is $7.25 per hour and goes back to July, 2009.

Everyone knows this. Even Weasels and Buccaneers.

Everyone also knows that the purpose and function of business is to make profit. Dollar$ loses no sleep over this, and Dollar$ implores you to sleep soundly as well. Making money threatens nothing you hold dear. Profit is the engine of every aspect of our society. Irving Berlin wrote music to make money; Shakespeare wrote plays to sell tickets. Michelangelo sold his skills to Renaissance patrons who bid for his services.

Organizations pursue profit like water flows downhill or electrons through wire, following the path of least resistance. Effective management will deploy labor in the most efficient way possible to maximize profit. That’s simply good business practice.

Everyone knows all this, too.

The Buccaneer-Weasel Chorus

So Dollar$ reads with wide-eyed wonder when the Buccaneer-Weasel Chorus lifts their voices to sing about the perils of a raise in the minimum wage laws and how that will cost jobs.

Even Weasels and Buccaneers know this cannot be true.

If it were so, then lowering the minimum wage would create more jobs, and none of us believe for a minute that Ronald McDonald, Mickey Mouse, or your kid on the corner selling lemonade would be hiring if they could pay the help less: they would, instead, be pocketing the difference in wages as increased profit.

No real Buccaneer runs an organization to create jobs. True, the pursuit of profit will make a successful organization expand, and this expansion will incidentally create opportunities and jobs for employees, but Mickey Mouse does not open theme parks in China, France, and Tokyo as a public service to out-of-work Chinese, French, or Japanese workers—Mickey sails under the Jolly Roger and owes allegiance to no nation.

Flag of Business Loyalty

Flag of Business Loyalty

  • Like Mickey, your kid is selling lemonade on the corner because your kid wants profit. Like Mickey. your kid sets prices by calculating the cost of sugar, water, lemon juice, and ice, and then calculating a sales price that makes her labor worth her time—that’s the pursuit of profit.

Neither Mickey nor your kid hires additional labor as an act of charity or public policy because the pursuit of profit requires efficient deployment of labor.

Why hire three lemon-crushers when one will do? What’s the minimum number of ticket-sellers at the gates to the Magic Kingdom on a Fall day in Tokyo?

Raising the Minimum Wage

  • Raising the minimum wage will not put high school kids dishing ice cream out of summer work—someone has to do it because summers do not last.
  • Raising the minimum wage will not put sales people out of work at WalMart—WalMart hires no floor help as an act of public spirited charity; they already hire the fewest number of people they can.
  • Raising the minimum wage will not mean be fewer people in food services—someone still has to flip the burgers and Ronald already they already hire the fewest number of people they can.

Raising the minimum wage reduces profit, and this is why Weasels are chasing their tails. On the one hand, all those underpaid Citizens vote, on the other hand, Buccaneers fund re-election campaigns.

What to do, O what to do?

Pity the poor Weasels!

Send your personal Weasel a note indicating you are willing to pay a nickel more for your next cheeseburger so that the person serving it to you can buy her kid eyeglasses or can make the rent.

Who among us would not?

PERSONAL FINANCE FOR THE CLUELESS: INVESTING, THE CAPITAL MARKETS

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on March 26, 2014 at 12:27 pm

Dollar$ is well aware of the gazillion resources online where some union of Wizards and Buccaneers blow rhetorical fog that is an alleged explanation of stocks and bonds.

Dollar$ submits that these explanations are deliberately arcane, part of the investment community’s strategy to hunt and bag the Clueless. After making what is simple appear complicated, up pops a talentless sales goon who for a small fee offers to manage your money.

 

WHERE WIZARD HIDE

WHERE WIZARDS LURK

Dollar$ seeks to dispel the fog.

When the Clueless understand what anyone can see, the Clueless are no longer clueless. No situation terrifies Buccaneers and Wizards more.

These are the same stalwarts that over a generation persuaded America that job training is a cost to be borne by the trainee and that education and job training are synonyms. An entire generation has accrued so much debt that they are indentured servants.

It is time to turn the table on the bastards.

Leap beyond the jargon of P/E ratios, large cap, small cap, technical analysis, book value and all the rest, grasp the basics, get started, refine your wisdom as you accrue wealth, seek financial and emotional independence.

A Fantasy

Suppose you are downloading 3 seasons of the Walking Dead because you are far too cool to watch broadcast TV at scheduled times, planning a long weekend of beer, pizza, a fluffy blanket, and a lover watching monsters eat brains. What could be more romantic?

Suddenly, as if in a vision, you imagine a way to supply the world with a new and better widget. Your lover shows up, you describe your plan, and your lover enthusiastically says, “We’ll need some money to get started, but eventually we will make wheelbarrows of dough.”

Hot damn!

Nothing comes easy, but after two years of running the business on a shoestring at 16 hours per day, you’ve proven the concept. You can make and deliver a quality widget for less. You need now to expand enough to get out of the basement. You want to hire some old-school experts in widgetry, and you need 10 employees. You are figuring with the profits that are forthcoming, eventually you will have 10,000 employees. The sky is the limit.

Scariest start-up ever

Scariest start-up ever

Do not laugh. This is how Amazon.com started, with Jeff Bezos sitting on the floor wrapping packages. This is how Facebook started, with Mark Zuckerberg gathering a cadre of code-writing geeks in a Harvard dorm. This is how Hewlett-Packard began—in a garage in Palo Alto. Maybe the scariest start-up in recent history was Fedex: on the first day in business in April 17, 1973, Fedex required 14 jets and 389 employees to deliver 186 packages to 25 cities. The idea was to compete with the US Post Office by charging MORE.

What lunatic would invest in that????

Ideas turn into goods and services that make our lives rich and our wallets fat. This is the miracle of America capitalism.

Capital Markets – Access the Money!

Participation in the public capital markets are the only way for Citizens to partake in that miracle.

Businesses go to the Bond Markets to borrow money. When a Citizen participates in the bond market, the Citizen becomes a lender. Lenders are guaranteed income determined by the face value of the bond, interest based on the rate of return, and an eventual return of principal at a predetermined date. Since part of the investor’s risk is the bankruptcy of the issuing organization, the rate of return (interest) is determined by how solid the issuing organization is.

Note that the investor does not participate in the growth of the issuing organization.

Note, too, that some organizations are not businesses promising interest based on future profits, but are municipalities promising interest payments based on future tax revenues.

Dollar$ hastens to point out that bonds are appropriate for investors with low risk tolerance—the aged and the nervous.

 

Citizen

Citizen

Dollar$ also points out that no investment is without risk. Ask Citizens who held bonds issued by the City of Detroit. Mostly, those bonds are held by large organizations such as labor union pensions funds, but when the fog lifts, those are Citizens. Instead of interest and eventual payment of principal, investors in Detroit’s bonds hope to get twenty cents on the dollar.

Businesses go to the Stock Market to sell shares in the company to willing investors who expect or hope that the good idea will make the value of the shares rise with the good fortune of the company. At some point, if the shares of stock are traded, the investor makes a gain or, if the value of shares goes down, incurs a loss.

For citizens to participate in the stock market requires only that the citizen have a broker, a clear idea of the advantages and disadvantages of different stock investment vehicles, and an investment strategy.

Dollar$ will be writing more soon.

FINANCE FOR THE CLUELESS: INVESTING #2 – BURN YOUR PILLOW CASE

In Economics, Economy, EDUCATION, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on March 19, 2014 at 12:30 pm

“OK, Dollar$, I have a few bucks in the bank, I have no significant consumer debt, and I have steady cash flow from a secure job. I have measured my risk tolerance in terms of my age and psychology, and I am persuaded that I want to get rich slowly to meet specific long term goals, such as buying a house, putting as yet unborn children through college, preparing for my own old age.”

Congratulations, Bunky! You are a grown-up! Its time to take your money out of a pillowcase.

photo-92-e1319326132194Tell your broke-ass friends who insist that the rich own the system and that they know they cannot get ahead that you have decided to join the Dark Side. Dollar$ adored Occupy Wall Street for its goals–who can argue with Justice? but Dollar$ sadly notes the “movement” lasted less than a year. So why not become one of those degenerate rich? While your friends bitch and moan, lusting for the next video game unit, having succumbed to the Consumer Culture that pollutes the mind by implanting false needs, you have decided to take control, take responsibility ad will rise above that.

You will never spend money frivolously or self-indulgently—that’s what children do—but you have goals, you have ambitions, and like it or not, all of us live in the sea of financial life.

You can choose to drown, float, or construct a ship to set sail.

Dollar$ wants you to set sail.

First, you’ll need to build a ship.

Save or Invest?

If you meet the Dollar$ profile, it will be plain that simply saving will have you sink not far from the dock. You work hard, so should your money.

Money in the bank is not working hard; however, it is totally liquid. You need to have some there for ordinary bills and expenses.

Dollar$ Recommendation: a balance of at least 3 months for the young (under 40), and as much as 6 months for the not very young. The Book of Ecclesaistes tells us:

I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

Or, as Dollar$ interprets The Good Book: Shit happens.

So DO Insure and save against the ay you will have bad luck. Everyone does. Do not let time and chance happenth on your watch.

Say you are minding your own business at a stop light when you get your leg crushed by a cement truck with failed brakes. If you have a disability policy or disability rider on your auto policy that kicks in after 6 months, it is a LOT less expensive than a policy that kicks in after 6 weeks. No sweat for you if you have some liquid assets in the bank, but a disaster if you are living check to check.

If you believe you are trapped, read Dollar$ on how to save more.

The Name of the Game is Averages

If someone offer you Magic Beans and a quick rich scheme, run. But the simple fact is that stocks show an average return of near 10 percent per year over the long term.  In this chart, the red lines are averages: notice, however, that some years are awful, and others are terrific.

Now you know what AVERAGE means.

avg-mkt-rtns-1926-2008-600x409

Some years are dogs; some are stellar.

Compare that average to current bank account returns, which as Dollar$ writes are less than 1 percent. Taking on some risk to average 10 percent seems mandatory instead of accepting a pittance.

Since you are following the Dollars motto, Get Rich Slowly, year-to-year gains and losses are of mildly passing interest. If losses of 10, 20 or even 40 percent trouble you—reset your gauge of Risk Tolerance.

The Marathon

We do not quit running after 2 miles because of a leg cramp. Shooting for an AVERAGE of 8 percent each year is realistic, possible, and will make you rich—slowly.

Think not?

This chart from JP Morgan shows three investors compounding their investments over time. One of them, Susan, starts at 25 and quits at 35.  She still winds up with a mere $850,000, enough dough to rent a tennis pro or two.

Growth over time

 

Dollar$ RecommendationWHAT ARE YOU WATING FOR????

Reassuring the Nervous

Suppose you are 25 years old and are able to invest $2,000 each year, maybe in an IRA, maybe in stocks–just keep it out of that pillowcase.  And after five years, you look with pride at your tidy pot of money. You are now 30, but just then the stock market crashes. They are leaping out of buildings on Wall Street. It’s as bad as the Great Depression—maybe worse.  The Depression lasted 12 years; it was 15 years of investor misery.  What happens to your Dollar$ plan?

Well you are all of 45 years old, a good 20 years from a youngish retirement.  If you’ve maintained investor discipline, you’ve accrued 15 years of investments at bargain basement prices. When the stock market recovers–and it will, since the United States is not going bankrupt any time soon– you may be lucky enough to enjoy a year like 2013, a whopping 32 percent gain in a single year.

All those cheap investments you made for 15 years are paying off! Buy cheap; sell dear! as log as you are dedicated to Get Rich Slowly, down markets are a buying opportunity, Bunky!

The sissie who bailed in 2008-09 go screwed. Those were bad years, and those investors with short term vision took it in the neck. They ran for the exits and took permanent losses because they took the short term view.

Now before someone tells Dollar$ that they were protecting themselves and, perhaps, were too close to retirement, Dollar$ will remind readers that being 65 these days is not old. Folks who are retired should prepare for at least 20 years more of life and so accept judicious risk. Any investor was over 70 in 2008 and had a significant pot of cash at risk….why? What are you? Invulnerable?

For the Dollar$ reader, the Clueless who are not H0peless, the lesson is plain:  Buy and hold, and do not let the vagaries of the markets year to year bother you.

Take a lesson from Monty Python.

Never bury what ain’t dead yet.

Convinced?

Watch for Finance for the Clueless: Investing #3 – Nuts and Bolts

FINANCE FOR THE CLUELESS: INVESTING – BASICS 1

In Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Political Economy on March 15, 2014 at 12:45 pm
Get Rich Quick Wealth Generators

Get Rich Quick Wealth Generators

Dollar$ Disclaimer

Wall Street Wizards are touts. Touts are eager to sell you the names of winners. On Wall Street, thy will sell you the names of companies that will be fracking the shale deposits deep beneath Central Park once they obtain regulatory permission. They can supply you with the names of organizations accepting reservations for tourism to Mars; they have a list of companies exploring time travel. As wizards, they often use rhetoric that is in the subjunctive mood. They employ a lot of if, maybe, and might.Dollar$ will name no companies. If you want a tout, there are plenty online.Dollar$ Readers seeking to own a Caribbean Island before their 30th birthday are advised to select very wealthy parents or to take all their hard-earned cash and place it on a three race parlay of horses at odds of greater than 10:1, a payoff of a cool million with an initial wager of $1,000.  Bookies will welcome you! The Wolf of Wall Street, a film based on fact, details the life of a Wizard who preyed on investors seeking quick and extraordinary profits.Such investors in the trade are known as “Suckers”; such investment counselors are known as “Millionaires.”

Wall Steet Tout

Wall Steet Tout

Dollar$, therefore, suggests that the Clueless embrace two principles of investing:

Get Rich Slowly

Know It Ain’t Complicated

Indeed, Wizards’ claim to wizardry and Buccaneers guard their freedom to pillage the economically ignorant precisely because they seek to keep Citizens befuddled.

  • “Give us your money so we may guide you!”
  • “Buy shares in International Widget so we may be richer than gods while you struggle to make ends meet!”
  • “Pay us for financial education!”
  • “Do not ask for explanations: It requires higher math!”

Sounds familiar?

Dollar$ writes to  frustrate the bastards.

Should You Have Skin in the Game?

Money in a pillowcase is not secure. Never mind the risk of theft, that money draws no interest, and as such it decreases in purchasing value over time because of inflation.

Dollar$ notes that inflation is not, like Gravity, a Law of Nature. Japan for much of the past 20 years has experienced the opposite, deflation, a fearsome economic consequence of the untrammeled boom Japan enjoyed in the 1980s. Yen in a 20-year pillowcase can no buy more Tokyo real estate than it did two decades ago, which may seem like a great thing unless you bought your Tokyo condo 20 years ago, in which case it is now worth less than cheap sushi. In 2009 the US experienced a year of deflation—which (rightly) scared the piss out of people.

The Fed in the US has lately employed several strategies to avoid deflation tand maintain a comfortable inflation rate of around 3 percent. One strategy is to keep interest rates so low that businesses and consumers perceive Savings as having all the economic advantages of a pillowcase.

If you want more, perhaps it is time for you to consider Investing.

Drop that phone!

Investment Readiness

Not so fast, Bunky.

Investing means placing money at risk.

Never forget that risk-reward correlated. Your insured accounts have almost zero risk, and therefore pay near zero. Up to $250,000 in a US bank covered by FDIC cannot be lost. However, that 3-horse parlay of nags at 10:1 or more pays at so high a rate because it never happens. The true odds are 1,000:1. Someone may win the gazillion dollar lottery, but that’s called gambling, not investing.

You have no right putting your money at risk until.

  • You have a secure job that supplies enough cash flow to meet your expenses.
  • You have NO consumer debt.  If you remain ignorant of the difference between consumer debt and leverage, Dollar$ forgives you, but insists that you reread Dollar$ on How to Spend. The math is simple: should you invest in pursuit of earning 7 percent, or pay off debt where you are forking over 20 percent?
    • For the record, student debt is leverage.
  • You have at least 3 months of expenses in liquid accounts. Liquid means you can get your hands on it quickly.
    • Everyone thinks their job is secure until they show up at the office and find the doors padlocked.
  • You have assessed your risk tolerance.

Risk Tolerance

Glad you asked. Your tolerance for risk consists of two factors that measure your willingness to experience catastrophic losses.

Age. The younger you are, the more willing you should be to undertake risk. If you are in your 20s, if the US goes through 20 years of hard times, such as the Great Depression or Japan’s Deflation Agony, you will be in your 40s when the sun breaks through the clouds, still two decades from anything like retirement, and if you have maintained the Dollar$ steady get-rich-slowly program, you will have amassed assets at bargain basement rates.

Psychology. Never invest in any financial vehicle that will force you to lose sleep. Let someone else make that fortune: you have a life to lead, and your lover, children, and co-workers do not want you to be some sleep-deprived zombie lashing out at them because the $1,000 you put into International Widget has fallen to $800.

Are you ready to go forward?

What to do and when is coming soon!

FINANCE FOR THE CLUELESS:  INVESTING – BASICS 2

PERSONAL FINANCE FOR THE CLUELESS– SPENDING #2 CREDIT

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on March 14, 2014 at 12:00 pm

imagesKQE1806T

Credit Card?  Debit Cards?

Spending gets dangerous when the naïve, foolish, and young believe that the plastic in their hand is free money. The problem is so chronic in America that an industry has grown up to rescue people from the consequences of their own lack of control. Never mind that the lack of control is imparted by Consumer Culture.

This is America. If we get you in trouble, we will blame you, but we will always be eager to take your money to get you out of the trouble we put you in.

Dollar$ will save you the rant and the familiar charts, but instead give you the rules.

Never use a Debit card.

There is no exception to this rule because there are no circumstances where a debit card is accepted that a credit card is not.  In fact, those same places accept cash, as well. The less cash you carry, the less likely you will succumb to impulse-buying.

Vendors LOVE debit cards because they transfer your bank balance to their pockets instantly. But a credit card affords you as much as a 3 week float, the time delay between the moment you buy and the moment you pay. In that 3 week period, your money snoozes, perhaps makes your checking account free, perhaps draws interest. It may not be much, but isn’t that nickel better off in your pocket than somewhere else?

If you overdraw with a debit card, your bank will impose usurious fees;

A lost debit card carries large liability if you do not immediately notify the bank of its loss; After 2 days, if your debit card has been in use by a thief, your bank will only offer you suspicion and may hold you responsible for up to $500. But should you lose a credit card, by law, you are only liable for $50.00.

Never ever carry a balance on a credit card.

This is your life we are talking about. Fees and interest mount. The catastrophic results will cripple your economic life, cripple your romantic life, and harm your children as you struggle for years to pay for goods and services you only thought you needed because of the compulsions of consumer culture.

If you have self-discipline problems, throw your plastic away.

If you are carrying credit card debt, pay it off first

You have no financial obligation more pressing, not even saving for retirement. If the leeches are into you for upwards of 20 percent per year, you are like a runner in a marathon bleeding from an artery. The harder you run, the more you bleed. You will eventually drop dead and never cross the finish line. Close your wounds! Spend less until you are free.
There are no services that can pay off your debts other than debt consolidation, a plan that may put money in your pocket month-to-month, but extends the life of your loan. Use debt consolidation if you must, but it’s even better to PAY IT OFF!

Good Debt

Dollar$ make a distinction between taking on debt in a good way vs. taking on debt like a runaway teenager set loose in a mall.

Consumer debt. Borrowing money to satisfy the false cravings instilled by Consumer Culture is always a bad idea. The satisfaction is temporary; the object or service bought will quickly need to be replenished; the payments will go on long after the object is of any use or pleasure.

Leverage. Borrowing money to invest in ways that will create revenue at a faster rate that the interest accrues is always a good idea.  Dollar$ knows you are not General Motors, so we are not talking about durable goods that will pay for themselves by producing more cars sooner. However, Citizens can avail themselves of some opportunities.

untitledReal estate. You have to live somewhere, and mortgage interest is about the last substantial tax deduction available to a Citizen. Mortgage rates are historically low; do not buy a home unless you expect to live in it for more than 5 years. If you are buying residencies as investments with the expectation of putting in sweat equity, Dollar$ salutes you. If you are buying real estate in hopes of a quick flip because prices are soaring rapidly, Dollar$ reminds you of the vast tracts of empty homes in Las Vegas where speculators were left with unfinished projects because real estate boom was swamp gas.

Auto. You need a car, and it is indeed an asset that will enhance your revenue opportunities because it will take you to and from work. In some places, however, automobiles and parking spaces constitute luxuries. You don’t need a car if you live and work in lower Manhattan.

Education. There is no better investment than in yourself. Your earning power over a lifetime soars with a college degree. Dollar$ does NOT subscribe to the Buccaneer mantra that you learn the skills their businesses need right now because these loons cannot predict the future beyond the next quarter.

Dollar$ urges you to major in what you love, but minor in how you will make a living.  Become a Graphic Designer with a minor in Business. Study Literature and minor in Computer Sciences.

Commodities Speculator

Become a generalist: in the digital economy of the 21st century, you will have 6 – 7 careers. You will need to be flexible. If you study a specific vocational skillset, your job will, eventually, be either automated out of existence or outsourced to the 3rd World. Buccaneers will tell you otherwise, but they are the very same people who will be outsourcing your job, expressing regrets, and suggesting you borrow money to return to school to retool.

Screw them. Take control. Lead the happy and productive life.

BITCOIN IN WONDERLAND

In Business, Economics, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street, Wall Street Journal on March 14, 2014 at 10:37 am

Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English); ‘now I’m opening out like the largest telescope that ever was!

Bitcoin Speculator

Bitcoin Speculator

Just when Dollar$ though the Bitcoin story was dead and safely buried, someone nibbles a few crumbs of Bitcoin Cake and we are back in Wonderland.

Beware of strange substances that are labeled Eat Me.

The Wall Street Journal reports that a Silicon Valley startup called Xapo is trying to become “the Fort Knox of bitcoin.”

Start with how the Journal ought to employ fact-checkers. Xapo is headquartered in Hong Kong, safely away from pesky US regulatory agencies. Sure, they’ve got offices in California, but so does every other financial firm in the world.

Magic Beans

The bitcoin business proposition is like the story Jack and the Beanstalk. (When it comes to bitcoins, metaphors from fantasy and fairytales are unavoidable.) Give us your real cow, and we will give you magic beans! Overnight they will grow to the sky! When you get up there, you’ll meet a giant who wants to devour you! To survive the giant, you have to be a thief and run like Hell!

Bitcoin: Give us your real money! Bitcoin value will grow to the sky. All you need is the heart of a thief!

The Xapo Proposition

Xapo claims to have raised $20 million to construct physical vaults, “the company says are in mountainous regions.” The vaults are to be guarded 24/7. You’ll need an eye scan to enter. Once each day, employees will descend into the vaults to verify passcodes for daily transactions. Indeed, Xapo indicates it will require 24 hours to complete any transaction.

There are no physical coins, of course. What will be down there will be computers Xapo promises will never be connected to the Internet.  The mountain locations are, naturally, top secret. They may, in fact, be in the back of your Mom’s lingerie drawer. What could be more secure?

Xapo has several competitors, testimony to the idea that a lot of people sell snakeoil.

Liquidity

The bottomless credulity of the cyber-community originates with vitamin deficiencies caused by a steady diet of cold pizza and Red Bull for breakfast, watching Goldfinger too many times, the conviction that one can get rich without ever getting out of a chair, and an unshakeable libertarian belief that the arms merchants, sex traffickers, and drug dealers MUST have an untraceable non-government issued currency for money laundering.

Bitcoin Banker

Bitcoin Banker

Criminals are famous for patience and trust. What 3rd World potentate on the lam requires liquidity? Money launderers of all sorts will  have no issue with a 24-hour waiting period.

Security

Xapo’s website reads, “The Xapo Vault offers fully insured storage for long term savings.” The Xapo website indicates that the insurer is “Meridian Insurance.”

Dollar$ best efforts to find Meridian came up with a few casualty and auto business insurers in the Silicon Valley area. There is no chance that any of them could sustain a few million in claims should Xapo somehow go under, never mind the billions in catastrophic losses made possible by the disappearance of an exchange like the late unmourned Mt. Gox. Could Xapo be arranging employee dental care with Meridian?

But Dollar$ wonders most what currency Meridian or any other insurer will use for indemnification. Will your stolen bitcoins be replaced by dollars, yen, or more bitcoins?

Criminals will stick with fiat currency or gold. Only the naïve and stupid will pursue their bitcoin dreams in Wonderland.

PERSONAL FINANCE FOR THE CLUELESS– SPENDING #1

In Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on March 13, 2014 at 12:24 pm

dollar20signWhat??!!!   Dollar$ thinks I need instruction on spending??? Madness.”

Well, yes and no. (Readers in search of a financial education will often see this wishy-washy maybe yes-and-no stuff; Dollar$ seeks to give unequivocal principles, usually. After that, Bunky, you are on your own, an independent Citizen, free to make your own choices).

Celebrity-Consumer Culture

The US is in the death-grip of consumer culture. Many of us know people who travel abroad and report other places feel “different.” Dollar$ suggests the difference people feel is relief from the unrelenting pressure of American marketing.

  • We buy stuff to feel good about ourselves;
  • We measure status by what we own;
  • We raise our kids striving to give them the best we can afford;
  • We wear clothes with status labels on the outside;
  • We fall in love with cars, cellphones, sexy kitchen appliances, computers, and fashion;
  • We care less about the achievement of celebrities than about the details of their lives, who they marry, how much they lost on a diet, how they raise their kids. Talent? Puhleeeaze…

America drifts on a sea of marketing and ads that like can rise up like a rogue wave to overwhelm us with false desires. No flat surface in America exists that marketers will not transform to ad space—the sides of buses, t-shirts, the seats of sweatpants, taxi-cabs, product placement in films, lunchboxes in elementary school. Dollar$ recommendation:

 Resist Celebrity-Consumer Culture.

 

Rules

Never go “shopping.” Buy stuff, but a journey to spend money is never a recreation.

THERE IS VERY LITTLE FOR SALE IN A MALL YOU CANNOT DO WITHOUT. A mall is a Temple of Consumerism, designed and conceived to separate you from your money.

Turn off your TV. Read a book. Play a sport—don’t watch it. Go for a walk in the woods. Play with your pet. Love people, not things.

If it is not food, clothing or shelter, you don’t need it. Even those necessities are only needed in moderation. We are fat, we have more clothing than anyone could reasonably wear, we lust to live in McMansions.

To modify your spending habits, modify your life.

Learn to feel good while keeping your wallet closed.

COMING SOON:

PERSONAL FINANCE FOR THE CLUELESS– SPENDING #2: CREDIT CARDS

PERSONAL FINANCE FOR THE CLUELESS–INSURING

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on March 12, 2014 at 2:32 pm

 

WIZARD OF FINANCE

WIZARD OF FINANCE

 

Four Financial Functions

Of the four personal financial functions, Saving, Insuring, Spending, and Investing, Insuring may be the least well understood.

Dollar$ broods on the why this is so. Insurance is not hard to understand, but Wizards who specialize in selling financial products lie awake at night dreaming up complicated products to befuddle the Clueless, which products more efficiently separate the Clueless from their dough.And so we come to the First Dollar$ Law for the Clueless.

NEVER BLEND FINANCIAL PURPOSES IN A SINGLE VEHICLE

Someday you will meet an Insurance Broker Wizard who will tell you that the best way to save for your retirement is with a life insurance policy. You may also meet his cousin, the Real Estate Broker Wizard, who tells you to purchase a house you cannot afford because it is an investment; you will meet another Credit Card Wizard who will happily point out that with this wonderful card that costs next to nothing, whenever you incur debt, you buy free airline miles, nights in a hotel, or tickets to see Bruce Springsteen while enjoying a free trip to the Poor House!

Do not work with these Wizards. They are sharpies presenting proposition bets, but as Marlon Brando explained to Frank Sinatra, do not take a proposition bet. Ever. You willhave a wet ear.

 

Wizards charge fees for a service, to which they are entitled, but a Wizard who sells additional services will want to collect MUST do so for a higher fee than you might pay for buying each of those products separately.

Over the life of a policy, which can be decades, even small fees mount up.  You are ALWAYS better off paying for pure products.

Rather than plagiarize, Dollar$ is happy to refer you to a short, lucid explanation from CNN talking about Universal vs. Term Life. CNN concludes, “The lesson: If you need life insurance, get term insurance. If you want to invest for retirement, invest in IRAs, 401(k)s or similar retirement plans.”

Smart folks at CNN.

The Industry

To understand what you should or should not personally do, you first have to understand the industry.

Dollar$ swears the explanation will be short.

Let’s say we live on a nice, tree-lined street. Beyond ordinary town services, our neighbors agree it is to everyone’s benefit to preserve the neighborhood’s good looks, so we form The Dollar$ Neighborhood Association. Everyone throws in a few bucks every year as a matter of civic duty. From time to time, you sponsor a block party, and the DNA buys a keg of beer.

One terrible day, a storm comes through town, and three of those trees are torn up. Luckily, no one is hurt, no homes are damaged. Town workers haul the downed trees away.

The DNA checks its accounts. If we skip the beer this year, we can afford to replace the 3 downed trees.

Property values are preserved. Our lives remain lovely.

  • The DNA is a very small scale mutual insurance company.
  • The stockholders are the people of the neighborhood.
  • The beer is the annual dividend paid to shareholders.

For Profit

A for-profit insurance company works the same way, but they charge larger fees, invest all the money they get, and need millions of clients to spread the risk.  After all, a tornado could wipe out the whole neighborhood. Better to make our community at least statewide.

Whatever a for-profit does not have to pay out, is profit that they keep.

Actuaries, skilled mathematicians, calculate rates by studying masses of data and crunching numbers. Do you know what percentage of women between the ages of 11 and 40 will break a leg next year?  Neither does Dollar$, but there are actuaries who do. They also know how much it takes to fix a busted leg, and they build all those data into health insurance rates for women between 11 and 40.

For-profits may pay dividends to shareholders (who may not be policyholders). It won’t be beer.

If a for-profit does not invest well, it may go bankrupt. Consider what might have happened to the DNA if 10 trees were destroyed. What happens if a hurricane hits New Jersey, the Mississippi overflows it banks, or an earthquake hits Manhattan? Lesson: Buy life insurance only from a well-established company that has been doing business at least 75 years. Anything else is an upstart liable to go belly-up the day you need them.

Action Items

Insurance protects the purchaser from man-made or natural accidents that have financial repercussions.

Dos and Don’ts for the Clueless

Insurance is not:

  • A guarantee that a loved one will live forever;
  • A bet that should things go wrong your heirs will become rich;
  • An investment;
  • It is never a gamble you win by losing. “Great news! I died and now my family is rich!’

The more people swim in the risk pool, the less expensive insurance is for everyone. The more neighbor in the DNP, the more trees can be replaced. The more low risk people buy health insurance, the happier Democrats will be because they will be paying in, but not taking as much out. If that sounds like a scam to you, you are probably younger than 35 and have never been sick.

Do not worry: you will be sick someday.

  • Never insure your children’s lives, unless your kid is Shirley Temple and so provides a revenue stream.
  • Term life insurance is a pure insurance product. In the event of disaster, it pays big bucks. At the end of the term, it pays bubkis. Buy it.
  • Take the difference saved by buying inexpensive insurance and invest or save it to provide wealth or revenue later.
  • Buy term life for as long as dependents will need to replace any income lost to death. That’s usually 20 years after the birth of the last newborn child in a family.
  • Buy enough life insurance so that survivors can continue their lives uninterrupted—do not underestimate this. If a spouse will need to pay for childcare, insure the spouse is cared for.
  • If you have no dependents or heirs, you need no life insurance; but you should consider disability insurance.
  • Disability insurance is more crucial than life insurance. It does not have to be your fault, but if your neck breaks in a car accident, you might survive for decades and need financial resources for all that time. Social Security will no pay what you want or need.
  • Mortgage insurance does NOT protect you: it protects the mortgage holder, not your heirs. You kick the bucket, the bank collects.
  • In America, health insurance has become mandatory. This is controversial, but is no different from mandatory auto insurance about which no one complains. Dollar$ suspects the Weasel mindset is at work here.
  • Insure revenue-producing property from fire and theft. Your auto provides you with  the means of getting to and from a job. Be sure your auto insurancee will be for a renter if you lose your car temporarily.
  • Insure your house from fire and flood. Flood insurance is tricky and varies from state to state. Do your homework.
  • Insure your possessions that would need to be replaced, and insure for replacement value. If your house burns down with a 10-year-ol refrigerator in it, will you be buying a 10-year old refrigerator, or will you need a new one?
  • Liability insurance makes sense if you own assets someone else can attach in the event of your negligence. Someone trips over your rug, takes a header down the stairs, and sues for financial assistance for a lifetime in a wheelchair. Will they go after your kid’s college savings account?  (Yes.) Will you want insurance against that personal liability (Double Yes). Should you put assets in places they cannot be attached? (Maybe—now you need an attorney, but if you have that much dough, why are you reading “For the Clueless?”)
  •  NEVER buy a warranty extension on an appliance. A defective product can be returned. If it breaks too late to be returned, take the money you saved buy not buying extended warranty protection and apply it toward the purchase of a new product.
    Carry as little personal liability on your car insurance as you can. Brokers are going to disagree, but in a world where health insurance is now a legal responsibility of every Citizen, why are you paying for someone else’s health insurance?

PERSONAL FINANCE FOR THE CLUELESS– SAVINGS #2: INCOME

In Business, Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on March 10, 2014 at 7:04 pm

My two Gen Y friends, call them John and Mary were out with me celebrating Mary’s return to the workforce after five months of unemployment.

John and Mary are chronically broke. Ordinary car repairs are a disaster. Every month, they juggle creditors. Who to pay, who to delay?

Mary, a college grad, now has a job she enjoys, though it does not pay much. John works at two hourly wage jobs, about 60 to 70 hours each week. While we eat sushi, his eyes drift half closed through most of dinner. John and Mary live in a less desirable part of town in a decent enough place owned by a relative willing to subsidize their lives by accepting about 75 percent of market rates in rent.

I asked John why he did not attend college. Maybe two years at the local community college? He looked startled. I felt I had offended him.

“Can’t afford it. Got to pay the bills.”

“Why not borrow for school?”

“Loans are too expensive.”

Think Out of the Box

John thinks he is trapped. From time to time, he  gripes about the system, whatever that means.

GEN Y LIFE

GEN Y LIFE

Is there any way out? He is already working more hours than anyone should.

But he is in his 20s.

How will he manage when he is in his 30s? His 40s?

John and Mary’s lives cannot go on like this forever. A tire blowout should not constitute a financial challenge. The only alternative to getting older is death, not a great alternative. John and Mary are going to get older, Dollar$ hopes. Everyone should live forever, but to make that a good thing requires financial management.

What Should John Do?

No  amount of thrift will help John and Mary. They need income. Since being an entrepreneur requires capital they do not have, John needs to go school. It’s his only way out.

John needs to pursue a career, not a job.

Dollar$ recommends, QUIT A JOB BEFORE IT IS TOO LATE!

This is a no-brainer. John needs to quit  the job that pays no benefits.  He is squandering two wasting assets:

  • Youth
  • Energy

They are wasting because as time passes, they diminish in value. He needs to quit before those assets are exhausted.

What can he do with the free hours he will create by reducing himself to working only 40 hours/week?

BORROW. GO TO SCHOOL. STOP KIDDING AROUND. THIS IS YOUR LIFE. AND YOUR LIFE IS YOURS TO CONTROL. NEVER ACCEPT VICTIMIZATION!

 The Cruel Science

Economics and Finance are unforgiving. In the U.S., a non-college grad can expect to earn $25,000 less EACH YEAR. In a working lifetime, that’s well over a half million dollars lost.

Wouldn’t you borrow $30K now for a half million dollars later? Why accept a life of used cars, inferior healthcare, crappy neighborhoods, lots and lots of old clothes, and fights about money, the cause of most divorces in the US.

John might say,“We are not into the system,” but, sorry John and others who would Occupy Wall Street, the last ‘60s communes are long gone. Hippies discovered that farming was back-breaking work.

Suck it up and face reality.

Good or Bad Credit?

John is not a lazy guy. He is as good as they get. But he may be confusing the two kinds of credit

CEO of MasterCard and Visa, c. 1400.

CEO of MasterCard and Visa, c. 1400.

Consumer credit is poison. Borrowing money to pay for something you consume or own is the American financial disease. You bought some bit of crap and now what? The road to Hell is paved with credit cards. Visa and MasterCard charge rates that a thousand year ago would have had them burned for usury.  Banks lust for chuckleheads who never pay off on time.

Do you want to be the bank’s best friend?

Use a credit card only for food and gasoline. Better yet, use cash. You remember cash? Green coupons with the presidents’ pictures on them? Dump your debit card. It exposes you to losses a credit card does not and offers you no float. The second you spend it, the second you lose it. At least a credit card delays payment by 3 – 4 weeks: the float.

Leveraged credit is the stuff of investment.  Borrow money when its purpose is to increase revenue at a superior rate to what you pay for the loan.

Let’s see: A student loan these days—which can be partly used to pay for John and Mary’s living expenses—may run 8 percent per year.

Hmmmm… Eight percent of $30,000 borrowed to pay tuition is about $2,400 per year. Throw in some principle—say the loan costs $3,000 each and every year until it is paid off, maybe 15 years or so, with no payments until the education is finished.

That $3K per year to buy entry to a world where salaries are $25K per year more! That might net John as much as $22,000 each and every year.

Leverage those assets! Get out of the Box!

Youth and energy have market value, but not if you allow them to lie waste away!

 

PERSONAL FINANCE FOR THE CLUELESS– SAVING #1 TAKE CONTROL

In Economics, Economy, EDUCATION, Finance, Personal Finance on March 9, 2014 at 12:23 pm

motherDozens of professional advice-givers advise on how to aggregate wealth. Dollar$ will tell you that other than being born to rich parents, there is no secret.

It is not your fault you are clueless. Financial and Corporate America WANT you to think this is complicated. How else can they justify fees?  Why do you think your high school does not have a required course in Personal Finance?

Dollar$ is please to fill the gap. Here is the secret:

Spend less than you earn.

Dollar$ has nothing but sympathy for the legions of the Clueless who find that advice hard. If you are victim to the consumer society and believe spending money you do not have is an act of patriotism, your contribution to an economy that needs all the help you can give it, join the revolution.

Perhaps you sail through the mall sustaining a life on plastic as a form of self-help therapy, a feel-good exercise superior to alcohol and easier to accomplish than satisfactory sex.

Perhaps you have no financial goals and live from day to day, free and easy, above it all not un like a monkey swinging from tree to tree in the canopy above a rain forest.

Yes, there is some psychological value to living in the moment, but in the world of finance such people have a technical label.

Typical Consumers

Typical Consumers

They are called poor.

Sometimes they are also known as marks and pigeons.

It pains Dollar$ to give you the news, but more than a few Buccaneers, Weasels, and Wizards have made it their life’s work to separate you from your money.

If when you sit down to pay your bills you feel like Mother Hubbard, start by tracking your spending. Record every dollar you spend, especially those impulse buys that have a way of evacuating your wallet. A gazillion apps will help you do this. If you want to see a larger picture on a single screen, Microsoft has a free template that is comprehensive.

Take Control

Get ruthless. Tracking your spending is not the same as controlling it.  This is your life we are talking about.

Track for three months, and run a triage on your expenditures. Identify necessities, nice stuff, and luxuries.

Necessities

Food.

Eating is not a political statement. If you are paying more to eat local or are depleting your wallet for organic food at Whole Paycheck, be certain you are so dedicated to the cause you are willing to impoverish yourself.

One less $4.30 grande latte at Starbucks each day is $30 per week, $1,500 per year—enough to fund your IRA and start preparing for a better old age if you are in your 20s.

If you live in the USA or most of Europe—but not Mexico– that stuff flowing out of your faucet is potable water. Potable water need not be contained in $1 worth of clear plastic.

For heaven’s sake, if you are dining out or bringing food in, limit that shit. Try cooking your weekly meals on the weekend, freeze them, and defrost your own cooking instead of defrosting prepared foods you bought in the freezer aisle. If you can boil water, you can make your own soup, and it will not only have less salt, be more nourishing, and taste better, it makes the whole house smell good.

Clothing.

Dress decently, but do not be a slave to fashion. Do you need a new wardrobe every season?

For work, look neat and look professional, but remember a woman with more than ten pairs of shoes is not buying footwear, but is engaged in therapy. Gentlemen, you need about 10 days of shirts and shorts to get to laundry day. If you aren’t doing laundry…ewwwww!

Shelter.

This is the hard one. Rent the best you can manage without incurring debt. Consider its proximity to places you need to go, such as school or work. Consider your sense of safety: if you lie awake nights fearful of strange noises outside your door, you will need to either get used to it, or move. Live with a roommate to afford a better place, if you must.

Trade sweat equity for rent: can you paint the place? Repair the roof?   Do work for other tenants?

Pay your rent on time. Every time you haul ass to escape a landlord, unless you are living out of a shopping cart, it will cost you, and eventually your credit rating will be gone.

Nice stuff.

Divide your nice stuff into two piles—the stuff you could not live without and the stuff you are going to hurl out the door. That is, divide this pile into Necessities and Luxuries.

  • Do you need to pay for Cable TV if you are streaming most TV shows from Netflicks at 10 percent of the cost of cable?
  • Is your sense of personal identity tied to your X-Box?
  • Do you really need to upgrade your phone every 18 months? Do you need a smart phone at all? Sure, it is hip and cool, but that sucker can cost you. How about a landline and an answering machine? So what if you are not in touch 24/7?

    dead-1

    It might be time for a new car. Maybe.

  • If you own a car, assuming you need one, drive it into the ground and it turns wheels up. Change the oil every 5,000 miles. If he does not work for a dealer, treasure your mechanic. If he works for a dealer, change mechanics.
  • Never trade a used car for another used car: you already own one! Fix it.

Luxuries

  • You don’t need them. That’s why they are called luxuries. Throw them out and do not replenish.
  • The only exception is decent chocolate.

Reject American consumerism. If you need to feel good, join a library group, volunteer at a geriatric facility, take your kids to the park, fall in love, read a book. Just do not spend money on goods or services you do not need. AND YOU NEED LESS THAN YOU THINK.

Coming to Dollar$ soon:

  • PERSONAL FINANCE FOR THE CLUELESS– SPENDING
  • PERSONAL FINANCE FOR THE CLUELESS– INVESTING