Perry Glasser

Posts Tagged ‘Financial Management’


In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on April 23, 2014 at 12:17 pm

If you are unsure you should dip your trembling toe into investment waters, reread FINANCE FOR THE CLUELESS: INVESTING – THE DON’TS right here at Dollar$.


If you are persuaded that the game is rigged and that age hates youth, deliberately having made money management and life-planning a cruel losing joke, consider that the bad guys will someday kick the bucket.  When they do, will you be among ageing schmucks still claiming injustice or do you want to position yourself to take your place as a leader?

The choice is yours.

If you are a twenty-something ready to grow up, or a thirty-something ready to take your share of the American Dream, you have  come to the right place.

Dollar$ will not equivocate. Here is what you must do to GET RICH SLOWLY.

Should you discover you need to get rich quickly, Dollar$ urges you to bet on race horses. At any racetrack, you will breathe fresh air, find friendly company, free parking, and can probably purchase a half-decent meal. You will quickly go broke, of course, but during the 1:12 it takes for a decent thoroughbred to run 6 furlongs you can scream yourself silly and dream of riches. Quarter horse racing is even faster!


Choose a brokerage like Schwab or Ameritrade, any organization that fits your digital lifestyle. Investigate apps or web sites; choose the brokerage that seems most navigable to you for research, purchasing, and tracking your holdings. You will want more as you learn more, but you need to be comfortable with an interface.

The Internet has leveled the cost of doing business, about $7.95 for any online stock trade, so in terms of costs brokerage firms are interchangeable.  At issue for you is service and minimums.

Most brokerages require a minimum amount to open an account: as this is written, Schwab is asking for a measly $500—perfect for the Clueless.


  1. Options. If you can get approved for Options trading, get it.  You will not use this until you have considerable wealth, but it costs nothing to check a box.
  2.  Margin.  Again, check it off and leave it the hell alone until you know what the hell you are doing, and even then think very, very, carefully about borrowing money from your broker to make an asset purchase—which is what Margin trading is about. Remember, your broker is not your partner. Your gains are your gains alone (W00t W00t!), but your losses are your losses alone. If you owe a margin debt, you will owe what you owe no matter what happens.
Margin accounts may have uses, but can be dangerous.

Margin accounts may have uses, but can be dangerous.

You know Tony down at the docks? The guy who lends money to people with no collateral? He is happiest when you pay him, but he does not care if your team lost, the deal went south, or your honey made off with your boodle—he only wants his money and interest back. When he does not get it, he becomes surly. He makes you sell your car, cash in in your kid’s college fund, and if necessary persuade you to these measures by realigning your knee caps with a baseball bat he keeps handy for just that purpose.

Think of your Margin account as Tony. Don’t let anyone get medieval on you.

3. Check Writing. Take it.  Add a measure of liquidity to your assets. You can write an emergency check if you need to—which you should not, but shit happens.

4. Reinvest Dividends. Absolutely. Dividends are how companies share profits with shareholders. Dividends are not interest, but in effect, reinvesting dividends is how your account will draw compound interest.

“He who understands compound interest , earns it ... he who doesn't ... pays it.” Einstein

“He who understands compound interest , earns it … he who doesn’t … pays it.”



1. Buy stock in at least 3 companies traded on either the New York Stock exchange or the OTC (Over the Counter) markets. Be sure these companies are in very different economic sectors. In other words, do not buy 3 media companies, or 3 retail companies, or 3 technology companies, but perhaps buy 1 of each.

You require a measure of diversity. You can buy diversity in a mutual fund, of course, a basket of stocks managed by professionals, but then you pay fees for professional management. Dollar$ cautions the clueless, who by definition are starting small, that the fees will bleed you white. Why start your financial life with a tapeworm?

Diversity is insurance against misfortune. While one sector of the economy may take a hit from unexpected circumstances—such as a change in a government regulatory posture or a political event in a faraway country— the only circumstance that will affect all 3 of your sectors are changes in the overall economic picture, such as a change in interest rates.  For the investor who wants to GET RICH SLOWLY, those dips can be shrugged off because unlike you and me, companies that sell goods and services can within limits raise their prices to recoup what was lost. The price of lumber goes up, the furniture business takes a hit, but next year the price of furniture rises. It’s not as though people will start sitting on the floor.

What constitutes a sector is very subjective. Is Walt Disney a service company or a media company?  Different online research will yield different sector guides. Here is one website that will allow you to bore down to Market Cap leaders by sector.

The final arbiter of what is what is you, Binky, so give special considerations to companies that are conglomerates. General Electric, the oldest company in the Dow Jones Industrial Average, founded by Thomas Edison, makes washing machines, jet engines, and runs an insurance business.  What sector is that?

2. Buy stock in companies that are at least 20 years old.

Ten-year-old companies have a modest track record of survival; twenty-year-olds are even better.

Yes, Dollar$ is aware that young companies are set to grow quickly, but they frequently are headed by untried management and are closer to going broke. Most corporations live little more than a person’s lifetime though the exceptions are remarkablebecause they embrace a culture of change and innovation. 3M Corporation was founded in 1902 to make sandpaper; now they make Post-It notes and Scotch Tape.

Young companies will also gather imitators, which mean ever-increasing competition will drive revenues, but not costs, downward. Someone is bound to improve on the original idea.  If the good Lord in 1985 had whispered in your ear, “Computers,” you may have chuckled at the Divine Wisdom that loaded your portfolio with Kaypro, Atari, Commodore, and Wang. Like last winter’s snow, those companies are now gone.

Avoid the bleeding edge.

3. Buy stock in at least two companies that are multinationals.

DSC_0230Doing business in places where general economic growth is not dependent on the value of US currency is simply prudent. Dollar$ would never bet against the financial muscle of the United States, but Dollar$ is aware that infrastructure build-out in the 3rd world is inevitably followed by consumer demand for a higher standard of living. You do not have to buy stock in a Chinese company to participate in the Chinese economy; you do not need to need to buy stock in a Chilean company to participate in the Chilean economy.  Logos and trademarks Americans see every day are all over the world: UPS, Disney, Starbucks, Pizza Hut… the list is endless.

If you have qualms about such things and think they are imperialistic, ask the folks in Red Square how they like burgers at McDonald’s, or ask Chinese citizens if the prefer iPhones to ‘Droids.

4. Buy stock in companies that pay dividends or, even better, have a history of raising regularly dividends.

Many companies do not share their profits with shareholders via dividends because managers hoard cash for future business investment. While Dollar$ respects the managerial strategy, Dollar$ notes such companies do not suit a strategy to get rich slowly. The Clueless want an opportunity to have their dividends accrue ever more stock.

Better yet, companies that pay dividends suffer less in a downturn because their dividends offer investors a yield, a cushion against losses.

5. Buy and Hold—even if it means going white-knuckled.

On September 16, 2008 the general stock market as measured by the Dow Jones Industrial Average crashed 10 percent in a single day. The Buccaneers who ran major financial institutions were competing to take greater risks for greater profits than any responsible bank should, fudging on what “banking” meant. On Sept 12, 2008 the DJIA was at 11,421.99.  By November 21, it was down to 8046.42 a breathtaking loss of 29 percent in 6 weeks.

Iceland went broke, Lehman Brothers went out of business, and for the first time ever, US citizens heard the phrase, “Too big to fail.”

Anyone who sold to defend his or her assets for fear of total ruin took themselves out of the game. They may have felt safer, but by doing so, they gave up any chance of recovery.

As Dollar$ writes, the DJIA stands above 16,000—which means sellers in 2008 have missed 100 percent gains measured from then, only six years. By selling into a panic, they gave up every opportunity to gain back all they lost and more.

True, if you owned stock in Lehman Brothers you took it in the neck, but if you had a diversified portfolio, over all, you survived and may have even made money.

A wise man once said, “You can’t go broke on a small profit.”

6. Buy shares and add to your portfolio regularly.

Ideally, you may be able to invest with a check-off system from your salary, an arrangement that will allow even those of us lacking personal discipline to take advantage of the maxim: Pay Yourself First.

Regular investing will allow you to take advantage of “dollar-cost averaging.” When stocks are up, you’ll buy fewer shares: when stocks are down, you’ll buy more shares. On average your cost will be somewhere in between. Free yourself from trying to guess if today or tomorrow are better days to buy; let time be your friend.

If your companies thrive and move steadily upwards, your average cost will always be below their current price level.  Over the long haul, stocks historically have gained 7-9 percent annually. Never try to time the market—just be a steady buyer and Get Rich Slowly.

7. Buy Mid and Large Cap companies.

“Cap” refers to capitalization, the sum total of the value of all the shares issued by a company.  Every company issues a different number of shares, so a company floating a million shares priced at $100 per share is worth $100 million dollars, but a company with 5 million shares priced at $50 per share is worth $250 million.  That’s right, the company trading at the lower price is worth more.

Large Cap companies are slow as battleships, but not likely to sink quickly; Mid Cap companies are more nimble and want nothing more than to grow to be Large Cap. They will take more risk, but have a record for taking risks and winning because they really were once Small Caps.

There are plenty of Small Cap companies, and investing in them is a respectable strategy, but Dollar$ does not recommend that to the Clueless: one needs a larger portfolio to overcome the inevitable losses small companies encounter. While a few Small Caps will experience spectacular growth, more will fail or stay stagnant. On average, an investor might do well, but only if the investor has a sufficiently diverse portfolio, unavailable to the Clueless without professional management—which must be paid for.

8. Sell when the reasons you bought a company change or the fundamentals of the business change.

You selected  XYZ company for your portfolio for reasons. Maybe you personally liked the product or the service; maybe liked the company’s competitive position; maybe you liked the company’s record for paying dividends; maybe you read and were persuaded by  the company’s strategic plans; ideally, you liked some combination of all of those.

But if those any of those change, why are you still holding the company? Never fall in love with a stock; review your portfolio regularly, at least every 3 years. Save your loyalty for a lover.


Discovering companies that fit the Dollar$ profile from the universe of thousands of companies is, in fact, easy.  You chose your broker because it offered digital tools for Research. Try the “screening” or “filtering” system—pick an economic sector, indicate your requirements in terms of dividends, choose from Large Cap or Mid Cap, etc.

  • Read about the company’s businesses. If you do not understand what they do, go no further. Invest only in what you understand.
  • Invest only in companies that sell services or products you would buy whether you were a business or a consumer.
  • Buy shares in companies that are ranked first or second in their industries.  
  • Be disciplined. Avoid trendy and hot stock tips, whether from your Uncle Fred or a TV pundit who is obliged to scream “news” at an audience every evening. Near term, they may be right: let someone else make that money while you sleep soundly.
  • Invest and relax—let your money work while you sleep and pay no attention to daily, monthly, or even annual trends. You are going for the long haul, and the long haul is steadily upward and has been for hundreds of years.


In Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS on April 5, 2014 at 12:24 pm

OK, Binky, let’s check.

  • You have:
  • Paid off your consumer debt;
  • Are paying off your leveraged debt, such as student loans;
  • Measured and understand risk tolerance as a function of age and psychology;
  • Have wrestled the Beast of Consumer-Celebrity Culture to a stand-off and so are able to resist its psychological hold on you to impulse-buy consumer goods you neither want nor need,
  • Have for emergencies banked at least 3 months of expenses in a purely liquid account (6 months is better);
  • Insured against catastrophe—possibly through your employer; and
  • A reliable flow of revenue.
  • Accepted the Dollars$ plan to GET RICH SLOWLY.

Should you lack any of the above, Dollar$ wishes you well, but advises you to take control of your financial life before attempting to aggregate wealth by investing.



You do not want to attempt to sail across a stormy ocean in a vessel that leaks. If you are sailing with a partner, you may also risk thinking you need to jettison the love of your life—but that won’t plug the leaks in your boat.

Dollar$ is well aware of the gazillion investment gurus offering all manner of “free” advice designed to give the Clueless investor an illusion of control by suggesting investment strategies that invite Wizards into their lives. Wizards cast arcane spells that universally reduce to one spell.

Binky, since you are too stupid to be a Wizard, give us your money and for a modest fee we will take care of your investments for you.

Dollar$ maintains that  the basics of money management are simple enough for a carrot; he is also certain that Wizards blow smoke the better to separate the Clueless from their money. Further, he does not doubt for a moment that their pals, the Weasels, elected officials, structure American education so that Citizens remain ignorant of how they are getting screwed by Buccaneers.

Dollar$ fights the Power.

Expensive Necromancy

Wizards who take what seems like a pittance: 1.5 percent each year for money management are parasites sucking your lifeblood.

But they are not stupid. If they bleed you to death, they will require a new host. It is far better from the Wizard’s perspective to keep you walking around in a weakened state. That way, they feast forever.  They have this philosophy in common with tapeworms.

If the stock market goes up 7 percent in a year, but a Wizard takes 1.5 percent of that, the Wizard is skimming more than 20 percent of your gains. By the way, if the stock market goes down, the Wizard will mumble apologies, and still take his percentage, accelerating your losses. Your Wizard partner wins even when you lose.

Avoid Wizardry!

It’s your LIFE we are talking about!  If you are unwilling to take control of it, someone surely will!

DON’T hand your money over to someone or some institution, not even a mutual fund manager. If the benchmark of a mutual fund performance is, say, the S&P 500, or the Dow Jones Industrial Average, it stands to reason that managed funds MUST do worse almost every year because no manager is taking a percentage. In fact, 70 percent of all managed mutual funds under-perform their unmanaged benchmarks.

The Exceptions

Nothing beats an employer-sponsored retirement plan—a 401k for example. 401ks have rules that require professional money-management, so accept that.

Nothing beats an enforced, pre-tax investment vehicle for wealth accrual. Pony-up every dime you can up to the employer sponsored maximum. Tattoo on your leg the Dollar$ maxim: LEAVE NO MONEY ON THE TABLE. If your employer is matching even as little as $.25 on the dollar, why would you leave it in your employer’s pocket?

Even better, since a 401k is pre-tax money, it reduces your Federal taxes. Look, Binky, if you are in a 20 percent tax bracket, you have no other investment that pays a guaranteed 20 percent the moment you make the investment.

So let professional money management manage your 401k. If you are young, this is no time to be timid. Create a mix of aggressive mutual funds. When you get to 45-ish, you can become more defensive. But there will only be one time in your life when you can sustain and endure bad luck–NOW.

The other exception to resisting professional Wizard management is after you accrue $100,000 in investable money. Dollar$ would then reconsider your portfolio, as life will get complicated and you do not want to be worrying about finance while you are sipping rum drinks from coconuts on your vacation.

Then again, if you accrued $100,000, you are no longer among Clueless, are you?


DON’T shake with envy over someone making a killing on a hot stock—your goal is to get rich slowly. Congratulate them; take solace in your slower but surer path to a comfortable old age or to aggregating the down payment for that first house.

DON’T pay attention to TV personalities who nightly scream about investments: they are under compulsion to say something new 5 nights each week. Surely, the investment landscape does not change so radically every 24 hours that yesterday’s strategy should be thrown out today.

DON’T pay attention to annual columns in magazines, online, or newspapers in which a bevy of Wizards name their top 3 or top 5 picks for the coming year. How is it that no two Wizards name the same list? Are they throwing darts or do they have a strategy? Could it be the publications want to annually run a second column about how they offer great advice because one of their professional touts will pick winners?

DON’T churn your portfolio. Make strategic plans and review them every 3 years. Markets will go up and down. Hold for the long haul.

DON’T sell in a sharp downturn: they call such moments “Panic” for a reason. Once you sell, you cannot recover. Investors who panicked in 2008 when the markets dropped and the Dow Jones Industrial Average left investors gasping after a plunge from above 14,000 to about 6,500 saw losses of 55 percent! Aaaagh!  Barf!  Rats! If they sold to defend what was left, they missed the subsequent rise that a mere 6 years later has the DJIA over 16,000.  What might have happened if they’d stayed the course and at deep discounts bought more?

If you are among the Clueless but setting out in a secure rowboat, pull at the oars and do not let the occasional storm swamp you.

There will be storms.

You will survive them.

 Coming Soon: The Dollar$ The Dos!


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


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.


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.



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.




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





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.


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?


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.



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?


 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!


Market Sentiment?

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on June 19, 2010 at 11:45 am

Jason Zweig’s column  Wall Street Journal column today suggests that wild market swings are the result of sentiment. Hahahahahahahahahaha.


Mr. Zweig:

Sentiment is a human attribute. As the Journal frequently reports, about 66 percent of all trading is machine to machine, algorithms at work. Those algorithms are the proprietary weapons of choice of organizations that move huge amounts of capital, hedge funds and governments.

Algorithms feel no sentiment. There is no herd instinct in circuitry.

Human investors, the kind that are suggested by the illustration accompanying your work and are the topic of the study on which you report, do not have access to the same markets as the algorithms moving two-thirds of the world’s money volume on any give day. As an individual, I cannot engage in “after hours trading.” That’s not the case for computers that never sleep and are programmed to capitalize at the sight of a penny’s discrepancy on, say the Tokyo and Berlin exchanges. That trade triggers other algorithms; all those pennies add up. While I am asleep in my Eastern US time zone, and while the markets are closed to me,  I may awaken to learn that the opening price of an issue or vehicle is significantly different from the previous day’s close.

Even if I were awake, it would not matter. While the bromide to individual investors for decades has been to diversify, and most individual investors, pension funds and smaller municipalities pay heavily for professional management via mutual funds, those investors are closed out of the markets while the markets are open.   Sentiment–whether fear or enthusiasm–cannot move the markets when buy or sell orders may only be implemented at the close of business, after 4 pm. Indeed, what crash after crash of the past several years has shown is that while the big investors trade in liquid markets, smaller investors do not, and pensions or college savings may be ravished before any action by investors may be taken. As the Journal reports, “Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels.” Our 401ks and IRAs  are trapped, holding trillions of dollars that do not grow.

In terms of real wealth, the past decade has seen us grow more poor. Only  volume has soared. Someone is making money, but it is not those of us schooled to buy-and-hold. We are stuck on the sidelines while fees and commissions bleed us white. Which someones? Oil emirates, the government of China, and the financial community that services those huge, capital machines by  developing ever more obscure financial instruments that investors subject to sentiment cannot understand, much less trade. All we get to do is bail out corporations too big to fail.

It would be lovely if the Journal stopped perpetrating a myth of an open market democracy. The word “investors” should be reserved for individuals and organizations that actually invest, and by doing so create wealth by facilitating capital formation , not money-movers who buy and sell in minutes, create no new wealth, and hedge against the less mobile funds of us poor saps who foolishly continue to believe the markets are a level playing field.

Best wishes,

Arbitrage and Bookies

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on June 7, 2010 at 9:17 am

Joe the Bookie, who was a friend of my father’s, explained to me when I was a naïve but ambitious lad that in the days before the official betting line was emanated from Las Vegas, every punter hoped to find a middle. It happened most often with sports bets, when home town fans addicted to sentiment so lopsided a book that the odds no longer reflected reality. “Say your Yanks are playing your Red Sox,” Joe explained. “In Beantown, taking the Sox to will earn you paying pennies because so many hometown heroes are betting with their hearts, so you take the Yanks at maybe two for one. Are you following me, kid? Now you hustle your ass to Manhattan where the same thing is true—but in reverse. In the Big Apple, you can get two to one, but on the Sox.”

“Yeah, So?”

He slapped my forehead.

“So you take both bets. Who the hell raised you?”

“I don’t get it. How does that help me?”

“Follow me carefully,” Joe said, folding his newspaper, The Racing Form. “You bet $100 in New York and $100 in Boston, right?  You put out a total of $200.”


You have to win one of those bets. At two for one, how much do you get paid off?”

“Two hundred,” I said.

“That’s your profit, kid. Don’t forget you get your wager back.”

“So I get $300.”

“Right. And how much did you risk?”

“Two hundred….oooooh, I see.”

“You had a middle. Doesn’t matter who wins or who loses, you are coming away $100 to the good.”

“Sounds great.”

“Naaah. It’s a nightmare, kid. How long before we’d have to close up if punters won every dime?”

My father sent his boys to public schools: Joe sent his kids to Yale.

Joe’s boys now performs arbitrage for international hedge funds. They’ve got computers that all day long look at bundled investment vehicles: mutual funds, index funds, ETFs, derivatives, whatever—and compare that to the actual prices of the underlying assets—vanilla stocks and bonds.  When the price of the bundle is out of whack with the underlying issues, they move a few billion dollars one way or the other, buying the bundle while selling the underlying issue, or vice-versa.

A few pennies times a few billions makes a nice day’s pay.

By the way, you can only play this game if you have proprietary software and a monster computer that is plugged into world markets 24/7.

When enough computers see a middle—or speculators create one—they mindlessly perform the trades and you get your Flash Crash.

In Joe’s day, anyone who disrupted the game that badly would be swimming with concrete overshoes.

Today, their shenanigans get rationalized in the Wall Street Journal.

Greifeld Makes World Safe for Computers!

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on June 5, 2010 at 10:18 am

Chutzpah Award Winner

In today’s Wall Street Journal, Bob Greifeld, CEO of NASDAQ and Wizard Extraordinaire, Oak Leaf Cluster, writes of the new measures to prevent another Flash Crash.

Greifled assures us, “markets work when a willing buyer and a willing seller come together to determine a fair price. Markets only work when they are continuous and performing. Any intervention must be based on the principles of transparency, fairness, objectivity and sound regulation. …  Our shared objective is to help ensure that investors and listed companies feel confident in the integrity of the prices generated by their equity markets.”

Sounds good, don’t it?

But who are these “investors?” If you ever had any doubt that the mission of the markets was to make the world safe for Buccaneers and Big Money, check out the details. Griefled writes:

  • The triggering price for each Nasdaq-listed security is the price of any execution by Nasdaq in that security within the prior 30 seconds.
  • …the Nasdaq Volatility Guard will trigger a 60-second pause in trading on Nasdaq in the affected security. During the trading pause, Nasdaq will maintain all current quotes and orders and will continue to accept quotes and orders in the security, as well as disseminate an electronic Order Imbalance Indicator every five seconds showing the number of shares and the prices of the shares on the buy and sell side as they converge to a price to open a stock. At the conclusion of the 60-second pause, the security will be re-opened with an auction.

Greifeld concludes, “While no market can guard you from uncertainty, Nasdaq is committed to protecting you from excessive volatility.”

To whom, one can only  wonder, does you refer?  Why, all of us who can respond in 30 seconds. Investors means the 66 percent of all trades done computer-to computer-at light speed.

Feel reassured? Instead of your life savings vanishing in a flash, you’ve got 30 seconds! No one to blame but yourself if you are slow to respond.

All rise!

Bob, you Rascal you! For being First Order Apologist and selling Soft Soap, Bunk, and general B.S. ,a Dollars$ Chutzpah Award to Bob Griefeld!!!

An open market means equal access, as Greifeld knows: suggesting 30 and 60 second safeguards is just contemptuous of traders–the kind who breath air.

Wizards at Work

In Business, Economics, Economy, Finance, Personal Finance, Politics, Wall Street on June 4, 2010 at 10:48 am

Wall Street Wizards are twisting in the wind still trying to figure out what the flash correction was about, knowing full well that if they do not come up with some  preventative measures, they will either get their asses regulated off or Citizens will desert the markets.

Worse, large foreign investors will reduce their exposure to American markets, pulling out their dough, which means the Wizards summer home in the Hamptons may be in jeopardy.

Today’s Wall Street Journal kinda, sorta, almost admits that the alleged transparent and open markets are anything but because 66 percent of all volume is being traded between computers at light speed, based on information no  human could possibly process.

Gee, ya think?

You read it here, first.

And here, second.