Monday, February 19, 2018

Unaffordable Housing?

Is there really such a thing as unaffordable housing? Not for very long.

Back in the 2000s, as I have noted, time and time again, we bought two condominiums here in South Florida.  We were alarmed as the prices kept ratcheting upward - sometimes 20% to 30% a year.   As much as we enjoyed this phantom "equity",  the rapid rise made us uneasy.  We'd lived through real estate bubbles before, and this had all the makings of one.  And we were right.

Every evening we would drive down route A1A and enjoy looking at all the fancy houses and also all that fancy new high-rises going up along the water.  It seemed like hundreds and thousands of new condominiums were being built, just within a few square miles.  And all of them would be topped out and finished off at about the same time, too.  Who would buy all these condos?

(Fast-forward 10 years and we are back in Ft. Lauderdale, and this time it is all new luxury apartments under construction - all set to top out within the next few months to a year.  Who will rent all this luxury apartment space?)

The inevitable happened around 2007.  All those condos were finished,with not enough people to buy them - and the real estate market crashed.  It is a cycle that Florida has been through many, many times, and is still going through today.

According to a recent article, a builder is warning the same thing may happen again soon, only this time with regard to luxury apartments.  And actually, if you google this, you will see articles from as far back as 2015 warning of over-construction in the luxury apartment sector.   Since the real estate crash of 2008, Builders have been adding more and more apartments as fewer and fewer people want to buy, and more and more older people are less interested in owning.

Many of these luxury apartments are second homes for very wealthy people, or even sometimes a third home - they're only seasonally occupied.  Others are downsized homes for empty nesters  whose children have left the house.  They no longer want to deal with the joys of homeownership and just want to a turn-key place they can go, and pay a monthly fee.

At the other end of the spectrum, poor people are having a harder and harder time finding decently priced places to live, particularly in very hot real estate markets such as the San Francisco Bay Area, Washington DC, and the like.

Many are spending more than 50% of their income on the housing alone, which puts them in the category of being financially stressed.   The question remains why are there not more lower income housing units for lower-income people?  The answer is complex, and it has a lot to do with the inefficiencies of the free-market, which often becomes a race to the bottom.   In this case, it is the builders racing to build a product that is the most profitable to them, but unafforable to most.  It is like the carmakers building $70,000 pickup trucks and $100,000 SUVs - and not being able to keep them in stock.  Meanwhile, no one wants to make a simple, inexpensive sedan anymore - no profit in that!

I mentioned before that there's really no such thing as unaffordable housing.  A house or apartment is placed on the market either for sale or rent and then is rented or sold for the highest possible price the market will bear.  Few, if any houses or apartments sit empty - for very long.   If people stop paying higher prices, the market corrects itself and prices go down.  This pattern has been established again, and again - and again - over the years.  But it does take time for these corrections to occur - and in the interim, people can get hurt as a result.

This is not to say that housing prices are ever cheap or that affordability is tracked in real-time. Rather, there's often a delay or hysteresis in the system as prices get ahead of the market and then inevitably crash and prices go below the market - at which point nobody can afford to buy because they're broke.

I mentioned this before in a posting about depressed real estate prices in Cape Coral, Florida right after the crash.  We drove down there after seeing houses selling for under $100,000 - houses that have been on the market for over $400,000 just months earlier.  By the time we got there wily investors had snapped up most of the prime real estate stock.  At that point in time, that's who could afford to buy these properties.  The poor people who really could have used those houses were financially stressed from the recession, likely having lost their jobs or maybe their life savings in some real estate scheme during the bubble.

Of course there are other factors besides supply-and-demand in the real estate market - or at least some people believe.  In many real estate markets, geography constrains expansion of the marketplace.  Areas such as Vancouver or San Francisco are bounded by water and it's difficult to expand beyond those boundaries.  Prices go up and poor people forced to pay an exorbitant amount of money for rent or have to commute enormous distances across bridges to get to their jobs.

Of course, there are other alternatives.  As I noted before, many of my semiconductor clients moved their offices to lower-cost areas such as Boulder, Colorado or Austin, Texas - which quickly became higher-cost areas as more more companies moved there.  Amazon is doing the same thing by locating a "second headquarters" in a lower-cost community, and it sounds like Apple may follow suit.

The high cost of living affects not only employees but employers as well.  And as the cost of living rises, employees are more likely to seek other job opportunities where pay is higher in order to better support themselves.  This is the reason I left the Patent Office to work for a law firm -  so we could buy a house in the expensive Washington, DC area.   My salary at the Patent Office was was not going to support our dreams of home ownership.

Although it may take some time, the same thing will happen in these hot real estate markets today. Employees will try to find higher-paying jobs or go on strike for more wages in order to pay for the higher cost of living. Companies will realize that the cost of living is too high and thus they have to pay their employees more.  That in turn will incentivize them to move some or all of their businesses to lower-cost areas in the country.  Eventually, a new equilibrium will be reached - which has happened before in the Bay area, many times, when real estate boomed - and then went bust.
Before he moved to Washington DC, Mark live here Boca Raton, Florida which was in the process of recovering from a real estate crash prior to the 1989 crash.  Many developers overbuilt the area with luxury condominiums for which there were not enough buyers.  He, and students like him, could rent these condominiums very inexpensively for use as dormitories while they were in college.  And they could rent inexpensively as the builder went bankrupt and a new owner took over - an owner with a much lower cost basis who could rent for less and still make money.

A builder, developer, or landlord might argue that the high cost of these units would prevent them from renting at low prices, bankruptcy enters into the scene.   We saw this same pattern in the Washington DC office real estate market in the 1990s, where too many new office buildings went up at once.   Once these white elephants went up un-rented, they often ended up in bankruptcy court. Some new landlord takes over and rents them out for a few dollars less, and since he has a lower cost basis and overhead, he can do so at a profit.

Pretty soon, his building is full of new tenants whose more expensive leases expired in other buildings.  Those buildings are now un-rented and they go bankrupt - and the process repeats, with these office buildings toppling like dominoes in bankruptcy court, one by one.

And I think that's what we'll see in this "luxury apartment" market.  When you have a major luxury apartment developer warning that people are over-building, then trouble lies ahead.  One or more of these apartment developments will end up in bankruptcy as the units end up un-rented.  Since the landlord can't pay the notes on these places, they will have to reorganize in bankruptcy court.  A bunch of the debt will be wiped out as a result, and the cost basis of the new owner will be lower, allowing them to lower rents to attract tenants.  This doesn't mean that Section 8 tenants will be moving into the luxury high-rises, only that this will depress rents all across the market.

Again, as we saw in the Washington DC office real estate market, this has a domino effect.  Thus, while housing seems unaffordable today, this could change dramatically in the coming months and years.  Eventually they will reach a point where people will stop paying and this will, in turn, drive down prices.  And the change could be sudden and dramatic, as we saw in 2008.  And it could be very soon, too.

This is not to say that housing will become cheap or even free.  People don't like to spend a lot of money on housing, and it usually takes up at least one-third of your budget, if not more, even in a "normal" market.  What people complain about is they would like to have more and nicer housing than they can afford and have more money to spend on bling.  And this is where I have a disagreement with the "affordable housing" people.

As I noted before, I pissed off a "housing advocate" in Key West once, as he argued that homeless people should be allowed to have homes on that resort island.  I pointed out that since they weren't even working there, why would they need to have housing on a resort island?  They could live further up the Keys or even on the mainland.  But in his mind, beggars could indeed be choosers, and if you wanted to be homeless, you should have your choice of where to be homeless, including in a resort area.

Meanwhile the poor bartender or waitress, who's doing 60 hours a week trying to make ends meet, has to commute two hours from up the Keys in order to go to their job.  They made the logical choice to go where housing was more affordable.  The working class gets punished here.

And those really are the only choices you have, when the housing market goes bananas and gets crazy expensive.  You can argue for political changes, but they're not likely to be forthcoming, particularly in the current political environment.  Or you can find someplace cheaper to live - or find a job that pays better money.   And in my life, I've been forced to do both of the latter, as there is no "middle-class housing advocate" with a 503(c) organization lobbying on my behalf.

A better approach, I think, is to realize that if you're living in an area with a high cost of living, is that you came there for a reason - most likely a job.  Earn your money, and bank as  much of it as possible - and spend as little as possible on housing even if that means getting a roommate or living in an apartment or a smaller place or a place less desirable than what you think your are "entitled" to.

Chances are, you may end up moving away in a few years, anyway.  If the market is that overheated, it may correct itself soon, and you may end up "upside down" on a house for many years - and stuck.  And I say this from experience, having bought at the height of the 1989 bubble - and then bought many more properties after it all went bust, in 1994.  If the market is overheated, don't be in a rush to buy.   It is like buying Bitcoin or gold after it has gone up in value - thinking that the boat is leaving the dock and you'd better get on board, only to later find out the boat was sinking.

When the time comes, you can move away to an area where housing costs are far less and live more comfortably.  The big mistake, I think, is to try to buy up to your salary level and spend a huge amount of the money that you earn on something that could fluctuate in value greatly, particularly in these bubble areas.

Because when it comes right down to it, housing is a commodity like any other - and it is subject to the same laws of supply and demand.  And when people try to tell you otherwise - that gold or bitcoin or houses, or tech stocks are "different" and don't conform to normal economic theories - that's a sure sign you are in the middle of a bubble that is about to burst, and burst bad.

And I think we are headed for yet another real estate meltdown, within the next couple of years.   And a lot of housing that today is "unaffordable" will drop in prices dramatically.  Don't take my word for it - ask the guy who is building these darn things!

Sunday, February 18, 2018

Cats Are Stupid, Dogs Are Worse.

Why would a cat choose a feral life over being domesticated?  Why would a dog run until it was lost?  Maybe these instincts can tell us something about human nature.

While traveling by RV, we often run into feral or semi-feral animals at campgrounds.  In some cases, people "dump" unwanted cats and kittens or dogs and puppies at campgrounds, thinking that people will feed them (and we do, sadly) and thus they will have some sort of life.  But of course, as animals that have been domesticated for millennia, they are not well-suited for the feral life.  The expected lifespan of a feral cat or stray dog can be measured in a few years or even months.  On the other hand, a domesticated cat or dog can live as a pet for well over a decade, sometimes even two.

So why would a cat choose a feral life over sublime domestication?   Because they are dumb as stones.   We were in Vermont last summer and around midnight, heard a cat meow outside our camper.  I went outside to see a perfect tiger cat, sitting outside the camper, waiting for dinner.  He is pictured above.  So I brought it a paper plate with some shredded ham, along with a saucer full of cream.  He ate like he hadn't eaten in weeks.   He was a well-groomed cat, but a little slovenly at the edges from living in the wild.  He purred and rubbed against my legs.  I was able to pick him up - a sure sign he was someone's pet at one time - and he purred as a I rubbed his belly.  Feral cats do not like being handled, as they were not handled as kittens.

I left the camper door open and he came right in, jumped up on the bed, and curled up with Mr. See.  Mark woke up and was somewhat surprised to see this purring tiger cuddling with him.  "Who is this cat?" he asked.  "I've decided to call him 'Hero' - since we are near North Hero, Vermont!"

I went to close the door and "Hero" jumped up and ran through the gap.  Free food and cream and cuddling was fine and all, but he wasn't about to be domesticated.   I speculated that he was someone's pet - someone who foolishly decided to take their cat camping.  Cats generally don't like traveling in cars, and often will run from a car as soon as you open the door.  I suspect "Hero" escaped from someone's car at the campground and ran as fast as he could.  The owners called for him for days, and then finally had to go home.  The same thing happened to my sister, traveling from Boston to Colorado in her Volvo in 1973.  She let the cat out at a rest stop and it ran as fast as it could.  Five hours later, no cat, and they had to leave.  Another feral cat living at a rest stop.

The problem for "Hero" was that he hated cars so much that he did not want to be trapped in an RV. or car.   So he would never allow himself to be adopted by some other camper - such as ourselves.  We realized, after three days with "Hero" visiting our camper for more food and ham, that he would never come home with us.   He would choose the feral life over domestication.

And what we were offering him, of course, was a chance to live in a comfortable house, have regular shots and inoculations, medicine and health care, all the food and drink he could stand, and someone to scoop his shit out of a box twice a day.  Oh, and he could expect a life expectancy well into his teens - maybe his early 20's as two of our cats achieved.  The more I thought about it, the more I thought it was a pretty raw deal for the humans involved.

But "Hero" would have none of it.  The feral life was for him!  He didn't appreciate what a coming Vermont winter would bring.

We are in Florida now, and the first night at the KOA, a small cat comes out from under a neighboring RV, curling around our legs and begging for food.  I give her cream, which she loves, and some ham and cheese - but apparently she's keeping kosher, or perhaps vegan.  I name her "Hollywood" since we are near there.   Once again, the same pattern emerges.  Clearly an abandoned pet who likes being handled, she still is too skittish to be adopted by humans.

And why should she?  Living in an RV park means a never-ending supply of patsies who will take pity on her and give her free meals and an occasional pat on the head.  All she has to do is mew and purr and rub against a leg - and voile!  Free meal!   Why be domesticated when being "free" is so much better?    But of course, a cat isn't making that mental calculation - or is she?

Maybe after being abandoned once, she doesn't want to risk abandonment a second time?  Or maybe it is just more fun to live under a trailer in temperate Florida, than to be confined to a house and one family?  Or maybe cats are just too stupid to grasp a good thing when they see it.

Dogs are not much smarter.   Dogs often will run away or get lost from their owners, and often can't find their way back home.  Despite the stories and movies you've read about dogs traveling thousands of miles to be reunited with their owners, the reality is, most dogs get "lost" only a few blocks from their homes.  Despite their reputation as tracking hounds, most dogs don't have enough common sense to come in out of the rain.  When let out of the confines of their back yards, many will just wander off in random directions, chasing an occasional squirrel or cat or whatever, until they realize they are tired, hungry, and thirsty, and their owners are nowhere to be seen.

And it is sad.  They end up in the pound or shelter, and the odds of them being reunited with their owners is maybe 50/50 at best.   Dogs have a good thing going - getting three squares a day and all the shoes they can chew - and yet they blow it the first chance they can dig a hole under the fence, by getting lost and never finding their way back.

(Our first dog, Maggie, a lab/chow mix, would have run off chasing a squirrel and gotten lost at the first opportunity.  And indeed, in Nova Scotia, we nearly lost her when we let her off the leash and she chased after a deer.  Ginger, our greyhound, on the other hand, knew a good thing when she saw it, and rarely ventured more than 20 feet from our sides.  Greyhounds are sometimes smarter than even humans.)

So what does this have to do with anything?   Well, humans aren't much smarter than cats or dogs.  Many humans, given the chance, would rather live under a bridge, provided they can have all the cheap beer and drugs they can consume.  And with a few hours of panhandling, they can often finance this lifestyle.    Or maybe a few hours spent stripping the copper coils off your air conditioner will suffice.  People will revert to a feral state if allowed to do so.  The veneer of civilization is indeed, very thin.

When we were living in South Florida, we used to drive our boat down various canals.  One went under a bridge under Route 1.  Some homeless guys were living there in a primitive camp made of found furniture, some broken-down tents, and whatnot.  They would ask us for beers when we drove by in our boat, and we would throw them a few cans - which they were adept at catching!   They had a lifestyle there that was, in some respects, envious.   Their life expectancy, of course, was severely shortened.  But they didn't have to be domesticated.

And this is the problem for people who actually have to deal with the homeless, as opposed to self-appointed "homeless advocates."  The latter would argue that the cure for homelessness is a firehose of money, preferably directed at their non-profit organization.    But of course, these "solutions" to the problem of homelessness - which is a problem of mental illness as well as drug use - fail to address the underlying causes.

Not every cat wants a warm lap to sit on, or a warm fireplace to curl up next to and nap - not when living on the street can be not only comfortable, but leave you with a sense of freedom and lack of obligation to anyone.   And while dogs are more like pack animals - and want to bond with humans more than cats do - they will wander off their leash at the first opportunity and end up lost.   They just aren't that smart.

And often, we humans are just as dumb.

Thoughts and Prayers Aren't Working...


We need to try something new....

Another day, another mass-shooting in America.  A deranged young man with access to guns.   And in most cases, these people who collect arsenals of guns and who are obsessed with guns are batshit crazy.   We can't stop selling guns to crazy people because they are the best customers!  It's time we realized that "gun nuts" are nuts, period, and this will never stop unless we change something.

But you know the routine.   Or you should by now.  Barely two months into 2018, there have been 18 school shootings alone, or about three a week.   And in each case, the same old process is played out.  The press reports breathlessly about the shooter (glamorizing him in the eyes of other potential school shooters).   The GOP and NRA give "thoughts and prayers" to victims and their families and castigate anyone for talking about gun control "at a time like this!"

The press continues to glamorize the shooter, with article after article about what was going through his mind, an intimate detailed biography of every incident in his life, and of course, weeping parents who say they "never saw this coming!" and they are the real victims here (if they weren't shot first, that is).

A week goes by and we see the "who were the victims?" articles, but we never click on these, do we?  Maybe a week later, a tearful article about some victim who had high hopes to be accepted at college or had a football scholarship all lined up.   We rarely click on those as well.

Meanwhile the memorial is set up, with flowers and teddy bears and cards and flags - as if this will somehow make it right.  The authorities later on remove the mounds of decaying flowers and mildewed stuffed animals with a front-end loader.

And... it's back to business as usual.  More guns sold to mentally ill people, using a background check system intentionally hobbled by the NRA -  and organization that has fought to allow convicted criminals and mentally ill people to be able to obtain firearms.

How can you tell if someone is mentally ill and trying to buy a gun?   It isn't that hard - check their closet for an arsenal of weapons.   Mentally healthy people don't have a need to hoard guns.   And I am not talking about gun collectors with a carefully curated collection of antique firearms in glass cases.  I am talking about the 20-something dude with guns leaning up against the wall of his closet, or arranged on the bed for a snapchat photo.  You know exactly what I am talking about - and those who claim not to, are lying.

So, nothing will get done, other than more "free flowers."

And it will continue to be this way, so long as people vote Republican.

By the way, in the 240 year history of this country, was there ever a time when politicians of either party "took away our guns?"

Why Gamblers Never Win

A brand new car - that you did nothing to earn.  Is this really an accomplishment, or a hollow victory?


It struck me the other day that even if one could "win" at gambling (and you can't - over time, the vast majority of people who gamble  - over 99% - lose far more than they win) you really aren't winning at anything.

For example, I saw at a casino once, a car up on a stage surrounded by slot machines.  If you played these "progressive" slots right and won, you'd get this shiny new Camaro convertible.  It was a V-6 of course, but still.

And I thought what it would be like to "win" this car, and felt that it would be a very shallow experience.

Think about it.   You are cruising the Las Vegas strip at sunset in your new car - after paying the taxes, insurance, and registration on it, which came to several thousand dollars.   Did you really accomplish anything?  Are you really a "winner"?  Are you wealthy as a result?  Of course not.

Did something you do differently than other people that would really entitle you to this car - was it something you earned or just something that fell into your lap, like finding a penny on the sidewalk?  You can't really say you are very special or did something special to earn this.   You may think you are a "player" for a few moments, but deep down, you know that you just got lucky this once and got a car out of the deal.

But of course, the reality is, like most gamblers, you'll end up selling the car to pay gambling debts, not to mention the taxes due.  Because no one ever wins at gambling - even when they win.

Saturday, February 17, 2018

Children Playing With Money


When kids play with money, trouble ensues.

A recent article online describes a problem with one of the cryptocurrency exchanges, Coinbase. Apparently they have been double- and triple-charging people's checking accounts resulting in overdrafts for the unfortunate victims of this scenario.

What I found hilarious about the whole thing was that the articles were quoting from Reddit - never a good source for newspaper or magazine articles, as all of the postings are anonymous and many of them are trolls or simply made-up.  But assuming that these postings are true, one in particular made me want to chuckle.  The person in question "invested" $300 in Bitcoin through the Coinbase exchange and was debited several more times.   I find this laughable as $300 is not an "investment" - it is a bet you are placing - it is gambling.

Another fellow claims they debited his account seventeen times for $1000 each time, and now he is "officially broke".  How sad when your entire net worth is $17,000.  Sadder still that you leave that much money in a checking account and grant some cryptocurrency exchange the right to debit from that account.

This reminds me of a guy I saw online who "invested" $500 in the Facebook IPO saying "I can afford to lose that amount."  He really isn't so much investing in the future of Facebook but thinking that maybe the stock with spike after the IPO and he will make a lot of money in a short period of time.  Why not, everyone else makes money on these IPOs, right?  Just as "everyone else" is making money on Bitcoin.  But for someone to make a dollar, often someone else has to lose one.  You cannot create wealth from a vacuum or from nothing.

Of course, Facebook stock tanked initially and he panicked and sold it, cutting his "investment" in half.  If he had a time machine and hung on to it for a few years, it may at least paid itself back. That illustrates the nature of this type of gambling on the market - people usually just lose money, due to fear and greed.   It also illustrates that all the big talk online from"investors" if not outright fake, is just the talk of kids throwing $100 at something.

Oh yea - that.   As it turns out, "crypto" has been the subject of pump-and-dump for some time now.  People hype cryptocurrencies in chat rooms and online forums.  The chumps thinking this "secret tip" is shared only with them, buy, driving the price up.  The spammers, trolls, and shills cash out and make a few bucks.   Act shocked.

Getting back to this crytpo warrior profiled online, what was even more laughable - and sad - that his investment was $300, was when they debited his account several times, he said his account went negative.  "But I used to have a comfortable balance!" he said.

I'm sorry, but having $1,000 to $1,500 in your checking account is not a "comfortable" balance. It's just nearly about empty.  Sadly, that situation describes me when I was younger - spending every last penny I made and borrowing five pennies more.  I was juggling my expenses and robbing Peter to pay Paul, and had barely a dollar in my bank account when I got done making payments on all the loans I had.

I recounted before how I used a debit card to buy some Chinese food at the takeout near our house, back when we used to do those sort of things, far too often.  The old lady behind the counter was very sweet, but kept swiping my debit card and couldn't figure out why it wouldn't go through.  She also had a bad habit of not reconciling her charges until the end of the week.  So what happened was about five holds for $25 for Chinese food were placed on my account and it wasn't until the end of the week that they were reconciled and cleared off.  In the meantime, I'm ashamed to say, my balance was so low that this cause my mortgage check to bounce.

If you have less than $1,500 in your checking account, maybe one should think about leaving $300 more in it rather than "investing" in Bitcoin (or buying Chinese take-out!).   Because if one has that small a bank balance, one is really in no position to be investing in anything.  True, you should be contributing to your 401(k) or making regular, small payments to an IRA, or perhaps investing small amounts in stocks or mutual funds at a rate of $50 to $100 a month to start with.  But throwing $300 at Bitcoin when your balance is $1500 or so?  Not very responsible!

If you are sucking air at the end of the month and your bank account never gets above three figures, you're really no position to be investing, and really no position to be speculating wildly on things like cryptocurrency.

The article is illuminating however, in that it illustrates an example of who these people are who are buying Bitcoin and other cryptocurrencies. These are not billionaires or millionaires investing thousands, tens of thousands, or hundreds of thousands of dollars in cryptocurrency as an "investment."  Rather, these are small investors who are throwing a few hundred dollars here and there at Bitcoin and hoping it goes up in value.  And they are also very young people, mostly males in their 20's to mid-30's.  Prime chump meat.

The real users of Bitcoin and other cryptocurrencies are people trying to transfer enormous sums of money from one part of the planet to another - usually to avoid taxes or for some other illegal purpose.  They purchase the cryptocurrency and immediately transfer it overseas and then convert it back into a local currency.  The Chinese businessman sends millions of dollars to Vancouver to purchase a house and establish a business there so he can obtain Canadian citizenship - just in case the whole China thing blows up.  A drug dealer in Panama launders his money through Bitcoin and transfers millions of dollars to an offshore account.  Human traffickers from Eastern Bloc countries send millions of dollars back home using cryptocurrency.  These are the real users of these cryptocurrencies - and almost all of their uses are illegal which is why governments will crack down on cryptocurrencies in the long run.

The real users are not "investing" in Bitcoin - they're using it to transfer money.  So for them, the price of Bitcoin or other cryptocurrencies is really irrelevant as they are buying and selling almost immediately.  Unless a sudden spike occurs in the market between the time they purchase and sell - which might be a matter of minutes - they really don't care whether one Bitcoin cost a dollar or $10,000.  It is just an exchange medium to them.

And since they're buying and selling almost immediately, their transactions really don't affect the market that much.  But these other people - the little people - who are buying and holding Bitcoin are driving the demand up when the supply is limited.  These are the $300 chuckleheads who are causing the price to spike to the stratosphere.

These are the grocery clerks and shoeshine boys that Joseph Kennedy complained of back in 1928, who are trading stock tips.  They have no idea what they're doing, and as soon as they start losing money they panic and sell.  Amateur investors tend to spook markets.   In the case of  cryptocurrency,  it's basically kids doing this, and by kids I mean people in their late teens or early twenties or possibly maybe early thirties.  What today is considered childhood in America.

When you go online to these discussion groups, ask yourself whether you want to take investment "advice" from some 20-something "playa" who has all of $300 "invested" in crypto.

Anyway, it made me laugh and also made me sad to read these reports.  I'm sure the poor guy threw a plate of chicken tenders at his mother when he found out his bank account has been drained dry. But then again, I recognize the pattern here because I used to be that way myself - very immature with money. And money is something you can't be immature with - but something to treat deadly seriously.

Friday, February 16, 2018

Fitbit Suicide



MIAMI - An Ormond Beach man was found dead yesterday of an apparent self-inflicted gunshot wound. Volusia County Police report the man left behind a suicide note saying he was despondent as his Fitbit no longer loved him.

Friends and neighbors said the man, a Mr. George Ormstein, was enamored of his new Fitbit which he purchased several months ago.  "He loved that damn thing," a neighbor said, "It was always telling him to get up and walk around and giving him little positive feedback messages whenever he did some exercise or got his pulse rate up!"

The relationship expanded from there. In addition to the constant nagging and praise the Fitbit provided to Mr. Ormstein, it started suggesting other activities. "I remember I was quite shocked," another neighbor said, "when it suggested they go out to dinner or see a new exhibit at the Museum."

Mr. Ormstein was apparently quite fond of his Fitbit, wearing it everywhere and constantly checking it for messages.  He started buying it accessories, such as colored wristbands and a custom diamond-studded charger.  However, the relationship soon turned sour.

"It happened slowly," a neighbor said, "the messages started coming fewer and fewer, and then some very odd and quixotic messages started appearing.  He (Ormstein) wasn't getting the positive feedback he was enjoying before!"

The end came, a neighbor said, as Ornstein received a message from his Fitbit suggesting that perhaps they start seeing other wearable devices.  Ornstein fell into the depths of depression, as his Fitbit stopped sending him daily messages.  "He tried dating a Garmin, but it just wasn't the same.  He was just going through the motions - his heart wasn't in it, nor was his heart rate," the neighbor said.

Services will be held next Saturday.  I lieu of flowers, donations may be made in Mr. Ormstein's name to Fitbit anonymous.

Thursday, February 15, 2018

Why Belief?

Belief is like sex - it feels good.

A recent article in the paper profiles a religious woman who gave away over a million dollars to an online Nigerian scammer.   He posed as a suitor, and after her husband died, she was lonely.  Over the years, he told her one tale after another, and always had a plea for money - a few thousand dollars at a time.  Finally, even he had enough of the charade and told her the truth - he was not the handsome man in the photos he sent her, but a scammer at an Internet cafe in Nigeria.   She is writing a book about the experience.

Why would someone do this?   Once again, belief trumps reason, and belief in that regard can be evil.  People are willing to use belief to make important decisions in their lives, and they usually end up screwed as a result - although in this lady's case, not literally.

We are in South Florida, and I thought about this as we drove along.  I saw another one of those cardboard signs by the side of the road, advertising a house for sale for a ridiculously low price.  "MUST SELL!" it proclaimed.  I wish I had the time and energy to investigate that - get a hidden camera and call the guy and see what the scam was - because you know it is a scam.

You don't?   Well, let me tell you why it is.  First of all, anything advertised on a cardboard sign is a scam, basically, other than a lost pet poster.  And even those....  No one is telling the great secrets of investment, how to buy distressed houses, the secrets to weight loss, or whatever, on cardboard signs.  If what they had was such a good deal, they would at least have a nice sign printed - and be able to afford to advertise.  You can spot a raw deal at 100 paces by the way it is presented.  No need to further investigate.

Still not convinced?   Well, explain to me why thousands of these same signs appear all over America - advertising houses at bargain prices, in almost identical wording.   You know that someone is playing a con.   Still not convinced?  Then just ask yourself this: If you wanted to get rid of a house at fire-sale prices in a short period of time, what would you do?   Call a Real Estate agent and get it listed at a low price so that some investor would snap it up by the end of the week?   Or put out a cardboard sign and hope someone buys your house?   Of course you'd do the former.

But people want to believe - and what they want to believe here is a common belief - that they are going to get something-for-nothing or a bargain that others miss, because only they saw the cardboard sign and maybe the seller is unsophisticated and they can take advantage of them.  So they call the number and the seller gives "the story" about why the house has to be sold so quickly.  And he meets them at the house, which is locked and he forgot the key.  But if you can put down a $10,000 cash deposit, he can sell you the house - but you'd better act fast, because he has other offers on it!

And of course, the house you are looking at doesn't belong to him, and you are out ten grand.  It is an old con.  A very old one - but one still being played today.  And like all cons, it plays upon the belief of the victim, not common sense or reason, which are like kryptonite to the con artist.  Get the victim to "suspend disbelief" as they say, and you've got him (or her) in the palm of your hand.

Why do people allow belief to take over their lives?  Because belief is fun.  You go to a church and sing "Hallelujah! Praise Jesus!" and raise your hands in the air and have that euphoric feeling you can get with belief.  Belief triggers the same pleasure centers in your brain as sex, I believe, as it is very similar in nature.

This is how cults and religions bring in new recruits - they all report that same feeling of euphoria and pleasure when they first join and are showered with attention.   It evaporates shortly thereafter when they are forced to beg on the streets to buy the minister a new Rolls Royce.  But they keep going back - like a junkie, a belief junkie - for another "hit" of euphoria, which are smaller and smaller and fewer and farther between - the classic addiction scenario.   Eventually, they run out of a "high" on the cult and leave - now embittered and angry, having wasted years of their lives and in some cases, most of their money as well.

Belief is a hook - and you can get hooked on it.  And that is one reason these Nigerian scammers are so successful.  The victim of the con enjoys the process of being conned, as the promises of millions in lottery money, a nice car for half-price, or a handsome suitor are always on the horizon but never quite arrive.  It is akin to being enamored of the process as I wrote about before - people who get caught up in the process and forget why they came there in the first place.

And this seems to be a pattern with people who are conned.  They enjoy the back-and-forth with their Nigerian scammers, as they ask for more and more money.  They enjoy thinking about the riches they are going to receive.  Actually receiving the money (which of course, never happens) would be a letdown.

Belief is a fine and wonderful thing, but God gave you a brain to use, not to put in "park" and leave in the garage up on blocks.  Belief - when it supplants reason, can be evil.  Blindly following someone or blindly believing in things that are convenient to you at the moment generally end up causing you personal grief, and I say this from experience.

If you look around the world today, and see all the hot spots and troubles we have, most of them boil down to people using belief in place of reason.  Whether it is a cult of personality around a dictator, or blind belief in a religion or a religious leader, belief leads to trouble, time and time again - and rarely leads us out of it.


Wednesday, February 14, 2018

The Good Life

What is the Good Life?  Is it being rich, or happy?

A reader writes that I am living in a world of self-delusion if I believe that working hard and achieving "only" a middle-class existence in America is really worthwhile, when I could end up being an internet billionaire.  Why settle for merely happy, when you could be ecstatic?

There is an old saying that "Money Can't Buy Happiness" and the retort that lack of money can buy all the misery you can stand.  And both are true.  I've lived amongst the rich and they are some of the unhappiest people you could ever meet.   Having enough money to get by is important.  Sadly, many in America squander their money on consumer goods, stress themselves financially and "have it all" while being desperately unhappy.  I know this as I used to be one of those Americans.

I think the reader in question is perhaps from the Russian troll farm - they love to spread discontent among Americans.  It is one of the narratives that the Russian Internet Research Agency, a.k.a. "Fancy Bear" has been pushing online lately - that since somebody else has billions, the fact that you have mere thousands or millions makes you miserable by comparison.

I'm not sure I buy it.  First of all, happiness is not determined by the balance in your bank account. Some of the richest people in the world are probably the most miserable. Take for example our President - who really isn't that rich but has quite a bit of money.  Do you think Donald Trump is really happy?  I mean this guy spends a lot of time on Twitter being angry at the press and his critics and just about everybody.

He wolfs down mounds of junk food and is obsessed with his reputation and image and with having all the trappings of wealth.  This sounds to me like someone who is chronically depressed.  Or at the very least, he doesn't act like a happy person.

I recounted before that I was fortunate enough to be raised and some of the wealthiest enclaves in America.  For a time, my parents lived in Old Greenwich Connecticut, which today is an enclave of investment bankers and their trophy wives.  Oddly enough, Mark's grandparents also had a house in Old Greenwich - a Sears House - back in the day when living in Old Greenwich was merely nice and not obscenely expensive.

We also lived for a time in Lake Forest, Illinois, a tony upscale suburb of Chicago.   But the bulk of my childhood we spent living in a wealthy suburb of Syracuse known as Cazenovia.  We had a beautiful Frank Lloyd Wright style house on the lake and like Richie Rich, the spoiled little rich kid, I would take my speedboat to school everyday.

My parents were hardly wealthy, but they were classic strivers.  Only one or two generations removed from abject poverty, they sought the trappings of wealth and acceptance by wealthy society.  I didn't realize until years later that they could barely afford to live in the neighborhoods they did - after all my mother did drive a Vega.  But they were more concerned about what people at the Country Club thought of them than what they thought of themselves.  And that was typical of their generation - you strove to move as high up as social ladder as you could.

But as a result of this upbringing, I had a chance to meet people who came from real wealth - inherited wealth or folks who had made truly obscene amounts of money. And the interesting thing to me was that - particularly the inherited wealth people - you saw that most of them were extremely unhappy people.  And among the self-made millionaires, it was often the case that their children were very unhappy. - unable to live up to the standards of their rags-to-riches parents.

And by unhappy I don't mean merely sad, but also the chronic use of antidepressants, the casual alcoholism and drug abuse, and the serial philandering.  There was also severe mental illness, and of course the more than occasional suicide.  One of my best friends, who stood to inherit enough money to live the rest of his life without working, had a brother who killed himself when he was only in his late teens.  Imagine that - not having to work for the rest of your life and having nothing to do but figure out how to entertain yourself for 70 years or so, and the only viable option seems to be parking your car in the garage with the engine running.

The "Richard Corey" song has more truth to it than folks realize.

Another friend came from a family that had millions of dollars (back in the day when millions of dollars really meant something).  His father pulled out a handgun at the dinner table one night and blew his brains out in front of the entire family.  Needless to say that sort of warped his son's mind after that.  Fabulously wealthy people - fabulously unhappy with their lot in life.  It makes no sense.

Now, I am not saying you should feel sorry for the rich.  Fuck the rich - if you can't be happy with millions of dollars while others starve, then something is wrong with you.   Rather, I am merely pointing out that being fabulously wealthy does not equate to happiness and in fact, people to are that wealthy are often less happy than people who are merely comfortable or well-off.

For a brief period (before they threw me out after they realized I didn't come from real money) I did attend a Prep School.  My brother did likewise.  It wasn't entirely like Harry Potter at all, either.  My experience was more like some of these weepy novels about prep schools -  such as The Dead Poet's Society, which was made into a movie starring Robin Williams (irony alert).  Once again, depression, alcoholism, drug abuse, and suicide rear their ugly heads.  The kids from the "rich families" were all messed up in the head and desperately unhappy.  I was just stoned out of my mind.

Now of course, you could probably say the same thing is true in the ghetto.  The rate of mental illness, drug abuse, alcoholism, and suicide is probably high there is well.  And if you looked at happiness is a function of how much money you have, you might expect this to be the case. After all being poor sucks, so poor people are likely to be depressed.  But oddly enough, suicide rates can be higher in wealthier neighborhoods, at least according to some studies.

But if having a lot of money was definition of happiness, then why were so many rich people I knew so desperately unhappy?  Now I suppose someone will point to a study showing that people with more money on the average are less unhappy than poor people.  But of course such surveys are based on self-reported data and are the suspect.  But not only that, even if such data existed, if you really had more money then you shouldn't be unhappy at all, right?

And that's what the reality is - you can have all the money in the world and be the most miserable person possible.  On the other hand, so long as you have enough money to live comfortably but not necessarily ostentatiously, you can be quite content and happy in life.  And according to some studies, this is indeed true (again, self-reported data is suspect).   These studies suggest that having "enough" money makes you happier, as you don't worry so much about money.  But having too much might make you unhappy, as - like the poor person - you worry about money even more, but in a different way.   It's like this lady who won the lottery but doesn't want her name exposed - she knows her life will be miserable when her neighbors and friends find out she is a half-billionaire.  I suspect they will find out anyway.

I think one sure way to be unhappy in life is to be constantly comparing yourself to others.  This goes back to the coveting aspect of the Ten Commandments which I wrote about before.  I never understood what that meant in Sunday school, as our Sunday school teacher never explained the Bible very well.  They were so in awe of the holiness of that book, they never bothered to question the meaning of any of it, even though it's been translated several times and was very ambiguous and contradictory in parts.

(I recounted before how at age eight, I was nearly thrown out of Sunday school as a heretic, because I questioned what the Holy Ghost was.  Like any rambunctious young kid, I was drawing pictures in the margins of my Bible workbook of a ghost with holes in it. This horrified my Bible teacher who was certain I was going straight to hell.  It turns out, there is a whole religion based on the idea that the Holy Ghost is a bunch of hooey - it is called "Unitarianism" or "One God".  No wonder my Bible teacher was horrified - I was turning into a Unitarian at age eight!).

But getting back to coveting, a lot of people think that coveting means that you are lusting after your neighbor's wife or wanting his possessions.  And maybe that's part of it, but I think more of it has to do with comparing yourself to your neighbor in terms of his wife and his car and his house.  Because if coveting was all about lusting, then this commandment would not also mention "his ox and his ass" unless it was trying to prescribe bestiality.

No, I think what the Bible is getting at is that if you constantly compare yourself to the wealthiest man in the world, you will always come up short - and you will always be depressed as result.  This is some good common sense advice, which the Bible is often short of, particularly in the Old Testament.

Because if you think about it, not only does comparing yourself to your neighbor or to other people make you depressed, comparing yourself to your own potential can make you depressed as well.

For example in my case, I could have made millions of dollars if I chose to do so.  I certainly had the ability, and I certainly had the opportunity.  After all I was able to become a Patent Attorney, and many of my friends in law school and at the firms I worked at are now partners in large law firms whose names you have heard of.  They're easily pulling in well over $200,000 a year, perhaps two to three times that much.

If they lived a reasonably comfortable lifestyle, they could invest a large portion of that money and have millions of dollars in the bank.  And indeed, I could have done this as well - and still be working in pulling in that big salary.

It is also possible they could have end up as a senior partner and some huge Law Firm or some big-shot litigator and be pulling in millions of dollars a year - it does happen to a few select lawyers. Of course, that presupposes one has the skills to do that.  I realized quite early on that while I could write a decent patent application, I was not a courtroom litigator.  We all have different levels of intelligence and skill, and although I've done very well with my skill-set, I have had the good fortune to rub elbows with people with far more skills than I have.  And as Clint Eastwood said in his role as Dirty Harry,  "a man has got to know his limitations."

Oh, and some of those wealthy partners I worked for?  Some of the most miserable people I've met.  Most were on wife number two or three (and their wives were constantly worried about being traded-in, so they resorted to plastic surgery and boob-jobs to maintain their trophy image - they were miserable people as well!).   Many were estranged from their children and step-children.  They really didn't even have any friends.  Even their "partners" at work didn't like them, and they were all willing to stab each other in the back to take over the firm or take a client - something I witnessed firsthand more than once.   Maybe that is why I didn't want to end up like them!

So yes, in theory, we could all end up being fabulously wealthy.  For some of us it would be a matter of luck, for others a matter of talent. For most of us will be a combination of both along with, of course, opportunity - and lots and lots of hard work, as well.

We live on a planet populated by billions of people.  And if you look around this planet, the outcomes for most of these people are pretty miserable.  For about half the planet, scrambling to obtain enough caloric intake for the day is their main occupation.  And indeed, your calorie intake affects even how you think.  When your blood sugar level drops below a certain point, your brain reverts to an animalistic level.  Survival becomes the name of the game, and you will do anything in order to stay alive.  Civilization is only the nice window dressing of the successful and well-fed community.  We are all one meal away from being savages.

I think the secret to happiness is not in comparing yourself to the richest man in the world, or comparing yourself to some hypothetical you that could become wildly wealthy.  In fact it's not in comparing yourself to wealth at all.  I think, at least for me, happiness is in trying to do things and finding out after years of effort how surprisingly successful you've been when it's all said and done, and realizing that being healthy and well-fed, and not having to worry so much are the best things in life - far better than the trappings of wealth or mere possessions.

Life is too short to obsess about being rich.  Be happy instead!

Tuesday, February 13, 2018

What's The Whole World Coming To?


The windows of the world are covered in rain. What's the whole world coming to?

Those lyrics, penned by Burt Bacharach, are very much a 60s saying.  It was a popular saying that was very popular back then, as I recall, what with the hippies and beatniks and all and the Vietnam War and the threat of a nuclear annihilation.  People would say "what's the world coming to?" when talking about some latest outrage or occurrence.

My mother, when she had a few martinis too many - which is to say more than zero - would get into one of her Fugue States and start railing against the world in general.  "What's the world coming to these days?" she would say, as if somehow our planet back in 1972 was in more dire straits than it was in the pas,t or indeed even today.

And I guess each generation goes through this - thinking their situation is somehow more unique or dire or dangerous than that of previous generations.  And it's funny to me, that as a woman who lived through both the Great Depression and World War II, she would rail that "what's the world coming to?" in the 1970s when the economy was relatively stable despite the gas crisis, Watergate, and stagflation.

But each generation and each decade faces its own challenges, some great, and some small.  Like I said, my parents had to face both the Great Depression and World War II, which you would think would make anything after that seem pretty small potatoes. But the Red Scare in the 1950s as well as the threat of nuclear annihilation probably put those two events somewhat perspective.  It seems as though the entire planet was ready to blow up on a moment's notice.

(This is not to say, of course, that each generation faces the same level of difficulty, only that it seemed so to each generation in question. The difficulties my generation faced with the Vietnam War, Watergate, and the oil crisis were nothing compared to the Great Depression and World War II. Problems we had in the 1990s or nothing compared to those during the war on terror in the 2000s.).

Then decades go by and the planet doesn't blow up, we develop a false sense of security that it never will.  Of course, one day we will probably all be in for a good surprise in that regard.  But then other things happene, such as the Arab oil embargo of 1973 which really changed our entire economy permanently.  Suddenly overnight, the price of oil was on everyone's lips in the price of gasoline became a big thing.

And then the economy started to tank and people lost their jobs - and suddenly politicians promised jobs as part of their election campaigns - something that seemingly never happened before.  And in the 1980s Reagan was elected and it was "Morning in America" and we were shipping arms to the cCntras and exchange for birthday cakes given to the Ayatollah. What was the world coming to?

And in the 1990s it was saxophone-playing Bill Clinton with his dalliances in the White House and elsewhere with chubby girls who like to give head.  Oh, what on Earth was the world coming to?

And then George Bush was elected in the World Trade Center was attacked and suddenly a lot of the trivial bullshit of the past was put into real perspective.  An entire generation has grown up since then knowing nothing but the war on terror and what is become a de facto war on Islam.

Today the anguish that people are wringing their hands over is the Trump presidency.  It seems we are headed once again in uncharted territory and dire consequences are forecast.  And, as in the past, no doubt some of those consequences may indeed come true.  But on the other hand, if you look at the track record of humanity and see the horrific things we've survived over the decades and centuries, when you ask "What's the world coming to? " it pretty much amounts to more of the same.

Of course, each time this question is asked, the underlying premise is that somehow eventually the planet will eventually exact it's righteous revenge from mankind for overpopulating the world. Perhaps this time around it will be global warming that will kill us off.  We all thought we would starve to death long before now as the supply of food will be far outstripped by the supply of humanity.

And if you look at the history of every species that's existed on this planet, you will see to that pattern does hold true.  Species breed and survive and thrive in a particular environmental niche until they basically destroy that environment and something catastrophic happens.  Sometimes that species goes extinct, other times it adapts to a new environment or perhaps a new species becomes dominant.

All hail our new cockroach Masters!

But as I noted before, you really can't make any money betting on Armageddon.  Even if your bet is correct, the best you can hope for is an subterranean lair stocked with canned goods and ammunition to last as long as you can survive.  It's not a plan for survival of the species, however, but merely a chance for you to witness the last degradation of mankind.

You have to hope that whatever wipes out humanity from the face of the earth - whether it is a cataclysmic comet, mega-volcano, nuclear annihilation, or the slow rise in sea and land temperatures, that it happens after you are long dead in the grave.  Because these things happen on a time frame measured in millennia not at near years or months.  And our investment horizon is usually terminates when we do.

This is not to say we shouldn't be concerned with world events or take action to change them.  The worldwide coalition to abolish ozone-depleting chemicals apparently has worked - and the ozone hole in the atmosphere has shrunk over the years.  This is in spite of the fact that many right-wing commentators - who are today decrying global warming as a hoax - said that the entire ozone thing was overblown and a bunch of nonsense.  It does illustrate that people working together can change the world literally and physically.

But that requires action, not hand-wringing in wondering "What is the whole world coming to?"

Monday, February 12, 2018

If I Could Turn Back Time...

We can't turn back time.  But if you are young, you might learn from the mistakes of those that came before you.

A reader writes:
I discovered your blog last year and I have been reading it off/on ever since. I was curious if you were able to give me some advice as a young person on how I can become actually wealthy instead of "pretend wealthy." I'm a college student and of course I am not eager to be incredibly stingy and miss out on experiences that can be afforded to me, but I thought you might be able to help. Some questions I have are,
What should I look for in a credit card?
What would be good to start investing in and what tips would you give to someone looking to jump into investment? What would be good investments early on?
Finally, and this is a little bit more of a curiosity about the lifestyle you live, how often do you fall back into your old ways? In what areas of your life does that happen?
I hope you can get the opportunity to answer my email.

So many questions packed into one e-mail!   I don't know where to begin.

First of all, I am not an advice columnist, so I cannot provide advice.  Furthermore, any advice from anyone over 30 is suspect.  How you succeed in this new economy is something I have no idea about - just as my parents didn't understand why I was obsessed with "computers" back in the 1970's.  After all, who could afford to have an IBM mainframe in their home?  The electric bill alone would be staggering!  Old people are clueless, let's face it.

Today, people make money by tweeting.  I am not sure exactly how, but I would have said that was a stupid thing to do.  Hell, some six-year-old made $11 million last year just playing with toys on YouTube.  The world is a crazy place.   But don't think that just because people like that strike it rich without any apparent effort, that it will happen to you or that you are entitled to it Being hit by lightning is a rare event.  It doesn't happen that often.  The rest of us have to work for a living - so have a plan in place to do just that.

But in a way, our reader has already won the game, if he is thinking of personal economics at age 18 (assuming the e-mail is not a troll).  When I was 18, like most young men, all I was thinking about was where my next beer was coming from, how to score some pot, and what sort of sorry thing I was going to stick my dick into next.   Sounds like our reader is light-years ahead of me at that age!

I wrote before - several times in fact - about a quote from Norman Mailer's The Naked and the Dead which jumped out at me when I read it the first time.  He mentioned something about wishing one could live their life over again and do things differently.   And he mentions that it is a common thought - and a waste of time, too.  Because you can't live your life over, you can only look forward.

At age 18, it may seem like the "adults" have all the cards - have all the money, the good jobs, the fancy cars, the big houses - the power.   But we all wish we were you - or at least could be 18 again and this time around not screw it up by being... well, 18.   If we had the wisdom and knowledge of the years, and the time and health of youth - what a potent combination that would be!  We could rule the world!

The problem for me at that age - and most 18-year-olds - is that we were big goofy kids who had no common sense or an idea about the future.  We wanted money - sure.  But we wanted it so we could squander it.  And what little we accumulated, we squandered on dubious things that didn't last long.  And when we "invested", well, it was like these get-rich-quick schemes you read about online.  We didn't invest for the long-term, because that was slow and boring.  We wanted to make huge amounts of money right now dammit!  And that is hard to do, unless your last name is Zuckerberg and you get struck by lightning.

So I can't offer any "advice" but I can tell you all the really stupid things I did, and maybe if you do only half of them, you will do better than I did.   Because you will make mistakes - we all do.  I am a college dropout and a "failure" on many levels.  But on the other hand, I am a millionaire and in the top 5% of wealth for the US and top 1% of the world (easily)I have no right to complain about how rotten I have it, because quite frankly, I did quite well, thank you, in spite of myself.   Others could do much better, quite easily, by not doing half the bonehead things I did.

Which is why I am not jealous or resentful of those who make more money than I do.  Sure, many of the guys I went to law school with, are today partners in big firms drawing huge salaries.  Maybe that could have been me, too.  But I made different choices and am happy with that, which is good, because I have to live with that.   There is more to life than just money, but being comfortable is important.

Today, of course, we have a new economy and new pitfalls for young people.  We didn't have staggering student loan debt back when I was in school.  And many today don't have it either - because they don't borrow more money than they can realistically pay back.   Borrow as little as you need - that is always the best route to take.  Borrow not at all, if you can.

One of the biggest life mistakes I made over the years was to borrow too much money.  Borrowing money for a worthwhile college education (I borrowed about $38,500) isn't a dumb move, but I easily borrowed twice as much as I needed - as evidenced by the fact I remodeled my kitchen with some of the money.   Borrowing money for a house wasn't too bad a deal.  Buying more house than I needed or borrowing more than I needed would have been dumb.  Refinancing my mortgage again and again was really, really dumb.  Of all the bear traps I stepped into, debt was probably the worst.

But what about life experiences?  Our friend doesn't want to be "stingy", but to drink deep from the well of life - like most young people do.   But the funny thing is, having fun and having experiences doesn't mean spending a lot of money and in fact, often spending more means having less.

For example, I mentioned my friends who hitchhiked around the world - twice - on a very small budget.  I also have some friends who are heirs to a fortune.  They took a cruise around the world that easily cost $100,000 in today's money.  Guess who had more fun?  Guess who had more experiences and really experienced foreign cultures?  I am not saying you should hitchhike around the world, just using this as an example of "less is more".

Or take my old BMW.  I bought a 1974 BMW 2002 for $700 and fixed it up.  It needed everything, and I took apart that car down to the last nut and bolt and rebuilt it.  I found a Korman 2200 cc 10.5:1 engine that a customer had ordered and never picked up - and snagged it for $1500!   That car ran like a scalded rat when I got done with it.  I sold it to buy a 1999 BMW M Roadster from my wealthy friend.  It was a nice car.  I put gas in it.  That was the extent of my interaction with that car.

Of the two cars, I had more fun for a lot less money with the old beater 2002 than the nearly brand-new "poster car".   You don't need to spend a lot of money to have fun, and often spending more means less fun.  It takes no talent to sign a check or swipe a credit card or sign a loan document.   Do things that require skill, artistry, effort, labor.  It doesn't matter your skill level - the fact you do things is important in fighting off depression and learned helplessness.

Going to college can be a good thing if you are getting a worthwhile degree.  The pitfall of college, as I have noted before, is to spend a lot of money for a degree that leads nowhere.  It was true when I was in college (all 14 years of it!) and it is doubly true to day with staggering tuition increases and student loan debt.  Taking hard subjects and being realistic about job prospects in the field both served me well.  In my case, I had the job while I was going to school.  It staggers me that people can be smart enough to get into college and still clueless about where their chosen field of study will take them.  A degree in "Sociology" isn't going to take you many places, but can cost a lot of money to obtain.

I was fortunate to go to GMI, which put me to work in a General Motors factory as a salaried employee at age 18.  It was like boot camp, without the drill instructor.  They threw us off the deep end and saw whether we could swim or not.  And Engineering classes weren't easy - but then again, nothing worthwhile really is.   I flunked out after three years (in a five-year program) and one of the bonehead things I did was cash in a $2200 retirement account from GM instead of rolling it over into an IRA.   One of the biggest mistakes young investors make is to cash in or borrow from retirement accounts for "emergencies"or in my case, to buy a motorcycle.

For most young people, starting an IRA or 410(k) isn't in the cards.   IRAs generally are not tax deductible for college students (consult your tax adviser - laws change!) and most college students are not employed, as I was, with a big company.   That doesn't mean you are without options.  Building up an after-tax savings account is a good start - to have that "rainy day" fund you can tap into, rather than use a credit card or cash in or borrow from your IRA or 401(k) later in life.

How to build up that savings?  The two mistakes I made were undersaving and oversaving.   Undersaving is to say not saving at all - just spending every penny and borrowing more.   When I decided to "save" I did the typical young person bonehead move of putting money into an investment without figuring out where in my budget the money was coming from.   By the end of the month, I was out of money and wondering what the hell happened.

I finally figured out that the smart move was to cut some small, unnecessary item from my budget - cable TV, designer coffees, and so forth - and put just a few dollars a day or per week into a basic savings account.  No, it won't grow very fast, but over a year or so you might have a thousand or two, and it will grow from there.   Being patient was the key - I wanted to see results right now!  And many people give up on saving or investing when the $100 they put in the bank doesn't magically turn into a million overnight.  You think I am being sarcastic - look at the savings rates of Americans.

Once you have some savings, you can invest.  But what to invest in?  At first, just building up a buffer of savings is important.  But later on, you can put money into mutual funds, bonds, or even stocks.   When you qualify to start an IRA, you'll have money to put into it.  The key is to diversify and to invest in fairly rational things.  Younger people can afford to takes more risks, to be sure - but gambling is not "risk-taking" - it is just throwing money away.

Diversification bears special mention.  I was having dinner tonight with an old friend and he mentioned putting 1/3 of his retirement account into a "tech" stock back in the day.  It went from $10 a share to $55 a share.  "You then sold half of it, right?" I said.  "No, I rode it all the way down to $5 a share!"  The expression on his wife's face was, well, interesting.   Diversify into a number of things, and if something does make a lot of money, consider selling off part of it to lock in your gains.

The main thing is to establish financial discipline - something I was lacking well into my late 20's and even early 30's.   Today, I enter every expense in Quickbooks and monitor all of my accounts on a daily basis.  When I was 18, I never even balanced my checkbook and bounced checks all over the place.   Learning to keep track of money is important - as you start to realize how hard it is to accumulate, and it forces one to think twice about spending.

The big problem for me was the company I kept.  I hung out with people who drank too much, did lots of drugs, and squandered every last penny on dubious car modifications.   As a peer group, this was a bad influence on me morally, mentally, and financially.  In that group, the best thing you could have as a "bitchin' car" and they would go into hock to get one - working a job to have a car, so they could drive to work.   It was idiotic, and we were all in debt up to our eyeballs just so we could have bling today, instead of wealth tomorrow.

Debt was not a big problem for me - at least initially.  They didn't have credit cards for 18-year-olds in 1978, but by the 1980's (when I was still in college, at the age of 25) it started to be a "thing."  It is tempting, as a young person, to think you should get a "rewards" card and earn all that cash-back!  But the interest rates are murder, and if you miss even one payment, the rates can jack to 25% or even 30% - and you'll never pay it off.  Instead of building credit, you are ruining it.

Young people are the most likely to have emergency expenses with little or no savings to fall back on (which is why it is important to build up that after-tax savings!).   So they are very likely to fall down on a rewards card and end up in a credit card crises - intractable credit card debt, ruined credit rating, late payments, and endless debt that never seems to get paid off.  Most Americans do this at least once in their lives - if you can avoid this, you will avoid a lot of pain.

By the way, getting back to coveting, it may seem a lot of your peers have nicer stuff than you do.  Fancier cars, the latest electronics, the designer fashions, and so forth.  Some may come from money, true.  Others are merely borrowing huge sums and are in desperate credit card trouble.  One thing I have learned in life is that it is possible to put on a front of "pretend wealth" leveraged all with debt, for at least a few years, before it all comes crashing down.  In the long run, however, such folks often end up desperately poor later in life.  And it ain't pretty.

Today, I have a lot of after-tax savings, so I have a "rewards" card and I watch it like a loaded handgun and pay it off several times a month.  No playing the float!   But not long ago - when I started this blog, I had a low-interest card with a LOW LIMIT, because I was getting into credit card problems and it was biting me on the ass.  I would suggest this for anyone starting out or anyone who is having trouble with financial discipline as I was (and still struggle with).  And yes, I still keep a low interest rate credit card "just in case" I need to make a large purchase that I can't afford to pay off in a single month.   These rewards cards are great if you treat them like a loaded handgun and are careful.  They are deadly if you don't!

I would think that a low interest-rate card with a low limit is the best choice for anyone with little or no assets or no access to ready cash.  When you don't have a "rainy day fund" your credit card becomes that, and in that case, you want to have a low interest rate and a reasonable limit - so you can pay it off in short order, rather than spend years and year paying off a transmission repair, with ruined credit to show for it.

Of course, your friends will shout that down.  Get the highest limit possible!  It means you are successful!  Get all the rewards!  That's the "smart" way to do things!   Talk to them in 10 or 20 years and ask them how that all worked out.  70% of Americans carry a balance on their credit cards, and I think 100% do at one time in their lives.  A credit card is a debt instrument, first and foremost.   Treat it like unspent nuclear fuel rods.

Credit cards are very, very dangerous, and I have had friends in their 20's declare bankruptcy over credit card debt.  It is very, very sad!   Low interest rare, low limit.   Don't be fooled by the bank "congratulating" by raising your limit - they are setting a bear trap for you to step in.  If you can avoid the problems that I had with credit cards - the problems my friends had - and the problems most Americans have, you will come out way ahead.   And don't think it can't happen to you.   We all like to think we are made of kryptonite - we aren't.   Understanding your own weaknesses and planning for them is the smartest move possible.

Buying a brand-new car is another bone-head thing I did when I was like 25.   I thought it was a sign of my financial independence and fiscal responsibility (like credit cards!)   Then I got a few speeding tickets and my insurance cost more than the car payments.  Oh, well, at least I didn't lease it like a friend of mine did - who ended up paying three years on a lease, and then another four years on car payments!  And all that high-dollar insurance the whole time.  Ugh.

And it never ends, either.   We all make dumb mistakes, to be sure.  What separates successful people from unsuccessful people is that the successful people learn from their mistakes rather than repeat them over and over again.   I've tried to learn from my mistakes in the last decade, and that is the reason I started this blog.   I was making many of these mistakes up until a decade ago!

And I still make mistakes, but they are getting smaller and smaller.  I wake up in the morning and realize that maybe we could have split an entree at the restaurant last night and saved money and ate less.  Or maybe some electronic toy was a waste of money (I haven't done that in quite a while, thank God!).   That sort of thing.  The real boners?  I am making less and less of them - at least I like to think I am.  Maybe I am living in a fool's paradise.

That pretty much sums up all the dumb things I did when I was young.  Like I said, when I hear a young person thinking about how to get ahead financially, I think they are already way ahead of the game.  Because most young people don't think about finances, and when they do, they think idiotic things like "Maybe I should buy bitcoin with my credit card!" or "I could make money selling Amway" or whatever other scheme or scam is going on these days.

But then again, maybe what I am saying here - which is not advice - will fall on deaf ears.  Because I am not saying what to do, but only illustrating the bonehead things I did and my friends did.   And they are all the bonehead things an 18-year-old desperately wants to do.  The credit card company dangles out a 25% interest rate "rewards" card, and the car dealer dangles out a set of keys to a shiny new Camaro.   It is tempting, and the best thing to do is leave your pen at home - particulalry in an era where an 18-year-old can sign his life away before age 21.   But most Americans, they fall into these traps, and then spend the rest of their lives bitching about how awful they had it and how unfair it is that someone else has more money than them.

Just don't do what most Americans do.  I guess it is as simple as that.



I'm 18, and I don't know what I want... that describes me at that age!