Monday, October 30, 2017

Consumer Confidence or Lack Thereof


Are you confident enough in today's economy to make a big-ticket purchase or take out a loan?  I'm not.

Consumer confidence is often mentioned in the financial press.   They have various metrics for measuring this, including surveys.  If consumers are confident in the economy, their jobs, their currency, their savings, and whatnot, they are more likely to buy new cars, houses, and other things and services, which in turn employs other people, earns profits for companies, who in turn pay dividends to shareholders like me.

In February 2009, the stock market hit rock bottom, and a lot of people freaked out.   People had stopped buying things, as their portfolios were ravaged and their homes fell dramatically in value.  Buying a new car when you are being foreclosed upon is just not in the cards.  GM and Chrysler went bankrupt.   Many today don't remember those times, even though there were only a few short years ago.  Some of these "Alt-Right" Nazis were only 10 or 11 years old at the time.  Today we listen to their "opinions" as if they were wizened.

Lack of consumer confidence can crash an economy or at the very least, make it worse.  Once people stop spending, companies lay off employees, who in turn stop spending.  News of layoffs make those who still have a job, nervous.  They stop spending.   Company profits are down, share prices drop, dividends are cut.   Retirees, living off savings and investments, get nervous and stop spending as well.  It is a vicious circle.

Franklin Roosevelt distilled this down to one pithy quote  - "We have nothing to fear but fear itself."

Once consumer confidence built back up in the 2010's, people started buying things, and slowly the economy recovered.   The same thing happened in the 1930's, and we saw it happen over the last decade.  Once folks realized that the world wasn't quite ending, and they got out from under onerous financial obligations, found new jobs, and found a new equilibrium, conditions improved, at least somewhat.

Of course, some (Republicans, mostly) complained that the recovery wasn't "good enough" and that we were entitled to massive growth rates, conveniently forgetting that massive growth is what lead to the recession of 2008 in the first place.   Like the alt-right, they seem to have no collective memory, at least not extending back more than 18 months (except when they want to blame Bill Clinton for the housing bubble, at which point their memory goes back 20 years.  Elephants never forget - but perhaps they have a selective memory).

The problem today is that for many in the middle-class, consumer confidence hasn't come back yet.  When we went boat shopping, it was interesting to talk with the boat dealers and salesmen.   They lamented that the boat business never really recovered since 2009.   "Back in the day," one salesman said, "I could sell a young married couple an 18-foot runabout.   Whey they were in their 30's, I could upsell them into a cuddy-cabin.   By the 40's, a nice cabin cruiser.   And maybe by their 50's, a big sport fisherman or ocean-going trawler.   But today?   I can sell huge boats to millionaires, but the middle-class is no longer buying!"


And the boating industry sales numbers seem to reflect this.   When the shit hit the fan in 2009, sales of boats tanked - but sales of high-end yachts barely had a hiccup.   Sales of vacation cottages went south - sales of luxury resort mansions kept going.   And so on throughout the market.   Today, sales of upper-end "luxury" homes are through the roof, while young people starting out lament there are no "entry level" homes for sale - nor is anyone building them.

Those who have money still spend it, the middle-class, striving to imitate the upper classes, was wiped out.  And perhaps we saw this same pattern in the 1930's, where luxury car sales ironically increased, while the middle-class started buying stripped down versions of Buicks (Marquette) and Oaklands (Pontiac).  Meanwhile, Cadillac introduces a V-12 and then a V-16.  The rich still had money to spend.

Today, unemployment is low, but so are wages - a deadly combination.  With low wages and low unemployment (and no benefits with most jobs) there is nothing to stop a worker from saying, "I quit - I can get a job just as shitty as this across town!"   And they are right - they can.  But they still have no money to spend, and most are living "paycheck to paycheck" so they can afford their smart phones.

We lived through this in the 1990's in the Clinton era, which was one reason I decided to stop being an employer.  People felt that since unemployment was so low, they could tell employers to piss off, and moreover, back then, demand huge salaries.   Employing people suddenly became unprofitable, which is why today, a lot of people are "part time" or "contractors" or working "gigs".  Employers cannot afford full-time workers today, so they hire part-time.

Trump could really screw up the economy by damaging consumer confidence.  The stock market is going nuts, but this doesn't trickle down to people with nothing in their 401(k) account.  And even for those of us who have saved money, there are other issues.

Take health insurance.  Uncertainty in the market is causing me a lot of anxiety, personally.   Our "cost" of health insurance is about $1200 a month or more, and this is not affordable without the subsidy (which wipes out more than half this cost, depending on income).   If I am looking at a $14,000 health care bill next year, I certainly am not going to buy a new car, boat, or even a sofa.

Compounding this is the specter of inflation, which is likely to rise in any event, after being at all-time lows for nearly a decade.  And this will rise because Trump is likely to appoint a new head for the Federal Reserve who will raise interest rates.  It is funny, but I ran into a Trump supporter before the election - the kind of guy who listens to "infowars" and he told me that Obama had "ruined the economy" with high inflation.   I had to ask him what planet he was from.

Throw in trade wars and perhaps real wars, as well as an overheated stock market (particularly with regard to so-called tech stocks), and we might see a pullback in the economy next year.

What businesses and consumers both want, more than lower taxes or fewer regulations, is predictability in an economy.   People can adapt to almost any economic system, even one with high tax rates (such as in Europe) provided the system is stable and predictable and people can plan accordingly.   But when pet economic theories are being bandied about and radical changes to tax laws and regulations are proposed, it is hard to plan in advance, other than to be more conservative in spending and investments.

If you are a young couple looking to buy a house today, and are paying for your own health insurance under Obamacare, do you feel confident enough to put down a down payment, not knowing what your tax bill or health care bill will be like next year?   Quite frankly, I think you'd be insane to buy right now, unless you could predict these actual costs and budget accordingly.

Some economists disagree.  They posit that consumers will spend more now if they believe that inflation will rise in the future.   I am not sure I agree with this idea.  The 22-year-old drooling over a Camaro at the used car lot isn't doing a mental calculation about interest rates and the latest prognostications of Janet Yellen.   He just wants or needs a car and buys it.   If he thinks he is about to lose his job, on the other hand, he might put off buying it.   Consumers don't do mental math on meta things like future interest rates and the discount rate, but they do calculate what their weekly budget and paycheck are - and where they are going.

People buying houses, on the other hand, are going to look at that tax deduction very closely, and how much they pay for the house will be based on how much they get back on their taxes.   If there is no deduction for mortgage interest (for middle-class homes, Trump proposes protecting this for richer people) then people will see less savings and thus pay less for such homes.   This could depress home prices - for the middle-class.

All I can say is, I am losing confidence in the market, largely because the people running things seem a little unhinged these days.   Not only that, they are not proposing minor changes to our laws and economic system, but rather instituting radical "overhauls" of our tax code and health insurance system - with outcomes that are either unpredictable, or, if predictable, look like misery for middle-class people (this is a good time to be a Billionaire, though, although is there ever a bad time to be one?).

Because of this, we sort of gave up on the idea of buying a boat, at least for the time being.  It just seems safer to have money in the bank than a hole in the water.   And of course, these means not buying a truck to tow it with.   If the economy does go down, there will be a lot of cheap boats for sale next year, just as there were in 2009.  So maybe it would pay to wait.   Or maybe it would pay not to buy at all.

Multiply my anxiety by the large number of Americans who are struggling to get by or retirees who are trying to figure out if they will outlive their money, and it doesn't look good, even as the financial press reports "record profits" for companies that still have P/E ratios in the hundreds.

Funny, but they said the same thing back in 2007.

UPDATE:  Blue Cross tells me that my health insurance will go from $18.72 a month this year to $675.89 a month in 2018.  I am not kidding.  This is serious shit.

Thanks President Trump!  You really fixed Obamacare!

Good thing we didn't buy a boat.....

Sunday, October 29, 2017

How Your Emotions Are Used Against You


Successful people in the world by and large are not emotional people.   The plebes, on the other hand, think emotionally all the time.

In the Bible Catholic Church, they call it the "seven deadly sins" and these pretty much sum up ways in which you can be manipulated - and the ten commandments are along the same lines.   Again, these sins are often not against your neighbor or even God, but against yourself.  As I noted in another posting, when you "covet" your neighbor's possessions and spouse, you just make yourself miserable by comparing your life to someone else's.   No one is harmed - except you.

The movers and shakers of the world are movers and shakers because they don't lie in bed until 10AM or call in sick because "they're beat" that day.  They don't come home at night and flop down on the couch and watch 6 hours of bad television and send out for unhealthy delivery food they can't afford.   They don't go out and hock their lives to buy houses and cars and other junk just to impress people they don't know (they earn their millions first, and then pay cash for that sort of stuff, and show it off to no one).

Depression is probably the number 1 emotion that is used against you financially.   As I have harped upon time and time again, the television is the depression box - designed not only to cater to depressed people, but to keep them depressed.   Depressed people make excellent consumers as they will spend money hoping it alleviates their depression.   At the very least, you can sell them take-out foods and cable TeeVee.   And they are prime candidates for drug and alcohol abuse, which, like television, creates a feedback loop of depression.

Envy is another emotion that is blatantly played up by the television and marketers.  And often they are not subtle about it.  "Think how jealous your neighbors will be when you drive up in your new Hupmobile SUV!" the ad says, playing to our needs for status and the urge we all have to impress people we don't even know.  When we fall into this trap, they have us by the short hairs, as we will do anything to out-spend our neighbors, friends, and co-workers, in a never-ending battle for status.  And it never ends, either.  You buy a huge new SUV and your co-worker goes out and buys and even larger one.   So you have to now trade-in yours and buy something even bigger or "lose" at this silly game.

Vanity is closely related to envy, of course.   Everyone wants to think their lives are special, unique, and have meaning, when in fact we are just one a billions of people who are alive or who have lived whose lives are not very unique and have no special meaning.   Many people cannot confront this concept without becoming more depressed, and in fact, their depression may stem from this simple fact of life.  So they squander what little money they have and borrow ten dollars more, to create they illusion they are unique and special.   Why do you think they call custom license plates "Vanity Tags" in the first place?  They are no different than a tattoo.   People want to be unique and will pay through the nose to appear to be unique.   The irony is, of course, they are being "unique" in a manner like most of their peers, which is to say, not unique at all.   The funny thing is, of course, is that you can be unique, be yourself, and have "meaning" in your life, all at no extra cost - by actually doing things rather than merely owning things.

Greed is another emotion that marketers like to use, particularly if they want you to "invest" in something, like gold, bitcoin, or an MLM scheme (all pretty much the same thing).    Something-for-nothing is the oldest flim-flam in the books, and yet people still fall for it today.  "Make an executive salary at home!  $5,000 the first week!" the cardboard sign tacked to a light pole promises.  No word on why they rely on cardboard signs and sharpies, if they are making such decent coin.   And people don't bother to ask, either.

Fear, of course, is another biggie.  "Vote for me!" the politician says, "or your mall will be bombed by Al-Qaeda!"   Or maybe the threat is your kid being confused as to which bathroom to use, or maybe cake-bakers being marched off to the gulag, forced at hard labor to make cakes for angry lesbians (are there any other kind?) 24/7.    No matter what the party or the policy, fear is used to get voters off their couches and into the voting booth.   It also sells cars and houses - "Buy now or be priced out of the market!" or "They didn't make many in this color, and I have someone else interested in buying it!"   Same old, same old - playing on our fears.

Anger, is of course, closely related to fear.   It is part of the flight-or-flight response, and yes, it is related to depression as well.   If you can get someone angry - so angry they see red - you can get them to do anything.   I recalled in an early posting that I had called a customer service line once, and was put on hold forever, and it seemed that the person on the phone was merely "playing" me - or playing with me like a cat plays with a dying mouse.   They wanted me to stay on the line forever, get frustrated, get angry, and then hang up and go away so I was no longer their problem.   Most call centers today have a rule that if the customer uses a swear word, the operator can hang up immediately.   So if you have a customer with a complex problem, you can try to help them, or just get them angry and then hang up.   Someone else's problem then, right?  Or maybe they just get you to give up and go away, because they likely don't want your business anyway.

Anger can actually sell things, too.  The clip above is from the movie "Fargo" which is not based on a true story.  But the scene in the dealership is, of course, based on reality.  When a salesmen says he has to "go speak to the boss" to get approval, they just go into the next room and tell jokes about you at your expense and then come back and ream you.   It is an old gag - keeping people in the showroom for hours at a time (sometimes as long as six hours - maybe more!) until you are tired, dehydrated, hungry and have low blood sugar.  You get angry, then embarrassed, and then it's "where's my goddam checkbook, let's get this over with!"

The deck is stacked against you.   Salesmen are excellent amateur psychologists.   Marketers are expert psychologists.   Both are students of human nature and know how to manipulate people - play upon their vanity, greed, fear, anger, depression, and envy.  They play us like players.  They play us like a cheap violin.  They work us over and if they do it really well, we aren't even aware we've been played, except perhaps when it is too late, and then we wonder why someone "took away all our money" and fall right back into the emotional trap (and vote for a candidate who promises to "take it away" from others and give it back to us).

The bad news is, of course, that we are entirely to blame for our own misfortune when it is brought on by poor decision making and emotional thinking on our part.   And this often goes for things that seem to be out of our control but in fact are predictable events.   You ride a "crotch rocket" motorcycle at 100 mph while "lane sharing" in busy traffic, you can expect to wake up in a hospital (if you are lucky) with a leg amputated.  If you are unlucky, you hopefully signed an organ donor card.   It doesn't matter than the "idiot" in the car changed lanes and hit you, you should have see this sort of thing coming.

And even hurricanes and natural disasters can be predictable events.   I don't expect anyone to feel "sorry" for me if my house blows away or is flooded in a storm.  I live on a spit of sand in the ocean - a spit of sand that is constantly eroding and moving.   If you want to live on a barrier island, you pay the price.  Why do you think they call them "barrier islands" in the first place?   You get insurance, if you can - but you can't expect to be made whole, or make a profit at it (some folks think they are entitled to a profit on insurance claims - believe it or not!).   Or you move to higher ground  We all have choices - sometimes even when we think we have no choices.

So that's the good news - we have choices.  We can choose not to think emotionally.  The people who get ahead in the world are by and large not emotional thinkers.   Granted, some emotional thinkers do get ahead, but by and large not as far as others who think more logically.  Some of the wealthiest people in the world got ahead by living modestly and working hard, not by buying "bling" on time and running up debts.   Warren Buffet, much to the dismay of his bodyguards, lives in the same modest house he had before he was a billionaire - and eats at modest restaurants.   Sam Walton rarely spent money on himself, and drove the same beat-up pickup truck for most of his life.

And one way to avoid these emotional traps is to turn off the marketing machine that is aimed at your head like a sonic beam at the U.S. embassy in Havana.  I am talking about the television, social media, and the smart phone - all designed to occupy you for hours on end with horribly bad normative cues and ideas that will make you unhappy, broke, and worst of all, in debt.   Spending less time "plugged in" to the world and more time actually doing things will not only improve your financial situation, but make you a happier person.

Of course, this is not to say that if you live frugally and make logical choices, you will automatically end up a billionaire.   However, I do believe that the more logical our financial choices are and the less we borrow and spend on "look at me!" purchases, the better off we end up, over time.

Which seems kind of obvious, if you think about it.

Friday, October 27, 2017

The Year Stocks Stopped Being Risky - What About The Year After?

When the happy-talk starts to dominate, perhaps we should be headed for shelter.


A recent article in the Wall Street Journal argues that stocks are no longer "risky" due to some metric which divides gains by volatility - the so-called Shape ratio.  Of course, with big gains, you have a high ratio.   So we have big gains this year, but of course, every bull market is followed by a bear one.

And today's bull market might not last long in an era of economic uncertainty, high interest rates, and stagnant wages.   If Trump's tax reform falls flat (after his stunning victories in immigration reform, repealing Obamacare, and building the wall) the market may tank.   I suspect the market is set for a correction.

People point to stellar profit reports this quarter, but even though Amazon is finally making a profit, its P/E ratio is a staggering 511.  And as for Apple, do you really think the majority of Americans can afford a $1000 cell phone or will camp out overnight to get one?   I am skeptical to say the least.

The article, after cheerleading for stocks for many paragraphs, closes with these two cryptic comments:
Only a few times, in the 1950s and in the 1990s, has the Dow’s one-year Sharpe ratio been as high as it has been this week. (Mr. Deluard calculated it by dividing the Dow's one-year return by its annualized standard deviation).
 . . .

Ultra-high Dow Sharpe ratios haven’t lasted long historically, suggesting that the market is due for choppier trading ahead.

Yes, in the 1950's the ratio was high and the economy boomed.  Everyone bought cars with fantastic chrome and tail fins.  Then 1958 happened, and people started buying stripped Ford Falcons instead.  It's called a recession and they happen with regularity.  The 1990's were a boom time as well, followed by a recession in the 2000's.

Now, granted, over time, the bulls beat the bears.  Even the dramatic recession of 2008 was followed by nearly a decade of solid growth, which is where we are today.   Over time, even if you just hang on to stocks, you will do well, even with "corrections" now and again.

In my lifetime, I have seen a number of these sort of events, either taking over the entire market, or merely affecting segments of it.   Car sales boom all at once, and everyone buys a new car.  Then they tank for a few years, until the cars bought eight years ago start to wear out and the cycle starts again.

Housing goes nuts and costs escalate, until people stop buying, then the market collapses.   Sometimes, this just affects housing prices (as in 1989) while other times, it takes out the larger market (2008).

That we are due for a correction is not debatable.  It is not a matter of "if" but "when" and timing the market is very hard to do.  You can look at a lot of metrics and try to figure out a formula, but I think that is tricky.   Myself, I go by the happy-talk index.   When people start saying nonsense like "buy now or get priced out of the market forever!" then you know something bad is going to happen.

There are a lot of stocks doing very well right now, and corporate profits in some sectors are way up.  But in some tech stocks, the prices don't reflect a rational valuation.   Yes, Amazon is doing well.  No, the stock price is not rational at a P/E ratio of 500.   Who wants to wait 500 years to earn their money back?

Other stocks, not so good.   Twitter, the President's favorite website, continues to lose money, although they claim they "may" turn a profit this quarter (someone needs to update the P/E charts, which still show a negative 600 ratio for 2018!).   Even if they manage to pull a rabbit out of the hat, like Amazon, they are horrifically over-valued.   Correction will happen, just wait for it.

Other companies are doing less well.  Toys R Us is going bankrupt, and perhaps 2018 will be (finally) the year Sears/K-mart collapses.   While CVS claims to be buying health insurance company Aetna, Walgreens is closing a number of stores (I guess CVS won the corner drugstore wars).

Meanwhile, the US car makers are doubling-down their bets on trucks and SUVs - killing off their car lines (As Chrysler did before the recession of 2008 - going to an all-SUV lineup, and we know how that worked out).   Meanwhile, oil prices creep up and the President wants to raise the gas tax (which is actually a good idea).   One war in the Middle East, or shutting off the Iran oil flow, and we're back to $100 a gallon, which is a good thing, as some oil companies are barely breaking even these days.

This is a hot stock market, to be sure.  But I don't see a lot of depth to it - any long-term stability.  The recovery has been fragile, based on slow, steady growth and a zero percent interest monetary policy (and even negative interest!).   All that is going to change, no matter who Trump appoints to the Fed.

Will we see a huge crash?   I don't think so, at least not in the near-term.   Housing prices are high again, but we are not seeing the spectacular double-digit increases we saw in 1988 or 2007, except in some hot markets.  If the correction is soon, I think it will be managable.

On the other hand, if we enter a new era of Trump euphoria, where the market decides that deregulation, tax reform, and other changes merit even larger increases in stock prices, the resultant bubble burst will be even worse.

Myself, I have been quietly liquidating some stocks and mutual funds, selling off portions of things that have done spectacularly well in recent months.   Better to lock in the profits than to ride it all the way down.   And at this point in my life, I am going from working, earning, saving, and investing, to spending.   So there is little upside to me keeping money in stocks as I get older and older.

We'll see what happens.  But this article in the WSJ has me worried.   Seems like a lot of happy-talk to me!


UPDATE:  Apple claims that sales of the new iPhone x are "off the charts" but fails to say what those charts are or provide any quantitative numbers as to how many have been pre-ordered. Given that it appears the facial recognition feature hasn't been completely debugged yet, Apple's coyness is understandable.

Wednesday, October 25, 2017

Connecting the Dots


Why does the world seem so divided today?  Could natural divisions among people be stoked and fueled to the advantage of third parties?  Connect the dots and see.

Oh a sleeping drunkard
Up in Central Park
Or the lion hunter
In the jungle dark
Or the Chinese dentist
Or the British Queen
They all fit together
In the same machine

Nice, nice, very nice
Nice, nice, very nice
So many people in the same device

Oh a whirling dervish
And a dancing bear
Or a Ginger Rogers and a Fred Astaire
Or a teenage rocker
Or the girls in France
Yes, we all are partners in this cosmic dance

Nice, nice, very nice
Nice, nice, very nice
So many people in the same device

I wanted all things to make sense
So we'd be happy instead of tense

"Nice, Nice, Very Nice" - Ambrosia.  Lyrics by Kurt Vonnegut.


Can things that seem dissimilar be connected somehow?   The rise of the Alt-right?   Divisions among Democrats between Hillary supporters and "Progressive" Bernie backers?  The derision the media and older folks heap on "millennials" and the blowback that generation has for their elders?  The election of Donald Trump?

What about Brexit?  Catalonia independence?   Separatist or independence or succession movements throughout Europe and the USA?   Who benefits from disarray among NATO countries and a weakening of the United States?   Who benefits from civil war in Spain?   Who has the ability to sow seeds of discontent by "nudging" people into one direction or another through facebook postings, Youtube comments, and Twitter bots?


Yea, that guy.


History repeats itself, never the same way twice.   But civil war in Spain and a megalomaniac dictator annexing countries while the rest of the world remains silent sounds awfully familiar to me.   Oh, right, because that happened before.

Whenever you see discussions online where someone is trying to get you to think in divisive terms, think about who benefits from this, and whether this is being manipulated and amplified by external forces.

Because odds are, it is.

It's Debt, Not Amazon


Are Brick and Mortar businesses dead, or has our financial system simply loaded them up with so much debt they cannot survive?

When I graduated from engineering school in 1987 I interviewed with a number of companies. One company I interviewed with in Syracuse was Crucible Steel. They were making small batches of high-quality alloy Steels and specialty Steels - and also had a powdered metallurgy division which was very hush-hush as I was not allowed to even see the operation.

They were still using rolling mills and had dirt floors just like in the old days.  The rolling mills were controlled by banks of clattering relay-logic panels, which is I recall were British-made (for extra reliability!)  A real nightmare, in my mind.  The fellow I was interviewing with said they wanted someone who could maintain this old relay-logic system. I explained to him that probably one personal computer hooked into an interface could replace thousands of these relays, but he didn't quite understand what I was getting at. I 'm sure since then they've modernized and upgraded the equipment.

The company had gone private at the time, as I recall, through a management buy-out.  They leveraged the company with a large amount of debt to go private as the steel business was struggling. The problem was not that they didn't have a good product and good sales - they did.  The problem was that now that they were so heavily loaded with debt, it was difficult to service the debt, particularly in the high interest rates of that era, while also turning a profit.

I believe since then they've gone through bankruptcy reorganization and emerged as a new company and are doing fairly well now.  Specialty steels, unlike bulk steel, have done well for American companies where the higher prices commanded for such unique items offset the increase cost of manufacturing in America.

But their story is similar to the story of a number of other companies in America which have gone private and or have been saddled with massive amounts of debt.   GM went bankrupt not because of union problems alone, or "foreign competition" but because they had staggering debts they could not service.  Servicing this debt ends up cutting into profits and increasing overhead and thus turning a once-thriving business into an nonviable proposition.

Once again, we are seeing articles in the press about the bankruptcy of Toys R Us.  One recent article mentions almost in passing that the demise of this largest chain of toy stores in America is "Amazon-fueled" - as if it was a given that the online retailer is putting everyone out of business:
"The surprise filing last month underscored the Amazon-fueled shift away from brick-and-mortar retailing, and bodes ill for the entire toy industry."
Note the assumption here that Toys R Us' bankruptcy was a "surprise" and the baseline assumption that anytime a brick-and-mortar chain goes under, Jeff Bezos is to blame.   But to anyone paying attention over the last year, the bankruptcy was anything but a surprise.

But in the next paragraph, they mentioned that the company went private and assumed five billion dollars in debt which is really the crux of their problem.  Granted, the rise of online sales is a problem for Toys R Us as well as another number of other companies. But if you've been to the toy ailes at Walmart recently you understand what Toys R Us' problem really is.  Walmart's toy section is almost as large as a Toys R Us store, and their prices are far lower.  Moreover, Walmart is now a go-to destination for Mom and Dad as they pick up their groceries, prescriptions, and new tires for their pickup truck - adding their toy shopping all in one stop.

In terms of retail competition, Amazon isn't so much the issue so much as it is Walmart.  But even given the competition from both Walmart and Amazon, the real problem is staggering amount of debt that Toys R Us has to service.  If the company was not saddled with all this debt, it would be a profitable concern.

And here's where it gets weird.  If the company does emerge from bankruptcy, the owners will lose their equity in the company, but the creditors may end up assuming ownership of the company.  The company, once stripped of all of this debt and other burdens may emerges as a much slimmer and more profitable enterprise.   Brick-and-mortar may not be dead just yet.

What is annoying to me, is that the way the financial media just routinely reports the demise of any company is being caused by Amazon, when Amazon really isn't as big an impact in the marketplace is they would like to suggest.  It is a factor, and a very important factor.  However there are a number of other online outlets that are also equally as culpable as Amazon.  And there are other retailers such as Wal-Mart which are also probably a bigger factor that online sales - at the present time at least.

But the big stickler is the massive amount of debts when these companies go private.  That's really the whole thing in a nutshell and they try to sweep this under the rug by saying "another company put out of business by Amazon" which is a narrative they want to sell people.  And I guess that's the narrative you want to sell to people if you're working for the Washington Post your boss owns Amazon.

Monday, October 23, 2017

Always the Brand Name, Always.


Walmart has gone from discount retailer to mainstream brand-name retailer and no one seems to notice.  It is no longer a place with really advantageous prices on most things anymore.

Further to my previous posting, I have written about Walmart in the past and have always been a big fan of the store and also am a shareholder in the company.  They have a lot of good products there at reasonable prices including, and perhaps especially, many of their store-brand "Great Value" products.
But the funny thing is happened along the way.  Walmart no longer is merely a competitor in the marketplace, but in many respects has become the marketplace in many towns, cities, and villages. Walmart is now the de facto grocery store, department store, automotive center, sporting goods store, optometrist, hair salon, fast food restaurant, gas station, tax preparer, and Obamacare sign-up center, among other things.  Where people used to go to malls for "one stop shopping", today they go to Walmart.  And for many families, going to Walmart is a weekend event.
In any retail business, often you have to initially offer competitive prices or very low prices to attract business.  You do this to get warm bodies into the store, and perhaps drive competitors out of business.  However, once people get into the habit of shopping in your store, you can bank on that habit, and no longer have to offer lower prices.  And it seems that Walmart is falling into that pattern, as lately their prices seem to be ratcheting up, and also they seem to have fewer and fewer store-brand products than before, and more "name brand" products instead.  Great Value Woven wheat crackers are nearly impossible to find, but there is a wall of Triscuits in its place.
And this is not by accident but design.  Several years ago I recall reading an article about Walmart where the management mentioned they were trying to push brand names more and move upscale.  The "always the low price" and smiley-face logo (and the "falling prices" campaign) went away and the new "live better" asterisk took its place.  It seems they've succeeded in this as I am finding fewer and fewer discount items at Walmart and more more things that are priced at what are fairly mediocre bargains compared to other stores.
But as I noted, people get into the habit of shopping in the store, and initially they may not notice the prices have increased.  And in many small towns and villages, perhaps Walmart is the only place to shop anyway, so consumers don't have much of a choice.
Whether this bodes well for Walmart is anyone's guess.  I suspect that like any other type of dynamic system, there is a bit of hysteresis in people's shopping habits.  People will continue will continue to shop at Walmart and initially not notice that prices have edged up.  But eventually, over time, people may gravitate toward another retailer with lower prices, much as they initially gravitated toward Walmart in the first place.
Whether that retailer is Amazon or someone else is hard to say.  Quite frankly, I find that Amazon, like Walmart, has sort of "meh" prices these days, and unlike Walmart, doesn't have the same products for sale, but often inexpensive off-brand Chinese products instead, which are hard to cross-shop.   If I want an inexpensive weed wacker, and don't mind some off-brand, Amazon is the place to go.   If I want a specific brand of one, Amazon might be the last place to look.

For example, I was looking for rye grass seed at Walmart the other day.  They were sold out, as the garden section has been converted to Christmas displays and they assume that no one plants "winter grass" in the winter (when else do you plant it?).  But Walmart, Lowes, and Home Depot ordinarily carry this product, about $30 a bag for 25 lbs of it.  Amazon, on the other hand, starts at $44 a bag for 20 lbs, plus shipping.   For some crazy reason, Amazon has crazy prices on a lot of things.   And then there is the weird deals on $50 jars of mayonnaise, which I think is a cover for money laundering.

In terms of lowest possible price, the big-box lumberterias, Walmart, and Amazon are no longer the "go to" places they were in the past.   Not only are their prices not very low, odds are, they won't have the item you want in stock - and you may not even be able to order it online!
Perhaps this is the break that Sears/Kmart has been looking for.

We Need a Little Less Christmas, Right This Very Minute!.


We need a little less Christmas. 
 
Christmas and holiday items are huge markup profit centers for most retail stores.  However, just because they could make it a good profit on Christmas and Halloween items doesn't mean they can turn their entire store into a holiday accessory store and expect to make money.

I wrote before about how Hechingers, the lumber store chain went out of business when the children took over the company from their father.  They quickly realized they were being run over by the likes of Home Depot and Lowe's and could not afford to compete.  They saw that the markup on small appliances was the most profitable for the company, so they decided to focus the company on selling small appliances such as coffee makers and crock pots.  Unfortunately this meant they didn't order things like two-by-fours and sheetrock.

Within a year, Hechingers was out of business.  You can't run a lumber store selling small appliances. Even though the markup might be higher than on lumber, people go to the lumber store for lumber, not coffee makers.  They are not acceptable substitute goods.

I've noticed that this holiday season, it seems like more and more stores that are not primarily in the holiday decoration business are saturating themselves with holiday decorations.  Big-box Lumberterias such as Home Depot and Lowe's are both clogged with Halloween and Christmas displays, much moreso than in previous years.  Our recent trip to Walmart revealed that they have allocated at least one or two additional aisles for Christmas items and it seems the store is overflowing with various Christmas displays including inflatables, lights, and other items - and of course, toys.


Most of the stuff is made in China and the markup on it is rather good.  So you can understand why companies want to sell more of these seasonal items. I can just envision the meeting at the conference room. "Gee, we make a lot of money on this Christmas and Halloween crap - let's see if we can sell even more of it!"  The problem is when every store tries to sell more holiday stuff, it becomes a race to the bottom.  Since holiday decorations can be reused, eventually reaches a saturation point where you can't sell additional holiday decorations to people.

But you can see how this happens.  One store puts up holiday stuff a week earlier than others - and makes good money on impulse sales.  So the other stores follow suit, and next year try to be even earlier.   You can blame the stores for putting the stuff out earlier and earlier, or you can blame the consumers for buying all this crap.   It is our fault as much as theirs.

Maybe I am old-school, but when I grew up my parents used the same Christmas decorations and Christmas lights again and again, year after year, without much change.  It was a major deal in our household when we switched from the big old bulky screw-in type Christmas tree bulbs to those new miniature GE lamps that they sold at the drugstore.  But that was about the only change of Christmas decorations my parents made in over 30 years.  And even then, we were dragged kicking and screaming into the 1980's.  Mother always said that miniature lights were "tacky" until the day she came home with several boxes of them.  But the rest of our ornaments and decorations were decades old - most older than I was.

But I worry that this trend toward Xmas saturation might be a sign of Hechinger syndrome.  Retailers are looking at the markup for products, rather than offering an array of products that people want.  They may find that there is a limit as to how many Christmas ornaments and decorations people will buy.  While it may seem like a money-making profitable move, if no one buys this crap, and you are "out of stock" on the stuff they do want, you may find that people stop shopping entirely - as I have been doing, walking out of Walmart and Lowe's, both stores twice, in recent weeks, without buying a damn thing, because what I wanted wasn't in stock, but the Christmas displays overflowed into the aisles.

On another note, in the housewares section I saw an entire aisle of pots and pans and other accessories labeled "Pioneer Woman" with a woman's smiling face on it.  I presume this is some sort of reality television show that is on cable TV that I'm not aware of (since I don't watch cable TV).  It seems that she is gone Rachael Ray in a very big way, selling too much, too soon.  As you may recall, Rachael Ray put her name on everything from pots and pans to dog food and over-saturated the market with her smilin' face.  Today only her dog food seems to still be around.  I guess you have to milk those 15 minutes of reality TeeVee fame when you get it.

Pioneer Woman, I'm afraid, may go the way of Duck Commander, which once flooded the aisles of the local Walmart and now cannot be seen at all.   What ever happened to those folks?   I'm not sure why people prefer to buy products with celebrity endorsements on them. They're not inherently better than non-celebrity endorsed products.   But obviously Walmart knows more than I do in this regard.

Or perhaps Walmart knows that the great unwashed masses will pretty much buy whatever Walmart puts out to sell...

More on that in my next posting.

Sunday, October 22, 2017

The Most Evil Company?


The Alien Replicants who work at Apple are ready to fly back to the home planet.


Apple has almost completed its new flying saucer headquarters in Cupertino, California. Once it is completed and all the employees - who are alien replicants - are on board, it will take off and return to the home planet, forever leaving the Earth behind.  Having done its job and infecting our planet with the iPhone, Apple aliens (Appaliens?)  no longer need to stay.

America is in the midst of an opioid crisis, and many people are pointing fingers at large pharmaceutical companies for looking the other way as distributors and doctors diverted millions of pills to drug addicts.  Tens of thousands of people have died as a result of this highly addictive drug.

However, Apple has scored a coup over the drug companies by creating an electronic drug in the form of the smartphone.  Not only is it far more addictive than opioids, it is far more pervasive. Nearly everyone in the United States now has a smartphone, while only a small number are addicted to heroin. And thousands, if not tens of thousands of people, have died as a result of smartphone addiction, usually while texting while driving.

And like drug addiction, cell phone addition has ruined lives, careers, and marriages.  It is certainly ruining the Presidency!

While touring our little island the other day, we went down to Clam Creek, which has a beautiful view of Jekyll sound.  I saw a number of people sitting on benches facing the water, but instead of enjoying the view, they all had their heads down and these little flat bricks in their hands which they were studying intently.  Yes, they were smart phone addicted.

____________________________ 

On Facebook they say "pictures or it didn't happen" - which strikes me as odd, as today is Sunday and many people are in church reading the Bible which doesn't have any pictures in it.
____________________________ 

Others were riding bicycles with their family members, stopping every few feet to take a picture so they can post it on Facebook.  Later on in the hotel room they would carefully go through the hundreds of pictures they took and pick the best ones to post on Facebook to brag to their friends about what a wonderful time they were having.

On Facebook they say "pictures or it didn't happen" - which strikes me as odd as today is Sunday and many people are in church reading the Bible which doesn't have any pictures in it.  People are willing to take 2000-year old stories on faith but won't believe that you took a vacation or went to a fancy restaurant, unless you have a photograph of it.

Whether Apple intentionally set out to create an electronic drug is up for debate.  However, I believe that the developers of the smartphone knew at the time they were developing something that had highly addictive properties.  And unlike opiates and other drugs, this new electronic drug is perfectly legal and in fact promoted and regulated by our government.

Granted, it is possible to become addicted to almost anything.  People are addicted to watching television - in fact the majority of Americans are.  Most Americans watch hours every day of television and think nothing of it.  People also become addicted to driving cars, particularly poor people.  As I noted in earlier postings, many people will just get in their car and drive around for "something to do"  Or they spend countless hours in long commutes and think nothing of it - and even admit that they enjoy this private time behind the wheel of this powerful machine, where they are in charge for brief point during the day.

And the nature of these addictions is very consistent.  There is a feedback loop that provides an incremental amount of pleasure to the user so that they keep coming back for more and more over time.  People stay up late watching television, flicking through the channels on their cable box trying to find something good on.  They look up with the clock and realized they've spent two or three hours flashing through dozens of channels watching only snippets of programs - and mostly advertisements.

Cell phones with the same way, but even more so.  There are some people who simply cannot put down their phone, whether they are texting on it, talking on it, or just looking at it.  Whether they are reading emails, going online to find sex partners, or just reading obscure articles on Wikipedia, it becomes a compulsive addiction, and no one, including myself, is immune from it.

I would like to think that I'm not completely addicted to the smartphone at this time.  I usually leave my phone off for most of the day, and leave it sitting on a table when I leave.  It is odd, but we will go into town to go shopping and not bring a cell phone with us.  People act shocked that we would leave the house without a cell phone, however in my lifetime this was a very common occurrence before the cell phone was invented.  Believe it or not, you can actually drive to the store without having to have your cell phone with you.

The problem is, since I am not tethered to my phone 24 hours a day, other people often get very upset with me.  Most other people have their phone in their pocket or in their hand or within easy reach at all times.  They have their cell phone ringer at full volume, whereas I have mine turned off.  So if they try to call or text or email me, I may not receive their message for hours.  They assume that I am screening my calls or intentionally not responding to their messages or emails and then get pissed off because I didn't immediately reply.

This is the new paradigm of the smartphone.  When people send you a text, they expect you to immediately text them back.  Since I don't have texting enabled on my phone at all, this becomes problematic.  People say, "I sent you a text didn't you get it?"  And I reply, "No I don't do texting" -  and they give me a blank stare.

This was driven home to me the other day when a friend called and asked why I hadn't responded to the voicemail message they had left on my phone.  The reason why I hadn't responded was that I had been in town shopping in my phone was sitting on my desk. When I returned home I didn't immediately race to the phone to see if there were any messages, and in fact didn't even look at it for several hours until they called.

To the cell phone addicted, who never leave their phone for even a nanosecond, this is heresy.  My friend all but accused me of screening my calls and intentionally not answering his voicemail.  The idea that I simply wouldn't have my cell phone with me or not be constantly checking it every five seconds for new messages was unfathomable to him.  So once again, I have pissed someone off, simply because I am not part of the herd and don't engage in the herd behavior.  Modern living is so complicated!

What is amazing to me about this is that given that cell phones and smartphones have only existed for a few brief years, that this sort of behavior is become so quickly and heavily ingrained into our society.   People today have new norms of behavior which are shockingly different than those from just a few years ago.  Indeed, Apple has done a very good job of molding our behavior and addicting us to this electronic drug.  They have changed the world, and not always in a better way.  In fact, not very often.

Saturday, October 21, 2017

Shitblogs, Shitnews, Shit-text and the New Internet


You think you are being informed by the news.  You are not.  You are being baited with trash articles written by "text farms" in the far east, simply to get you to click.


What sucks about the article is not the content, but the writing.   Yes, it would be interesting to read about outrageous trademark applications, claims, and lawsuits.   But for some reason, the writer confuses the words "Patent", "Trademark", and "Copyright" often in the same sentence.   You cannot Patent your Trademark or get a Trademark on your Copyright.  These are three distinct forms of intellectual property.

And if you think I am nit-picking, let me put this in terms you might understand.   A car is not a boat, nor it is a motorcycle.   And you can't tell the difference between the three, you are being particularly dense.   And no, I don't want to hear, "what about amphibious vehicles?" as you are just being annoying for the sake of being annoying.

What's worse, the author confuses Trademark applications (filed with the United States Patent & Trademark Office) with lawsuits (filed in Federal Court) and again, conflates the terms often within the same sentence.

This is shit-posting.  This is shit-text.  This is garbage "news" generated by some fellow in a third-world country who no doubt was paid bubkis for this "content" which in turn was posted on a dubious site ("Lovemoney?") and reposted by MSN.

MSN, of all the "news sites" has fallen down the toilet of fake news more than others.   Apparently they have been blocked from reposting other content, particularly in their finance pages, and as a result, have resorted to the cheapest form of sensationalist postings for their "Money" page.  I mean, it is really crap these days.

But that, in a nutshell, is the new Internet.   No one wants to pay for content anymore, so companies rely on shit content to fill their web pages and news feeds.   This makes a perfect storm for Russian Troll farms, who find a ready audience for their outlandish stories.  The press acts like they hate Russian Troll farms, but frankly, they provide a ready source of news feed for them, as they can report the outlandish stories promulgated by Russia, and then write a second story debunking it.  No one reads the second story.

And if that isn't enough, you hire "copy writers" from third-world countries to come up with topical content that people will click on.   "List" stories (20 best this, 10 worst that, etc.) as well as "You'll never believe what happens next!" type stories are typical of the genre.    Of course, as others have noted, whenever you see a question mark in a headline, the answer is usually "NO".

What is the answer to all of this?   It is hard to say.  So long as we demand "free" data on the Internet, we will get exactly what we pay for - a shit taco, wrapped in a layer of advertisements.   In a way, it is like free television - not worth watching and mostly infomercials or commercials.  You can watch that crap, but it is mostly just ads trying to program your brain to get you to buy something.

Or worse.  On the Internet, much of the "free" content is stuff designed to destroy your life.  Join ISIS!  Join a White Supremacy Cult!  Join a Tax Protester club!  Come share your conspiracy theories!   All stuff that just poisons your brain and gets you nowhere - but free of charge, of course, until you run afoul of the IRS or the local police.

Of course, I am not sure "paid content" is the answer, either.  Both the New York Times and Washington Post (now basically the same paper) want me to pay to see more than a snippet of their articles online.   But what they are selling isn't necessarily impartial and balanced news coverage - anymore than Fox news is.

It is a conundrum.

In the meantime, before my malpractice insurance expires, I plan on Copyrighting a few Patents, or perhaps Trademarking a few Copyrights.  Or something along those lines.

Why Debt Forgiveness is Taxable and Should Be

If you allowed forgiven debt to be untaxable, we could all pay each other in forgiven loans and avoid the IRS entirely!

A recent heartbreaking story in the paper (which of course, tells only one side of the story) concerns a disabled vet who went to Cooley Law School and ran up a quarter-million dollars in student loan debt.   I will refrain from commenting about Cooley Law School as they have sued people in the past who have discussed their operations.  The Wikipedia link cited above, if read carefully, tells the whole story.

Sadly, this story is repeated time and time again in America, where we are told that a college education - any college education at any college in any field of study - is a one-way ticket to riches.   It isn't.   Even in the lucrative fields of Engineering and Patent Law (well, at least at the time I was in them) it was a ticket to a comfortable middle-class lifestyle, and certainly not worth $250,000 in student loans, even today.

For people majoring in "Sociology" or "International Law" or other nebulous fields?  People who attend "for profit" or bottom tier schools?  For them, college and grad school can be worse that worthless - the staggering cost and lifetime loan commitments mean the student sells off the rest of his working life for a few years of "study" that never leads to gainful employment.    It simply isn't worth it.

There are better fields to study, and cheaper ways to go about getting a degree.   Spending $60,000 a year on college is just plain dumb - no matter what your major is.   Sorry, but that's the God's Honest Truth about it.   I worked my way through college - all 14 years of it - and graduated with a lot less than $250,000 in debt.   Plus I had a job when I graduated - the same job I had before I graduated!

But I feel bad for this guy, because like so many before him, he answered the siren song of college and law school, sold on the idea that if he borrowed enough money, he would end up with this credential that would guarantee him a high-paying job.   The problem is, the jobs were never that high-paying to begin with and then the bottom fell out of the legal market about eight years ago.

Now he's on full disability and his law degree is pretty worthless to him.

Oh, it's not all bad news, of course.  There are still lawyers - with experience - who are finding jobs and employment.   They aren't making the big bucks that you see on television law shows, however.  It is a much more competitive business than before.   And as I noted before, "If you are in it for the money, you will never be happy, but if you do it because you love it, the money doesn't matter."

And sadly, a lot of people get into fields such as Engineering, Medicine, Law, and so forth, convinced they will make a lot of money, when in fact, the best they can hope for is a nice comfortable middle-class existence and a career that is interesting and rewarding.

That ain't such a bad thing, is it?

But I digress.

What is shocking - at least to some folks - is that after this fellow had his quarter-million-dollar loan debt cancelled, he was sent a bill by the IRS and the Michigan Department of Taxation for taxes due on this loan forgiveness.   Since this $250,000 "payday" puts him in the highest brackets, he owes about 40% of the loan amount as income - and a smaller amount to the State as well.

To some folks, this makes no sense, or at the very least, seems unfair.  The poor guy can't repay his loans on disability income, so there is no way he can pay the taxes on it, either.    Perhaps a payment plan can be worked out with the IRS to pay the debt in installments over a number of years.   Maybe the government will come up with a new law exempting people on disability from this tax.    Hell could also freeze over, too.

But while it may be unfair to tax a disabled person this way, the underlying premise of the tax code in taxing forgiven debt isn't anything new or anything shocking.   If we allowed "forgiven" debt to be untaxed, it would not take long for everyone to be paying each other in forgiven loans.

For example, suppose you wanted to pay me a million dollars.  That would knock me into the highest brackets and I would end up paying the IRS and the State over $400,000 in taxes or thereabouts.   I suppose we could form a Subchapter-S corporation or something and I could pay myself in dividends or deferred interest whatever that Mitt Romney and Donald Trump uses.   That might knock me down to 25% or even 15% capital gains rates, if we structured it right.

But suppose instead, you loaned me the million dollars and then said, "I forgive the loan!"   Since you don't pay taxes on loans (because, despite what poor folks think, getting a loan is not like getting free money) you don't have to pay taxes on the million bucks, right?

Well, the IRS and the United States Government are not that dumb.  That loophole was closed a long time ago and Publication 4681 explains how this works.  And if you think about it, there are logical reasons why this law is in place.   A loan forgiven is income, because your net worth just jumped up by the amount of the debt that was wiped out.

Now granted, this can have unintended consequences - most sections of the tax code do.   For example, you buy an investment property for $250,000 and then proceed to remortgage it over the years, adding to the balance of the loan.   A decade later, you now owe $500,000 on the mortgage, having "taken out" cash at closing in a series of serial refinances.   You also have depreciated the property on your taxes, reducing your income tax each year.  But now your "adjusted basis" in the property is zero dollars.

You sell the property for $500,000 which barely pays off the mortgage.   You walk way with no cash.   But the IRS (and State tax people) sock you with a capital gains tax of $75,000 or more - 15% of the proceeds.   You made no cash on the deal, but you now owe money, which you haven't got.

Now in this case, you would not cry "unfair" because the person with the property made money and just chose to spend it by taking cash out in refinancing.   They also got a tax deduction as well.   The fact they didn't put some money aside for the inevitable capital gains taxes isn't the fault of the government or the IRS, but themselves.

But of course, we expect an investor to be a little more sophisticated when it comes to finances.   Someone investing in real estate should know what they are doing, but of course, the track record of boom-and-bust-and-default-and-foreclosure that has been going on since the 1980's would seem to tell a different story.  Americans all think their houses are made of gold and get angry when they find out that sometimes they aren't.

You could make the argument (but I won't) that this disabled vet received a free education worth $250,000 (I question the pricing of the law school, though - that seems awfully pricey!).   So he is not simply walking away from debt, he is walking away from something of value he bought.  That he overpaid for that "something" isn't really the IRS's problem.

In other words, the IRS isn't being "mean" here but just doing their job.   In fact, they have no discretion or choice in the matter.  If they chose to "forgive" tax debts, they would be in far more trouble than the bad P.R. they are getting now.  Government agencies are not allowed to selectively enforce laws depending on the sympathy of the person or corporation involved (at least in theory, I am sure there are examples where some well-heeled company has managed to bend the law to their will).

Of course, this raises the question, did Donald Trump have to pay taxes on all the forgiven debt he had running his various businesses into the ground?   And I suspect the answer is "no" as he was shielded from most of these debts (directly) as they were run through corporations that ran his various projects.   The corporations then declare bankruptcy and leave the banks and the IRS hanging.

Too bad law students can't incorporate.   Oh, a neat idea, but it won't work.   For us "little people" the idea of forming a corporation and then accumulating debt in the corporate name simply won't work.   I had three subchapter-S corporations at one time, and two of them had debts, my real estate venture in particular had over a million dollars in mortgage debt.

But a funny thing - in order to obtain those mortgages, we had to personally guarantee the notes, which meant that if the whole thing went belly-up (for example, we didn't sell out in time as we did) we would be on the hook personally for those debts.  And if those debts were forgiven, we'd have to pay taxes on the forgiven debt amounts.   And yes, some real estate investors caught up in the bubble of 2008 found themselves with tax bills for forgiven mortgage debts.  For your own home, however (whose capital gains are largely untaxable) such taxation of forgiven debt may not apply.  It gets complicated.

Funny, but if his home mortgage was cancelled, he would have been in the clear.  Maybe pay for school with a home equity loan instead?   That does require you have a home, however, as well as equity in it.

I hope the poor fellow in the article finds some sort of relief from the taxes due.  Perhaps he needs to declare bankruptcy, as painful as that sounds.   Expecting Congress to act and pass a retroactive bill seems kind of farfetched, given how little Congress gets done these days.

But the idea that taxes are due on cancelled debt is "a weird area of law" as one person opined in the article or that it "makes no sense" as another noted, it just naive.   Cancelled debt is clearly income - you are receiving a monetary benefit that increases your net worth by the cancelled amount and relieves you from paying back the balance of the loan.   While it may not put cash in your pocket, it is income, no matter how you slice it.

Whether this is "fair" in certain circumstances, is another question.

Friday, October 20, 2017

Used Jet Ski Trailers

Jet skis burn out after a few years, leaving the trailer to rot in the owner's side yard.  You can buy these cheap and use them as utility trailers, for camping, or to haul a small boat or kayak.  And hey, if you're dumb enough to buy a jet ski, at least save a few bucks buying a used trailer.  Be sure to pack those wheel bearings though!

We were thinking of making some sort of trailer to tow behind the golf cart, so we could take the kayak to the boat ramp.   Hauling it on the truck is OK, but it takes a long time to set up the roof racks and whatnot.   We saw someone hauling their kayak on a small trailer and thought, "why not?"

(The Kayak in question is an Old Town 13' two-man loon we bought used for $200.  Sturdy, but heavy).

We found this out by talking to someone at the campground who had a neat trailer to haul his kayak and a box bolted on top with some angle irons to haul all his camping gear, life preservers, etc.  He told us it was a used jet ski trailer he found for $70 at a junk yard.   Good scavenging!

As opposed to.... going out and spending thousands of dollars on brand-new kayaks.  While searching for a cheap used Jet ski trailer, we found this missive on Craigslist in nearby Jacksonville, Florida:
Three Kayaks, Trailer, paddles, life-vests, transporter, storage box, rod storage tubes, rod holders etc. These kayaks and trailer have been stored in a garage and are in excellent condition. Two of the them have only been used twice and the other (140) was a demo model. Just have too much going on to be able to use the kayaks. Would like to sell as a package to someone who wants to get started in a great outdoor activity. Contact me if you would like to take a look.

Wilderness 140 Tarpon
Wilderness 135 Ride
Wilderness 115 Ride  
Ouch.  They spend all this money on brand-new kayaks, a trailer and then use them twice because there is "too much going on" (read:  Watching Fox News 6 hours a day).   You can go kayaking for a lot smaller investment than this, trust me.  Like $200 or so.

But this got me thinking.   A lot of people decide, "We're going to get into Kayaking!" or boating or pottery, or a motorcyle or a hobby car or whatever.  And they go out and buy all brand-new stuff and it languishes in the garage.   We've seen a lot of brand-new kilns, for example, that sit unused and obsolete, over 10 years old, in the owner's garage.  They were going to get into pottery, spend thousands of dollars on equipment, and then lost interest.   And pride prevents them from selling all this brand-new stuff and moving on with life (and learning a valuable life lesson).

We've seen people buy brand-new motorhomes - spending tens if not hundreds of thousands of dollars - and then go camping and decide they hate RVing.   And they sell the rig at a huge loss, or since they are upside-down on the rig, let it rot in the side yard until the loan is paid off.

Or consider my former dental hygienist, who went to a boat show with her husband and bought a boat.  They went out on it once, on a very windy day, and it scared them so much they never used it again.  They failed to winterize it, and the first winter cracked the block.   Nearly a decade later, it sits in the driveway, full of green water, the transom rotted out, and ten hours on the hourmeter.   What a freaking waste!

Yet the middle class does stupid things like this all the time, and then wails that the "1%'ers" took away their money.   And younger people do this too - signing onerous loan agreements to go to party university to get a useless degree in naval gazing and then wondering why there is no six-figure job at the end of the pipeline.   Forgive my loans!  Make college free for everyone!  Guaranteed minimum income!  Tax the rich!  It has to be someone else's fault, right?

I could go out tomorrow and buy a brand-new trailer at a boat store.  I could go to Lowe's and buy one of their "little gay trailers" they have parked out front and pay cash for it.   I choose not to.  Because this is a want more than a need, and the fun part is finding something that someone else discarded and then making something of it.

Sort of like our $299 golf cart.   Our friends have spend thousands of dollars on tricked-out golf carts - $8000 or more.   We've spent about $2000 all told, and are having a ball with it.   And if our friends think we are "poor" then so much the better.   Fly under the radar - that's my mantra.

If all else fails, I think I can make something from some old galvanized steel studs they are throwing away in one of the hotel demolitions, and a couple of used wheelbarrow wheels.   Either way, I'm in no hurry to go out and spend money on a trailer, that's for sure!


Thursday, October 19, 2017

Why Brick and Mortar and Mom and Pop are Not Dead Yet.



What store has the best prices and best service?  Amazon?  Best Buy?  Lowes?  The local Mom & Pop Appliance store?  The answer may surprise you.

Our icemaker finally died after 12 years.   Such appliances are designed with a 15-year design life in mind, so it was a few years too early.  Hard water really eats these things up, as they are constantly on and constantly spraying water about the innards, and scale builds up quickly.

So I go online to find a replacement.  Most undercabinet ice makers are 15" wide, and ours was 18" wide.  Not wanting to re-build our cabinets, I search for an exact replacement.   These are not cheap.  The retail price on a replacement is a staggering $2599.   Ouch.   These are toys for the rich, or at least people who like their martini ice just so.

So I check Lowes and Home Depot.  They can order one, with two month's notice, for $2159.  That's somewhat better, I guess.  But having seen all the dented appliances at both stores, I am reluctant to order.  They hire kids to work at these places - kids who basically don't give a shit about anything.

I actually found a used one on Craigslist that needed a new pump.  I just replaced the pump in mine, so I could swap that part out.  Sadly, it was sold by the time I called.   That might have been a big savings, but then again, if ours burned out at 12 years, how long would a used one last?

I go online to all the other places - Compact appliance, Amazon, etc.  They have 15" models, or ice makers that are just freezers with conventional refrigerator ice makers in them (that make half-moon shaped cubes, not "clear ice" like a real ice maker).  Or they have 15" models which have pretty half-hearted ratings.   So much for Amazon taking over the appliance business from Lowes.

I keep searching online and find pretty good prices at some appliance stores.  But since I am out of their area, they can't ship to my house.   Then I think a minute.  The local Mom & Pop appliance store, Coastal Appliances, furnished all the Kitchen Aid appliances that came with this house.  We bought the fridge, washer and dryer from them as well.  I call up and they are $100 cheaper than Lowes or Home Depot, and will deliver, install, and remove the old ice maker as well.

And unlike Lowes and Home Depot, I trust these folks not to drop the damn thing off the back of the truck, put a dent in it and say, "Gee sorry!" the way the chain store lackeys do.

Now, sure, you could say I could have bought a cheaper model, or paid a carpenter to narrow the cabinet opening.   But that's comparing apples to oranges.   When it comes down to it, when I searched online, the best price available for this particular make and model was at the local appliance store.

Not Lowes.

Not Home Depot.

Not Best Buy.

Not Compact Appliance or Amazon.com - they didn't even stock such an item, only pale imitations.

The heralded demise of brick and mortar and Mom and Pop may be further off than we think.   Sure, Amazon has great prices on some things.  But if you want a specific thing, they largely don't have it.  They will have some crappy made-in-China substitute that no doubt is cheaper, but not quite as good.  And granted, half the time what they have is adequate.

But in terms of buying a specific product, the big-box stores and online sites all fall down when compared to the local Mom & Pop appliance store.