The Death Tax; Weekend Reading February 9, 2001February 17, 2017 THE DEATH TAX Sean O’Donnell: ‘The (relatively non-partisan) policy wonks in have beaten the issue of death taxes to, well death, and the conclusion is nearly unanimous that the compliance cost of this tax (the cost to the public and private sector of administering the tax) and the cost as a result of economic decisions being made to avoid the tax are greater than the revenue.’ ☞ Economic decisions like huge grants to charity? One of the unintended consequences of ending the tax, I fear, would be a huge blow to charitable giving. I do agree it would be wise to simplify the tax and close the loopholes. Also, probably to raise the exemption to $5 million, so it would really apply to only a tiny handful of fortunate families – who, even after throwing in some of their chips at the end of the game, would have to be considered winners. WEEKEND READING There is a provocative piece in The Nation which I think merits part of your weekend. It has nothing to do with money, only your nation. The Nation, as many of you know, is proudly liberal in its orientation, which instantly closes some minds. Give it a shot anyway, and then send me your thoughts. The only line of objection I rule out out is the line that goes ‘this topic is not fit for public discourse.’ Quite the contrary, this topic is called ‘American History,’ and it will be taught and debated for years to come. Click here.
Two Things WARNING! NEITHER IS ABOUT MONEY! February 8, 2001February 17, 2017 MY WARDROBE Colin Ramsey: ‘Early in the summer of 1988, I found a dark blue Champion sweatshirt in the gutter in front of my rented house on Martha’s Vineyard. I picked it up, and, seeing it was in decent shape, took it inside and washed it. I wore it frequently the rest of that summer, and still wear it occasionally, even today. Nevertheless, I wouldn’t buy my clothing at Walgreens.’ ☞ Sticks and stones will break my bones . . . A COLUMN FROM THE BOSTON GLOBE Read this.
401(k)s at 15% — and More TiVo February 7, 2001February 17, 2017 But first . . . Did you see the op-ed in last Thursday’s New York Times calling for a $500 “dividend” for every man, woman and child in America instead of a tax cut? This one-time $140 billion dividend could be effective right away in fighting recession. And being a one-shot, it would deflect our deficit-reduction trajectory just once. That’s a great thing, because paying down the national debt will provide a terrific ‘tax cut’ all its own. Namely: low mortgage rates, low car loan rates, low rates for business borrowers, a strong economy, and a strong dollar that keeps consumer prices low (especially stuff we buy from abroad, like your TiVo). A one-shot dividend doesn’t rule out some kind of ongoing tax cut – especially if it’s not too large, and is aimed at those who need it most. But what a great, democratic (small d) idea. A dividend! I like this so much, I think I’ll repeat it all week. John March: ‘The proposed $500/person dividend in lieu of a tax cut is, as even you must recognize, shamelessly redistributive. If the tax code is progressive on the way up, shouldn’t it – to be fair – be just as progressive on the way down? In other words, if ‘the rich’ pay a disproportionate share of tax revenues, shouldn’t they receive a (dis)proportionate share of any tax cut when the government runs a surplus? Whose money is it, anyway?’ ☞ Well, in Eisenhower’s day, the top marginal federal rate was 90%. Under Kennedy, Johnson, Nixon, Ford and Carter it was 70%. It got all the way down to 28% under Reagan – and I didn’t notice average folks’ tax bites dropping proportionately. (In fact, when you take into account the payroll tax, their bite was rising.) Yes, I know it’s not this simple; among other things, ‘tax shelters’ allowed you to avoid the high tax rates. (Instead of paying 90%, you’d often lose 100% in a disastrous tax shelter. But it was worth the try.) My point is that, while an ethustiastic case can be made to give 43% of the tax relief to the top 1% of our countrymen (me! me!), the fact is, we’re doing just fine. We are! And much better than we’d be doing in most other industrialized countries, where tax rates are higher. So . . . in a world of limited resources, with many Americans truly straining to raise their kids and make ends meet, my own priority would not be relief for the best off (who already pay tax at a low rate on the often large chunk of their income that comes from capital gains). Now . . . DO 401(k)s MAKE SENSE AT A 15% RATE? Tom Whitaker: ‘Under Dubya’s tax cut plan, the 28% bracket would go to 15%. If this is true, will it make a substantial difference in the advisability of contributing to 403b accounts, versus just investing in index funds? My thinking is: the 403b contribution will be ‘only’ getting the advantage of 15% which would go to taxes, versus the current 28%. And currently, taxes on capital gains are (am I right?) less than those charged eventually on 403b proceeds.’ ☞ Good point. It makes little sense to shield money from tax at 15% only to withdraw it years from now at what might be a 35% tax rate. For low-bracket folks, a Roth IRA makes much more sense than a traditional IRA or 401k or 403b. And index funds entirely outside a retirement plan will defer the tax on much of their growth until you sell – and then, likely, be taxed at a low, long-term capital gains rate. However, despite all this, a 401k or 403b remains truly compelling if — as is very often the case — the employer provides matching money of its own. Free money is hard to beat. TIVO I told you last week that I love my TiVo. It’s truly one of those great leaps forward, like cell phones, that squeeze more hours out of each day and make your life better. (Yes, too much TV rots your brain, and there’s some slight chance cell phones do, too, but on balance they make your life better.) Bill Coppedge: ‘You are right – it is awesome. I could not even imagine how cool it would be until we started using it. My wife is into old movies — AMC and TCM are where we record most stuff. I spent about 5 hours hooking the thing up because I had to think through what I thought would be the optimal way to hook up all the cables, so that we would have the most flexibility.’ Robert Miller: ‘I have had TiVo for a year and a half and share your enthusiasm. A couple of comments: It is possible to watch a show on one channel while Tivo is recording another, provided that you have a VCR hooked up to the TV and to TiVo. I’ll spare you the details but I think the TiVo booklet shows how. And, as you say, one can save TiVo recordings to videotape. I did this for several months until I realized that I never watched the tapes. There were always too many newer things on Tivo that I preferred to watch. ‘Incidentally, my dog would like to thank you and your reader who recommended audible.com. The Diamond Rio player arrived about a week ago and we go for much longer walks now. My first download was a winner: Great Books, by David Denby. I’d read those great books myself [rather than Denby’s discourse on them], but with TiVo and now the Rio, I just don’t have the time.’ Nick Barendt: ‘An aspect of the Tivo device that is interesting from many views (e.g., technical, social, business, etc.) is that it uses an embedded version of Linux, the free, open Unix-replacement operating system. It is one of the first such consumer devices to be introduced to the market, hopefully followed by many more.’ J.E. Bakke: ‘A wasteful and extravagant suggestion: Get an extra cable box, dedicated to TiVo. That way, TiVo can record what it wants when it wants independent of what else you might be watching. True, this costs an extra few bucks a month in rental from the cable company, but I find it’s worth it. You have to find a way to shield the little infrared remote transmitter from the second box (aluminum foil works), so there’s no cross-interference, and you have to use two video inputs either at the TV or via a receiver (which is simple but can seem complex to some). But I recommend the TiVo/cable box combination. Think about it.’ ☞ My own solution is similar but less high-tech. If there were something on NBC I wanted to see while TV were recording CNN, I’d go in to the other room and watch it. Or you could try Rick Mayhew’s method, which is written in a language I do not know, but faithfully transcribe for you here: Rick Mayhew: ‘You can configure TiVo to do this. Use a splitter on your cable wire and run two separate wires (one to the TV – another to the TiVo) and then run a wire from the TiVo to your TV (output to input). We have ours setup this way and it works great. TiVo stays active on channel 3, you grab the regular remote when a show starts to record – and surf to your heart’s desire.’ Andrew Megibow: ‘If you get a splitter for the cable wire you will be able to watch live TV while using Tivo to tape another show. Unfortunately, you cannot watch a premium channel while recording (assuming you have a cable box). You can tape a premium channel while watching a basic cable channel. Let me know if you need more info. Also, you wrote about a small keychain attachment that connects through a USB port and acts as a 16MB drive. Just wanted to pass on that a number of mp3 players perform the same function – many people have the equivalent of the Q-Drive and don’t know it.‘
Airfares and Education February 6, 2001February 17, 2017 But first . . . Did you see the op-ed in last Thursday’s New York Times calling for a $500 “dividend” for every man, woman and child in America instead of a tax cut? Richard Freeman, a Harvard economics professor, and Eileen Applebaum, research director at the Economic Policy Institute, note that a tax cut – inevitably a complicated and hotly disputed piece of legislation – would take a long time to enact and then kick in, coming too late to avert a possible recession. This one-time $140 billion dividend could be effective right away. And being a one-shot, it would cut into our projected surplus, and deflect our deficit-reduction trajectory, just once. That’s a great thing, because paying down the national debt is a lot more prudent course than cutting taxes – and will provide a terrific ‘tax cut’ all its own. Namely: low mortgage rates, low car loan rates, low rates for small and large business borrowers, a strong economy, and a strong dollar that keeps consumer prices low (especially stuff we buy from abroad, like your TiVo). A one-shot dividend doesn’t rule out some kind of ongoing tax cut. But what a great, democratic (small d) idea. A dividend! I like this so much, I think I’ll repeat it all week. Dana Dlott: ‘Tax cuts and dividends are fundamentally different. A tax cut stimulates production and consumption. A dividend stimulates consumption. No incentives to work harder or invest more. A tax cut goes to people who are working hard to make money. It sends a message: work hard and the government won’t take as much of your money. A dividend goes to whomever Congress designates. It sends a message: Wheeee! Here’s free stuff courtesy of your government.’ ☞ Good points, but I still like it. I think if most of us were incented to work much harder, we’d collapse. Now . . . AIRFARES Bob Ceremsak: ‘I checked out farechase.com. They left travelocity.com in the dust. (May I recommend my favorite book buying site? It is bestbookbuys.com. Recently I bought Lincoln on Leadership as a gift. The book cost less than the postage!’) Steve Gilbert: ‘Tried farechase.com to get a quote for a trip from LAX to OAK. The lowest price quoted was United Airlines. They somehow omitted SWA, which was cheaper.’ Steve Meyer: ‘I have looked into a few airfare websites and I feel the best by quite a large margin is travelbyus.com. Not only does this display all fares available, but it also has an option which allows you to check nearby airports at the same time. Thus, for example, if you’re going from SFO to JFK, it will check flights out of Oakland and San Jose, and/or flights into LGA and EWR.’ EDUCATION M. Greger: ‘You chose to print my response to one of your columns, which is fine. I write what I believe. But your selective ‘bolding’ of words that I did not bold is irresponsible journalism. As I am sure you are aware of, bolding changes writer intent, and allows you to prepare a more focused rebuttal of the argument that you choose to ‘bold.’ I do not think it was a fair or decent thing to do.’ ☞ Sorry, M. My intent was not to distort or embarrass you, just to catch people’s eyes with key phrases that might interest them. I do this quite often, especially in longer columns – vaguely the way magazines use ‘pull quotes’ – and no one has mentioned it up to now. But I’ll try to be more careful about it in the future, because it’s really not my intent to distort. Thanks for pointing this out. (While we’re at it, it may be worth mentioning that I often also trim or edit reader comments. But never to change their thrust, only for readability.) Debra: ‘People like Mr. Greger apparently think that if America spent one more cent on health care, education, or headstart-type programs that the whole American economy would collapse. The second largest economy in the world, Japan (where I live and teach), has both nationalized medicine and a uniform public education system whose students regularly beat the pants off American students in standardized testing. Providing for all of their citizens hasn’t destroyed their economy (though corruption might).’ Ronald Baldwin: ‘You are right about the schools, but not about the solution. There is lots of evidence that the federal government will only make it worse. Schools are locally controlled. There is no constitutional federal responsibility for education. The federal government does have complete responsibility for the schools in the District of Columbia. Until those schools are paragons of excellence, I cannot respect any public education ‘solutions’ that come from the federal government.’ ☞ OK, but would you respect money? A lot of local school boards feel they could do a lot better implementing their local solutions if only they had the money. Canaan Huie: ‘I think you may have missed one important point in your response to M. Gregor. The David Berliner article he links you to also makes the following point: ‘Perhaps, instead of condemning public education on the basis of these average scores, unhappy citizens should advocate paying teachers enough money so we can attract mathematicians and scientists to public school classrooms.” ☞ This would indeed seem opposite to Mr. Gregor’s position. Eric Delph: ‘Could you explain the implied link between these two sentences that you wrote? << … their home lives are, so often, horrendously more difficult. That’s where money comes in: for rehabing the schools, upgrading the facilities, decreasing classroom size, recruiting terrific teachers, and supporting after-school programs. >> I’m lost. If the reason inner city students do so poorly in school is because their home life is so difficult, how does spending more money on schools improve their home life?‘ ☞ Well, Eric, if there’s no one at home to read to you (or, sometimes, no one at home who can read) . . . no one to help you with your homework one-on-one, and no books at home . . . no quiet place to sit and read and no one home when you GET home, to supervise you after school . . . that, I think, is where having some terrific teachers and counselors, with time to devote to you one-on-one, come in. And top-notch school facilities kids can feel excited and proud to be part of. And supervised after-school activities. And, yes, maybe even “midnight basketball.” It’s expensive to provide substitutes for parental care, and you can never do it fully. What’s more, in a perfect world, we shouldn’t have to. But investing an extra $20,000 in a kid’s early years to help him become a productive citizen, will be recouped many times over in added tax revenues and diminished anti-social behavior. Plus, it’s simply the right thing to do. Tomorrow: More TiVo
Bird Guts and Cheap Shirts The Walgreens Shirt Feedback Continues . . . February 5, 2001February 17, 2017 But first . . . Did you see the op-ed in last Thursday’s New York Times calling for a $500 “dividend” for every man, woman and child in America instead of a tax cut? Richard Freeman, a Harvard economics professor, and Eileen Applebaum, research director at the Economic Policy Institute, note that a tax cut – inevitably a complicated and hotly disputed piece of legislation – would take a long time to enact and then kick in, coming too late to avert a possible recession. This one-time $140 billion dividend could be effective right away. And being a one-shot, it would cut into our projected surplus, and deflect our deficit-reduction trajectory, just once. That’s a great thing, because paying down the national debt is a lot more prudent course than cutting taxes – and will provide a terrific ‘tax cut’ all its own. Namely: low mortgage rates, low car loan rates, low rates for small and large business borrowers, a strong economy, and a strong dollar that keeps consumer prices low (especially stuff we buy from abroad, like your TiVo). A one-shot dividend doesn’t rule out some kind of ongoing tax cut. But what a great, democratic (small d) idea. A dividend! I like this so much, I think I’ll repeat it all week. Now . . . BIRD GUTS Ralph Sierra: Your reference in today’s column to disemboweling birds to foretell stock prices reminded me of a recent piece in the kid’s section of the Washington Post about the origin of the word inaugurate: The new president may not be thinking of ancient bird guts, but that is partly where the term inaugurate comes from. The word dates back to the early Romans. A man called an augur was said to be able to foretell the future by observing the flight of birds (if the birds flew to the left, it was a good omen; to the right, a bad omen). The augur also listened to the bird’s songs, observed what food they ate and examined their intestines to try to guess the future. The word augur comes from two Latin words: avis (bird) and garrire (to talk or tell). If the augur’s interpretation (or augury) was good, it meant that it was a good time to take a major action such as formally recognizing a new king or emperor. Eventually, the Latin inaugurare, meaning “to install an official after consulting the birds,” became our word inaugurate. CHEAP SHIRTS Rob Bullock: ‘Your shirt story reminded me of when I worked at a clothing store in college. This was back in 1981-82, when everyone had to wear designer jeans (Jordache, Calvin Klein …). When we received a shipment, it showed the price we paid per pair to the manufacturer, the factory code and our price. Our mark up was about 400 – 500%. The telling piece was that the Levi’s that sold for half the price of the designer jeans came from the exact same factory. I can proudly say I have not paid full price for an article of clothing in years. If I am really supposed to have it, it will be there in my size when I go back and it is on sale! (Some scoff, but I also clip coupons every Sunday morning. I keep track of my savings by placing whatever I saved in an envelope and writing it on a log sheet when I get home from the store. Over the last three years I have saved at least $500 annually on groceries. My average grocery bill is about $60 a week so this is about 8% annually. The front of the Yellow Pages is a great place to find coupons for services and products – oil changes, tires, basic auto service, pizzas, etc. What I save goes toward my vacation fund.) Mike Sieverman: ‘Not to top you, but I still have two perfectly good plaid flannel shirts bought at Osco Drug 8 years ago for $9.99. Now, if they would only sell Khaki’s.’ Mark Centuori, concerned about my $110 wine stains: ‘Sounds like you need to visit HowToCleanAnything.com.’ Mark Kennet: ‘You can get the same exact shirts that you paid $12.99 for in Walgreens in Manila, Bangkok, or Jakarta for less than half that. In Bangkok, for about the $12.99, you can get a custom shirt made to order in less than 24 hours out of any material you choose.’ ☞ Ah, but the airfare! To which Mark, anticipating my every objection, replies by continuing: ‘You can do the same with custom suits. If you’re a big enough clothes horse, you could probably justify the round-trip airfare to Bangkok plus hotel just on the savings in your wardrobe. I got two extremely nice all-wool suits with an extra pair of pants each for a total of $500, and that was without haggling. These were literally made from whole cloth in only two days.’
Their Kids, Your Money February 2, 2001February 17, 2017 But first . . . GOING SOMEWHERE? Alan Rogowsky recommends: farechase.com. It checks all the airlines real fast and presents results starting with the cheapest. Not surprisingly, this new site is frequently busy – ‘try later.’ If they don’t blow it, this site has the potential to be very popular. Now . . . THEIR KIDS, YOUR MONEY M. Greger: ‘Your 1/30/01 posting greatly reminds me of your 11/15/00 posting debacle. That column, as this latest one, typifies the socialist mentality of how everything can be easily fixed if we just spend frugal people’s tax dollars. It is the classic argument of personal responsibility vs. socialist spending. The hypocrisy with the posting is that you should know better. With your supposed (maybe I am wrong) level of sophistication, you should already understand the following: ‘First, U.S. schools are not broken. I read your posting, have the courtesy to read this one by David Berliner in the Washington Post. The most telling excerpt is this: ‘In science . . . the scores of white students in the United States were exceeded by only three other nations. But black American school children were beaten by every single nation, and Hispanic kids were beaten by all but two nations. A similar pattern was true of mathematics scores.’ In a highly heterogeneous, competitive, and capitalistic society, it is only natural that we have the brightest students and unfortunately, the dumbest as well. The brightest allow all Americans (including the dummies like myself) to continue to prosper from their world-leading innovations. Inequity does happen, Andy, I was crushed when I realized I could never throw a 95 mph fastball. ‘Second, despite all of the Teachers Union rhetoric, we all know (let us all quit pretending otherwise) that the performance of the student is directly related to the involvement level of the parents, the level of respect and discipline in the classroom, and the innate ability of the student. Money cannot change these parameters. It is the personal responsibility of the parents to involve themselves in the school life of the child. Maybe you want to have a new government program called, ‘Pay a Parent to Care.’ If so, you fund it. ‘Third, why would the Teachers Union want more spending? The same reason why the fox wants to watch the henhouse. It is an instant increase in salary with no additional responsibility or accountability. And five years from now, the union will ask for more money, and the schools, despite all of the spending, will still be in supposed ‘bad shape.’ That sad cycle has been sputtering for decades now. Plus, in your world, $38,000 a year in salary (with Summer and holiday seasons off) may not seem like much money, but to a peon like me, that’s not bad. Shame on you Andy for posting such nonsense.’ ☞ Leaving aside the fact that this $38,000 was for New York City – which is the equivalent of about twelve cents in most other parts of the country – part of your premise, if I read this right, seems to be that black kids are inherently stupid. But neither I nor your President buy that. We both think inner city schools can be improved, that great new teachers need to be recruited, that inner-city kids have great innate ability and can do much better. What IS true of black kids, by and large, is that they go to inferior schools and need more help because – precisely as you say – their home lives are, so often, horrendously more difficult. That’s where money comes in: for rehabing the schools, upgrading the facilities, decreasing classroom size, recruiting terrific teachers, and supporting after-school programs. You are right in being frustrated with fathers who abandon their families (black or white) and mothers who, overwhelmed trying to make ends meet or poorly brought up themselves – or for whatever reason – do a poor job of raising their kids. This is a huge problem. But you make a terrible mistake, I think, by seeing it as just their problem. (And you are heartless, I think – unintentionally, I have no doubt – in not wanting to help the kids anyway. Even if the parent is to blame for this rotten situation, the child isn’t, is he/she?) It’s not just their problem, it’s our problem. Because we can’t ‘fire’ these kids. These kids are going to be part of our enterprise (a country, in this case, but imagine the US as a big company) for the rest of our lives. They are your co-workers. Either we invest in giving them the help and care they need to be productive, contributing citizens, or we pay the price when, a few short years from now, they are not. The price comes out of your pocket in so many ways: The cost of welfare, of course, and of building and staffing a huge prison system. The cost of burglaries and muggings, either directly (ever had your car stolen?) or indirectly (through your insurance premiums). The cost of a less efficient, competitive, prosperous economy. (And what of the intangible cost of having a resentful nurse who can barely read caring for you in your old age? Wouldn’t you prefer an engaging companion to push your wheelchair around? And what of the opportunity cost of letting a truly talented kid, who could have been a great Secretary of State, fall through the cracks and become, instead, a whip-smart – albeit illiterate – young gang leader or drug dealer?) Make no mistake: the quality of an enterprise’s employees affects the level of its success. And while you can isolate yourself from some of that – i.e., you can prosper even when the economy as a whole is not doing so well, or the dollar is weaker than it might otherwise be – we all have an easier time of it when our enterprise is thriving. The more productive, tax-paying citizens we have, the better able we will be to shoulder the costs and challenges of the future. So leaving aside the morality of it, it’s just great business sense to invest in kids, especially the at-risk kids. If this isn’t a national priority, I can’t think what would be. Happily, President Bush – no socialist – calls it his first priority. The point of the Matt Miller column I excerpted was that the President has his priorities straight by putting education first, and by backing that with a call for increased federal funds. But that the amount of those funds, especially as compared to what he’d allocate to lowering taxes on America’s 2,400 wealthiest families, suggest education is more like his last priority. All agree that money alone won’t do it. And that schools should be controlled, for the most part, locally. But a good free-market capitalist (as Miller pointed out) recognizes that if you want to attract and motivate good people, you have to put your money where your mouth is. Imagine yourself in a dilapidated, crumbling inner city school with no books and, say, 38 kids in your classroom – many of them, as you say, from very difficult homes. Wouldn’t you fail at teaching them the skills they need to be good, contributing citizens? Wouldn’t you be grabbing Uncle Sam by the collar, shouting, ‘Wake up! We need four times as many teachers and coaches and counselors to help these kids! We need to give them lots of one-on-one attention, lots of small-group learning experiences. And it is the best investment we can make, because the extra $25,000 or $50,000 we might spend on each kid in the formative years will pay massive dividends over the 70 years that follow.’ It would be nice to think that every local school district would just appropriate the money needed to do this right. But decades have shown they lack the funds. We can just say ‘tough,’ and build more gated communities (ours, on the water; theirs, called prisons). We can have yet more affluent neighborhoods ‘seceding’ from the city’s tax base, as Aventura and Coral Gables and others have so shamelessly done in Miami, to avoid paying taxes that would help the inner city schools. Or we can make education our nation’s first priority, and provide the funds – and the incentives and testing and ‘consequences,’ as the President rightly insists – that will go a long way toward getting the job done. This is not socialist, it’s good business. And it’s not government spending, it’s government investing. Please read Matt Miller’s column again. Enjoy those great airfares . . .
TiVo! February 1, 2001February 17, 2017 I’m not sure how big a breadbox is, so let me be more specific: It’s about the size of your VCR. A foot deep, a foot and a half wide, and four inches high. Black. No controls on it – run entirely by a remote control that will also figure out how to control your TV. Let me start with the cons: It’ll set you back about $600 — $399 for the machine unless you get a deal, and $200 for the lifetime hook-up (the life of your TiVo, not your lifetime). You’ll wind up watching even more TV. You’ll wish you had one in every room. Now here are the pros (not necessarily in the same order as listed on the box): As luxuries go, at least it’s easy on the planet. It’s not a Jet Ski, for crying out loud. And it’s a lot cheaper than remodeling your kitchen. They include every possible cable and connector you could need, and although the setup process will take you a while, you will succeed! They make it fun! (Needless to say, I do not guarantee this; but I succeeded, where I usually don’t at stuff like this, and I had fun.) It stores up to 30 hours of TV on its hard drive – or 18 or 14 or just 9 if you want to record everything in top quality, to see the beadlets of sweat fly from the quarterback’s brow. You can fast-forward through commercials – or fast-fast forward or fast-fast-fast forward. This allows you to watch your favorite half-hour sitcoms in just 23 minutes. The nightly news – which you will never again miss even if 6:30 slips past you – will take about 20 minutes, saving you 50 hours a year – a decent work week. (You’ll start watching any time you want, fast forward through the commercials, but also skip occasional features that don’t interest you, or where ‘the headline’ says it all.) You can freeze-frame, slo-mo, or slo-mo backwards. You can be watching a TV show – live – and press PAUSE when the phone rings. Take your call, press PLAY, and you haven’t missed a thing. You can be watching the news – live – and if you aren’t sure whether the guy said, ‘Soviet Jewry’ or ‘Soviet Jewelry,’ you can press the instant-replay button as often as you want until you decide. Again, you don’t miss a thing. You are in control. All across America, people are having to watch this over and over again – Soviet Jewry . . . Soviet Jewelry – until you are ready to proceed. Tom Brokaw just has to keep doing it over and over again. Or at least I think that’s how it works. (Others believe that TiVo automatically records whatever you’re watching, and keeps recording even as you’re diddling around with instant replays and slo-mos and phone calls, so that when you resume it can just pick up where you left off.) You can tell it to record ‘The West Wing’ every Wednesday, ‘Meet the Press’ and ‘Sixty Minutes’ every Sunday, and ‘The Mole’ just this one time on Tuesday at 8PM on ABC because you’re an Anderson Cooper fan and you want to see if it’s any good. Plus every episode of the ‘The Sopranos’ and Larry King Live. You can transfer stuff you’ve recorded with TiVo onto your VCR. (Once your 30 hours of recording time is filled up – or 60 hours if you went nuts and bought the deluxe model – stuff begins to scroll off into oblivion.) If you were about to get a satellite anyway, you can get the TiVo model that doubles as a satellite receiver and maybe save a few bucks. You can record shows you never knew existed, like Jackass on MTV. Who says you can never recapture your adolescence? (Of course, you could do this with a regular VCR, or just watch it live – but you wouldn’t, would you?) You can press the green thumbs up button or the red thumbs down button as you are watching a live or recorded show to let TiVo know what you think of it. Based on what it learns about your preferences, TiVo will suggest and record stuff it thinks you might like . . . although it will always delete that stuff to make room, if need be, for something you actively instructed it to record. Things you can’t do: You cannot watch one thing live while it is recording something else. (You can watch something you’ve previously recorded while it records something new.) Solution: watch the live thing downstairs in the den. You cannot record two conflicting shows simultaneously. If you try to set it up to record something that runs from 8pm to 9pm on Showtime and something else that runs from 8:30 to 9pm on CNN, it will politely advise you of the problem and ask which of the two you want to do. You cannot channel-surf quite as fast as you used to. You can still do it. And there are some other pretty neat things you can do in terms of seeing what’s on (meanwhile, the show you’re watching remains on in the background). But with TiVo, there’s a slight delay in going from channel to channel. You cannot do much of anything unless TiVo makes a phone call once in a while to bring its program schedule up to date. In normal operation, it calls once a day, at whatever time you set – I chose 4:47am. It needs to be within 50 feet of a phone jack (it comes with a 50-foot cord), which it happily shares with your regular phone line without blocking any calls. Or you can just keep that 50-foot cord in a drawer and hook it up manually once or twice a week, using the ‘call now’ option. (This is the 21st Century Spoiled Rich Guy’s equivalent of ‘roughing it.’) Can you live without a TiVo? Why, of course you can! The question is: can you live without seeing ‘The West Wing’ every week. And ‘Jackass’ once in a while? Here, we can be less sure. To buy one, use qbsearch, type in tivo, select GoTo as the best engine for this kind of search, and then just e-shop til you e-drop. Or go to eBay. I own no stock in TiVo or Philips or Sony (which make TiVo), or in GE (which owns NBC which airs ‘The West Wing’). I am, from time to time, a jackass.
The A & P and the J January 31, 2001February 17, 2017 At the beginning of the month, I wrote: Are you old enough to remember ‘the A&P’? The Great Atlantic & Pacific Tea Company Inc., symbol GAP, runs hundreds of supermarkets under various monikers – including the tony Food Emporiums in New York. It’s a pathetic shrimp next to Amazon – it has a total market cap of about $266 million, down about 75% in the past year, to Amazon’s still hefty $5 billion or so. And it sells shrimp! The company’s ‘9.75% preferred J’ stock pays a preferred dividend of $2.34 a share and traded yesterday under $12. I had previously bought some for $10.50. If the company goes broke, you might lose everything. Otherwise, you get about 20% a year on your investment, plus the possibility of a double if the preferred were ever retired (the call price is $25). There are a lot of high-yield speculations like that these days (thanks to the estimable Joe Cherner for pointing this one out), which is why a lot of the smart money seems to be buying high-yield ‘junk bond’ funds and the like. A&P recently suspended the dividend on its common stock, but who knows? It might be able to keep paying the preferred dividend. Since then, this preferred stock (symbol: GAJ)has jumped to 18-and-a-fraction, closing yesterday at 17. Even at 17, that’s up more than 40% for the month – and it has a 58-cent quarterly dividend, payable to those who bought before January 12, en route, adding another 5% or so. I am beginning to feel pretty cocky about this, which is always a bad sign. It probably portends a house fire or some other awful thing. So if you did buy it at $12, sell it so I can know that you locked in your 50% or so in a month. Surely, my peace of mind should govern your investment strategy – no? No? Well, OK, then, if primitive superstition is not the right guide here, what is the sensible way to approach this? In my own case, I am holding on, for three reasons. They may or may not apply to you. I don’t want to sell the shares I bought in a taxable account, because I don’t want to give what would be about 40% of the gain to Uncle Sam. It’s a gamble to keep my chips on the table another 11 months . . . but the difference in tax rates – 40% now versus just 20% if I wait (and the possibility of continued fat dividends) – tilts the gamble, at least as I see it, in my favor. I don’t want to sell the shares I bought in my tax-sheltered retirement account, because – although there’d be no immediate tax on the gain – neither would there be tax on those outsized dividends, if they keep coming. Were it not for the risk of the investment, my retirement plan would clearly be a better place for this high-income investment. I foolishly bought so little GAJ that, really, the risk is not significant to me. If A&P should go bust and lack the money to pay the preferred shareholders a penny, let alone the $25 face value of the shares, my life would go on pretty much unaffected. Oh sure, I would feel stupid. I would feel angry for letting a bird in the hand slip off beyond the rainbow. But what else is new? Trust me: If I had a nickel for every dumb investment decision I’ve made, I’d be a rich man today. The logical way to look at this in Claudius’s day was to take the bird in the hand, disembowel it, and examine its entrails. This method, although gorier, actually scores approximately as high as modern Wall Street research in pegging when to buy or sell a stock. The decision with GAJ, like the decision on when to sell any stock, is basically two-fold: First, is how it fits into your overall plans. For example: Are you approaching a time, a year or three out, when you might actually have a serious need for the money? If so, sell. Second, if you didn’t already own it, would you buy the stock today? Tax considerations aside, holding GAJ that you bought for $12 when it’s now, say, $17 or $18, is like buying it for $17 or $18. If you had $1,700 or $1,800 in cash, and thousands upon thousands of investment alternatives, is GAJ the one you’d choose? If so, don’t sell! If you hold on, you’d still be getting a hoped-for $2.34 dividend – which is pretty great – but only so long as the Great Atlantic & Pacific Tea Company is able to make good its dividend (or, if it should fail, finds enough money in liquidation to make good the $25 face value of these shares). In liquidation, the word “preferred” makes you feel like one of those frequent fliers who get special treatment. Until you realize that there are gold members ahead of you, and platinum members, and executive platinum members – not to mention those one-in-a-million travelers with actual $1,774.25 first-class New York-Chicago tickets, who come ahead of everyone. In the case of a bankruptcy, these fliers are called, among others, “employees,” “creditors” (such as A&P’s suppliers), and “bondholders.” Assuming the $2.34 were assured, and assuming in your case that selling would net you, say, $15.50 after tax (depending on your tax bracket), then by selling you trade $2.34 a year for $15.50 in cash now. That works out to a 15% annual yield you are kissing good-bye ($2.34 divided by $15.50 equals 15%). But will A&P make it? Or have the funds, in liquidation, to pay off its preferred stockholders? Go down to your local A&P, if you can find one, buy a chicken, and study its entrails. Then decide. I hereby disclaim any further responsibility. You made 50%, and that’s the end of it, as far as I’m concerned. * As for the little basket of A-Much-Smarter-Person-Than-Me’s stock picks from last March 14 . . . that group is up about 55%. Not bad with the NASDAQ down nearly as much over the same time period. I disclaimed any further (non-existent) responsibility for these stocks months ago, once they’d climbed about 40%, although I said I planned to hold most of my own shares. And as for the August 22 stocks I suggested that one might buy with a five-year time horizon – a ragtag assemblage I foolishly cobbled together myself – they are down about 3%. But the night is young. Given my knack for this, by 2005 they could all be in the toilet. (If you’re keeping track of this little portfolio, note that holders of CMM received a distribution of preferred G shares that should be factored into your tally.)
Education vs. the Estate Tax January 30, 2001February 17, 2017 In case you don’t read one of the 62 newspapers that syndicates Matthew Miller’s column, here are excerpts from last week: The problem with Bush’s school plan is not its eensy-weensy voucher program, which, despite all the shouting, won’t affect more than a handful of families if enacted. No, the real problem is twofold. The first is that Bush devotes far fewer resources to his supposed “No. 1 priority” than to tax relief for the best-off Americans. The second is that Bush punts almost entirely on what he has rightly identified as the biggest challenge facing public (and especially poorer) schools: the need to recruit 2 million new teachers over the next decade. Based on campaign figures aides say he’ll track in his new proposals, here’s where things roughly stand. Bush wants new school spending of $10 billion a year. His tax cut for the wealthiest 1 percent of Americans will cost $36 billion a year. Dividing the tax cut by the school plan gives us an initial, “unadjusted” hypocrisy index of 3.6, which is impressive. But we can refine this further. After all, Bush might say that when it comes to schooling, money isn’t everything, and he’d be right. But how about when it comes to creating incentives for young Americans to enter a teaching profession where the starting salary now averages $26,000 and rises to only $40,000? Every free-market fan knows that you get what you pay for. Bush, for example, would never have put his talent to work in the baseball industry without the prospect of public stadium subsidies that could earn him millions. Similarly, when affluent Scarsdale, N.Y., pays teachers with a master’s degree and five years of teaching experience $60,000, and New York City pays her counterpart $38,000, is there really a question about where the top talent goes? If Bush is serious about his “solemn pledge … to build a single nation,” where the ambitions of poor Americans are not “limited by failing schools” and “the circumstances of their birth,” money must be part of the answer. He knows that poorer districts can’t find the cash on their own; they’re already too strapped to fix crumbling buildings. Let’s look at the numbers. Bush is adding $400 million a year to an existing pot of money for teacher training and recruiting, and an additional $300 million in tax breaks for school supplies that teachers pay for themselves. That comes to $235 for each of today’s 3 million teachers. Bush is also devoting $30 billion a year to abolishing the estate tax. Nearly half of the savings will go to 2,400 families. The savings per rich family is $6.2 million. Dividing the cash per rich family by the cash per teacher gives you a final hypocrisy index of 26,382 – meaning that Bush’s agenda is nearly 27,000 times better for heirs (not mentioned once in the inaugural address!) than for teachers – and, by implication, for poor school kids. [. . . It’s possible], of course, that this index doesn’t measure Bush’s hypocrisy but his detachment, meaning he is unaware of the stunning gap between his avowed priorities and his actual plans. While this ignorance would be troubling as we take our measure of the new President’s brain, it gives some hope regarding his politics, because it would mean Bush might yet be persuaded to make his deeds less a moral mockery of his words. The idea that the first lady, a former teacher, will urge young Americans to pursue a career in the classroom is terrific. But, as Bush himself argues, good intentions aren’t enough. Think of the hypocrisy index as a way to save our new President from “the soft bigotry of low expectations” that he deplores, or as the Oval Office equivalent of Bush’s call for performance measures in our schools. We know what’s in your heart, Mr. President. Now show us the money. Matthew Miller’s e-mail address is mattino@worldnet.att.net.
Denim . . . the Sequel January 29, 2001February 17, 2017 I had not planned to write further on my new shirts, but last night a billionaire sailed into town for dinner. This happens to me even less often than my finding $39 shirts for $12.99 at Walgreens (one of you wrote to say they would have been $55 shirts at the Gap! I love it!), so my point is not to show off, just to report the facts. Dinner. What to wear? This is a very old friend (I find it tough to make friends with billionaires after they become billionaires, hard though I try) – or, as they say, a ‘friend of long-standing,’ because he is not old old – and the dinner we had in mind could not have been more casual. I switched out of my New Balance 990s into my Rockports (casual, yes, but this was dinner, not lunch, and with a billionaire) and donned one of my new Walgreens shirts. Billionaire drives over, I hop in the car, we get to the place, it turns out not to have a liquor license but-you-can-bring-in-your-own-wine, we go around the corner to the liquor store, and Billionaire, who has long been amused by my frugality (but who had to admit this was not a bad looking shirt for $12.99), asks me what my top would be in a red wine. I wasn’t sure whether he meant my ‘top varietal’ or my ‘top price,’ but knowing almost nothing about wine (Merlot if it’s red, Chablis if it’s white, end of story) I said $12. Because really, you can always get a good bottle of red wine at a liquor store for $12 or less. It is just the way the world works. Billionaire laughed and headed straight for the bottles that were locked up in a special case. One of them was $339. One of them was $1,400. ‘Billionaire,’ I said, ‘if you spend more than $100 on a bottle of wine, I will kill you.’ ‘Why is that?’ he asked, examining a bottle from the days of Louis XIV. ‘Because,’ I said, ‘there are children starving in China.’ I think he was perusing the trophy case mainly to get my goat. He left with a simple $110 bottle of wine and a $1.07 corkscrew and we walked back to the casual little restaurant and sat down. I ordered a diet Coke. To be sociable, and to see what $110 wine tasted like (it would have been marked up to $300 on a restaurant menu), I let the waiter pour me half a glass. And now here’s where the camera work gets tricky, but somehow, after just a couple of minutes of animated conversation, and a sip or two of the wine (woody, with a note of insouciant extravagance), Billionaire must have pushed forward a menu which bumped into a magazine that scrunched into and all but knocked over my wine glass. I managed to catch it from crashing to the floor, but not before most of the contents had wound up – $110 red wine! – on my brand new, much bragged about $12.99 Walgreens shirt. I’m not sure what the point of this story is, other than perhaps to let you know that red wine will come out if you wash it promptly. But, oh, wait – I forgot the last little piece of this. So we’re now finished with dinner (and I have reluctantly decided not to try to take home the wine that remains, but only because we couldn’t find the cork – ‘you mean you’re just going to leave it here?’ I marvel), and begin walking back toward the car, and I see The Gap (the gap between Gaps in many cities having become barely a block or two, it’s hard to walk very far and not see one), and – because my Gap ‘clean cut’ khakis had been bespotted in the accident as well – I went in to get a replacement pair. And as I was signing the credit card slip, I said to my sales professional: ‘Now, you are a fashion professional, and I need your honest, expert opinion.’ He looked a little surprised, but willing. ‘Look at this shirt,’ I said, pointing to myself. ‘Could this be a Gap denim shirt? Assuming it didn’t have all these red wine stains on it?’ His brow furrowed in half a moment’s appraisal. ‘Sure,’ he said. ‘Walgreens,’ I smiled, turning triumphantly and marching out the door.