Don’t Shoot! I’m Just Trying To Sell You A Rotten Life Insurance Policy January 16, 2013 TRYING TO FINANCE COLLEGE COSTS? Beware! My pal Zac Bissonnette, author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents, commends this good reporting from Money Magazine: . . . For fees typically ranging from $800 to $4,000, these advisers — who represent a niche within the college planning universe — promise to help families save for college, pick good schools, and maximize aid. The product many are promoting: life insurance. They tout guaranteed returns and point out that a loophole makes life insurance one of the few savings options that won’t hurt a student’s chances for need-based aid. That’s mighty attractive to parents disappointed in 529 returns and frustrated by colleges’ miserly aid packages. Yet a four-month investigation by MONEY has found that, in reality, the people most likely to profit from this strategy are the planners themselves — most of them insurance agents with flimsy college-planning credentials and, often, little understanding of financial aid. . . . GUNS AND BUTTER Stephen G.: “Hilarious column yesterday, Andy [suggesting we borrow the money to employ people to revitalize our infrastructure] — a great satire from the guy who wrote The Only Guide. Did you fall on your head on that ‘Ultra Liberal Groupthink Cruise’ and forget what you wrote about living within your means? At least you’re safer in NY now with Emperor Cuomo. Today Obama may give the final blow to the Bill of Rights, we’ll see. I note that a Congressman will try impeachment, should have happened for NDAA but I’ll take it for this. (‘After a shooting spree, they always want to take the guns away from the people who didn’t do it.’ – William S. Burroughs)” ☞ Thanks, Stephen. So a family should never take out a mortgage to buy its first home? That’s huge deficit spending. Never put office supplies on a credit card to start a small business? Never take out student loans to get an education? Never borrow to fix the car they need to get to work? Some things are perfectly reasonable to borrow for, especially when the 10-year interest rate is essentially zero. You’d really rather let the country crumble than borrow to put people back to work strengthening it? Continue to hemorrhage from energy inefficiency than spend what it takes to shape up? This is not you at your most far-sighted. Imagine if someone had said in 1943 that we shouldn’t build so many ships and planes and send so many troops abroad because we had to borrow (and, by the way, tax) massively to do it. Treason! We had to win that war. (And then, over 35 years — until Reagan reversed the happy trend — we gradually shrank our national debt ratio back to its pre-war, pre-Depression level.) Well, we have to win this war, too — the war for a modern, efficient, healthy, competitive society — and, as I’ve suggested so many times before, the great thing about this war is that instead of borrowing all that money to blow things up, we’ll be borrowing to build things that last 100 years. And lowering our expenditures on unemployment insurance and food stamps at the same time. So that’s part one. As to guns, I’m not sure I’d look to William Burroughs for the most thoughtful public policy. Is it your view that “the right of citizens to buy Stinger missiles without a background check shall not be abridged?” I think you’d agree we do have to regulate the bearing of those arms, useful though they would be in repelling the gunship attacks of a tyrannical government. So where do you draw the line? Howitzers? Machine guns? Is the line perfectly drawn today, with just the right safeguards? When Congress passed the assault weapons ban in 1994 — by a simple voice vote in the House and a bipartisan 61-38 vote in the Senate — did you call for impeachment? And ARE background checks okay? If so, why NOT close the glaring, gaping, gun show loophole?
No? January 15, 2013January 14, 2013 [Today is the deadline to send in your fourth quarterly estimated tax payment (if money is due). Here are the forms and instructions. You don’t have to file it if you file your complete return by January 31.] It’s so obvious. We have a $2 trillion infrastructure deficit — our country is falling apart and falling behind. We have millions of unemployed who’d like nothing better than to throw themselves into the task of modernizing our infrastructure (and start paying taxes again instead of collecting unemployment and food stamps). We have a zero cost of borrowing the money we’d need to employ them. The result of borrowing that money, employing them, and rejuvenating our infrastructure would be an end to our economic doldrums, a more secure, efficient, competitive economy, and a lower deficit. So? Shouldn’t we just do it? The undertaking would not be one of “big government.” Contracts would be let for competitive bid by private enterprise, mainly by the states. (How else to modernize 35,000 schools, repair 185,000 bridges, make sound countless sewage systems?) And tax incentives would drive massive efforts to weatherize homes — the ultimate small-business opportunity — smarten our electric grid, and the like. You think we can’t afford to modernize our infrastructure and become energy efficient? Really? Don’t you see we can’t afford not to? Why is this controversial?
The Road Ahead January 14, 2013January 13, 2013 FUTURISTIC HIGHWAYS Jeff: “Behold this soon-to-open Dutch road with 21st Century features.” ☞ Cool. SELF-DRIVING TRUCKS From Shelly Palmer’s blog: Google is road testing its self-driving car. Now, Audi and maybe Lexus/Toyota will follow. If this turns out to be true, we will see a significant number of socioeconomic changes. Why own a car when you can just tap an app and have a car drive itself over and pick you up? But there’s more — The idea of aerodynamic trucks that are 40% more fuel-efficient and run 24/7 without union drivers will dramatically change the prices of goods that are delivered over the Interstate Highway system. I could go on forever, but you can too. Self-driving vehicles will change everything. One more reason we are going to have to figure out how to “share the wealth.” All those cab and bus and truck drivers? One day unemployed? In 1870, 70% of us were engaged in agriculture. Today, more like 2%. The number of people required to provide essentials — food, shelter, clothing, transport, energy, communications, education* — keeps shrinking. Done right, that should allow more and more of us to experience more leisure (is it really so awful the French get six weeks off?), more and more convenience and security, more non-essentials, shorter waits for the nurse when you press the button by your hospital bed. But not, I think, if we insist, Ayn Rand-like, that only the super-talented or the super-great-looking or those who own the machinery get the lion’s share of the rewards . . . while your average Jane or Joe, without benefit of minimum wage or collective bargaining or much in the way of wealth-spreading and redistribution — all anathema to some — deserve little more than subsistence. And our contempt. I have every expectation we’ll make progress toward working it out; and no expectation that I have all the answers. But to those who think raw capitalism with the least possible regulation and the smallest possible government, funded by the lowest possible taxes, are the path to full-employment and the most desirable society . . . I’d ask, what possible evidence do you have? HERE COMES THE SUN Because, really, when you look at these folks in a Spanish unemployment office, and watch what unfolds, is it your sense that they are lazy moochers on society; or that the Spanish, along with most of the rest of us, have simply failed to organize things as well as they might have? *Remember, Harvard may soon have 10 million students and no larger faculty.
Fix the Filibuster January 11, 2013 FILIBUSTER Don’t you think a Senator should at least have to filibuster if he wants to filibuster? What kind of movie could Frank Capra have made if all Jimmy Stewart had had to do was inform the Majority Leader that he was blocking the bill. And then gone off to take a nap. Here is the call to action. This is such a big deal. And we have just a few days to get it fixed. After that, the Senate rules can’t be changed for another two years. MONEY Charley Barsotti is one of my very favorite New Yorker cartoonists. I’ll give you $1,000 if you can guess — unless you already know — where he lives. No Googling. (Hint: he is . . . a New Yorker cartoonist.) Give up? Kansas! But I digress. The point is: I have somehow neglected to link you to this cartoon. It’s been sitting in my “to-do” pile for nearly four years. It’s the one where God and St. Peter, or two angels or — well, I don’t know who it is, but two bearded old white guys (so it’s probably not God) . . . on a thundercloud . . . and one is holding a big bag of money over his head, about to throw it Earthward, saying with a grin to his skeptical chum, “You’ll see, this is going to cause real trouble.” GOOD NEWS RAZORS Chris Anderson: “Wednesday, you suggested that we ‘invest in things that will last 100 years rather than things that will blow up.’ Yesterday, you mention problems with your iPhones, as well as the idea of doing with half…or less…or even none! Appliances and tools used to be made to last decades, if not generations. I have a perfectly functional toaster oven from the early 70s which works far better than some of the new ones made today, and I know someone who is still using a Hoover made in the 1940s. Several years ago, I bought a new toaster because of an excellent store rebate. It did not work as well as my ancient unit *and* failed within six months. Now, after only about five years, the replacement is beginning to fail. While my ancient toaster doesn’t have timers or bells and my friend’s vacuum doesn’t have the filtration level or visually stimulating features of modern plastic high carbon-footprint Chinese-made disposable landfillers, both “obsolete” appliances are adequate for our needs and, if parts were still available, could function well for another two or three generations. Sadly, the Chinese company that owns Hoover no longer makes or sells repair parts for most of their products more than a few years old, and I am sure GE (or whatever company owns the name) wouldn’t recognize the toaster. Other brands have better parts availability, while some simply do not sell parts at all, apparently expecting buyers to throw their broken products away and buy new every few years. I suppose that’s fine for those who are so rich they can just buy a new one, as I heard one well-known daytime radio talk show host recommend (I believe the statement was ‘don’t be afraid to try to fix your iPad; if you break it, just buy another one’). It must be nice to have enough money that $400-500 can be simply thrown away for the pleasure of the latest electronic gadget. But I fail to see how being able to go out and buy whatever we want, whenever we want, truly allows us to ‘live better.'” Jack Nettleton: “You use disposable razors?! You can still buy old-fashioned double edge razor blades and avoid the wasted plastic.” ☞ Well, this is embarrassing. Live long enough, and you’ll have written on just about every topic — even the irresponsibility of disposable razors. Here was my deeply sarcastic 1976 review of Gillette’s disposable debut. (When the table of contents comes up, click on Page 55.) In my own lame defense, 36 years later, I’d note that I go weeks and weeks with the same razor, so maybe use 8 a year, for a total incremental throwaway weight under 3 ounces. Still . . . PINBALL I am — forgive my honesty — a pinball wizard. A Bally table king. Not maybe what I once was, and maybe only in my own mind; but I do hold the 32,822,000 record score on the Ripley’s Believe It Or Not machine I keep in the guest room (which takes quarters, by the way, which seems to surprise some of my guests, but how do they think I keep the lights on?). So thanks to one of you for forwarding this look at the current state of play as the industry hangs on by a thread. The Wizard of Oz just may save the day. Now: go do something about the filibuster.
Again No Column January 10, 2013 Even listening to it at double-speed, Walter Isaacson’s Steve Jobs biography ate up my whole day — and I’m barely up to 1985. It’s so interesting! Not least because I’m listening to it on a Jobs-inspired iPhone 5 as I walk to and from the Jobs-inspired Apple store to swap it out for one that won’t reset itself every ten minutes or so. (Only to find that the swapped-out phone does this, too, so it must be a software problem.) I bought some AAPL at $512 the other day, down from $700 — but sold it yesterday at $522 because I’m wondering why I’ve had so many problems with my (otherwise miraculous) iPhone 5. Okay, iPhones 5 — plural — one AT&T, one Verizon — my excuse being that, hey, look, I don’t own a car and my Swatch cost $50, so sue me: I own two iPhones. So no column today. But I reorganized one of my closets and got 143 points with CHALKIER, playing off the K my words-with-friend had put down, and getting a triple double-word score and using all letters. And I decided that most of us can use basically just half what we use today — half the size toothpaste dab, half the amount of shaving cream (if any at all — it’s not a law, you know: a disposable razor cuts most stubble just fine without shaving cream, if done right out of the shower) — half as much detergent, half as many potato chips (again if any at all), half as many blog entries. If this works for you, you’ve just cut the cost of such items in half. And are living lighter on the land, for which Mother Nature thanks you. So: no column again today.
Every Warship That Is Launched . . . January 9, 2013 GUNS Gabby Giffords, the terrific Tucson Congresswoman (and gun owner) who got shot in the head by a lunatic, and her terrific astronaut husband Mark Kelly (also a gun owner), have launched Americans for Responsible Solutions to help blunt the power of the NRA — most of whose members agree its positions are too extreme. If you think you might want to help, click the link to learn more. BONDS After last week’s spectre of a bond bubble, several of you asked where you might put your bond money instead. I mentioned two timber stocks (timber grows), I mentioned a dredger (silt accumulates). Some master limited partnerships I own for the long-term: PAA and OKS, yielding around 4.7%, MWE yielding about 6%, PVR and TOO at about 7.5%, and CMLP at 9% — all partly tax-deferred. Don’t put all your eggs in this basket; but a basket to consider for a couple of them. HAGEL We should wait for the hearings, of course, but c’mon. A lot has changed since Chuck Hagel compiled his dismal record on LGBT equality. I have little doubt that, if confirmed, he would — to borrow the phrase of the Marines — “step out smartly” to treat LGBT service members fairly and with respect. So the question is: how would he do at the rest of the job, and in helping to make the Department more efficient, squeezing the same capabilities out of a meaningfully trimmed budget? With that budget so huge, what an opportunity! Because, as President Eisenhower famously noted, “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed . . .” To the extent it can be done without jeopardizing our security, let’s invest in things that will last 100 years rather than things that will blow up. PFLAG Jeanne Manford died yesterday, at 92. Mother to a gay activist, she founded Parents and Friends of Lesbians and Gays in 1972. Listen to the President tell that story.
Please Don’t Feed The Goat But Try Our Espresso January 7, 2013March 27, 2017 COFFEE TOFFEE Just when you had despaired that The Frieze would never again have their Coffee Toffee Crunch — not to say that the Lychee sorbet, almost always in stock, is anything short of life-changing, either, but it’s not Coffee Toffee Crunch — you return one last time, and there, at last . . . they still don’t have it (bet you didn’t see that cone coming) and so, largely drained of your will to live, you half-heartedly try a taste of the Banana Vanilla Wafer . . . nah . . . and then a taste of the Grapenuts ‘N’ Raisin (really?) . . . and — I did not see this coming — your life is changed forever. THIS IS THE BEST ICE CREAM EVER! Grapenuts ‘N’ Raisins. Proof that’s it’s darkest before the dawn. That’s item number one, for South Floridians. (Unless they start offering franchises to expand beyond their sole Miami Beach location, in which case you should quit your job, move someplace sunny, buy a pair of flip-flops, and open one.) Item number two is for New Yorkers: COFFEE AND A GOAT My friend Victor is friends with Anthony and Aurora who are yet to buy a goat, which I find odd, because they operate their Fair Folks Cafe under the corporate name Fair Folks & a Goat. I want to see the goat. Even a fake goat. Were he tied up outside the place with a dish of water under a sign like, PLEASE DON’T FEED THE GOAT — BUT TRY OUR ESPRESSO, I don’t see how folks could resist. Still, even goatless they seem to be doing fine, offering all the coffee you can drink with a $25/month membership. Here‘s how the place looks (thank you, New York Times) and here‘s what they’re saying over at Yelp, in case you’re a New Yorker who wants a satellite home-base in Greenwich Village. Item number three is for anyone with an appreciation of the truly daft: COFFEE AND A SMOKE When it comes to smoking, Democrats are all about trying to discourage it (smoking is the country’s leading cause of preventable death), Republicans are all about helping the tobacco industry as best they can. Fair enough. Well, it now seems, according to investigative work performed by right-leaning groups, that “top Senate Democrats who have pushed policies that fund anti-tobacco measures have money invested in pharmaceutical companies that manufacture tobacco cessation products such as Nicorette.” The concern is that this is a form of insider trading. If people people buy Nicorette gum as a result of Senate Democrats’ anti-smoking efforts, Senators with knowledge of this (whether they are pro- or anti-tobacco, but why quibble) will have information that could lead them (or anyone else, but, again, why quibble) to profit. Over the past four years as he repeatedly pressed for federal funding to stop smoking, [Iowa Democratic Senator Tom] Harkin has owned between $50,001 and $100,000 in stock in health products maker Johnson & Johnson, which makes the popular anti-smoking product Nicorette. . . . He’s hardly alone. A half-dozen senators who have been among the most vocal advocates for federal funding for smoking cessation — including Majority Leader Harry Reid, Nevada Democrat, and Majority Whip Richard J. Durbin of Illinois — have direct or indirect investments in companies that make anti-tobacco products. Shocking, no? J&J makes a profit of about $10 billion a year from the sale of these 100 brands. If whatever the Senate does somehow doubles its profit from Nicorette, J&J’s earnings might rise by 1%. That could send J&J shares themselves up 1%. Which could augment Tom Harken’s net worth, if he has $75,000 worth of J&J stock, by $750. According to this, the Senator’s net worth in 2010 was $16 million, thus probably more like $20 million today, so that $750 would hike it by 0.00375 percent. Which is nearly four-thousandths of a percent. Our friends on the right are not concerned by climate change. But this? This is headline-worthy. MONEY I know. I owe you responses from last week.
New U? January 4, 2013January 4, 2013 I’m basically taking the day off — so many good movies to see (if you liked Brad Pitt’s “Inglourious Basterds,” don’t miss Jamie Foxx’s “Django “– and, for that matter, if you liked “Lincoln,” and can handle violence, don’t miss “Django” either . . . they make remarkable companion pieces . . . and if you didn’t like “Lincoln,” or still haven’t seen it, then — seriously — what is wrong with you?) — but hope to tackle a couple of questions from yesterday’s Stocks and Foreplay post Monday. In the meantime, imagine a world of free-ish higher education — and Harvard with an enrollment of 10 million. This has a load of implications. (One use for all those shuttered universities: Retirement communities!) The End of the University as We Know It, By Nathan Harden . . . The most important part of the college bubble story—the one we will soon be hearing much more about—concerns the impending financial collapse of numerous private colleges and universities and the likely shrinkage of many public ones. And when that bubble bursts, it will end a system of higher education that, for all of its history, has been steeped in a culture of exclusivity. Then we’ll see the birth of something entirely new as we accept one central and unavoidable fact: The college classroom is about to go virtual. . . .
Stocks, Foreplay, and Caulk January 3, 2013December 27, 2016 Okay, okay, OKAY — good grief! — let’s talk a little about money. (The first few years, this site was devoted almost entirely to money — but how many times can we discuss whether it makes sense to pay off your mortgage? If you care about money, just read the book, for crying out loud. It’s only ten bucks. Or save fifty cents and read it right now.) Here are my thoughts on money: 1. Live beneath your means. That sets you up for success. It also allows you to pace yourself because — forgive me if you’ve heard me say this before — a luxury once sampled becomes a necessity. How can you live happily on the second floor after you’ve had an apartment with a view? Happiness has more to do with direction than amount: you want to live a little better each year. How tragic to be 24-years-old with a Bang & Olufsen stereo (I’m still about 20 years away from that) and a hot Mercedes. Pace yourself! “Tease yourself with anticipation. Ease the fingers of your aspiration up the inner thigh of your cupidity. Tickle your fancy. Of course money buys happiness!” — I concluded a Playboy column decades ago — “but both will last longer if you remember the importance of foreplay.” 2. Corollary: live lightly on the planet. That sets us all up for success. Or at least for better odds. The most thrilling thing I’ve done in recent memory was replacing four 100-watt recessed kitchen floods with four dimmable 6-watt LEDs that have been serving just as well. A 94% reduction in energy at no sacrifice whatever. (Yes, the bulbs are expensive; but they are an investment, expected to return many times their cost — a return better than I’d get from buying stock in an electric company. And tax-free. 3. Avoid bubbles. Yes, it’s unwise to try to “time the market.” What do we know that would give us an edge? But every so often an asset class is so wildly overpriced, like tulip bulbs in 17th Century Holland or real estate in 21st Century America, that it is best avoided. The house next to mine that sold for $105,000 in 1998 sold for $740,000 in 2005. Hello. The dot.com bubble of 1999-2000 also springs to mind. Today’s equivalent are Treasury bonds. The price you have to pay for each dollar of interest is amazingly high. Even long-term TIPS are now priced so high it would make sense to sell any you may still own. (When first suggested here, they yielded a ridiculously good 4.25% above inflation. Today, depending on their maturity, they yield either nothing above inflation — or, because they are priced so high, carry a small negative yield). I wouldn’t hold long-term municipal bonds either . . . not so much because I fear default (although there’s that), but because when interest rates finally take off again — which sooner or later, without warning, they may fairly dramatically do — the price you can get for selling them will plunge. And if you smugly note that, by holding them to maturity, you will come out just fine with the full promised $1,000 per bond, I remind you there’s a chance a tube of toothpaste will then cost $1,000. 4. Avoid transaction costs. Mutual fund fees, annuity fees, advisory fees, “full-service” brokerage fees, taxes — as argued more fully in the only investment guide you’ll ever need (ever!), it’s easy to find oneself betting on a horse with a 400-pound jockey, even as equally fit equines support 18-pound jockeys (see the section on “Willow” in my book, where I had a spectacular success at the track). 5. Read #4 again. 6. After you’ve covered all the basics — paid off your credit card debt, secured adequate term life insurance (if you need it), saved up an ample rainy-day fund (in the bank) — and after you’ve picked the really low-hanging fruit (like investing in LEDs and caulking to cut your utility bills by $400 a year, say, at a cost of $1,000, say, for a 40% annual return on your investment, tax-free) — diversify. Some real estate (your home, for starters), some stocks (via index funds), some gold (GLD), maybe a little timber (via PCL or WY). This is a longer discussion, of course — one would need to write a whole book to do it justice (go ahead: read the book) but that’s the overview. One strategy I like to suggest for the money you want in the stock market is to dollar-cost average most of it into index funds or ETFs (but the right kind, which is to say the equally-weighted or fundamentally-weighted ones, not the market-weighted ones) . . . but to set aside some modest portion as “play money” to be spread among perhaps half a dozen individual securities, many of them quite speculative, for two reasons. First, you’re human: this can be exciting, fulfilling a need that might otherwise be met gambling on something where the odds are much worse. Second, you get to control the tax consequences. If you use your losers to lower your taxable income and your long-term winners either to reap lightly-taxed capital gains or to fund the charitable giving you would have been doing anyway, you can come out ahead even if you only break even. Of course, you could also do worse. You could lose money. But you also might do better. Which brings me to a few updates. Starting with our dredging stock, GLDD, which rests on a premise of sediment. Silt accumulates. Yesterday, the company made a potentially smart acquisition — what? you don’t read Dredging Today? — sending its stock up to $9.50, quadruple the best price I suggested it at, although for much of mine I paid more like $5 and $6 a share. It remains a core holding for me. Then there was the news yesterday on NPSP, suggested at $6.65 two years ago, $9.15 at yesterday’s close, after which some news was announced. Guru: “The great news for investors in NPSP is that they have priced Gattex at $295,000 and should realize at least $236,000 per patient per year, they have identified at least 1,000 individuals that are immediate candidates, and believe there are at least 3,000 in the US. This price is about 3 x what the analysts had been estimating and will greatly boost their profit outlooks. Models are being updated as we speak. Based on current estimates I simply do not see how this won’t be a 30 stock in two years, 50 in three years.” And I don’t see who can afford, or what health care system can afford, a $20,000-a-month drug. But I’m glad for the 1,000+ people who may be getting it, and hopeful the stock does have more room on the upside. We have lots of stocks it’s a good thing you bought only with money you could truly afford to lose — what a marvelous job they’ve done lowering our taxable income. But we have a few that have done rather well; and I continue to live in hope for quite a few others. One of you has put in a ton of work building a spreadsheet to try to quantify the “performance” of this site over the past 16 years. He is now waiting on me to supply some of the information on the more obscure recommendations whose outcomes he can’t assess. That, too, is a lot of work, so I’m not sure when it may all get done. And, of course, “past performance,” even if it turns out to have been positive, “is no guarantee of future results.” But I do hope to get around to it. In the meantime, caulk all the drafty places. Best investment you can make. And tax-free.