Author: A.T.

From the estimable Dorothy Mallonee:

My husband, Bill, works for a company that sells solutions to Y2K problems, so I am familiar with some of the issues, and have a couple comments.

First, Y2K is so big and scary that companies are in absolute panics. Some of them are so overwhelmed that they will listen to anyone, buy anything, and pay any amount of money to someone who promises to fix their problems. I have heard about companies that will fix your code for, say, $1.50 per line; some organizations have BILLIONS of lines of code. There’s lots of opportunity out there for Y2K charlatans; we should not suspend common sense when trying to solve the problem.

Second, Bill agrees with today’s correspondent that ’98 and ’99 will see the beginning of some big troubles. He suggests that, starting TODAY, your readers keep every scrap of paper dealing with financial transactions: statements, canceled checks, buy/sell confirmations.

Third, don’t be too confident that, because people know about the problem, they have it in hand. I heard a few weeks ago that some federal regulatory body fined some bank because it had not even started to deal with its Y2K issues.

And from the equally estimable Dan Hachigian (though how does one estimate these things, anyway?):

The most astounding thing about the Y2K bug is that we haven’t learned anything from it. Our children’s children or perhaps one or two generations further out are going to face a crisis that makes the Y2K problem look trivial. I refer here to the “social security number bug” about which I haven’t heard anybody else saying a thing.

Essentially the problem is that social security numbers are “hard coded” to be nine digits long. Virtually every program that uniquely identifies individuals in the US makes use of this fact. Hence virtually all of these programs limit themselves to 1 billion unique id’s. Imagine the scenario that US population doubles every 60 years. That gives us less than 120 years until the name space is not large enough to accommodate a unique id per person. Recoding this field is going to be several orders of magnitude more work than Y2K.

Note the second poor assumption here, that SS #’s can be recycled, which to my knowledge is not currently done. Every year we retire something like 1/75th of the population’s id’s. We can buy some extra time by recycling them, but it will be at the expense of potentially getting ourselves confused with dead people. On the other hand, maybe it wouldn’t be so bad to end up with Bill Gates pension benefits! But, of course, I’d hate to end up with the id # of a wanted criminal!

Well, I guess it’s kind of like the environmental problem, the energy crisis, or the social security cash flow question. Most of us probably won’t be alive when it hits the fan. Wouldn’t it be astounding if the real crisis in social security isn’t running out of money but rather running out of id numbers?

Reason enough to join ZPG! Well, not really. This is only slightly less worrisome to me (and I suspect to Dan, whose tongue was poking around his cheek) than this one, from the estimable Monty Goolsby. I think even I can solve this one:

So you think the Year 2000 problem is bad, huh. Just wait ’til 2100. Most computer programmers I know determine a leap year by dividing the year by 4 and checking for a remainder of 0. If it is 0 they assume that it’s a leap year.

But 2100 isn’t a leap year and is evenly divisible by 4.

The rule for determining leap year is: Every fourth year is a leap year except that every hundredth year is not except that every four hundredth year is. Whew.

So, the year 2000 will be a leap year and 2100 will not. On March 1, 2100 the whole world will be one day later than the computers think it is. This is going to be so much fun, I think I’ll have a party. Of course, if all the enterprises begin now and fix this problem on their legacy systems while they’re working on Y2K, then their synergy will avoid a paradigm that they won’t like.

Again, we have to assume Monty’s tongue is in his cheek. But apart from the near certainty that technology will have advanced to the point that problems like this have become trivial, there’s this: the world could simply agree to make 2100 a leap year.

(But wait: maybe Monty’s right. What about the legacy software that had already been designed to do this right? Then it would be goofy. Still, I have to think that getting the date wrong by a day will be less catastrophic than getting it wrong by 100 years — the current problem.)

Tomorrow: A (not so) Cheery Year 2000 War Story from S. McGrath

IRA ROTH . . .

From Glenn Doherty: “I’ve been preparing to open an IRA, though I have also been taking full advantage of our company 401K. From what I’ve read of the pros and cons between the Roth and traditional IRA, a person in my position would be better off opening a Roth. What I was thinking of doing was to open a traditional IRA as well, since a portion of it — the standard deduction and personal exemption — will remain tax-free. So when I retire I would take just enough out of the traditional IRA to use up the deduction and exemption and then take the rest of any needed funds out of my Roth. Is this logic flawed?”

You’re young. Who has a clue what the tax system will be when you retire? What if the income tax is replaced with a VAT? Won’t Roth folk feel silly then. (They will have forgone tax deductions now to avoid paying income tax no one has to pay after all!) Not that this is likely. But the point is: who knows? The main thing is just to fund one or the other. Since the 401(k) will provide taxable funds, why not “diversify” with a Roth IRA?

This is especially true if you’re in a relatively low tax bracket, and would be a complete no-brainer if, being covered by a plan at work, your contribution to a traditional IRA were not deductible.

The Roth IRA will also prove to entail less paperwork and be eminently more flexible at withdrawal. Opening both a Roth and a traditional IRA is more work, and income you receive from the 401(k), not to mention Social Security and/or outside investments, is likely to use up the standard deduction and personal exemption anyway.

INFLATION FROTH . . .

More from Glenn: “I always hear the phrase adjusted for inflation, as in my 15% gain was only 12% after it was adjusted for inflation. Is it only me or does this inflation number seem out of touch with reality? The number is derived from a consumer price index of things some of which I never buy; others bought at rates I never pay. I really believe a lot of things have been going down in price because of improved efficiencies in the marketplace. New distribution channels like the Internet have brought down prices for those of us that know how to look for them. Which brings me to a concept which I think more than offsets this thing called inflation. I like to think of it as a personal rate of becoming a more efficient consumer. Every year I become a better consumer because of increased knowledge of value and where to find it. From new distribution channels to better ways to buy, like bulk, each year I think my dollar goes farther, and thus makes me wonder if inflation is real or has any real meaning.”

As amazed as I am that scientists are able to measure changes in “world temperature” over the century within a fraction of a degree — how can they possibly do that? — so you have put your finger on at least some of the difficulties in accurately measuring inflation. Another would be the difficulty in measuring the value of improvements. A car may cost 3% more this year than last, but what if it’s safer? Or more comfortable? Or gets an extra mile to the gallon?

I do think the government should adopt recommendations for a better measure that would have cut the CPI by about 1% over the last many years and might cut it about that much going forward.

But beware of confusing your own CPI with a global statistic. The fact that you become a smarter shopper each year does not mean that the cost of the items you shop for are falling. You might also be spending less on gas each year, as you learn to inflate your tires for better fuel efficiency or drive with fewer starts and stops (lift your foot from the gas pedal well in advance of the light . . . glide . . . no need to brake . . . the light turns green . . . now accelerate from 15 mph instead of from zero). But does that mean the price of gasoline has dropped?

So where are we now? We are where we always are: delicately balanced on the edge between greed and fear, between great prospects for the future and the possibility of grave disaster, between risk and reward.

Here are some of the most important factors at play:

The Positives

1. Peace. With our military budget cut from about 6% of GDP to 3%, our economy suffers that much less drag. Relatively speaking, directing our resources to pay soldiers or to blow up targets in training missions — while obviously important — adds less to economic progress than directing those resources to industry or education.

2. Technology. The pieces of the puzzle are fitting together faster and faster, with simply dazzling results. Things barely imagined two decades ago are routine, as we take three-ounce phones from our pockets and all but instantly reach the ear we seek 12,000 miles away. Things that seemed impossible two decades ago are now around the corner — cars that routinely got 12 miles to the gallon in 1972, or 25 miles to the gallon in 1992, could get 80 miles to the gallon in 2002. A quantum leap in efficiency.

3. Free Markets and Trade. NAFTA, GATT — the world has been moving toward freer trade and toward market-based economies. Russia may have come out of its seven-year economic collapse as the seeds of capitalism have taken root. Even Africa may be stirring. This is good for world economic growth and also for keeping U.S. inflation low.

4. Demographics. We baby boomers are saving like mad for retirement. And the younger generation, realizing that Social Security won’t be enough to provide a comfortable retirement, are funding their 401(k)s as well. Month after month, new money pours into stocks, driving their prices higher, with no letup in sight.

The Negatives

1. War. One way or another, the Iraqi crisis will pass. But one can envision a scenario under which we turn the next generation of Iraqis into bereaved fanatics, each of whose mission it becomes to go abroad with a small aerosol can.

2. Technology. What if the apocalypse is brought not by four horsemen but rather by this preposterously simple, silly technological glitch — the Year 2000 problem? Wouldn’t that be ironic? Most businesses and government agencies may have perfectly patched or replaced their “legacy” software by then. But in a world so interconnected, even a small number of problems could have ripples. Or what if, instead of aerosol cans, those Iraqis who’d seen their loved ones killed by our bombs took up their computer keyboards instead, devoting their lives to hacking into and destroying confidence in our computer networks? I’m not remotely predicting any of this. But the financial panics of old — the bank runs, and such — were always paper-and-pencil based. What would our first true high-tech panic look like? How quickly might it spread?

3. Protectionism. What if Congress’s denial of “fast-track” authority to President Clinton a few months ago proved to be the peak of the free trade cycle? What if the problems in Asia led to beggar-thy-neighbor competitive devaluations? What if that made the price of Japanese cars so cheap Detroit had to call for protectionist quotas? And slash its dividends and throw a significant chunk of its people back onto the unemployment line?

4. Demographics. As Japan and America age, the ratio of strong young workers to elderly retirees steadily shrinks. What happens to the stock market when, some hoping to “die broke” and others having no choice, we stop piling money into the stock market and begin piling it out?

#

My own view of the future is far more positive than negative. But that doesn’t mean, with stocks at record levels, we have nothing to fear.

BUFFETT AND SILVER

“What should you do if you are worth nearly $40 Billion? Maybe #6 on Mr. Buffett’s list was to buy a few million bags of silver dimes. Comments?” — J.B.

Let’s not kid ourselves that Warren’s not in the enviable position of being able to move markets — and knowing in advance which way he will move them, which gives him (an entirely legal) edge.

Sounds as if his analysis of the supply/demand for the commodity itself showed it to be a good bet. So he got silver’s value as an inflation hedge for free.

DIAMONDS AND SPIDERS

“How about discussing the advantages and disadvantages of buying diamonds and spiders (DIA and SPY) as opposed to buying index mutual funds? I am still a little confused about this.” — Chris

These two derivatives — baskets of the Dow stocks and the S&P stocks that trade just as if they were themselves stocks — are very convenient, with tiny transaction costs, and thus may even beat out index funds (if you already have a deep-discount brokerage account through which to buy them), though at some level you wind up splitting hairs; i.e. both are very good. The question with both is whether the Dow and even the S&P have gotten ahead of the smaller stocks. (That’s the question; I don’t have the answer, though I don’t feel the Dow is cheap here.) If you think so, you may want to explore an even broader index fund.

CROATIA

While I laud the humor in your recent column, keep in mind that Croatia and the current Yugoslavia are peaceful and have not been involved in the war in Bosnia. Incidentally, most Bosnians speak Serbian, a relative of Croatian. — Dan Scott

I’ve written at some length about “the population problem” — most recently last April with respect to nervous lobsters — and about why I serve on the board of Zero Population Growth (ZPG).

Many people think this is silly. Sure, they acknowledge, we are now swelling our ranks by a billion people every dozen years or so. That is simple fact. No one disputes it. But have you seen all the land yet to be paved and developed? Or consider this: the average human probably lives in a two-story structure. (Most live in one-story housing, but blend in all the taller buildings and maybe the average is two stories.) So if we gradually Manhattanized the world (people love Manhattan!), then we could go from 2-story structures to, say, an average 10-story standard, and we could fit five times as many people — an extra 25 billion or so — without having to disturb any wilderness. As for food, pretty soon the biochemists are bound to find a way to produce protein and carbohydrates from water, air and all those autumn leaves suburbanites now just have to bury or burn. A single food factory might do the work of a half-million-acre farm.

Leaving aside what other technical problems there would be, and what the lines would be like to see the Grand Canyon, here’s the thought I wanted to add today:

Population concerns may be silly. Or they may not. You can make a pretty persuasive case on both sides. But compare the alternatives:

• If we’re wrong in thinking it’s important to prevent unwanted pregnancies and to find other voluntary ways to help slow world population growth, where’s the harm? What’s the risk? Too few people? If underpopulation ever emerged as a threat — and, incredibly, some people have actually begun worrying about “the birth dearth” — we could resolve it in virtually a single night of global merry-making. (I exaggerate and oversimplify, but you get the point.)

• If we’re not wrong, overpopulation will cut into our species’ quality of life, and possibly throw out of kilter the billion-years-in-the-making delicate ecological balance that has so nicely sustained human life. What would the solution be then? A single night of world slaughter? How would you ever get the population back down from 10 billion 50 years from now to, say, today’s 6 billion or 1950’s 3 billion?

Not to be concerned with population is to take a huge, species-threatening — and unnecessary — gamble. It would be beyond awful ever to get to the point in the world where we actually felt involuntary population limitations, of the type imposed in China, were the lesser of two evils. It’s precisely to avoid that, among other things, that support for population education and other measures of the type ZPG advocates is, in my view, a “core holding” in one’s social portfolio.

From Dickson Pratt: “In my home state of Colorado, the tax lien game is a little different from what you described. One makes premium bids at auction for the right to buy the lien and earn 14% simple interest. The catch is that the premium you pay doesn’t earn interest and isn’t refunded. If one pays an 8% premium and the lien is redeemed the following week one gets a month’s interest (about 1.1%) but loses the premium. So buying liens is a question of odds. What are the odds that this lien will remain unredeemed long enough to cover the premium (and opportunity cost) and start to make money? The goal for the investor is to get liens that make it into the next year since one can pay the subsequent year’s taxes without any premium and earn that fat 14% from day one.

“This used to be a good game when bids were in the 6%-7% range; the chances of a few liens making it into the next tax year offset the losers that were redeemed early. The last couple of years, however, the premium bids in my home county have been in the 10% range and the numbers just don’t work. So I thought I’d check out the tax lien sale in a mountain county where I own property and know the area very well. To my astonishment the premium bids for those liens were mostly in the 80-200% range! Now, one doesn’t have to be mathematically gifted to know that it is impossible for an investment paying 14% simple interest to make back a 200% premium bid unless one actually ends up owning the property. But the odds of having a lien go all the way to Treasurer’s Deed are about 0.2% in my area (and many of those are worthless, such as a 10 foot wide remnant strip of land along a road or “mineral rights only”). It was clear from the pattern of bidding that these unsophisticated “investors” really believed that they were going to end up with the property. They seemed to view the auction as a giant lotto game (“This time we’re going to hit the big one!”). Although I left the auction without cracking my checkbook I could console myself with the knowledge that revenue the county earned from the sky-high premiums would go to lower my own property taxes next year (we have revenue limitation in Colorado).

“It would appear that my tax lien buying days are over, sad to say. It was fun while it lasted.”

Could our Bosnian peacekeeping efforts be bearing fruit? Might we Americans actually have reason to be proud of the efforts we’ve made in that region? My agent reports that we’ve just had an offer for — are you sitting down? — the Croatian rights to The Only Investment Guide You’ll Ever Need. I kid you not. It seems to me what this says is that at least one Croat thinks at least a few other Croats — potential buyers of the book — are thinking about the future. Now if only we could get the Hutus or the Tutsis interested.

Tomorrow: The Tax Lien Game in Colorado

I can report no visible progress whatever toward adoption of the clickle, my predicted Internet cyber-coin, a cross between a mouse click and a nickel. And so, while in no way retracting that idea (or my hopes for an infinitesmickle royalty on each clickle for thinking up the word), I have decided to diversify my cyber-portfolio with another prediction. The replicator. This was inspired moments ago in the shower, as I squeezed the last few drops from a container of obscure shampoo. Yes, I mainly use whatever hotel-size shampoolets I’ve most recently unpacked from my suitcase. Thrifty, thrifty. But somehow this shampoo had found its way into the shower (I lose socks, but just as mysteriously gain shampoo) and I was thinking what a chore it would be to try to find the same brand, or even remember to do so.

Hence, the replicator.

No, not some science fiction thing where you pass the empty bottle under a Hollywood special-effects machine and the next thing you know pixels coalesce into a brand new bottle. Nah. A real, possible idea for the next decade. And a whole new way to spend your clickles.

Every product, item of clothing, music CD, trowel, dish — everything we buy — would have an identifying bar code on its bottom. A great many of them already do. When you wanted more “copies” — more of the same shampoo, another identical trowel — you would merely swipe the bar code past the eyeball of your computer (a simple plug-in device that would soon be sold built-in ) and instantly get a screen showing the item. It would allow you to click size, quantity, and other options as appropriate (e.g., color). It would allow you to click on “competitors” to see what else might interest you. It would display alternative prices and availability times (it might be cheapest direct from the manufacturer but take a bit longer if that manufacturer were in Thailand); you would click your choices.

There would be several competing purveyors of this kind of universal shopping service. Amazon.com would be one. It started with books, would simply expand to . . . everything else. FedEx would be another. One assumes Microsoft would have an entry. You could flip your replicator eyeball scanner to any of these, setting one as your preferred “home mart.”

You’d never have to enter your address (just click if you want delivery to an alternate address), never have to fuss with a credit card (it would just tote up the bill and debit whichever account you clicked). You’d have the option to set up regular deliveries (a quart of Tropicana every Tuesday and Friday); you’d have the option that Amazon.com already gives you to have whatever you just ordered delivered immediately, or wait to be bunched with more items to reduce the shipping cost. You could set up a regular delivery schedule — with FedEx or some other carrier that got with this program, guaranteeing to show up at your home every Saturday morning between ten and one, for example, with whatever items you had ordered that week.

This system would not be great news for physical retailers or their landlords — shopping-center REIT holders take note — but it would be great for us baby boomers as, in our waning decades, we became too infirm to cruise the aisles for shampoo and trowels.

Marketers would flood us with samples, knowing that whatever we liked could be swiped past the scanner eyeball and a moment later the sale would have been completed.

Others would send you their cents-off coupons, complete with bar code (or you’d find in your newspaper). To get the item, you’d just — swipe.

L.L. Bean would begin to get orders for all those classics you and I both have in our closets . . . fraying, fading, but we love that shirt and just wish we could get another just like it. No problem! Just swipe its label. Running low on printer cartridges? Swipe. Want another of these cheap phones? Swipe. Friend come by and like that Spice Girls CD? Swipe.

This would actually be depressing. It’s more fun to go shopping — to be dazzled by the variety and have a chance to get out of the house. What am I proposing, A Clockwork Orange? But if you did want another bottle of this chamomile shampoo . . .

Look, too, for the advent of the refrigerated mailbox. New homes would all be built with a high-tech set of four mail chutes. The first, little one would be for . . . mail. The second would be for regular packages that would just thunk onto the floor, like the mail, when put through the (bigger) slot. But the third would be an actual refrigerator to keep your delivery fresh until you arrived home, and the fourth would be, of course, a freezer. Just as “green” packaging now universally denotes healthy or decaf, so the distribution system would wrap your refrigerated stuff in orange plastic and your frozen in blue. The delivery guy/gal would slip your mail through the mail slot, your trowel through the package slot — thunk, thunk. The orange shrink-wrapped stuff he had for you would go into the orange door, and the blue into the blue.

To keep passersby from reaching in for a snack, the orange and blue doors would have locks. The delivery guy’s “wand” would know all about your order and address and when passed in front of your mail chute’s eye, would confirm that he was the FedEx guy and that he had come to the right place, unlocking the refrigerator and freezer doors.

Yes, all this would add $1,000 to the cost of a new house. But so does a washer/dryer, and how many houses are sold these days without those?

Like the clickle, you heard it here first.

From Dan Mincavage: "As a computer programmer in the early sixties, plugging up the "year" fields with ’99’ to designate ‘End of File’ and ’98’ to designate special processing for a transaction was common practice with an 80 column punchcard. [Note to young readers: punch cards were actual, physical cards, about three inches by seven inches, with actual little holes punched in them. An operator fed them into the computer, and it ‘read’ them and executed the programs. — A.T.] After all, that problem was over 30 years away, and we had a deadline to finish the programs within that year. We certainly weren’t too concerned with a problem at the end of the century (y2k). I’m aware how well the banks, insurance, and brokerage legacy programs are running since that time; however, starting next month (1998), a few ripples may appear under the surface. [Note: a legacy program is one that dates way back to when your dad went to college, like 1966.]

"Eventually I gained a little respectability in the computers and communications fields. I became a computer Systems Manager and Auditor with a Big Six accounting firm. I’ve had a firsthand look at the conditions of the systems and program documentation of many, many of these fine institutions around the world.

"Because of time-saving patches to machine language programs by computer vendors and in-house programmers, many of the programs’ documentation doesn’t match the program running on the computer. [Note: This is not a good thing. "Documentation" is the English explanation that’s meant to explain what each line and section of computer code is for, and why it was done the way it was, so someone years later could sort of "read through" the program and make sense of it. Imagine being called in to fix a wildly tangled system of phone wires and having an inaccurate diagram to work from.] In addition, many upgrades and much obsolescence have occurred within the program assembly languages, compilers, and operating systems over the years. Substandard documentation was commonplace, and the attitude oftentimes was that if the big major system was running and we don’t have a problem now, why fix the tie-in to documentation if it ‘ain’t broke.’ Automated systems have been working somewhat to fix the y2k [Year 2000] problem with about 30% success. Testing, integrating, interfacing systems enterprise-wide and also with outside vendors cannot be automated. This will take much longer than fixing the y2k computer program glitch.

"I love your attitude that the problem will get fixed since people are aware they have one. But I’m not as sure as you that the problem is really understood. And then when financial institutions start having problems with their records and the public realizes that problems are occurring, the ‘run on the banks’ and the impact on stocks will be heard around the world. I really hope that you’re right, and I’m just another fuddy duddy."

Sorry I didn’t "print" that response when it first arrived — it got lost in the shuffle. It is kind of astounding to think that something as simple and basically silly as this problem could have such devastating implications. It reminds us what a fragile and interconnected world we live in, and how dependent most of us are on things we can’t control — or even understand. How long would most of us last without electricity?

I heard some other smarter-than-me people discussing the Year 2000 problem at a gathering over New Year’s. One said an insurer on whose board he sits had budgeted $4 million to solve this problem when he first asked about it, then $40 million when next he asked about it, and now — well, it could be vastly more. Another member of the group said he thought U.S. financial institutions had this pretty well in hand, but that when he asked folks in Europe about it, they just stared at him blankly. This scared him, as all the world’s financial institutions are more or less interconnected. A third said that, well, the European and especially the Asian institutions may actually be at much less risk, because they came to computing more recently, and tend to be working from more modern systems not rooted in 1960s technology. A fourth said that the huge shift to software maker SAP’s installations, greatly pumping up the revenue and success of that German firm, was largely fueled by the Year 2000 problem. Many companies have realized it’s actually cheaper to install entirely new, albeit highly complex, SAP systems than to try to fix the systems they’ve got. So for less money they (a) solve Year 2000 and (b) get a much better, brand new system. Only problem: it takes at least two years to switch from the old to the new . . . and two years from today, if you were just starting, would be — oops!

So Dan is right. I probably underestimated the potential problems here. And I certainly hadn’t realized that ’98 and ’99 were used by some early programmers in creative ways, too. So the Year 2000 problem may actually begin showing up in odd ways even before the Year 2000.

Will this be the end of the world? In my experience, the world doesn’t usually end. But could there be enough glitches, contained panics, and general wariness to slow world growth? Yes, I suppose there could.

Yet another reason to look askance when someone tells you he expects 20% annual growth in the stock market, and sloughs off bear markets as either a phenomenon of the past or else something easily ridden out, akin to a squall.

From Gary: “IT SAYS HERE THAT THE VOLUME OF CORRESPONDENCE MAY NOT PERMIT YOU TO REPLY INDIVIDUALLY. I’LL TURN IT DOWN… there. that’s better. now we can talk. i saw your holiday interview on cnbc, and thought, someone to pay attention to. (quick background: i’m a financial non-entity, with large debt due to indifference and procrastination, but a recent convert determined to reverse my fortunes and get rich) (i’ve also developed a pretty aggressive investment plan involving REITs, so i really do owe you a debt of gratitude). a week or so later, i happened onto one of your books and thought, there’s that guy again. i have been enjoying the book a great deal. tonight, i’ve encountered no less than seven articles authored by you, at no less than two different websites, and i’m saying to myself… again with this guy? being a subscriber to the old ‘three times is enemy action’ school of thought, i’m compelled to confront you and ask, exactly what is it you want from me?”

Amused and nonplused (albeit flattered), I wrote back: “Much appreciated. What I want from you is word five years from now that you are well along your way towards your goals, happy and healthy.”

Which elicited this message (titled, SENSATION OF BEING STALKED STOPS… FEELING OF NEGLECT ENSUES):

“Thank you very much for your reply. I considered honoring your thinly disguised plea to be left alone for five years, but decided that perhaps a capitalist as quixotic as yourself wouldn’t mind another intrusion. I am a poker dealer, currently working in San Jose, California. I lived in Las Vegas for several years, and have also dealt cards in Los Angeles and Reno. The situation I’m about to describe is, sadly, true of those and other places. There are dealers who have made $100-200 a day in cash for ten to twenty years, whose net worth is near zero, and whose investment plan mainly consists of trying to find a lively game to play in after work. As a group we tend to compulsively gamble, smoke, drink, get high and generally punish the hell out of ourselves. We’ve done it all our lives with no regard for the future, and embody the spirit of the old joke that if we’d known we were going to live this long, we would have taken better care of ourselves. Only recently have many of us have become more investment conscious, which explains why I’ve never bothered you before. We are, collectively, babes in the financial woods, and we don’t have a quixotic bone in our bodies. I’m happy to report, 4.99 years earlier than you requested, that some of us have begun an investment club, and are invested in a basket of REITs, being managed by… ta da… me. We call it the Black Chip Club, that being the $20 denominated chip we use at work, as well as the amount of our daily individual contribution. (In my world, Blue Chips are only worth a dollar.) There are ten of us, so we’re knocking back a dime a week… sorry, that was shop talk… we’re investing a thousand dollars a week. That’s roughly 10% of our income, and there’s talk of increasing the amount later. (Conveniently, we also have a $25 chip for just such an occasion.) This leads me, as you feared it would, to my question o’ the day, and I’ll make it easy, since this is your first day. I’m 48, and intend to deal for about ten more years. The rest of my group is 396, and will be working for 684 more years. How high should we raise our contribution to make up for lost time? Is there a formula to calculate risk tolerance in a slightly skewed segment of the market such as ours? We all seem to agree that we can come up with more… may I have your opinion, please?”

Writing so fresh is almost enough to want to make you go find his blackjack table and lose some money of your own. Why isn’t this guy writing a gambling column for Forbes FYI or for GQ or for — not that I approve — Cigar Afficionado?

Anyway, putting aside $20 a day each, $7,000 a year, is more than a lot of people do, so hats off to you for doing this — and for getting started, which is the hardest part. You’re 48, and your nine fellow dealers average 44 (396 divided by 9) . . . and will be working an average of 76 more years each (684 divided by 9) which sounds a little fishy to me.

If they really did plan to work another 76 years, they’d have their end of this knocked. Assuming a real, after-tax, after-inflation return of 5%, each of your $20-a-day buddies would have at retirement about $6 million in today’s dollars. At 120 years of age, that should easily last them the rest of their lives.

But you are in not quite such good shape, at 48 planning to work just 10 more years. You’d have $94,000 under these assumptions, or enough to throw off about $6,000 a year for the next 30 years, to age 88, when you’d be out of chips. Of course, if you’re convinced you won’t make it past 78, you could use up your nest egg faster, bumping up the annual withdrawal to $7,500 or so. If you were sure of croaking by 68, then you could withdraw $12,000. But even that isn’t much to live on, and my personal feeling and hope is that anyone with your sharp wit will live a lot longer — perhaps even beyond 88.

So you either have to save more, start winning those after-work games, marry some wealthy widow who comes to your table in search of excitement, or earn more than the 5% after tax and inflation I assumed above.

At, say, 23% a year, your $20 a day in 10 years would have grown to $244,000, but (a) that’s still not enough and (b) no way are you going to earn near that kind of return (though keep it up for 50 years and you’d be up over $1 billion — all from $20 a day).

Marriage sounds more and more like the solution.

Failing that, I’d stick with the 5% assumption and try to save more.

Especially given your background, you will be tempted to speculate actively and run your money up at a much greater rate. The problem with that is taxes (although your tax situation does seem a bit . . . unclear). Taxes — let alone short-term capital gains taxes (taxed at the full ordinary income rate) — are to an investor swimming across the financial pond what shoes, pants and a parka would be to a swimmer swimming across a real pond. Far better to invest in the kinds of stocks or mutual funds that can compound their growth largely tax-free, selling (and incurring tax) only very occasionally.

Now, there are two ways you can take all this:

1. As hopeless, throw up your hands, and head over to the craps table.

2. As encouragement to save even more than $20 a day, and take only prudent risks with it, with an eye toward long-term capital gains.

I strongly urge you to opt for #2. And see if you can pick up some extra dough writing the aforesaid column. Who knows — there might even be a screenplay in it.

Monday: The Year 2000 Problem Begins — Oh, No! — Last Month