Wednesday, November 22, 2017

Use The Internet, Don't Let It Use You!

The internet can be very useful to you, or it can be something that uses you.

In a recent posting, I sarcastically opined that Apple was the most evil company in the world and in fact was run by alien replicants, who were building a flying saucer, so they could fly back to their home planet.  Apparently this message resonates with people other than myself.  A recent article in the New York Times opines that Tech is perhaps become evil.

More and more people are noticing that social media, smartphones, the internet are being combined in a witches brew to addict people.  By providing incremental amounts of positive feedback, the powers-that-be can get us coming back again and again to various sites, or constantly pawing at our phones, hoping for that one little rush of dopamine that we so desperately crave.

But like anything else, it depends on how you use it.  Granted, there are some drugs that cannot be used responsibly.   I recall someone trying to tell me that they had a responsible meth habit -  however they had lost their job, career, and a small business in the process.  And of course opiates are turning out to be something that can be instantly addictive and very hard to kick.

Maybe other drugs, less so.  While I'm not a big fan of marijuana, as it seems to suck the willpower from people and make them feel sorry for themselves, many people smoke pot and hold jobs and are "functional" in that they at least support themselves and pay their bills.   And a large number of people in this country drink alcohol without serious adverse effect.

This is not to say that people don't become alcoholics or end up killing others in drunk driving accidents.  Or that some folks become "chronic" marijuana users and retreat to their parents' basement or the equivalent thereof.   There are some drugs which are very destructive no matter how hard you try to control your usage of them, and others than can be used somewhat responsibly.

In terms of electronic drugs, however, you have to weight the benefits with the costs.   And that's why I say that cable TeeVee is a horrible bargain.   It is very, very addictive, costing you hours of your life every day in channel-surfing.  And the payoff is just not there.  "500 channels and nothing on" goes the refrain, and that is the reason I unplugged from Cable TV - it just wasn't a value proposition, costing close to $100 a month, taking up a lot of my time, and providing no real benefit to me.

The internet, when used responsibly, however, can be useful to you, and in fact be beneficial.   You can work over the internet and make money - legitimately.   You can send business e-mails and communicate with clients.  You can do business over the Internet - file documents with government agencies, check your bank balances, or your investments, or whatever.

You can also find good bargains online, if you look.   And yes, you can communicate with friends and family and interact with others.

But like any other drug, it depends on how you use it.   If you find a bargain on the Internet for something that you want and need, then that is a good thing.   On the other hand, if you become a compulsive shopper on Amazon or eBay - just buying junk for the hell of it - you could ruin your financial life.  And people have done this - and articles have been written about it.   I've known personally, people who went on spending sprees on eBay and Amazon, to the point where their spouse had to hide the credit cards (lot of good that did, with one-click purchasing!).   One lady I know bought a car on eBay during a fugue state.

Similarly, keeping in touch with friends is fine and all, but getting sucked into a four-hour-a-day Facebook and texting habit can be destructive to you personally.   And a huge number of people are indeed sucked into this.  Not only is it a huge time-waster, it has little or no payback.  You can always tell when you are talking to "facebook people" as they tend to believe wild urban legends and "fake news" stories planted by the Russians.  "It was in my 'feed' so it has to be true, right?"

Similarly, compulsive texting is a self-destructive habit.  Not only is it a time-waster, it can literally kill you if you try to do it while driving (or worse yet, kill others, like me).   Again, the payback is kind of slim - the idea that you can carry on these abbreviated and awkward conversations by text with people all day long is, well, kind of dumb.

But few people have the personal willpower and strength to use facebook, twitter, texting, or other forms of social media in moderation.   Most people are like drunks, and cannot say "no" after just one beer, or one text or one facebook "like".

And this is why I am not on facebook - the temptation to check it constantly to see what is going on would be too much.  It becomes a real time-waster and I didn't like who I became on facebook.   Moreover, I didn't like who other people became on facebook.   Whether it was a friend sending me pictures of every meal he ate or another friend posting sarcastic comments on my photos, it seems that it is all-too-easy to become an asshole on facebook - just as people can become assholes after three or four drinks.

And the same is true for Twitter, which the media is obsessed about.   I have read hundreds and hundreds of "tweets" but have never been on Twitter.  The media reports tweets obsessively.  And usually - 99% of the time, it is because someone lost their job, career, or spouse, because of something stupid they said on Twitter.   Others, like our President, are wholly addicted and cannot control themselves on the platform - saying one stupid thing after another.   President Trump is like a drunk - he can't have just one Tweet, he has to slam the six-pack.

So I'm not on Twitter, either.  And quite frankly, I don't bother reading news stories anymore where the central premise of the story is what someone said on Twitter.   Who the fuck cares, really?

And it is why I don't have texting enabled on my phone, either (that and I only pay $100 a year for service, which doesn't include texting, and I'm cheap!).   It is nice, sometimes, to be able to get texts.   The bank will text me if something is up - I have them text to Mark's phone.   He has the service on his phone, and I can see firsthand how he gets sucked into it sometimes.   But he is trying to be a responsible drunk with the texting - at least so far.

You can tell if someone is addicted to Facebook, or Twitter, or Texting or whatever other form of social disease media.   And it is very simple to tell.   If someone sends you a text or a tweet or a facebook posting and gets pissed off if you don't respond within a matter of minutes, odds are the sender is addicted.   They just assume that everyone else on the planet is glued to their smartphone 24/7 and is waiting breathlessly for the latest messages.   The idea that someone might turn their smartphone off or not carry it with them at all times (two things I routinely do) is not even plausible to them.

And the funny thing, too, is that this technology is only about a decade old, its current level of penetration even less.  The majority of Americans have been texting, tweeting, and facebooking for only a few years now - but you would think it has been around since the dawn of time, from the way people treat these things.   And it is one reason why I doubt the staying power of much of this stuff - it is not that old, and other things came before it, and other things will come after it as well.   But of course, when that happens, we will all say we saw it coming or say, "facebook? what was that?" - much as we do today about MySpace, even if we had an account with them only a few years back.

The Internet, smartphones, social media - they are all electronic drugs, or inter-related electronic drugs that can harm you, personally, physically, and financially.   Check out the physique and health of anyone who spends all day online - it isn't pretty, and it is one reason our generation has a shorter life expectancy that the previous one.  The sedentary lifestyle is simply toxic.

Use the internet - but don't let it use you.   Think long and hard about the benefits you are getting from tweeting and facebooking and texting, and then weigh them with the costs.   Odds are, most of this stuff is just wasting your time and making you unhappy and depressed.

But it is making other people an awful lot of money.

How Little You Need to Live Large

Many people think you need a huge annual income to be "wealthy" but in reality, if you own money, you don't need to earn it so much.

I was talking with a banker the other day and they remarked how surprised they were that some folks who live on retirement island get by on so little money.   These are not poor folks, but people living in  houses worth at least $400,000, driving fairly new cars, and not wanting for anything.

My banker friend was puzzled by this, as they had to struggle to pay bills, pay the mortgage, make the car payment, and put food on the table - and save for retirement at the same time.   How can someone live on a retirement island in a home that costs twice as much as theirs, on half the annual income (or less)?

And the answer is pretty simple:  The retirees don't have any debt.

Of course, not all retirees retire this way.  We have friends with fat government pensions (yes, including those "underpaid" New York State schoolteachers!) who live the debt lifestyle in retirement.  One confesses to me that they have only $30,000 in savings.  But with a six-figure combined pension, they can afford to pay a mortgage, have car payments, and whatnot.   When they want to spend, they borrow, just like working people.

But the "old school" method of retirement, which is quickly becoming the "new school" with the 401(k) generation aging out, is to have no debt and thus no need for income in retirement.

And when you get older, well, a lot of bills simply go away or shrink.   For example, most jurisdictions have tax abatement for older folks.  In New York, it was based on need in our County.  Here in Georgia, they exempt you from school tax once you hit the age of 65.   Of course, many retirees move to lower-tax jurisdictions to begin with, so their taxes are far less.

Having no mortgage means not having to cough up $1500 to $3000 a month in mortgage payments - which is an awful lot of money, in case you weren't paying attention.    Since you don't commute, you don't drive as much anymore - and your car can last a lot longer.   We've had the hamster for over two years now, and it has only 12,000 miles on it.  You save on gas, you save on maintenance, your car lasts longer - oh, and your insurance drops down to nearly nothing.

Health care costs are another aspect.   While your health may decline in old age, much of the cost is picked up by Medicare.  For the middle-aged self-employed person, it is a catch-22.  In order to earn enough to pay that huge mortgage, you make too much to qualify for an Obamacare subsidy - and you could be paying thousands per month for health care for you and your family.

What you discover, as you get older, is that the cost of living can drop down significantly.   And it is not just these big ticket items, either, but a whole host of smaller things.   As you get older, the idea of paying $200 for a pair of "designer" blue jeans seems kind of silly, when you can buy the real deal for well under a hundred.   You really aren't interested in impressing people you don't know anymore, which is why old people dress so funny and unfashionably.   We tend to dig old clothes out of the closet and wear them - which appalls the younger generation.

Similarly, being seen at the "in" club and standing in line to pay a cover charge no longer seem like important things.   On our little island, everyone goes to the happy hour at the Hampton on Wednesday, where the drinks are half-priced and the appetizers are cheap.   Yes, we tend to seek out bargains more - we have nothing else to do all day long (not really, but you do have more time to think contemplatively about your money and how you spend it).

This is not to say we don't go to other venues, but just not as often.   Meanwhile, the working people here on vacation go to the club or the Westin and spend $10 or more on a cocktail and put it on their credit card.   A lot of fun for us, once in a while, but not an affordable lifestyle in the long term.

It becomes a bit of a game - to see how much you can get away with for how little.   And it is a fun game to play.   And since you are no longer working and have few sources of income at this point in your life, it is a game you have to play.

As a result, you can live the lifestyle of someone making "six figures" in the big city, for less than $50,000 a year - often far less.   But in order to do this, you have to be astute and you can't be burdened with debt.

Good ol' Sooze Orman has been harping about this as of late.  I guess she wants more attention or is selling a new book or something.   But even a stopped clock is right twice a day.  And for our generation, who is expected to retire on "savings" and a small amount of social security, she makes a valid point.  She argues that in the last few years before you retire, it makes little sense to stuff more money into your IRA or 401(k), as the compound interest you will earn will be pretty small.   Paying off that mortgage, on the other hand, will mean you can live on a lot less cash-flow, and the savings in interest are money in the bank.

Of course, her advice to someone who has serially refinanced their house for 20 years and now owes more money on the house than it is worth (or owes hundreds of thousands of dollars with no realistic way to pay it off before retirement) is sort of useless.  The best they can hope to do if they have any equity at all, is to downsize their lifestyle and sell the white elephant and move into something a lot cheaper, preferably in a State with much lower taxes.  And no, a reverse mortgage isn't the answer - it is more like throwing gasoline on the fire.

Which is why it is important to figure out how to be debt-free by the time you retire, and figure this out early on in life.   And often this doesn't mean scrimping and saving and doing without, but rather just not refinancing your home again and again to take out cash, but rather paying down that mortgage over 30- years.  It means living within your means, which really isn't all that hard to do.

Because when you retire, you will be forced to do it anyway.   Might as well get used to it!

Tuesday, November 21, 2017

Big Tent Republicans

Is the Republican "big tent" becoming too big?

With apologies to Martin Niemöller....

First, Republicans were conservatives in that they espoused conservative fiscal policies such as small government and low taxes.  And I thought to myself, these seem like reasonable policies, and I said nothing.  
Then, the "evangelical Christians" started flocking to the party.  Now the Party stood for fiscal conservatism, anti-abortion, "family values", prayer in school, and teaching "creationism" in school as well.   And I thought, maybe this is not such a good thing, but since I wasn't in school and didn't need an abortion, I said nothing.
Then, the "tea partiers" joined the party - demanding that taxes be slashed and the budget be cut to the bone - so that "those people" would have their welfare cut.   And since I wasn't on welfare, I said nothing. 
Then the "alt-right" joined the party - demanding that we go back to the "good old days" when women and blacks were subservient.   And since I wasn't a woman or black, I said nothing. 
And then Trump joined the party - promising to deport Mexicans and slap import tariffs on imported products and punish companies that moved business overseas.   But I wasn't Mexican, and didn't run an international business, so I said nothing. 
And then the white supremacists and the KKK joined the party - and they demanded that Jews and women and blacks be "put in their place" and that we return to our roots as a "Christian Nation". 
And I tried to say something, but it was too late.   And there was no one left to speak up for me.
* * *

What we are seeing today is an implosion of the Republican Party - a slow-motion death that they brought on themselves.  The GOP has always been a hard-sell to voters as they promise not more welfare and food stamps and minimum wage hikes, but rather self-sacrifice and draconian budgets and small government.   It is like trying to sell spinach to kids when the guy across the street is offering candy for free.   But we all remember what Mom told us about strangers offering candy, right?

So the GOP made unholy alliances with people on the "right" such as evangelicals.   And until about 1979, evangelicals, particularly Baptists, were apolitical, often not bothering even to vote.  The idea of the pulpit, pew, and voting booth being linked was an alien thought.   But then someone realized there was a whole lot of discontentment that could be tapped into.   So they promised to overturn Roe v. Wade, but of course had no intention of doing so.  It was just lip-service to get elected.  The last thing they wanted was a full overturn of that decision - it would cause their "base" to stay home and no longer vote!

But even that "base" of voters wasn't enough - even as their far-right religious views turned off many progressive Republicans (yes, such a thing existed in the 1960's and 1970's - today, Nixon would be considered a "Liberal" for founding the EPA and creating wage/price controls).   Many mainline GOP legislators found themselves in uncomfortable territory, endorsing the teaching of "creationism" in school and other retrograde and ridiculous positions.   But they swallowed their pride and did it, to get re-elected.   But again, it wasn't enough.

So they went after smaller and smaller groups of far-right radicals to get out the vote and get re-elected.  Hold your nose and campaign.  And when a supporter says that Obama was a Muslim, you just nod your head and try to figure out how to spin that later on.  Pretty soon, you are attending hate rallies - which are your campaign rallies - and wondering how you got here.   And wondering if perhaps, you created this.

And so here we are today, with a new "far-right" unabashedly admiring Hitler and pining for the "good old days" when blacks were slaves (slavery wasn't that bad, right?) and the Nazis were in power.  They certainly had snappy uniforms, right?  And the Autobahns - it made it all worthwhile!  A whole generation that slept through history class - or learned their history on YouTube - is now demanding to be heard.

And the GOP, instead of standing for something is now finding they stand for nothing, other than to pander to a "base" (in every sense of the word) and to wealthy donors who want their taxes cut and special favors and contracts.

No wonder the GOP is in a love-fest with the Russians - they want the same style of Oligarchy here as they have in Russia - where the well-connected can take over state industries and become billionaires overnight.

They should, of course, be careful of what they wish for.  Russian billionaires quickly become political prisoners or end up being poisoned or beaten to death, when some other oligarch decides they want a taste of the pie.  Such is the fate of tyrants.

Granted, there are some in the Republican Party who are saying, "enough is enough!" and speaking out.   But the only real action they are taking is quitting the party, which really doesn't accomplish much other than to insure that an even further-right candidate will win the next election.

There was a time in this country when the two parties were more alike than different - and ideological differences weren't something people were willing for fight over - much less kill for.  It seems that time has past already, and the transition was so gradual, taking decades, that we have really failed to notice the changes.

And sadly, it seems the Democratic party is doing the same thing, only in another direction - courting ever smaller minorities of extremist thinking in order to win elections.

Just a crazy idea, but the majority of Americans are pretty middle-of-the-road.   If you are going to pander to someone, why not pander to the clear majority?

Monday, November 20, 2017

What If They Had An Economic Boom And Nobody Came?

How can a consumer-based economy work without consumers?

There is a lot of talk in the press about how great things are going and how even greater they are going to get next year and the year after.   Company after company talks about projected profits and how their sales are expected to rise in 2018, 2019, and 2020.

And the stock market is rewarding them for these projections, which seems to me to be a little bit premature.   We are told that the new tax bill will put more spending money in the hands of the average American, who will go out and buy more and the economy will expand further.   The problem, is, the tax bill largely favors the rich.  As one Senator put it, "My donors called and said to get this done or don't bother calling back!"   It is rich donors driving our government, not the people.

And already our economy is divided further and further in to two groups, the very rich and the very poor.  The middle class is disappearing to large extent.  As I noted in another posting, talk to any boat salesmen - they can sell mega-yachts or rowboats, but nothing in-between.  The days of a young married couple starting out with a 21-foot cuddy cabin and working their way up to a 55-footer are long gone.   Today you either buy big or go home.   There is no room for the middle class.

The working poor and what remains of the middle class (which are two groups that are rapidly combining) are taking on more and more debt and saving less and less.   How exactly are these folks going to benefit from their $700 a year tax cut?  Most would merely apply this money to their staggering debts, or it would merely offset inflation.

Republicans like to say that "a rising tide lifts all boats" but I think it is essential that the smaller boats be lifted first.   One reason marinas and other maritime facilities are shrinking is that there are fewer and fewer middle class people who can afford to own boats.   And while this may make more room for the mega-yachts, the very wealthy should bear in mind that what keeps the marina in business isn't one or two mega-yachts, but boats of all shapes and sizes filling every slip.

And the same is true for our economy.   Sure a tax cut for the very wealthy sounds great - if you are very wealthy.   You take that money and invest it - but in what?   Buy some GM stock - but who is left to buy the cars?   Your investments will tank if no one is left to buy the products that your company makes.  You need all these "little people" to buy cars, cell phones, cable TV, data plans, fast-food meals, consumer loans, and all the other things that American companies offer for sale to consumers.   Without customers, though, it all falls apart.

And I think that message gets lost sometimes.   Many on the right want to cut welfare programs - but not corporate welfare, of course!  But the two are intertwined.   Food stamps and other "government handouts" act as wage subsidies as well as a lifeline or safety net to the underemployed.   You can cut these programs, but it doesn't necessarily mean than the folks relying on them will spontaneously go out and get higher paying jobs.   They might just end up destitute - and spending money on nothing but basic sustenance.

The very wealthy also (should) realize that keeping "the masses" content is an act of self-interest.   When people become poor and destitute, they are more likely to riot and act out their aggression on the upper classes - and no amount of policing can keep that in check.

There is a lot of talk as to why crime rates have dropped dramatically since the 1960's.  An aging population, sentencing guidelines, and the war on drugs, are all offered as possible causes.   But a growing economy and greater economic security are also cited as reasons why people are less likely to engage in crime today than in decades past.

I don't know.  I just don't see it.   All this happy-talk about how the economy is going to take off like a rocket, when already we've been experiencing the greatest postwar bull market.   How much further can the market go?   These things go in cycles.   And I am not sure that a lot of folks feel that economically secure that they want to go out and spend and consume even more.

And without consumers, how can a consumer economy grow?

Sunday, November 19, 2017

The Myth of Amazon (And Walmart)

Are Amazon and Walmart going to "take over" retail as we know it?  Maybe not.

The media is still all agog about Amazon, which is probably because one of the largest media outlets in the country is owned by Amazon.   We are told that Amazon is causing "retail Armageddon" or that it is the "death star.   Amazon, we are told, will take over retail and put every brick-and-mortar store out of business.

We are told.

We are also told that the "last man standing" in brick and mortar is Wal-Mart, who like Amazon is "putting everyone out of business" with its low prices.   Once Wal-Mart comes to town, everyone else goes bankrupt!

We are told, anyway.

The reality is more complicated that that.   Retail is a business that anyone can get into, without a lot of capital investment.   There are no Patents or Copyrights involved in setting up shop and re-selling goods.   And this goes double for the Internet.

Recently, I made a number of purchases of parts and materials to do a makeover on our camper.  The 18-year-old carpet was kind of nasty, so I ripped it out and bought some vinyl flooring at Home Depot.  I hope to post a video of it soon.   At the same time, I replaced or upgraded a variety of items - adding lights inside the cabinets, installing new swivel chairs (the old ones were serviceable, but getting worn) and replacing a number of bits of hardware.   About half of this stuff was bought online, and half at the local Home Depot.   Wal-Mart doesn't carry RV parts, other than a small inventory of accessories.  And their "hardware" section is, well, as you know, kind of an afterthought joke.

But what about Amazon?   Certainly you can buy anything on Amazon, right?   Well, I ended up buying only one thing - a set of table bases - and that was a mistake.   Although they offered "free" shipping, making the price less than eBay, I ended up buying another $30 worth of travel guides (we are going to Alaska) to qualify.   Score:  Amazon 1, Chump 0.    By the way, used library books on Amazon can be a good deal - hardly used and usually coming with a plastic cover protector.

But the best prices for various RV parts wasn't on Amazon - often Amazon wasn't even close.   eBay was often the best place for really cheap stuff, or the website of an RV parts store.   I noted before how Amazon's prices are somewhat high - and this is not counting the bizarre listings for $100 Mayonnaise.   Not only that, but the product Amazon delivered wasn't the actual item I ordered (which was made by Edelbrock - the header people) but rather a knock-off with "Made in China" on it (of course).   No big deal, it worked OK.  But it was not the thing advertised.

Amazon simply isn't a bargain anymore - compared to other online sites.   Or put more succinctly, if I am shopping for something, I check Amazon, to be sure, but more often than not, I buy the item on some other site (eBay, for example) for far less.   Amazon's complicated "gotcha" checkout procedures are not an inducement either.   No, I do not want Amazon Prime, Sam-I-Am.   Nor do I want green eggs and ham.

And therein lies the problem for Amazon.   People buy things online because of lower prices and convenience.  If you take away lower prices and make it a hassle to find things (after wading through pages of bizarrely priced items and then making checkout a hassle worse than a timeshare presentation) people will move elsewhere.   And on the Internet, there is an awful lot of "elsewhere" to find things for sale.   Being a merchant isn't rocket science.

Wal-Mart is going upscale into the fashion industry, selling Lord and Taylor online.

But what about Wal-Mart?   As I noted before, Wal-Mart seems to be shedding its low price image and going upscale.  They are even now selling Lord and Taylor fashions online and have stated they want to become an "upscale" online fashion center.   This should be a shock to their regular customers.  And others have noted this as well.   Brand name products and high-priced items are slowly filtering into the store, displacing the cheap-but-good "Great Value" brands.   The other day, I could not find a 12-pack of seltzer at the store.   Winn-Dixie had it, though, at a very low price.   When Wal-Mart stops carrying the products I want and raises prices, I will shop elsewhere.   And I suspect a lot of other people feel the same way as well.

The "invisible hand" of the marketplace can be denied and skewed and diverted - but only for so long.  Eventually, people figure these things out.   I have a friend who cross-shops at every grocery store in town - and often has to make six stops to get all their groceries.   Maybe it isn't worth it to drive two miles to save 10 cents on a can of peas, but they do it.   And they report back to me (and to others) where the best deals are.   And increasingly, they are not at Wal-Mart.

Wal-Mart succeeded where others failed by offering staggeringly low prices and getting warm bodies into the store.   Many traditional grocery stores went by the wayside as a result, as their prices were far higher and selection less.   Sure, people will keep shopping at the old grocery store for years - out of habit.  But eventually, they will hear from friends and neighbors about the great deals at the "new" store and try it out for themselves.   And often, this converts them to the new store.

In 2008, this happened to us.  We shopped at Wal-Mart and were impressed by the variety of goods and the low prices.   We never went back to Publix after that.   So our loyalty is today to Wal-Mart.  But that loyalty could evaporate just as quickly, if they keep raising prices and concentrating on brand-names.   Something else will come along, and people will slowly figure out there are better bargains to be had elsewhere.

My recent experiences with Wal-Mart and Amazon are not an anomaly, I think.   Amazon is trying hard to make money, but with a P/E ratio of over 500, isn't making nearly enough to justify its stock price.  Their logic is that they are plowing money back into the business, so as to take over a larger and larger market share.   Eventually, after they put everyone else out of  business, they will make enough profits to justify their $1000+ share price.

Eventually.

But eventually could never come.   The idea that you can dominate a free-market in a monopoly fashion is a dream many a capitalist has had - a dream that eventually fails.   GM used to have 60% of the auto market.  Used to have, that is.   The problem, of course, was that others could and did take away that market share by offering better products at lower prices.   Back in the day, GM could afford to under-cut the likes of Studebaker or Kaiser by selling stripped versions of their cars for about the same prices.   You could buy a low-budget "Henry J" from Kaiser, or for a few dollars more, get a nice Chevy.   It is an old game - one that Wal-Mart played well back in the day, too.   Undercut your competitors and then run them out of business.  Profit.

The problem with this business model is that you never run out of competitors.  You end up playing whack-a-mole with each new entry into the marketplace, and cut your own margins - and your own throat - by lowering your prices in an attempt to not only compete, but run them out of town.  The vaunted "easy street" part of the plan when you have a total monopoly and can charge monopoly prices never happens as a result.

And the same is true for Amazon and Wal-Mart.   Yes, they are both huge retailers (Wal-Mart being substantially huger, though).   But neither has a monopoly in the marketplace and never will.   Neither will ever be able to dictate prices to consumers, so long as there is even one competitor in the market.  And for Amazon, that could be some kid re-selling junk he gets from China, using his own website.   The barriers to entry in online retailing are remarkably low.

So what is the takeaway on this?   I think the following:

1.  Amazon stock is horrifically overvalued.  They are not about to increase profitability by a factor of 10-20 in order to have a rational P/E ratio anytime soon.   Don't buy Amazon stock because you are familiar with the brand and use the service.  As I learned the hard way, that is the dumbest way to invest known to man.

2.  Wal-Mart could be vulnerable.   They have made mis-steps in the past, however, and recovered.  I think if we see recession in the future (and we will, eventually, we always do) the brand-name and high-price strategy will falter.  The big attraction for Wal-Mart is low prices.   Take that away, and all you have left is gawking at the other customers.

3.  Habit shopping is a bad idea.   We get into the habit of buying things on Amazon or eBay with "just one click" and don't bother cross-shopping on price.   It isn't hard, particularly online, to search for competing prices by typing in the product name or model number.   For brick-and-mortar, this is a little harder, but it can be done.   Going to the same store again and again out of habit is never a good idea, as prices can edge up over time and you might not notice it.

4.  The financial media's prognostication that Amazon or Wal-Mart (or both) are going to "take over" is a little overstated.   The mercantile business can't be protected with a Patent or Copyright.  There are other alternatives out there - and new ones being created all the time.  Don't listen to the financial press when they gush about things.  Usually that is a sign.

Thursday, November 16, 2017

Rocket Jesus

Is the adulation of Elon Musk perhaps a little overstated?  Perhaps.

One aspect of the next tech crash will be Elon Musk and Tesla.  Musk has his share of supporters and detractors.  I am kind of neutral about him, personally.   Technology and investment should not be based on a cult of personality, but rather on the underlying fundamentals.

And coming from the car industry as a kid, I saw firsthand how ruthless a business it can be.   Margins can be razor-thin.  And capital costs can be staggering.  You invest billions of dollars in factories, equipment, and worker training, spend tens of thousands of dollars per car in labor, parts, overhead, and marketing, and sell a car worth $40,000 for a paltry profit of a thousand or two.   You'd be better off buying government bonds, in some cases.  Ask Henry J. Kaiser how simple it is to break into the car business.

Of course, for GM, Ford, and Chrysler, they can make up for this with $10,000 profit on a pickup truck or monster SUV - people pay a lot of money for empty steel boxes.   But even that strategy can backfire, as evidenced by the bankruptcies of GM and Chrysler in 2009.   What about Tesla?  Can they buck the trend of the last 70 years or so and become the independent carmaker who is not left in the dust behind the big-3 and foreign competition?

That is the conundrum.   There is no magic sauce in an electric car - Musk isn't selling something that other carmakers can't and aren't already copying.   Maybe he can sell the model S based on exclusivity and luxury - and indeed, in rich neighborhoods, you see them parked out front of the tony restaurant at the valet stand, next to the Porches, BMWs, and Mercedes.

But the model 3?  A car that looks and is priced like a Toyota Camry?   That is a car that has to compete on its economic merits, not on cache or perceived status.   And it is here that Musk may well fall down.  BMW is the most profitable car company on the planet as they are not just selling cars, but selling status and exclusivity.   Just as a befinned Cadillac in your driveway in 1959 showed everyone you had "made it", a trim 5-series sedan today says the same thing - that you have money to spend and are (allegedly) smart about how you spend it.

Take away that status and exclusivity and the BMW or Mercedes is as pedestrian as a police car or taxicab - indeed, what they are often used for in the rest of the world.  And that is not the only problem for Musk.   If he really attempts to "mass market" an electric car, he will need dealers and service centers to service them.  They just opened a Tesla service center in Jacksonville.  I drove by it the other day on the way to the wholesale club.   Maybe it was the hurricane, but it now says "ESLA" on the front, which is not a good sign.

When I drove by one Tuesday, it said "ESLA"

Mass-marketing cars is a whole different ballgame.  Sure, you can sell "boutique" cars with dealers only in limited areas.   Rich folks don't mind having their Ferrari flat-bedded to the dealer for an oil change - in fact, they get off on that sort of shit.   But for the rest of us?   There is a Chevy dealer in nearly every damn town we drive through.   You'd better be prepared for that kind of infrastructure, if you want to sell hundreds of thousands of cars.  GM, Ford, Chrysler, Toyota, Nissan, et al., already have this infrastructure in place.   When they get in the electric car game, it is game over for Tesla.

Of course, the big problem for Rocket Jesus is money - or the lack thereof.  He isn't making any, but rather has been hemorrhaging cash since the get-go.  Tesla was poised to make money there for a while, but then the model-3 came out, along with the purchase of solar city.   Both could be smart moves, I guess, if they made money for the company.   And in order to make money, you have to sell product.   And they aren't selling many model-3's because they aren't making many of them.  And solar city seems to have gone dark, other than some grandstanding operations in Puerto Rico.

And as I noted before, we have an administration who would rather see cars powered by coal.   It is not going to be a friendly regulatory environment for electric cars or solar panels.  The new tax bill could roll back or eliminate many tax credits and other incentives.   The ITC has found that Chinese companies are "dumping" solar panels on the marketplace, and now it is up to President Trump (I throw up in my mouth a little bit every time I say "President Trump") to decide what tariffs should be applied to solar panels.   If he goes along with the complainant's suggested import duties, many suggest that solar installs, which are already slowing in the United States, will grind to a halt.   The purchase of Solar City will start to look like a bad bet for Tesla.

And questions will be asked - pointed questions - as to why Tesla bought Solar City when Musk and other insiders had investments in Solar City.  The specter of self-dealing will be raised and shareholders might be more than a little miffed.   A shareholder derivative suit may ensue - well, it already has ensued.

But what about Space-X?  Is that making a profit?  Bloomberg claims so, back in 2015.  Others are guessing at the answer - using "scenarios" to calculate potential profits, as Space-X keeps financial information pretty close to the vest.  The folks at Motley Fool can't figure it out, either - guessing at profits based on scant information the company provides.  As a privately held company, they don't have to disclose their finances.

Frankly, I think these "analyses" are rather optimistic.   Space travel is staggeringly expensive.  Space-X has been stealing launch business by undercutting industry giants like Boeing.   In other words, they are likely losing money on each launch, just to get their foot in the door - hoping later to bring costs down through re-usability of the components and eventually make a profit.

A nice theory, but it won't work - or work as well as they'd like.   In space travel, every system is mission critical.  We stopped flying to the Moon, even though we had several Saturn-V rockets and Apollo space capsules laying in wait (which were later used for Soyuz and our first ill-fated Space Station, Skylab).   Why?  It was incredibly fucking dangerous and we nearly lost two crews.    People forget that Neil Armstrong took manual control of the LEM at the last minute, and landed the craft with seconds of fuel to spare.   It could have turned out very, very badly if circumstances were different or if he had hesitated a moment longer or his landing skills weren't up to snuff.   And then there was Apollo 13, which illustrated dramatically how one tiny flaw in a wiring harness can cause all sorts of trouble.

So, if you want to re-use a rocket component, that is fine and all - the Space Shuttles did it for decades.  But  you end up inspecting, adjusting, fixing, and replacing every damn millimeter of the thing, in order to insure it is safe.   And as we learned from the Space Shuttle, twice, sometimes that's not even enough.   The end result is, re-usability or not, the costs of going into space are pretty staggering.   And you can only sell launches for below cost for so long.

Now don't get me wrong, I am not anti-Musk or anti-Tesla.   I think the entire concept of electric cars recharged by the sun is a great idea.   And eventually, I think it will happen.   But first to market is often last in the marketplace, and Musk is basically being the sacrificial lamb here - prodding more mainstream manufacturers to move forward into this electric and solar era.   And once Trump and his cronies are out of office, maybe this idea will have legs.   In the next few years, however, it will be tough sledding.  As a personal investment, I don't think Tesla stock is a good buy for the small investor.  If you buy this stock, it is for emotional reasons not logical ones.  Even Musk is embarrassed by the stock price!

I think also that I am not fond of the idea of these "Tech Messiahs" who the press puts forward as the mythical gatekeepers of the future.   We are told that Bill Gates, who once said the Internet was a fad, has some special insight into technology and futurism.   He doesn't.   But if you want to sign a licensing agreement, you might want to run it by him.   The deal he made with IBM was what made him rich.   He is not a "tech guy".

It is sort of like how the press hangs on every word Stephen Hawking (whose personal life is a bit of a train wreck) says about futurism - as if every scientist knows everything about every technology.   Granted, the guy is a genius in the physics business.  Ask him about quantum gravity.   I am less sure he is an expert in "AI" (whatever the hell that is - it seems to be a catch-all phrase these days, like "block chain" - repeat it often enough and you will sound smart).   But the press reports breathlessly that Hawking is warning us about "AI" or global warming or whatever - things outside of his purview.   It is sort of like these Einstein "memes" that are bandied about, where poor old Albert is said to give his views on everything from economics to your sex life.   Most of these are things he never said, but even if he said them, what does a theoretical physicist bring to the table here?

Worse yet are the mere business-people who are hailed as "tech geniuses" such as Zuckerberg, Bezos, or that crazy guy who started Uber.   These are mere merchants in the marketplace, but we are told they are "tech" people and have special insight into everything from robotics, to "AI" (again) to politics, economics, futurism, global warming, or whatever.  And I guess you could argue that Musk, who made his money in PayPal (a mercantile endeavor if there ever was one) is part and parcel of this group - but at least he has earned his chops in the space and electric car business by actually doing things in these areas.

Put not your faith in Rocket Jesus - or any of his modern-day disciples.   Worshiping famous people or rich people is to worship a false God.   This is not to say these are bad people or that they have bad ideas, only that we should not place them so much on a pedestal.

Because unlike Gods, humans have a tendency to fall off.


UPDATE:  Some people like to hero-worship too much, and apparently my blog entry upsets their world view.  Surely these great men of our era are Ayn Rand style gods, right?   A reader writes that he read a book by Bill Gates, and in it, he says he foresaw the importance of the Internet.  Bullshit.  Sorry, but I was there, as were a number of other people.  Microsoft dropped the ball on the Internet, but of course, later on, put Netscape Navigator out of business by making IE part of Windows (just as the put WordPerfect out of business by bundling Word with Windows, originally).

Of course, maybe our reader read the revised edition of Bill Gates' book - where he suddenly has a road-to-Damascus experience and decides the Internet is the next big thing.


Tuesday, November 14, 2017

Dinner For Eight

Restaurant meals with more than 4 people can be problematic.

A reader writes, in response to my previous posting, that he dreads going out to large group dinners. And it's something that I wholeheartedly agree with.

Don't get me wrong, I enjoy going out for meal with another couple - maybe as many as six people in a group.  But beyond that, it just becomes cumbersome and difficult.  Of course, it is even better to have dinner at someone's house or have someone over for dinner at your house then to eat out in a restaurant.  Not only is it a lot more intimate and fun, it is a lot less expensive.

But here on retirement island, we have a number of friends who say things like "let's all go out for dinner together!" - wanting to get together a group as many as 8 or 10 or even 12 people to eat at a restaurant.  The problem with this is multi-fold.  First of all, when you come into the restaurant and ask for a table for 10, the waitress is going to give you the evil eye, and for good reason.

Look around any restaurant the next time you go on into one.  There are tables for two - the so-called "two-top" - as well as a number of four-tops and maybe even a six-top.   But there are not very many 8, 10 or 12 seat tables in most restaurants.  Moreover, most restaurants don't really like to see large parties for a number of reasons.  And there was a reason why they usually tack on a mandatory gratuity of 18% or more for parties of 6 or more.

Simply stated, from the restaurant's point of view, as well as that of the server, big tables are a big pain in the ass.   It's very hard to cook a large number of entrees and have them all come out at once - and have them all come out well.  If you're cooking for a party of 2 or 4 or even 6, this isn't too difficult.  But with much larger tables, it's very hard to make each entree come out so it is served at the perfect temperature and perfect doneness for each person in the party.  And oftentimes, one set of entrees comes out at one time, and another set ten minutes later.  As a result, either half the party has to start eating, or face dishes of cold food.

And large tables are often at disruption to the restaurant.  The servers have to scramble to assemble smaller tables into one larger one.  And if the party doesn't show, they've tied up an awful lot of their tables which could have been given to other diners - which is why a lot of restaurants refuse to seat people until the entire party has arrived, particularly large parties.  Not only that, but large parties tend to be loud and boisterous which is often disturbing to the other patrons.

But aside from the difficulties the restaurateur has, dining in large parties is often not very fun for the diner either.  In a large group, you can hope to maybe talk with the person on either side of you or perhaps somebody across the table.  But it is impossible to carry on a conversation with everybody else at the table, particularly in a noisy restaurant.  Thus, instead of being a party of 8, 10, or 12, you're really just a group of two or four tops dining together at adjoining tables.  Why bother?

I've been to some of these nightmares and it is very interesting.  Even though I am dining with people for an hour or two, if they are at the other end of the table I never get a chance to have more than a word or two with them.  It is almost as if we were not dining together at all, in fact we were not.  And if that is the case, then why bother going out to eat together in an unwieldy group?

This is less of a problem went dining at home, as it is quieter and is possible to have conversations across the table or down the table.  But in the noisy restaurant, you have to shout to hear yourself heard, which is probably one reason why large groups are often so loud and noisy.

And there is the issue of the check. As I noted before, waitresses restaurants routinely add on an 18% gratuity for large groups, apparently because some groups don't tip very well.  How to divide up the check becomes problematic.  Some people insist on separate checks, which some waitresses are very adept at handling.  Here in the South, asking for separate checks is quite common, but in other areas of the country, it is not only uncommon, but restaurants will refuse to do it.

When I worked at my first law firm, I used to go out to lunch with a number of other associates, which was a really bad idea career-wise.  We would spend an hour and a half at some Chinese restaurant in Chinatown, and come back to work bloated with food and sleepy.  However we always brought along one of the associates whose name was Bruce, as he could mentally divide a check in his head, accounting for what each person at the table ate, and how much it cost.  He had a genius knack for this, that made it worthwhile to take him along on these outings of 8 to 10 people.

But like I said that was a bad idea from a career perspective.  Partners seeing you come back to the office late from lunch or not very impressed with your work attitude.  And usually the conversation at such luncheons turns to how awful work is and what a rotten place the law firm is - things they're not necessarily good for your psyche.   But I digress.

Worse than these group dinner outings, here on retirement Island we have a number of supper club type organizations which get together on a monthly basis to have group dinners.  These are taking the group dinner nightmare to the next level.  Rather than just a group of 10 or 12 people, they get together with five or six tables of 10 to 12 people each.

One of the supper clubs actually expects members to invite as many as 10 people to a table and pay for their dinner, which is a rather expensive proposition.  I'm sure it started out as an interesting social experiment, but it is sort of kept going with a life of its own.

And unlike a cocktail party, these dinner meetings are not necessarily a means of socialization and mingling.  At a cocktail party you can walk around and talk to different people and introduce yourself and have brief conversations with a number of folks.  At a sit-down dinner party, you can only talk to the person on either side of you, particularly at a circular table of 12.

And rather than mix up people so that each attendee sits next to somebody they haven't met before - something a good hostess knows to do - they instead tend to stay within their particular groupings so that each person at a table already knows everybody else at the table.  As a result, newcomers are often shunted off to the "newcomers table" which is akin to the rickety card table that children are forced to sit at at Thanksgiving.

I recounted in earlier posting how much we are invited to such a party on nearby rich people's island. The hostess made an attempt to mix up the table seating as there were probably 30 people in attendance - far too many for a reasonable dinner party.  Nevertheless, she tried to make it fun and came up with table ornaments and name cards using a beach theme.  She intentionally mixed up the seating arrangements so that each person would be seated next to at least one person they had met before and thus generate conversation and socialization.

Unfortunately a boorish group came in and saw the table settings and swept them all aside and said "we're all going to sit here" and just disrupted the hostesses plan.  This is an astonishing breach of etiquette on their part.  As a result, everybody ended up grouping into the same cliques that they were before the party and no one really interacted with anybody else other than their existing friends.

We ended up sitting in a table in the kitchen with some friends we had come with, and decided quickly to leave.  There was really no point in going to a party where you don't meet anybody other than the people you already know.

Some friends of mine were invited to one of these supper clubs here on the island.  They reported that they when they went there, all of the tables were filled and they didn't have a chance to meet anyone else at the dinner.  Then end up sitting at a half-filled with a number of other newcomers.  The people who had invited them did not even sit with them.

A friend of mine tried to invite us to one of these supper club nightmares but we politely declined. When she asked me why I didn't want to go, I replied "I already lived through high school once, I don't need to go through that again."

I think perhaps that some people believe in the old adage, "the more the merrier," and feel uncomfortable in small groups, as small groups are very intimate and in-your-face.  When you're sitting down group of two three or four people, it is a much more intimate experience than being in a table of 6, 8, 10, or 12.  And many people are uncomfortable with intimacy.

In fact, I guess most people prefer to be superficial.  They want to put on a "face" to society - an image of who they believe themselves to be.  People do not like to discuss the more intimate aspects and details of their lives with others.  And I guess this ties into this obsession people have today with so-called privacy - this idea that they have this private life that is so, so top-secret, while at the same time spilling their guts out on Facebook.

So they prefer the group gathering to the intimate dinner, because it is less threatening to them.  In these group dinners, the conversation is superficial and there's a lot of guffawing and laughing going on, but not a lot of serious or deep conversation, the latter of which makes most people uncomfortable.  Again, the large group in the restaurant tends to be the loudest, and not merely because of their numbers.

Smaller groups are more interesting, I think, because people tend to say more interesting things.  It is hard to be glib and superficial when you are sitting face-to-face with another person in a more quieter environment.  More interesting and profound things get said.

I guess, in a way, this is why some people like to go to noisy and crowded bars - something I never really understood.  When I was younger, I used to go out with my friends to the bars and discos but was never really happy going there.  My friends all wanted to go and they said it was a lot of fun, and I guess I went along with the crowd because everyone said this is what you're supposed to do.

But at the end of the night, I find myself an awful lot poorer having paid for a cover charge and expensive watered-down drinks.  And of course I'd be half deaf with my ears ringing from the loud music and even louder conversation.  People had to nearly scream at each other to be heard over the sound of the music in the crowd.  And of course, back then, they allowed smoking in bars, so basically had to set fire to your clothes when she got home because they stink so badly of cigarettes. Going clubbing - what's not to like?

This is not to say I always had a bad time. I remember we went to see the Squirrel Nut Zippers at Club 9:30 in Washington DC back in the late 1990's, and it was an awful lot of fun with a group of friends.  Back then they have a cigar bar in a martini bar and we had a great seat on the balcony overlooking the stage. Of course, they weren't really a overly loud band and the crowd was pretty laid-back.

We were turned with a different group of friends a few months later to see a Hootie and the Blowfish (remember them?), and the audience was mostly middle-aged drunken white people.  It was not nearly as enjoyable experience as the place was packed shoulder-to-shoulder and the music was deafeningly loud.  The contrast between the two experiences was interesting.

Maybe this is another aspect of the madness of crowds.  That group-think is really not thinking at all, but merely cheerleading for each other.  And that can be fun perhaps once in a while.  But I think overall I prefer more contemplative and intimate experiences.

Monday, November 13, 2017

Just 'Cuz You Want It, Doesn't Mean You Can Have It!

Losing weight is like saving money - it is hard to do and requires a lot of self-control.

Mark and I are trying to lose weight again.   Over time, weight creeps up, just like credit card debt or monthly spending.   I have noted before that saving money and losing weight are very similar endeavors.  And they are both hard and most Americans fail at both.

And when we fail, we lash out at others or externalize our problems.  "I'm not fat, I just look that way next to those super-thin supermodels!  Fat-shame me?  Thin-shame them!   Full-sized girls are beautiful!"   And there is a nugget of truth in that - supermodels tend to look like emaciated boys, and that certainly isn't a desirable look or a healthy one.

Or we argue that it is our "hormones" or being "big-boned" or genetically disposed to fatness.  And there is a nugget of truth in that as well.  You can look back in your high school yearbook and see photos of friends who were thin then, but fat now.  And when you look at their old photos, you can tell they were destined for fatness.   For some reason or another, some people have no trouble staying slim, while for others, it is a struggle.

Or we externalize.  "It is all the bad stuff they put in the food!  High Fructose Corn Syrup!  Hormones in the meat!  Too much starch!"   And there is a nugget of truth in that as well.   But when you get right down to it, well, it is your choice to shove awful food in your mouth, as well as your choice how much to consume.

Finances are no different.   We fail to save and we fail to budget, and want to blame the Republicans, the Democrats, the "people on welfare" (code word for blacks), the evil 1%'ers, or whatever.  But none of these people "took our money away" if we never had any to begin with.   And just like weight gain, we didn't squander all our dough on one thing, but frittered it away on little things.  Bags of chips, or Cable TV.

Blaming others or externalizing isn't going to help you lose weight or save money.  It just isn't.   Even if all your Republican/ Democratic/ Libertarian/ Conservative/ Socialist/ Communist/ Fill-In-The-Blank theories were enacted into law tomorrow, you'd still be in the same economic position as before.  Maybe you'd get some tiny tax cut or your "guaranteed minimum income" - but neither would affect your financial situation that much.   You can't live on either.

So what is the answer?  Well, in part it is self-discipline, which is staggeringly hard.  It is all-too-easy to "treat" yourself to things, whether it is a handful of pretzels as you walk by the kitchen, or an impulse purchase at the shopping mall.  Just 'cuz you want it doesn't mean you can have it

And we kid ourselves that it is just a "little" snack or a "little" expense so it doesn't make too much of a difference.  But it is these little things that add up - which is why grandiose government or economic schemes rarely affect the vast majority of people.  We go into debt a penny at a time, on hundreds if not thousands of "little things" - not some jumbo single purchase.  At least in most cases.

Similarly, the stereotype of the fat person "gorging" themselves on mounds of food is just that - a stereotype and a wrong one.   All you need is an extra 100 calories a day, which translates to 3000 calories a month or a pound of fat, 12 pounds a year, and 120 pounds after a decade.   No one becomes fat overnight - or bankrupt.

Self-discipline is indeed the hardest thing there is to do, and the reason is quite simple:  Our brains are programmed to accumulate things.   In the wild, we want to find food - and indeed, for the majority of human beings alive today, getting sufficient caloric intake is a daily struggle (and you complain about too much! Shame!).   In the wild, we also want to accumulate things - flint tools, a bow-and-arrow, a warm fur, clothing, firewood, whatever.   In survivalist mode, we are not penalized for having too much, but will die if we have too little.  The caveman who was on a diet, died and did not live to reproduce (not that such a thing would even occur to a caveman!).

So our brains are programmed to eat and accumulate.  You are going against millions of years of biological programming when you say, "I want to eat less and consume less!"   It isn't easy to do!

One way that helps the logical brain overcome this emotional underling, is to have a goal in mind and chart that goal.   If you want to lose weight, weigh yourself every day and chart it on a piece of paper or on your computer or whatever.  Every single day- no exceptions!  No "I'm late for work!" and no "I'm on vacation!" or whatever other lame excuses we give ourselves.  Charting your caloric intake is also essential.  You can't control that which you can't measure as one reader reminds me.

Similarly, in financial matters, it pays to have a budget, to check your bank balances and investments daily.  I calculate my net worth on a daily basis - thanks to the plethora of net-worth calculation programs offered by investment houses and banks.  Press a button and voila! - your net worth down to the penny.    And this can tell you where you are coming from and where you are headed.  And it gives you an idea of what you can afford.

When I was younger, I let lenders make this decision for me.  Can I buy a new car?  I'll ask the bank how much I can borrow!  If they say yes, then it must be affordable, right?  Wrong.  Today, I consult my own finances and think, "Can I really afford to spend 1/10th of my net worth on a motorhome or a boat?"   While I could physically do so, the idea of taking 1/10th of one's wealth and spending it on something that will be worth nothing in a decade seems, well, obscene.

We all want a lot of things in life.   A restaurant entree or a new cell phone.   Or we convince ourselves (or are convinced by the television) that we desperately want these things.  Maybe I am getting older, but a bloated new SUV or a buggy new $1000 cell phone don't seem as desirable to me today as maybe they would have to a younger me, a decade or two ago.   They just seem less interesting.   And I guess this makes it easier to save.

Food, on the other hand, still has its allure.   And temptation is hard to resist!

Sunday, November 12, 2017

Debt and Fraud

What causes markets to crash in a cyclical fashion?

Growing up during the baby boom of the 1960s, there were two historical events that were beaten into my head by my parents, who were part of the "greatest generational ever" (and most modest).

The first, of course, was World War II.  We had just beaten the Nazis only a decade or two ago and learned a hard lesson that fascism and other easy solutions to complex problems are always the wrong answer.  Not only that, but Nazism and other forms of fascism are the ultimate horror.  Sadly, it seems this lesson is lost on many in the younger generation, for whom World War II is about as distant to them as World War I or the Civil War is to me.  But I digress.

The other historical event that my parents constantly reminded me of was, The Great Depression, which they had to live through, although they did not personally suffer too badly as a result of it.  However, they vividly remembered how conditions were very difficult for others.  For my father, it was the struggle of his parents to get by during the Depression, particularly his father, who was an alcoholic and was thrown out of the Buick dealer run by his brothers.  My grandfather ended up rejoining the Army (which he had been in during World War I) as it was one of the few jobs available to him.  He ended up being a "retread" - serving in both World War I and World War II.

My mother's family was a little better off.  My grandfather on her side was the mayor of Larchmont, New York and was a successful attorney in New York City, representing what would eventually become Citicorp.  Mother recalls vividly, the homeless man coming to the back door of the house asking for a sandwich or some other foodstuff in return for some menial labor.  Of course, back then we didn't call them homeless, but rather bums or hobos.

Both my parents also realized what caused the Great Depression.  During the Roaring Twenties, the stock market took off like a rocket and everybody was making money in stocks, or so it seemed.  One famous investor once remarked that he got out of the stock market when the grocery clerk packing his groceries was talking about the stocks he was invested in.  That investor realized that when such unsophisticated people started investing, the market was overheated and bound to fail.

At the time there were few regulations regarding the issuance of stocks, and the market could be easily controlled or manipulated.  Part of the recovery plan in the 1930's, under Roosevelt, was to institute new laws and regulations to govern the market and also regulate how banks operate in it.  My Grandfather, being the chair of the Banking Committee of the New York State Bar Association, spent some time flying down to Washington in Ford trimotors from Idlewild Airfield to discuss these new banking regulations with the Roosevelt administration.

Given the depth and breath of the Great Depression, these regulations remained in effect for many years.  Very few people were willing to propose loosening these regulations as the horrors of the Great Depression were too much to bear.  But just as the younger people today don't really understand Hitler and World War II, today many people, particularly on the Right, think these regulations should be abolished - and in many cases have been abolished.

It is a familiar cycle. A Republican administration decides that regulations in the market are ubnecessary and either loosens these restrictions or abolishes them entirely.  The market takes off like a rocket, and stocks and other commodities become way overvalued. People go heavily into debt, including governments.  Fraudsters and other marginal operators appear on the edges pitching shady stocks and investment deals. Eventually the entire thing collapses and we go back to where we started, instituting regulations in the financial market in an effort to recover our economy.

We saw this in 2008. Over the eight years of Bush administration, regulations in the market had been loosened repeatedly.  In addition, the government was on a spending spree not only for two foreign wars, but also because the formerly fiscally responsible Republicans decided to abandon all pretense of that responsibility and cut taxes without cutting spending.  In addition, all sorts of fraud and chicanery started to appear around the edges. I wrote before about mortgage fraud which many people ignorantly think was something done by Bank of America.  Rather, organized criminals were buying and selling houses and mortgaging them and ripping off the banks in the process.

Since it is a complicated scam, people don't understand how it works.  The economy is the same way.   It is complicated, so people don't understand it.  And they cry out for simple solutions to complicated problems.   "Lower taxes on the rich!" they cry, "and it will trickle down to us!"   Others want other simple solutions.  "Give everybody basic guaranteed income!" they say, "And we'll never have to work again!"   Both answers are simple and pay and wrong, simply because they address an incredibly complicated financial system and posit that adjusting one factor will change everything. Simple answers to complicated problems are usually the wrong answers.

And by the way, that's one reason why conspiracy theories are always wrong.  They are simple, pat answers to a complex world.  But I digress.

Getting back to 2008.  Eventually the economy came crashing down and a new president was elected.  The Obama administration instituted new financial regulations to clean up the marketplace. In addition a new Consumer Protection Bureau was established to prevent people from borrowing money on onerous  terms - or at least that was the idea.

And the economy recovered.  Unfortunately, one of Obama's big ideas was to create something calles a "Regulation A" which allowed people to offer stocks in small companies with few regulations and no oversight.  This was part of something called the JOBS Act which was designed to kick start businesses.  Nearly a decade later we're discovering that very few if any of the companies offering stock under Regulation A have succeeded, and in fact most have just been abject failures squandering all of their investors money.   And more than a few were con-jobs from the beginning, designed to enrich the founders and steal from the shareholders.

But in spite of this, the market has recovered and the economy, although slower than some would like, has had a steady march of progress since the crash of early 2009.   And once again we have a Republican President in power, who promises to eliminate unnecessary regulations and free up the market so it can take off like a rocket again.  Taxes will be slashed and the debt will increase as a result.  Republicans are even up front about how much debt they plan on adding - about 1.5 trillion to the 20 trillion we already have.  So we are seeing the market loosen up in terms of regulations and we are seeing an increase in debt load by the government.  We are also seeing an increase in personal debt load by American citizens.  This is starting to look like an awfully familiar formula.

As I noted in an earlier posting, many brick-and-mortar companies are going bankrupt or are struggling because of this debt.  The press likes to report that it is Amazon that is putting everyone out of business when in fact Amazon is only a small factor in this equation.  And it is not hard to see why they report this - people click on stories about Amazon, as it is interesting and fits their preconceived narrative.   Stories about retail debt are boring and hard to follow.   Personally, I find myself ordering less and less from Amazon, as their prices are "meh" and their checkout system is confusing as hell, with its "Prime" offers and convoluted "free shipping" offers ("free shipping for orders over $25 - provided we fulfill the order!").

Most of these companies were taking private by equity investors and then loaded up with debt.  These companies, which could have survived without the horrendous debt loads, are finding it impossible to service this debt, and as interest rates increase and these debts become due, it may be harder and harder for many of these companies to survive.

And apparently I'm not the only one to notice this.  This recent article on Bloomberg confirms my theory that most of these retail chains that are facing difficulties are loaded up with massive amounts of debt, and maybe set to fail as these debts become due and interest rates rise.  It's not just Amazon - in fact Amazon maybe a minor factor in all of this.

The other side of the coin is fraud.  We are starting to see around the edges more and more chicanery in terms of people offering stocks that are basically fraudulent vehicles from the get-go.  A number of these "Regulation A" offerings - in fact most of them - appear to be real losers from the get-go if in fact they were not designed to do so.  And even so-called "legitimate" companies have an aspect of fraud to them.

Some new "dot com" company which is all the rage in the marketplace and the darling of the financial prognosticator has a P/E ratio in the hundreds if in fact it is earning any money at all.  Some of these companies are so wildly overvalued that they may never earn back the stock price for the shareholders in their lifetimes.  They will, however make a lot of money for the founders and insiders who run these companies. The distinction between a fraudulent company and legitimate one is very hard to determine these days.

Is Twitter or Groupon or even Facebook a legitimate company offering a profitable service, or merely a vehicle for early investors and founders to make millions, if not billions, off the backs of small investors?  It could play either way.

Having grown up hearing stories about the Great Depression, and having lived through two or more major recessions in my lifetime, this seems to me to be a very predictable pattern. The market is exuberant and everyone is crowing how the Dow is at all-time highs. They said the same thing in 1929, 1989, and 2008.  And then it all came tumbling down.

Of course predicting the timing of this is what is most difficult.  When the stock market finally crashed in 1929, it was long after many people had predicted a crash was coming.  It seems that these type of ebullient markets coast on their own upward, just as a roller coaster car will coast up a hill further than you think it will.  We saw the same thing in 1989 when the real estate market crashed - and people thought for sure that it would have crashed years earlier.  The same is true with 2008.  I got out of the real estate market in 2005, sure that it was going to crash in 2006 at the latest. I t turns out I was off by a couple of years.

If this current situation fits this predictable pattern, we can expect to see more ebullience in the marketplace at least for another 12 to 18 months. Short-term profits for many companies will continue to climb as tax rates are cut and regulations loosened.  Of course, stock prices will continue to climb even if there are no increase in profits, as people will simply believe that there will be in the future.  And in fact, that seems to be what is going on right now - many investors are speculating that under Trump, businesses will take off down the road and they are thus "buying ahead" of the market.

That to me, is not a good sign.