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Month: September 2008

Thank God the bailout didn’t pass

Thank God the bailout didn’t pass

I’ve never had more thanks and faith in this mostly useless congress than yesterday.   It was a day that Democrats and Republicans alike revolted against their party leadership to look out for and listen to the people (who voters were rejecting this bailout at a rate of 100 to 1).  And because a bailout didn’t happen – are the stock markets collapsing today?  NO – we’re up by big margins in fact.  The sky didn’t fall (as I predicted) because in its heart of hearts – Wall Street knows a bailout is coming eventually.  I still predict more down days (which NEEDS to happen) but Wall Street certainly hasn’t died by a long shot – and won’t.  I was proud of our Oregon Rep Peter DeFazio – who called it just as it was (OPB interview of his vote – and worth the 5 minutes to hear) – and stood for his principles.  He just earned my vote next go around.

Yes, government intervention needs to happen (see below for why), and I almost half think this attempt was just show to make Wall Street’s immediate fears stop so they could get a breather for a real bill.  Still this was a really BAD plan that we should all be hugely thankful for it not passing.  There was growing evidence this bailout would just be a stop-gap, and in the end would have just deflated our currency and raised inflation (I agree) – and still wouldn’t have worked (did nothing to stop the downward spiral of house prices).  There are other financial experts weighing in on this matter in rapid order as DeFazio points out.  Many of those plans keep the burden on the financial institutes and Wall Street where it belongs – and many nearly or do pay for themselves without giving an acting Fed Chairman complete cart-blanc with absolute freedom without penalty of the courts.  Many of those methods were lessons learned from the 80’s hedge fund bailouts.

So keep writing your senators and reps daily – encourage them to do the *right things* – and not let something get ram-rodded through for the sake of doing something.  The last time that happened we ended up in an unjust war in Iraq.  When crisis’ hit – you don’t knee-jerk react – or you get a knee-jerk solution.  Tell your senators and congressmen to take a breath – because the markets will allow it – and get a correct fix.

 Let it all fail!

Still, it’s amazing how many folks on forums and around the web are dead set against the bailout for the wrong reasons – “Let the banks fail!”, “F* Wall Street!”, “Stop Corporate Greed!” – and other idiotic statements.  “I don’t want to pay for Wall Street’s fat cats” – well neither do I.  But guess what – you’re wrong that we can just let this all collapse now.  Its gotten too big now.  Go read about the collapse of 1929 if you need a little primer on how and why an entire market collapses and what happens to you at home when that occurs.

But another point I want to make my fellow Americans – before we love to start pointing fingers around – this time it was clearly not 100% corporate/Wall Street misbehavior like Enron was – this is different.  Yes, you did have financial institutes lending way too much money on too little capital (estimates were that some firms were leveraged to $5 trillion for every $100 billion in actual assets to back it).  I’ve said it several times, and I’ll say it again – the people not paying their debts this time are US.  WE are the ones not paying our housing mortgages because we got in over our heads.  WE are the ones that did not do our basic financial homework when making the biggest purchases in our lives.  WE are the ones running up record debts that some cannot pay in our own life times.  OUR INDIVIDUAL POOR DECISION MAKING has been feeding into this for years – and now the piper has come due.  Oh yes, banks and financial institutes stupidly let us – and they should have known better.  They did have a job to do and blew it royally. But we are the other half of the equation – and everyone chose to ignore the many financial planners that had been urging restraint and caution all along.  As one blogger put it:

This road to destruction was paved with the best of intentions – that everyone should be able to own a home. Unfortunately, that reality is much more difficult than just opening the doors of loaning to everyone.

The rules of good personal and loan management have been known for years – and we chose to disregard them. And lest you think you have some right to talk, I now, because of my GOOD planning and reading the signs – may get to pay back $2000 for each of your bad decisions. I think that gives me more right than anyone losing their home to b*tch. Next time you don’t think that actions have a consequence, every man woman AND *every child* in this country also just inherited $2000 worth of debt due to this actions. That 6 year old just got saddled with $2000 in debt. Nice legacy folks – well done.

If you can’t find it in the US…

If you can’t find it in the US…

My Aliens Pulse Rifle project continues.  In the process of gathering the parts I wanted, I’ve ended up with enough spares to make a second, much cheaper one using Airsoft parts.  Airsoft makes toy guns that shoot the little plastic yellow balls and have replicas of just about ever gun ever made.  Not only that, they usually have cheap, medium, and realistic versions of each – with the realistic ones being made of actual metal and often costing almost as much as the real thing.  However, the airsoft versions used by folks that build the Airsoft-based pulse rifles are very hard to find.  Especially the Maruzen M870 which hasn’t been made in years and is impossible to find in the US anymore.  Harder to find than the SPAS cages – which are real gun parts – if you can believe it.  In the end, the Maruzen toy version actually cost just a little more than a real 870 express – if you can find it. Crazy.

Anyway – enter Japan.  In Japan, the gun laws are so strict that there is just about no way for the average person to own a gun.  Consequently, the toy gun market is huge over there.  Just a little digging around on Yahoo Japan’s auction site turned one up – and I bought it through a marshalling service that I often bought cels through.  In Japan, Yahoo’s auction site is king – not eBay.  And you can find all kinds of stuff that you can’t in the US.  The prices turn out to be about the same – plus about 10% for the marshalling services and mailing.  So all-in-all not bad.  Tricky part is that everything is in Japanese – so one has to wade through a bit of confusion.  Still – something you might want to keep in mind.

President Bush’s…surprise

President Bush’s…surprise

I like most of you, heard Pres Bush’s 15-minute address on Wednesday.  If you missed it, the text is here and along with the audio/video as well.  The most surprising part – he described the situation very accurately, succinctly, and – quite honestly – surprised me with how well he did with it.

He spent the first half of the speech describing how we got where we are now at (and his summary was as good and accurate a summary as I’ve yet heard).  He acknowledged the anger and frustration of folks that did do their homework and pay their bills on time, as well as assure that the Wall Street would be given a stimulus package in order to stabilize the market.  He ended on an inspiring note – which I urge you to read – because I think it’s true.

While I’ve not been a big fan of George over the years on various things (I’m registered as independent as they come) – this is by far the best address I’ve ever heard him make.   If you want a good summary of what happened on wall street and why we now are stuck bailing it out (or facing near depression era market/economy collapse), I now will be pointing folks to George’s speech.  And that’s a first.

Most untrusted man I ever heard

Most untrusted man I ever heard

I listened to some of the Fed Chairman Ben Bernanke’s address to congress about the bailout.  It was stunning.  The man seemed to have only one solution on the table – complete bailout without questions or accountability now.  No questions, no alternatives, just dump the money on me and we’ll figure it out.  Not only that, it was only two pages.  Here’s the text.  Want scary – read these parts:

Sec 8 – Review:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec 10 – Increase in statutory Limit on the Public Debt:
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000


So, if I’m reading right, he’s saying they must give him the money to dispense with in any way he pleases WITHOUT any oversight or review by courts or congress – even after the fact.  Get out of jail free cards were never so easy to get!

And if you think that the $750 billion is what it’ll cost, he just tipped his hand.  Sec 10 says that the national debt may be raised to $11 TRILLION dollars. Our national debt currently stands at 9.7 trillion.  So in other words, Bernanke is giving us a guess of what this bailout will cost: 11.3 – 9.7 = 1.6 Trillion dollars.  That jives – most projected numbers for government projects are about half of the reality.

Even worse, there is a staring match going on between the Fed and the embattered loan companies who aren’t keen to reveal the extent of their bad loans just yet.   I kid you not, one of these mortgage brokers was quoted saying:

“If we can just get liquidity back (aka – money given to us), we’ll be able to move all this debt at current or better market value.”

You must be kidding me?  With home prices dropping anywhere from 5%-50% depending on region – exactly where does this guy plan to sell this debt?  In other words, these guys are flat lying through their teeth in order to cover up the extent of how bad it is (likely – since once a bailout starts -aka foot in the door – they can just keep shoveling since you wouldn’t want to stop now would you?), or they’re completely incompetent (even worse).

I’m emailing all my congressmen/senators today about this – and I highly recommend you do to.  Here’s what I sent (sans the swearing):

1. A step-by-step bailout with regular re-evaluation.  The markets are mostly stabilized right now (Wall Street).  They believe a bailout will be coming and are now just sitting still.  Ensure the markets that targeted support will be given by the government on a case by case basis.  Just as we have been doing so far.  Congress, if you bail these jokers out and give them a blank check – I’ll seriously be pissed off at every one of you.
2. If you are getting bailed out – you’re upfront and honest about the debt situation or you GO TO JAIL.  What the f*ck!  These guys running this thing can sit and lie to you while putting their hands out for wads of cash – cash they f*cked up the first time???  Only an idiot gives a fool money.  Their either fools or criminals – they should be treated as such.
3.  If you get bought out – you lose your company.  If the government buys you – then they get to set the rules of lending, they get all your perks, they get all your bonuses, they get everything until you’re paid back in full with interest (or all your assets are sold).  Maybe at the end they give it back to you – much poorer and hopefully wiser.
4.  Something very shady is happening – somebody likely needs to be going to jail.  Bernanke didn’t offer one alternative than pass me the loot with no strings, oversight, or jailtime attached.  That’s NOT open and honest government.  Something very fishy is going on – and has been.  There’s NO WAY these experts didn’t know what was going on.  My single personal finance class told me that even before the housing crash were were headed for big trouble.  How did they not?
5. The market needs to experience some SERIOUS pain.  Unless folks lose some serious money.  Unless some lose houses.  Unless some go bankrupt, unless some folks go to JAIL – we will be in this situation again in 10-20 years.  The problem was half lack of oversight, but as any behavioral psychologist will tell you – unless *core behaviors* change – we will do this again (like many other countries: Argentina’s a great example) every 10-20 years.  Only a fool keeps lending money to relatives that can’t manage money.  We simply have all been living beyond our means for too long.  We all need to experience some personal ass kicking and loss or we will not change the core behavior of the people who did this.  Instead, it will reinforce bad loaning behavior, it’ll reinforce bad consumer behavior (aka running up huge debts they can’t afford), and will ruin the value of our markets.
The US is taken the first big step into becoming a second-world economy.  The US dollar and markets are now no longer considered bullet-proof – so now folks are going to start take their money elsewhere.

The market and you

The market and you

After listening to the talking heads blame this and that for the latest financial situation- and OPB’s love to link everything to the coming election – I want to throw a little of my take on this out there.

I keep hearing folks walking around out here saying “It’s the fault of George Bush”   I’m not a big fan of Georgy-boy – but folks – if you think the president sitting in his office is responsible for this current economic meltdown – you need to wake the heck up.   I was listening to “World Have your Say” and I think a British caller said it best:

We’ve been telling people for so long that they can have anything they want that people have run up debts they can’t hope to pay off in their lifetimes.  It’s time for people to start living within their means and stop thinking they can afford to just run up debt.

If you’re expecting a new president to fix these problems – you’re probably going to be sorely disappointed.  They can exacerbate or help stem the tide – but tough times are definitely coming.  This will likely take YEARS to recover from – since it took us years of bad behavior to get to this point.  But the problem started somewhere else.  It started with each of US running up the largest individual debt loads in the history of our country without doing our homework.  It seems we’ve lost touch with what it looks like to be financially healthy.

So lets sit down and have a little lesson on what has traditionally and financially been described as being on track.  One of the best courses I took in college was a financial planning course.  It helped me as much as almost any of my CS courses.  Here’s the principles:

1. You’ve done a monthly budget.  You know what is coming in (pay, annuities, interest, etc) and what’s going out (rent, food, gas, utilities, loan payments, etc).  Unless you have set this all down, you don’t even know if you can afford to live where you live.  Without this, you don’t even know what you can afford/not afford.  But with this, you can answer questions like:

  • Am I living in a place I can really afford, or do I need to downsize.  Can I upsize?
  • What are my fixed monthly costs (utilities, rent, medical, etc)
  • How much money do I have for discretionary/entertainment
  • etc.

2. You’re habitually (read EVERY paycheck) saving at least 30% of your income.  Whaa?! you cry.  That’s not possible!  Well, the savings rate of Chinese has reached nearly 50%.  Yet, Americans have been averaging 1% or LESS per year in the last 5 years.  One of the leading indicators of a healthy economic system is the savings rate.  America’s is abysmal and the day of reckoning is starting to become reality. Things that must be saved for:

  • 401k/retirement – for most people, your goal is to have your contributions maxed at 15% of EVERY paycheck (and hopefully that’s matched to some degree by your employer).  Above/beyond that you should be contributing the $5k yearly max to your Roth IRA each year.
  • Contributing to your fully-funded emergency fund and to a minimum 6-month living expense account (see below)
  • Anything left should be put into a good mutual fund until you hit 30% (or more)

3. You have at least $1000 in an emergency fund.  In cash, ready to be used for a car breaking down, unexpected expense, etc.  This helps you maintain your savings goal of #1 so you’re not schizophrenically starting/stopping/changing your contributions.

4. You have at LEAST 6 months of living expenses on hand in CASH.  Not in bonds/stocks/retirement accounts.  This is money above and beyond anything else sitting there ready to be used with no other strings attached.  The way you know you have enough is that if you lost your job, no relatives could send you money (aka absolutely NO other money is coming in), could you pay all your bills, rent, home/car/student loan payments, buy food, gas, and have enough money to go looking for another job for a solid 6 months.  Better still is having 9-12 months saved – especially if you have a professional job that might take some time to find a position.  Odds are very good this is going to be in the $20,000-$30,000 range for most folks.  More if you have a family.

I personally have 9 months saved up with enough money to go to 2 targeted conferences with job fairs and pay for 3 flights with hotel+car rental during that time.  In addition, I have enough for first/last month and moving expenses in case a new job takes me to another city.

Why in cash?  Well, because if you lose your job, odds are good the time that happens will be a financially tough time in the economy at large.  Hence the reason you got laid off.  That means that stocks and other investment vehicles will probably be down as well.  When I worked at Intel and the dot-com crash happened, the stocks crashed too.  Then you get laid off and if you try to liquidate those stocks for your living expenses and you had half of what you thought you had.  And you’re stuck because you can’t wait to liquidate them when things are better.

Also, when the dot-com crashed, there were lots of computer folks looking for the same jobs.  I knew people looking for work for 12 months.  Don’t just think because you’re highly skilled means you won’t be out of work.  Often when layoffs happen, nobody else is hiring either – and there will be lots of folks with good skills fighting for the very few jobs open.  That’s why you need to save up more than what normal market conditions would require.

To beat inflation, you can put the 3 month blocks of living expenses in rolling over CD’s spaced so that every 3 months one of them becomes available.  Your goal is NOT to build money, but beat inflation but be immediately available and guaranteed.

5. Alway be insured My professor had a rule:  You must be adequately covered by insurance for all possibilities you can’t absorb with cash in hand.  This was kind of a surprise for me.  My professor said that if you aren’t comfortable/able to pay for some eventuality – you need to be covered by insurance.  Some examples:

  • Health Insurance – I know, this is brutal – and a good percentage of our country does not have this.  If you don’t have health insurance, you should be doing everything in your power to get it – even partial coverage.  You are guaranteed to need health coverage at some point in your life – even if you are as fit as a fiddle. Without coverage, you’re playing with serious fire and you should NOT be going on to buy houses or cars or other things until you are covered.  This is number 1.  If not, prepare to become a sob story on the radio.  I have no sympathy for you and you don’t deserve government bailout if you’re driving a new car but don’t have health insurance.
  • Long-term disability – should cover you to a minimum of 80% of your current annual salary.  Surprised me – but you can’t believe how many folks get disabled in car accidents/back injuries/etc that will debilitate them for the rest of their lives.  Without this coverage – you’ll be saddle with the double problems of not being able to work and likely having persistent and expensive medical outlays at the same time.
  • Car insurance – a single car accident that seriously injures someone in another car or folks in your own car (including yourself) can result in lawsuits that can run up to a million dollars.  I’ve personally seen it.  And if you’re not covered – you most likely will be dragged into a court room and lose your house or anything else of value on top of trying to recover from injuries you’re trying to deal with yourself.  You simply must have coverage and not the bare minimum.  Just a few years ago, $100,000 in coverage was thought to be adequate, that number is now $300,000.  If you don’t have coverage – you can expect to lose your home or have your wages garnished for near the rest of your life.  All in the blink of an eye.
    Now, I used to drive an old Nissan that was worth $1500 blue-book value.  I simply dropped insurance to cover my own car in an accident at that point.   However, I still kept $100,000 in coverage for injury/other drivers.  I saved $30/mo that way.  Reason being that I had enough money saved up that I could absorb that money IF I got in an accident.  And you know what – the gamble paid off.  I had no accidents and ended up saving about $400 in one year.  However, this requires that you actually HAVE the money to replace the car and can actually absorb that hit.  It’s a gamble that if you lose, you can just shrug and pay off – not live on Ramen noodles for 6 months.  This is the principle of ‘if you can absorb it – don’t insure for it.  If you can’t absorb it – then insure for it’
  • Home/renters insurance – I went without this for some time when I didn’t have much in the way of possessions.  The cost of insuring it was not worth the few $1000 worth of stuff I had.  Now that’s not so true.  Don’t believe me?  How much would it cost to replace the clothes, books, kitchen wares, computer, electronics (xbox, stereo, tv, dvd player), furniture, bed,  paintings, blinds, etc in your home or apartment?  If you could re-buy it yourself and not cry any tears – then just go without insurance.  But unless you’re a monk (which I dabbled with!), you’ll have about $10,000 worth of stuff – even if you’re living frugally.
    Also, in an apartment, just ONE irresponsible person can burn the building down – so your exposure is higher.
  • Life insurance.  I have no heirs or dependents – so I don’t bother.  Sure, you could get it and donate it to some good cause, but I don’t bother.  If you have kids/wife, I believe the amount you need is equal to 5-10 years of living expenses – but I’m not sure of that exact number – look it up.

6.  Buying a home – you cannot afford a home unless you have a 20% down payment in cash, and your monthly mortgage payment (WITHOUT DEDUCTIONS) is 40% or LESS of your TAKE HOME (after tax) pay on a 15 year FIXED mortgage.  You should also have on hand the 6-12 month emergency fund funded to take care of the new mortgage payments as well.  This sounds outrageous and overly harsh considering the financial vehicles being peddled today (interest only, second mortgages, etc).  But traditionally, and for most years up until this point, this was the rule of lenders for home buyers.  By following this rule you can absorb repairs that will likely run thousands of dollars, can absorb a market decline, refinance to a 30 if you get into financial trouble, AND still have a life.  This also means you’ll likely be buying 1/2 the house other people are buying with your same income.   But when you can barely afford the monthly payments on your 30 year mortgage, already have a floor rented out, AND then get hit with a job loss/new roof/etc – you have absolutely no out or way to work with the bank.  Which is exactly what you’re seeing play out all over the country.

You also cannot afford to buy a house if you don’t have the first 5 things covered (fully funded retirement, fully funded emergency funds, insurance).  First things first.

7. You have clear financial goals and review them yearly at minimum  You do not let your finances go on autopilot – even if you have no immediate goals.  Mutual funds for your retirement need to be reviewed every year at bare minimum.  Other goals you might be working on:

  • Paying off all debt
  • Weddings
  • Dream vacations
  • Savings for a child/children
  • Saving for child college fund
  • Additional money for investment purposes or starting a business (businesses should almost *always* be started from home while you have gainful employment until they are making money and can pay for themselves and you)

And so forth.  Basically: you have plans and are working towards them.
And least you think this is all impossible, I do this AND contribute 10% of my salary to charity (all save owning a house anyway – because I haven’t got the 20% down yet).

I’m sure there’s others – suggestions you’ve heard?

Pulse rifle parts!

Pulse rifle parts!

Hey there!  I arrive home to find my latest purchase has arrived.

As some of my friends know, I’ve had a little hobby I’ve been churning on in the background.  It’s to build an authentic, original parts Pulse Rifle used in the movie Aliens.  Why?  Because it’s awesome – and one of the most sought-after builds.  Not only that, but so many folks do it, that there is a good collection of folks online contributing to it.

The build itself is very expensive – as you need to buy actual gun parts as well as manufacture or buy secondary parts.  The hardest part of the build is actually aquiring 2 cage parts from a no-longer importable Fanchi SPAS-12 shotgun.  I have been working my way down the list from hardest to easiest parts to acquire, and now all I need is a few simple pieces that most local shops sell.

I’m going to sort the parts this afternoon, and perhaps start a new blog!

Day 7 – Doubt I’ll ever use US Airways again

Day 7 – Doubt I’ll ever use US Airways again

After a nice morning and a stop at Harvard for lunch, I hopped the train to the airport.  Upon arriving, I find that all their flights to Philadelphia are canceled due to “storms”.  Funny – the other carriers didn’t seem to cancel their flights to Phili.  So, I get to stand in huge line with a bunch of other folks.  Well, long story short, I ended up getting my 5 hour near direct flight re-routed though Arizona and it turned into 8 hours of flying for a total of 12 total traveling hours including the delays and standing in lines.

I did manage to get my checked bag (that was also overweight) thrown in for free, and exit rows on both flights – at least that made up for some of it.  People right next to me took the same flights to Portland – but didn’t get those amenities.  Shows what being nice to the gate agent will get you.

Still I seriously doubt I’ll fly US Airways again.  I got the distinct feeling they were simply canceling flights to fill existing flights and staffing.  They mentioned that the flights I was re-routed on were nearly empty. One fellow in line next to me said in the 3 years he’s been flying them (traveling at least monthly) he has only had everything go smoothly about 5 times.  Not good.

PS: on my way out, we got deplaned in AZ at 1am and delayed an hour due to hydrologic problems.

Boston – Day 6

Boston – Day 6

We got a relaxing start to the day and planned on doing the tour of Fenway park and then seeing the Isabella Stewart Gardner house and maybe the Museum of Fine Arts.  However, after the tour of Fenway, I was convinced I wanted to stay for the evening game.  Problem was getting tickets – and so began the most amazing evening of baseball ever – which ends in me actually getting into the baseball hall of fame.  No, I’m not lying or exaggerating.

So, my brother and I decide to try our hand by standing in the line for same-day-sale tickets that are left over from all the sales.  It’s basically 100-300 tickets that were left unsold at retailers.  You just walk up and get what’s left basically; but you only have to pay normal face price.  Ah Fenway, your ticket scalpers were everywhere selling tickets around the stadium for 2-8x the face value of tickets.  Pushy too.  We were prepared to take anything that was left.  We got in line about 5pm, and then waited until 7pm when the gate opened.  We were about 50th in line, and the ticket agent actually had 2 tickets together up on the green monster.  We bought them at face value and headed up to our amazing seats.

Second row of the green monster, seats 1 and 2 right over the third base fowl line.  So close you can taste the action.  We sat next to two older guys, Mike and Ron who said that in the 30+ years they’d been attending games, this was the first time they’d ever gotten tickets over the green monster.  They couldn’t believe we’d actually just gotten tickets by walking up.  Apparently luck was smiling.

But that’s half the story.  Next up, this game was the record-breaking 456th consecutive sell-out crowd at Fenway.  As part of the proof of the record, the names of all the ticketholders were included in the record-breaking submission.  So now my, and several thousands of others, names are now in the baseball hall of fame. No lie, I have a little certificate to prove it.

And finally, I got to meet the ball boy+girl and the guy that threw out the first pitch – who happen to have gotten the seats right next to us.  How’s that for amazing?

Oh yeah, and here’s the last play of the game (avi) – Boston wins 3-0 against the Rays:

We didn’t actually get to the museums – but somehow I don’t feel sad.

Boston – Day 5

Boston – Day 5

Went on the freedom trail today – well, half of it anyway.  Time was a little limited and after mass, we only had time to take care of the whole Northside part of the trail – which was great.  Got to see the ‘little Italy’ part of town and attend mass there.

We toured Paul Revere’s house, the old North Church where the ‘one if by land two if by sea’ lanterns were placed.

Also saw the Constitution – the worlds oldest floating, still operational battleship

Overall, a great tour of Boston’s north end.

Boston – Day 4

Boston – Day 4

After a whole week of good luck with weather, the remnants of  hurricane Hanna resulted in a full day of rainy, blowy weather.  We decided to take a relaxing day inside cooking lobster and watching football.

Here’s our friends Pinchy and Grabby about to become dinner: