Sunday, May 20, 2018

Are All Psychiatrists Crazy?

Psychiatry was quite a fad back in the 1960's - even middle-class people went to a "shrink" or an "analyst" to discuss their angst.   Today, it it less popular among the bulk of Americans, only because insurance no longer covers this expensive treatment.   But are psychiatrists themselves a little crazy?  I think you have to be a little nuts to become one, quite frankly - and many have admitted as much to me!

Back when I was a kid in the 1960's and 1970's, going to a psychiatrist was a common thing among the middle-class.  It was, in fact, sort of a perverse status symbol, that you had some sort of angst about the modern world, and could afford to spend an hour every week talking to someone about your deepest feelings.   Psychiatrist jokes were common with comedians.  Being "analyzed" was featured in movies, such as Annie Hall.  Bob Newhart did a show where he played a psychiatrist - and not for insane people, but rather for common folks with quirky complexes or anxieties. Charles Shultz featured Lucy as a 5-cent psychiatrist, as shown above.  It was a thing back then.

Of course, back then, the psychiatrists, like the "pain doctors" of today, were also your drug dealers.  Feeling a little stressed?  Go do the nice doc, and he'll write you a script for some Quaaludes.   It was a booming business, and so long as the insurance company paid (as they do today with Oxycontin and "sports medicine" clinics), the party kept going on.   But eventually, Quaaludes were outlawed, and after some prominent overdoses involving other depressants, the whole idea of "better living through chemistry" started to fade from the scene.  The coupe-de-grace was when companies cut benefits, such as mental health counseling, from their insurance plans.

But hey, by then, it was the late 1970's - the "me" decade.  Downers were out, cocaine, was in.   Snort a line and you're king of the world!  No time for angst and doubt now - in fact, going to a "shrink" was no longer seen as a status symbol, but a mark of weakness.   Psychiatrists had their hands full with really mentally ill people by that point, anyway - many victims of the "free love" and drug era of the previous decade.

Along the path of life, I've met many of psychiatrist and psychologist, and quite frankly, I always thought they were the blind-leading-the-blind.   Their personal lives were often train wrecks, yet they were dispensing advice to other people.   What's more, they often were a little crazy themselves, and more than one admitted to me that they got into the field to better understand their own problems.

My first exposure to a "shrink" was my Mother's psychiatrist, who also "treated" my brother, which arguably is a conflict.  He sedated Mother with Librium, which didn't seem to help with her underlying problems - alcoholism and an inability to come to grips with her sexuality.  In fact, I doubt my mother ever mentioned the latter to her doctor (out of some sort of stupid, outdated concept of shame) or admitted to the former.   If you lie to your psychiatrist, you aren't going to get better.  Yet most of the patients I've known have told me things that their doctor should know about - but they feel too embarrassed to admit them.  How can a shrink do you any good if he has an inaccurate picture of you?

The problem with Mom's doctor went beyond that.  I ended up dating his daughter, and she was a nice girl, but decidedly mentally ill.   Their house was a crazy house.  I don't know how to explain it - I don't believe in auras or that nonsense.  But at least three four times in my life, I have been in houses where you can tell crazy is going on.  They are deafeningly quiet.   The first was my brother's girlfriend's house.  Her mother was sedated beyond all belief - sort of like Mary Hartman.  Her brother was also crazy - institutionalized, actually - again having more to do with his family not accepting his sexuality than anything else.

The house was deathly quiet.  Even when the television was blaring, it was deathly quiet.  I don't know how to describe it, but it was like the soul was sucked out of the place.  Later on in life, I would meet a very nice young man whose Mother committed suicide.  He and his Dad lived alone together, in the same house his Mother died in.  That house was very quiet as well.  And I just thought of it, my friend whose brother committed suicide also lived in one of these "quiet" houses as well.  Maybe it is a matter of my perception.  Maybe there is something to this aura nonsense.  Probably the former.

Anyway, my girlfriend's house - which was also my Mother's and brother's psychiatrist's house, also had that deathly quiet aura about it.  One day we were there, in her room, and we started talking about horses, for some reason.  "We have a horse!" she said.   This was odd to me, as I had been in their barn and never saw any horse.  She took me outside to a shed, and opened up the door, which appeared to be stuck.  Inside the darkened shed (with no open windows) was a sad-looking old mare, standing in its own filth.   I was appalled.  Apparently, they had bought the horse ages ago, lost interest in it, and basically fed it once in a while and very rarely, cleaned out its shed.

Welcome to crazytown.  Population, one family.

I kind of became skeptical of psychiatrists at that point.  How could this guy help my Mother and brother, when his own household was so messed up?

I met a few more head shrinkers in my life.  One was the head of the psychology department at a school I used to go to.  He was a very nice guy, but wanted me to come back to his office with him, after hours, so he could "hypnotize" me.  He put his hand on my inner thigh, and I figured out quickly what he really wanted.   And he was married, too.  Another psychologist I met in academia finally came out of the closet at age 45.  He liked to hang out with the pretty boys, so I was safe around him.  But it amazed me that someone who is supposed to be giving advice to people, particularly young people, couldn't figure out his own life very well.   He admitted to me that one reason he got into the field was to deal with his own issues about sexuality.

And these were not bad guys - I liked them both in spite of their faults (and hoped they did vice-versa).  But the point is, where they in any position to be doling out wisdom of the mind to other before getting their own house in order?

But of course, he got his PhD in an era where homosexuality was considered a mental illness.   So maybe he was a victim of the era.   But I didn't really feel he had his shit together - any more than any other person does.   And that is why I am not a fan of gurus, religious leaders, and whatnot.  The idea that some of us, having lived about the same short time-span on this planet, and having about the same life experiences, have some special insight into life that others of us don't have, seems kind of ridiculous.  I mean, you go to shrink school or priest school, and they teach you in a few years, all the secrets of life that the rest of us don't know?   I highly doubt that could happen.

As I noted before, I doubt the human brain can accurately map out the human brain.  It just seems to be patently obvious - you cannot put more information into a vessel than it can hold, and us trying to understand how our brains work is like a toaster telling you how it works.   It is a noble effort, to be sure, but it seems like a divide-by-zero error to me.  If we truly understood how our brains worked, down to the most minute detail, we would become Gods.   And that ain't about to happen.

But on the other hand, perhaps if we knew the basic structure of the brain and how it works and malfunctions, it might be illuminating.   One of the most insightful books I ever read, was not about psychiatry or the human mind, but was a Defense Advance Research Projects Agency (DARPA) concerning neural networks.  Reading about how neural networks - which are based on the design of the human brain - work and malfunction was illuminating.   Trying to train a Maverick Missile to identify Soviet tanks by optical recognition was almost comical.   What was intended was for the network to "learn" what a Soviet tank looked like, as opposed to a NATO tank.   What the system actually learned was to identify the difference between spy photos (grainy, out of focus, and dark)  of Soviet tanks and "beauty shots" from tank manufacturers (bright, focused, and clear) of NATO tanks.  What the system actually learned was to aim at dark and obscured objects.

Sort of reminds you of how teenagers learn.  You try to teach them one thing, but they are learning something else entirely - often the opposite of what you intended!

But I digress.

My next experience with the head shrinkers was a little scary.  I was dating a young man who had anxiety problems - again related to sexuality.   He was mocked and bullied in high school, and instead of graduating and putting it as far behind him as possible, he had an episode and ended up in a hospital.  This resulted in him staying in high school until he was 20.   The problem was "high school" and the cure was "more high school."   It was like torture.

So they medicated him and got him hooked on the psychiatry gag, such that he adopted mental illness as a hobby.   As I noted before, one problem with mentally ill people is that they are selfish they are introspective and think the world revolves around them.  The "cure" for this is to spend hours each week talking about themselves with a doctor, which makes them feel even more important and their trivial problems even larger than they are.  The cure is to throw gasoline on the fire.   Oh, and by the way,  no one has ever been cured by psychiatrists or psychologists.

What scared me about his doctor was that he asked to see me (and charged me for the visit as well!) and during our "session" he told me a lot of confidential patient information about my friend. Not only was it a conflict for him to see me at all, but to tell me doctor-patient confidential information was beyond unprofessional!

We ended up seeing a counselor at school, and his advice to me was "run away as fast as you can!" which turned out to be good advice.   It is difficult, if not impossible, to form a healthy relationship with a crazy person.  It is hard enough to do it with someone who is "normal" (whatever that is).    As I noted above, even "professionals" in this field have a batting average of .000 in terms of effecting a cure.   What are the odds you'll be able to work things out with someone who is off-kilter?

This is not to say that we don't have empathy for folks who are crazy.  The problem is, as I noted before, they are often selfish and look at the world through a crazy prism, where the world is a merry-go-round, and they are in the center.   And the rest of us are just wallpaper.   So when you shoot up a school, well, those aren't real people you're killing, right?  It is just another first-person-shooter video game, and you've got the high score!

And that brings us to the present.   While having an "analyst" was all in vogue in 1968 in the Mad Men era, today the shrinks are busy with more serious problems - young people (and it usually is when this sets in - around 18-22 years old) going crazy and becoming violent.   No longer is the bread-and-butter of the business some bored housewife who is anxious about the "rooskies" dropping "the big one" or the helter-skelter of "modern" living.   No longer is it some young executive who is overly stressed and wants a happy pill.   No, today, it is really crazy people doing very bad things - to themselves or others.   And a lot of the work ends up being forensic.

Are people today crazier than back in 1968?   Perhaps so.   We watch far more television these days, and the Internet - well, you get the idea.   It is possible to be a "little" off and still be functional in society.  But if you spend hours every day on a conspiracy theory site, an ISIS recruiting site, or an alt.right discussion group, you can go from a little off to way off in no time.

And then there is depression.   People watch too much television and get depressed, because their lives are not as fabulous as the people on TeeVee.   They end up watching other people cook, dance, remodel homes, or build trebuchets in their back yard, rather than doing things themselves.  As a result, they develop learned helplessness, a condition that occurs when people start to think nothing they can do can change their world, even a little bit

Of course, the cure for this is simple - no pills, no analysts are needed.   Simply cut the cord on cable, and spend less time on the Internet.  Get off Facebook and Twitter.  Stop watching other people do things and do things yourself.

You will be a lot happier in life and actually get shit done as well as save money.   Instead of watching TeeVee, getting depressed and sending out for pizza (and feeling worthless as a result) you can make your own meals, save money, and put money in the bank (and pay off your debts).   Who knows, maybe you'll be the one on reality TeeVee.   I think so many Americans feel so useless and depressed these days that reality TeeVee is running out of people to feature, as most Americans are couch potatoes whose only shot at fame is to be the victim or witness to some regularly occurring mass-shooting.

Of course, a lot of other things have changed since the 1960's.  We all saw One Flew Over the Cuckoo's Nest and thought that mental institutions were cruel and should be closed.  So we did.  We closed them and opened homeless shelters - medicating millions of people who should have been in a controlled environment.   They get better, stop taking their meds, and then get worse - in a never-ending cycle of misery.  A worse form of torture, I could not imagine.  And yet, we thought mental institutions were cruel.   Go figure!

I am not sure what the point of all of this was.   A reader sent me an article about how guaranteed basic income was a good idea - an article written by a psychiatrist.  And my gut reaction was, other than playing outside of his sandbox, that most psychiatrists and psychologists are looney-tunes.  If you can't spot the obvious flaws in "guaranteed basic income" then you really don't think very hard.

But I guess it illustrates how some folks are willing to believe anything said by anybody who has a set of "credentials" - no matter whether these credentials are relevant to the line of work they are in, or whether, in fact, those credentials really qualify them in their own field of work!  Think about this:  Whenever some "crazy" guy shoots up some place with a gun (like this week, last week, 20 minutes ago, whatever), a number of "expert witnesses" will appear at trial to argue whether the person was sane or not.  If sane, we can put him in the chair and fry him (hooray!).  If not, he ends up like John Hinkley, a quasi-celebrity who is now living at home with his Mother.  How nice for him.

The point is, in this "science of the mind" we have, you can line up and equal number of experts in the field, who will come to opposite conclusions (crazy or sane) in almost every case.  And maybe because I used to be a lawyer, that I am skeptical of "expert witnesses" because in many cases, they say what you pay them to say, and not what is necessarily the truth.   And juries, baffled and confused by a litany of degrees and awards, will buy a credentialist argument, and assume that whatever the credentialed guy says is true.

And before you take me to task on that, let me remind you that Ben Carson is a neurosurgeon.

Would you go to him for advice... on anything?

Saturday, May 19, 2018

Obama care and Delaying Social Security

Taking social security early may mean losing your Obamacare subsidy.

A reader writes that he and his wife are debating whether to take Social Security early or not.  And one thing that is affecting their decision is the Obamacare subsidy.  If they take Social Security early, they may lose all or part of their Obamacare subsidy - meaning they may have to pay tens of thousands of dollars for ObamaCare, each year.

One problem with Social Security is that the age cutoffs are completely detached from that of Medicare.  At the present time, you can collect Social Security early at age 62 or wait until the full retirement age of 66 or 67 depending on the year you were born.  You can even delay it until age 70 and get increased benefits for each year you delay.

Unfortunately, Medicare is locked in at age 65, which used to be the age for "full" Social Security, but now no longer aligns.  Thus, if you take Social Security early, you still have to fund your own health insurance somehow, unless you qualify for Medicaid.  But in order to qualify for Medicaid you have to be living below the poverty line, which collecting Social Security may push you above.

As I noted before, there are many reasons to take Social Security early.  If you work out the numbers as an accountant friend of mine did, if you live to be the average age you'll end up collecting more money if you collect early - in terms of the overall payout from the Social Security Administration. On the other hand if you delay collecting Social Security, your monthly payout will be more, and if you end up living to an old age this might be a more advantageous situation to you.  If only we knew how old we will be when we die we can make a logical choice.  But that's a piece of information most of us don't want to know.

The problem with Obamacare, as I noted before, is that it kicks in once you make a dollar more than the poverty line.   Below that you're forced to go on Medicaid.  But once you make a dollar more than the poverty line, you can get a enormous subsidy and enormous subsidy from the government to pay for Obamacare.   The subsidy starts at about 100%, and then tapers off linearly to about 50%, based on your income level.  At that point suddenly drops off to zero, which for a married couple occurs at about $70,000 income.

When the law was written, no one anticipated the premiums with me so expensive and thought the taper to 50% would be sufficient, even with the sharp cliff at the end.  But since the law was enacted, premiums have skyrocketed.  Ours started at about $12,000 a year, quickly increased to $18,000, and now are running about $24,000 year, which is a staggering sum of money.  Without the government subsidy, we could not afford this kind of insurance.

Initially, my thought was that as soon as I qualified for Social Security I would take it.  But if I did take Social Security early, it would increase my annual income to the point where I might have to give up some or all of my Obamacare subsidy.  It could end up creating a unique situation where it pushes my income over the cutoff level and all the money I collected in Social Security would just be spent entirely on Obamacare premiums.

For our reader, who is a few years older than me, this is a decision that he has to make very shortly. And all I can suggest is to do the math and figure out which scenario ends up working to your advantage.  If delaying Social Security until age 66 (only four short years) means you retain your Obamacare subsidy, then it would make sense to delay collecting Social Security.  On the other hand, there are folks who need the money now, as they have no other means of support and retirement. It's a tough question to answer.

For me, I'm not sure need answer the question right now.  I have a feeling Obamacare will change dramatically in the next five or six years, before I have to make this decision and as a result there's no need for me to decide now.  It might very well turn out that the health insurance landscape is dramatically altered between now and age 62 or 67.

But this convoluted system that we have illustrates the problem with the carrot-and-stick approach to government.  When the government creates incentives by giving away money or creates penalties by increasing taxes for certain situations and scenarios and behaviors, it forces people to do odd things in order to optimize their outcome. And often these odd things are not the optimal situation for the individual or society as a whole, nor are they what the individual or society would like to occur.

Free market fans and libertarians would argue that if we didn't have such carrot-and-stick approaches that people would do what was the best optimal outcome for themselves.  Once these government distortions in the marketplace are removed, a new equilibrium would be achieved.

It's a nice theory and a nice fantasy, but a neglects human nature.  Human nature being what it is, many people would elect to have no health insurance at all and then throw themselves on the mercy of charity when they end up in the hospital with severe illness or injury.  In the classic example, many young people go out buy a new motorcycle instead of using that money to pay for health insurance premiums.  They wreck the motorcycle, end up in the hospital, and now are a liability to the state.

Meanwhile, the responsible citizen who eschews buying a motorcycle or other expensive toy and instead spends his money on health insurance ends up being punished, as a big portion of his health insurance premiums end up paying for the people who are irresponsible.

Unless we're willing to take the libertarian argument to its logical conclusion - and deny medical coverage to people without health insurance or ability to pay, the system simply wouldn't work.  But since we are compassionate society, we can't let people bleed to death at the door to the hospital simply because they don't have an insurance card (or are we doing that already?).

I guess the point is, the theories and incentives or lack thereof on either side of the political spectrum end up having unintended consequences.  And there are no easy answers.

Thursday, May 17, 2018

Investment Advisers

Investment advisers get paid - and the money that pays them comes from you.

In a recent article in MarketWatch, early retiree Chis Mamula recounts the worst investment advice he ever got.  He claims to be retired at age 41, after making an awful lot of money and investing it wisely, but points out that due to excess fees from investment advisers, as well as poor investment choices and tax problems, he could have easily socked away a million dollars more.

Let me just point out here that while I admire Mr. Mamula for retiring at age 41, I think he's one of this new generation of people who claim to be retired, when they really are not.  As long as you're engaged in a money-making venture for profit, you're not really retired.  If a person claims to be "retired" and yet to runs a website or a podcast or whatever (usually hyping early retirement!), particularly one that is monetized, it's not really being retired.  They're just working in a different line of work.

But I digress.

What interesting about the article is at the author came to the same conclusion I did many years ago. Namely that investment advisers can be a double-edged sword.  They can provide you with some good advice, but they also want to be paid for that advice.  Nothing in life is free.  Relying on recommendations from family or friends for an investment adviser is probably short-sighted at best.

Yet when I talk to most people here on retirement island, or my friends down in The Villages, they all say they don't know much about investing, and just hand over all their money to "The Guy" - who invests it for them.  And without exception they all love "The Guy" that they use for their investments, and say he's doing great things for them.  But in many cases they have no idea a load or no-load fund is, or what expense ratios areThey're not really sure how "The Guy" gets paid, as it is not really itemized on financial statements.

And quite frankly, when I started this blog, I had no clue, either.  Today, I have half a clue, which is still a half-clue short of where I need to be.   The 401(k) and IRA have forced us to become investors, and few of us have the skills to do it.   I have stumbled along - like the author of the Marketwatch article, making expensive mistakes along the way.  By the time I am dead, I will have it all figured out - by then it will be too late to use this knowledge.

My first experience with an investment adviser was when I was very young.  I called an investment adviser and ask him how to start an IRA.  He said "get together $5,000 and we can talk."  But of course I didn't have $5,000.  And I realized right there that investment advisers earn commissions on the money that is invested, and therefore they want to see a certain sizable amount of money before they'll even talk to you.

My second experience was with a family recommendation - namely my father.  When my father was forced into early retirement age 55 he dabbled a bit as a financial adviser.  It is a pretty lucrative racket.  You set up a retirement plan for a company and you get commission checks for the rest of your life - as he did.  Not big checks, but checks, nevertheless.   I wanted to invest some money and he set me up with American funds which I didn't realize had huge 5% upfront load -  which he got a taste of.  My own dad basically fucked me on a retirement account!

Of course, all is fair in love and war, and I've certainly had cost him far more to raise me as a child than he managed to scrape from my pitiful IRA account.   So we're more than even, I think.   Although, how much a price do you put on emotional cruelty?   Just kidding!  Parents aren't perfect, to be sure.  Just grow up, move away, and move on with life.   There is a happily ever after, really!

My next experience was with Northwestern Mutual.  My Northwestern agent was very good at selling me policies and investments because he got a commission on each one of these.  He put me into some funds, which I could have sworn he said didn't have loads but later on I found had very high loads and expense ratios. Yes, American Funds, once again. When I stopped buying new products from him,  he stopped returning my calls.  What I wanted was advice, and I never seemed to get that.  In fact that's a common denominator among financial advisers I've talked to - you ask them how much money you need for retirement and they say, "that depends" and then try to sell you another product.

My next experience was with State Farm.  State Farm decided to become a bank and handle people's investments, which is a very lucrative deal.  The local agent and invited me over and I showed her my entire portfolio.  She suggested I cash in everything including my life insurance and hand it over to her for which she would get a 5% commission.  I wasn't ready to hand her a payday of $50,000 just for "the sake of convenience" as she put it, and we walked away.

We had a number of funds with Fidelity, again based on a family recommendation - this time Mark's father.  Mark's dad always put everything in to Fidelity because "The Guy" he went to at Fidelity was so smart and gave him good returns on his investment.  And he did pretty well with Fidelity and we've done pretty well with it as well.  But once our portfolio reached a certain amount, we had phone calls for them asking us to come in and talk with an adviser.  And I'm not sure what the adviser did other than "rebalance" our portfolio.  And it was never clear to me whether he was getting a commission on this or not.

Here's a clue: people don't work for free. Those fancy offices with the glass walls and the marble countertops aren't donated.  A recent article about Fidelity reports that some Fidelity advisers were abusing the reimbursement program for home computers.  They would buy a computer for home office use, and then return the computer to the store and get a refund after submitting the paperwork to Fidelity to be reimbursed for up to $10,000.

That's an awful lot of money - can you guess where it came from?  Yes it was paid for by the customers of Fidelity, indirectly. I'm not taking a particular piss on Fidelity here, all of these brokerage houses are about the same.  They invest your money - billions and billions of dollars - and take a tiny percentage off the top, which is how they earn their living.  How much they take varies depending on the brokerage house involved.  As I noted, the American Funds my dad (and my Northwestern Mutual adviser) put me into, had very high load fees.  Fidelity was somewhere in the middle to low-end, and other companies like Vanguard have very very low fees.

Some places charged me $20 a trade to buy stocks, which dropped to $9.99, then $7.99 and today, free, at least with Merrill Edge.   Free trades makes it possible to create your own "mutual fund" of stocks, with few fees.  Note that if you buy some mutual funds through Merrill, there are some fees involved, if the funds are managed by another company (Fidelity, Vanguard). 

The problem is it took me more than 30 years to learn all of this, and there were a lot of painful lessons involved.  The author of the MarketWatch article says about the same thing.  He was making a lot of money and investing it, but had no clue about what was going on.  He had to educate himself about investments - and realized it really wasn't all that difficult.  In fact, given the seriousness of the subject matter and how vital it is to your basic survival, it is someone ironic that people take such a laissez-faire attitude towards something so important in their lives.

The few people that do try to take control of their finances often do disastrous things.  These are the folks who invest in Bitcoin or gold or whatever get-rich-quick scheme comes down the pike. They are convinced that the people putting their money into mutual funds are a bunch of chumps - and they are going to beat the system by investing in some scam or con, instead.  Usually, they lose their shirts, become bitter, and say it's the government's fault.

There is however, a happy medium.  You can educate yourself about finances and make more rational choices. You can also accept that you're going to make some bad decisions and lose some money - that's the nature of the investment game.  And some of those poor choices are going to be paying too many fees to investment advisers.

What should you look for in an investment adviser?  It's a tough call.  If you have a 401(k) through your company and are invested in one or more of a number of mutual funds they offer, you probably don't need an investment adviser until you approach retirement, or rollover your 401(k) into an IRA.

There are plenty of investment advisers and banks out there who will encourage you to rollover your 401(k) into an IRA.  And I'm not saying it's a bad idea - I've done it every time myself when it left a job.   The idea of leaving my money with people who I used to work for - who may not be happy with me leaving - didn't strike me as a good idea.   These investment advisers want people to roll over the money to their company, so they can take a little taste of it as it passes through their hands.

The thing to do is educate yourself about loads, both front-end and back-end, as well as expense ratios. You can look all this stuff up on the internet as I illustrated before in this blog (often thanks to helpful readers!).  When somebody suggests a fund to invest in, you can research this information online.  It is like buying a car - you'd go online to see what a reasonable price is, before sitting down at the dealer and signing on the dotted line, right?  Same is true for investments.  Do the research, do the math.

Also, ask direct an honest questions of the adviser as to how he's being paid for this. Most will give you elusive answers - I've never gotten a straight answer myself - but if you push the matter they should tell you.  Walk away from someone who's deceptive - even the tiniest bit of deception, as we know, is a telltale of what is to come.

And never, never ever, give a financial adviser or broker trading authority on your account.  If you are investing for the long-term there should be no reason for you to trade funds or stocks more than a few times a year at most.  Anything else is just gambling.  And investment advisers and brokers get paid on how many trades they make and it's been shown in the past that some crooked brokers will trade an account down to zero, collecting fees for each trade.  Some unscrupulous Brokers have ripped off old people off, buying and selling the same stocks multiple times in one day, just to generate trading fees.

And beware of any broker from Madison County, New York - my hometown.

The author of the MarketWatch article doesn't say it exactly how he get ripped off.  He does mention paying excessive fees, which over time can add up to a lot of money.  He also mentions having undesirable tax consequences, which sort of had me puzzled.  I can only guess that perhaps his investment adviser sold some stocks and created huge capital gains problems for him during the year which he did not anticipate.

But overall even though the author is vague as to exactly how he lost money (which would have educated all of us as to how to avoid these pitfalls) he does make a good point.  Going with someone based on family recommendations, or  recommendations from your doctor, is probably a bad idea.  It's a better idea to educate yourself about finances. The more you learn, and the more you know the better off you'll be.

It's like owning a car.  Even if you never turn a wrench on a car, the more you understand how it works, the better off you'll be when you go to see the mechanic.  Because you'll be able to spot when he's bullshiting you and when he's telling you the truth - and be able to tell a good mechanic from a bad one.

As I noted earlier post, there was an article online where a woman gigglingly complained that her car needed "A new evaporative emission canister, whatever that is!" as if being ignorant of this was some sort of badge of honor.  Indeed, many people wear ignorance as a badge of honor, thinking that actually knowing things is somehow plebeian.  I guess this starts in grade school, where you get mocked for raising your hand and having the right answers.  But, actually the opposite is true -ignorant people usually end up poor and worse off than people who bothered to learn things.  And for the life of me, I've never heard of an evaporative emissions canister wearing out on the car so I think she did get ripped off.

It's not like this stuff is hard to learn - we have this thing called the internet.  You can Google things and learn a lot, provided you can filter out the bullshit from the truth.  And of course in the financial field the bullshit will be the get-rich-quick schemes and discussion groups exhorting you invest in Bitcoin or dot-com stocks, or IPOs or gold or whatever shiny things coming down the pike.

But there are a lot of other financial sites and give you a treasure trove of data, although they are not as sexy and stimulating as he get rich-quick-scheme sites. But then again, that's probably life in general - anything that seems like cotton candy fluff is appealing, but it's probably bad for you. Broccoli and the other hand might make you regular but is really less sexy - unless you covered it with cheese.

Tuesday, May 15, 2018

The Dishwasher Breaks, Sort Of.

Older dishwashers don't break, usually, they just start to leak.

After breakfast today, Mark notices that the engineered hardwood flooring is warped and stained next to the dishwasher.   Hardwood floor in a kitchen, what could possibly go wrong?  If we ever replace this, we will put in tile.   Anywhere there is plumbing in your house, water will end up on the floor, either from splashing or the inevitable leaks.   There is no reason to put carpet or hardwood in such an environment.   Yet, we've owned houses with both.  Put in something waterproof.

I wrote about dishwashers before, how they are arguably a useless appliance, as they really don't get things "clean" but might cater to your phobias about germs.  It hurts your back to even think about bending over to load and unload them - and in every household, it is a passive-aggressive game to avoid loading it, and avoid unloading it.  Many people never put their dishes away, but use the dishwasher as a storage cabinet, running it occasionally and taking dishes in and out.  I know, gross, right?

Of all the appliances in the house, the dishwasher is one of the most fragile - usually the first or second to fail.  They are remarkably inexpensive to buy, and when you work on one, you realize why.   They are surprisingly flimsy - with plastic hoses, plastic cabinets, and a piece of rope attached to a spring to hold up the door.  Yet, they are engineered to last a decade or more, and then fail.  Considering all that, it is a pretty good job of Engineering.  For the buck, that is.

As I noted in earlier postings, our house was remodeled about 13 years ago, right before we bought it.  So all the appliances are the exact same age.  And given that the design life of an appliance is about 15 years, we are seeing them fail, one after the other, and the dishwasher is no doubt next.   First it was the disposal, which has a plastic housing and cracks over time, as I discovered by googling the problem.  I avoided the temptation to "upgrade" to a fancier one ("this time it will never break!") as I realized from experience that the fancier one wouldn't last longer, it would just break more expensive.

It is like our buggy.   The battery trays, after 19 years 24 years, rusted through, due to battery acid and a salt air environment.   Some folks would go overboard, fabricating stainless steel or aluminum trays, to make sure "it never happens again!"   But I was able to buy new trays for about $100 made of the same mild steel as the originals, which lasted nearly two decades, which is longer than I plan on keeping this buggy (indeed, longer that I may even be alive!) and certainly a more reasonable proposition for a $300 buggy.

I saw the same thing in online BMW forums.  Someone is replacing a decade-old part that simply wore out, and people online (who work for aftermarket parts companies) say, "You should buy the super-duper part made of unobtainium!  It will never break again!"   But the reality is, you might keep that car another 5-10 years, tops, and if you just replace it with the stock part, odds are, you will never replace that part again, either.   And oddly enough, the more plebian part can sometimes be more reliable, easier to install, and fit better.   A lot of this "upgrade" shit is not really an upgrade.  But I digress.

Anyway, after the disposal, it was the icemaker.  Do I replace it or install a cabinet or a wine cooler or what?  My neighbor was faced with the same dilemma - he opted to install a cabinet, as he never used the ice maker anyway.   Myself, I bit the bullet and bought a new one - a definite luxury item, and this time, I intend to maintain it religiously.

Then it was the washer and dryer.  Actually, those were not yet completely broken, although the washer was starting to do funny things and rust everywhere (a problem with appliances in the South, particularly near the coast, particularly in Florida).   So we bit the bullet and bought new ones, as part of a plumbing upgrade to the garage and laundry room.   By the way, I am pleased to report that I finally finished the sheetrocking, painting and wiring the lights.   It is nice to have a clean, well-lighted place to work in.  We donated the old washer and dryer to a local policeman who does work for veterans.

So that leaves the stove (getting pretty ratty) the microwave (hanging in there), the refrigerator (please, God, no!  They cost thousands today!), the dishwasher, the hot water heater, and the air conditioning system.

We both looked at each other and said, "the dishwasher is next!"   It has been behaving oddly - not draining all the way, not getting things really clean.  The cap to the "rise agent" bottle was melted, so when you put the rise agent in, it just leaks out all at once.

My experience with dishwashers has been not that they fail, but they start to leak, and when you look at how they are made, you understand why.  We unscrewed the two screws that hold it to the underside of the cabinet and rolled it out.  Yes, it has wheels, which tells you how often they expect you to roll it out, I guess.   The plastic drain pipe connecting it to the disposal was dry and brittle.  It wasn't leaking, but it is only a matter of time before that explodes.   You could replace it, I suppose, but there are a number of similar plastic hoses that snake around the inside of the washer that are equally as brittle.

Shutting off the water is always fun.  Every sink has shutoff valves, right?   Problem is, they are installed when the sink is originally installed (in our case, 13 years ago) and never used since.   And in most cases, including ours, they simply stop working.  Either they are rusted open, or the seals are so shot that when you turn it, nothing happens - except perhaps it leaks through the stem, so don't turn it if it won't turn easily.   They make patch-job valves you at attach to the broken valve, so you can shut off the water using the second valve (and just leave the old valve in place).   In our condo, there were a string of four such valves, each with an indication they had been dripping over the years.

And like the valves in the bar sink, whoever did the plumbing just let the pipes hang loose, so when you turn these valves, there is a 50/50 change you may break off a plastic pipe in the wall.   So anyway, I had to shut down the hot water in order to disconnect the dishwasher, as the shutoff valve under the sink was worthless.

The wiring was the next nightmare.  "Professionally Installed", the wiring was a plug, not hard-wired, and there was no wiring clamp holding this wire to the electrical box underneath the washer.  Yank on the plug, and you rip the whole wiring out.  Speaking of electrical box, it was missing as the "installer" decided, I guess, that it wasn't necessary and wires hanging down underneath was just peachy.  Trivial things, perhaps, but shit, you have one job to do, do it right.  Right?

We cleaned everything and re-installed the washer.  I removed the front kick-panel so I could see underneath and we placed sheets of paper towel underneath as a "tell-tale" to find leaks.  I find this is a good way to spot leaks under sinks and where you've been working on plumbing.

Sure enough, the plastic water line from the inlet solenoid valve makes a drip - but that isn't enough to cause the damage to the hardwood we are seeing.  I run the washer on super-heavy duty mode, and sure enough, we start to see a drip, drip, from the right front side of the door.   It doesn't take much water to make a big mess, particularly on the unsealed edges of engineered hardwood.

I will try adjusting and lubricating the seal and maybe putting a drip tray underneath there for the time being.   But down the road, we are looking at a new dishwasher.   Hopefully, Trump won't have put some sort of stupid tariff on them.

So what's the point?  The point is, a house is a collection of things - machines and structures that wear out over time.   It is not "The American Dream" and never was.   It is just a thing you will own for part of your life - an expensive thing that earns you no income and makes you little money.   In fact, it is a series of expenses over time, and if you are lucky, you may end up breaking even when it is all said and done.

If you are renting an apartment or townhouse or condo, don't think you are "missing out" on something by not owning it.   And in today's overheated real estate market, don't stress yourself financially for the "privilege" of owning a home.

And for God's sake, if you are going to own a house, learn how to be handy!

UPDATE:  A reader asks, "why not just remove the dishwasher and replace it with a cabinet?"  That is an interesting idea, but a house without a dishwasher would be considered "quirky" at least in this market and price range.   Plus, hiring a cabinet maker to make a matching cabinet (good luck with that!) would cost more than a new dishwasher.   Yes, you should keep your house in condition to sell at any moment  - because you may have to, someday.

So, it is like with the icemaker.  You could do without, but you are going to spend a lot to patch up the hole where the appliance was, and end up with a quirky house.  And your house, while it doesn't make you money, is a huge asset that should be taken care of.

I found the door seal to be covered with scale from hard water.  I will clean it with Lime-Away (from the dollar tree) and put some silicone on it.   It doesn't seem to be leaking - for the time being, anyway.   We'll keep monitoring it, but a new one is in the cards - along with a new kitchen floor.

Other people have told me horror stories about leaking dishwashers - where the intake valve leaked.  They went away for a few weeks, and came back to a flood and rotted floorboards.

Always turn off your water when you go away!  At least, I do.

Monday, May 14, 2018

Warning Lights

When you see a warning sign, should you take action, or assume the warning is wrong?

When I was a kid, my brother bought a 1965 Jeep Wagoneer, with a snow plow.  It was powered by the OHC "Tornado" inline six, with a three-on-the-floor.  It wasn't a bad car/truck, with not too much rust, but it was about 10 years old at the time and near the end of its design life back then.   It didn't help that it was being driven by a teenager.  This was before the Wagoneer became a "luxury SUV" in the era before SUVs existed.

My brother had two speeds - stopped and full-throttle.   And when he drove it, it was always foot-to-the-floor.  One night, we were out driving it - aimlessly, as teenagers and poor people tend to do - and the temperature and oil lights came on.  I pleaded with him to stop the car, but he said, "Oh, those lights are probably broken!" and downshifted it and gave it more gas.

The deal was, he didn't have ten cents to his name - my Dad in fact paid for the car.   So he didn't want to think it needed oil, because he couldn't afford it.  It was better to assume the oil light was broken.

I finally made a deal with him - pull into the next gas station, and if it needed oil, I'd pay for it with my paper-route money (what little I had that he didn't steal from me).   It was a poor bargain, as when we lurched into the Gulf station, it turned out to need four quarts of oil.  What it didn't burn, it leaked, as it turned out.

And while I ended up paying nearly $4 for the oil at gas-station prices, at least I didn't have to walk home twenty miles that night.   Of course, the poor Jeep didn't last long under my brother's care - nor did the next one my Dad bought for him, although that one seized when my Dad refused to pull over when the transmission got stuck in first and over-revved and overheated the engine.   Like Father, Like Son - car abuse seemed to run in the family.

But it is an interesting phenomenon.  I've been watching "P3D" flight simulator reconstructions of airplane crashes or FS reconstructions on on YouTube.  They are strangely compelling.  What is interesting about the videos, is that in most cases, the pilots had a chance to land the plane or take some action, but instead ignored warning alarms and tried to "figure out" the problem, often wasting precious minutes calling their maintenance department and trying to find someone to help them turn off the alarm.   When the stall alarm comes on, it is no time to be calling the help desk in India!

But I guess it is human nature - to ignore alarms or try to figure out if they are real or fake.   And the more a system sets off false alarms, the more people ignore them - the boy-who-cried-wolf syndrome.  In some of these accident reconstructions, it is reported that pilots turned off circuit breakers for various alarm systems, such as the takeoff configuration alarm.  You take off with the flaps up, and well, bad things happen quickly.

And in complex systems, it is possible that false alarms sound.   Modern cars set off the "check engine" light seemingly on a whim.  When the OBD-2 cars came out in the mid-1990's, many owners were righteously pissed-off when they took their car to the dealer and paid $80 to reset a "check engine" light, only to be told the problem was a loose gas cap.   They haven't really fixed that problem, although the Hamster has instructions on the gas cap door on how to reset the CE light if the gas cap was loose.   It is sort of a "patch" to the problem, not a real fix.

But as a result, people tend to ignore "check engine" light warnings more.   More of the-boy-who-cried-wolf effect.  Or take these signs for "construction zones" where no construction is going on, or "lane closed ahead" and you pull over into the other lane, only to feel like an idiot when everyone passes you on the right and it turns out there is no closed lane, just lazy construction workers who failed to take down the signs.

And that is a real danger to road maintenance crews.  Because I am seeing this more and more these days, and more and more people seem to be ignoring these sort of signs, until they can see for themselves that actual lanes are closed and construction equipment is present.   Crying wolf has real and negative real-world consequences.

Similarly, in finances, we tend to ignore warning signs.   Our net worth drops down, and we ignore this - if we even bother to calculate it in the first place.   Our debt load increases, and we assume this is OK - we can continually refinance our debts, juggling them from credit card to home-equity loan.  So long as the monthly payments are made, we're doing OK, right?

And I can say from experience, that I fell into that trap.  When you are young and starting out, you get a paycheck and use it to pay the rent, the car payment, the cable bill, and the groceries.  Maybe if there is a little "left over" you go out to eat on Saturday night, or buy a new shirt at the mall.   If there is nothing left over you put it on a credit card and will pay for it later - somehow.

We become trained to think of money in terms of weekly and monthly installments, instead of something we own.   So over time, we get into this monthly "cash-flow" mindset, which might be inevitable when you are 25 years old, own nothing, and have a large monthly rent or mortgage payment to make.   But over time, you have to get out of that mindset, or you end up in a spiral dive into the ocean - like those planes on the P3D simulator.

And maybe the same is true of markets.   We hear a lot of background noise - alarms - about the market these days, but ignore them.   The plane is still flying - and climbing - the alarm must be broken!   Never mind that we are losing cabin pressure and everything seems fine, only because we are succumbing to hypoxia.  That darn alarm must be broke again!  Call maintenance and ask them what to do.   What you should do is land the plane, dummy!

So, every day the market doesn't crash is a day that the bulls can cry, "the warning light is broken!  See, nothing bad has happened!"

Yet.

The Bear Necessities - Risk Premiums

Are you getting paid enough to risk your money in the stock market?

A recent article in Business Insider interviews a "famous" Wall Street Bear, John Hussman, who argues that we are not only due for a recession, but a doozy of one.  He argues that investors are looking backwards too much, thinking about how the market gains over time, historically, and not looking at the present picture.

He makes a compelling argument, that you should buy in times of financial discomfort, and sell in times of financial comfort.   Buy low, sell high.  And right now, things are high.   Which is why I have sold off a lot of stocks (but not all).   The other reason, of course, is that I am retired and need the money.   So I keep enough for the next 5-10 years in FDIC insured accounts.   Oddly enough, some of those are earning more money than my stocks!

I recently raked Sirius XM over the coals once again, and what startled me was not that the company was foundering and losing money, but that it was making money.  But what was interesting to me was that the market had bid up the price of the stock to the point where it was not such a great deal for investors.

Oh, sure, if you are one of those people who only looks at share price, and not P/E ratios, dividends, and other "metrics" it may seem like it - and the greater market - are doing well.  After all, if you bought at 11 cents a share a decade ago, it is now worth over $6 today!  Whoo-wee!  But of course, eventually, this era of low interest and low "risk premiums" will come to an end.

Risk Premiums is an interesting term used by Mr. Hussman, and one which investors don't often think about.   We want to know what our return on investment will be, but we fail to appreciate what risks are involved.   For example, you buy stock in WillGrowCo, and it goes up 5% per annum.   That's swell, of course, but then the next year, it goes bankrupt and leaves you with nothing.  Having experienced this firsthand with General Motors (and others), I can tell you it ain't pretty.  It leaves you with that pit in your stomach.

In short, when you invest, you are taking a risk, not only that the stock may go down in price, that the company may not make profits and may not pay dividends, but also that it may drop down to nothing in price and leave you with zilch.   The reason why investors make profits, is that they are taking risks.  The higher the risk, the higher the profit should be.  Low-risk investments have low profits.

This is a point missed by the far lefties who think "profits are evil, man!" and that there should be no profit for risk-taking.   And they think this, because they don't appreciate that people are indeed taking risks with their money, and there should be a reward for that - otherwise, why invest money or loan it out?  But I digress, but not too far.

In this era of low inflation and negative-to-zero interest rates, a company with earning of 2.5% and a dividend ratio of 0.65% (as is the case for SiriusXM) doesn't seem all that bad, right?   After all, your savings account is paying only fractional interest, and even "money market" accounts are struggling to break 1%.   So a low "risk premium" is acceptable, right?

Maybe.  Maybe not.   The fact that other investments are lower doesn't take the risk away from a risky equity investment.   And I am not saying that SiriusXM is particularly risky, only that like all equities, there is a risk involved.  And as I noted in my earlier posting, you have to wonder where the company is going with its 8-track technology.  Can they jump on the streaming bandwagon or something?  We'll see.   But getting a lousy 2.5% profit doesn't seem like much of a premium for the risk.

Now to be sure, risk premiums can be adjusted for inflation, and today inflation is at an all-time low.  If you are investing in a market where inflation is at 5%, then a company making a 5% profit is really just breaking even, isn't it?   But traditionally, companies have made better profits than they are in the present.  A P/E ratio of 20 or so (a 5% profit) was, until recent years, considered the benchmark of a company that was doing well.  And a dividend ratio of a few percent was considered pretty standard for a company that paid dividends.   What changed?

Well, we have the 401(k) generation trying to find places to invest.  Suddenly, we are all investors, and we all want to "beat the market" by buying equities and bonds and whatever else promises to make us money.   And some folks, who under-saved their whole lives, want to make spectacular returns, and are willing to throw money at junk bonds and junk investments, on the promise of a spectacular return.   So the market is overheated - people are bidding up the prices on equities to the point where they are "meh" deals - much as the housing market has been bid up, yet again.

And I guess that illustrates the point - we've been through this before, not ten years ago.   Usually the market cycles every 18 years or so, but it seems today, it is cycling faster and faster between boom and bust.

There are, however, some caveats.   The current price of stocks represent only what the "last guy in" paid.   So, for example, if you bought SiriusXM back in 2009 for 11 cents a share, the earnings-per-share today of 20 cents seems fantastic - even accounting for the inflation-adjusted cost of what you paid for those shares.  Once again, old people win.  I hang on to some stocks, not because their current P/E ratio or EPS or dividend ratio is all that great, but because based on what I paid for the stock a few years back, it is a rock star.  The fact the market over-values the stock today is really not that important.  If the stock drops to half its value, it still is a gain for me.

(And maybe that is how it always is.  Young people, being new to the market, have to buy at higher prices and take more risks - which they can afford to do, as time is on their side.  Older people, having bought in years ago, are in a less risky situation, as their "risk premium" relative to what they paid for a stock, adjusted for inflation, is much higher).

Of course, you could make the argument that there is an "opportunity cost" to this - I could sell the stock with the current low P/E ratio and buy something more attractive.   But again, in this economy, what would that stock be?   Everything, to me, seems quite overpriced right now.  Why would I risk losing my life-support-system in retirement for a paltry 2-3% gain?

And that was the point of the article - that when market conditions change, what is deemed a "good return on investment" can change overnight:
"A market crash is nothing more than a period where low risk premiums are pushed abruptly higher," Hussman wrote. "For that reason, the combination of thin risk premiums, increasing risk-aversion, and upward yield pressures is the single most negative set of conditions an investor can face. Ignore this paragraph to your detriment."
So, rising interest rates, rising inflation, and rising T-bill rates could cause investors to demand better returns on their investment - to maintain the same "risk premium" as before.  Why risk your money in stocks for a paltry 2.5% return when a T-bill is doing as well or better?

We'll have to see how this plays out.  But I suspect the era of low rates-of-return and low risk premiums may come to an end shortly.

Sunday, May 13, 2018

Sirius XM - An Obsolete Format?

Vinyl Records, 8-track tapes, cassettes, CDs, iPods - all obsolete in a new era of music streaming.   Does Sirius XM have a future?

I got a promotional come-on in the mail from Sirius XM the other day.  I thought about it for half a second and then tossed it.  We are driving to Alaska, and it would be nice to have Sirius XM activated on the truck.   And at the promotional pricing of $5 a month, why not?

Well, a number of reasons.  First of all, service in Alaska is spotty - as shown by the coverage map above.  So while it might be nice for the first part of our trip, it might be worthless later on.   Second, I just lashed the kayak to the roof of the truck, and as a result, it covers the XM antenna, which means basically I have no service, or have to move the kayak to one side, or leave it behind.   No service was the best option.   Third, the negative option deal.   Sure, it is $5 a month for six months, then it ratchets up to the regular price of $15.99 which is no freaking bargain.  And you have to remember to call them to cancel service, or your credit card gets dinged - and they are counting on that.

And fourth, well, it just isn't that great.  When you filter out the dozens of sports and talky-talky channels, it comes down to just a few music channels.    Of those, you can (or at least I can) filter out the heavy metal and rap channels, as well as the warbly "pop diva" channels that feature artists I've never heard of, because I don't watch Dancing With the Celebrity Chefs Sing-Off as They Remodel and Flip Hoarding Houses Storage Wars kind of crap.

So that leaves Siriusly Sinatra and maybe two other channels.   The Sinatra channel can be great - with some of his kids hosting the show, no less.   But the others, less so.  So there isn't a lot of "there" there - at least not for five bucks a month.  Certainly not for $16 a month (which is what $15.99 is).

Fifth, well, $5 a month doesn't seem like a lot, but it is more than zero.   And free is even better - and Pandora is free.   If I was to spend $5 a month, I would throw it at Pandora premium instead.

Oh, and sixth, the promotion was valid only for the Hamster, not the truck.   So in the trash the Sirius XM mailing card goes.

It struck me that Sirius XM is as obsolete and quaint as the cassette decks in my BMWs (why, dear God, why?  In 2002?).  It is a pretty useless feature, and if Sirius XM didn't pay the car companies to put it in their cars, odds are, most would drop the feature.    Most cars today have an AM/FM radio feature as well.   Few people use the FM radio anymore and fewer use the AM.

In fact, when was the last time you listened to AM radio?  Unless you are a conspiracy theorist who likes to listen to scratchy stations where some idiot rants about the Illuminati, odds are you've never turned it on, much less set the station presets.   And FM?  A barrage of bad car dealer advertisements as well as come-ons for various schemes and MLM crap.  Who even listens to that?   Even NPR has gone down the tubes and become a talk-show station.  So the idea that so many cars have XM receivers makes the company "worth a lot" is, in my opinion, bogus.  So many cars have AM as well - that doesn't guarantee an audience.  And AM is free.

SiriusXM the company, however, seems to be hanging on in spite of all this.  While the stock price peaked at over $60 a share in 2000, it languishes at about $6 a share today.  If you bought at 11 cents a share (!!!) in January of 2009, you'd be doing quite well now!   With a P/E ratio over 40, it isn't making record profits (in terms of price per share), but any profit, even a penny, means you can keep the lights on and live for another day.   It is even paying a dividend, although with a paltry yield of 0.65%.   A good buy for those who bought in 2009, not such a deal today.

(With a P/E ratio of over 40, you can see the stock is clearly overvalued - double where the price should be.   With interest rates and inflation rising, investors are not going to be content with a 2.5% rate of return or a 0.65% dividend.   But this just illustrates how far our bull market has to fall in the coming months).

But of course, I am not the target audience for Sirius XM.   They are going after the commuter market - people who spend 1-3 hours a day (or more) in their cars, going to and from work, and to run "errands".   I never leave the house for days at a time, and even then, it may be by bicycle or golf cart (and I can stream Pandora on both!).  The cubicle drone who zones out in traffic on I-66, west of Washington, likes to listen to an hour or two of "sports talk radio" or Howard Stern or some such nonsense ("Bubba the Love Sponge"?  Who thinks up this shit?  Who listens to it?).   That's their target audience - idiots.  It is like the target audience for cable television - morons who will sit through 15 minutes of commercials to watch a 15-minute-long "History Channel" show about paranormal pumpkin-smashing trebuchet makers.

The "drive time" audience - highly coveted by the radio stations - is what Sirius XM is going after.  Since it is so difficult and expensive to pipe Sirius XM into your home (running an antenna to the roof, paying for a separate receiver, etc.) it is not really aimed at the casual listening audience.  It is hard to take Sirius to the beach, on my bike, or in the golf cart.  You can't take it jogging like with an MP3 player - or your cell phone.  Certainly not on our island, whose tree canopy makes coverage even in your car, spotty.

The problem for SiriusXM is that it seemed, when they stared out, to have so many channels.  But music streaming services have an infinite number of channels - you can create your own channels and the system "learns" what you like over time, and creates a unique channel that is tailored to you alone, and you are the only one listening to it.   With Sirius, you have to listen to the same channel millions (or at least thousands) of people are listening to, so as a result, the channel has to be a compromise as to what the majority wants - or what is the lowest common denominator.   Sort of like how television works, including cable.

Of course, you have to wonder where this is all going, if we are truly entering a "post-car" era, where people will hail self-driving Uber cabs.  Who would pay for satellite radio in that scenario?   Of course, there may be other applications for this hardware, but satellites need to be replaced and refreshed on occasion, as the Iridium people discovered when they were going through bankruptcy.  Sirius will need to keep paying to install radios in new cars, and to pay for satellite infrastructure, in addition to paying for content to copyright holders and celebrity hosts, like Howard Stern.

It seems like these format changes are coming quicker and quicker these days.  Vinyl records had their day in the sun for decades.  8-tracks lasted maybe ten years, cassettes maybe 20.  CDs lumbered along for a couple of decades - we thought they would never go away.  Then the iPod made those obsolete.   Then the iPod itself was pushed aside by USB memory sticks and online music streaming.   I am not sure what is next - beaming music directly into your head, or memory implants?

All I can say is, SiriusXM isn't the wave of the future, it is the wave of the past - as quaint as the 8-track tape.  And kids born today, will ask their parents, years from now, what those funny buttons on the radio in Grandpa's car, labeled "AM", "FM", and "XM" were for.

Saturday, May 12, 2018

Psychics? Fools and Their Money!

Going to a psychic for fiscal advice is like listening to Jim Cramer.   You can lose money following the advice of either!  But at least Cramer isn't stealing from you - directly.

In a recent news article, a psychic was arrested for stealing $800,000 from various "clients."   It is not a new scam, but a rather old one.  But like so many things that are legal today (lotteries, gambling, payday loans), the Psychic business was largely illegal or at least tamped-down in years past.

When I was a kid, they busted Psychics all the time.   You never saw them advertise or have offices with neon signs.   That sort of shit was just illegal.   I was surprised when I moved to Virginia and saw a dilapidated house with a neon sign in the window that said, "Madam X, Psychic Readings."  Wasn't that against the law?  The South was surely a different place!

Again, it is funny to me that "Libertarians" rail against government intervention in their lives today, when in fact, we have less intervention than at any time in the modern history of our Republic - in my opinion, anyway.   A lot of shit is legal today that was just not done when I was a kid.   Today, you are free to ruin yourself through a number of avenues - gambling, over-spending, over-borrowing, and paying money to Psychics.

It seems harmless enough - maybe even fun - to consult with "Madam X" and have a "reading" which is all spooky and kooky.   And I guess if you spend $20 on a "reading" on the boardwalk and don't take it as anything other than entertainment, you are just out twenty bucks.  That does seem like a lot of money to me, though.  You'd be better off with cotton candy - about as fluffy and nearly as bad for you.

The problem is, people get sucked into the web of a psychic and end up bankrupting themselves.  These are often not very bright people, and often recent immigrants who don't speak English well, or have only a rudimentary understanding of finances.  You know, the sort of people who think that putting a red envelope under their phone will result in money coming to them.   People who think money is like the weather - it is a drought one day, and raining pennies the next - and they are not sure why, where, or how this occurs.

The Psychic will chat with the "customer" and ask a few innocuous questions.  Often people blurt out their darkest secrets in a form of verbal diarrhea, not realizing they have told the Psychic great details about their lives.  And the Psychic can fill in the rest from those details.  During the reading, the Psychic then barfs up these details, which "amazes" the client/victim.   She must have real powers!

But the deal is, when the Psychic makes guesses to fill in the blanks, she looks at the reaction of the victim, and if it is negative, she says, "No, I am getting another image now!" and makes another wild guess.   The victim remembers only the correct responses (a form of confirmation bias) and thinks the Psychic has special powers.

But what about the money?  In front of a lot of these Psychic places, you will see cars, boats, motorhomes, and travel trailers for sale.   What's up with that?   Well, the Psychic finds out what assets the victim has, and over the course of a number of visits, insinuates that these possessions (including money) are causing the victim psychic pain.   The bass boat is evil and you must get rid of it!  And no you can't sell it and keep the money, because the money would be tainted by that evil!

So the only way out is to give it to the Psychic who will then sell it in her front yard, cleansing it of all the evil spirits.   Your life is now "clean" and you are free to go on to happiness and prosperity, provided some other evil money or possession doesn't come into your life.

Sounds ridiculous, right?  Yet these places thrive all the time, and they seem to have a never-ending parade of customers.  From the giggling girls in a bridal party having their "hen night" before a wedding, to curious tourists, to the hard-core true believers, they can eke out a living.   And it only takes one or two hard-core true believers to stay in business.   The tourists and curious merely pay the light bill.

How do you avoid being scammed by a Psychic?  The answer is simple:  Simply don't go.  It is like payday loans, casinos, buy-here-pay-here used car dealers, or lease deals.   Simply leave your pen at home and don't set foot in those places.   You can't go to a casino for "a little gambling" just as you can't go to a Psychic for "a fun reading".  The odds are getting taken in are pretty high.

On the other hand, if you don't go at all, the odds drop down to ZERO.    It is like so many other things in life - you can eliminate all risk by doing one simple thing, why not do it?   If you stop rolling stop signs, your risk of a stop-sign collision drops to nearly nothing.   So why roll a stop sign?  How much time are you really saving?  And how "fun" is some creepy Psychic reading?  Or playing a slot machine? 

And even if you don't think you would be taken in by a Psychic, why would you subsidize such an operation by giving them your money?   It would be like going to a payday loan place and handing them five bucks just for the hell of it.   Why enable evil? (and by evil, I don't mean the bass boat for sale out front).

But the same thing is true for other raw deals in life.   You will never get into trouble with a crappy car lease deal if you never sign a car lease.   You will never get in trouble with a payday loan if you never take one out.   And so on down the line - from the ultra-shitty deals that the poor bite on, to the merely crappy (but far larger) deals that the middle-class bites on, such as refinancing your house to pay off credit card debt.

Because in the end, it isn't the Psychics who are at fault here - any more than it is the car salesman who enticed you to lease a "luxury SUV" you could not afford.  It is the chump who goes along with these deals and hands over all their cash who is to blame - and who is responsible.  And granted, in some instances, these folks are not of sound mind, which is a concern to all of us as we age.   But yet it is another reason to simplify our lives and our finances as we get older - to avoid being scammed like this.