Happy Holidays!

MasterPo wishes all his readers and friends a happy, healthy and safe holiday season and new year. (That includes you Ricky, Jack and Apex)

MasterPo will return after the first of the year (unless something ocurrs that can't wait).

Be patient.

It's only 30 days away!

Of Being Affordable and Paying For It.

“Afford - to be able to do, manage, or bear without serious consequence or adverse effect; to be able to give or spare” (Source: Dictionary.com Unabridged. Random House, Inc. 20 Jul. 2010)

The term “afford” is too often been used to justify someone paying more than someone else for the same thing. Or someone paying the way for someone else. Phrases like “You can afford to pay it” or “If you can afford this then you can afford to pay that” and so on are common dialog, particularly among public policy and rule makers.

This is a sadly mistaken point of view.

Just because someone has the ability to pay for something can not (should not) ever be mistaken with that person having the means to pay more and/or pay repeatedly. Such a point of view conveniently overlooks several aspects of reality.

Some examples:

- A person takes a lavish vacation. That doesn’t mean they will be able to take lavish vacations all the time. It may have taken that person years to save up for it.

- Your car breaks down. It will cost several hundred dollars to repair. You pay for the repairs. But that doesn’t mean you are able to pay several hundred dollars periodically for repairs again and again. (Alternatively, you choose to purchase a new car but that doesn’t mean you have the means to purchase new cars every time your current transportation breaks down.)

- The train is the only means of going everyday to/from work. It is announced fares are going up next month. You have no choice but to pay the new fare in order to get to work. But that doesn’t mean you can simply pay the higher fares any time the whim for a raise is floated.

- You lose your job. You have to draw on your rainy-day fund (that you have carefully disciplined yourself to establish and not touch) to get by until you find another (unemployment insurance not withstanding). You have at least 6 months worth of funds to draw on. But that does not mean you can afford to be out of gainful employment for 6 months.

These are but a tiny few examples.

At best in every case it is false to conclude the ability to pay for something must mean the ability to afford to pay for something. At the worst, it further divides and categorizes people based on the most superficial of indicators – What they choose to (or need to) purchase. Nor does it take into consideration the hard work, sacrifice, and/or length of time that went into the preparation for the ability to pay.

As the definition at the beginning of this article shows “afford” is a highly conditional state of being. The affordability comes at the cost of good preparation, dedicated/disciplined work, forethought, and most likely a sacrifice of some other aspect of your life. It simply didn’t happen due to the good graces of fate.

Something to consider when deciding who should be paying for whom.

Insurance or Insanity?

There is an old saying that if you bought all the insurance you should have then you wouldn’t have money for anything else!

Some insurance is commonly accepted as, if not absolutely necessary, good to have.

Fire insurance
Theft insurance
Damage insurance
Liability insurance
Life insurance

Just to name a few.

Then there are the more detailed/specific insurances:

Water/flood insurance
Storm insurance
Errors and Omissions insurance
Professional/Malpractice insurance
Transportation insurance

Lost wage/pay insurance

Again, just to name a few.

Those who produce and sell these kind of policies make good arguments why they are needed.

This article is not about slamming the insurance industry (Washington does a great job of it already).

But you can go crazy worrying about all the events that might go wrong and then go broken trying to insurance against those events!

Insurance pros say that it isn’t the likelihood of an event happening but what kind of impact if it happened that you should be concerned about. Fire insurance on your home is a good example. Even without a mortgage (as a requirement of the bank for the loan) if your house was destroyed by fire that would be a devastating loss. By the same point, however, how many people have you ever met in your life who’s homes have been destroyed in a fire? MasterPo never has met anyone like that. Yet it is certainly a worthy risk.

Going beyond insurance, there are things we do everyday to protect against possible risk. You put your seatbelt on in a car not only because it’s the law (in most places) but just in case of an accident. Yet how many moving vehicle accidents have you ever been in during your life? And even if you have how many were serious enough to potentially cause significant injury or worse? Probably very few if any. But the chance is still there and if it happened the loss (your safety or even your life!) is significant.

At the same time, there is a line somewhere.

Consider Y2K.

As MasterPo has written here before there was real potential for disaster. But it didn’t happen.

Much hard work for months, even years before, help reduce (because you can never totally eliminate) the risk. Nevertheless, people did all sorts of things in preparation for the potential.

Some just had some extra food and water on hand in case of a few days interruption in services. Others went so far as to buy shelters in the deserts of Nevada and Arizona (for $30,000 each!). At least with the food and water you would use it eventually in daily life anyway.

What you do to protect yourself and your family is up to you. What you see as realistic risks or not is up to you.

But it does make sense that loss instead of probability is the greater factor to consider.

Be safe.
Be prepared.

Cheap, Abundant, Efficient

Those are three words you never hear mention when “green” energy is talked about!

Wind and solar (as they are the current two top darlings of the “green” energy crowd) are never ever described in those terms.

MasterPo wonders: Why?

Sure wind and solar are described as “environmental”, “safe” (what can go wrong with a windmill unless you walk into it?!), “renewable” but never ever described as being cheap, abundant or efficient.

“Cheap” you can see for yourself. Go price the cost of an 80% solar power system (which is what the “experts” recommend for most homes). MasterPo has. To add an 80% solar system to MasterPo’s house would cost $50,000. Even with the tax credits and rebates (which are not guaranteed MasterPo would qualify for) it will still cost MasterPo about $25,000 out of pocket At that cost electric rates would have to jump 8x current rates in order for MasterPo to break even in 10 years on such a system!

If anyone has a spare $50,000 or just $25,000 to donate for MasterPo’s solar system your generosity would be appreciated.

“Abundant”. Sure. If you can guarantee cloudless skies and stiff breezes 365 days a year.
A couple of years ago MasterPo and Mrs. MasterPo spent a few days in Atlantic City in the summer. The local power company has 3 MASSIVE wind turbines on the shore line. Throughout the stay only 1 turbine at a time ever turned and even then it was slow. No breeze.

And what of shorter days and lower light intensity in the winter?

“Efficient” changes almost every day as newer technologies come out. Solar panels manufactured today are twice as efficient as those made just 5 years ago! Imagine what it will be in 10 years. So why buy today what will literally be obsolete in a year or two?

Wind turbines have a very limited life. Wear&tare is extreme.

And in both cases commercial solar and wind power generation has to be built in remote areas with wide open spaces. Construction costs and logistics are more difficult, plus loss of generated power efficiency when the electricity has to travel long transmission lines to the consumer.

Cheap, abundant and efficient energy is vital to the growth and prosperity of a 21st century economy. If you look across the world those countries that do not have cheap, abundant and/or efficient electrical energy production also do not have strong economies or high standards of living!

That begs the question: Why is the President so head strong pushing to abandon traditional energy sources for admittedly more expensive, less plentiful and inefficient sources instead?

Never in human history has a nation advanced by going to lower efficiency and reduced energy production.

Things that make you go “Hmmmmm….”

Setting The Record Straight Part 2 – “Gold Bug” Is Bugging Me

In this second installment of trying to state MasterPo’s position on certain topics in such a crystal clear fashion that no one (not even you Apex) can misunderstand, MasterPo wants to tackle a point that has come up. It shouldn’t be in question but apparently is so it needs to be addressed.

Recently both on The Pofile and some other sites (notably financial) MasterPo has be accused of being a “gold bug”. Presumably that is a person who so loves gold as an investment over all else. This is usually based on the personal belief that gold, having been a means of trade currency for over 4,000 years of human history, will continue to be a vehicle for trade long after whatever happens to current paper currencies.

The truth is that MasterPo owns very little physical gold as a percentage of his overall investment portfolio. With the recent (as of writing this) run up in gold (and silver) MasterPo does wish he had the foresight to have bought more just a few years ago but hindsight is always 20/20. The same can be said for buying Amazon.com at $15/share or Walmart at $19/share.

It is no secret that MasterPo does have great (grave?!) concerns about the future prospects of the U.S. dollar as a national much less international currency. It is sooooooo clear that current (as of writing this) American national financial policy sooooooooo closely parallels the policy of the Weimar Republic it should concern (to put it mildly) any sane person. History shows what happened to Weimar so why would anyone think it can’t happen again this time to the U.S.?

As of writing this:

· $13 trillion dollar national debt and growing.
· $1+ trillion in national deficit until at least 2020.
· Individual states with hundreds of millions of dollars in debt.
· State and local pension planes also hundreds of millions of dollars underfunded.
· “Official” unemployment hovering at 9.6% (U6 unemployment at %17.1, several states including CA, NV, WI and MI with double digit unemployment).
· Costs and regulation from National healthcare sky rocketing
· Quantitative Easing #2 about to start.
· The Federal Reserve buying Treasury Debt even though Ben Bernake promised in 2009 under oath in front of a Congressional Committee the Fed would never do that.
· The Federal Reserve actively pursuing a policy of trying to raise inflation while devaluating the American dollar.
· Interest rates at near zero, having nowhere but “up” to go.

And none of this takes into account the inevitable unforeseen events that life throws at you.

For all these reasons and others MasterPo is taking a second hard look at gold (and silver) as both an investment and emergency currency alternative. Even at today’s lofty prices ($1,350/oz for gold, $24/oz silver as of writing this) if this is what is needed that’s the price to pay.

For this MasterPo has been called a “gold bug” and accused of being a “bomb shelter” loony. While Mrs. MasterPo may at times agree with the latter, facts are still facts. Closing one’s eyes to what is happening and parallels to history might make you feel better rather than dealing with the problem head on, but won’t change the outcome.

MasterPo doesn’t know if anything significantly bad will happen on our shores as a result of the above points.

MasterPo certainly does not want anything bad to happen!

Nothing would please MasterPo more than if in 5 years time everything is turned around – unemployment is below 5%, the Dow is over 15,000, S&P approaching 2,000, gold below $800/oz, national debt really cut in half (not just a 10-year projection), etc. But MasterPo isn’t holding high hopes for that scenario.

Each person has to do what they believe is best for them and their dependents. One person might say there’s nothing to worry about and go on with blissful dreamy eyes. Someone else may say this is potential for problems and choose to take at least some steps to be prepared if such happens.

This is not a question of who is right and who is wrong! “Right” and “wrong” are not the issue.

Prepared vs. unprepared is the issue.

Just as one person perceives it is prudent to buy a certain kind of insurance while someone else thinks it isn’t necessary, such as it is this case. MasterPo believes at this juncture of national events some measure of physical gold and/or silver is prudent to own while someone else may think not.

That’s your individual call.

Point of fact is that risk management professionals do not prepare for emergencies based on measuring the likelihood of them happening but rather the level of loose that would sustained if such an event ever did take place. For example, MasterPo has never known anyone who lost their home due to fire. Yet everyone who owns a house (and many renters too) also have fire insurance.

Just in case.

Whether or not you agree with MasterPo on this subject doesn’t matter.

You choose your level of preparedness (from nothing to everything) and live with the choice. Only time will tell which was a better call.

The Morality of Preparation And Forethought

Recently on another site an article appeared discussing thoughts on the ethical and moral obligations of people to make plans and preparations for disasters and extreme events in their lives. The author was speaking of physical events such as hurricane or flood or earthquake. The idea being that it is moral and ethical to have made preparations in advance for yourself and your family rather than rely on your neighbors and community (and government) to provide for you in the event of an emergency.

All good things to be ready for if you live in a location frequented by such events. Indeed, MasterPo has noticed a significant increase in commercials and public service announcements from FEMA and state agencies advising people to have a plan and supplies on hand. (Someone trying to tell us something??)

But while physical events can and do happen, the same concepts of ethics and morals can and should be applied to non-physical event that are much more common in daily life. If one can say it is moral and ethical to prepare for a hurricane than isn’t it just as moral and ethical to:

- Prepare for a disabling injury or illness by having disability insurance?
- Prepare for a life threatening accident or illness by having life insurance?
- Prepare for the damage or destruction of your home due to storm or fire by having property insurance?
- Prepare for your eventual retirement by putting something away in a 401k or IRA?
- Prepare for the unexpected but inevitable repairs and replacements life throws at you by having a rainy-day fund?
- And, as unpleasant as it may be to think about (though why MasterPo can’t understand, death is inevitable for all of us), prepare for the care of your family and loved ones by having a proper will drafted?

Yet all too often, more and more (or rather fewer and fewer) people see the need for such thought and preparation. Some of it is defiantly the Ostrich concept of not thinking about it and therefore it won’t happen (head-in-the-sand). But a lot is also clearly a general lack of concern in that if something bad happens then someone else (probably the government) is responsible for their problem resolution!

MasterPo shouldn’t be surprised. Personal responsibility isn’t taught any more in schools, unless it’s “green” responsibility to the planet or helping “the poor” fight “the rich”. Otherwise we are all global citizens and one big village.

Keep your nose out of MasterPo’s tent!

Setting The Record Straight: Part 1 – Tax or No Tax?

It would seem that some readers of The Pofile (and of MasterPo on other sites) have gotten several misconceptions of some of the position MasterPo takes on various subjects. MasterPo believes he has been crystal clear on everything he has said (and repeatedly said) but apparently misunderstandings still thrive. Or it could just be that some people simply read one thing and prefer to think another. (Funny how the “broad brush” only flows in one direction.)

In this article MasterPo will address one of those misconceptions.

MasterPo is not a zero-tax person!

(For those unfamiliar, a zero-tax person/advocate is someone who says there shouldn’t be any taxation at all.)

MasterPo has said many many times that some minimal level of taxation is necessary for the operation of government at the Federal, State and local levels. The U.S. Constitution provides for certain functions of the government (as well as in the Constitution of the individual states) such as military/defense, interstate and international commerce, boarders and sovereign security, Federal elections, a judicial system etc. On the state and local levels functions such as public education, municipal water/sewer/garbage, roads, local police and judicial systems, etc. are the function of having local communities. It is clearly proper for all Americans to pay a minimal amount of tax in order to fund these operations for these are the functions that define a sovereign nation and the communities that compose a nation as opposed to a loose confederation or association.

The difference is that MasterPo has repeatedly stated his belief (which is echoed by many many others) that we as a nation are at a point of too much taxation cumulative for all levels of government. Everything and anything you want to do in life now requires paying some form of tax – either directly as a tax or disguised loosely as a “fee”, “permit”, “license”, “registration”, “filing”, “excise”, “duty”, “usage”, required purchase under penalty of law, etc. – to do. MasterPo is hard pressed to think of anything that doesn’t involve some level of taxation, if not directly on the individual then on the business or organization or someone else involved in the activity.

What is worse, for the last 40-50 years we have been told that if we ‘only’ paid just a bit more tax on this or that then whatever problems or ills could be solved.

The tax was levied.
The money was collected.
The funds were paid out.
But the problems still exist.

And then our leaders (said very loosely) tell the American people if we only paid just a bit more then we really could solve these problems and have paradise on Earth. So the taxes go up and/or new taxes are levied, money collected and paid out, the problem persists, and so on and so on year in and year out.

The problems we face today are not because as Americans we are taxed too little!

To believe we can run a nation – much less a state, city or county – with no taxes whatsoever would be a truly foolish idea. Civilization throughout history have collected some form of payment from its members to support functions common to all the citizens.

The issue is not if there should be taxation.
It is how much tax and what kind of tax (as well as how it is spent).

To that end MasterPo does not object to taxation.

(You hear that Ricky!)

The Real Budget Busters!

Long time readers of The Po File know that MasterPo is rooted in truth and reality, no matter how unpleasant it may be. Human nature, regardless of what people say, is such that nobody likes to be told the bad truths. They’d rather be told good lies and pleasant fantasies than confront cold truth and awful reality.

For as long as MasterPo can remember the talk in Washington from the politicians was about reducing spending and reducing the budget. Didn’t matter who the President was, what party controlled Congress, etc. All sides said the same thing.

In truth there were some tepid attempts at this once in awhile. An item here and there was reduced a few percentage points. But in the big picture it was just pennies.

So here we are today with a $13.3 trillion dollar debt, a $1.3 trillion dollar deficit (gap between what the government takes in from taxes and what it spends out), and these numbers increasing by the TRILLIONS every year for at least the next 10 years! That’s not partisan or rhetorical. That’s what both the White House and Congressional Budget Office figures say. Look them up for yourself.

Let’s face reality:

Social Security and Medicare together consume 40% of the Federal budget (based on 2009 budget figures).

The reality is it doesn’t matter who is in office or what party they are, Social Security and Medicare are NOT going to be cut! Much less eliminated or privatized. Just won’t happen. Never. The politicians may play with some numbers here and there but the programs will remain, in full force, and in full funding. These are the American ‘Rock of Gibraltar’, though not as awe inspiring or cause for pride.

So what does that leave to be cut?

The typical response is “Cut the military!”

The same budget figures show American military spending is just 20% of budget.

If someone can show MasterPo how 20% is bankrupting the country while 40% is not please do!

There are a wide host of reasons not to cut defense in this day and age. Far too many to discuss here at this time other than to say it’s like cutting your town snow removal budget on the first day of winter. That is not to say there’s isn’t waste in the military budget ($500 toilet seats, etc) either.
So, even if we eventually someday actually do get a President and Congress that is serious about real substantive spending cuts, where will those cuts be?

If 60% of the budget (SS, Medicare and Military) are considered so sacrosanct where will those cuts come from?

MasterPo doesn’t have an answer. But MasterPo does know that if real solid budget cuts are ever to be made there cannot be any Sacred Cows

It’s not a matter of “shared pain”.

It’s reality.

Election 2010: Manage Your Expectations.

Today is Election Day 2010.

Whoopie.(?)

The ‘who’ and the ‘what’ has been beaten to death in the media and other sites for months now so MasterPo isn’t going to take that one on. Besides, at this point if you don’t know who you’re going to vote for then you are likely someone who gets all flustered at an all-you-can-eat buffet.

The odds on favorites are the Republicans and Tea Party candidates to win by a significant margin. Some say landslide.

We’ll see.

But even if they do win (as MasterPo does agree is likely) don’t pop the Champaign just yet. 2011 holds a huge number of issues and problems for the new Congress. Some even go so far as to say the Republicans and Tea Party are being setup for a spectacular failure in the year to come.

There may be some truth to that.

Consider:

· The current 99 week unemployment limit/extension is going to start being hit early in 2011. The new Congress is going to have to deal with whether or not to extend it more. 110 weeks? 120 weeks? More?! But if they don’t they will be savaged in the media for being cold hearted conservatives.

· As of writing this the U.S. national debt is $13.6 trillion dollars. The legal debt ceiling (the max the Federal government is allowed to have outstanding as debt) is $14.2 trillion (which the current Congress raised this year already). The new Congress is going to have to decided to raise the debt ceiling again or not. $15 trillion? $16 trillion? If they do raise it they will be slammed (and not without some just cause) for being no different than tax&spend Democrats. But if they don’t raise the ceiling the Federal government will literally go broke if it can’t borrow more money! Imagine what the economy will do? What world markets will do?

· The President’s Debt Commission is already floating plans for new taxes and tax hikes (e.g. VAT, energy tax, reduce or remove the home mortgage deduction, reduce or remove the child tax credit, reduce or remove retirement savings deductions, etc.). Surely some of these are going to come up for a vote. Most likely they will be tied to some other legislation that is considered more desirable. Will the new Congress be strong enough to stand firm against these?

These are just some examples.

The stock market has already factored the Republican/Conservative win into the system, hence the recent run up. But 2011 will be the reality check.

MasterPo has his doubts the new Republican/Tea Party/Conservative Congress will in fact be able to hold together in the face of pressure from others in Congress, the media, and certain groups and elements of the public at large.

It might be a whole new change (just remember what happened the last time America voted for ‘change’!) or could be the same old/same old in the end.

2011 – That’s when it really begins.

Riding the Wheel of Debt

Recently MasterPo had an insightful (and rather unsettling) conversation.

The other person, a woman in her early 40’s, said she has $50,000 in credit card debt. Like most credit card debtors she’s paying very high interest which causes less and less of the minimum payment to be applied to principle. Thus, according to the disclosure on the statements, indicate at min payment it will take 20 years to pay them off (presuming of course no additional charges).

And, like most credit card debtors, this didn’t happen overnight but built up over time as she charged this or that she didn’t have the cash to pay for but felt she “needed”. In truth, some of the things she charged were really needed like gas for the car to get to work, food, basic clothing (this person doesn’t at all dress lavish), etc.

So MasterPo asked her a question: “If you could make all these debts just go away, have a totally clean slate, what would you do differently to prevent yourself being back in this situation a couple of years from now?”

Her answer: “I don’t know. Probably nothing.”

MasterPo has sympathy.

MasterPo has been in the situation where you do need something urgently so it gets bought on credit. Yet, even while signing the receipt, having no idea where the money to pay the bill will come from and just hope to figure it out later. Not a fun way to live!

Yet it is the response that most troubling: This woman has not recognized there is a fundamental flaw in her living style that encourages frequent over spending and high debt. Plans can go astray and certainly life comes at you fast from odd directions you never see until it’s upon you. But not even considering a plan to remain debt free (if she could erase her debt) is all too typical these days.

But then again, why not?

Why do the right thing?

There are no debtors prisons anymore.
In spite of various bankruptcy reforms passed it’s still pretty easy to declare.
The government (regardless of administration) keeps demonizing banks and lenders for wanting to be repaid (how absurd to loan money and expect repayment on time and in full!)
The government keeps forcing lenders to “work with” people to pay off debt instead of enforcing the original terms of the agreement
You can’t really be denied much for having bad debt – the rates may be higher but there’s always somebody willing to lend to you.
A person can’t really be denied a job or advancement (in spite of the claims of a credit check – something MasterPo never understood anyway but let’s not digress…)

MasterPo doesn’t know how this woman is going to get out from under, nor even if she really wants to be! Even if she does odds are pretty good she’ll be right back in the same situation.

Still, why condemn her when our own government is basically doing the same thing.

If we all just had a printing press in the basement…

When the Long-Haul Comes Knocking.

Browse through today’s personal financial and investment websites and blogs and you will find many articles and comments such as “Doesn’t matter what the market does now, I’m in it for the long run!”. While such is a good generic commentary for long term investing, eventually that “long run” will arrive!

Think about it: Today’s market conditions are someone else’s yesterday’s “long run”!

As of writing this Japan is starting its third “lost decade” of stock market performance. But you don’t have to go half way around the world for evidence. From the late 40’s thru the mid 70’s (give or take a few years) the Dow was pretty flat (not including reinvested dividends). The great market rise most contemporary investors have come to love and expect has only happened since the 1980’s.

No promises it will continue.

Being invested in quality businesses, with perhaps a little bit on the side in some more speculative endeavors seeking a little more growth opportunity , isn’t at all a bad idea. But sooner or later that future long term horizon will be at your front door. While time is your ally it is also you enemy because you simply cannot afford too many flat (or negative years) of returns no matter how long term your goals are.

At the same time however you can’t be over reactionary too. Markets do burp every so often. And there are always pundits claiming the next big drop is coming (and when the drop dose come there are even more pundits claiming credit for having predicted it years before!).

As with most investment planning it all comes down to how much risk the individual is willing to take. But don’t be lulled into a false sense of security believing that in the long run everything turns out fine. Your time frame and the “turn out fine” time frame may not overlap as smooth as you would like.

The events of life don’t always follow our personal convenience schedules.

Welcome to The Near-Urban Neighborhood!

We have all heard the terms urban (and the deeper location of the inner city) and suburban, with the term “rural” on the extreme end. The former conjures up images of tall buildings, row houses, crowded streets, and lots of concrete; The latter images of individual house with pools in the backyard, lots of trees, grass, non-metered residential parking etc; And “rural” being cows and fields of grain.

As a practical example, New York City is composed of 5 boroughs: Manhattan, Brooklyn, Queens, Staten Island, and the Bronx. To most people (especially Long Islanders) the “city” is Manhattan. The other four boroughs are the “outer boroughs” not really considered the city (some even consider Brooklyn and Queens to be parts of Long Island, technically geographically correct).

Moving further East, Nassau and Suffolk counties are Long Island. As such, Nassau and Suffolk are considered suburbs of New York City.

But as cities have expanded over the last 50-6o years these kinds of categorizations are no longer valid in a great many cases. For example, walking along Merrick Road in the towns of Valley Stream, Freeport, Merrick, or Bellmore in Nassau county you are technically not in an “urban” environment though with the tight concentration of houses and business, density of population, noise and pollution etc. while it’s nowhere near as New York City is, it is just as clearly not suburban and definitely not rural.

Even in MasterPo’s own neighborhood in Suffolk county (about 40 miles East of New York City) the setting is not as country-like as suburbia of the 1960’s and earlier.

MasterPo is placing a stake in the ground and coining a new phrase “Near-Urban” meaning less developed and dense than inside the geographic boundaries of a city but far from the rolling hills of the country side. A place you can see your neighbor, see into their yard, hear them come/go in the middle of the night but at the same time you don’t hear them flush the toilet at night nor have concrete from end-to-end.

Under this new term near-urban places like Nassau county and Western Suffolk County (up to about Oakdale/Smithtown) are near-urban, from Oakdale/Smithtown to Riverhead suburban, and further East rural (in spite of encroaching development there still are active farms on Long Island). These kinds of geographic distinction may be difficult for non-New Yorkers and non-Long Islanders to grasp but the same can be said for the areas around all the larger cities like Boston, Chicago, LA, Houston, etc.

This evolution shouldn’t come as a surprise. In MasterPo’s father’s day most of Brooklyn was still dairy farm land! The landscape of America changes as the generations change. Good or bad, right or wrong – probably both from different perspectives.

May you find your corner of the land to hang your hat.

Dangerous Tough “Green” Love

It seems that for all of MasterPo’s adult life some celebrity or politician (hard to tell the difference some times), advocate, or zealot has been crying about how we as humans – and specifically we as Americans - only have X-amount of time to mend our evil post-industrial ways in order to “save the planet” or else it’s curtains for humanity. 10 years, 5, years, 4 years, whatever. It’s all the same. We have to take draconian measures now or the world is dead meat in whatever the time frame is.

Funny thing is, for all years someone has been screaming the time frame keeps getting pushed further and further out. 20 years ago when someone said we only had 10 years to fix the ills, well, the 10 year mark came and went and humans are still here doing rather well overall. So they added another 4-5-7 years.

It reminds MasterPo of the old joke: A guy goes to his doctor and the doctor tells him he only has 6 months to live. Then hands him the bill. The guy says he can’t pay the bill. So the doctor gives him another 6 months to live!

But jokes aside, now it’s getting a bit too serious. Not the rhetoric but the actions and possible future actions.

Consider: If you truly believed that something had to be changed now otherwise you and your family would be irrevocably harmed, to what lengths would you go to [try to] make that change happen?

Most recently (as of writing this) yet some other global warmers and greenies group made yet another statement that we (read Americans) have only 4 years to implement dramatic changes otherwise we’re all goners. Same song, different singer.

But now stop and think: If a person or group really and truly believes that we only have 4 years to changing things around otherwise everyone is forever and irrevocably harmed then to what extent is a person or group like this willing to go?

In the first year probably a lot of PR with heavy rhetoric and strong imagery.

But nothing changes (at least not to the extent or rate they feel it should!).

Second year add in law suits and open protests in the streets.

Still nothing changes.

Third year – half way to Dooms Day - now it becomes interesting.

Legal recourse?

There have recently been articles discussed how there is a push both in the U.S. and the U.K. (as well as Canada) that anyone who disagrees with global warming should be arrested and jailed. In Canada there is a push to have anti-global warming views actively suppressed and those expressing the views jailed for treason!

But let’s go on…

Fourth year – Time to pay the piper?

What if no significant public policy changes or industrial or social actions have taken place? Think again about a person or group who feels now is IT for saving the world and themselves or not.

What about active sabotage against the devices and facilities of what they perceive as the engines of threat to the environment?
What about violence against the owners and operators of these devices?

Imagine violence against industrial plants.Imagine violence against manufacturers and sellers of heavy machinery.Imagine coming out from the shopping mall to find your large car, pickup truck or SUV smashed!Imagine someone’s home that is deed a “McMansion” fire bombed!

Unlikely? Maybe.

But then again to a person that honestly truly believes this the end, the crunch time, the do or not do moment that we need to save the planet or else they and their families will perish because of your actions (or rather the lack there of) these actions may seem reasonable. Afterall, how far would you go to protect your family’s future?

Eco-terrorism isn’t new. But now it’s being brought closer to Main Street.

Consider the recent attack by a man at the headquarters of the Discovery Channel. His motivations were published on the net for all to see: He was an extreme zero-population person. MasterPo read his manifesto (before it was removed) and, as others have reported, it was full of anger and hate for humans and babies. He really seemed to think physical force to stop human procreation was the answer (and that Discovery Channel should prompt it by having sympathetic programming).

This person may be the first of a long and violent line of people who feel ‘talk’ has gone as far as it can; Now actions are needed.

There is nothing more dangerous than a man on a mission.

Adapting is Falling Behind

As of writing this article the so-called “Financial Reform” bill is sailing through Congress and will most likely be passed and signed into law by the time this article is published. Much has already been writing about the proclaimed pros and cons of the bills and as readers well know by now MasterPo doesn’t rehash the same old same-old story. That’s what Google is for.

But one thing is certain: the total un-certainty of how all these new rules and regulations and oversight will manifest themselves in the market and thus impact all our lives.

You have a checking account? You’re impacted.
You have a mortgage? You’re impacted.
You have a 401k? You’re impacted.
You have a credit card? You’re impacted.

But to what extent?

That question was very poignantly made by one of the hosts on CNBC while discussion the ramifications of the bill. He said quote “Whatever they are, we’ll adapt.”

Adapt - aka Change.

Stop and really think about what that means.

Right now you go about your daily life, businesses go about their daily operations, more or less smoothly because the processes and procedures of your life (and business) are setup and functioning.

Along comes “change”.

ZAP!

Now you have to stop what you are doing and re-adjust the processes and procedures of your life for the new reality. That takes time, effort and cost. All the while you aren’t living your life but merely “adapting”.

For a business – particularly a small business – that means the owners and managers have to stop performing the functions of the business in order to focus on the “change”. MasterPo is a business owner. That means when these changes come MasterPo must stop managing and overseeing the functions of the business (making products, marketing and selling the products, organizing advertising, exploring new products etc) and spend valuable time “adapting” the business to the “changes”.

MasterPo Is not arguing the merits or need for change (nor is he blindly accepting it, just not a topic of this article). Simply that for the sake of a cohesive and smooth economy wholesale changes have a much more disruptive that positive effect that can negate any benefits the change is supposedly going to usher in.

That isn’t how you advance an economy.
Particularly one in perilous condition already.

Rethinking Silver

MasterPo has been very clear on this blog and other sites that physical ownership of gold is a vital item in the current uncertainty of economics and politics. Not gold certificates or ETFs and certainly not TIPS over gold.

MasterPo is not a “gold bug”. Stocks, bonds and mutual funds is much more MasterPo’s speed. MasterPo thinks he has made it abundantly clear that his push for physical ownership of gold isn’t for the investment growth per se (it is nice!) but for the fact that, historically speaking, economies come and go but gold has been an item of value for thousands of years of human history. And, short of a Mad Max end of the world scenario, it will continue to be.

Over the years MasterPo has passed on silver purchasing seeing it as a cheap metal. Certain it is a less expensive metal cost wise even after the huge rise of the recent period. To make any usable money you would need to trade a large quantity of it compared to gold (or platinum).
For example, presuming you purchased 1 ounce of gold at $1,000/ounce and 1 ounce of silver at $20/ounce. Both go up 20%. Your gold is now worth $1,200 and your silver $22. That means a $200 and $20 profit respectively (not including the spread between the bid and ask when you sell).
$200 is useful.

You can do something with $200.

You can buy groceries.
You can buy fuel for your car or home.
You can buy clothing.
You can pay for maintenance or repairs.
You can pay bills (at least in part).
You can pay for medical treatment.
etc

Now, what can you do with $2?? That will get you a coffee and newspaper – maybe.

But that isn’t the point of this article.

MasterPo has decided to reconsider purchasing silver, even at the current price (about $20/ounce as of writing this). As with gold, not so much for the investment of it but for the uncertainty of the future. Silver, being cheaper than gold, lends itself to being able to purchase more ounces (at $20/ounce $1,000 buys 50 individual ounces!).

MasterPo’s change of heart comes from an article posted on another site.

MasterPo has stated here and elsewhere that maybe the economic and political situation could deteriorate to a point where the dollar as a currency is, for all intents and purposes, worthless (see Weimar Republic or Chile in the early 1970’s). Hard assets like metals maybe traded for daily essentials of life. Perhaps even on a black market if it comes to that (and MasterPo surely prays it doesn’t!) The article mentions as an example trading five silver coins to a farmer for a bushel of produce when the dollar is seen as worthless.

MasterPo can’t say if this is a realistic scenario or not. MasterPo has no idea how it would actually work to trade metals of any kind for food and other supplies (though MasterPo is sure your local Pathmark won’t be taking silver and gold at the check out!). Nevertheless, MasterPo intends to add some physical silver to the investment portfolio.

As with the gold, this will be an investment MasterPo would be happy (well, almost) to be wrong about. The consequences of being right are worse than just loosing value.

Stiff upper lip.

This is What $700 Billion Gets You These Days?

We have all heard the saying that a dollar ain’t what it used to be.

So what can you get for 700 BILLION of those dollars?

Apparently not much.

Sheesh!!

This figure is of course the official Obama White House cost estimate of the so-called “stimulus” package passed in early 2008. You know, the one we must have right now or else unemployment will sky rocket, the economy will disintegrate, the nation as we know it will cease to exist, cats & dogs living together, etc etc etc.

As of writing this article unemployment is at 9.6% and holding steady. MasterPo supposes that’s an improvement over the 10.1% it was earlier in this fiasco, though if 5-tenths of a percentage is cause for celebration…

You may recall President Obama’s editorial in the Washington Post on February 4, 2009 in which he said:

"And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

(By the way, when was the last time a sitting President wrote an editorial for a newspaper??)

On page four of President Obama’s “stimulus” plan document it shows a now famous (infamous?) chart. The chart illustrates that without a “stimulus” the unemployment figure will rise to 9% in 2009 before slowly declining. But with the “stimulus” will ‘only’ rise to 8% before quickly declining.

So we procured $700 BILLION (that the nation does not have to spend, had to borrow) and the unemployment still went to 10% anyway?!

The person who draw up that chart should get a Nobel Prize. They seem to be handing them out to anyone these days anyway.

In truth (if that is the correct word to use) only about $400 BILLION of the “stimulus” was actually spent to date, which begs the question why??

Initially some pundits thought Obama was holding off until spring or even summer 2010 to spend the bulk of the “stimulus” to give Democrats a boost at the polls come November. But that hasn’t happened (the spending that is).

Now pundits think he is holding off until later in 2011 or even early 2012 to spend the balance in order to give his own re-election campaign a boost. If true, incredible to consider that an American President would play such games with the future of the nation and the people for his own gain!
Further, if true, spending in 2011 or 2010 may not work either! By that time the damage to the economy may be so severe that even multi-billion dollar spending can’t resolve it in any meaningful time frame.

Whatever the reasoning, it’s clear that $700 BILLION doesn’t produce the results the plan was sold on.

So what’s plan B?
And what will that cost?
And where will that money come from?

Let the interesting times roll on.

Financial Lessons from Chernobyl

The American economy today, especially all the attempts at “stimulus”, bears a striking resemblance to the events that lead to the April 1986 Chernobyl nuclear accident.

On that fateful day in the Ukraine the nuclear reactor operator s were trying an experiment to generate emergency power from the turbines in the event of a reactor scram (an emergency shutdown). Problem is nuclear reactors (especially of Russian design) don’t turn on a dime and controlling the output of the reactor at low levels proved very difficult. In order to try to achieve the minimal power levels needed a large number of the cadmium control rods were removed from the reactor.

Nothing changed. The power level remained low. So more control rods were removed.

Still nothing. So even more were removed, violating well established safety and operations procedures (not just Russian but worldwide throughout the nuclear industry).

Sudden – the power spiked off the chart!

The reactor operators pushed back in all the cadmium control rods.

But it was too late.

BOOM!

The Chernobyl nuclear accident was now history.

Now compare what the Obama administration has done with the American economy in terms of bailouts and stimulus.

Billions for the AIG bailout
Billions for the bank bailout
Billions for “stimulus”
Cash for Clunkers
Cash for Caulkers
Tax credit for home buyers
99 weeks (so far) of unemployment benefits

And yet as of writing this unemployment is at 9.6% and expected to rise.
The market is down and shaky.
New home sales have hit a 15 year low.
Consumer confidence is poor.Consumer spending is in the tank.
Business hiring is very slow.
The Dow dropped below 10,000 less than a month ago.
Gold is at a new record high over $1,300 per ounce.

Yet the Federal government keeps pouring more and more money into the economy and bailing out or saving this or that business and sector. This is equivalent to essentially removing all the controls and safety devices of the economy. Meanwhile, the expected boost just hasn’t come.

And just like with Chernobyl when enough of the controls have been removed – Boom!

More likely Crash but the end result is the same.

History repeats.

Debt vs. Cash Flow: And The Winner Is…

All forms of personal financial media are filled with articles and advise about how it is soooooooo important to pay down your debt. It is a worn out mantra.

Worn out or not, MasterPo 100% agrees with the concept. Especially high credit card and other revolving credit line debt. And even with today’s low mortgage rates owing your property outright is definitely not a bad thing!

Can’t argue against it.

But there is also a reality check that has to be considered.

Paying down debt at the exclusion of all other discretionary financial activities may not be the best approach in all cases. That is, putting every last spare dime to paying debt precludes alternatives such as making investment deposits, funding a spare cash/emergency cash account, protections such as insurance etc.

Financial planners and number crunchers are quick to offer up mathematical models they claim show the “return” on paying debt is better than most investments. This is based on the paradigm that paying off debt is the best “investment” you can make.

And it is a false paradigm.

Repaying debt is not an “investment”. Nor is it a “savings”.

Don’t jump all over MasterPo. It has already been stated in the article that repaying debt is not a bad thing.

But there is no “return” on repaying debt. Not in a practical, spendable sense. If you have a credit card at 10% interest you are not getting a 10% “return” on your money when you pay it off. Nor are you “saving” 10%. At best you are reducing your future anticipated interest payments (as well as reducing your overall indebtedness). While this does improve your cash flow it is not yet cash in your pocket until the future comes, you have the cash in hand to make the former debt payment and you don’t have to make a payment (or at least as large a payment as you otherwise would have).

A “return” implies you are receiving something of value back for what you have paid in that can be used to purchase some other product, service or investment. While reducing your indebtedness is certainly a good thing it has no spendable value. You can’t take a handful of non-indebtedness or reduced debt to the store to buy groceries. The only way to get spendable value out of debt reduction is to draw back again on your credit thereby adding back to your debt! Catch-22.

Neither is paying down debt a “savings”. You already planned to spend the money to repay the debt (presumably). If the debt is reduced or eliminated that money may be freed up to spend on something else but it is not new-found/earn money. One way or another it would have been there anyway. How you spend it – repaying debt, making purchases, investing, etc – is irrelevant. The total does not change.

Once again please make no mistake, MasterPo is not advocating against repayment of debt or becoming debt-free. Simply the single-mindedness of debt reduction has to be tempered with the realities of life.

Even if it does take longer and cost a bit more to extend debt repayment there are very practical real-world reasons for choosing not to plow everything in your pocket into debt reduction. Clearly this is open to much adjustment based on each persons’ individual needs and situation. Definitely not a one-size-fits-all approach.

But neither is blind obedience to debt reduction.

Nudge

“It’s all about control.”

That’s what a long time friend told MasterPo too many years ago in MasterPo’s youth. He was referring to people and politicians that seem to be hell-bent on destroying the very fabric of the nation just to have power because “power” was the end game. Not improvement, not advancement, not trying to make things better in some weird/warped way. Just control over the people for the sake of control.

Laws and regulations that outright say you can’t do this or that, own something, go somewhere etc. are bad enough, though occasionally are a necessity of society – MasterPo is not a Libertarian.

But at least we can have an open discussion and debate on these statutes. And if/when passed we have the voting record of the politicians to hold them accountable for passing these laws.

But it is the unexpected and unforeseen outcomes that have the greater impact on our lives and our society in the longer run (or perhaps is in fact expected and foreseeable by those designing these laws and regulations). And as such are even more insidious and evil (yes, evil!). For, rather than outright say you can or cannot do this or that, a little change here or there “nudges” you in a certain directly while allowing the powers that be to give the appearance of clean hands in the matter.

For example, consider the slew of new car mileage standards being imposed and the changes to vehicle designs as it relates to the impact on your life. (This will be a lot easier for people with families than singles to understand but don’t dismiss it – one day you too will most likely have a family!)

(Nudge)

SUV’s are bad. Small cars like a Yaris and Mini Copper are good. But realistically, how can a family of 4 (2 adults and 2 children, especially small children in safety seats) fit in Yaris along with luggage, toys, food etc. that is need for a road trip or driving vacation? The situation becomes even more impractical (if not outright impossible) for a family of 5 or 6. Add in the family dog and you’re packed tighter than tuna in a can.

So you don’t take that driving vacation or don’t go so often to see family out of state, etc. You drive less, do less.

(Nudge)

In fact, being in such a situation becomes more a personal choice by way of not having a family or restricting yourself to only one child. Thus, what would otherwise be a purely a voluntary choice to have only one child (or none at all) is really now imposed on you not by your own circumstances and decision making but by the practicality of the rules the ‘leaders’ have created ostensibly not about children but about cars. You certainly can still have as many children as you want. No one has made a law (yet!) that you can’t have 4-5-6 or more. But now how are you going to transport your brood in a Yaris? Forget travel and vacations – just to get them to school, sports, the library etc. Not happening. Or at least will cost you much much more in terms of needing additional vehicles.

(Nudge)

For that matter, what of large people? MasterPo isn’t just referring to fat people (let’s call it for what it is, no PC talk here) but there are people who, for a variety of natural and well accepted health reasons, are very large. MasterPo can’t see those people cramming into a Mini Cooper. So now the push for ‘thin’ and ‘healthy’ becomes much more than a good idea for longevity and daily health, and now is truly a daily matter of practicality for being able to go and do what you want. Literally, the size of your vehicle requires you to be smaller of stature.

(Nudge)

Meanwhile, the ‘leaders’ and politicians can say with a straight face and clean hands they did not force you to have only 1 or 2 children, you still have the freedom to go where you want to, and nobody is imposing standards of fitness upon you. All very true – in the letter of the law.
But there you are nevertheless, being limited as to the size of your family, the ability to travel by car, and even needing to be a certain physical size and magnitude to fit into a car.

And you’re left wondering “How did this happen??”

(Nudge)

Manufacturing is DEAD!

Get over it.

The American manufacturing industry, for all intents and purposes, is dead.

No matter what Washington says it’s going to do to help it won’t work. May was well try reviving King Tut.

Sure, there are still American manufacturing companies. Some are profitable and make a good product. But as a business segment – especially as a pillar of the American economy – manufacturing is dead and it’s not ever coming back!

MasterPo doesn’t blame President Obama, nor President Bush, nor President Clinton, etc. Nor was it in any way exclusively a Federal problem. States and localities too had a big hand in it.
This was a death by a thousand stabs. Like “Murder on the Orient Express” – they all did it! Doesn’t matter who was President, what party controlled Congress, who sat on the courts at the time. It all was, as the song says, just another brick in the wall.

A tax on this.
A regulation on that.
A requirement to do something.
A mandate to operate in a certain way.
OSHA
EPA
Labor Board
Unions
Environmentalists
NIMB’s

And many more all have their finger prints on the murder weapon.

The death was a compounded effect over time. Any one or two of these taxs/regs/mandates would have been bad enough but in the longer run still manageable. But when more and more taxes/regs/mandates keep getting piled on year after year after year after year it adds up to disaster.

By contrast, a factory in China or India or the Philippians does not have to deal with any of this red tape. So they can respond quicker and cheaper to market demands and thereby produce a cheaper equivalent product. Under such conditions it’s the height of absurdity to think consumers are going to willfully spend 5-6-7-8+ times more for an American product than a foreign made product. Study the economic concept of “utility”.

It is not “greed” by corporations or CEOs for moving manufacturing jobs overseas. It’s reality: The global consumer (including the American consumer) simply is not going to pay the kind of price required for American manufactured products because of all the above reasons when they can buy the same or equivalent products cheaper manufactured elsewhere.

Eventually, 2 maybe 3 generations from now, those relatively cheaper foreign manufacturing areas will probably be nearly as expensive as American manufacturing now (maybe, the rest of the world has much more common sense about things that Americans do so MasterPo doesn’t expect all the same PC policies and taxes elsewhere, some but not all). But that doesn’t do us much good now.

Wishing for the glory days of American manufacturing just isn’t going to help. This is reality.

A River Runs Through It

By now anyone who has been paying attention to recent events had heard of more and more the government (at all levels) seizing private land, ostensibly for ‘the common good’ under the guise of Eminent Domain. But at least then the government is required by law (if they obey their own law!) to make “just compensation” to you for the land. In other words, they can’t just take it and toss you out in the street.

But what if, rather than taking the land, just declare it unusable? Isn’t that the same thing.

A few days ago some friends stopped by and told MasterPo their experience with this.

These people bought 15 acres of undeveloped land in upstate New York. The land is in a scenic valley near mountains and has a stream running through it. They intended to someday build a house on the property.

This year, out of the blue, they receive notice from the New York State Department of Environmental Conservation that because of the stream it has declared 14 of the 15 acres to be a “wet land” and therefore cannot be developed. Essentially their land is now worthless!

They tried to fight it but both the law and the legal costs were too great and they ended up selling the land literally for pennies on the dollar to a liquidator. A total loss to them.

MasterPo is all for protecting the environment. MasterPo is a sportsman (an avid sport fisherman).

But stop and consider the abject destruction of wealth this caused!

MasterPo doesn’t know what these people paid for that property. Surely 5-figures at least. Even if we presume no appreciation in value at all over the years (even in this real estate market) whatever it was the vast majority of the value is gone and not coming back. Who’s going to buy land you can’t do anything with??

So that is wealth that has literally vanished overnight!

Taking it further, if these people had constructed a house on the land just think of:

-The jobs created by the work crew and contractors building the house.

- All the business generate by purchasing building supplies.

- All the business generated purchasing appliances and fixtures (and sales tax paid!).

- The business the local utility companies would have received to supply electricity, fuel, etc.

- The business the local insurance company would have received for insuring the home.

- And don’t’ overlook all the property tax the local municipality would have received every year as the land is now developed.

But no. New York State killed all that with the stroke of a pen. All to “save” the environment.

Who’s going to save us from the state?