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.