It’s Preparation, Not Prevention

In 2010 a group calling itself the National Inflation Association published a report forecasting hyperinflation in 2011, especially soaring food prices. While MasterPo doesn’t agree with the specific projects this report claims (and has some significant disagreements with some stances that group takes in general), some measure of inflation is inevitable if not already showing itself in the supermarket. Even if food inflation is only one-quarter what the NIA is projecting we’re all in deep trouble!

The other day MasterPo was discussing this projection with an associate. As we pontificated over the possible resulting scenarios for paying $10 for a loaf of bread or $20 for a gallon of milk etc. the associate said “If it happens there’s nothing we can do to stop it so why worry about?”

“Why worry about?”

To MasterPo that sums up a lot of people’s attitudes about everything.

MasterPo agrees that some things (many things actually) are beyond the control of the individual to effect change.

You can’t control the weather.
You can’t control other people’s bad driving habits.
You can’t control delays at the airport.

But just because you can’t control the outcome does not mean there isn’t anything you can do to prepare for it.

Just throwing your hands up that you can’t prevent something isn’t a good response. It isn’t even a mature on. It’s the response of a person who doesn’t want to confront reality. Understandable to and extent. Unfortunately too many people these days seem to rather be dumb&happy in ignorance than deal with reality. A catastrophe unto itself.

It may rain so bring an umbrella.Other people drive badly so you drive defensively and have good insurance.Get to the airport well ahead of your flight time in case of delays. Etc.

In the case of inflation or hyperinflation there’s little the average-Joe can do to prevent it. Indeed it seems our government is Hell-bent on forcing massive inflation (if anything thinks the Fed can peg-hole inflation at ‘only’ 2-2.5% then come to New York for a bridge sale). Other than voting and writing your elected representatives there’s nothing the common man/woman can do to stop it.
But we can prepare for it.

You can buy investments that typically do well during inflation – Gold, silver, TIPS (though MasterPo’s opinion on TIPS is well known), blue chip stocks to name a few.

You can pay down debt now to free up cash flow for the future (not a bad idea in any event).

You can identify what costs in your life are truly necessities and which you can live without (you’ll probably find there are few necessities really, though MasterPo has no issue with “wanting” vs. “needing”, but that’s a topic for another time).

And so on.

There are many articles and opinions as to what can be done to prepare for an inflationary economic environment. A simple Google search will find dozens of sources.

The point is that while we can’t prevent inflation we can and should prepare now for inflation.

Imagine you’re on the Titanic and you know in 1 hour it’s going to hit an iceberg. No one in the crew will listen to you and you can’t change the ship’s course yourself. The ship’s fate is sealed. But you can prepare for it and increase your own chances of survival. You can go back to your cabin and collect only the most valuable items you must have. Dress very warmly. Then put on your life vest and wait by the closest life boat to ensure your first place on the line. You probably will be laughed at during the hour leading up to the hit. Probably laughed at more initially after the hit as no one will believe the ship is going to sink. But as reality sets in (and those around you start to panic) you will already be in a position to maximize your chances of survival.

Be that person.

Rejecting Wealth?(!)

It is reported that one of the many themes of the revolt in Egypt and Tunisia, as well as other calls for revolt and civil unrest in many parts of the world – including the U.S. – is the rejection of capitalism and condemnation of “wealth” (both cash in the bank as well as assets). In short, it is said to be a rejection of wealth, those who have wealth, the pursuit of wealth, and the perceived proverbial unequal distribution of said wealth.

“Rejecting Wealth” - Stop and really think about that.

Where does wealth come from?

If you’re the U.S. Federal Reserve you can print all the “wealth” (read as money) you want. But for the rest of us little people we have to work and earn it (do you know anyone with a printing press in their basement spitting out dollars?). That means being productive, creative, innovative, intrepreneurial etc.

By rejecting “wealth” that automatically is a rejection of those things too:

Rejecting invention and innovation.Rejecting productivity and efficiency.Rejecting creativity and vision.Rejecting risk taking and out-of-the-box thinking.

Is that really such a good thing?!

Every device, item, tool and service we enjoy today had to be thought of, invented, refined, and brought to market for us to buy and use. Someone (probably a lot more than just one person) made tons of money doing this. They got wealthy.

Reality check: No one is going to do all the things outlined about without the reward of wealth. No one!

All the good things people have created are as much for helping and providing to others as it is to make themselves wealthy. Take away that wealth incentive and few people will toil away year after year after year. That is the motivation for going the extra mile, thinking grand thoughts and putting effort to make the idea real.

Without the very real prospects of wealth why bother?

Smart Work, Not Hard Work

"Hard work" and "work hard" are two grossly over used and over played phrases.

It is true the often the real meat & potatoes of work is boring, routine, and just plain laborious. But it still has to get done and someone has to do it. And the reality is that everyone must start somewhere in their career. Very very few (in spite of current popular myth) start at the top.

Toil without end is no great improvement. Year after year hanging your head against the wall (metaphorically of course) isn't improvement. And more over, even a mule will eventually learn it isn't getting you anywhere.

Hard work can not be avoided. But smart work is the ultimate goal.

"Work smarter, not harder" is another tired out and over used phrase. But it does still have merit.

The difficulty is knowing the difference between hard work and smart work, finding the smart work, and recognizing it when you do find it. The task isn't simple. As with any opportunity it rarely announces itself with trumpet fan fair. And there are many false leads that initially may look like "smart" work but turn out are not.

Similarly, it isn't only the work itself but the environment you work in that determines hard vs. smart. You must work in an industry and job environment that lends itself to recognizing hard work and rewarding it. You may be the best mailman in the entire Postal Service. But the USPS isn't well known for advancement and promotion, nor for rewarding creative thinking and embracing new ideas (what do you expect from a government agency?!).

As with work, finding the right environment for smart work isn't easy. You really don't know the mentality of the organization until you are in it. Even then in organizations purportedly open to new ideas and encouraging of individual growth, sooooooooooooo much also depends on the department you're in and even on your specific manager.

MasterPo has all too well seen good people held down and eventually lost because bad management just didn't want to recognize their hard work. Meanwhile different managers rewarded and promoted others just for doing little more than the jobs they are supposed to do! Regrettably there is little way to know for sure until you are in if it's a smart work or just hard work environment.

But there is one thing for sure: Although there is always a need for hard work, hard work by itself never gets you anywhere.

“Money” Can NOT Solve People’s Problems – Only People Can Solve People Problems!

One of the more popular social myths making the rounds these days is “the poor” (defined however you wish) just need more money and they will be “poor” no more. It follows that “the rich” (defined as you want) have taken money from the poor (how can you take money from people who, by definition, have none??) so if money comes back to them everything will be rainbows and cotton candy.

MasterPo is here to say: NO!

Based on personal experience nothing can be further from the truth.

Over the last two years MasterPo and Mrs. MasterPo have ‘provided’ direct financial support to 4 separate “poor” families (and in one case, twice to the same family) in the aggregate of well into the 5-figure range. The reasons for providing the financial support are not relevant to this discussion other than to say it wasn’t because we had nothing better to do with the money nor out of any Savior complex.

The resulting benefits to these families?

Nothing!

Absolutely nothing changed in these people’s lives.

The amounts provided were more than enough to give these people a good head start for turning around their lives, getting out from under some of their debt and bad circumstances, even to re-locate to areas with better prospects for work and self-sufficiency. Definitely would have been the best chance they ever had (and are likely ever to have) to get back on a good path in life.

But no. They didn’t take it opportunity. They squandered the money on things like big screen TV’s, Xbox, dinners out, gambling and drinking, etc. And today they are just as poor and bad off as they were when MasterPo first met them. Nothing changed.

Thus proving that simply giving money to people doesn’t solve their problems. Only the persons themselves can solve it if they want to.

Solar – It is STILL a LOT of Money!!

Go green.
Save the planet.
End foreign oil dependence.

Yaddie, yaddie, yadda.

The song is played out – get a new tune.

Yes, MasterPo is angry.

The dream and the reality simply do not mesh!

MasterPo has written before about this and needs to repeat it: The true costs of private solar energy for a home simply do not make financial sense!

Recently MasterPo went to the website for Renewable Energy Long Island (www.renewableenergylongisland.org) for a current quote on adding solar power to the house.

Here’s how it went: (dollar amounts rounded)

For a 100% solar system the estimated installation cost is $70,000 (not including tax).
Expected estimated rebate from LIPA $17,500.
State tax credit $5,000.
Federal Tax Credit $16,000.
Income tax to be paid on the rebate (you have to pay a tax on a rebate?!) $1,400.

Total out-of-pocket cost to MasterPo: $33,000

Further, it is estimated to add $56,000 in value to my house which might be added to MasterPo’s property tax (if MasterPo’s town chooses not to follow the New York State 15 year moratorium on taxing solar system installations – any bets?).

This is a bargain??

For a 75% solar system the numbers are:

Installation $53,000
Rebate $15,000
State tax credit $5,000
Federal tax credit $11,500
Income tax on rebate $1,400
Total out-of-pocket cost $23,000

Added property value $42,000

And for a 50% system:

Installation $35,000
Rebate $10,000
State tax credit $5,000
Federal tax credit $7,500
Income tax on rebate $1,400

Total out-of-pocket cost $14,000

Added property value $28,000

Where is this a good deal?!

Of course, the website “suggests” taking out a loan to finance the balance of the system. So now a person has to go into debt for all this too?

And the paperwork – Oh Lord! The paper work! – for filing for the utility company rebate and approves is a nightmare! Supposedly the contractor will help but still a bureaucrat ’s dream!
MasterPo has nothing against solar power per se. But come on!

In an economic crunch like now who in their right mind takes on costs and debt like this?!

The $5 Tipping Point?

As of writing this crude oil is still flowing in the Middle East and through the Suez Canal (as well as other products) in spite of the chaos in Egypt. Will that last is the question. And yet even with the continuation of oil world prices for crude are rising as is gasoline at the pump.

2011 oil and gas price predictions are all over the map from $90-$100 per barrel crude to retesting the 2008 $147/barrel level. Concurrently predictions of gasoline prices at the $5-$6/gal level or higher are equally being seen in the some peoples’ tea leaves.

MasterPo doesn’t make price or breaks predictions. And MasterPo has lost far more than ever made listening to TV “experts” on finance and markets. But it is a reality that trouble in the Mid East always leads to some kind of bump in oil and gas prices.

Under more normal, better economic conditions it would be a nuisance at the most. But today is not normal, better economic times:

- Official unemployment is 9.4% (U6 is at 17%).
- Home foreclosures are still sky rocketing while real estate values continue to fall.
- The national debt is going to hit $14.5 trillion in March.
- The annual national deficit is expected to be $1.5 trillion in 2011.
- Official inflation is only around 2% but that doesn’t include food and fuel costs (how convenient!).
- The 99ers are rapidly running out of benefits with no decent jobs recovery in sight for years to come at a minimum (hail the jobless recovery!).
- Individual states and cities are technically, and in many cases functionally, bankrupt.

(just to list a few issues)

If the chaos in Egypt does impact the flow of oil through the Suez Canal, or even worse, ignite further chaos in other Middle Eastern countries (notably Saudi Arabia, Yemen, and UAE) the predictions for $5-$6 or higher gas will easily come true.

With all this on America’s platter already the question becomes: If it does happen (realistically things are rarely as dark as predicted), will this be the tipping point in America for social unrest?

Not because of the price of oil or gas per se. But rather because of the ripple effect throughout an already weak American economy.

People are already heavily burdened to pay for the necessities of life. Like it or not oil as in gasoline, heating oil, and diesel is one of those essentials. All fine to say that in 30 years we’ll be 80% or better on “green” energy. Maybe. Maybe not. But that isn’t today. People still need oil to heat their homes and power their cars (not to mention electric generation).

The price of oil ripples into food costs too which are already on the rise due to commodity prices and world demand. Those tractors and harvesters don’t run on fuel cells or solar batteries. The trucks that carry the product to the food processors and then to the supermarkets aren’t wind powered. The trains that take food across the country in a matter of hours can’t do it on compressed gas. And that doesn’t even begin to consider the costs for ocean freight, air transport and travel, plastics and synthetic manufacturing (of which petroleum is a significant raw material).

A great many American families are already living a very tenuous life through no fault of their own. Job loss, hours worked loss, little is any pay raises over the last few years, rising fees and taxes at all levels of government, near zero interest on bank deposits, CDs and bonds, all put a squeeze on unsteady individuals and families. A sharp and sustained rise in oil prices may be all that is needed to push thousands, perhaps millions, of families off the edge.

Even without pushing families a rise in oil that translates to a rise in gasoline will have a negative impact on the economy. People will cut back on discretionary travel. Many are already doing so.

That translates into lower incomes for the travel industry including hotels/motels, food and shopping, day attractions and events, etc.

All this can easily be the action that kicks out the already wobbly legs of this [alleged] economic recovery and pushes the nation into a deeper recession if not full blown depression.

(Footnote: This article is not about getting off oil, too dependent on Middle East oil, “green” energy etc. The reality is at this stage of our social and technical development there simply is not anything else as universally applicable as oil, nor as efficient, economical (all things considered up to now), and as abundant (‘peak oil’ is a myth) as oil. Our entire society and economy is built around the use of oil. It can be changed. And not doubt someday it will change. But “change” needs to be for the better and not merely for the sake of “change” itself. Just as our leaders are calling for a slow and careful transition to more democratic structures in Egypt and other places around the world so do we have to adopt a slow and careful change to our society for less oil use. Anything less is a shock to the American system that may be irrecoverable.)

I Hate Winter!

It’s official. MasterPo doesn’t like winter.

As a child MasterPo loved the snow, the days off from school (infrequent as they were – NYC schools rarely close), not so keen on the shoveling but overall the snow was a friend. Being cold, wet, half frozen was all part of the thrill.

Not anymore.

MasterPo still very much enjoys the change of seasons. MasterPo wouldn’t want to live in a place that was sunny and 80’s all year long. But as MasterPo grows old more and more the winter feels like it’s getting harsher and harsher. Just can’t shake that cold.

Sure, 6 months from now in the sweltering heat and humidity of summer (and the higher electric bills!) MasterPo will be counting the days until the cooler weather approaches. But for now MatserPo has had enough of winter.

Ps- Anyone seen Al Gore lately?