Tuesday, December 11, 2012
New location!
Big news! After eleven years in a home office, I'm moving 8 doors down the street to a great place to expand my practice. It's the grey building two up from the YMCA. Stay tuned for news about new staff hires!
I'm probably not going to be in the new building until mid-January, though, so if we're meeting before that please come to my old location: 3 Grinnell St., at the corner of Crescent, Grinnell and Highland Avenues. See directions here.
Friday, October 5, 2012
Book Review: "Debt-Proof Your Marraige" by Mary Hunt
The subtitle of "Debt-Proof Your Marriage" is "How to achieve financial harmony: become effective money partners; create a get-out-of-debt plan that works, be prepared for unexpected expenses; slash mortgage payback time in half; deal effectively with roller coaster income." Quite a mouthful, but I'd say it pretty much delivers.
Apparently she wrote a book called "Debt Proof Living" and this is the revamped and remarketed version that throws in marital advice. I think it's great. With very few exceptions I agreed entirely with all of her prescriptions. I sometimes call things by different names, but she is describing the same organs in this financial body as I see, and solves the same problems in the same way that I solve them.
There were only two or three places where I'd diverge from her, so let me get those out of the way.
First, she writes from (and for) a Christian audience and has a few compartmentalized sections that are aimed at that market. One is about gifting, the other is about trusting in God. To be honest, I do the same functions without God in the mix; I think you need to gift for psychological reasons; if you say "I am too poor, I can't afford to give" then it becomes true. You're the one who decides what "too poor" means. If you say "I am well off enough that I can afford to share" then it ALSO becomes true. It's a binary switch and the person who flips it is you. I tell all my clients to find a charity that reflects their values and then give money in such a way to "make the world a better place because you exist by funding your values." She says it's because God wants you to. Whatever, same diff to me.
The trusting in God thing goes like this: just give this system a try. Don't worry about how it will work out, just do the right/smart/hard thing for a bit and maybe God will rescue you with a lottery winnings or a raise or an inheritance. Because God's a cool dude and it could happen. I see this as a trick to get you to start rescuing yourself. If you need to feel like the rescuer is just around the corner, that there's a deux ex machina intervention to this story, that's fine by me. But, uh, in the meantime how about just getting started. You know, while you wait.
So, yeah, I'd agree with what she says and leave faith out of it, but a great many people have faith as an important central source of power in their lives and it's fine with me if they want to tap that.
I also thought her insistence on binders and pieces of paper was too old-fashioned, but am fine about giving her the benefit of the doubt on this one. Not everyone has a free app on their smartphone for tracking spending, and I've certainly seen how having Quicken just be on my laptop saddles me with being the 100% of the time bill-payer/financial-partner in a marriage. Maybe she's right on this one.
The only other place I might have differed is on her insistence on closing out credit cards. She has a great section on reading credit reports - very useful. But she also talks about sending certified letters and checking credit reports to make sure they're closed, etc. I do not see the point in this. She also mentions elsewhere that you can "put your credit on ice" by putting them in a block of water and keeping them in the freezer. I think this is a fine idea for all your credit cards. Closing accounts can actually HARM your credit rating! This is because one of the metrics for how well you handle credit is how much of all your available credit lines are currently used. So if you have a cumulative of $9K in credit card debt and three cards with $10K credit lines, you go from 9/30 ratio from 9/10 ratio if you close two of those cards. Better to have the credit line and not use it! That actually reflects credit maturity, in fact.
But I say this as someone whose roofer wants to do a $10,000 improvement this winter and I do *not* have $10K in my home improvement pot. (Yes, this is the same scenario as this time last year, it's a reoccurring problem. This house swallows $10K in home improvements a year and I had "decided" I wouldn't do it for a few years when I had two kids in college but, uh, my "decision" turned out to not be pertinent to the house's needs.) So here I am needing to come up with $10K again and I'm awfully glad I have a couple of 0% cash advance offers on my credit card. Maybe this reflects that I'm a lousy manager of debt, but I don't think so; I'd say instead that I'm an advanced user of debt. I'll pay down that credit card in full before the 0% rate expires. This is a $30,000 home improvement and I'm doing it $10K/year over three years rather than getting a home equity loan of $30K with closing costs and 10 years of repayment. Point is, there are times when having a credit line available with no fees and no requalifying is awfully useful. Her advice is really only useful here for the people who really are rank amateurs.
Which brings me to the other issue: this book pretty much assumes you're not unemployed, and there's only a tiny lip service at the end to being self-employed. She makes a good, albeit brief point that you can standardize your cash flow as a self-employed person and this will illuminate if your business is failing, i.e., if you feel you need to get $3,000/month and your business cannot handle paying you $3,000 every single month then you need to go get a better job.
I liked this book quite a lot. I liked it a lot better than Elizabeth Warren's "All Your Worth", although Warren had good ideas about how to set up a budget that I haven't seen elsewhere. It was more useful for people early in the accumulation years or anyone seriously in debt, but I'd prefer Henry Hebeler's "Getting Started in a Financially Secure Retirement" for anyone really trying to get a budget nailed down in or near retirement. If you are self-employed without marriage problems you can skip this book entirely, though, and go straight to "The Money Book for Freelancers, Part-Time and the Self-employed"by Denise Kiernan. I liked it a whole hell of a lot better than anything by Suze Orman (I'm not going to bother searching back through my reviews to link to that) and it was similar, but slightly nicer, than Dave Ramsey, and slightly different than Jean Chatsky's book, although it covered mostly the same things. (Chatsky talked more about insurance.) Fact is, the basic elements of how to have a good financial life don't really differ that much. It's like fat loss methods; what ever method of eating less and exercising more works for you is fine. The basic problem with all of these methods is that none of them "work". YOU have to do all the work.
It's been a while since I read "Your Money or Your Life" by Dominguez (I can't find the review? Did I not tag it? Or not review it? Could this pre-date my book reviewsl?!?) but that is a more essential book than this one. You need to really grasp what money *IS* before you can feel sufficiently motivated to bother to manage it, in my opinion.
What really stands out in the Mary Hunt book, though, is the wise and kind and useful marital advice. It's slapped on the front of a money management book a bit disjointedly, but the chapters don't have to be long to be right, and they certainly belong here.
Recommended.
Apparently she wrote a book called "Debt Proof Living" and this is the revamped and remarketed version that throws in marital advice. I think it's great. With very few exceptions I agreed entirely with all of her prescriptions. I sometimes call things by different names, but she is describing the same organs in this financial body as I see, and solves the same problems in the same way that I solve them.
There were only two or three places where I'd diverge from her, so let me get those out of the way.
First, she writes from (and for) a Christian audience and has a few compartmentalized sections that are aimed at that market. One is about gifting, the other is about trusting in God. To be honest, I do the same functions without God in the mix; I think you need to gift for psychological reasons; if you say "I am too poor, I can't afford to give" then it becomes true. You're the one who decides what "too poor" means. If you say "I am well off enough that I can afford to share" then it ALSO becomes true. It's a binary switch and the person who flips it is you. I tell all my clients to find a charity that reflects their values and then give money in such a way to "make the world a better place because you exist by funding your values." She says it's because God wants you to. Whatever, same diff to me.
The trusting in God thing goes like this: just give this system a try. Don't worry about how it will work out, just do the right/smart/hard thing for a bit and maybe God will rescue you with a lottery winnings or a raise or an inheritance. Because God's a cool dude and it could happen. I see this as a trick to get you to start rescuing yourself. If you need to feel like the rescuer is just around the corner, that there's a deux ex machina intervention to this story, that's fine by me. But, uh, in the meantime how about just getting started. You know, while you wait.
So, yeah, I'd agree with what she says and leave faith out of it, but a great many people have faith as an important central source of power in their lives and it's fine with me if they want to tap that.
I also thought her insistence on binders and pieces of paper was too old-fashioned, but am fine about giving her the benefit of the doubt on this one. Not everyone has a free app on their smartphone for tracking spending, and I've certainly seen how having Quicken just be on my laptop saddles me with being the 100% of the time bill-payer/financial-partner in a marriage. Maybe she's right on this one.
The only other place I might have differed is on her insistence on closing out credit cards. She has a great section on reading credit reports - very useful. But she also talks about sending certified letters and checking credit reports to make sure they're closed, etc. I do not see the point in this. She also mentions elsewhere that you can "put your credit on ice" by putting them in a block of water and keeping them in the freezer. I think this is a fine idea for all your credit cards. Closing accounts can actually HARM your credit rating! This is because one of the metrics for how well you handle credit is how much of all your available credit lines are currently used. So if you have a cumulative of $9K in credit card debt and three cards with $10K credit lines, you go from 9/30 ratio from 9/10 ratio if you close two of those cards. Better to have the credit line and not use it! That actually reflects credit maturity, in fact.
But I say this as someone whose roofer wants to do a $10,000 improvement this winter and I do *not* have $10K in my home improvement pot. (Yes, this is the same scenario as this time last year, it's a reoccurring problem. This house swallows $10K in home improvements a year and I had "decided" I wouldn't do it for a few years when I had two kids in college but, uh, my "decision" turned out to not be pertinent to the house's needs.) So here I am needing to come up with $10K again and I'm awfully glad I have a couple of 0% cash advance offers on my credit card. Maybe this reflects that I'm a lousy manager of debt, but I don't think so; I'd say instead that I'm an advanced user of debt. I'll pay down that credit card in full before the 0% rate expires. This is a $30,000 home improvement and I'm doing it $10K/year over three years rather than getting a home equity loan of $30K with closing costs and 10 years of repayment. Point is, there are times when having a credit line available with no fees and no requalifying is awfully useful. Her advice is really only useful here for the people who really are rank amateurs.
Which brings me to the other issue: this book pretty much assumes you're not unemployed, and there's only a tiny lip service at the end to being self-employed. She makes a good, albeit brief point that you can standardize your cash flow as a self-employed person and this will illuminate if your business is failing, i.e., if you feel you need to get $3,000/month and your business cannot handle paying you $3,000 every single month then you need to go get a better job.
I liked this book quite a lot. I liked it a lot better than Elizabeth Warren's "All Your Worth", although Warren had good ideas about how to set up a budget that I haven't seen elsewhere. It was more useful for people early in the accumulation years or anyone seriously in debt, but I'd prefer Henry Hebeler's "Getting Started in a Financially Secure Retirement" for anyone really trying to get a budget nailed down in or near retirement. If you are self-employed without marriage problems you can skip this book entirely, though, and go straight to "The Money Book for Freelancers, Part-Time and the Self-employed"by Denise Kiernan. I liked it a whole hell of a lot better than anything by Suze Orman (I'm not going to bother searching back through my reviews to link to that) and it was similar, but slightly nicer, than Dave Ramsey, and slightly different than Jean Chatsky's book, although it covered mostly the same things. (Chatsky talked more about insurance.) Fact is, the basic elements of how to have a good financial life don't really differ that much. It's like fat loss methods; what ever method of eating less and exercising more works for you is fine. The basic problem with all of these methods is that none of them "work". YOU have to do all the work.
It's been a while since I read "Your Money or Your Life" by Dominguez (I can't find the review? Did I not tag it? Or not review it? Could this pre-date my book reviewsl?!?) but that is a more essential book than this one. You need to really grasp what money *IS* before you can feel sufficiently motivated to bother to manage it, in my opinion.
What really stands out in the Mary Hunt book, though, is the wise and kind and useful marital advice. It's slapped on the front of a money management book a bit disjointedly, but the chapters don't have to be long to be right, and they certainly belong here.
Recommended.
Friday, August 24, 2012
Book Review: The New Retirementality by Mitch Anthony
Mitch Anthony is a sales consultant to the financial services industry. He's not actually an investment adviser, he teaches investment advisers how to get clients. His skill is in inspirational public speaking. If I had known this up front I would not have bothered to read this book. But it was interesting. "The New Retirementality: Planning Your Life and Living Your Dreams... At Any Age You Want (Third Edition)" was a bit of a hodge podge.
The first part of the book appears intended to help grasshoppers feel okay about not having saved for retirement. He comes at why this is okay from a bunch of happy angles. For example, he doesn't see why you can't just start now and get 15% return on your investments if you want to play it safe, or maybe 50% return if you care to gamble a little. Oh, did I mention, this was originally written at the top of the internet bubble in the late 90's?
And, hey, if investing isn't your thing, you can always sell your house at an enormous profit and move to a cheaper location. But, uh, he also suggests you keep your social circles intact. Maybe by cheaper location he means an apartment in your same town. (The second edition was written in 2003.)
His other main thrust is that it's perfectly fine to not save because you can keep working. After all, people really benefit from working. It helps their soul. All you have to do is find a vocation that you love and structure it so you can work part-time. He then goes into a few chapters stolen straight out of "What Color Is Your Parachute" to inspire you to go find a job that makes you happier. Because, he says, the workplace is so desperate for employees that they will gladly bend over backwards to accommodate aging baby boomers. (Did I mention that the most recent edition was written in 2008?)
But, anyway, to "retire" is to get sick and die. (He has a causation vs. correlation problem here, in my opinion.) Instead of being incapacitated by old age, though, he suggests that it is way better to stay vibrant and young, which you can do by continuing to work. And don't you worry none about social security imploding. This is the baby boom we're talking about, and they are rule-breakers! Not ones to let simple math get in the way! No one dare defy the Baby Boomers when they want something. So relax. Take a cruise now if you want. You'll be fine later.
Then he goes into a section on "Your Money and Your Life" which is radically different than the excellent "Your Money or Your Life" by Robins & Dominguez. Mitch Anthony's point is that you shouldn't care about Return on Investment - which he says is outside your control - but instead be concerned about Return on Life. I kind of liked this, to be honest. He said not to be a gerbil on a wheel, but rather to use your money as a sail on the boat taking you places. He said that a good return on life meant:
I agree that you need to have a vision of what you want out of your life, and harness money to achieve that vision rather than just accumulate money for the sake of money alone.
He also had a nice section on "Maslow Meets Retirement" where he asks you to identify the part of your budget that is:
He also gets into a section on "Money Maturity" that appears to have been cribbed from George Kinder's "Seven Stages of Money Maturity". At this point I'm being impressed that he has read all the same books I have. I liked his section on "wealth-care checkup". He says to watch your balance, or else:
And, hey, if investing isn't your thing, you can always sell your house at an enormous profit and move to a cheaper location. But, uh, he also suggests you keep your social circles intact. Maybe by cheaper location he means an apartment in your same town. (The second edition was written in 2003.)
His other main thrust is that it's perfectly fine to not save because you can keep working. After all, people really benefit from working. It helps their soul. All you have to do is find a vocation that you love and structure it so you can work part-time. He then goes into a few chapters stolen straight out of "What Color Is Your Parachute" to inspire you to go find a job that makes you happier. Because, he says, the workplace is so desperate for employees that they will gladly bend over backwards to accommodate aging baby boomers. (Did I mention that the most recent edition was written in 2008?)
But, anyway, to "retire" is to get sick and die. (He has a causation vs. correlation problem here, in my opinion.) Instead of being incapacitated by old age, though, he suggests that it is way better to stay vibrant and young, which you can do by continuing to work. And don't you worry none about social security imploding. This is the baby boom we're talking about, and they are rule-breakers! Not ones to let simple math get in the way! No one dare defy the Baby Boomers when they want something. So relax. Take a cruise now if you want. You'll be fine later.
Then he goes into a section on "Your Money and Your Life" which is radically different than the excellent "Your Money or Your Life" by Robins & Dominguez. Mitch Anthony's point is that you shouldn't care about Return on Investment - which he says is outside your control - but instead be concerned about Return on Life. I kind of liked this, to be honest. He said not to be a gerbil on a wheel, but rather to use your money as a sail on the boat taking you places. He said that a good return on life meant:
- I'm living well within my means.
- I'm investing time, energy and resources in those I love.
- I'm allowing myself to have experiences and live whenever possible.
- I'm saving with discipline.
- I'm not comparing my progress to others who live with a different set of circumstances.
I agree that you need to have a vision of what you want out of your life, and harness money to achieve that vision rather than just accumulate money for the sake of money alone.
He also had a nice section on "Maslow Meets Retirement" where he asks you to identify the part of your budget that is:
- survival,
- safety
- freedom (hobbies, travel)
- gifting,
- dreaming.
He also gets into a section on "Money Maturity" that appears to have been cribbed from George Kinder's "Seven Stages of Money Maturity". At this point I'm being impressed that he has read all the same books I have. I liked his section on "wealth-care checkup". He says to watch your balance, or else:
- Physical rest becomes laziness
- Quietness becomes noncommunication.
- The enjoyment of life becomes intemperance
- Physical pleasure becomes licentiousness
- Enjoyment of food becomes gluttony
- Self-care becomes selfishness
- Self-respect becomes conceit
- Cautiousness becomes anxiety
- Being positive becomes insensitive (his term, mine would be "oblivious")
- Loving kindness becomes overprotection
- Judgement becomes criticism
- Conscientiousness becomes perfectionism
- Interest in possessions of others becomes covetousness
- Generosity becomes wastefulness
The theme emerging here is that you don't need to save for retirement, you just need to find a job you love, stay healthy and age well, and not worry about material things. See? The New Retirementality. Oh, and have an extra $250K stuck aside for health care spending you're really going to want to do, and maybe another $50K to help your centenarian parents when they run out of money. But, hey, other than that kick back and relax. Except when you're at work. Work hard then. Because you've got shit-all to fall back on. But don't worry, be happy!
Oddly, I did get some business management tips from the section on how to find a good employer. I might write those notes up as I'm probably going to be hiring some staff next year (as I work hard getting set up for retirement) and can always use more tips on managing employees.
Monday, August 20, 2012
Book Review: The Age of Deleveraging: a tome by A. Gary Shilling
I heard Gary Shilling speak at a conference last month and his discussion of demographics was interesting and insightful so I sought out his most recent book: "The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation". This book was 500 pages long. Five hundred. I told B. I felt like I was taking a graduate level course in economic forecasting. I'm not even sure how to integrate this book into my body of knowledge, but here's my attempt.
The pieces I find myself thinking about in new ways are 30 year treasury bonds (it comes as a surprise to me that someone LIKES those) and that emerging country growth won't be as solid a play as I was thinking. He also gave me some instruction on how to think about the Big Picture, and my brain may be ready for more on that subject after I rest up from reading this book. It was tough going at times, and he occasionally veered into stories about his days meeting with captains of industry or highly placed officials. I guess he's allowed. He's pretty proud of the job he did replumbing the house he bought in 1968 and still lives in. I found myself liking the man, much the way I like Jack Bogle and Bud Hebeler. Overall, recommended, but be prepared to skim some parts.
The first 125 pages or so are on the subject of why we should listen to him. Each chapter is about triumphs in prognostication he had over the years, his "Seven Great Calls" when he predicted major economic changes. I found the history to be occasionally interesting and skimmed the chapters looking for what he considered the markers of change. The main thing he appears to do is to really dive down into the STORY that the economic indicators are telling. Look at the big picture: where are the demographics? What is the existing inventory level? What makes SENSE to happen next? I found his methods to be plausible and in line with the way I look at the world, too. Each of the many threads emerges into a tapestry if you stand back and look at the big picture. This is why I read so many threads and go for long walks to let it gel. I'm not Gary Shilling, but I don't have to be if I can listen to people who see the big picture.
The central premise of this book is that Gary Shilling sees slow growth ahead. Period. He stands with Mish Shedlock in the deflation camp (although he never mentioned Mish Shedlock.) Instead, he takes on more esteemed heroes of mine. He pooh poohs Peak Oil (we'll switch to natural gas, he says, and doesn't sound cornucopian when HE says it.) He dismisses Milton Friedman's definition of inflation "as always and everwhere a result of excess money." What is money, asks Shilling? If you have a $10,000 credit line on a credit card - whether you use it or not - isn't that money? American Express cards have no limits on them... what does THAT mean to the money supply? Instead he talks about there being seven varieties of inflation/deflation:
1. Commodity
2. Wage-price
3. Financial asset
4. Tangible asset
5. Currency
6. Inflation by fiat
7. Goods and services.
I have to admit, I really liked having seven dimensions to this issue. It is far more satisfying that Friedman/Martenson/Austrian versions. It fits reality better. It's hard to hold them all in my head at once, and they often move in tandem, but they actually are NOT identical and our current world situation has allowed the effects of different parts to be teased out better. If I ever re-read this book it'll be for Chapter 8: "Chronic Worldwide Deflation". This is where he makes the case that he isn't just some cranky old man moaning about how things were better when he was young (and get off my lawn, kid!)
Chapter 9 talks a bit about what help we can expect from the Fed, IMF and Congress. It's a short chapter. (Synopsis: none.)
Chapter 10 is about the outlook for stocks. The short version there is that he expects very low earnings going forward. He pretty much stayed away from the question of whether to buy index funds or managed portfolios in a confusing way, by saying managed portfolios will do better, except most of the time they don't. He is not a fan of long-term buy and hold and hates asset reallocation strategies, too, thinking it's foolish to sell your winners to buy your losers. Far better to just buy winners low and sell them high. (D'oh, why didn't *I* think of that?) So, all in all, this chapter was pretty worthless to me. (Because every book that says, "first, start by buying a high quality stock cheap right before it goes up" is similarly worthless, although is certainly fine advice.)
Chapter 11 was his explanation of twelve investments to sell or avoid. This is worth elaborating on:
1. Big Ticket consumer purchases (because people will be more austere and expect prices to fall so they'll wait to buy.)
2. Consumer lenders (who are about to find out that "deleveraging" means that they don't get paid back)
3. Conventional home builders (demographics suck)
4. Collectibles (there's a distinct shortage of greater fools)
5. Banks (see #2)
6. Junk securities (did you notice how the lenders faired in #2 and #5)
7. Flailing companies (uh, when WERE those a good idea?)
8. Low tech equipment producers (becoming obsolete and fungible at the same time)
9. Commercial real estate (low growth = high vacancies)
10. Commodities (they're being played by speculators)
11. Chinese and other developing country stock and bonds and
12. Japanese securities.
Japanese securities were because Japan is a stagnant aging population with a serious debt problem whose heroes all die in kabuki plays (or something like that.) But the Chinese and other developing country stocks and bonds was because of currency risk and because the economy is still too dependent on exports to the First World. Until a country develops a sizeable middle class that can purchase its own GDP the economy is too tied to ours, he claims, and so you just end up with the currency risk that will eat up any growth. He also thinks that China has been stimulating itself into creating too much capacity that they aren't yet using. In other words, he's expecting deflation there, too.
Instead, he suggests you buy:
1. Treasuries and other high-quality bonds. (This guy loves him some long bonds. He had a unique voice on that subject and I should probably reread this section because I find myself really confused how the Long Bond could be a good investment in a 0% world. He appears to be expecting the interest rate to go still lower!)
2. Income-producing securities (sort of the opposite to #7 above, I mean, duh.)
3. Food and other consumer staples (because they won't be subject to people putting off buying them.)
4. Small luxuries (fluffy toilet paper? Watches? Cosmetics?)
5. The U.S. dollar (he made the case that no one else has anything better.)
6. Investment advisers and financial planners (Wuhoo! He makes a case that we're worth our keep.)
7. Factory-built housing and rental apartments (so, buy those REITS but make sure they aren't commercial, merely residential housing. Uh, good luck with that.)
8. Health care. (Demographics, government unicorn funding, the thing people want above all else)
9. Productivity enhancers (because everyone wants to run their business without actual people)
10. North American energy (because we're massive hogs who care not one whit about climate change and want our air conditioning RIGHT THIS MINUTE without having to negogiate with Iran for oil. Sounds like a solid bet to me.)
The central premise of this book is that Gary Shilling sees slow growth ahead. Period. He stands with Mish Shedlock in the deflation camp (although he never mentioned Mish Shedlock.) Instead, he takes on more esteemed heroes of mine. He pooh poohs Peak Oil (we'll switch to natural gas, he says, and doesn't sound cornucopian when HE says it.) He dismisses Milton Friedman's definition of inflation "as always and everwhere a result of excess money." What is money, asks Shilling? If you have a $10,000 credit line on a credit card - whether you use it or not - isn't that money? American Express cards have no limits on them... what does THAT mean to the money supply? Instead he talks about there being seven varieties of inflation/deflation:
1. Commodity
2. Wage-price
3. Financial asset
4. Tangible asset
5. Currency
6. Inflation by fiat
7. Goods and services.
I have to admit, I really liked having seven dimensions to this issue. It is far more satisfying that Friedman/Martenson/Austrian versions. It fits reality better. It's hard to hold them all in my head at once, and they often move in tandem, but they actually are NOT identical and our current world situation has allowed the effects of different parts to be teased out better. If I ever re-read this book it'll be for Chapter 8: "Chronic Worldwide Deflation". This is where he makes the case that he isn't just some cranky old man moaning about how things were better when he was young (and get off my lawn, kid!)
Chapter 9 talks a bit about what help we can expect from the Fed, IMF and Congress. It's a short chapter. (Synopsis: none.)
Chapter 10 is about the outlook for stocks. The short version there is that he expects very low earnings going forward. He pretty much stayed away from the question of whether to buy index funds or managed portfolios in a confusing way, by saying managed portfolios will do better, except most of the time they don't. He is not a fan of long-term buy and hold and hates asset reallocation strategies, too, thinking it's foolish to sell your winners to buy your losers. Far better to just buy winners low and sell them high. (D'oh, why didn't *I* think of that?) So, all in all, this chapter was pretty worthless to me. (Because every book that says, "first, start by buying a high quality stock cheap right before it goes up" is similarly worthless, although is certainly fine advice.)
Chapter 11 was his explanation of twelve investments to sell or avoid. This is worth elaborating on:
1. Big Ticket consumer purchases (because people will be more austere and expect prices to fall so they'll wait to buy.)
2. Consumer lenders (who are about to find out that "deleveraging" means that they don't get paid back)
3. Conventional home builders (demographics suck)
4. Collectibles (there's a distinct shortage of greater fools)
5. Banks (see #2)
6. Junk securities (did you notice how the lenders faired in #2 and #5)
7. Flailing companies (uh, when WERE those a good idea?)
8. Low tech equipment producers (becoming obsolete and fungible at the same time)
9. Commercial real estate (low growth = high vacancies)
10. Commodities (they're being played by speculators)
11. Chinese and other developing country stock and bonds and
12. Japanese securities.
Japanese securities were because Japan is a stagnant aging population with a serious debt problem whose heroes all die in kabuki plays (or something like that.) But the Chinese and other developing country stocks and bonds was because of currency risk and because the economy is still too dependent on exports to the First World. Until a country develops a sizeable middle class that can purchase its own GDP the economy is too tied to ours, he claims, and so you just end up with the currency risk that will eat up any growth. He also thinks that China has been stimulating itself into creating too much capacity that they aren't yet using. In other words, he's expecting deflation there, too.
Instead, he suggests you buy:
1. Treasuries and other high-quality bonds. (This guy loves him some long bonds. He had a unique voice on that subject and I should probably reread this section because I find myself really confused how the Long Bond could be a good investment in a 0% world. He appears to be expecting the interest rate to go still lower!)
2. Income-producing securities (sort of the opposite to #7 above, I mean, duh.)
3. Food and other consumer staples (because they won't be subject to people putting off buying them.)
4. Small luxuries (fluffy toilet paper? Watches? Cosmetics?)
5. The U.S. dollar (he made the case that no one else has anything better.)
6. Investment advisers and financial planners (Wuhoo! He makes a case that we're worth our keep.)
7. Factory-built housing and rental apartments (so, buy those REITS but make sure they aren't commercial, merely residential housing. Uh, good luck with that.)
8. Health care. (Demographics, government unicorn funding, the thing people want above all else)
9. Productivity enhancers (because everyone wants to run their business without actual people)
10. North American energy (because we're massive hogs who care not one whit about climate change and want our air conditioning RIGHT THIS MINUTE without having to negogiate with Iran for oil. Sounds like a solid bet to me.)
The pieces I find myself thinking about in new ways are 30 year treasury bonds (it comes as a surprise to me that someone LIKES those) and that emerging country growth won't be as solid a play as I was thinking. He also gave me some instruction on how to think about the Big Picture, and my brain may be ready for more on that subject after I rest up from reading this book. It was tough going at times, and he occasionally veered into stories about his days meeting with captains of industry or highly placed officials. I guess he's allowed. He's pretty proud of the job he did replumbing the house he bought in 1968 and still lives in. I found myself liking the man, much the way I like Jack Bogle and Bud Hebeler. Overall, recommended, but be prepared to skim some parts.
Monday, July 30, 2012
Two Very Different Books about Integenerational Wealth
I've recently finished two books that are very different but I'm going to review them together because they are oddly similar.
The first one I read was "(Not) Keeping Up With Our Parents: The Decline of the Professional Middle Class" by Nan Mooney. The gist of this book is that people who went to college for degrees in creative writing or art history are pissed because they came out of school with massive amounts of student loans and can't get jobs that pay enough to cover their apartments in Manhattan, much less a nice detached split-level in New Jersey. The entire book is devoted to exploring the raw deal that the "creative professional class" gets when their special snowflakeness turns out not to command the income they would prefer. In other words, it turns out that the middle class, unlike being poor or being rich, is NOT an inherited position, but one each generation must earn themselves. And it's HAAARRRDDD.
Whiny doesn't begin to describe it. The entire book whines about how easy it is to lose the house you purchased with 0% down (or, in some cases, a 110% mortgage) and how no one could be expected to save what with what things cost now-a-days. The solution is for more government support of artists at the style to which they would prefer to become accustomed.
It's a well-researched book and full of references to Brookings Institution studies and every Barbara Ehrenreich book or article ever written. In fact, there's an 11 page bibliography that is heavy on Paul Krugman and Elizabeth Warren. Notably absent: Hayek. The other thing notably absent: any suggestion at all that people refrain from going to Harvard or becoming artists if they can't afford it, and save up for things they want in life. In fact, she specifically pooh poohs the concept of saving:
This book had me grinding my teeth wanting to yell at her about personal responsibility. But, hey, that's explicitly what she was TRYING to offload.
Later, towards the end, she has a heading called "personal responsibility". It was amusing. You could tell that editors and reviewers had been trying to tell her something. "You need to put something about PERSONAL RESPONSIBILITY in your book" they must have been saying. So she put two pages in where she suggests you become educated about your own finances and try not to live beyond your means. Even here she still doesn't mention saving, just getting help in understanding how to refinance your debt. Then she suggests that you not resign yourself to the fate of living on what you can make, but get involved in a revolution to get the government to pay you better.
When I googled her I found out that she left Manhattan after writing this book to move in with her parents when she was "single, broke and pregnant" at the age of 38. I'm sure her parents are thrilled. Oops, maybe not. More googling shows that she then had another child (so she has two under the age of 4 now as a 42 year old unmarried writer) and her Dad just died. Well, maybe her Mom had a good job.
The next book was "The Legacy of Inherited Wealth: Interviews with Heirs" by Barbara Blouin & Katherine Gibson. It came out of their experiences being therapists counseling people who suffered from being inheritors of great wealth. It was told with great heart and a total lack of snarkiness, even when "I'm An Alcoholic" screamed across the page like a watermark on one of the stories (where a woman rants how her lousy ex-husband stole all her money - by giving it to her to spend.)
There were 17 different stories about how people handled being plunked into the upper class without deserving it. Some of them longed to be middle class. A few longed to be poor. A few were just fine and dandy with circumstances as they were. Several of them talked about their desire for social justice and to use the money they had philanthropically. One gave away all his money and started on the lecture circuit preaching that everyone else ought to, too. There were suicides and alcoholism and drug addiction represented at the levels I've noticed. But there was an undercurrent of hope as eventually all these people damaged by too much money learned to be okay with it after all. The ones that hadn't died from drug overdoses, that is.
Barbara Blouin is active in a group called "The Inheritance Project" that tries to help the very wealthy be decent people, despite their significant personal challenges. In an odd way, I found it more hopeful and inspiring in terms of people taking personal responsibility than I did the book about people demanding they stay in the middle class.
Another thing I found interesting is that the desired lifestyle of the inheritors is PRECISELY the desired lifestyle of Nan Mooney: working in the arts or in low-paid not-for-profit sector in jobs where you are not worried about having to trade your day's actual labor for money. I've tried to tell this to my clients before: the people who are "making it" as sculptors or artists? They have trust funds buying their houses, cars, health insurance and education. This is also true for a lot - although by no means all - of the people working in not-for-profits for $24K/year, and often times the wealthy person donates to the organization enough to cover their own salary.
These two books were about "class" and I've always found this a bit murky. Nan Mooney describes it as people making $30K to 100K. Barbara Blouin describes it as "people who do not need to work for a living." Both of them were trying to nail down how people's parents' class affected their own class. As someone who is "bi-classal" I find this interesting at a personal level. I may do more reading on this, but I'm not sure I will. I never know what to do with these conversations.
Because, in the end, it doesn't matter to me what my parents have or don't have. It's 11:30 on a Monday morning and what happens to me depends on what I do next.
The first one I read was "(Not) Keeping Up With Our Parents: The Decline of the Professional Middle Class" by Nan Mooney. The gist of this book is that people who went to college for degrees in creative writing or art history are pissed because they came out of school with massive amounts of student loans and can't get jobs that pay enough to cover their apartments in Manhattan, much less a nice detached split-level in New Jersey. The entire book is devoted to exploring the raw deal that the "creative professional class" gets when their special snowflakeness turns out not to command the income they would prefer. In other words, it turns out that the middle class, unlike being poor or being rich, is NOT an inherited position, but one each generation must earn themselves. And it's HAAARRRDDD.
Whiny doesn't begin to describe it. The entire book whines about how easy it is to lose the house you purchased with 0% down (or, in some cases, a 110% mortgage) and how no one could be expected to save what with what things cost now-a-days. The solution is for more government support of artists at the style to which they would prefer to become accustomed.
It's a well-researched book and full of references to Brookings Institution studies and every Barbara Ehrenreich book or article ever written. In fact, there's an 11 page bibliography that is heavy on Paul Krugman and Elizabeth Warren. Notably absent: Hayek. The other thing notably absent: any suggestion at all that people refrain from going to Harvard or becoming artists if they can't afford it, and save up for things they want in life. In fact, she specifically pooh poohs the concept of saving:
"There's a pervasive notion in recent media that, though retirement security might be a legitimate concern for low-income workers, when it comes to the middle class, lack of savings is a question of more discipline and less procrastination. If only educated professional could start saving early and sensibly, they'd be fine. But stories like Lewis's reveal the flaws in this sort of logic. The reality is that stagnant salaries and higher health-care, housing, child-care and education costs make it very difficult for even educated middle-class professionals to save anything at all. Because we're pushing so many major financial decisions to later in life - in the hopes that later will be when we can finally afford them - those high-cost expenditures are bumping up against our retirement years. With so many people going back to school later, having children later, and buying homes later, the balance of our financial ecosystem has changed. Retirement can hit at the same time we'll be trying to put our kids through college, and before we've managed to pay off our mortgages. Not only is there less to stow away these days, but there's less time in which to do it."
This book had me grinding my teeth wanting to yell at her about personal responsibility. But, hey, that's explicitly what she was TRYING to offload.
"Over the fifteen years I've spent in the workforce, I've been personally responsible for covering most of my own health care and all my retirement savings." She then goes on to say how unacceptable this is and how it drove her to write this book "to understand what we as a society must do so that circumstances for those in situations similar to my own might change."
Later, towards the end, she has a heading called "personal responsibility". It was amusing. You could tell that editors and reviewers had been trying to tell her something. "You need to put something about PERSONAL RESPONSIBILITY in your book" they must have been saying. So she put two pages in where she suggests you become educated about your own finances and try not to live beyond your means. Even here she still doesn't mention saving, just getting help in understanding how to refinance your debt. Then she suggests that you not resign yourself to the fate of living on what you can make, but get involved in a revolution to get the government to pay you better.
When I googled her I found out that she left Manhattan after writing this book to move in with her parents when she was "single, broke and pregnant" at the age of 38. I'm sure her parents are thrilled. Oops, maybe not. More googling shows that she then had another child (so she has two under the age of 4 now as a 42 year old unmarried writer) and her Dad just died. Well, maybe her Mom had a good job.
The next book was "The Legacy of Inherited Wealth: Interviews with Heirs" by Barbara Blouin & Katherine Gibson. It came out of their experiences being therapists counseling people who suffered from being inheritors of great wealth. It was told with great heart and a total lack of snarkiness, even when "I'm An Alcoholic" screamed across the page like a watermark on one of the stories (where a woman rants how her lousy ex-husband stole all her money - by giving it to her to spend.)
There were 17 different stories about how people handled being plunked into the upper class without deserving it. Some of them longed to be middle class. A few longed to be poor. A few were just fine and dandy with circumstances as they were. Several of them talked about their desire for social justice and to use the money they had philanthropically. One gave away all his money and started on the lecture circuit preaching that everyone else ought to, too. There were suicides and alcoholism and drug addiction represented at the levels I've noticed. But there was an undercurrent of hope as eventually all these people damaged by too much money learned to be okay with it after all. The ones that hadn't died from drug overdoses, that is.
Barbara Blouin is active in a group called "The Inheritance Project" that tries to help the very wealthy be decent people, despite their significant personal challenges. In an odd way, I found it more hopeful and inspiring in terms of people taking personal responsibility than I did the book about people demanding they stay in the middle class.
Another thing I found interesting is that the desired lifestyle of the inheritors is PRECISELY the desired lifestyle of Nan Mooney: working in the arts or in low-paid not-for-profit sector in jobs where you are not worried about having to trade your day's actual labor for money. I've tried to tell this to my clients before: the people who are "making it" as sculptors or artists? They have trust funds buying their houses, cars, health insurance and education. This is also true for a lot - although by no means all - of the people working in not-for-profits for $24K/year, and often times the wealthy person donates to the organization enough to cover their own salary.
These two books were about "class" and I've always found this a bit murky. Nan Mooney describes it as people making $30K to 100K. Barbara Blouin describes it as "people who do not need to work for a living." Both of them were trying to nail down how people's parents' class affected their own class. As someone who is "bi-classal" I find this interesting at a personal level. I may do more reading on this, but I'm not sure I will. I never know what to do with these conversations.
Because, in the end, it doesn't matter to me what my parents have or don't have. It's 11:30 on a Monday morning and what happens to me depends on what I do next.
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