Sunday, September 17, 2017

Stewardship, a Different Definition

Stewardship is a Christian word. When was the last time you heard that word used outside of a Christian context, or the Lord of the Rings? Christian cringe whenever they hear the word because they know that the preacher is about to put his hand in their pocket while calling them brother. Recently, I listened to a sermon by Wayne Cordeiro, pastor of a Hawaiian megachurch. He put a totally different spin on the word. He defined stewardship as the faithful use of everything you possess in the present moment.

Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.  So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?  And if you have not been trustworthy with someone else’s property, who will give you property of your own?

We have all heard the verse about a choice we make, whether to serve God or Mammon. Even secular wisdom observes that money makes an excellent servant, but a poor master. Instead of listening to another sermon on “stewardship,” let’s spend a few minutes considering the three verses that proceed that famous verse, the one that is often used as a rationalization for irresponsible behavior.

One of my neighbors had a son who worked part time for McDonalds while in high school. He enjoyed his job. When he graduated from high school he continued working for McDonalds, but now as a full-time employee. He also started earning a two year degree in business at the local community college. After a while, he was promoted to assistant manager at our local fast food provider. When we left the area, the powers that be were so impressed with his performance as an assistant manager that they promised him his own store as soon as there was an opening in the district. First, he was trusted with little. After proving himself, he was trusted with much. That’s the way it works in heaven’s economy and that is the way it works on the earth.

Whatever your beliefs tell you, God, the universe, or chance has given you your life. That wasn’t your idea. It was a gift. What are you doing with it? Right now? You can’t rewrite yesterday. You don’t know what tomorrow will bring. All you have is right now, this present moment. You may not have much going for you, or you might possess every possible advantage. Doesn’t matter, the standard is the same. If you want financial freedom, wisdom, physical fitness, more faith, or better relationships, the process begins with the wise and faithful use of what you have been given in this present moment. Don’t try to run a confidence game on the universe, “Sooner or later,” as the song says, “God’ll cut you down.”

“Whoever is dishonest with very little will also be dishonest with much.”

Do you want true riches? Heavenly riches? It would seem that the first test on the road to eternity concerns how we handle worldly wealth. Isn’t that interesting? I wouldn’t limit that verse to dollars in the bank, real estate, or shares in Exxon. Your worldly wealth includes your intelligence, your talents, your interests, your ambitions, your body, as well as your cultural background and environment. If you could float outside of your body, watching your performance as the manager of your own life, would you give yourself a promotion, or the pink slip? Are you stealing office supplies for your children to use in school, or are you giving the company a few extra minutes at the beginning or end of your shift?

“There is nothing concealed that will not be disclosed, or hidden that will not be made known.” 

I believe that it all works out in the end. Usually it works out in this world, always in the world to come. I started my post-college career packing rolls of cloth into burlap bags for a few cents more than minimum wage, but that was not the end of the story. Twice, over the course of 45 years, I was unfairly stabbed in the back by a rat bastard. It happens, but twice someone or something spoke Joseph into my life. “They meant it for evil, but God meant it for good.” In the first case, I returned to school. Earning a degree in engineering, worked out pretty well. In the second case, I decided it was time to learn about investing. I learned enough to retire early.

There is another principle at work in the definition of stewardship, “From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.” Moses didn’t make it into the promise land because he misrepresented the nature of God to the people of Israel when he struck a rock rather than speaking a word to the rock. That seems pretty harsh, after all Moses did for the Lord, but consider how much God gave him. Don’t worry about Moses. His body was taken into Heaven. He is called, “the friend of God.” He counseled Jesus on the mount of the Transfiguration. Moses is doing OK, but one sin prevented him from taking his people into the promise land after more than forty years of hard work.

May God have mercy on my soul.

Thursday, September 14, 2017

Bitcoins, Tulips, and The Barrel of a Gun

Since everyone else is talking about it, I might as well throw in my two cents on the subject. Jamie Dimon, CEO of J.P. Morgan Chase, largest of the big four American banks, announced that bitcoins are a fraud and that the governments of the world are going to put an end to cryptocurrencies very soon. It wouldn’t surprise me if that happens. Jamie Dimon, a former governor of the Federal Reserve Bank, is privy to sources of information not available to retired engineers. He also has a hand on one of the levers or power that could put an end to the world’s latest version of tulip bulb mania.

This morning the price of a bitcoin dropped on the news that the Chinese are closing it down at the end of this month.

Money ultimately has value because you and I believe it has value. It could be seashells, gold coins, big rocks, or pieces of paper imprinted with pictures of dead presidents. If it serves as a medium of exchange and a store of value, it is money. The ability to create money, as opposed to the ability to create wealth or the desire to trade collectibles for a profit has always been a monopoly controlled by governments. Jamie is probably correct. If the bitcoin is perceived as a threat to that monopoly power, the bitcoin exchanges will be reminded that political power grows from the barrel of a gun, another area where the world’s governments hold at least something close to a monopoly.

Jamie and the Chinese government certainly haven’t helped things for the bitcoin. It has dropped from a high near $5,000 to today’s price of $3,500, but I wonder if this wouldn’t have happened anyway. The increase in the bitcoin value was beginning to look like a hockey stick. That kind of rapid increase in value is not sustainable. These events usually end in a catastrophic collapse, like the Dutch tulip mania of 1637.

Jamie Dimon also said, “Markets have always been wrong.” He got that one right. If markets aren’t always wrong, there wouldn’t be any need for a market. Every time a share is bought or sold on an exchange, someone believes that it is going to go up in value and someone believes it is going to go down in value. They both can’t be right. Should the market capitalization of Tesla exceed that of General Motors? In 2016, Tesla lost $773 million producing 76,000 cars. GM produced over 10 million cars while earning $9.43 billion.

It is at moments like this that it is important to have an agreement with yourself to direct your investments. My prime directive is, “If I don’t understand it, I am not going to buy it.” The truth is, I don’t understand why one cell phone is sexy and another cell phone isn’t when they look pretty much the same to me. I don’t understand why a normal person would buy an electric car until you can charge the batteries in less than 5 minutes at a cost of less than $30.00 (today’s price) and then drive over 300 miles at 60 mph or better. Taxpayer subsidies can only sell a finite number of automobiles. Unless I was someone looking to move money without the possibility of discovery by my government, I don’t understand the ultimate value of cryptocurrencies. I do understand that traders can make a lot of money buying and selling anything from baseball cards to antique Christmas tree stands, but I am not a trader.

What I do understand are companies that have been around for a while that have a track record of paying a dividend that is trending in an upward direction over a long period of time. This is not a get rich quick scheme and I am vulnerable to value traps that occur when things look good on the surface, but the inside of the company is starting to rot away, but it works. It worked for a genius like Warren Buffet and it has worked for an overly cautious retired engineer, like me. Johnson & Johnson has a long history of selling high quality medical products. Chevron sells the gasoline and oil that goes into my cars. Coca Cola turns fizzy sugar water into money. Aqua America provides water for important functions like flushing toilets in cities across America. These are all examples of things that I understand.

As an investor, I am content with who I am.

Now, if I could just come up with contracts with myself for the other dimensions of a healthy, fulfilling life….

Friday, August 25, 2017

The Chain and Whip of the Modern Slave-Driver

Don’t kid yourself. It’ a battle for your mind. The headline (CNBC) reads, “Most Americans live paycheck to paycheck,” The two “grabbers” below the headline certainly got my attention. “Nearly 10% of those making $100,000 or more say they can’t make ends meet.” “Overall, most workers said they are in debt and many believe they always will be.” That last sentence is key. What you believe is possible will lead to your decisions. Decisions lead to actions. Actions lead to habits and your habits, for better or worse, will define your life and your life will continue to echo in the lives of your children and those who look to you for guidance. The forces arrayed against you are formidable. The higher education cartel, the major money center banks, the automobile industry, major retailers, the credit card companies and THE MEDIA that they control through advertising revenue and access to underwriting equity financing, all want you to become a willing debt slave. They do not want to deal with men and women who, through swimming against powerful cultural currents, have found both intellectual and financial freedom. In the Devil’s Dictionary, Ambrose Bierce defines debt as, “An ingenious substitute for the chain and whip of the slave-driver.” The article reports that 78% of Americans live paycheck to paycheck and that 71% of Americans report that they are in debt. I would love to know to what extent those two sets overlap. I do know where these numbers will lead. I saw the 2006-2009 train wreck live and in person while living in the Washington, DC area. Two income families earning more than $250,000 a year, living in $1,000,000 McMansions, driving leased luxury cars, and carrying too much credit card debt lost everything in a matter of months when one of the bread winners lost their job. When those houses were actually selling for less than $600,000 their owners were too far underwater to get out. Even in my own modest neighborhood where house prices topped out at $400,000 there were foreclosures and short sales. Since then, as a nation, we have added nearly a trillion dollars in student loans to this wretched mixture. At some point, there will be another crash. Historically they happen every twelve years or so. Then, as Warren Buffet observed, “Only when the tide goes out do you discover who has been swimming naked.” It doesn’t have to be you. You can change your life, but you have to change how your relationship with money. Start by believing that debt is a curse and that the ability to loan money to others is a blessing. Stay out of debt unless absolutely necessary. If you are in debt, pay off your debts as rapidly as possible. Don’t use a Credit Card unless you can pay it off every month. Start an emergency fund in a bank or a money market fund. The goal here is six months cash reserve (six months take home, both salaries). It will take some time to reach this goal. Don’t beat yourselves up about this but keep putting a little something aside every month. When you have a little extra cash beyond the six months fund or maybe even as a part of the six months fund, begin to experiment on a small basis with stocks, bonds, mutual funds, or even real estate. Start thinking about retirement when you are young. Take advantage of anything offered by your employer. Barring some catastrophe, like an uninsured medical emergency, how much you earn isn’t the problem. The problem is you, the decisions that you have made, the decisions that you are making, how you choose to live your life. When I was first living out on my own, I was earning only slightly more than minimum wage, yet I managed to spend less than I earned. If that practice becomes a habit, you will be amazed at how far you will have travelled by the time you reach retirement. You don’t have to be in debt for the rest of your life, but to be free, you will have to live a different kind of life than the one “THEY” want you to live. The decision is up to you.

Tuesday, August 22, 2017

Step by Step. Inch by Inch

I apologize for writing the same article again and again, but it is so important to take that first step to financial freedom. According to multiple surveys, 69% of Americans have less than $1,000 in total savings. 34% report that they have no savings at all. Let us assume that someone with no savings at all, needs to replace the tires on their car to pass state inspection. What are their options if they can’t tap a family member for a loan? A high interest credit card? A title loan? A payday loan? A lack of an emergency fund is a disaster just waiting to happen.

Pay yourself first. The consensus of experts recommends skimming ten percent right off the top of your take home pay, before you spend a penny. Put that money in savings. That is pretty ambitious for someone overwhelmed with credit card debt and student loans, but don’t tell yourself what you can’t do. That won’t solve your problems. Tell yourself what you can do. Can you throw a dollar or two in a jar every night? $1.50 X 365 = $547.50, more than enough to buy a new set of tires for an average midsized car.

Automation is easier. Set up a savings account or a money market account connected to your checking account. Weekly or monthly, every time you are paid, auto debit a predetermined amount into that emergency fund. Let’s say you take home $600 a week. Chances are you could afford to pay yourself 5% and not miss that money—at least not most weeks. $600 X 0.05 = $30, dinner out for two at a typical mid-priced family restaurant with nonalcoholic beverages. You can afford it. $30 X 52 = $1,560. Add that to the money you threw in the jar in the first example and your emergency fund would be $2,107.50 after a year.

Slowly I turned. Step by step. Inch by inch.

I don’t remember with certainty when I passed the six months’ living expenses in cash mark, but it was sometime after ten years of marriage, but before the fifteen-year mark. Hey! Life happens! My wife went to grad school. I went back to get my engineering degree. Twice, during those early years, we dropped below or close to $1,000. Even back then, when $1,000 would equal $3,700 in today’s money, I considered having less than $1,000 an emergency. When it happened, we cut expenses to the bone until we recovered. Fortunately, I was raised with a third generation terror of debt. Borrowing money to buy a car or go to school simply never occurred to me. I was about 35 years old before we finally got our first credit card. By then, living without a credit card was just too difficult and debit cards didn’t even exist back in those days.

As the savings habit becomes an ingrained part of your life, you will find that your definition of an emergency will change. Recently, I bought a new set of tires for our older car. They cost $300. There was a time when such an expense would have caused me considerable pain, requiring a significant reordering of our priorities, and the probability of an argument with my wife. As time passes, you will find that you have factored such “known unknowns” into the size of your checking account balance. In those days, I would grumble, annoyed that my balance was below the preferred number, even though I knew my checking account would be healed by next month. Finally, the day will come when a new set of tires, barely merits a shrug of the shoulders.

It won’t happen overnight. Don’t beat yourself up. Just put something aside every month. Little by little. Step by step. Inch by inch. You will get there. May it happen sooner than you believe possible.

Saturday, August 19, 2017

God Chance Effort

It’s just a number and a number can be changed. It doesn’t matter how that number came into your life. Whatever it means to you, it’s just a number.

When I look at a weight machine I see the number that belongs to the last user. If it is a low number, I think, “That number belongs to a woman or a feeble old man—like me.” If the number is higher than my number, I think, “That number belongs to someone with superior genetic gifts, or some kind of fitness freak.”

But, it’s just a number. It isn’t even a real weight, as the machines are a compilation of levers, pulleys, and gears. My number on the Torso Arm Machine that works my muscles like a pullup is 320. I only weigh 240 pounds. If I was pulling 320 pounds, I would lift myself up off the seat.

It’s just a number and a number can be changed.

There are a lot of ways to increase any number you find in your life, or decrease it in the case of my weight, but they all involve some sort of effort. I have increased my numbers in the gym over the last six months because I do my little ritual three times a week, even when my 66-year-old body whines in protest. That young Hercules over there lifting real weights has the advantage of youth, but he has also been working harder than me for six or more years rather than a paltry six months. Although I am still hoping that the bite of a radioactive spider will give me the strength to lift an entire weight machine, I am not counting on a comic book miracle to change my life. If I keep going to the gym, I expect my anemic numbers will still continue to crawl in an upward direction.

Calculate your net worth. Just add up all your debts and all your liquid assets. Don’t count the value of your car or furniture until you sell it. You need those depreciating assets for life. I doubt you are going to sell your existing bed in order to sleep on the floor. You got that number? It might be negative, but that too is just a number. Carl Icahn’s number might be $35 billion. Your number might be $3.50. Don’t worry, it’s just a number and a number can be changed. At one point Donald Trump’s number was a negative $800 million.

The outcome of our life is dependent on at least three elements God, chance, and human effort. Your numbers, large or small, are the result of the decisions you have made, the will of God, and the luck of the draw (nature and nurture). While we can’t ultimately control any of these forces, it seems logical to focus on our effort, the only one where we have, at least, some control. We live in what is basically a cause and effect universe that has been corrupted by the fall. Our thoughts lead to our actions. Our actions produce immediate results, long term results, and establish habits that help us to improve our lives or habits that could ultimately lead to death. Whatever free will, we do or do not possess, I believe that the best results will be obtained if we accept 100% responsibility for the decisions we make and the actions that we take. I have found that blaming or problems on others, even when true, ultimately leads to failure.

Thursday, August 3, 2017

Back to Basics--Again!

Every once in a while, it is good to get back to the basics. Finding our way to financial freedom is important. The rules of the game are simple, but nobody other than a late-night infomercial huckster babbling about real estate millions on an obscure cable station is going to tell you it will be easy.

Here is the money equation. This equation and a little bit of grade school arithmetic are all the head knowledge you need to get started.

Money In = Money Stored + Money Spent

There are only two ways to move Money Stored in a positive direction; earn more money or spend less of the money you earn.

There are no silver bullets. Most big lottery winners end up in bankruptcy court and few family fortunes last past the second generation after their creation.

First on your to-do list. Stay out of debt. Starting your adult life with a large negative balance in the Money Stored column is a recipe for a lifetime of debt slavery. Carrying $100,000 in student loans for a degree with a starting salary of $35,000 a year will steal at least two decades out of your life. In essence, you have a mortgage without a house. That first car loan will become a monthly car payment for the rest of a middle-class American’s life. Don’t bite the hook. Pay cash. Drive that clunker until you can afford something better. If you are making that car payment to yourself instead of the bank, you will be amazed at how soon the day will come when you can pay cash for new or at least low mileage, late model cars. Credit cards? That’s easy. Never, ever carry a balance. Never, ever pay a late fee.

If you are unfortunate enough to find yourself in debt, pay off your debts as rapidly as possible. Pay off the debt with the highest interest rate first and the debt with the lowest interest rate last. This is called the Debt Avalanche. It works. Or, pay off the debt starting with the smallest account and then work your way to up to the largest balance, probably your mortgage, last. This is called the Debt Snowball. It works.

Start an emergency fund in a bank or a money market fund. The goal here is six months cash reserve (six months take home, both salaries). It will take some time to reach this goal. Don’t beat yourselves up about this but keep putting a little something aside every month. If you have less than $1,000 in your emergency fund, consider that an emergency.

Live on a budget. We have never had a budget except the one in my head. That worked pretty well for us, because I was born with a third generation fear of debt in a family that boasted that we could squeeze a nickel so hard that the buffalo would bellow. If you are having problems making it to the end of the month, don’t mess around. Sit down with your spouse on the first day of every month and negotiate a zero-based formal budget. Then live on it. Forms and instructions are free on the Internet.

No secrets. If you or your spouse spend more than the cost of a CD or a paperback book on something, decide on that expense together, as a couple. There are exceptions. My wife does not want to know about the power bill, tires on her car, or specialized tools she does not understand. Set your own rules and limits for your own marriage and stick to them. Having a pink and blue account for husband and wife to spend without explanation will help avoid arguments, but what goes into those accounts is a part of the monthly negotiation process.

When you have a little extra cash beyond the six months fund or maybe even as a part of the six months fund, begin to experiment on a small basis with stocks, bonds, mutual funds, or even real estate.

Start thinking about retirement when you are young. Take advantage of anything offered by your employer. 401(k) matching money will give you an instantaneous 100% tax deferred return on your investment. How can you beat that? This was not a problem or an issue 50 years ago. If you are under 40, your retirement picture is positively scary. This is likely to be a very low priority with so many other demands at this time in your life but don’t forget retirement is sitting out there if you are lucky enough to live that long.

Investment isn’t rocket science. The key is to keep doing it; month after month, year after year, here a little and there a little until you are free. If you don’t want to think or learn, all you need to know is four words Vanguard Target-Date Funds. These funds will automatically provide you with an age appropriate mix of stocks and bonds at a minimal cost. As you learn, don’t be afraid to start buying a mix of conservative dividend paying stocks. Look up Dividend Aristocrats on Google for some ideas.

Don’t forget. Give something to God without expectation of return. It is good for your heart.

That’s all folks. No matter where you are in the process, there is something you can do to improve your situation.
Don’t wait. Start today.

Saturday, July 8, 2017


After throwing out my lower back—Again!—last February, I decided to supplement walking with weight machines and a Yoga class for a more balanced exercise program. In the months since, I have discovered that of the eight weight machines that I was instructed to use, two of them just plain don’t like me. Most of the machines tolerate my presence without many comments. One of them likes me so much that I am looking forward to maxing out the contraption. I suspect there is more than a little ego in this dream, but dreams are the first step on the road to reality.

This past Monday, I was waiting for a young body builder to finish his reps on the Triceps Press machine, one of the two machines that have it in for me. When he finished, I asked him why he was using the seatbelt. He replied that since he could press more than his body weight, the seat belt prevented him from lifting his body off the machine. I laughed, replying that certainly wasn’t my problem.

After this brief conversation, I set up the machine for my lifts. I thought I pegged the weights at eleven. I have been stuck at eleven for so long, I forget the last time I was able to increase the weight on this machine. I noticed I was having a difficult time performing this exercise in a correct manner, but I managed to complete the required ten repetitions, although some of them shouldn’t have been counted as complete and proper. Then I noticed that I had the machine pinned at twelve. Suddenly, instead of wondering why I was having more trouble than usual, I was surprised that I was able to do any reps at that weight. Just for grins, after finishing my circuit, I returned to try the Triceps Press machine at twelve a second time to see what would happen. I managed to perform eight more substandard lifts.

On my next visit to the gym, I returned the setting to eleven, but this time I was able to complete fourteen acceptable repetitions, enough to increase the setting to twelve. Yesterday, I managed a ten count at the highest setting, a personal record.

A Yoga master once observed, “For a committed man, there is no such thing as failure.” For me, the commitment to finding financial freedom seemed a fairly natural extension of the values I had internalized from my parents and later from those around me whom I respected. While paying off my mortgage, I maintained a spread sheet that calculated the amount of money I was saving every time I made an extra payment to principal. During the stretch run to retirement, I tracked the increase in my account balances until 2008. Then I made additional efforts to pour more money into my declining accounts. Ultimately, I achieved my goal.

I wasn’t raised to value physical exercise. In fact, if there was any risk involved in an activity, I was ordered to avoid it. Now, at age 66, I am discovering that the same methods that worked for me in saving and investing for long term goals are working in the area of physical fitness. I keep track of my weekly mileage (in my head) and my activities with the weigh machines (on paper). The numbers are increasing slowly on two of the machines and rapidly on one of the machines, but they are increasing on all of the machines.

Yes, you can hit a hard stop in your checkbook or in the gym. A few days ago, I spoke with a man of my age. I learned he was there rehabilitating from knee replacement surgery. Talk about a hard stop, but for the committed man there is no such thing as failure. Losing your job or suffering a major health problem without insurance certainly are examples of hard stops, but even after such disasters, I have seen men get up off the ground and try even harder to find their way to financial freedom.

Keep trying, maybe someday, even though you don’t believe it is possible, you might discover you can lift a twelve.