Saturday, August 31, 2013

Soar Like an Eagle

Yesterday coming home from downtown Greenville, I managed to get turned around and ended up on the wrong street. The city has changed since I left in 1978. There is much I have forgotten in thirty five years. I knew where that road intersected with a major highway that would take me home, so making the correct turn was my only concern. On two occasions I have written about the economic rebirth of Greenville, SC. It is nothing short of a miracle. I left a dying textile town. I returned to a beautiful new city based on a diversified economy. Greenville is the ninth fastest growing city in the United States for a reason.

The route I ended up taking home ran along the edge of what was once called the mill triangle. Today the mills are still there, but they are closed. The small businesses and strip malls that once served the working poor are in pretty bad shape. It is a story I have seen repeated throughout the state of South Carolina. From my unofficial explorations of my new home state over the last few years in search of a retirement home, there appears to be a tale of two states. The Greenville area (including Geer, Anderson, and Clemson), the Columbia area, and Charleston are doing very well. South Carolina off the Interstates is dying. Old style company towns from the textile era are drying up and blowing away (even Spartanburg is suffering from too much dependence on companies like Milliken). Rural, agricultural South Carolina has always been poor. But even in booming areas like Greenville, there seems to be a tale of two states. The older textile neighborhoods look like too many people never made the transition to a new world.

Change is inevitable. Everything that I love and hold dear (including my own life) will ultimately fade away. How we deal with the storms and vicissitudes of life define our success or failure as a human being. Maintaining internal virtues like compassion, faith, love, and equanimity in the face of personal disasters or injustice is the mark of a high quality human. Continuing to do the right thing even when it doesn’t seem to work any more makes you the man or the woman that God wants you to be.

We know what is important. It starts in our hearts. Do we nourish the plants that will in time produce the fruits of righteousness, peace, and joy or do we nourish thoughts of bitterness, selfishness, and violence? Be certain that the trees you choose to nourish will produce its harvest in your life.

It is hard to continue to be a good employee in an unfair situation. It is even harder to continue to look for work when your expectations lie broken at your feet. I have seen this error take two forms.

In the first, good men who have been rewarded their entire life by pushing the blue button (following their old path) continue to push that button long after it has been disconnected from any power supply. They need to try pushing the red button, or the white button, or any other available button, but they won’t do it. They are too certain of their own mastery of a profession or a trade. As Shunryu Suzuki observed, “In the beginner's mind there are many possibilities, but in the expert's mind there are few.” They can’t see beyond what is gone.

The second error is surrender. Recently, I spoke with a woman who for many years served as a work force development counselor. In the last recession she finally gave up in frustration. Too many of her clients didn’t really want here services. They were content with unemployment. She said in some instances after a month and a half these people had not even updated their resumes. She asked, “What else do they have to do?” This woman started a company in a totally unrelated field. Today she has created a fulltime job for herself and five employees.

As these people gradually sink further into poverty and despair, the social fabric of their families and their community begins to disintegrate. Depression, illness, substance abuse, single parent families, divorce, and crime are the fruits of despair. Turn on the local TV news in the morning. You will hear reports about this harvest.

Whoever you are; whatever your condition, if you are still sucking air you can improve your life. Consider the eagle. I have heard that an eagle will get away from another bird that it finds annoying by simply spreading its wings and flying higher until the other bird simply gives up. How high can an eagle fly? No one knows for sure, but there are numerous reports from hang glider pilots of eagles flying at altitudes in excess of 15,000 feet. There is every reason to believe that eagles can continue to soar to higher altitudes where man would require bottled oxygen to survive.

Birds and airplanes take off by facing into the wind. What would seem to be adversity in fact generates the lift that allows them to leave the ground. I’m not saying it is easy, but I challenge you to face the winds in your life—and soar!

Friday, August 30, 2013

Bond Ladders

Until recent years, bonds have been the foundation of a well balanced portfolio. While bonds are still necessary to cushion principal risk inherent in stocks, they provide miserably low rates of return in our current financial environment. Generally speaking individual bonds (other than Treasuries) are somewhat illiquid. If the owner of a Fredrick County Water and Sewer Bond needed to sell before the bond’s date of maturity, it might be difficult to locate a buyer unless the bond was sold at a discount. For this reason individual investors are better served by investing their money in low cost bond funds. These funds are highly liquid. They can be sold at posted, well understood share closing price on the day of the transaction. The money will then be available for the investor to spend in no more than a few days depending on the rules of the fund.

The problem with bond funds is interest rate risk. While these funds are frequently categorized as short, intermediate, or long term investments, their price (like bonds) moves inversely with changes in interest rates. If interest rates go up the value of a bond or bond fund that pays a fixed amount will drop. If interest rates go down the value of the bond or bond fund goes up.

A classic method of protecting the investor against interest rate risk is termed the “bond ladder.” While this method has dropped out of favor as interest rates have plummeted over recent years, it is being rediscovered by baby boomers (like me) in search of yield and safety.

Bond Ladder: “A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of purchasing several smaller bonds with different maturity dates rather than one large bond with a single maturity date is to minimize interest-rate risk and to increase liquidity. In a bond ladder, the bonds' maturity dates are evenly spaced across several months or several years so that the bonds are maturing and the proceeds are being reinvested at regular intervals. The more liquidity an investor needs, the closer together his bond maturities should be.” (Investopedia)

Consider a bond ladder of ten individual ten year bonds each with a different maturity date. In this hypothetical example, let us imagine all the bonds mature on January 1; one bond every year. Utilizing this method your entire portfolio is paying a ten year (long term) rate rather than the lower short term rate. Every year 1/10 of your bond ladder pays off allowing you to reinvest in a new ten year bond at the then current interest rate. As interest rates rise and fall your income is protected from unforeseen shocks to the economy.

Principal is protected as older bonds move towards maturity. If sold, they will command higher prices. Remember, short term interest rates are lower than long term interest rates. This means the long term coupon rate produced by your bond will result in a higher selling price. This phenomena is termed “surfing the roll” down the yield curve. This only works in normal times. In the case of an inverted yield curve, an unusual short lived event that usually indicates an oncoming recession there will be no roll to surf.

Dude! Like, what a bummer.”

All of these observations are also assuming that these bonds are not “callable.” Some bonds can be paid off before their due dates if interest rates plummet. It also assumes that these bonds hold on to their rating. Changes in ratings from junk to investment grade or visa versa will obviously change the results generated by your bond ladder.

According to Ed Easterling the total return of “seasoned” bond ladders (what does that mean?) with lengths of 10 years or less have been positive each year over the past 100 years. The problem I see is how best to start a bond ladder with interest rates near historic lows. It would appear there is only one way for interest rates to go—up! This does not seem like a very good time to put a lot of money in a new bond ladder.

Please! Let’s be careful out there today.

Wednesday, August 28, 2013

I Don't Know

Hopefully, soon, I will have one of those good kind of problems. When my house in Maryland sells, I will need to invest the proceeds. I believe the market is over valued, although it is starting to drop as the current administration beats the war drums. Bonds are paying historically low interest rates. If the interest rates continue to increase their short term values will continue to decline. Precious metal stocks have been choppy for several years. I am just not a rental property kind of guy.

So let me invoke the three most powerful words in investing, “I don’t know.” The beginning of wisdom always starts with an admission of your limitations.

Pride goeth before destruction, and an haughty spirit before a fall.

In the twelve years I have invested in a serious and conscientious manner, I have followed a course that could be described as a modified form of dollar cost averaging. I invested 14% of my pretax income in a mix of funds offered by my employer. I seldom adjusted my contribution percentages to different types of investments. I probably rebalanced my holding in this account once a year or less. The theory (and it works) is that over many years, buying more shares when the price is low, fewer shares when the price is high is safer than attempting to time the market. Rebalancing on a periodic basis forces the investor to buy stocks when the market tanks and sell when the market is high. Outside of my Government equivalent of a 401K, I would invest relatively small amounts of money in different kinds of investments as opportunities present themselves or I needed a little more of this or that to stay in balance.

I believe one of the keys to safety in investment is never invest too much in any one holding (diversification) or too much money at any one time. Now, while I doubt that I will invest all the proceeds from the sale of my house at one time, realistically I will need to invest more at one time than is my habit. Of course I have some ideas, but at this time I have no idea what I will actually do when the time comes.

Here are some of my thoughts:

1)Add to my holdings in Vanguard Wellington and Wellesley Income funds. Together these funds give me a 50%/50% holding in a diversified group of conservative dividend paying stocks and investment grade bonds. This position is the basis for my attempt to self fund my need for long term care insurance. Also if I die and my wife does not desire to maintain our self managed account, she could sell shares in companies she didn’t understand and move the money to these two funds.

2)The recent bankruptcy of the city of Detroit has caused some problems in the municipal bond market. A tax exempt interest rate of 3.12% sounds interesting. I could add to my holdings of Vanguard Intermediate Term Tax Exempt (VWITX).

3)I am reasonably certain that I want to buy some more utilities, particularly water companies. They pay a good dividend with a reasonable degree of safety.

4)Add some platinum to my gold and silver holdings (just a little).

5)Peruse the lists of dividend aristocrats. My basic investment style can be summed up in three words, dividends, dividends, and dividends. I really am not very interested in a company that does not want to share its profits with the owners (me). Also, now that I am retired income is more important than ever before. Maybe I can find a bargain.

6)Start a bond ladder. The classic way to generate retirement income is the bond ladder. This is probably worth an entire post, but basically here is how it works. Buy a bond for income that expires at some certain future date. Then buy another bond that expires before or after the first bond-and another with a different term-and another with a different term etc, etc. As the bonds mature reinvest the proceeds in another bond. This provides a steady stream of income with a minimum of risk caused by interest rate fluctuations. This method is out of favor because bonds are currently paying just about nothing.

Let me end with a warning, “I don’t know.” I look into my crystal ball, but I just don’t know.

Please! Let’s be careful out there today.

Monday, August 26, 2013

Project Management and Budgets

Monthly budgets are for monthly expenses or predictable infrequent expenses like property taxes and car insurance. The emergency fund is for emergencies. Eventually, if you are diligent, you will outgrow the need to tap the emergency fund for most “emergencies.” What about expenses that are not predictable but are not emergencies?

When buying a new house I started with a budget in mind, $180,000 to $220,000. I overran this budget by a little less than 5%. I am satisfied. In picking a price range Zillow gave me a pretty good idea of what I was getting myself into. I was somewhat familiar with the Greenville area before starting the process. As I did my research and explored neighborhoods with satellite imagery and actual feet on the ground explorations with a realtor, the final picture came into pretty sharp focus. We learned that the lower end of our initial range was unrealistic give what we wanted in our new house. As our data base of actual houses and asking prices grew, we learned the upper end of our range was pretty accurate.

There was another aspect to purchasing a new house, the move. To be honest I had no idea what this might cost since I had never done such a thing. So I proposed and funded what is known in the project management world as a SWAG (Scientific Wild Ass Guess) of $20,000. It turned out that the components of my estimate were not particularly accurate but the total looks like the total it is going to be just about right. I thought moving our junk would cost about $10,000 based on conversations with coworkers. I thought repairs and upgrades to our existing property might run another $6,000 given conversations with my realtor and my favorite contractor. The move from Maryland to South Carolina actually cost $6,000. I kind of sort of included the cost of the move from the storage unit in Atlanta in the total estimate but it was more expensive at $1,500 than I expected. Fixing up the old house is pushing past $9,000 so those estimates were low. Our realtor in Maryland insisted we leave our washer and dryer with the house. That lowered the cost of the move on one end but tacked on $1,200 to the other end. I still need to get the inside of the garage painted and the deck sealed. Would those be part of the cost of the house or the cost of the move? So I am closing in on $18,000 with a few unknowns lurking in immediate future. I am satisfied.

When funding “projects” that do not require the use the emergency fund, try to make a realistic estimate, knowing that you could easily be off by ±15%. Even if you think you know what you are doing add 10% for contingencies to your projected budget. If you are working with a number of unknowns add 15%. If at all possible organize your project so that you can fund, completely execute a part of the project, and then stop if you discover that you have really blown the estimate. It happens.

I still have an official 6 months take home salary emergency fund based on my salary during the last years before I retired. It sits in a CD that rolls over every 6 months. I hope I never need to use it, but I keep it to remind me that the world is an unpredictable place and I am a fallible human being. Even if your net worth falls in the $1,000,000-$5,000,000 range, I would recommend leaving your emergency fund in place. If your net worth exceeds $5,000,000 I think you have outgrown the need for a formal emergency fund.

May all your projects and all your investments be blessed with success.

Sunday, August 25, 2013

The Upgrade Trap

There is a problem with a new house or a new anything else for that matter. All of a sudden everything else looks old or small. The temptation is to just say, “Aw, what the hell,” and upgrade.

We needed to get internet and phone service. Trying to take care of even basic financial actions, like moving money or balancing a checkbook is just about impossible without access to the Internet. Our pay-as-you-go cell phones on the Sprint Network are adequate for travel and emergencies but at least in this area, they drop calls and sometimes fail to ring when they should. Trying to coordinate deliveries, communicate with our real estate agent, or the comings and goings of technicians with these barbaric instruments is infuriating. We had a choice between two providers. Both are thoroughly hated for bad customer service. We choose to go with Charter because AT&T does not yet offer high speed Internet in our neighborhood. For another $16.00 a month I could add extended basic cable TV, “Aw, what the hell.” Now my wife can watch animal planet. Readers of this blog know cable TV is one of my prime bugaboos.

South Carolina has had the most remarkably wet summer in memory. Rainfall has exceeded average by something like 21 inches. The state needed the rain. A drought lasting several years had left the reservoirs depleted, but over the last two days the sun came out and the grass is growing—really fast. I am somewhat worried. Parts of our yard have a pretty steep slope. The grass is still really chunks of sod, lying on the local red clay. It needs to be rolled. I am somewhat concerned about attempting to cut the grass with my self propelled lawn mower. The solution? Hire a yard maintenance company for just a few months with the proper equipment and expertise rather than risk the need to replant the yard. How much could it cost? “Aw, what the hell,” after all, I am just protecting my investment. What happens if I like having a lawn service?

We gave away our oldest furniture. Giving away furniture is a lot harder than I could have ever imagined, but we succeeded. Personally, I expect the Washington suburbs are so affluent that charitable organizations can afford to be picky. I expect I would have done better in the Pickens County Jockey Lot, but then I would have needed to transport the stuff from Maryland to South Carolina. Our furniture that was not old furniture in an old house, suddenly looks old in a new house. My wife is talking about replacing things that don’t match or are showing their age. Can anyone say, “A refinishing project?” Time will tell. For about 40 years (they predate my marriage) I have used cheap screw together metal shelves to house my book collection. Obviously, those things are not going into a brand new house. Really. One of the shelves is bent. A big patch of paint is missing on another shelf where once some printer ink leaked out of a cartridge. Cleaning it up managed to strip the paint. The shelves are out in the garage, where they belong, holding my tools until I can get a storage shed to replace the very nice storage shed I had in Maryland. You can’t transport an eight by twelve storage shed over 500 miles. I will need to buy new bookcases or leave my books in boxes for the next 20 years. I will need to buy a shed for my lawn mower and similar instruments of destruction (unless I really like using a lawn service).

It all adds up. Solomon observed, “Take us the foxes, the little foxes, that spoil the vines: for our vines have tender grapes.” Generally this verse is the basis for a sermon on small sins that creep into a virtuous life, eventually leading the sinner down the road to perdition. The same can be said about our attempts to control our expenditures. There is always a perfectly good reason to spend a little more money. The more expensive model is on sale. It is a better buy. Yep, we bought the more expensive washer and dryer that were on sale. It has flashing lights. It beeps. It saves water and it protects your clothes since it doesn’t have an agitator.

Adding this desirable feature to your plan is only X dollars a month, just pennies a day. You already heard about the Animal Planet.

Who is it saying, “Really, you have worked so hard. You deserve it! We will worry about a budget tomorrow. Like, financial responsibility is like so boring.”

Saturday, August 24, 2013

You Have Been So Good

I have to confess, gratitude is not my strong suit. I tend to view the world as a somewhat indifferent and sometimes hostile environment. I spend a lot of time trying to be vigilant. I try and keep my swords and my ax sharp, ready for battle. This morning while drinking my coffee I had a little realization of the goodness of God. At least for the moment I am grateful.

I can give thanks for many things. I am living in a big brand new retirement home. It is much larger and nicer than anything I imagined (at least as an adult) that I would ever own. I was able to pay cash for this new house even though I have not yet sold my old home.

God has been good to me.

In many ways I have moved home. We still have friends in the Greenville, SC area; friends who have been friends for more the forty years. Some of them have been better friends to me than I have been to them. My wife still has family in the area. Our new neighbors seem like they are going to be nice people.

God has been good to me.

I have a wife who has stood by me for over 38 years. How many men can make that claim?

God has been good to me.

I was able to retire at 62 because I wanted to retire, not because health issues or downsizing forced me into retirement. I have been retired for almost exactly seven months. I have really enjoyed the freedom to go and come as I please and dabble in whatever appeals to me at the moment.

God has been good to me.

Of course I have my aches, pains, and limitations but I am really in remarkably good health for a man of my age.

God has been good to me.

It is a beautiful sunny morning in the foothills of South Carolina. The world is green. The air is fresh. I already have an alumni library card at Furman University. Now I must return to unpacking dozens of boxes that are still stacked around our beautiful new home.

God has been good to me.

While I was testing my computer after unpacking and reassembling it, I found and played a song I saved in my music folder. It was emailed to me by the beautiful Christian woman who helped to direct me into this financial ministry. I hope you enjoy it.

You Have Been So Good

Thursday, August 15, 2013

What Does One Dollar Mean to You?

One Dollar ($1.00) So what’s a dollar mean? Even a child understands converting a dollar to a candy bar or a soda.

One Thousand Dollars ($1,000) Almost all adults understand the meaning of one thousand dollars. Perhaps it is your monthly rent or mortgage payment. Perhaps you think of one thousand dollars in terms of your take home pay for some period of time. Perhaps it is means the down payment on a new car.

One Hundred Thousand Dollars ($100,000) If we live long enough, we will have something in our lives that will mean one hundred thousand dollars. Perhaps that 30 year mortgage is finally paid off. Maybe you will have that much in your 401-K. Even if you are drawing Social Security, using the 4.0% rule, you have an annuity worth $500,000 in order to draw $20,000 every year. Multiply $500,000 by every baby boomer in America; just something to think about.

One Million Dollars ($1,000,000) Something like 7% or 8% of American families have a net worth in excess of one million dollars. Most of those Americans are first generation self made millionaires. To those people one million dollars means a lifetime of deferred gratification, self denial, thrift, and hard work.

One Billion Dollars ($1,000,000,000) Only about 400 Americans actually are able to relate to a billion dollars. I have some idea of a billion dollars means when I watch the Redskins play in FedEx Stadium on a Sunday afternoon, but I really don’t understand a billion dollars in any personal way.

One Hundred Billion Dollars ($100,000,000,000) I would contend that the Government officials who handle this kind of money have no idea what that number means in real human terms. If their decisions turn out well, the nation is blessed. If their decisions turn out badly, frequently innocent lives are ruined. Sometimes blood runs in the streets.

One Trillion Dollars ($1,000,000,000,000) About 1/16 of our current national debt. Also about 1/16 of the total personal debt of all Americans, or about 1/60 of our total debt including all unfunded liabilities.

The U.S. Debt Clock

Wednesday, August 14, 2013

Finishing our Last Will and Testament

After two years of interruptions including the death of my mother-in-law and the heart attack suffered by our attorney, our wills and estate planning documents are complete. They contain all the usual material one would expect to find in such a package including power of attorney and advance health directives. These are two pretty scary documents. Sometime in my life, if I am sufficiently incapacitated, someone will need to have the power to manage my money as well as the legal authority to pull the plug on my life.

We were assisted in this somewhat convoluted process by a gentleman who provides estate planning services for our district of the Christian and Missionary Alliance. There is no charge for his very valuable services. Of course it is his hope that you will provide for the Church in your will. In our particular case one of the tools at our disposal is termed a Charitable Remainder Unitrust. This is normally just called a Charitable Remainder Trust or CRT. If you have $250,000 or more in a 401-K or similar tax deferred accounts or own assets that have appreciated enormously but have not yet been hit with capital gain taxes check out the CRT. It isn’t just a good thing for evil rich people.

Consider my Government TSP account. It has never been taxed. Although I no longer contribute to this account, it continues to grow tax free. Not counting my house, my tax deferred holdings are my last line of defense. I don’t intend to use any of this money until it is absolutely necessary. What happens if I manage my money wisely over the remaining years that God gives me? There might be a significant lump of untaxed money left in that account. If it all comes out at one time my heirs would be hit with a terrible tax bill. It is better in my mind to continue to protect that money from the taxman rather than see it squandered by the state of Maryland.

When I die any remaining funds in my TSP account will pass untaxed into a CRT. These funds will be distributed at a rate of 5% of the remaining principal per year to my wife for as long as she should live. After my wife passes, the CRT will provide our heir with this same income for an additional 20 years. At the end of the 20 year period, any remaining funds—if the Christian and Missionary Alliance is half way competent that should be a significant number—will then be distributed according to the instructions found in our Ministry Fund (another legal document that is part of our estate package).

For now, the management of my TSP account remains in my hands. If we need to spend the money in my TSP account it is there for us while I am still alive. Whatever is still there after my death will bless my wife for as long as she lives and will provide a guaranteed supplementary income to my goddaughter (who knows maybe as she approaches retirement). When it is all over four of our favored charities will be blessed without benefiting the taxman. By the way we can change the charities and the percentages any time we want until my death.

If you have been blessed with substantial untaxed assets, consider them as candidate investments for a CRT. Work with your Church and your attorney to put together something that makes sense for you at this time in your life. Then revisit your will from time to time (maybe every 5 years or so unless something dramatically changes). It doesn’t turn into stone until you are dead.

If you are young and single, you really don’t need a will for your motorcycle and the three pieces of stereo equipment you own. Still, if you are an adult go ahead, fill out one of those $30.00 Internet wills. They are certainly better than nothing. If you are married, keep everything you own as joint tenancy. Then if one of you dies, your financial life goes on undisturbed. Again, one of those Internet wills is probably enough. You absolutely must have a will if you have children. You want to decide who gets custody of your minor children, not the court system of your particular state.

Let us hope that the day will come when you have substantial assets that require careful management to balance the claims of your heirs, your desire to bless others, and the ever present danger of the taxman. When that day comes, protecting your estate will require a little more work than filling out forms on the Internet.

Tuesday, August 13, 2013

Like It or Not, We All Live by Faith

[31] And Terah took Abram his son, and Lot the son of Haran his son's son, and Sarai his daughter in law, his son Abram's wife; and they went forth with them from Ur of the Chaldees, to go into the land of Canaan; and they came unto Haran, and dwelt there.
[32] And the days of Terah were two hundred and five years: and Terah died in Haran.

[1] Now the LORD had said unto Abram, Get thee out of thy country, and from thy kindred, and from thy father's house, unto a land that I will shew thee:
[2] And I will make of thee a great nation, and I will bless thee, and make thy name great; and thou shalt be a blessing:
[3] And I will bless them that bless thee, and curse him that curseth thee: and in thee shall all families of the earth be blessed.
[4] So Abram departed, as the LORD had spoken unto him; and Lot went with him: and Abram was seventy and five years old when he departed out of Haran.

The first four verses of Genesis 12 are a favorite of preachers everywhere. Abraham, the Father of Faith, obeyed the call of God, leaving his home for nothing but a promise from a God he had never seen. However, these verses are preceded by the last two verses of Genesis 11. Evidently, Terah, Abraham’s father started out on the same path, but decided things were pretty comfortable in Haran, a town somewhere up in modern Turkey. He never saw the Promised Land. Instead he settled for a place that means “parched” in Hebrew. Hmmm.

I am getting ready to make another one of those big jumps, my second in a year. After retiring in January, I will be moving to another city in a few days. Unlike Abraham, I know where I am going to live. Still, after almost 26 years of living in the same house in the same little town, this is both exciting and scary.

We all make big jumps from time to time. We choose a school, or the military, or our first full time job when we leave high school. We get married (a really big dangerous decision). We buy our first home, usually with a 30 year mortgage. Who can say what will happen over the next 30 years? Yet we sign the paper like we know the future. We start a family, not knowing what kind of life our children will live to experience. Talk about faith!

Whenever we change direction, we are making a faith decision. If you buy a house or choose to invest in a stock, you are making a faith decision. Whenever you change jobs or go after another degree you are making a faith decision that you are headed for a better land.

I know what you are going to say, “This is not faith. I have studied the problem and through the application of logic to the facts I have made this decision.” Yea, over the course of three years my wife and I scoped out potential retirement sites. We can safely say SC is cheaper and warmer than MD. The taxes are much lower. We still have friends and family in the area. We are trading a 40 year old track home for something that is brand new and nicer. With a little bit of luck, the trade will leave me with a good bit of cash in my pocket. Still, I don’t know what the future will hold. I won’t know if this is a good decision or a bad decision until it is time for me to go home to place not made by hands, a place where I can rest.

Don’t kid yourself. Your crystal ball can’t be trusted. You don’t know the future. You can’t time the market. So tell me what will be the best investment for the next ten years? Cash? Gold? Stocks? Real Estate? Bonds? We choose an investment discipline that matches our personality, trusting that over time a well balanced portfolio, judiciously maintained using time tested rules will pan out.

So where is your faith? Most of us (including me) put a great deal of faith in our own abilities. However, I know that statistically I am already past my best years for making complex financial decisions. We peak in our middle 50s. Of course our bodies begin to betray us in our middle 30s. Put your faith in others? You will be disappointed. Those around you are pretty much like you. I don’t need to tell you about your weaknesses and limitations. You already know all about those problems.

So take a few minutes today, ask yourself, “Where is my faith? What is it that sustains me when everything is falling apart?” If you have never needed to ask yourself those questions, I can guarantee you that day will come. It is better to know the answer in advance.

Sunday, August 11, 2013

Say What You Mean. Mean What You Say.

But let your communication be, Yea, yea; Nay, nay: for whatsoever is more than these cometh of evil.
Matthew 5:37

But above all things, my brethren, swear not, neither by heaven, neither by the earth, neither by any other oath: but let your yea be yea; and your nay, nay; lest ye fall into condemnation.
James 5:12

For those of you not too familiar with the Bible, the first quote is Jesus. The second was written by James the Just, first bishop of Jerusalem, believed to be either the half-brother or cousin of our Lord, depending on your tradition. What you say when compared to what you do is pretty important, but we all know this to be true no matter what the basis of our ethical system.

Quite simply, this is a rant, born of my dealings with various kinds of contractors and salesmen as I continue to prepare for my move to another city. The Washington, D.C. area is filled with people who have money, but no time. While many of these people have multiple college degrees, they do not have intelligent hands. They need help with their lawns, home repairs, home improvements, and housekeeping. Over the past 25 years I have considered not only my own experiences but those of my friends and neighbors. Generally speaking the kind of people that provide these services can not be trusted to do what they say they will do. While the customer needs to understand the first law of project management, “Good. Fast. Cheap. Pick any two,” if those who provide these services exhibit even a shred of integrity, they will never be without work.

As it is written: Do you see a man skilled in his work? He will stand before kings; He will not stand before obscure men.

The biggest problem in dealing with those who provide these services is just getting someone to show up. Many of them have the kind of personality that prefers to go fishing rather than go working. If the weather is nice or the fish are biting or they were out late drinking with their buddies, they just don’t show up. Some of them do good work for a good price. If you have the time and don’t pay them until they finish the job this is OK, but it sure sets your teeth on edge. Just tell me in advance, “I will be late tomorrow. I have something planned for this evening.” I won’t ask about your business and I won’t be concerned when you don’t show up in the morning.

Salesmen have a different problem. Too many of them are liars. Either they simply do not deliver what they promise or the use deceit to get you to bite the hook before you learn what is contained in the fine print. “Oh! You wanted a steering wheel with your new car? You have to buy the Platinum Package if you want a steering wheel.” People, tell the truth. If the situation is one in which you would want to hear the truth, the whole truth, and nothing but the truth in advance, treat others with the same consideration that you would want to receive.

Do you want to know what salesmen are thinking about when they are looking at you like a hungry tiger eyeing a side of meat, check out this list of closing techniques. The names of many sound like the names given to various con games by grifters, “Who exploit characteristics of the human psyche such as dishonesty, honesty, vanity, compassion, credulity, irresponsibility, naïveté, or greed.” (Wikipedia)

Closing Techniques

I understand independent contractors and commission salesmen (who are really independent contractors) have a harder time earning a living than those of us who receive a regular paycheck. I also understand that they provide an irreplaceably valuable service in a capitalist economy, but for God’s sake, say what you mean and mean what you say. If you make a promise, move heaven and earth to fulfill your promise. People aren’t stupid. If you tell the truth and do your best, they will understand that you are not going to be perfect every time. Always make it a habit to deliver more than you promise. People will respect you. If you consistently deliver less than you promise, people will take their business elsewhere.

Oh, by the way. The words of this rant also apply to you and they also apply to me.

Friday, August 9, 2013

The Road to Pumpkintown

A vector is a mathematical entity that contains both direction and magnitude. For example if you are driving from Slater, SC to Pumpkintown, SC you will be headed west on SC 288 at some velocity between 35 miles per hour and 55 miles per hour depending on the speed limit. This is not unlike the pursuit of any life goal. Unfortunately in life many of our goals also have magnitude and direction. The amount of money required for a comfortable retirement changes over time as the value of the dollar drops. As our dreams and the demands of practical necessity change over time, our life can be described as vectors in pursuit of vectors.

Often there are many paths to the same goal. During our recent stay in the mountains of North Carolina, we planned to take the Pickens Highway from Rosman, NC as the most direct route to Travelers Rest, SC. Unfortunately, the road was closed. I could have attempted to follow the detour down a winding back road or first drive to Brevard and then take the road down the mountain to Travelers Rest. As I was familiar with those roads and did not wish to be late to our appointment, I selected the longer but “safer” route. On the way back, time was not a consideration. I really kind of enjoy exploring back roads, so even though I have seen the movie Deliverance, I wasn’t too worried about getting lost. Even without GPS I don’t believe that I could get so lost that I couldn’t find some location that I could identify on a map. As a friend once observed, “All roads come out somewhere.” On our second trip down the mountain, I knew the detour would cut 30-40 minutes off the time required to drive to Travelers Rest. I was now familiar with the roads that comprised the detour, so there was no confusion or risk involved in following this new path that did not appear on any of my maps.

Are you following directions from a map or a GPS on your way to your goals or are you just wandering aimlessly around the back roads of life? If you want to get out of debt, ask yourself, “Am I spending less than my take home pay?” If the answer is no your vector is pointed in the wrong direction. A budget can quickly point out the magnitude of your mistakes. The first step in learning to control your money is often finding our where you are spending it. Then focus on how to get from where you are to where you want to be. Begin to repay your debt in some orderly systematic method. The debt snowball (smallest debt first) and the debt avalanche (highest interest rate first) both work. However, neither will work unless you keep your foot on the accelerator and your car pointed down the road. The trick is to stay motivated and focused even when the twists and turns of a mountain road are starting to aggravate your tendency towards motion sickness.

What happens is you hit a detour? Perhaps your current job does not pay enough to cover your monthly expenses. You might need to take a part time job until you get your expenses under control. You might want to work harder and smarter at your current job. Who knows, you might get a promotion. You might want to look for a new job that pays more than your current job. Actually, unlike a car and a road, you can follow all three of those paths simultaneously. What might happen if your answer to a detour in life is, Yes! Yes! and Yes! Try applying the multiple Yes! to any kind of problem, building a relationship that could lead to marriage, saving for retirement, or finding a way to do what you love even if it has no commercial potential.

So, if you ever need to drive from Slater to Pumpkintown just turn on to 288 West it’s right there by the Burger King. You can’t miss it. If you find the road is blocked, just turn off at Oolenoy Church Road or State Road S-39-298 (it don’t have no name). They both connect to SC 135 just turn right and follow the road to Highway 8, the Pumpkintown Highway. Turn right on 8 and you’re almost home.

Thursday, August 8, 2013


I have just returned from spending a week in a delightful cabin up in the mountains near the South Carolina line. This trip was occasioned by the need to work out the final details of buying our new house. I wasn’t exactly in the mood to read the material I brought along, so I went looking for something a little lighter in the book selection provided by the owners of the cabin. I found a book entitled Positivity written by Barbara Fredrickson, the Kenan Distinguished Professor of Psychology at the University of North Carolina at Chapel Hill, a well known researcher in the area of positive psychology, the study of what works rather than traditional psychology that studies pathologies, what doesn’t work. While this book is written for a popular audience, it is properly footnoted, referencing other scholarly work by recognized authors.

The author explores a rather obvious question. Are successful people happy because they are successful or are they successful because they are happy? The answer is both propositions are true. People who exhibit positive emotions at a ratio of 3 to 1 when compared to negative emotions are far more likely to achieve success in their chosen field than us more normal folks who are likely to average a 1 to 1 ratio, or worse.

If you want to improve the quality of your life generally, cultivate, meditate upon things that increase these emotions for YOU in YOUR LIFE. Obviously, what would generate these emotions are to some degree specific to you as an individual.

Interest (curiosity)

One of Frederickson’s collaborators, Marcial Losada, former director of the Center for Advanced Research (CFAR) in Ann Arbor, a psychological researcher who has spent his career specializing in the study of high performance teams has found the same “positivity ratio” separates average or below average teams from the top quintile. In fact, he has found the exact ratio is 2.901311 to 1. In teams the questions that separate high performing teams from the run of the mill are a little different than those that define individual performance.

Positive/Negative Contributions
Other Focused (the customer’s agenda)/Self Focused (your agenda)
Inquiry (not knowing the “right” answer)/Advocacy (defending “the truth”)

At 3:1, the positivity ratio begins to produce non-linear results. Small increases produce surprisingly large improvements in measurable performance standards. This continues to be true up to ratios of 6:1 in groups. However, at some point, too much positivity does not improve performance. Losada and Frederickson compare this to the design of a traditional mono-hull sailboat. They have discovered that the ratio of mast height to keel depth is, you guessed it, 3:1. If a vessel has too much sail and not enough keel it will be difficult to control and will be more likely to capsize in a storm. There is a time for negative contributions. Not every proposition generated by a brain storming session is going to be a good idea. If you are not focused to some degree on your own agenda, your company is not likely to stay in business very long. There is a time when the amount of inquiry needs to contract. At some point the group needs to focus on implementing the plan rather than continuing to explore possible options.

If you want to be more successful, if you want to be more resilient, better able to overcome the inevitable difficulties, problems, and failures in life spend some time exploring what make you happy, really happy, then cultivate those experiences and memories that bring you closer to peace, joy, and righteousness. At 3:1 the data suggests you just might trigger a virtuous cycle that will send your life into another dimension of success and happiness, no matter whatever those two words might mean to you.