Monday, March 31, 2014

Early Retirement Calculations

Figuring out whether you have enough to retire is one thing, figuring out when is another.


One problem in deciding when to retire is figuring out what your income streams will be, when they will kick in, and how long they will last.

For many people, this question never comes up.  Their career lurches along until one day they are tossed out of the company and they never work again.  Retirement is thrust upon them and they live on what they have saved up, plus whatever they can get from Social Security and a pension plan, if any.

But suppose you actually want to plan your retirement and maybe want to retire early?

The problem is, there are a number of benchmark ages you and your spouse will hit, that define when streams of income will become available, and also expire.   For example:

1.  Age 59-1/2:  The age you can tap your 401(k) or IRA without tax penalty.

2.  Age 62:  The age you can start collecting Social Security.

3.  Age 65:  The age you qualify for medicare (cuts expenses dramatically)

4.  Age 67:  The present age for "full" Social Security.

5.  Age 70:  The present age for "enhanced" Social Security.

6.  Age 89:  The age your 401(k)/IRA will tap out, if spent using the 5% Rule & Draw at age 59
As you can see, this means your retirement income stream can bump up at one of several points in time - and drop off.   Now throw in your spouse's retirement.   Unless you are both of the same age, this means your income will have several steps of increasing and decreasing income, over time.  Instead of six steps, you may have twelve, each about 2-3 years apart, depending on your age spread.

So when you hit 59, you may be able to retire early and withdraw money from your IRA.  Three years later, you hit 62, and qualify for Social security.   Two years after that, your spouse hits 59, and she can tap her IRA.   Three years after that, she qualifies for Social Security - and you for Medicare.  And so on, and so on.  These "break points" in retirement can be many!

Of course, how much you choose to take out of your 401(k) and IRA is up to you - at least until age 70, when you are forced to take out a certain amount.   But even then, you can choose to spend only part of it and thus preserve your income for a longer period of time.

People routinely live to ages longer than 89 today, so running out of money in retirement is a real possibility, if you start drawing at age 59-1/2.   Thirty years later is age 89-1/2, and you may be still kicking.

This creates an income stream that ramps up over time, peaks at about age 70, and then declines to mere Social Security, by the time the youngest spouse reaches age 89.   If you want to take these disparate sources of income and reduce them to an even yearly income stream, you'd have to solve some second-order equations that take into account inflation, rate of return, future value of money, and the like.   It is not as simple as it appears.

And compounding (and confounding) the problem is that we don't know how long we will live which makes calculating your annual income even harder.   Suppose by the time you reach 89, they have new drugs and methods that make living to 100 a commonplace thing?

Sounds crazy, but already within my lifetime, the average life expectancy has risen by nearly ten years.  In Japan, for every baby born, another person turns 100.   The world is getting older and older.

Needless to say, this adds another level of complexity to the retirement calculations for the 401(k) generation.   Our parents got Social Security and a Pension - so they knew exactly how much to expect every month (with cost of living increases) for the rest of their lives.   There was no need to "wait" for these breakpoints to occur, and then decide how much to cash in, versus how much to spend.

One additional wrench in the works is that if you want to retire early before age 62, this may affect your Social Security payout.  The Social Security Administration has an excellent website (and brochure) that illustrates how this works.   In their lexicon, the "retirement" age is the age you collect Social Security (minimum age, 62) while the "Stop Work" age is when you, well, stop working.

As they illustrate:

"If you stop work before you have 35 years of earnings, we use a zero for each year without earnings when we do our calculations to determine the amount of retirement benefits you are due.

Even if you have 35 years of earnings, some of those years may be low earnings years. Those low earnings years will be averaged in, creating a lower benefit than if you had continued to work."

So, if you are counting on that amount of money that your Social Security Statement projects, and you decide to retire, say at age 59 (when you can tap that IRA or 401(k)) you may be in for a surprise at age 62, when your retirement benefits are less than you expected.  How does this play out?

For example, at age 54, I have exactly 37 years of work logged by the Social Security Administration, starting at age 17 with the $590 of reported income from the Olde Tyme Gaslight Restaurant and going on until today.  Sadly, my peak income was in 1999, which reflects the declining fortunes of the Patent business, as well as the fact I have moved more to a part-time basis.

For me, with declining income in my declining years, going to "Stop Work" may affect my Social Security calculation less dramatically than others.   For many people, their last few years of work are their highest earning years, and thus cutting off those years from the Social Security average could dramatically affect their benefits.

Bear in mind, however, that your earnings are "capped" at the cutoff amount (about $108,000 or so, at the time of this writing) so you don't get an extra benefit for those years you earned more than that.

So, how early retirement will affect your Social Security is yet another factor to consider in an already complex equation with multiple variables, and several unknowns.

My gut conclusion, after doing some initial calculations, is that I should work to about age 60 at least, in order to have a comfortable retirement.   If I quit work now, I would have to burn through a lot of after-tax savings to make it to 59-1/2.   Once there, I would have to burn through my IRA money pretty quickly, until Social Security kicks in three years later, and Mark's IRA kicks in, two years after that.   In the meantime, health care costs, even under Obamacare, will continue to rise, until I reach 65, and Medicare kicks in (and even then, there are costs associated with that).   Health Care costs - yet another variable.

You know, this 401(k)/IRA thing sounded so simple back in 1978 when it was created.  It turns out to be a lot more complicated, once you scratch the surface.


Sexism on the Left


Women demand and deserve equality with men.   One of the biggest obstacles to this is not from the Right, but from the Left, who tells Women they are "different" than men.  They tell them they are victims.


You've come a long way, baby.   That was the sexist "equality" slogan used to sell cigarettes to women in the late 1960's and early 1970's.   Not much has changed since then, with the idea of women's equality.

And sadly, today much of this retrograde attitude toward the sexes comes from the Left, not the Right.

This morning, on People's Leftist Radio, this tidbit from the "Marketplace" program from American Public Media about Women and Investing:

"I really don't know where to start," says Christiane Geidt, married and 46. She's actually accumulated a nice chunk, but — common for women — it's sitting in her savings account. Geidt is nervous about losing money if she invests, something that doesn't seem to bother her husband.

"I think men ... enjoy it more," she laughs. "It's their adrenaline, maybe, that kicks in."  Actually, research suggests it's testosterone that makes men open to to such risk.   But women have something else that men don't.  "Women are terrified of retirement," says Cindy Hounsell, president of the Women's Institute for a Secure Retirement. "They're terrified of running out of money. They're terrified of becoming bag women."
 
"We don't want wealth management gobbledygook that we can't understand," she says. "A lot of the studies show that women want somebody that they can talk to, who will say, 'How old is your mother?' And 'Who is caring for her?' and all those things. Well, they haven't been trained like that."

One thing I like about People's Leftist Radio is that it usually gets me so angry in the morning - with blithering nonsense like this - that I get up out of bed, rather than lay around lallygagging.

Wealth Management Gobbledygook?   I threw the radio against the wall (I go through a lot of radios this way).

What we are told here, in a not-so-subtle message, is that Women are "different" than men, and have "special needs".   They are delicate hothouse flowers, who, now that you think about it, should probably stay home and let the men manage things.

Oh, but those brutish men!  What with their testosterone and shrewd wealth management strategies!   Women are victims here, of a system that is stacked up against them!  If only having a uterus would make one savvy with investing!

Wow.   Pretty sick stuff.  But it doesn't begin or end there.   The Left laps this shit up - "Women are from Venus, Men are from Mars" and that sort of crap.   Weepy self-help books that don't say "Stand up for yourself" but rather, "We understand, we are victims too!"

The problem with this approach, other than it is factually, scientifically, and socially wrong, is that it is very dangerous and harmful.   Once you posit that women are "different" than men, then you concede that they cannot be equal to them and thus demand and deserve "special treatment" - which is what caused women to be treated as chattel in the first place.

All I could think of, when I heard this piece of drivel from "Marketplace" (which has a lot of drivel) is how an investment firm could be targeted to women.   And this scenario started playing out in my head:
"I just love my investment adviser at at the Womyn's Investment Financial Group!   We have such good times!  None of that Gobbledygook that the mean male adviser used to give me!  You know, like math and stuff that we girls are no good at!

We just have a little "me time" when we get together!  We have facials, do our nails, and then gossip a bit over a Chai tea.   Then we take a soaking tub while she tells me about emerging market growth funds!   It's just all girl-time!

And she takes such an interest in my life.   We trade tips on where to shop, as well as dieting advice.   She is just like a super-friend to me!

And none of those confusing numbers or any of that hard stuff that women just can't handle!   She understands my needs!

Yes, Ms. Madoff is the best investment adviser I've ever had!"

Is that what women want?  Really?  To dumb things down?   I respectfully disagree.   Or let me rephrase that.   Let me scream from the mountaintop that that idea is a crock of utter bullshit.

Women are making huge strides in the professions.   More women graduate from law school and medical school than men these days.   And this is real progress as opposed to the "I'm a victim" type of "progress" that the media touts. 

When I was a lad, a "lady lawyer" or a "lady doctor" was something to be remarked about - and made fun of.  Johnny Carson (who was, in retrospect, a real prick) would make jokes about those "lady doctors" on the Tonight Show.

You have come a long way, Ms.

But this progress came not by making special exceptions for women (for the most part) but rather by allowing them to compete on an even playing field.   Women do not get deference in medical school or in law school.   The do not get special treatment in the hospitals or the courts.   They have to win their cases and cure their patients using their skills and skills alone.

There are, however, those who think themselves "progressive" who think that the fight for equality means pandering or catering to women and minority groups, who are viewed as damaged goods or victims who need a boost up, in order to succeed.

I mentioned before about a visiting professor in law school who thought that women in law school were "intimidated" by the mean, old, testosterone-producing men.  He felt that only women should be allowed to answer questions in class, lest the evil men intimidate them.   I asked him about this policy and pointed out to him that once they graduate, Judges wouldn't give them the same special treatment - and that they would have to think on their feet and not be hothouse flowers and wilt, the first time some "man" is assertive in court.   He didn't agree with me.   Needless to say, he wasn't invited back as a visiting professor.

Despite the actions of Leftists like him, women are succeeding in this world, not because they are given special treatment, but simply by opening doors that were previously closed to them - closed for no other reason than their gender.

When I was at General Motors Institute, there was a woman a year behind me who is now President of the Company.   And today, she is in the hot seat because of decisions made long prior to her tenure.   But she is handling it well, and not because she is a woman or in spite of that fact.   She has demonstrated that she is capable of leading and that she has the skills and know-how to do the job.

In other words, despite the media hoopla about her gender, she got the job because she deserved it, and gender was not a consideration.   That's the way things should be.

And it is the way things are trending.    Now, granted, this is not the path that all women want, nor should they.   You can be whoever you want to be, and if you want to stay home and raise the kids in a "traditional" sense, that's OK, too.   But that doesn't mean that your whole life should be focused on "finding the right man" and "marrying smart" either.

What do women want?   To be treated specially?  To be treated just like men?

I think neither.  I think women are like any other human being and they want to have the same opportunities as others - based on their skills and talents alone - and the choice to do what they want to do with their lives.

Traditionally, opposition to this idea came from the Right - who thought women should stay home and make babies and be subservient to men.   The Right has largely abandoned that idea.  

Sadly, the Left still engages in pandering to women and treating them as victims.   That remains the last obstacle and hurdle for women to overcome, to achieve full equality.

Not the Right.  The Left.



Sunday, March 30, 2014

Computer Hacking

Hacking is nothing new - nor has it changed much.


I hacked my first computer back in 1976.  It wasn't that hard to do.  The computer, a brand-new PDP-11, ran on two 8" floppy drives, and had two time-shared terminals, one a DEC-50 CRT, and the other an LA-36 DECwriter printer terminal.

The Operating System ran on one floppy (those were the days!) and the second floppy could be used to store our data files and programs.

There was a login procedure with usernames and passwords that was administered by one of the teachers, who had little time to devote to the task.   The usernames and passwords were stored in plain ASCII text.

One of the more clever students figured out that if you removed the O/S floppy when you logged in, the computer would hunt for the data file containing the passwords (named "PASSWORD.TXT" of course) and when it didn't find any disc, would "bomb out" into a default "Admin" mode.

Once in "Admin" mode, you could re-insert the floppy disc and then have access to all the files, including the password files, and either add your own password, or just use the Admin password.

Of course, our teacher got wind of this and escalated matters.  He changed the name of the password file, and then tried to encrypt it using a single-letter offset code in ASCII.   "A" became "B" and "B" became "C" and so on.  It was not a hard code to crack, particularly since the algorithm was in BASIC and you could just read out the encryption technique.

He finally gave up and just let us use the computer, as it was clear that he would spend a lot of time trying to preserve security on it, and it didn't have any secret data or grades or anything on it.   Why have security for un-secure data?   The worst we could do is corrupt the O/S disc, and there were backup copies of that.

Not much has changed in the nearly 40 years I did my first hack.   Today, such "backdoor" methods of entering a site or a computer are known as "exploits".   Often you can find a weakness in a program or an O/S where you can overwhelm the system with some sort of error condition, and it will "bomb out" to a default operating mode, usually Admin.

Of course, hacking has gotten a lot more sophisticated since then, and for the most part, the biggest part of hacking today is the "phishing" aspect of it, or "social engineering" - where you try to tempt or bait a user into either (a) coughing up their usernames and passwords (or financial data) by using some sort of ruse, or (b) getting them to load executable code into their computer, again using some sort of ruse.

For example, you may get an e-mail saying that you need to appear in court, or that you have been called for jury duty, or that you are being audited by the IRS.   "Click on the attached file for more information" it says.   And the attached file is a trojan that, once loaded into your computer, lets all sorts of other unsavory characters in.

Some are not even so sophisticated.  I got one recently, from a friend, that was just a link to a .php file on a weird site.   I quickly googled it and realized it was an executable file, and moreover my friend never actually sent the e-mail.   Rather, she was hacked, and the program she loaded sent this link to everyone on her e-mail list, 10 names at a time (as "send all" is usually blocked by most e-mail programs today).  People think that just because the link is "from" a friend of theirs, it must be trustworthy.  It isn't, of course.

And of course, the stakes in hacking these days are far higher than back in 1976, when maybe we could hope to crib someone's homework or something.   Banking information, passwords, and credit card information are the real juicy tidbits that a hacker hopes to find - and use - before anyone is the wiser.

But many other hacks are (or were) just attempts to hijack your computer so that it could be used to send SPAM messages in bulk, or be used for denial of service attacks.   Zombie armies of hacked computers could be used by a hacker to send out millions of SPAM e-mails, or to attack a certain website and thus crash it.

Will hacking ever go away?   Maybe not.  Things have improved dramatically in Windows systems with the introduction of Windows Defender.   It automatically installed as part of Windows Update, for many computers, and it performs the actions of many programs, such as Spybot and Malwarebytes or any commerical virus scanner - only it is free.   Microsoft realized that they had a real problem on their hands, as such a huge percentage of Windows PCs were compromised.

Today, I am seeing a lot less of this, and a lot less SPAM than in days gone by.  And when "fixing" friend's PCs, I am seeing a lot fewer problems with malware and spyware on their hard drives.

With automatic updates and Windows Defender, it is getting harder and harder to take advantage of "exploits" in many programs, as each time an exploit is discovered, a new version of the program can be issued, forcing the hacker to find a new exploit.   This dynamic form of programming is similar to the double-encryption system used for Satellite television receivers (and yes, I wrote the Patent) where the "Smart Card" can be removed and replaced, to upgrade the encryption system, if a hacker figures out how to compromise the original.

However, social engineering and phishing will continue to be with us.   Finding exploits in programs is hard work and requires real skill.  And the exploits are only available until they are discovered an patched in the next update of the program in question.   However, if you can get the user to load a piece of malware into his computer for you, it is a lot easier to break in.

Fortunately, we do have some defense in this area as well.   Most e-mail programs do try to scan for SPAM and known phishing and social engineering e-mails.   When they see a million e-mails across their system with the same text, pointing people to the same malware site, they can flag them as SPAM or as dangerous, or just even delete them en masse.

And yea, that means that the e-mail provider has to "read your e-mail" to figure this out.   But they are not "reading" it per se but rather using a computer to hunt for patterns (e.g., heuristics).  So even on the social engineering and phishing front, there is progress.

But that being said, hacking will always be with us, just as various forms of regular crime (and raw deals and ripoffs and the like) will always be around.   Heck, even Google allows advertisements for malware and spyware sites.   (Never click on an internet Ad!  That's the moral there.)  It is up to the consumer to be aware.   When you click on a link, be careful.  It is all-too-easy to end up on a malware site.

Sadly, this means than even the best of us will get into trouble, at least once in our lives, on the Internet.

Trampolines

Behind nearly every trailer is a trampoline, usually filled with dead leaves.

I had a nightmare last night that I was in Hell, and Hell was a wholesale club.  Everyone was rushing around to buy things, before they closed.   I was trying to buy a barbecue grill, but the employees had not assembled it right, and the legs were loose, bolts were missing, and there were stray miscellaneous parts inside.  A speaker blared, "We are closing in 10 minutes" as I struggled to bring this discounted half-assembled grill to the checkout.   I woke up in a sweat.   What a weird dream!

I realized that I had been reading the BJ's Wholesale catalog before bed, which was probably a bad idea.   I glanced at it again, and saw on the back, trampolines and huge play sets, with the caption, "Be the envy of your whole neighborhood!"


This Taj Mahal of Swing-sets features five slides and two clubhouses.  Really?

The huge playset, pictured above, had the caption, "Make your back yard into the neighborhood playground!" which I immediately thought was probably not a good idea, from several perspectives.

It is funny, but the poorer people are, the more likely they are to have such trash in their backyard, which is rarely used, as the portly kids (like most today) are inside playing Xbox and eating snack foods, not exercising out-of-doors.  But is like clockwork that whenever you drive by a run-down trailer home, there will be an amazing outdoor playset in the back yard, and the inevitable trampoline.  It is like Christmas lights - the best displays are in the poorest neighborhoods.   For some reason, rich people don't have trampolines (and usually not ostentatious Christmas displays, either).

And this is a shame, too.  How else will your children qualify for the International Trampoline Competition, get into the Olympics, or go to college on a Trampoline scholarship?   It would be like denying your kids a pool table!  Maybe you are dropping the ball here, in the parenting department.

But that reminded me of another thing about trampolines - my insurance application.   You see, on both my homeowner's and Umbrella liability applications, there was a question, "Do you own a trampoline?" which I thought was telling.  

Actually, they kind of went right down the redneck accessory checklist.   "Do you own a pit bull?" - and so on.

Trampolines can be dangerous, of course, particularly when used unsupervised.  They are safer today than in the past.   When I was a kid, a trampoline was a tiny round affair with no screening on the sides, or even padding over the skin-pinching springs.   You went off the side of a trampoline, and your leg shot down the gap between the springs, usually very painfully.   Sometimes this resulted in broken bones, other times, far worse.   Bouncing up 20 feet in the air and then landing on your head has predictable results.

And the insurance companies are aware of this, apparently.   So when you make your backyard "The Neighborhood Playground!" you are courting a huge amount of liability, as other people's kids could get hurt, and their parents, in turn, will sue you.

And maybe that is one reason why you see this stuff behind trailers and run-down homes of poor people.  They have no attachable assets, so being sued doesn't worry them.   Heck, they probably don't even have homeowner's insurance (I've seen this, firsthand, and it didn't work out well).

It is also emblematic of how poor folks think.   They do like to "treat themselves" to a lot of consumer goods, and they view life as a series of acquisitions of "nice shit" that will impress other people like themselves.  Jet skis, motorcycles, motorhomes, cars, trucks - generally anything with an engine attached.   And it goes without saying that the homes with the largest flat-screen televisions are often in the worst parts of town.

So the giant playset and trampoline are sort of status symbols for this set.   "Look how much money I can afford to spend treating my children!" it is saying - along with the litter of children's toys scattered on the front yard, including the playskool bright-plastic roto-molded junk, and the de-rigeur electric powered mini-car.

Their children are taught at an early age that life is all about acquiring shit and consuming it (but not taking care of it).  Buy stuff, put it on a credit card, and then smash it up good so you will be ready to buy more shit.   Repeat ad infinitim.   Screw "saving money" -  that's for "sissies" who don't have a Camaro.

Middle and upper class people tend to favor manicured lawns and property values, as well as putting money in the bank.   Buying an amazing playset for your kid is really just spoiling him - he will grow up just fine with only one or two slides, trust me.   And maybe middle and upper-class people think that putting that playset money into a college savings account is a better way of "treating" your child.

It's funny, but this trend also illustrates how wealthy we have become as a country.   We can afford all this crap, mostly because it is made in China, but also because we have more wealth in real terms, compared to days gone by.   And what is really remarkable is that the poorest among us can afford this shit.

Compare the trampoline and playset above to the ones we had in 1965.   A "de-luxe" playset back then (made of rusting steel) had maybe a slide, two swings, and maybe a "coaster".   The trampoline back then would have been about 10 feet in diameter without any of the safety features we see today.

Now go back to my parent's childhood in the 1930's.   No trampolines at all, and a swing-set might be something you had in the public playground.  Of course, back then, the suburban sprawl had yet to take hold, and children would actually would walk down the street to the public playground to play - often without parental supervision.

Our generation, growing up in the suburbs, learned to play in the background, on our own equipment.   So maybe right there is the reason this sort of thing has expanded over time.

And that gets me to thinking that if you buy the giant playset like the picture, the odds of "the entire neighborhood" coming over to play are pretty slim.   Chances are, all the other kids have a similar set.   The giant playset becomes like the giant Motel-Like house that grandparents buy, on the premise that "the grands" will come.

Funny, but when we lived in Virginia, the County built one of these giant playsets at the local park.   It was enormous and it was pretty de-luxe.   And it was rarely used.

You can really go broke, one credit card charge at a time, buying all the crap they have on display at the wholesale club.   And it all looks so appealing, in the displays and in the catalogs.   And each item is priced just at that point where you can "swing it" with your credit card.   Hey, it's only $1999.99!  That's like a thousand bucks, right?

And it doesn't end with trampolines and playsets.  Adult toys abound as well.   A popular item is these cheap outdoor bars, which look really cool inside the club.   Many are branded with "Tommy Bahama" (how far that company has fallen!) and assemble with just a few tools.   You can also get a giant cooler-on wheels, with a bottle opener on the side!  How cool is that?   And if you are not sitting at the bar, you can relax in your shade tent, complete with padded outdoor furniture.

A friend of mine went out and bought the whole kit and kaboodle.  The bar even had a sink, that you could hook up to a garden hose (no word on where the drain went).   It sat out in their yard, quietly rusting, being used maybe once or twice.   The bar was like 7/8ths normal size, so it was like sitting in a kiddie playhouse, and not comfortable.  The roll-around cooler was so huge, it took two bags of ice to fill, and was kind of stupid for a party of four people.  The legs wobbled and rusted.   The giant shade tent shredded its fabric after one season, and the padded cushions started to mildew and get funky.   Three thousand dollars charged to the credit card - and for what?

Think long and hard before you whip out the credit card at the wholesale club.   A lot of the crap they sell there is poorly made, overpriced, and ends up being unused after a week or two.

The wholesale club truly is hell.

Friday, March 28, 2014

Export America?

Made in America, sold worldwide.  BMW has proven that American-made products still have a worldwide audience.   And yes, you can buy BMW stock and and share in the riches.

As I noted in a previous posting, one of my Australian associates noted that, in addition to the Australian Auto industry being completely phased out, many of the "Japanese" vehicles imported into that country are, in fact, made in the USA.

And as I noted in comments on an older post, with lower wages and cheap fracking fuels, many foreign countries are investing more and more in the USA - and it is not hard to see why.

GM tried to close money-losing factories in Germany.  Due to their quasi-socialist European economy, wages and taxes were staggering, and in order to close the factory, they would first have to request permission of the German government.

That is crazy socialism run amok.  No wonder no one wants to expand a business in Germany!

So, it comes as no surprise that many Europeans, such as BASF, are looking at America as an ideal place to expand - with cheaper labor, cheaper energy costs, fewer regulations, and a "welcome to America" policy in many States (at least in the South).

Every major auto manufacturer in the world has plants in at least two countries - China and the USA.  They represent huge markets, to be sure.    But only one actually exports cars.  Increasingly, the USA represents a place where you can manufacture goods cheaply enough to export them to other countries.

BMW is the latest in this trend, expanding their Spartanburg, South Carolina by 50% to be the largest plant in the company.   BMW is now more of an American car company than ever before. 

And here's the kicker - 70% of the vehicles made there are produced for export.   And I watch the giant car carriers sail by my house, every day, as they leave with Caterpillar tractors, Kias, Hyundais, and BMWs in their holds, nearly as full as when they came in.

If this doesn't amaze you, check your pulse.

As long as I have been alive, more than a half-century now, I have lived in a country were imports were on the rise, exports in decline, our balance of trade was always alarming, and we were told that "imports are always better" - and moreover, no one else wanted "made in America" products anymore.

I was told, at General Motors Institute, that by 2010, we would exhaust the world's supply of oil, and what little there was left, would come from the middle-east.

Back then, the big-3 had trouble exporting its mediocre UAW-made cars.  But the "transplant" factories from Nissan, Honda, Toyota, BMW, Mercedes, Kia, Hyundai, and Subaru, have proven that you can make products in the USA and even export them for a profit!  This is an amazing turn-around.

All it takes is a good product and reasonable labor and energy costs.

And it doesn't end with cars.  We all think of cars, because everyone has one in their driveway.  But from everything from plastics to specialty steels to bearings to electronics, increasingly, the USA is seen as the new China - with a better infrastructure, lower energy costs, fewer translation issues, and without all that pesky corruption.

We are the new China.  Yea, maybe it took reducing our status to third-world country for it to happen, but it happened.  Wages finally sank low enough to be competitive on a world stage.

In other words, as economists predicted, eventually, things reach an equilibrium, and distortions in the economy (caused by high wages and energy costs from 1970-2010) even out.

Now, some would say (if they were stupid), "Well, the profits are going overseas to foreign companies!"

Really?  As a shareholder of BMW (one of my better investments) I can only say that I am looking forward to my hefty annual dividend from the world's most profitable car company, whose stock has nearly doubled in value since I bought it.   And all it took was a click of a mouse.

In a world economy, anyone can own anything.   It really doesn't matter whether Toyota is a "Japanese" company, when anyone can buy the stock.   And if you are invested in a Mutual Fund, chances are, you own a piece of several "foreign" manufacturers.

America is back, baby!   Someone send a telegram to the Chinese!   With their rising cost of labor, incipient and entrenched government corruption, lacking infrastructure, and staggering energy costs (and pollution), they are not well-poised to be the manufacturing hub of the next half-century.

And if you thought "Fracking" was a bad idea, maybe you should re-think this.  The environmental concerns hyped by the coal industry (irony of there ever was!) have yet to materialize.   Meanwhile, we have become the Saudi Arabia of Natural Gas, and may end up exporting crude oil, over time.  We don't need no stinking pipeline from Canada for crude oil.  We've got plenty of our own.  Maybe we can sell some to the Canadians - along with cheap natural gas!

Funny thing, though.  To hear most "Patriotic Americans" tell it, America is in the dumpster and headed for the shithole.

I respectfully disagree.  We are on the cusp of a new era of expansion and prosperity.

The Grands!

Some folks buy houses as big as Motels, on the premise that their Grandchildren will come visit.  It is a pretty dumb premise.


A neighbor is selling their three-bedroom house here on retirement island and moving inland.   The stated reason?   The wife wants to buy a larger home so they have room "when the grandchildren come to visit!"

This is a pretty common fantasy amongst retirees, particularly women.   I guess they want a second bite at the apple of parenting, which seems pretty harmless.  Of course, some turn into "helpful grandmas" which I have written about before, and end up undermining their children's parenting skills by doling out money to the grandkids and presenting conflicting values.

But all that aside, is buying a Motel-like home on the premise that your grandkids will visit once or twice a year a smart move?   I don't think so and let me tell you why.

First of all, while you may think your grandchildren love and adore you, they also think that old people smell funny and are not a lot of fun to be around.   It may be fun to visit grandma and grandpa at the beach house, but if you move inland to a 6-bedroom Motel-home, the fun might not be there.

And as children get older, particularly as teens, their interests in visiting Grandma and Grandpa drop off.  The want to hang with their peers and meet the opposite sex and do all the things teens want to do.   Hanging out with a bunch of old people, even for a weekend, is just "lame" to them.

Now, granted, there are two exceptions to this rule.  There are boys (and girls) like Mark, who have a great relationship with their Grandma, which is due in part to his Mother dying when he was 14.   They love to hang out and go shopping and bake cookies.   And that is just great.  But you don't need six bedrooms for your one Gay grandson.

And there is the second, less savory type, of grandchild, which I have written about before, at length.  This is the type that looks at Grandma and Grandpa as an ATM machine, and they will come visit, steal ("borrow") Grandma's jewelry, ask for small amounts of money, and of course, to co-sign a car loan.   And lonely Grandparents will look past these transgressions as they think that the Grandchild really loves them, and not just their money.

But again, you don't need six rooms for that.

But let's assume you do have a Norman Rockwell family that comes to visit four times a year, and all of your children and grandchildren actually like you and each other (what are the odds!) and all want to stay in your home like one big, happy, sweaty family.

OK, let's assume.

Does it still make sense to pay for a huge house, pay taxes on a huge house, pay for upkeep on a huge house, and pay for heating and cooling a huge house?   Does it make sense to spend your twilight years cleaning bathrooms and bedrooms and making beds and washing sheets?

Or, would it be more cost-effective to put up the kids in a Motel, or rent out one of those vacation homes, and really have fun?

If you do the math on this, I suspect the latter is probably a better financial deal.   Because it leaves you with flexibility to have family reunions anywhere you want to, and at whatever interval you want to, without having all that overhead and labor for empty rooms that remain unused for 50 weeks of the year. 

Thinking emotionally is always suspect.   Selling and buying a home (which in this instance, will result in about $24,000 just in Real Estate Agents fees!) on the premise of a vacation fantasy that may or may not occur, seems like a rather foolish thing to do.

And in retirement, downsizing, rather than upsizing, is probably a better option.

But, to each their own.  And people make foolish choices based on emotional criteria.   And there ain't nothing much you can do to stop them.

But from what I have witnessed of this "family reunion" scenario here on Retirement Island, it rarely works out.   The kids and grandkids rarely come to visit, and the cost and hassle of owning all those empty bedrooms is pretty onerous.

Some oldsters have moved off the island to move closer to their grandkids, after the visiting grandkid scenario didn't work out on the island.   This, to me, is pretty sad.  They are so desperate for validation from pre-teen children, that they sell their home to move closer, on the premise that the only thing preventing the "Grands" from visiting more often is the distance between them.

I suspect that moving closer doesn't necessarily solve this problem.   Like I said, old people smell funny and are really no fun to be around.   Grandkids have other things to do.   If you really want them to visit, forget about the spare bedrooms and buy an Xbox instead.  That would be a better lure.  They wouldn't mind sleeping on the couch, so long as they could play "Lethal Car Theft XXXIV" until the wee hours of the morning.  Stock up on junk food, too.   That's what they want, not turnips.

But buying a huge house on the premise your grandchildren will visit?  That's just idiotic.

Thursday, March 27, 2014

Guns in the House...

The problem with keeping loaded firearms in the house is that they can kill or maim you or a family member.  In fact, they are quite likely to do so.

I got a phone call today.  A friend is in the hospital with half his head blown off - by his own .357 Magnum.

This is not the kind of phone call you want to get.  To hear about a young man, in the prime of his life, now with his life shattered.   Facing months, if not years of rehabilitation.  Disfigured for life.   Perhaps never returning to work.  The amount of pain and suffering is unimaginable.

And this sort of thing, I keep thinking, happens to other people.  This is something you read about in the newspaper or see on a television show - which makes it unreal.   This doesn't happen to your friends and family.  It doesn't happen to people you care about.   Does it?

Of course, you are already asking yourself, "How did he get shot with his own gun?  Was it a suicide attempt?  An accident?  Did is wife try to kill him?  What?"

And yes, it is human nature to want to know the "dirt" - and sadly, we will never really know, as he remembers nothing (and with the brain damage, will likely never remember).  Was he despondent?   Were they having an argument and he made a rash dramatic gesture?   Did he drop the gun?   Was she sleep-waking on Ambien and didn't realize she did it?  Or what?   Like I said, we'll likely never know.

But one thing is for sure, if they had not kept a loaded .357 magnum in their nightstand drawer, this never would have happened.  Because regardless of whatever scenario caused this to happen, it never would have happened if the gun wasn't around.   If you are depressed, you are less likely to kill yourself if you don't own a gun.   If you get into an argument with your spouse, you are less likely to kill them (or yourself) if you don't own a gun.   And it goes without saying, an "accidental shooting" can't happen if there are no guns around.

Why did they keep this gun, which cost a lot of money and was a very dangerous and powerful weapon, in their nightstand?  Protection against intruders was the reason given.

I was a little alarmed, a few years back, when he told me that they were taking up target shooting as a hobby.  They bought a large-caliber weapon, but after a few weekends at the range, realized it was very expensive to buy ammo.  So they bought more guns - smaller calibers for target shooting, larger ones for "home protection".

Like I said, it alarmed me, but he told me they were responsible gun owners and nothing bad would happen to them.  That obviously didn't work out.   And yea, I am a little upset about this.  Upset that a gun industry sold them a bill of goods that having guns was a desirable thing and "fun" and that they would need guns to "protect themselves" - when statistics show that far more people are injured by their own firearms than "intruders".

And now my friend is a statistic.

And the intruders?   Well, my friend and his wife lived in an upscale development far from the inner city.   There was hardly a crime wave going on in their neighborhood, if there was any crime at all.   And what did they own that was worth stealing?   A flat-screen television?  Granite countertops?  An old computer?   No junkie, even if they could find their way 30 miles out of the city, would be interested in such crap.

If you are at risk for crime, it is someone burglarizing your home when you aren't there - taking your stuff at their leisure and then putting it in a plumbing truck in your driveway.   No one in the sterile suburbs would even notice it - and your gun is no protection if you aren't there.

If you are at risk for violent crime, it would be the mugger putting a gun in your face as you visit the nightclub in the bad part of the big city.   And then it is too late to pull out your own gun (assuming you have it!) and shoot him, without him shooting you first.

And in many cases, the mugger just takes your gun away from you, and shoots you with it.

No, this "home protection" nonsense is just that - Nonsense.   The NRA likes to tout "stories" about how so-and-so thwarted a robbery or shot a home invader.   But they are anecdotal stories that are overwhelmed by the number of accidental shootings in America every year:
"Rather than being used for self-defense, guns in the home are 22 times more likely to be involved in accidental shootings, homicides, or suicide attempts.
For every one time a gun in the home was used in a self-defense or legally justifiable shooting, there were 4 unintentional shootings, 7 criminal assaults or homicides, and 11 attempted or completed suicides."
Read that again.   Twenty-two times more likely.   You buy a gun and odds are, you are going to hurt yourself or a family member.   The odds you will thwart "an intruder" are very, very slim.
 
Will this ever change?  Hell, no.   Americans, I am beginning to realize, are not very bright people.   No, really.   Yes, we have some top scientists who can put together a Mars rover, or design a new computer (although many of the latter are here on Green cards from Asia or the Middle East).   But we also have a lot of people in this country, who can't figure out that if you take out a payday loan, you have to pay it back.   We have a lot of people in this county who are convinced that  if you play the lottery enough, you will win it.   We have a lot of people in this country convinced that if you cut the taxes of the very rich, it will "trickle down" to the people in their trailer park.

And we have a lot of people in this country convinced that the "gub-ment" is evil and corrupt and trying to "take away their guns" and that a gun purchase is a sound investment, as you can use it to protect all the precious Chinese-made shit that you bought at the wholesale club, from those "intruders" (black people) who want to rape your wife and steal your crap.

So, with that in mind, nothing is going to change.   The NRA will tut-tut about my friend's fate and tout some "story" about a guy in Texas who shot a teenager trying to steal his car battery, as an example of how the system works.

Meanwhile, lying in rehabilitation, half his face (and one eye) missing, breathing and eating through a tube, my friend looks forward to the rest of his life, which at age 35 changed dramatically one evening.

Another satisfied customer.

Wednesday, March 26, 2014

Here we go again - more junk investing



After the implosion of Zynga (the makers of Farmville) you'd think people would be a little gun-shy about investing in the "latest and greatest" gaming company, particularly one that makes cell phone games.

Games have a short shelf-life.   Stocks have a long one.   Investing, as the name implies, is not a ten-minute deal, but a ten-year process.   And flash-in-the-pan fads and trends are hardly worth investing in, unless you can get your money out right away, and walk away.   No one wants to be left with an inventory of hula-hoops, once the fad has died down.

And if you go into the stores these days, you can see that the "Angry Birds" merchandise is marked-down heavily.  What was once the cell phone game that "everyone" was playing is now hardly even thought of.   I am sure some people who were fiends on it a year ago will claim to have never heard of it, now.

Again, and I will say this slowly for the particularly dumb out there - a modern IPO has only one purpose, and that is to enrich the founders of the company at the expense of the shareholders.

Actually, perhaps this has always been the case.

A friend of mine recently gave me a stack of old antique automobile magazines, and it is interesting to read about the early days of the automobile.   The number of companies that formed and went bankrupt is staggering.   The car was the hot technology of the turn-of-the-century, and many folks were hoping to "get in on the ground floor" of the next hot company.   But for every company that made it, ten went bankrupt.   Even some of the major players, like General Motors, nearly went bankrupt after initial success.

And prior to that, in the late 1800's in post-Civil-War America, the big new technology was Railroads - with dozens of companies forming and selling stock and building rail lines and going bust.   And again, for every one company that made it, ten went belly-up.

And yes, even back then, there were con artists and shysters who formed companies with no intention of actually making money, but instead, just selling stock.  And there is a thin line between "legitimate businessman" and "shyster" in the stock business.   For the consumer-investor, there isn't much of a difference - either way, you lose your shirt.

Say you invested with Bernie Madoff.   You lost your money.  He is a crook and he went to jail.   But suppose you invested in one of these "dot com" technology stocks that went belly-up, or whose stock value plummets to 1/4 of its IPO price (which you foolishly paid)?   Is there any difference, really?  You still lost a lot of money.

And the "legitimate" company pays its founders huge salaries from the money raised by selling stock.   And the founders sell their shares on the open market, based on the hype of the IPO and make millions more.   They walk away from the smoking ruins of their dot-com company (or auto company or railroad) with millions in their pocket, while the shareholders have nothing.

The founder of Groupon, for example, was laughing his ass off as he wrote his humorous resignation letter.   And why not?  Even with the company imploding around him, he still made a ton of money, leaving shareholders, directors, officers, and employees to clean up the mess.   It wasn't his fault, after all, that thousands of idiots thought that a coupon-company was "the next big thing!" - was it?

And you realize what an idiot Bernie Madoff really was, as there are legitimate ways to make a ton of money on Wall Street, while still gouging the shareholders - and avoid all that nasty jail time.

Like I said, it is a game as old as the hills.   And you don't have to lie or commit a crime to play it.   You go on a "roadshow" and hype the value of your company.   You actually PAY people to say nice things about your stock.  You generate a lot of hype that the "little guy" investor buys into, and then you sell your stock in an IPO.   Never mind that the company is dependent on Facebook for all its profits and only has one product (as with Zynga) or that it has a "technology" that is really more of a non-protectable business plan that is readily copied (Groupon) or has a high-overhead, high-risk business that has a finite growth curve (ZipCar).  So long as you can sell Joe Public, who gets all his information from CNN Money, will throw a few hundred dollars at you, hoping they bought "the next big thing".   And if you can get a few million Joe Publics to do this, you can make an awful lot of money.

What got me thinking about this was reading about the Briggs-Detroiter automobile, a company that went bankrupt twice in six years, and sold a few thousand automobiles, of which only a handful remain.   The company went to great lengths to advertise its cars, spending a ton of money promoting what was, in essence, a very mediocre car.   Like most small manufacturers of the day, they bought their parts, including engines, from a number of sources, and then merely assembled the cars.  The results were predictable - a car that tended to overheat (no fan, no water pump) and was hard to find parts and service for, after the sale.

But they managed to sell stock - lots of it - and also sell dealerships.   And the principals of the firm made some money, before it went out of business, twice.

Fast-forward 50 years, and Preston Tucker is trying the same thing.   Yea, I know, you saw the movie and read the books, and you think that Tucker was "ahead of his time" and got a "raw deal" because the "big companies" forced him out of business.   But the reality of it was, his kooky car (which was enormous) was expensive to build, he was under-capitalized, and his chief finance officer had been convicted for (wait for it) stock fraud.

Tucker made money by selling dealerships and also by selling prospective customers parts of the cars he promised to build.   Many people put down deposits on cars and bought accessories like radios, and never saw their money again.   That he managed to build 50 or so of the cars is amazing at all.   That he had serious intentions of building a real car company, is, in my mind, up for debate.  

So, today, the latest cell-phone game company goes public - and the IPO price tanks right out of the chute.   Maybe people are waking up and realizing that just because something is popular doesn't mean it is also profitable or a good investment.   Maybe, but I doubt it.

It really doesn't take a lot of money to develop a cell-phone game.  Many are created by individual people, not huge corporations.  You don't need millions of dollars to develop "the next big game!" but rather, you need an outlet on the market to sell your stock.

Angel investors will pump money into a small company, hoping to make back their investment down the road when it goes public.   Those Angel investors don't pay the retail share price you and I would pay, to invest in the next "flappy birdies" or whatever.   They hope to pump up the company, do an IPO, create a marketable stock vehicle that the small investor will bite on, and then then sell out, doubling, tripling, or quadrupling their money (if not more).

You can play their game (literally) if you like, but when you buy that stock, you are not enriching yourself, just other people.

"But wait!" you say, "Suppose I miss out on the next big thing?  Suppose this new stock is going to be like Facebook and double in value?"

Well, that is the risk you take.  But bear in mind that for every ten companies that form in a particular field, maybe one is successful, and picking that one is hard to do.   And while Facebook has gone up in price, with a P/E ratio of over 100 (and no dividends on the horizon) the jury is still out on that.   You might make money trading the stock by buying it low and selling high.   But in terms of the stock having any real inherent value, it really hasn't happened yet.  Facebook is profitable, but still not profitable enough to justify the share price.   It is still trading at five times what a reasonable P/E ratio should be.  What magic makes it worth that much money?   And will it be around for the long haul?   Those are the questions to ask - and the Internet is littered with the carcasses companies that once seemed like long-term institutions, such as AOL.

People love the hype, it seems.  Whether it is Bitcoin, gold, dot-com stocks, or whatever.  Folks will invest in whatever is in front of them, or is in the headlines.   Not many look at the overall picture, the P/E ratios, the profitability of the company or whether it pays dividends.    For most folks, investing is akin to gambling - placing a bet and then hoping they win.

You might as well buy lottery tickets.

Tuesday, March 25, 2014

Life Insurance for Children? (Gerber Life Insurance)

Should you insure your baby?  What on earth for?


I received a brochure in the mail for Gerber Baby Insurance.  I was about to toss it away, but figured, "Heck, this is prime blog meat here."

And besides, there's nothing in the news today except a lame article (also on NPR) that notes that "Payday loans are a bad deal!"  (Oh really?  I never would have guessed).  That ground has been covered.

So,what about Baby Life Insurance?

At first glance, this seems like a good deal.   You pay $3.18 a month for $5,000 in coverage.  At age 18 (described as "during age 18") the coverage doubles to $10,000.   $3.18 a month works out to $38.16 a year, and for the average life expectancy in America of about 77 years (average between male/female) that comes out to $2,938.32 in lifetime premiums - with a cash payout for your child's heirs of $10,000 (which in 77 years will buy what, a cup of coffee?).

However, when you "do the math" on this, well, another picture emerges.   $38.16 invested yearly for 77 years at a paltry 5% interest, yields $33,507.29 according to the Moneychimp compound interest calculator.   If you can make 7.5% in stocks, over time, heck, you'd have $142,806.21 - for your kid to spend on himself, not his ungrateful heirs.
 
So you see, the folks at Gerber are making out pretty well.  They invest these premiums at market rates and pay back, on average, 2.74%.   Of course, maybe you will win the Sudden Infant Death Syndrome lottery and "Cash Out" and win big!   Or maybe not.

Yes, the Gerber policy builds "cash value" over time - but what that value is, is anyone's guess.   The site is silent as to whether there is a guaranteed cash value (as with my Northwestern and State Farm policies).  However, based on my experience with those policies, I doubt the cash value would exceed the face value of the policy - at least for a very long time.

In fact, it is hard to find any information on these polices online.   As you might expect, there are a lot of "sites" out there like Wikianswers or Yahoo Answers that are basically the Gerber brochure barfed-up intact, along with some cheerleading nonsense about what a great idea this is.

This article from Marketwatch labels it the "stupid investment of the week" and that probably nails it pretty well:
"Buying $25,000 in coverage for a one-year-old would cost less than 50 cents per day, which sounds pretty good until the parent recognizes that the $175 per year would pay for a $100,000 term life policy that would protect the family until the child reaches age 21."
And that is really the point of insurance - to insure things worth insuring - like YOUR income, which is really what protects your child.   If your kid dies young, well, he doesn't need insurance.  And as he gets older, well, that money spent on the insurance might come in handy for other things.

And as the author notes, a lot of people probably let these policies lapse, particularly kids when they turn 21, and figure they have better things to do with their money.  Or perhaps Grandma dies, and the policy payments are no longer made.

To me, the telling part of this pitch isn't in the math, but in the way it is sold.   First, the brochure comes in the junk mail - with the coupons for pizza and stuff.  It is SPAM, pure and simple.   Second, the wording of the brochure is a little oblique.   The pitch is the same as the one for burial insurance - you get thousands of dollars of coverage for pennies a day!   It plays to the plebe mentality of cashing out big for small money down - the gambling mentality.

Life insurance, as I have noted before, is not a very good investment.  In fact, it is not really an investment at all.    If I had the money I had spent on premiums on my Northwestern Mutual Whole Life Policy over the last 20 years, it easily would exceed twice the existing cash value it is worth today.  Of course, as this point, I might as well keep the policies, as they increase in value by nearly two dollars for every dollar invested at this point.   Still, overall, in terms of an "investment" I would have been better off feeding my 401(k) with the dough.

Insurance is just what it purports to be - a bet placed that you will die.  And when you buy baby insurance, you are betting on your baby dying.   It is pretty morbid.

There are, of course, worse ways you could go about wasting a couple of thousand dollars, such as buying lottery tickets or just plain gambling.   I suppose a life insurance policy like this is one way of teaching kids about investing, at an early age - and illustrating how money invested very young can create huge yields later in life.   But then again, there are other ways of investing and saving that would accomplish this as well, and as noted, life insurance is not really an investment.

And even if you went this route, it would pay to call multiple agents at multiple companies.  There are other companies out there besides Gerber, that offer whole life policies, such as Northwestern.   Rates can vary - as well as policy terms.  It pays to shop around, as insurance is marked-up heavily, and usually the people advertising on television or by junk mail (such as the burial insurance people) have the highest rates.

Are there any advantages to baby insurance?   Well, you can borrow against the cash value, of course, but at a whopping 8% interest, which is kind of ridiculous in this day and age.   And for a $10,000 policy, the cash value is pretty slim for the first couple of decades of the policy.   This ain't much of a catch.

There is another aspect, as discussed in the Marketwatch article and touted by Northwestern as well:
"About the only way the Gerber plan is likely to be a real benefit is if the child somehow becomes uninsurable, developing a condition that makes it hard to get coverage as an adult. The Gerber plan guarantees coverage, but that protection is severely limited and the additional coverage beyond the small minimum comes at “standard rates.” That’s likely to be pricey because insurers typically price bulk coverage as if customers have one foot in the grave."
 So, if your child develops some horrific disease later on, they may be guaranteed coverage for "up to ten times" the initial coverage, but at rates that may be far higher.

But you know, that sort of is a long-shot deal.  And if your child develops some sort of debilitating illness, then chances are, they aren't going to be interested in long-term investments like this.

So overall, I would have to put this down as not a very good deal.

* * *

Another thought occurs to me is that if you really want to buy $10,000 of life insurance for your child or grandchild, a better deal would be to purchase a "paid up" whole life policy, with a one-time premium.  This way, the policy is always in force, even after you die, or if your child/grandchild forgets to pay the premium after you die.   Again, I am not suggesting that you buy one of these policies, but it sounds like a better deal to me to give a "paid up" policy than one that is only paid for the first few years.

History Repeating

That's the sound of history repeating....


It's a familiar story.   A European country defeated in war and nearly bankrupt, embraces a charismatic leader who fans the flames of nationalism, as well as prejudice, to accumulate power and bring back a feeling of national pride to its citizens.   They feel outnumbered and overwhelmed by their former opponents, and want to recapture the former glory of their empire.

And then one thing leads to another, and the "fearless leader" starts to annex neighboring territories.

Are we talking about Nazi Germany circa 1938?  Or Russia today?   The parallels are enormous.

Of course, today, it is unfashionable to persecute Jews.   Perhaps Gay is the new Jew.  History is perhaps not repeating, but merely echoing.

The reasoning given for invading the Crimea is an echo of the "logic" given by Hitler to invade Czechoslovakia.   He claimed that German citizens were being treated badly by the Czechs, and that Czechoslovakia (along with Austria and the Sudetenland) were "natural" parts of a "Greater Germany".

And today, just as back then, a world torn by depression and weary of war, didn't want to "start something" over some small Eastern European country, and tried to negotiate "Peace in our Time."

Only this time it's different.  This time both sides have nuclear weapons.

And of course, the Italians are out of it, this time around.   There is no charismatic leader running Italy - a macho-man womanizer who runs the country out of his back pocket.   Oh, wait, there was.   But Italians wised up in time.

Actually, the parallels between Russia and post WW-I Germany are many.   After World War I, we imposed what many argue was an unfair treaty of Versailles on Germany - a treaty that insured that their government would be weak and corrupt, and that their economy would suffer.  Under such circumstances, a charismatic leader would naturally emerge - one that would break the rules, violate treaties, and tell his people that that should have pride again, in their nation.

Of course, we did not impose such a treaty on Russia, but when the Soviet Union collapsed under its own weight, we didn't really do enough to prevent the new Russian government from devolving into an oligarchy of powerful and corrupt business interests - leaving the average Russian to suffer for years, until their economy could turn around (and to some extent, it never did).  Putin is popular in Russia as he is seen as eliminating some of the worst of the corrupt practices of the post-Cold War era.

And parallel goes further.  Putin has "cleaned house" so to speak, having former friends arrested for various alleged crimes just as Hitler turned on the Brownshirts.   And it goes without saying that political dissidents and protesters are routinely jailed for expressing their opinions.   If I was living in Russia right now, I'd be figuring on a way of getting out.   You remembered what happened to the Jews who stayed in Germany, thinking that "Mr. Hitler" was just all bluster, and eventually, the German people would "come around."   It didn't end well.

And of course, this time around, Japan has no interest in being part of an "Axis".   But perhaps North Korea?   Sort of fits the bill.

But all that being said, are we doing the right thing here?  How is this going to play out?  We are poking the Russian Bear with a stick.   And when you enter a cave, poking a bear, and the bear has no way out, it has no choice but to strike back.  An animal cornered is a dangerous animal, no matter how weak that animal may be.

Much of their former territories were stripped away, and from the Russian point of view, you could understand where they might feel as though they were being surrounded - as more and more of their neighbors aligned themselves with Western powers - NATO and the EU.  As more and more countries started to turn to the West - including countries right on Russia's doorstep, it was inevitable that some sort of confrontation would result.

Putin does have a point about the Ukraine, which, like most countries, contains people of more than one ethnicity, as well as disparate interests.  It is uncontested that the Eastern half of the Ukraine is mostly Russian and looks to Moscow.  The Western half, wants to align with the West.   And that right there is why the country has been in turmoil for the last few years.

But of course, invading isn't necessarily the correct response.   Recent history shows that there is a legal way of dividing a country in half.  Following a referendum in 2011, Sudan was divided into two countries, Sudan and South Sudan, and with the blessings of the world community, it peacefully divided into two separate entities (of course since then, there has been war between the two halves, as it turns out the oil is.... guess where?).

Putin engineered a "referendum" in the Crimea, but it was not recognized by the international community.   And strategically, he went about it all wrong.   The Crimea is not contiguous with Mother Russia, but an island of land surrounded by the remainder of the Ukraine.   Why not have a nation-wide referendum, and see which provinces want to stay with the Ukraine, and which want to join Russia - or form some new, independent Russian-leaning country?   It would have saved a lot of trouble.

Defusing this situation is essential to preserving the peace - and the world economy.  Sadly, leaders on both sides are presently in bluster mode - each trying to out-macho the other with strong talk.   Neither, it seems, wants to be perceived as "weak" by negotiating a UN-backed solution of the sort I have outlined above.

And that is the problem right there.   Not that the situation can't be worked out, but that the egos of the world leaders, and their public opinion polls are more important than doing what is right.  Obama, facing mid-term elections, doesn't want to be perceived as "weak."  Putin is backed into a corner and can't back down, as his popularity with the Russian people is at stake.

And guess what?  Putin ain't going anywhere.  The photo below is from the 30th G8 summit on Sea Island, Georgia, a stone's throw from my house.   Look carefully at the assembled "world leaders" in the picture - and think about which ones are still around.   The answer is, of course, none of them, except the glaring Russian in the background - the fellow with the 1000-yard stare.

World leaders come and go.   Putin keeps turning up, like a bad penny.