Market Place Blinders

January 5, 2015

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My bride and I are basically retired and living off a combination of income streams. We both have small pensions and collect social security. Since we have no major debts, we could probably make do on that.

However, we both saved in company sponsored 401K programs while we were working and did some other investing as well. The dividends of those savings are adding to our retirement income and providing the money we need to continue to live more comfortably. We can buy gifts for our children and grandchildren and we can travel. We’re far from living in the lap of luxury, but we have enough. (More people should learn to be happy with ‘enough’!)

Our investment plan has been fairly simple. We bought stocks, bonds, and mutual funds that all pay quarterly dividends. Until we fully retired, we let the money grow through dividend re-investment programs. From a psychological standpoint, it made following the market rather interesting. It’s always comforting to see the value of your investments going up. But, come quarterly dividend time, it’s fun to see the value go down – that means your re-investment will result in a greater number of new shares. Thus, your next dividend payment will be that much larger!

We continued to let things grow until we no longer had regular paychecks. Then we quit the re-investment programs and now have the dividends automatically deposited in our bank account. So far, it is working great! And that bothered me.

It bothered me because none of the experts I follow, nor the publications I read, recommend doing such a thing. In fact, while they are saying that bonds are not a good investment at this time, people our age should be moving more of our assets into bonds. Go figure! They have all sorts of fancy formulas, but none of them make sense. Why should I put 50 to 60% of our retirement nest egg into something that the experts are saying to avoid?

I read an article this morning in Money Magazine. It was talking about the problems of going after high-yield (translate that into dividend paying) stocks. Their take was that as the price of the stock went up, the yield (translate that as the amount of the dividend payment as a percentage of the price of the stock) went down – unless the company increased the amount of the dividend.

For example, let’s say you buy 100 shares of Jim’s Journeys for $100 per share and I pay you $5.00 per share per year in dividends. The yield is 5%. Now, if everyone wants a piece of the action and the price of my stock doubles to $200 per share and I continue to pay the measly $5.00 dividend, the yield is now a mere 2.5%. On the other hand, if the market dives (through no fault of my blog) and my share price dips to $50 per share, your yield is now a whopping 10%.

Thus, looking through the “Market Place Blinders” unless you buy the shares at $50, it may not be a good deal. But the financial planners and experts fail to see it any other way. They only see values at the time of the transaction. If you are not currently buying or selling, they are not paying much attention. Yields, to them, are nothing more than the percentage of the selling price.

In truth, I can’t tell you how much we paid for individual shares along the way. I really don’t care. The only thing that concerns me is the size of the quarterly checks.

So, if I was your financial adviser, I’d tell you to do what I did. Spend a month examining every company that pays dividends. The questions I asked were: How much do they pay per share? Has that amount increased over the years? What sort of business are they in? (I avoided any company that did not manufacture something. Mortgage companies, banks, and holding companies all pay handsome dividends, but they’re the companies that had to be bailed out and were saved only because they were “too big to fail”.)

As to our dividend income payments, my only regret is not taking advantage of this methodology sooner in my life. I watched our nest egg grow for about ten years before we began to reap the benefits. Had I begun the process much earlier, the nest egg would have grown more substantial and we would now be living in the lap of luxury. But then again, we’re more than happy with enough.

Hopefully the time it took me to write this article will pay dividends for the person who takes the time to read it.


Preparing for Another of Life’s Milestones

May 14, 2013

In a few months, my bride will retire from her job and I will change my status from “semi-retired” to “fully retired.” In the past I’ve written about “Rites of Passage” and this is one for which we’ve been preparing for many years, but it’s a bit more frightening than all the previous stages of my life.

In the first place, there are the retirement savings accounts. My oldest account was started more than thirty years ago. It saw me though a long period of unemployment when I had to borrow from it to pay my bills. I’ve managed to repay those loans and add to it. But in a few months, I will stop adding to it and, (GASP!) begin withdrawing from it.

At the same time, we will transfer my bride’s 401K to a dividend paying mutual fund and virtually end the growth of that account. Hopefully, the dividends we collect from our retirement accounts will supplement our Social Security payments so we won’t have to move in with our kids… for at least a little while.

Many people who retire, do little more than sit in front of the TV and wait for the final curtain. I doubt if my bride could ever do such a thing, which means she won’t let me do it either. That’s one of the reasons we bought our new toys.

Our new travel trailer.

Our new travel trailer.

Our new tow vehicle

Our new tow vehicle

Some retirees go out and buy a two seater sports car and drive off into the sunset – stopping at fancy hotels along the way. Lu and I prefer to travel more frugally, and also hope to be able to take a few grandkids along with us to some of our as-yet-to-be-planned destinations.

To give those grandkids and their parents something to think about… our potential destinations include Tybee Island, Georgia, various parts of Florida, Ohio, Pennsylvania, Yellowstone National Park, Illinois, Colorado, Oregon, Washington, New Jersey, Texas, and a number of Canadian provinces.

In 1984, I dragged my first wife and our four children on a cross-country camping trip. That was done with a pop-up camping trailer and an 8-passenger van. We saved a lot of money by staying at camp grounds, but strained a lot of relationships by having to deal with a daily allotment of chores, dirt, flat tires, dead batteries, lost pieces of the trailer, and spartan meals. I think I’m the only one who absolutely loved the adventure, but, then again, it was my idea. I had to love it!

That 1984 trip was carefully planned almost down to the number of miles to be driven each day.

Now, we’re looking at a trip that has no definite destination and no detailed advanced planning. However, technology has advanced significantly over the last 29 years. We now have cell phones, GPS navigators, Wi-Fi computers, and 29 years of experience in the art of living. We also have a better financial picture and hope to keep that improved picture by keeping our travel expenses as low as possible.

Some of my readers may take that last statement to mean “We’re coming to visit you and expect you to house and feed us for some period of time.” I promise you that we won’t stay long. So don’t worry.

In 1984, I had to estimate how many bills would be delivered in our absence, and how much we would owe. I paid most of the bills in advance and wound up with credit balances on most of them. Today I can review my bills on line and pay most of them by simply making a few keystrokes on the computer. Hopefully, our bank account will not run out on us.

Needless to say, even with all the advancements in technology, our additional knowledge and wisdom that comes with age, and all the other assets in our possession, our future remains a vast unknown and leaving home is a somewhat scary proposition.

Fortunately, we have family, friends, and neighbors who we can count on to drive by the homestead from time to time to let us know that things are OK, but I’d hate to be in Timbuktu when we learn that a tree has fallen on the house. Perhaps that is why many RVers sell their homes and take to the road on a permanent basis.

Perhaps that will be our next significant rite of passage.


Voting Rights

April 29, 2010

I recently ran across the following quote on the Internet:

"i agree. bush is evil and anyone that worked with him and help in his
games. Will get theres in the end by gods way not by people. and some
can say we voted him in but he cheated the 1st time around. and if he
was that bad then why did half the same people that voted for him
before and critize how bad he is voted for him again.. i swear
stupidity and no common sense. some people dont like obama cause
1- he black / coming from a white person view(know a lot of white
people didnt want him in just cause of his race-stupid i know.
2- he too young../ which it shouldnt matter the race just as long
as the JOB GETS DONE. AND THE PEOPLE ARE taken care of.. yea the
founding fathers would shit them selfs if they saw a black man
being president. but it was time for a change and personally.. as
long as obama is for the people and keeps his word i would not hate
him . but alot of people needs to understand it takes time. to undo
the evil.."

I tried to reword it so that it would sound like a tirade against President Obama from someone who blindly supported President Bush, but I gave up.

The point I want to make with this is that these words came from someone who obviously feels very strongly about her beliefs and most likely made sure to get out and cast her vote.  But what sort of vote was it? Was any thought given to the qualifications of the candidates? Or did she simply follow the party line and vote the straight ticket to stop George Bush from having a third term in office? (Wasn’t that part of the campaign rhetoric? John McCain was simply the reincarnation of Bush.)

I see myself as a moderate who leans more to the right than the left. But I refuse to be considered a Republican. In my mind, the two major parties, with the help of the press, have created a terrible chasm in our country. The professional politicians have us so preoccupied with arguing over politics that we are blind to what they are doing to us.

Right now we can say Obama and the Democrats are destroying our nation by taking away our individual freedoms and putting our great grandchildren in debt. But the truth is, they are just carrying on where Bush and the Republicans left off.

Greece is in terrible disarray because their national debt is over 100% of their gross domestic product. Simply put, they owe far more than they can collect in taxes. Spain is right behind them.

And the United States is heading in that same direction.

We need to stop the bleeding (earmarks, legislation that puts us more deeply in debt, printing more money to pay the debt and causing inflation) as quickly as possible.

The Democrats would have us believe the Tea Party people are a bunch of radicals looking to destroy the nation. If the Republicans were in power, they would be sending out a similar message.

I’ve been to a Tea Party rally and I’ve read their literature. They want to stop the madness in Washington and the only way to do it is to vote out the professional politicians that think tax dollars are their money to spend however they see fit… to get themselves re-elected.

The Tea Party groups are not calling for an armed rebellion. They are encouraging people to do things the American way… at the voting booth.

So, are we going to stay home, because it’s not worth the effort – and let the elections be decided by people who demonstrate their high levels of education and intelligence by writing less than intelligent rants on the Internet – or are we going to carefully study the candidates and vote for those who promise to find ways to fix the mess that Washington has become?

If I had my way, every person in the House of Representatives would be replaced as would one-third of the Senate. Maybe then our politicians will wake up to the fact that they are supposed to be representing us – not their party, and not the groups that finance their political campaigns.

If you’re tired of being at the bottom of your representative’s priority list, fire him or her! These are the folks who refused to increase social security payments because of the recession… but gave themselves a raise. What does that tell you about how they feel about the people they represent? They hold us in disdain.

Everyone of us has the privilege of voting. Technically, it is not a right, but it should be an obligation. Start studying the candidates now so you can make an educated decision in November.


Ramblings for September 2nd of ’09

September 2, 2009

A friend recently sent me a photo of a swine flu victim.

The curse of the flu

The curse of the flu

Perhaps I’ll get the shot after all.

A few years back I got a shot to protect me from getting shingles. That’s one shot that I’ll never know if it worked. However, if it doesn’t work, I’ll be sure to know.

Which brings me to the thought that continues to bug me every time I hear someone defend the government’s plan for reforming health care.

I’ll preface my remarks by saying I agree that there are parts of our nation’s health care system that definitely need reformed. For instance, portability of insurance across state lines to make it more competitive and affordable.

I also believe the government should use our tax dollars to take care of people with pre-existing conditions. And that’s about all.

Anyone who believes the government can take over the entire health industry is living in la-la land.

Look at the track record. The Postal Service cannot exist without massive tax-payer subsidies. The VA hospitals are in the same boat. Social Security is already broke – that ‘lock box’ is filled with I.O.U.s from a government that is borrowing money from China. Medicare is also going broke.

What else does our government run? The military. Yes, I agree that we have the best trained and equipped military on the face of the earth. However, how many of our tax dollars that go to support that military are being wasted on a daily basis?

There is no doubt in my mind that if our military was run by private businesses, the costs would be far less.

And getting back to Medicare. Millions of dollars are being lost due to fraud and incompetence on the part of the politicians who are supposed to be overseeing the funding. In Washington, such lackadaisical behavior is met with a firm slap to the wrist. In private business, ineptitude would be met with a pink slip.

Our federal government and most state governments have proven time and time again that they do not know how to run a business of any kind. Whether the plan was for a non-profit enterprise or not, that’s how it ends up. Refer to the tax payer support required to keep our mass transit systems alive.

Congress and the President should stick to what they can do well – set regulations to force insurance companies and health providers to be more competitive and find ways to reduce costs. In the meantime, set up procedures to insure that all legal American citizens can receive health care as needed – using tax dollars if necessary – but not by forcing private insurance companies to intentionally take on policy holders that will sap more money out of the company than they could ever put in.

I just recognized an analogy. The government is that patient with the pre-existing condition that is sapping the tax payers for more than the tax payers could ever hope to get in return.

It’s time to heal that pre-existing condition by replacing the professional politicians with true representatives of the people.


The Colonel is Spinning

June 18, 2009

I have a lot of respect for the late great Colonel Sanders. He loved to cook and hated the idea of retiring on a meager Social Security check. So, rather than take up residence in an old folks home and hope that the government would pay his expenses, he developed his Kentucky Fried Chicken recipe and became world famous.

So, now that he has moved on to cooking for the bands of angels, what has his beloved company done?

This has to be a sin against nature

This has to be a sin against nature

They don’t even mention the secret recipe of herbs and spices. They totally ignore the legacy of the company. Perhaps that’s why they changed the logo to simply KFC. In years to come, we old folks will be gone to join the Colonel and no one will know what those letters stand for. How about the Kentucky Feather Corporation?

In the meantime, the general public appears to agree with me. It seems almost sacrilegious to think about cooking the Colonel’s chicken without grease. People have not rushed to the restaurants to try out the new concoction.

Therefore, at least one KFC decided to run a special promotion. I didn’t hear the details; they were either giving the chicken away or selling it at a discounted price. Regardless of the deal, they were caught off guard by the sudden demand, and they ran out. (That leads me to believe they were giving it away!)

In years past, when vendors ran out of the product, they simply put up a “SOLD OUT” sign and closed up. That didn’t please all those who missed out on the special deal, so lawyers suggested the phrase “While supplies last!” be added to advertisements to avoid lawsuits.

Again, I’m not real clear on the details. They may not have followed the advice of their lawyers. However, they did hand out vouchers to everyone who missed out on the special deal. Those people could return on any other day and use the voucher to get the same deal. What a DEAL!

Unfortunately, one person refused to be satisfied with the KFC solution and has filed a law suit claiming the KFC was using ‘bait and switch’ tactics to bring in customers.

Obviously, the lawyer representing this client has been having trouble finding work. As I understand it, ‘bait and switch’ – a tactic used by car dealers – involves a product that cannot be produced. Once the advertised product is gone, any other customers must buy something else.

In this case, the customer is inconvenienced by having to return at a later date. But, he or she will receive the exact same product at the exact same price.

I’d imagine at this point the Colonel is glad to be wherever he is.


No News – Not Really Good News

May 17, 2009

I’ve come to the conclusion that the old adage, “No news is good news” is a bunch of baloney. Some people simply see no reason to bother their friends and family with the bad news.

A case in point is a high-school classmate of mine who recently died of cancer. I’d seen him less than six months prior to his death and he gave no indication that he was fighting for his life. Evidently, he didn’t bother talking to his doctor either.

What scares me the most is what our politicians are doing. I’m hearing lots of rumors about gun control and other actions that would strip us of our constitutional rights.

The rumor that scares me the most is the one about Uncle Sam confiscating all of our 401-K, IRA, and any other personal retirement savings plans and throwing all the money over to the Social Security Administration. Our hard-earned and saved money would then become “community property” and be doled out to all of us. Another bail out! This time the recipients would be the people who made no effort to save for their old age.

It’s 2009. Do you know what your representatives are up to?


It Beats the Alternative – I Think!

April 23, 2009

My father finally retired when he was sixty-nine years old. He was able to collect Social Security, but there was no such thing as Medicare in 1960. Of course, medical costs were far smaller back then, so it wasn’t really a problem.

The reason I mention this is because I am fast approaching the age of sixty-five, and it would be impossible for me to overlook that magic number. For the last month I’ve been bombarded with offers to buy supplemental policies. Naturally, every one of them has a deal that is better than any other.

And that leaves me wondering where I can get true unbiased advice. To be honest, I don’t even know if I can trust some government employee to steer me in the right direction.

If I’d received all sorts of mailings prior to my twenty-first birthday and had to make a decision based on that age, I wouldn’t have thought twice about asking Uncle Sam. Now that I’m a lot older and have seen enough to make me distrustful of bureaucrats, I find myself in a dilemma.

There are two reasons I distrust government employees. In the first place, many of them are ill trained for the job they are supposed to be doing. We’ve all heard the horror stories about the inept IRS employees – call twice with the same question, talk to two different employees, get two completely different answers.

Secondly, considering how many times we hear about dishonesty, how can I be sure the bureaucrat I’m talking with isn’t getting kick backs from some fly-by-night insurance company that he or she highly recommends?

As for AARP, the group that claims to be looking out for us, it seems that they have sold out to the highest bidder. The only insurance company that carries their seal of approval is the same company rated lowest for claim processing.

I think they need to quit lending their name to any company willing to buy that name, quit glamorizing the youthful appearances of celebrities in their magazine, quit trying to get the government to pay for everything – it is our tax dollars the government is spending – and recognize that not all retirees can afford the homes and vacations they think we should be taking with our grandchildren.

With few other options remaining, this morning I decided to learn some things on my own. I went to medicare.gov and downloaded their ‘convenient’ handbook. It is one hundred twenty-eight pages long. I’ve read about a third of it and still have no idea what it is all about.

Getting old is not pretty, and our government doesn’t make it any easier. We’ve all heard that getting old beats the alternative – dying young – but sometimes I’m not so sure. If dying means I can go to heaven and never have another health problem and never have to decide which insurance plan to purchase, that might not be so bad.

However, as long as I have a shadow of doubt in the back of my mind, I’ll stick it out here for as long as I can.

Now, if you’ll excuse me, I’m going back to studying about plans A, B, C, and D. I hope there are no more than that.