Cash back cards are no longer offering spare change

The Thinker by Rodin

The number one rule of credit card management is to always pay your balance in full when you get your statement. When I had to watch our cash flow more closely, every time I made a purchase with a credit card I wrote it into the checkbook. That way I didn’t worry if I had enough money to pay the bill in full when it arrived, plus it gave me a high level snapshot of whether we were spending beyond our means.

Thankfully, the latter is no longer an issue, but what has changed is we don’t work for a living, at least not much. I still earn some income from consulting, but it’s gravy. So any extra, unearned income you can bring in is good. We’re retired so the pension plus 401K withdrawals more than amply pay our bills.

Still, the habit that served me well years ago still works fine, and I still subtract credit card debits on our checking account. But now, with cash back credit cards, I’ve discovered that not only do I not have to pay usury interest for charging stuff, but I can make the credit card an income stream as well.

There are lots of cash back credit cards out there, but finding the right one for me had to meet a number of conditions. First, I don’t believe in paying for anything when I don’t have to. So many cards come with nice perks but at the cost of $100 or more a year for the privilege. So a no annual fee cash back credit card was what I wanted. Second, I wanted it to be generous. A lot generous. Fortunately, I found just the card I wanted where I have been banking for more than thirty years. Okay, it’s not a bank. It’s a credit union. Pentagon Federal Credit Union, for short. We get two percent back on every purchase we charge.

At one time you had to work in the Pentagon or be a member of the armed forces to bank at PenFed. I worked there from 1988 to 1998. That’s not true anymore. Pretty much anyone can join. It was easy to bank there because there was an office in the promenade. We’ve had checking, savings and credit cards from PenFed for years and still do. But in truth, most of our savings are now stored at Ally Bank, which offers much more generous interest rates than PenFed.

So as a place to get a good interest rate on your money, PenFed’s not great but better than most banks. But with their Power Cash Rewards card, we get that sweet two percent back for everything we charge. And since we charge at least $2000 a month, and that means we get a rebate of at least $40 a month.

Obviously this won’t be the solution to your financial crisis and you can’t pay the rent on this money, but it does add up. To make it work though, in addition to not carrying a balance every month, you should only charge stuff you were going to buy anyhow. It makes no sense to buy a new sofa to get two percent back if you don’t need one.

To get the two percent though I had to create a redundant checking account, an Access America checking account and put $500 in it. The interest rate on this account is currently .2% per year, which is actually somewhat decent these days. You also have to not let it drop below $500, or you get 1.5 percent cash back rate instead. Since I already have a different checking account there, it was no problem.

Since I applied for the card last October, it has earned us $402.81, or about $57 per month. The amount has varied from $44.64 for the latest month (it’s hard to spend too much money stuck at home during a pandemic) to $89.33 in January (when we paid the balance due for a cruise we took in March). At this rate we should earn close to $700 per year. Even better: this income is tax-free. Generally, the IRS considers it a discount, not real income although that could change.

We also got a $100 sign up bonus after the first month. This income might be taxable but if it is, it obviously won’t amount to a lot of money.

$700 a year tax-free income is not bad for buying stuff I would have bought anyhow. I think this is the best deal out there for most ordinary folks. If so, you might want to join Pentagon Federal Credit Union just to get the card.

The joys and hassles of self publishing

The Thinker by Rodin

So I published a book! It’s self-published and no, I won’t link to it here. This blog is, or attempts to be, anonymous, although someone with enough time could probably figure out who I am. Also, the book is technical. It’s not like I am writing the great American novel.

I’ve always wanted to write the great American novel, but even in retirement I can’t seem to find the patience to write it. First of all, publishing a novel through legitimate (not self-published) channels is probably too high a bar for me. My wife has been trying for decades to get something published. She’s published a lot of fan fiction. She’s a very good writer, probably better than me, so if she can’t do it, I figure I probably can’t either. Second, I probably don’t have the patience for it, although being retired I really can’t claim that I don’t have the time anymore. Self-publishing this technical book though was doable. It remains to be seen if it will also be profitable.

But I analyzed the market and there’s really nothing like it in the field, and it’s about the work I do for side income anyhow. Lots of people are happy to pay me for my knowledge and abilities. I’ve had over four hundred clients since I started the business in 2006. Also, I have enough writing skills to at least write this well and enough spare cash from the business to make an investment, or at least a write off its costs if it fails. In direct costs, its costs are about $2500 so far, mostly to have it professionally edited. I’m not billing the cost of my time, which is theoretically free. I’m hoping it will eventually turn a profit.

I began it last October and kept iterating and reiterating over and over again. In late January, I figured it was done well enough to have an editor make it more readable. I found such a woman locally who, curiously, like me, also taught at the local community college as an adjunct. She looked vaguely familiar, like I had met her in passing at a faculty or union meeting. She probably deserved more than we agreed on as her fee, but I was trying to make the book profitable, so some limited but not overly extensive editing seemed appropriate.

Even after her editing, I still went over it three times more. She can’t verify its technical content, so the onus was on me. I considered getting someone to lay out the book professionally, but opted to do it myself. My friend Tom offered to do cover art, but got too busy with his real job. So I ended up with a stock photo image.

I also ended up on Amazon, or rather its publishing arm KDP (Kindle Direct Publishing). I didn’t want to. I wanted to create a store somewhere and sell it from there. I expected that Kindle versions would have to be published via Amazon KDP. But I wanted to offer PDF and ePub versions too. I frankly didn’t want to give Jeff Bezos more money, as he looks close to being the world’s first trillionaire.

But self-publishing is still a pain in the patootie. KDP pioneered this market. You can do it all online. But it’s still a learning experience. The high hurdle to do it the ideal way gave way to my pragmatic nature. I wanted to be done with the book, at least for now, as it was beginning to eat me alive.

Still, it has been a learning experience. There is so much to learn. I feel I’ve learned maybe twenty percent of it. My main approach was to save the marketing for the end and to concentrate on writing and rewriting it endlessly. This engaged my barely controlled OCD because when I put something with my name on it, I want it to be perfect. It also engaged my writing side. Hopefully from this blog you’ve gotten the sense that I can write well and be reasonably engaging. I wanted to bring this to a technical book too. I’ve read a few of these self-published books that were crap: paragraphs pages long with atrocious grammar and run-on sentences. I’m not a technical writer, but I wanted it to be crisp and clear with plenty of illustrations, short paragraphs and pungent sentences and easy to follow.

The book should be reasonably financially successful with time. I know the market and I know there are people who need to know what I know but can’t afford me. So I’m advertising it on my website, and took out some Google search ads. Not sure how well I am doing, but my cost per click is currently 36 cents.

As for the publishing formats, I’m offering both eBook (Kindle) and paper. Publishing it as an eBook revealed a few issues with Amazon’s Word to Kindle parser. Images placed on the side around text didn’t lay out right. I need to fix that, when I can find the energy. Amazon won’t let you charge more than $9.99 for an eBook, so the royalties amount to maybe half of that. I’m going to have to sell a ton of eBooks to make a profit.

I’m also offering a paperback edition. Amazon does publish on demand. Laying it out though brought out a lot of complications. People don’t buy books sized for 8.5 by 11 inch paper. With many illustrations I needed enough width so they could be read, and since most were screenshots, the paper had to be pretty wide. I decided to use the Dummies book at a guide. It uses 7.5 by 9.25 inch paper. Printing it in full color is basically cost prohibitive as it would cost more than $40 for its 339 pages. But a black and white version is profitable. Amazon suggested $14.99 for a price. I made it $19.99.

But so far since May 6 when it was released I’ve sold exactly three copies, all eBooks, so if it’s going to be profitable it’s going to be a long-term challenge. Some good reviews would help and maybe those will come in time. After 30 days I can offer discounts, so I’ll probably do that to see if it stimulates more sales. The nice thing is that it’s pretty easy to update the content, so I’ll probably be doing that when I find mistakes.

If you have any suggestions on how to do better marketing, please leave them in the comments.

On Easter, praise Jesus for the Internet!

The Thinker by Rodin

As you sit at home twiddling your thumbs, imagine how much worse all this social isolation would be without the Internet. There’s not much you can count on these days, but if you at least have a high-speed Internet connection, social isolation and boredom shouldn’t be among them.

It is likely that the Internet will only become more vital in the months and years ahead. That’s because contrary to what you might hope, most of aren’t going anywhere. Those of us who can work from home are going to keep doing so, and many will never return to the office.

“The office” may be one of the casualties of this crisis. If you make it into the office at all, it will probably be to a cubicle of the day. The new normal for white collar people will be what many of us were doing before all this started: working from home. We’ll be using VPNs (virtual private networks) to securely work remotely.

Our social life will evolve to what is already happening: Zoom meetings. This platform seems to be emerging as the go-to online meeting platform. Here on our hill of 55+ people, our association paid for a Zoom account. It sounds silly since we all live in the same neighborhood, but it’s a very socially active neighborhood. Many of these meetings are now virtual. Meeting in person in groups is probably at least a year away.

The ramifications of all this are still being sorted out. We can see one of them today: your Easter service if you are attending one is virtual. Our country was moving in a more secular direction already; this COVID-19 crisis will do more to accelerate it. After a while you may forget why you went to church at all. You can save a lot of money if you don’t have to tithe to your church, and since it can’t provide much in the way of spiritual services, what use is it?

It looks though that in our crazy, upside down world you can at least count on the Internet. Not that it isn’t under stress. Where I live, the only provider is Comcast. With everyone home all the time, and with neighborhoods sharing bandwidth over the same coaxial cable, latency issues are happening from time to time. Sometimes when we stream we get the dreaded hourglass. I’ve looked into this. We were getting 35 megabits per second, but are paying for “up to” 800 megabits per second. Sometimes Comcast can’t do better than 4% of the speed we are paying for.

It will be a wake up call to some that the Internet is not now just a nice-to-have thing, but an absolute necessity, and that we pay way too much for it. For a couple of years I have been trying to persuade our city to create a municipal network to compete with Comcast. The effort has been going great. We were all set to select a vendor to study the viability and costs of the network, then COVID-19 struck. It’s on hold, but I’m betting when our mayor and city council have a chance to catch their breaths, they will prioritize it over a lot of other things going on; indeed, it may be crucial to our city’s recovery from this. Ten years from now, if you are not getting Internet from your local government, you may be thinking you are living in the dark ages. In short, I don’t think Comcast stock is a good buy for the long term.

Most haven’t studied the history of the Internet, so we tend to take it for granted. While there is nothing miraculous about the Internet, the story of how it was created is indeed amazing. It’s the story of the success of long term investment, the sort of thing we rarely do in government anymore. Basically, we threw money at the Defense Advanced Research Projects Agency in the 1960s (then known as ARPA) to try to get military installations and educational institutions to be able to communicate electronically.

The genius behind it was a core group of radical thinkers (something you don’t associate with our Defense Department) that the network should be super reliable. By creating a public packet-switching network using open protocols, we created a super fault-tolerant network. If it breaks down at all, it’s in local neighborhoods like mine where the pipes provided by a single provider aren’t sufficient to meet the demand of the traffic that streams across it.

Imagine how socially isolated you would actually be if there were no Internet. You would be limited to telephone calls, probably from a landline. Since you could not afford long distance, it would be mostly to people on your local exchanges: one at a time, no conference calls. Imagine searching for work without the Internet. You would not be able to go out and knock on employers’ doors in the midst of a pandemic. You would be limited to local want ads in the paper, but even so what jobs that are available would largely be work from home jobs while the pandemic rages. Without the Internet, finding jobs at all is pretty much impossible.

The Internet provides a robust platform for information and knowledge exchange about pretty much anything, any time, and on demand. It just works. The Internet made much of my career possible and continues to provide me with income even in retirement. Now I help clients with their IT problems over the Internet, and have since 2006. I never leave home to work; it’s all done virtually. Most of my clients are from overseas. Without the Internet I would have never had their business. Yesterday, I was charging a client $60/hour to work on a site they are upgrading. Going to the office means going upstairs. That’s my office now and since I retired in 2014 it’s been my only office.

We’ll get through this in time. It’s going to be painful to get through it too. But if you think you are in pain now, imagine what life would be without the Internet. If nothing else, it can keep you fending off boredom pretty much indefinitely. If you are wise, you can use the Internet in this downtime to train for that next career, and emerge a winner in what is likely to be a new, more socially isolating age.

Coping by moping

The Thinker by Rodin

In the week since I last wrote, life has been wholly upended for most Americans. But in many ways, life is unchanged for us. There’s just the two of us (four if you include two cats). Being retired, we are minimally impacted by COVID-19.

For us, the biggest financial impact is our stock portfolio. It’s down $180K at the moment, or about 19% from its peak on February 19. It will probably go lower, but the good news is that we don’t draw it down much, just $1900 a month and that comes from selling bond funds. So the stocks inside it wait for a more prosperous time when share prices recover.

Those with money that survive it will be the winners. On Monday we met virtually with our financial adviser. We actually bought some stocks on the theory that they are historically cheap and over time will recover. It amounted to 5% of the portfolio so it wasn’t that risky. Since no one can time the market (although I got lucky), those with money buy incrementally when values go down precipitously should eventually reap nice profits. I think that’s what our financial adviser is doing. Since he is paid as a percent of our portfolio, if he’s right, then he too will be enriched some years hence. Meanwhile, a steady pension and social security provide the bulk of our income. I can’t see those going away.

The government may give all Americans money to get through it. If so, we are unlikely to spend it. Since we don’t need it I hope there is some means testing. I’d rather it go to those who do need it, which is most of us.

In truth, being retired already, things haven’t changed that much for us. Mainly there is a lot more washing of hands and cleaning of surfaces than there used to be. We shop minimally and go through an informal protocol of bringing sanitary wipes with us when we shop to wipe surfaces like shopping cart handles. When we get home we wash hands and clean things we touched. So far it’s working. Eight days ago we got off a cruise ship and flew home, and there are no signs of COVID-19 here. Some items were in short supply at the store, or not available. But so far coping hasn’t been hard. Coping is accomplished mostly through moping. I do have some consulting work that generally keeps me busy. It hasn’t dried up at all, for which I should be grateful. Thankfully, it’s all work that can be done remotely.

We have plenty of incentive to be sanitary, because the one thing we can’t count on now is our health care system, at least if we come down with something serious. We might get some advice from doctors over the phone. But if we need hospitalization, as this thing gets worse it’s unlikely that we will get it.

I got my hair cut yesterday. It was our last opportunity as our hairdresser is going on hiatus starting Monday. It was all done carefully, but there was some risk. It’s likely that my hair will get quite long before it is cut again.

As this drags on, we will miss things like going out to dinner and travel. There is no place to go, and it certainly won’t be on a cruise ship. Unless we want to take in a mountain vista nearby, we might as well stay home. All this of course will just feed the recession sure to come, which looks like it could easily topple over into a depression.

This would be a good time to spend some money to stimulate the economy, but that too has risks. I wouldn’t mind a bathroom on our upper level, but not at the cost of having construction workers in my house for weeks on end bringing in who knows what with them. I bought a new car last year and we really don’t need to replace my wife’s car. The house is well furnished, so there is no need to replace anything.

The YMCA is closed indefinitely so exercising with weights won’t be happening for a while. What exercise equipment we have at home is cardiovascular. My principle form of exercise is walking, and that’s at least still okay. When I go walking I see plenty of neighbors, so at some level it’s like nothing is happening. Generally they are keeping their social distance, but I see couples not doing so. The park across the street from us is closed, but that hasn’t kept people from parking in the part that isn’t closed and walking around it. There were a few hundred people in the park yesterday. Occasionally I do see questionable behavior. A group of kids on bikes on the local path were probably breaking protocol. I just don’t think they care and figure they won’t get it.

What I do know is that this is just ramping up. Its economic consequences are already evident and will get much, much worse. A month from now the threat won’t be so much not being able to find toilet paper, but from having a supply chain under strain. As grocery clerks and pharmacists get sick, things will get much more dicey. I’m already seeing cops parking along the sides of the road in places they normally wouldn’t, I think mainly to signal to the community that big brother is nearby. I expect in time we will see them guarding grocery stores and pharmacies. We may think this is the new normal.

I do believe all this is temporary and things will rebound nicely when it is over. But it’s likely to last longer than thought. Complacency may set it, bringing a resurgence of the virus. Clearly, it’s going to have huge ripples. When it’s over, society is likely to be reorganized in pretty fundamental ways. We probably will see this time as a period of great change where things we took for granted, like an abundance of local retailers, largely come to an end.

The long term impact of COVID-19

The Thinker by Rodin

Aboard the M.S. Nieuw Amsterdam, off Hispanola, May 11, 2020

We JoCo Cruisers don’t seem to be too upset about the coronavirus thing, here on Day 5 of our cruise. We have more pressing things to do, which is basically to nerd out with fellow nerds, something they don’t get to do much of once they are home. Life on the mainland is hardly like The Big Bang Theory. As best I can tell we two thousand passengers on the Nieuw Amsterdam have escaped the dread coronavirus and the COVID-19 disease.

The Dominican Republic let us into Santo Domingo yesterday where our activities went on without a hitch. Santo Domingo is the bright spot on the island of Hispanola: a chocolate city, thoroughly modern with crushing and relentless traffic. It’s a shining gem of a Caribbean city, despite being the oldest city in the Americas. Considering what Christopher Columbus did to the natives here (basically wiped them out, mostly through disease) you would think they would not revere him. But he is revered, and the current citizens of the Dominican Republic are mostly distant ancestors of slaves.

As for the Turks and Cacoas, they are giving our cruise ship a pass. We were schedule to stop at Grand Turk on Thursday, but that’s off. Instead, we’ll stop at Holland America’s private island, Half Moon Cay in the Bahamas on Friday instead. We can’t be kicked off an island that Holland America owns. We were scheduled to go there on Sunday, but stormy seas kept us from berthing offshore and tendering in.

I don’t blame the Turks and Cacoas for rejecting us, but it’s really kind of silly since no one on our ship is “presenting” signs of the virus. Another Princess cruise ship, one of those we saw leaving with us out of Fort Lauderdale, is sailing aimlessly off the coast of Florida. A cruise greeter at the Princess terminal apparently got COVID-19, so this ship is now suspect. Here on the Nieuw Amsterdam, we’re trusting to frequent hand washing and lots of Purell and doing our best to party on.

Our principle problem is there are lots of us in a confined space, so if one of us has the virus it is likely to get quickly passed on. It’s pretty clear that our government is clueless on how to intelligently manage this pandemic. There is some good news about this virus. Unless someone with the virus coughs in your face, you get it from touching surfaces that has the virus on it. The virus degrades with time, faster on certain surfaces than others. It looks like a virus could persist on a surface for 2-3 days. You shouldn’t get it from an air conditioning or heating system. Keep six to 12 feet away from people, wash hands frequently and avoid touching your face and most likely you won’t get it. Vigilance and regular hygiene are your friends. Act like a doctor who sees sick people every day and rarely gets sick because they wash hands before and after seeing you.

For us, success will be to make it home without the virus. Since incubation can take up to two weeks, if we make it then we probably won’t know for sure until two more week have elapsed. Even if not infected, getting home might prove problematic. Flights are being canceled. I had Wifi briefly in Santo Domingo (there is free public Wifi in much of the city) and so far no notices from JetBlue, our carrier home, on canceled flights. We’re getting a $50 per berth cruise credit, so my share went for Wifi here on the boat, where it is slow and costs a lot. Fingers are crossed.

We are fortunate to have Andy the epidemiologist and Tim the virologist on board. Both are paying passengers, but are spending some time giving us the straight dope, which mostly isn’t coming from the White House. My suspicion that we were probably safer on a tightly packed ship with lots of people doing proper sanitation than outside of it in a public that isn’t seems validated. Tim the virologist says even air travel is not that dangerous. Unless someone sneezes on you, the cabin’s HEPA air filters will keep viruses from hitting you. We’ve got sanitary wipes to clean nearby surfaces, in case the previous occupant was carrying the virus. Assuming authorities let us catch our flights, we should be fine. The dirty Fort Lauderdale airport we fly out of is more of a danger to us than this cruise ship is at the moment. We need to keep our distance from people there as best we can and wash our hands in the restroom frequently.

Markets though operate principally on fear, which is why they keep plunging. There’s no question though that this will all have an impact. A recession is a virtual certainty. Republicans and Democrats may come together to, temporarily at least, make employers pay sick leave for employees, at taxpayers’ dime most likely. The corporate welfare is likely to get larger as travel and other affected industries are likely to get bailouts. Maybe that will calm markets.

The long term impact of the coronavirus may be to convince people that looked unconvinceable to let government govern again. Joe Biden seems to be the primary beneficiary of coronavirus fear. Real relief may wait until January 2021 if he is elected, but in times like these sober people look a whole lot more vote-worthy than those at the extremes. That’s fine by me although Biden was never my first choice.

What I’m really hoping for is a political tsunami in November, so Democrats can regain all levers of government. Maybe next time we get a virus like this we won’t be caught so needlessly flat footed.

Post updated March 16, 2020 to indicate that coronavirus can persist on surfaces for up to a couple of days. Post updated again on April 12, 2020. It is now believed that in interior spaces the virus can persist in the air like an aerosol for an hour or more. So wear a mask and gloves when in these spaces.

Cruising in the midst of a coronavirus panic and economic upheaval

The Thinker by Rodin

Aboard the M.S. Nieuw Amsterdam, off Haiti, March 9, 2020

Markets are plunging and authorities are pleading for people not to get on cruise ships. So of course we are on a cruise ship. We merrily set sail on Saturday along with close to a dozen other cruise ships out of Fort Lauderdale. We’re on a Holland America ship again, but the difference this time is that rather than being one of the youngest passengers on the ship we are now one of the oldest.

Holland America passengers skews toward 60+, but it’s really more 70+, which is why we felt so young on our last cruise. The difference in this cruise is that it’s a themed cruise, a JoCo cruise to be specific. Having invested over $6000 in this cruise, we weren’t going to be deterred by the threat of coronavirus. We might have had we not paid all this money into it and had some way of getting it back. So armed with plenty of saniwipes in our carry on, we took our chances and boarded a JetBlue flight last Friday from Hartford to Fort Lauderdale.

There are hundreds of cruises still going on across the globe and last I checked only two had cases of coronavirus, both of the Princess Cruise Line brand. There were two Princess cruises going out of Fort Lauderdale with us. The two thousand or so of us passenger onboard the Nieuw Amsterdam may look odd. My wife is hardly the only woman around here with purple hair. In fact, it’s more normal to see oddly colored hair on this cruise than not.

This cruise is full of weird people and oddballs, the sorts of whom we used to meet at science fiction conventions thirty years ago when that was still a thing. Now there is plenty of evidence that the remainders of this tribe take this annual JoCo cruise instead. It’s aligned around a programmer turned nerdy song writer Jonathan Colton. There are plenty of polyamorous people on this ship, along with all sorts of other other odd people, but I’m betting they are much more a safe sex type than the general population at large. They are at least 90% white, average age probably somewhere around 35, the sorts that like to dress in costumes, decorate their cabin doors with quirky stuff, play endless role playing games mostly in the upper dining room, sleep little and frequently queue into long lines at the food court on the Lido Deck.

Time will tell if we suffer the fate of the two Princess cruise ships, but most likely we’ll be fine. Even before all this coronavirus started, sanitation has always been a high priority on cruise ships. Purell stations are everywhere and people are mostly refraining from touching each other and washing their hands thoroughly after bathroom stops or when leaving or returning to their rooms.

We’ve rented the whole ship so it’s been largely transformed for us. Generally, this is good. There is no annoying art auction and the shops and casino look eerily empty. Also largely empty is the promenade (Deck 3) which is usually full of walkers and joggers. I saw one lone jogger and a few others in deck chairs. It was the quietest place on this noisy ship.

Should I take it as an omen that we didn’t berth at our first port of call? It’s Half Moon Cay, Holland America’s private island in the Bahamas, and pretty much always the first port of call on one of their ships out of Fort Lauderdale. We weren’t spurned due to coronavirus fears, but because seas were choppy due to a strong low pressure system north of our ship. That’s why the captain changed course and this morning we found ourselves south of Hispanola where the seas are finally calmer.

Tomorrow we are expected to berth at Santo Domingo where we’ll have an outdoor concert. Last I heard, the Dominican Republic hadn’t refused our entry. That’s because no one was let on the ship sick. They took our temperature prior to boarding, and we had to assert we hadn’t recently traveled through suspect Asian airports.

Still, you never know. We don’t get much news on this cruise ship. Internet is prohibitively expensive, but we do get satellite TV and Holland America doesn’t block the New York Times site, in fact it subscribes to it for us. For the most part the passengers seem vigilant about hygiene but won’t let it affect their valuable social interactions. This cruise is a place to be your inner oddball, so it’s quite okay to be Corporal Klinger in high heels and hose around here. You are probably one of a dozen passengers with a similar theme. Klinger though was just vying for a Section 8. There are plenty of real trans people on this cruise. If you can’t figure it out from their somewhat manly appearance and breasts, their name tag suggests you use “they” as their personal pronoun. They look happy and liberated. For a week they can be accepted and be themselves. It’s going home to a much colder world that is the hard part for them.

If anything, I am the oddball around here. I’m dressed American-ish, my personal pronoun is He, and I’m not polyamorous, in costume, have a stuffed dragon on my shoulder or am particularly into the odd stuff most of these people are into. My wife is quite into this culture. I just kind of observe it all from the sidelines. I’m no redneck and believe in live and let live. In my sixty plus years, I simply don’t care what your color, age, body shape or your sexual orientation is. We all are here and should just get along. The only thing that gives me some heartache are self-identified Republicans and conservatives. I just don’t understand them.

And until Saturday when we return and are hopefully let off the ship, I don’t have to. We are living in a kind of private space on this cruise, mostly insulated from the real world which will probably come crashing back to us on Saturday. Any coronavirus is likely on shore, not here on the ship. There are board games and weird seminars and exclusive shows on the Main Stage every evening. It may be that for us the safest and friendliest place in the world, at least for the moment, is right on this ship with the coast of Haiti off the port side.

Expect a recession

The Thinker by Rodin

A recession is coming. It’s probably already here; we just can’t prove it yet.

The trigger was the emergence of the coronavirus and the resulting COVID-19 disease in late 2019 in China, but if it hadn’t happened it would have likely happened later in the year anyhow. As predicted it’s spreading all over the globe. People are already starting to hunker down. In some places it’s getting hard to find bottled water, toilet paper and hand sanitizer.

This is an overreaction. You don’t need bottled water unless the public water supply system goes out, which it won’t. And even if somehow the water is unclean, you can boil it. Fear of course makes people overly cautious, but it’s currently way overblown. It’s the fear that is driving down the stock market and making people buy too much toilet paper.

The world economy is now built on specialization and trade, so when China’s manufacturing sector takes an indefinite hit, it’s going to have large worldwide ripples. It’s already happening, but if you need proof you just have to look at Chinese ports, where little is going out or coming in. When items like rolled sheet metal don’t make it to manufacturing markets, value-added products can’t get produced. That will cause layoffs. But fear in general will cause people to be cautious with their money. The Fed can cut its discount rate by half a percent, but it won’t do much to solve the underlying problem.

Coronavirus was perhaps half the reason I sold twenty percent of my stocks and moved them into bonds on February 14, at just about peak market. Even then, it wasn’t too hard to see how this was likely to go. With the wholly inept response by the Trump Administration, it was clear that an intelligent response to the health crisis wasn’t going to be forthcoming. We could have been much better prepared than we were, but instead Trump cut the Center for Disease Control’s budget. Voters won’t forgive incompetence when it kills their family, friends and neighbors.

It’s also becoming clearer that this virus will not only put us into recession but turn into a pandemic. It’s pretty much there already. It’s not hard to catch and there is no vaccine available. Potentially 40-70% of us could contract it. For most of us, a bout of the flu will be much worse, but since it will spread so easily and has about a two percent mortality rate, it’s going to take a lot of lives.

There are 330 million Americans. It’s realistic that 10% of us will contract the virus this year, and there may be more next year. At a two percent mortality rate, it’s likely to kill about 660,000 of us this year, principally the aged and infirmed. This is just a ballpark figure, but it’s likely to be the biggest public health crisis since the 1918 Spanish Flu. I live in a 55+ community, with most of my neighbors probably 75+. If it gets me, it’s unlikely to kill me, but it’s likely to kill a few of my neighbors. Most neighborhoods will see at least a few casualties from this virus.

So of course we are going on a cruise. It’s hard to get out of as it’s paid for, but the cruise line won’t let in people cruise who fail a health check or who have traveled through certain countries recently. It’s unlikely to affect our cruise beyond perhaps being denied ports of call. But it’s still worrisome. 660 people on the cruise ship Diamond Princess out of Japan contracted the virus and 7 died, in part because Japan wouldn’t let them off the ship into proper quarantine facilities.

I’m not panicking. Prevention is mostly being vigilant, which means washing hands frequently. Still, cruise ships are great places to pass it on, as the Diamond Princess learned, because of the centralized air conditioning which can push the virus through the whole ship. In general, being in close quarters is not a good idea, and you can’t avoid that on a cruise ship.

Speaking of which, the travel industry will slump. Actually, it will go into a depression. And that will affect a large supply chain of its own, which will feed a downward economic spiral.

What can you do? Don’t overreact, but also take sensible precautions. Wash your hands regularly, particularly after touching foreign surfaces, with soap, for 20 seconds or more. A vaccine is probably at least a year away. This means you could easily get the virus anyhow, just realize that it probably won’t kill you, but it will be widespread.

With luck you can avoid it until there is a vaccine, but even when it’s available it will go to the elderly and infirmed first. One in 50 odds of dying is very good odds. Unfortunately, the way our society is ordered will make it worse here. So many workers have no sick leave, so they will come to work and spread it further. It’s the downside of a gig economy and our poor labor standards. Those who can will work from home. Those who can’t will bear much of the risk and be the principle carriers.

It also probably means that Trump will be a one-term president. He is managing this as ineptly as we feared. It won’t take too many MAGAers to die before their friends notice. It will help people put their prejudices aside and force them to understand the value of science again. At least I hope it will. It should.

Am I a financial genius?

The Thinker by Rodin

My recent post I’m betting on a recession didn’t get a lot of reads. There was no reason it should because I was just some nobody opining that a recession was imminent who decided to make a six-figure decision to lessen the impact if it happened.

We won’t know officially if we’re in a recession for about six months, but based on four days of major stock market declines and increasing numbers coronavirus cases, it’s looking like it will arrive sooner rather than later. In fact, it may be here already, we just can’t measure it yet.

Anyhow, yes, on February 14, I moved $106,144 in my retirement account from stocks to bonds. Before it was 60% stocks, 40% bonds. After it was 40% stocks, 60% bonds. My timing was just about perfect, as markets crested about a week later.

Mind you that all this didn’t make me any money. I am still invested 40% in stocks and those took a hit. We lost money overall. But if I hadn’t, we would have lost $89,439. Instead we lost $19,249, as of the close of markets today.

Perhaps I could get lucky twice. Just maybe when stock prices reach their nadir, I’ll move back to 60% stocks, 40% bonds and reap the rewards some years later. But who knows? Growth has been mediocre across the world for years. The main reason stocks were going up at all is because of the cheap credit the Federal Reserve made available. This caused a lot of stock buybacks, which due to supply and demand pushed up stock prices to artificial highs. Perhaps we’ll never go back to peak market again.

To answer my question: no, I’m not a financial genius. No one can time the market. What I did was likely very well timed but mostly luck. I shouldn’t count on luck twice in a row.

But I can watch the fundamentals of the overall economy, and periodically make decisions like this based on my analysis. If my assumptions are sound and I buy into categories of stocks, it could work again, this time on the way up.

With markets now officially entering correction territory due principally to coronavirus scares, a recession looks a whole lot more likely. It’s the supply chain disruption caused by the virus, not to mention its impact on the travel industry that is likely to take big hits that should make it official.

I did notice that someone recently read my Riding the recession’s wave post from January 2008, before stocks really tanked that fall. Back then I explained that a recession could be perversely good for those with steady incomes and significant savings. This definitely proved true for us. During a recession, prices come down, including inflated stock prices that can often be snatched at bargain prices, providing you hold onto them until markets recover. When money gets tight, you can get all sorts of deals. Already, home mortgage rates are dropping. That, with some decline in real estate prices, might make it a good time to buy a home.

If you are retired like we are, recessions make you appreciate the value of a pension, if you are fortunate enough to have them. This makes us recession immune. The portion of our income that comes from selling retirement assets though takes a hit while the recession lasts. You just have to hope that when markets recover your portfolio won’t be too severely impacted.

They say not to put all your eggs in one basket. By moving more of our assets to bonds, I can get a predictable rate of return, albeit half or less compared to what stocks have returned recently. To supplement our income, we sell some of these bonds periodically, husbanding the declining value of the stocks in the portfolio for a better day.

Meanwhile, while I hate the suffering a recession brings, I’m glad I bet on a recession. Let’s see if it actually arrives. We won’t know officially for about six months, but if we see the unemployment rate creep up, that will be a sign. Recent high stock prices have been signaling a false economy, but that appears to be changing.

I’m betting on a recession

The Thinker by Rodin

In a recent post, I suggested leading a logical life. It’s logically the logical thing to do.

Of course, it’s hard to say what is logical, as there is a lot of murkiness in the world. To deal with the murkiness, sometime toward my late forties I hired a financial adviser who gave me all sorts of logical advice about how to manage our finances. It was good advice. He must practice his own advice because after he retired I found another financial adviser so the good times could keep coming.

His advice costs me a few thousand bucks a year, but I figure it’s worth it. I likely wouldn’t be as successful financially on my own, as the ins and outs of markets leave me bewildered. Markets really don’t make a whole lot of sense. One sensible piece of advice that investors will hear from reputable advisers is not to time the market. Find a sound financial strategy and stick to it. Ride the ups and downs in the market. Always think long term.

It’s been good advice. As I noted in previous posts, our wealth is a result of investing regularly, but it was greatly assisted by the collapse of markets in the Great Recession. By accident instead of design, I ended up buying lots of funds when they were grossly undervalued and watched them steadily appreciate over the last decade.

Buy low, sell high is great advice too, but you never really know when a stock or a fund is a good value. Currently the cost of buying into the market is quite high, by historical measures. I don’t trade in individual stocks. Like most Americans, I trade in funds: mutual funds and ETFs for the most part, along with various commercial and government bonds. It makes sense: any individual stock can have huge fluctuations. I find safety in market baskets of similar funds instead.

Every year when I think stock prices can’t get higher, I seem to be proven wrong. 2018 turned out to be a no-growth year because of a selloff in December 2018, but 2019 was phenomenal, with funds up more than twenty percent. It’s crazy but looking at our investments, since we retired in 2014 we’ve nearly doubled the value of our portfolio mostly by doing nothing but periodic rebalancing.

Given all this, it would seem foolish to start cashing in our chips. And yet today, that’s exactly what I did. I didn’t do it with our entire portfolio, just with the part I control. Our financial adviser oversees our assets in TD Ameritrade, but I oversee the funds in my Thrift Saving Plan (TSP), the federal government’s 401K system for its employees when I was one of them. Until now I’ve been mirroring in that fund the plan our adviser has been recommending in our TD Ameritrade account: 60% stocks, 40% bonds. Today I issued an order to the TSP to rebalance these funds to 40% stocks and 60% bonds.

Crazy? It might be. While no one can time the market, for a long time I’ve been queasy about being so highly invested in stocks. Our financial adviser said not to worry because my pension means that we can assume more risk, and thus reap greater rewards. And he’s been right. I keep waiting for this house of financial cards to collapse, but it doesn’t seem to be doing that.

While not an active investor, I do watch a fair amount of financial news and look at trends. Certain mega-trends that have me worried. What I keep seeing is that we’re doing the same stupid stuff that led to the Great Recession. It really looks like we have a credit bubble underway. If this bubble pops pretty soon, I’m going to look smart. If it doesn’t, I’ll look kind of silly. But consider these statistics:

  • Corporate debt is now higher than it was before the Great Recession: 46.5% of GDP in 2019
  • Credit card debt is at an all time high of $930B, which is $60B more than at its peak before the Great Recession
  • Auto loan delinquencies are at an all time high too, past the Great Recession rate. Some 7 million Americans are 90-days or more behind on their payments
  • Overall household debt is at a new high of $14.15T, as of the end of 2019
  • Student loan debt is at $1.4T at the end of 2019, and no one realistically expects most of these loans will be fully repaid
  • Wage growth has been mediocre. One percent real wage growth per year is certainly better than no wage growth, but it’s hardly a shot in the arm to the economy, which is probably why debt is up so much. The real cost of living is much higher than this mediocre wage growth which means most Americans are treading water financially. To the extent lower wage workers are doing better, it’s largely due to raising the minimum wage in more progressive states and localities.

The Fed is keeping the economy primed by injecting cheap money into the economy, which is encouraging the record high debt statistics. Because Trump’s tax cuts benefited largely only the rich, who can’t spend much of this new wealth, the Fed has to prime the economy instead.

On the plus side, mortgage default rates are half what they were before the Great Recession, which is probably because it’s still harder to get a mortgage than it was before the Great Recession, when pretty much anyone could get one with no money down.

All of this strikes me as showing that our economy is fragile and built on large amounts of unsustainable cheap credit. Certain sectors of our economy are in recession. Many nations are already in recession. Then there is the fallout from trade wars and now a coronavirus to worry about. Given all these risks and the huge credit bubble, my gut tells me that things are overdue to fall, perhaps spectacularly again. And when they do, the Fed will have few tools to use.

In general, stock prices strike me as crazily overvalued, pumped up by cheap credit and stock buybacks financed by cheap credit. All this cheap credit is encouraging unhealthy levels of debt by all sectors.

Obviously, I could be wrong on all of this, but reallocating about $100K in our portfolio from stocks and toward bonds lets us reap these inflated stock prices before most catch on that these assets are wildly overvalued. Also, when stocks return to more reasonable prices, we could buy them cheap again.

We’ll see what happens but I’m betting I made a smart move today.

Live a logical life

The Thinker by Rodin

As you may have noticed, there are a lot of illogical people out there doing a lot of illogical things. It seems large portions of our population are into doing stupid and counterproductive stuff, making things bad if not for just themselves, then for the rest of us too.

It’s easy enough to start with Donald Trump, but you can throw in virtually the whole Republican Party as well as many Democrats. It’s easy to pander to your emotions because emotions are much more powerful than reason. This is being used against us.

For myself, while my decisions are not entirely logical, I strongly believe in trying to act logically instead of emotionally. I look at the world around me, look at my assets and do my best to make logical decisions. If I can’t get others to do the same (it’s not from lack of trying, and in many ways is the theme of this blog), then at least I can do it for myself.

Consequently, when we retired, my wife and I bugged out of town. Our house was paid off but we still bugged out of town. Part of our relocation adventure was simple restlessness; we had lived in the Washington DC area for more than thirty years. But it was also easy to see where things were going to go, as we were living with them even back then.

Life in DC’s burbs was expensive and getting more so. The climate was hot and muggy even thirty years earlier, but was worse now, along with the air quality. So the answer was pretty straightforward: move some place less expensive, more natural, less congested, further north where it’s cooler and somewhere safer in general.

We ended up in western Massachusetts. We endured about two years in a long adventure in retiring, selling a house and relocating, then setting up a newly constructed home. We’re living nowhere near a beach; in fact our new house is on a hill. So rising seas won’t affect us, but even massive flooding it shouldn’t affect us. The water should run downhill, thanks to our new house’s excellent drainage system. Earthquakes are almost unknown around here, along with most natural hazards. We’re starting to see an occasional tornado, but for the most part our lives should be hazard free.

Our big move was basically a once in a lifetime event. We certainly didn’t have this as a viable option during our working years. The good thing about the Washington area though was that despite its high costs and hassles, jobs were easy to find and in general they paid quite well. It was more luck than great planning that we ended up in that region, but once there we were at least smart enough to use the areas resources intelligently. We mostly lived within our means, mostly made sound financial choices and definitely stopped at one child. We ran the numbers and a second child would leave our standard of living significantly impaired.

You don’t have to choose to live life with the blinders on, but it seems to be the default for most of us. Maybe it’s exhaustion from all the other stuff going on in life that makes it hard to focus on longer-range stuff. The thing is though that only you can direct your life, and if you don’t do it intelligently and logically, you life is likely to end pretty messy and full of tremors.

We weren’t perfect. We had no master plan in life and went with common horse sense much of the time. If I couldn’t summon up the energy to create a twenty-year plan, I could summon the energy to redirect any excess money into paying down our mortgage or in getting a home equity loan to cut finance costs for many of life’s major expenses.

I have learned that by paying attention to life and investing time in thinking about your future, you can make your future. There are always unknowns and no guarantees in life, but if most of your actions in life are logical and follow a sound strategy, your odds of ending up where you want to end up someday greatly increase.

It requires time, clear headedness and hopefully some engagement. It also requires curiosity into how others are doing it successfully. Directing your life instead of letting it direct you can be very empowering.

Around 1990, I started tracking our household income and expenses. Simply doing this roused my curiosity in an area that I hadn’t thought much about earlier. I did know I was sick of having bills come due and not having enough cash handy to pay them. Thinking about our income and expenses meant we started planning. It was just a little at first, but as time and interest made possible, it grew into longer-range plans. As I thought about these goals, I had to measure them against what our lives were and think about to achieve them.

It meant some hard choices. For example, there was my decision to go to grad school while maintaining a full time job. For about three years my life was pretty hellish, but fortunately it paid off in promotions and more income. Surmounting this challenge also brought new confidence – I can do this – and led me to find the confidence to take some job risks that paid off.

After September 11, working in downtown D.C. looked simply dangerous. It wasn’t hypothetical, as I was working downtown when that plane hit the Pentagon. Our building was right next to the train tracks. I decided that this fear was telling me to find a job closer to home, without the commute, and I eventually succeeded. Turning my mind to the problem helped me build the future that I wanted. Being three miles from work instead of thirty turned out to be a terrific decision, and the job I landed was also just right for me.

Now I live something of a gilded retirement: financially secure, away from the more obvious threats in life, plus I found a new community that really agreed with me. But it didn’t happen from hoping and wishful thinking. It happened by being logical and by planning and listening to my gut.

I am hoping my country can wake up and do the same. It won’t be easy. It’s much easier to let your right brain run amok.