Tuesday, March 13, 2012

Girl Scout Cookies

This is a story about Jeannette and Mark and what happened to their family. Mark was a very hard working guy putting in many hours at work. Jeannette was also hard working, taking care of the children, the household and doing community work. One of the tasks Jeannette did was to handle a Girl Scout Troop. This involved also handling sales of Girl Scout cookies. Jeannette was very good at getting tasks for Mark to do when he was not at his job. She kept Mark's plate full. He did a lot of driving to get the kids to places they needed to be, Jeannette wanted the kids to do everything and Mark was the means by which this was accomplished.

Through Jeannette's drive in selling Girl Scout cookies, she was able to beat other sellers. Her kids won awards for selling so much. Since Jeannette was so good at selling she was assigned handling sales for a whole district. One day Mark came back from work, opened the garage door, and saw so many boxes of cookies that he could not get his car into the garage. He closed the garage door and drove away, never to return. The Girl Scout cookies were the last straw.

Soon thereafter, the whole family was at my parents house for a Sunday dinner meal and card playing. Mark and Jeannette were missing and the story was going around. The ladies were all buzzing about it in an incredulous manner. How could this happen? Nobody had an answer for Mark's behavior but they found it unbelievable that he should leave his wife and children like that.

Marty watched all of this and addressed all the ladies with a most humorous line, a line that, if I did not guffaw out loud, I was laughing hilariously on the inside. He said: "All of the males in the family drew straws and Mark drew the shortest one." I know he meant to put all the ladies on notice that they might be next to get the same treatment and not to get high and mighty that it could not happen to them. I don't recall how the ladies took it I was too absorbed in laughing at the humor of the statement.

Saturday, March 10, 2012

Home Ownership

For some, not all, the American Dream includes home ownership. In my generation this was a truism and many bought homes as soon as they could. The idea was why pay rent to a landlord when ownership meant you paid the rent money to yourself. A rule of thumb that was used at the time was the house payment should not exceed one fourth of your monthly income. If you made a thousand a month the payment should not exceed $250 a month. Of course, there was up-front money of from 10 to 20% needed to satisfy the bank to make the loan. Everybody I worked with in the fifties owned homes, some had very expensive homes in upscale neighborhoods or on a lake. It was the thing to do.

The government encouraged home ownership by allowing an income tax reduction for interest on a mortgage. They were helping to fulfill the American dream. In its way it promoted families that tended to stay rooted in the place in which they had residence. That mortgage deduction had a built in incentive for getting a larger, or more expensive home if your personal income increased. The larger the mortgage the greater the deduction. It was like free money.

For a home owner, a move to another city brought a problem that had to be resolved, what to do with the house. A divorce also brought the need to shed a house but with additional social problems if children were involved. Divorced men nearly always lost the house, courts were delighted to award it to the female. Many comical movies were made about this frightening situation.

Since home ownership was the prevailing meme at the time many people that should not buy a home did so. Some of the reasons that cause the whole idea of home ownership to fail are: unstable income, ignorance of general maintenance, laziness, unstable personality, lack of care for the neighbors, infidelity and extravagance. These types of people tended to lose their invested and accrued capital.

The last ten years has added an additional example of those that should not own a home, the under invested owner. Partly, this was brought about because home values were steadily increasing.over time. It was reasoned: Since a $100,000 home sold today would be worth $140,000 in the near future, it would be good for business to ignore, or expand, the rules for home loans. The home as an asset would increase to eliminate the original risk. Therefore, many in the government desiring more people to make the possible gains decided to change the rules for lending, mostly they were liberals. Others saw disaster in changing the rules because good times do not always continue and housing prices could come down, mostly they were capitalists. Of course, events came about to prove the capitalists correct, the whole housing market collapsed causing a severely depressed economy. We are still trying to get out of this hole.

Nevertheless, now is a wonderful time to buy a house, Prices have not been this low for fifty years and interest rates are also historically low.

Sunday, March 04, 2012

Doing Very Well

The number of people unemployed in this country is higher than it has ever been. The number of people using food stamps is higher than it has ever been. The number of one-person households is declining. The percentage of American cars sold in the total market is declining. Our economy is riding in the doldrums. Yet many people do not feel any pressure in their lives. For them, it is business as usual.

For those who have jobs, the nonworking group appears to be some sort of alternative universe. Having a job means they are insulated from pain and are not pinched in any way, life goes on day after day as usual. Yes, they notice some prices rise and they create some inconvenience, but, for the most part, they are able to handle it.

There is a third part of the labor force that is doing very well. These are the people that have jobs in industries or companies that have found that adding workers in this part of the business cycle is cost prohibitive. It is such a high cost that paying overtime for any additional work required is cost beneficial. A worker in this situation, that is willing to work overtime, does very well. If fact, the longer this business cycle continues the better they do. The truly ambitious will give up vacations, work when not feeling good, work on Sundays, work two shifts straight, etc., to rake it in when it is available. They fish rather than cut bait.

This "doing very well" has a downside for the unsuspecting worker. Some believe that these times will go on forever and get themselves into trouble with a slide into expensive lifestyles, outlandish expenditures, acquiring things or toys - the money is there. When the boom eventually busts, and it will eventually bust, there is some deep remorse in the realization it was all wasted away.

The wise worker will realize that the extra income is temporary and will save some of it, invest most of it, and let it serve as a nest egg for a rainy day.