Carnival of Wealth, Sequestration Edition

Marie Antoinette would have found this distasteful.

Marie Antoinette would have found such displays of taxpayer-subsidized wealth distasteful.

 

When in the course of human events it becomes necessary for the federal government to reduce spending by .3%, let’s start by cutting something unimportant, such as air traffic control. Because there’s nothing else – Centers for Disease Control anti-smoking programs, Department of Agriculture subsidies to tobacco farmers – that we could cut first. People really do get the governments they deserve.

We never give Andrew at 101 Centavos the opening slot, and have no excuse. He’s one of our 4 best contributors, week in and week out. This time around, have you ever wondered why the internal combustion engine refuses to go away? Among other reasons, gasoline is extremely potent (in terms of energy density, 2524 tons per square inch.) Also, even at $4 a gallon, it’s wicked cheap compared to any other means of powering a vehicle that can carry passengers and travel at a decent speed. Tell that to the investors who are convinced that renewability is the only criterion for judging a fuel. Bonus: Andrew’s post introduces us to a public company’s use of “derisking” in its official communications, and if the WordPress spellcheck underlines a word in red it raises some color flag. The phrase was “derisking our business on the regulatory front,” shorthand for “if we pay a former state governor and a former Secretary of State to sit on our board, it won’t matter that our product is unfeasible.”

Today’s featured image also pays homage to the perverse incentives that come with what’s rapidly becoming a command economy. Michael at Kitces.com shows us that with ever-increasing capital gains tax rates, not to mention Medicare surtaxes, the traditional tax planning strategy has inverted. Instead of deferring taxes on gains as long as possible, and harvesting capital losses, it can make sense to harvest capital gains instead. Land of the Free.

Most 1st person blog posts are awful, because most people’s lives are insipid and not worth sharing. Then there’s Pauline Paquin at Reach Financial Independence, whose very existence reinforces the wisdom of living life on your own terms if you’re responsible enough to do so. The latest addition to her Guatemalan beachfront estate? A rooster and 9 hens. That keeps Pauline in eggs and possibly in arroz con pollo. Also, you don’t want to know what the poultry industry does with most male hatchlings.

Paula Pant at Afford Anything has the definitive argument against the naysayers who decry people such as Pauline (and Paula herself) for having the audacity to not work at a dismal and soul-crushing job. “If everyone did that, the economy would collapse.” Your point?

We knew this CoW was too good to be true. Edgar at Degrees & Debt continues the unbroken streak of blogs with “debt” in the title being endless complaints about how society is stacked up to take advantage of their, the bloggers’, bad decisions. We goofed on Edgar for this a few CoWs ago, but he’s back for more with a post on, and we quote, “methods to achieve student loan forgiveness.”

Well then. So you borrowed money, and you don’t feel like paying it back? Edgar has a point – paying stuff back sucks. Much better to keep the money, especially if being dishonorable is something you have no trouble living with. Aside from being male, Edgar is the stereotype of the overeducated and indebted blogger: he’s a graduate student who’s earning a master’s in project management. Beats working, as they say. This post contains loaded language, e.g.

The Obama administration recently improved on the student loan laws in the US.

By “improved on”, Edgar means borrowers can now get away with more than ever before.

[B]orrowers are only allowed to pay a max of 10% of their income as their monthly loan payment regardless of the amount the individual is earning.

He means “required”, not “allowed”, and means ”     ” instead of “a max of”, and threw the incorrect word “individual” in there in order to sound educated, but the gist of Edgar’s post is that the federal government has now institutionalized deadbeathood. Edgar has 5 student loans and is a quarter-million in the hole (reprise), but the good news is that he lowered his debt load by $1300 last month. Assuming he wants to continue lowering his debt, instead of taking his own advice and abusing a system designed for abuse, Edgar will be in debt for only another 16 years or so. Yes, that’s the kind of person who should be submitting to something called a Carnival of Wealth. Gold star. Also, Edgar’s writing style is equal parts plodding and pedantic, a telltale sign of overeducation.

Emily Guy Birken at One Smart Dollar has some easy if facile tips for incipient college graduates. Live within your means, blah blah blah. She also says

It pays to have a healthy emergency fund

Which we’ve exposed time and again as a dirty lie. First, an emergency fund doesn’t literally “pay”. Quite the opposite. Second, setting aside cash for purposes of inertia runs counter to what rich people do. They buy assets. Where have we heard that before? Oh yeah. Kids, do yourselves a favor. Ignore Emily Guy’s* advice and heed ours instead.

Darwin’s Money gave us his (correct) opinion on emergency funds last week, and follows it up with an even better post on the phenomenon of (bogus) early retirement. Sure, it’s empowering to be 40 and “retired”. But if in retirement you’re

  • living ascetically because you can’t afford not to
  • sponging off your spouse
  • committing more hours to some other method of generating revenue than you did working,

Then you’re not retired.

Josh Dorkin guest posts at Free From Broke about how to invest in real estate while doing more than just burning incense and offering a prayer to Mammon. To be brief, cash flow is far more important than the hope of appreciation will ever be. We know this. We wrote about it here (in case you missed our earlier plug.)

Why are so many personal finance bloggers from Vancouver, that festering wet den of immorality and sloth? The Outlier Model is the latest to get our attention. Its authors, a husband and wife (or boyfriend and girlfriend, whatever) own an investment condo and are looking for someone to replace the presently departing tenants. That’s about all, except the authors are irrationally worried that they won’t find anyone to rent their condo. In one of the most overpriced real estate markets in the world. It’s fun to be paranoid!

You people who need anything larger than a car cupholder to carry your change – what the hell is wrong with you? There’s no excuse for having an industrial-size water bottle, vase, or even ashtray filled with coins. No human should ever possess more than 4 pennies, 2 dimes, 4 nickels and 3 quarters at once. If you’re patronizing establishments that give change, those are where you should be spending change. Yet CoinStar machines exist, and take the easiest 9.8% cut in all of commerce. Harry at Your PF Pro found a way to avoid that fee, while ignoring the larger problem of accumulating those absurd little metal disks in the first place.

No one is more shameless in his use of pro wrestling quotes than Jason at Hull Financial Planning. This week, he quotes the topical Million Dollar Man and ties it to the ultimate goal of many an entrepreneur. That goal isn’t building a better widget, nor changing the world, nor even being one’s own boss. Usually, it’s cashing out. If you’re thinking of doing so, Jason explains how to value your business objectively and without any input from that killer of financial dreams, emotion.

From new submitter Blogging Banks, an explanation of a term we hear so often that it’s easy to take for granted that everyone understand what it means – FDIC insurance. This post is short but informative. It’s the Jenna Lee of blog posts.

When governmental intervention creates or exacerbates a problem, by now we’ve all been conditioned to know what the solution is. Hair of the dog. Ross Garner at Wallet Hub explains how the Federal Housing Administration has spent the last 5 years backing even more mortgages that borrowers shouldn’t have incurred in the first place. Which would require greater mortgage insurance premia, except record numbers of defaults and foreclosures have caused the total balance of mortgage insurance funds to decrease. In fact, that balance is now negative. So you’ll now pay more than twice as much for insurance as you would have a few years ago. Which will likely send you to non-FHA loans, which will even further reduce the FHA’s effectiveness, etc., and someone explain to us again why the government is in the business of insuring loans in the first place?

Finally, from the consistently magnificent PKamp3 at DQYDJ.net (if you’re new here, it stands for “Don’t Quit Your Day Job”), the latest in his series of handy calculators. This week’s calculates inflation between any 2 dates in the last century. The post also includes a sobering graph that shows how badly our dollar has depreciated relative to itself since World War II. PKamp3 continues:

I do intend on building [the calculator] into other tools in the future – including some calculators where you can figure out daily inflation adjusted returns for various assets classes.  I’m not sure that sort of information exists anywhere.  I intend to bring it to you.

And that, folks, is the difference between CoW-worthy excellence and another gaggle of rejected posts about digging one’s way out of student loan debt while still taking time to shop for shoes.

Thanks again for coming. We’ll see you tomorrow.

*Is her given name Emily, or Emily Guy? We’re going with the latter because it sounds funnier.

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