Greatest Idea Ever

 

Get it? It's like the "got milk?" campaign, only they replaced "milk" with "insurance". Seriously, do you get it? Should we walk you through it again? They didn't even bother changing the damn font. Advertising is the worst business on Earth.

Get it? It’s like the “got milk?” campaign, only they replaced “milk” with “insurance”. Seriously, do you get it? Should we walk you through it again? They didn’t even bother changing the damn font. Advertising is the worst business on Earth. (Obligatory mention that this ad is not, in point of fact, a parody. It is horribly, horribly legitimate.)

 

We’ve already shared our analysis of Obamacare with y’all. First, we explained how this was never intended to “help the uninsured”, or lower costs, or any of those highfalutin goals noble in their definition but ultimately unachievable by a federal government that can’t even close a defunct rural post office without stretching the process out for years. Rather, Obamacare was created with the eventual intention of rendering private health insurance superfluous. A month later we described our 1st-person frustration at how our President, Congress, Chief Justice and 4 associate justices of the Supreme Court took something that was working and broke it. Then, Control Your Cash being first and foremost a pragmatic site, we showed you how you to take advantage of a loophole to get a few hundred dollars’ worth of drugs on the house. Hey, every little bit helps if you’re like us and now have a federally mandated $7000 deductible – which is to say, you don’t really have insurance at all, as you’re going to be paying for everything out-of-pocket.

But now the insurers can’t reject people with pre-existing conditions! Isn’t that great? 

Pre-existing conditions, whether phocomelia or obesity (or if you want to expand the definition for an increasingly effete populace, seasonal affective disorder or restless legs syndrome), cost money to care for. Why shouldn’t a leukemia patient pay higher premia than someone healthier? Dust yourself off, do something about your indignation, and answer the question. The very purpose of insurance is to measure risk. Why should the pre-existing condition of a penis force someone into paying higher auto insurance premia than his unpenised sisters? A bungalow in a floodplain costs more to insure than a bunker in the Utah desert? So unfair. It’s not as if the bungalow asked to be placed there.

You can force producers to charge some, even most, of their customers below-market prices. But they’re going to have to make it up somewhere, usually by seriously overcharging the remaining customers.

Somewhat amazingly, a lot of people don’t seem to understand the ramifications of Obamacare. To modify one of our favorite lines of reasoning from noted wag P.J. O’Rourke, the punishment in the United States in 2014 for failing to purchase health insurance is death. (Fail to buy insurance, and the IRS will fine you. Don’t pay the fine, and you’ll go to trial and then prison. Try to escape from prison, they’ll shoot you.)

The fine starts off modestly in the first year, just $95. However,

The American economy is now in at least its 6th year of static, but for some reason that has nothing to do with

perverse incentives (Wait, I get paid for not working? And paid more for having babies?)

a federal tax code so convoluted, requiring so many billions of man-hours to comply with, that not only does the IRS acknowledge said complexity, but paradoxically needs 72 footnotes to explain why.

Over 200,000 pages of federal regulations, turning essentially every citizen from an independent actor into a bureaucratic vessel/lab monkey.

This, the initial appearance of a memorable quote from Mike Rowe. Watch the whole thing, but fast forward to :37 for the money shot:

“We are lending money we don’t have, to kids who can’t pay it back, to train them for jobs that no longer exist.”

People who will watch that video and then immediately fill out a college application and a Sallie Mae form. And then major in dance. With a minor in comparative literature.

So yes, the early 2010s would be a great time to restrict health insurers in their ability to insure. To give doctors less autonomy. And to force millions off their existing health insurance plans, into the limbo of not wanting to buy lifesaving drugs or otherwise conserve resources because the deductibles are so high. Why would a newly registered Obamacare enrollee see the doctor for a sudden hacking cough or anything else not immediately life-threatening when confronted with a $6250 deductible? (Number taken from real-world example.)

And there’s more. Taxes on medical devices. Fees for brand-name drugs. Altogether, these governmental surcharges will average $68 billion a year over the next decade. Because you were enjoying too much of your money as it stood, citizen. That figure is from the House of Representatives’ Joint Committee on Taxation, an august body not known for its liberal estimation powers.

This intermediate area of artificially mandated pricing and output is unsustainable. Either a president’s signature legislation will be repealed out of financial necessity, too few dollars chasing too many resources, or we’ll go as far as possible in the other direction and end up with a fully socialized system that does its necessary rationing by some criterion other than ability to pay. (Candidates include patience, youth, connectedness etc.) In the meantime, eat your vegetables, go to the gym, don’t smoke, don’t drink, and douse your heroin needles in Barbicide® before sharing.

Ignorance Really Is Bliss

What, you want some sort of fresh take? It’s personal finance, where there’s very little new under the sun. The basics are straightforward, not that that stops tens of millions of people from ignoring them. Buy assets. Sell liabilities. Look at the full price of something rather than its apparent price (your $100,000 house is really a $215,000 house). Don’t incur debt for stupid reasons. Don’t buy unreasonable stuff. (Not unrationalizable stuff, unreasonable stuff.) If you think furthering your education is important, paying tens of thousands of dollars for a useless English degree is not the way to do it. (It’ll educate you alright, but not in the way you planned.)

One more: Don’t pay attention to short-term market movements or other economic indicators. In fact, when the time period is short enough, calling them “economic indicators” isn’t even accurate. Here’s what we mean:

Monday’s CNBC headline, which also warranted the big font on Drudge Report:

CNBC 1

And, yesterday’s CNBC headline:

CNBC 2

How do these journalists live with themselves? (Rhetorical question: They’re journalists. Unlike dogs, they don’t have souls.) Kate Gibson’s Monday piece is full of doom and foreboding, with lines such as “heightening concern about the economy” and “investors compiled a list of worries”. How come reporters editorialize when they shouldn’t, and refuse to when they should? Gibson ought to have added, “The market’s going to bounce back by the end of the week. It always does. And if stocks had risen 300 points today, I’d be making the opposite pronouncement about what’ll happen by Friday.”

Again, this is how the game works. You can fill in the template and make your own financial story:

  • Overblown headline
  • Quote from strategist at a reputable firm
  • Appended quote, if you’re running short
  • Quote from another source to show that you’re objective
  • Meaningless data

Done!

Here’s the quote from the 1st strategist in the 2nd story: “What we’ve seen over the last week or so is the market looking for direction.” No, what we’ve seen is ordinary, unremarkable fluctuation. But an analyst who would say that is never going to see herself quoted on CNBC, or anywhere else. Being a major journalist’s go-to quote machine gets one recognition, which can be expected to lead to personal wealth. For the source, not for anyone else. “Nothing to report” is not a report, even though, paradoxically, it often should be.

We’ll save the authority-bashing for a later paragraph. The takeaway from this is that daily movements in the markets are meaningless. Utterly, completely meaningless. They shouldn’t even be reported on, but what are you going to do? CNBC has an electric bill to pay and a schedule to fill, as do Fox Business, Bloomberg and related nonsense. The markets are open every weekday, and thus their levels will either rise or fall relative to the previous day, so technically, if you’re a news editor, you have a guaranteed story every day. As we pointed out years ago, neither a good day nor a bad day in the markets means anything. Nor a good week or a bad week, for that matter; at least not for the market at a whole. An individual non-penny stock can decline irreversibly in one day, not that it happens that often. (It never works in the other direction. No stock goes from middling to breakout blue-chip that quickly, for the same reason that demolishing a building takes less time than constructing it does.)

We beseech you to unlearn. To step away from the data, before you drown in it. You know how continued exposure to Facebook or 99% of what’s on Twitter makes you stupider? Same thing here. Look, every part of your daily news feed is bloated and full of empty calories, not just the financial stuff. “New Study Shows Link to Overeating, Obesity”, “Obama Endorses Democrat in Senate Race”, “Water Wet” etc. Unplug and understand that you’re in this for the duration. That doesn’t mean you have to defer every piece of gratification to the last possible moment; far from it. It means you need to see the forest for the trees.

Buy undervalued assets. Do your research well in advance, before committing, and understand that even a healthy investment with plenty of growth potential isn’t going to augment in value overnight. Or overweek. Or even overmonth. Don’t know where to start? Good: here’s an obtrusive commercial, right in the middle of the narrative.

The financial news is entertainment, and very little more than that. Moreover, it’s not even good entertainment. The only story of any consequence this week is that Microsoft hired a new CEO, and that Bill Gates is sort-of coming back. Unless you’re in the industry, the guy at Steven Cohen’s SAC Capital who got busted for insider trading is of zero consequence. Boston Federal Reserve Bank president says what his boss orders him to? Don’t waste your time. Just understand the difference between what’s important and what’s trivial. If in doubt, go with trivial.

 

 

 

Genius of the Month and RotM

It's the 1850s Know-Nothing flag. Fun fact: By "Native Americans" they meant white folk born in the USA and not from the mud countries of Germany and Ireland.

The 1850s Know-Nothing flag. Fun fact: “Native Americans” meant white folk born in the USA, as opposed to those from the mud countries of Germany and Ireland.

 

The Last Psychiatrist isn’t a financial blogger, nor anything else we can identify. (He’s even more rigid about not disclosing personal information on his site than we are on ours, and we’re assuming he’s male because sexism.) But more than a year ago he wrote more succinctly on the futility of what passes for tertiary education than we ever could. Although we’ve tried. Here, bask in this:

[W]hy would a smart high school junior, 4.0 and AP Everything, think that going to Hampshire College for English Literature was a good idea?  Why would her parents allow this madness, other than the fact that they were divorcing?  What did she think would happen given that she knew in advance there were no jobs for English majors? [...]

The choice to major in English was predicated on information she received from multiple sources like schools and TV– sources I will collectively call the Matrix–  that every generation does better than the last, that there was a safety net of sorts, a bailout at the end, that future happiness was inevitable, and so we return to economics: the general name for that safety net is credit.  America was the land of the minimum monthly payment.  And if this analogy isn’t clear enough for you, let me reverse it: the ability of the economy to offer English as a major required a massive subsidy to make you feel like $20k/yr was the same as free.  If you had to pay it up front, you’d either be an engineer or $80k richer.  That subsidy is now worthless, not because the money doesn’t exist but because the bailout at the end, e.g the four options I suggested were operational 1977-1999 which guaranteed the payments would be made, won’t help.

Imagine a large corporate machine mobilized to get you to buy something you don’t need at a tremendously inflated cost, complete with advertising, marketing, and branding that says you’re not hip if you don’t have one, but when you get one you discover it’s of poor quality and obsolete in ten months. That’s a BA.

(Thanks to Jason Hull for showing us that such a person could exist.)

Nothing you can say will convince certain people, lots of certain people, that what’s stylistically termed “an education” has finite value. In fact, it probably has negative value. The most resolute in that camp will look at the last line above in boldface and think, “Well, of course. You need at least a master’s.”

Would you hold onto a stock portfolio that had lost $80,000 in value and was costing you more in monthly fees than it was worth, or would you be adult enough to admit that your initial estimates for the future of the portfolio, however hopeful, were false and that you made a poor decision? Then explain why we can’t substitute “college degree in something other than the hard sciences” for “stock portfolio”? More pertinently, what price would suffice to make you reassess? What if universities across this great land decided to octuple their tuition fees tomorrow? Would you shrug your shoulders and say, “This sucks, this is unfair, but an education is still priceless”? Or would you comprehend that diminishing returns are a thing?

If you’re new here, know that we regularly single out debt blogs to make fun of. Smarter Bucks is as emblematic of the genre as any. (Stick it out, this one has a twist ending):

Hi, my name is Lisa, and I have an addiction.

No, it’s not to gambling – though I occasionally like to partake in a game of blackjack or two. No, it’s not drugs and no, it’s not alcohol – although beer and wine are delicious (in moderation, of course);)

What am I addicted to? Well, it’s a little embarrassing… but… I’m addicted to paying off my debt.

(Emoticon in the original, obviously.)

Honey, if you’re occasionally playing simultaneous blackjack games, no wonder you’re in the hole. Also, you can’t beat blackjack. We don’t mean you in the general sense. We mean that you, the chick who thinks that it isn’t trite to pattern her introduction after an Alcoholics Anonymous confession, is too dumb to be one of the few people in the world who can beat blackjack (let alone find a single-deck game.) Why are we harping on this? Because blackjack is yet another activity with a guaranteed negative return. If Ben Affleck or Michael Jordan gets off on throwing money away at a casino, more power to him. He can withstand the losses. You can’t. How do we know you can’t? Because you’re paying off debt.

Lisa was $20,450 under water, a modest amount compared to some of the other morons we’ve featured on here. She continues about how badly she wanted to pay off debt, which sounds somewhat commendable, until she finds false refuge in the passive voice:

A few months after declaring war on my student loans, life decided that it was time for me to buy a house (it wasn’t in the plan, but it had to be done for personal reasons that I do not want to go into)

a) If you’re going to display your confessionals publicly, at least learn to write. Your parenthetical comment serves no purpose other than to let us know that the value you place on your privacy is arbitrary and inconsistent.

2) Life is in the saddle, riding you? Whatever you say. Look, none of us like self-determination. (See the throngs blaming Philip Seymour Hoffman’s death on everything but his fondness for heroin.) It’s way easier to wait for fortune to smile upon you than to seek it. Even so, you’re giving The Fates far too much credit if you think they’d indelibly written “Buys home, 2012″ on the Lisa thread before inserting it in the wheel.

$20,450 in the hole? And making efforts, however incorrectly motivated, to pay it off? Sounds like the perfect time to buy a house. But wait…how did she qualify for a mortgage? The short answer is C) [it's always C], suspended adolescence:

My auntie (who I cosigned with) and my mom helped a lot with the down payment

Yet they wouldn’t help her with the student loan debt. Good, they’re only partially crazy.

We underestimated closing costs [...] I dived back into my credit card debt, not only using existing credit lines but also opening up a few more.

One day, these debt bloggers are all going to confess that yes, this was intended as a personal affront. That they were writing this blather specifically to drive the folks at Control Your Cash nuts. The good news for them is that it’s working. At the price of their financial sanity, mind you, but at least they forced us to pay attention.

Mathematics being an unforgiving harpy, Lisa started making just the minimum payments on her student loans. Time for a patented CYC 1-question quiz:

Does anyone think she has a hope in hell of keeping the house?

Thank God for Lisa’s “auntie”, and that juvenile appellation says it all. We only wonder how the aunt could be smart enough to have amassed enough for a down payment yet stupid enough to have cosigned on the loan.

Lisa’s a hero, though. “I am staying on top of it by paying consistently, every month.” You mean you’re honoring your obligations to a creditor? And to think that people say America has no role models.

She has a side hustle, of course. She’s building an emergency fund, of course. Her indebted compatriots, all with identical blogs of their own to publicize, appear in the comments and offer vapid encouragement, of course. Someone must have gone Six Sigma on these awful people, these debt bloggers, because they’ve achieved 99.99966% uniformity. W. Edwards Deming would be proud.

You’ve waited long enough. The promised twist ending:

Lisa E. is a financial analyst

Not to beat this example into the ground, nor the metaphor of a dead (white) horse, but say the late Mr. Hoffman had had the same publicized heroin habit but worked as a physician. Would you take medical advice from him? Or would you avoid shaking his hand if you knew you had to submit to a hair-sample drug test the following morning?

Unless you’re an idiot (you might be, we don’t mean to assume anything), you’d find another doctor and fast. Just like you should find a financial analyst who perhaps knows the first thing about money. Yes, she said “analyst” and not “planner” but it’s the same tune in a parallel minor key.

The Last Psychiatrist seems to be saying that an unfocused “education” is pure liability. Searching for truth might be its own reward, and might even have practical applications. But depending on the subject matter, modern tertiary education is hardly about that quest for knowledge or enlightenment. Rather, it’s about trying to please the instructors who grade you. And who were every bit as deferential to their own instructors, back in the day. Finding and absorbing objective reality is less important than getting an A, even a valueless one.

But the quest for the A still costs money. Maybe yours, maybe your auntie’s and mom’s, maybe the taxpaying public’s. The university admissions department takes checks, not intangibles. And if you think that the charade is all worth it, because of the opportunities that lie on the other side, stop being a denialist. You accept anthropogenic climate change, but not the pointlessness of academia?

You can read. You can write. You can probably do math, if you’re male. Maybe you can even think critically, but if you haven’t figured out how to do that by your late teens you never will. You know who your hero should be, now that Nelson Mandela is dead and Ryan Braun has been exposed as a fraud? Blue-collar truck driver and high school graduate Nelson Smith at Financial Uproar. Writes entertainingly and informatively about personal finance, and has the real-world portfolio and absence of student debt to back it up. Furthermore, he writes more clearly than could any humanities graduate student who prattles on about heteronormativity and the Judeo-Christian hegemony paradigm. Aspire to be something akin to Mr. Smith, a man who builds wealth while saving the world from a lack of nutritionally dubious food, rather than a walking indebtedness machine.