Sunday, February 19, 2017

Some Reviews

                I’ve come across one film and read a couple of books recently. I recommend all of them.
                The film is The Big Short. If you’re curious about how the mortgage crisis developed and how ridiculous things got before the crash, this is the film for you. I almost didn’t watch it because it clocks in at over two hours. Since it’s on Netflix, I figured I could watch an hour and then come back to it later for the rest. I didn’t have to. It’s the fastest two-hour film I’ve ever watched. It’s based on fact, and when it takes liberties with the actual events, it tells you. The film is about several people who were sure or were told (one group by a wrong number phone call) the crash was coming. One man was so certain of a crash he had securities designed so that he could short the mortgage market by a firm happy to take his money, since it was axiomatic the housing market would never deflate. The group that answered the wrong number investigated the mortgage market in Florida and discovered a stripper who had five mortgages on houses she thought she could always refinance as well as tenants who were not aware their landlord, who had the mortgage in the name of his dog, had defaulted—I guess it was actually the dog that defaulted (or maybe ate the mortgage). The group investigating Florida mortgages were convinced to short the market. One thing that stands out is how willfully everyone in a position to question the madness, from the ratings agencies to the SEC, ignored their jobs, in no small part because their continued existence depended on repeat business.
With our new administration and congress in the process of dismantling the protections (including the Consumer Financial Protection Bureau) the previous one put in place to prevent this sort of thing from happening again, I recommend this film as a way for us to protect ourselves, since no one else is going to be looking out for our interests.  

I listened to Thomas Frank’s Listen, Liberal, which was written during the 2016 campaign. Post-campaign, Mr. Frank could be considered a modern-day Cassandra. He gives a biting commentary on what’s wrong with the Democratic party—namely that they’ve cozied up to the well-educated and well-heeled elite. The Democrats have abandoned the concerns of their (former) working class base for those affluent (primarily coastal) city dwellers whose concerns are bike paths, meritocracy, and individual opportunity. Perhaps it’s because these people are the ones writing the checks, but, as we’ve seen in the past election, these people are not the ones voting in states needed to win an electoral majority. What’s even worse, is the Democratic elites’ answer for everything is education. If you’re out of work because of NAFTA (which was pushed through congress by Bill Clinton), it’s your fault for not having the education to get another job. Mr. Frank reminds us it was also Bill Clinton who pushed through welfare “reform,” depriving many of a means to a legal income. What is interesting to me is Frank’s quoting Democrats who sound like very conservative Republicans. (Larry Summers, for example, said, “One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way that they’re supposed to be treated.” You didn’t go to Harvard? Well, you deserve what you got.) There simply seems to be no sympathy or even empathy for the single parent making minimum wage who does not have the time, energy, money or work schedule to get an education. But, then, what kind of contributions will the party get from these losers?
Now that Mr. Frank has proven to be correct, will the party take some action? Or will it just slap some makeup on the dead horse its current leadership has left behind?

Finally, What We Do Now, edited by Dennis Johnson and Valerie Merians (and if I were either of these people, I would be really pissed to have my name in such microscopic print on the cover—it’s a lot of work to edit a book) was thrown together in two months. The book has contributions by twenty-seven writers on “standing up for your values in Trump’s America.” Some of the contributions are painfully predictable (How many ways can Bill McKibben say the same thing?), but there are a couple of surprises. Allan Lichtman, a history professor and developer of a prediction system, “the Keys to the White House,” echoes some of Thomas Frank’s points except Lichtman is more in favor of free trade. Cognitive linguist George Lakoff tells us Trump uses the brains of those listening to him to his advantage. I’m not sure I agree—I’ve listened to Trump, and all I get out of doing so is wondering how the man got as far as he did. Nevertheless, he did win the electoral vote, so maybe there’s something to what Mr. Lakoff says. Dave Eggers gives us several vignettes he witnessed just before and just after the election. He notes that in Michigan, where Trump won by 13,107 votes, 110,000 people voted down ballot but did not vote for president. Writer George Saunders offers a scathing view of the media in his contribution titled, “The Braindead Megaphone.” He savages reporters—especially on the local level. While reading it, I couldn’t help but think of a local station that features a married couple as dual anchors. They’re so sweet it makes me want to barf, and when they show photos of their children and dog (“This is Sweetie Pie in the snow; oh, look here’s another one of him; oh, and here he’s petting Fido, etc.”),  I want to scream, “This is not why I watch the news.” I mean, I like dogs as well as anyone (children not so much), but I have one of my own. Anyway, evidently this kind of thing goes on everywhere these days. Mr. Saunders gives the example of even when local media are reporting they’re frequently dwelling on the obvious—malls are busy during Christmas because people buy presents, so mall parking is more difficult to find that time of year. I’d add to that people buying shovels and salt and what the highway departments will be doing to the roads when a snowstorm is predicted. When I see something like that, I say, to no one in particular, “My, wasn’t THAT informative?” I am glad I’m not the only one who finds such reporting dumb and annoying, but I’d be happier of someone would elevate reporting to maybe at least a third- grade level. 

By the way, and I guess this is a recommendation for a third book, I highly recommend Dave Eggers’ The Circle, which is a novel about a Google world taken to the extreme.

Incidentally, I know people are reading this blog. I’d really like to get some discussions going, so please feel free to comment.

© 2017 Larry Roth

Thursday, February 9, 2017

The Chickens Are Coming Home to Roost

                Recently the PBS NewsHour had a segment on the experiences of many middle-age Americans in today’s economy. The segment focused on two people: Elizabeth White, the author of Fifty-five, Unemployed, and Faking Normal, and Neal Gabler, who had written “The Secret Shame of Middle-Class Americans,” which was published in The Atlantic last May.
                Before I go further, let me admit I have not read Ms. White’s book. It was self-published, which is pretty much what writers, including this one, must resort to these days to get their works in print. The downside to self-publishing is it takes a while for libraries to get our books on the shelves. I promise I will read the book when it gets to my library. That said, as I write this, the book has thirteen reviews on Amazon--all of them five stars, and not many books can match that—especially just two months after publication! From the reviews, it appears the book is a resource for those who find themselves laid off after an age-shortened career and features more than 100 online resources.
                I read Mr. Gabler’s article in The Atlantic, and all I could do was shake my head and think, “What a screw-up.” Think of something financially stupid, and Mr. Gabler’s done it. Buy a condo in Brooklyn. Check. Send the kids to a private school. Check. Rent then buy a house in the Hamptons. Check. Sell the Brooklyn condo at a loss. Check. Become a one-income family. Check. (Mr. Gabler is the author of several books, but even though his income is variable, that’s the one income the family chose to rely on.) Keep your spouse in the dark about the looming financial Armageddon. Check. Have your parents use your inheritance to pay for your kids’ expensive college. Check. Become delinquent on your taxes. Check. Drain the 401(k) to pay for a daughter’s wedding. (Paying, presumably, the early withdrawal penalty along with the income taxes. AAUGH!) Check. I couldn’t believe a kid would allow her parents to put their retirement at risk for something so transitory as a wedding, but… . Well, you get the point. Mr. Gabler says, “Perhaps none of this would have happened if my income had grown the way incomes used to grow in America. It didn’t, and they don’t.” Mr. Gabler doesn’t ask for sympathy, fortunately; he merely points out he is in the same boat as at least 47% of Americans his age—unable to come up with $400 if a sudden need to do so arose.        
                How did we get into this situation?
                Let’s take a trip back to the heady days of the 1990s.
                Thanks to an article in The New York Times in 1992 that mentioned my book, Living Cheap, and Living Cheap News, the newsletter I had just begun, I found myself part of what the media called the “New Frugality” movement. I got to see, first hand, how the media regarded frugality.
                A couple of the newspaper writers, usually the guys, were intrigued by the idea of living below their means. The women not so much. Magazines were pretty much the opposition.
                I got invited to appear on Dr. Dean Edell’s show, Dr. Dean. It was a disaster. I’d been told the show was about frugality. It was. Frugality as a mental illness! I was “diagnosed” on the air by the late Carla Perez as “unhappy,” and the reasons for my unhappiness could be I was unhappily married. Or maybe I was single. Or maybe I was unhappy in my career. Well, I was single, but certainly not unhappy—except for being ambushed on TV. I was not happy about that! While Carla was droning on about my unhappiness, the producers kept waving signs that said, “Jump in.” I decided Carla was quite adequately making a fool of herself. And, besides, being the polite Midwestern boy that I was, I would not want to be rude and interrupt such an insightful, if inaccurate, spur-of-the-moment diagnosis.
                When the audience was allowed to speak, their questions were about how to save money. One questioner asked what I did with the money I saved. I said I bought bonds. Dr. Dean quipped, “He just can’t help himself.”
                Actually, if I’d been allowed to speak at length, I would have explained I wanted to build an independent income so I would have the option of doing what I wanted with my life and not be tied to an employer or dependent on a salary. I’d had to make two forced relocations in the previous ten years (one in 1982 and the other in 1987), and I didn’t like not being in control. Not even of where I lived.
                But Carla’s point was frugality is unnatural, and if I were happy, I’d be out spending everything I made—and then some—just like every other red-blooded American male—just like Neal Gabler!
                About a year later a writer for Worth contacted me. We talked at length. He seemed surprised at how good being frugal had been for me. Sometime later I asked him how he’d been able to use the information I’d given him. He said he’d discovered some bad feelings among some of the people in the New Frugality movement, and his editors had told him to pursue that story. The article (“The Three Scrooges”) was negative not only about the movement, but about the people discussed. Fortunately, I was not one of them.
                Shortly after that, I was screened for yet another daytime talk show. I came across as too normal—that’s actually what the producer said. They were going for some “more real people.” I saw the show. I was happy not to have been chosen.
                After Amy Dacyczyn retired, she was conned into opening her life to a reporter for Money. She didn’t really want to do the interview. After all, she had absolutely nothing to gain. After the reporter hinted Amy may have “something to hide,” Amy agreed. The article was savage. This same writer, who was childless at the time, would go on to write articles advising working mothers not to leave the work force. She may still be out there lurking and looking to write other articles that better demonstrate her lack of qualifications and objectivity.
                In 1997 Amy agreed to write a chapter for a book I’d proposed. The book was published by Berkley in 1998 as The Simple Life, although my title had been The New Frugality Anthology. (“Simple” was so much more “upscale” than “frugality.”) When we were talking, she said frugality was a hard sell given the economy was so good. I remember saying, “But when the economy is good, that’s when it’s easy to save for times when the economy is not so good.” But she was right. Frugality was a hard sell in the 1990s.
                Then came the bust, and the Great Recession. It was like the seven years of Biblical famine following the seven years of feast. Only it’s gone on longer than seven years for many people.
                Neal Gabler is or will be 67 this year. As he admits, he may have dug a hole he and his wife will never get out of. It’s almost certainly too late for him to recover. But at least he can sell the occasional magazine article. Not everyone has that option.
                For Neal Gabler and others in my generation who listened to the media about how silly and at times unpatriotic (remember the message after 9/11 was to go out and… shop!) frugality is, it’s too late. The chickens have come home to roost.
                But what about those who are young enough to take control of their finances? The lessons of Neal Gabler and the 47% of middle-age Americans who would have to scrounge to come up with $400 for an emergency should be clear.
                Get frugal already! Start saving. One thing I will guarantee is when you get to Neal Gabler’s age you will be astounded at how quickly the past 20 or 30 years have flown by. So make some painless adjustments to your spending today to avoid a painful old age.
                Think for yourself. If the media—or anyone else--starts telling you how silly it is to save money, ignore them. I’ll admit I had a much different upbringing than many in my age group in that I was foisted off on my grandmother a lot when I was young. She immigrated to the US in 1912, homesteaded in what would become part of the Dust Bowl, and survived the Great Depression as well as the home front deprivations of World War II. While I didn’t have first-hand knowledge of those times, I certainly heard a lot about them. As a result, I was always careful with money, although if my grandmother were here, I’m sure she’d be appalled at some of the things I spend money on.
                And don’t count on resorting to dog food in your old age. As one who buys food for our canine companion, I can tell you even Alpo is getting pricey.
                Take control. Think for yourself. Learn to decide what you want and what you actually need. Run your life like a business. Eliminate superfluous expenses the way businesses eliminate employees. Save and invest. And earn yourself a nice life.

© 2017 Larry Roth