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The Problem with Patrimony

June 20, 2015 5 Comments

Dick and Ruby marry 1942

Dick and Ruby marry 1942

Men and women have coexisted in inequality for all of history.  Treatment for women around the world is just now starting to bring the female population out of slavery to the male population.  The serious wounds to culture, development and education can be healed, but only through a process of patience and forgiveness.  In the developed world we struggle for equal pay, but in the third world females have a very hard time getting an education or determining their own fate.  How do we make a path that will lead to respect and appreciation for both sexes in our societies?  There are economic barriers as well as political practices that impede progress toward equality.  Cultural beliefs about roles and appropriate careers change slowly without outside help.  Figures show that educating women and making small business loans available to them is the best way to jump start local economies.  Many great examples are popping up around the globe.  Still, Boko Harum kidnaps and marries school girls.  Violence against women continues, as does slavery and sex trafficking.

Tomorrow is Fathers Day, a time to commemorate the contributions of all fathers living and dead.  I am extremely grateful all my forefathers survived in order that I might exist.  I wonder about their politics.  I have studied them throughout history and wonder about their secrets and inner beliefs.  There is evidence of discord in some of my family history, between husbands and wives, but there are also examples of dedicated and happy families (according to history).  My family was probably about average on the bliss and harmony scale.

I was fortunate to be born a boomer because women’s liberation as a socio/political movement in the United States gained momentum when I was a teen.  I can clearly remember calling my father a male chauvinist pig when I was in high school, only partly joking.  My parents wanted no liberation for my mother, but had mixed feelings about my own. They always said I could achieve anything, but still focused on dress code more than education.  My mom scored some liberation in her 60’s because my parents took up hot air ballooning.  Ruby was not only the ground crew, a sometime pilot, but most importantly, she could sew the balloon when it was damaged.  My parents were exposed to younger people in the ballooning circles, and I noticed that my dad needed her as an equal in that situation. He started to treat her with a bit more respect in the balloon days.  They were born in the 1920’s, so there was only so far they could be expected liberate.  I suppose they went as far as they could toward equality.

My father had a stroke and pretty steep decline of his facilities which left him unable to handle finances.  The problem was at that time my mom had never balanced their checkbook, let alone had any understanding of the investments/insurance/retirement plans they had.  She was not really in shape to learn everything about finances at age 78.  She learned Quicken and began to do the bill paying and simple tasks.  I convinced them to move to Tucson to a retirement home so I could keep an eye on them.  This worked well for a while until my dad’s health took another serious dive.  He was in the hospital, looking very much like he might die when I asked him about his estate.  He told me to ask his accountant.  I called and learned that his accountant had no idea what all his assets were, or where they were.  Neither did my dad.  He did survive that scrape and lived for a few more years, but the crisis gave me the opportunity to find out that:

  1. Although they told me they had a trust, they had no assets in trust, just a folder
  2. My father had obligations to partners in New Mexico who could call for cash any time
  3. There was no market for the oil shares in New Mexico, so he could not sell them
  4. His vast holdings and constant call for cash had the potential of breaking his bank

This reality hit me like a brick when I was already emotionally stressed about my dad and his near death.  I managed to help them get their assets into a trust.  By then they had to have separate property trusts drawn up to protect my mom from my father’s deeply speculative dealings.  This was expensive, but the alternative was divorce after more than 60 years to protect my mom.  The oil properties had to be legally described and placed into trust, then he stopped paying the cash calls.  His lawyer told the partners he had nothing to contribute, which was true.  Finally after about 3 years of negotiating the partners let him out of his obligations.  I have no idea what happened to all the wells, but the deed was signed in Texas the day after my dad died in Tucson. His final act on earth was to be released from that piece of bad judgement.

My father believed that the price of oil could never go down over time. He plunged more money that he rationally had into that belief because he was a petroleum engineer.  He had no financial sense, and by the time he started buying into those wells he had no sense of any kind. My mom had no protection and no way to guess how wacky his finances had become because he stayed in charge after he was incompetent.  From that experience I learned a lot about finances and investments.  Not only did I help them put their house in order and in trust, I put all my assets in trust.  I am happy I learned enough to save my mother’s financial fate, and possibly my own.   This Father’s Day I honor my dad and all his forefathers.  Here’s hoping that their ideas of patrimony fade, for everyone’s sake.

Dick 1945

Dick 1945

 

 

Counting and Comparison

June 20, 2014 1 Comment

The Freaks Shall Inherit the Earth

The Freaks Shall Inherit the Earth

There are different ways to approach finances, but there is only one way to count. You can count by 5’s or by 10’s but when you come up with a sum, that is reality. People today are often confused about what constitutes wealth, security, or satisfaction. One of the problems I notice is the addition of interest rates and complicated denial schemes to hide from financial reality.  When people became accustomed to using credit cards many also abandoned balancing the budget.  Some might believe ignorance is bliss, but when the interest rates catch up with your finances there will be no bliss for you.  The popularity of Suze Orman shows how very well educated and powerful people can be financially illiterate to the point of causing agony in their lives.  When I was a child there were no credit cards.  The parents had metal plates that belonged to specific stores, but I don’t think there was credit advanced.  The bill at the store was paid each month in full.  We did not consider borrowing money to buy everything.  Time was more bountiful too, so people were not strapped to decide which meeting/sporting event/social episode to choose.  We had time for everything, including hopping in the car to drive across the country.  I do not think we need to return to the days of yesteryear to conquer or mathematical shortcomings.  I think we need a simple way to teach those who have always lived in a world with credit cards how to understand compounded interest.

Chris Brogan, one of my favorite authors, has written a book, The Freaks Shall Inherit the Earth, that offers a wonderful solution to our dilemma of rampant financial delusion.  He calls it “Mortgage Math”.  It is a brilliant way to compare and bring into focus money that one is contemplating spending.  Instead of trudging onward randomly spending, paying, and wondering how to get out of debt he suggests that each expenditure be compared to something you buy all the time.  A mortgage payment is a very common overhead expense to which people can relate.  If you have to decide if what you will pay (both now and in interest) for something is worth it, just ask how it compares to your mortgage payment.  This adds perspective to an otherwise never-ending spending problem that has buried many Americans in hopeless debt.  I have no mortgage, but I use this system to compare anything to a trip.  I want a first class ticket to Europe, plus time and money to spend months tracking down my dead ancestors in style.  This adventure will be pretty pricey, and I want it more than most day to day things I might purchase.  I am not really saving up for it, but rather am using it as a guideline for comparison.  I am not an interest payer.  I like to be an interest collector, but I still find this idea very useful for attuning with financial reality.  He uses a similar formula to determine how valuable time is.  By limiting meetings to 20 minutes, saying no often, and staying aware that tempus fugit, memento mori, he gives good advice to create frameworks for more abundant free time.  By valuing what you already have, time and freedom of choice, you can make your own financial future more comfortable and successful.  There are many good ideas in this book, but this way of looking at finances and time has great potential to help many get on track and fulfill dreams.

 

What is a Carry Trade?

April 9, 2013 1 Comment

High finance is very easy to understand. The fact that everyone avoids understanding it makes it very easy to take advantage of the financial ignorance of the population. Bernie Maddoff you do not have to be, in order to screw your neighbor and your society out of maximum profit. Buy/borrow/die is all one has to do to benefit from the magic vanishing value of the currency everyone uses. Taxation avoidance, both legal and shady, is the province of those who already have their money in hand. Taxation without even a shabby lobbyist for representation is the fate of those who must claim earned income from jobs.

A carry trade is a calculated risk. The problem is that now the general public does not seem to know how to calculate risk, also known as random acts of unexpected circumstances. We hear the words risk-reward and carry trade, but think this is something that has nothing to do with us and our finances. This banker jargon is for people who wheel and deal, not for borrowers who pay interest on almost everything they buy during their lives. While occupying Wall Street may be symbolic, society would benefit by knowing how Wall Street profits while the population withers financially. If you carry credit card debt while your banker is free to gamble/borrow/invest in carry trades, you will come out as the big looser.

Do you ever wonder why carrying debt at a high interest rate all the time seems natural and unavoidable? Do you simply accept the idea that everything you buy is charged to the future, when presumably it will be so much easier to pay?

The Federal Reserve has become the banker of bankers. Now it is possible to predict with some certainty that interest rates will be kept at nothing for a long time. The certainty itself reduces risk for anyone who wants to gamble with money. Knowing how this will effect your own personal finances may be the single most valuable concept you have learned since you learned to count.

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