Coffee heat rising

Economy

Dollar$ and ¢ents, 2014

by

So the year has come around the curve and is streaking toward the finish line. Time to take stock of the money predicament.

Turns out it’s not such a predic’ as expected. Really, I expected 2014 to end in Flaming Financial Disaster, what with the car bills and the dog bills and the house bills and the healthcare bills and the jacked-up property taxes and the one. freaking.  screaming. EXPENSIVE. thing. after. another.

Last January, I started the year with a cushion of about $11,000 in the bank. Rather than draw down from savings quarterly, as I did in 2013, I decided to estimate the amount I would need for 12 months and pull that out of investments in January: $13,000+.

That was a gulp-making maneuver. Yanking that kind of money out of savings triggers a Bag Lady Syndrome fit in me. But in theory it would all come out in the wash — one way or another, I’d need about that much to live for a year, and trying to calculate how much to take out in Q3, when little or no teaching income is forthcoming, was a verifiable PITA.

And I will say, Q3 was damn scary. I pretty much took up residence at the Mayo Clinic, a mighty pricey hotel, and precious little income was materializing from teaching, editing, or blogging. But in the fall, the piddling pay for three adjunct sections, surprisingly, took up the slack.

I have no idea how much I’m going to end up paying for surgery after surgery after surgery after surgery. Bills come from the Mayo — eleven grand here, fifteen grand there — but they seem to have no meaning. Medicare is picking up some portion of that; Medigap is picking up more. Apparently the victim mark patient has to pay something, but it’s so difficult to tell what it is that even the billing people at the Mayo can’t figure it out. Or at least, they claim they can’t. Right now, every time a check comes in from Medicare B or the Medigap insurer, I just throw it in the Mayo’s direction. That leads them to imagine I’m at least trying to pay the bills, and that, mercifully, has kept them off my back. So far.

Weirdly, despite all the extraordinary expenses, at the end of November the balance in checking was just a few hundred dollars less than the January 1 balance: a little over eleven grand.

But now for the BIG weird:

Hang onto your hats, folks.

The balance in investments and retirement savings at the end of October  was $107,633 more than the January 31 balance.

Yeah, you read that right: one hundred seven thousand six hundred thirty-three DOLLAH!!!!!!!!!!!!!

That’s after drawing down $13,000 to live on and after paying out $7,350 for my share of the mortgage on the downtown house.

Holy mackerel. And we want to put the Republicans back in charge of the government…WHY?

Changing Climate, Changing Property Values?

by

 

Dust storm in Rolla, Kansas
Dust storm in Rolla, Kansas

Let’s dust off the crystal ball this morning. “Dust it off” is the operative term. Here in lovely uptown Arizona, gale-strength winds have been blowing every day and most nights for the past several weeks. Clean the furniture, and the next day it looks like you haven’t dusted in the past ten days.

Arizona is still mired in a decade-long drought, with no end in sight. Actually, the drought has gone on longer than a decade, and “normal” summer temperatures have been steadily rising as development runs amok and cities get bigger and more hectic. When I moved here in 1962, a 110-degree day was hot. Summer temperatures might rise as high as 112, but 114 was unheard-of. Now we regularly get 114-degree days, and we have seen highs of 118. In some parts of the Valley, unofficial backyard thermometers hit 120.

The City of Phoenix, now the eighth- or ninth-largest metropolitan area in the country, has not yet instituted water rationing, although it has raised water bills into the astronomical range, our City Parents hoping to discourage water use. It now costs as much to keep my xeric landscaping alive as it used to cost me to water lawns in front and back yards: often the water bill is higher than the exorbitant air-conditioning bill. The Valley avoids having to force residents to save water, by law, because of the Central Arizona Project, which diverts Colorado River water into the low desert.

However, the Colorado is running low, and the reservoirs that impound that water are running lower.

Outlying towns are forbidding residents to wash their cars, to refill their swimming pools (which means when your pool drops below the level of the tile rim, you have to shut off the pump and drain the pool, or let it turn into a green mosquito nest), to water their lawns, or even to use their garden hoses at all. Exceed your allotment or get caught in the act and you’ll get a stinging fine.

So…the question is, how long is this region going to remain livable?

If tomorrow the City informed me that I couldn’t run my irrigation system, couldn’t keep my pool full enough to operate the pump, and couldn’t water the trees, life here would take a decided turn for the worse. The shade and citrus trees temper the heat inside the house and help keep air-conditioning bills marginally under control. The pool, besides providing therapy for the chronic back and hip pain, makes living through a Sonoran Desert summer marginally tolerable. Without it, one would either suffer some serious misery for three or four months or, if at all possible, leave town for the summer.

The gardens and the flowering desert trees and the springtime abundance of citrus form a major part of what makes the low desert a good place to live. If suddenly we were told we could no longer have those things…well, it would no longer be a good place to live. My guess is about 90% to 95% of Phoenix dwellers would agree with that. Give us water rationing, and we’ll give you out-migration.

And, as you can imagine, if a lot of people start to move away, property values will drop as dramatically as they did during the Great Recession. Only this time they won’t come back up.

Right now, prices are back to where they were pre-Bubble. Most people are no longer underwater. And interest rates are low.

If I were a young Arizona professional, business owner, or craftsman able to make a decent living, I’d start looking right now for work someplace at least 20 or 30 miles inland – more, preferably – where they have water but no tornadoes. And precious little snow. This could be one’s last chance.

The Third-Worldization of America: Proceeding Apace

by

Lineman_changing_transformerThe electrician and his sidekick were here this morning to install a few outlets at hip height, so I don’t have to crawl painfully on the floor to plug in a vacuum cleaner, a laptop, or a heating pad.

This guy, Dave, has been the electrician of choice for the past 30 years, so we’ve become casual friends. We’re both beginning to enjoy the vicissitudes of old age — he more than me, I’m sure, since he does a lot of physical work. While the two men were working, I was fiddling with installing a new battery-run doorbell (one of the previous Happy Handyman homeowners took out the hard-wired doorbell!), and I remarked that compared with the one I put in eight or ten years ago, it’s a piece of junk. That, of course, kicked off the Going-to-Hell-on-a-Handcart conversation.

Dave remarked that he feels unhappy in the 21st century, because so many changes keep coming so fast. He doesn’t like either the changes or the pace of change.

I said, well, if you’ll recall that’s exactly what our parents said when they got to be our age.

He said, that’s true. But there was a difference between 20th-century change and 21st-century change. In the 20th century, the changes put people to work: people had jobs. The opposite is happening now. Fewer and fewer people have jobs, and those who do don’t have very good jobs. Then he clucked about the stupidity of sending all the decent jobs offshore — and the harm it’s doing to America.

One thing that’s good about having a trade, I said, is that they can’t offshore electrical installation.

That’s true, he said. But the problem is, when people don’t have decent-paying jobs, they can’t afford to have maintenance work and improvements, like installing outlets where you can reach them, done right. So they either don’t do them, or they just jury-rig things to try to keep them going as long as possible.

You’ve been in Mexico, he continued. You’ve seen how the construction and infrastructure are thrown together, just enough to hold it up for a few days. That’s because nobody can afford the material or the skilled labor to do a proper job. They toss things up, they patch things together just so they’ll last until tomorrow. When tomorrow comes, they’ll figure out what to do then.

Well, that kind of thing is happening here more and more. When repairs need to be done, they either don’t get done or they don’t get done right, because people can’t afford to hire an electrician or a plumber. They’re just not earning enough.

Holy sh!t.

I think I’ve talked before about the Third-Worldization of America. As Dave said in passing, the only people who benefit from the changes we’re seeing today are the very wealthy and the upper-level, extravagantly paid executives of huge corporations.

Listen to the workingmen. They’re the people who are on the ground, trying to make a living with American jobs — you could say they’re the canaries in the mine. And in my opinion, they have a clearer, truer view of the health of our country’s economy than does any theoretician in academe or any politician in Washington.

What they have to say will curl your hair.

Image: Lineman installing a new transformer. Dave Pape. Public domain.

This post was included in the Carnival of Wealth at the feisty iconoclast Greg MacFarlane’s site, Control Your Cash. Thanks, Greg! 😉

 

Is the Republican Party Bad for Business?

by

Well, I never thought I’d say it, but here’s what we’ve come to: The Republican Party is bad for business. It’s not only bad for business, it’s bad for anyone who has a 401(k), a 403(b), or any other instrument for equities investment.

How, really, does a major political party get to be captured and held hostage by a bunch of crazies? Well…one explanation may be gerrymandering. Arizona’s district 5, for example, in 2011 was merged with District 6, solidifying Republican control of the Greater Phoenix Metropolitan Area’s East Valley suburbs, which have historically been dominated by the Mormon church.  Hence, Matt Salmon, one of the smuggest of the crazies we’ve sent to Washington. Other Arizona districts have similarly been manipulated to give Republicans an edge.

Another is probably poor education. You’ve heard me comment on the deplorable products of my state’s K-12 system. Former Intel CEO Craig Barrett, who was largely responsible for bringing his company to Arizona, has said that had he known how bad the educational system here is and how blithely the legislature cuts funds to schools, he would not have suggested that Intel build here.

Only a blindly ignorant electorate could possibly vote in clowns like Matt Salmon and Jeff Flake. One almost wonders if the Republican determination to underfund education in this state has an ulterior motive: uninformed, gullible voters = Republican wins.

My own business only just started to recover this year from the recession engendered by misguided right-wing theories about the economy and ill-advised military occupation in the Middle East. Now the fundamentalist crazies are at it again. The Republican party, driven by an extremist minority that in many ways can be likened to conservative Muslim extremists, has succeeded in shutting down the most powerful government in the world. And it is about to cause us to default on our loan payments.

Taken together, these two blunders will drive our country and the world into another recession. My business certainly won’t sustain that, and I’m sure many others won’t either.

As I write, eight hundred thousand people are furloughed from their jobs, thanks to the extremists in the House.

You understand: that’s 800,000 people who are bright enough to figure out that their livelihoods are threatened by a bunch of doctrinaire fools. It’s 800,000(!!!) responsible, hard-working, taxpaying citizens who, if they have any clue which side their bread is buttered on, will NOT vote Republican in the next election.

Meanwhile, tens of thousands of children are locked out of HeadStart programs that, for many children of the working poor, provide the only square meal the kids get in a day and the only affordable day care for minimum-wage and underemployed parents. Not, I suppose, that we should care about the Underclass, eh? But hey: these are freaking children!

I used to be a Republican myself — was a fan of Barry Goldwater, amazingly enough. Actually campaigned for the man when he ran for president. He signed my first straight-A report card from the University of Arizona.

But the party diverged from my way of thinking (and, I believe, from Mr. Goldwater’s) years ago.

I am still not a doctrinaire liberal, although in the current atmosphere the crazies like to paint people like me as far to the left. That’s simply untrue. As a business owner, I probably would vote for Republican policy if it supported my company’s interests. I happen to believe in the Second Amendment, and if all things were equal (i.e., if all candidates had full control over their marbles), I would vote for a Second Amendment candidate and against a gun confiscation candidate, no matter what the party.

However, a policy that brings down the government is not good for business.

 In my opinion, it’s sedition.

When exactly are the sane men and women of good will who remain in the party going to wrest control away from the nut cases?

Frankly, these people frighten me. Politics and governing
demand compromise.

—Barry M. Goldwater
November 1994

Do We Have More Expenses Than Our Parents Did?

by

At Surviving and Thriving,  a reader named Grace posted an interesting comment on Donna Freedman’s latest gracefully written post about generosity and about keeping perspective on one’s own problems.

Perspective is such an important thing, and one that we so often lose in the face of our personal woes. While I am quick to whine about my financial state, I do try to keep in mind that my parents reared their children, bought a home and had a satisfying retirement on far less than I make. Naturally, they didn’t have my expenses, but truth to tell, I shouldn’t have my expenses!

Our parents brought up their families, paid for a home, and had an adequate retirement despite never earning much…. They didn’t have our expenses, but…maybe we indulge ourselves. Oh, God. I can’t resist:

Really? Is that so?

My parents rented all the time that my father was working — partly because we lived overseas for ten years, and partly because my father felt mortgage interest was the biggest rip-off known to humankind. When my father retired, he bought a house in Sun City with cash.

The house my parents retired to would sell for about $71,000 today. In 2004, it sold for $110,000, considerably less than Zillow thinks it was worth at the height of the bubble, in 2005.

My parents bought that house in 1962. Let’s go with the $71,000 figure as the value of the house, although, relatively speaking, it may have been somewhat higher when the place was brand-new. In 1962 dollars, that price would be $9,235.  In 1960, the average price of a Sun City house was about $10,550 — and my parents’ house was one of the smaller models.

I think my father earned about $8,000 to $10,000 a year as a Merchant Marine deck officer with a license to sail any tonnage on any ocean. That translates to about $61,500 to $76,880 in 2013 dollars. And it’s probably low: today a tanker captain with an unlimited license earns between $120,000 and $200,000. However, toward the end of his career my father sailed, by choice, as first mate, because the job didn’t entail 24–7 responsibility for the ship’s operation and safety.  So, the lower figures are probably accurate. My mother occasionally took office jobs, but she wasn’t paid much — in today’s dollars, probably no more than about 18 grand. By the time my father retired, purchased a new car, and put me through college, he had about $130,000 left in savings; that would come to about $999,400 in today’s dollars.

If that estimate is anywhere near accurate, he was doing a great deal better than his daughter is doing.

Is it true that they didn’t have our expenses?

Well, my father paid for my tuition, room, and board at the University of Arizona. He gave me $1,000 a year to cover all my bills for the nine-month academic period. That’s the equivalent, in 2013 bucks, of $7,868. I paid the tuition and dorm bills, budgeted $10 a week for all my meals, clothing, laundry, and other incidental expenses, and, at the end of spring semester, came out about even. Today, if you lived on campus, it would cost you about $24,744 to attend the UofA.

So: check! There’s an expense he didn’t have.

The four-door Ford Galaxie he bought cost $2,500: about $19,980 in today’s dollars. Not much difference there: that’s what I have budgeted for the purchase of my next vehicle.

In 1962, the cost of gasoline was about 25 to 30 cents a gallon: $1.92 to $2.31 in 2013 dollars: about 2/3 of what we pay today, adjusted for inflation. Some savings there, but not as much as one might have expected.

A Porterhouse steak cost $1.19 a pound; hamburger was 45 cents a pound; butter, 67 cents a pound; baby food, 25 cents for three jars; carrots, 9 cents a bunch; asparagus, 19 cents a pound; potatoes, 39 cents for 10 pounds; corn, 5 cents an ear; onions,  29 cents for 2 pounds;  oranges, 89 cents for two dozen; bananas, 10 cents a pound; bacon, 79 cents a pound; Crest toothpaste, 50 cents a tube; Tide laundry soap, 59 cents.

How much would that market basket cost us today, if we paid the same amount in inflation-adjusted dollars?

• Porterhouse steak: $9.15 a pound (= $1.19 expressed in 2013 dollars) (Safeway has Porterhouse for $5.99 a pound just now)
• hamburger: $3.46 a pound (Bureau of Labor Statistics estimates average price of $3.055/pound for 100% ground beef in 2013)
• butter:  $5.15 a pound (BLS estimates $3.37/pound in 2012)
• baby food: $1.92 for three jars (at Walmart, 98 cents for two; that’s $1.47 for three)
• carrots: 69 cents a bunch (BLS estimate: 55 cents a pound, which would probably be about $1.10 a bunch)
• asparagus: $1.46 a pound (on sale at Safeway in 2011 for $1.28 a pound)
• potatoes: $3 for 10 pounds (in 2011, the federal government estimated you’d pay about $6.50)
• corn: 38 cents an ear (in 2012, $1 for 6 ears at Safeway; 17 cents an ear)
• onions: $2.23 for two pounds — about $1.12 a pound (last week I bought onions at Safeway for 88 cents a pound)
• oranges: $6.84 for two dozen (today’s price: 88 cents a pound; for 24 that would probably be about $10.55)
• bananas: 77 cents a pound (55 cents a pound, Safeway)
• bacon: $6.07 a pound (BLS estimate, 2013: $5.23 a pound)
• Crest toothpaste: $3.84 per tube ($3.67 at Kroger; $1.67 with a coupon)
• Tide laundry soap: $4.54, unknown quantity (2013 price: Costco, $17.49 for 170 ounces, high efficiency)

Let’s compare. In the comparison, though, let’s drop the laundry detergent, since we don’t know how much that inflation-adjusted $4.54 bought and since the new HE version would wash many more loads than 1962’s Tide would.

What would they have paid, in the same dollars we use, for their products, and what are we actually paying for those products today:

1962 vs 2013 prices

I swear: I’m not making this up!

If you express the amounts they paid in 2013 dollars and then compare what you and I would pay for the same products today, the total is…just about the same!

So no. Their day-to-day expenses were not a lot less than ours.

What about utilities?

Well, the average residential cost of electricity in 1965 was 2 cents per kilowatt-hour; adjusted for inflation, that figure would come to 15 cents per kilowatt-hour. In 2010, the average cost for residential users was 11.53 cents per kilowatt-hour. No bargain for our parents there.

Most homes had no air-conditioning, although we did have swamp coolers and window air-conditioners, which, like heating systems, were inefficient and expensive to run. And of course no one had ever heard of a DSL connection.

Average cost for cable TV: about $50 a month; in 1962 dollars, this would have been $6.50. But it’s moot: there was no cable TV in 1962 — television viewing was free. There was less advertising, too, we might add.

After much Google and Yahoo searching, I haven’t found a reliable figure for the base monthly cost of a residential land line in the 1960s. Today’s basic cost for cell phone service of $30 to $50 compares favorably with the  $45 landline cost claimed by Wiki Answers (there were no cell phones, of course), except…$45 would equate to $331 today, plus you had to pay extra for toll calls. Highly unlikely. If memory serves, I think the base residential cost was $8 or $10 a month, but any call to another area code, including one just a few miles away, would result in a long-distance charge, which could be pretty expensive. When we lived in San Francisco, my mother had to pay long-distance charges to call her grandmother in Berkeley, a 20-minute drive across the Bay Bridge. Assuming you rarely made toll calls, though, a $10 bill of 1962 would be $76.88 today — about what I pay Cox for a DSL connection and a landline.

If we moderns dispense with the land line, we can get cell service for a much more modest rate. We’ll have to pay for the phone itself — but that’s a one-time hit. And besides…the “phone” is not really a phone: it’s a tiny computer connected to the airwaves.

In 1968, a 23-inch color console TV cost $349; a quick conversion indicates this was the equivalent of $2,328. A 60-inch high-definition flat-screen color TV will set you back only 980 of today’s dollars at Costco. And you won’t have to deal with the recurring visits by the repairman that we enjoyed during the 60s.

The average salary from which our parents paid costs that were the same as or higher than the prices we’re paying today was $4,659 in 1965 — $31,082 in today’s dollars — and most households had only one salary: the man’s. Today’s intact families usually have two earners. In 2012 the average starting salary for new college grads (those who could get jobs…) was $44,259. For all earners, the average salary in 2011 was $42,980. But bear in mind: in many households today, two adults are working. In 2012, the average U.S. household income was $63,091 — twice what a typical married couple in my father’s generation could expect.

Think of that. They were paying the same or higher costs — sometimes much higher — for the same products and services we buy. But in many cases those products and services, such as automobiles that were unsafe at any speed and clunky hard-wired phones with extra fees for long distance and TV sets prone to snow, static, and spinning images, were decidedly inferior to ours. Overall the cost of living was not a heckuva lot less, when the monetary units consumers paid with are inflation-adjusted.

• Did our parents make far less than we do? Yep. In general.

• Did they have fewer expenses than we do? Not exactly.

• Should we have our expenses? Well, sure we should. Most of them buy the same services and products our parents had, only better in quality and lower in real cost. The only indulgence I can see in the expenses shown above is cable television — and many American TV fans have canceled that in favor of cheaper, less wasteful entertainment such as Netflix.

Maybe there’s a reason we live in bigger houses than our parents did, collect electronic gadgetry that would have been science fiction to them, and park two or three cars in the garage: we can afford them.


 

Are You Better Off Now Than You Were Four Years Ago?

by

Various politicos, pundits, and demagogues are asking if we’re better off now than we were four years ago. For moi? The answer his “hell, yes!”

How about yourself?

Four years ago today, I knew my job and the jobs of my four staff members (five, if you counted interns) would end in two and a half months. The nation was heading into the worst recession since the Great Depression, and I was heading into the most difficult financial times of my life.

I was struggling to pay off a $30,000 equity loan on my hugely devalued house, which would soon be worth less than I’d paid for a house with the same floor plan by the same developer in the same tract ten years before.

My life savings were down by about $180,000.

The house I’d helped my son buy at what we thought was near the end of a downtick was sinking below the waves, headed for Davy Jones’s Locker.

To pay off the home equity loan on my house, I was “noon-lighting” by teaching online upper-division writing courses on top of my regular job at the university. The Great Desert University caps its writing courses at 30, or 10 students more than NCTE recommendations allow, but it removes caps for online courses. Each class was double-enrolled, something I didn’t find out until two days before the semester started. I demanded pay for four sections and, to my amazement, got it. But the overload caused by the equivalent of five reasonably populated writing courses (120 students) on top of a full-time job was vast.

Got the loan paid off, though. 😉

As layoff day loomed, most employers didn’t bother to respond to applications. I couldn’t get hired for love nor money, whether in jobs that used my considerable experience and skills or in menial work. I couldn’t even get hired to drive the tourist train at the zoo!

I was forced to start Social Security benefits six years before I’d planned to do so; two years before I reached so-called “full” retirement age. It was that or draw down from my devastated retirement fund, something my financial manager strongly opposed. This resulted in much reduced Social Security payments, leaving me without enough cash flow to live on. There was a real possibility that, if I couldn’t find some kind of menial work, I would lose my paid-off home to county taxes, which I did not know if whether I could cover. Nor did I know whether I would be able to pay the utilities or cover routine maintenance on my home.

At the end of December, 2009, I just squeezed in under the wire to get the reduced rate for COBRA. Without it, I would have had to go bare, since I couldn’t have begun to afford the full freight. At the reduced amount, COBRA cost many times what I paid for the same insurance on the job, though it still was cheaper than Medicare, which mercifully kicked in just as my COBRA eligibility expired.

I finally did have to accept long-term part-time employment in a menial job, teaching junior-college freshman composition on an adjunct basis, despite having sworn, after the last time I taught freshman comp, that I’d never do it again. My classes filled up with scared, unemployed adults whose desperation was so solid you could reach out and touch it. Though I tried to put a bright spin on it—after all, I was grateful to have some income, even though it entailed hours of unpaid labor and paid all of $150/week per course—the truth is it’s exploitive, miserable work. Since then I’ve been living on net pay and $14,000 of emergency savings I had at the time I was laid off. And it hasn’t been easy.

Today things look a great deal better. Business is picking up, a fact reflected in the recent drop in unemployment. The economy is recovering from the real estate bust that dragged us all down: in these parts, real estate values have climbed almost 30% over the past year. The value of M’hijito’s house is now high enough that we would not have to bring an impossible sum to the table if he wanted to move; mine has now recovered enough value that if he got a job in San Francisco, where he would much prefer to live, I could sell my house, pay off the bloated loan on his, and move into it.

Friends in real estate, residential and commercial lending, renovation contracting, and travel report that things are picking up. A few are very busy, indeed.

My savings have recovered to the point where a 4 percent drawdown plus a modest income from freelance editing will support me in the same grand style I’ve enjoyed as an adjunct college instructor. In fact, it may allow me to cobble together a slightly larger income. It won’t be enough to live the life of a publishing magnate, but…neither will it require me to teach freshman comp.

Business is recovering enough that The Copyeditor’s Desk now has a steady flow of clients. Indeed, enough work is already coming in to share it with subcontractors, and it looks like some assiduous marketing will create further growth.

I can’t say everything is sweetness and light. Unless a miracle happens, I’ll never earn what my actual job brought in. In terms of month-to-month cash flow, I never will qualify as a member of the middle class again. And I can’t imagine how I’m going to afford to replace my 12-year-old vehicle, which surely won’t run more than another 40,000 or 50,000 miles. If I live to advanced old age, I probably will run out of cash. But things sure are better than they were four years ago!

How about yourself? Compared to four years ago, are you better off, worse off, or about the same?