Coffee heat rising


So I’m sittin’ around here (actually, slamming around doing some housework and unplugging the kitchen drain) when for unknown reasons the brain decides to reflect on bygone quarrels between my mother and my father over the way she used to spend “his” money.

In those days, it was almost impossible for a woman to get a job that paid more than pocket change. At one point my mother got a real estate license and went to work for a broker who was peddling property at the Salton Sea (we lived in Southern California at the time) — it was quite the little scam, from which she made approximately nothing. Actually, I believe her take was in the negative numbers, by the time you added up the gasoline and the cost of the damage to the car’s paint from sandstorms out on the desert. So in fact, whatever we lived on was what he earned.

My father deeply resented the way she would spend “his” money, although we did not live high off the hog in general. We rented mid- middle-class apartments, drove Fords, never traveled, did not go out to eat, did not gallivant to speak of. But she did like to buy clothes and makeup and she did like to shop in department stores. One time when he was home from the ship he happened upon a bill from a department store, the result of which was quite a sh!tfit, in which he ordered her to “stop spending my money.”

She used to shop in this department store, not far from where we lived…she was a hopeless sucker for the cosmetics salesladies. It was a nice middle-class store, but nothing swell-elegant. It was probably a Broadway: on the order of a Dillard’s. Not I. Magnin or Saks, but not Penney’s either.

She liked to wear lots of makeup and lots of perfume. Because she smoked a LOT, her skin was a mess to begin with and she needed perfume to temper the tobacco stink. And we’d spent 10 years in Saudi Arabia at a time when people imagined that a “healthy tan” was good for you. This meant her face was your basic shoe leather, the result being that every morning she would sit down in front of her dressing table and coat herself in layer after layer of moisturizers, cover-ups, foundation, rouge, and powder. An easy target for a sales pitch, she never understood (or rather, she refused to believe) that there was essentially no difference between a cheap make-up like, say, Coty, Avon, or Revlon and pricey stuff like Estée Lauder, and so she would allow herself to be talked into buying a whole line of spectacularly expensive products.

I can remember standing around a cosmetics counter with her as she browsed and bought and yakked and browsed and bought and yakked and finally we came away with something over $100 in make-up and perfume. This was in Southern California, so I would have been in my first or second year of high school — 1960 or 61.

Know how much a hundred bucks in 1961 is worth in 2020 dollars? Eight hundred sixty-nine dollars and twenty-nine cents! 

Holy sh!t!!

No wonder the poor guy blew a gasket! That would have been as much as he earned in a month — maybe more — going to sea full-time! As a Merchant Marine commander with a license to sail oil tankers of any tonnage on any ocean…

When I went to the University of Arizona in 1962, my father gave me $1000 a year to live on. It was enough to pay my tuition, the dorm rent, books, and food…with a little left over for clothes and incidentals. In 2020 dollars, that would be almost $1,000 a month, though after my freshman year tuition was essentially free. So…just imagine how outrageous spending a month’s worth of that on make-up would’ve been. 😀

Strange, what crosses your mind when the place is quiet and you have nothin’ else to think about but cleaning the kitchen counters…

Time to Buy a Big-Ticket Item?

Yipes! Inflation is about to rear its hideous head, or so we’re told. Manufacturers are threatening to raise prices as much as 15 percent between now and this fall. The reason for yet another kick in the ribs to folks who are unemployed, underemployed, and furloughed is the rising cost of commodities from cotton to copper to foodstuffs.

Well, if that’s the case, now may be the time to buy pricey goods such as appliances, especially if you’ve been putting it off until you can afford it. In another couple of months, you’ll be able to afford it even less. 🙄

My dryer has been dead for so long I’ve lost track—running safely only on “Air Dry” for the past year, anyway. Haven’t replaced it because I quickly learned that I’d just as soon hang the clothes on the line. But before I put away the comforters for the summer, I will need to wash them, and that is the one chore that will require a fully functioning dryer. The comforters need to be batted around inside a warm dryer to fluff them up.

At least…umh…I think they do. Maybe I’ll try it on Air Dry before springing for an $850 dryer.

Meanwhile, though, the washer is also about to give up the ghost. It no longer will spin the water out of a load of laundry. Last night I pulled out a wad of sopping wet jeans. Stuffed them back into the washer and ran the spin cycle again, to exactly zero avail.


Think of it: eight hundred and fifty bucks for a $325 appliance! What a flickin’ outrage. Every time we get another energy-efficient, green “improvement” to our lives, it ends up either costing us through the wazoo or, like the infinitely plungeable toilet, just flat not working. According to that article, we can expect Whirlpool (which makes most Sears appliances) to jack up its prices by 8 to 10 percent, as of April 1. That would be a price increase of 68 to 85 dollars, plus the 9.3 percent tax extortion: $74 to $93 all told…before the delivery charge.

That’s probably enough to justify accelerating the purchase of a washer, rather than waiting until the thing stops dead.

I’m thinking I’ll buy the dryer through Craig’s List, since it looks like I’ll hardly ever use it. But the washer is something I’d like to have for its entire lifetime (especially since they’re now designed to crap out in seven years). So I guess I’ll buy that new.

But it frosts my cookies.

How about you? Will you consider buying a big-ticket item sooner than later, knowing the prices are about to jump significantly?

Shave and a Haircut…

…six bits! Anyone remember that little ditty?

Okay. Can anyone remember when a shave and a haircut actually cost six bits? That would be 75 cents, for those of you born in the latter third of the twentieth century.

Well, the new version is “Shave and a haircut…forty-five bucks!”

No joke, gents. Saturday, in search of a Sur la Table store, M’hijito and I paid a visit to the über-tony Kierland Commons, a fixture serving the ever-more-upscale hordes of north Scottsdale. We parked the car in front of a barber shop—barber salon may be better—whose window proudly advertised a shave and a haircut for $45.

Well, it’s a bargain, I guess: less than I paid, a few hours later, for a haircut alone.

Amazing, isn’t it, what inflation does to a currency? My father told me that when he was a young man delivering milk on a horse-drawn wagon, he earned ten dollars a month. I must have looked startled—at the time this conversation took place, ten dollars would buy a bag of groceries—because he hastened to assure me that $10 a month was a living wage then. He not only lived on it, he said, he lived decently on it.

When he retired, he figured his hard-earned life savings of $100,000 would make him set for life. Then came the double-digit inflation of the 1970s, which reduced its value by…what? two thirds? Today a nest egg of a million dollars feels a little skimpy, considering that most of us can expect to live well into our eighties and some will live into our nineties. I don’t know if the prospect of accruing $100,000 felt as daunting to my parents as a million-dollar target does to me. It never was enough to set them up in affluence, even when he first retired.

I do know that if I still had a job, I’d still be working toward a million-dollar retirement fund. And I wonder if it would be enough to allow me to run the heat in the winter and to cool the house into the comfortable range in the summer.

“Six bits,” by the way, represents inflation, too. The original ditty went

Shave and a haircut, two bits!

The Twilight Zone

Today we present another guest post by Stephen Taddie, managing partner of Stellar Capital Management, LLC, located in Phoenix Arizona. In this essay, a quarterly report to investors, Steve observes that although the economy appears, by some indicators, to be on the mend, we may be about to experience an inflationary experience, and he explains why. Two other possibilities present themselves, neither of which is an impossible scenario. Full disclosure: Stellar is my financial manager.

If you stepped into an episode of Rod Serling’s Twilight Zone last New Year’s Eve and were isolated from newspapers, television, the Internet, and the obsession with valuing the daily gyrations in the economy and markets and then emerged from that alternate reality on July 1, what would you find?  The S&P 500 was up about 2 percent to 920, the 10-year treasury bond yield rose by about 50 percent to 3.5 percent, economic activity as measured by the gross domestic product (GDP) fell about 3 percent, and nonfarm jobs in the U.S. dropped by over 3 million taking the unemployment rate to near 10 percent.  In sum, a rather flat stock market, much higher interest rates, and a worse economy.

In last quarter’s commentary, “Déjà Vu or Something New,” we drew parallels to 1938 and suggested that the combination of regulatory change and massive stimulus provided a catalyst for stability, and that the tide should turn. Since then, the tide has halted its relentless ebb and has risen a bit to cover up some of the jagged rocks and sunken ships in the harbor.  The sea looks much calmer now, but backward-looking economic data will continue to serve as a reminder of the past carnage. We will likely see a few more ships running aground as they attempt to navigate the still treacherous harbor.  The sea captains are still searching for the elusive catalyst for growth that will create a rising tide and make the harbor more navigable for commerce.  The months of debate on this topic on news channels and in professional journals has yielded no real evidence of growth, and has caused the equity markets to stall. The question lingers: “How long will we wallow around in a less bad economy?”

In our investment meetings, where Dick, John, Phil and I delve into the details of the economy and markets, we have been discussing three major themesgeographic and industry growth centers, the U.S. dollar, and inflation.  Looking at current and projected U.S. economic growth rates, it’s clear that less bad economic news is not a very clear path to growth.  Comparatively, Asia seems better positioned for growth than America or—for that matter—many other regions. Even though we would like to believe that the sun rises and sets on the U.S. economy, consumerism, while still a significant part of the U.S. economy, is unlikely to be a growth engine for us or the rest of the world until we create more jobs.

The sheer size of the stimulus monies available puts much of the U.S. economy’s fate in the hands of our policymakers and their handling of the Fed’s balance sheet.  Three mutually exclusive outcomes related to the management of the national balance sheet are 1) inflation, where the Federal Reserve (Fed) does not shrink its balance sheet fast enough and eventually monetizes the government deficit, flirting with an inflationary spiral; 2) Goldilocks II, where the Fed gets it right, shrinking its balance sheet while methodically avoiding a monetization of the deficit, and achieving growth without inflation; or 3) deflation, where the Fed shrinks its balance sheet too quickly, pulling the rug out from under the economy, worsening the recession and flirting with depression.

There is as much debate about inflation as there is about finding the elusive catalyst for growth. At times it has been a politically charged debate, with Republicans forecasting that the liberal Democrats’ runaway spending programs will cause inflation, while the Democrats blame the Republicans for getting us into this jam in the first place.  Entertaining as those debates may be, it is hard for us to fathom that the U.S. economy can avoid an inflationary bias with the amount of stimulus monies currently circulating and three times that amount still ready to be pumped into the economy, plus the admitted bias of policymakers fearing deflation more than inflation.

The rational arguments for “no inflation” are mostly based on our economy having no upward wage pressure and plenty of spare industrial capacity…which are very good points. Our concerns, however, lie in the worth of the U.S. dollar versus the currencies of our trading partners, its effect on the interest rates U.S. debt issuers must pay to compensate investors for that weakness, the higher prices consumers might have to pay for the goods we import, and the additional cost that manufacturers might have to pay for raw and intermediate materials.  This may not make headlines until later in the year, because the year-over-year comparisons for commodity prices still reflect the sky high levels of last summer and do not yet flash the warning signs of inflation.  As we move into the fall and winter, the differences will narrow and, at current levels, will show price inflation by the turn of the year.  The Bernanke Fed has proven its mettle, and policymakers as a whole have done a good job of coordinating efforts.  We hope the policymakers “get it right,” but we are still looking for inflation to begin increasing in 2010, with the Fed following—rather than leading—the market with regard to increasing short-term interest rates.  This should yield a scenario somewhere between inflation and Goldilocks II—call it “inflated Goldilocks.”  We believe the U.S. economy will see a return to growth. It will not be a V-shaped “total recovery,” but instead will be a less leveraged, slower-growth version of its previous self, as those of us who weren’t fortunate enough to be in the Twilight Zone don’t have enough memories of the meltdown to last a lifetime.

The steep slide in the stock market that was reinitiated during the first quarter of this year was the straw that broke the back of both individual and institutional investors, keeping many on the sidelines, and it will have lasting emotional effects.  The catalyst for stability in March spurred a combination of wishful thinking and less gloom and doom, and the resulting rally pushed the S&P 500 to a 35 percent advance from the market low in early March.  To advance significantly past this point, some of these wishes will have to start coming true.  Just as many did not see the depth of the downturn in the cards two years ago, many will also not see the potential for more a significant upturn either.  The twist woven into this episode might be that the individual emerging from the Twilight Zone remains oblivious to the meltdown and the subsequent exuberance of the stock markets and, absent that emotional baggage, is able to better evaluate the economy for what it is.

Steve Taddie
Managing Partner
July 6, 2009


If you’re still employed and you have some cash, now could be the time to invest in real estate. And not just because it’s cheap. The better reason is that when inflation happens, the real cost of interest on a loan drops. Let’s say you have a loan at 6 percent. If the inflation rate is at 3 percent, the “real” interest rate you pay is 3 percent (6% – 3%). But if inflation jumped to 20 percent, then your real interest rate would be -14 percent (6% – 20%).¹

In the near future, we’ll be seeing some serious inflation. This will come about because of the huge amount of money the government is minting and pouring into the economy. Dollars will be worth less—possibly lots less—and so we should be positioning ourselves to get into investments that will have some value.

SDXB sends a report that appeared in the Financial Times to the effect that China has proposed replacing the dollar as the international reserve currency; this is interpreted as a sign of China’s fear of the inflation that will likely result as the Federal Reserve prints money with abandon.

On a submicroscopic level, we’ve hit upon the very reason I bought a freezer, planted a garden, and started stocking up food and household goods. Prices may very well go haywire in the next few months. If I were living on a fixed income but still could dodder out to the workplace, I’d be looking for a part-time job. Now, not later.

Not since the American Revolution have Americans seen extreme inflation of the sort that occurred in Germany before World War II or, more recently, in Argentina and various Eastern European nations. Probably we won’t see it this time, either, because we have some mechanisms intended to keep this sort of thing under control.

However, I lived through the double-digit inflation of the 1970s. While it was not a period of hyperinflation, it still wrought plenty of harm for many Americans. My husband earned a good living as a corporate lawyer, and so we were not seriously affected. But I saw what happened to my father, who by then had retired on what he thought was enough to keep him comfortably set for the rest of his life: $100,000.

In the 1960s, a hundred grand was a lot of money. By the end of the ’70s, it wasn’t enough, combined with his union pension and Social Security, to keep him out of poverty. Having been burned some years before when the bottom fell out of the insurance securities market (in which he was overinvested), he stashed everything in CDs, which did not keep up with inflation. So, by the time he paid for his room and board at the life-care community where he moved after my mother died, he had no disposable income left. He and his wife didn’t travel, they didn’t go out, they didn’t buy anything more than the bare necessities for existence. Because the two of them had managed to get into the life-care place, they were safe and well cared for. But they were stuck there: they didn’t have much of a life during their last years.

This is why, I think, it’s necessary to accumulate lots more than you think you will need in retirement. Investments should be spread between conservative instruments that do not keep up with inflation but at least don’t go down the drain and somewhat riskier ventures, such as equities and certain kinds of real estate, that are likely to gain enough to keep you out of poverty in the event the value of the dollar drops significantly.

Cultivating frugal habits and staying flexible can’t hurt, either.

¹Formula from Wikipedia, “Inflation.”

Disclaimer: I am NOT a financial advisor! I’m a little old lady with a blog. I have a Ph.D. in English, not an MBA! If anything you read here looks to you like advice, don’t buy it.


bikeFor quite a long time, I’ve wanted to buy a three-speed or ten-speed bicycle. I have a coaster, but it’s no use for what I want to do: take long rides along the canal. Salt River Project has built a long, narrow park along the Arizona canal, with underpasses running under the main drags so people can go for mile after mile after mile safely. I live within walking distance of this convenient source of exercise and sightseeing entertainment. While I really do need the exercise, hauling my heavy coaster up from the bottom of those underpasses is not quite what I have in mind. I have to get off my bike and walk it out of the underground tunnels, a major pain in the tuchus. I love bicycling, though, and have thought that if I had a bike with gears, I could use it every day or two to get out of the house and also get some good exercise.


Yesterday I paid a visit to the bicycle store that, in years past, has sold me other bikes. Prices for multispeed bicycles range from $450 to $700!!! An ordinary cruiser with no gears and pedal brakes costs $350. Three-speed bikes cost more than 24-speed numbers. I don’t want 24 speeds—I’d never be able to figure out how to operate such an array.

I looked on Craig’s List and found the prices comparable for anything that appeared to be in decent condition. The rate of bicycle theft around here is phenomenal—at one point, a ring used to go onto college campuses in trucks and take bolt-cutters to the locks and just load the things up. So I’m kind of afraid to buy one second-hand, for fear of getting stolen property. Besides, the newer bikes are so involved and complicated, I would have no way of knowing what I was getting or if anything was wrong with it.

How disappointing. I guess I won’t be losing any weight that way. {sigh} It was probably a bad idea, anyway. What on earth would I do if I blew a tire ten miles from home? I wouldn’t have a clue how to fix it, and I sure don’t want to have to push a bike eight or ten miles.