Monday, April 11, 2011
WHO DO WE BLAME FOR OUR PROBLEMS?
It's All George Bush's Fault. No. The Fault Lies With Obama. There was a recent series of posts on Facebook where several posters argued as to whether George Bush or Barack Obama was at fault for the current economic malaise. This reminds me of my own upbringing. We were Democrats from head to toe. There was no room for argument. Herbert Hoover caused the depression we barely survived and FD Roosevelt got us out of it. In every subsequent election we voted against Hoover and in favor of Roosevelt, even though both had been dead for several years. It was that simple. I would be a Democrat when I became old enough to vote. Through out high school and into college, I saw no reason to change my plan as my high school teachers and college professors somehow began to let their preferences creep into their lectures. Not only did I know I was right, I could advance a series of arguments, relatively well constructed, to defend my position. Where Are We Now? As I looked at the series of Facebook arguments, it became obvious to me that things have not changed. Each poster had a very simple answer as to who was responsible for our current situation. One side claimed that Obama has failed to take the necessary steps to remedy our situation because of his lack of leadership skills while the other side claimed he was doing as well as he could be expected because of the mess that Bush left us in due to his lack of intellect and willingness to lie to get what he wants. Which one is to blame. Bush? Obama? Both? We all have our opinions. The real facts are that none of us have access to enough information to know. Both Bush and Obama had access to a host of skilled advisors and more facts than any of us could access in a lifetime. The success or failure of each president will depend on a number of factors beyond their control. For example, Clinton was a highly popular president who produced a budget surplus for which he gets the total credit. This is despite the contribution of Reagan who gets credit for the fall of the Soviet Union which allowed Clinton to cut the military budget as a result of the decline of the cold war. Bush gets total blame for getting us into war in the middle east. This is despite the fact that an overwhelming plurality of congress approved that war. The surplus turned into a deficit for a number of reasons, not the least of which was 9/11 and massive additional expenditures to keep us safe. The Bottom Line I still have my opinion and I'm sure most of you do too. But neither of us can assume that we know enough about all the factors involved to put forth a simple answer or offer a simple solution to a problem that is far too complex to be solved by a simple solution. We also have to look at the voting public who continues to expect the government to provide things for us that we can't provide for ourselves. Want a nice house, a new car, all the gasoline you need, and a low stress job with an income that provides more than 90% of the wage-earners in the world can't afford? Want all of this guaranteed by the government? Ain't gonna happen folks. Beware of any politician who claims to be able to provide it for you. What Does This Mean To Your Finances? No doubt, the government has an influence on your financial future and this is the main thing I'm interested in. There is little or no reward in safe investments. The FED is keeping interest rates low and providing liquidity to the market by increasing the money supply. This is likely a temporary situation that will eventually cease as those funding our deficit will decide they don't want to keep providing us with goods and services that we can purchase with dollars of ever decreasing value. The correction may be prove to be painful to investors. For this reason, I am staying with my same old arguments. Stay with investments that provide income. The most critical factor in evaluating your investments should be how likely is that income to continue. On my next post, I will discuss the real estate market and how you can profit in the current situation. The Picture At The Top. This is a flower bed that we planted when Hurricaine Ike blew down a cluster of Magnolia trees. Rather than try to replace those trees we decided to take advantage of the increased light to add a little color. The bright red flowers are called "Knockout Roses" which I had never heard of but which provide more color than I expected. One of life's pleasant little surprises.
Monday, April 04, 2011
TEARING DOWN FRUITDALE SCHOOL
All I Needed To Learn I Learned At Fruitdale School In my last post, I talked about a phenomenon known as "Creative Destruction." It's a process by which our society can change for the better. Dr. Jack Makens, a friend of mine from high school sent me two examples from the Denver Post. One of these articles was about the Fruitdale School, the place where I obtained my first 8 years of education. I loved that old school where I learned a lot from several dedicated teachers. There is now a controversy as to whether or not the old building will be torn down. It was offered to the Wheat Ridge Historical Society for the modest sum of ten bucks. The society turned it down because it could not afford the estimated $225 per square foot it would take to remodel it. Several local citizens oppose the destruction of this school because it has been a landmark in Fruitdale Valley for almost 100 years. The building was designed and built by Temple Buell, a prominent Denver area architect. He hired several local farmers to work on the construction. I considered joining in the effort to protect the building but then decided that the significance of that school was the people I encountered there, from classmates to teachers. My memories of those days will always center around those people rather than the old red brick structure.
Another process most likely scheduled for destruction is the teaching of cursive writing (longhand or script to most of us). This is being replaced by "keyboarding skills." I never used cursive after obtaining my college degree since I learned how to print very rapidly as an air force radio operator. My guess is that cursive will gradually disappear from our culture. I, for one, will not miss it.
I'm not sure all this destruction and replacement represents an improvement. At the end of the street where I lived, there was a trolley track where you could ride down town for a dime. We used it a lot during the war when gasoline was in short supply. It was a handy way to get where you wanted to go if you wanted to go to an area near the track. Every few blocks was a green colored station with a roof where you could wait. I won't mention other uses for those buildings but I'm sure your imagination will serve you well if you think about it. The station, tracks, and trolley cars have all disappeared and those who use public transportation can stand out in the cold and catch a bus. If they hadn't constructed I-70 where those tracks ran, they might still be viable for light rail.
An Update On Intel. One common investment mistake I have made is that I am reluctant to sell a stock just because it drops in price. I have invested in companies that I rode all the way from my original price to virtually zero as I held and waited for the price to rebound. Fortunately, I recovered much of my original investment via option premiums and dividends but I would have a much larger portfolio if I had just followed the old adage of "Cut Your Losses and Let Your Profits Run." That is much easier said than done but I surely could have done better than I have. I decided on a somewhat different strategy with Intel. Although I still think it is a good company, the fact that it has dropped almost 10% since I bought it, I decided to take my loss and bail out. Well, almost bail out. I sold my 1000 share of Intel for a $1700 loss. Some of the loss was recovered from profits of $1239 in option premiums and $181 in dividends received for a net loss of $280. Just in case my decision to get out proves erroneous, I purchased an option which gives me the opportunity, but not the obligation, to repurchase my 1000 shares at $22.50 per share any time between now and January of 2013. I paid $1680 for this privilege. This allows me an almost unlimited upside potential should Intel suddenly reverse fortunes and go to unexpected heights with a downside of only $1680.
It is my opinion that option strategies are a valuable tool in the management of any investment portfolio. I would advise virtually any serious investors to learn the basic principles of option investing. Many, if not most, investment managers and stock brokers advise against their use because some don't know enough about them and others are afraid that their clients will become too aggressive and lose money. For this reason, broker dealers require that their investors obtain approval from a designated options principal before they are allowed to trade in this area. While many investors have lost considerable sums speculating in options, others find they can be a valuable tool in managing risk. In the present environment I have limited my own investment choices to those companies that offer attractive option opportunities as well as sound fundamentals.
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