Category Archives: Commentary

News You Make Fake

Posted by on January 9, 2020 Comments Off on News You Make Fake

In my phone’s news feed, there are some headlines that I know are pure clickbait and more times than I’m willing to admit to, I’ve clicked them.  The grand offender of this scam is a website, Alternative Nation, which seems to specialize in rock music gossip, a total tabloid trash website.

To get an idea of how bad they really are, I went directly to their site and did some browsing.  Because they appear to be a blogging platform, I simply appended /feed to their domain and I was able to get an RSS feed of their latest articles, which I loaded into Outlook for some cleaner review.

Here’s an example of how this bullshit works.  Eddie Van Halen has been rumored to be in poor health for a very long time.  So what the editors at AN do is create a headline that suggests EVH’s health has taken a turn for the worse.  An example would be: Eddie Van Halen Family Leaks Terrible ‘Skinny’ Photo. (The subject of the post is not EVH, but his wife.  The photo is not of EVH or his wife, but of a random skinny person who is representative of her weight loss goals.  Not a leak, not terrible.)

Another broader method they use is to exploit the perceived depravity of rock bands.  Motley Crue, Aerosmith, KISS are all prime targets here.  The trick is to take something completely simple or innocent and twist the words so your brain thinks it’s something dirty or horrible.  It’s your fault and when you figure it out after reading the article, you might be mad at AN for tricking you like that, but again, you know you’re to blame for reading too much into the headline.  Some examples:

  • KISS Singer Paul Stanley Leaks Creepy ‘Feet’ Photo – It’s a picture of him wearing KISS branded Puma shoes.  No leak, no feet, no creepy.
  • Steven Tyler Girlfriend Reveals ‘Worst’ Drug Used – A brief mention about listening to music while on acid.  "Worst" does not get used in the article.
  • John Lennon Sad ‘Licking’ Claim Finally Revealed – "Lick" as in "guitar lick", no tongues.  Sad, indeed!

The headlines have some go-to words: "sad", "disturbing", "terrible", "stuns", "caught".  But those words are probably part and parcel of any tabloid editor’s toolkit.  It wouldn’t surprise me at all if there was a utility that could re-write an article replacing all normal-strength adjectives with hyped-up, over-the-top versions.  The only difference between these articles and printed tabloid stories is the lack of exclamation marks.

But you know, it’s all for the clicks.  These "editors" subscribe to celebrities’ social media, then attempt to build an article on a single statement.  A single statement isn’t much to work with, but with some clever wordsmithing, at least the article will generate a page view and some ad views.  That’s all that matters anymore.

Ok, Boomer

Posted by on November 6, 2019 No comments

https://www.bloomberg.com/opinion/articles/2019-11-04/millennials-should-be-happy-they-are-stuck-renting

“Millennials spend a lot of time bemoaning their inability to buy a home, forcing them to keep renting. They should want to stay renters, if they know what’s good for them financially.”

You son of a bitch.

This fucking article, written by an economist, is trying to sell the idea that people are better off renting than owning a house.  And specifically, millennials are better off doing it.  You wonder why young people hate the boomer generation?  Well, this is a pretty good piece of evidence.  Take away the condescending tone and you actually are left with malicious advice.

It’s amazing to me the slight of hand that is performed in order to make the pitch in this article.  The author actually says that buying a house is a losing proposition.  “…it has cost the homeowner 3% per year to own a house before taxes, maintenance, utilities and insurance.  That’s a real negative return.”  A goddamn economist, who manages investing funds, is selling this shit.

Then this paragraph:

“Some millennials were caught up in the subprime mortgage boom and collapse, and remain scarred by it. They believed they could buy houses with no money down and never shell out a dime because continuing rapid appreciation would allow for continual refinancings. So the bursting of the subprime mortgage bubble and subsequent one-third decline in house prices was a rude awakening, especially since it was the first nationwide drop in values since the 1930s.”

This needs some unpacking.  First, not just millennials were caught up in this shit.  Everyone was.  But who was most vulnerable to it?  And that snark about what millennials believed?  You fuckers sold them that belief.  You convinced them.  They had no prior experience in real estate investing and falsely trusted you.  So then we get the first housing crash since the 1930’s.  Thanks for that.

Look, I’m no economist.  I’m just a former renter who became a homeowner.  When I went to purchase my new house, my simple criteria was, “is the same cost as what I’m paying in rent?”  That was my budget and that’s where I went.  I completely understand the issue of house prices being insane, but I also see what rent costs and it’s not much better.  So, I encourage anyone to buy when they can.  If you have to start small, do that.  Don’t hold out and wait until you can afford big.  And don’t listen to this bullshit that you shouldn’t buy at all.

Here’s the truth that the author is not telling you.  It’s very simple.  When you rent, you get nothing for your money.  You get lodging and that’s it.  When you own, you keep what you spend.  People want to argue that housing doesn’t have a high rate of return on investment?  Fuck them.  It’s not supposed to.  They say, what if you own a house for 10 years and sell it for what you paid for it, not gaining a cent?  You fucking assholes, you gain all the equity in the property.  All the money you paid into the loan (minus interest of course) is equity.  You get that back.  If you’re renting, what happens when you end your lease?  What equity do you get from that? That’s “not gaining a cent”.

Then they can argue that property values can fall.  Yes, this has happened once.  Do I think it will happen again?  Probably, but not as extreme as last time.  But here’s the thing.  You don’t lose money until you sell.  I was underwater over $30k at one point.  I kept making my mortgage payments and the property value eventually came back.  And all the payments I made while it was underwater?  Guess what?  They still counted!  Just like every other payment.  It’s all equity.  Stay the course!

So, you want to know why this fucking boomer wants you to keep renting?  He’ll tell you right at the end of the article.

“The trend toward renting over owning should persist and may even increase. I continue to favor investments in rental apartments—assuming, of course, they meet the location, location, location test.”

So you better keep renting, if you know what’s good for you.  And what’s good for you is very good for me.

You All Fail Economics

Posted by on July 1, 2019 No comments

https://www.ibtimes.com/nasa-asteroid-tracker-eyes-giant-golden-asteroid-could-make-all-humans-billionaires-2803286

Have you seen the headlines for this news story?

NASA Asteroid Tracker Eyes Giant Golden Asteroid, Could Make All Humans Billionaires
NASA to explore heavy metal asteroid 16 Psyche that could make everyone rich
Golden Asteroid Could Make Everyone on Earth Wealthy

Who?  Who believes this?  First of all, who thinks that anyone, corporate or government entity, is going to spend the money to capture a distant asteroid, haul it back to Earth, then distribute the asteroid’s contents to all people on the planet, making everyone rich instantly?  Like they will do it out of the kindness of their hearts?  Just trying to make everyone’s life better, you know.

Then there’s the simple economic reality that gets in the way.  Let’s say that this crazy idea is implemented.  Is everyone rich now?  Of course not.  Everyone is exactly where they were before, because all that happened was the floor was raised.  Your net worth increased by two billion dollars – you’re rich, bitch!  But your neighbor’s increased by the same amount.  Are you both rich?  You’re richer than everyone you were richer than before.  Good job!

The sad reality is that the one(s) that will be rich beyond comprehension will be those in possession of the asteroid.  And even then, will they be rich?  Kind of.  Because wealth is really just an illusion.  Maybe you’ve read some fringe articles that express disbelief that our world economy even functions.  How does it function?  It’s all on faith.  We all agree a dollar is worth so much.  What makes it worth that much?  Agreement.  That’s it.

Value is determined by scarcity.  If there is less of something and with the assumption that demand for that something remains equal, the value rises.  If supply increases or demand falls, the value falls.  It’s simple supply and demand equations we all should have learned in school.  Now, take a mega-millionaire like Bezos, Gates, or Zuck.  They are mega rich because they have tons and tons of stock in their respective companies.  Yeah, they’re rich, but what if they wanted it all in cash, right now?  If they sold all their stock, the supply of stock for the company would explode and because it’s not scarce anymore, the value falls.  They aren’t as rich as they are on paper, when they control the supply.

And that’s what would happen to the golden asteroid owner.  They can’t cash all the gold in right away, because the price of gold would plummet.  Even if they dole out the gold over a period of time, it’s still going to affect the quantity available, reducing scarcity, reducing value.  Just like a company owner, it’s a stockpile of wealth that can’t really be utilized directly.

I could go on about this, but my only real point was the stupidity of the headline suggesting that everyone on Earth could be made a billionaire.  While it may technically be true, it doesn’t mean that anyone would be wealthy as a result.

Where To Go, What To Do?

Posted by on May 29, 2019 No comments

https://www.msn.com/en-us/money/companies/amazon-to-unleash-a-long-feared-purge-of-small-suppliers/ar-AAC1xhQ

For me, it’s the growing dawn of a new realization.  It’s not really anything revelatory; it’s a topic that has been bantered around for years.  Essentially, the thought is, Amazon is getting too big and too powerful, much like Walmart was before.

It sure is easy to be addicted to quick shipping, which is what Amazon is very good at.  I was disappointed by an online order from Lowes that took a week to arrive, and an item I ordered on Ebay just the other day is going to take a week to arrive (shipped from Canada, so, ok…).  Some other things, I’ve ordered recently have also taken time to arrive, like a new kitchen sink, or lights, or CDs.

But notice something, all of these items were not purchased from Amazon.  That realization is somewhat important to me.  Amazon is not the one-stop, end-all, be-all shopping destination for me.  And, with recent news like this, I feel I should wean myself from Amazon’s grasp further.

It’s not all bad.  There’s a lot of things that don’t need to be received in a couple of days (and there are some that do).  There are times I’ll use Amazon’s no-rush shipping option, and never claim the little reward they offer for doing so.  Price-wise, other places can be competitive and sometimes even much better.  Home Depot beat out Amazon by almost 50% on one item I needed.  When it comes to selection, not even Amazon can match a specialized online store, especially when it comes to furniture and other home goods.  And in a lot of those cases, Amazon’s selection is only much broader because they have a massive selection of cheap import products.  If that’s ok with you, EBay can be just as fruitful.

I’ll admit, sometimes, I find what I’m looking for on another site and will check it against Amazon.  If Amazon is close in price, I’ll usually order it from Amazon.  This is solely because I don’t want to have to go through the hassle of creating a new account on a new site.  But, with my planned dependency-reduction, I may begin doing so to spread the wealth a bit further.  For some people, this might not be as feasible, because if you are reusing your email address on many sites, you are increasing your risk of having your email harvested for spam.  Since I use a different email address for every site, I don’t have this worry.

This reliance on Amazon for a lot of things is sort of a downward spiral.  As we buy more stuff online, stores make fewer items available to purchase in-store, which forces us to buy more online.  I wish there was a way we could reverse it.  Some places have an in-stock check, like Lowes, Home Depot, and Staples for example.  So you can check to see if an item is there before driving to the store.  And if it’s not in stock, well, would you order it from there to be shipped or held for pickup, or would you just return to Amazon to buy it?  I know I’m going to have to be more proactive in that choice.

Why can’t someone with more business connections than I have make a website that tracks who sells what.  This should be easy as hell.  Any store that has an electronic point of sale system must have a list of products they sell, and that list of products would contain a UPC.  It should be trivial to upload a list of UPCs to a website to indicate what products your store sells.  The website allows someone to search by product and a list of who sells that product is displayed.  It could work the other way too, where manufacturers upload a list of UPCs and the retailers they distribute to.  The data is there, it just needs aggregated.

How To Save Money When You Have Too Much Money

Posted by on February 12, 2019 No comments

https://www.msn.com/en-us/money/realestate/how-mortgage-recasting-works-and-how-it-can-save-you-money/ar-BBPNazf

I read this article the other day.  It taught me a new financial term: mortgage recasting.  This particular action is taken when you want to reduce your monthly mortgage payment… only.  The term stays the same and the interest rate stays the same.  Contrast this with a mortgage refinance, when you are changing either the term length or the interest rate in order to get a lower monthly payment.  If recasting sounds like a solution in search of a problem, you’re right there with me.

Some people may not have whatever it takes to go through a refinance.  Maybe a hit to the credit score for a hard inquiry, the closing costs, the appraisal costs, the additional fees, the potential negative change in interest rate to get a longer term.  There’s plenty of reasons.  But a recast is simple.  It’s a lower fee and doesn’t even involve any other invasive actions.  Everything is simplified because all you are doing is lowering your payment.

Here’s the concept of recasting in a nutshell.  You make a very large payment on your mortgage, then the bank recalculates your monthly payment on the new principal balance until the end of your loan term.  It will be lower.

If you feel confused by this, let me reiterate the example in the article and see how that helps.  You have a $200k mortgage balance and your mortgage payments are $1200/mo.  You make a $50k payment on your mortgage, then recast it and your monthly payment drops to $900/mo. and you’ll save $35k in interest.

Maybe you’re still with me on this.  But, I can’t wrap my head around the idea of lowering your payment when you have surplus funds.  As if your thinking is, “I have 50,000 dollars in emergency savings.  I should use it all at once to save some money later.”  You’re saving $300/mo.  $50k is almost 14 years of $300 monthly savings.  And if you put all that money into your house, and you need it later, you’re looking at a HELOC or refinance to get it back out, both have a lot of fees to go with them.

I can understand how the concept works, I just can’t see why anyone would want to use it.  Why not just throw the $50k as an extra payment and shorten the loan term dramatically?  Because you can’t afford the $1200/mo and need it to be $900/mo?  You have $50k!  Why can’t you afford $1200/mo and still have almost 14 years of the difference on-hand? 

Crying poor with a stack of Benjamin’s in each hand.

Stop This Shit

Posted by on April 24, 2018 No comments

https://blog.cheapism.com/lies-teachers-told-17314

I don’t do many commentary posts, but this article really dug at me and it came on the heels of a response I had given somewhere about Mike Rowe.  The commonality in both of these is that there is a line, and it’s not exactly a fine line, where information becomes inflammation.

To start with, the title is “50 lies you learn in school”.  Before you’ve read anything, the article is implying that teachers, the people trained to educate you, are purposely lying to you.  In order to lie, you have to know the truth.  So the article is saying that your teachers know the truth and have intentionally told you otherwise.

If you go through this slide show, you will start with moments of, “Ok, I didn’t know that”, and “Huh, neat” but then, less than halfway through, you’re hit with “You can’t end sentences with prepositions.”  Whether or not you agree or not, does this sound like a lie?  By the definition, yes, it is a lie.  However, that statement is not what is taught.  You would be taught, “You should not end sentences with prepositions.”  And that is not a lie, because it is not being presented as a fact or a rule, merely a guideline.  The same thing with “You can’t begin sentences with conjunctions.”  A style guide is just that, a guide.

The other type of tactic this article uses is on display with “The tongue map”.  The slide says “The tongue map drawn back in 1901 is a lie.”  And this is what REALLY pisses me off.  It is not a lie when you do not know any better.  The slide immediately says, “Scientists now know…”  which means they were not intentionally hiding the truth back in 1901, they just had limited information at the time.  This is repeated over and over with “facts” that had to be revised as more information became available.  That does not make the original facts “lies”.

Another tactic is playing with words.  “There’s no gravity in space” is clearly a lie.  Why?  Because the proper statement is “There is not a substantial amount of gravity in space.”  The article proposes that not being explicit enough is a lie.  Then the slide show starts to get into fringe medicine, such as “You need milk for strong bones” which cites as a reason some potential cronyism by an executive.  There’s a couple of “facts/lies” I have never heard before in my life. “Blood is blue in the body”?

All in all, this is a terrible article, and let me now explain the Mike Rowe connection.  There is a growing wave of anti-intellectualism here in America.  It is dangerous as fuck and since about 2016, it’s been blowing up everywhere.  It is the absolute proof that Idiocracy is coming to pass.  It’s not enough that people are not taking the time to educate themselves, which is damaging enough, but now there is an active effort by some people to discredit other people who are intellectual.

Here’s the gist of how it works.  You find some information that used to be considered factual, but because of additional study, is now considered wrong.  And that former information is not labeled “obsolete”, but is instead touted as a “lie”.  The argument is that the “smart people” lied to you all these years with that incorrect information.  But the insane part of that argument is that it was the “smart people” who corrected the mistake.

The goal of this article and other examples of it (like Mike Rowe’s position on science) is to cause people to distrust information from learned sources.  They want people to ignore “best practices” because they are not completely proven yet.  Even if they are proven, what is proof?  They want everyone to live in a “We just don’t know enough yet to make a decision” mindset.  Conservative to to the point of regression.

Holding On

Posted by on February 7, 2018 No comments

I read a recent post by AK that flew right in the face of a hobby I’ve been cultivating.  It’s something I’ve been doing for a little while and is really only one facet of the other side of the Letting Go story.  The hobby (and obsession for some) is “archival”.

First, I’m no stranger to purges and I feel the same satisfaction from downsizing as anyone with too much stuff would.  However, sometimes, regret comes back to haunt me.  It’s not the loss of a blender or a stack of towels that I miss.  It’s usually something less utility and more historically significant, which usually carries some emotion with it.  When I say historically significant, I don’t mean like a piece of the Berlin wall, I mean something that represents a period of your life.  And even though there is emotion and significance behind it, there is also a strong element of uselessness.

I ‘ve read a little on the KonMari method and internally nodded my head up until I got to the point where it was explained that we hold on to things for two main reasons: the future and the past.  In the case of the future, we don’t want to get rid of something because we may have a future use for it.  That’s a rational argument, but I usually tackle that by reminding myself that when I need it in the future, I can buy the latest and greatest version of what I need.  (Ironically, the latest version of most things will probably be made shoddier and overall be worse in quality, so…) That kind of mindset would make older generations freak out.  How wasteful!

In the case of the past, which is where my archivist neuroses kick in, you are afraid of losing a bit of your identity.  The modern philosophy is to live in the present, which, expressed in outrageous terms, is hedonistic.  If you disregard your past and do not plan your future, what is life?  A day-to-day experience with no permanence.

And, many would agree, the past is highly important, on a personal and societal level.  I’m not going to go to the levels of psychoarchivists who want to preserve absolutely everything, but I do believe that you need to have a record of your past in more than simple digital records.

I have a box in which I keep all my ephemera.  I have items going back to my teenage years, which I believe are personally socially significant.  One of the most useless things I have is a rubber hand with formable fingers.  Yes, at the time, it was usually used to flip people off and it has literally zero value today, but it’s a part of my past and is a useful prop when sharing my life story with someone.  Everybody loves props.

I have an old horoscope paper which used to be sold in little plastic tubes back in the day.  I have memorabilia from past jobs – old name tags, signs, magnets.  You could find some of these things in thrift shops and consignment stores and that is where the great disconnect happens.  People think these things have value.  They only have value to the person who acquired them.  You can’t buy a memory from a store.  I would never try to replace anything from my memory box from a store.  Like a child’s replacement teddy bear, it’s not the same.

So back to the KonMari method.  You might surmise that I would keep everything in my memory box because it gave me joy.  That’s not entirely true.  It rekindles a memory.  And more importantly, the loss of not having those items is greater than the cost of keeping them.  There is a time in a friendship where you finally feel comfortable baring yourself for another person, and that is when the memory box comes out and is shared.  To not have a physical record of your personal highs and lows would be a shame.  You can flash all the photos and videos on the screen that you want, but to be able to touch someone’s past is unique and special.

As Usual, All About Me

Posted by on January 29, 2018 No comments

I have regrets delving into potentially politically topics, but then again, I have had posts about libertarianism and extreme ideologies before, so I’ll give it another attempt.  My regret is that it’s so easy to bitch about hot-button topics.

I follow a “news” site that sort of straddles the line between hard-right and anarchistic.  I think it’s a good idea to at least read opposing viewpoints, despite how much it might piss you off or baffle you.  This site could be considered a news aggregator, although they do have some original authors on there.  A lot of times, what you get is an opinion piece with quotes from news articles.  And this one was no different.

Typically, the postings on this site are using news articles and other sources to promote their ideology, which is free-market capitalism and very anti-government – essentially extreme libertarianism.  This particular article I found was on health care costs and how it is cheaper to go to Mexico for surgery, on the order of ten times cheaper.

Naturally, the article invokes the trigger word, “socialism” as in “socialized healthcare” and their applied synonym, “ObamaCare”.  The belief is that if we stop the subsidies, the prices will come down to reasonable levels.  And to bolster that argument, the article compares a $30k procedure in the US to the same procedure in Mexico, which cost $3k.

Let’s pause for a moment here and realize there are quite a few Americans who do not have $3,000 readily available for an emergency.

Now, let’s also consider that the exchange rate.  Today, $1 is nearly 19 pesos.  Another potential cost of living metric is that bread in the US costs $1.40, which in Mexico it costs 15 pesos.  So then, sure, things in Mexico are typically ten times less expensive and our American dollars get us much more in Mexico.  So, you could just as easily have a Mexican version of this article wondering why a medical procedure costs 57,000 pesos.

So, let’s play along and embrace the libertarian dream.  Now, there is no insurance and health care is a cash-only option.  Because the health industry can’t exploit insurance, prices drop to $3,000 for a particular procedure.  So, who’s going to have trouble paying for this?  Hint: It’s the same ones that couldn’t pay $3,000 before.

As usual, this just reinforces the standard position of not caring about anyone but yourself.

The End Of Credit Cards

Posted by on December 27, 2017 No comments

https://www.msn.com/en-us/money/personalfinance/the-age-of-credit-cards-may-be-ending-and-thats-a-good-thing/ar-BBGMvem

It’s been a while since I’ve done an article commentary.  This one really set me off, so it’s been in the queue for a while.  I’ve said that journalism is dead many times and that many new articles you read are either opinion pieces or are sponsorship pieces to promote one thing or another or to detract from someone’s competitor.

This article is not really any of those.  It feels to me that the author had an idea and just thought up reasons as to why that idea might be true.  It’s actually not too far removed from the bullshit I post here on my blog.  I could be getting paid for this fuckery?

So let’s start, then.  The article is saying that credit cards are going to disappear and people are going to stop using them in favor of other forms of payment.  And that other form of payment isn’t cash! 

These are the reasons why:

  • Credit cards often aren’t 100% secure.  It’s going to be anticlimactic to provide the whole reason why every other payment option pitched by this article is inferior.  A credit card has consumer protections in place in case you are hacked or have your card stolen or lost.  You are not liable for fraudulent charges.  I’m going to harp on this quite a bit.
  • Credit cards have high fees.  Where the fuck are you getting your credit cards from?  There are many, many, many credit cards with no annual fee.  Any other fees you would incur would be from transactions that you couldn’t even accomplish via other methods, like cash advance or balance transfer.
  • Credit cards are rarely accepted worldwide.  Yes, they are.  Nothing else to say here.
  • Digital payments are more convenient than credit cards.  PayPal, Venmo (who?), Amazon Cash, PayTM (who?) are somehow easier to use than a credit card.  In the case of Amazon and PayTM, you have to add cash to your digital wallet using an online application.  If you want to add cash to your Amazon account, you can go to a store and they can add the balance to your account with a special barcode.  This is more convenient?  HOW?
  • It’s easier to exchange money between friends, and for an employer to pay employees digitally than using a credit card.  This isn’t even a valid scenario for a credit card, so how is that any sort of proof that credit cards are obsolete?
  • Unbanked/underbanked individuals can’t get a credit card.  So that means credit cards are obsolete?  No one else needs them?
  • You don’t need a wallet anymore, only your mobile phone.  Sounds wonderful, except for the need to carry ID cards, reward cards, and insurance cards.  Then there’s the small problem of losing your phone, which has all your eggs in one basket.  Or dropping your phone, or running out of battery, or not having cell signal in a building with a steel roof, or whatever wonderful things happen in the digital world that just never seem to happen in the physical.
  • Bitcoin and other cryptocurrencies let users stay anonymous.  Yes, because when you order something online, you don’t give out any personal information.  That’s how sales transactions work.  Who fucking cares if you’re ordering a case of dildos?

Now, here’s some statements that I really want to punch in the face:

“This points to an important truth: Even for most online payments, cards simply aren’t necessary.” – Cards are absolutely necessary for online payments because of the aforementioned consumer protection.

“Since so many people already use smartphones for day-to-day payments like ordering food or hailing an Uber, ditching wallets altogether seems like the logical next step.” – The ability to do two things (neither of which I’ve done) means we should just eliminate wallets.  That’s totally logical.  Now I can hear you, “just because you don’t do it doesn’t mean it shouldn’t be done.”  Well, just because some people do do these things, doesn’t mean that’s the eventual solution.

“[Bitcoins,] Unlike credit cards, they have low transaction fees and don’t require sales tax.” – Your payment method has zero bearing on how you are taxed for a purchase.  And what transaction fees?  Currency conversion is even free with my no-cost Capital One card.

And the summary: “After all, for consumers, the motivation to ditch the card is simple: lower fees, improved convenience, and increased financial independence.”

If you are ditching a credit card because of the fees, you’re doing it wrong.  If you think any other payment form is more convenient (and safer) than a credit card, I don’t know what to tell you.  If you think you are somehow going to succeed financially by ignoring a significant source of credit history that can determine how you can afford to purchase a house, lease or buy a car, get an apartment, get utilities turned on without a hefty deposit, or get a better insurance rate, then by all means, try it.  Then complain at how difficult it is to not have a solid credit file.  Also, you can enjoy not getting any rewards for using credit cards for your daily purchases.  If you have the self-control, you can utilize credit cards to get significant cash-back rewards.

Call me old-fashioned, but the mindset set forth in this article is foolish.

Innocent Villains

Posted by on December 7, 2017 No comments

It’s in the news today that Toys R Us executives are going to be granted bonuses, despite the company entering bankruptcy.  It was a little over a year ago that the same thing happened with Sports Authority.  In the case of Sports Authority, there were going to be bonuses, then a judge said no, then another judge said yes.  There was lots of public outrage.  Why should executives get bonuses for a failed company, especially when all the floor workers just lost their jobs?

I’m going to take an unpopular position and say that the bonuses should be awarded.  I can’t address the loss of employment for the rank and file workers.  I am also very sensitive to income inequality and I would hope that somehow we can curb outrageous executive pay in the future.  The only thing I am focused on is putting the blame where it belongs.  And that blame is actually not on the executives.  The fault is higher up than them.

Both Toys R Us and Sports Authority are victims of leveraged buyouts.  You can expect that Guitar Center will soon be joining them, because Guitar Center has the exact same situation stemming from its own leveraged buyout.  This article has a very succinct description of how the bought-out company is doomed after a leveraged buyout.

Private equity firms like Bain take mid-sized companies and pump them full of debt with the express intent of making them industry-dominating competitors, selling them to the stock market as a candidate for massive growth, and cashing in. To make this possible, private equity’s stake in the company is usually represented by “payment in kind” (PIK) notes, a type of bond that pays crushing interest – in this case 14.09% – but requires no cash outlay until the bond’s maturity. So that 14.09% is accruing, but it isn’t due for years, ideally after the company has been sold to what is often charmingly referred to as “the dumb money,” the retail investors who buy a stock without knowing the company’s true financial position. Before any of the company’s real problems are revealed, the private equity firm receives its payback in the form of stock, since PIK notes can be paid back in any medium of exchange. If all goes to plan, the stock price shoots up after the IPO and the PE firm makes a tidy profit – all in about three to five years.

The end result is that the company has enough money to pay the daily bills, but has no reserve cash to pay off this growing obligation.  It’s a lot like interest-only mortgages back before the last housing crisis.

But back to the executives.  These guys didn’t write up the buyout.  They weren’t able to stop it from happening.  When the buyout did go through, they kept the machine running.  They kept the company viable, if not spectacularly profitable.

So, how much at fault are they?  They did their job and fulfilled the duties in their job description to receive their full compensation package, which would include defined bonuses.  You can very easily protest, “They didn’t earn it!  The company went bankrupt!”  The company didn’t go bankrupt through their actions.  That card was cast long ago by people much higher than them.  These executive’s only fault was hitching their wagon to a falling star.

My point in taking this controversial stand is that the blame needs to go where it deserves.  It’s not with the executives, it’s with the companies that are executing leveraged buyouts and destroying perfectly valid corporations for their own gain.