Waxingandwayneing’s Weblog

August 24, 2008

Men and their Toys

Filed under: Luxury — waxingandwayneing @ 3:13 pm
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Upon buying the Oakland Raiders, Marvin Davis commented, “As men get older, the toys get more expensive”. And perhaps there is no greater toy for a grown man than a very, very expensive automobile. As part of the 58th annual Pebble Beach Concours d’Elegance—the world’s premier celebration of the automobile—held during the third week of August, several auto auctions were held providing (aging) men (and women) the opportunity to accumulate even more of these toys.

The oldest and most prestigious of these auctions was staged by RM Auctions, celebrating nearly 30 years in the collector car industry. To get an idea just how expensive these toys can get, last May RM auctioned off a 1961 Ferrari 250 GT SWB California Spyder, formerly owned by Oscar winning actor James Coburn, for nearly $10.9 million. This was the most money ever paid for a car in auction history.

It is hard to comprehend how someone (in this case a buyer from the UK whose identity was not revealed) can justify plunking down $11 million for a car—albeit a very beautiful car indeed. Not knowing who the buyer was, we can only speculate that this buyer owns many other “toys”, with the 1961 Ferrari just another addition to his collection.

Tony Bell, an attendee of the recent RM Auctions event and an avid car enthusiast who lives in Aspen, noted that the recession seems to have slowed down the buyers a bit, but only just a bit. After all, this is the high-end of the market, whose buyers don’t depend on tax rebate checks from the government or 14-hour sales from department stores. When it comes to purchasing cars at the prices reached by RM Auctions, buyers seem to exist—recession or not.

The RM auction highlights included some lofty sales, including a 1961 Ferrari GT SWB Berlinetta, which sold for just over $4.5 million. A 1933 Rolls-Royce Phantom II Special Town Car brought in $2.31 million. Twelve of the automobiles sold surpassed the $1 million benchmark. And of those twelve, seven were Ferrari’s.

Overall, the total dollars changing hands at this auction exceeded $44 million, which was $2 million less than last year’s total. In fact, the economic slowdown does seem to have had some effect of the results this year. For example, the heavily-promoted Ford “Orange Crush” custom roadster had a pre-auction estimate of $175,000-200,000, but was sold for a “cheap” $100,000. A 1957 Chrysler Imperial Convertible sold for $162,500, well under its expected price of $200-300,000. Perhaps the bargain of the event was a 1972 Ferrari 365 GTB/4 Daytona Spyder, which sold for a “mere” $1.1275 million, well below the estimate of $1.3-1.5 million. Certainly there were cars that sold for more than the bid estimates, but they were in the minority.

In a bold marketing move, jeweler Black, Starr & Frost, rented space just outside the auction room, to provide the big spenders in attendance another reason to part with a bit more of their wealth. At first glance, having a high-end jeweler set up shop to compete with world-class cars seemed like a stretch. But The Molina Group, owner of Black, Starr & Frost since 2006, recognizes that many of the buyers of fine automobiles are investors, viewing the purchase of a showcase car as a means to make a profit over time. Fine gems provide similar opportunities for value appreciation. So Black, Starr & Frost graciously decided to provide the well-heeled auto shoppers an alternative way to spend their money and perhaps make a nice return on their investment. Most of the people who detoured into the Black, Starr & Frost were women, many of whom were thrilled to see a radiant sparkle coming from something other than a nice wax job.

So, perhaps the marketing geniuses at Black, Starr & Forest decided to provide an “out” for these male buyers, pumped up on the testosterone of a rare Ferrari, by allowing these buyers to purchase a bauble or two for their dates, to justify the investment just made on a sexy hunk of steel.

We all have our toys—men and women. Some of us display them, some of us wear them. Some of us drive them, some of us simple store them—in a garage, a jewelry box, or elsewhere. If these toys make us happy, all the better.

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August 13, 2008

Why are We Here?

Filed under: The Meaning of Life — waxingandwayneing @ 10:17 pm

We drove up to Carmel this past Sunday. What a great drive—even if part of it was on Interstate 5. The beauty of driving, instead of flying, is the opportunity to see so much nature, as well as avoid all of the artificial influence of flying. I find that driving provides me with a therapeutic chance to unwind and mentally explore whatever issues might be clogging up my head.

The summertime landscape on I-5 is mostly brown, but in a very soothing way. Probably because brown comes in so many shades. The glorious hillsides covered in light brown grass portray the majesty of a sleeping lion awaiting the cooler evening. Rich, tilled soil in other areas gives hope to next season’s bounty. Where crops are exploding—and that occurs many places along our route—we are treated to a wide array of mostly greens, from the plentiful vineyards to the ever present lettuces, intermixed with the deep ruby-colored leaves providing an explosive contrast only nature can display.

So, amidst all this natural beauty—oh, did I forget to mention the incredible fog-shrouded coast and hillside of Carmel?—I am drawn deeply to measure my life against time. Not just my time here, but against my time over a larger scale. I cannot help but wonder, “Why are we here?” What does it all matter? Long before I was here and certainly long after I am gone, those hills will be brown, the soil will be rich, lettuces will burst out of the ground, and fog will roll in. These events will happen without my seeing them occur and without my playing any active role in making them happen.

My commitment to my Microsoft Outlook (especially my Tasks and Calendar), my Blackberry (I just love my Blackberry), balancing my checkbook, changing the furnace filter (every 3 months, thank you), my job, family, etc. are so important to me. At times, these matters are all consuming. But, to what end? Do these things really matter? What’s it all about, Alfie?

I turned 50 this year. Perhaps that is driving this contemplation. Milestones are markers that permit us to examine where we are, where we want to be. What probably consumes me most these days is what mark I will leave. Why am I here? At many levels, I feel very good. I have been married for 26 years, have 3 great daughters, live in a beautiful home, have been very successful in my career (could be more successful), have mentored many people, am a leader in my community, make people laugh (most of the time), and care about the world in which I exist. Any yet, I do not feel successful. There is so much more I can do.

So, why am I here? One thing I do know is that I am not content just occupying space like so many other people I observe. Going shopping, taking that trip, or attending that party is all about consumption—activities most people seem so content in which to partake and for which to live. But what do you really have to show for a life based primarily on consumption? How have you improved the world? How will you be remembered?

Shouldn’t we be focused on leaving a lasting mark, on guiding others to improve, on making this world better than it is now? I want to believe that is why we are here. Do you?

July 13, 2008

Return…………….and then the Risk

Filed under: The Economy — waxingandwayneing @ 11:43 pm

So many people seem to be chasing that brass ring, that above-market rate of return that others don’t seem able to achieve. People ask me, “So what do you think of those hedge funds?” Or they tell me that they are thinking of investing in a venture that promises to pay a 16% dividend each year for 20 years. Even simpler, why not put some idle cash into an Indy Mac money market that ispaying 75 basis points more than any other bank’s monthly market account? These higher returns seem so nice….so much better than the rates being offered by other institutions.

Sure they are. That is, until the inevitable reality sets in. They are paying higher rates of return for a reason. They are riskier investments. They are paying you more money to compensate you for the fact that you may not get your money back. Then why is it we always talk about “Risk and Return”, when we actually live in a world of “Return…..and then the Risk?”

In the financial world, we act more like a horny teenager on prom night–unconcerned about getting his date pregnant and focused solely on delivering the goods–than someone who cares that there will be a tomorrow to worry about. We constantly chase the rate, seeking out the better return, without much regard for the risks involved. Typically, we tend to minimize the potential for risk, arguing propensity, or rationalizing that someone will rescue us if necessary.

We need to get to the point in this country where we are responsible for our own decisions–financial ones included. If you put money above the FDIC limit into a bank or thrift that fails, you stand a good chance of losing that money. Don’t petition the government for help. You should have known the rules.

If you don’t fully understand the risks of a particular investment, then stand down….don’t invest. Most investment products are complicated and complex for a reason. The principals will come out just fine, win or lose. They don’t tell you that in bold writing, but it’s all there. Do you really think they are compiling all those documents to protect your interest? Please!

Were you surprised that Indy Mac didn’t take out full page ads that said: “Our rates are the best because we really need your money right now and we might not be able to give it back to you, but we will still be paying our executives a lot of money”? They were offering you a nice return……..and then they were presenting you with a lot of risk. Go figure!

Just remember: In business, politics, life in general…..If something sounds too good to be true, it probably is.

June 10, 2008

Hungry No More

Filed under: The Meaning of Life — waxingandwayneing @ 9:14 pm

When I am really hungry, it is difficult to concentrate on anything else. My stomach growls, my head hurts, and almost anything sounds appetizing. I seem to only be able to focus on finding food, on satiating my hunger. I am truly on a single mission to find something to eat.

Besides the hunger caused by not eating, when is the last time you were truly hungry for something? When you were driven by a strong, single force to do something? When you were driven to accomplish something where nothing else mattered?

If you are like most of us, you have probably never experienced that type of hunger. Never driven to focus on one single goal at the expense of everything else. To be truly hungry for something.

I know that people used to be more hungry. Not just in the food sense, but in other things, such as building towns, plowing fields, discovering new lands, inventing useful items, struggling for a noble cause, fighting against what they truly felt to be wrong.

These days, we are consumed with such superficial activities because we are hungry no more. You can look around and easily conclude that we do not need to be hungry for anything. Everything we seem to need (or, more correctly, think we need) is right in front of us: Theaters with 36 screens, cars that park themselves, airplanes that let us actually sleep, medications that sooth and sometimes cure problems, digital-high density television with almost a million channels, cellphones that truly untether us, shopping centers that sell virtually anything, an Internet that virtually offers anything. It is so easy to just sit back and consume. To be consumed by all of it.

As a society, we truly are hungry no more. We are complacent, lazy, ordinary, and fat. Yes, fat. The presence of so many comforts, the readily-available existence of all these things has enabled us to not just be hungry no more, but to also become an obese society.

According to the Obesity Action Coalition,

  • In the United States, it is estimated that 93 million Americans are obese.
  • Almost 112,000 annual deaths are attributable to obesity.
  • In the United States, 40 percent of adults do not participate in any leisure-time physical activity.

So, in a country of about 304 million total people, nearly 31% are considered obese. The CDC defines “obese” as anyone having a Body Mass Index (“BMI”) of 30 or higher. The BMI figure takes into account height and weight, and correlates to body fat. To calculate your BMI, click on this link AFTER YOU FINISH READING AND POSITIVELY COMMENTING ON THIS BLOG ENTRY: http://www.cdc.gov/NCCdphp/dnpa/bmi/index.htm.

I know there are some people who are obese due to medical conditions. But I am guessing that most obese people are fat because they are undisciplined about what they eat, how much they eat, and when they eat, as well as because they don’t exercise. (See the stat above that 40% of adults don’t have any leisure-time physical activity.) As a society, this problem is the responsibility of everyone. With no sign in sight that the trend of obesity will abate, we will face increasing health care costs for the many medical issues caused directly and indirectly to being fat. If for no other reason, we need to trim down to use less fuel!

Let’s stop accepting the fact that so many of us are fat and that’s just how it is. Let’s stop thinking it’s OK to be fat. It’s not. Screw being politically correct and so accepting of so many overweight people who just choose to be supersized. Enough is enough. Put the turkey leg down and nobody will get hurt! Perhaps if the 40% of Americans who get no leisure time activity got off their butts and exercised (walking to the refrigerator doesn’t count), they would have an interest (and maybe the energy to “get hungry” about a good cause.

Please don’t assume that I am saying that only obese people are lazy. Plenty of normal sized people lack the hunger also. We all need to fight this complacency in society and start to get more hungry.

Certainly it would be wrong to state that everyone lacks this drives to achieve something special. There are those people who are not satiated, who are driven by the hunger of a cause. Everyday, people invent new things, do great things. Unfortunately, most of us are not those kind of people. And you may ask, “How many of us can truly do great things?” A lot of us can. You don’t have to invent a computer that performs 1,000 trillion instructions per second (oh shit, IBM just did that: http://www.crn.com/hardware/208403186) to make a difference.

What I am really trying to suggest is that we get hungry about something important. Not about a new sale at Nordstrom, or a new video game, or new BMW M6. I am talking about getting up off your ass and asking yourself, “What difference am I making in this world? What will it matter when I am gone? Will anyone truly miss me?”

What also concerns me about this lack of hunger is that it is causing a shift of world economies. Where America once was a country of citizens who were hungry to better themselves, we are now watching other, more hungry countries, innovate and create at a faster pace, shifting resources and wealth away from America. Our complacency has enabled these countries to excel. I am not suggesting that these countries have no right to shine..they do. But, it’s important to be aware of this shift and realize that it will have consequences. Perhaps one day, we will really be hungry again.

April 29, 2008

Tax Stimulus Package as Viagra

Filed under: The Economy — waxingandwayneing @ 9:12 pm

Once the media started talking about the economy, the politicians figured they better do something about it. Instead of addressing the systemic problems of our financial affairs, our brilliant government decided to simply throw some cash at the problem. Our never ending thirst for “quick fixes” has yielded the economic stimulus package, where eligible Americans will get a check for $300 to $600.

According to the IRS,

“the vast majority of people who file a 2007 income tax return qualify, and many who don’t regularly file a tax return may qualify as well. You’re eligible if you have a valid Social Security Number (SSN), can’t be claimed as a dependent on a tax return and have either an income tax liability or “qualifying income” of at least $3,000. Qualifying income includes any combination of earned income and certain benefits from Social Security, Veterans Affairs or Railroad Retirement.”

Some 130 million households (75% of the country) will receive these payouts, costing us (not the federal government…they don’t pay taxes, we do!) $168 billion. The first checks will be mailed this week. And then what?

As reported by CBS, a CBS News/New York Times poll conducted over the weekend shows that,

“of those expecting a rebate, half say they plan to pay bills with the extra money, 27 percent say they will save or invest it and 18 percent plan to spend it.”

So, with 50% of those polled expecting to use this windfall to pay bills and another 27% saving or investing the rebate, how can we expect any stimulus from these checks?

One could argue that paying bills will help the economy, as it frees up credit to enable new purchases. Fair enough. Saving the money does grow deposits at banks providing them with funds to loan out, with a multiplier effect. Investing is not as clear, since buying a stock does not stimulate the economy, per se, except that it does enrich the seller of that stock who may then buy something that helps the economy.

What is unfortunate about this bailout scheme is that it was intended to be spent. Back in January when the stimulus package was being developed, Treasury Secretary Henry Paulson, said,

“There are no silver bullets. But…to give money to consumers, there’s plenty of evidence–you give money to people they’re gonna spend it.”

On the eve before the first checks enter the system, that doesn’t look like what will happen.

But let’s give the politicians the benefit of the doubt for a moment. Let’s assume (incorrectly) that these checks will all be spent in our economy. Best case scenario, every check is spent on new TV’s, refrigerators, bikes, lawnmowers, clothing, side of beef, DVD’s, or whatever. For precisely the length of time it takes the checks to work through the system (probably 6 months), retailers will enjoy spikes in sales.

So how does this help the economy? It clears out stale inventory; that’s a good thing. But does it cause new orders to be placed? Probably not. Retailers will very cautious in ordering new merchandise to support the new sales levels, because (and here is the big surprise) the sales peak is just a one-time shot. So the suppliers to the retailers will not feel any benefit from the rebates.

How will these checks create jobs? They won’t, at least not in the long-term. At best, employers will hire employees to handle the sales spike. That is great for those hired, but I would imagine the job growth will be marginal at best. And then, most of the temporary hires will get laid off. How lovely!

Doesn’t this economic stimulus package sound a lot like Viagra? If a man has erectile dysfunction, he has two basic choices. He can take Viagra (or a similar short-term pill) or cure the problem–either surgically or psychologically. I am not making any value judgment of those who have ED (although I am grateful I don’t have that problem!) Clearly, if a man chooses to take the magic blue pill, he will have put off worrying about his flaccidity for 4 hours or so. But when next he has an urge to “rise to the occasion”, he will have to pop another pill. Unfortunately for the man whose penis is in a recession, he will get no stimulation without medication.

Why is our economy any different? I may be a bit slow on the uptake, but I am not wrong about this. The rebate checks are a one-time benefit, no different than a rebate check you might get from a manufacturer. Once you spend it, it’s gone. Unless you can count on an endless supply of rebate checks, you are not going to make any long-term changes in your spending pattern.

The economic malady we are in now is deeply rooted, systemic. Quick fixes will provide, at best, a temporary respite from the realities of the problem. Pop that pill and delay the need for a long-term fix.

Unfortunately, the only thing our politicians know how to do is send us pills. And we simply swallow them.

April 20, 2008

Put it Down….You’ve Had Enough

Filed under: The Meaning of Life — waxingandwayneing @ 11:36 pm

When I was kid, my mother used to tell me my eyes were bigger than my stomach.  I would regularly be unable to finish what was on my plate.  Wasting food was not good, she would tell me.  People are starving around the world.  Of course, she was right.

Today, we are faced with an economic crisis caused mainly by excessive consumption and greed.  For the past several years, Americans have been consuming well beyond what they really need, or, for that matter, beyond what they could really afford.

Propped up by artificial real estate prices and  baseless lending practices, consumers were presented with liquidity they did not deserve.  Shouldn’t we all have been a bit suspicious with advertisements for home loans at 100% of appraised value (leaving no cushion for error), or the 125% home equity loans promotions.  Why didn’t we demand  scrutiny when lenders were willing to do loans with no income verification or sign loan documents to borrowers that the lenderS knew did not understand what a rate reset would really mean.

This liquidity fuel artificially propped up the economy enabling most economists and legislators to believe we were in a healthy growth mode.  Once the pipeline of play money stopped last year, the engine started to sputter and the economy  faltered.  It seems to me that what is happening now is an economic slowdown that will caused a marked job loss and the need to evaluate what drivers really exist.  WE ARE IN A RECESSION.  Let’s just grow up and admit it.  This is not voodoo.  Saying the dreaded R word will not make us slipped further into this malaise; we are in it, so let’s now figure out what we have to do to get out of it.

One thing I feel we must do is tame our consumption.  We have been buying like a drunk sailor at a bar for so many years that we finally have to sober up and stop.  The time has come for someone to finally say, enough is enough.  Or, to steal a phrase from the Passover seder, Dayeinu!

As with any situation, the media loves to find a victim.  The poor borrower, lured into a loan he never should have signed.  Let’s bail him out.  Nonsense!  It’s wrong to bail people out of mistakes like this.  Certainly if any lenders violated lending laws, then that should be dealt with.  But for the government to bail out borrowers in loan foreclosures would set a bad precedence.  On top of that, we don’t have the money.  (We are pissing it away in Iraq!)

We also should not be providing any assistance to the lenders or equity holders of these loans.  Banks have never been able to assess risk properly.  Charging a couple of hundred basis points for a riskier borrower is the wrong way to compensate for higher risk.  Those extra percentage points hardly compensate the lender when the loan goes into default.  Yet, banks continue to price risk based on interest rates.  If we are going to throw any money at them, send them back to school to learn how to properly structure loans.

This recession should give all those affected a chance to evaluate what got us into this mess.  Years of greedy consumption paid for by resources we didn’t even own fueled our economy and allowed us to falsely believe everything was fine.  It’s now time to stop and evaluate what we truly have and what we can actually afford.  If you are making $50,000 a year, you cannot afford a $2,000 a month mortgage and the house that goes a long with it.  Do you really need that RV or to go on that 2 week vacation for $20,000 (financed by your home equity loan)?  NO!  Start to live within your true means and not in a “wanna be” world.

Like my mother used to say, “Put it down……you’ve had enough.”

April 12, 2008

Recession and Responsibility

Filed under: Ramblings — waxingandwayneing @ 1:11 am
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Just finished up my birthday.  Turning 50 is supposed to be dreadful, but, for me, it was exciting.  As long as I continue to act much younger, my actual age is not important.  But, enough about me; at least for now.

I want to use this blog to present my view on various topics that interest me.  I enjoy being controversial, so, if you wish, please get back in my face and challenge my thoughts.  I only ask that you do it with respect and good grammar.

Am I the only one that thinks most economists and politicians have no clue what financial mess we are have gotten ourselves into?  UCLA still believes we will not go into a recession.  And what is the phobia we have with the R-word?  Let’s just face the facts.  We lived for many years on resources we never really owned, propped up by unscrupulous lenders loaning money to people who never earned the right to own such nice homes.  While this was happening, we were selling boatloads of treasury securities to the Asian, mostly the Chinese, enabling interest rates to stay artificially low.  Unfortunately, all dreams come to an end.  But, in this case, the dream is replaced by a nightmare, th elikes of which we haven’t seen in our lifetimes.  Let’s just be frank:  We are in trouble.  We are going to experience a period of tough pain.  Artificial means to stimulate the economy, e.g., the brilliantly-conceived tax rebate plan, will do little to correct our financial problems long-term.  Sure, a $150 billion injection will create jobs, but for how long.  Until we deal with the core problems, the situation will remain.

I will revisit this topic later, but enough on this for tonight.

I continue to worry about the deteriorating state of our country’s morals.  I am hardly one in favor of the government legislating how we live, but living in a society that places no rules on behavior is just not working.  How did we get to a point where everyone has a right to pretty much do anything, for fear that we will offend people by saying “No.”  A combination of liberable judges, overly ambitious lawyers, and undeserving litigants has put fear in our society that dire consequences exist for anyone attempting to put boundaries aorund behavior.  The proverbial pendulum has swung too far, creating a society that no longer requires accountability and the need to “earn” rights. 

For too long we have simply handed benefits to people, creating a sense of entitlement that continues to expect more and more from its government.  As we head into this severe recession that will cripple governments’ ability to provide for us, I hope more of us will realize the importance of self-responsibility.  Let us help each other.  Make the road go both ways.

 

April 11, 2008

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