DO NOT HANG UP!

Telemarketers are back, and blowing through the 'Do Not Call' registry the same way an abusive husband tears through a restraining order.

True Story:  The other day, I get yet another one of those robo-calls that says, "DO NOT HANG UP!  This is not a telemarketer call!  You have selected to receive a FREE GE Alarm System!"

Now, chances are, you've been getting this call, too.  I have had it at least 10 times.  And yea, it is fraudulent, and if you do business with these people, you should not act surprised when you get ripped off.  After all, they have telegraphed, up front, what low-life lying scumbags they are.  They are violating Federal Law.  And if you do business with them, don't expect it to go uphill from there.

And of course, it goes without saying, if you do business with them, you encourage this sort of thing.

But I like to have fun with telemarketers, so this time, I hit "1" and the following conversation took place.

STEVE (telemarketer):  "Congratulations!  You've won a new alarm system!  My name is Steve and let me tell you about this fantastic opportunity!"

ME (using same over-animated voice):  "Gee! Thanks Steve!  But before you do that, let me ask you a question, OK?"

STEVE: "Uh, sure..."

ME: "Tell, me Steve, have they PAID you yet?"

STEVE: "Actually, uh, no..."

ME:  "That's right, Steve!  And they aren't!  You see, Steve, you work for a telemarketing company that has no compunction about violating Federal Law, ripping off their customers, and of course screwing their employees, sometimes literally.  And these folks hire young energetic guys like you, promise you all sorts of riches, and then don't pay you, hoping you keep showing up for work for at least a month, before you finally get wise to their excuses, and quit.  Have you thought about QUITTING, Steve?"

STEVE (whispering): "Well, actually..."


ME:  "Well, this is your LUCKY DAY, STEVE!  I'll tell you what.  Just take off the headset, put it down on the table, get up from your cubicle, and just WALK OUT THE DOOR.  Because you know, Steve, this isn't even a REAL JOB, is it?  In a REAL JOB you get PAID.  And you are just WASTING YOUR TIME at this telemarketing gig - you really can't even put this job on your resume, or let me say, if I was you, I wouldn't!"

STEVE: "Well, I..."

ME:  "BUT WAIT, Steve, THERE'S MORE!  If you ACT NOW, you can actually get your life and career back on track!  You could take this precious time you are spending working for a CRIMINAL ORGANIZATION that WON'T PAY YOU and put it to good use.  You know, a real job, or going back to school.  Even just being unemployed would be better than working for NO PAY!  So, whaddya say, STEVE?"

STEVE:  "Fuck it, I'm out of here!"

ME:  CONGRATULATIONS STEVE!  YOU'VE WON!!!

* * * 

We all have to do what we can.  Who knows?  Maybe I turned his life around.

Dumbing it Down

Videos of handling equipment at work are hardly instructive as to how things are made.  But this is what the television thinks we are capable of handling.  They want to keep us passive and uncreative.

I was recently watching this show on Netflix, called "How its Made" and I was bitterly disappointed in it.  Why?  Well, the producers seem to enjoy showing mesmerizing video of automated equipment used in high-volume, high production factories, which, while interesting, doesn't really tell you "how its made" at all.

It reminds me, in a way of this Monty Python bit, where they describe how to cure all the diseases in the world, as well as how to play the flute:

Alan: Well, last week we showed you how to become a gynecologist. And this week on 'How to do it' we're going to show you how to play the flute, how to split an atom, how to construct a box girder bridge, how to irrigate the Sahara Desert and make vast new areas of land cultivatable, but first, here's Jackie to tell you all how to rid the world of all known diseases.

Jackie: Hello, Alan.

Alan: Hello, Jackie.

Jackie: Well, first of all become a doctor and discover a marvelous cure for something, and then, when the medical profession really starts to take notice of you, you can jolly well tell them what to do and make sure they get everything right so they'll never be any diseases ever again.

Alan: Thanks, Jackie. Great idea. How to play the flute. (picking up a flute) Well here we are. You blow there and you move your fingers up and down here.

Noel: Great, great, Alan. Well, next week we'll be showing you how black and white people can live together in peace and harmony, and Alan will be over in Moscow showing us how to reconcile the Russians and the Chinese. So, until next week, cheerio.

That pretty much sums up the show, How It's Made.

For example, a segment on cheese-making shows milk going in one end of a factory, and cheese coming out the other.  In the middle are lots of machines moving around blocks of cheese.  You see the cutting and packaging, but the actual process, with the enzymes, is glossed over.  How they clean the trucks is more clearly illustrated.

The show is non-empowering.  Nowhere do people appear - running things or doing things.  The message is clear:  You are a consumer.  Our robot overlords make products for you.  Do not try this at home.

And it is a dumb message for a dumb culture.  People can make cheese.  My hateful town clerk runs a cheese factory in her back yard.  I have been to a goat cheese factory in France - and saw people making cheese.  I visited a cheese factory on the Gaspesie peninsula in Canada, and saw people making cheese.  The process is not hard to explain.

And an explanation of cheese-making really isn't complete without the history of it - and our relationship to the cows and the domestication of them.  And perhaps an explanation of different cheese types?  But no, all we get is video of blocks of cheese darting about through stainless steel conveyor belts, finally coming to rest in plastic pouch packages.  Cheese is handed down from the mechanical Gods.  You are little more than a consumer.  Eat your nachos and shut up.

Or take the segment on making CDs.  It goes through the process, spending more time explaining the washing steps than  how CDs work or are formatted or how the data is stored (in pits and lands).  All you get from the segment is more mechanical ballet of automation.

CDs are hard.  Machines make them.  You can't.  You are a dummy. 

Why is this a bad thing?  Because it dumbs down our culture - and turns us into passive consumers.  Creating things is "hard" and technology is "difficult" so you might as well not bother, and just get a job in Human Resources or sales.

But it is people, not machines, who make things, and people who makes the machines.  And we needn't dumb down our discourse just to appease the lowest common denominator.  And that is exactly what is going on, too.  Journalism majors and TeeVee producers - themselves having an 8th grade educational level - are scared of technology and believe that "content" will scare off viewers.  "You don't want to confuse people with facts," I've heard them say, "Punch up the story with good visuals and quotes!"

So they think a "Reality TeeVee" show about motorcycles, where people scream and throw wrenches at each other is more interesting than one where they actually explain how they build motorcycles.  They tell us that the emotional drama is so much more interesting than real facts, real technology, and real creativity.  And this drags our entire culture down to the level of soap opera.

People can create things - even complex things.  Apple computer was created in a garage by two guys who built a computer.  Geniuses? Hardly.  A lot of people were building "hobby computers" at the time.  Turns out, anyone can do it - people still do, today.

People build their own cars - either through kits, or through their own designs, or by rebuilding old cars from scratch.  And often they engineer their own solutions to problems.  And yea, they build motorcycles, too, although they don't generally throw wrenches and hissy fits.

And yes, people even build their own airplanes.  The Experimental Aircraft Association is dedicated to the principle that anyone can build their own airplane and should be allowed to do so.  And people do - a lot of people.  And it never ceases to amaze me that folks can spend a few winters in their basement with some spruce and glue and fabric and end up flying through the air later on.

Empowerment.  It is a very wonderful thing, to be able to actually do things, rather than just watch them on TeeVee.  But the powers that be want you to be powerless and clueless, for a number of reasons.  Powerless people are easy to manipulate.  You can sell the clueless idiots who watch Fox News just about any proposition you want to, because they likely are powerless people who are mere consumers, not creators.

So, everyone has an opinion, for example, about the economy.  How many of those opinions are very well informed?  Not many, it seems.  Most folks will vote for the candidate who promises bread and circuses - or $2.50 gas.  They have little or no clue about geopolitics, the laws of supply and demand, or even how the oil business works.  They really think the President gets up in the morning and decides how much gas will cost that week.  And we let these people vote.  Scary.

People ask me, "How do you know how to fix cars?" and I have to say, "Well, how do you not know?" and while that sounds smart-ass, it is essentially a truism.  How can you live on a planet for 3/4 of a Century and not understand even the basics of maintenance of the hundreds of thousands of dollars of machinery that will pass through your hands in your lifetime?

And the answer is - willful ignorance coupled with our "dumbing down" society.  Many folks act like ignorance is something to be proud of - as if soiling your hands with labor or your mind with knowledge is only something the "little people" do.

We built a studio in the back yard last year, and it is really a small factory that churns out ceramics.  People act amazed we built the building.  But it turns out, anyone can built a house.  All you need is a hammer.  for millions of years, we built our own shelter, made our own clothes, grew our own food.  Today, these skills are lost - and we are told that only "experts" with machines are even capable of it.

People act amazed when Mark makes a pot.  "How do you do that?" and the answer is, the same way our ancestors going back thousands of years made ceramics - which were essential for daily living.  It ain't real rocket science - you take clay out of the ground, shape it, fuse it in a kiln, then glaze it and then fuse it again.  voila.  Doing it well takes talent and experience, of course.  But the basics are not beyond the capability of anyone.

No doubt, if the producers of "How It's Made" did a segment on this, it would show lots of automated handling machinery and huge railroad-car-sized kilns, with the subliminal message of, "You can't do this, only big companies can" - and show stacks of bland and uncreative ceramics filling tractor-trailers.   Yea, we need this mass-produced stuff, but seeing how it is made is not very instructional - or empowering.

As a Patent Attorney, I see all the time, how great inventions are created - by people, often like you and me.  And the difference between and inventor and a consumer is often only that no one told the inventor he couldn't do something, or not to try, because it is too hard.

Unfortunately, more and more of our society is dumbing down.  Real information is hard to come by, and the major media outlets program more and more superficial information and intentionally edit out anything that seems difficult to understand, lest they "lose the audience" with "boring details."

And this yet another reason why I say not to watch television.  People ask me, "How can you stay informed, if you don't watch the news on TeeVee?" and I ask them the opposite, "How can you stay informed by watching this drivel?"

Seek out the hard information, the detailed facts, real information,  It is hard to do, but it is where the money lies - in learning things.  Don't waste your time with superficial crap, celebrity gossip, or these "Reality" TeeVee shows.  Fill your brain with garbage, and you will remain poor and powerless your whole life.

It never ceases to amaze me, how I meet people who know every detail on the background and status of every character on a Reality TeeVee show, like America's Idolatry or whatever, but have no clue what the balance is in their checkbook, or how to change the oil on their car.

It is a matter of priorities.  If you dumb down your own life, you have no one to blame but yourself, when you become a passive consumer and are powerless to control your own life.

Do the hard thing.  It pays off handsomely over time!

Line of Credit?

For businesses, a line of credit can be a good thing, or indeed, even a necessity.  But much of what works for business is a disaster for the individual - or even a small business.

Opportunity Cost.  Leasing.  Lines of Credit.  In the business world, these concepts often make sense, as businesses, which create wealth and create income, can benefit from these concepts.

I talked about opportunity cost before.  For General Motors, there is an opportunity cost to paying off debt.  While it might improve their balance sheet, they need the money to develop the next generation car, otherwise the business will falter.  Paying down debt has a real opportunity cost for them.  However for you, taking on debt and spending more is just spending more - you don't have a new line of products hitting the market.  As a consumer, you just consume, period.

Similarly, leasing might make sense for a big company, as they can expense the cost of a lease and thus not have to depreciate their vehicles.  And for many companies, having a fleet of reliable vehicles is paramount, as you don't want to be dealing with a blown head gasket, when you need to serve customers.  And you don't want to have to hire an army of mechanics to fix old cars and trucks.  And since you get your vehicles at a fleet discount, it is not a bad deal.   For the consumer, on the other hand, it is just a way of spoiling yourself by driving around in a car you can't afford, for a few years.  There are no tax advantages.  And it is the most expensive way to own a car that there is.  You are not saving money, merely squandering it.

But in both cases, that doesn't stop salesmen from applying the logic used for large corporations, to your personal finances.  But you ain't GM - or Apple.  What works for them is financial suicide for you.

And the same is true of lines of credit.  For a business, credit can be essential.  You buy raw materials, hire workers, and then build a product, which you sell to consumers.  You create wealth, as the sales price of the finished product is more than the sum of the raw materials and the labor.  But to get that first sale, you need a lot of money to build a factory, develop a product, and then hire workers and pay for the raw materials.  And even once you are up and running, you need credit to make this work.  Customers don't pay until they buy the product, so you have a lot of inventory that is "paid for" sitting around for days or weeks, waiting to be sold.

If you paid cash for all that, you'd have a lot of cash tied up in inventory and in salaries and in materials.  And as a result, you'd have to have a lot of cash on hand.   And sometimes, inventories fluctuate, sales are seasonal, and you need credit to carry you over a patch until sales are made.  So many businesses and companies not only sell stocks and also sell bonds - to raise capital - they also set up lines of credit with banks, so they can spot-borrow money.  And often, you hear about companies getting into trouble when these lines of credit are cut off.  But more about that later.

For you, the consumer, a line of credit doesn't make any sense.  Why?  Again, you are not General Motors.  You are not taking iron ore and union labor and making cars in your back yard.   You are merely spending money - that is the consumer's life.  Even if you run a small business, a line of credit can be problematic.

The point is, all the arguments in favor of a line of credit for a company, just don't apply to you, just as leasing and opportunity cost arguments make no sense for consumers.  And when someone tries to tell you they do, they are lying to you and trying to steal your money.  Walk away from such folks.

The lure of the line of credit is the same-old siren song of debt.  You can have it all NOW on E-Z payment terms.  The problem is, like any loan, it has to be paid back, with interest.  And often, years later, you are paying back debt and wondering why you bothered taking it out in the first place.  The thrill of spending lasts for mere nano-seconds.  The pain and drudgery of paying back debt lasts for decades.

You might as well smoke crack - because that is basically the same deal.  A brief high, followed by a lifetime of misery.

Banks offer consumers lines of credit based on their home equity.  Of course, today, this is less so, as up to 1/3 of us have negative equity in our homes.  And in addition, banks are getting wary of letting people "cash out" equity in their home, as it basically was the root cause of the recession of 2009.  Moreover, while such loans may appear to be "secured" by the Real Estate, as a second note, they are second in line to the primary mortgage, and as lenders discovered in 2009, when values drop, there really is no security left anymore.  Plus, clever lawyers can "lien strip" these second notes, leaving the lender holding the bag.

So, perhaps this posting is just of historical note.  Home Equity lines of credit are harder to come by.

When you get such a line of credit, however, they often hand you a little checkbook, which is akin to handing you a little vial of crack.  Suddenly, you have access to a "bank account" of $50,000 or more, with repayment terms amortized over 30 years at a "low" interest rate (usually a few points higher than your primary mortgage rate).  It is tempting to spend, just as it is tempting to go on the pipe.

One month, your bills seem kind of high.  That nagging credit card debt is bothering you - and at 14% to 25% interest rates, certainly not a good bargain.  You think you are clever and decide to pay it all off by writing one of those little crack-checks from your line of credit.  You congratulate yourself for your financial acumen.  After all, you've taken high interest rate debt and converted it to low-interest rate debt, where the interest is tax deductible!

Well, the latter is not really true.  Home mortgage interest is tax deductible up to the purchase price of the home.  If you deduct interest for debt above that initial value (as so many did in the 2000's) it is not allowable.  But since the IRS rarely checks this, many people did it.  Hope you don't get audited.

The second problem with this act of genius is that all you are doing is taking one debt and then tagging it onto your house with a 30-year amortization.  You are not really eliminating the debt, just moving it around.  And the amount of interest, over time, will far exceed the amount you would have paid, if you just got a low-interest-rate credit card and paid it off the regular way.

But time - that is the third problem.  While the amortization may be 30-years, the actual payoff may be far less than that.  Many banks insist that any line-of-credit be paid back in 5, 7, or 10 years.  If you make the minimum payments - based on 30-year amortization, at the end of the fixed period, you may find yourself in a "balloon note" situation, where a large amount is due at once.

The friendly banker will suggest refinancing both your primary note and the line of credit, into a new primary mortgage.  Smart move, except that you are now adding several thousand dollars in closing fees to the balance of your mortgage, even if the monthly payment is less.  You are running as fast as you can, and falling behind, at the same time.  And you just amortized that Big Mac that you paid for with a credit card, over 30 years.  You will be making payments for three decades for meals you shat out a month ago.

You see, these are not "smart" financial moves.  The basic problem is just plain old spending.  A line of credit encourages you to spend.  And people, being weak, tend to spend until they run out of money - just as a goldfish grows to the size of his bowl.  Just as Boyle's law says a gas expands to fill a container.

"But," you say, "I have the willpower to avoid the temptation to spend!  Tie me to the mast, I can resist the siren song and avoid steering onto the financial rocks!"   Nice try, Hercules, but you get a "No Sale" from me.  No one is that strong, first of all.   Second of all, if you are going to get a line of credit and "not use it" then why get one at all?  There are real closing costs involved, even if you don't use it (in most cases, in others, they may offer "free closing costs" but then jack the rates).

The bottom line is this:  As a human being, you are weak and prone to error.  Rather than deny this and pretend you are a Superman, just admit it and then plan your life accordingly.  Rather than say, "I'm not prone to gambling!  I can go into a casino and not gamble!" you are better off just not going into casinos, period.  Because, if you really don't gamble, then why go?  And if you do have a gambling problem, then why go?  Just don't go - either way.  There is no upside to a casino - or a crack house.

People who get lines of credit will, very quickly - within a year or so - rack them up to the limit.   It just happens, trust me.  You pay off other debts using the line of credit, and then think you are being smart, so you rack up more debt.  Or you decide to buy a new car, using your line of credit, and think you are being "smart" for "paying cash" (which you are not) and using deducible debt (which it is not).  Everyone does it (or did it).   Period.  No one goes to the strip club and doesn't order a lap dance.  Never think you are immune from being human.

And yes, we had one of these home-equity lines of credit.  Heck, back then everyone did, and at the cocktail parties on the street, 30- and 40-something homeowners would hold forth on what a great deal it was, and we'd all nod in agreement about what financial superstars we all were, for taking advantage of these "smart deals" as "smart consumers".  Hey, did I mention all the flyer miles I'm getting on my credit card?  Oh, really?  Do tell!  Can I get you another drink?

Oh, those were the days.  Were we ever that young and naive?  Oh yea, we were, as a nation.

Borrowing more and more money is never a good plan in life.  Limit borrowing to situations where you really, really need to.  And even then, minimize the borrowing.  The problem with debt is that since the "monthly payments" initially appear low, it is tempting to spend more - to buy brand new, instead of used, to buy the GT model, instead of base SE, to go to a more expensive school, rather than a State one, to buy a deluxe house with sun nook, instead of a house you actually need.  Loan money is funny money, and like lottery winnings, is easy to spend.  Unlike lottery winnings, you have to pay it back - with interest.

What about small businesses?  It is tempting as a small businessman to get a line of credit.   Customers may be slow to pay, and you may need money to make your tax payments and other bills which come due and are not extendable.  However, taking on more debt may not be such a smart move for a small business, as it masks the underlying problems of the business.

For example, when I ran my firm, I had a line-of-credit with American Express.  I used this when I needed to make payroll and pay withholding, which are not bills you can extend.  And for a while, it seemed to be working out OK.  But what I was failing to realize was that (1) I was not bringing enough money into the joint, and (2) I had way too much overhead for the amount of business I was doing.

I hired more people, but they did not produce enough billings to justify their salaries.  And stupidly, I hired more support staff to do work for me, but didn't have time to supervise them properly.  And I over-paid them.  I made money, as a one-man shop (and should have left it at that) but lost money as a four-man firm.

The line of credit masked this effect for a year or more.  But one day, Amex decided to cancel my line of credit.  They based this on my credit report, and it was all done by computers.  Their computer pulled my credit report (I think scores did not exist then) and then made an automated decision to keep or cancel the line of credit.  It then generated a letter which was mailed out to the consumer.

Problem was, between the time the letter was generated and the time I received it, I used the line of credit to make a deposit to my bank account to cover payroll and taxes.  And when that line-of-credit check bounced, well, it started a cascade of problems.   Fortunately, my bank was able to extend me a line of credit, and that turned out to be a better deal, in that at least it was not cancel-able at will and they would at least call me if there was a problem.

But lesson learned, and I realized that running this debt hamster-wheel was a false value and a bad idea.  I laid off the staff and went solo again, and found myself having a lot more fun, and actually making more money.

And when I read the financial pages, I saw that many large companies had the same experience I did - they would get into a small financial difficulty, and their lines of credit would not be renewed, and as a result, their small difficulties snowballed into huge ones - and this often meant bankruptcy.

A line of credit leverages you, financially.  It hollows you out.  And when you do this, you make yourself more vulnerable to the whims of financial weather.  You have a dry spell, for example, and it wipes you out.

And that is, by the way, what bankrupts farmers - debt, not drought.  A drought may cause a farmer to lose a crop or lose money.  But it is failing to service huge debts that makes him insolvent, bankrupt, and eventually, no longer a farmer.  The farmer with less debt, or no debt, has a better chance of surviving the drought - and then buying his neighbor's farm at the bankruptcy auction for pennies on the dollar.  Kind of harsh, but that's business.

I have been very lucky, in life, and part of this luck was, in some instances, being able to see the writing on the wall and get out while the getting was good.  In my small law practice, I saw the debt load increasing and I got out.   I listened to the nagging little voice in the back of my head saying "debt ain't right" instead of the siren song of commerce that shouted, "More debt is better!  See if you QUALIFY!"  A friend of mine was less lucky - he went millions of dollars into debt, hiring 14 attorneys and finally had to sell out his practice to another firm.

In the home arena, the same thing happened.  That little voice in the back of my head said, "Gee, we are taking on more and more debt, and not paying down our mortgage, but increasing it, over time."  Others listened to a different song - which was on the top-40 at the time - which sang, in sweet, soothing tones, "You'll never pay off your mortgage anyway, don't sweat it!  Debt is good!  Cash out the equity in your home and enjoy life!  It's what the smart set is doing!"

So I sold out of Real Estate, before the market crashed.  Smart?  Perhaps.  Lucky?  You bet.

But a lesson is learned - taking on more and more debt is never a good move.  And "lines of credit" are as dangerous as lines of cocaine on a broken mirror.  They are tempting and evil, and in exchange for short-term pleasure or relief, they provide long-term misery and deprivation.

If you are thinking about a home equity line of credit, think again.  Think why you need to take on more debt, and whether this is truly a smart idea.  Chances are, it isn't.  Chances are, you don't need it.  Chances are, it is a really, really bad idea you should run, not walk away from.

Small Claims Court

People like to threaten to to 'take you to court!'  How real is this threat?  Not very, as it turns out.

As a lawyer, I always get a chuckle from folks who like to tell me about the law.  And they usually repeat a lot of folklore and urban legends, and when I try to tell them the real deal, they interrupt me and say, "Well, you aren't much of a lawyer, because everyone knows that...."

Oh well.  I get the same amusement, as an Electrical Engineer, when some yahoo shows me their new electronic gadget, with such pride you would think they had designed and built it.  But alas, they are merely the consumer who the marketing department sold it to.  And the names Engineers have for the end consumer are not usually very polite.  Sucker is one of them.

And as a Patent Attorney, I also get a chuckle out of this, when a person shows off his new electronic toy - again, as if he invented it, instead of merely going into debt for it, as chances are, I wrote the Patent on it a decade ago, and it is only now just hitting the market.  I try to act amazed, just to humor them.

And you'll notice that I am not one of the suckers walking around with that piece of e-trash hanging off my belt, ear, or whatever, either.  That's for the suckers - excuse me, customers.

But I digress.

The funniest thing I hear all the time is "I'm going to sue!" and the context people say this in.  For example, on one car forum, someone started a thread ten years ago about "how we should all file a class action suit" against a car maker because their power windows broke.  These yuppie whiners go on and on about this, as they take the car to the dealer to get it fixed, and it costs $500 each time, because the dealer replaces the entire window assembly and charges $150 an hour labor.

I tried to point out to them that the culprit is a 99-cent clip that takes about a half-hour to install.  I even posted a series of pictures on how to disassemble the door and replace the clip yourself.  It isn't hard to do.

And I pointed out to them that getting mad at the manufacturer isn't fixing your window, and moreover after a decade, a class-action suit isn't likely.  And I pointed out to them that the only people who win lawsuits are lawyers, not the people wronged, and the lawyers want to see millions of dollars of damages and injuries before they will even consider such a case, and a few broken power windows, well, don't amount to much, particularly on decade-old cars.

But again, I get, from non-lawyers, the response, "Well, you must not be much of a lawyer, because...."

Well, perhaps I am not much of a lawyer.  But you ain't one, period.  And what you picked up on TeeVee or in the schoolyard is basically all wrong.  Yea, I know, after three seasons of "CSI" you can solve murder mysteries, and after 10 seasons of "Law and Order" you are now qualified to argue cases in court.

But actually, no.  I don't like watching those shows, as most lawyers don't, as they are so bogus that it isn't funny.  On TeeVee, lawyers do all sorts of things that would not last a microsecond in court.  On the TeeVee the lawyer gives long-winded testimony, enters hearsay as evidence, leads witnesses, assumes facts not in question, and generally takes the Rules of Evidence and throws them out the window.  Few Judges would stand for such grandstanding, and in fact, they don't.  And in fact, real courtroom drama is pretty darn boring, as anyone who has watched the courtroom network will attest to.

Filing lawsuits sounds like a swell idea - to right wrongs.  But the problem is, it is very, very expensive.   Even a broken down litigator is going to want $5,000 to $10,000 up front just to file a suit - or should, if he is smart.  A lawsuit is a complex and time-consuming process and can require an entire team of attorneys and paralegals to administer.   And since the costs are open-ended, any Attorney who doesn't get a retainer up-front is very foolish.

And if you are suing a "deep pocket" company that has a mega-lawfirm at its disposal, it will swamp your attorney with pleas, motions, and discovery requests, which will take up hours of attorney time and escalate costs rapidly.

And for this reason, most con artists steal $5,000 to $20,000 from their victims, knowing full well that even if the victim goes to the Police, the Police will say they have no jurisdiction or that no crime has been committed, but rather a tort, which is grounds for a civil suit.  If the victim hires a lawyer, the lawyer will gently inform them (if he is any good) that filing suit will cost thousands of dollars with no guaranteed result and moreover the victim will likely be counter-sued as a result.

So most victims fold their tents at this point and slink away.  And the con artists win again, which is why you should avoid dealing with con artists.  Anyone who steals less than $100,000 from you isn't worth going after.

What about contingency-fee litigation?  What about it?  The John Edwards ambulance-chasing scumbags of the world want one thing, and that is money and lots of it.  And they aren't going to make it taking your $5,000 dead parakeet case.  They want a dead person, or preferable a quadriplegic, who was run down by someone driving for a big, big company with deep pockets.  They want a slam-dunk-win case that a jury will get all weepy about, and result in a huge victory and a huge reward (reduced on appeal, of course).

The lawyer takes 60% or more (those "expenses" add up, particularly those $500-an-hour expert witnesses) and the victim ends up with a little more than the insurance company initially offered, sometimes less.

"But wait," you say, "I just heard about a big case where some guy won big!  John Edwards wrote about his big legal victories in his autobiography!"  And that is true, there are some big wins out there - just as there are at the casino.  And good Personal Injury Attorneys tout these loudly.  I get a newsletter from a Florida firm which highlights all their "big wins" but fails to mention any of their big losses.

Lawyers win lawsuits, period.  Plaintiffs and Defendants usually lose.  But most folks miss this salient fact, and in fact, it is the poor who are usually Plaintiffs in such suits and even after a big win, they usually remain poor - or return to poverty in short order.

So, unless you have a large claim and can afford the cost of an attorney, a lawsuit is not very realistic.  And unless there is a huge damage award that is near-certain, a contingency fee attorney is not very likely.  Small amounts of damages are hard to litigate and even harder to collect.   Heck, even large damages are hard to collect - ask the fellow who sued O.J. how that worked out.

But what about small claims court?  What about it?   Small claims court is one of those jokes the legal profession perpetuates to give the impression to the rubes that we actually do live in Norman Rockwell's America, where concerned citizens can stand up in a town hall meeting and state their piece, and the good folks of River City will vote their conscience.  Not the alternative view - that a small group of powerful and wealthy people control everything - because that's not the way things are, right?  Of course not.  Now keep your head down and eat your media kibble.

Yes, Small Claims court is a joke, and the punchline is that you expect justice from it.  But likely not.  To begin with, most courts have very small limits on how much you can sue for - a few thousand at most, some less than a thousand.   This is worth you taking time off from work to go after?  It is like challenging a parking ticket in the District of Columbia.  Who can afford to take a day off from work to challenge a $50 parking ticket?  Just pay the damn fine.  It doesn't matter if you were "right" - no one gives a shit.

When I was a youth and had naive ideas about causation and right and wrong, I rented an apartment from a slumlord.  The fellow was retired, and he bought a house in town with a large carriage house, and proceeded to divide it up into no less than 10 apartments, five in the house, five in the carriage house.  The neighbors must have loved him.  It was a cheap place to live and the turnover rate was pretty high.

I lived there for a year or two until I found a better place to live (or so I thought) and when the lease ended, I moved out,  and expected my security deposit back.  But of course, no security deposit was forthcoming.  I called the landlord, who up until then had been nice to me.  Now, he was not my friend.  He claimed I hadn't given him sufficient notice, even though the lease has expired.  He also claimed I had "damaged" the property by putting a nail in the wall to hang a picture.  After a few phone calls, it was clear he felt he was owed the security deposit.

So, I filed suit in small claims court.  A week later, we were scheduled to appear, and I waited and waited and waited.  The local magistrate was hearing cases for speeding tickets and misdemeanors and the like and finally at the end, he was about to adjourn, when the landlord finally showed up.   I had a friend with me as a witness and a deposition from another friend, that the property was clean and in good condition.  I also had a copy of the lease which I showed to the judge.

The landlord was livid, and he screamed at me, and at the judge, which was a mistake.  He simply felt that he could do what he wanted to, and that was that.  The judge read the lease and agreed with me that I was owed my security deposit.  But with regard to the "damages" he decided to split the baby in half, and deducted half the cost of "repairs" (which was mostly painting the place) from the deposit.  I won half my security deposit back.

So, after the court was adjourned, I asked the landlord for a check, and he said "fuck you" and left.  And I discovered that collecting such judgements was tricky at best.  I would have to record the judgement, place a lien on his property, and then try to get a Sheriff to tow his car or seize a bank account, or wait for him to sell a piece of Real Estate.  And the cost of doing this far outweighed the amount I was owed.

In terms of emotional satisfaction, it was a win for me, particularly after seeing the Judge read the landlord the riot act.  But in terms of financial satisfaction, it was a zero - if not a loss, considering my time and efforts involved.  Without a detailed knowledge of the legal system, which I did not have at the time, I was flying blind, and no one goes out of their way to help you, at that point.

A lady recently made headlines by suing Honda because her car did not get the EPA rated mileage that it was supposed to get.   A bunch of class-action lawyers had filed suit and, like most class-action suits, won token amounts for the car owners, and huge fees for the lawyers.  The lawyers always win.  This lady decided to "opt out" and file her own lawsuit in small claims court, instead.

To me, it is a spurious suit, as the actual mileage you get in a car depends entirely on how you drive it.   Ride the brakes, for example, and your mileage will suck.  Floor it off the line and slam on the brakes at the stop sign and mileage will suck.   And this is particularly true for hybrid cars - the subject of the suit - as they rely on regenerative braking to stop the car, which requires that you stop slowly and let the car recapture kinetic energy and convert it to electricity.  Slam on the service brakes, and, well, all you get is heat and brake pad dust - and crappy mileage.

Plus, the EPA rated mileage is not something that is within the control of the automaker.  It is based on an EPA test that is defined by the EPA and is not a guarantee of actual mileage, but just a number used to compare your car to others.  It would be like saying your tax assessed value on your house is an indication of its real worth.  It is not.  And moreover, the automakers are required to post this mileage rating.  So it is not like Honda lied about the mileage, made up a number, and then touted it in the ads to spur sales.  The government told them how to calculate mileage and then mandated that they post it.  Getting sued for obeying government regulations is idiotic.

And besides, everyone knows, "Your mileage may vary" - it is part of the lexicon, for Christ's sake.

But regardless of the merits of the suit (there are none) this lady brought suit, and the kindly judge let her win, so that we plebes will all go 'atta girl!' and be led to think the justice system actually dispenses justice, and not just windfalls for crafty lawyers.  But of course, Honda will appeal, and in the appeal, costs can escalate, as unlike Small Claims Court, the opponent can now bring to bear their entire legal staff and legal arguments, and basically swamp the other side.

But here, no great loss, as the case had no merits anyway.  Stop riding the brakes, lady!

Should you go to small claims court?  Should you threaten to sue people if they wrong you?  The latter is problematic and arguably illegal in some states.  Using the threat of a lawsuit is enough to get a lawyer disbarred, anyway.

But in most cases, it is an empty threat.  Few individuals can afford to follow through with such actions, and the few that do, well, have you ever had a friend who sued someone?  Even when they win they are never happy, are they?  That should speak volumes to you.

You should not rely on a lawsuit as a mechanism for enforcing performance of a contract or any other financial obligation.  Because it is hugely expensive, time consuming, and largely fruitless.  Rather, use the oldest mechanism in the book - never pay until services are rendered.  In 9 times out of 10, people who claim they are ripped off are the ones who pay up front for something and then never get what they expected.

Do some people succeed in small claims court?  Yea, it happens.  Where an opponent doesn't realize that they can get away without paying, if the claimant doesn't have the wherewithal to go about collecting.  But in most cases, all you will get is emotional satisfaction.

Which leads us to the next thing.  People who say, "I don't care about the money, its the principle of the thing" which of course translates into "It's about the money" - in most cases.

Seeing emotional validation is an utter waste of time and effort.  In 9 times out of 10, you are better off just moving on with life and learning from your mistakes.  For me, as a youth, I probably should have stayed at that apartment for another year, rather than move.  The rent was cheap and it was a pleasant enough place to live.   I ended up buying my first home after that, and likely, the best solution would have been to go house-hunting.

But I could have afforded to walk away from the security deposit - indeed, that is what happened.  Getting all riled up about it and being self-righteous and angry didn't serve to do much for me at the time.  And trying  to sift through what is "right" and "wrong" is usually a waste of time.  You rent an apartment from a slumlord, it is hard to act shocked when he treats you badly.  That is, after all, a predictable outcome, right?

In fact, you should expect nothing else.

* * * 

If you do decide to file a suit in small claims court (and don't say I didn't warn you!) contact your local court clerk for more information.  It is a State law issue.  How much you can sue for and what the procedures are, vary from State to State.

This is not a "how to" posting on how to go about doing this.

However, if you think it is going to be like "Judge Judy" where you get to stand up in court and orate before the judge about what a rotten person the other guy is, well, you are in for a rude surprise.  Stop watching TeeVee and thinking that way.  Real life ain't like that.

You have to marshal your facts, your documents, your evidence, and have foundation to enter them.  Otherwise, you will get creamed.  Moral outrage rarely carries the day.  In fact, it never does.

Playing Teeter Totter

Playing teeter totter, as a kid, was fun, until the fat kid jumped off his end, while you were still up in the air.

Teeter Totter.  It is what a lot of people played in the 2000's.  Many Americans - middle class Americans - had nice houses, nice cars, some savings in their 401(k) and a huge mountain of mortgage debt.

In many cases, people had as much in their 401(k) - or more - than their mortgage debt.  And many folks started to wonder, "Gee, it is such a swell idea to have all this money on paper and at the same time have all this debt?"

And many folks started to wonder, "Gee, can I cash in my 401(k) and just pay off my mortgage?" and the answer is, of course, no - not without some huge tax penalties.

And in 2009, just like in the schoolyard, the fat kid got off the teeter totter when we were way up in the air - leveraged in debt and invested heavily in stocks.  And the teeter-totter slammed down, breaking our coccyx and sending us to the Nurse's Office.  The fat kid got an hour's detention.

Once home value and stock values declined at the same time, the whole thing went wrong, in a hurry.  Suddenly, the home was worth less than the mortgage balance, and the value of the 401(k) dropped as well.   We went from a balanced position, as shown above, where debt and equity neatly match (but still produced a net worth of ZERO) to a situation were debt far outweighed equity.  Ouch.

Today, the economy is recovering, despite what Fox News is saying.  But many folks are going right back out and doing the same old thing - loading back up with debt and leveraging themselves.

But many others are not - gun-shy and worried about getting caught in the same problem again.  And many economists argue that this is a "problem" with our economy, as banks want to loan money, but qualified borrowers with legitimate borrowing needs are hard to come by (deadbeats who want to buy a Camaro, however, are dime-a-dozen).

Of course, you have to make your personal financial decisions to benefit you.  Yes, there are people out there dumb enough to think that buying a brand-new car and going heavily into debt is "helping the economy" and therefor a good thing to do.

All I can say is, let the other fool do that stuff.  Do what is in your best interests.  And playing teeter totter is never a very safe game.

Hollowed Out Economy?

How do you hollow out a company or an economy?  By loading it up with debt.

Mitt Romney's Bain Capital, the Mohegan Sun, your Home Equity Loan, and your Parent's reverse mortgage, all have one thing in common - they are ways of hollowing out companies, lives, and our economy, by loading us up with debt.

In the not-too-distant past, we actually owned things in this country - our houses, our cars, our factories, our lives.   When someone got a car loan, it was for 24-36 months.  The 72+ month car loan simply didn't exist, nor did leasing, outside of the commercial arena.

Similarly, when you bought a house, you got a mortgage, and then you paid on it until you sold the house or paid it off.  The idea of refinancing again and again to get a better interest rate simply didn't exist, because rates were stable.  And the idea of taking money out of your home to spend was just not done - you would need that money to make the down payment on your next house.

Similarly, companies were not laden with debt, and often actually owned the land and factories they operated from.  A company was worth money because it made money, and it also had some actual liquidation value, more than pennies on the dollar.  GM's factories were an asset, not a liability, back then.

Today, it is very different.  We live in a debt culture, and during the last two decades, we have hollowed-out our lives, our companies, and our economy, all so we can go on a spending spree.

The antics of Bain Capital are well known.  You buy a company, load it up with debt, and then take the money before the thin shell of the company collapses in your wake.  The secret is to be out of the shell before it collapses.  The Bains of the world are risk-takers, just as those companies that implode buildings are risk-takers.  But strictly speaking, they are not creating wealth, just destroying and making a profit from destruction.

In your personal life, this hollowing-out has been a trend that has accelerated in the last two decades, culminating in our recent economic meltdown.   People like to blame Bush, Obama, the Republicans, the Democrats, or the "Wall Street Fat Cats" - and certainly all of these people have a hand in things.   But the greater conspiracy is what I call the conspiracy of 330 million people - which was the actions by all of us in hollowing out our own lives to satisfy the now while sacrificing the future (or simply not thinking about it).

So, in the 1990's and 2000's, people went on a refinancing orgy, taking out cash or getting lines of credit and buying "stuff".  Why not?  Property values and stock values were climbing - so why not "cash out" some of that money and have a party?

Problem was (and is) that taking out loans is not "cashing out" but merely borrowing.  No one wanted to sell their stocks, as they were locked into 401(k) plans with hefty tax penalties.  And why sell, when the market is doing so well?  Why sell the house when it is going up, up, up in value?

So instead, we borrowed against these inflated assets, and the result was catastrophe, as the value of the inflated assets sank back down to where they should have been (and then kept going down) while the loan balances remained and the payments were still due.  People's lives collapsed, as the thin, hollowed-out shell lacked any real support.  But for a brief time, this hollowed-out shell certainly looked impressive.

Old folks were encouraged to take out "reverse mortgages", which I have written about before.  These served to hollow-out their retirement, as it took their largest remaining asset, and then loaded it up with debt.  Their net worth plummeted, while their immediate cash-flow increased.

 Many others entered retirement with traditional mortgages, car payments, and credit card debt, relying on their pension plan to pay for it all.  A great plan, until Mitt Romney comes to call, and Bain Capital "hollows out" your pension plan, leaving you with 40 cents on the dollar, and a dollar's worth of loan payments to make.

What is worse is that many financial advisers still feel that hollowing out is a good strategy.  They believe you should tie up all your money in stocks and never pay off your mortgage.  So you are heavily invested in the market, but also heavily in debt.  What happens is, well, 2009 happens, and it all goes horribly wrong as the debt remains and the stocks drop in value.   But the financial adviser collects 5% either way.

Have you hollowed out your own life?  What is your net worth?  Do you actually own anything?  If you have loan payments due on everything in your life, chances are, you are hollowing yourself out.  And it never ceases to amaze me how some folks do this.

The other day, I was talking to a fellow with a BMW X5.  He was commiserating that he had to spend $3000 on repairs at the mechanic (my mechanic labor cost to date:  $0 - you can't own decade-old BMWs and not know how to use a wrench).   But what amazed me was that he said, "Well, I only owe $3000 on the loan at this point."

A loan?  On a 12-year-old car?  What's the point of that?  And what was weirder was that he owned four cars, one of them an exotic sports car, and owed money on most of them.  And yes, he complained about being broke all the time.

Just a simple thought:  How about owning ONE car and actually owning it?  The cost savings, in loan interest, collision insurance, registration fees, repair bills, and the like are staggering.  In fact, they are enough to go out and OWN a second car.

But he was hollowing out - borrowing more to have more, when he could own outright for a lot less.

It is tempting to hollow out - you get "more" up front, in terms of shiny cars and jet skiis and vacations to exotic destinations.  But long term, you suffer - and suffer greatly - for it.

Free Furniture

Most folks buy furniture on time.  Really stupid folks rent-to-own furniture.  Really smart people get their furniture for free.  How can this be done?  Buy quality furniture!

The other day, driving through rural Florida, I nearly drove off the road when I saw that stupid Aaron's dog on a billboard, with the caption, "Credit is hard, renting is easy!"

Ouch.

It reflects the mentality that furniture is "expensive" and that the only way to get a chair or a television is to borrow money.  And this is sad.  Because furniture should be free.

Free?  Yea, you bet.  If you look at the overall transaction costs and not just in terms of monthly payment.  Let me explain.

Most of the crap you buy in life is just that - poorly made junk that is worth pennies on the dollar the moment you purchase it.   You use if for a few years, and then throw it away, adding to our landfill problem.  Or, if you are a hoarder, you keep it, on the premise that "you paid good money for it" and thus cannot bear to part with it.

So those old Aeropostal shirts hang in your closet, worn out and hopelessly out of "style" and worth maybe 25 cents at a garage sale, when you paid $29.99 for them new and wore them maybe a year.

It is a huge loss, in terms of depreciation.  And sadly, most folks think this is how every purchase is - and should be.

In the realm of furniture, most Americans buy crappy furniture made of particle board - and many finance it on  consumer loans or credit cards.  The furniture rarely outlasts the payment terms, and eventually, that pink velour sectional sofa ends out at the curb, stained, unloved, and with the padding all coming out, waiting for the trash truck.

And Mr. and Mrs. America go back the loud-advertisement furniture store and buy a house-load more of this crap.  Repeat ad infinitum.

I had neighbors like this, in Connecticut.  They went to the place that advertised on the radio and furnished the whole house on credit.   The wife was so proud of their faux suede leather sectional and chrome ball lamp, as well as the glass coffee table with chrome legs.  It all looked so modern and clean!  And she would make us take off our shoes before we went into her show-room like living room.  It was a status thing (white trash status, but status nevertheless) and every month, they sent off $99 to the finance company.

10 years later, they had none of that furniture.  The faux suede did weird things after about three years, and its particle board and cardboard frame, stapled together, started to come apart after repeated sittings.  And the cushions started to take a set and the cheap chrome on the coffee table started to corrode and peel and the glass scratched.  It all went to the curb or to goodwill, and they went out and bought new crap.  Well, after the divorce, I am sure she did, anyway.

Is that really a good value, in the long run?

But, suppose that you bought a piece of furniture that was well-made, but not flashy.  And you had it for maybe a decade.  Maybe 20 years.  Maybe a lifetime.  And after all that time, the piece of furniture was worth, well, about what you paid for it, maybe more.

The overall transaction cost is zero.  When you decide to sell the furniture, it is worth more than you paid for it.  It is less an expense in life, than an investment.

How can this be done?  Well, for starters, by not buying crap furniture from those loud furniture stores which sell trendy crap that is poorly made.  How do you know what kind of stores these are?  Look for the big ads in the newspaper and loud ads on the radio and TeeVee.  Right there is the police tape marking off these places as raw deals.

Second, don't be in a hurry.   IKEA and many crap furniture stores sell the idea of "having it all now" - furnishing your entire house in one fell swoop.  IKEA is famous for its "This entire room!  $1999!" ad layouts.  The loud furniture stores are famous for their "bedroom suits" and sets - entire "combos" of "matchy-matchy" that you can plop down and start making payments on.  But none of this rarely lasts.

Most of our furniture today is from Stickley.  It is solid quarter-sawn oak which is strong enough to jack up a car on.  Every damn piece of it.  And over time, it holds its value, significantly.  Since it basically can never wear out, you will have such furniture for the rest of your life.

Now of course, that kind of furniture is expensive to buy.  A simple Morris chair can cost a couple of thousand dollars.  But again, since it holds its value, over time, it ends up costing little or nothing in the long run.   Such a chair will easily outlast 5-10 $499 recliners in your lifetime.  Which is really cheaper?

"But," you say, "I have no cash!"

Well, relax.  There is no need to furnish an entire house all at once, and in fact that is one good argument for owning a smaller home.  Many people go into debt trying to furnish these mini-mansions, and end up with room after room of crapola furniture.

You are better off saving up for quality furniture, one piece at a time, than going into debt to have rooms full of crap, now.

And yea, I have had to sleep on the floor while saving up to buy a new bed.  And yea, even fairly recently, too.  But I would rather pay cash for a good bed, than go into debt for crap, just so I can say I "have it all now."

Quality furniture can also be had, secondhand, at some attractive prices.  And over the years, we have had a number of pieces that we bought at "antique" or "junk" shops, which were well-made hardwood pieces that lasted decades.

However, you have to be careful shopping in a "junk" shop, lest you buy junk.  Buying someone's clapped-out particle-board furniture is never a good bargain.   Just walk away from that sort of crap, entirely.

Similarly, never buy an "antique" piece that has wobbly legs, delicate caning, or looks as if it will fall apart with any sort of use.  Fragile antiques are not functional - leave those behind.

And no, you can't "fix" broken antiques.  If you see a chair in a shop with a bad leg, chances are it will always have a bad leg, and if you examine it closely, you will see where some other poor fool tried to "fix" it earlier.

Our dining room "set" is an example of such a find.  The table was free - a family piece that was sitting unused in an attic for many years.  It is 12 feet long, and the top is made of two planks that are 2" thick and 16" wide, each.  You just don't see pieces of lumber like that very often these days.  It has two large carved pineapple bases and is strong enough to support a car.  It is very old and has many scars, but it also has character.  And it is worth some money and has appreciated in value over time.  Even if we had paid for this table, it would still be a positive cash-flow deal - it would always be worth more than we paid for it.   It will never go to the curb as a pile of broken twigs, like the laminated crap that sell at Joe's Discount Furniture Outlet.

Along the back wall, we used an old church pew for seating.  We paid maybe $200 for this pew and paid another $100 for a cushion (at churchpewcushions.com, I kid you not.  Where do you think the church's get their pew cushions?).  On the other sides of the table, we have a set of eight solid-oak chairs that are from the 1940's and appear to have been from a school or office.  These are solid chairs, not rickety or wobbly.  I think we paid $200 for the set.

Someday, we will likely downsize to a small retirement home, and a 12-foot dining room table will be out of the question.  And when that time comes, we will sell the table, the pew, and the chairs, for far more than we paid for them.

Free furniture.  It ain't that hard.

And so on, down the line.  Good quality furniture lasts forever, and you can buy it new or used.   But junk falls apart, and you keep having to buy it, again and again.  The rich buy quality, and keep it forever.   The poor buy junk, over and over again, and remain poor.

It is like the parable about the cardboard soled shoes.  Poor folks, back in the day, would buy pair and pair of cardboard-soled shoes, even though they rarely lasted more than a few months.  A simple pair of leather-soled shoes would last 10 times as long but barely cost twice as much.  But the poor look only at purchase price not the overall transaction cost.

Which is why they are poor.

Now don't get me wrong - you can't consume your way to wealth.  If you read this article and use it as an excuse to go out an buy all-new furniture, you are entirely missing the point.

But it pays to look at overall transaction costs - the back end as well as the front end.  Most people look at purchase price on items, and then fail to think about overall value, in terms of cost of ownership as well as depreciation and eventual resale.  And this is probably because most stuff you buy has no resale value at all even after only a few months.

But some things do hold their value.  And quality furniture made of solid wood, with timeless styling, is a case in point.

Solid wood, solid leather.  This chair will last decades, if not a Century.  But beware, the cheap furniture stores are starting to sell poorly-made knock-offs out of particle board and veneer.