Lazy Man and Money

Spending a Million in a Weekend… or When Crazy Calls you Crazy

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I was reading Peter King’s Monday Morning Quarterback yesterday and a little bit of personal finance slipped it way into what is the best weekly football read there is. Due to the summer off-season, the NFL slows down a little and Peter King took a vacation. Writing in his place was the Indianapolis Colts’ recent high draft pick from Stanford, Coby Fleener.

It is a very well-written article and in it Fleener goes into detail about the orientation the NFL has for rookies. What really caught my eye was that they got Adam “Pacman” Jones and Terrell Owens to talk on a stage to the rookies. This was a shining example of getting a pair to show players what not to do.

“Pacman” was the first defensive player taken in the 2005 draft and showed remarkable talent in two things, playing football and occupying the backseat of police cars. Repeated incidents, including a shooting, lead to numerous suspensions. When he got back on the playing field karma seems to have caught up with him in the form a couple of neck injuries that ended a season and slowed him down in another. He still seems to be playing football, which was a surprise to me. He’s certainly not a factor that opposing teams prepare anymore.

Terrell Owens is a little more well known. He had a very productive career, but one in which he had been traded or simply released many times because of disagreements with ownership. Many people witnessing his antics have concluded that’s bipolar.

With this background knowledge in mind, Adam “Pacman” Jones was telling rookies about the things that he regrets in his time in the NFL. Fleeney didn’t report on how many hours the talk went on, but at one point “Pacman” Jones “regretfully recounted spending $1 million in one weekend” and Terrell Owens turned to him and said, “Man, you crazy!”

For the first time in my life, I’ve heard what a crazy person thinks is beyond crazy. On the flip-side of things, I can’t imagine what “Pacman” Jones’ life was like. He estimated that 90 percent of his childhood friends in Atlanta are now either dead or in jail. I wish I could have connected with him and said, “Hey, here’s a chance to use that money to save some of those friends.” I’m betting that a few people tried to tell him that along the way, but he might not have listened. After all, it’s his money, and if he wants to go to the strip clubs and make it rain money, that’s his business. However, in just a few years he’s talking to the rookies telling them about how much he regrets spending that money.

Unlike many of my articles, I don’t have any practical advice here for the average reader. Unless your rich uncle Brewster puts you in the situation to spend millions, you and I will probably never see that. However, if you do find that situation, I suggest you put the money to good use. At the very least, set aside a few dollars for star NBA players who can’t afford lenses for their glasses. Also, please get Katy Perry some Ambien.

From Hero to Zero? A Schilling for My Thoughts on Job and Wealth Creation

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I got an email the other day asking me not “if”, but “when” was going to write about Curt Schilling and his company 38 Studios running out of money. It was a fair question.

For those of you who haven’t lived in New England for 30 years, let me give you a brief update. Baseball isn’t a way to pass the time, but a way of life… and the Red Sox rule the 6 state region (except for the evil half on Connecticut that is in under the delusion that they are in New York).

For generations, the Red Sox didn’t win a championship. They got as close as you can get many times, but it all fell apart in the end. The rival New York Yankees racked up a couple of dozen. In 2004, the Yankees were on their way to thwarting the Red Sox in the most embarrassing way, a four game sweep, when any religious fan will tell, God intervened. Balls started bouncing the Red Sox way in the late innings of the 4th game that would end the series. Not just a few fortunate bounces, but every… single… one.

The Red Sox managed to pull out game 4 and 5 with late heroics, giving Curt Schilling, one of their best pitchers a chance. However, Schilling had an ankle injury, an injury that caused to pitch terribly in game 1 of the series. The doctors thought they found a way to MacGyver it with super glue, some duct tape, and a little chewing gum (or maybe they used real medical techniques). Schilling went out an pitched a tremendous game with his ankle bleeding creating a true Red Sock. He won the game and the Red Sox pulled off a comeback to win the series that was unparalleled in baseball history. They then went on to win the World Series to get that championship that had the team for 86 years. He was a hero in New England.

Schilling, who was getting past his prime as a baseball player, retired and moved on to business. He created a company called 38 Studios with the intention of creating a variety of digital media such as video games and films. When Rhode Island promised $75 million dollars in loan guarantees he moved the company there.

Things were going well until 38 Studios ran out of money recently. The company missed a loan repayment to Rhode Island, which got the state active. It turned political. Schilling claims that Rhode Island politicians weren’t keeping some of the promises they made and the governor of Rhode Island released a company secret about them still being a year away from releasing their biggest game. This caused the company hardship as they lost much of the negotiating power they would have had in selling off the company assets. With no money, the company had to lay off all the employees. With an estimated 400 jobs lost, Schilling has come under fire.

I understand the state’s point that it has to be honest with the tax payers about the loan that looks like it is going to default. On the other hand, such honesty has a way of being a self-fulfilling prophesy. Just as an unemployed person would have difficulty in getting a loan, a company with financial problems isn’t likely to fair much better. No investor wants to throw good money after bad.

Schilling had a quote of:

“I have done whatever I can do to create jobs and create a successful business, with my own income. Fifty million dollars, everything I’ve ever saved, has been put back into the economy. The $49 million from Rhode Island has been put back in the economy. I’ve never taken a penny and I’ve done nothing but create jobs and create economy. And so how does that translate into welfare baby? I’ve tried to do right by people.”

My friend made the point that even people on welfare put money back in the economy. While I agreed that this was true, he did have his own “skin in the game”, much like putting down 20% for a mortgage. He also directly created jobs in the local economy and didn’t do something like go buy a bunch of Ferraris or Rolexes that helps the economies of companies outside of Rhode Island. It’s not like people on welfare are buying Ferraris or products from other economies, but the point was that he was creating something. With more money or better spending, perhaps he could have created the next Electronic Arts, which would bring a lot of jobs and earn the state a lot of tax dollars.

As a home owner in Rhode Island, I’m on the fence on this one. This is why I wasn’t sure whether I should write about it. For the most part, I side with Schilling’s good intentions. He created jobs with his money (and Rhode Islands’) that wouldn’t have been in Rhode Island in the first place. If the company can’t be salvaged and it is a total business failure, it won’t be the first time that it has happened. We can blame Schilling for poorly managing a business, but that’s hardly anything new either. I think Rhode Island should have kept its criticism under wraps for at least a couple months while working with 38 Studios on an exit strategy.

Inflation: It’s Not Just About Money Anymore

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A couple of weeks ago, The Economist took a step back from discussing money, at least directly. The Economist article covered the devaluation of everything. What’s that? It’s the way marketing has crept into our lives to get us to buy product or otherwise influence us financially.

Let’s take the sizing of women’s pants. The Economist did a little research and found that:

… The average British size 14 pair of women’s trousers is now more than four inches wider at the waist than it was in the 1970s. In other words, today’s size 14 is really what used to be labelled a size 18; a size 10 is really a size 14. (American sizing is different, but the trend is largely the same.)

It makes sense if you think about it. Let’s say that Gap has their jeans a half an inch bigger than Levi’s. Some people are going to fit in the Gap at a smaller size than Levi’s and feel pretty good about how they look and buy those. It’s a competitive advantage. The Levi’s people aren’t going to take it lying down and are likely to leapfrog the Gap. So it continues for a number of years and all of a sudden you have size 10s that are size 14s.

The Economist points out some other examples. “Starbucks coffees are Tall, Grande, Venti or (soon) Trenta.” Notice there’s no small in there? Having worked at Papa Gino’s, a New England pizza chain, 20 years ago, I can tell you it was confusing when a customer ordered a small and the closest options were a kids size and a medium size. Also 5-star hotels have been replaced by 6 and 7 star hotels. “Standard” rooms have been replaced with “deluxe” rooms.

These are all marketing gimmicks to make the customer feel like they are getting some extra value. In reality they aren’t. It’s some kind of Orwellian Newspeak.

It doesn’t end with the products we buy. It’s also in our job titles. It’s far cheaper for your employer to give you a fancier title than a pay raise. The Economist gives an example of a “Director of First Impressions”, which is commonly known to be receptionist. Of course this is nothing new. I can’t remember the last time I’ve heard anyone call a flight attendant a steward or stewardess. That’s one that’s always confused me. Why did we need to invent flight attendant and not meal attendant to replace waiter and waitress?

It’s as if we want to make sure that everyone feels special. Of course if everyone feels special no one is special. But hey, we live in a world where we have to protect everyone’s feelings. Students of New York Prep schools can’t celebrate getting into great schools anymore because they’ll hurt their classmates feelings. And a coach was forced to resign because he played more talented freshmen instead of the less talented upperclassmen.

It’s a messed up world and as the Economist put it, you can’t put the toothpaste back in the tube. It’s here to stay. If you can’t beat ’em, join ’em, right?

Lazy Man
CEO, Lazy Man Media

Gas Going to $5 in 2012? Here’s How to Fight Back.

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Last week, I noticed many media outlets predicting $5 gas in 2012. It seems to have started from this post from GasBuddy. The theory goes that we have some of the highest gas prices we’ve ever had, and during the summer months prices typically get higher. This GasBuddy chart has the nation’s average price at around $3.34 as of today. GasBuddy also says that prices typically peak at 93 cents from the start of the year. that would bring the average around the country to roughly $4.27, most likely in time for your Memorial Day vacation.

Where does the $5 come from? It seems that all the uneasiness and politics in the Middle East, particularly Iran, could lead to a slowed production of oil. That could raise prices. GasBuddy is even suggesting that oil prices could pass their high of $147 in 2008. While it seems that GasBuddy is the catalyst, CBS New York, CBS Baltimore, and ABC seem to be jumping on board with the possibility. Of course gas prices vary throughout the country, so if some places see $5 gas, others may avoid it.

So what can you about this? You can try to occupy your local gas station, but don’t expect that to get gas prices lowered.

I see two things that you can do. The first is to look into these tips on saving money on gas. That’s a no-brainer.

The second tactic is less obvious. If GasBuddy is right and the price of oil goes from around $100 today to the $150 record highs, you can make a lot of money by investing wisely. I have some money put aside in PowerShares DB Oil Fund (DBO). At that peak of oil price of $147 in July of 2008, the stock reached nearly $55 a share. It currently trades at around $30. If we see a similar trend, perhaps that stock jumps to between $50 and $60 a share. If so, you could nearly double your money.

As long as you invest enough, doubling your money would certainly ease the anxiety at the gas pump, right?

Who is up for a game of guess the peak gas price average (as reported by GasBuddy) this year? I’m going to go with $4.16. Leave your guess in the comments.

A Sucker Punch of Personal Finance to America

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In the last 24 hours I’ve had three experiences drastically change how I feel about personal finance in America – one of them major, one of them minor, and one… calling it a stretch would be generous.

Last night, my wife called me from her hotel in upstate NY. That’s a long ways from our San Francisco home. She said, “It’s worse that I thought here.”

Let me back up a bit. My wife has a white-collar job in the military. She asked to be deployed to help with victims of Hurricane Irene as that was a requested need. I was surprised to hear about a military deployment to Hurricane Irene months after the fact. I didn’t really take the need that seriously. It seemed that Vermont got all the news stories, not New York (though there’s not a large distance there). I had figured that by this time everyone had reached safety. This clearly wasn’t going to be like the deployment for Katrina that I’ve heard so many stories that I won’t repeat in this space.

What’s so bad in upstate, NY? It turns out it is a personal finance nightmare. There are people who don’t have houses because they were swept away by the river. Some of these people didn’t have flood insurance. (Dear FEMA, you require me to buy flood insurance when I already have it, and others don’t have to have it at all? Really?!?!) Many people lost their jobs because they were literally washed down the river as well. My wife explained that these people are in the worst kind of pickle – no home so they can’t get a job… no job, so they can’t get a home. I’ve never really thought of this predicament. Two thoughts immediately came to mind:

  • Where’s the emergency fund? It kills me that over and over again, people don’t seem to have an emergency fund set up. They don’t realize it until something that they can’t control and devistates them – like a hurricane or a flood.
  • What about and extended stay hotel on credit cards? I know it’s not a good situation, but getting income is key and if a place of residence is required, get an extended stay hotel and use that. You need to stay somewhere. In times like this, it’s probably worth even looking to cash out some those Roth IRA and 401k savings. The kind of thing is a financial set back, but you are able to live.

I’m waiting to hear more details about the pickle, because it seems solvable especially in extreme cases that effects the whole community. I’ll be waiting for a couple of weeks until my wife gets back. Then I’ll be able to ask her in more detail.

I do believe she is coming away with a new appreciation of sound personal finance. Though in some ways she may think my site is more of joke now, as I don’t cover these extreme situations – the ones where people need the most help. I honestly don’t have a lot of experience with such situations, so I don’t know if my advice would be helpful. I’m better off at handing the “problem” of having maxed out your 401k too early in the year (we should be so lucky).

There’s hope though. I think people are learning from these experiences. And I don’t think they are learning from just having it happen it to them, but the media is doing a decent job covering it. Unfortunately, there’s also a lot of people learning about how unemployment works from first-hand experience. I was there once and I didn’t want to go back. It directly lead to the creation of this website. This whole thought of hope came to me in the form of that second, minor experience that I mentioned above. I was watching an old episode of Clark Howard and he said the following in a clip on a radio show:

“I used to feel I had to convince people why they should be smart with their money. I don’t have to do that as much any more. The mood of the country has changed.”

When I first started writing about why MonaVie was a scam, a lot of distributors said, “Big deal, it’s only $125 a month. I know my finances and I can afford that.” I would love to be able to audit them and find out how many of them have a year of expenses in their emergency fund. I’d like to know how many have their retirement all squared away. The $125 per month, per person in a family of four turns out to be $5000 a year (there’s some bulk discounts). I think people are now starting to take stock of what that $5000 a year would mean to them. We are talking aftertax money too. That’s like giving yourself a $7500 at work. Who wouldn’t want that?

I’m cautiously optimistic that America seems to be getting it. Perhaps America is as smart as my dog after all.

This brings me to the third experience – the Sucker Punch. I was watching the movie last night (scantily clad women fighting with swords is the kind of thing you can get away with when your wife is 2500 miles away) and while the long middle part of the movie dragged from too many fight scenes, I thought the ending was fantastic, perhaps one of the best I’ve seen. I don’t think I’m giving anything away with this, but I’m going to leave you with the final sentence:

“You have all the weapons you need – now fight!”