Why the Lottery is a Good Investment

When I bought my morning coffee today I noticed that the Mega Million jackpot stood at $289 million!  That’s $289 million! Wow!

However, many say that, given the gazillion-to-one chance of actually claiming the jackpot, only complete fools would bother wasting their money on a lottery ticket.

I beg to differ, and as a registered financial adviser, I think my opinion should hold some weight. A good investment is one that delivers a benefit in excess of its cost. That benefit could be in the form of cash or some other good, such as enjoyment, knowledge or some other kind of fulfillment.

I believe a lottery ticket provides two potential streams of enjoyment:

• ·       A huge monetary award
• ·       The fun of thinking about what you would do if you win that huge monetary award

Obviously, most of us will not win the lottery, but how many of you have not taken advantage of the second benefit?

I for one make it a practice whenever I buy a lottery ticket to lose myself in a brief reverie of how much money I would win in a lump sum after the state’s cut and income taxes. I think about how I would invest the money and spend the money and alter the lives of my nuclear family to enable us to realize all our dreams and wishes.

In other words, I allocate 10 minutes of my time to dream, which I consider a cheap form of entertainment. From a monetary standpoint, a $1 lottery ticket providing 10 minutes of pleasurable dreaming comes out to an expenditure of only $6 an hour (60 minutes/10 minutes= 6 x $1= $6.00/hr.). Compare that to other forms of entertainment.

• $15 ticket for a 2- hour movie: $7.50/hr
• $100 ticket to a 3-hr Yankee game: $33.33/hr
• $50 two-hour meal at a fancy restaurant: $25/hr.
• $4 ice cream cone (takes 15 minutes to eat): $16/hr

So if anyone tells you that buying a lottery ticket is a waste of money, challenge them to come up with a more economical way to spend their entertainment dollar!

Guitar vs. Sudoku

As I progress through my sixth decade, I’ve become quite concerned over the potential of losing…my…mind. Not in the sense of going crazy, that condition is a given, but rather losing the mental capacity to focus, remember, and apply my mind to complex problems.

I’ve been encouraged to take up Sudoku by several people, since it’s a demanding way to exercise the brain and, presumably, retard the retarding process. Problem is, I don’t really like games so much—that whole subset of Sudoku, crossword puzzles, jigsaw puzzles—just puzzles in general don’t excite me.

So I play guitar. As mentioned in a previous post, I’m not a natural musician and playing guitar is an avocation that I do purely as a challenge and a form of relaxation. And playing guitar, especially classical pieces, exercises a variety of muscles. It develops hand, wrist, and finger strength, not to mention overall digital dexterity. And if you hold the guitar correctly, it helps develop good posture.

But it also builds your mind. Classical guitar requires the ability to read music and translate music on the page to the fret board and strings of your instrument. Not only must you figure out the structure of the passages being notated, you have to determine finger positions on the fret board and your right hand movements, which can be very challenging since the same note configurations can be played several different ways on the neck. 

All this is results in significant mental exercise, especially when you begin learning a complex piece.

So I’ll take guitar over Sudoku anytime—you get both your physical exercise and brain work in at the same time. 

And sometimes it even results in some sweet music.

Do Good There or Do Good Here

A columnist for The New York Times by the name of Nicholas Kristof uses his refined journalistic sensitivities to plead the case of the poor and downtrodden in third world countries. He’s written a book in which he urges readers to donate money and/or time to help improve the lives of these people. He often works on your sense of shame to be more proactive to his pet causes.

Certainly his heart is in the right place and there is endless misery in the world that must be addressed, but Mr. Kristof and spouse seem to home in the most hopeless and most desperate. As a reader, I sympathize for the plight of the less fortunate, but where does one begin?

For the most part, the greatest misery is found in the regions of the world with the most dysfunctional leadership, which leads me to conclude that without addressing that underlying situation, our charity will be wasted or otherwise usurped by the power structure.

Mr. Kristof is an intrepid traveler and visits and meets with the most afflicted populations in the world, so naturally he is greatly moved and inspired to call the first world’s attention to the most horrific situations. But again, with the need so great, how can our pittance of support make much of a difference?

I hate to say it, but charity should begin at home. It begins by providing education and other opportunities to the next generation, your kids for instance, before you can adjust your sights outward to volunteer time and money for the community. I believe in local first. Help bootstrap the less fortunate in your town or in less affluent areas where your contribution can make the most impact.

Yes, I’d love to provide a roof and an education to the masses of unspeakably poor and abused in the Sudan and Congo, but my humble efforts are little more than spitting into the ocean. When the system is so broken, how can we know that our dollars are well spent—or spent as well as they could be if we take a more local approach? 

Are You Cut Out For the Corporate LIfe?

I’ve had a moderately successful career in middle management at a major financial services company, despite the fact that I lack many of the qualities needed to be extremely successful in a corporate environment. In fact, the only reason I’ve survived is because I offer a valued skill set, specifically an ability to write and produce a wide range of marketing communication materials in all formats and for almost any audience.

This is a quirky skill set that’s essential to a firm offering its products and services to various audiences, but it limits the upside potential for such a person if he or she doesn’t have the other attributes needed to really climb the ladder. In fact, the following attributes, which I lack, are far more important than the ability to create a web site, write and produce brochures, produce videos, and so forth if you really want to advance into the executive ranks.

Here is what is holding me back from being a smashing corporate success:

I’m an introvert. Organizations dote on outgoing people who like being amongst other outgoing people. Those who can’t function at cocktail parties, conferences, and team-building activities don’t get very far. Plus, I hate public speaking, which is a must when you work in a group.

I’m not a team player. Organizations are all about collaboration and doing things as a team. I tend to create my masterpieces alone in my office and present them to others. When creativity is involved, adding cooks to the piece is not usually synergistic. And I want the credit when I do something well and not have it dispersed to lesser contributors. If it sucks, I’m more than willing to accept the blame.

I don’t schmooze. Schmoozing and small talking your peers and bosses and forming mentor relationships are essential to career growth. I have a physical gag reflex that prevents me from sucking up to superiors and mouth sweet nothings to people I care nothing about.

I resent authority. I’m usually smarter than those in charge and since I’m self-motivating and self-guiding, my bosses usually can’t tell me anything about my performance that I don’t already know.

I have zero leadership skills. Leadership is big in corporations—they look for future leaders. Don’t look at me—I hate supervising people, have no desire for power, can’t do the “rah-rah” thing without suffering bouts of reflux, and, of course, my personal goals always take precedence over corporate goals.

Devoted to the company mission. You must make your company’s goals your personal goals. I’m way too self-centered to care about the company’s mission. If I do my job well, then the company directly benefits. That’s the order of importance for me.

So, if any of my negative traits apply to you, you will not be happy in the corporate life. You’re better off starting your own thing, since unless you’re willing to become the corporation, you will never go far in the corporation.

Ebola? You’re Worried about Ebola? Oh Puhleeze!

Sure, Ebola is a frightening disease and a grisly way to go. But did you know that you are 23 times more likely to die from a lightning strike than contracting and dying from Ebola? Consider:

NUMBER OF DEATHS IN THE U.S. FROM:

Ebola:  1 in 2014

Lightning strikes: 23 (2013, NOAA National Weather Service)

Skateboarding: 30 (2013, skatepark.org)

Helicopters: 133 (2012, helihub.com)

Guns: 30,000+/year (Centers for Disease Control and Prevention)

Vehicle-related: 33,561 (2012, Insurance Institute for Highway Safety)

Drinking: 80,000+/year (Centers for Disease Control and Prevention)

Smoking: 480,000+/year (Centers for Disease Control and Prevention)

Really, aren’t there better things to worry about? 

France and Italy Finally Step Up

It's supposed to be the eurozone, not the Germanyzone, which is something that France, Italy and other member countries are finally realizing. Eight years of economic mis-rule by Merkel and her ilk in Germany has Europe teetering on the brink of deflation and a third descent into recession since 2008.

Isn't that enough proof yet that austerity, budget reductions, and cutting back on government spending is a sure way to economic disaster in the face of today's negative demand enviroment? It's death by wayward ideology!

So it's heartening to see that France, Italy and the European Central Bank are finally rebelling against Germany and its austerity gangs by finally talking about stepped up government spending to stimulate their economies, put people back to work, stoke demand and actually lay the foundation for sustainable growth.

"We need to show that Europe is capable of investing in growth, and not only in rigor and austerity," said Matteo Renzi, Italy's Prime Minister. Here here! Europe's economy is as large as the U.S.'s, so a European stimulus helps international trade in the U.S. as well and may finally snap the Western world out of a slow-to-no growth treadmill that we've been on for the last four years.

It may just happen, because even Germany--the eurozone colossus-- is spiraling towards another recession, so it may finally be receptive to some stimulus itself. This is not the Weimar any more. Inflation, rather than being an evil, is actually needed in times like these.

There are certainly times to tighten the purse strings. But now is not that time! Let's go out and fix some roads, build some bridges, and hire more teachers. 

The Internet of Evil

It’s difficult to overestimate the evil and underlying immorality rampant in the world today. How is that for a grand, encompassing sentiment? What's with the proclivity to take the short-cut, to steal and otherwise acquire what one desires through illicit means? 

Like many things, this tendency is magnified by the Internet. Just as our Narcissism and shallowness leap to the fore on various social networking sites, our human urge to sabotage, undermine, and steal is magnified by the stealth and convenience of the online world. 

I’ve always felt that community and religion help keep those aspects in check—community because it’s easier to be exposed and humiliated for such behavior, and religion because of the ever-present punishment of the Great Inferno. 

But the anonymity and scale offered by the Internet reduce the chances of being caught and religious belief isn’t as much of a deterrent to the tech-savvy for some reason. Thus, our sinister natures come to full flower in the constraint-free world of the Internet. It’s an infinite red light district of scams, boondoggles, con games, vandalism, voyeurism, and sex.

Not that there’s anything wrong with that, but when no controls are in place, it makes it much easier to run roughshod over positive social norms. It does make me wonder the degree to which our character is inherently malevolent and destructive. It would seem, when left to our own devices, a predominant choice would be mayhem. 

Our evolved intelligence and cleverness only makes us more destructive per capita than any other beast. The Internet and how we use it does accentuate our essential beastly nature. 

In other words, just be on the lookout whenever you log on.

Things Not to Worry About

Lotsa of things of an unsettling nature are going on today.  As I write this, the stock market is down about 400 points and is rapidly approaching correction territory. A correction is a decline of at least 10 percent from the most recent market high. So if the Dow Jones Industrials goes down to 15,551, we would be in correction territory.

The thing is there’s nothing you can do about it. While the global economy picture is not great, stock prices are not at a point that they are terribly over-valued, so not many people are predicting a bear market. There have been 27 market corrections since the end of WWII and each time the market has bounced back, with the average being 115 days. 

So if you haven’t taken your stocks off the table already, leave them where they are because if you cash in now, you’re only locking in your losses. These things usually happen once a year, but we haven’t had a correction since 2011, so we’re due. This is something not to worry about.

Another thing not to worry about is Ebola. At least not in the U.S. There are many things to worry about in my home country—out-of-control Republicans, stupid gun laws that kill 30,000 people a year, abortion law restrictions that will end in the deaths of untold numbers of young women, lightning strikes that will kill a few dozen, and the lack of political movement on climate change. But Ebola, gosh, it’s killed two people in the U.S. so far—we lose that many in 30 seconds to heart disease.

And finally, back to ISIS. Let’s not worry about ISIS. They do not present an immediate threat to the U.S. Sure they’re crazy and sure our bombing missions will not subdue them—but really, are they about to set up a caliphate in the U.S.? Please, not to worry!

Finally, don’t worry about Beyonce and Jay Z. I’m sure they’ll be able to work out their differences and remain the first couple of American Pop. We all have our ups and downs. Let’s worry about those things and let Beyonce and Jay Z worry about theirs. If things do go south on them, it’ll give us more time to worry about Kim and Kanye.

Still, if you must worry about things that don’t affect you, let me know and I’ll share my martini recipe with you. It nips worry in the bud.

Think Twice About Buying That Annuity

Here’s some more investment advice: Most annuities are a bad deal. First, what are annuities? They are an investment that you make in which your gains (interest and appreciation), if you have any, aren’t taxed until you withdraw them.

In the case of variable annuities, which are the most commonly bought, you are investing in underlying mutual funds, usually stocks and bonds. The beauty of an annuity is when you retire, and “annuitize” your annuity, you get a guaranteed stream of income for life, if you so choose. Outside of Social Security and a traditional company pension, which few people have these days, only annuities can provide that guaranteed income.

Here’s the downside—cost. Variable annuities are not cheap. To get that tax-deferred benefit and guaranteed income, you have to pay for the risk that the annuity seller is taking to guarantee your money. Depending on the variable annuity you buy, that annual fee could be 3% or more—and that’s on top of the fee you are paying on the mutual funds in your annuity.

Bottom line, you could end up paying anywhere from 4% to 8% or more in fees for your annuity, which means your investments must make at least that amount each year to break even and start earning investment returns. I think that’s a pretty steep price to pay for a little added security. Most people are better off just investing in low-expense index funds and setting up a withdrawal plan at retirement.

There is one kind of annuity I do believe in—it’s called an immediate annuity. Companies don’t publicize them that much because they’re not big money makers for them like variable annuities. With an immediate annuity, you deposit a lump sum of money with the provider, usually an insurance company, and they pay you a set stream of income for life.

The interest rate on a immediate annuity is based on prevailing interest rates plus an amount based on your life expectancy—the shorter your life expectancy, the higher the interest rate, since the annuity provider won't have to provide income for as long. The big benefit is you get a guaranteed stream of money at a higher rate than if you had invested in a bond at the prevailing interest rates. The downside is you lose access to the principal that you invested, but heck you won’t need that money when you’re dead!

Let me know if you’re interested in the best way to set up a retirement withdrawal strategy. 

On Josh Beckett's Retirement--Yankees Should Take the Hint

Dodger pitcher Josh Beckett announced his retirement this week at the age of 34. This after pitching a no-hitter back in May and recording a sparkling 2.88 ERA in 2014. However, Mr. Beckett has been slowed by injuries the past two years and apparently decided that he was tired of the rehab routine and calling it a career was in his best interests. He earned north of $15 million dollars in 2014 and was eligible for free agency in 2015 and probably could have made a few more million if he had decided not to call it quits. 

But, heck, how much pain can a body take--and why go through it again just to add a few million more to a career earnings total approaching $117 million? It was time and Josh Becket knew it.

As a Yankee fan, I wish our roster of aging, over-paid former stars would take a hint from Josh Becket and let the team and its fans off the hook by just saying good-bye. There's A-Rod, of course. 39 years old, a year away from the game and with nothing left in the tank. Except he is due more than $60 million over the next three seasons. Make Yankee fans love you again by hanging 'em up and just walking away. 

Mark Teixeira is the same age as Josh Becket and his decline has been fast and steep since 2010, and he can't seem to stay in the line-up. Injuries to wrists, to quads, to hamstrings, to ankles, to shoulders--Mark is a slugger and sluggers do not age well. Mark makes $22.5 million a year and is signed through 2016--but he's done now. You've made more than $167 million in your career--why deal with a broken down body for two more years for a few million more? Do yourself and your fans a favor and and hobble slowly into the sunset.

C.C. Sabathia--your knees are shot, you've lost your fastball and now you're basically good for batting practice. Sure, you make $23 million a year and will make even more over the next two years--but know it's your time. You're done--how much money can you spend in this life?

Beltran (37 years old, $16 million), Kuroda (39/$16 million but a free agent)--you get the idea. The Yankees have become a collection of museum pieces that flourished at an earlier time. 

Baseball is unkind past the age of 32 and it's understandable how money can be such a lure. But it's hard on the fans when clueless general managers dole out contracts based on performance that aging players will never again be able to approach. Are they just fooling themselves, or is it really just about the money? 

Make the Cowards in Congress Stand Up

To my chagrin, there seems to be support among the majority of pols, and the citizenry, actually, about the U.S., or should I say the "coalition" bombing strikes against ISIS in Syria and Iraq. 

As avid readers of my blog may recall, I have listed a plethora of reasons why we should not be involved in that effort, since history shows that U.S. bombing in that part of the world has been ineffectual, except to the extent that it breeds greater hatred of the west (read U.S.) and ends up backfiring on us any way. We have a gift for picking the wrong side to support, which means the wrong people get our high-tech weapons in their hands and use them against us and/or their own people.

Sure, ISIS is horrible and barbaric on a Game of Thrones level, but the problems it represents are complex and impossible for the West to sort out, understand, and remedy--the people of the Mid-East will just have to work through their issues, which will probably take a hundred years or so. Europe went through such convolutions in the Middle Ages.

To me, there are two ways to extricate ourselves from the misery of perpetual bombing in the Mid-East:

1. First, let's pay for it! Unlike Iraq and Afghanistan, let's add a federal surtax that all Americans must pay to finance operations in the Mid-East. Hit Americans, especially Republicans, where it hurts: in the pocketbook. We boosted taxes to pay for WWII and WWI--if we really want to eliminate ISIS, let's put our money where our mouth is!
2. Re-initiate the draft. The all-volunteer army makes it too easy to just send troops hither and yon when those making such decisions have no skin in the game. When Republican sons and Republican daughters are sent to the deserts of the Middle East to fight the savages, either fairness will be achieved or more sober reflection will be involved before military action is invoked. The draft and its attendant protest movement played a major role in the U.S. withdrawal from Vietnam.

Of course, these suggestions are mainly facetious. Our cowardly Congress would never enact a dedicated tax or the draft because they don't believe in responsible government--heck, the Republicans don't believe government should do anything at all, except send mercenaries to fight their wars for them. 

I do guarantee, however, if the U.S. does those two things, our footprint will shrink to almost nothing in that horrific part of the world. 

This Dumb Thing I Do

I’m going down to the stream near my cabin tucked in a sheltered bluff in the foothills of Grandfather Mountain in the middle of nowhere North Carolina.  I’m going to strip off a dead branch perhaps three feet in length and maybe an inch thick and collect buckets of shiny rocks.  And I’m going to toss stones of varying shapes and sizes in the air with my right hand and thwack them with the stick held in my left hand. 

This I will do for hours on end and pretend that I am running through lineups of various major league teams from the 1960s and 70s, with each thwack and swing representing the fortunes of each batter.

 

Batters will strike out if my aim is not pure and the game will be strictly binary in nature.  Rocks that clear the stream will be home runs; everything else is a pop out or grounder. 

This I will do for hours over a period of days, my hands worn leathery from the rough texture of my “bats,” which will have to be constantly replaced as rocks carve grooves and cracks into the wood until the shredded sticks shatter. 

I will play game after game this way, hidden from the view of my wife and others who will mock this silly pastime as my father did in my youth when I spent hour after hour hitting rocks with sticks at a nearby ball field.  Though he shook his head, it did sharpen my eye and hone my hitting skills by the time my Little League years approached. 

I still love hitting rocks with sticks, the rhythm of toss and thwack and towering trajectories that clear the riverbank and disappear into the woods with a whisper of striking leaves.  It’s what I call retirement. 

Others love to toss strings with hooks into shallow water or hitting little white balls with sticks into man-made pits of sand.  I like hitting rocks with sticks over running water. 

I see nothing wrong with that!

Switch Hitting Will Get You To the Big Leagues

I grew up a baseball fanatic. As a kid, baseball occupied my life 24-hours a day. I played baseball, I read books about baseball, I talked non-stop about baseball.

I devised little games for myself that I played from my early single-digit years through high school. We had a ball field near my house, and when there was nobody to play with, I’d take a bat and ball across the street and toss the ball up and whack it as far as I could. Usually it took three or four hits to get from home plate to the end of center field. When it took fewer, I was jubilant.

We had a garage made of concrete in the back and I’d spend hours throwing golf balls(!) against the garage wall and pretending to field the ricochets like a middle infielder corralling hot smashes and throwing runners out at first base. When a ball got by me and carried into the back yard, I’d shag it down and try to cut down the runner at “home plate.”

People wondered how I became such a great first baseman with lightning reflexes on batted balls. Golf balls thrown with force against concrete will do the trick.

My baseball career was undermined by my father’s insistence that, as a hitter, I was to be purely left-handed, just like he was. Of course he was an all-state player with stupid stats, whereas I couldn’t hit a lefty curve ball for the life of me. Plus, I was mandated to play first base, just like he did.

Big mistake.

If you have a son, never let him learn his natural side. Teach him to hit from both sides of the plate from birth. And have him (or her, for fledgling softballers) learn every position on the field. The more options you give the coach, the more innings you’ll play.

I was never a superstar ballplayer like my dad who could insist on a single side in a batter’s box and a specific position in the field. But I could’ve gone a lot farther and hit a lot higher if I had developed more versatility both on the field and at bat.