Alberto R.

Thank you so much for the latest great articles posted on your site. This specific paragraph sent my brain on a trip:

Have Americans essentially surrendered to adolescent fantasies? In pondering Jon H.'s commentary, I have to wonder: why would Americans knowingly blow their capital on an essentially worthless consumer binge?

Here are 5 thoughts that flashed through my mind while reading the above:

A large number of Americans:

1) Spend countless hours every day staring at the TV instead of reading or talking to their family about the daily matters that are important to a regular family. I have learned that only a few programs on TV will teach you something worth watching, and for that reason I could go for weeks, and sometimes even months without turning on my 32 inch CRT TV (emphasis on CRT and not flat screen). I do share some good cartoons with my children though...and I explain to them every wrong message I catch on them while watching.

2) Do not eat dinner together with their family every night. I think this is very important for the unity of a family. I was taught this way in a home where food was not abundant, but it was shared together as a family, and we talked to each other every night.

2) Do not have a monthly home expense budget. They spend more money than they earn in material items they really do not need, and they can't accept to live within their means. (Reading "How our parents shopped" would be a wake up call for many. For me, it showed me that I can live with even less than I do now)

3) Purchased an overpriced house or refinanced and pull all their equity out to spend it in not needed material items. At this time they are either under water, or in the process of loosing the house, or renting every room in the house to another family to be able to make the mortgage payment which just had a reset. I have wanted to buy a larger house for years now, and I kept wondering how can people afford the houses at those prices, and then go in and remodel the entire house in a couple of months. I thought: What am I doing wrong here? I bought my house in 1995 for 1/4 of 2006 peak's price in my area, and it has taken me until now to change the things I added to my wish list when we bought it.

4) Have one or more car payments that eat up a considerable portion of their monthly income. They have to have that new car at any expense. On this topic I always remember coach Jack Fullerton at the Orange County Commonwealth Investment Club. He explained a while back how much buying a new car today really costs you versus investing the money in real estate. The number was close to $1 million compounded over the years. I wish I had these numbers as they were written in the projector screen.

A great book a read years ago :The Millionaire Next Door" tells you how rich people view cars as liabilities and they do not buy them new or finance them. They choose to wait until the car has lost a considerable part of its market value and they buy it for cash for the lowest possible price. Again, financial intelligence vs instant gratification.

5) Eat out constantly because they do not have time to cook a meal at home or they are just too lazy to do that. It is easier to drive through any fast food place than to spend 30 minutes and cook a simple and healthy meal from scratch. Charles, this was covered in great detail by an article you posted a couple of months ago. This one shows a total lack of sacrifice to even take care of your most important asset "your own health".

Fortunately self-education, discipline, and lots of sacrifice allowed my family today to be excluded from all of these issues.

Thank you again for your time and for having a site that makes us think, learn and grow constantly. I appreciate it very much and I will continue to be a contributor hopefully for many years to come.

P.S. A note about home prices:

I do not know about Northern CA where your home is, down here in OC we are starting to see some large and quick home price drops. In West Anaheim where I live, a typical 3BR/2BA house with around 1300 sq.ft (at the peak of market) was selling for a range of $560k to $615k depending on the condition of the house.

Today the lower part of the spectrum in this 1955 neighborhood is starting to show up in the MLS for under $400k. As a matter of fact there are 3 to 4 listed right now for under $350k. Even one in a corner of a main avenue Brookhurst for $330k. These are 2003 prices! Very interesting.

Be who you are and say what you feel because, those that mind don't matter and, those who matter don't mind. DR SEUSS

We are in the crapper, Charles. I'm in south Florida, and let me tell you working people and rich people are losing everything here home, cars, boats, business, equipment. There is no money, business are broke cites are broke even if they lower the interest rates big deal we have to have work or business going on so that we can pay the borrowed money back.

The thing is that we can't pay back the money that we already borrowed, how can we borrow more? We are so over built with residential and commercial now and there is no other sector to turn to. The tourist seasons have been get shorter and shorter, just more chickens scratching s*** with more chickens.

From the Pogo cartoon strip long ago:

"we have met the enemy and he is us"

I think that sums it up.

The reason we have a government of imbeciles, morons, idiots, is because we elect those who are most like ourselves. Government by the stupids elected by the stupids. In a democracy we elect those who will give us what we want. We don't want pain, we don't want to save, we don't care about the future. Our legislators don't either. They buy us off.

The reason this great country is going down the toilet is that we have squandered what the Founders gave us. They gave us a Republic and slowly and surely it was corrupted into a common democracy and a nanny state. Now it's mob rule by the majority. Those who live off the teat of the nanny government outnumber those responsible for feeding the nanny. People will vote themselves more benefits and more entitlements whenever they can. Human nature.

Just listen to the politicians from both parties. There's no program too grand, too expensive that we can't as a nation give to the people. No one talks about responsibility. Yes we have rights, we have liberty, but we also must have responsibilities.

The great experiment started 200 years ago is starting to wind down.

Yes, the public knows that we are broke. More importantly the public knows that we are broken as a people. This became apparent to me the week after Katrina when I asked an Army Chief Warrant Officer, in uniform, what he knew about the Katrina relief efforts. What I got was a 30 minute unsolicited rant about how the Iraq war was lost already and he kept re-upping simply to try and keep the younger kids alive. This was a guy who had served in Beruit when Reagan was playing with battleships.

I think people deeply and fundamentally understand that they are playing a poker game against a rigged deck. They are well aware that they too can get rich or get kicked off the bus at any time and their efforts to the contrary may not change that outcome significantly. They understand that playing fair is a suckers game yet most of them continue to play fair anyway.

They all have seen somebody they know make it rich on the worst kind of speculation and graft. All you have to do is to know a real estate agent or a building contractor. The real estate agents require no education, skills or work ethics other than the ability to prosper in junior-high social environment. The building contractors almost universally hired subcontractors that ran crews consisting entirely of illegal immigrants doing slapdash work. They inexplicably got rich while guys with masters degrees drive cabs.

Most importantly the money system is broken. The money that they labor heavily for is handed out at 2 percent interest rates to banks to play games with the stock market. Watch the daily stock charts for two weeks and it's obvious the big boys are rigging the game. The prices of food, housing, health care, clothes and education rise noticeably every year and then CNN announces that there is no inflation because iPods are cheaper.

The jobs that their dads worked 40 hours every week doing now only offer either 30 or 50 hour weeks; nothing in-between. Busting your hump and saving up doesn't matter because your money is worth less every day and either the doctors or the divorce judge can take away everything you worked for in a minute. Money is about as fragile as potato chips and is better spent than saved. Spend it before they take it is the rule.

This is going to be a very bad, bad year. The cheap oil is gone, the climate is out of control and the financial world is in chaos. Good luck making sense of it.

I'm surprised you are surprised by this (demise of dairies in Hawaii). We don't have any farms in Manhattan either, althought the climate would support it, and there are plenty of people there! The economy has a better use for that land, namely skyscrapers.

It would be more interesting if the farms are disappearing for some other reason. For example, if restrictive zoning or environmental considerations had made them unprofitable (increased costs of using them for agriculture.) I'm surprised that doesn't happen here on the California coast.

I thought everything in Hawaii is imported, including nearly all of the food. Why make an exception for milk?

Hawaii is far more dependent on tourists from Asia (and the strength of their economies) than it is on cheap oil. I haven't done the math, but I'm pretty sure if you figure the capacity of a cargo ship (in gallons of milk or anything else), and the amount of fuel it burns coming from Asia or the U.S., you'll get an absolutely trivial price per gallon or pound of finished product. Not even a penny per pound, I'm guessing.

Funny you should mention adolescence. About a year ago I quipped to my wife that it appeared that many Americans were stuck in adolescence.

As for dis-intellectualization, in terms of the common definition of intellect, I cannot think of any society in history where the "masses" were or are intellects, or so inclined.

However, I do not necessarily agree with the common definition intellect. Is the individual who finds calculus easy but can't get his car to run smart? I would venture yes and no. Is the mechanic who can fix the calculus whiz's car but doesn't know about the existence of calculus smart? Again, I would venture yes and no. I would posit that, in people with full mental faculty, that intelligence may vary more so in type than degree, i.e. task specific.

There are few Renaissance men.

Can we be both intellectual and immature? I believe so and therefore your reference to adolescence (or the rejection of adulthood) is probably more apropos than intellectualism or a lack thereof.

You wrote:

"Let's start with a pernicious truth about credit: if you don't have any, then you'll never be able to obtain a home mortgage. Like any good pusher, the lending industry must first create a need, and then be the only source to fill it. In this case, the "need" is a high credit rating, for without a good credit rating, you will be unable to qualify for a conventional (low interest rate) mortgage. So how do you establish good credit? By taking on debt. There is no other way."

It is a myth that you need to take on debt to get a good credit score. You do need "credit" but you don't need to take on "debt".

K.K. (with no debt and a credit score over 800 for the last decade)...

You need to use credit to have a real high credit score (I charge a couple thousand every month) but it does help a little to have credit cards even if they have never been used in years (If you have a lot of accounts for a lot of years without ever having a problem it really helps the score).

I met a math guy that works at Fair Issac a few years back (he was dating a friend of a girlfriend) and he said that they are not supposed to talk about the model, but he told me that the Chevron and Nordstrom cards that I got in 1983 and have not used since 1985 were helping my credit score more than they were hurting it (I asked if I should cancel them).

Do you really want a world in which the business looks down it's nose at the consumer and says, in effect, "you aren't smart enough to buy my product?" That's what you are implicitly recommending when you say lenders should judge the creditworthiness of borrowers. I prefer the attitude "you're an adult -- manage your money like an adult!"

Also, even if all banks judged all borrowers accurately and responsibly, and never used this for redlining poor areas, and no loan sharks or other predatory lenders sprung up to serve this demand, you are still asking for an unequal situation. You are saying "merchants should be saints, and consumers can still be idiots."

Many on the right come at this from a moralistic, "law and order" perspective. I see it as an evolutionary problem. If you want people to learn, you have to make some distinction between the ones who do it right and the ones who fail. If you remove the penalty for failure, you remove the benefit of success as well. You don't get any improvement if there's no penalty for failure. Or no opportunity for risk.

You are really pushing for a system where a poor person can't get in over their heads, but they also can't take a loan for night classes or to start a new business. You'll be worse off with that system than the one we have, where we loan money easily, and expect people to go bankrupt if they botch it up.

NOTE: I will be away from my desk until March 3, but will try to post regardless.Email will be read but I may not be able to respond in a timely fashion; my apologies in advance.

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