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The Importance of Being Able to Think for Yourself



November 28, 2011 – Comments (10)

“A little knowledge can go a long way.”

“If something sounds too good to be true, it probably is.”

Sentiments as true today as ever before. I’m sure you’ve seen all the commercials celebrating the 100th year anniversary of one of the great, iconic American brands, Chevy. It’s amazing to think about what General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler stood for back then as symbols of American excellence. Today, they’re fighting an uphill battle for survival. If you want to get technical about it, GM and Chrysler have already died and been resurrected.

I’d venture to say that GM’s size and market share back in the mid-1900s helped set it up for failure. GM more or less dictated market conditions for the others. I say helped because there are a number of different reasons why Chrysler, GM and the ill-conceived Delphi failed. And I’m not setting out here to debate why or what was the most important and whose fault it was. Blame management; blame the UAW; blame the United States and our rising costs of health care. Heck, blame Walter Philip Reuther. Don’t know who he is? Look him up; interesting character to say the least. Ultimately GM along with other companies like Bethlehem Steel failed because of unshakable legacy costs (pensions for example along with other promises made for many years in the future). Forget how the got there. Legacy costs are what killed them.

Pensions were a benefit; something that attracted workers to the workforce. Wages were negotiable, but pensions, healthcare and the like were the benefits that really got folks interested. If you put in your time, unions and management together were basically saying that you were guaranteed a decent retirement and they would foot the bill. And that sounds great, it really does. In fact it sounds too great. No company can sit there and tell you what the world is going to be like in 30, 40 or 50 years. It simply isn’t possible. But that’s what pensions are. They’re predictions of what the world is going to be like many, many years down the road. For this reason alone they’re doomed for complete and utter failure.

Reuther was a socialist who appealed to the working man. He fought hard for them, demanding more and more for workers in order to guarantee the spread of the American Dream, apparently without any thought as to the actual potential of a “rainy day” or the concept of supply and demand for that matter. Competitive forces come together to change market conditions in the blink of an eye, but remember that competition is a good thing. It offers the best opportunities for progress and advancement and I believe that our American economy continues to provide the best platform for competition to take place.

There’s a lot of blame to throw around these days. People are hurting, unemployment is brutal and housing sucks. The funny thing is that it sure didn’t seem like anyone griping when everything was humming along several years ago. But things were just as bad then; we were just on a delay. We were waiting for the bottom to fall out.  Some people knew it, most had no clue at all. The bottom line here is you need to be able to think for yourself. Don’t count on someone to do it for you. It’s amazing to think in regard to finance what seems like common sense to many is not to others. I don’t need someone to tell me that tapping the equity in my home so I can keep up with the Joneses is a bad idea; I know it is. But a lot of people did it. And the banks let them. So who’s to blame? Well of course they’re both to blame.

The banks took that risk knowing good and well that it might not pay off. And what’s worse is that many of them blindly sold consumers on the prospect that they could in fact afford it. Read Lowenstein’s “The End of Wall Street” and tell me you don’t want to punch Angelo Mozillo square in the nose.  But consumers were guilty too of borrowing more than they could afford. They were (and many still are) either poorly educated in the ways of finance or lacking any self-control at all (or maybe even the deadly combination of both). And our government failed us without question as Fannie and Freddie continued to subsidize the securitization of all of these bogus loans.

Whatever it is you do, whatever it is that you want, don’t rely on someone else to get it for you.  A little knowledge can go a long, long way; especially in today’s world. Don’t count on the promises of a government or an employer for that matter. Those are promises made based on predictions of the future, and we simply cannot know what the future holds with any kind of certainty. Social security and corporate/government pensions are perfect examples. Live within your means. Save your own money. Learn how to manage your own money and take control of your own future. I’m not saying it’s easy and I’m not saying the system is perfect. But for cripe’s sake people, being Americans does not entitle us to success and a great life. It gives us the opportunity to pursue that, or whatever else it is we want. But don’t just sit there and think that it’s going to be handed to you. Because if anything, I would argue we are moving more and more towards a society where that is becoming less and less the case simply because it’s now quite obvious that we can’t afford that type of behavior.

I’ve written before of my feelings toward the Occupy Wall Street movement. Nothing new there that I think it lacks any kind of a clear message. But I read the other day about this Occupy Xmas movement, and thought: (Well first I thought, “Great, another occupy thing.”) “Wait a minute, this is a message that has a point.” Here’s what I read that caught my eye:

“Consumer overconsumption has gotten us into this mess and the economic crisis to begin with. The work we’re trying to do is to get people to care about the country, to get us focused on how we can redirect our resources,” Chicago Tribute quotes spokeswoman for OWS, Dana Balitki.”

Holy crap! Lemme understand correctly. You’re assigning blame to the consumer here, right? Because that’s what it sounds like. Anyone who thinks that consumer overconsumption is not a problem of epic proportions in our country today isn’t thinking rationally in my book. Now more than ever before do we have so many things we can buy and so many ways we can buy them. From iPads and iPhones to cars, houses, boats, and every other gadget and toy imaginable. It amazes me to hear people gripe about their finances to then diddle around on an iPhone or some other expensive toy that is not a need. I don’t need to waste your time with the examples. They go on and on and on and we see them every day and everywhere. We’re working very hard in my house to teach our girls the difference between what they want and what they need. And they’re getting it too.

I’ll close simply with what I said before: Live within your means. Save your own money. Learn how to manage your own money and take control of your own future. It’s the best chance you’ve got and the U.S. is the best country in which to do it.

10 Comments – Post Your Own

#1) On November 28, 2011 at 6:32 PM, TMFJMo (71.00) wrote:

I'd be curious to know how many out there feel like they are in control of their financial destiny and how many don't. Any takers?

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#2) On November 28, 2011 at 7:15 PM, vriguy (62.07) wrote:

Being in control of your financial destiny may not be an either/or proposition. Absent a cataclysmic societal shift, I am in control to a large extent.  But, there is a chance that we could have a meltdown and in that case all bets are off. Since I cannot realistically plan for the latter scenario, I'm personally behaving as if I do have control.

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#3) On November 28, 2011 at 8:05 PM, TMFJMo (71.00) wrote:

You mean like a guns and gold kind of meltdown? Yeah I guess that's something that definitely needs to be acknowledged as a possibility, though I'd like to believe it won't happen.

Since I cannot realistically plan for the latter scenario, I'm personally behaving as if I do have control.

Makes sense to me and I'd say I'm right there with you.

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#4) On November 29, 2011 at 12:14 PM, TMFJMo (71.00) wrote:

How many people have jobs out there where they feel like they're able to contribute to a retirement plan that they understand and will be able to benefit from down the road?

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#5) On November 29, 2011 at 12:43 PM, WikiCPA (36.74) wrote:

Except for a guns and gold kind of meltdown, I feel like I'm able to contribute to a retirement plan/retirement fund that I understand and will benefit from. But not many people have the chance to have an investing time horizon of 40+ years though. Living in a competitive country, I realize i may lose my job and lose my ability to fund my retirement fund. Gotta stay marketable I guess!

As for overconsumption, I believe the economy/the people have a choice. Either opt for local businesses for a slightly higher price, but not as popular good, or opt for the cheap cool overseas good. With every choice comes a consequence, we gotta deal with it now. As much as I'd love to tell everyone to not blow their paychecks on the 1st and 15th of every month, it's just so much easier for people to do. I hope in the future they require finance classes in high school.


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#6) On November 29, 2011 at 2:17 PM, TMFJMo (71.00) wrote:

As for overconsumption, I believe the economy/the people have a choice...I hope in the future they require finance classes in high school.

Exactly...there's always a choice.

I feel like this could go such a long way making sure that finance is a core study in high school. Given that we are and will always be an economy that functions on credit, it is just amazing to see that the overwhelming number of students that graduate can't pass a basic financial literacy test. Yes, this can also start in the home (my wife and I for example are making sure that our daughters become educated in this regard), but it's not like all parents know either and it's not like all kids come from homes that can provide this. It's imperative that this makes it into our educational system now.

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#7) On December 01, 2011 at 8:10 AM, OneLegged (< 20) wrote:

Over past three years combined my gross earnings have totaled 1/2 of my average earnings between 2000 and 2006.  In 2011 I will earn 9% of what I earned in 2006.  No cell phone.   No TV .  No health insurance.  No dental.  0 retirement.  No debt other than my mortgage.  I've always lived well within my means, but when there is no work there is no "within" your means.


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#8) On December 04, 2011 at 4:18 AM, BillyTG (29.51) wrote:

I feel like I'm in partial control of my financial destiny. With each passing day, the world gets closer to major war and the Americans closer to civil unrest. Politicians and big business are as openly corrupt as ever seen int his country. A primary dealer bank recently handed out bonuses to its employees then shut the doors the next day, taking clients' cash and gold with them. The markets go through monthly, sometimes weekly or daily whipsaws of "risk on," "risk off" investing, dominated by a huge number of large hedge and mutual funds, leaving the retail imvestor at their mercy.  To me, for anyone to believe he has control is naive. Any hope that the next year or two will reward the typical TMF buy and hold value investor is such a longshot that it needs to be discarded as a plan.

Let's face it. Everything from our bank accounts to our emails and purchases are now under surveillance and under threat.

There ARE ways to prepare for vriguy's meltdown scenario. Obviously, not all people have the means to take all these preparations.

1: Consider holding cash AT HOME. You might have a million dollars in the bank, but that's not going to help you if the ATMs stop, if you use MF Global, if a massive freeze happens. Buy a nice strong safe and load it with cash.

2: Consider physical silver and gold purchases that can be held in your possession, whether hidden in some secret cache, or stored with a private vault. If there is a meltdown, silver and gold might be the single best chance you have at preserving savings. As Martin Armstrong says, gold is a hedge against political instability and sovereign economic default. You think either of those things is looking rosier these days???

3: Transfer assets to foreign banks and foreign locations. Most people have all their eggs in one basket, that is, all their real estate holdings, stock holdings, personal possessions, money, and anything else is controlled in the US. That's great so long as things function perfectly. Rather than be "surprised" and say "no one could see this coming," why not diversify the LOCATION of your stuff?  From first hand knowledge, I know that extremely wealthy people are makng backup plans that have nothing to do with the US or traditional investing. There are reasons why high level politicians are buying agricultural real estate in south america and other places...

4. Load up on supplies. Taking control of your financial destiny doesn't need to mean relying on a pension plan, bank account, orhoping for an improving economy. It can mean taking some of your money and converting it to THINGS. Things like food and stored water and personal supplies. Take $1000, go to Sam's Club, and load up on food, toothbrushes, soap, toilet paper. Does that really sound like a crazy thing to people? First, you'll be saving money in bulk. Second, they are things you'll eventually use, whether through emergency or normal use. Third, there is no risk involved in having emergency rations and INFINITE reward if they are ever actually needed in an emergency. 

The bottom line is that everyone should have a plan in case there is a financial meltdown or natural emergency. The plan should be to thrive off the grid, in case electricity goes down, ATMs go down, your credit card stops working, there is a run on the grocery stores (think Black Friday was out of control? You haven't seen anything yet). Keep food and money at home within your possession in safe places, and attempt to diversify those places beyond US borders.

Hope is not an option. 

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#9) On December 04, 2011 at 4:25 AM, BillyTG (29.51) wrote:

OneLegged, sorry to hear of your situation. It sounds like you're making all the right moves in your predicament. TV is unnecessary. People have tremendous control over health and fitness. I've given up driving almost completely and taken up cycling. I've given up eating out almost completely and taken up cooking healthy foods. Lots of money is "saved" (never spent) and my health and fitness levels are better for it. Besides that, there are nice collateral benefits like imrpoved mental health, more energy, and a feeling of confidence and control.

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#10) On December 05, 2011 at 11:14 PM, HarryCaraysGhost (87.66) wrote:

Not only do I have to deal with-,26211/

My shop started taking out of my check to cover the diff.

It's like Christmas when I actually get a full 40 HRS in.

So I could've sat there and whined. but I joined the FOOL and made money on Mr. Market,

Also made money selling stuff on E-bay.

My goal is to have no debts with all my bills paid by dividend payers.

Getting closer.


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