Poor People Choose To Stay Poor

Poor people make poor choices. I suspect most of their poor choices are made because no one was or is there to help them make better choices. I believe that there needs to be help provided to instill common sense into their financial decision making. But as my MBA friend once said, “Common sense is not common”.

Here’s an example of what I mean.

I was watching TV and one of those “Make a low payment and own some piece of crap” commercial was on. The one that I’ll illustrate here was a woman saying “I bought a Playstation for my kids for only $15 a week!”. Let’s examine the STUPIDITY of buying from this lender to the poor.

I looked up on Amazon a Playstation 4 with some games and it’s $347.69. I also looked up the website, Flexshopper.com, that ran the TV ad.  It currently shows the SAME Playstation for $17 per week.

Now $17 dollars a week for a year is 52 payments which makes the total CASH outlay of $884!! That’s well North of double the price of the stupid toy.  If the woman just put aside that $17 every week she could buy the console in 20 weeks, just 5 months.  At the end of the year she’d have $544 extra dollars in her pocketbook.

Just for fun I did the calculations for $347.69 to figure out what interest rate a poor person is paying. It works out to annual rate of 226% !!!!

WTF?  226% is one heck of a return on investment for that predatory lender.  The best CD rate right now is 1.5%. Home loans are about 4%.  Used car loans are around 7%.  And they say used car salesmen are scum!  If we make an assumptions of 40% markup  to the cost of goods, $248.35 is the wholesale price for the $347.69 retail toy.  The actual annual rate of return is closer to 343%.  Not too bad in my book.  Can you say “Loan Shark”?  The “Easy Pay” sleazes are only one group of people that are financially RAPING the poor with predatory lending practices.

I’m a free market kind of guy and I’m not sure I would advocate legislating predatory lenders out of business.  But it does trouble me that there are people who are getting wealthy preying on the ill-informed.  I will say that Flexshopper is better than some other of these bottom feeders in that they do show in small type right below the payment amount, the total cost of the “loan”.  If someone chooses to buy from them, as Forrest Gump said, “Stupid is as stupid does”.  I looked up some other “easy payment” outfits that advertise heavily on TV, Rentacenter and Fingerhut, and it’s difficult to figure out their terms.  Rentacenter’s website makes you fill out an application before they’ll show the price which is total BS, in my opinion. Fingerhut buries the payment terms in their website.

What’s my solution?  There needs to be an educational focus on how to make wise financial decisions.  Sorry Hillary and Bernie but free college IS NOT the answer to the elimination of poverty,  There needs to be education to stop the financial enslavement of the poor.

Let’s play one more financial game.  Let’s say the young 25 year old mother took the EXTRA $544 a year and put it into an Individual Retirement Account, IRA, each year and worked until she was 70.  If the rate of return was 7% she would end up with $166,329 in her account.   If she didn’t buy the Playstation at all and put the full $884 per year into the IRA, she’d end up with over $270,000!!!  All of that money, well over a QUARTER MILLION DOLLAR$, can be hers for NOT making JUST ONE stupid purchase per year!

Why is there no outcry from EITHER PROGRESSIVES OR CONSERVATIVES to end this ENSLAVEMENT in poverty?

Backup Plans

When I was working in the corporate world I led a new product development team.  During the course of developing a product for an “unnamed” customer we had a new Program Manager (PM) named Gary, assigned to our team.  I had known Gary, from a previous life when I was working as a software consultant many years ago.

I brought Gary up to speed as to where we were and what the plan of execution was. After giving the lay of the land to PM-Gary he asked me a question that almost every PM asks, “What’s your backup plan?”.

“Backup plans are for losers”, is what I told him.

I almost laughed at the shocked look on his face. I doubt anyone ever said that to him before.  I will tell you that I stand behind my statement. As I explained to Gary, if I didn’t think my plan was going to succeed I wouldn’t be executing that plan. My goal was and is success and failure is not an option.  My advice is,  “Plan for success.  Don’t plan for failure”.

As I mentioned in an earlier post, how you envision your goal is how you will execute it.  If you have a backup plan, you are giving yourself an option to fail and you will most likely fail.  If you envision success, you’re on the path to success.  This is not to sound Pollyanna about progress.  Projects and plans will fail.  Course corrections (pivots as they are called) will occur.  In many cases the plan will radically alter during the course of execution.  However, no matter what happens, your mindset needs to be success.

Gary had my statement “Backup plans are for losers” written on the top of his office whiteboard.  It was still up there when I left the company.

Hacking And Short Selling For Fun And Profit!

Here’s an interesting video. It’s pretty boring and filled with techno mumbo jumbo, so you may not want to watch it all the way through, BUT the big takeaway is it shows a hack to remotely crash a St. Jude Medical pacemaker.

https://vimeo.com/180593205

Sheesh you MIGHT be able to kill someone by remote control. There is a BIG MAYBE that I discuss below.

Okay it took over over 3 hours to hack into the device. I suspect the time indicated was just run time to allow a brute force attack as it looked like an open loop attack (one-way from the hacking device to the pacemaker). It might have crashed the pacemaker in less than 3 hours. An attack could be executed while someone was sleeping, which would allow plenty of run time.

Now for the truth in lending part. It’s hard to tell if this is a real threat. The company that released the video is Muddy Waters LLC which makes money by taking down companies and SHORT SELLING their stock as it plummets. St. Jude Medical is in a $25 Billion acquisition deal by Abbott Laboratories which means lots of “gamblers” are betting on the stock. Stock prices generally rise during the speculation time of a big takeover. If you take a short position and the price tumbles after this inflationary jump in price, cha-ching, big buck$ are made. With a $25 Billion dollar deal, BILLION$$ can be made with a huge short position.  This sort “investment behavior” is why I ranted earlier that the SEC needs to stop short-selling-gambling. You can read my earlier rant here.

To get my political musings in, think about which presidential candidate is in bed with big Wall Street money.  Do you think she will call for trading reform?

Second truth in lending.  There may be a real concern about a hack.  The company, MedSec, published their research that the St. Jude Medical devices have security flaws.

Third truth in lending.  MedSec has a financial deal with Muddy Waters to license their research and to share in profits derived from their research.

What a convoluted arrangement of money shifting and back scratching!

This reminds me of the great junk bond days.  Ruin good companies and make money!  The gamblers just found a new way to play their game.

And we wonder why we don’t have good jobs in this country…