A lot of people have been asking What's it all for?
I had the chance to talk to a wide variety of people over the Thanksgiving holiday: friends, family, hunting buddies, old high school acquaintances.
And though they said it differently, many of them had the same general questions and problems.
My 20-year-old cousin is a cashier at SuperFresh. She's attending community college and was able to afford her own apartment for awhile. Now she's living back at home.
Friends my age (25-30) are combating debt — student loans, credit cards, cars, prematurely bought houses — while still trying to keep up the American consumerist lifestyle as The Dream slowly slips away.
Their parents haven't seen their retirement accounts rise since the late 1990s. The Dow is trading at the same level it was in 1999.
“We've done everything we were supposed to,” was a common sentiment. “And we still can't get ahead.”
From homeownership and a four-year college education to a nine-to-five job and an individual retirement account, in many cases what they were “supposed” to do turned out to be the wrong thing to do.
They weren't happy. They felt like they were trapped in the rat race for nothing. And more than a few of them were starting to notice a couple of other things I'd like to pass on to you today, before I get to my take on the situation...
For Whom Do You Work?
A couple anecdotes...
My mom is a social worker in a small Maryland town. She creates and administers programs for at-risk youth and young offenders. She knows many of the young criminals in town.
Last weekend, she ran into town to fill a prescription and get some bread. At the pharmacy, she noticed one of the town's known drug dealers in front of her in line. He was having a prescription filled, presumably so he could sell it.
My mom was shocked when she heard the dealer tell the pharmacist he had two types of insurances — and if one didn't work, the other would. They were both forms of public assistance.
She then went across the parking lot to a deli where she saw a woman paying for cat food and soda with food stamps.
Needless to say, it rubbed her the wrong way. Her taxes — and yours, to be sure — just went to pay for those drugs and cat food while she has continual financial worries.
My best childhood friend manages his family's liquor store in the same town. A Section 8 housing complex is adjacent to the store. To live there, you have to make “50% or less of the area median income.”
Yet my friend says the inhabitants of that complex visit his store in droves on a daily basis to purchase cigarettes and alcohol. Meanwhile, increased liquor taxes and other pressures on small business owners are wreaking havoc with his livelihood.
Are we subsidizing low-income housing so they can free up cash to buy booze?
According to TaxFoundation.org: “Americans will work well over three months of the year, from January 1 to April 12, before they have earned enough money to pay this year's tax obligations at the federal, state and local levels” — the so-called Tax Freedom Day.
That means you're working almost a third of the year so low-income (potentially criminal) individuals and families can get cheap or free drugs, cat food, and malt liquor... while you're struggling to get ahead.
From that angle, it's easy to see why so many people are wondering What's it all for?
I'll take a few stabs at answering that question in a moment. First, the parable of the Mexican fisherman, which everyone seems to enjoy when I share it.
What's the Goal?
While on vacation in Mexico, an American businessman came across a local fisherman with a small boat full of fish. The businessman asked how long it took him to catch all those fish, to which the fisherman replied only a short time.
“Why not stay out and catch more?” the American asked.
“Because this is all my family needs,” said the fisherman.
“Then what do you do with the rest of your time?” questioned the American.
“I sleep late, fish a little, play with my kids, take a siesta, stroll into the village, play guitar and sip wine with my friends. I have a full and happy life.”
“I have an MBA,” said the American. “You should spend more time fishing and buy a bigger boat. With the proceeds from the bigger boat, you could buy a fleet of boats. Instead of selling to a middleman, you could sell right to the processor and eventually open your own cannery. Then you could move to Mexico City and then New York, where you'd run your expanding enterprise.”
“How long will all this take?” the fisherman wondered.
“Ten to twenty years of hard work.” was the reply. “But then comes the best part! You announce an IPO and sell your company stock to the public and become rich. You'd make millions.”
“And then what?” asked the simpleminded fisherman.
“Then you would retire to a small fishing village in Mexico, sleep late, play with your kids, and play guitar and sip wine with your friends,” said the businessman.
The fisherman, a bit confused, asked, “Isn't that what I'm doing right now?”
Be a Mexican Fisherman
My grandfather didn't do anything he was “supposed” to do. I'm a lot like him.
Dirt poor and barely able to feed his young family, he left Italy in the early 1960s. He left his bride and young daughter (my mother) there to be sent for later.
With hardly a formal education, no money, and no firm plan, he got on a ship, leaving his parents and siblings in the Old Country in search of a new life.
He moved in with an already-immigrated aunt, took a job sewing suits at a factory to hone his trade, and started saving.
Banks? He didn't trust them.
Managed retirement account? Forgetaboutit. He operated in cash.
Again, against everything Americans were “supposed” to do. He saved enough to bring over my grandmother and mother, and eventually enough to open his own small business, Italo's Tailor Shop of Newark, Delaware.
He went from unable to afford milk for his child in Naples to being Joe Biden's tailor while he was still practicing law in the 1970s.
My grandfather still doesn't know what credit is. He only took cash or check at his shop.
He bought and paid for four houses and two beach houses. He also had one in Italy he recently sold. I'd say he only mortgaged the first one in the 1970s.
Every new car he buys (only when needed, of course) is paid for on day one.
Same with my best friend's grandfather, who came here even earlier from Greece and bought a farm and opened that liquor store.
They don't teach hoarding cash, being frugal, and owning hard assets in high school — it's mostly a staging area for the rat race.
And who ended up best in the long run?
A recently-released Wells Fargo survey found that:
25% of middle class Americans say they will “need to work until at least age 80” to live comfortably in retirement
74% of middle class Americans expect to work in their retirement years, including 39% of all respondents who will need to work to make ends meet or maintain their lifestyles
Among middle class Americans age 40 to 59, 54% say they will “need to work,” compared to 34% of those age 25 to 39
While those people are greeting at Wal-Mart, my grandfather is probably tending his fig tree or doing some woodworking or watching Juventus play soccer or going on his annual cruise or digging his toes into the sand in front of his oceanfront condo.
Point is, doing what you're told is best or what everyone else is doing may feel right, but it's often wrong.
I'll be 28 next week. My truck and student loans will be completely paid off in the next three months, several years ahead of schedule on both counts.
My first house is locked in a 3.2% mortgage that I expect to pay off in the next five years.
I didn't get my first credit card until this year, and that was only to improve my credit score. I have an IRA and a personal trading account each with tens of thousands of dollars and growing.
I don't enjoy saying it, but I'm in a better financial position than most 30-, 40-, and 50-somethings I know.
I avoid consumerism. I still wear jeans and sweatshirts I wore in high school. I used my last two cell phones until they died of natural causes. I bought my truck one-year used to avoid instant depreciation.
I spend a lot of time hunting and fishing, probably 50 days a year if I had to guess. My freezer's filled with meat I brought to the butcher myself and vegetables I watched grow from seed.
I don't try to keep up with the Joneses or outwardly impress others.
I don't have a solution for the 50 million Americans on Medicaid, the 46 million on food stamps, or the millions more on housing assistance or other forms of welfare. That's not my job. I never want it to be.
The way I see it, my only job is to live life the way I want to live it and not worry about the rest. I just happen to make money by telling people just that.
Wise investments are a big part of it. And I tell you about plenty of those. I even shared my unedited Scottrade sell history a few weeks ago.
But they aren't everything...
And I don't use their proceeds to buy things or stuff.
I use them to live the kind of life I like to lead, just like the Mexican fisherman. Just like the Greek and Italian immigrants above.
Like I said, 74% of Americans expect to work in their retirement years.
My grandfather did what he wanted and ended up fully retiring in his 60s when he sold his tailor shop... to a Vietnamese immigrant.
Stop running in circles chasing the busted American dream. Create your own dream and follow your own path to get there.
Call it like you see it,
Editor, Energy and Capital
P.S. Sorry if this became a diatribe or sermon, I intended neither. Instead, I usually find it helpful this time of year to take a step back and ask the tough questions. It always helps me to refocus on important goals. I hope it helped you as well.
I'm off tomorrow to San Francisco, where I'm taking a few days to catch up with a college buddy who now sits at the derivatives desk at Goldman Sachs. I should have some interesting things to share upon my return, when we'll get fully back into investment mode.