Odds and Ends

Scott Burns in the Globe with some basic advice and why it's harder to follow for young people today:

Marry, and stay married. The first part is easy. The second part is more difficult. But it's a great measure of capacity to adapt and change. The responsibility of having children teaches us to defer and to live on less because the children need more.

Be employed and stay employed. The fact that you have a sizable pension indicates you were a reliable and productive employee for quite a few years. It also means you benefited from having an employer who did a lot of your saving for you. So you never needed an investment adviser, and you could manage your basic saving on your own.

Live within your means. Your pension and Social Security benefits, alone, are greater than your annual expenses. You find this easy to do but, trust me, many don't. We live in a society that plays to grandiosity in all things. Living within your means allowed you to save enough money to build a comfortable nest egg.

Note that there are no miracles on this list, just consistency and the rewards of time. Sadly, the young are not so blessed:

Employment stability, even for reliable and productive workers, no longer exists.

Our pension system is being dismantled. Our corporations no longer take the responsibility for either saving for our future or for managing the savings. So many people need to have a financial adviser.

Advertising and electronic media have cultivated envy and expansive spending in ever more invasive ways. So it is a lot more difficult to lead a life of modest spending.

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My Dad recently asked me what I thought about buying TIPS bonds. TIPS bonds are treasury bonds that are indexed to the rate of inflation (the CPI). The way the indexing works is that the principal amount of the bond is periodically adjusted to reflect the CPI. When the CPI goes up, the bond principal magically increases. TIPS bonds have a coupon rate, and they are bought and sold like other bonds, so the actual rate is determined by the price of the bond.

Currently, TIPS bonds have a negative yield. This is widely taken to mean that investors have very high inflation expectations (they are predicting that future adjustments to the bond principal will more than make up for the current low yield). Fed officials have downplayed the importance of this indicator.

My suspicion is that "smart" investors are attempting some sort of bizarre arbitrage with these bonds. Specifically, the bond is indexed to CPI while short to intermediate Treasury yields are tied, albeit loosely, to the GDP chain deflator computed by the Fed. I would also not care to own TIPS bonds if oil prices should happen to drop back into the $50 range, since we could suddenly see starkly negative non-core CPI numbers, which would reduce the principal value of the bonds.

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I am blessed with generally very good health, but I suffer from two common conditions that can be extremely painful (kidney stones and a herniated disk in my back). One of my biggest happiness challenges is figuring out how to not let pain make me unhappy. Even though I know that the pain will pass, when it is with me, it can be hard to stay focused on the keys to happiness. I have no insight here, just an observation.

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In that extremely irritating way that old people have of attempting to torment the young, I was trying to get my son to stop whining about how the DVR was not instantly serving up the desired episode of Word Girl by explaining to him what life was like when I was five:

• No DVR
• No DVD
• No videos
• No cable television
• No television at all
• No Google Video
• No YouTube
• No Disney
  
• No Internet
• No Computers

And beyond all of that, we didn't have one tenth the number of toys that you have. Some how, back in the day, people managed to survive without devoting an entire room to nothing but plastic kid crap. Kids just didn't have as much stuff?

Why?

Because before the wonderful world of "free trade" if you wanted to buy a manufactured article, you had to pay a worker a wage sufficient to live alongside of you, if not in your town at least in your state. And that meant that stuff was expensive.

Nowadays, manufacturers move instantly to the lowest-wage locations. Stuff is cheaper than ever before. And we're choking on it.