I needed a quart of motor oil and found this

I counted 32 different brands and types.

It seems strange to me. Why so many choices?

(Does it mean there is money in selling oil products and a lot of people want a piece of it?)

The Man Who Broke Atlantic City

I’ve read the article a couple times. Good writing. Fascinating story. (Plus, he’s from Oregon.)

Apple, Microsoft, Google, Amazon compared

Here is a chart comparing the Net Income of each company for the past five years:

Here is a chart comparing the stock performance of each company for the past five years:

Here is some commentary about the charts:

• Everything makes sense. Except Amazon’s stock price. Geez.
• I’d like to see Samsung in the charts (but I couldn’t find their quarterly profits for the past five years, and they are not traded in the US).

Would you trade two years for complete financial freedom?

Would you trade 2-4 years of:

• No smartphone
• No cable TV
• No internet at home
• No car payment
• Conserving gas: walking, riding bike
• No new clothes
• No eating at restaurants
• Careful shopping for groceries

For complete financial freedom?*

(* having enough money and not needing to work.)

———————————–

Scenario #1

• Unmarried high school grad. (18 years old)
• Earns $15 hour.
• Works full-time (40 hrs/week)
• $15*8 hrs/day = $120 – 20% taxes = $96/day
• $96*20 workdays/month = $1,920/month * 12 months = $23,040/yr
• Saves 50% of income = $11,520/year * 4 yrs (while peers are racking up massive debt in college)
• Earn 15% interest on investment
  • Yr 1: $11,520 + 15% = $13,248
  • Yr 2: $13,248 + 11,520 + 15% = $28,483
  • Yr 3: $28,483 + 11,520 + 15% = $46,000
  • Yr 4: $46,000 + 11,520 + 15% = $66,148
• Then, you stop living on half your income, but you don’t touch the $66,148 invested and keep earning 15% per year.
  • In five yrs = $133,047 (you’ll be 27 years old)
  • In ten yrs = $267,605 (you’ll be 32)
  • At this point, if you continue to earn 15%, your nest egg will make $40,140 per year. You are free to live.

Scenario #2

• Married couple, both spouses work full-time. Earn $50,000 per year together.
• You save half your income = $25,000 per year.
• Earn 15% interest on investment
  • Yr 1: $25,000 + 15% = $28,750
  • Yr 2: $28,750 + 25,000 + 15% = $61,812
• Then you stop living on half your income. But don’t touch the $61,812.
• Two years is not a long time. It is shorter than college.
• The nest egg continues to earn 15% per year.
  • In five yrs = $124,326
  • In ten yrs = $250,100
• If you continue to earn 15% interest annually, your nest egg makes $37,515. You are free to live.

Scenario #3

• Married couple, both spouses work full-time. Starting out with professional jobs. Earn $80,000 per year together
• You save half your income = $40,000 per year.
• Earn 15% interest on investment
  • Yr 1: $40,000 + 15% = $46,000
  • Yr 2: $46,000 + 40,000 + 15% = $98,900
• Then you stop living on half your income. But don’t touch the $98,900.
• Two years is not a long time. It is shorter than college.
• The nest egg continues to earn 15% per year.
  • In five yrs = $198,923.
  • In ten yrs = $400,105. At this point, @ 15%, you earn $60,015/yr.

The danger in each scenario: national stock market corrections. We had a tiny one in 1987, and large ones in 2000 and in 2008.

Note: Two years, five years, ten years are going to go by anyway (that’s how time works). Do you want to continue to trade hours for dollars, or do you want to set up something amazing for yourself (and offspring)?

Copy the best. John D. Rockefeller was the richest man in modern history. He said:

“And as I was saving these little sums, I soon learned I could get as much interest for $50 loaned at seven per cent — the legal rate in the state of New York at that time for a year — as I could earn by digging potatoes ten days. The impression was gaining ground with me that it was a good thing to let money be my slave and not make myself a slave to money. I have tried to remember that in every sense.”

———————————–

Each scenario at a more conservative 10% interest:

Senario #1:

• Yr 1: $12,672
• Yr 2: $26,611
• Yr 3: $41,944
• Yr 4: $58,810
• In five yrs: $94,714
• In ten yrs: $152,537 (@ 10% = $15,253/yr)

Scenario #2:

• Yr 1: $27,500
• Yr 2: $57,750
• In five yrs: $93,006
• In ten yrs: $149,788 (@ 10% = $14,978/yr)

Scenario #3:

• Yr 1: $44,000
• Yr 2: $92,400
• In five yrs: $148,811.
• In ten yrs: $239,661 (@ 10% = $23,966/yr)

———————————–

Appendix A: The S&P 500:

• 2012 (YTD): 11%
• 2011: 1%
• 2010: 11%
• 2009: 26%
• 2008: -40%
• 2007: 4%
• 2006: 13%
• 2005: 5%
• 2004: 9%
• 2003: 20%

Cumulative: 59%
If you invested $10,000 in the S&P 500 in 2003, it would be worth $15,900 today. If you cut out 2008 (maybe you sold to avoid a big loss), it would be worth $32,000.

Appendix B: AAPL:

• 2012 (YTD): 38%
• 2011: 25%
• 2010: 54%
• 2009: 115%
• 2008: -57%
• 2007: 129%
• 2006: 22%
• 2005: 128%
• 2004: 201%
• 2003: 32%

Cumulative: 7837%. Or… if you cut out 2008, 18,000%. Wow.
$10,000 invested in AAPL at the start of 2003, would be worth $793,700 today. If you cut out 2008 (maybe you sold to avoid loss), it would be worth $1,810,000.

How much should the rich contribute?

I wrote the essay at the bottom of this post on June 23, 2012. I submitted it to the New York Times (because they’re my favorite newspaper). They didn’t run it.

But on October 26, 2012, Yahoo published this story: “Do the Rich Have a Moral Obligation to Pay Higher Taxes?”

(As usual, I see the Zeitgeist. But more importantly, other people are asking the same, important questions.)

Here’s my essay:

“What Should We Expect of the Rich”

In his TED talk, Nick Hanuaer says that rich people don’t create jobs.

“We’ve had it backwards for the last thirty years. Rich people like me don’t create jobs. Jobs are a consequence of an ecosystemic feedback loop between customers and businesses. And when the middle class thrives, businesses grow and hire and owners profit…Taxing the rich is the single shrewdest thing we can do for the middle class, for the poor, and for the rich.”

What should we expect of the wealthy? Just that they bear their share of the burden.

There is no reason to penalize the wealthy, but there is every reason, from logic to economics, to require the rich to bear their part of the financial need of a county and planet. The wealthy ought to pay the same percentage in taxes as the rest of us.

But that is not the current system. Currently, the wealthy pay a lower percentage in taxes than the rest of us. It is so absurd that even the (sometimes) richest man in the world, Warren Buffett, spoke out about it, saying, “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

One sub-group of the wealthy, hedge fund managers, pay less than half the tax rate the rest of us pay. They are the only earners in the world with this tax break. Journalist Pat Garofalo points out that:

It would take the combined income of 441,000 middle-class families to equal the income made by just the 25 richest hedge fund managers. The top hedge fund manager at the moment, John Paulson, makes more hourly than most Americans will earn in a lifetime, while paying a lower tax rate.

Closing this loophole would raise more than $4 billion per year just from the 25 richest hedge fund managers, according to calculations by RJ Eskow. If just 25 people paid taxes like you and me, we’d cut $44 billion of the national deficit in ten years.

It sounds crazy because it is. One reason for an equal tax burden is that anything else is literally insane—so illogical that it cannot be defended. Another reason is that it is the only sustainable financial policy. Taking more and more money from those who don’t have money will never keep up with the demand of a growing, national economy, much less a globally-connected economy.

Milking the poor and middle-class for more and more is not only illogical, it is sick. It is a cruel joke. The punchline is that though the poor and middle-class feel every dollar of tax, the wealthy do not. Paying 20% of $1 billion still leaves you with more money than the rest population will see in their entire life. (Indeed, paying 90% of $1 billion still leaves you with more money than the rest of the population will see in their entire life.)

There is no reason or benefit in absolving the poor from tax responsibility. Nor would good come from penalizing ambition, or wealth, or even greed. But we can insist that those with wealth bear their share of the load.

Or can we ask for more?

Plato argued that once a person achieves enlightenment, they are not only best suited to lead, they are obligated to lead. That reasoning, which has stood history and scrutiny, can be applied to the problem of the tyranny of wealth.

Those with wealth are certainly better able of solve needs and help humanity. Does that mean they obligated to?

The richest individuals of modern times, Andrew Carnegie, John D. Rockefeller, Warren Buffett, Bill Gates believe so. Carnegie wrote “The Gospel of Wealth” in which he claimed that the wealthy should accumulate money, then purposefully distribute money. Rockefeller followed Carnegie’s ideas. Bill Gates and Warren Buffett also subscribe to those principles.

But really, what else are they going to do the money? Buy a second megayacht? (Actually, some do.) It appears that once a person encounters wealth, a strange and terrible thing takes over. A corrupting of the soul occurs. The more you have, the more you want. Few wealthy people have ever resisted this corruption. The condition is not exclusive to the rich. But there is a difference between wanting more and wanting more than most countries need. (Honoré de Balzac claimed: “Behind every great fortune there is a crime.”) Are there some common causes of this disquiet?

In his book, Outliers, Malcolm Gladwell argues that all success is circumstantial. This past graduation season, one of the few commencement addresses to go viral was by bestselling author Michael Lewis. The thesis of his speech was that success is based on luck. In the past several years, I have heard a successful author and a successful filmmaker, separately, say that successful people feel a low-grade terror, a nagging fear, that they will be found out as frauds: as no more talented or deserving than anyone else. The Hollywood insider claimed that this sense of undeservedness is a reason for so much drug and alcohol abuse among celebrities.

If these claims have merit, then our question solves a great many problems, from a county’s revenue to a person’s conscience.

What should we ask of the wealthy?

At least what is asked of me. Maybe more. For everyone’s sake.

Apple. Facebook. Amazon. Seth Godin + Progressive

APPLE. Apple’s stock is at its 52-week all-time high.

FACEBOOK. Facebook is down again today to a new low. I think they are still over-valued. Their market capitalization is $41 billion, and I don’t think they’re a $41 billion company. That would mean, all things equal, that they make 15 times less profit than Apple Computer. Except they don’t. They make almost 60 times less profit. (last quarter: Apple, $11.6 billion. Facebook, $205 million)

AMAZON. In related news: Amazon.com’s P/E ratio. Have you seen it? 295. Unbelievable. And unsustainable. No investors are that optimistic. What’s going on here?

SETH GODIN and PROGRESSIVE INSURANCE. I’ll stop saying it when it stops being true: but Seth Godin has the best page on the Internet. Today he discusses what Progressive Insurance did recently. My favorite line from his post today:

“They bet on short memories and the healing power of marketing dollars, commercials and discounts.”