Bonus Blog: My Love Affair with My Laptop is Over

fee-only financial planners, good postureI remember the first time I met a laptop. It just about took my breath away. Instead of the huge tower and monitor, here were all the charms of a computer in one nice, neat package. What a bombshell:  computer, keyboard and monitor all in one.  And, since it was so light, we could travel together all the time and be together endlessly. It was love at first sight.

It wasn’t a monogamous relationship at first. I continued primarily with my tower and monitor at the office. I used the laptop at home. Loved every minute of it. Over time, my tower grew old and clunky. The appearance of the monitor wasn’t what it used to be. I found myself using my laptop more and more.

Ultimately, about five years ago, I started using a laptop exclusively. The two of us were inseparable. Little did I know that this relationship was harmful to my health the more we were together.

It all became clear about a month ago. I was working on some large projects and was with my laptop for 10-12 hours per day for a few weeks. I started feeling back pains. My right shoulder ached. There was numbness in my right arm. Friends suggested I had developed a pinched nerve or herniated or bulging disk

A visit to my doctor confirmed this. Our vertebrae are cushioned by small, spongy discs. When healthy, the discs act as shock absorbers. When a disc is damaged, it may bulge. The bulging disc presses on nerve roots and can cause pain, numbness and weakness in the area of the body where the nerve travels. As you age, the discs dry out and aren’t as flexible. Further, discs can be injured in a number of ways, particularly poor posture over time. Fortunately, my injury wasn’t too severe. I’m on injured reserve now, but rehabbing and hope to better than ever physically in a few months.

I found that the basic reason this occurred was that I was a victim of “laptop-itis.” Don’t laugh. Researchers at UNC-Chapel Hill School of Medicine first coined the term two years ago. After much research they determined that “high use of laptops can lead to a new ailment called laptop-itis:  neck, back and arm issues that can develop from the use of a portable computer”. The health center there says that laptop-itis had become an “epidemic”.  And, remember, these students didn’t have aged, inflexible discs when they came to campus.

Many students use their laptops regularly, for online classes, homework, research and entertainment. For them and us, the laptop often results in the user hunched over the screen in a “scrunched” position. Posture is bad and the body positions are not ergonomically correct. Prolonged use of a laptop is causing headaches, neck aches, carpal tunnel, tendonitis, and back pain in young and old.

So, my love affair with my laptop is over. I have a new adjustable-height desk at which I work standing up half the time. I have my monitor attached to a movable arm that positions it for the perfect eye-level distance. I have a rubber keyboard and an “evoluent” wireless mouse, which operates while my hand is in a vertical position (like shaking hands) not a horizontal position. It’s basically an ergonomic showcase.

I’m sharing this sad story of love, damage and separation, because many of you may be using your laptop too much as well. Here are some pointers for the future if you are using a laptop:

  1. Take a break every 20 minutes. Stand up, walk around and stretch.
  2. If you’re going to use a laptop, don’t cradle it in your lap.
  3. Tilt the screen so you don’t need to bend your neck. 
  4. If you can, use a desktop computer for long durations at the computer.
  5. Switch out your laptop for a desktop or use a docking station.
  6. If you have pain, see a doctor.

Remember, don’t let your laptop seduce you. It may cause you pain in the long run.

Lessons from Iceland’s Meltdown into Materialism

fee-only financial planners

From The Charleston Mercury, Thursday, September 20

Remember Iceland’s collapse in 2008?  It’s an amazing story.

Iceland is a tiny country with only 320,000 people. Yet, starting in 1994, this nation of fishermen and farmers became an international financial center. Its three major banks increased their assets by the end of 2007 to an astounding 923% of Iceland’s GDP. Personal income soared. GDP per capita was one of the highest in the world (39% more than the U.S.). However, the widespread affluence of the entire country was, in fact, a mirage. Households had debt of 250% of their annual income. When the world financial crisis came, Iceland’s banks and economy collapsed. A country built on materialism and consumer spending had gone bust.

Before the collapse, two professors, Ragna Garoarsdottir and Helga Dittmar, started a study to compare materialism, debt and financial well-being. Iceland was their lab. Recently, the Journal of Economic Psychology published their results. The conclusion was that “people who endorse materialistic values have more financial worries, worse money-management skills and a greater tendency towards compulsive buying and debt.”

Their study pointed out that in consumer societies, materialism has long been considered a national goal. Hard work produces higher income which results in more consumption and therefore higher living standards. GDP has long been considered a proxy for a nation’s level of well-being. If so, then one might suggest that for households, greater consumption, or materialism, would produce greater financial well-being. That just isn’t the case.

Garoarsdottir and Helga Dittmar’s study focused on five variables; materialism, money-management skills, tendency to spend, compulsive buying, and financial worry.  Respondents were asked  to measure how much they agree or disagree with statements such as “The things I own say a lot about how well I’m doing in life”, “I always know how much money I owe”, “I spend extra money quickly”, “I sometimes feel that something inside pushes me to go shopping”, and “I worry about my financial situation.” They summarized the results and compared the variables for correlation.

Materialism has been defined as the “importance ascribed to the ownership and acquisition of material goods in achieving major life goals.”  This Icelandic study concluded that the level of materialism is related to “higher levels of financial worry, a greater risk of compulsive buying, and higher debt.”

Their conclusions don’t surprise me. Financial well-being doesn’t result from materialism. On the other hand, a realistic financial plan can help promote and provide financial well-being. Such a plan identifies goals in three categories; Needs, Wants and Wishes in that respective priority and requires tough choices based on income. Materialism puts Wishes as top priority and tries to find ways to fund them. That’s a bad strategy.

Les Detterbeck is one of a small number of investment professionals in the country who has attained CPA, CFP®, and CFA designations. His firm, DWM Financial Group, Inc., a fee-only Registered Investment Adviser, has offices in Charleston/Mt.Pleasant and Chicago. Les may be contacted at (843)-577-2463 or les@dwmgmt.com.

 

Middle East: Muslim Rage Likely to Continue

muslim rageThe attacks on the U.S. Embassy in Benghazi and elsewhere were deplorable. American foreign policy in the Middle East must be clear and firm. Yet, a balance must be struck between supporting democracy and guarding our national interests. It won’t be easy. And Muslim rage is expected to continue.

The violence in Libya, Egypt, and across Arab countries may have looked spontaneous. It wasn’t. Many believe we can expect a new phase of Muslim rage. The Arab Spring replaced hated dictators. These dictators were all about control, including blocking internet access to prevent their people seeing inflammatory material and using their strong security forces to prevent or limit protests. That’s all changed.

Most new governments have fragile mandates, ever changing loyalties and weak security forces. They aren’t quite sure what to do or how to do it. According to the September 24th issue of TIME, “the tendency has been to look the other way and hope the demonstrators run out of steam.”

To be sure, the attacks are more than a reaction to an anti-Islam video. And, the rage isn’t directed only at America. Seven days prior to the killing of Ambassador Stevens in Benghazi, scores of people were killed in Iraq, the defense minister of Yemen survived an assassination attempt, and Syria’s civil war continued, with over 25,000 already dead. Salafists, the second leading vote getters in Egypt, attacked Sufi shrines in Tripoli and other Libyan cities. Small groups of hate mongers are taking advantage of the current situation to promote their religion and their politics, often to a suspicious and ignorant population.

Most Americans know little about the Arabs. And, they know little about us. Coincidentally, two weeks ago I completed a very interesting book entitled The Arabs: A History written by Eugene Rogen. I found it fascinating and highly recommend it. It details the last five hundred years from the rise of the Ottoman Empire until now. It outlines why the Islamic world seems to bear a grudge against the West. In their minds, Western intervention and imperialism, primarily by Britain and France, made many Arabs slaves within their own countries for centuries. And, even with independence, Britain and France still continued to extract economic benefits and support dictators who stifled individual economic and/or religious freedom.

Of course, Muslims resent slights to their religion. Hence, certain Muslim outbursts of rage play well for political parties. The Salafists are fundamentalists. They would like a fusion of government and religion as exists in Iran. Stirring up religious fervor is exactly what they are about. It’s not too difficult to do. Ignorance of the West facilitates rabble-rousing in Muslim countries. Protestors at the American embassy in Cairo erroneously believed that the offensive film was shown on “American state television”, which seemed very likely to those unaccustomed to independent broadcasting. We Americans know we don’t have a “state-run” television system, but many of the protesting Arabs didn’t know that.

The Middle East matters- big time. It’s the world’s energy’s center, at least currently. It is home to Iran, one of our committed enemies. And, it is the heart of Islam, a religion followed by over 2 billion worldwide. The Arab Spring will likely be good for America. However, now that change has come and the genie is out of the bottle, we can expect to see continued rage from a small minority of the Muslims for some time to come.

Housing: “Full Recovery” or “On the Mend”?

home prices upI loved the cover story for Barron’s on Saturday. Jonathan Laing’s article announced that the “national nightmare is over, home prices are headed up and the recovery is for real.” Wouldn’t it be great if he’s right?  After six years of major declines in home prices wiping out $7 trillion in home values, we’re all ready for a big turnaround. Unfortunately, though housing is certainly on the mend, a full recovery may still be far off.

Mr. Laing, of course, pointed to the Case-Shiller report that showed a jump in home prices of 2.3% in June over May and a 6.9% increase in second quarter 2012 compared to first quarter. He pointed to optimistic reports such as Moody’s Analytics’ Mark Zandi who feels home prices on average will rise 10% by the end of 2014. And, Lawrence Yun, chief economist of the National Association of Realtors, thinks that home prices could increase by as much as 5% in both 2012 and next year, in part due to lower inventory of houses for sale. Lastly, Ingo Winzer, president of Local Market Monitor is forecasting a cumulative increase of 7% over the next three years.

Others are not so optimistic. Nick Timiraos, in the Wall Street Journal on Monday, indicated that the strong sales in early 2012 signal that more U.S. housing markets have hit bottom. However, in his words, the housing market “remains far from normal.” In addition, “hitting a bottom shouldn’t be confused with a recovery, which looks a ways off.”

Here are some reasons that Mr. Timiraos, Barry Ritholtz and others believe that housing has stabilized but we are not in recovery mode:

  1. The economy is still limping along- consider weak job creation, flat wages and low household formation.
  2. The foreclosure process was slowed or halted for almost a year as part of the “robosigning” settlement discussions. Distressed sales fell from 38% to 28% of existing home sales. Now that this issue has been resolved, foreclosures are moving higher, putting more distressed houses on the market. This will likely reduce the average price of houses sold.
  3. Low inventory is not necessarily good. Home equity plunged in the last six years. Many homeowners would like to move on. But, they become buyers after they sell, and if they won’t have enough equity after the sale to buy, then they sit.
  4. Mortgage rates are at historical lows. Buyers get a huge increase in purchasing power with these low rates. What happens to home prices when mortgage rates start to rise?
  5. Results must be seasonally adjusted. Second and third quarters are historically the best months for home sales. Let’s see what the fall and winter bring.

There are good signs in housing. Yet, there are still plenty of headwinds before we see a return to normal. Regardless, it appears that housing has stabilized and hit bottom in parts of the country. That’s good news.

 

US Budgets and Debt: A Non-Political Primer

U.S. Budgets and Debt are key issues in the Presidential Race. Budgets, of course, represent priorities and choices. Just as elections do. I thought a quick recap of budget and debt might be helpful to each of us as we cut through the election rhetoric and try to evaluate various proposals for the future.

The U.S. fiscal year ends September 30th. The budget for the 2012 fiscal year ending in four weeks is expected to generate a deficit of $1.3 trillion. Our total revenue is $2.5 trillion, yet we willl spend $3.8 trillion. Our current debt is roughly $16 trillion and growing.

Revenue comes primarily from taxes:  50% from individual income taxes, 10% from corporate income taxes and 30% from payroll taxes.  Expenses are grouped into three major categories: Mandatory programs, Discretionary Programs and Interest.

The chart above shows the relative amounts spent on various items. Mandatory expenses, including social security, medicare,  medicaid  and federal pensions, account for 56% of the expenses. 37% of expenses are “discretionary” expenses, of which 20% is defense spending and 17% is everything else. “Everything else” includes education, transportation, veterans’ benefits, environment and others. Fortunately, interest rates are at historical lows, so interest on the $16 trillion of debt is “only” 7% of total expenses.

Hopefully, this provides some perspective on where the dollars come from and where they go currently.

Annual deficits of $1.3 trillion are not sustainable. You may recall that in 2010, the National Commission on Fiscal Responsibility and Reform (often called the Simpson-Bowles Commission) was formed to review and propose changes. The bipartisan committee delivered their final recommendations on December 1, 2010.

Their proposal was designed to save $4 trillion (through program cuts and revenue increases) over the next decade. Its five main “steps” were:

  • $200 billion reduction per year in discretionary spending, which included defense cuts of 15% and cutting the federal work force by 10%
  • $100 billion in increased tax revenues including an increase in gasoline taxes and restricting certain tax deductions
  • Controlling health care costs
  • Reducing entitlements, including farm subsidies, federal pensions and student loan subsidies.
  • Modifying social security to raise the payroll tax and retirement age.

Unfortunately, the commission fell short of the supermajority of 14 or 18 votes to approve the report and send it to Congress for a vote.  

A year ago, Congress voted to raise the nation’s debt ceiling (to $16.4 trillion). At that time, they established a super committee to identify at least $1.2 trillion in savings and submit them to Congress for a vote. If there was no approval, then automatic reductions of $100 billion per month would start as of 1/1/13. The supercommittee was unable to reach a budget deal last November and Congress has not moved forward with its own plan. Now, the automatic cuts scheduled for January represent part of the current “fiscal cliff”. The other part is the planned expiration of the Bush tax cuts.

There is much at stake in this election. Budgets and Debt are key issues. I hope this information helps.