HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
I have mentioned before some people have told me I am the most efficient person they ever saw. By definition, that makes me terribly time-conscious. Shortly before I graduated college a semester early in January, 1973, Bulova came out with the Accutron, based on a vibrating tuning fork (I am told by a music professional who owned one that the tone produced was Concert G sharp). They were the first truly accurate wrist watch, guaranteed to within a minute a month.
I said “I’ve got to have one of these”. The one with the gold-filled case was $250. I just couldn’t do that. Even the basic model at $180 (almost one thousand dollars in today’s money) was a stretch, but I did it. I absolutely loved that watch.
About 10 years ago, it needed some major repairs. It then worked fine until about 3 years ago; from then on it was one thing after another. The local jeweler, Buchroeder’s, stood behind the work, but the last time it went down we both agreed that it just wasn’t worth putting any more money into. I got 37 years out of my Accutron.
If I can get 37 years from my next watch, I will die at age 96 a happy man. So I bought a top-of-the-line Rolex.
1) The watch is used (two years old). I got it for half the price of a new Rolex.
2) Rolex is obviously a quality brand, and it really looks sharp (but not gaudy).
3) But this was the deciding factor. You know how bullish I am on gold. This watch is solid 18K gold, with a total weight of 6.3 oz; the melt value alone is more than half of what I paid for the watch.
The thing that actually made me write on this topic now is that last weekend at a University of Chicago Alumni Caucus one of the other doctors was carrying an obviously-worn briefcase embossed with his initials.
I told him that one of the best investments I ever made was when I paid $225 for my brief case more than 20 years ago. It is my traveling office; it has rubber bands, paper clips, my address book, my appointment book, refill cartridges for my fountain pen, and any papers that pertain to things I am currently working on. It is sturdy enough to hold my computer and the books I am reading. Once something gets in there, I know where it is. I have never lost anything from my briefcase. Every 4 or 5 years I treat it with Rawlings baseball glove oil. About 2 years ago I took it into one of the local shoe-repair stores to sew a few things that have torn.
Here is the point of this newsletter: for important things, things you use all the time, where performance, durability, dependability, looks, are important—buy quality. It always pays in the long run. Things such as appliances, machinery, furniture, suits, shoes, car, watches, etc. Cheap things look cheap. Quality things give you service, look like quality things, and pay for themselves many times over.
Also remember that your time is worth $100-200 per hour. When you buy something, buy a quality product that works when you need it to work. You also don’t have much free time; don’t spend it trying to repair a piece of junk.
My general rule is to buy at the top of the middle price range. This gives the best combination of reasonable price yet high quality. Beyond this, higher prices tend to produce diminishing returns. You are often just paying for a name or some option that can often be done without. For example, a $1,000 suit looks significantly better than a $500 suit. But at least to my eyes, a $2K suit doesn’t look twice as good as a $1K suit. A $700 washer washes your clothes just fine. Why pay $1K for an additional (apparently) cool option that you really never use or need.
RMD
A few more points on credit cards and gift cards.
Credit cards: When given the options of any sort of rebate, credit or perk, always take cash.
Gift cards: The last time I requested the cash rewards on my British Petroleum card (have been a member since 1974, when they were still Standard Oil of Indiana, Amoco), they sent me gift cards by mistake. The most valuable rewards on my BP card are 5% cash rebates when I use the card to purchase gas at a BP station. If I would use the gift card, I wouldn’t get the 5% rebate.
This is just one more example of how paying attention to details will save you money.
Wall Street Journal, 10/15/10. Obama Drops CEO Search for Top Economic Advisor…to replace the departing National Economics Director Larry Summers.
“Any CEO who knew something about the job wouldn’t take it, and anyone who didn’t know anything about it was not likely to succeed” an administration official said.
RMD comment: Not a good sign. That sounds like a pretty big shot job to me and no one will touch it with a 10-foot pole. People are abandoning the Obama administration right and left and nobody wants in.
Last week the dollar continued to get spanked (see chart, next page). However, interest rates also started to rise (see chart of 30-year Treasury bond, page 4). This is what you would expect if the dollar is loosing value. People must be compensated more (higher interest rate) to hold it. Bottom line is that this is not good.
As I said last week, keep the maturity on your fixed-income investments short. It’s hard to think of a worse investment right now than a 30-year Treasury bond.
Buy some gold. While on that subject, the precious metals have been blowing the doors off. It “seems” they are due for a rest. Watch the silver stocks, such as Silver Wheaton (SLW), Pan American Silver (PAAS) and Silver Standard Research (SSRI). They will probably lead the way; up or down.
On Thursday, the banking stocks were slammed big-time. Bank of America (BAC) was down 5.2%, Wells Fargo (WFC) 4.2%, and XLF (the SPDR Financial Sector ETF) was down 1.9%. They were “sent cryin’ back home to their mama” again on Friday; BAC was down another 4.9%, WFC 4.1% and XLF 1.7%. Even mighty JP Morgan (JPM) was down 10% over 3 days. All of this action was on monster volume.
RMD comment: It is not good for anyone if the big banks are still in trouble.
This mortgage tar baby just won’t go away. The geniuses on Wall Street created synthetic mortgage products that in the short-term reaped them billions of dollars in bonuses. People who couldn’t afford homes and shouldn’t have been lent money bought homes at inflated prices. Guess what: they can’t pay the money back and the homes are worth nowhere what they paid for them.
It soon became obvious no one knew what they were doing. As the story unwinds, Merrill Lynch, Bear Stearns and Lehman Brothers (to name just a few) became history, AIG and Citigroup (to name just a few) were taken over by the government, many were propped up by the government, and the entire financial system was brought to its knees.
And it’s obvious we aren’t out of the woods yet. The Mortgage-Backed Securities were and are toxic, and they are again killing the (mostly big) banks. This will only end when 1) the government stops its artificial interference and lets the system “cleanse itself”, i.e., home prices fall (? collapse) until they reach a level appropriate with supply, demand, and replacement cost, and 2) the government lets the banks fail that should fail (Unlikely, because the Federal Reserve was established to do just this: bail out the big banks at taxpayers expense). There are many, many strong, well-run, smaller banks around to pick up the pieces.
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