Wednesday, October 28, 2009

A Suit Becomes You

The Bar Mitzvah boy's lessons also include getting his first suit. My dad had a high school friend who grew up and became a manufacturer so it was an obvious choice to drive to NY to visit him in the factory in the garment district for the purchase. It came with a lecture. "You should always have a blue suit in your wardrobe. You never know what might come up when you will need one and so it's there for whatever."  He then proceeded to take me around the shop, pointing out the stations where the suits are assembled and explaining to me the basics of what makes a quality suit. There was no mention of price point, or brand. There was a demonstration of the grades of suits and how each successive grade included more hand elements. That is to say that at each level of quality there was a justification of price based on an inherent value.

In the above excerpt from the annual report of the Philips Van Huesen Company, the largest distributor of men's clothes in America, you can see their corporate strategy is entirely based on price points and brand options.

The recent announcement of DJ AM's death included this image: The man had style. In an attempt to look as good we are going to need expert guidance. It exists. Every man has a dad in the name of the "style guru".   Here is a basic guide to choosing a suit.

Friday, October 23, 2009

Our Money

It really is our money.

Big numbers like a 14 trillion dollar national debt, ( David Walker, Comptroller of the Currency under Bush, suggests the implied debt is really 65 trillion) are disregarded because none of us can conceive of them. Nonetheless these figures will be a factor in all our lives as we have to pay this obligation off, or suffer the ravages of bankruptcy if we don't. This debt was created by government spending more than they took in revenues. The way this debt is retired is our payment of taxes. The government could sell off land holdings, oil leases, federal buildings, but the bulk of the debt will be paid through our taxes. Our collective obligation to pay.

This is the funny season when tax attorneys and estate planners sharpen their pencils and begin to design the ways and means that their clients can avoid taxes. As the time gets nearer and the rhetoric on tax and debt issues gets louder, you are going to hear some tired arguments. The most common is that the poor, or 47% of citizens will pay no taxes, and that the rich pay the disproportionate share of all taxes. The latter is true as far as it goes. The issue here is are they paying what they MIGHT owe, and if not who is responsible for their share?

By example. Lets say ten of us agree to buy a $10,000 plot of land on which to grow veggies. We borrow the money. To keep it simple we have an interest only loan at 5% principle due in 20 years. We owe $500 interest a year per share. If for any reason, one of us doesn't or can't make their payment, the loan isn't reduced, it is redistributed among the remaining payers. We each have to kick in 10% more. We might penalize the non payer and deny him his share of the veggies. When it comes to government goods and services there is no take back of services from those who don't pay.

So taxes that are not collected from one of us, are made up for by the rest of us.

This is the time of the year when Forbes publishes its list of the richest persons in America. It is also a convenient time for many of those on the list to trot out their charitable activities. These charities are created by diverting money that would otherwise be paid in taxes into a variety of instruments, lets summarize and call them foundations.
The Wealth Management Exchange is just one of thousands of organizations that can help you create a foundation.

Here is a quick summary of benefits:
Private Foundations At A Glance
• Immediate income tax deductions for amounts donated to foundation
• Reduce income taxes by up to 30% per year
• Exempt from Estate and gift tax
• Long-term build up of foundation assets free of income tax
• Complete legal control of foundation during life of founder
• The ability to make the world a better place through a sustained long-term program of well planned and executed charitable giving
• A unique opportunity to share value and vision with children and grandchildren
• Build a permanent legacy
• After founder passes, foundation may stay under family control

The last entry means that heirs, who did nothing but get lucky choosing a parent, carry on the family business, and they too pay no taxes.

When Ted Turner announced his enormous gift to the U.N. he was also generous about how the system works for him. A USA Today story characterized the gift as follows:

Turner’s gift, it turns out, is not as generous as described in media reports. An amount of up to $1 billion will be donated in the form of Time-Warner stock in ten annual installments. The cost to Turner could be significantly less than $1 billion if he takes advantage of tax write-offs, tax deductions and ways to avoid estate taxes. Amazingly, USA Today claims "Turner, or at least his heirs, could end up $100 million richer because he’s giving a billion away."

So just to hammer home the point, the tax advantages that accrue to the rich, will be made up for by the rest of us, with our money, and the charities they create are funded with our money. When you read of the good work that is being done be sure to stand up and declare it is in your name, with your money.

Monday, October 19, 2009

Ribs and Wings

When the market place goes topsy that doesn't mean you have to. Take spare ribs.
Spare ribs are what is left over when the butcher is finished taking off the prime cuts of the pork carcass. Prime cuts include chops, and roasts, You can recognize a prime cut, they have meat on them. In the day, when true value was not market driven, spare ribs were the cheapest cut in the meat case. Now that demand has outstripped supply you have a situation where baby back ribs (from the loin area) cost two to three times what the boneless loin costs. And on a yield basis, how much meat you get, the factor may be ten fold.

Lets be honest. The rib is really just a sauce delivery vehicle. (For some bone suckin, crunchin, freaks of which I am one, the bone is an important part of the experience. To you I say, save the bones from the next order of ribs you eat, clean and store them, and have them on the plate for dipping the next time you BBQ some loin.)

Buy a loin roast. Halve it longways. Rub in your favorite rub. Sloooow roast at 250 for 4 hours or till internal temp reads 140, check every hour or so, bathe in sauce for last 20 minutes. Let rest. Slice in half inch strips, dip in yet more sauce. Forget about ribs.

Chicken wings now cost more then breast meat for the same reason. Supply has outstripped demand. Buy a good heavy chefs knife. Learn to use it.

Buy chicken thighs (which are inherently juicier than wings). Chop them in half. Cook as for wings but a bit longer to compensate for the added meat on the bone.

And when all of the cuts are boned out of the respective animal, the scrapes, the leftovers are turned into sausage. Some sausage is now more expensive then any cut of the animal, particularly chicken. Making your own is so simple and so healthy by comparison there is no reason not to do it. You do not have to stuff sausage into intestines. Make patties formed from fresh meat and spices or crumble and use in your favorite recipe.

Tuesday, October 13, 2009

Built-Ins are Bankable

Built-ins are Bankable:

You enter the dwelling space and you immediately sense that the owners have overreached. It isn't a matter of the size or the cost of the housing. The sparse furnishings suggest that the owners simply haven't the money to fit out their new digs.
The fact is that the cost of furnishing a new home is rarely factored into the total cost of housing. Typically new starts begin with a hand me down or two, play out a shabby chic style, or worse, go into more debt, at outrageous interest costs, to furnish a space. "Rent to own", credit cards, or furniture store credit is usually exorbitant.
If we are to develop affordable housing options we have to be mindful of the total livability cost of any space. So here are a couple of thoughts and strategies we might employ.

When I say that "built-ins are bankable" what I mean is that if the builder has included the banquette pictured at the top for example, it is included in the cost of the house and is wrapped into the mortgage. It is financed at the same time as the home and at the same interest rate as the structure. It is part of the structure and therefore considered "real estate". In today's market that means the cost of the money for the kitchen seating group was 5%. As long as we continue to provide tax reductions for interest payments on real estate, the interest is deductible.
Strategy number one has us influencing builders to include as many built-ins as we can imagine.. The pic above is from a book currently on Google Books. The cover itself is filled with possibilities.

Strategy number two involves people about to buy a new space and before they agree to purchase they develop plans for additional built-ins that they want included in their new home. If the builder is still on site it is probable he will welcome the opportunity to increase his return on the structure. If the original builder is not available then the buyer can contact an aftermarket retro-fitter and work out a building plan that is formalized and thus can be brought to the table with their lender. This movie shows a typical retrofit.

A third strategy has a person in their space and considering a refinance, or executing a part of a home equity loan. In both cases a set of plans and contracts for built-ins will be accepted as a bankable home improvement. At times like these, "cheap money" suggests the time is right to increase your "relatively cheap" home line of credit rather than getting killed by your credit card rates. So consider beds, closets, book cases, entertainment centers, cupboards, storage chests, shop benches, the list goes on. Built-ins are also the key to maximizing small spaces and making them functional. THINK BOAT.

Wednesday, October 7, 2009

Antiques, the new Green

Ikea has become synonymous with new house formations. Students in large numbers and "starters" finding themselves in need of furnishing and pinched for cash opt for the affordable, stylish solution. In the process IKEA has become the world's third largest consumer of wood and though IKEA suggests they are responsible, their consumption patterns are hard to discern. In Ellen Ruppel Shell's new book "Cheap: The High Cost Of Discount Culture" Ikea is taken on as the new WAL-MART.

There is an alternative that may be a little hard to get your mind around at first. A Brit with the fabulous name Nigel Worboy has formed an organization, "Antiques are Green". In the following interview he makes his case for collecting antiques being the oldest form of recycling.

There is a great variance in what constitutes an antique. I don't think one has to learn the trade to begin the process of furnishing your life with sturdy pieces that you can use for a lifetime, pass on, or sell for a profit when you no longer need them. Parents wanting to do their kids a favor might consider off loading to them a piece or two when they need it most. The three pictured items might be good places to begin. The cupboard is named a Hoosier for the company that made them and serves as a kitchen utility area for those short on cabinets. An armoire is a closet that can be moved and comes in many configurations. The farm table could become the multipurpose center of your space. Each of these pieces is guaranteed to appreciate in value and afford you the most bang for the buck in the long run.