When is investing not investing?

Most everyone is affected by the recent financial meltdown in the stock market and the economy in general. Millions have seen their investments in their retirement plans lose a huge part of their value and they are justifiably worried.

Since you have no influence on stock prices once you purchase them, are they really investments or should it more accurately be called gambling?

Some definitions of gambling include:

1) anything involving risk or uncertainty

2) take a risk in the hope of a favorable outcome

This sounds much more like what we do when we "invest" in the stock market. In fact when we buy a house with the goal of making a profit when we sell it aren't we doing the same thing? Indeed, we are gambling.

On the other hand if one buys a house to live in while raising a family or to enjoy retirement, we are more like the business owner who invests in his business. We too, maintain value by keeping our home well cared for and updated. We even may increase its value and if and when we decide to sell the home it may even be at a profit. So much the better.

But if our home is worth a little more or even less when it comes time to sell, have we not enjoyed our 'investment' all the years we have owned it and lived in it? This is a true investment.

We need to rethink our notions of investments and gambling. When we buy stocks and lose money on them we need to understand that we have lost a gamble; we made a bet and lost. If the price goes up our bet has paid off. It's a gamble not an investment. Our so called investment is actually a crap shoot and the most we can expect is that the dice aren't loaded.

If our pension plans 'invest' in the market and lose value we can be disappointed but don't whine about it. We lost a bet. If you don't want risk, don't gamble.

It's an ugly truth that transparency, oversight and basic honesty have been in short supply, and those in charge on Wall Street and in Congress need to be taken behind the woodshed. Despicable, greedy, dishonest behavior needs to be stopped, and punished and soon.

But the bottom line is that our economy has been built on gambling, and as any good gambler knows, you have to "know when to hold 'em and know when to fold 'em".

And let's not be stupid - always keep some 'real' money in the bank for emergencies. (preferably a bank that isn't getting a bailout)

But maybe it's just me.

Did you see this?

Did you catch this in President Obama's inaugural on Tuesday?

"It is the. . . selflessness of workers who would rather cut their hours than see a friend lose a job that sees us through our darkest hours."

When I recently suggested in a letter to the editor that teachers' union concessions would help ordinary Rhode Islanders, not corporate executives and shareholders, to weather this financial storm, I was trounced by union members suggesting I was just anti-union.

Why aren't they criticizing President Obama?

Some good news for Rhode Islanders?

Tucked away on page B3 of the Projo, January 21, 2009, was an article, "Supreme court to hear ethics appeal", which is certainly good news for Rhode Island citizens. In fact the Supreme Court decision may have a greater impact on us than the hugely important Inauguration of President Obama.

I hope that all Rhode Islander follow this case, which can determine whether or not RI lawmakers can be held to some standard of ethical behavior instead of ignoring the people. The current "speech in debate" clause is an impediment to honest and just government.

Politics v Ethics

Robert Benson Jr., in his Providence Journal, Jan. 2, Commentary, "Legislators can ignore ethics law" asks "Where's the outrage and protest?"

His concerns are real and frightening for every Rhode Islander no matter what party. Article VI, Section 5 of our state constitution says: "For any speech in debate, in any house, no member shall be questioned in any other place." Judge Francis Darigan has ruled that this provision means that a State Senator can not be prosecuted by the State Ethics Commission for his actions (read; votes) in the General Assembly.

The response in the local blogs to this piece was about whether more Democrats than Rebublicans were being held up as bad examples. This serves only to deflect attention away from an extremely important and serious decision by a Superior Court judge and turns it into nothing more than partisan posturing.

That's not what is important here. This is not a political issue, it's an ethics issue.

If current language in the Constitution insulates Senators or Representatives from charges of ethics violations, then that language must be changed, either by changing the Constitution itself or a challenge before the Supreme Court. As it stands now, this makes a mockery of our ethics laws.

Mr. Benson is right. Every one of us should be outraged.

Private v Public Unions

I believe our best teachers are underpaid, yes, underpaid, and that our very high per pupil costs come from other than teacher salaries. This must be remembered when we try to address a very serious problem facing cities and towns.

It is no secret that our cities and towns are struggling to pay for services and also stay within the tax levy increase limits. As revenues from the state are lower than last year, towns need to replace that lost revenue. One easy answer is to increase property taxes on a population that is already paying among the highest in the country. This will not sit well.

Another choice is to look for cost savings, and unions, especially teachers' unions, will surely be asked to re-negotiate contracts. This of course, will be met with resistance. But I hope everyone will keep the following in mind in these tough times.

When private sector unions make concessions, their sacrifices will go to companies whose executives often make millions in salaries and to shareholders whose dividends can benefit from those concessions.

When a public sector union makes concessions the beneficiaries are not high priced executives but the people, the homeowners, the citizens of Rhode Island. That is an important difference.

I know this will not make me very popular in some circles but I believe it needs to be said. It's not us against them. We have to work together and we'll get through this.

Let Teachers Teach

In the Commentary in the Dec. 14, Sunday Journal, "Great Public schools belong in R.I." by Daniel McKee, mayor of Cumberland, he makes some excellent points, first and foremost, that public education is arguably the most important issue we face both locally and nationally.

I think most people will agree that our students are our most valuable and precious treasure and that quality education is our most important goal.

The article suggests that the answer is to bring in new education models such as Mayoral Academies, which claim to consistently outperform Rhode Island's public schools by wide margins.

We should do whatever we can to improve student performance. But is bypassing the existing public school system the best, most cost efficient way? Would it not be better to utilize the existing teacher and educator expertise and let them work with others to develop and implement the changes needed to reach the goal of academic excellence?

However, I do see one enormous obstacle - the Teachers' Contract.

In North Kingstown's contract there are 26 Titles and 2 Appendices. All of them deal in some fashion with the obligations of the schools to the teachers. Not one paragraph specifies the obligation of the teachers to student performance.

There are no requirements for example, that student performance be improved in any measurable way. There are however four pages specifying limiting class size and teaching hours. There are eleven pages regarding sick leave and absences but not one defining teacher responsibilities and performance.

The entire contract is weighted heavily in favor of teachers' wishes ignoring the school department, students or taxpayers. At first blush it is easy to blame the unions for this lopsided document but in truth the unions are doing their job. Their first obligation is to the teachers, despite their frequent battle cry, "It's for the kids". That is simply a ruse; it's for the teachers and that's what they have been hired to do.

It's the School Committee that has failed in its obligation to provide the best education for our children and has simply bowed to union demands whenever "for the kids" conflicts with "for the teachers". For example, if the School Committee were to close a school due to drop in enrollment saving the cost of fifteen teachers, they could only eliminate ten because the contract sets the number to ten. We'd have to pay for five unnecessary teachers. "For the Kids"? Hardly. I'll bet if teachers were able to work with planners without union influence they could come up with an outline that would be far better for both the taxpayers and the children.

The Town Council should establish an Education Panel to outline needs and goals and, together with the School Committee, set forth an agenda which would include, at minimum, major consolidations, reduction of and restructuring of the bureaucracy, pay increases for the better teachers and the introduction of merit pay.

Before adding another educational system give the current system one year to satisfy that goal. If it fails then we can move on.

The Elephant in the Room

I recall some months ago when the automakers requested money, some congressmen wondered out loud whether it was a good idea to send money to help the very people that were responsible for the auto manufacturers' problems.

Watching the hearings over the past few days no one has had the guts to make this a condition for the 'bailout'. They were outraged then but now they seem afraid to require that the CEO's hand over control to someone else who will change the direction of the industry as a condition for receiving $Billions of our money.

Just an observation.

Where's the Suggestion Box?

On Sunday, November 23, in the Providence Journal, John Kostrzewa wrote a sobering assessment of the financial challenges facing Rhode Island. My friends, it's more than serious. Mr. Kostrzewa ends with: "Taxpayers can leave it to the elected officials, or they can push for more grass roots influence on how much taxes are collected and how they are spent."

Good advice but just how does the average reader do this? You, yes you who are reading this now, must make a phone call, write a letter, or send an email to lawmakers and the Governor. The 'suggestion box' is the contact information at the State's website's Member Contacts which will let you find whom you're looking for. Use it. And letters to the editor are useful as well.

The truth is that nothing will change unless lawmakers feel pressure. Our responsibility is to assure they feel the pressure from the citizenry at least equal to the pressure they feel from other interest groups.

Talk to friends and define your feelings about what's going on. Compose a position on the issues that matter to you and send this to your legislators. The more names the better.

IT'S NOT UP TO "THEM". IT'S UP TO US.

The Subprime Mess and Property Taxes

Maybe it doesn't seem like there is a connection between the worldwide financial meltdown and our property taxes but both suffer from the same delusion.

The sub-prime mortgage meltdown has been blamed for the worst financial crash since the great depression. What happened? In a word, people were treating the market values of homes as if they were real money. When the market said a home was worth umpteen dollars people acted as if they really had umpteen dollars. But the dollar value was in fact NOT REAL. The value of a home, or other property, becomes real only when a buyer is willing to pay you umpteen dollars - only then is it worth it.

The market driven housing bubble continued to expand and people continued to act as if those inflated prices were real cash and they borrowed against those values. When reality set in and housing prices began to fall back, people panicked and began selling, further driving down prices. The cascade was devastating to the entire financial structure as people began to understand that they were spending an illusion.

Property taxes are much the same. Property owners pay their taxes on the same illusion that drove the housing bubble - the market price of homes. The bizarre result after revaluations is that about a third of property owners pay LOWER taxes. That is not a misprint, I said lower! These decreases are paid for by the rest whose market values have increased more than the tax levy. Some owners saw their taxes double! We are being taxed on an illusion.

In times such as these it would not be surprising that the more modestly valued homes might even see their values increase more than the high priced homes and the results would devastate moderate income people. This entire system of property taxes suffers from the same illusion as the sub-prime mortgage frenzy. Isn't it time to change the system and distribute the property tax burden in a fair manner?

Please see our website for a different way to pay our tax levies in a fair and reasonable manner and maybe even attract new businesses at the same time. http://righttax.org

From Mutually Assured Destruction to Mutually Assured Defense

The thought occurs to me that the most effective way to accomplish the goal of reducing the threat of missile attacks would be to sell our BMDS (Ballistic Missile Defense Strategy) technology to any country that wanted it, especially unfriendly nations who see missile defense as a threat to their security and a provocative act on the part of the US.

In a reversal of the MAD (Mutually Assured Destruction) philosophy of the Cold War of the 60's I believe this would reduce the emphasis on building up nuclear arsenals and missiles on all sides. If the technology were effective enough it would make the possession of such weapons moot and an unnecessary expense for all nations.

Selling and installing this technology world wide might even be a source of revenue for the United States.