From Where Does The Money for Long Paid Maternity Love Come?


cropped-smallivy1.jpgI was reading an interesting commentary in Yahoo Parenting called “The Real War on Families: Why the U.S. Needs Paid Leave Now.”  It was talking about how other countries have a requirement for businesses to provide a year or more of paid time off when a family has a child and that the US should adopt this model.  Personally I think that every family that can should have one parent take a really long leave after having a child – like ten to twenty years.  I just think its very important for a child to have a parent home to care for and teach them during the early years.  Even when the child starts school and doesn’t need some one home all the time, having a parent with a flexible job so that they can stay home with the child when sick, take care of all of the things that come up that require a parent during the day, and be there for the class parties, field trips, and awards ceremonies makes things a lot easier.  Probably the best thing would be to have a parent who is able to take part-time assignments with long due dates and then work from home so that they can flex their time as needed.

Still, I’m not sure that requiring companies to provide lots of paid time off, rather than simply allowing employees to negotiate for such benefits as part of their employment package, would be a good idea.  It just seems like there could be unintended consequences of forcing companies to pay for a year or two of salary and benefits to employees who were not working during that time.  For the employer, it would mean paying for work that was not being done, plus paying someone else to fill in for the parent that was out to complete the work.  This would be a relatively small expense for a company with a thousand employees who had one out on leave at any given time, but it would really be an issue if there were several employees who ended up having children at the same time.  Certainly small businesses cannot cover the loss of three or four employees, and even large businesses would feel the strain if one to two percent of their were out and they needed to pay for the work twice and only receive it once.

Now, I love free stuff as much as the next person.  I would love to have my boss give me three months off per year of paid time, give me fantastic health insurance that paid for anything but still gave me full flexibility in the doctors I see and the medicines I take, and even pay for my gas to get to work and lunch each day.  The issue is that the money to pay for those things would need to come from somewhere.  Without something to offset these generous benefits,  I would be consuming more than I would be producing, which is an imbalance that cannot continue for very long.  I would expect to have a smaller salary, such that I would really be the one paying for those things, pay more for things since I’d now need to cover more lavish benefits for others like me, or both.  Not everyone can work for the government and force your “customers” to pay you for more than you produce under threat of jail time.

So there are several questions that arise, and I’d love to hear from people in foreign countries that have long maternity leaves required for businesses to understand how this would work.  I’d also love to hear from advocates for long paid leaves about how they think it would all work.  Specifically:

Where does the money come from?  If your country requires long paid maternity leave, do you make the same salary as someone in the US in a similar job, or do you make less, such that you’re trading salary for this benefit?  Also, do things generally cost more than they do in the US, meaning you’re paying for this benefit for other people when you shop?

For young couples, are employers reluctant to hire you?    Having the choice between a more senior person less likely to have children or a young married man or woman in prime child-bearing age, the employer might select the former to reduce the chance of needing to pay for a long maternity leave.  Do you notice this happening?

If you could be paid 10% more or have a paid one-year maternity leave, which would you take?  Having forced maternity leave makes the decision for you and those who don’t have children are penalized.  Would you rather just get paid more and then decide to take the time off unpaid, using the additional salary you received before and after the leave to make up for it?

Do people who don’t have children get ahead of those who do?  Just because you’re able to take paid time off doesn’t mean you’re not losing experience, both forgetting some of what you know and not getting the experience others are getting while you’re gone.  Do coworkers who don’t have children end up moving ahead while you’re out, and is it hard to catch up again once you return?

I’d love to hear your comments on this! Please let me know what you think, especially if you have experience in the matter.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

More Friday Night Poetry


sailboat_Ipod

The Red and Gray Ship of Bodego Bay

Once out on Bodego Bay,

There was a ship of red and gray

Which sailed from the dawn ‘til night,

Equally balanced, left and right

‘Cause some liked one side, some the other,

And one or two would man the rudder,

And so they sailed through the day

On the red and gray ship of Bodego Bay.

Now, now and then they’d take on crew,

Which, before boarding, they’d interview

About their interests, skills and past,

And then they’d gather ‘bout the mast

To take a vote on whom to hire,

And whom to leave out on the pier,

To watch them as they sailed away

On that democratic, autodidactic,

Red and gray ship of Bodego Bay.

One day after hiring crew

And sailing off into the blue

More stood to left than to right,

And though their surplus was quite slight

The Lefties all devised a plan –

The next time that they stopped to man,

They’d vote in those who liked the port,

And leave behind the other sort.

Their plan worked and as time passed

They filled the left from rail to mast,

So much the ship began to lean

And cut a path, straight and keen.

It’s speed picked up a knot or two,

And they then declared that it was true –

The left side was the better way

On the leftward leaning, port tack a-beaming,

Red and gray ship of Bodego Bay.

And so they formed the “Porty Club,”

And those on Starboard side they’d snub.

“We’re all so smart,” the Porties’d say,

“True intellectuals think this way,

‘The Port is best’ – it must be true,”

For so thought everyone they knew.

So in their bubble they would play,

In that most unusual, collectively delusional,

Red and Gray ship of Bodego Bay.

One day sailing on the bay

On a windy, wavy day

A great white wave upset the ship

And to the port she start’d to tip

The Porties realized, in their fright,

That just one mate stood to the right –

A quiet gent who kept the books –

A cold, dark panic then filled their looks.

They realized, that fateful day,

‘Fore their ship sank ‘neath the waves,

That to provide stable ballast,

One must staff both sides of the mast,

And one may not always see clear

When just simpatico folks are near.

But this they found too late that day,

On that sinking, failing, beyond bailing,

Red and Grey ship of Bodego Bay.

Are We in a Correction or a Bear Market?


dolphin

This is actually a repeat from a post I made about five years ago – the last time we saw a big correction.  Once again, however, we’re seeing people misuse the terms correction and bear market.  My readers are better than a bunch of financial reporters who just parrot the wrong definition they heard.  Here’s what the true definitions of a correction and a bear market are, so you can use the term correctly:

Please allow me to address a pet peeve of mine today.  That is the correct definition of a correction and a bear market.  It wouldn’t bother me so much if just the nightly newscasts got this wrong, but I hear people who should know better such as the Wall Street Journal getting it wrong as well.  Please refer your friends to this post and distribute it far and wide for I’d like to stop hearing people incorrectly using these terms.

First of all, the incorrect definitions.

Often on a newscast during a market downturn someone — either the anchor or the person they are interviewing — will say we’re having a correction, but have not yet entered a bear market.  They then will present the usual, incorrect definition that a correction is when the market has gone down 10%, and a bear market is when it has gone down 20%.  While it is true that the market will tend to decline more during a bear market than during a correction, the correct definition has nothing to do with percentages.  (This is like the old joke that a recession is when people are out of work, but a depression is when you’re out of work!)

To understand the correct definition, one must understand a little about charting, trends and Dow Theory.  For some basic definitions see the past post on charting: https://smallivy.wordpress.com/category/charting/ .  Corrections and bear markets have to do with what kind of trend the market is in. Specifically the long-term trend, which is found using a chart with intervals of a week making up each point in the chart.  Normally a Open-High-Low-Close chart would be used in which the opening price, high price, low price, and closing price for the week would be plotted for each point.  For an example, see the chart for Harley-Davidson during the 2009-2010 period:

http://finance.yahoo.com/q/bc?s=HOG&t=6m&l=on&z=m&q=b&c=

A stock is in an up-trend if the stock is making higher highs and higher lows, such that a straight edge can be laid on the chart and a line drawn from low to low and the stock does not cross this line.  This is known as the trend line.  Harley was in an up-trend from mid-February to mid-May of 2010, and as one can see the lows followed the trend line pretty well, such that each time the stock’s price fell to the trend line it bounced off of it and moved higher.  A down-trend is just the opposite, where the stock sees lower lows and lower highs, such that a straight edge could be used to connect the highs in a descending trend line.  A stock will be in an up-trend, a down-trend, or drawing lines (bouncing between two prices and going nowhere) at any given time.

In order for the trend to change, three things need to happen.  For an up-trend:  1) The stock’s price must break the trend line.  2) The stock must fall below the previous low, and 3) The stock must not reach the previous high.  For Harley the trend line was broken in early May, the low was broken in mid-May, and the stock failed to reach the previous high later in mid-may, so the stock has reversed from an up-trend to a down-trend (like much of the market in 2010).  One could now form a down-trend by connecting the high reached in early May to the lower high reached in mid-May.

Dow Theory looks at the Industrials (the DJIA) and the transportations (the DJ Transportation Index).  Each time both of these move down in price (one of the regular downward movements as was seen in the Harley chart) while they are in an up-trend — a Bull Market — it is called a correction.  If they both actually change from an up-trend to a down-trend, we are in a bear market.  For Harley, it was in a bull trend from February until May, with corrections about once or twice a month.  In late May 2010 it entered a bear trend and went all of the way down to $10 before correcting and turning into a bull trend.

I’ve heard that the incorrect definition came from someone one of the shows was interviewing who didn’t want to go into Dow theory, so he just gave the 10%, 20% definitions, probably in a statement like, “If it is just a correction, we may see a decline of 10% or so.  If it is a bear market it may go down 20% or more.”  Because a correction only requires one down-leg before the stock climbs to a new high, while a bear market by definition requires at least two down-legs, most bear markets will result in a decline of about twice that seen during most corrections.  Likewise, a correction of less than about 10% probably would be barely noticed, so the trader was probably just trying to get the relative magnitudes across, not knowing that his rules-of-thumb would become gospel.

Corrections can be much larger, however.  An extreme example is the crash of 1987, which now just looks like a small blip on the chart of the DJIA.

http://finance.yahoo.com/echarts?s=%5EDJI#symbol=%5EDJI;range=my;compare=

In that stunning crash the Dow Jones Industrials went from 2596 to 1938 in one day — a decline of more than 20%!  Looking at the chart, however, you’ll note there was only one leg down, the trend was never broken, and the spectacular bull market that started back in the early ’80’s under Reagan continued clear until the early 2000’s when it was finally ended by the dot-com bust.  Since that time we have been drawing lines.

So, you now know the correct definitions, so please stop spreading the incorrect ones.  Also, forward a link to this post to all of your friends to correct the mis-information.  I’ll know my quest is done when I see USA Today with the correct definition.

.

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Are You Holding An Asset from Sentimentality


OLYMPUS DIGITAL CAMERASentimentality is a powerful emotion.  My family laughed when I insisted we pass by the home I grew up in not once, but twice the last time I went back to my home city.  I’ll also swing by old apartments, schools, campsites, and other places where I spent a significant amount of time or even a memorable evening.  When I proposed to my wife, I wanted to do it on Shelter Island in San Diego at a gazebo where we had danced to music from my boombox a couple of years before.  The gazebo apparently was in disrepair and had caution tape around it — it’s actually gone now — so I got down on one knee beside it.

One issue with sentimentality is that it often causes us to keep things long after we should have let them go.  This can clutter up our homes, cause us to have two of many things, and sometimes cause us to use items long after their lifetime has expired when we could have a new, shiny one for a few dollars.  With investing, holding on to an asset through sentimentality can be devastating.

My father once told me to never fall in love with a stock.  While long-term investing is good, sometimes when we’ve owned a stock for a long time we become sentimental about the stock (or other asset).  We then become blind to the fact that the company has changed and hold a large position in a company right from the peak down to the ashes.  We also might become  so convinced that the company is good and will turn around that we’ll continue to plow money into it even as it is going under.  Despite giving me this advice, even my father fell into this trap, holding onto a company that he had seen double for years and years after a new CEO was appointed that radically changed the company and drove it into the ground.

Probably the most dangerous time where many people fall into the sentimentality trap is when there is a death.  Watch an episode of Hoarders and you’ll see that many of the people who now have paths through their homes among piles of possessions started their hoarding after a death.  They ended up keeping everything the person had in an effort to hold onto their memory.

While many people keep clothes and personal items out of sentimentality, which results in clutter and full closets, keeping assets out of sentimentality can cause financial damage.  For example, we keep our parents home and rent it out, even though we live in another state, and end up paying all kinds of money to travel to the home and deal with the issues that require us to be at the home.  We would never buy a home in another state in order to rent it, but we hold onto our parent’s home because we’re sentimental, and in doing so make a bad financial decision to have a rental property that is hard to manage and possibly a bad rental property as well.

Another thing that might happen is that a relative has a lot of shares in a stock that we end up inheriting.  Because the stock reminds us of that relative, we hold onto the stock even though it is way too much money to have in one stock.  If something goes wrong at the company, we risk losing the full value of that stock.  If we had sold instead, we could have used the money for something useful, or even invested the money so wisely so that it would pay us income for the rest of our lives.  The issue is that by having the stock, we remember that relative and we want to hold onto the stock to hold onto a part of him or her.  If we sell it and spend it, or even sell it and just add the cash to our regular portfolio, we lose that connection.

Probably the best thing to do in this situation is to still keep the money together to keep the memory, but either spend it in such a way that you can preserve the memory or invest it together in a way where you still reduce the risk.  One way to spend the money but still hold the memory is to buy something permanent with the money such as pay  in off your home, make a home upgrade, or even buy a vacation home or other luxury.  That way each time you see the item, it will remind you of the person.  If you are going to invest, you could buy a less risky single asset, such as a local rental property, or a single asset that is diversified in itself such as shares of a mutual fund.

One of the best things you can do with an inheritance such as this is create a separate asset for which you use the income for a special purpose.  For example, you could buy shares of a mutual fund and then sell off 10% of the mutual fund each year for a home improvement.  Maybe replace a floor one year, then buy a new couch the next, and so in.  In this way it is like the relative is giving you a gift each year.  As long as the amount you take out each year is modest (maybe between 5-10% from a mutual fund), the relative will keep “giving you gifts” for many years.

In our case, I received money from my Uncle David from a life insurance policy.  Rather than putting the money into our portfolio where it might get lost, I put it into an index mutual fund.  Each year we withdraw 10% and take a special vacation we call the “Uncle David Trip.”  It is not a huge amount of money, but enough for maybe a weekend at a nice hotel or even a week on the road staying in low-cost motels.  By doing this, we can share time as a family and remember my uncle while doing so.  This is much better than an holding onto an old shirt.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on investment strategies, stock picking, and other matters relevant to the investor. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

DON’T PANIC!!!!


 

Fish
Don’t Panic!  Any fan of the Hitchhiker’s Guide to the Galaxy knows that those calming words are scrolled across the face of the Hitchhiker’s guide to bring comfort to the user.  They should really be scrolled across the top of your screen when looking at your brokerage account statements this week, because panicking is the worst thing you can do when the market goes into a tail spin.
Panicking makes you sell stocks at the bottom, or try to do fancy things like selling stocks short or buying options in an effort to protect your portfolio that often just end up making you lose more money.  It’s really our nature to try to do something, but just like it is usually the best thing to let go of the wheel and take your foot off of the gas and brake when your car goes into a spin on a patch of ice, sometimes the best thing to do when investing and the market goes into a free fall is to just let things go and wait for things to settle.
Things to know about market drops:

The losses from many sell-offs will be largely or fully regained within a year.

If you look back at some of the big sell-offs, such as the 2008 fall and the 1987 drop, you’ll see that the prices of stocks had largely recovered by about a year later.  If you can simply stay put and wait, things usually get better.

The crowd is almost always wrong, so when people are selling, it might be a time to buy.

If you can add money during a fall, you can come away in better shape than you started.  You’ll probably miss the timing, so expect the market to continue to drop as you buy for a while.  This is called “trying to catch a falling knife,” which is just as tricky as it sounds, so don’t expect to catch the bottom.  Just buy in, raise some more cash, and then buy more.  Also, spread your investments around a bit since some segments of the markets will recover before others.
Even when you see sell-offs coming, figuring out exactly when they will occur is nearly impossible.
It is easy to see when the market is overvalued and ready for a fall, but that doesn’t mean it won’t continue to rise for a couple of years after that.  Accept the fact that you can’t time the market.  Buy regularly when you have many years before you need the money.  Sell and raise the cash you’ll need within a few years regardless of market conditions.
Some sell-offs are very short and then resume the climb.
Before a real sell-off to end a bull market, there may be false starts.  Sometimes stocks will fall, only to rebound when the news comes out indicating that the Fed isn’t going to raise rates or something.  If you panic and sell, you may end up buying back in at higher prices, only to see the market actually fall at that point.
Once a sell-off is complete, it will probably be the best buying opportunity you will have for years.
At the start of 2009, there were many great companies that had their share prices in the single digits that are above $50 now.  Market sell-offs are great things when you still have many years to invest.  Take advantage of big bull markets when you’re starting to get to the time in life when you’ll need the money to raise the cash you need.  Take advantage of market drops to accumulate shares when you won’t need the money for several years.
Hey, I sure don’t know it all.  Help make this site better by leaving a comment!

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Friday Night Poetry


ImNormal Cash Flowpulse Buying

In your cart:

A dozen bananas, very ripe,

A Clancy Novel, large print type,

A dozen eggs, spare cribbage pegs, some markers – blues and blacks,

A Hair ribbon set, variety pack,

A child’s car seat, detachable back,

A lobster – live, a Chia tribe, stain guarded Khaki slacks.

A car battery, ultra last,

A Grease recording, original cast,

Gold Christmas bells, red shotgun shells, unsweeted grapefruit juice,

The Friends box set, years one thru ten,

A Barbie Doll set with neutered Ken,

A Mighty Mite, some bagel bites, a tiny Chinese spruce.

For what you came you’ve quite forgotten –

You’re in the spell of Samuel Walton.

 

             farmhouse

          God Plants the Seeds

God plants the seeds, and I help them grow;

I water them weekly and tend every row.

The seedlings I shelter ‘til the weather gets warm;

I block wind and hard rains, and protect them from harm.

As they age I support them and help them grow tall;

I keep out the weeds, prop them up when they fall.

As they flower and fruit, then they need my help less,

But I’ll be there to help them through drought and through stress.

I tend them from Spring, ‘til the first Winter’s snow,

As I wait for the harvest, and my turn to go.

Going to Bars to Drink is Foolish


 

MushroomsMoney had an article called Here’s How Rich You’d Be if You Stopped Drinking that peaked my interest last weekend.  I thought that maybe they were going to look at what investing the cost of what people are spending on alcohol would do over your lifetime.  Instead they focused on the cost of drinks and food at bars and suggested things like drinking and eating before you go out to the bars and then only getting a drink or two.  I’m not sure telling people to drink before they go out and drink more is such a good idea.  Really, having more than one or two drinks in public is not a good idea at anytime since it leads to bad decisions and possibly the police station as either an inmate or a victim.

What the article really should have said is that using bars to drink is a dumb idea.  If you walk into a bar and drink for the sole purpose of getting a drink, you’re being financially foolish.  You can get the same alcohol that they are serving for maybe a quarter of the price at the store.  You can make your own wine or beer for about one eighth of the cost of a drink at a bar.

If you go to a bar, you are paying for the atmosphere.  You should be there to watch the game on a TV you don’t have at home or with a group of friends.  You should be there to spend some time with a friend or a date.  You should be there to get drinks you can’t get from the corner store (for example, brew houses).  You should be there for entertainment such as live music.  It should be worth your money.

Given how many sad, pathetic bars there are in the world, I’m guessing that many people don’t follow this advice.  There are too many dirty, dingy, run-down bars with nothing but some tables and some neon that are still in business.  Hopefully people will start demanding more from bars by voting with their pocketbooks.  Coffee at coffee houses is way overpriced as well, but at least they are able to make coffee drinks you can’t buy at the corner store or make at home.  Why should bars be any different?

Comments?  Questions? Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get notified of new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.