PracticalDad Price Index – June 2016:  We Just Broke the Buck

The PracticalDad Price Index for June 2016 is completed and calculated and the results are simple.  The Total Index of a market basket consisting of 47 grocery store items again lost ground from the previous month and broke the buck, actually declining to a level below its initial start point in November 2010.  The June 2016 Total Index declined to 99.90 (November 2010 = 100) from May’s near-zero reading of 100.66.  The Food-Only Sub-index of 37 foodstuff items within the same marketbasket likewise lost ground from May’s level of 101.60 to this June’s reading of 100.24 (November 2010 = 100).

What precisely does that mean?  Simple:  It now officially costs less to buy the market basket of 47 grocery items than it did at the beginning of the survey in November 2010.  So much for Quantitative Easing.

What does it mean to break the buck?  The term comes from the money market group of mutual funds and refers to the scenario that all money market managers try desperately to avoid – when the Net Asset Value of their fund’s actual investments decreases below the $1 per share floor.  Understand that money market funds are considered to be the safest investments around since they invest their proceeds in extremely short term debt instruments, which are of such short duration that they are considered ultra-safe.  But while safe, money market funds aren’t insured by the FDIC so the managers work assiduously to ensure that their share Net Asset Values don’t break the buck and breach the $1 floor, an event with signficant psychological impact upon the fund-holders.  The last time that a fund did so was in 2008, at the height of the financial crisis and the government actually created a fund to insure and stabilize that market.  As I sat and reviewed the results, it seemed to be an appropriate term that’s applicable to situation.  The Fed’s intent with the multiple Quantitative Easing Programs was to invoke inflationary pressures and so long as they could inject liquidity into the system, it managed to create a modicum of steam to drive inflation.  But the ending of QE 3 in late October of 2014 doused the boilers and brought a deflationary return that commenced within only two months and has continued almost continuously since then.  What it took the Fed to accomplish in 49 months – with some help from real supply/demand issues in beef and dairy – has been simply reversed back to, and beyond, the original point in only 18 months.  The Fed must indeed feel like that 2008 Fund manager as they too, break the buck to a point where they don’t wish to be.

And now for the past six months of results.

 

Month Total Index Food-Only Index Spread
6/16 99.82 100.07 .25
5/16 100.66 101.60 .94
4/16 101.64 101.40 (.24)
3/16 102.86 102.85 (.01)
2/16 103.86 104.27 .41
1/16 104.54 105.25 .71

PracticalDad Price Index – May 2016:  Start Watching the Shelves

Deflation reigns.

The May installment of the PracticalDad Price Index is now ready, prices for the 47 item marketbasket gathered at three unrelated grocers, averaged and calculated.  The result?  Deflation continues as the Total Index dropped from April’s level of 101.64 to a current level in May 2016 of 100.66 (November 2010 = 100), a decrease of almost a full basis point.  When I remove the ten non-food items, the remaining 37 item Food-Only Index did increase marginally from April’s 101.40 to May’s 101.60 (November 2010 = 100).  This month’s Total Index drop was fueled by one grocer’s decision to drop the cost of a package of Enfamil formula and another’s decision to significantly drop the price of both adult and children’s store-brand ibuprofen.  Magnify these types of decisions by the untold number of prices that are on the shelves of grocers across the United States and you have a sense of what’s occurring.

There is another significant difference this month and that pertains to what I’ve noticed as to the inventory levels maintained by the grocers.  There have been occasional blurbs noted online – and I can’t verify where I’ve read them – about what might be going on with the inventory levels at retailers as people might have noticed that clothing racks suddenly appear to be more widely spaced apart than they might have been in a previous visit several months before.  Because the PracticalDad Price Index is a monitor of grocery prices instead of inventory levels, I haven’t paid explicit attention to what’s happening with the product inventory.  It’s something that I’ve begun to notice within the past years in a huh… fashion as shelves might appear to have fewer of the item in stock than previously or even missing it completely, leaving me to work with the shelving label.  But I was taken aback this month to see entire gaps in the frozen food section of one grocer as multiple products were missing in entirety from the case – and the shelves were still labelled for those products.  This observation raised a mental concern and that concern was confirmed when I visited another grocer to find a perceptible difference in the quantity of products on the shelves of the health/beauty aisle.  In this particular store, there was the typical variety of health/beauty products for sale but in far less quantity than I ever recalled seeing previously; there would be handful of an item but it would be set back against the back of the shelf and the front part of the shelf would be completely empty.  Magnify this across an entire spectrum of products in the health/beauty section and it appeared utterly barren.  When I continued through that particular store, I began to note other areas in which the product line appeared to be well-stocked but only because the amount on the shelves had been moved forward but there was very little behind it.  In other words, there was no product in depth on the shelving as I’d seen in previous months or years.

So what is the upshot?  As family incomes continue to decline and the middle-class American is stretched, this economic emaciation is beginning to move through the greater economy as grocers now appear to be far more actively culling their inventory levels to maintain their margins and profitability.  I’ve already noted that a grocer might opt to no longer carry a product because it simply isn’t profitable – two of the three grocers no longer carry cases of size 3 store-brand diapers, for example – but this is now moving beyond the individual product choice to a broader spectrum.  So when you next walk through the aisles, looking at the shelves and have a huh… moment, there’s a decent chance that it isn’t just you.

A View From The Ridge, Part 7

I’ve said before that being an engaged father is akin to hiking a heavily forested area.  The life with kids and their activities is a forest for the trees experience as the rush from one place to the next fills your vision and planner and you don’t always have the opportunity to take a moment to reflect.  But then your wooded trail comes to a ridgeline and you can suddenly see for miles, backwards to where you’ve been as well as forward to what lies ahead and you sit for a moment and take it all in.  Such was the case this weekend as Eldest – who was in middle school when I first thought of this site – graduated from college.

The benefit of arriving early to grab seats for elderly relatives was that I could look in different directions from the ridgeline.  When I looked in one direction, considering the event in terms of this website, Eldest had progressed from middle-schooler to college graduate.  Middle, the elementary school kid at the site’s inception, had arrived the previous day with his grandparents, who picked him up at a nearby train station where he’d caught a morning train from the city where he himself is now in college.  Youngest, at the outset just entering kindergarten, was now himself in middle school and en route to becoming a truly stalwart adult of honestly surprising capabilities of observation and common sense.  When the doors finally opened and I found seats that worked, my Better Half ushered in her parents and the sons followed with Boyfriend, who had come along unannounced to surprise Eldest.

In another direction from the ridge was to see things in terms of the college experience and while one was now graduating college, the youngest was still a good two years away from beginning the pathway to higher education; it will probably be a college degree given his growing skill set and inclination, but the reality is that the cost of a degree is such that it can no longer be the de facto choice, the road taken simply because it’s what everybody is expected to do when high school is finished.  My wife and I have now lived through two rounds of college solicitations – and folks, it’s fascinating to see how different the college mailings are from one kid to the next – and prospect visits, completion of the dreaded FAFSA and the excitement of the acceptances and first moves away from home.  What also crossed my mind was that the funding of college was now a family affair.  This was, for Eldest, a communal family effort as her debt-free degree was in due to multiple parts: a decent scholarship that made the difference between this particular university and a local state university; four years of hard work through summer jobs to help pay for her annual contribution to the cause; years of savings and then input into the pot by us; and a lovely piece of generosity from another elderly relative.

In another direction was the view of my own age and mortality.  It’s now more than two decades since Eldest’s birth and as she has aged, so have I.  Some years ago, a now-deceased elderly friend commented to me that in his head, he was the same guy who once served as a Marine and a firefighter and I have come to appreciate his statement.  All three of the kids have grown up knowing that their father has a physical debility and each has adapted to it through the years.  But it’s fallen most upon Youngest to help pick up the slack caused by the issue and his siblings’ college absence.  It’s a most curious coincidence that he is now the largest and strongest of any of us within the household, most capable of picking up and covering for said slack and I go to lengths to avoid abusing him because of it.  I have to admit that there was conflict between personal pride and common sense during the wait, as I considered a lengthy drive behind the wheel of a 16′ box truck with no cruise control and it was only after acknowledging to myself that I’m no longer a thirty-something young father, that I agreed to let someone else handle that aspect of the move.  I plan to be around for Youngest’s event in less than a decade but there’s a point at which you realize that it’s time to adjust the speed downwards and go for distance instead of speed.

But doors open, crowds enter and the view fades and you are once again in the forest amidst the trees, waiting for that next moment when you reach the ridge.  Maybe I should make it a point to try for the ridgeline more often.

Post-Consumer Parenting

We have many jobs and roles as parents, too many to note.  But all of these things happen to only one purpose – to raise the kids to make their way in the adult world; successfully, we hope.  Much of their success will be dependent upon their own efforts but it’s the simple truth that their efforts will be built upon the foundation that we give them.  If it’s crucial that we teach them about the great, wide world then we have to understand that the world in which we were ourselves raised has changed and that particularly goes to our economic system.  We must now purposefully buck the long-prevailing consumer-model – in which the lion’s share of American economic activity is predicated upon the typical American’s willingness to spend – as that is functionally dead.  We have to now raise our kids to both survive and live within a post-consumer system.

Post-consumer is a term typically tied to ecology and sustainability.  We see the term posted on the park benches made from recycled plastic products and on cereal boxes touting that they’ve been made from 30% recycled paper and cardboard materials.  It has come about because of the earth-friendly ecology movement that launched in the latter part of the twentieth century and the whole movement has a new-age, California, touchy-feely vibe to it.  Yet post-consumer also has a much more hard-nosed aspect to it that is intimately tied to what we’re seeing in both America and the world around us.  Remember that the words ecology and economics are at their heart related to the same thing, albeit from different angles.  Each is based upon the prefix eco-, derived ultimately from the greek oikos-, meaning household or habitat.

Ecology literally translates as the study (-ology) of our household or habitat but became synonymous with the environment in the wake of a series of widely covered environmental disasters such as the infamous incident in which an Ohio river, the Cuyahoga, caught fire in the late 1960s.  It was inconceivable to even the most common person that water could be so utterly polluted and fouled that it lost the most basic property of being able to extinguish burning debris floating upon it.  Coupled with a multitude of images of dead and befouled wildlife and adopted as a cause by the then-young and hip Boomer generation and it took on today’s evocation.  Economy is a word likewise coupled with the root of household and habitat but from a different aspect, that of how it is numbered (-nomics).  Step back from the hard-math financial aspects promoted by many economists, economics is at its heart a matter of how our resources are not only numbered but allocated and – boy howdy! – are we looking at the America of today.  Wealth gap, anyone?

Ours is at least the third generation to be raised under the consumer-driven model of the economy.  This model conceives of the average American – the consumer – as a driver for economic growth and was first proposed by macro-economists in the early twentieth century but didn’t become an economic reality until it was pushed in the years immediately following the Second World War.  The principal economic driver beforehand had been Business and Capital Investment but its collapse in the Great Depression meant that American political and economic leaders began to look elsewhere for a driver to supplement that if not outright replace it.  What made the consumer-model possible was more than just the growth of personal income via well-paying jobs; it was also that many costs previously borne by the individual were now partially borne by other sectors of the economy.  Insurance for health-care costs was becoming a standard benefit for corporations that hired many Americans.  Educational costs for the youngsters was subsidized by the state first via the GI Bill of 1944 and then subsequently through public funding of state supported colleges and universities.  Old age was no longer feared economically as there were corporate and public-sector pensions and the government now guaranteed a base minimum via Social Security.  There was now not only income, but disposable income that allowed for the things – the niceties – that were previously unaffordable to previous generations.  The wants that we’ve now been ably taught to accept as needs.

The truth is that the consumer-driven model is now functionally dead, an economic zombie shambling along and awaiting the merciful head shot that drops it, allowing it to be kicked into the gutter and out of the way.  The very factors that made it possible are either falling away as we watch or gone completely.  We’ve now seen almost an entire decade of falling family incomes and the wealth gap is increasing to levels unseen since the Gilded Age of the late 19th century.  Health insurance?  Increasingly unaffordable and shifted back to the family and individual.  Educational costs?  Disproportionately expensive and with public funding cut back, costs borne more and more by the family and youth.  Retirement?  Likewise shifted back to the individual with an increasing reliance upon self-funding via the IRA/401k.  The you can have it all mantra with which we were incubated in the consumer-model system is now replaced by a painful and simple reality.  You can’t.

This sea-change is the truth with which we have to contend and which we will have to teach our children.  It is not, however, a truth that the economic and political establishment wishes to acknowledge.  Establishment mouthpieces such as the Wall Street Journal print missives to the American public telling them that they aren’t doing their part as consumers.  Economists at the Federal Reserve publish studies about Americans not spending and slant their phrasing phrasing negatively when they state that Americans are hoarding money.  When former Federal Reserve Chairman Ben Bernanke spoke to a group of high school educators, his choice of terminology was telling.  When he referenced teens, he referred to them as students and young people; when he referenced adults however, he predominantly used the term consumer with the implication that our job is to raise our young people to be consumers.  In the days immediately following the 9/11 attacks, then-President George W. Bush even spoke to the American people and urged that they shouldn’t let the terrorists win but should instead go back out and shop.  Seriously…shop?  So obviously, spending money matters.  Questioning the consumer model is a threat to the corporate profits that are directed to a smaller and smaller cadre of executives and investors that make up the high tier of the wealthy class.  Questioning this model is a threat to the profitable tenure and security of our elected and government officials, many of whom will exit government to cushy sinecures in the private sector.  Acknowledging this will require the public will for change that is a threat to the cancerous symbiosis between the corporate and political sectors that is, at its heart, fascism.

The rise of Donald Trump and Bernie Sanders as presidential contenders is a clear sign of the public pushback.  There are commonalities at the core of each movement that ultimately lead back to renewed opportunity for the individual and most importantly, sustainable, living-wage jobs.  There are massive differences in how each candidate would hope to achieve these ends but when you cut through them, the heart of each pertains ultimately to trade, jobs and income.

This consumer-driven economic model that we’ve followed has been around for longer than the lifespan of most Americans and like anything, it will change and be replaced by something else.  That is at the heart of our present upset because nobody knows with what it should be replaced and such a real-life process is neither as sterile nor academic as it would seem when written on a page.  What the Establishment seems to want is a perpetuation of the model even though they understand that it continues the hemorrhage of the American Middle-Class until the. masses of our countrymen are reduced to a servitude of dead-end jobs and interest payments.  It’s what they know and as the saying goes, if you give a monkey a hammer, then that’s what it’s going to use.  However, that doesn’t square with the great mass of Americans who understand that something is badly amiss yet can’t precisely enunciate what it is.

So here are the takeaways.

First, the Consumer-Model economic driver of the past six-plus decades is officially dead.  It has been killed by a combination of falling incomes on one side and competing demands for that same income on the other side.

Second, the Corporate/Political Establishment has a vested interest in perpetuating this dead model.  The Corporate because it allows money to be extracted from someone else – the Consumer – and redirected to them.  The Political because of unchecked campaign finance practices and a post-political career revolving door into the lucrative corporate sector.

Third, we cannot assume that whatever replaces the consumer model is already pre-ordained.  What we are witnessing with the utterly unexpected rise of Trump and Sanders are early salvos in a contest between this Establishment and the diverse citizenry.  If the Gilded Age is any example, it will be a contest that will last for decades.  That means that we have to remove our noses from Facebook pages and begin to think in the longer term.

Fourth, parents must begin to purposefully raise their children so that they aren’t herded into a dead economic system that views them solely as prey.  We must be overt and direct in our conversations with them and we must likewise model an economic behavior of controlled consumption that is, for many of us, uncomfortably new.

We must become the first generation of Post-Consumer Parents.

PracticalDad Price Index – April 2016:  The Failure of QE

Frequently, compiling the monthly PracticalDad Price Index is less than exciting – have you ever wondered how stupid you must look when you’re on your knees checking a shelf label six inches from the floor? – and the results can be dull.  But there are times when it is exciting, and the past number of months are a case in point.  Last evening’s final calculation for April led to an audible sonuvabitch as I considered the number on the spreadsheet.  The Total Index result for the 47 item marketbasket dropped by more than a full basis point to an April level of 101.64 while the 37 foodstuff item Food-Only Sub-index declined by almost one and a half basis points to an April level of 101.40.  What does this mean?  It means that everything that the Federal Reserve has tried to achieve with three rounds of Quantitative Easing, the trillions of dollars added to the money supply and their own balance sheet in an effort to spur inflation, is being utterly wiped away in abject failure.  Unless, of course, you’re a hedge fund manager with assets in the market. 

The 47 item grocery marketbasket index began in November 2010 with a baseline index of 100 and through QE programs 2 and 3, the programs were able to induce a degree of mild inflation to offset the dread deflation.  But QE 3 ended at the end of October, 2014 and the 37 item foodstuff sub-index subsequently peaked in December, 2014 – only a month later – with a sub-index reading of 115.13 (again, November 2010 = 100).  To purchase the same 37 foodstuff items more than four years after the outset of the Index would have cost 15.33% more at the peak.  And now?  Less than a year and a half later, with no QE, that has been almost wiped away and the indices are once again back where they were in the first quarter of 2011, only months after the start of QE 2. 

Take note of one particular element of the data listed below.  The final column is labelled Spread and is literally the differential between the Total Index and Food-Only Subindex results.  For me, it’s an indication of where the activity within the marketbasket is taking place, whether the 37 foodstuff items alone (for a breakdown of the items surveyed, see here) or whether there’s more effect among the ten non-foodstuff items such as soap, ibuprofen or trash bags.  What I’ve come to find is that the foodstuff segment of the Index is more sensitive to factors than the more stable 10 item non-foodstuff segment.  Most of the rise in the Index has been fed by this more sensitive foodstuff segment and during the last months of the QE 3 program, the spread between the two was at times greater than three basis points with the Food-Only Subindex leading.  But this month is only the third time in more than 65 months of consistent pricing that the Subindex trails; food led the way as an inflationary indicator and now it leads the way as a deflationary indicator. 

It shouldn’t have been a surprise since the first part of the week brought a mailer from one of the surveyed supermarkets, which touted Thousands More Prices Just Dropped.  This market, along with the two surveyed competitors, have taken multiple steps in the past year to adjust to the economic environment of increased food stamp usage and diminished family incomes.  New suppliers have been found for their store brand offerings and cut-rate products are now sitting on the shelves for the price-conscious.  Yes, meat is still higher than it was at the outset years ago, but that kind of supply/demand imbalance brought about by decades-low herd sizes doesn’t end even remotely overnight.  It can be mitigated by factory techniques brought to the meatpacking industry and this is happening as more stores are now selling their 80% lean ground in factory-packed plastic tubes called chubs.  Yes, more temporary supply dislocations brought about by factors such as avian flu can arise, but these resolve more quickly and the products, especially eggs, are lower in price than they were.  Yes, commodities such as sugar and coffee have suffered stealth inflation so that they’re now sold in smaller containers, but even their prices have ebbed from their previous highs as the hot money of QE has ended.  But the problem of the diminished family income, further weighted by new claims upon it by higher education and healthcare costs, isn’t so easily treated.  So the grocers do everything within their power to make their products more affordable so that they can compete and this bareknuckle price competition is symptomatic of deflation…brought about by a smaller money supply amongst the general public.

Which is perversely fascinating given all of the money that’s been created by the Federal Reserve since the initial Quantitative Easing attempt began more than seven years ago.

This little datapoint of the prices at three unrelated grocery stores is fully related to the much larger issues being revealed by the chaos of the 2016 Presidential Electoral Process.  Massive amounts of money have been created out of whole cloth yet so little is reaching the general public that true deflation is being exhibited by the pricing and production behaviors of the grocers, as close to the first line of consumer spending as any line of business on the planet.  It’s this political anger, fueled by unpopular trade policies and protracted military engagements that remove living-wage jobs and detract from important public investment, that gives literal rise to the figurative middle fingers of both left and right of the political spectrum to the establishment mandarins.  Make no mistake about it, the anger from both sides is coming together as the divides are two sides of the same coin with the common element of anger directed at this government/corporate beast that we’ve allowed to be created.

So what happens to the prices going forward?  While my guess is as good as anyone else’s, the bet is that they’ll continue to decline.  Some items are more expensive than they were five and a half years ago, but there will be enough offset elsewhere that the cost of purchasing a marketbasket of the same items will actually be cheaper than they were at the outset.  Unless they either re-institute another round of QE – which would be disastrous without fundamental changes to the existing system that’s already created such divisions of wealth and class – or find a way to promote the creation of sustainable, living wage jobs, then the hemorrhaging and deflation will continue.  So, here are the indices for the past six months.

 

PracticalDad Price Index – April 2016
Month Total Index Food-Only Index Spread
4/16 101.64 101.40 (.24)
3/16 102.86 102.85 (.01)
2/16 103.86 104.27 .41
1/16 104.54 105.25 .71
12/15 104.92 106.39 1.47
11/15 104.79 105.97 1.18

Kids, Socialism and the Communist Manifesto (Really…)

The conversation occurred one evening when Middle was home from college on break.  Given the political primaries occurring shortly, it naturally pertained to politics and where we stood on the issues.  But as the time passed, the discussion widened from specific issues and candidates to one of more general political leanings and it was here that I learned that Middle was now classifying himself as a Democratic Socialist cut from the European mold.  He likewise noted that many of his peers and friends now were leaning in that general direction and it was certainly in sync with the recent article that

Driving Up the Cost of Higher Ed:  Bette and the New Educational Baseline

Before he departed for his freshman year in college, Middle and I were talking about student debt and the high cost of a college degree.  He looked at me and asked “How in the hell did this happen?”  This article is the third in a series that tries to make sense of what in the hell did happen to so disproportionately ratchet up the costs of higher education.

The cost of a degree didn’t just skyrocket willy-nilly over the course of decades, much as the shuttle Challenger didn’t just explode and the Titanic didn’t just sink.  In each instance, there were a variety of reasons that came together to set the stage for the events in question by guaranteeing that higher education now had a far more massive demand for its services than ever existed previously in American history.  In terms of the demand for higher education, the first factor was globalization and the knowledge-based economy.  The theory was that the lower-end and unpleasant manufacturing would be farmed out overseas and the Americans would, in their wisdom and foresight (and for those with Asperger’s, this is sarcasm), keep the higher-end technical manufacturing, administrative and service functions here.  The second factor – and the one that we’ll explore here – is also business-related:  starting in the 1970s and afterwards, the business community shifted the educational baseline for employment from the high school diploma to the college degree.

A reasonable part of the shift during the last quarter of the twentieth century was objective.  The baseline for academic performance – rightly or wrongly – is the SAT and since the the Golden Era of the 1960s, the average SAT scores on both the verbal and math components had dropped consistently.  There was also continuing criticism of the public school system and its apparent inability to prepare young people to compete in the workplace.  No, folks, what we discuss today has been around in one form or another for decades.  American business through the 1970s and 1980s was in the process of having its lunch eaten by the Japanese and Germans and entire industries were simply being destroyed.  Remember the textile industry?  Foreign competition was hungrier and the sense was that the former Axis powers had lost the Second World War but were well into the process of winning the peace.  Given these factors, the push was on in the business world to recruit more and more college graduates to work instead of those with potentially suspect high school diplomas.  Hey, our high schoolers might be idiots but the good ones go through the still-respected college system and are ready to roll in the workforce was the attitude.  If you are old enough to recall the stories about Ford Pintos catching fire and Chrysler employees sending cars out the factory doors with empty bottles rattling around inside the car doors, it actually made sense.  This gave the kids another four years to mature and gain a better education in preparation for the world.

But increasing global competitiveness wasn’t the only reason that businesses shifted their baselines upwards.  The other reason was simply a question of cosmetics and I was privileged to be intimately acquainted with two separate instances of cosmetic baseline changes.  The first instance was cosmetic in terms of appearance to other businesses.  My first real job was when an employer hired me as part of its first group of college-educated “professional” hires for a particular operational area.  It was the job that actually paid me enough money to allow myself to move out of the family household, where I’d lived for a year after my own college graduation and it pertained to ceded reinsurance.  You can certainly refer back to the link, but the best real-world example is that of a bookie laying off bets with other bookies so that he isn’t wiped out should that million-to-one shot actually pay off.  Many insurance policies were written with reinsurance provisions that allowed a company with a large loss to be reimbursed by other companies and it was my job, along with the others, to review all of these losses and first ascertain if a reinsurance provision existed, then determine the amount to be billed and finally to get the money back from them.  It is an arcane, technical arena of insurance and the hubs for such work are all in major cities such as New York, Los Angeles, Munich, Atlanta and London.  My hire came about because the operations director for my new employer had looked around and noticed that everyone with whom his department interacted to retrieve the monies had, at the minimum, a bachelor’s degree and in his mind, they’d be more willing to pay if they had faith in the competence of the people doing the billing.  It made sense cosmetically.  But the reality was that with adequate training, the job didn’t actually require a college degree as much as the capacity to focus and a simple willingness to learn and this was something that the majority of the existing non-college staff had in abundance.  We new hires did have to undergo two full weeks of classroom training before the director even allowed us onto the floor to shadow our non-degreed trainers and to say that it was uncomfortable was an understatement.  The demand for a degree was further fueled when these same staffers were told that if they wanted to go anywhere else within the company at or above their pay-grade, they would now require a college degree.

The second instance of a cosmetic baseline change was to demonstrate perceived competence to prospective customers, even if the job again didn’t require a college degree.  Hey, we’re better!  Our people have college degrees!  I left the reinsurance position to move to a smaller city where my better half was in school.  There was no hope of another reinsurance job but I managed to swing another hire as a commercial claims adjuster for a regional insurance carrier.  It is a mystery greater than the disappearance of Amelia Earhart that the claims manager and supervisor actually hired me since I had no actual experience doing this and simply had to learn on the spot, absorbing information and settling claims across a spectrum of insurance lines – workers’ compensation, commercial and auto liability.  But it was also another uncomfortable situation since that company had instituted a college-degree requirement for all claims adjusters.  That meant that any future hires into adjusting positions had to be college graduates and that any future promotion for an adjuster was predicated upon the completion of a degree; another increase in the aggregate demand for a degree.  Because I didn’t receive the home office training received by new hires with a degree, I was literally dependent upon the goodwill of those around me, most especially those non-degreed adjusters now locked into a position.  When one of these adjusters – Bette – asked me to help clarify her purported confusion about a liability case, I agreed to do so and then smuggled the file out of the office to study it that evening to find the appropriate response.  When I gave her my response the following morning, I passed her test.

Bette was the perfect microcosm for the debate on whether a degree was truly necessary.  A claims adjuster is the person who proverbially walks behind cleaning up after the elephant parade; the adjuster is dealing with those who have had a loss and it’s not uncommon to take undeserved heat arising from misplaced anger.  The questions that arise also beg answers that don’t come from calculators:  How do you compensate someone for damage to an arm or leg?  Does a person who is considered ugly deserve less for a scar than someone who isn’t considered ugly?  How much does someone deserve for pain and suffering?  It was Bette’s handling of a particular case that taught me a life lesson in assessing value, detail and negotiation.  Our insured store’s security had publicly and wrongly detained an African-American educator in a neighborhood store for alleged shoplifting, immediately afterwards releasing him when the manager realized his innocence.  A claim was filed for wrongful detention and the insured wanted to see it negotiated promptly so as to avoid a publicly humiliating trial.  The case was assigned to Bette and she visited the educator and his wife, departing their home with the skeleton of what became a mutually satisfactory settlement after only the first visit.  What she noticed on the visit was a variety of travel magazines on the coffee and end tables and she used that as a departure point for cordial conversation.  After they began to discuss their claim, it became the segue to a settlement when she tied a potential amount to the cost of a vacation in their dream locale.  The upshot was that the couple happily had a two week vacation for considerably less than a possible jury verdict.  This case demonstrated more than anything that the college degree was utterly irrelevant to performance of the job at hand.  There was nothing about 120 credits of academia that could have successfully concluded this case, or almost any other for that matter.  What was required for a successful career was simply native intelligence, good people skills and an acute ability to observe.

There is a time and a place for higher education.  I want my bridge-builder and aircraft designer to have a good basis in engineering, which can only come from concentrated study.  I want my Family Practitioner and medical researcher to likewise have skills that only arise from concentrated study.  But the simple reality is that we’ve allowed ourselves to be told that the only route to financial success is via a college degree and business hiring has now cast that into cement and again, the only winner is the institution of higher education.

PracticalDad Price Index – March 2016:  The Human Face of Deflation

The data is collected and calculated for the March 2016 edition of the PracticalDad Price Index and once again, the Index has declined as deflation now roars through the grocery stores.  The PracticalDad Index marketbasket consists of 47 items from a standard grocery store that are commonly purchased by a family on a budget.  These items compose the Total Index and for March 2016, the Total Index for this marketbasket was 102.86 (November 2010 = 100.00) and was down a full basis point from February’s level of 103.86.  The Food-Only Subindex is composed of the 37 foodstuff items within the basket and in March was actually less, at 102.85 (November 2010 = 100.00) and declined by a considerable 1.42 basis points from February’s Subindex reading of 104.27. 

Let’s put this into perspective.  The PracticalDad Price Index began in November 2010 as a kitchen-table project to ascertain what was actually happening to food prices on a family level.  The Federal Reserve had commenced the first of three efforts at Quantitative Easing, an untried and novel approach to kickstart economic activity by flooding the financial system with liquidity.  The QE programs were the brainchild of the then-chairman Ben Bernanke, an economics professor whose academic expertise lay in the errors of his Great Depression era predecessors in the effort to fend off the deflation that laid waste to the global economy.  It was only natural that such an untried policy approach gave rise to immense debate over it’s ultimate impact and whether it would fail, create the unicorn-like moderated inflation of 2% or tear the economy a new one that spewed a raging storm of inflation.  Yeah, good times…  But for all of the conversation about isolated items rising or falling in price, or the closely followed CPI, how would this play out in the marketbasket composed of items purchased by the common American family?  And so the PracticalDad Price Index was born. 

So in five years and trillions of dollars created and injected into the Financial system by the Federal Reserve via three separate QE programs, what has been the result?  From the period of November 2010 to November 2015, the Federal Reserve more than doubled the asset holdings on its balance sheet, seeing an increase from approximately $3 Trillion to $7 Trillion while the DJIA during the period of November 2010 to March 2016 rose by 60%, from 11124 to 17829.  The gap between the uber-wealthy and the average American increased in terms of amount of assets owned by the top .1% – that’s top one-tenth – now equals that owned by the bottom 90%.  So Ferrari and other luxury car firms sold more, and the prices taken by collector’s artwork at auction increased as well.  But that’s on the upper end of the spectrum.

What’s happened on the lower end of the spectrum is a far, far different thing.  By 2014, the most recent year for which Census Bureau figures for median household income are available, the median household income was 6.5% lower than the same category in 2007 ($53,657 vs $57,357), the last year prior to the Financial Crisis.  The number of Americans receiving SNAP benefits rose from 44 Million in December, 2010 to 45.4 Million in November, 2015.  This is the human face of deflation:  deflation isn’t just prices mechanistically declining on a grocery-basket basis, it’s the result of thousands of grocers and suppliers working to maintain sales and profitability in the face of lower incomes, competing demands and increased hunger amongst millions.  Deflation occurs by substituting lower priced brands of food from cheaper suppliers across a broad range of foodstuffs.  And if the quality has to suffer, so be it.  Deflation is not a sudden event but instead a steady grind as economic pressures sand down incomes with the result that the suppliers and producers have no choice but to lower their prices so as to maintain sales and hopefully, profitability.

When economists talk about inflation and deflation, it’s treated much as any other abstract principal and the essential humanity behind them is lost.  When I finally saw The Big Short with Middle the other week, I noted the scene in which two young hedge fund managers are in Las Vegas and break into celebration when they find that their mentor, Ben Rickert (Brad Pitt), has been able to secure the credit default swaps that will – hopefully – pay off massively when the housing market breaks.  But Rickert simply stares at them and reminds them that for all of the statistics, there are people who will suffer.  Lost homes and bankruptcies, broken families and dislocation, and the two become more grave at the reality.  And so it is with deflation.  Prices will fall, but there is a cost to it.  The human face of deflation within the PracticalDad Price Index is one of hunger and quiet desperation.  It is the face of millions of Americans requiring government assistance to put food on their tables.  It is the face of the Food Bank manager who has to once again search out donors to help replenish the shelves for those in need.  It is the face of the elementary school student who receives a backpack each Friday afternoon during the school year, filled with enough food to sustain her through the course of the weekend until she returns to school and a free lunch the following Monday.  It is in the face of the elder who has to choose whether to spend precious funds on food or medication.  It is the face of the Boy Scout who participates in an annual national food drive to replenish food banks, and whose family is possibly going to have to utilize that food in another week.

This project began out of an intellectual interest in what was occurring on a policy level.  But maintaining it for the past five years – following the same 47 items – has become more than an intellectual exercise.  It has brought an awareness of the faces within those stores and with that, a frank anger at the hubris and detachment of so many of the political and financial elite.  Listen to what is being said and the manner in which it is presented.  But most importantly, try to move beyond the language and see the effects upon the humanity which will ultimately feel the impact of the proposals.  This affects our neighbors, co-workers and classmates.  This affects us and most importantly, it affects our children.  Because God forbid that the face of the youngster looking at the stark choice is our own child.

On Being Sandwiched

          As we were, so you are.

          As we are, so you will be.

                – Sign in the crypt of the Capuchin Order, Rome, Italy

You see some odd things as you travel and one of the oddest is the crypt of the Capuchin Friars in Rome.  It is a multi-room collection of the bones – some still full skeletons – of more than 3700 Capuchin Friars and others, assembled in various displays that in some ways are morbidly artistic.  The captioned quote is on a sign in one of the rooms and serves as a graphic reminder to the tourist of the fleeting nature of life.  I saw the sign during a family vacation several years ago and noticing it served as the cherry on a thoroughly bizarre day.  But the full import was lost on me until I became sandwiched between the youngsters and an elderly parent.

For most people, life is a Bell Curve and the plateau for the total person – mental, physical, emotional – is typically reached during middle age.  When you have kids, you’re at or near the top of your game and can focus on raising them, bringing them along and preparing them for their own adulthood.  It is hard work, as the Wall Street Journal noted in a groundbreaking article some years agoseriously, when I first read the article years ago, I actually looked at the title and exclaimed “well, duh” – and when you have more than one young child, the work explodes on a seemingly exponential level.  But that work is also played out against a backdrop of anticipation, hope, love and at times, pure joy.  But there will come a time when the Bell Curve starts to slope downwards and while you are still approaching, at, or near the plateau, your own parents will start to descend that slope.  The parent’s decline can be gradual and it certainly doesn’t occur across all the phases – mental, emotional, physical – of the person.  But there can and probably will come a time when there’s a break in the elder parent’s descent and it goes beyond the capacity of one or both parents to manage it in the moment.  Falls that once would have left a bruise now leave a break and if the parent is sufficiently elderly, the break can create a cascade effect flowing further to the downside.  Middle-aged moments of forgetting what you needed from upstairs become senior moments of forgetting to turn off a gas range or even where you live when you take a walk.  These are the situations that bring the phone calls soliciting help from the elders and lead to an entirely new dimension of adulthood:  parenting your own parent.

The slang term for the situation is being sandwiched because of the pressure that’s felt from being responsible for both sides.  While it makes sense on one level, it’s also deceptive.  What’s really happening is that you’re simultaneously being stretched as the demands of each surrounding generation pull you in one direction and then in another.  If you’ve waited to have children until you’re older, then the stretch is even more pronounced as you might find yourself visiting both pediatrician and geriatrician in the same week.  Trying to juggle making an appointment for the kid with the work schedule?  Now toss in having to make an appointment for your infirm father and the tension from the stretch becomes palpable.  As the American family has gone nuclear and mobile, creating physical distance between the adult generations, the response has been a budding growth industry for assisting the elderly when the adult children are absent.  The elderly with sufficient assets can enter full-spectrum retirement communities able to meet their needs as they age; the parents can purchase a cottage and if and when the need arises, they can then shift to an apartment and later, be assured of a bed in assisted-living or skilled care.  Want to stay at home?  Purchase a chairlift for the stairs or modify the bathtub to account for increasing issues with balance.  Hire a person to come visit for periods of time to combat the cumulative effects of isolation upon the mental faculties. 

There’s a downside to this however and my wife noted it, in of all places, a commercial for Priceline.com.  The gist of the commercial was that another market segment for discount travel was for those who needed to get to elderly relatives quickly and inexpensively, because emergencies don’t allow the luxury of planning six months ahead for the best rates.  In the commercial, an elderly woman was hiring someone to do repair work and the contractor was then coaxing her out of her social security number.  That came on the heels of a recent phone conversation between my wife and her own mother, who’d related how an upset elderly neighbor had visited, frustrated that she had allowed herself to divulge her bank account information and number to an unknown person on the phone.  This isn’t to necessarily imply that all businesses oriented towards the elder market are shady, because they aren’t.  But it is a real and added concern for the adult children because they don’t want to see their parents manipulated and gulled.

There is a common factor amongst the previous two paragraphs and it’s one of which I am highly mindful as I look ahead:  assets.  We’ve predicated our family structure and society upon a model that requires assets for optimal performance.  Americans are living longer and encountering aging issues that didn’t exist before simply because people died before they could reach the point at which the issues became relevant in the aggregate.  But the American family isn’t in the same situation as it was during our grandparent’s generation.  The costs of healthcare and higher education are disproportionately higher relative to family income than two decades ago, yet the family and individual now must bear a greater burden than before…and on a family income that is, in the aggregate, declining.  The private assets simply aren’t there to support such a model for more than another generation and it’s already leading to generational warfare between the likes of AARP and the Millenials as squabbling begins for the allocation of public assets.  While raising children can bring the emotions of anticipation, hope and joy, what I honestly feel as I look forward isn’t tension, but foreboding.  On a personal level, is this something I can expect?  Debility and dementia?  Frustration and fear because I might be increasingly incapable of navigating a technological system that’s opaque to an elder American for its complexity?  Hell, I have difficulty figuring out the new smartphone already…what’s going to happen when I’m three-quarters deaf and expected to walk through an automated phone registration system for some program or another?  As my late grandmother used to say, being old ain’t for sissies.

That leads to the last aspect of being stretched.  The model for aging in America will have to change and as we grope our way forward to whatever that new model is going to be, it’s incumbent upon me to figure out how to model an appropriate behavior upon which my own children can draw as they move into adulthood.  My own parents dealt with their parents from a nuclear family’s distance of 225 miles, although one parent had a sibling nearby to her mother.  Until the bitter end, it was managed via phone calls and the occasional visit to handle business and it’s not terribly far removed from the way that many of their peers managed as well.  But the stresses of American society are such that it’s not so operative anymore and it will be better for all involved if the kids are more closely attuned to their parents’ situation, even if they aren’t necessarily living down the street.  How often can I make medical appointments?  How do I honor a parent’s desire for independence and yet assure safety for the parent and others?  What arrangements must I make if I’m responsible yet want to take a week vacation with the family?  How do I manage my own frustrations as ancient issues resurface after decades of living on my own as an adult?  What must I do to prepare so that I can be on good relations and make their own way easier as they eventually move into this role?

I’m a parameters guy.  I don’t believe that there’s any one perfect way of addressing any situation.  You determine the parameters within which you have to work and then figure out a mechanism that’s best for the given set of parameters and even then, it’s not going to be perfect.  But I’m mindful that the parameters within which our country has operated are changing and doing so rapidly and that simply is creating additional pressure because we’re now in the position of not just being sandwiched between generations, but being sandwiched between systems.

Technology, Fairness and Kids

It’s not fair!  It’s just not fair!

Almost all of us with kids have heard this phrase from their mouths at one time or another, especially if the child has a sibling.  It’s been a chronic complaint for generations of parents as the egocentric kids worry that Sib is getting more than they are, whether it’s a smartphone, an Easy-Bake oven, a Hula hoop or a Dick Tracy detective kit.  And the response of most parents is a sigh or groan and an explanation that the Sib is really not being treated preferentially.  But does this age-old situation taken on a new face?  Has the technology curve changed how we handle the concept of fairness and equity with the kids and how do we manage it?

From talking with my peers over the years, the common recollection was that most parents tried to maintain an almost mechanistic even-handedness in dealing with the kids.  Like my own parents, if one child got a real desk at 10 years of age, then the next child received the same item at the same age.  It was a realistic defense in dealing with the kvetching that comes from kids sensitive to anything that threatens their own perceived place in the world.  And if anything can drive a parent batshit crazy, it’s the constant grousing from one or more of the kids who chronically attempt to prove their point, as pointless as it may be.  My own history was one of the mechanistic even-handed sort.  My older sister got some milestone item at a specific age and when I reached that same age a few years later, I received a like milestone item.  Desk?  check.  Decent bicycle?  check.  With many of my peers, it was a similar situation because typically, a kid didn’t need a specific item until there was actually a perceptible need for it. 

While my wife and I worked with this process through the early years of our children’s lives, it has taken a decidedly different turn in the past several months because of technology, specifically laptops and smartphones.  Until a few years ago, the family line was that there would be one family computer for the kids to share and that device was located in a common area of the house.  None of the kids had laptops that could be removed to bedrooms and there were no smartphones; the word on mobile phones was that when circumstance dictated it, then a child got a cellphone.  When Eldest was fifteen years of age and traveling to a distant city for a week-long event, we got her a cellphone.  As her high school graduation gift, we footed a nice, high-end laptop that would last through college.  Several years after Eldest blazed the way, Middle got a cellphone just before he was eligible to drive.  His laptop however, was earlier since the school decreed that all students would receive free laptops for use and lo and behold, a laptop appeared years before we had planned to foot for one and household guidelines had to be revised accordingly.  When the school district redrew boundary lines for the various schools to rebalance the size of their respective student bodies, we found that Youngest would be attending middle school at the school that was the further away so he got a simple cellphone for use in case or emergency; this was at an age several years younger than his siblings.

But the push has been on for months about upgrading to a better phone and by better, I mean a smartphone.  The repeated requests have been at Youngest’s behest because his simple phone is incapable of handling the communications now used by his peers, all of whom possess one manner of smartphone or another.  As one of his buddies commented, Dude, you should get an Apple…we’re an Apple family!  We’ve found that some of his friends will text with him simply because they’re friends but he’s the only one with whom they text and all else is handled via Instagram; this means that in oversight, there have been multiple events and get-togethers from which he’s been excluded and despite subsequent apologies from his buddies, it still hurts.  This realization has led to more discussion in the household.  Should we let the fact that he’s the only one without the latest and greatest drive a family decision?  What are the new family guidelines on smartphone use?  How fair is it to the older siblings that he’s received earlier access to technology and in some instances, by years?  Because Eldest was home visiting from college over a recent weekend, she responded that it was really irrelevant now.  The communication platforms favored by the youngsters – even younger than the college crowd – has changed significantly from when she was that age less than a decade before and if it was interfering with his capability to have a healthy and active social life with his peers, then it was worth the upgrade.  To be fully equitable however, we also upgraded Middle to a smartphone and as a favor to me, my wife also got me one as well.

So technological change has altered the question of maintaining a degree of fairness amongst the children.  What we’ve seen is that the other factor which makes it more pertinent is the age differential between the various children.  If you have only a few years between the children, then the matter won’t be a potential booby-trap.  But if you’re talking anywhere around the vicinity of five or more years between the kids, then it’s liable to be more of a concern.  There are no right or wrong answers here.  But it’s worthwhile to be aware of the trip hazards as you negotiate the debate.