Since nobody’s talking yet about the Coco Crisp trade, I will

Dave Farquhar Baseball

Today the Royals traded a relief pitcher to the Boston Red Sox for center fielder Coco Crisp.

Crisp is a bit overrated, as most Boston players are, but I have to say I like this trade on several levels.For one, Crisp may or may not be a gold glove-caliber outfielder, but the Royals of recent years have had poor defense. The great Royals teams were built on George Brett’s bat, good defense, good pitching, and speed.

Crisp and David DeJesus give the Royals the best outfield defense they’ve had since the days when Johnny Damon and Carlos Beltran patrolled the outfield. (Yes, the Royals had those two at the same time. Yes, they were good then. No, the Royals weren’t, because they didn’t have any pitching.)

But beyond that, Crisp can hit around .270 and steal 20 bases. It’s been years since they’ve had anyone who could do that. Crisp may even pop 15 home runs, which would be welcome, but not necessary. Maybe outside the limelight of Boston, he’s the guy who hit .300 with 15 home runs in Cleveland. But even the guy who hit .264 in 2006 to Boston’s disappointment is much better than their other options.

The knock on Crisp is that he doesn’t draw a lot of walks, but his on base percentage is close to league average. League-average is a huge improvement for the Royals, so there’s no reason not to take that.

The Royals traded a quality relief pitcher to get him, but relief pitchers are fickle. Some have long careers, some have one good year and then turn into batting practice pitchers. Ramon Ramirez looks like he should be a good one, but he’s only had one good year, so he’s not a known quantity.

But Ramirez is replaceable. The Royals have a pretty good track record of scouting and developing relief pitchers. They also have a pretty good track record of trading them at the right time. Meanwhile, they’re terrible at developing outfielders. Chances are the Royals can find a suitable replacement for Ramon Ramirez; there’s nobody in the pipeline who could outplay Crisp. So from that perspective, it makes sense.

Crisp isn’t Carlos Beltran, but arguably he’s a more valuable player than Johnny Damon would be at this stage in his career. His presence in the lineup means the Royals score more runs, and maybe with him stirring stuff up on the bases, he makes some of his teammates better hitters, which leads to even more runs.

Honestly, when I heard about this trade I was surprised. I didn’t think the Royals could get someone like Crisp this cheaply.

The Royals have traded two of their best middle relievers for bats now, but I’m more confident in their ability to locate replacements for those two pitchers than I am in their ability to locate an everyday second baseman somewhere in the system. Quality relief pitchers are a lot more useful when they have leads to protect.

What I\’ve learned about working with Marmoleum click tiles

Dave Farquhar General , , ,

After spending the better part of two weekends on it, the kitchen floor is exactly six tiles away from being complete.

I guess this is as good of a time as any to share what I’ve learned.If you mark the tiles with pencil, the pencil marks come off really easily with a little soap and water. This is good, because I don’t think I ever got my measurements right the first time.

The later at night it gets, the more likely I am to measure something wrong. I cut two tiles close to the counters too short. I can cover up the gap, but I shouldn’t have needed to. Note to self: Check measurements at least one more time than seems necessary.

T-rail is ridiculously expensive. I’m not going to pay $25 apiece for the t-rail I need for the two doors. I’ll buy a couple of $3 3-foot lengths of hobby wood, then I’ll stop off at the hobby shop for a piece of 1/4″ square basswood if I can’t find something similar at the big box store (I’ll probably need a dollar’s worth). I’ll glue and clamp them together, then finish it how I like, and probably have something better for 1/6 the cost.

Quarter round is ridiculously expensive too. The original baseboards from my kitchen are in the basement. A previous owner reused some of it in place of quarter round the last time the kitchen floor was redone, but there’s plenty left. I’ll use some of that instead.

Use at least a 25 TPI blade to cut the tiles. Tom Gatermann came over yesterday to help me cut some tiles. He found that coarse blades just don’t cut the tile as quickly or easily as a fine blade does.

Using his bandsaw, I can cut a tile in about five minutes, even for weird cuts like around doors. I think Tom might have taken a bit longer than that sometimes, but his cuts are a lot straighter than mine too. But that’s the nice thing about click tiles–the cuts will be hiding under quarter round or baseboards or some other kind of moulding.

Don’t leave difficult spots in the middle of the room, like around your stove, until later. It’s really hard to come back and click tiles into place when the surrounding tiles are already down. You can do it, but it takes a lot longer, and your chances of leaving a gap somewhere are a lot higher.

Get a pullbar for laminate floors, and use it to slam the tiles together. You can get one for about $7 at a big-box store, and it’ll save you hours. It might be the best seven bucks I ever spent.

Most of the time, the pullbar is the right tool to put tiles together. Occasionally, you’ll need to bang the tiles with a piece of 2×4 to get them to move together. It seems to me that about a 10-inch length of 2×4 is about perfect for those cases.

This stuff never should have fallen out of fashion. I guess linoleum fell out of favor in the 1960s and 1970s because vinyl offered a greater variety of colors and patterns, but that’s a shame because it’s wonderful stuff. It’s extremely easy to clean. It’s durable and to an extent, it’s self-healing. I’ve watched it heal itself after minor mishaps. Linoleum is expensive, and the Marmoleum click tiles border on ridiculously expensive, but it will outlast pretty much anything else you can put down and it won’t drive you nuts trying to keep it clean.

And now I know why kitchens are expensive. Everything that goes into them is expensive, and you end up needing a lot of little things. Some of these things are easy enough to make yourself–transition pieces for other types of flooring come to mind, but that requires some time and at least a little skill. So you’ll either pay for material, or you’ll spend more time to save some money.

Use your coupons!

Dave Farquhar Saving money

So on Friday, I went to the local Walgreen Drug (no, I won’t misuse an apostrophe) to buy Zicam to ward off a cold. I spent $20, and they gave me a $2 coupon. I went again today, spent another $20 on similar products, and got another $2 coupon. And yesterday, Target sent us a coupon for $10 off a $100 purchase.

It seems stores are trying to lure us in. If you’re smart, that means savings.In the case of Walgreen Drug, we’ll use the coupons on non-FSA stuff. The chain isn’t exactly known for low prices on consumer staples, but if you can get $2 off with few strings attached, then it’s worth it. Especially if you have to go there anyway because it’s cold season.

In the case of Target, we made ourselves a list of things we needed and stuck to it. We bought two cans of formula instead of one (we’ll use it), and stuff like furnace filters that we’ll use eventually anyway, and tracked it as we went along. It wasn’t long at all before we had $110 worth in the cart–a bit more than we needed, but that’s OK. Everything we bought was either on sale, or cheaper at Target than wherever else we’d buy it.

We got a coupon from either Petco or Petsmart this week too. So we’ll use that to go stock up on dog food–once again, something we’re going to need eventually anyway, so there’s no harm in buying three bags if that’s what’s necessary to get the coupon to kick in.

So we saved ourselves some money at Target. And we’ll save a little at two other stores too in the near future.

It’s not a lot, but every dime counts. Especially in this economy. So if the stores near you are sending you coupons (or printing them for you at the register), use them. Be smart about it, but use them.

So what now?

Dave Farquhar Politics , , , ,

The Republican Revolution is over. What went wrong?

Before I try to answer that question, a few words by Dr. Donald Prahlow, my high school history instructor, seem pertinent. In 1992 when Bill Clinton took the White House, Dr. Prahlow stood in front of a classroom full of young, mostly right-leaning students and tried to make sense of what happened. "As a historian, I have to say the best thing that can happen, when one political party has been in power for a long time, is to hand power over to the other one." He went on to give some examples. The most important thing I took from his brief aside before getting onto the day’s regularly scheduled lecture was that no president in history has ever been able to wreck the country irreparably in four or even eight years.

Not Richard Nixon. Not Warren G. Harding. Not Lyndon B. Johnson. Despite my strong feelings on that day in 1992, not William Jefferson Clinton. And regardless of your feelings on the two men, neither George W. Bush nor Barack Obama will be the first.

And I believe that what went wrong with the Republican Revolution, which started with the stunning 1994 comeback in both houses of Congress, is largely the neoconservative movement and George W. Bush.

What’s sad is that the end all started with so much potential. I vividly remember Bill Clinton, interviewed on the evening news on either ABC, NBC or CBS around 2002 or 2003 talking about Bush. He said he thought Bush would be very successful early on, because of two words that are largely forgotten today: compassionate conservatism. I’m paraphrasing, but basically Clinton said that if Bush could deliver Democratic-like social programs while delivering lower taxes, it would be almost impossible for the Democratic party to compete with that.

Unfortunately, nothing ever came of that. Rather than being remembered as the president who popularized compassionate conservatism, we’ll remember the image of Bush flying over New Orleans after Hurricane Katrina, looking out of touch and perhaps a bit over his head. Or we’ll remember the bothced recovery effort, which was long on excuses but painfully short on results.

The other Bush promise that never turned into anything was his bipartisanship. As governor of Texas, he had the reputation for reaching out to Democrats and working with them. Unfortunately, as president, we saw a man with little tolerance for anyone who disagreed with him, even if they were members of his own party.

In all fairness, it’s difficult to know how much of what we saw was Bush, and how much of it really was Dick Cheney. And that’s another failing of the Bush presidency: He failed to stand up to Cheney when necessary and put him in his place. The ticket read Bush-Cheney, but
often it seemed the reality was Cheney-Bush.

I don’t think I need to even bring up the wars.

Ultimately, all that came back to bite John McCain. The John McCain who stood up to Bush in 2000 was largely absent in 2008. It’s entirely possible that voters would have punished McCain for the sins of Bush no matter what, but ultimately, McCain didn’t do enough to distance himself from his predecessor. Certainly he risked alienating the 28% of the population who approved of Bush in doing so, but he fell into the same trap the Democrats fell into repeatedly in the 1990s when trying to appease the far left fringes of its party. As long as McCain managed to stay to the right of the Democrats, the minority of the population who favored Bush wasn’t going to abandon him and vote for Obama. McCain needed to concentrate on getting 23% from the center of the spectrum.

Meanwhile, while McCain was failing to distance himself enough from Bush (and was showing he was perfectly capable of being out of touch), Obama was showing up on the Sunday morning political shows, demonstrating that he read things, including newspapers, including the op-ed pages, including the parts written by people he didn’t always agree with. After 8 years of an administration whose idea of keeping informed was listening to Rush Limbaugh and watching Fox News, he probably seemed refreshing.

So what’s next?

The comeback doesn’t have to take as long this time. Remember, the only thing less popular than Bush right now is the Democrat-controlled Congress. They get a pass right now because they’re mostly unpopular for not standing up to Bush. But if the new, bigger Democratic majority fails to get desired results, there’s no reason to believe the electorate will be so sympathetic in two years.

So the Republican party needs to be ready. It has until the 2010 primaries to find its soul, to figure out what it stands for.

For their sake and everyone else’s, I hope it involves smaller and more efficient government and taking the Constitution in its entirety seriously.

And in the meantime, we have a man in the White House who embodies the American Dream and who personifies the result of decades of struggle. Whatever you think of his politics, he will inspire a generation or more, and a lot of good can come from that.

What to the rich do with their money?

Dave Farquhar Politics , , ,

Charlie brought up the question of what the rich do with their money in response to the theory of trickle-down economics. This seems timely, as one of my coworkers and I talked trickle-down just yesterday.The theory is often maligned, and usually by people who don’t understand it very well. But frankly its proponents don’t always understand it either.

The classic justification is that if you tax the rich less, they’ll use that savings to buy things like boats and luxury cars, creating jobs for people who build and sell things like boats and luxury cars, and for the suppliers of those companies. And the argument is that this economic activity spreads the wealth better than the government taxing and redistributing wealth, due to government overhead.

At least that’s the simple, back-of-a-napkin explanation you’re likely to hear from a conservative activist when you ask the question. It’s the one I’ve always heard.

The theory is more complicated than that. For most of the 20th century, the fabulously rich were taxed at extremely high rates–70 or even 90 percent. The economist Arthur Laffer argued that if one taxed the rich at a lower rate, then tax revenue would actually increase–the reason being that someone who had the ability to make $10 million probably also had the ability to make more than that, but would probably be more willing to try to make more if the government weren’t taking 90% of the spoils.

Ronald Reagan lowered that upper tax rate to 50%. And sure enough, revenue went up, because 50% of $20 million is more than 90% of $10 million. So both the entrepreneur and the government won.

But contrary to what the modern Republican party seems to think, Laffer didn’t argue that the less you taxed, the more revenue would increase. Tax revenue is a more like a bell curve–tax at 0%, and revenue will be $0. Likewise, take 100%, and revenue will be $0, because nobody will work (or they’ll hide it if they do). The question is what percentage puts tax revenue at the top of the bell curve. I believe that history says it’s somewhere around 38%. Ironically, it was a Democrat who demonstrated that rate. (Hint: it wasn’t Jimmy Carter.)

And when Democrats malign trickle-down economics, they ignore one important fact: When Reagan cut taxes, revenue did rise–a lot. And when Bush I cut them further, it rose even more. The problem was that spending in Washington outpaced revenue growth during the 1980s and most of the 1990s. In the waning years of Clinton’s presidency, revenue finally caught up with spending, and for two years in a row there was actually a small surplus.

And in all fairness to Bush II, that’s been the biggest problem with his economic policy the past 8 years. Revenue went down slightly when he cut the highest tax bracket. But the bigger problem is that Washington spending increased beyond Reagan levels. Had spending stayed in check, we might still be talking about small deficits and occasional surpluses. Instead, he kept taxes low while signing budgets that made Clinton look like a fiscal conservative.

But that’s enough about trickle-down economics. Let’s talk about the rich.

A little over three years ago, I was walking out to my car after work when a couple of well-dressed men approached me and asked for a jump start. I pulled my Honda up to their rental luxury car, we hooked up the cables, got the car started, and they went on their way.

I now believe one of the men that day was the man who soon became the CEO of that company. I won’t name him or the company. Perhaps he was interviewing for the job that day. Not long afterward, he got the job, and as a result of one of his earliest decisions, I lost mine.

So I did a favor for a guy who made $4.81 million last year, and the thanks I got was unemployment.

The soak-the-rich attitude comes from stories like that. When we think of the rich, we think of CEOs who take over large, failing companies, get rid of lots of people, bring in their people, and in the end the companies don’t really get much better, but in the meantime they pocket a few million dollars every year. And when they lose their jobs, they get a golden parachute of a few million more.

But the majority of the rich aren’t like that. They’re more like the owner of the next company I worked for. It was a small consulting company, but it was smaller when he bought it. He bought it during a dark time in its history, brought in some good people, and together they worked hard to make the company profitable again.

In 2006, not long after I met him, he sold the company to a much larger competitor and turned a nice profit for himself. They only retained him for a short time, but he’s not hurting for money. Shrewdly, he didn’t sell them the building, so the company is still paying him rent every month.

Nobody knows what his future plans are, but some people who know him better than I do believe he’ll start another company at some point.

Read books like The Millionaire Next Door, and you’ll find the majority of millionaires are unassuming people who park their Ford Crown Victorias in front of ranch-style houses every night. They’re often self-employed, and usually made their first million by saving a lot and investing in themselves.

I have little respect for the first CEO I talked about, because he has his job mostly because he looks and acts the part. He dresses well, looks like a movie star, and when he talks, he can convince you he cares. But let’s talk qualifications. During his first year on the job, his company’s shares were worth about $1.20 apiece. Now they’re worth 42 cents per share and the company is $1 billion deeper in debt. That’s not all his fault, but it’s hard to argue that he’s done much to turn the company around, and it’s even harder to argue that those results are worth $4.81 million a year. I would think they could outsource his job to India and get comparable results for $100,000 a year and bank the savings.

At least they’d save more than they saved by outsourcing people like me.

I have a lot of respect for my other former employer, because he took a bad situation and turned it around, and he got the job because he bought a company with his own money. He invested his time, energy, and money in it, and besides making himself wealthier, he also created jobs–about 200 of them at his company’s peak–including one for a 31-year-old newlywed who was down on his luck and had worked for two other employers that same year.

The problem with trying to use tax policy to soak people like the first guy I mentioned is that it’s very difficult to do without also hurting the second one I mentioned. And if tax policy hurts him, he might as well just stay retired and play golf or whatever he enjoys doing, rather than starting a new company and making some new jobs for people.

And frankly I’m not sure what we gain when we make people like the first guy pay. I guess we feel better for a while. But the main thing we do is motivate him to hire the very best accountants and lawyers to find and exploit every loophole they can. So he still keeps most of his money, the government gets less than it projected, and the masses are blissfully ignorant, thinking they got some fat cat to finally give up his fair share, whatever that means, but they never see any tangible benefit.

Outlandish CEO pay and incestuous boards of directors loaded with conflicts of interest that perpetuate these outlandish compensation packages really are a separate issue, and the tax code isn’t the appropriate place to try to fix it.

But back to that tax code, and the second guy–the one worth worrying about. For what it’s worth, neither of the two major presidential candidates is likely to do anything that would singlehandedly persuade the second guy to stay retired. A return to Reagan’s or Carter’s income tax levels might, but neither candidate is proposing something like that. The difference between the two is much narrower than either of them want the rest of us to think, and their political rhetoric reflects that.

When it makes sense to cheat on the envelope system

Dave Farquhar Saving money ,

So I’m only a week into the family budget and I’ve already cheated on it. Look inside the envelope containing my lunch money, and you’ll find $8, a few loose coins, and an I.O.U. for $30.

I can explain. Really.For the last couple of years, lunch has usually been a Healthy Choice frozen meal. They’re easy to find on sale, they heat up quickly, they have a pretty wide selection, and there’s practically no work ahead of time involved with them. Unfortunately, I found a lot of them have hydrogenated oils and high fructose corn syrup in them. The only thing healthy about those is the calorie count.

Not wanting to slowly poison myself, my wife went looking for an alternative. She found one: Kahiki, a line of Asian-inspired frozen meals. They’re made with natural ingredients and usually weigh in at a reasonable 300-400 calories. There’s just one problem: They’re a lot more expensive than Healthy Choice.

This weekend my wife and son were away, so I had to fend for myself. I wandered into the nearest grocery store Saturday night looking for something to eat when I spotted a display of Kahiki on sale at two for $6. I bought four.

Later that night I told my wife, and she reminded me that each of those packages has a 55-cent coupon in it. That drops the price to $2.45, a very appealing price point for a Scottish miser like me. So I cut out the coupons, went to the store, and bought four more. I then proceeded to walk out to the car, cut out those four coupons, walk back into the store, and use the fresh coupons to buy four more. Then I did it all again. Pretty soon I could cut the coupon out of the package without even opening it by following landmarks on the outside.

If anything, I felt guilty only buying $30 worth. At $2.45 a pop, I can come in $11 under budget for next month. And if Costco gets another shipment of the Thai noodles I like any time soon, I can eat those a couple of times a week at $1.09 a pop and save even more.

Maybe I’ll buy another four late in the week. I already have the coupons cut out.

R.I.P.? The American Dream

Dave Farquhar Society , , , , , ,

Nearly 20 years ago, as I sat in a high school English class, the teacher told us all about the American Dream. And then she said there was one generation that wasn’t going to experience that dream, and she pointed at us.

As grim as things look right now, I can look around myself and see people proving Mrs. Susan Collins wrong, and that makes me happy.I guess she read somewhere that the U.S. economy had basically peaked. I vaguely remember reading something like that sometime in the late 1980s. It would have been just like my Dad to find an article like that in a magazine, rip it out, tell me to read it, and tell me not to let it happen to me.

The current prevailing theory is that as the rest of the world develops, our economy will grow as well because they’ll be better able to afford to buy our stuff. Hopefully by the time that happens, we’ll still know how to make something here.

The real threat to the American Dream right now is the sense of entitlement. When I look at the American Dream, I look at how my Dad lived when he was my age, and I have him beat hands-down. I have a house in the suburbs, and I own it outright. When Dad was 33, he lived in a slum. Well, not quite a slum. It was the former Toledo Motor Lodge, converted (badly) into apartments. The way Mom tells it, it was even worse than it sounds.

The problem is that we’ve been brainwashed not to compare our lives with where our parents were at our age. We’re supposed to have a better life than them right now. And if you’re under the age of 40 and your parents are white collar workers, that’s not a realistic expectation at all.

If my Dad were alive today, he would probably make 2-3 times what I make. Osteopathic radiologists with 30 years of experience make more money than systems administrators with 10 years of experience. What if I’d followed his footsteps and become an osteopathic radiologist like he was? He’d still make more than me, because radiologists with 30 years of experience make more money than radiologists with five years of experience. Who wouldn’t rather have the guy with 30 years’ experience reading their x-rays?

But that’s something my family has been dealing with for generations. Dr. Edward Andrew Farquhar started practicing medicine before the Civil War, and when you trace him to me, I’m one of only two generations who didn’t follow his footsteps. When it comes to the American Dream, it’s hard to compete with your father when your father was the town doctor. It isn’t all just handed to you.

But that’s a blessing in two regards. That means anyone who’s deserving of the title can be the next town doctor. That’s good for everyone, because unspeakable things happen when I have to look at something that’s bleeding a lot. If I were the town doctor, lots of people would probably bleed to death.

And any time someone says the American Dream is dead, I look at my neighborhood. It’s overrun with Bosnians. More than 50,000 Bosnian refugees ended up in St. Louis in the early 1990s.

I wish every city in the United States had 50,000 Bosnians move in, because they’re the best thing that’s happened to St. Louis in a very long time. They found jobs, worked hard, saved money, and bought run-down houses in declining neighborhoods. I can remember (barely) some of those neighborhoods, and they’re a better place now because of it. The neighborhoods not only look better now, but they’re safer.

Some of the children of those refugees are grown now, with jobs and families of their own, and increasingly they’re moving into the suburbs. In other cases, first-generation Bosnian immigrants are upgrading to houses in the suburbs.

It’s clear how they do it. Besides having a regular job, they always have something going on the side. Maybe more than one. They shop at thrift stores and garage sales, and they negotiate hard. They treat every dollar like it’s their last. And they’re always looking for an opportunity, or trying to make one.

They’ve tried to maintain their distinct culture, but what they may or may not realize is that they’re more American than their neighbors down the street who’ve been here for four generations.

I hope they’re still going at it when my son is old enough to pay attention. Because I intend take him out and find some Bosnians in action. And when I do, I’m going to point at them and tell my son to watch everything they do. Because for anyone who’s willing to do what the Bosnians do, the American Dream will always be alive.

How does the live-within-your-means movement apply to the current recession?

Dave Farquhar Saving money , , , , , ,

Joseph brought up some good points in the comments for the previous entry, and I don’t think a short response does them justice. He wants to know what the personal finance experts have to say about the current economic crisis.

Suze Orman actually went on TV a few weeks ago and called it an opportunity of a lifetime. I’ll explain.Joseph says this feels different from other recessions. I think it’s because it is. It’s more like 1929. The major difference is what people were investing in.

The biggest problem in 1929 (besides the crash) was that Herbert Hoover didn’t realize until it was too late that we had a big problem on our hands. That’s not the case this time. Although Bush and McCain were denying it for a long time, both readily admit now that we have a problem.

The cause of our problems today is twofold. One, we should have had a recession in 2000-2001 and we didn’t have much of one. The Fed lowered interest rates to stave off recession, and the result was something of a boom. Both political parties blame the other for this, but basically, under their encouragement, everyone and his uncle was willing to loan people way more money than they could realistically pay back. (Republicans liked this because it was deregulation; Democrats liked it because minorities who previously couldn’t get loans suddenly could get them in spades.) Then, when too many people failed to pay those loans, the banks ran out of money, so now we have banks failing.

I remember seeing Suze Orman come on TV on Sunday morning years ago and warn this was coming. The reason was simple: Too many people were in over their heads in debt, and eventually it was going to catch up with us. She even had the timeframe about right.

It didn’t take a prophet to see it. We started having problems when large numbers of adjustable rate mortgages started resetting. One month, people could make their payments on everything. The next month, their mortgage skyrocketed and there wasn’t enough money left to buy a day’s supply of Ramen noodles, let alone make car and credit card payments.

Soaring gas and food prices didn’t help either, of course. Then again, that’s all interconnected too. Back in 2001, Ford and GM started offering 0% financing, and their primary products were big gas guzzlers. Increased consumption raised fuel prices, which in turn raised the price of everything.

But for those who are able to pay their bills and keep their jobs, the opportunity of a lifetime is nigh.

Stock prices are down. Nobody knows if they’ve hit bottom yet or not. But they came back after 1929, and they’ll come back after this crisis too.

My grandfather was a wealthy man. He started his medical practice sometime during the Depression. He died in 1980, long before I could have a meaningful conversation with him about money. I can only speculate how he made his money, because the living relative who might have firsthand knowledge isn’t especially honest or reliable. I believe he bought stock in the 1930s at depressed prices sometime after he graduated from medical school. While those investments certainly didn’t pay off immediately, by the time the ’50s and ’60s rolled around, he still owned that stock, which he’d bought at Depression prices. At those prices, he might as well have stolen the stock.

I believe the same opportunity exists today. This isn’t the time to cash out your 401(k) accounts–it’s time to max out your yearly contributions, if you can afford to.

A similar situation is beginning to exist in real estate. If William Nickerson (the original make-a-fortune-in-real-estate guy) was still alive, he’d be having a field day. Nickerson made at least $5 million in his lifetime by buying distressed properties and turning them around. Before this crisis is over, there’s going to be a lot of distressed property that needs fixing up.

The bottom line is that the people who have no debt, or who have a reasonable amount of debt under control don’t have anything to be afraid of right now as long as they’re able to stay employed. They have numerous opportunities, in fact.

For one, they’re in an ideal position to convert pre-tax retirement plans into Roth IRAs, which are tax exempt on the back end. You take a tax hit when doing that, but this is the time to take that hit–prices are down.

Two, they can buy stocks and/or real estate at depressed prices, hold on to those assets, and in 20 years they’ll be rich. Once again, let’s go back to 1929. The Dow Jones Industrial Average peaked that year at around 380. If you take the worst case scenario, buying at the peak and then crashing, it took 25 years (1954) for the DJIA to get back above 380. But once it did, it stayed above that level for good.

But aside from that extreme scenario, it’s very difficult to find any 10-year period where stocks didn’t make money.

About a year ago, the DJIA was near 14,000. Today it’s below 9,000 and threatening the low 8,000s. There’s no historical precedent for it to drop lower and stay lower, and there’s no historical precedent for it to stay stuck at any level either. There’s every historical precedent for it to reach 14,000 again, and it’s much more likely for it to do it in less than 7 years than for it to take 25 years like 1929. Between now and then, individual companies will go under, but that’s why you don’t invest solely in one company. Buying an index fund that tracks the S&P 500, for example, spreads your risk over 500 large companies. If General Motors evaporates, you lose a little. But if GM gets its act together and the stock soars, you share in the gain.

Finally, when it comes to real estate, all those people who had bad mortgages have to live somewhere. It’s a terrible market to sell, but if you’re inclined to buy properties and rent them out, the environment is ideal for that and will be for a very long time. People who have enough saved up to pay cash can pretty much monopolize this game for a while, since loans are hard to come by.

There’s a positive for the country as a whole too. Did you get sick of the rest of the world buying up our companies because their economies were booming while ours stagnated? Now everyone’s in the same boat as us, so we’ve probably seen the end (at least for a while) of ruthless international conglomerates buying U.S. companies and then slashing everything that moves.

Overall, I do think this bust is a net positive for society, and not just for the reason I just mentioned. I read not long ago that many people under 40 consider the American Dream a birthright, not something that takes work and ambition. Society as a whole has been using borrowed money to artificially raise lifestyles up into the next-higher income tax bracket. Today’s crisis may put an end to that, and ultimately, that’s good for everyone, although it will be painful in the short term.