Thursday, December 29, 2016

Of Class, Poverty and Wealth

In my efforts to discover the mysteries of humanity, I have always been perplexed at poverty, wealth and class. Why are some people a member of the country club, drive nice cars and live in big houses while other people live paycheck to paycheck? Why is it rare for someone to rise above poverty?


Nantucket

Right now $10 to $15 per hour is a common wage, but it is hardly sufficient for a family. After taxes, the worker brings home about $1,900 per month. Mom works at the neighborhood restaurant, she makes about $1,200 per month after taxes, while they raise three children. After they pay their bills, there is little money leftover. They are working for poverty wages. A living wage is $15 per hour. It's hard to get ahead, even with both incomes, $3,100 take home per month isn't much for a family of five.


Anytime people in poverty do get some money, it is hard for them to hold onto it. They are so used to spending every paycheck. But if perhaps they get a settlement like $50,000 from a wrongful injury lawsuit, they quickly find ways to spend the money. I know one person who started spending a promised $15,000 back pay settlement before he even got the money, he had already racked up $6,000 on his credit cards, buying stuff like a television, stereo, speakers and movies and CDs. When the $15,000 arrived, he paid off his credit card, and then quickly spent the remaining $9,000. It was all gone within a few months.


Institutional poverty is still with us in America. Three million slaves became "free" after the Emancipation Proclamation, but were kept in shackles through laws designed to keep them in prison, and separated from whites. Plessy vs. Ferguson in 1896 upheld the racial segregation laws for public facilities under the doctrine of "separate but equal." It was only in 1954 that Brown vs Board of Education overturned the separate but equal clause. So think about it. Blacks didn't have wealth that was passed down from generation to generation. Grandpa was poor, Dad was poor and Son is going to be poor too. It's only been in the last 50 or 60 years that blacks have been able to build up wealth and pass it down to their children.


Meanwhile there are multiple thousands of white families who have had generations of wealth passed down to them. A good example is the Forbes family. John Murray Forbes was so wealthy in 1850 that he was able to buy an island in Cape Cod. That island, Naushon, is still in the Forbes family, it's probably worth billions of dollars. It's a private island in trust for the benefit of the Forbes family and its heirs. So the Forbes family has enjoyed generations of wealth that goes back over 150 years.


Wealth is so prized in America that anyone with that sort of pedigree can get into the best schools and land the best jobs and make the most money. No wonder Goldman Sachs is full of rich kids who went to Harvard.


Escaping poverty

Oprah Winfrey once tried an experiment to help the poor. Oprah said she would finance a program to move 100 families out of public housing, off public aid and into better lives, but only five families participated in the program. The experiment taught her some lessons. "At its most basic, the lesson of Families for a Better Life may be that the lives of the poor are so chaotic and infused with a 'mind frame of entitlement' that they defy even programs specifically designed to overcome these obstacles," The Chicago Tribune reported.

The crisis, paycheck-to-paycheck lifestyle is a soap opera that requires constant attention; the car breaks down, Mom suffers from back problems from standing all night at the bar, Dad is a Manic Depressive Alcoholic, he should be taking his medication and not drinking so much. A teen-age son is in trouble for skipping school and smoking pot. Mom flirts with another Man at the bar, Dad is jealous. They drink late into the night, fighting and yelling, scaring the children, who wonder if Dad is going to move out. Talk about a house of pain. 

Divorce is another cause of poverty. Two incomes in one household are better than one income; two working together can do great things, but divide the family into two houses, you have twice the utility bills, twice the rent, twice the expenses of maintaining two homes.


How do you rise above that? How does one break free from the chaos? Some say religion is the answer, others say the answer is found in the 12 Step AA or NA program. God and money Evangelist Dave Ramsey has programs designed to help people pay down debt and get ahead financially. He talks about people being "slaves" to bankers, always having to pay debts to the banks. Stop being a slave, he says, pay off your debts and free yourselves from entrapment. 


Financial advisors will tell you to create a budget that not only pays your bills, but also sets aside money for emergency savings and retirement. All of this advice is readily available, even free on the Internet. There are thousands of self-help books like "Think and Grow Rich" by Napoleon Hill.


My advisor in college said, "Get your social life in order, so you can focus on your profession." That was great advice.

I like rags-to riches-stories. GirlBoss is one of my favorites. Sophia Amoruso was a punk rocker who lived off the grid after high school, she had a job that paid poverty wages, while pursuing her fashion hobby, buying on the cheap retro outfits at estate sales and then reselling them on eBay. Her Nasty Gal business took off. For her Web site, she used her photographic eye to create images that were attractive to young girls. Customers paid a premium for her retro-looking clothes. Because Sophia lived off the grid for so long, she struggled to get credit. At first, banks didn't want to loan her money. So she paid for everything in cash. Eventually she created her own brand of clothing, operating out of a big warehouse in Los Angeles, the business grew to $100 million. A business like this has an 8% to 10% margin, netting about $10 million annually.

More close to home, I know someone who grew up in a small town in the Midwest. His parents were poor, but honest and hard-working. This person, Danny (a real person but I am changing his name to keep him anonymous)  entered the military after high school. He married well. His wife encouraged him to continue his education, earn a bachelor's degree and complete officer training school. They raised three children. Danny moved up the ranks in the military. After 24 years, he retired from the military with a pension paying $75,000 annually. He took two years off, then got a similar job as a civilian, making $75,000 annually. So now he makes $150,000 annually. Plus his wife works, making about $30,000 annually. They paid off their debts and plan to retire in a few years. A couple of reasons why Danny was successful: He stayed married, he and his wife worked hard to raise their children. Danny surrounded himself with good mentors. He particularly was fond of his wife's grandfather, who served 20 years in the military, got a pension and then started working again in banking for another 20 years. This grandfather mentored Danny. And Danny listened and applied the knowledge given to him. Danny believes the breakdown of the family is the root of poverty and misery. There is some truth to this.


I know a young talented man who could go far in life, but he is struggling post high school, trying to figure out how to get ahead. He does not want to go to the University of Kansas or Kansas State University because he says he can't afford it. His parents did not go to college. This person, I shall call him Johnny, does not want to work in restaurants because the pay is low and the work is hard. He wants to be a graphic artist. Most employers hire graphic designers with college degrees. I suggested my friend work any job that supplies steady income, save up $1,000 while living at home with your parents. Open a studio in NOTO Arts District for $300 per month, or open a studio in your home. Work part-time at the studio, focusing on solving client's graphic problems. Clients will tell you what THEY want, you do what they want, make them happy, and you will grow your business. Work two jobs, work all the time, when not working the regular paying job, work on the design job. But Johnny didn't seem interested in that plan. He seems to be floundering.


With any business idea, find out if there is a market for your services or product. Do a market survey. Find the biggest problems and solve them. Entrepreneurs get paid well for solving problems.


I worked two jobs for much of my life. One summer in college I had three jobs, as a Daily Nebraskan reporter, a telemarketer and as a line cook at Wendy's. And I took classes in between these jobs. When I finally got a full-time job as reporter at a daily newspaper, I started working on a second job as an investor. Charles Armstrong, an Edward Jones representative from Grand Island, Neb., told me to read everything I could get my hands on about investing. I did. In my spare time, I read Money magazine, Value-Line, and books about Warren Buffett. I opened a brokerage account with $1,000 and started buying stocks. I worked these two jobs for about 20 years before I finally was able to give up the 9-to-5 job and work on my own, operating my own investment portfolio and freelance business from home.


Conclusion


The rags to riches story is a story of hard work, persistence and dedication. It is a story of struggle, learning and great reward. It is also a story of sacrifice, change and adaptation. Don't let history hold you back. To anyone wanting to get ahead, find out what you love to do, figure out a way to make money doing it, and then do it all the time. You will be amazed at how much income you can have with this mindset. Once the income is rolling in, save 10% to 20% of your income, invest it wisely and you have a lot of money over time. 




Friday, December 23, 2016

Monday, December 19, 2016

Westar Energy Sale Not In Best Interest Of Public, KCC staff says

Westar Energy’s (WR) sale to Great Plains Energy (GXP) is not in the best interest of the public, said Jeffrey McClanahan of the Kansas Corporation Commission, in testimony filed on Friday.
Jeffrey McClanahan is employed by the Kansas Corporation Commission as Director, Utilities Division.

“Staff’s overall conclusion is that the proposed transaction fails most of the 22 merger standards and is, therefore, not in the public interest,” he said. “Moreover, there are fundamental flaws in the proposed transaction that prohibit staff from recommending merger conditions that would support a finding that the transaction is in the public interest. Thus the proposed transaction should be denied.”

Justin Grady, KCC staff, says the purchase price Great Plains has agreed to pay cannot be determined to be reasonable in light of the savings that can be demonstrated and it is not within a reasonable range.

Adam Gatewood of the KCC says the post-merger entity will be financially weaker than the existing stand-alone entities. He also asserts  that the merger is not in the public interest because customers will be asked to pay rates that are in excess of the cost of providing services. Finally, the transaction weakens the commission’s ability to effectively regulate the post-merger entity.

Robert Glass, Ph.D., finds that the transaction will have a negative effect on the Kansas economy.

McClanahan said the proposed transaction would leave ratepayers, the state, and even the post-transaction entity in a worse position moving forward. In fact, this transaction primarily promotes the interests of Westar’s shareholders – due to the overcompensation they will receive – to the detriment of the public interest.

McClanahan said staff cannot recommend approval of the merger even with conditions. Merger conditions cannot remedy several fundamental flaws within the transaction as proposed. These fundamental flaws are: The purchase price of $12.2 billion is too high because it results in Great Plains and its subsidiary Westar being in a significantly weaker financial position post-acquisition. Even though joint applicants assert they are not explicitly requesting recovery of the acquisition premium, ratepayers will inevitably pay this acquisition premium implicitly through financial engineering.

Financial engineering requires the commission to change its current approach to setting a utility’s cost of capital by allowing Great Plains to earn equity-level returns on investment financed with lower-cost debt, McClanahan said.

Joint applicants have failed to demonstrate that the transaction benefits customers through demonstrable and quantifiable savings which can be reasonably attributed to the acquisition, McClanahan said.

Joint applicants have failed to provide any certainty with regard to the continued financial health of the companies.

Great Plains Energy plans to acquire Westar Energy for about $12.2 billion. Westar shareholders will receive $60 per share -- $51.00 in cash and $9.00 in Great Plains Energy common stock. Upon closing, Westar will become a wholly-owned subsidiary of Great Plains Energy. On Sept. 26, 2016, the two companies announced that the shareholders of both companies voted to approve Great Plains Energy's acquisition of Westar Energy. The companies hope the acquisition will close in second quarter 2017.

The governing body for the Kansas Corporation Commission are three commissioners. They do not necessarily have to follow recommendation of the staff.

Jay Scott Emler was appointed to the KCC by Governor Brownback on January 8, 2014. He was confirmed by the Kansas Senate on January 16, 2014. On May 21, 2015, Emler was confirmed for a four year term, which expires on March 15, 2019. He was elected Chairman on January 14, 2016.

Shari Feist Albrecht was appointed to the KCC by Governor Brownback on June 25, 2012. She served as Chair from January 9, 2014, to January 14, 2016. Her term expires on March 15, 2016.


Pat Apple was appointed to the KCC by Governor Brownback on March 24, 2014. He was confirmed by the Kansas Senate on April 6, 2014. His term expires on March 15, 2018.

Friday, December 16, 2016

How To Play The Westar Energy Sale

Westar Energy is trading 4.5% below its sale price of $60 per share.
Great Plains Energy plans to acquire Westar Energy in Q2 2017.
GXP stock is down 11% since announcement of acquisition last spring.
Stock in Westar Energy (NYSE:WR) has gained in value from $9.60 per share in 2002 to $57.30 per share today, plus paid quarterly dividends over that time period. Westar stock is so popular in Kansas, it is held by Westar Energy employees and retirees, plus many Kansas investors who appreciate the dividends.
However, Westar Energy is changing soon. And investors in the stock need to make some decisions. Click here to read more.



Friday, December 9, 2016

Irwin Rosen: Scholar And Friend in Field of Psychiatry Dies

By Michael Hooper
Topeka lost a top scholar and a loyal friend in the field of psychiatry on Wednesday when Irwin “Irv” Rosen died at age 93 surrounded by his wife Betty and family.
Rosen came to Topeka to study at the Menninger Clinic in 1952 after receiving his Ph.D., in clinical psychology at the University of Pittsburgh. He graduated from Menninger’s post-doctoral training program and joined the staff and worked about five decades at Menninger, including as director of the Adult Outpatient Department and head of its psychotherapy services.
Roy Menninger, former Menninger president, said Rosen was a unique individual who had a positive outlook.
“He was an unflappably good man, who saw good in almost anything,” Menninger said. In an interview in 2003, Rosen recalled moving to Topeka in the early 1950s and seeing a sign that said, “Welcome to Topeka: Psychiatric Capital of the World.” The Menninger Clinic, Topeka State Hospital and the Veterans Administration Winter Hospital combined to create a mecca for anyone needing treatment or a job in mental health. Topeka State Hospital closed in 1997 and the Menninger Clinic moved to Houston in 2003. The VA continues to operate in Topeka.
Rosen’s colleagues said he helped others with his transformative and inspiring personality. He was a scholar who published into his late 80s. He had a quick wit, a big smile and a warmth that made it comfortable for others to confide in him.
He was very close to the late Irving Sheffel, former administrator of the Menninger Clinic, who died in May 2015, at age 98. At Sheffel’s funeral, Rosen praised his longtime friend’s talent for keeping peace at Menninger and then made fun of Sheffel’s golf game.
Roy Menninger said Rosen had a special talent for entertaining others. Rosen and Jerry Katz performed a song and dance act during an engagement party for Roy and his wife Beverly.
“Irv was marvelously imaginative, curious and creative,” Menninger said. Rosen was also extremely loyal and supportive.
“I was glad to have a friend like that,” Menninger said. “I have so much respect and fondness for him.”
Siebolt Frieswyk, a former Menninger employee, said Rosen had a profoundly influential career at Menninger.
“He transformed generations of students and colleagues with his passion for the theater and tennis and his devotion to professional excellence,” Frieswyk said. “His incredible humor and transformative passion for social justice and the concern for our fellow human beings whose lives he touched with grace and compassion often inspired those who had not grasped their special talent and possibilities. He and Jerry Katz could entertain endlessly, given their immersion in the American musical theater. Irv climbed mountains with his friends in Colorado and inspired us all to heights of excellence and devotion to our shared cause.”
Rosen was saddened to see the end of the Topeka Institute for Psychoanalysis when the Menninger Clinic left for Houston in 2003.
At the time, Rosen wrote, “The way now to perpetuate what we built together is to carry with us internally the place, the people, and what we did here, to re-create what we have learned here and keep it alive, and to practice and teach it afresh in our consulting rooms, our classrooms and our writings. On that premise, our Institute and its parent, The Menninger Clinic, will live in our lives and in the lives of all those patients and students whom we will ever touch.”
Services honoring Rosen will be held at 10:30 a.m. Monday, Dec. 12, at Temple Beth Sholom, 4200 S.W. Munson. Burial will follow at Mount Hope Cemetery.


Wednesday, December 7, 2016

Panic Buying Drives Stock Market to New Highs

A "buying panic" swept through the stock markets today as stocks reached all-time highs, the Dow Jones Industrial Average was up 1.55% or 297 points to 19,549; the S&P 500 up 1.32% or 29 points to 2241 and the Nasdaq was up 1.14% to 5393.

Panic buying is the the action of buying large quantities of stock due to sudden fears of a forthcoming price increase. Investors don’t want to be left behind so they are moving billions and billions of dollars into stocks. Several commentators on CNBC described Wednesday's stock surge as a "buying panic."

The S&P 500 is up 7% since the presidential election on Nov. 8. I had predicted the election of Donald Trump would cause the stock markets to contract, but I was wrong. I’m glad I did not sell out when he was elected. Indeed I had just moved all idle cash into the stock market just before the election. I was all in and remain all in.

The businessman Donald Trump -- a true outsider who never before worked in Congress -- has cultivated a belief that he can improve the U.S. economy.

The inauguration of Donald Trump as the 45th President of the United States will take place on Jan. 20, 2017.

Who knows exactly what will happen with the stock market in 2017. By some measures, the general stock markets are over valued now, but that doesn’t necessarily mean the stock market can’t go higher from here.

Eventually panic buying may turn into panic selling. But I’m not selling out. I invest for the long term. 


We’ll see how Donald Trump leads the country. I hope it’s not just the rich getting better, I hope all Americans see growth in household income.

I think some parts of the stock market are way overheated. Some regional bank stocks have gone up tremendously.

Equity Bancshares (EQBK) is up 35% since the Nov. 8 election. Equity Bancshares, Inc. is a bank holding company with headquarters in Wichita, Kan. Its Equity Bank provides financial services primarily to businesses, business owners and individuals through a network of 34 full-service branches in Arkansas, Kansas and Missouri, including the Wichita, Kansas City, and Topeka metropolitan areas.

Stock in Capitol Federal Financial (CFFN) is up 14% since the presidential election. Capitol Federal is a Topeka-based bank with a focus on lending to single-family home owners.

United Way of Greater Topeka Suffers $1.3 Million Operating Loss in 2014

United Way of Greater Topeka has suffered operating losses in recent years.

United Way's total revenues have fallen from $6.9 million in 2013 to $5.6 million in 2014. The organization suffered an operating loss of -$1.3 million in 2014, according to its Form 990 tax return.

There is a 2015 Form 990, but it only runs for a half year; nevertheless, the organization had posted a $1 million loss in the first six months of 2015, according to its tax returns at guidestar.com

The Topeka Capital-Journal reported that United Way of Greater Topeka's top executives resigned effective immediately. Miriam Krehbiel resigned her position as CEO and president, and Kim Ribelin resigned as vice president of resource development, the newspaper reported.

The local United Way's total expense for salaries and benefits was $1,008,406 in 2013. Total expense for wages, salaries, employee benefits grew to $1.18 million in 2014. 

Krehbiel’s total compensation in 2013 was $128,173. That year revenues were $6.9 million, with total expenses of $6.6 million, with a $270,985 net gain (profit).

In 2014, total revenue was $5.6 million, expenses were $6.9 million, with a -$1.3 million loss. Krehbiel's compensation was $129,222. 

In recent years, United Way changed the way it distributes grants. Historically, donors got to choose which charities they want to support. However, in recent years, the organization changed focus to supporting projects to implement change in the community. The top three areas of focus are improving education, financial stability and health care. 

Donors have struggled to understand how this works. I think it’s easier for a donor to say I want to support Girl Scouts, or Housing & Credit Counseling. But now United Way is choosing how to use donor money to support education, financial stability and health care. With the change, it’s difficult to measure whether United Way’s efforts are actually working or making a difference.

The United Way's mission statement on its tax return says: "We create positive, sustainable change in our community. We work to solve issues no single donor, charity or government agency can handle alone. By focusing on education, financial stability, and health, we help more children graduate and get stable jobs, help families become financially stable and improve the overall health of our community."

Oh really? It seems to me there is more work being done in our local schools than in the UW to help more kids graduate from high school. The chamber and Go Topeka are more equipped to create jobs than the UW is. I think Housing & Credit Counseling, local financial advisors and Dave Ramsey programs in our churches do more to help people gain financial stability.

The UW's mission statement seems like a top-down, push-down into our community that doesn't really match the charitable giving style of Topeka.

I've heard plenty of United Way presentations over the years. After the change was made in recent years, I heard a presentation that sounded nebulous. The presenters could hardly make sense of it, let alone the people they were trying to convince.