Monthly Archives: February 2015

Machine Gun World, Orlando, Florida

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Florida has always been playing catchup with California when it comes to amusement and theme parks. Disneyland in California opened in 1955. Disney World in Florida opened in 1971. Universal Studios in California opened in 1964. Universal Studios in Florida opened in 1990.
machinegunworldWell, with the opening of Machine Gun World in Orlando, Florida has finally got a kind of theme park that we don’t have here in California. At Machine Gun World, children as young as 13 years of age can shoot military-grade machine guns, and with no prior experience or gun training required. (See photo of a boy with a machine gun at Machine Gun World. Isn’t that cute?) Machine Gun World is located 6 miles from Disney World in Orlando, so families with children can visit both theme parks on the same trip. Visitors to Machine Gun World can choose from a wide range of weapons, and they can pick personalized shooting experiences, including Special Operations, and a ‘007’ license-to-kill game, all using live ammunition. Machine Gun World says that they will not give loaded machine guns to people who are obviously intoxicated, and people show up drunk fairly often. In other words, sober children can have machine guns, but drunk adults cannot.

There are no machine gun theme parks in California, and it is highly unlikely that one will ever open in this state. Gun laws in California are very different from those in Florida. There is no way that a theme park could get a license to operate in California in which 13 year old children with no prior experience using firearms are given loaded machine guns.

So I guess we are going to have to concede this one to the Sunshine State, also known as the Sinkhole State. Congratulations to you, Florida! You finally got a kind of entertainment that we don’t have here in California.

Florida News Update: Last week, Disney raised adult admission to Disney World in Orlando to $105. a day, and Disney considers anyone age 10 or older to be an adult. Disney’s Park Hopper, which provides transportation between Disney attractions, hotels, and restaurants in the Orlando area will cost you an additional $60 a day. Gee! For what it costs a family of 4 to go to Disney World for 1 day, you could buy each of your kids a brand-new machine gun as a souvenir of your trip to Florida! Plus, there is no minimum age in Florida for the purchase of ammunition, so even a 5 year old child can legally purchase unlimited quantities of armour-piercing bullets in Florida! So its hats off to the Stand Your Ground State – Florida!
 

Do You Make $79 An Hour?

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The real estate web site Zillow recently calculated how much a single renter has to earn in order to afford the average apartment in 20 cities across the United States. Landlords typically assume that a tenant can afford to spend up to 30% of his pre-tax income on rent. Assuming that, and assuming that a tenant is working full time (40 hours a week), Zillow says that a person would have to be getting paid $79 a hour in order to rent the average apartment in San Francisco. The median priced apartment in San Francisco is now $3,950 a month.
Now, I am pretty sure that most people living in San Francisco make less than $79 an hour. The minimum wage in San Francisco is now $11.05 an hour. It scheduled to rise to $15.00 an hour by 2018. I can’t figure out how people who work at minimum-wage jobs can afford to live in San Francisco or Berkeley, but I know that many do.

Inflation and Aunt Bessie

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Whenever people ask me for investment advice, this is the #1 thing I tell them:
Think about inflation!
The single biggest mistake that investors make is ignoring inflation. Whenever people who invest in the stock market tell me how much money they made on an investment, they always talk as though they thought that the inflation rate was zero.  People say things like: “I bought this stock 20 years ago, and it has tripled in price!” People say that as though they thought that they had tripled their money, even though they know – as everyone knows – that a dollar was worth a lot more 20 years ago than it is today.
Aunt Bessie’s Silver Dollars. Most people grossly underestimate just how much inflation has eroded away the value of the dollar. When I was a kid, my Aunt Bessie used to give me one silver dollar every year on my birthday. These were real – 90% silver – silver dollars.  I wish I had saved the silver dollars that Aunt Bessie gave me, but I  spent them. Aunt Bessie bought silver dollars at her bank once or twice a year for use as gifts. Back in the 1950s and early 1960s, you could buy one silver dollar at a bank for one paper dollar. Today, you need 20 paper dollars to buy one silver dollar. Now, let me be clear about this. I am not talking about rare or collector-grade silver dollars. I am talking about common, worn silver dollars that are only worth a little more than their silver scrap value.silverdollar
20 to 1. It isn’t just silver dollars that have gone up 20 fold in price. A lot of things are now 20 times more expensive than they were in 1960. In 1960, with just 5 cents in your pocket, you could buy a Hershey bar, a bottle of Coke, or a daily newspaper. Today, each of those things costs a dollar. In 1955, the average movie theater ticket in the U.S. was 50 cents. Now it is $10.00. And it isn’t just small-ticket items that have gone up 20 fold in price. The cost of tuition at many universities is now 20 times more expensive than it was in 1960. When I went to the University of Maryland in the mid-1960s, tuition for in-state undergraduate students was $500 a year. Today, it is $10,000. And consider the biggest big-ticket item of them all – the Federal debt. When Ronald Reagan was elected president in 1980, the Federal debt was just under $1 trillion. It is now almost $20 trillion. See that 20 to 1 ratio again?
Paper vs. Tangible Assets. I have never known a single person in my entire life who made money investing in the stock market on an inflation-adjusted basis. I really don’t know a single one, and I know a lot of people who have been investing in the stock market for decades. Paper assets like stocks, bonds, mutual funds, and certificates of deposit all lose a lot of their value over time due to the eroding effect of inflation. This explains why people who put inflation into their investment calculations don’t invest in paper assets. People who put inflation into their investment calculations (like me) invest in tangible assets, like real estate.
I have often wondered why so many smart people never take inflation into consideration when making their investment decisions. It doesn’t make sense. I’ll tell you what I think the reason is. I could be wrong, but I think that most people ignore inflation simply because inflation is depressing to think about. People don’t want to think about what inflation has done to their life savings, so they put it out of their minds when making investment decisions. I think it is really just that simple. Yes, that is irrational, but people make irrational investment decisions all the time.
Conclusion. Inflation destroys the value of people’s life savings. When people get old and think about how much their money was worth when they put it away for their retirement and then compare it to what that money is worth today in real buying power, they get depressed. However, that is not a good reason for ignoring inflation. Inflation is not going to fade away or disappear. Inflation will be worse, much worse in the future. The Federal government’s debt is now so huge that they will have to inflate the money supply for decades to come just to pay the interest on the debt. It will not matter at all whether Republicans or Democrats control Congress or the White House. The interest on the government’s debt will get paid no matter which party is in power. So you better think about inflation when making your investment decisions. I think about what happened to my Aunt Bessie’s silver dollars when making my investment decisions. You should too.