Girl Pregnancy Pact Gloucester MA High School: School Subsidizes Teen Pregnancy (Savers Are from Mars. Debtors Are from Venus. Episode 6)

School Subsidizes Teen Pregnancy

Media Reports Miss the Main Point on Spike in Teen Pregnancies

A large number of high-school girls intentionally got pregnant or were happy to get pregnant at Gloucester High School in Gloucester, Massachusetts.

Earlier reports of a formal group "pact" to get pregnant are now disputed to be a post-pregnancy pledge for the teen mothers to somehow support each other, although the point about the girls' enthusiasm to get pregnant appears undisputed:

"But at a press conference today, Gloucester Mayor Carolyn Kirk emerged from a closed-door meeting with city, school and health officials to say that there had been no independent confirmation of any teen pregnancy pact. She also said that the principal, who was not present at the meeting, is now "foggy in his memory" of how he heard about the pact.

[Gloucester High School, principal Dr. Joseph ] Sullivan has not spoken publicly about the teen pregnancies since he told TIME earlier this month that several girls repeatedly requested pregnancy tests at the school clinic and that some had reacted to positive test results with high fives and plans for baby showers. Pathways for Children CEO Sue Todd, whose organization runs the school's on-site daycare center, told TIME on June 13 that its social worker had heard of the girls' plan to get pregnant as early as last fall. She noted that some of the girls involved had been identified as being at risk of becoming teen mothers as early as sixth grade, when they began to request pregnancy tests in middle school." (TIME)

Various reports blame the depressed, working-class, blue-collar, fishing economy or a poor, anti-social home-life:

""What we've seen is the girls fit a certain profile," Todd said. "They're socially isolated, and they don't have the support of their families."

The Real Point

People with no job prospects and no family support should be trying to INCREASE income and DECREASE outgo. Teen, single, diploma-less mothers are DECREASING their income potential and INCREASING their outgo expenses.

The schools apparently utterly failed to teach math, logic, or home economics.

The schools apparently do manage to teach and subsidize teen pregnancy (according to public radio and other reports):

• The school(s) teaches sex to children: School-district health coordinator Ann-Marie Jordan blamed budget "cutbacks" for stopping sex education after the 9th grade, leaving 'only' the years of sex taught in middle school and freshman year: Exactly how many YEARS does it take to figure out? One pair of unfixed neighborhood dogs or cats should do it.
• The school(s) conducts "health surveys" that ask children to describe their sex lives: Behavioral experts know that people are more likely to do something when you make them discuss, imagine, and visualize doing it.
• The school(s) provides/conducts pregnancy tests on children: Children can see grown-ups' tacit acceptance and expectation of teen sex (and usually failing tests in school is bad).
• The school(s) provides a FREE in-school daycare center for teen mothers: "The high school has done perhaps too good a job of embracing young mothers. Sex-ed classes end freshman year at Gloucester, where teen parents are encouraged to take their children to a free on-site day-care center. Strollers mingle seamlessly in school hallways among cheerleaders and junior ROTC. "We're proud to help the mothers stay in school," says Sue Todd, CEO of Pathways for Children, which runs the day-care center." (TIME)

Gee, can anyone think of where the girls got the idea to get pregnant?

The school is one step away from providing wine coolers and a Jacuzzi.

"Experts" continue to miss the point:

"Dr. Joanne Cox, director of the Young Parents program at Children's Hospital in Boston, said that in-school programs for birth control are shown to be effective, as is education. Upon hearing of the situation in Gloucester, she said that considering birth control distribution in school would be wise. "When 10 are pregnant — that's the time to have the political courage to do it," she said. She added that the lack of easily available birth control — which, she said, pediatricians are often hesitant to prescribe — is "probably the No. 1 reason" for an increase in pregnancies." (Gloucester Daily Times)

1. Basic economics: Subsidize something and you get more of it.

2. Birth control is useless when the girls WANT to get pregnant, which is the reported case with the Gloucester girls.

Maybe there would be fewer teen pregnancies if the schools spent less time and money teaching and subsidizing sex -- and instead spent more time and money teaching math, logic, and economics.

Personal Finance Carnival 128 Features Home Finance Freedom's "Savers Are from Mars. Debtors Are from Venus. Episode 5"

Home Finance Freedom's "Savers Are from Mars. Debtors Are from Venus. Episode 5" was featured by the 128th Carnival of Personal Finance at Stock Trading To Go in an "Investment Truth" edition, along with a number of good articles from fellow PF bloggers. Thank you.

Personal Finance Carnival 127 Features Home Finance Freedom's "Payoff Mortgage v. Invest Stocks: Housing Myths Part 12"

Home Finance Freedom's "Payoff Mortgage v. Invest Stocks: Housing Myths Part 12" was featured by the 127th Carnival of Personal Finance at Moolanomy with a "Wonders of the World" theme, along with a number of good articles from fellow PF bloggers. Thank you.

Savers Are from Mars. Debtors Are from Venus. Episode 5

Turning Gold into Lead:
How To Lose $100k, and Your House, and Your Family

"Wendy's home had appreciated in value by about $100,000, only months after she and her husband bought it. So, they took out a second mortgage for almost $80,000 to enhance their new home. It was at 8% interest. When the housing bubble burst, that $100,000 in equity evaporated. But, the interest on that second adjustable rate mortgage by now had climbed from 8% to almost 16%, creating a monster of a monthly payment they couldn't handle. 'Then, it just gets pulled from right out underneath you.' Wendy says her marriage even broke-up over this. Now the couple faces possible foreclosure on the house" (KVOA).

Debtors often display this unfortunate tendency to turn even a $100k windfall into more debt, to eliminate increases in net worth, to eradicate any trace of even accidental equity.

Remember that the $100k was only a paper profit, not real wealth, because they did not sell the home at the high price (they ignored the basic, old "sell high" truism).

They ignored the chance to increase their income and instead increased their outgo (spending)--the opposite of basic financial advice to increase income and decrease outgo.

Avoid Holiday Travel Costs with Virtual Visits

Look Who's Coming to 21st-Century Dinner

National Public Radio (NPR) yesterday interviewed a woman who could not afford airfare to visit family. High fuel prices raise the cost of air and road travel.

Better than a card or phone call:

Use a webcam to virtually visit for almost free.

You might already own the computer, internet connection, and webcam needed to virtually visit distant family (and webcams are cheap now).

You can park the monitor like another seat at the dinner table (fun gimmick).

A large TV display beside the table might feel like another table.

Virtual visiting also can help when little Billy might be bored at Grandma's house but can play with his cousin across the country.

Personal Finance Carnival 126 Features Home Finance Freedom's "Home Decorating Costs: Housing Myths Part 11"

Home Finance Freedom's "Home Decorating Costs: Housing Myths Part 11" was featured by the 126th Carnival of Personal Finance at Million Dollar Journey, along with a number of good articles from fellow PF bloggers. Thank you.

End of Privacy Sought by Government

"Privacy no longer can mean anonymity, says Donald Kerr, the principal deputy director of national intelligence. Instead, it should mean that government and businesses properly safeguard people's private communications and financial information" (Associated Press (AP), Yahoo! News).

Privacy (noun) = the government knows everything about you--but keeps it a secret from you.
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You Owe 9 Trillion Dollars

Congratulations, the United States gross national debt now exceeds $9 trillion.

You owe $30k. Your baby owes $30k. Your family of 4 owes $120k.

Your government put you in all this debt to make you richer, in case you were wondering why your life has felt so easy and virtually cost-free all these years.

Remember that when choosing a presidential candidate.

Why stop at $9 trillion?

Should the federal government make us all even richer by borrowing $18 trillion (so a family of 4 owes $240k) and leverage-investing it in the stock market for a higher return?

After all, Ben Stein recommended that you stay in debt to get rich: Payoff Mortgage v. Invest Stocks: Housing Myths Part 12

Payoff Mortgage v. Invest Stocks: Housing Myths Part 12

Previous: Home Decorating Costs: Housing Myths Part 11

Hock Your House?
Beware Over-Hyped Benefits of Leveraged Stock-Market Investments

Free Money Finance (FMF) responded to a pro-debt, pro-leverage Ben Stein article. Stein and some FMF commenters unfortunately repeated a number of false assumptions about stock market returns and dubious expectations about arbitrage net returns.

Sustained real returns near double-digit rates prove elusive.

People trick themselves into believing that low inflation (officially) under 3% is normal, that mortgage interest rates under 6% are normal, and that long-term, indexed stock market annual returns on investment (ROI) of 9-12% are normal. None of that is true.

Real (inflation/price-adjusted) stock/mutual fund ROI can be flat or negative over most of a decade. (Update 6/25/08: Remember that you are bleeding your mortgage interest even if your stock is "flat" and remember what a flat or negative first decade means for the long run in the world of compound interest.)

Hyped nominal stock returns near double digits often include periods of high inflation such as when consumer prices rose over 13% in 1979 (little real stock growth). (Update 6/25/08:...and the real growth can become real LOSSES when you remember your borrowing costs (see next paragraph).)

The periods of high nominal stock returns often coincide with high nominal debt costs (little arbitrage room): One measure records average mortgage rates of over 9% in most of 1991 and over 15% for about a year 1981-1982 (US Federal Housing Finance Board’s Monthly Interest Rate Survey (MIRS) National Average Contract Rate for purchase of previously occupied non-farm single-family homes, by combined lenders). The common apples-oranges mistake is comparing a recent short-term snapshot of low mortgage rates to past long-term inflation-contaminated stock returns, which is just as misleading as comparing a short-term stock-market crash returns to high long-term mortgage rates. The pro-leverage cheerleaders parrot the past 30-year S&P500 historical average but rarely mention the concurrently high 30-year fixed-rate mortgage average that leveraged people paid--because the 2nd half of the reality undermines their "easy money" sales pitch. (Update 6/25/08: Note the hypocrisy of people who drone on about decades-old "historical performance" until you remind them that they are leaving out the historical performance of COSTS, at which point they insist that old data is irrelevant because "that was then, this is now": Fine, then never mention past performance again, start with a clean slate on BOTH gains and costs, and we are left with a future, guaranteed mortgage loss compensated by nothing guaranteed on the plus side, and even a 5% mortgage could result in a double loss, as described later.)

Those hyped stock returns are sometimes intentionally inflated using a misleading method (arithmetic average annual return) in another improper apples-oranges comparison to mortgage rates: Use the proper annualized return (geometric mean) to compare directly to compounded mortgage-interest negative returns.

The popular major-market indicator Vanguard 500 S&P500 index fund (VFINX) cost about $30 in 1987 (20 years ago) and $140 today (late 2007), which is an annualized return of not 9-12% but only 8.01%--before taxes (Update 11/12/07: A VFINX $30 purchase and current $133 price puts the 20-year annualized return at 7.73%) (Update 6/25/08: $30 in 1987 and the current $122 puts the 20-year annualized return at 7.27%. There are many other pluses and minuses such as dividends which might add 1.6% to the 7.27% for 8.87% BEFORE COSTS but a 0.15% expense ratio reduces that to 8.72% and a possible 0.5% mortgage PMI (often overlooked on the leveraged cost side) reduces that to 8.22%, plus possible mortgage points, dividend taxes, etc., before we even get to subtracting the main "mortgage rate").

The S&P500 20-year average performed about the same as an 8.xx% bond (before tax differences), and the US 30-year Treasury bond's yield was about 8% for most of the first decade after 1987 and peaked over 10% in 1987.

Borrow at 11% to earn 8%?

Anyone who in 1987 had cash to buy a house in full but decided instead to take an average 30-year fixed-rate mortgage (FRM) to invest the cash in an S&P500 index fund might have crucified him/herself on a (July) 10.5% mortgage interest rate to earn 8% in stocks/mutual funds, for a clear loss.

The poor sap could pay more in additional fees to refinance when mortgage rates decreased but average rates fluctuated near 8% for most of the 2 decades (finally breaking below 6.5% about 2002). Even a small negative arbitrage percentage can cost you tens of thousands of dollars. (Update 6/27/08: You could get a 5.xx% mortgage in 2005 but VFINX price since 2005 performed about 3.2% (5% with dividends) so your 2005-2008 leveraged investment gave about a 0% net return. VFINX price since 1998 performed about 1.8% (3.xx% with dividends) but 1998 mortgages cost about 7% so your 1998-2008 leveraged investment bled a LOSS of NEGATIVE 3.xx% per year for a decade. Pro-leverage cheerleaders say things such as "up 20% since 1998" to conceal the dismal 1.8% annualized returns but remember that negative 7% compounded for a decade results in a 50% loss (DOWN 50% since 1998).)

(Update 6/28/08: The borrow-to-invest plan to lock in a low mortgage rate for 30 years often fails in the real world for a number of reasons: (1) the average American mortgage lasts for an average of only 7 years (according to ING) due to moving or other reason, so the average person does not keep a low rate for 30 years; (2) banks advertise ideal rates that apply to few people but the more realistic rate is the report of average rates actually obtained by borrowers (6.62% for 30yr fixed-rate $165k mortgage according to Bankrate.com's 6/25/08 weekly national survey of large lenders, or 6.45% plus 0.6 points for 30yr fixed-rate mortgage according to Freddie Mac's 6/26/08 Primary Mortgage Market Survey (PMMS)); (3) people like to quote their rate but forget total costs such as points yet 0.6 @ $200k is an instant $12,000 loss before you earn a penny in the stock market; (4) people like to quote their mortgage RATE but their actual, annual debt cost is the APY (Annual Percentage Yield, which is higher than the rate because APY accounts for compounding during the year); (5) internet forum users claim to have a 5.xx% or even 4.xx% mortgage but best credit in ideal market conditions is rare so telling the average person, "Leverage your house in the stock market. First, get a 4.xx% fixed-rate 30yr loan," is like saying, "Make a million dollars. First, get $900k.")

The Iron Rule of Debt

Borrowing usually costs more than investing earns, given equivalent risk (with borrowing, you pay inflation + risk + someone’s salary/bank’s overhead; with investing, you (hopefully) earn inflation + risk – fees - taxes; therefore, with borrowing-to-invest, inflation and risk cancel out and you are left with transaction costs at both ends). Even the abnormally low mortgage rates of recent past coincided with the stock market crash of negative annual returns, so someone could have borrowed at 5% to lose 20% in the stock crash (-5-20), for a net 25% loss.

Investing in income-generating enterprises rather than attempting pure price speculation might help your odds but leveraged investments remain risky even with income-generating investments.

Hope Springs Eternal: Everyone Wants To Be above Average

Even people who know that the average active stock/mutual fund picker will underperform the market by a percent or 2 (e.g. 6-7% instead of 8%) think that they will be the ones who will outperform the iron rule of debt, by both picking and timing both debt and investment correctly, and therefore earning more than their debt costs. Every leveraged investor believes that he/she brilliantly will borrow at 8% to earn 11% when we know that quite a few people will be like the poor sap in 1987 who borrowed at 11% to earn 8%.

Those who beat the odds will be the "poster children" to recruit an army of saps. Even many of the saps will recruit more saps by falsely thinking they earned 11% when they actually earned 8% and by falsely thinking they had a positive net return when they actually had a negative net return. Take the cheerleading leverage/arbitrage hype with a grain of salt and learn the true risk and math before you act.

Good luck to all.

Ron Paul Sets Financial Record for Presidential Candidate

Amusing Theme Yields Impressive Funds for Presidential Candidate Ron Paul

Air Force veteran, Congressman, and obstetrician Dr. Ron Paul is one of the most interesting presidential candidates for the 2008 election. Ron Paul inspires energetic loyalty and outperforms other alleged "frontrunners" in some respects. Paul's supporters ("Paulites") spontaneously organized an earnest if humorously named "Guy Fawkes Day" "money bomb" of 1-day fundraising yesterday which apparently set a record:

From Baltimore Sun:

It is people voting for someone other than the establishment, odds be damned.

Paul already had raised a stunning $5 million in the last quarter, and he has set a goal of $12 million for this final quarter of the year. And, according to his campaign Web-site, Paul raised more than $3.1 million in 19 hours on Monday, marking the single largest fundraising effort of the 2008 election cycle.

As of 4 pm, the campaign maintained, it had raised $2.7 million, surpassing the record for the largest online presidential primary fundraising effort in a single day, and by 6:30 pm, the campaign said it had surpassed Republican Mitt Romney’s $3.1 million record for single-day fundraising this year. This morning, the Web-haul was reported at $3.8 million-plus.

Commenters asserted that the final tally was $4.2 million.

(Update 11/13/07: CNN reported Ron Paul's 1-day total as $4.38 million.)

This Ron Paul grassroots groundswell is something to see.

Home Decorating Costs: Housing Myths Part 11

Previous: Homeownership Cost Cliches: Housing Myths Part 10

The Million-Dollar Paint Job
Peculiar Priorities To Justify Spending a Million Dollars

Those who concede that homebuying is not always financially better than renting often switch the argument from financial bottom lines to unquantifiable personal preferences that cannot be tested by Excel spreadsheets.

One of the favorite intangibles that you “can’t put a price on” is the “freedom” to do no end of unpaid labor, such as painting walls.

Bone Is Freedom. Eggshell Is Slavery.

This obsession with painting houses is very strange:

• Others consider painting to be a chore, on par with having to empty the chamber pot if there was no indoor plumbing ("But if I rented I wouldn't be able to empty my chamber pot and the landlord would get to do it every time.").
• Few people confess to jealously resenting the landlord’s “freedom” to repair the plumbing or shovel the driveway yet we hear people eagerly protest the cruel fate that denies them the right to spend their free time spreading liquid on a wall.
• These color-minded people must be very highly accomplished in life to be able to say, “Darn it, I spend way too much time playing with my children. Spreading liquid on a wall is a much higher priority.”
• Few people express the same compulsion to change the color of their car yet we see people shake their fist against the tyranny that denies them the right to spread liquid on a wall.
• Few people express the same compulsion to trim the hedges in particular shapes yet we can imagine people pacing their floor while seething with burning resentment at the anti-artistic conspiracy that denies them the right to spread liquid on a wall.

Oh, the repressed self-actualization.
Oh, the humanity.

A House Is the World's Most Expensive Canvas

Customizing your home, whether rented or not, is understandable.

Less Expensive Solutions for Frustrated Artists:

• Even extremely customized/specialized decoration does not require paint at all: Most people would guess that a room with beige walls and pink drapes, pink sheets, a pink dresser, and a pink telephone is a girl's room.
• The fixation with hammering holes in walls, instead of the “tyranny” of placing your pictures on a mantel or bookcase, is equally perplexing. Given that houses often cost several times their “sticker price” (initial value) by the time they’re paid off, how many thousands of dollars per hole is that (more expensive than wildcat oil drilling?)?
• Compulsive painters could rent while changing professions to become house painters/remodelers to get paid for their hobby, or volunteer to paint walls at homeless shelters or Habitat for Humanity.
• Even if a landlord does not allow temporary color changes, the color-obsessed occupant might find that forfeiting the renter's security deposit is much cheaper than the million-dollar paint job of buying a house.

(Even a non-"jumbo loan" house can cost a million dollars after you add the mortage interest costs to the initial price: $400k @ 8% 30yr = over $1 million.)

Cheaper than a House:
Landscape painter Bob Ross' The Joy of Painting Basic Paint Set

The Myth of Landlord Color Tyranny

Some landlords let you paint and add picture holes. Some landlords let you repaint to a weird color as long as you return to a neutral color before you leave.

Homeowners Do Not Escape Color Tyranny

The irony is that homeowning is no different from renting and experts recommend that you the homeowner behave exactly like a landlord and repaint your purple kitchen to a neutral “landlord-approved” color if you wall to sell your home. This expert recommendation exposes the basic economic fact that color was never a landlord tyranny and always has been a customer tyranny.

Yes, the tyrant was YOU when you were the customer.

The homeseller is slave to the homebuyer.

The average American moves every 7 years (according to the real estate industry). The housing karma is that you were the tyrant when you were buying so you get to be on the receiving end when you try to sell.

Next: Payoff Mortgage v. Invest Stocks: Housing Myths Part 12