The Retired Investor: Can You Put a Value on Your Dog's Life?
Your elderly dog has arthritis. His breathing is difficult. He needs assistance to get up, and his bladder is failing. The vet bills are far higher than your own, and it is getting more difficult to pay them. "How much is too much?"
Some say there is a limit, others would be willing to go into enormous debt to prolong the life of their pet. The veterinarian technological and medical innovations of today make preserving your pet's life achievable. Vets offer plenty of ways to prolong life, even in cases of terminal illness.
Specialists abound who can offer chemotherapy, radiation, kidney transplants, drug trials, and much more. Given all these options, it is no wonder that the emotion that wells up in most of us is "save my dog (or cat), no matter the cost."
Pet insurance, given the expense of pet health care, should be the obvious answer, but it isn't.
The American Pet Products Association (APPA) says that 67 percent of American families own a pet. Roughly 70 percent of those families own a dog, 45 percent have a cat, and roughly one third have another sort of animal. However, less than 3 percent of all dogs in the U.S. are insured, according to the North American Pet Health Insurance Association (NAPHIA).
The most common assumption is that pet insurance is just not worth it. And if you only consider annual routine veterinary care that's probably true, since the average cost is between $200 and $400 for a dog, and roughly half that for a cat. In comparison, the average annual wellness insurance policy can cost $300 per year.
Pet insurance becomes "worth it," however, when illness and accidents come into play. Consider that diabetes in a cat once diagnosed and treated will cost between $240 and $360 per year. Heartworm in your pet can cost upwards of $1,000 to treat. Emergency room care, $1,000 or more. If your German shepherd tears an ACL, you are facing $3,300 to treat and repair it, a herniated disc in a Labrador retriever (my personal experience) will cost you more than $15,000.
The older your pet, the more health issues it will likely have. As your dog ages, they become susceptible to a variety of illness, injuries, and health conditions. Many of these can be life-threatening, painful, and extremely costly to treat. For example, the American Medical Veterinarian Association reports that almost 50 percent of all dogs over the age of 10 will develop cancer. The minimum cost to treat this condition can be $5,000.
You might wonder when your dog becomes a "senior." Smaller dogs live longer than larger dogs. As such, they qualify as seniors at 11 years of age. Medium dogs at 10, and larger dogs at 7. Some of the physical signs of aging are greying snouts, reduced energy, lumps and bumps that begin to appear, and periodontal disease (bad breath is telltale sign).
The average monthly cost of pet insurance premiums in the U.S. for elderly dogs is just under $120 a month with an annual limit of $5,000 and a $500 deductible. If you decide to sign up, make sure you study the pre-existing conditions clause. Many elderly dogs will have developed one, if not more, health conditions like arthritis that many insurers will not cover.
The older your animal, the less likely it will qualify for many coverage options and the more expensive the premiums will be. Some insurance companies won't cover hereditary conditions, which often manifest later in a pup's life or cover periodontal disease. Fortunately, there are various insurance policies tailored for older dogs, although you can expect the premiums to be steeper than those that aren't.
As for my own experience, it is true confessions time. Our dog, Titus, a loving, energetic chocolate Labrador retriever, passed a little over four months ago at 13 1/2 years old. My wife and I failed to purchase insurance for Titus. Over the years, we spent large sums of money on his health care. Arthritis, and a herniated disc, were his main symptoms. We tried everything including water therapy, massage, and acupuncture plus dozens of medications. In his last year, laryngeal paralysis, a condition common to elderly labs, foretold the beginning of the end.
The decision to continue to pay his mounting expenses, his almost weekly visits to the vet, and the growing cupboard-full of medications that had little to no effect on his condition was never in question. We knew there were surgical options that may have worked, but at what cost? He loved the water and surgery on his larynx would make it impossible for him to swim, or even dip his paw in the water. His arthritis became so crippling and painful that he needed to lay down every 15 feet on his walks.
Fortunately for us, our vet had a talk with us in April 2022. I say "fortunately" because many veterinarians are not trained to have frank conversations about terminal conditions of pets with clients. She advised us that it was time to end the increasing pain and discomfort that Titus was going through. She gave us permission to do what suddenly became obvious to us. We were so focused on keeping him alive and with us that we failed to consider his well-being.
What I learned was that "how much is too much" should not begin with your pocketbook, but with what is best for your dog, cat, or other animal. How badly will your pet's lifestyle be impacted by its medical condition or its treatment? Is your pet in pain and is it increasing? Remember, animals live in the now. They have no projects to complete, nor do they fear death like we do, as far as we can tell.
End-of-life decisions are traumatic and intense and there is no right or simple answer. In our case, Titus had to come first, and his passing was the best way we could express our love for him. As for the economics side of this equation, if we could do it all over again, (or if we adopt another dog), we will definitely purchase pet insurance. I advise you to do that as well.
The Retired Investor: No End in Sight for Airline Agony
Missing bags, canceled flights, stranded passengers, and interminable check-in times have made this summers' travel a nightmare. What's worse, the cost of travelling has exploded.
Consumers are paying an average 34 percent higher air fares this year versus last. The reasons why range from higher jet fuel costs, increased labor costs and sky rocketing demand among others. As the summer season progresses, it seems that the worse the experience gets, the more consumers are willing to pay.
If you watch the horror shows on the news, chaos abounds not only here in the U.S. but in the international airline system overall. Short comings in one location, whether it be from the weather, labor shortages, lost baggage or some other cause, has an increasing domino effect that impacts airports and airline schedules throughout the country.
As the system continues to break down, airports and airlines are besieged from all sides from irate passengers to an increasingly concerned government. Readers who have firsthand experience or may be even now caught in this web of travel turmoil might ask a simple question. "How did we get here?"
The origin of this disaster has its roots in the COVID-19 pandemic. As we all know, the coronavirus devastated air travel worldwide. By 2020, airline travel was down a whopping 70 percent. To put that in perspective, the 9/11 attacks reduced travel by a mere 7 percent. For the airline industry overall, how to survive was the chief topic of conversation within corporate boardrooms.
The industry answer -- reduce employees, slash pilot headcount, sell aircraft, and retire older planes. Top airline managements were ruthless in their headcount. Delta and American Airlines, for example, laid off 30 percent of their staff, offering buyouts, early retirements or simply letting people go.
The common assumption among airline executives was that it would take five or six years to recover their former traffic. As such, managements continued to reduce their operating expenses to the bone. But the coronavirus did not occur in a vacuum. The government, together with the pharmaceutical sector, managed to develop several effective, COVID-19 vaccinations. That breakthrough reversed the six-year timetable.
The consumer suddenly became willing to fly. Travel demand turned around far faster than anyone expected, thanks to the government's vaccination efforts. The industry was caught completely off guard. But that was more than a year ago. Why is the industry still woefully unable to accommodate the surge in demand?
The scarcity of labor, which is plaguing the nation in general, is hurting airlines far more. Let's start with pilots. An army of experienced, older, industry pilots decided to retire, (or were asked to retire) and are gone forever. Hiring and bringing on entry-level pilots requires years of training.
In addition, there are myriad regulatory requirements such as clocking at least 1,500 hours of airtime before being allowed to pilot a commercial airplane. Oh, and by the way, those who train these newcomers (instructors and flight simulators) are also in scarce supply.
Hundreds of thousands of workers from cabin crews, to ground staff, to baggage handlers were also let go. Many of those ex-employees have either found new jobs or have no wish to rejoin an industry that kicked them out during the worst crisis this nation has seen in a hundred-plus years. Many of these former employees don't see the upside in a job that once again exposes them to the mutations of new COVID strains. They also have no wish to face armies of angry passengers in an industry where job security is no longer guaranteed, if it ever was.
Traditionally, airlines have depended on redundancy in their system to handle unpredictable disruptions. Think of it as insurance that if anything goes wrong, a back-up staff is there to handle it. Without the staff, airlines are at the mercy of every sudden storm, pilot absence or COVID-related sick day. Today, a sudden cancellation can cascade throughout not only one airline, but throughout the entire system.
Compounding the industry's labor shortages, are shortages of TSA and customs personnel, as well as air traffic controllers. This results in long lines that delay check-ins, which delay departures and arrivals, which keep planes waiting, and incoming passengers on planes, sometimes for hours.
I wish I could say that the chaos in air travel will pass with the summer travel season. The problem is that the labor shortages the industry faces cannot be solved overnight. Competition for workers will persist in the months ahead. Industry experts say the problems besetting the airline industry will continue into 2023.
The Retired Investor: Local Gas Stations Suffer From High Fuel Prices
Given the price jump in gasoline, you would think owners of the corner gas station are raking in the money. Unfortunately, the opposite is occurring, especially now that pump prices have been declining for more than a month.
"The national average price of a gallon of gasoline has dropped below $4.50 per gallon after touching $5 as recently as mid-June," according to Berkshire Money Management's Allen Harris. He goes on to say that despite the 10 percent decline, gas is still up 9.3 percent over the last three months. That brings the year's gain thus far to 36.8 percent
In an environment of higher gasoline prices, consumers are hurting. Drivers naturally tend to blame the most visible object of their distress, which is their local gas station. At the same time, gas station owners are also the target of President Joe Biden, who is accusing them of profiting from higher gas prices. Four California cities are so angry with gas stations that they have banned the opening of new gas stations.
The truth is that most gas stations tend to drag their feet in raising prices. They know that most consumers have no loyalty when it comes to filling up. The lowest advertised price usually wins the day and higher prices mean lost customers. A look at the typical owner's business model explains what is going on behind this energy crisis.
The way it works most often is that when a gas station refills its tanks, it purchases many weeks' (if not months, in the case of diesel) worth of fuel at a single high price. And let's say they did so in mid-June when gasoline was over $5 a gallon. If prices begin to fall (as they have this month), the gas station is forced to sell the product at below its' own cost.
Most gas stations barely turn a profit on their core product at the best of times, and when oil spikes, they may even take a loss on it. Gas stations, according to IBISWorld, an industry market research firm, make an average net margin of 1.4 percent on their fuel. A lot of operators set their profit margins as a fixed rate, which only amounts to a few cents at best. Remember too, that when gas prices climb, so do the fees the owner must pay out to credit card companies, since their fees are set on a percentage basis. Rising gas prices after credit card fees can easily erase the stations' profit margins altogether.
The facts are that station owners make most of their profits on sales of food, drinks, and alcohol (where sales are legal). In this scenario, think of gas as a loss leader. The National Association of Convenience Stores believe that 44 percent of gas station customers go inside the store. One in three customers ends up purchasing something. Gross margins on certain items such as candy, health and beauty items can be as much as 50 percent. The trend toward selling more prepared foods, which have higher margins than the usual fare of chips, Lotto tickets, coffee, etc., helps as well.
Many readers believe that big oil companies own most gas stations, so why feel sorry for them? All those Shell, ExxonMobil, and Chevron signs we pass on the freeway are proof positive, right? Wrong. Most major oil companies have long-since backed out of the retail business because selling gas isn't profitable. The reality is that 80 percent of the gas bought in the U.S. is purchased from a franchised convenience store that is individually owned, no matter what brand of oil they may sell.
It may surprise you to know that the number of gas stations has been in a decline for decades. Higher oil prices are one of the chief causes of their demise. The spike in energy prices in 2008, for example, forced hundreds of gas stations out of business. Further competition in the form of big box stores that can purchase fuel in bulk at lower prices has also eaten into the mom-and-pop stores' market share.
Finally, the rising number of electric vehicles in use now and their growing popularity into the future will also reduce the number of stations. Despite the EV threat, few stations have made the costly decision to install EV charging units, which can cost more than $100,000 each.
So, the next time you fill up, while clenching your teeth as the dollars mount up, just remember that it is not always the gas station owner who is gouging you. In truth, the object of your anger is misplaced. Look half a world away, where war rages, and cartel quotas dictate the price we pay for oil.
The Retired Investor: Public Sector Can't Compete in Tight Labor Market
State and local government employees are essential in delivering everyday services to the American public, but the government's labor force is understaffed and has yet to recover from its pandemic lows. The reasons range from lower pay and less advancement to little flexibility in areas such as remote working.
Private-sector jobs have already surpassed pre-pandemic levels, while in the public sector, government employers are still looking for more than 664,000 workers with little success. This may sound like one of those "so what" kind of issues but consider this.
Public employees operate the nation's trains, subways and buses in addition to delivering essential services like health and unemployment insurance. Also on the list; safety-net services such as housing and cash assistance, protecting the nation's water, food, and air as well as combating infectious diseases. And let's not forget the increasingly difficult duty of teaching and caring for our kids in state universities, community colleges, and K-12 education.
I focus on teachers especially since jobs in education account for most of state and local employment, according to the U.S. Census Bureau. Teaching salaries have the reputation of being notoriously low in the best of times, which these are not.
The ongoing pandemic, now in its third year, provides a clear and present infection danger for all teachers. Throw in the increasing number of school shootings, and the tension that goes along with it daily and you can understand why teachers have been retiring in droves with few replacements.
The increasing political pressure from outside the classroom on everything from facemasks, to books, to what lessons plans will be least likely to cause turmoil and/or outrage among parents adds to the teacher's list of grievances. No wonder, that, with a laundry list like that, it becomes even more difficult to woo young teachers for $50,000 a year when the same graduate can earn twice that and more in the tech industry.
Workers considering employment in areas like education, the postal service, etc. are being wooed away in this tight labor market by hefty signing bonuses and faster wage growth in the private sector, which becomes especially important in an inflationary environment.
You would think the simplest solution would be to raise wages for government employees just like the private sector has been doing. That turns out to be a rather difficult proposition. In the past, state and local governments struggled with a combination of cutbacks in federal spending (depending on who was in office), as well as low tax receipts from time to time. This made budgeting difficult and somewhat unpredictable.
Which brings us to government budgets. For the most part, it is the budget that determine salaries for public workers. Budgets, as we know, are ponderous things that take a long time to pass, and almost always involve political horse-trading. Raising wages for government workers, therefore, is a hot potato that few politicians are willing to tackle unless they must.
Another disadvantage in finding workers is that government work is not as flexible. Working from home doesn't cut it for a bus driver, police office, or letter carrier. Therefore, hybrid and remote work options just aren't in the lexicon of most state and local governments. So, who suffers the most from these lower wage jobs?
In the overall economy, state and local governments account for about 12 percent of employed people. Most of these workers are women. Workers of color, particularly Black and American Indian employees, are also heavily represented in these industries. As such, public sector employment has provided economic security for women and minorities.
Is there a solution to this employment problem? Probably, but not in the short term. However, as the wait time between your bus or subway stop lengthen, the lines at your unemployment office, or at the tax assessor's office trail out to the sidewalk, and your mail is two weeks late, we will notice and complain. At some point, if we yell loud enough, things will change, but I suspect not before they get much worse.
The Retired Investor: China Tariffs on Deck
The Biden administration is wrestling with whether to ease some of the Chinese import tariffs on billions of dollars of Chinese goods. If they do, it would mark the first step in reconciling the trade differences between the world's two largest economies and could even nudge down the inflation rate.
The trade war is now over four years old and substantial tariffs remain. "To what end," some may ask, as certain deadlines approach. The first tranche of the Section 301, China imports tariffs on $34 billions of goods, is set to expire this week. Another $16 billion worth of tariffs will expire on Aug. 23 followed by $100 billion of tariffs on Sept. 4.
You may recall that back in 2018, former President Donald Trump imposed a series of tariffs on a host of Chinese products totaling more than $450 billion. In response, China imposed their own tariffs on American goods. From there, as the rhetoric reached new heights, each side escalated the tariffs, encompassing more and more goods at higher and higher penalties.
Since China represented the United States' largest agricultural export market, China focused their retaliatory tariffs in that area. The U.S. Department of Agriculture found that the tariffs reduced U.S. exports of agricultural products by $27 billion from 2018 to 2019.
The damage ultimately was so bad that the federal government was forced to give farmers nearly $30 billion in taxpayer money just to compensate for lost sales to China. Overall, the tariff war caused U.S. exports to fall by 9.9 percent, while reducing GDP by 0.04 percent, according to the National Bureau of Economic Research.
The tit-for-tat escalation ultimately led to a "Phase One" trade deal between the two countries, signed with great fanfare by Trump in January 2020. The agreement required China to sharply increase its purchases of U.S. goods as a precondition for the president to remove the new tariffs. The agreement was a total flop. China, during the first two years of the deal (2020-2021), purchased only 57 percent of its commitments. China purchased $289 billion of U.S. goods, instead of the $502 billion promised.
A partial explanation for such a big miss was the COVID-19 pandemic, which affected trade between almost all nations. In addition, supply chain disruptions had a meaningful impact on other U.S. products such as automobiles and aircraft exports. Weakening demand for imports overall, as China's economy declined, has also been a contributing factor.
Bottom line: if one looks at trade between the two nations overall, China's purchases are below the level they were before the trade wars began.
The United Nations Conference on Trade and Development found that the trade war was simply a lose-lose for both countries. The tariffs were supposed to protect American industries, but they have hurt the U.S. economy instead. If there had been no trade war, U.S. exports between 2018 and April 2022 would have been $129 billion more, according to a Washington-based research group, Americans for Free Trade.
Unfortunately, the Phase One agreement did not end the tariffs, but only prevented them from going higher. The average tariffs on goods affected is still about 20 percent on each side. Not only did the tariffs on Chinese parts, components, and materials not make our manufacturing sectors stronger and more competitive, it also did the opposite.
Our companies needed those Chinese intermediate products (now on the tariff lists) to manufacture finished goods here. Companies found that without them, competing with companies in Japan and Europe, which continued to have access to those cheaper Chinese inputs, made our products more expensive in the open market. Our companies continued to lose market share globally as a result. Those losses continue today.
Some may question why President Biden has continued Trump's misguided policies, despite the damage it has caused the U.S. economy, while doing little to hurt China's economy. The simple answer is politics.
Being "tough on China" is a popular stance among Americans, even if it means a weaker economy. If you throw in China's growing authoritarianism, suppression of human rights, oppression of minorities, and military ambitions in Asia, the Biden administration would need some strong counter arguments to justify an easing of tariffs.
Given the rising inflation rate and cooling economy in the U.S., President Biden may now have the political cover to roll back some of those tariffs. President Biden is hoping that reducing tariffs would lower the costs of everyday merchandise to consumers. Unfortunately, economists are expecting that tariff reductions will only have a modest impact on inflation, but in my opinion, every little bit helps when inflation is topping 8 percent.
This week, the U.S. Treasury Secretary Janet Yellen, and China's Vice Premier Liu He, held talks focusing on economic policy and relieving global supply chains. Words such as "pragmatic," "constructive," and "substantive" seemed to indicate that some movement on tariffs is in the offing. Let's see what develops throughout the week.