Chapter 6: Financial Planning

Thursday, December 19, 1968

Surprisingly, not much was said about my testing out of Algebra 1. Those who noticed me skipping out on the classes assumed I was dropping out of the class, not burning ahead. It would be more noticeable in January, when I began sitting in on some of the Algebra 2 classes. Mrs. Bakkley’s plan was for me to skip out for about a month, studying on my own to catch up, and then to audit the class towards the end of the spring semester.

Otherwise, things went along quietly. Eighth grade English and Social Studies were abysmally boring, as always. They had been before. We didn’t move ahead of the norms until we got to high school in those subjects. General Science was much like before, and Mr. Rodriguez was just as interesting. I still found chemistry to be interesting - after all, I had made it a career once before - but now had no burning desire to do so again.

Gym proved curious. Before, I had suffered from the same body anxiety and nervousness as any other little boy. I often tried to skip out on showers after gym, and my locker smelled unbearably atrocious. Now, I just didn’t care if anybody saw my scrawny little ass, and if anybody commented on the size of my pecker, I’d just ask them why they were looking. I also cleaned my shit out of the locker and took it home to wash. The EPA would have approved, if there was an EPA at the time; it wouldn’t be invented until after Nixon took office.

My physical training program had begun paying some marginal dividends. I could run almost three miles now, and if I wasn’t the world’s fastest runner, I could do so without embarrassing myself or tossing my cookies all over the place. I decided it was time to learn self-defense.

Monday, at dinner, after dessert, I brought it up. Suzie had already been excused along with Hamilton, but I stayed at the table. “I want to learn self-defense.” I announced.

Mom looked startled at that, and Dad said, “I thought your new plan was to run away?”

“Well, what if they catch me?” I replied, earning a snort from him and a frown from my mother.

“Did you have something specific in mind?” he asked.

I nodded. “I don’t know if you remember him or not, but Lance Miyagi was at Hampton with me, and his father teaches karate or something up on York Road in Timonium. I figured I could see about that.”

Hamilton had been spying on us from the kitchen. Laughing, he came through the doorway. “You’re going to learn karate?” He kept laughing and started waving his arms around in giant fake karate chops.

“I may use it on him,” I muttered.

“Hey Suzie, Carl wants to learn karate!” Suzie came running up the stairs and the pair of them jumped ludicrously around the living room chopping and kicking at each other. Mom and Dad yelled at them to knock it off, which only ended when my idiot brother connected and hit her arm. Suzie started crying and Hamilton got smacked by my father and both got sent to their rooms.

“Well, that doesn’t seem like a very good idea, now, does it?” asked my mother in her most disapproving voice.

“Mom, it’s not my fault he’s a jerk. Why did you even have him? I mean, you got it right the first time!”

Dad laughed at this, and Mom pursed her lips. This was a recurrent joke around the house. I would say that they got it right the first time and how can you improve on perfection. Suzie would say it took them three tries to get it right, and they were able to stop after she came along. Only Hamilton couldn’t say anything, stuck in the middle like he was.

“I don’t like the idea of you fighting. It’s not right.”

“Mom, it’s not fighting, it’s learning how not to fight.” That made no sense, but Mom wasn’t big on logic to begin with. Reasonably smart lady but couldn’t pass a logic course if her life depended on it.

Dad agreed to take me up to the Miyagi school after the holidays, at least to look around. Unsaid but implied was that I was going to have to figure out how to pay for any lessons. He certainly wasn’t going to cough up any cash. This evening, however, the answer to that problem had come through. Dad came home early, and Mr. Steiner followed him. Ham and Suzie were sent to their rooms, and my parents and I sat down in the living room with him. It was a very brief meeting.

The lawsuits we had brought against the other students on the bus had been settled, much like I had predicted, but even faster than I thought. He had been barraging them and their lawyer with letters, but that was about it. His only real time and trouble was the day he filed the lawsuit and had them all served with papers. He opened his briefcase and brought out a pile of papers that he had my parents and me sign, and then handed me a check for $20,000.

This was some serious coin for the day. Dad never said anything to me, but it could well have been more than his annual paycheck, and he was a senior engineer at the company. It could certainly have paid for four years at most colleges for me, and that was the plan immediately announced. Mom decided to put it in their savings account.

“I think I’d rather put it in my savings account,” I announced.

“Don’t be silly. We certainly aren’t going to let you have it. It’s for the future,” she replied.

Steiner raised an eyebrow at that, but I just calmly answered, “According to the check, it’s my name on there and not yours. I have no problem with putting it in a savings account to start with, but it will be in my name.”

“Well, I never!” She looked at my father irately. “Are you going to just sit there? He can’t keep this money; he’ll just spend it!”

Dad didn’t agree with her automatically. Instead, he looked at me and asked, “What did you have in mind?” This caused my mother to issue an outraged cry.

I ignored her and answered, “Well, a savings account would be adequate to start with, but I know I can get a much better rate of return at a brokerage. The equity markets in general have been averaging somewhere around nine to ten percent for most of the last decade, which is quite a bit higher than a savings account. If I am saving this money for the future, I should make it work for me.”

Mom continued to fulminate as Dad and Mr. Steiner sat back and appraised me. Finally, Dad said, “Shirley, settle down. He’s making sense.”

Mom quieted down, not too graciously, and Dad then asked, “Anything particular in mind?”

I did have some thoughts, but simply said, “Not initially. Probably a general stock fund, perhaps something that mimics the Dow, or a money market account. Eventually, though, I see considerable opportunity in commodities.”

That stumped him. Steiner broke in and asked, “Commodities? Like wheat or orange juice?”

“I was thinking more like oil.”

“Oil!”

“You’re crazy!” remarked Dad.

I grinned. “Crazy like a fox. You wanted to know what a mathematician can do? Here’s an example of probability theory as applied to financial analysis.”

“What in the world are you talking about?” asked my perplexed father.

The lawyer, however, said, “This I want to hear. He was right about the lawsuits, after all. Go on, Carl.”

I smiled. “Okay, consider the following - the Arabs hate the Jews, right?”

“The Arabs and the Jews? What in God’s name are you talking about?” thundered Dad.

I just held up my hand. “Bear with me. The Arabs hate the Israelis. That’s a given. In the last twenty years they have fought three separate wars. The first was in 1948, the second was in 1956, the last one was last year.”

“During which, the Israelis handed the Arabs their heads on a platter,” remarked Steiner.

“Indeed, they did, but does anybody here think they have made up and are friends? Or do you agree that everybody hates each other’s guts?”

“Agreed.”

I continued. “Okay, so let’s apply probability theory. From 1948 to 1956 is 8 years. From 1956 to 1967 is 11 years. The average separation between wars is 9.5 years. With me so far?” My father and Mr. Steiner nodded their heads. Mom was totally lost and stared at me in disbelief. “So, for simplicity’s sake, let’s say they average 10 years apart. That would mean the odds of having a war in any given year are 10 percent. Once you have the likelihood of the war determined, it is possible to apply probability theory to subsequent actions.”

“Keep going,” said the lawyer.

“If we assume a ten percent chance of a war in any given year, then you have a ninety percent chance of avoiding a war in any given year. So, now, one year later, there was a ninety percent chance of not having a war in the Middle East.”

“Which we didn’t have,” said Dad.

“Right. So, what are the odds of not having a war next year?”

“Like you said, ninety percent.”

“And the year after that?” I pressed.

“Ninety percent, like you said. Why? You disagree?”

“Quite. The odds of avoiding war for two years in a row are ninety percent times ninety percent, or only eighty-one percent. The odds of avoiding war for three years in a row are .9 times .9 times .9, or roughly seventy-three percent. Four years works out to sixty-four percent, five years is under sixty percent, and at six years we are barely at a fifty-fifty chance of not having another war between Israel and its neighbors.”

“So, you’re saying that by 1973 there is a fifty-fifty chance of a war starting between now and then,” asked Dad.

“Precisely.”

“Okay, but so what? They hate each other. We already knew that!”

“Leaving aside other considerations, the Arabs are probably going to lose again, just like in every war they’ve had before. And, like in every other war, they will blame everybody but themselves - specifically the United States and Western Europe. The last time they had a war, they seized the Suez Canal, but now what can they do? What is the one thing that the Arabs have that everybody else wants and that they can take away from us?”

Suddenly a light went off in both Dad’s and Mr. Steiner’s heads! Almost as one, they both whispered, “Oil!”

“Precisely. What is going to happen the next time the Arabs get frisky and decide to take on Israel? We already know it is going to be sometime in the next five to ten years, and we already know the Israelis will clean their clocks. The one single thing the Arabs can do is shut the spigots off. The price of oil will go through the roof.”

“So, we’ll just pump more from here. There’s still plenty of oil in Texas and Oklahoma,” countered Steiner.

“It doesn’t work like that. Oil wells aren’t like faucets you can turn on and off. Dad, you’re an engineer, you know it’s not that simple.”

Dad looked at us thoughtfully and answered slowly. “Uh, this really isn’t my specialty, but he’s right. Besides, the reason we went to Arabia is because it’s cheaper than drilling here. If we start drilling here again, the price is going to rise anyway.”

“So, we stop burning oil in power plants and burn coal or something,” countered Steiner.

“You can’t burn coal in an oil-fired power plant. You’d have to spend a fortune and six months just refitting them. That much I do know,” replied Dad.

“And you can’t burn coal in your car engine. What happens when gasoline that now costs 28¢ a gallon costs a buck or more?” I added.

“The government would never let that happen!”

“I don’t know,” commented Dad. “This actually makes a lot of sense, in a crazy sort of way.”

“All I’m saying is that if I put the money in the stock market rather than just a bank, I’ll have a way to do better than whatever they pay on a passbook account. There are any number of events that can happen, any one of which can affect prices on stocks or bonds or commodities, but you can’t do anything unless you are willing to play the game.”

Dad eyed me. “Is that what you want to do? Become a stockbroker?”

I just laughed at that. What an impossibly boring job!

Mom decided to put her foot down. “You aren’t actually going to allow this insane plan, are you? You want to gamble on wars and killing? Charlie, I absolutely forbid this!”

“Shirley, settle down.” Dad faced me. “All right, I can see the idea of investing in the market, but you’re only thirteen. You’re too young to do that.”

“So, we put your name on the account. Not Mom’s, she’s obviously against the entire idea.” Mom started squawking again when I said that, causing the three of us to wince. “I’ll make the decisions. Is it my money or not?” Mom’s squawking got even louder.

“Shirley, for the love of God, shut up!” Dad rarely, if ever, yelled at Mom, and the sheer shock of it made her speechless. “He’s right. It’s his money. I’ll keep an eye on it.”

I stuck my hand out. “Deal.”

“Deal. But you better be right, or I’m going to have to bunk with you down at the poorhouse.”

Mr. Steiner laughed at that and took his leave. “You really are amazing, Carl. Don’t forget I want you in our Explorer Post next year.”

Chapter 7 »