Cover the children's ears, folks, it's a controversial idea

http://www.cnn.com/2009/POLITICS/09/04/obama.schools/index.html?iref=mpstoryview
Cnn reports:

The White House said the address, set for Tuesday, and accompanying suggested lesson plans are simply meant to encourage students to study hard and stay in school.

Many conservative parents aren't buying it. They're convinced the president
is going to use the opportunity to press a partisan political agenda on
impressionable young minds.

"Thinking about my kids in school having to listen to that just really
upsets me," suburban Colorado mother Shanneen Barron told CNN Denver affiliate
KMGH. "I'm an American. They are Americans, and I don't feel that's OK. I feel
very scared to be in this country with our leadership right now."

Okay, I'm probably preaching to the choir, but, seriously? What has happened to America - and particularly to conservative Americans - that we can no longer tolerate having our children exposed to anything but the parents' own ideas?

Fer crying out loud, President Obama is OUR president. All of us. When libs were faulting Bush for Iraq, right wingers did plenty of hand-wringing about the importance of honoring the President, but when the vote is on the other foot, parents are upset at the idea that their children might actually hear a message from the President? Please, please tell me this is a joke. The President is the leader of our nation and he deserves our respect - not necessarily our agreement or affection, but at least the courtesy we would extend to a slightly batty elderly relative - out of respect for our nation. And if we can humor crazy Aunt Edna, then I think we're capable of treating the office of the Presidency - and, by extension, the person who holds that office - with enough respect to recognize his right to believe as he believes, even when we disagree with him. In doing so, we teach our children a little something about behaving appropriately and honoring our nation - all the more so when we teach our children to respect the President we may not like.

Within our free society - the free society that ultra-right-wing and ultra-left-wing conservatives claim to value - there is room for difference of opinion. You might believe that Ben & Jerry's is the best ice cream ever made, and I would argue that homemade, fresh, natural ice cream is the best ever made. It's okay - we can agree to disagree. When we teach our children to recognize and respect disparate (and sometimes wrong) points of view, we raise good citizens. When we stick our fingers in the kids' ears and yell "lalalala I can't hear you," we fail to teach our children the important lessons of maturity. When our kids are exposed to bad ideas, we can teach them the all-important ability to measure each claim on its own merits, a skill that will protect them when exposed to truly bone-head ideas like street racing, playing russian roulette, becoming young parents, and all manner of dangerous youthful inclinations.

Listen up, American extremists (lefties AND righties!), it is possible for children to see or hear an idea without accepting it at face value. That is why nature gave parents the ability to talk and gave children the ability to listen, understand, and consider. If your children are exposed to ideas that run counter to your beliefs, then talk to the kids about it. Explain why you believe differently. Explain why you hope they will grow up agreeing with you on the topic. If you are right, your kids will probably recognize that you are right and they will probably agree with you.

Yep, that's right folks, children can watch people kiss or discuss sex on TV and still think "hmm, that's not right for me at my age;" they can watch their peers get high and say "I think that's a bad idea, and I'm not going to join in;" they can listen to the President and think "I respect our nation's ideals, I respect the office of the Presidency, and I am still going to fight overly liberal policies that I believe are detrimental to the future of our nation." Parents have the ability - and the responsibility - to help children recognize differences of opinion, different religions, different cultures, and different values and make the best decisions that the child can make.

Chicago taxis

We took a working vacation, with 6 days per week in classes. It was a busy, busy trip. We were always running, and we took taxis almost everywhere.

I have lived and/or worked in several major cities: Honolulu, Baton Rouge, San Francisco, etc. I have visited many cities. I have never enjoyed taxi service like this. We stepped out the front door of the hotel, put a hand in the air, and the tax was at the curb before we got there 98% of the time. We came out of a grocery store into a downpour, and retreated to the covered entrance. I saw a taxi in the street, waved once, and the taxi pulled right up, alongside the covered entrance. Day and night, when we wanted a taxi, it was never more than a few minutes' wait to find one.

Sure, taxis are pricey, but so are cars. It was faster to take a taxi than to pull our car out of the parking garage, pay the parking fee, drive to our destination, and find parking there. And taxi fares were generally comparable to parking fees. The ride was... interesting. I have seen racecar drivers drive less aggressively. The cab drivers whipped from lane to lane, accelerated hard, braked hard, and actually managed to keep aware of what was going on around them. We heard an interesting assortment of music from around the world.

We have considered moving to Chicago. The convenience of taxis is certainly a draw. Nowhere else have I had such an easy time finding an available taxi, on any street in any neighborhood.

Back from vacation... Do you believe in miracles?

I've just returned from a working vacation in Chicago. Because of the dog, we drove to Chicago and back. As we drove out of Salt Lake City, the Interstate had a large gap between the eastbound and westbound lanes. Two lanes in each direction with a valley about 8 lanes wide in between, speed limit was 70 or 75 mph. A car on the eastbound side spun, flipped into the dirt between eastbound and westbound, and rolled all the way across the valley, finally landing, wheels down, on the westbound shoulder. Not knowing if the car would travel into the westbound lanes of traffic, we came to a complete stop and pulled onto the shoulder virtually parallel with the other car. A young woman was driving, alone, her rear hatch and backseat fully loaded with her belongings.

She was able to walk away from the car - I'll never know if she suffered shock or injuries from the tumbling, but her emergence from the accident, relatively unscathed, was amazing. The windshield shattered, but stayed intact and fell clear of the car. The driver did not even appear to have cuts or scrapes. The car tumbled fast enough that most of the forces pressed in the sides, not the roof of the car. The car landed wheels down, on the shoulder of the opposite lanes of traffic, but fully on the shoulder and fully clear of the traffic lane. Even that was a stroke of luck - the nearest ambulance service was almost certainly located near Salt Lake City, and she landed on their fastest path of approach.

An off-duty EMT was traveling behind the accident, and stopped to render aid, with first aid kit in hand. Traffic was light. Several cars stopped, and we were still close enough to the city that cell phone coverage was excellent. No one who stopped knew exactly where we were - with the EMT present and the driver in decent shape, we drove on to find a mile-marker and call it in to 911. Apparently, her tire blew out and she lost control of the car.

Late august, loaded car - probably a student returning to college. Despite all her good fortune in surviving the accident, it was probably a disaster for her. It didn't look like the kind of car someone would carry comp and collision coverage on, and even an insurance deductible can be a catastrophe for a college student. Some of her belongings fell out beside the interstate - not much, but if all your important belongings fit in your car, a little bit of stuff is a lot. I hope she is safe and well and able to complete her travels with minimal disruption.

You won't get eaten at S.F. Zoo anymore, but you won't have any money left over for popcorn, either

San Francisco Zoo had a little "oopsies!" last year when a group of teens/young adults *allegedly* taunted a tiger that had never climbed out of its enclosure before. Whether they taunted or didn't taunt, the tiger found something especially delightfully delicious about that particular trio and did something no San Francisco tiger had ever done before - climbed out of her substandard enclosure and went a-huntin' for a taste of Dhaliwal*. This was not the economic high-point of their year. The zoo is now running a deficit.

It got me wondering - how bad are zoo prices in San Francisco? Well, not much worse than a movie, but, then again, the zoo pays their stars in grass, hay, kibble, mice... Here's how some zoos stack up:

City Adult/Child admission
(Generally, children under 3 are free, children over 10-13 are charged as adults)
San Francisco:
Sacramento: $9.50/7
San Diego: $35/26
Portland, Oregon: $10.50/7.50
Bronx, NY: $15/11
Queens, NY: $7/3
Boston, MA: $13/7
Minnesota: $16/10
Columbus, OH: $12/7
Chicago: Free
Washington D.C.: Free
Topeka: $5.25/3.75

You take an upper class family, they can take their kids on Safari. A middle class family can send their kids to a school with regular zookeeper visits. But poor family can raise a little genius, too, because they have access to so many stimulating experiences in American cities. Museums, Shakespeare in the Park, matinee concerts, libraries - this is the American dream, rags to riches on nothing more than pluck, perseverance, determination, sacrifice and enough love for a parent to get off their butt and schlep around to cultural experiences that narrow the gap between rich and poor. America became a leader, a beacon to immigrants from throughout the world - because we offered equality of opportunity, not because we offered really good food stamps.

And God bless 'em all. How many privileged middle class families do you see that can't be bothered to slap their child and say "you say please when you order the Barista to bring you a latte, young man! And pull your pants up!" You show me a young, poor, struggling single parent spending evenings and weekends parenting, and I'll show you 5 entitled middle-class or better families that think parenting is a fun hobby, one that should never be corrupted with discipline, responsibility or, you know, parenting.

I am a bit saddened the cost of taking children to the zoo is so high in so many cities. One of the beautiful facets of American life is that we make a tremendous amount of cultural and educational experiences available and accessible for all families. I'm not saying the government needs to guarantee every kid an annual zoo pass. A lot of zoo funding comes from committed donors, fundraisers, and volunteers. I think the 1 adult+1 child=$20 zoos should really look at their financial management and their business model. I'll tell you what, if I can walk into the zoo for free when I have a free hour, I am more likely to expose my child to the wonders of the world beyond our hometown - and I am also more likely to buy my kid the $5 ripoff bottled water, or the annual membership or the full retail priced book in the gift shop. You still get the money, but we all get to feel better about it, and the poor families still get to stimulate their children's intellectual growth.


* Yes, the Dhaliwal's friend, a young man reported to have been a pillar of society whose biggest flaw was hanging around with friends who had been arrested before and were arrested again, he is dead and his parents are now mourning the loss of their beloved son. I am sorry for their pain, and I realize that my opening paragraph is in somewhat poor taste with respect to those parents' feelings. But my BS meter really dislikes implausible stories, and it loathes implausible stories that then result in fat payouts to the people spouting the implausible stories, especially when said payout is likely to be used to pay criminal defense attorneys.

CaptchaKu Haiku by Captcha

I seem to get interesting word combinations from Captcha. Today's entry:

Morning Upon
Taiwan Periled
Overlooks Inquiry
Following Finding
Electoral Complete

Although, perhaps it meant Iran.

Stress Tests: An Abundance of Caution, or a Warning?

Have you noticed that the government has been giving banks "stress tests" to determine whether the banks have enough capital - for what? The stress tests supposedly measure banks' are sufficiently capitalized to survive a severe and prolonged recession. Why on earth would we test banks' ability to survive a severe and prolonged recession if we believed that the economy will improve by year's end?

It's a little reminiscent of the logical inconsistency between banks needing TARP bailouts last winter, and reporting record profits by spring. Am I the only one who feels like we've fallen into bizarro world?

Perspective, News, Media

I think the single most important development in the last century is the widespread and nearly instant access to news, entertainment, and information from throughout the world. Television started it, cable TV advanced it, and the Internet strapped a rocket to its butt and lit the fuse. One odd little consequence of media proliferation is the selection of stories. Coupled with vast population increases, information sharing has changed drastically.

A hundred years ago, a person in a small town got most of their local news over the fence (gossip), and got their business/politics news from the papers. The proportion of stories would be fairly similar to the proportion of events that impacted a community (albeit with a slight emphasis on scandal and a bit of inaccuracy in gossip). So if one house was burglarized, the average person heard about one house being burglarized. If a house in another town was burglarized, that burglary would be reported in their local news. When I was growing up in the 1970s, parents worried about their children being stolen. Was it because child disappearances were an epidemic? No. It was because child disappearances seemed like an epidemic when every news-watching person in every town in America heard about virtually all of the (still rare) child disappearances happening throughout the country. Television made all news feel local.

Then you throw population increases into the mix, and the world feels mighty dangerous, indeed. Even if child disappearances held steady at (I'm totally making this number up out of thin air) 1 per 10,000 population, every time the population doubled, that would mean that the number of cases doubled. In 1930, our population was less than 3 million; today, it is over 300 million. That's 100 times more people. If long-term trends continued unchanged, that should represent 100 times more crimes, 100 times more illnesses, 100 times more divorces, 100 times more marriages and church picnics and everything else that is, generally, proportional to population.

Our perception of risk has jumped off the deep end. Some kid shoots himself while playing with grandpa's gun and the story is different through the TV lens. A hundred years ago, if you heard over the fence that little Johnny shot himself accidentally, you knew little Johnny and you knew he was an idiot. Now, you hear about it on TV and the reporter doesn't mention that little Johnny is an idiot, and a lot of people respond with "we need a law to keep that from happening to my kid!" Pretty soon, we have a lot of laws to protect normal kids from abnormal risks, and we get into a legal game of one-upmanship. "By golly, if it's illegal to talk on a cell phone while driving, it out to be illegal to ____ [fill in the blank]. That's WAY more dangerous!"

Perspective has been completely destroyed. Our brains have to filter out information just to survive (imagine if you couldn't ignore all of the conversations at other tables in a restaurant), and we alternately filter out anything that affects "the rich," "the poor," "minorities," "majorities" and various groups we aren't in, we filter out anything affecting an irrelevant number of people (only 1,000 dead? that's not news), and then we filter in anything intolerable-but-possible (children dying? I couldn't stand to have my child die!).

Maybe every newscast should end with a shot of perspective. "20 people have been diagnosed with the possible killer flu. In other news, 299,999,935 Americans probably don't have killer flu. 299,999,600 Americans have not been kidnapped, and 140,000,000 Americans did not pay any Federal income tax this year. 298 Million Americans have not been killed or seriously injured in an industrial accident, while 400,000 Americans have been laid-off as their jobs shipped to nations that do not try to outlaw every possible danger. Thank you, and Good night."

Remodeling: Contractor Progress Payments

We've run into a bit of a problem with our contractor. It seems that, despite us telling him many times that we want everything done to code and we want all necessary permits, he doesn't like to pull permits. His contract - his boilerplate contract, not ours - says that he will handle all the permits and all the permit costs. So he called us the day before beginning work and asked if we wanted a permit for the job. Of course we do. Say what you will about the government's right to control construction of our house, we feel that the prudent thing for us to do is to comply with the applicable laws. If the law says we need a permit, we want a permit.

So the contractor demanded the permit fees. We pointed out that the contract says the fees are included, and that we agreed on a price in the belief that, as the contract says, permit fees are included. Consequently, the contractor feels aggrieved and has been difficult to work with. If I knew a week ago what I know now, I would have hired someone else. And I'm all the more peeved because we selected the contractor who presented the best quality quote, not the lowest price. In the process of dealing with the "forgotten" permit, the contractor breached our trust. His subsequent attempts to cut corners on the job have further damaged our respect for him.

Today we made another progress payment. We have a big mess, bare wall studs, exposed wiring, partial plumbing, a hole in the floor. Our contractor now has 65% of the contract cost in his pocket. I'm feeling a bit nervous. I made a mistake in agreeing to front-load the progress payments so much. For example, we made a large payment upon completion of framing, not realizing that framing is basically the first task. Now, the job is perhaps 30% complete, while the payments are 65% complete. I have no reason to believe that the subcontractors have been paid; if the contractor doesn't pay them, Mechanics Lien law allows the subcontractors to sue us for their fee (even though we have already paid their fee to the General Contractor), and to place a lien against the house if we refuse to pay. If the contractor quit now, he would have a legal obligation to refund us the excess payments, but we would have the burden of recouping that money from him - not an ideal position to be in when local contractors are going bankrupt.

In the future, I will make sure that we have a more detailed definition of what work shall be complete before a progress payment is due. I will also make sure that the payments are slightly back-loaded; the contractor will have to finish the job to receive payment in full for the work.

I also discovered a neat little website. In Sacramento County, you can look up building permits by contractor name, company name, job site address, etc. So next time I hire a contractor, I will look up his/her permits before I interview him or her. If he/she has not pulled a substantial number of contracts, I will ask why. And when I buy a house, I will search for permits issued to that address. If there are no permits and the house has obviously-new items that require a permit, I would rather know that before I buy than after.

Is it better to earn $11k/year or $60k/year?

The Sacramento Bee has an interesting graphic depicting how long it takes various people to earn $100,000. They show a single waitress at the bottom of the heap, the poor woman takes 7 years to earn $100k. But that doesn't tell the whole story.

A family of three, headed by a single parent, earning $11,700/year gets much more than $11k/year's worth of standard of living.

The family qualifies for a Section 8 housing assistance, worth over $12,000/year.
The parent qualifies for the Earned Income Credit, worth $4,710/year.
Temporary Assistance for Needy Families gives them $8,448/year.
They get Food stamps worth $372/month, or $4,464/year.


The qualify for free school lunches, worth $2.57 each, or about $925/year.
They qualify for MediCal/Medicaid worth, conservatively, $300/month or $3,600/year.
They don't pay a penny in taxes. They contribute 8%, $941/year, towards Social Security.

Equivalent Net disposable income? $45,900. With welfare benefits, the needy family has about the same standard of living as a family earning $50k a year.

Contrast that with an accountant earning $60,000 a year to support a family of 3. The accountant will pay about $3,800 in California state taxes, and about $3,600 in Federal taxes, and $4,600 towards social security.

Net income after taxes: $47,900.

For all the years spent in college, all of the job stress, all of the work and planning that went into having a decent middle-class job, the accountant has just $4,000 more disposable income than the welfare family has. Meanwhile, the accountant has to worry about job security; the needy family has financial security because they will still have food and housing even if they lose their job.

The accountant takes work home with him/her, reads accounting journals, studies up on changes to the tax code. The job has a lot of responsibilities that spill over outside work hours. The accountant is a salaried employee, with no compensation for overtime. If you divide the disposable income by hours worked, the accountant actually has a lower net hourly wage than the "needy" parent has.

What is wrong with this picture?


The chart shows the income of a single parent with 2 children, earning $60,000 a year. The long periwinkle blue bar is the income the family keeps after taxes, the three small bars on top are state and federal income tax and social security/FICA withholdings.



The bar on the right represents a single-parent household with 2 children, earning $11,772 in wages. The blue bar near the top is social security withholdings, which is the only income tax the parent pays. The periwinkle blue bar second from top is wages. The multiple bars below wages show how much government subsidies raise the family's effective income.

Edit: Added the bar chart.

Everybody's talking about a bottom in real estate

"Of all mortgages covered, at year-end slightly more than 10 percent were nonperforming, meaning behind on payments, compared to about 7 percent nonperforming in September. "

From: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/03/BUU716RR4Q.DTL

Article is a good read, with some nifty graphics.

Here in the Sacramento area, I've seen homes listed as short sales for a very long time at unreasonable prices. I made an offer on one, an incredibly risky all-cash offer, and the bank didn't accept it. The house is now in the process of foreclosure, and I would not offer the same price for it today (the market has fallen since then, and the house has had a full year of not being maintained). Generally, when a house goes from short sale to foreclosure, the bank drops the price to a reasonable price, sometimes even a fabulous price. Sometimes, although it's rare, we see short sales at reasonable prices. Why are some so incredibly over-priced that they cannot sell, while others are priced almost as low as foreclosure prices?

It appears that the banks are only willing to be reasonable on short sales if the buyer stops making payments. As long as the buyer is paying, the bank will insist on an unreasonably high price. I base this observation on another observation - over-priced short sales sit on the market for a long time, some go well over a year, which suggests that the borrower is continuing to pay (otherwise the banks would have foreclosed). Well-priced short sales, if they do not sell as short sales, come back on the market rather quickly as foreclosures, which suggests that they were in foreclosure (not making payments) while listed as short sales.

So some of the increase in "seriously delinquent" mortgages may actually be a sign of buyers catching on to the bank's tricks, rather than an indication of increasing illiquidity. Still, the fact that serious delinquencies are increasing even as the government hands out free loan modifications, coupled with the overhang of inventory that is not presently on the market, suggests that the bottom may not yet be here. The article says that 10% of all mortgages are non-performing; when you think about the fact that many, many people have less than 10 years remaining on their mortgages, many people bought their homes in the 1980's for less than $30,000, a whole lot of people owe very little on their homes, 10% of all mortgages is a LOT. Then again, at least in Sacramento, there are homes priced so low that they cash flow even at very low rent assumptions, even if expenses are rather high (like if the owner hires a property manager). So, bottom, top, I don't know, but caution is still warranted. Not inaction, not abject terror, but caution. As I look to buy, I keep reminding myself of the old saw, "markets can stay irrational longer than you can stay liquid."

Putting saving first

It sounds so scary when experts tell us how much we need to save for retirement. For every $10,000 we want to spend, they tell us we need to save $250,000 (for a 4% withdrawal rate, which maximizes the likelihood it will last throughout old age). That just sounds impossible for a family making $40k a year - heck, it sounds impossible for a family making $100k a year in high-cost-of-living areas where people are likely to earn that much. But small steps lead to medium steps which lead to great results.

$25 a month is a start. Heck, if $10 is all a person can save, the $120 they've saved after just a year is a small fortune. Then, when they don't have to pay late fees and use check-cashing services to do basic banking, they can save even more. Then, when they have a couple thousand dollars, when some swindler tells them they can buy that $1500 sofa for "just $25 a month" (forever), the little voice in the back of the brain says "gosh, that's almost every dollar I've got. It took me years to save $1,500. Maybe I better buy a $100 sofa off craigslist until I can afford to pay cash for a new sofa." That is a life-altering moment that leads to financial freedom.

Cash savings means not having to sell the car for gas money. It means not refinancing the house every 2 years for living money. It means paying off the house in 30 years, and having an affordable place to live in retirement. It means having money to buy a house when everyone is selling, and being able to take that terrific job in another state, even though the employer won't pay moving expenses. It means keeping food on the table during illness or layoffs. It means being able to afford insurance so that all the little problems life throws at you - and life will throw them - don't bankrupt you.

Two years ago, on Christmas eve, our water heater died. We had just inherited a child, with private school expenses and transportation expenses and food expenses and clothing expenses that we hadn't prepared for. But we had savings, and we had a determination to get our budget under control. So we cut some expenses that we didn't need, and we dipped into savings a for a few months while we adjusted, and when that water heater died on Christmas Eve, we were blessed. We didn't have to go to the stores to return all the presents, and we didn't have to wait until the plumber that accepted credit cards opened after Christmas. We called the 24-hour plumber, wrote a check, and went to celebrate the holidays. Let me tell you, we've both been in situations where it would have been different. But we've made saving a priority - so we made continuing to save a priority - and we're not rich, but it sure feels wealthy knowing we can give Christmas presents without going into debt, even after spending 800 unexpected dollars on Christmas Eve.

Saving starts with whatever small steps we can do. Nobody needs a latte or a dinner out or a new TV. Experts sometimes make us feel like we may as well give up if we can't put away a thousand dollars a month. That's just not true. A dollar a month - if it's really all we can afford to save - gives us the small fortune of $12 after a year. $5 a month is $60 in year. $100 a month is $1200 in a year. Don't even think of it as a year, if that sounds too hard. It's just saving once a month, twelve times. Lather, rinse, repeat.

Saving is a gift to ourselves, a promise that someday, we won't go into financial crisis every time we need an oil change or a brake job or a $100 continuing education class. Eventually, after a few years, it's the gift of peace. It's getting out of debt, staying out debt, and having options. Then, as the decades pass, it's the gift of understanding money, understanding how hard it is to earn, how hard it is to keep, how much easier it is - in the long run - when we just say no rather than say "charge it!" At retirement or during an ugly layoff, it is the gift of staying fed, clothed, and housed.

A lot of experts say to pay off the credit cards before putting money into savings. For me, I needed to save first, to have the security of not needing the credit card when unexpected expenses popped up. I needed to have the sense that I could do it, that it was worth it, and what it really took. I started saving young, but things kept happening, and I eventually gave up. Just plain gave up. But when I started again, I realized that my sense of money was skewed. My idea of what was "a lot" of money had been framed by credit limits and how much I could buy for "just $25 a month" and news reports of billions, and, honestly, by the false belief that I earned my full salary every year. After taxes and deductions, after housing and food, I had less than half my salary left over, but I still thought - when spending - in terms of "I earn $X a year." After I struggled long and hard to save $1,500, I truly understood that $1,500 was a lot of money.

There's a sneaky side benefit to saving, too. If you pay 15% of your income in taxes, and you save 10%, you're only living on 75% of your income. So if you lose your job, you only need to make up 75% of your income to maintain your standard of living. If you couldn't afford to save and eat out every week, you already gave up eating out once a week - you don't have to cut back so much during lean times. It's tough to cut back after a layoff - you already feel low about losing your job, and then having to cut back makes you feel poor, on top of it. But if you cut back to what you could afford before crisis hit, so you could save, you have a cash cushion and you don't need as much. That's double the bang for the buck.

Nobody talks about the benefits of saving. They just say you should do it, save for a rainy day. I say, save for a sunny day, because savings makes those rainy days a lot less dreary. If it never rains, well, saving is still mighty good. At first, it's just less drama, but then it's dramatic benefits, being able to buy a house, being able to go on a trip without borrowing, being able to pursue a dream or retire early or put your kid through school. It's a freedom and lightness that everyone should experience for as much of their life as possible. Put saving first, before the lattes, before dinners out, before the luxuries, because financial security is the best luxury money can buy.

Swimmin' nekkid

Buffet is quoted as having said, "when the tide goes out, you see who's been swimming nekkid." You see who can't make ends meet anymore, with their credit cards cut off. You see who can't handle their mortgage payment and who can't handle their car payment. But, then again, you see who hasn't been swimming nekkid. You see who is keeping their house, keeping their car, quietly buying a little investment property, picking up some small luxuries and still not going bankrupt.

You start to see that the people buying generic groceries with coupons are paying cash, while the people buying the expensive brands of potato chips are using food stamps. You notice that the big-screen TVs are being loaded into couple-year-old boring cars, and the food bank is loading groceries into bimmers and Escalades. If you're smart, you notice that the geegaws of conspicuous consumption are dragging people underwater, while the sensible cars and total lack of bling that embarrassed people's kids a few years ago turn out to be tools for financial freedom.

I have tried to teach my nieces and nephews some basic finance lessons, like saving and avoiding debt. It has sometimes been hard to teach those lessons, when the kids don't see me as a financial guru or expert. People who know about money, they think, have enough of it to drive the Escalade and live in the the McMansion and wear designer clothes. I live in a totally mundane house, drive a mundane car - gosh, the kids think, if I knew anything about money, I would be able to afford better.

Which, of course, was exactly what I was trying to teach them. If I afforded better - usually on borrowed money - I wouldn't be able to build savings. Getting rich, without an inheritance, an incredibly lucrative career, or a lottery jackpot, is all about spending less than you earn. It's about plugging the budget when you start "leaking" money. It's about putting a little away, regularly, until it becomes more than just a little, and then investing it wisely so it can grow into a little something. But all those nekkid swimmers out there, living high on borrowed money, undermined that message - for my nieces and nephews and for the rest of the kids.

So maybe it's not such a bad thing that the tide is going out for a while. Young people's heads have been filled with lies about finance. They thought that people who spend a lot of money are "rich" while people who spend moderately - but actually save - are poor. "The Millionaire Next Door" showed that more millionaires are created on moderate incomes but high savings rates, than are created on generous incomes but luxurious lifestyles. Self-made Millionaires, it turned out, clip coupons and re-use ziploc baggies and they don't have to have NFL-star salaries to make themselves Millionaires.

If young people today, going out into a work force where pensions are no longer available, where life expectancies have grown faster than savings rates, where globalization means outsourcing crummy production jobs AND well-paid professional jobs, if those young people are going to have the luxury of financial security and freedom from extreme financial stress, they need to learn the spend-less-and-save philosophy (or else the tax-more-and-make-do-with-less philosophy).

When the people who only had credit are, well, discredited as financial experts, that's painful in the short-term but healthy in the long term. When savers get the goodies and over-stretched borrowers don't, it rewards responsible behavior and creates an incentive for other people to mimic responsible behavior. That's a good message for the kids.

Now it's the Insurance Companies

It's all so predictable. In the interests of marital harmony, I have avoided saying "I told you so," but my tongue is getting sore from being bitten all the time.

If you're a Californian, you're probably headed for double incentives to sell off your excess cars. The car tax is going up, and it's a darn good bet that your car insurance is going up, too. Because there's a natural cycle in the insurance industry, and most people don't realize that it rises and falls on the stock market.

The basic model for insurers is to sell insurance at just about what they expect to pay out (spread over many, many insurance customers) so that the insurance side of the business is barely profitable. But they don't pay out every dollar in the year they get it - so they invest their cash reserves and make their money on the investment profits. In a sense, the investments have been subsidizing our "cheap" premiums during all these high-growth years.

When investment markets are booming, insurance companies lower their rates to attract more customers - to attract more investment capital. Eventually, the boom fades, the investment returns slow or even reverse, and the insurance companies then scramble to layoff employees, cut costs, and raise premiums to at least cover costs. Trouble is, right when insurance companies start losing out on investment returns, their claims start increasing. People who would work through the pain in good times, take disability when jobs are scarce. People "accidentally" leave an unattended candle in the house that won't sell, they "lose" valuables and they "break" insured stuff (like cars with hefty loan payments). People make stupid mistakes when they're stressed out about the economy, and people do desperate things when the economic problems hit too close to home. Theft increases, vandalism increases, worker comp fraud increases, and the insurance companies start feeling like even their mothers only call because they need something.

Compounding the natural cycles in the insurance industry, this year we've got once-in-a-lifetime investment losses and a sudden contraction in the number of individuals (families and businesses) that can carry the necessary rate increases. When you get three generations living in one house, they're only paying one homeowners' insurance policy. A lot of people in financial distress discover that they don't need a second car, maybe not even a first car. And businesses that go out of business drop all of their insurance policies - general liability, workers' comp, key-man life insurance, business continuation insurance, et. al.

Girl Scouts aren't the only ones passing their cost increases on to the consumer.

Incongruous thought of the day

MySpace: "The W H Macy appraciation societies aims are to celebrate the William H Macy through the wearing of costumes..."

(If you don't know, William H. Macy is an American character actor, and I don't know that he has ever worn a costume, outside of wardrobe and sometimes props, like eye glasses.)

The myth of the $600 hammer vs. the Data Driven Life

The myth of the $600 hammer (12/7/98) -- www.GovernmentExecutive.com: "Bookkeeping based on congressional appropriations makes such cost-finding immensely difficult. Functions that in practice are inextricably intertwined are often paid for by totally separate line items in the budget. New weapons are bought with one 'color of money,' existing weapons are maintained with another, and the personnel who operate them are paid with a third. In fact, to save administrative costs, military salaries and pensions are all paid from one central office. As a result, said Eckhardt, among commanders 'there's a tendency to view military labor as free, because you're not making any expenditures from your installation [budget] to pay those people.'"

This is a fascinating article that, IMHO, should be required reading for every voter and taxpayer in the country.

In my household, we live the data-driven life. Our budget is updated to reflect actual fluctuations in income as well as risks to income. Our retirement plan includes a spreadsheet tab showing our assets and future income, with risk level specified (our home equity, for example, for a house east of Sacramento, is subject to employment trends at the major local employers, including the State of California). We break our budget down into monthly figures for both monthly costs and intermittent costs. For example, although we don't have a car payment, we have a monthly budget item for a car "payment" (the cost of our average car, divided by 5 years, because we typically replace one car every 10 years, and we have two cars). We budget for vacations and gifts and replacing the computer every few years and redecorating periodically.

The idea behind our budget is to 1) recognize the true costs of a daily latte or a Christmas splurge and 2) ensure that we set aside enough money for our day-to-day expenses as well as our year-to-year expenses. Most of our savings - in retirement accounts and taxable accounts - is earmarked for retirement and we hate to take money out of retirement for current expenses. It is, perhaps, an odd habit to try to account for both daily expenses and once-a-decade expenses in our monthly budget, but it encourages us to be honest about our expenses.

Let me give you an example. When we buy groceries, we multiply the per-meal cost by 30 to determine where it fits in our budget. If the meal cost is so low that eating it everyday would put us under-budget, that's a meal we can eat as often as preference and health considerations allow. For instance, $5 meal, if we ate it every day, would put our monthly dinner budget at $150, which is affordable. On the other hand, we make some recipes that use multiple fresh herbs. At $2 per herb, plus a pricey cut of meat and out-of-season vegetables, we have accidentally spent as much as $25 on a good, but unexceptional, meal. If we ate like that every day, our dinner budget would be $750, which strikes us as unreasonable. That's not to say that a $25 meal is out of the question - it's still cheaper than going out to eat, so it's a good value if it is at least as enjoyable as going out to eat. Our local restaurants don't use particularly fresh ingredients or especially creative recipes, so cooking something special at home is often more enjoyable for us than dining out. Expensive meals are relegated to occasional treats, not cut out altogether.

On the other hand, I agonized over replacing my laptop computer. I could get a fast, powerful computer for about $1,000, or I could get a functional computer that is much faster than my current computer, for around $500. That's a lot of extra money to spend. (In fact, I am still on the fence and holding out for prices to drop.) But we realized that we hadn't budgeted for computer replacement, so we added it to the budget. We replace the computer about every 3 years, so a $1,000 computer works out to about $30 a month. In other words, I should agonize over the $4 daily latte ($120/month or $4,300 over 3 years) and just go ahead and buy the better laptop computer.

See, without data, the latte seems like "it's only $4" and the computer - which is more useful and valuable - seems like a lot of money. Data is powerful stuff, useful stuff, and if it helps me spend money smarter and save money more often, imagine what it would do for the government?!

Ziprealty can kiss my price predictor

I've written before about the heinous algorithm used in Ziprealty's "Predict It" price "game." It still sucks.

There is a neighborhood that I track. I know this neighborhood pretty well. A house came on the market, bank-owned REO. Before it hit MLS, we spoke with the bank's agent about buying the house - but their price was crack-smoking high. When the house hit MLS, I "predicted" the selling price on ziprealty. The house has languished on the market, unsold at its unrealistically-high asking price. The bank finally lowered the price, but the price is still unrealistic. Another house on the same street came on the market last week, a smaller house on a larger lot, but in much better condition. The second house is priced realistically - although not low enough to drive much traffic, let alone a bidding war.

The listing agent decided to relist the property when he lowered the price. So although the asking price is now within spitting distance of my price prediction, my "Property IQ" for the property is calculated by comparing it to the asking price in the original listing. That's a bogus programming choice, and one designed to support the asking (wishing) price as the realistic value - in a market where the State budget crisis, continuing economic uncertainty, and the all-important employment rate are all dragging home prices down. The major local employers have announced cutbacks - or investment anywhere other than California - and the State of California keeps threatening to layoff State workers. These are not conditions that bode well for rising home prices anytime soon, so why design a price algorithm that is heavily weighted towards asking price, unless the intent is to subtly manipulate buyer sentiment towards the asking price in the complete absence of any validation of asking price?

Ziprealty has an "Offer Evaluator" tool that compares the offer price you enter to recently sold properties in the same area. I simply enter $1 as the offer price, and the Offer Evaluator tells me that $1 is unlikely to be accepted because most comparable properties sold within ___% of asking price. But that's the key piece of information - it tells you what percent of asking price (typically 95%-105% of asking) most similar properties sold for. And yet, the Price Predictor skews towards asking price, even when the Offer Evaluator shows that most similar properties sold well under asking price.

Another flaw in the price predictor is that it basically ignores user input. On several properties I've "played," all players entered prices well below asking price, yet the algorithm claims that the Community prediction is merely hundreds to a couple thousand below asking price. Which begs the question - how many users does it take to make the "Community Prediction" actually match the predictions entered by the Community? A thousand? A million? 4.6 Trillion?

If this was meant to be a useful tool, it would have been designed without so many major flaws in its algorithm. If it was meant to be a subtle marketing manipulation, well, it's perfect. Bankers weren't the only sleazebags that created the bubble, they're just the only ones who've had to stop being so overtly sleazy.

Is Saving Sexy? Is Talking about Finances Romantic?

Laura Crowley wrote an article about the romance of talking about finances. Oh, it seems silly - Happy Valentine's Day, honey! Let's talk about the budget! - but maybe not. In my house, we talk before holidays about what our gift expectations are, and what our budget is. It's unspontaneous, sure, but there haven't been any "how could you buy me a toaster when I got you a sports car?!" arguments, either. And the B word - budget - has been helpful for holiday spending choices, too. This is my second marriage. In my first marriage, I was always the bad guy because I tried to limit our spending to increase our saving. I got lucky this time around - I found someone I love and respect, and I also stumbled upon the perfect fall guy, Mr. Budget.

Okay, honestly, Mr. Budget doesn't get a lot of blame, but he gets to be the unromantic guy that says "Diamond tiaras for President's Day?! No way!" We agreed on a gift budget for the year, and our pre-holiday budget discussions usually go something like this:

"How much do we want to budget for [upcoming holiday]?"

"I dunno. How much do you want to budget?"

"I dunno. How much do you think is reasonable?"

"I dunno. How much do you think is reasonable?"

(Side note: Before we created a budget, this conversation would go on 5 minutes, get nowhere, and repeat every few days until the holiday itself. Now, thanks to the budget, we have an out.)

"Well, we've budgeted $__ for the year. We have $__ left. Will 10% of that work?"

"Gosh, that's not much. Do you want to just exchange cards and have a nice dinner?"

"Sure."

"Okay."

There are certainly holidays where we decide to exceed our budget. But looking at the budget first makes us mindful that the extra money has to come from somewhere - withdraw it from savings or cut some other expense. We both hate withdrawing from savings. Since we're honest with each other, we know that steaks and lattes are a luxury, and we know where we can cut back.

Chocolates and flowers are romantic gestures, but creating a way of dealing with finances that honors both partner's fiscal AND emotional needs in the long-term and short-term, that's more than a gesture. It's like getting the brakes fixed or buying clothes for the guy who hates to shop or doing the early feeding so she can sleep in. It's grown-up love, and it's romantic in a very boring, very loving way. It says "I hope I don't, but I could die. I want you to have a good, happy life without me," and then buys life insurance. It recognizes that "til death do we part" is a mighty long time, so we'd better build some savings. It puts more credence on keeping a healthy heart then on buying a fake diamond heart. This Valentine's Day, as I count my blessings, I'll spend a moment being grateful for the Hallmark-free gestures of love that sometimes get taken for granted.

Besides, a good budget always has room for chocolates.

Happy Valentine's Day!

Unemployment at 13.9%?

John Burns Real Estate Consulting publishes a newsletter on housing. This week's report says that unemployment is 13.9%. "The U-6 unemployment rate, which represents 13.9% of the total adult population who wants to work, also includes part-time employees who would rather work full-time."

There is a problem with saying that things are better (or worse) today than they were during the Great Depression. We have modified our data definitions so much that today's data really isn't comparable to 1930's data.

Meanwhile, California State workers are crying about mandatory furloughs. They take a day off without pay - but their pay rate isn't cut - and they keep their jobs. One of my concerns about the mid-term housing prospects in Sacramento County was State layoffs. It has been clear for several years that state spending was unsustainable. If the State can keep workers on at a lower rate of pay (via furloughs or pay cuts), that would be a positive for State employees, for the housing market, and for the local economy.

In fact, we might consider adding tax breaks for employers who avoid layoffs over the next three years, as an incentive for employers to pull together and help the economy avoid further contraction and decline.

Stimulus Brings Out City Wish Lists: Neon for Vegas, Harleys for Shreveport - WSJ.com

Stimulus Brings Out City Wish Lists: Neon for Vegas, Harleys for Shreveport - WSJ.com:

"Las Vegas, which by some accounts already glitters, wants $2 million for neon signs. Boynton Beach, Fla., is looking for $4.5 million for an 'eco park' featuring butterfly gardens and gopher tortoises. And Chula Vista, Calif., would like $500,000 to create a place for dogs to run off the leash.

These are among 18,750 projects listed in 'Ready to Go,' the U.S. Conference of Mayors' wish list for funding from the stimulus bill moving through Congress. The group asked cities and towns to suggest 'shovel ready' projects for the report, which it gave to Congress and the Obama administration."

Stimulating the economy back to 2005 would not be a good thing - we were wasting money we didn't even have, buying jewelry (bling) for our cell phones (!?!) and putting $50k/yr. families into $50k SUVs.

We need to stimulate HEALTHY spending. What's healthy spending? Investing to increase future earnings or to decrease future expenses. Building projects, though they sound good, will merely take workers off unemployment for the duration of the project, then put them back on the street when the project's done. Obama could take a page from Kennedy's book - putting a man on the moon gave us a surge of innovation and a huge psychological boost. It was ambitious, it was crazy, and it worked. President Obama needs his own "man on the moon."

How much is a Trillion?

The current porkulus package is just shy of $1 Trillion. Gosh, just a decade ago, we were hearing "a million here, a million there, pretty soon you're talking about real money." Obama isn't even proposing a whole trillion - just 8 or 9 tenths of one.

We have 300 million citizens in America. Go google "1 trillion divided by 300 million" and you'll see that this one little bitty trillion dollar package will cost every man, woman, and child in America $3300. The average family is about to add $10,000 to their debt load.

America has an unfunded liability - money we've borrowed from Social Security, promised Medicare benefits, and military/government pensions that haven't been funded - of about $40 Trillion. Our national debt is about $10 Trillion. We are $50 Trillion in the hole, and digging our debt grave ever deeper.

With $50 Trillion owed, every American owes $150,000. That is roughly half a million dollars per family. That's $150,000 per man, woman, child, bank executive, welfare recipient, student, dog trainer, social worker, engineer, and salesman. That's an average of $150,000 per person, but, truthfully, a huge population of Americans will never pay more than $5000 in taxes in their lives. The rich and middle class taxpayers will end up paying their own $450,000 per family, and then they will have to pay for one or two or a hundred other families' share of the debt. And, in the meantime, we'll be paying interest on the debt. Right now, $10 Trillion of the debt is owed to outsiders, and the other $40 Trillion is owed to Social Security beneficiaries and government retirees. As baby boomers age and retire, that unfunded liability will become an actual liability, and the government will have to borrow to pay out real dollars to retirees.

For every $1 Trillion borrowed, we owe $30 Billion a year in interest (at 3%) every year. Right now, we pay about $300 Billion in interest on government debt. If we don't find a way to reduce debt and pay off our liabilities, our yearly interest payments could grow to $1.5 Trillion in interest payments every year.

So to anyone complaining about the GOP holding up the stimulus bill, maybe you should thank your local obstructionist lawmaker. Or else put your money where your mouth is - send Obama a few thou to help "stimulate" the economy, and toss in a few extra thou to help break out of the debtor's prison the United States is building around ourselves.