Monday, August 31, 2009

Contest Winner Announced!

Greetings all, after a slight mishap with my computer (involving having left it at my in-laws' place, after taking it there this weekend to catch up on some work while the kids were otherwise amused by their grandparents), I am now back online.

Which brings me to the following happy announcement:

In total there were only 9 valid entries (and one curse post accusing me of running a "scan") in my $50 shopping credit contest. My thanks to my friends Frugal and Kim for leaving links to my contest on their blogs. Each of the comments and links was given a serial number, according to the order in which they were entered, and a random drawing on established the winner.

And the winner is...

Congratulations to Erin! What's up with the pink blog, btw? Erin, since there is no e-mail or other contact info for you on your blog, please contact me so I can set you up with your prize (see left bar for my e-mail address).

Thank you all for participating and for the good advice.

The hunt for a house continues - so far unsuccessfully - but Alpaca and I remain undaunted.

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Thursday, August 27, 2009

iPhone: Intentionally Crippled Technology

After over 7 years of loyal service, our home computer has finally failed this weekend, which means it's time to buy a new one. I was long expecting this, but was hoping the computer would make it 'till October when the new Windows 7 operating system is due to come out. I don't want to buy a much maligned Windows Vista based computer when a new operating systems is less than 2 months away from release. Don't talk to me about Apple, it's not an option (if you ask I'll tell you why, but this is a good overview of the answer). In the mean time, we'll try to make do with an OLD laptop computer we had lying around the house, and my own work laptop.

Switching computers is a major hassle. Never mind the fact that you have to re-install all your old software and set-up your preferences. The real problem is dealing with intentionally crippled technology. Case in point, my iPhone. I love that phone. It's the best I ever had, but it has been intentionally crippled by Apple - probably to comply with insane copyright owners.

So here's my dilemma. My contacts and calendar are safe, because those sync directly to my company's exchange server. The problem is with all my legitimately purchased and paid for content. My 1000 songs. My dozens of applications. These are all stuck on my old (now dead) computer. No, they are not lost. I have multiple, redundant back-ups. The problem is that when trying to sync my phone to the newly downloaded copy of iTunes on my work machine, Apple wants to delete all the content that's already on my iPhone. I now have to go through an annoying and time consuming process to try to get my honestly purchased content, ONTO MY OWN GODDAMN PHONE, just because my computer died.

How insane is that??? It's like your car died and all the CDs you kept in your vehicle stopped functioning in all other CD players.

The technology and content industries have been abusing consumers for decades. This problem is not unique to iPhone. DVD players are intentionally crippled so that they can only play content purchased in certain parts of the world. When someone in Israel gives me a gift DVD, a normally purchased, un-cracked DVD player in the US cannot play it. All so that the film studios can price discriminate between different regions of the world (BTW, how is this not an anti-trust issue?). Ever tried to skip the stupid copyright warnings at the beginning of a movie? You can't. You're a hostage to the content companies. When my work computer died last year, and I tried to re-install some of my business software, some of it wouldn't function until I called the company (Business Objects) and they "allowed" me to operate my $1,000 piece of software on a new machine. And it's getting worse - just last month Amazon remotely deleted validly purchased content from their customers' Kindle readers. Someone compared this to Barnes&Noble sneaking into your living room to steal back a book they weren't supposed to sell you.

These people are treating us all like criminals. It is insane and it has to stop.

I am tired of having to fight my gadgets to do what they are supposed to do in the first place. I paid good money for these things, and I demand that they function the way the should.

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Wednesday, August 26, 2009

Win a $50 Prize: Only Two More Days

Only two more days to participate in the current contest I am running on Money and Such. The prize is a $50 purchase of your choice at CSN Stores. Shipping is included!

For contest rules and to submit your entry, follow this link.

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Tuesday, August 25, 2009

Updating My Blog Roll and Thoughts About Blogging

This weekend I decided to clean house on my blog-roll. It's been over a year since I updated that module, and in that time I have started reading a BUNCH of new blogs, while some of the old ones I have been following have sunk into oblivion and have stopped publishing.

So, check out the new blog-roll, if your blog is there, that means that I read your blog at least every couple of weeks. If your blog is not there, it means that I haven't heard of your blog yet, or that you publish so infrequently that I have chosen to stop following you.

Which brings me to this thought: why do blogs have such a high attrition rate? When cleaning up my RSS reader lists, I deleted more than 20 blogs that have ceased publication. Why do people start publishing a blog and then stop? Is it that they find that publishing a blog is too difficult or time consuming? Do they get frustrated with the lack of exposure or regular readership that most blogs suffer from? Is it that they simply run out of things to say about their chosen topic? Boredom? I have no clue.

I have been blogging about personal finance for about two and a half years now. I find that this topic is so vast and endlessly renewing that writing topics are practically infinite. Personal finance is just a useful tag for labeling the financial aspects of everyday life - from career to legislation to money saving tips & deals. Just as life constantly changes, so personal finance keeps offering new ideas for blog posts. I have never been at a loss for something to write about. Is it always good? Ahhhh... no, but that's part of life, I guess.

I have yet to become bored with blogging. That's not to say that it's impossible. Periodically I get tired of posting, at which point I stop for a week or two. Once, in early 2008 I more or less abandoned Money and Such for a couple of months. But so far, I have always come back. I succumb to the siren call of the blog.

Money and Such clearly enjoys very limited success. I have just over 300 subscribers, and my traffic remains constant more or less from month to month, and even from year to year. For me it's not about fame and fortune (although either would be nice, people!), it's just a way to voice my opinions and ideas. Better than shouting at the TV screen and more useful than writing to my Congresswoman - although I have been known to do both on more than one occasion.

Bottom line: it's a hobby, and as hobbies go, it's cheap (actually, cash flow positive).

I'll continue to follow the waves of incoming personal finance bloggers. Hopefully some of them will stick around for a while.

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Monday, August 24, 2009

House Hunting Update

A week has passed since my previous house hunting update, and much has happened. For one thing, we have put down an offer on a house. Well, it was technically an offer but we bid about 10% below the asking price - that's all we could afford. True, the house was languishing on the market for 4 months before we put in our offer, and it's true that the sellers had already reduced their asking price by about 15%, but still I was expecting a flat out rejection.

The house was about 10% above our budget, so we had not choice but to low-ball the offer. It's a really great house and Alpaca and I loved it immediately. It's located on a nice side-street, in a good neighborhood, with good schools. It is impressively renovated, and it's clear to me that the owners bought it as an investment (they bought it a couple of years ago) and threw a lot of money at repairing and renovating the property.

Anyway, on Wednesday evening our realtor came over and together we assembled the offer. That was an interesting experience. Our realtor is a very energetic person and is very useful and knowledgeable when it comes to finding and researching houses, but it very quickly became apparent to me that she knows little about the contractual part of the process. I am a lawyer by training (although I haven't practiced in 10 years), and I understand the implications of a contract, so I was taking none of her bad advice. For example, she wanted us to have a financing contingency with a maximum interest rate of 6.5%. I explained to her that I needed a tighter contingency of 6% on the mortgage, since a 6.5% mortgage would break our budget. Under her proposed terms we would have to remove the financing contingency even if the lowest rate we could obtain was 6.5%.

Yet another example came a bit further in the contract, we she specified the appliances included in the sale as "per MLS", and was really surprised when I insisted on checking MLS to verify which appliance were included in the listing. None were included. I insisted that she spell out the appliances and she protested saying that this is something that she could always negotiate later. I had to explain to her that this is a binding contract, and while she may be able to negotiate after the fact, the seller would be under no obligation to agree to the change. When she finally agreed she insisted on making the correction on the contract using "White Out". I explained to her that this would not be valid, but she insisted on proceeding, explaining that she would ask around and if this was a problem she would have us re-sign by fax the next day. It was a problem, and we re-signed by fax the next day.

Anyway, Perry Mason she's not, but I am still happy with her service and dedication. I wouldn't recommend her to someone without legal training, but given that I feel my background in contract law is sufficient to at least spot any traps in our way, I am happy to keep working with her.

From here on out, there is only anti-climax. The sellers did not respond within the 24 hour response period that was specified in our offer, but they sent us a counter offer the next day. In their counter offer they reduced their asking price by about 1% and insisted that we take the house as-is and without a contingency for property appraisal value. A non-starter if there ever was one.

Saying I am disappointed would be over-selling the point. I sort of expected this result given our budget and resulting low-ball offer. Still, I am a little disappointed. It's a really nice house and it was almost (but not quite) within reach. I guess it's back to that old axiom: the house you want is the one just slightly beyond your budget...

The search continues.

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Saturday, August 22, 2009

Contest: Win a $50 Shopping Credit

Once again, I have a little prize to raffle-off to my readers. This time, the contest is sponsored by the kind people at CSN Stores. The prize is store credit to purchase an item worth up to $50, from any CSN store. They got a lot of cool stuff - from mattress to stroller to rugs to cool things for your house. They have an impressive selection. So, while $50 can hardly be defined as a shopping spree, you can call this a shopping spr. :-)

What do you have to do to win the prize?

Very simple. My readers know that my wife (who shall hence forth be known on this blog as "Alpaca") and I have been looking to buy our first house. In fact, (this week we put down our first offer on a house). To participate in the contest you need to leave a comment on this post with a (hopefully) useful piece of advice for Alpaca and me. What are the most important things for us to consider in searching for and buying our first house?

No need for literature, just a small, little piece of advice will do.

Want to earn an extra entry into the contest? Link to this post from your own blog or website.

So. Here are the rules:
One comment per reader. No limit on the number of entries you can get through external links.
Contest only open to residents of the lower 48 US states. Sorry international readers, you can't get in on this one. Obviously "void where prohibited" is something I gotta say. There will be only one winner.

The contest will continue until 5 PM Pacific time on Friday, August 28. The winner will be determined by a random drawing and will be announced by Monday, August 31.

When you leave a comment or link, you need to make sure I am able to contact you. Best way is to leave your e-mail in a similar format to this shadox1 [at] gmail com or something similar. Should be good enough to defeat spammers. The winner must then contact me within 3 days. If the winner does not contact me, I will select and announce a new winner.

In my last contest, there were only about a dozen valid entries, so it looks like anyone who enters may have a good chance to win. Looking forward to reading your advice.

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Friday, August 21, 2009

Voted by Whom?

Last week on my business trip I ate at a restaurant that had this sign across it's front enterance.

My only question is who voted? I sure didn't.

How useless are these throw-away marketing statements. Does anyone really care? Does anyone actually say "Oh, wow, it's been voted DC's best sea food restaurant. I am eat there!" I don't think so.

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Thursday, August 20, 2009

Lemming Americans

Yes, people. There are Native Americans, African Americans, Jewish Americans and apparently we can add to our national diversity one more group: Lemming Americans. Those Lemming Americans are the ones that follow the herd. They hear something and they repeat it as loudly as they can, and truth or facts be damned!

It looks like a common sense reform to our health care system is going to be derailed by simple lies repeated often and loudly enough, by so called leaders and opinion makers. Apparently all it takes these days to make sure reform is derailed is someone to whisper conspiratorially "Death Panels". From that point forward the truth goes out the window. The lie gets repeated and magnified. The interested parties smile broadly and stand aside while the imbecile masses fight a battle contrary to their own self interests.

Let me comment on this one more time:

The Moral Argument - it is simply wrong that tens of millions of Americans do not have health insurance. All of us deserve to lead a healthy life and to receive decent treatment if we get sick. For crying out loud, we provide health services to our felons in prison, but not to our hard working poor. If there is injustice in the world, this is a clear example.

The Economic Argument - our system is broken beyond repair. My family of 5 - all completely healthy - WITH health insurance, spent more on health care last year than we spent on anything except for daycare and rent. This is without even counting the $12K or so in insurance premiums paid by my employer. The system is simply hemorrhaging money through waste and bureaucracy. Costs must be controlled or (i) our economy will collapse; or (ii) half of us will be uninsured.

The Fear Factor - the fear mongers would have us believe that government will pull the plug on granny. Complete and utter lie. Hate to break it to you idiots, granny already has socialized medicine. She's on Medicare! Or that government bureaucrats will come between us and our doctors. They don't tell you that right now there is an insurance company coming between you and your doctor, and that your insurance company makes money by denying you care. Why should they care? The fear mongers know that gullible Lemming Americans will buy anything they sell.

Here are some real things to worry about: today if you lose your job, you lose your health care insurance. If your employer decides to stop offering health care, you're out of luck. If you or a family member get seriously sick, your insurance will probably not be sufficient to keep you from financial ruin. If you exceed your lifetime insurance cap, as far as your insurance company cares you can just curl up and die. If you are not afraid, you don't understand the true nature of your predicament.

The Personal Experience Angle - I was born and raised in a country where so-called socialized medicine exists. You know what? If I had the unfortunate choice between getting sick in the US or getting sick in Israel, I would much rather get sick in Israel. The US has the best health care system in the world you say? Bullsh** I say. Base your claims on facts and on reality. Here's one easy comparison - life expectancy. Life expectancy in France, Canada and Israel - all countries with socialized medicine - is higher than in the US. Best health care system in the world my left foot. Lemming Americans.

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Wednesday, August 19, 2009

The Market, The Market

So what do you think about the stock market these days? It's been climbing non-stop since March. OK, there was a little hiatus in June, but investments I made in early March are now up more than 50%. My 401K is now well above break even. Our total portfolio is only a few percentage points down compared to where it was since this crash began. Truth is, I am getting nervous.

Just like I said that things weren't that bad in the dark days of February, they aren't that great now! BTW here's a post I wrote in early March preaching the upside of stock investing, just a couple of days before the market started bouncing back. No special powers of prognostication here, just simple coincidence.

The stock market upsurge has me just concerned enough that I have halted all new investments in the market (except for my 401K contributions), since the beginning of May. OK, there's also the small matter of my preparations for the possibility of buying a house, but even if this were not the case I think I would have paused for a while. I don't like this euphoric mood.

Yes, I believe we are done with the recession, but I don't think that euphoria is called for. There is still much economic risk out there, including risk to our currency from the twin scourges of inflation and deficit.

Curious to hear your take on the situation.

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Tuesday, August 18, 2009

Guest Post: A Critique of Value Informed Indexing

A few weeks ago I published a guest post by Rob of A Rich Life. In doing so, it appears that I inadvertently stumbled into the middle of a religious war. Schroeder, a critic of Rob's has asked me to post the critique which follows, and having read it, I thought I would share it with my readers and let you all make up your own opinions. This critique is broader than a direct response to the guest post on Money and Such. With this, I think that I will gracefully bow out of what appears to be a larger dispute between these two thoughtful writers. I am sure that Rob will respond in detail in the comments below. The guest post.

This is a critique of Rob Bennett's "Valuation Informed Indexing" or VII for short. Here is Rob's claim:
"Valuation-Informed Indexing always provides better risk-adjusted long-term returns than Passive Indexing. If you take the same portfolio as the Coffeehouse Portfolio or the Wellington Fund and instead of following a rebalancing strategy you adjust your stock allocation in response to big price changes, you will achieve higher risk-adjusted returns. I am not able to imagine how there could be any exception to this general rule." [Shadox - this quote is taken from Rob's comment (#24) to this post on Get Rich Slowly]
Adjusting your stock allocation in response to big price changes" is the key phrase and defines Rob's VII. And the claim is that if you adjust your stock allocation in response to big price changes, you will achieve higher returns than sticking with a static, never-changing stock allocation.

In order to compare VII versus a static, never-changing stock allocation, we need decision rules that tell us how to implement VII. Rob provides us VII decision rules here:
"A Valuation-Informed Indexer might go with a stock allocation of 50 percent at times of moderate prices (a P/E10 level from 12 to 20), a stock allocation of 75 percent at times of low prices (a P/E10 level below 12) and a stock allocation of 25 percent at times of high prices (a P/E10 level above 20)."
How do we determine P/E10 levels? P/E10 data is contained in an Excel spreadsheet on Robert Shiller's website. Here is the link.

So if you were a VII investor and followed Rob's guidelines, you would have maintained a normal stock allocation of 50% when the P/E10 level ranged between 12 and 20. This was the case up to 1992. However, you would have switched to 25% stocks in 1993 when P/E10 first went above 20. P/E10 stayed above 20 for the next 16 years before dropping below 20 in October 2008.

Now that we have defined Rob's VII, we can take the next step and test Rob's claim. Repeating what Rob wrote above:
"If you take the same portfolio as the Coffeehouse Portfolio or the Wellington Fund and instead of following a rebalancing strategy you adjust your stock allocation in response to big price changes, you will achieve higher risk-adjusted returns."
I will choose the Coffeehouse Portfolio because the returns are tracked on Bill Schultheis' website:

Year Return
1991 23.55%
1992 9.57%
1993 15.64%
1994 -0.58%
1995 22.89%
1996 14.53%
1997 17.95%
1998 6.88%
1999 8.30%
2000 7.25%
2001 1.88%
2002 -5.55%
2003 23.56%
2004 14.18%
2005 5.97%
2006 15.002%
2007 2.91%
2008 -20.25%

Annualized 17 Year Return 8.61%

Rob says that a VII investor would have reduced their stocks to 25% when P/E10 went above 20. This occurred in 1993. And since the Coffeehouse Portfolio is 60% stocks, we need to add a bond fund to make the valuation-adjusted stock allocation equal 25%.

To achieve a 25% stock allocation with the Coffeehouse Portfolio, we would need to add a bond fund such as the Total Bond Market (TBM). By my calculations, you would place 58% of your money in TBM and 42% in the Coffeehouse Portfolio.
So for example, if you had $10,000 and only want $2500 in stocks (25%), you would put $5800 in TBM and $4200 in the Coffeehouse Portfolio (CH). How much do you now have in stocks?
$4200 * 60% = $2520

Which is close enough to $2500.

We now have almost all the information to test Rob's claim that when you take the Coffeehouse Portfolio and instead of following a rebalancing strategy, you adjust your stock allocation in response to big price changes and thus, you will achieve higher returns. The only piece missing is the returns for the Total Bond Market. That data can be found at this website:

Year TBM
1991 15.25%
1992 7.14%
1993 9.68%
1994 -2.66%
1995 18.18%
1996 3.58%
1997 9.44%
1998 8.58%
1999 -0.76%
2000 11.39%
2001 8.43%
2002 8.26%
2003 3.97%
2004 4.24%
2005 2.40%
2006 4.27%
2007 6.92%
2008 5.05%

So with a little spreadsheet work, we can apply Rob's VII guidelines and produce valuation-adjusted returns for the Coffeehouse Portfolio. The left column represents the unmodified Coffeehouse (CH) and the right column represents the Coffeehouse modified using Rob's VII guidelines:

1991 23.55% 23.55%
1992 9.57% 9.57%
1993 15.64% 12.18%
1994 -0.58% -1.79%
1995 22.89% 20.16%
1996 14.53% 8.18%
1997 17.95% 13.01%
1998 6.88% 7.87%
1999 8.30% 3.05%
2000 7.25% 9.65%
2001 1.88% 5.68%
2002 -5.55% 2.46%
2003 23.56% 12.20%
2004 14.18% 8.41%
2005 5.97% 3.90%
2006 15.00% 8.78%
2007 2.91% 5.24%
2008 -20.25% -5.58%

Coffeehouse (CH) 18-year annualized return = 8.52%
VII 18-year annualized return = 7.93%

So it appears that adjusting the stock allocation for the Coffeehouse Portfolio in response to big price changes did not produce higher returns. The valuation-adjusted returns were 7.93% annualized over the 18 year period from 1991 through 2008. This is lower than the unmodified Coffeehouse annualized returns of 8.52% over the same period.

To repeat, the Coffeehouse Portfolio maintained a static, never-changing stock allocation of 60% over the full period. By contrast, the valuation-adjusted Coffeehouse added TBM in response to big price changes as occurred in 1993 and thus reduced its stock allocation to 25% and maintained that lowered stock allocation from 1993 through 2008.

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Monday, August 17, 2009

House Hunting Update

Last week, while I was traveling on business, my wife went house hunting with our realtor. She saw several houses and thought that a few were worthwhile for me to look at as well. On Friday, when I got back in town I left work early and we went to look at 5 of them. The score card: one really nice house, two reasonable ones, one horrible and one... no longer for sale. The owners decided to rent instead of sell.

Anyway, one good house is all it takes. While it has been on the market for about 4 months and the price has come down substantially, it is still about $80K above our budget. We asked the realtor to help us decide whether we should still put in an offer. She thinks we should, but I think it may be difficult to get that house with our budget.

The two other houses I thought were decent would also work, but each of them requires a substantial amount of improvement before I would be happy. In any case, both are substantially less attractive than the house we liked. It's just like I said before, it looks like the house you want is always just a bit above your price range.

In the meantime, our mortgage pre-approval came through for the full amount we wanted. The mortgage broker had to send us the pre-approval letter three times, because she kept misspelling my wife's name... I don't think we'll be using her services when we actually apply for a loan. If she can't handle the fine details of spelling a name correctly, how can she be expected to handle our loan application correctly? Call me picky, but I want someone meticulous to help me hunt for a mortgage and to handle my finances. Am I wrong?

One more step successfully completed: I transferred some funds into our checking account. Just enough to cover our down payment when we decide put an offer on a house... we are locked and loaded. Now it's just a matter of deciding when and how to pull the trigger. It's all about patience and a steady aim.

Exciting stuff. No?

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Thursday, August 13, 2009

Adventures in Home Buying Continued...

Our house buying adventure continues. In this episode: first meetings with a realtor; getting pre-approved for a mortgage; realizing that compromises are a part of the deal.

First Meeting with a Realtor - good friends of ours recently bought their first house and were so enamoured with their realtor that they convinced us to use her as well. Turns out the same realtor also helped a couple of other friends, so supposedly she knows what she's doing.

We met with her in person last Thursday and I have to say, I am not THAT impressed. Clearly she is informed and energetic, but she spoke to us as if we were unprepared and uneducated children. Lady, I already explained I am a lawyer and an MBA by training and before setting an appointment with you we read a couple of books on purchasing a house and did our homework on what it is that we want to buy. Give some respect. After that initial meeting though, she aggressively threw herself into the project and while I am traveling on business, she has been going out with my wife to see some houses. Some interesting prospects at this point, but nothing that blew my wife away. I'll get to see some of the better prospects this weekend.

Getting Pre-approved for a Mortgage - our realtor recommended a mortgage broker and I spoke with her and went through the pre-approval process. As I twittered a couple of days ago, the broker thinks that we should have no problem getting the mortgage we are looking for. Another nice piece of information, our FICO score: 799. Identical for both of us. Sweet. Maybe paying our bills on time all these years and having no debt will pay some dividends.

Compromise is Part of the Plan - here's an axiom: no matter what your budget, the house you really want is only $100K more expensive than your budget... urghh... The budget will hold. We are made of iron. We shall not fall prey to temptation. Not, I say. Not.

But it's not just the budget. Every house has something a little off. Maybe it's too close to the freeway or too far from the park. Maybe the kitchen is old or the lay-out is crappy. It's actually upsetting, but it appears that compromise is required when looking for a house. I guess the important thing is to be patient and to not compromise on those things that are REALLY important to you.

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Wednesday, August 12, 2009

United Sucks AGAIN!

Airlines these days are notorious for nickeling and diming their customers, but as far as I am concerned, this week United really outperformed their competition. I don't think anything new happened here, but this was my first opportunity to experience their lousy service in its full glory. You see, I recently lost my Premier status on Star Alliance.

I am traveling on the East Coast this week, and while checking for my flight in San Francisco yesterday, I used the self-service check-in machines at the airport. Thinking I could simply grab my boarding card and walk away, I had a nasty little surprise waiting. United - holding me hostage to the little cardboard ticket I needed from their machine - started pitching me all sorts of upgrades. One at a time.

Do you want more leg-room (5 inches worth) for $49? No.

OK, but do you want to upgrade to first class for $199? No.

OK, but would you like to sign-up for double miles rewards for as little as $149? No. I just want my freaking boarding card so I can walk away and buy a newspaper and a snack before I have to board your crowded, smelly plane on which I will be served no food for 6 hours.

Oh, don't worry sir, you're in luck. Your flight is delayed. Right now it's showing 15 minutes late, but by the time you'll actually take off it will be 3 hours behind schedule. However, as a personal service to our valued customers, and to make sure you get a little bit of exercise before your long flight, we're going to change gates for you three separate times. Oh, goody.

Well, never mind me. I am a veteran business traveler and I am used to taking crap from airlines. When it became clear that our flight would be 3 hours delayed, the gate agent came on the speaker and with only a hint of irony said "those of you who were going to connect in DC will be missing their continuing flights. The good news is that the DC area has over 1000 hotels, and United will put you up for the night". I kid you not.

I hate United.

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Wednesday, August 05, 2009

House Hunting: Fear and Excitement in Silicon Valley

It looks like we're getting serious about this house hunting business. On Thursday morning my wife and I will be meeting with a realtor to seriously begin our search for a new house. No, we haven't made the final decision to buy, but we are certainly taking some concrete steps.

Over the past week I have been reading my real estate books, I have been soliciting advice from friends and seeking recommendations for Realtors, my wife and I even sat down together and put down in writing our perfect house profile which we intend to give to the realtor we choose. We are even getting ready to get pre-approved for a mortgage...

In my gut I feel a combination of excitement and fear. If we go through with this, it will be the largest deal and largest financial commitment that we are ever likely to make. At work, I negotiate multi-million dollar deals a few times a year without a tinge of nervousness, but this is the first time I will be working on a 6 or 7 figure deal with our own money.

You see, as a renter, my financial concerns are an order of magnitude smaller than they would be when we own a house. If we lose our jobs, we can always pack-up or sell our stuff, take the kids and go hiking in India for a year or two. No big deal. We can bring our monthly burn rate down to a crawl. We also have a considerable cushion of savings which we have built up over the years. This cushion should be sufficient to take us through any but the most disastrous of economic scenarios without serious hardship.

When buying a house, the equation will change. Most of the money that we have saved will be used for our down payment (we will absolutely retain an emergency fund equal to 6 months of living expenses, in cash). The house, while a very valuable asset, is a non-liquid asset and unlocking its value is very dependent on the vagaries of the housing market. Home equity line of credit? Ask the folks who lost their credit lines when the sub-prime crisis developed into a full blown melt-down. Nope. Cash is always king, and it looks like we may be about to abdicate... :-)

On the other hand, what excitement! In our late thirties, we have never owned our own house. I love the idea of having a place to call our own. How awesome would that be? It's been a while since I have been that excited about anything.

Fear and excitement in Silicon Valley. They should make a movie.

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Tuesday, August 04, 2009

Cash for Clunkers: I Don't Buy It

The cash for clunkers program has been wildly successful if you judge by the fact that the first billion dollars in the plan has run out in a matter of days. This money was expected to last well into the fall. The program has apparently done a lot to get people to buy new cars, and getting people to spend money is the whole point of a stimulus program, right? Well, I don't buy it.

Let me start by saying that the program is clearly doing some good. Yes, it did get folks to open their wallets, and clearly some ol' gas guzzlers are going to get scrapped, but is that enough? As far as I am concerned, this stimulus program was pretty much a give away to American car companies. Those very same companies to which the government has already given billions of our dollars.

If the goal of the plan was to get gas guzzling cars and trucks off the road, why did the program pay consumers $3,500 for a minute increase in gas mileage? Folks who traded-in an SUV or light truck could get away with an increase of only a couple of miles in gas mileage and still participate in the program. I can't prove this, but I am willing to bet that in many cases the CO2 emissions required to produce and deliver a new car greatly exceeded the energy that would be saved by the small MPG increase. If the reason for the program is environmental, why not require buyers to replace their vehicles with hybrid cars that would get at least 40 MPG? The answer is simple: such fuel efficient cars are made by foreign manufacturers, and we can't be giving money away to foreigners... even if those cars are produced by Japanese companies here in the US... nah, we can talk about the environment, but giving money to foreigners?! Unthinkable.

Second, how does destroying our assets improve our situation? Cars traded-in under the cash for clunkers program are destroyed. Yes, that's right, they are taken off the road and shredded. How does that help our national economy? Should we boost our construction industry by bulldozing old houses? Would we be better off as a nation if we destroyed our bridges so we could build new ones? We are taking assets that could be re-used and we are dumping them. How can that possibly make us richer as a nation? Is there some alchemy involved here?

Finally, this program is no doubt inflicting severe collateral damage on charities who would otherwise receive many of the vehicles being traded-in as donations. Here is some anecdotal evidence for that happening.

The only sound reasoning for such a program, in my opinion, is the environmental rationale, however those are clearly secondary and minor in the way the program is designed, as far as I can tell.

After I finished writing this post, I read this article which suggests that folks are buying cars with better fuel economy than is required by the Cash for Clunkers rules. If that is indeed the case, my objections on environmental reasons may be over stated (even though the combined gas mileage average is clearly far lower than it could be). We'll see.

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Monday, August 03, 2009

Demand Health Care Reform!

A monumental battle is playing out in Washington, between those who strive for health care reform, and those who are doing everything in their power to maintain the staus-quo. The American people must stand-up and tell Congress that we do not only demand reform, but that we demand meaningful and sustainable reform that will guarantee health coverage to all Americans.

I call on my readers to take action to make sure that the first chance for real reform in over a decade is not wasted. We must make our voices heard.

Visit HealthReform to understand where we are, what we need to change and how we can get there. Join the fight!

Here is some data from that site which tells a very clear and well substantiated story for why health care reform is required for California. You can get similar information about the state where you live:
  • Roughly 19.7 million people in California get health insurance on the job1, where family premiums average $13,297, about the annual earning of a full-time minimum wage job. 2
  • Since 2000 alone, average family premiums have increased by 114 percent in California.3
  • Household budgets are strained by high costs: 19 percent of middle-income California families spend more than 10 percent of their income on health care.4
  • High costs block access to care: 13 percent of people in California report not visiting a doctor due to high costs.5
  • California businesses and families shoulder a hidden health tax of roughly $1,400 per year on premiums as a direct result of subsidizing the costs of the uninsured.6


  • 19 percent of people in California are uninsured, and 71 percent of them are in families with at least one full-time worker.7
  • The percent of Californians with employer coverage is declining: from 58 to 54 percent between 2000 and 2007.8
  • While small businesses make up 77 percent of California businesses,9 only 46 percent of them offered health coverage benefits in 2006.10
  • Choice of health insurance is limited in California. Kaiser Permanente alone constitutes 24 percent of the health insurance market share in California, with the top two insurance providers accounting for 44 percent.11
  • Choice is even more limited for people with pre-existing conditions. In California, premiums can vary based on demographic factors and health status, and coverage can exclude pre-existing conditions or even be denied completely in some cases.
To read the citations and end notes cited above, follow this link.

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