Sunday, January 30, 2011

Two Spaces vs. One

I'll admit that I tend to add two spaces after a period at the end of a sentence. I even go back and correct docs to add them. I am perfectly willing to admit that the practice is wrong. (I noticed that blogger's editor automatically removes them when posting). I probably will not stop doing it, however.

Mostly I'll continue because I do it pretty much automatically after typing the little dot, but also because I find it easier to read what I have written...particularly when I am reviewing/editing. Maybe it doesn't read any better to someone who is not reading for grammar/punctuation/flow, but when I read back over what I have written, I am reading to make sure that sentences stand on their own properly, and that they neither go on too long nor end too. Having an extra space helps that a little.

Of course, if I ever wrote something that I actually anticipated another person reading, I may prefer that it be edited properly.

Thursday, January 27, 2011

Taxing Driving

I'm a bit confused as to how it is that people fail to comprehend how much "big government" makes their driving possible. Roads are a much bigger infrastructure investment by the government than is public/mass transit. But riders of trains and buses pay a fare. Only a very small fraction of roads have tolls, and only a small fraction of parking is metered.

There are many proposed fixes to make drivers pay their share. There are three I feel are fair. One is more metered parking, and higher rates where it does exist. Another is a significantly higher gas tax (at least $1/gal. if not $2). And a final one is "congestion pricing" which is hinted at in this generally not good article. But that article lists one of the worst ideas out there, and pushes another. It is a wonder that such a thoughtless individual could be a professor of any level at any credible university.

First off: public-private partnerships only work if something can be made profitable. We have roads all over this country, but only a few areas of the nation have enough population to support an expensive piece of infrastructure. Bridges and tunnels through mountains, over gorges, under rivers/bays, are not cheap, but while a new tunnel between Jersey and NYC could recover enough in tolls after maybe a decade, a simple bridge over a stream in the middle of Wyoming may not ever be able to do so. This may mean that we shouldn't build that bridge, but maybe it means the government should use profits from NYC workers to help maintain roads servicing ranchers in WY.

Second: mileage taxes are a bad, bad, bad, horrible, awful idea. This is for two reasons: one is invasion of privacy. If I pay cash for a train ticket the government doesn't know that I took the train, but to do the mileage tax, there would need to be a GPS bug in my car tracking my every move. I don't want that, neither do most people (including any libertarian worth their salt, and even most tea partiers). Second: a "mileage" tax would require a whole new mess of infrastructure to monitor and assess, but there is already an existing tax stream which already does pretty much the exact same thing: the gas tax.

A gas tax is a mileage tax, but it is also a road damage tax and even a carbon tax. The more you drive the more you pay. The heavier your vehicle, the more gas you burn per mile, the more you pay. The more you idle your car in bumper to bumper rush hour traffic, the more you pay. Hybrids are certainly advantaged here but hybrids cause less damage to roads and contribute less carbon to the atmosphere. Still, if you want more out of hybrid drivers' pockets, just raise the gas tax until they feel it.

Wednesday, January 26, 2011

Less Evil Banks

Even CNN is admitting that banks are evil. Their "good" banks list even admits it.

One, however is a credit union and doesn't really belong on the list.

Monday, January 24, 2011

Another Evil Bank

U.S. Bank will be ending free checking. Like most other big banks (all?). For people with sense there are plenty of credit unions in the country, almost all of which are better than banks, and quite a few smaller banks that are several steps down the evil ladder.

I would love to see people abandoning their mega-banks in droves when their fees go up. I doubt it will happen, though.

Saturday, January 22, 2011

What Education Does and Doesn't Do

As an aside to this little post, and as someone who really supports education I would like to clarify what education does and doesn't do.

Education does provide us with a population that is capable today.
Education does provide us with a tool to prepare for tomorrow.
Education does ensure that we preserve our discoveries/culture/heritage.
Education does allow us to challenge our past.
Education does keep us discovering new things.

Education does not make for less inequality.
Education does not guarantee jobs or employment.
Education does not change who is in power today.
Education does not do anything fast.

Education is important for us (as Americans and as people) because it is our national investment in the future. No matter how good (or bad) a city, state, nation, or the world is today, going forward things will get better or worse based on whether the populous is sufficiently well educated to adapt, change and grow.

Thursday, January 20, 2011

Banks Are Still Evil

CNN repeatedly produces frustratingly stupid economic articles. Paul R. La Monica writes their (daily?) "The Buzz" articles and mostly sounds like an in-love-with-bankers type financial analyst. This screed of his is an excellent example: "Hate the banks if you want. But we need them."

Right off there is a problem: Yes, we need banks but no we don't need these banks. Any banks can do. The problem is the massive banks that we have are not good, and we could do better without them.

Then we get false notions of equivalence as he starts with talking about big banks then moves to small ones and says they are not doing well either:
Hudson City did not run into the problems that many of its peers did when the housing market imploded. The bank even refused to take TARP money. But Hudson City announced Wednesday that profits in the fourth quarter slipped 11% from a year ago.
A couple issues here. First, they are still profitable, so most of the argument turns to garbage right there. The feeling most people have is that banks are making too much money and should be far less profitable--and if there was real competition they would be much less profitable. All the "banks are down" stuff he is saying is bad is utter horseshit. BANKS ARE STILL VERY PROFITABLE! So long as they are profitable, there is zero reason for this garbage article. If you believe in competition then less profitable banks is good: it means they are facing real competition, or at least that regulation has somewhat reduced how much they can screw over their depositors in favor of their shareholders.

The second issue is that small banks (up or down) is not relevant to the problems created by big banks. Yes, many small banks fell prey to the stupid a few years back but when it happens these banks are eaten by the fed, liquidated and depositors are credited out of FDIC. When BofA crashes so spectacularly we have to rush in to bail their asses out! This non-equal footing means comparisons are not really meaningful. Unless competent banks (large and small) are going into the red (not just being less profitable, but actually losing money) what happens to Chase, and BofA and Wells Fargo is completely separate from what happens at Hudson City and any other small bank.
"For a healthy economy and market, you need stable financial institutions," said Michael Cuggino, manager of the Permanent Portfolio in San Francisco. The fund owns Bank of New York Mellon (BK, Fortune 500) and State Street (STT, Fortune 500), two trust banks that also reported disappointing earnings this week.
Repeat after me: "Hugely profitable, massive financial institutions are not, by definition, stable." Banks becoming less profitable is moving them toward more stability, not away from it. Yes, their stock prices may, in the short term, be unstable, but no sane person should give a shit about that so far as "stable financial institutions" are concerned. Especially since stock prices seem to seldom be reflective of anything other than mob mentality ("Dear God! We thought they would make $4.35 billion and they only made $4.34 billion, everyone sell, sell like the wind!" and the stock price is depressed by 8%).
Still, there are some encouraging signs for the banking sector. A long-awaited (and needed) period of consolidation may finally be beginning. In the past month, three notable bank deals were announced.
Really? No, really? Massive banks that tried to destroy our economy leads one to think: "What we really need is more massive banks." Yes, I know that there are likely quite a few weak banks out there and that some level of consolidation among the smaller banks is probably good (and for wise investors could be very profitable) but what the sector really needs is to be more competitive...i.e. split up the big banks or at least get them much better regulated, which the financial reforms passed last year will not do.
So rooting for the big banks to suffer just isn't smart because it probably means the whole economy is still in lousy shape.
Near 10% unemployment means the economy is in lousy shape. The one thing that Paul should have learned but didn't in the past 3 years is that wildly profitable financial sector is bad for the economy. A significantly less profitable (but still profitable) financial sector is good. Right now the banks are wildly profitable, so unless they really start to "suffer" a bit, the economy can't recover.

Tuesday, January 18, 2011

"Return on Investment" for a House

I'm sure somewhere there is a calculator that does this, but I haven't seen it. A quick figuring of how much a house returns as an investment would be the amount saved on rent as a % of the invested value.

e.g. If rent costs $1750 per month, and taxes/insurance/maintenance for a purchased home end up at $750/month then buying the house netted $12,000/year. for a $200k house that would be 6% yield. This is with zero house appreciation. So that would be if you are buying the house outright.

The nice thing is that that ROI is independent of where you get the money from. So if you financed with a mortgage for 100% of value, and with an interest rate of less than 6% (real, not nominal) then you are getting more out of the investment than the bank. If, on the other hand, your interest rate is higher, or if the house price is much higher, then that may not work out short term.

Investing otherwise is a tricky figure, but your return with mortgage roughly works out as the difference. The problem comes with the "what are you doing with the money otherwise" question. Rent is not an investment. If rent and mortgage are equivalent then mortgage wins (if the above is positive) though it may take a few years to offset closing costs. If rent is less, then you would need to only look at return on the difference and compare the total values not just percents.

This is a valuation that ignores inflation and appreciation. If the house is appreciating and/or if rents are inflating, than the numbers shift more toward buying. If the house is falling in value or we have deflation in rents, then it shifts away. A generally safe assumption would be to add 2% for inflation. Appreciation is a non-factor to me as it only factors in upon selling and is likely eaten up by a subsequent purchase.

Monday, January 17, 2011

Poor Rich Folks

Inequality is a funny thing because most people think about it as the rich people and the poor, but that isn't really what makes for high overall levels of inequality. What does is the super-rich. If your household brings in $45k/year you are just ahead of the median income and so are doing better than 50% of households. If you double your household income you push over the 75th percentile and are doing quite well. A household bringing in $250k/year is doing very very well--better than 96% of all households--doubling that still doesn't get them to the 99% (data from here graphically here). More importantly, doubling that doesn't really do a whole lot for standard of living.

Basically if you go from $45k to $90k/year you see a rather large boost in your economic standing, but if you go from $250k to $500k then you are...pretty much exactly the same place. You have the same economic peers. You still can't really have a private jet or multiple $10 million vacation homes or get a building at Princeton named after you.

The super-rich suck up such a large amount of our income and wealth that no-one, not even those who are, in fact, rich looks that way. People earning over $1M/year grossly distort the income distribution. Maybe this is an argument for adjusting the tax brackets with the top one starting at $1M and being a sizable 60%+ and maybe it's an argument that people making $300k should stop bitching about "tax hikes on the rich" (including them) since they are not really the ones affected by it.

Really, though, it is a calling to stop giving a shit about money at some point. For individuals earning $400k/year having plus or minus $20k doesn't really do anything for them (and if it does then they really should reassess their lives). What a person can do with $200k is not a whole lot different than what a person can do with $500k. That difference gets even less with more money.

Once you own two fully furnished houses, a few cars, and have enough income to cover all expenses plus a couple nice trips, and sufficient savings so that your kids can go to school, then what more do you need? What more do you want even? Maybe it's from not being rich ever, but I can think of a lot of neat things to buy/have/spend money on, but I can't think of anything that I could do earning $1 million a year that I couldn't earning $250k/year, other than retire sooner, but even then: I like my job and would likely go stir crazy without it. Further, I do have a pretty amazing imagination; I just don't have the desire to own a diamond studded platinum case for my cell phone or anything else so ridiculously ostentatious.

Maybe I'm the odd one out, but I don't think so. For as little good as money can be for an individual beyond a certain point, I will never understand the insane response to someone proposing that people earning far more than the vast majority in this country pay a bit more in taxes. But that insane response is winning, and has been for over 3 decades now.

Poor rich folks. We wouldn't want them to have to work now, would we?

Future Republican House Bills...

In honor of the ironically (moronically) named "Repealing the Job-Killing Health Care Law Act" I wonder what other bills the newly GOP lead House will vote on this year. My guesses:

"Ending the Right-to-Life Raping Practice of Abortion Act"

"Stomping Out the Farm Family Slaughtering Estate Tax"

"Starving the Programs That Make Poor People Wretched Blights on our Communities Social Security Reform"

"Preventing Scary Brown Foreign Muslims From Being Happy Proposal to Bomb Oily Mid-East Desert"

"9/11, Terrorists, Obama, Sadam, North Korea, Taxes, Iran, Booga Booga Booga!"

Actually I think that last one will be the default precursor to every bill starting sometime in late November this year. When asked about it Eric Cantor will reply that he doesn't really agree with the name, but the concerns raised are legitimate, and the media will drool over itself to say how "reasonable" he is, unlike the "shrill" Democrats who spend time complaining about the name instead of the issue...

Sunday, January 16, 2011

I've Got a Hypothesis

I think that recessions bring about better creativity and a desire for more competent "art" by the general public, where economic boom times leads to lots of crap. Mostly I associate this with music, but after reading this article I think it may apply to movies as well.

With music, my working hypothesis was that when times are good younger people (i.e. middle school, high school, and even elementary) have more disposable income and free time and are driving the entertainment industry, and that in rough times, that group's purchasing power decreases by the most and the main consumers are people in their 20s and 30s.

I think something similar may be happening with movies. People are not sending their kids to theaters every weekend, so the pop garbage that tends to dominate isn't drawing the crowds and repeat viewers that it would have five years ago. If the movie-going crowd becomes older and better educated, it could follow that their taste would be better quality films.

Of course I also think that there is a secondary aspect, call it the "misery loves company" theory. The films doing surprisingly well are not happy romps or clear-cut good vs. evil with no ambiguity thrill rides, but are movies that show flawed humans and difficulty and suffering. If the real world is depressing then escaping to some utopic world for a few hours may just make the real one seem even worse upon return. Seeing challenge and difficulty--overcome or not--in an escape can make a depressing reality somewhat less so.

Sunday, January 09, 2011

Close but...

This CNN Money article discusses how long residential housing is going to take to recover its value.

Short: nominal values in bubble areas will take 20-30 years to recover, which corresponds to roughly 2% expected growth in value. That sounds fair. I'm sure that optimists would expect higher return, and pessimists don't think the value has bottomed out yet. The problem in the article is with one particular sentence-paragraph:

And these are nominal prices: Inflation-adjusted recovery will take even longer.

This was a bubble. That means that prices were way too high to be justified. It also means that "inflation-adjusted" prices will NEVER recover. If they do, it will mean another bubble.

I'm not sure why that sentence would be allowed, but my guess is that they don't want people who bought at the peak to do the smart thing and bail. And that would cause problems. The fact is that the nature of a bubble means that peak prices won't (shouldn't) ever recover. Anyone who bought at that peak is pretty much screwed. Those who paid cash or who put large down payments are probably out a huge chunk of money. Those who financed the bulk if not all have a debt level that doesn't match their asset. They should walk. It is the smart move.

I have heard a lot of carping about "moral hazard" and that those that walk are dead beats, but I don't buy it. Those that walk will take a hit: credit scores, and any $ they put into the house (closing costs/down payment/rennovation). The banks were the ones who had real moral hazard, and they've been bailed us. It may have been the necessary thing to do but it didn't feel good, and it should have some benefits to the house owners who were either duped or greedy. It doesn't though, so they should walk. All of them.

Tuesday, January 04, 2011

More Housing

Back to crack. Patrick himself has an article up now complaining about HUD. I agree with him on how badly HUD presents things ("Home," "Dear Future Homeowner," and such) but there are two things that he ignores here that are kind of critical: long term ownership and the local nature of housing.

In California, Nevada, and several other places the cost difference to buy vs. rent is not really worth it. For me, on the other hand, my house would cost about the same to rent as my current mortgage + taxes + insurance today. This means that I am better off buying even if housing and rent stay flat.

But even this ignores what is often the reason that buying is more expensive in the short term: a mortgage is like rent control that, at the end, leaves you owning the dwelling. It is a hedge against inflation. A guarantee that in 15 years, when I am hopefully making more money, I get to save/invest/spend a larger fraction because my mortgage hasn't changed. In 15-30 years (whenever it is paid off) I get very cheap housing--taxes and insurance only--and that when I retire my likely lower income will be plenty because I WON'T HAVE TO PAY RENT AT ALL!

The house hopping behavior of the past couple decades is not what house ownership is really about. It was a modern invention that only existed because people had ridiculous notions about how fast a house would/should appreciate.

Buying a house is expensive. Moving into a new house 5 years down the road should mean taking a net loss. It won't everywhere, and there will always be some people able to profit with house buying and selling, but for people who are buying a house to live in the investment is one that in the past has really only worked long term for the vast majority of house owners.