Defenestrating Thoughts from the Bivouac

As you may know, I just got back from a business trip to Boulder. And instead of staying at a hotel, I stayed with my parents. It was really nice being home and, since Sri is in Oregon visiting friends, I had my parents all to myself. No sisters or wife to hog the parents. :-)

Yesterday, we realized that this was the first time that it’s just been me and my parents for more than a day. Like the first time ever. In the past 27 years, if I was with my parents, I had to share with one of my sisters.

When you think about it, that’s really crazy. But a nice side-effect was that the house was really quiet and peaceful. :-)

Except we weren’t alone. Sri got a gerbil that lives in a cage in the study room. The gerbil just runs on the hamster wheel all day long. Since Sri is out of town, Amma is feeding the gerbil and taking care of it. Amma really likes the gerbil and you can often find her talking to gerbil in Telugu, [roughly translated] “Hi little dear. I’m sorry I didn’t come visit you yet today. Did you like your dinner?”

It’s really, really funny. Especially so, since the gerbil doesn’t speak Telugu! Amma astutely pointed out that the gerbil doesn’t speak English either, but still.

Sri gave the gerbil some name I can’t remember, but I think a better name is “Sribil” (Sri + gerbil).

And we have one more guest in the house. A woodpecker has burrowed into the house and is building a nest inside the walls by Akka’s room. My parents didn’t notice since no one was using this room. I noticed, though, because bright and early each morning, Mr. Woodpecker start drilling (or pecking) very loudly.

And during the night, he gets bored and starts running around in the wall right by my head. You know, during the day, it would be cute (in an Animal Planet sort of way). But at night, when I’m trying to sleep, it’s rather annoying.

If Mom and Dad don’t do something soon, they are going to have a wall full of baby birds come spring. :-)

… well, except that it was Crissy and me, not trains. And we didn’t pass each other, we stopped and talked for a bit. And it was mid-morning, not night. But you know, the phrase “Like two people talking to each other mid-morning” just isn’t as poetic.

As you know, Crissy was visiting her family last week. And for most of this week, I’m on a business trip to Boulder. I booked our flights so that if everything was on time, we would get to meet at the airport and hang out for 30 minutes or so.

And instead of wasting money on cabs, I drove Crissy’s car to the airport and parked it in short-term parking. And then, Crissy could go to the parking lot and drive her car home. We both had car keys and if we missed each other, I would use her voice mail to tell her where the car was parked.

Despite the simplicity of the plan, there were a lot of things that could go wrong. I could forget to leave Crissy a message with the location of her car. She’d then need to walk around the airport looking for it or wait until my flight landed in Denver. Or Crissy could have lost her keys. Or countless other things.

But it actually worked out nicely. I parked Crissy’s car, went through security and walked to Crissy’s arrival gate as her plane taxied in. I walked with her to the “Exit to Baggage Claim” area and then went to catch my plane.

Given all our recent travel ordeals, I can’t believe it actually worked. :-)

This post is a long time coming. I started it shortly after we got home from Christmas travel and have been slowing adding to it. It’s really long, but there are some valuable travel tips to learn if you’re (very) patient…

For Christmas, Crissy and I had our usual “visit both families” trip. Our flights were all booked on United airlines. First we’d go to Crissy’s house; the plan was to fly from Seattle to Kansas City (with a plane change in Denver). Then fly Kansas City to Denver to see my parents. And then finally fly back to Seattle after the New Year.

It was a fairly straightforward plan. But the travel gods had other plans. Only some luck, knowledge gained by lots of travel experience, and persistence made it work out somewhat smoothly.

Our trip started ominously, as my usually punctual town car service to the airport was 25 minutes late (the service claimed the dispatcher mistakenly canceled our reservation). We rushed to the airport and learned that our flight out was now delayed at least an hour and a half.

As a result it was impossible to make our connection in Denver. The United ticketing system caught this and when we tried to check our luggage, the service agent started the process to book us on a later Frontier flight. Unfortunately, the service agent was having problems getting the re-booking on Frontier.

(Continued)

“Experts” say that when you open your car trunk to load groceries, you should leave your car doors locked. That way, while you’re distracted putting things in the trunk, no one can sneak into your car.

It sounds good in practice, but I find myself doing the exact opposite. Now that I replaced my old Accord, I actually have a key remote that unlocks my doors and opens my trunk. So as I walk up to my car, I unlock the doors and pop the trunk. This way if I accidentally lock my keys in the trunk, I can open the car door and use the trunk release to get the keys.

Not that this ever happened; I’ve never locked the keys in the car or the trunk (knock on wood). But it seems prudent. The chances of my locking my keys in my truck are much, much higher than some guy sneaking into my car as I load groceries (especially now that I have a job, I don’t have to shop at the sketchy grocery store like I did while I was in college).

Even if it’s 100 times more likely that I lock my keys in the trunk than a guy sneaking into my car, I think it’s worth it. Imagine locking your keys in 100 times; now imagine a random guy getting into your car — whom you will likely see or hear anyway, since it’s hard to hide in a sedan.

Seems like a prudent trade-off. What do you think?

I had a pretty weird dinner last night: a samosa, sushi, and Greek yogurt. Thanks to my strange appetite, foods from India, Japan, and Greece got together and interacted — in my stomach. :-P

That’s right, I’m back in bachelor eating mode. Crissy’s visiting her family for mid-winter break, so I’m in charge of my own dinner. My dinner strategy is more like grazing than eating. I look in the fridge and eat whatever sounds good. Real men don’t prepare meals.

The Greek yogurt is Fage Yogurt and I can’t get enough of it; it tastes really, really good. The only problem is the yogurt has tons of saturated fat in it: 45% of the daily recommendation. On the double cheeseburger scale, the yogurt is 83% of a double cheeseburger in terms of saturated fat.

I’m going to switch to the 2% yogurt variety so the damage will be only 8% of my saturated fat. In the meantime, I’ll eat the rest of the regular yogurts I bought and pretend that dairy fat is actually good for you.

If you read my review on Nickel and Dimed, you know that I didn’t like it. This book, written by Barbara Ehrenreich, discusses her experiment of living as an “unskilled worker” and trying to make ends meet. I felt that the author went into her experiment with the goal of proving her hypothesis that essentially the system keeps people in poverty. This “begging the question” led her to avoid opportunities that would have helped her situation. Most notably, she doesn’t even take the advice of her co-workers and maintains a condescending, defeatist attitude throughout the book.

I started reading her newer book, Bait and Switch, which claims to expose the middle-class working world. But I felt it was more of the same; assuming that it’s impossible to get a job and not getting it. Assuming all career help resources are rip-offs and getting ripped off. Too much pontification and too little unbiased investigation.

So these books got me thinking: maybe when people tell us that that your attitude is 90% of the battle, they are correct. If you go into anything expecting to have a bad time, you most likely will. Your brain harps on whatever negative it can find: you’re tired, the movie will be bad, dinner service will be slow and so on.

The opposite applies too. If you go to a bad movie expecting it to be bad and expecting to have fun laughing at it, you’ll probably have fun.

I came across this story about a guy named Adam Shepard who tested the “American Dream”. He started with what he was wearing and $25. By the end of ten months he had an apartment, car, and saved almost $5000.

Obviously, he had a very different outcome than Ehrenreich. One thing that is evident is that Shepard that a very different attitude. His premise is that you can work your way up from poverty and that’s seems to be what he achieved. In fact, he set out to “disprove” Ehrenreich’s book.

So what were the differences between Ehrenreich and Shepard? Until I read Shepard’s book, I can only guess. But it seems like the major difference was their attitude. Of course, their gender and age are different. But, I’m not sure how much of a difference this would have made.

There are lots of similarities: both of them had an escape hatch (a “real life” they could fall back too), both have college education, and so on.

Of course, the big question is: why do some people get stuck in poverty? It surely can’t all be attitude; presumably there is some degree of luck, health, and circumstances. Obviously being a young man with a college education helped Shepard a lot.

I added this book on the list of things to read. I’ll let you know what I think when I get around to reading it!

A while ago, I wrote about inflation and thought it was be interesting (or depressing) to revisit it. Though the Bureau of Labor Statistics (BLS) Inflation Calculator is most likely understating real inflation, it’s still alarming data. Crissy and I plan to have our first child in one to two years. For us to have the same real income my parents at the same point in their life (two years before their first child was born was born), we need to make over 4 times than my parents did.

Why? Because $1 from 1974 is worth $4.21 today according to the BLS.

And that’s just cash flow. Inflation is eating away at our savings as well, since money in the bank is losing value via the inflation tax.

The current recession is interesting. From my limited understanding of economics, economic downturns can be inflationary or deflationary. And, of course, as we learned from the 70’s it can be the dreaded stagflation. Not one seems to agree on what we’ll see this time around. My hunch is that we’ll see substantial deflation as “paper assets” disappear.

The Fed will continuing trying to print our way out of trouble and will keep lowering rates. I think, at best, this will do nothing and at worst, we’ll see stagflation.

Why do I say deflation is likely?

First, the downturn in housing is likely just starting. As house prices drop, more people have negative equity on their house: they will be “underwater”, since they owe more than the house is worth. When this happens there is an economic incentive to “walk away”. The lendor takes a loss since the original asset (the loan) is replaced with a repossessed house worth less than loan value. That lost worth is a deflationary event — the money is now gone.

This should follow in losses in unsecured debt like student loans, car loans, and credit card debt. If people can’t make their mortgage payments, they probably can’t make these payments. So again, the lendor takes a loss on their original investment; another deflationary event.

I expect the same thing to happen to commercial real estate. If money is tight, the market can support less stores. What will happen to all the new strip malls? They will likely sit vacant. So the builders lose money and at best can sell these for a loss.

This same analysis applies to the monoline insurers, banks, and hedge funds — basically anyone that touches SIVs.

Alternatively, the Fed could keep printing dollars and saddle us with stagflation. I really hope that doesn’t happen.

Continuing on the Jill post from yesterday… Crissy’s mom was having some routine images taken yesterday, so Crissy’s dad took Jill around the hospital to meet all his colleagues. Apparently, Jill was a hit everywhere. The GI nurses had already put the newspaper clipping of Jill’s article on the wall, so they had Jill autograph it, and then everyone clapped and cheered!

Jill’s autograph complete with her signature star above the “i”. Sheesh, even I don’t have her autograph. Maybe I should get one before they get to be collector’s pieces and I can’t afford it. :-)

If you haven’t met Crissy’s sister Jill, you’re missing out. Everyone loves Jill. Especially the media. For a not famous person, she has her picture in the paper a lot; once at a Special Olympics, she was dancing to music and pretty soon, a huge circle of college student volunteers and fellow athletes started clapping and cheering.

And a nearby reporter took a picture that appeared on the front page of the local newspaper the next day.

Recently, someone met Jill at the swimming pool and next thing we knew Jill is featured in the “Our Town” series of the Columbia Tribune.

It’s a cute little article; but it could have been more in depth and had more stuff about her (or at least about me!). And the picture was a little weird. I prefer this one. :-)

I think Jill must have been a little nervous; she doesn’t usually give one word answers. And, if you’re wondering, Jill does indeed test her glucose all by herself. Everything from the prick to calibrating her glucose meter.

And you can really trust her to do everything; except one small thing: read the number display correctly. For whatever reason, Jill will often transpose numbers when reading them to you. So a reading of 185 can become 815, which can cause a panic. Personally, I think Jill can read it fine, but likes to have the whole room say, “Jill!” when reads the number incorrectly.

Oh well, knowing Jill, she’ll be in the paper many, many more times. Maybe we could get her an afternoon talk show. If not, we may just have to sit down and finally write that book about Jill.

Yesterday, Warren Buffett offered to “buy” the municipal bond portfolio off some monoline insurers. And for some reason that I can’t figure out, the market saw this as a positive sign and went up.

Some background: monoline insurers cover bonds (principal and interest) when an issuer defaults. Municipal bonds are considered to be a low risk bonds and thus more profitable to insure. Usually bond insurers offer insurance mainly to muni bonds, but with the credit bubble, a lot of monolines took on riskier debt to make a profit.

Now, as the monolines are forced to cover bad bonds, they no longer have the capital to maintain a high rating (”AAA”). Without a AAA rating, the monolines can’t attract new business. And without new business, the monoline has no cash flow and will collapse. That, of course, is bad.

Buffett’s offer was to pick up the coverage of only the muni bonds; not any of the subprime mortgage debt. And, of course, subprime debt is the cause of the problems. So Buffett is basically saying, “Let me take your profitable business and you keep the garbage.”

Insuring muni bonds is the only profitable part of the monoline business. And if Buffett takes that over, he will basically get all the future contracts. Why? He’d be the only one with a AAA rating, because he’d have a nice portfolio of safe muni bonds.

Also consider this: for bonds, the insurance premium is paid when the bond is issued. So the monolines would have to pay Buffett to take over the muni bond liability.

Buffett himself said that he’s not being altruistic: “”When I go to St. Peter I will not present this as some act that will entitle me to get in. We’re doing this to make money.”

So why would a monoline accept this offer? Only if they were very desperate. Desperate enough to “sell off” their most valuable asset in the hope of delaying rating downgrades until they to fix up their asset to liability ratio. It would be unlikely to work, so this is really the last resort “nuclear” option to save themselves.

Buffett knows that the monolines are in bad enough shape that they would consider the nuclear option. So he made the offer.

So given this, why did the market go up?