Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat.

Theodore Roosevelt, The Strenuous Life

March 11, 2012

Money and Finance, Opinion

Comments Off on A Shift in the U.S. Housing Paradigm

Many years ago my then boss explained that you could live in a house for nothing; every payment would be covered by the appreciation in value. What a deal! It will be unlikely for you to agree with all of my conclusions about the housing market, but see how far off the mark the following lists are.

The Old Thoughts

Housing is an investment for the owner-occupant.

You cannot lose money in housing. Finance as much as possible to maximize leveraging.

There will be a growing demand for housing as long as the population increases.

Repair before selling to maximize profit.

Be careful of location. Buy the worst house in the best neighborhood.

Buy in a great school district.

Houses sell quickly, so buying for an upwardly mobile and career-oriented individual is a great decision.

The New Paradigm

Housing is an expense. The land is a small portion of the expenditure, so it’s better to think of a house as a depreciating asset.

You can lose a lot of money in housing. The greater the purchase price, the greater the opportunity for loss.

The demand for housing is amazingly elastic. Even with increasing population, demand can decrease as the average number of occupants per dwelling increases, and those demographic groups who typically buy cannot due to unemployment and low wages.

Caution is warranted with improvements and repairs made in preparation for sale. Cleaning, painting and yard work are okay, and you’ll have to make repairs anyway if the buyer uses FHA financing, which is quite common now. But improvements will yield 50 cents on the dollar at sale if you’re lucky. (The real estate agents will still encourage you to repair houses.  The reason is simple. Most agents still work on commission. Repairs and improvements speed sales. Agents are happy to earn 5% on the 50% of value remaining for each dollar you spent.)

Location is still important, but can be trumped by a shrinking local economy that was impossible to predict.

Renting may be better for those who will pursue career goals perhaps with a move to another city. Career aspirations and where we live can be antagonistic goals now, especially if we own a house.

February 19, 2012

Current Events, Money and Finance, Opinion

Comments Off on The Curse of Fame or the Risk of Wealth?

The Seattle Times published an essay by Kathleen Parker on February 15 entitled Whitney Houston: the Curse of Fame. The earliest comments to the article disagreed with Ms. Parker, assuming that Whitney died of a drug or alcohol overdose and emphasizing that Ms. Houston made her own bad choices. This is a case where you can agree with both viewpoints; there is no inconsistency. Whitney did make bad choices in how she lived, perhaps for almost the last two decades of her life. However, her situation, with lots of money, low education, the rigors of performing, and the company she kept certainly changed the risk of making those bad choices.  In all fairness, the comments as of today are more balanced than the early few. For example, one noted that there are actually few people with fame that succumb to self-indulgence and mind-altering substances.

Ms. Parker’s editorial is thought-provoking. Fame does not mandate stupid choices, but the loss of privacy is usually inherent, pernicious and irreversible. How many of us want our worst behavior, greatest weaknesses, physical infirmities, and social missteps known to all? This loss is costly, and not just economically. Have you ever gone shopping without wanting to meet anyone you knew or who knew of you?

It is very easy to think that more wealth would improve our lives and make things almost perfect for us; that the negatives accompanying wealth are minor annoyances. The truth is more harsh. Wealth brings about some serious problems. Everybody is friendly to you, even people that do not like you. It is difficult to distinguish friend from foe. Good choices, like learning a craft, volunteering, returning to college, starting a new profession late in life, exercising, limiting the intake of excellent liquor, avoiding expensive drugs whether legal or not, exercising, helping others, and even deciding to perform some menial labor on your own house (or at one of your estates) can become difficult choices and seem like silly things to do.

I have long noted the effects of wealth on people generally, and term the potential bad consequences from some choices open to them as “wealth risk.” The wealthy can buy cars with top speeds near 200 mph that are street legal. They can sky dive, engage in rock climbing, buy illegal drugs in copious quantities, and engage in many activities that are more risky than working forty hours each week.

It seems most of us should find happiness in our present circumstances and get to a point where we might change very little of our lives with an unexpected infusion of wealth.

December 21, 2011

Current Events, Opinion

Comments Off on U.S. Congress Is Dysfunctional

The U.S. Congress is spending more time on the Social Security payroll tax cut than they did debating the invasion of Iraq. As a body, they decided quickly to illegally invade a nation based on erroneous intelligence that even if correct did not justify their action. This cost thousands of young Americans their lives and left many with physical and mental injuries. It cost about $1 trillion, give or take some trivial billions.

The payroll tax cut is an allocation decision among various accounts: the national debt, the social security trust fund, and the net worth of American families. On average, all three accounts or classes of accounts are in trouble. Therefore the decision on whether to continue the lower tax rate is almost trivial.

Perhaps we should recommend that Congress establish a special commission to study how a large group of intelligent people can be stupid in their collective actions. The first body to study will be the U.S. Congress.

November 13, 2011


Comments Off on Guest Post

The following post originated on www.honeybeesuite.com and was written by Rusty. It is posted here with the author’s permission. Thank you, Rusty.

The feds forced me to use insecticide

. . . and ticked me off no end. Although I spend vast amounts of time and energy preaching the dangers of indiscriminate pesticide use, last week the FHA forced me to hire an exterminator and spray for non-existent anobiid beetles. I argued and pleaded, but no amount of logic had any effect on the all-knowing and all-powerful FHA. In short: no spray, no sale. End of argument.

It all started when my husband and I decided to sell a rental house we owned in downtown Olympia. The house was built in 1906 and was completely remodeled by a VA finish carpenter in the early 1980s. We purchased it in 1997 and kept it in rental service until September of this year. The house had been a great investment, but we were tired of being landlords and decided to get out.

We told our real estate agent in advance that we did not want to accept offers based on FHA loans, but he assured us it would be “no problem” so we reluctantly let him check off the FHA box. Sure enough, the first offer that came in was from a first-time home buyer seeking an FHA loan.

The problems started almost immediately when the certified pest inspector crawled under the house and photographed what he called an anobiid beetle infestation. Although neither of us had ever heard of such a creature, we studied the photos and decided he was crazy. When the carpenter re-built the house in the early 1980s he apparently found some weak joists under the floor, some of which had beetle holes. At the time he “sistered” these with new lumber. This simply means he installed new joists alongside the old ones to add strength and minimize distortion.

The photographs clearly showed the old wood with the beetle holes and the “new” (1980s) wood without a single hole or any other damage. We reasoned that if there were active beetles down there, they would have started boring into the “new” wood by this time. After all the “new’ wood is now thirty years old. Furthermore, an associate of my husband assured him that if anobiid beetles were active down there all these years there wouldn’t be a house left to sell.

Instead of listening to logic the bank was adamant. The spray had to be completed and the beetles “certified” dead. I couldn’t—and can’t—believe that a branch of the federal government would require us to spray poison in a dwelling as a condition of sale—a poison that will seep through the floorboards and into the home—a poison that isn’t necessary—a poison that the new owner will get to breathe and live with for who knows how long. I asked how this was ethical. But no one seemed to care. “Just do it and get it over with,” I was told.

So I did. It was the last thing on my list because I didn’t want to go back into that house after it was sprayed. I choose an exterminator—the $250 guy—who I liked better than the $500 guy, who I liked marginally better than the $600 guy.

Turns out, I really did like the $250 guy. He was a large man who arrived wearing a bushy gray beard and knee pads. He had a hand sprayer that he filled from a big tank on the back of his truck. I eyed him doubtfully but he managed to marshmallow himself into the tiny crawlspace opening. He spent all of fifteen minutes under there and then reappeared, spanking thirty years of dust from his fleece vest. “I’m done,” he said, “but there ain’t no beetles down there. Never was.”

I asked about the holes in the old wood. “Them’s exit holes,” he said. “No entrance holes. Dry as a bone down there.”

He went on to explain that in the old days, before wood was kiln dried, the lumber might contain anobiid beetles that entered the wood while the tree was still standing in the forest. If the wood was used in a damp environment, the beetles could thrive and you would see entrance holes and sawdust where the larvae bored back in. If you see only exit holes, the environment was too dry to support them and they died. End of story. Kiln drying kills the beetles, which explains why they are no longer a common pest.

I wrote a check and received my precious “pest certification.” As I walked back to my truck I could smell the pesticide seeping from the crawlspace. I thought of those molecules landing in the soil, washing away in the coming rains, and racing through the storm drains to pool in the estuaries where fingerling salmon try to survive their first year—all for a pest that doesn’t exist and never did. It’s so sad I wanted to cry.




September 18, 2011

Money and Finance, Opinion

Comments Off on A Report Card for the United States

If I were to outline the chief responsibilities of any central government, I would only include three essential functions: (1) the common defense, assuring that the nation is not conquered; (2) assuring that human rights are preserved; (3) operating the government with fiscal prudence. The report card for the United States government would be:

Defense: B

The U.S. has achieved the essential objective against our enemies, defeating them and keeping them outside our borders. A higher grade would correspond to not invading countries based on bad data and without justification, and by achieving great results at less expense.

Human Rights: B+

The U.S., despite some glitches and gaffes, has done quite well in this regard. Exceptions include over-regulation (100 watt lamps as we know them are about to be illegal to produce and sell; prohibition was silly; and the internment of the Japanese and modern airport security are a few other exceptions to a good record.)

Fiscal Prudence: D

By not creating a surplus within ten years, we are counting on inflation to reduce the ratio of debt to GDP. This is so bad that it is essentially a failure to even admit the magnitude of the problem, always the first and essential step in solving one. This D has a good chance of becoming an F if it leads to the result that is increasingly probable, a decline in the wealth and power of the United States.

July 16, 2011

Managing Debt, Money and Finance, Opinion

Comments Off on U.S. Efforts at Deficit Reduction

News concerning debt ceiling negotiations recently mentioned three plans by  Mr. Obama to cut the deficit. The most aggressive, and offered as such, is a $3 trillion cut.  He did not say that we will cut $3 trillion over ten years, or an average of $300 billion per year. Assuming an equal cut per year, a big leap, this is only a 20% cut in the current deficit,  reducing the deficit to about $1.2 trillion per year. And it is quite likely the majority of the cuts will be delayed to affect future administrations.  Thus, the unsustainable and profligate spending will continue,  providing substantial annual additions to the $14.3 trillion debt of the United States. The Republicans are correct that this level of deficit reduction simply postpones more instances of raising the debt ceiling in the future. Also, cutting the deficit the same amount each year over ten years is not in the interests of Mr. Obama because delaying the cuts helps his chances for re-election.

Stated differently, the current debate is not about reducing or eliminating the debt of the United States. It is about finding an agreement on the appropriate rate at which the debt should increase!  If the United States eliminated the deficit, there would be no need to increase the debt ceiling.

Paul Krugman and many Democrats argue that this is not the time to cut government spending because we need to create jobs. They are right, except that the U.S. government cannot afford to do the best thing. We spent too much during good times and bad since World War II, creating a huge debt load.

The Republicans are against raising taxes. They are wrong. Taxes must rise to resolve this. They should agree to a ten year tax increase, with a sunset provision and a tax trigger, causing the application of the tax only if deficit spending is at or below an agreed annual target. Cutting Social Security benefits is within the authority of Congress, but they should not do it for anyone who is paying social security taxes. We are relying on Social Security for our retirements and will need much of that income to cover medical insurance costs, especially if we retire prior to attaining the Medicare eligibility age of 65.

News organizations should be more factual in reporting what is happening, clarifying when someone refers to a reduction over a ten year period and leaves the period of the reduction out of the statement. News organizations should be clear that the debt will continue to rise irrespective of which party dominates the outcome. And finally, news organizations should simply stop reporting on these negotiations daily. The budget, tax law, spending, and debt management are under the exclusive control of Congress and Mr. Obama. They made this mess; they need to solve it.

The average citizen is simply stuck with what passes Congress and is signed by Obama. Congress and Mr. President, please do your job and tell us the truth about what you are doing. We don’t hold the power to decide this issue, but you may not get re-elected if you continue to screw this up.

May 15, 2011


1 comment

My wife commented that some of the big companies, like Wells Fargo, serve us quite well and that some of the local shops disappoint. Except for noting that Wells Fargo wouldn’t seem so good if we paid the fees for bouncing checks, I had to agree. Some businesses we like:

Costco: Narrow selection of excellent products at great prices. They do the hard work for you; if a supplier raises prices excessively, they drop the product. Their return policy has been a life saver in those rare instances when we buy a lemon.

Nordstrom: Too expensive for us in general, but the only place to buy a man’s suit. You get what you pay for. Their adjustments give you the look of a tailored suit.

Harbor Freight: Great prices on all kinds of tools. Sometimes the quality is low, but care and study will usually be a sufficient guide for you in deciding what your needs are, as long as you do not make the mistake of assuming low quality correlates with low price. It is not necessarily so at Harbor Freight.

Wells Fargo: Great service and good terms on accounts. You save money if you do not break the rules, such as bouncing checks. They give the best mortgage statements in the business, providing you with the remaining principal owed each month.

Home Depot: Pretty good, but not exemplary. Great hardware stores tend to go out of business because they must carry weird stuff that gives the store low margins. Home Depot falls short on specialty fasteners and high quality (commercial grade) door hardware. Also, to get help, I have to start cutting my own rebar or climbing on their shelves, at which point someone admonishes me for increasing the store’s liability. Then they help me.

Fred Meyer: Great vegetables, great variety of groceries that includes lots of organic food. Speeding the check-out lanes, ceasing inquiries about the store discount card and even eliminating the stupid things would be a further improvement.

Trader Joe’s:  The best little grocery store I have ever visited. Great wine at great prices, always free coffee for the customers with samples, great bread and I like the frozen Mandarin Chicken dinner. Great chocolate at good prices, too. If you need to gain a few pounds, this is the store for you.

Amazon.com: Fast, easy, free shipping for orders greater than $25, and you can get all kinds of things from them. Recently I ordered a $12 garage door lock. My wife said I needed to add to the order to get the free shipping, so I asked for the $125 Honda Civic Service manual. Free shipping. The manual arrived and we are still waiting for the lock.


May 6, 2011

Current Events, Legal Views, Opinion

Comments Off on Obama Kills Osama

The two major ways nations kill is by execution pursuant to criminal laws and through war. Osama bin Laden was not killed by the United States because of his criminal acts; he was not tried, convicted or sentenced. All of these processes are prerequisites to execution. Instead he was declared an enemy combatant by the executive branch and killed by the same branch of government. The only legislative involvement with Osama’s death was the passage of the Uniform Military Code of Justice into law long before he was shot. There was no court or judicial check on the use of executive authority.

It is quite clear that nations have the authority to defend themselves from attack by military invaders. The executive branch would argue further that it can initiate combat operation without a declaration of war under many broad circumstances. Interesting questions follow from this. Should the United States and the Commander in Chief  kill those, like Osama, who are unarmed, not a member of a uniformed military service, and not engaged in espionage against the U.S. on behalf of a foreign government during time of war?

I make no argument that Osama was not depraved, not evil, and not a perpetrator of heinous acts. That is established. But that Osama was an enemy combatant and could be declared such and then executed by the president of the United States without a check on that power is like the authority vested in British kings many hundreds of years ago. We revolted from a system with more protections for those being killed at the hands of the state than that.

The budget fight continues. Here are a few myths and observations:

1. It is the wrong time to fight the deficit and debt. Creation of jobs is what is important.

This is catchy. It is correct, except that we are essentially out of money. Indeed, the U.S. would be brilliant to spend any surplus on re-vitalizing the economy. The problem is that the U.S. already expended the funds and cannot afford to stimulate the economy as much as it should.

2. We should not cut spending for public radio because U.S. spending for the Corporation for Public Broadcasting is trivial compared to the deficit and debt.

Most spending that is wasteful or that should be reviewed for cutting is trivial compared to the enormous debt of the U.S. This argument applied to all expenditures dooms to failure the frugal and diligent who believe spending is too high.

3. We are making cuts to the wrong programs.

The parties need to first agree on the magnitude of the cuts, then they can fight about where the cuts should be taken. There are two issues. There is no reason to disagree on the cuts, but where they should be made is a natural area for controversy.

4. We have a spending problem, not a revenue problem. New taxes are not justified.

The first sentence is true. However, the hole we have dug is too big to fill without new taxes. The only questions should be against whom should they be levied and how much should they be.

5. We have a budget deal that kept the U.S. Government open for business. Isn’t this wonderful?

Right. Congress cut the budget about 1% and spending is more than 40% greater than income. Great work.

6. We need to close tax loopholes for corporations.

This is not so. It is far better to use the Individual Income Tax as a tax for individuals and keep corporations in the U.S. by not taxing them at all.


There is no one to bail out the U.S. in case we default or otherwise need financial help. It took years to create the current mess and will take much diligence and pain to reverse the trend. The analogy is to the family that is spending at the rate of 140% of its income; a lot of good expenditures must be cut to make the finances work in the long term.

BBC World News is reporting this situation well, distinguishing between the debt and deficits of the United States and regularly comparing our debt to GDP ratio with that of other nations struggling under mountains of debt. When people know the amount of debt we have per worker the political pressure will increase on our leaders. This debt level makes every major spending decision, such as funding a huge stimulus package or war effort, a Hobson’s choice. We gamble with not addressing a present need or risk economic collapse because of excess spending and debt. This is not a path to a world leadership position and is unacceptable.


March 27, 2011


Comments Off on Land Clearing Efficiency

While I was hand-clearing a little area in our forest for a small storage building, I thought of the mischief mechanical engineers did by designing modern equipment for logging, earth moving and other tools that can quickly change the face of the planet. We have been part of a quasi-conspiracy that can destroy the natural environment with unprecedented speed and ease.

One example is logging. Instead of whole villages of men engaged in clear-cutting forests, we can now watch one or two men remove all the commercially valuable timber from hundreds of acres. They arrive with high-quality chain saws, changing the forest to something resembling the game “Pick-Up Sticks.” Then they limb the trees, and cut the timber into lengths for transport and market. One fellow returns with a track hoe that has a thumb attachment on the bucket to stack the logs and pile the boughs and limbs. He burns the slash pile, loads his own trailer using the same track hoe, then drives his truck to his buyer. He repeats the truck loading and delivery operation until the huge stack of logs is gone. The final step is reminiscent of the old, more labor intensive operations. Prison crews arrive with seedlings to expedite the return of the forest.

Logging in this area used to require temporary rail lines, camp kitchens, cooks, machine shops, riggers, laborers, yarding operations to drag the logs to loading areas, and derricks to lift and load the logs. All of that, and the local villages to support the families of the loggers, is gone. The rate at which they harvested and the substantial decrease in manpower needed for logging means that most of these jobs have vanished.

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