Monday, May 29, 2006

Scott Burns agrees with me on the new issue of I-bonds

My original analysis seems like it matches up with Burn's.

Day 1: Coast to Coast

Last evening was gorgeous, but we woke up to rainy weather. (Because of jet lag, we woke up at 5:30am, but had gotten about 8 hours of sleep, so it was good) We took off with a little bit of mist in the air, and then the rain started coming down, but our hiking umbrellas came through and were quite good.

Then the sun came out, and bathed the coast in all its glory. It was so beautiful that it took us nearly 4 hours to hike the first 5 miles, we were stopping to shoot so frequently!

Then we cut across pieces of the English country side that were quite beautiful, except a few boggy fields which slowed us down and dirtied our boots. Way finding was more than a little precarious, especially after I discovered that they'd been quite a bit of tree cutting on Dent Fell, and my coast to coast guidebook was just a couple of years out of date. But we did make it through by dead-reckoning and instinct (when in doubt, go up hill), and then were lucky enough to have locals around to ask directions of.

Dinner was at the Ennerdale View B&B, with its gorgeous views. We're quite footsore, however, and Lisa has already gone to bed. (A first for her, beating me to bed!)

Also, the Tomlin Guest House we stayed in the first night was also excellent --- a great value, and such friendly people! Everyone we've met so far has been very friendly, from the airport information person to the taxi driver who detoured out of an errand he was running for his family to take us to our guest house because otherwise we'd have to wait 20 minutes!

Aside from the footsoreness, the muddy spots and the occasional rain, I'm loving this trip so far.

Nannycatch Beck

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Descending towards Raven Crag

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On the Coast trail, with Ireland (or is it the Isle of Man) in the background

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Gorse + St. Bees Beach

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Lisa enjoys the view of St. Bees beach

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The start of the Coast to Coast Trail

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Friday, May 26, 2006

Going on vacation...

We're finally embarking on our coast to coast walk! I might be on-line sporadically long enough to post pictures and reply to friends, but don't expect heavy posting.

Monday, May 22, 2006

More Mac Woes

My Mac Mini woes are not over. 3 days after receiving my replacement Mac Mini, Mac OS X has started hanging. It works for about 3 minutes after booting up, but after that hangs. Nothing works, so the only solution now is a reinstall of OS X.

This time, I know it's not hardware problem because when I boot into Windows XP, it's solid as a rock. (The Mac hardware test CD works too, and proclaims the hardware solid)

Ah well. If at any time there's a time to do a reinstall, it's 3 days after you get a new machine, before you've done too much to it. I have to say, at this point, I'm really thinking that all the hype about how solid Mac OS X is is simply hype. We'll see how this goes.

Sunday, May 21, 2006

Replacement Mac Mini

The replacement Mac Mini showed up, and it is just so slightly difference from the other machine:
  1. It's much quieter, it doesn't go into "full fan mode" as often as the one that died.
  2. For some reason, Mac OSX seems to be happy to use a little less memory on this guy.
Now that I've had a chance to try boot camp, I'm unhappy with it:
  • There's an annoying bug which refuses to turn off the Mac's internal speakers.
  • Palm Desktop causes the whole thing to crash!
  • It seems to hang intermittenly. (Don't blame this on Windows XP. Lisa's Acer works just fine, as does my office laptop) There's something wierd going on.
However, running on the same hardware, Windows XP is still faster than Mac OS X. Ah well... We'll see if this machine dies in a week like the other one did.

Friday, May 19, 2006

Greg Mankiw agrees with me

From my previous post:
English and Journalism majors are simply too incompetent at complex issues to do a proper job of covering our world today.

Though maybe I should be scared that a Republican Economist agrees with me. Then again, he's agreeing with Brad DeLong as well...

Sunday, May 14, 2006

Scott Burns is Disingenous again...

Compared to the General Fund Deficit, Social Security's impending deficit in 2040 is not a problem. [source] Medicare is in significant trouble, but before things get too bad, we'll simply be forced to have a rational, national healthcare system like all the other industrialized countries (and have better health outcomes to boot, what a tragedy), so that problem is a matter of political will, not an inevitable disaster.

The General Fund deficit, however, will persist as long as Republicans stay evil and as long as they keep winning the three branches of government. The fact that they're not currently popular doesn't mean that they won't resort to other methods of stealing the election.

Black Mountain Today

It was hot, about 83 degrees. About a mile from the top, I ran into a guy wearing a Coast-To-Coast T-shirt. I mentioned to him and his wife that Lisa & I were going to do the walk in a couple of weeks. They told me they did the trip 7 years ago, and that they were so lucky that they had only one day of rain out of about 16. That's pretty darn good, considering my own Scotland trip about 11 years ago had much more rain than that.

They did mention that the first few days was quite hilly. I asked how bad it was, and they said about 2500'. Why, I said, that's about the same height as Black Mountain! They agreed, and said that if you'd been climbing it all year, it was probably nothing scary.

This is one of the things I love about the Bay Area. No matter where else in the world you go, if someone else tells you how steep or high the mountains are, after you've asked a bit, you'll realize that it's nowhere as steep or as tough as they think it is, since the Bay Area has plenty of steep, tough hills.

Saturday, May 13, 2006

The Paradox of Choice

This is a great video, especially since the material is fascinating (unfortunately, the cartoons he shows are copyrighted, so the video omits them, which makes it very annoying when the audience is laughing at a cartoon and you don't get to see it!). Basically, humans have several reactions when confronted with too many choices. One possible reaction is paralysis, which explains why many people don't sign up for 401(k) plans --- they don't know which fund to choose so they end up doing nothing. Another possible reaction is to spend a lot of time going through the choices in an attempt to maxmize satisfaction but in the end being disappointed, since if there are 200 choices and you're less than perfectly happy with your choice then it must be your fault. Finally, the fact that you have so many choices can make you devalue all of them.

This does seem ironic, since choice is an incredibly positive thing. My personal solution is to make a decision appropriately, and then not spend any time reflecting on its goodness or badness other than to learn what I can from it. You can't live life as one regret after another, or you'll have a very sad life. If you question all your past decisions all the time, you're not going to be very productive, either.

Finally, this video also explains why people hire agents: even though many agents are corrupt, have other conflicts of interests, or simply incompetent, for a lot of people, having an agent make the agonizing decision for you eliminates the unhappy feelings they have about making the decision themselves.

An interesting financial question

Someone approached me the other day with an interesting financial quandry. I think I've analyzed it correctly, but it's worth writing down the question and the answer in case one of my readers points out an obvious flaw in my answer.

Q: I have a large amount of U.S. dollars to invest. I currently live and work in the U.S., but as I do not have a green card I do not know how long I would stay in this country or even want to be here. However, there is a significant chance that I might settle here in the long term. What should I do with my investments?

A: If this answer was something that would be resolvable in a year or so I'd just tell you to wait and see. But seeing that you're sitting on a pile of cash that you definitely will want to invest for retirement, I suggest that you build two portfolios: one in your home country and one here in the U.S. Within each portfolio you would perform your asset allocation essentially, each porfolio mirrors the other: the only difference is that one is denominated in U.S. dollars, and the other denominated in Euros.

The reason for the mirror'd accounts is that of paying round-trip costs. Let say you bought European investments in a Vanguard European Index Fund. The problem is that when you need to withdraw, you'll be paying two round-trip conversions, from Euros to U.S. dollars and back again. That's inefficient when you already have a European account and can directly trade a European index. You could also perform balancing between accounts. For instance, hold all US Equity in the American fund, and all European equity in the European account. Hold US Bonds in the American fund, and European bonds in the European account. Split your Asia-Pacific and Emerging market funds between both accounts. This ensures that you never pay round-trip conversions whenever you can help it.

You face some obvious problems: we know that there are low cost, efficient instruments in the U.S. for long term investments, such as the Vanguard Index Funds. I don't know if such instruments exist in Europe. You'll have to do your research and study the funds carefully. For instance, if an efficient International Fund is not available in Europe, you might be better off paying the round trip cost and holding everything in the U.S.

Another AppleCare Success Story. NOT!

Despite Apple receiving the dead machine on the 11th, they've told me they will only ship my replacement on the 18th! Is this a company that wants my future custom? Doesn't seem like it to me right now. They're using up half my 30 day free AppleCare support with one DOA.

Book Review: The Four Pillars of Investing

Wlliam Bernstein is the author behind The Efficient Frontier, the website discussing asset allocation and the theory and tools behind it. Bernstein wrote two books on investing, his first being The Intelligent Asset Allocator, a technical discussion of Asset allocation. This is the book, he says, for liberal arts major. (I did get a Bachelor of Arts in Computer Science, so this book is for me!)

Being a big fan of asset allocation, Bernstein writes:
since you cannot successfully time the market or select individaul stocks, asset allocation should be the major focus of your investment strategy, because it is the only factor affecting your investment risk and return that you can control

This is generally good advice, and his chapters on indexing, market timing, bubbles, and history are really good, and very much worth reading. His actual sample portfolios, however, are excessively complicated. For instance, for a taxable account, he suggests a bond portfolio that looks like this:
  • 25% Treasury Ladder
  • 25% Vanguard Short-Team Corporate Bond
  • 25% Vanguard Limited Term Tax-Exempt
  • 25% Vanguard California Intermediate-Term Tax-Exempt
I can understand not wanting to dump everything into California municipalities, with their risky histories, but it is doubtful that this portfolio with its attendant extra costs and extra manipulation needed would do so much better than one consisting entirely of a Treasury Ladder and the California Tax-Exempt fund as to be worth the extra effort. If you don't trust the California funds, a 75% weighting in the Treasury Ladder would be a better bet. Bernstein also neglects the delicious I-bonds, which have good tax properties and are worthy of an allocation.

For his tax-sheltered example, he goes for something even more complex for the equity portion:
  • 20% Vanguard 500 Index
  • 25% Vanguard Value Index
  • 5% Vanguard Small Cap Index
  • 15% Vanguard Small Cap Value Index
  • 10% Vanguard REIT Index
  • 3% Vanguard Precious Metals
  • 5% Vanguard European Stock Index
  • 5% Vanguard Pacific Stock Index
  • 5% Vanguard Emerging Stock Markets Index
  • 7% Vanguard International Value
There are several problems with this:
  1. Rebalancing between all these portfolio is a chore, and I doubt if most individual investors would enjoy having this many options
  2. Meeting the minimums alone would require a fairly substantial tax-sheltered portfolio
  3. Most 401(k) plans won't give you a good enough selection of Vanguard funds to enable you to cover such diversification.
  4. By having so many small accounts, you ignore the benefit of being able to qualify for Vanguard's Admiral shares, which have a significant reduction in expenses. Such reduction in expenses might cause your ultimate return to be higher than a complex portfolio, also partly because you are more likely to be able to rebalance such a portfolio on a regular basis.
Bernstein also doesn't understand the SEPP 72(t) exception, which is a very useful tool for early retirees, so don't expect help from him on such matters.

Ultimately, there's a lot of value in keeping your portfolio simple and easy to follow. When you see something that seems really complicated and hard to manage, run away and go for something simpler. I doubt if Bernstein's hypothetical tax-sheltered account would do much worse with:
  • 65% Vanguard Total Stock Market Index
  • 10% Vanguard REIT Index
  • 3% Vanguard Precious Metals
  • 22% Vanguard Total International Index
A simpler portfolio with lower costs and much less to go wrong.

[Addendum: The reason Bernstein recommends holding the components of the Total International Index is that you get the foreign dividend tax credit, which reduces your overall costs. This is a big enough deal that it's worth considering. I still think there's value in simplicity, however.]

Friday, May 12, 2006

Brad DeLong: Immigration is a good thing

Ok, I'm not trying to reopen a debate I had with BuddhaMouse about immigration, but I came across Brad's Morning Coffee series on Google Video, and can't help pointing it out.

The entire series is very much worth watching (each video is only about 5 minutes long, so it's not a big time sink) by the way, and I didn't really become a Google Video fan until this series of videos, along with the Google EngEDU series were posted.

Thursday, May 11, 2006

Lisa's Laptop

We considered Dell, where we had coupons and an employee purchase plan discount. But Dell's site is annoying and irritating, and you can't easily compare prices because they sell different models to different customers, all ending up with the equivalent price. That alone was enough to annoy me into trying different venues.

Fortunately, Buy.com had pretty good deals on the Acer Aspire 5670 series of laptops. After digging around and finding a coupon in my mailbox, we ended up with an after-tax-and-shipping price of $980 for a 1GB machine with a dual-core CPU, a DVD burner, a built-in camera, 100GB of disk space, and a very nice remote (much nicer than the one that comes with the Mac Mini). Sure, it's not as cute as the Mac Mini, but it comes with a very nice screen, an excellent graphics card, and all the same extras for about $100 less than what Apple sells its entry-model machine for. The only advantage the Mac has over the Acer is that the Mac will have 2GB of memory (which is admittedly very expensive right now).

MacOS X is a nice operating system, but I'm pretty sure if I tried really hard I could probably boot Linux on the Acer. I guess we'll see what the reliability is like, but my guess is that the Mac and the Acer will be comparable.

Tuesday, May 09, 2006

A dead Mac

After speculating about the Macintosh's reliability, my fears are confirmed. My Mac Mini CDROM drive, after a mere week of service, has given up the ghost. To add insult to injury, it took a physical visit to an Apple store and a verification by an Apple Genius before Apple would agree to RMA the product. Even then, they want me to drop off the machine to Fedex before they'll ship me a new one.

By contrast, my brother tells me that Dell would ship me a new machine as soon as they agree to RMA an old machine, so that I'd never be without a computer.

Lisa's 5 year old Dell laptop just recently gave up the ghost (yes, I've been suffering a rash of hardware failures), and after seeing the reliability problems with the Intel Mac Mini, she's decided that her next laptop will also be a Dell.

Sunday, May 07, 2006

This new issue of I-bonds might be a good buy

The financial press that mentions I bonds at all (a scant few, admittedly) is complaining that the rates that got reset this month were low at a 2.41% are really low compared with prevailing interest rates of 4.5% or more. What they are ignoring is that the real rate went up from 1% to 1.4%. In the long run, the real rate is what you care about, since the inflation adjusted rate will fluctuated with CPI. This series of I bonds are a really good buy if you believe that inflation is going up in the long run (which I think is a good bet). If I hadn't already loaded up on them this year, I'd be buying more. In fact, this might indeed be motivation for me to go down to the local bank and buy paper I bonds. The rate resets again in October.

There is no such thing as talent

This New York Times article (registration required) says that people who are good at something spend a lot of time practicing and becoming good at it. The conclusion being that when it comes to choosing a life path, you should do what you love — because if you don't love it, you are unlikely to work hard enough to get very good. There are many interpretations of this, of course, but it accounts for a lot of the difference in performance in Math between Asians and Americans (as seen in how badly American kids do badly when on average). When an Asian kid complains about how hard Math is and how she doesn't like it, her parents are very likely to push her, find a different tutor, anything to make her better. It's not unusual to hear Americans saying "I have no talent for it" instead.

The same thing was described in unlocking the clubhouse, a description of CMU's effort to increase its proportion of female students in Computer Science. In it, there was a section describing how women students from Asia tended to stay in Computer Science rather than the non-Asians. The reason wasn't because the women were mysteriously more talented, it was that they didn't feel that they had a choice --- dropping out would have meant a loss in face or a return to a society they had worked so hard to leave.

So while the general conclusion the New York Times might draw is that you should choose to do what you love, because that way you'll be willing and happy to work hard at it, an Asian parent might, upon seeing these results, conclude that there isn't an excuse for poor results at school --- that simply means you aren't working hard enough. While the former approach might result in happier lives (though I do recall Malcolm Gladwell talking at Google about stellar performers not necessarily leading very happy lives because they're so driven), the latter is what causes Americans to lag behind in Math and Science education. The rest of the world sees in Math and Science an opportunity to lift themselves out of poverty, what I'm seeing is that more and more Americans seem to deem Math and Science as a necessary evil, not very highly prized and easily jettisoned whenever it conflicts with religion.

[Thanks to Greg Mankiw for the pointer.]

Saturday, May 06, 2006

Review: Everything Bad is Good For You

This is a quick read, mostly because the content can really be summarized really quickly: current and new TV shows and video games are becoming more and more complex, with the result that they provide a cognitive load that's surprisingly large and capable of providing intellectual stimulation and teaching problem solving skills that are useful in many other aspects of life.

The possible expense, Johnson points out, is that we've become a frentic, soundbite society that's incapable of pondering long range problems and goals. But that's always been true throughout human history (a read of Collapse will provide sufficient proof of that), so common lamentations about how kids are wasting their time playing video games are largely irrelevant.

One study at the University of Rochester asked subjects to perform a series of quick visual recogniation tests... Regular gamers consistently outperformed non-gamers on all the skills measured by the study... Games were literaly making them perceive the world more clearly... the gaming population turned out to be consistently more social, more confident, and more comfortable solving problems creatively. They also showed no evidence of reduced attention spans compared with non-gamers.

Is Mandantory Financial Education A Solution?

Earlier in our conversation, Buddha Mouse suggested that a mandantory program of financial lessons might be implemented in school for most folks.

While I won't oppose such an idea, I think that this will not have as great an effect on poverty as she might hope becaues:
  1. To be able to save, you must have enough money to eat, pay rent, and pay for clothing. If you're making below the national poverty level, it's quite likely that you'll have trouble saving.
  2. Most people are surprisingly bad investors. Many folks I know either aren't interested in the subject of financial planning (in which case, they'll get Cs or Ds) in the class, or even when they know what the right thing to do is, they're not emotionally capable of doing it. I have a very smart and intelligent friend who can't bring himself to buy I-bonds, because the electronic product is too intangible.
  3. Financial planning is suprisingly hard! Even people like me take more than an hour to rebalance a relatively simple portfolio. If you're short on time, or don't enjoy it, you're simply not likely to do it.
I think the best chance of getting people to save is to have a national savings plan that's matched at lower to middle income levels, and professionally managed (in a balanced portfolio) in a low cost manner (similar to what federal employees get). The economies of scale by doing this nationally is huge, and the progressive savings matching will get more people to save, regardless of them knowing what they're doing. By setting up the investment plan automatically, people have a harder time making poor decisions. The fact that lower incomes are matched also means that younger workers develop the habit of saving while they are relatively early in their careers, when their investments have the most opportunity to grow.

This idea was proposed in Gene Sperling's book , and I think it has a lot of merit. The chances of it happening in our pro-wealthy Republican Congress, Senate, and White House are effectively nil. But the reason I'm pissed at Democrats as well is that not one of the forty-something senators in the Senate have had the guts to even propose something like this. If the Democrats continue not proposing and trying to get through such good ideas, they're going to keep losing elections.

New Computer

After my last computer died, I bought a Mac Mini. The computer took about a week to get to me: 2 days for the customization (I ordered 2GB of RAM), and another 3 days in shipping, and then 1 day while it got misdirected.

After having it for a few days, here are my first impressions:

1. I thought that 2GB might be overkill. Turns out that this is not true. My typical working set under Mac OS X appears to be about 1.2GB, just enough to cause my machine to swap if I had bought a 1GB machine.
2. A few things aren't as intuitive as you might imagine. For instance, I had to edit a Samba mount to share an external (USB) drive.
3. Mac OS X is a bit of a disk hog. The 80GB that came with the machine are going to go really fast, especially if you intend to dual boot the machine into Windows.
4. If your favorite environment is Emacs, you're going to have to use special instructions for building GNU Emacs v22 for Mac.
5. A few things still feel a bit sluggish. I think the extra special effects contribute to the feel. Things fade in and out instead of just snapping in and out like I'm used to.
6. Having UNIX interface underneath is really really nice.
7. The text edit fields in the web browsers seem really slow. I'm running the Universal Binary version of firefox, so it's got nothing to do with the binary.
8. The machine is much louder than expected. When it's in sleep mode or when not much is happening, it's dead silent. But rip a CD or two, compile Emacs, and the fan kicks up and you can hear it from across the room. Fortunately, like most engineers, I spend most of my time editing text and reading.
9. Despite the much vaunted UI that's not supposed to go wrong, I already managed to screw up the registry equivalent once by installing two versions of Microsoft Office.
10. 2 CPU cores are really nice too. Even when compiling, using web browsers or other apps don't bog down at all.
11. Now I have a more powerful machine at home than I have at work (my work machine is about 3 years old).

I'm still slowly warming up to the UI, so we'll see how I feel a bit later. In particular, I'm going to start running Windows XP (both as a bootcamp'd partition for games, and as a virtualized machine for quicken and possibly photoshop, which isn't going to have a universal binary version for awhile).

Thursday, May 04, 2006

It's easier to rig an election than to fool a slot machine

Is it likely that the Republicans rigged the 2004 elections? Probably not. Is it likely that the companies which produced the voting machines (most of which were owned by Republicans) rigged the machines? That's not out of the question. What surprises me is that the press hasn't covered this story at all. But then again, a glance at Delong's blog will convince you that our press corps are know-nothings. English and Journalism majors are simply too incompetent at complex issues to do a proper job of covering our world today.