I am on my annual pilgrimage to ski country this week. I’ve noticed that the tilt towards the green side has become more pronounced over the last few years. It started with the invitation to reuse your towels, so that housekeeping didn’t have to expend so much fresh water on laundry. Now it has expanded to include the use of compact fluorescent bulbs throughout the condo unit we are staying in this week.
The management has posted a little notice in the room, stressing how energy conserving they are, doing their part to fight global warming. It put me in mind of an article I read in a skiing magazine a couple of months ago. The article profiled an activist in the ski town of Crested Butte. This woman was committed to fighting global warming, specifically to preserve heavy snowfalls in the Rockies. More snow, better skiing.
After thinking about this for a while, it gave me an idea of how we could really fight global warming to preserve snow: ban skiing.
Well, not really. My idea is not to ban skiing. Just to ban the sport as currently practiced. The modern ski vacation has got to be one of the most carbon intensive activities on the face of the planet.
To get to the resorts, we fly in from all over the country, if not the world (how much carbon do you emit to get to Colorado from Australia, I wonder). Once we’re here, we stay in luxury condos, housing that stands empty for eight months out of the year. That can’t be environmentally benign. In the last ten years, I have yet to stay in a unit that doesn’t have a gas fireplace. They’re not efficient heating units, but the flames are pretty, as we watch irreplaceable natural gas get converted into carbon dioxide and water vapor.
Then there is the sport of skiing itself. First off, to create the ski runs, they mow down swathes of National Forest. Last I checked, trees were carbon absorbers, but hey, we’re out to have some fun. Then, they install big diesel powered ski lifts. They haul us up the hill, solely so that we can slide down, back to where we started from. A less practical activity can scarcely be imagined.
Trying to offset all of these carbon emissions with compact fluorescents is like trying to bail out the Titanic. With a teaspoon.
No, if we were really serious about slowing down greenhouse gas emissions to preserve snow, we would close down the ski areas. Of course, that wouldn’t leave many people to care about whether there was fresh powder snow on the mountains or not.
I guess it would be a case of having to destroy the village in order to save it.
Monday, January 18, 2010
Thursday, January 14, 2010
New Year's Resolutions
I went to the gym this week, and the place was packed. Every machine had someone using it, and many of the machines had at least one person waiting their turn.
It’s always crowded this time of year. I attribute it to New Year’s resolutions. Folks get done with the holidays, resolve to lose some weight, and start going to the gym to work out. The crowds usually thin out by early March, as willpower gives in and old habits resurge.
I don’t really make New Year’s resolutions. My process is more like goal setting for the year. I start with areas of my life where I have commitments, than I develop tangible goals that relate to those commitments. It’s the underlying commitment that keeps me going, not the goal itself.
For 2010, my goals are based on three commitments. First, I want to push back against the decrepitude of the aging process. I’m committed to maintaining my physical capability to the greatest extent possible. Second, I’m going to increase my level of fiscal security. It is still a pretty dicey economy, and no job is certain in today’s world. Still, if I have to swim against the economic tide, I want to be the guy with fins on. Third, I’m committed to living as rich a life as I can, subject to the constraints of health and finances. Family, friends, and experiences enrich our lives, and I want as much of all of them as I can get. After all, you could move to a mountaintop in Idaho and subsist pretty cheaply, but who wants to live on a diet of potatoes?
In the area of health and fitness, my goal is to run 50 kilometers of road races throughout the year. When I run a 5K, I’m not competing against anyone but myself. I am not going to be the fastest runner, although I can win my age group if I’m the only one who shows up. However, the mere act of getting out there with other serious runners on a regular basis forces me to maintain a higher training level than I would without the road races. So far I’ve kept my body mass index below the 25 that is the threshold for overweight, and I intend to keep it that way.
In terms of economic security, I plan to work the problem on both defense and offense. By defense, I mean building up my cushion of assets in case I have to make an involuntary job transition. By offense, I’m talking about increasing either my current income, or my marketable skills.
On the defense side, my savings goal for the year is 20% of my earned income. Most of that will be automatic. Between salary deduction for my 401K and the matching corporate contribution, I’ll get to 15%. The last 5% will take the day to day discipline of saying no to temptation. Do without if you don’t need. Make instead of buy. Repair instead of replace. Since I am the least handy guy in North America, most of the heavy lifting in this category will be under the heading of “do without if you don’t need it.” I’m not planning on doing my own plumbing, or even changing the oil in my car.
I’m also going to continue the deleveraging project I started last year. By making extra equity payments on my mortgage (a guaranteed 6.5% rate of return), I hope to get my total indebtedness down below $60K, split between primary mortgage, home equity line of credit, and car loan. My credit cards will continue to be paid in full every month.
Increased savings improves my long term economic security. In the short term, I’m also taking steps to increase earnings and boost my marketability in a crummy job market. Tax season is starting, and I’m working for H & R Block again to make a little side money. The goal here is to pick up $2000 in additional income. This is just about what I pay my lawn service every year. Basically, I’m hoping to trade knowledge work in a climate controlled office for dirty, physical work outside. Based on last year’s results, $2000 will be a stretch. I may have to develop a Plan B to make up the balance of what I don’t earn doing taxes.
I’m also going back to school again. Post-MBA, I started taking graduate level classes in accounting last fall. My intent is to pick up 9 more credit hours in 2010. By taking one class in Spring, Summer, and Fall semesters, I’ll only need one more class to have enough credits to teach at the college level. Also, if the worst occurs at my current job, more accounting knowledge will help me stand out from the other job seekers out there.
But man does not live by bread alone. I could easily save more money by sitting at home watching television, only venturing out to work, jog, or attend classes, but that would be boring. Besides, my wife would only take so much of that before she snapped and smothered me in my sleep. So in addition to struggling to get rich, I’ll expend considerable energy and time into enriching myself in ways other than monetary.
It has been a few years since I’ve been out west on vacation. It’s a big country, and I want to see more of it. So one of my 2010 commitments is to visit one of the National Parks that I haven’t seen yet. The documentary maker Ken Burns calls the National Park system “America’s Best Idea.” I’m leaning towards Yosemite in Northern California, maybe in combination with a trip to the wine country.
There is an old saying: “No man is poor who is rich in friends.” I don’t have too many friends who will volunteer to pay my light bill, but I still cherish them. To celebrate and enjoy my friends, I’m committed to holding 12 in-home entertainment events this year. This covers everything from formal dinner parties to backyard cookouts to our annual Christmas party (even if I do end with the Chia pet playing “dirty Santa”).
The last of my enrichment projects is internal. Along with the formal education I’ve addressed above, I’m continuing to read authors from “The Lifetime Reading Plan,” a book I first discovered in my father’s library over thirty years ago. My goal for this year is to tackle three of the selections in 2010.
Finally, I’m going to continue posting in this blog. The goal here is a minimum of 60 posts over the course of the year, at least once a week.
After all, everybody deserves my opinions. And now back to our regularly scheduled productions.
It’s always crowded this time of year. I attribute it to New Year’s resolutions. Folks get done with the holidays, resolve to lose some weight, and start going to the gym to work out. The crowds usually thin out by early March, as willpower gives in and old habits resurge.
I don’t really make New Year’s resolutions. My process is more like goal setting for the year. I start with areas of my life where I have commitments, than I develop tangible goals that relate to those commitments. It’s the underlying commitment that keeps me going, not the goal itself.
For 2010, my goals are based on three commitments. First, I want to push back against the decrepitude of the aging process. I’m committed to maintaining my physical capability to the greatest extent possible. Second, I’m going to increase my level of fiscal security. It is still a pretty dicey economy, and no job is certain in today’s world. Still, if I have to swim against the economic tide, I want to be the guy with fins on. Third, I’m committed to living as rich a life as I can, subject to the constraints of health and finances. Family, friends, and experiences enrich our lives, and I want as much of all of them as I can get. After all, you could move to a mountaintop in Idaho and subsist pretty cheaply, but who wants to live on a diet of potatoes?
In the area of health and fitness, my goal is to run 50 kilometers of road races throughout the year. When I run a 5K, I’m not competing against anyone but myself. I am not going to be the fastest runner, although I can win my age group if I’m the only one who shows up. However, the mere act of getting out there with other serious runners on a regular basis forces me to maintain a higher training level than I would without the road races. So far I’ve kept my body mass index below the 25 that is the threshold for overweight, and I intend to keep it that way.
In terms of economic security, I plan to work the problem on both defense and offense. By defense, I mean building up my cushion of assets in case I have to make an involuntary job transition. By offense, I’m talking about increasing either my current income, or my marketable skills.
On the defense side, my savings goal for the year is 20% of my earned income. Most of that will be automatic. Between salary deduction for my 401K and the matching corporate contribution, I’ll get to 15%. The last 5% will take the day to day discipline of saying no to temptation. Do without if you don’t need. Make instead of buy. Repair instead of replace. Since I am the least handy guy in North America, most of the heavy lifting in this category will be under the heading of “do without if you don’t need it.” I’m not planning on doing my own plumbing, or even changing the oil in my car.
I’m also going to continue the deleveraging project I started last year. By making extra equity payments on my mortgage (a guaranteed 6.5% rate of return), I hope to get my total indebtedness down below $60K, split between primary mortgage, home equity line of credit, and car loan. My credit cards will continue to be paid in full every month.
Increased savings improves my long term economic security. In the short term, I’m also taking steps to increase earnings and boost my marketability in a crummy job market. Tax season is starting, and I’m working for H & R Block again to make a little side money. The goal here is to pick up $2000 in additional income. This is just about what I pay my lawn service every year. Basically, I’m hoping to trade knowledge work in a climate controlled office for dirty, physical work outside. Based on last year’s results, $2000 will be a stretch. I may have to develop a Plan B to make up the balance of what I don’t earn doing taxes.
I’m also going back to school again. Post-MBA, I started taking graduate level classes in accounting last fall. My intent is to pick up 9 more credit hours in 2010. By taking one class in Spring, Summer, and Fall semesters, I’ll only need one more class to have enough credits to teach at the college level. Also, if the worst occurs at my current job, more accounting knowledge will help me stand out from the other job seekers out there.
But man does not live by bread alone. I could easily save more money by sitting at home watching television, only venturing out to work, jog, or attend classes, but that would be boring. Besides, my wife would only take so much of that before she snapped and smothered me in my sleep. So in addition to struggling to get rich, I’ll expend considerable energy and time into enriching myself in ways other than monetary.
It has been a few years since I’ve been out west on vacation. It’s a big country, and I want to see more of it. So one of my 2010 commitments is to visit one of the National Parks that I haven’t seen yet. The documentary maker Ken Burns calls the National Park system “America’s Best Idea.” I’m leaning towards Yosemite in Northern California, maybe in combination with a trip to the wine country.
There is an old saying: “No man is poor who is rich in friends.” I don’t have too many friends who will volunteer to pay my light bill, but I still cherish them. To celebrate and enjoy my friends, I’m committed to holding 12 in-home entertainment events this year. This covers everything from formal dinner parties to backyard cookouts to our annual Christmas party (even if I do end with the Chia pet playing “dirty Santa”).
The last of my enrichment projects is internal. Along with the formal education I’ve addressed above, I’m continuing to read authors from “The Lifetime Reading Plan,” a book I first discovered in my father’s library over thirty years ago. My goal for this year is to tackle three of the selections in 2010.
Finally, I’m going to continue posting in this blog. The goal here is a minimum of 60 posts over the course of the year, at least once a week.
After all, everybody deserves my opinions. And now back to our regularly scheduled productions.
Friday, January 8, 2010
Who Knows What Evil Lurks in the Hearts of Men?
I learned a new expression this week. Shadow inventory. The term refers to real estate properties that haven’t been foreclosed on, but for which no one is paying a mortgage.
In the real estate business, inventory is the number of houses in an area that are listed for sale. There are four sources of inventory: new construction, voluntary sales because people are moving or downsizing, short sales, where the owner is selling for less than the mortgage, with the bank’s blessing, and foreclosures.
The last two, short sales and foreclosures, are forms of distressed sales. In a short sale, the bank takes a haircut on what it is owed, and the homeowner loses any equity they ever had. Banks don’t like short sales, but they prefer them to foreclosures. With a foreclosure, the bank has to get the former owner out of the property, a difficult and expensive process. Then the bank has to maintain the empty property until it can be sold, another difficult and expensive process.
With the collapse of the housing bubble and subsequent deep recession, banks have been so inundated with non-performing loans that their foreclosure departments have not been able to keep up. So they have put new foreclosures on hold until they can clear their books of the current wave of housing repossessions.
I know some people who are living in shadow inventory right now. They have lost their income and stopped making mortgage payments, but they haven’t been kicked out of the house yet. In some cases, people have been in default, but still in possession for over a year now. Basically, they’re squatters in what used to be their own home.
I’d hate to live with that sword of Damocles hanging over my head. It has got to be tough living your life from day to day, knowing that at some point the foreclosure people are going to work their way around to you and boot you out of the house. Even the name sounds sinister. Shadow inventory.
This shadow inventory is significant, because before the housing economy can recover, the excess inventory of houses built during the bubble years have to be absorbed. Until that process is completed, housing prices will continue to slide downwards.
One of the standard tools for forecasting the direction of the housing market is to watch the level of inventory. When inventories of houses listed for sale are low, prices tend to rise. When inventories are high, that is a signal that prices are going to fall.
With a pool of shadow inventory of unknown size, it becomes impossible to follow that process, because as houses are sold, more houses come on to the market to keep pricing levels down.
One thing’s for sure. If there is enough inventory hidden from the market to warrant a special name, we’re a long way off from hitting bottom.
In the real estate business, inventory is the number of houses in an area that are listed for sale. There are four sources of inventory: new construction, voluntary sales because people are moving or downsizing, short sales, where the owner is selling for less than the mortgage, with the bank’s blessing, and foreclosures.
The last two, short sales and foreclosures, are forms of distressed sales. In a short sale, the bank takes a haircut on what it is owed, and the homeowner loses any equity they ever had. Banks don’t like short sales, but they prefer them to foreclosures. With a foreclosure, the bank has to get the former owner out of the property, a difficult and expensive process. Then the bank has to maintain the empty property until it can be sold, another difficult and expensive process.
With the collapse of the housing bubble and subsequent deep recession, banks have been so inundated with non-performing loans that their foreclosure departments have not been able to keep up. So they have put new foreclosures on hold until they can clear their books of the current wave of housing repossessions.
I know some people who are living in shadow inventory right now. They have lost their income and stopped making mortgage payments, but they haven’t been kicked out of the house yet. In some cases, people have been in default, but still in possession for over a year now. Basically, they’re squatters in what used to be their own home.
I’d hate to live with that sword of Damocles hanging over my head. It has got to be tough living your life from day to day, knowing that at some point the foreclosure people are going to work their way around to you and boot you out of the house. Even the name sounds sinister. Shadow inventory.
This shadow inventory is significant, because before the housing economy can recover, the excess inventory of houses built during the bubble years have to be absorbed. Until that process is completed, housing prices will continue to slide downwards.
One of the standard tools for forecasting the direction of the housing market is to watch the level of inventory. When inventories of houses listed for sale are low, prices tend to rise. When inventories are high, that is a signal that prices are going to fall.
With a pool of shadow inventory of unknown size, it becomes impossible to follow that process, because as houses are sold, more houses come on to the market to keep pricing levels down.
One thing’s for sure. If there is enough inventory hidden from the market to warrant a special name, we’re a long way off from hitting bottom.
Monday, January 4, 2010
King of the World
The Hollywood director James Cameron has set the benchmark of most expensive movie ever made three times. When he made Terminator II: Judgment Day, it was the first movie ever made with production costs exceeding $100 million. Questioned about the high costs of making the movie, Cameron answered his critics by stating “It’s all up there on the screen.”
He was right. The special effects of Terminator IIwere ground breaking and spectacular. It was the first movie to use the technology of digital morphing, having a character change shape seamlessly on screen. Married to pulse pounding story and memorable characters, Terminator II went on to become a monster hit, spawning two additional sequels, and cementing Arnold Schwarzenegger as the #1 movie star in the world at that time.
Later, Cameron helmed the movie Titanic. The cost overruns on this $150 million movie were so extreme that Cameron had to forfeit his normal director’s fees before the studio would release additional funds to allow him to finish the movie his way. Before the movie was released, an executive of a rival studio sneered “Everybody knows what happened. The boat sinks. Everybody dies.”
The story of star-crossed lovers, combined with special effects and elaborate sets that created total realism, convinced audiences to see this movie over and over again. Titanic became the most successful movie in the history of cinema, pulling in over $1.8 billion in global box office.
This month James Cameron released his first movie in twelve years. Avatar took four years to produce, and cost estimates are ranging from $250 to $300 million. New motion capture technologies had to be invented to allow the screenplay Cameron wrote to be presented with the verisimilitude to allow the suspension of disbelief. At the upper end of that cost range, the movie would have to reach $750 million in global box office just to break even. Since the American movie going public typically supplies half the sales dollars for a film of this type, that means that the domestic gross on Avatar would have to be over $350 million to have a prayer of paying back the investors.
The early reports from this weekend’s box office are in. After just under three weeks, Avatar has pulled in $352 million in domestic sales. Globally, the news is even more spectacular. Avatar has just crossed over the $1 billion mark in global box office.
To put this into perspective, only four other movies have cracked past the billion dollar mark. The Dark Knight ($1.001B), Pirates of the Caribbean: Dead Man's Chest ($1.07B), Lord of the Rings: Return of the King ($1.1B), and Titanic ($1.8B). At this rate, by next week James Cameron will have directed the top two grossing movies of all time. He will be the only director to direct a billion dollar movie that wasn’t a sequel.
The movie business is one where you have to lay down large bets, and nobody really knows what is going to work. Even making a low budget film requires an upfront investment of $10 to $20 million, with no guarantee that anybody is going to want to pony up eight bucks for a ticket. For every My Big Fat Greek Wedding, which grossed $368 million worldwide on a $5 million production budget, you get a Speed Racer, which cost $120 million to make and earned $94 million in worldwide ticket sales.
Basically, making movies is a gigantic crapshoot, and nobody places bigger bets than James Cameron. But I wouldn’t bet against him.
He was right. The special effects of Terminator IIwere ground breaking and spectacular. It was the first movie to use the technology of digital morphing, having a character change shape seamlessly on screen. Married to pulse pounding story and memorable characters, Terminator II went on to become a monster hit, spawning two additional sequels, and cementing Arnold Schwarzenegger as the #1 movie star in the world at that time.
Later, Cameron helmed the movie Titanic. The cost overruns on this $150 million movie were so extreme that Cameron had to forfeit his normal director’s fees before the studio would release additional funds to allow him to finish the movie his way. Before the movie was released, an executive of a rival studio sneered “Everybody knows what happened. The boat sinks. Everybody dies.”
The story of star-crossed lovers, combined with special effects and elaborate sets that created total realism, convinced audiences to see this movie over and over again. Titanic became the most successful movie in the history of cinema, pulling in over $1.8 billion in global box office.
This month James Cameron released his first movie in twelve years. Avatar took four years to produce, and cost estimates are ranging from $250 to $300 million. New motion capture technologies had to be invented to allow the screenplay Cameron wrote to be presented with the verisimilitude to allow the suspension of disbelief. At the upper end of that cost range, the movie would have to reach $750 million in global box office just to break even. Since the American movie going public typically supplies half the sales dollars for a film of this type, that means that the domestic gross on Avatar would have to be over $350 million to have a prayer of paying back the investors.
The early reports from this weekend’s box office are in. After just under three weeks, Avatar has pulled in $352 million in domestic sales. Globally, the news is even more spectacular. Avatar has just crossed over the $1 billion mark in global box office.
To put this into perspective, only four other movies have cracked past the billion dollar mark. The Dark Knight ($1.001B), Pirates of the Caribbean: Dead Man's Chest ($1.07B), Lord of the Rings: Return of the King ($1.1B), and Titanic ($1.8B). At this rate, by next week James Cameron will have directed the top two grossing movies of all time. He will be the only director to direct a billion dollar movie that wasn’t a sequel.
The movie business is one where you have to lay down large bets, and nobody really knows what is going to work. Even making a low budget film requires an upfront investment of $10 to $20 million, with no guarantee that anybody is going to want to pony up eight bucks for a ticket. For every My Big Fat Greek Wedding, which grossed $368 million worldwide on a $5 million production budget, you get a Speed Racer, which cost $120 million to make and earned $94 million in worldwide ticket sales.
Basically, making movies is a gigantic crapshoot, and nobody places bigger bets than James Cameron. But I wouldn’t bet against him.
Friday, January 1, 2010
Phyrrhic Victories
Pyrrhus was a king of Epirus, one of the city-states of ancient Greece during the Hellenistic period. He was considered one of the greatest generals of the ancient world. He led armies in wars against both Carthage and Rome, the two major powers in the Mediterranean at that time.
Invited in by Italian cities revolting against the growing power of Rome, in 275 BC he led a combined Greek and Macedonian army against Roman forces on the Italian peninsula itself.
In 279 BC, his army met a Roman army at the battle of Asculum. The Romans suffered losses of over 6000 men, while Pyrrhus lost only 3000 soldiers. The Roman legions were pushed off the field of battle, leaving Pyrrhus in possession of the ground. Tactically, Pyrrhus had won the fight.
But the Roman losses could be replaced with fresh recruits. Pyrrhus, operating far from his base of operations, could not replace his losses. Strategically, the loss at Asculum had weakened Pyrrhus more than it had Rome.
Knowing this, when a subordinate attempted to congratulate Pyrrhus on the victory, he was heard to say “Another such victory and we are undone.”
What has this story got to do with the health insurance reform bill passed by the Senate last week?
Well, the legislation passed the Senate on a straight party line vote. Not a single Republican senator could be induced to break ranks to vote for it, and we know that the inducements offered were huge. Democratic senator Ben Nelson of Nebraska got a $100 billion bribe, er, inducement, for his state as the last hold out from his caucus. Surely Olympia Snowe of Maine could have pried loose something from Harry Reid. A promise to make the Bath Iron Works the sole provider of ships to the Navy, perhaps.
But the Republicans stuck to their guns, leading to the spectacle of a major piece of legislation, affecting one sixth of the American economy, having to pass in a purely partisan fashion.
Although it got sixty percent of the available Senate votes, the health care insurance overhaul was far less popular among the populace it is intended to serve, and who will have to pay for it. I am speaking of the American public. According to the latest Rasmussen poll, 55% opposed the bill that the Senate just passed. Among likely voters, 81% think that the plan will lead to higher middle class taxes.
Among Democratic senators, the belief seems to have been that they had to do something in the area of health care, that leaving the system as currently configured would be worse than a bad bill.
The 2010 elections will show whether passing the current legislation was a true victory, or merely a step towards the Democrats becoming undone.
Invited in by Italian cities revolting against the growing power of Rome, in 275 BC he led a combined Greek and Macedonian army against Roman forces on the Italian peninsula itself.
In 279 BC, his army met a Roman army at the battle of Asculum. The Romans suffered losses of over 6000 men, while Pyrrhus lost only 3000 soldiers. The Roman legions were pushed off the field of battle, leaving Pyrrhus in possession of the ground. Tactically, Pyrrhus had won the fight.
But the Roman losses could be replaced with fresh recruits. Pyrrhus, operating far from his base of operations, could not replace his losses. Strategically, the loss at Asculum had weakened Pyrrhus more than it had Rome.
Knowing this, when a subordinate attempted to congratulate Pyrrhus on the victory, he was heard to say “Another such victory and we are undone.”
What has this story got to do with the health insurance reform bill passed by the Senate last week?
Well, the legislation passed the Senate on a straight party line vote. Not a single Republican senator could be induced to break ranks to vote for it, and we know that the inducements offered were huge. Democratic senator Ben Nelson of Nebraska got a $100 billion bribe, er, inducement, for his state as the last hold out from his caucus. Surely Olympia Snowe of Maine could have pried loose something from Harry Reid. A promise to make the Bath Iron Works the sole provider of ships to the Navy, perhaps.
But the Republicans stuck to their guns, leading to the spectacle of a major piece of legislation, affecting one sixth of the American economy, having to pass in a purely partisan fashion.
Although it got sixty percent of the available Senate votes, the health care insurance overhaul was far less popular among the populace it is intended to serve, and who will have to pay for it. I am speaking of the American public. According to the latest Rasmussen poll, 55% opposed the bill that the Senate just passed. Among likely voters, 81% think that the plan will lead to higher middle class taxes.
Among Democratic senators, the belief seems to have been that they had to do something in the area of health care, that leaving the system as currently configured would be worse than a bad bill.
The 2010 elections will show whether passing the current legislation was a true victory, or merely a step towards the Democrats becoming undone.
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