Wednesday, September 29, 2010

Pathetic Return

We will continue to keep a portion of our savings in U.S. Government debt. However, the returns on Treasury bills are pathetic. Last week our 90-day $10,000 T-bill earned a grand total of $3.41, less than a latte at the coffee shop. That's not one percent (1%) per year but closer to zero-point-one percent (0.1%).

A better return for the same risk can be earned through U.S. Savings bonds. We bought some many years ago for the kids and also received a few as gifts. Savings bonds are physical instruments with all their attendant risks. Owners have to keep track of them, and replacing lost or destroyed bonds can be a hassle. However, the rate differential over T-bills may be worth the trouble.

Savings bonds also are more flexible with regard to income taxes. The entire accumulated interest over the years is recognized when they are redeemed, which may not be painful if they are cashed out in a low-bracket year. Alternatively, a taxpayer can elect to recognize interest annually on the tax return, which can be useful in the case of a child who has little income but who will redeem them as a taxpaying adult. Every year we've been attaching a list of savings bond interest to our son's tax return, accompanied by the following statement:
Pursuant to IRC Section 454, taxpayer elected for the 19xx and later tax years to treat as income during the current year the increase in redemption price of U.S. Savings Bonds.
Yes, that's a hassle, too, but I'm sure he'll thank me for that later :)

Saturday, September 25, 2010

Re-entering the Fold

L to R: iPhone 4, iPhone 3GS, Nexus One

After a month-long dalliance with Google's Nexus One
mobile phone--which I did like but did not love--I re-entered the Apple fold and signed a two-year contract for an iPhone 4. The Nexus had superior hardware to the two-year-old iPhone 3G that it replaced but in my humble opinion wasn't quite up to the i4. The fact that I prefer Apple's IOS4 operating system to Google's Android only made the decision easier.

Another disincentive to switch from Apple is that I had dollars invested in Apple's iTunes music, videos, and Applications. (I understand that there are solutions to converting from iTunes to Android and vice versa without losing my investment, but I didn't want to go through the hassle.)

All that said, if I were starting anew, I might well pick an Android phone like the Nexus One. I like the use of the "cloud", i.e., one can update one's calendar or address book in gmail, and all one's computers and mobile devices automatically have access to the new data on Google's servers. Also, the fact that web videos written in Flash cannot be viewed in the iPhone is somewhat irritating.

There are numerous mobile-product comparisons. Below is Gizmodo's:

Thursday, September 23, 2010

Even More Tempting

On July 16th I opined (hoped) that Google shares had decent prospects, despite the company's second quarter earnings disappointment. I also thought that GOOG had more upside than AAPL, which I also own. Since then both stocks have increased more than 12%, outperforming both the Dow and NASDAQ.

Google's Android system for mobile phones continues to gain adherents. The latest rumor is that Facebook, which promises to have the hottest IPO since, well, Google, will introduce its own mobile handset.

Meanwhile Apple shares continue to rise into the ionosphere, as analysts fall over themselves raising their price targets into the high $300's. At those levels Apple will easily surpass Exxon-Mobil to become the most valuable company in the world.

As to when Apple will begin to look moldy I haven't the slightest idea. Several years ago I put in an Apple sell order at $70 but then pulled it back when a family member thought that it still had room to run. (In contract bridge one peek is worth two finesses, and in investments a woman's intuition is worth 100 pages of financial analysis.) I thought the iPod craze had run its course, which was arguably correct. I just didn't know about the phone and tablet computer sprouting in the lab.

Another and very recent example that one shouldn't look to me for investment advice is my experience with another Internet stock. Loving the company but nervous about its price-earnings ratio of 56, I took a small profit in Amazon a couple of weeks ago at $135 per share. AMZN immediately went on a tear and as of this writing is at an all-time high of $155.92 at a PE of 64.

Predictions that stocks will crash and burn look increasingly remote. Cash that earns a pittance burns a hole in my pocket as Amazon, Apple, and Netflix float ever higher. Thus the cruel temptress lures us to our doom. © 2010 Stephen Yuen

Monday, September 20, 2010

Haunting Question

“The question that haunts every parent of a child with autism is, What will happen when I die?”

The Atlantic runs a portrait of the first autism patient (“Case 1 - Donald T. ”), whose condition was documented in 1943. The life of Donald Gray Triplett, now 77, gives hope to every parent of an autistic child. Donald’s parents have been gone over 25 years, and their son “has freedom, independence, and good health. All in all, life has turned out well for autism’s first child.”

Donald’s typical day in Forest, Mississippi, is “morning coffee with friends, a long walk for exercise, a Bonanza rerun on TV, and [a] short drive down Route 80 to get in some golf.”

Donald was blessed with parents of means. More importantly, they indefatigably pursued the best treatments of the day, pulling the plug when they didn’t work. His lawyer father’s 33-page letter to a psychiatrist about his 5-year-old son is the first detailed listing of the symptoms of autism . (It doesn’t say so in the article, but it’s possible that the senior Triplett would today be placed somewhere on the autistic spectrum.)

Donald’s brother, Oliver, looks after him, as do other members of the Forest community. It helps that an irrevocable trust (Donald cannot touch the principal) provides for his basic needs and that his housing--he lives in his parents’ house—is taken care of. Donald is high-functioning; he is proficient with numbers and has learned enough skills to interact with others on a day-to-day basis. (It’s likely, however, that most “normal” people can tell he is “different” within just a few seconds of watching or talking to him.)
Donald reached his potential thanks, in large part, to the world he occupied—the world of Forest, Mississippi—and how it decided to respond to the odd child in its midst. Peter Gerhardt speaks of the importance of any community’s “acceptance” of those who have autism. In Forest, it appears, Donald was showered with acceptance, starting with the mother who defied experts to bring him back home, and continuing on to classmates from his childhood and golfing partners today. Donald’s neighbors not only shrug off his oddities, but openly admire his strengths—while taking a protective stance with any outsider whose intentions toward Donald may not have been sufficiently spelled out.
Whether one agrees with Hillary Clinton’s statement, it’s very clear that it does take a village to look after adults with autism. It also is likely that these special people have a better chance at happy, fulfilling lives in the towns of “flyover country” instead of the urban jungle.

Interesting throughout.

Thursday, September 16, 2010

A Call I Won't Be Returning

More than half the calls we get on our home phone are from toll-free prefixes. We never pick them up. I don’t need a cold-caller to tell me what to buy or advise me which charities I should donate to. To that list of conversations non grata we should add collections agencies.

None of the 800/866 callers had the courtesy to identify themselves until this morning. The Takhar Group left its call-back number and said that we “must” contact them. The Takhar Group is a disreputable collection agency which complainants say engages in the following practices:
  • They call about nonexistent debts.

  • They call the wrong people.

  • They collect bills already paid off.

  • They refuse to provide proof of the debt.

  • They call people at their workplace.
  • The probability that we may have an unpaid bill somewhere, unfortunately, is not zero. Every year our household processes over a hundred medical, dental, and prescription invoices. Among the over-charges (which Blue Cross says are not the patient’s responsibility), double billings, deductibles, co-pays, and in-network and out-of-network reimbursements, it’s very difficult to determine what we really owe.

    After a medical procedure we have found it is best to wait at least 90 days for all the billings and insurance to sort themselves, then pay the balance at the bottom of the statement. We’ve been careful, but there have been a few bills that have taken over a year to work out with the doctor or hospital.

    Once in the past decade an unpaid balance was shunted to a collection agency. The agent had no understanding of medical terms, much less the convoluted byways of medical insurance. I later resolved the matter by engaging with the doctor’s billing department. Having a collection agent in the middle of medical bills is about as beneficial as him handling the instruments in the operating room.

    Although I’ve made it a practice always to respond to inquiries, the Takhar Group’s call is one I won’t be returning.

    Friday, September 10, 2010

    Not Ready for the Bug-Out

    A distant conical haze marred the sky as we headed home on a clear Thursday evening. We turned on the radio, listening for a possible report of a fire. Our concern about the effect on traffic vanished when we heard the news.

    Blocks of homes in San Bruno were burning. Maybe an airplane had crashed. No, SFO responded that there were no planes missing.

    Perhaps a gas station blew up, but someone said there weren't any gas stations in the hills above San Bruno. The latter statement, too, proved false; a gas station next to the Lunardi's market did exist, but the gas station was undamaged and not the cause of the fire.

    A horrific and smaller-scale echo of the events, rumors, and speculation of nearly nine years ago, we were glued to the TV for information. The youngster's friend, Harry, lives on Trenton Drive. Harry's family evacuated their house, but luckily they live about three-quarters of a mile from the fire and their home was undamaged.

    The fuel source turned out to be a natural-gas pipeline, and in the days and months to come more questions will be answered. [Update - 9/12/10: four people are confirmed dead, and five are missing. The City of San Bruno has listed 37 homes destroyed.]

    Meanwhile, the San Bruno fire prompted a much-needed discussion in our household about bug-out emergencies. We are semi-prepared for a major earthquake, in that we can live for a week on supplies that we have stored securely. The advice for earthquake survivors, however, is to stay put.

    If there were a fire, tidal wave, or other disaster that allowed us only a few minutes to pack and leave, would we know what to throw in the car? Should we stay together or take all our cars? No answer is perfect, but this is one case where any decision is much better than inaction. May you, dear reader, never experience a bug-out situation, but please spend a few minutes thinking about what you are going to do. Your life may depend on it.

    Wednesday, September 08, 2010

    Peter Pan 360

    Tinkerbell and Wendy (book photo)
    The big white tent is coming down and the show is leaving town. Peter Pan 360, a 21st-century update of J M Barrie's century-old fable, closed its San Francisco run over the Labor Day weekend. I did enjoy its mix of acrobatics, special effects, and drama, but not as much as some enthusiastic reviewers.

    What I liked: 1) The rolling R's, clear diction, and dramatic presence of the British leads; 2) The creative use of puppets and machinery to animate Nana the Newfoundland dog and the crocodile, Hook's nemesis. 3) The acrobatics of "flying" on support wires and the choreographed transitions as the play resumed on land.

    Why I can't give it four stars: 1) the spotty quality of the secondary actors; 2) in a world where spectacle can be pulled up on home widescreens the CGI doesn't measure up to Avatar and the actors aren't Cirque du Soleil acrobats; 3) the adult ticket price of $80 to $120 is steep (it will be lower when the show moves to Orange County later this month).

    But these nits are more about my idiosyncrasies than this production. I know that I wanted more song-and-dance--I can't watch "Pygmalion" without hoping for a few numbers from "My Fair Lady." And live action is expensive, especially when situated on the expensive San Francisco waterfront. It was a pleasurable afternoon that I'll remember fondly, if not forever, but for quite a while. © 2010 Stephen Yuen

    Even from the back there's a good view

    Monday, September 06, 2010

    Belabored Day

    President Obama has proposed yet another spending program to goose the floundering economy, but this time the spending will be accompanied by tax breaks for business. The proposal has three components:

    Tax deductions: businesses would write off capital expenditures immediately instead of claiming depreciation deductions, i.e., spreading them over three to twenty years under current law.

    Tax credits: businesses would claim increased tax credits for research and experimentation expenditures.

    These measures, even if enacted by this Congress, will take years to boost the economy. They won’t budge the unemployment rate of 9.6 percent in 2010 and help Democrats up for election in November.

    If the economy does improve by 2012, President Obama will point to this proposal as justification for his re-election.   It’s designed to help him, not members of his party.

    To the extent a business can expand by investing in machines rather than people, increasing equipment tax breaks will hurt, not help jobs.  If it becomes relatively cheaper, a business will substitute capital for labor at the margin.

    History repeating:  the 1970’s tax code had high tax rates, partially offset by incentives to lower both the cost of labor (job tax credit, lower marginal rate on earned vs “unearned” income) and cost of capital (investment tax credit, accelerated depreciation).  The 1980’s promulgated the idea that business and individuals would better expand in an environment of lower tax rates and lower complexity (fewer specific tax breaks, i.e., let the tax code be neutral so that each business can decide its own mix of equipment and labor).

    Commentators have likened President Obama to President Carter. This proposal, as well as the current state of the economy, only buttresses that argument. © 2010 Stephen Yuen

    Wednesday, September 01, 2010

    A Good Walk Spoiled

    Golfer’s errant shot goes into rough. Next swing hits a rock. So far, so familiar--what follows not so much.

    Spark produced from club hitting rock. Brush catches fire, 12-acre blaze. 200 Orange County firefighters called.

    1) But what did he shoot?
    2) Rock would go farther if he kept head down.
    3) He really set the course on fire!
    4) Boy scout manual needs revision (“if two sticks not available, use five iron”).
    5) Sandtrap doesn’t look so bad now, huh?

    Photo from Yahoo News