Friday, January 30, 2009

The Land of the Quick Fix

In the land of the quick fix the citizens are easily taken in. They believe that they will lose 30 pounds in a month by popping a pill, when doctors say that what’s needed is at least a year of diet and exercise. They think that house prices will be restored now by the government buying up toxic mortgages that no sane financier would touch with his own money. They’ll solve the ancient blood feuds of the Middle East if warring tribes would just sit down and talk to each other in an encounter group and maybe try role playing.

And in the biggest quick fix of all they will soon open the spigot of spending and spend, borrow, and tax their way to prosperity.

[One problem is that it’s going to be big, but it sure won’t be quick.]

Chart from

Like a gambler who doubles his markers trying to get back to even, we will dig the hole so deep that maybe we can't get out. Perhaps the Iraq war was a disaster, but at least President Bush pretty much fixed it by the end of his second term. It’s going to take more than two terms to fix the problems caused by this administration, and it’s only been in office one week.

Monday, January 26, 2009

Happy Year of the Ox

The Lunar New Year allows us to have another fresh start. Perhaps we have already backslid on the resolutions made on January 1st. The biculturals can reboot.

The person in charge of our household has become more traditional. We spent the weekend cleaning the house, a new year's custom that we had only spottily observed. Last night she and I inserted crisp folding money into red envelopes for the younger unmarried people (it seems to me that they're the lucky ones who should be giving me money but I'm not one to question authority) whom we will encounter today.

Two close family members were born during the Year of the Ox, meaning that their age on their next birthday will be evenly divisible by 12. (Because neither will turn 60, it's not a milestone birthday in Western eyes.) Both are sturdy, reliable individuals and occasionally stubborn like their animal namesake.

I've always been skeptical about the Chinese Zodiac because my life turned out to be the opposite as my sign would predict:
The Dragon is omnipotent. They are flamboyant, attractive and full of vitality and strength....It would be right to say that people born in the year of the dragon have a natural charisma and are certainly gifted with power and luck.
Well, there's still time to change and fulfill our promise. Happy New Year!

Saturday, January 24, 2009

How to Stimulate the Economy NOW Without Increasing the Real National Debt or the Size of Government or Lowering Taxes

No, the title is not a Steve Martin joke. This came to me in a reverie:

1. Every present and future recipient of Social Security benefits was given a one-time option to take all his benefits in a lump sum.

2. The lump sum was equal to the present value of future benefits, assuming life expectancies and discount rates as shown in various Treasury publications.

3. The lump sum payments were not subject to income tax (ok, the heading was an exaggeration—income taxes were eliminated for this one item).

4. Many people elected the option--especially those whose health was poor--and trillions of dollars were injected into the economy, at once avoiding the buildup of a huge procurement bureaucracy and arguments over changes to the income tax code.

5. A good portion of the windfall was spent, thereby stimulating the economy, and the balance was deposited with financial institutions which desperately needed these funds.

6. The official National Debt increased, of course, but that was simply due to correcting the faulty accounting practice that had left the Social Security liability off the government balance sheet. What was unrecorded was now recorded.

7. Many lump-sum recipients continued to work. Their accounts with the Social Security Administration were zeroed out, and their future payroll taxes built up credits in a program akin to a defined contribution plan.

8. Some people blew their receipts on foolish expenditures and speculations, despite an intensive information campaign conducted by the government and the financial services industry.

9. The most interesting part of the political debate had little to do with money: it was over the conception of ourselves and our society---whether trusting individuals to make their own economic decisions made for a better outcome, knowing that a few would make poor, even disastrous choices for themselves.

10. Popular opinion in favor of this measure became overwhelming. Although those with the highest income received the biggest payments, Americans perceived this result to be fair since big contributors had paid the most into the system.

11. The DJIA increased by 2,000 points, presaging a sharp recovery.

Then I woke up. © 2009 Stephen Yuen

Friday, January 23, 2009

Battlestar Galactica: Humans Lost in Space

(I began watching Battlestar Galactica in 2005, one year after the series premiered on the Science Fiction channel.)

Last week Battlestar Galactica began its final run of ten episodes. BSG is a “re-imagining” of the Seventies TV series, in which the spacefaring human race is all but wiped out in a nuclear attack by the Cylon robots that were created to serve humanity. Far grittier and rawer than its progenitor, the new show has the surviving humans fleeing in a ragtag assembly of vessels led by the military “Battlestar” named Galactica. Their worlds destroyed, the humans cling to a belief in the mythical planet Earth, the home of the “13th colony”, whose location was lost thousands of years ago. Humanity’s search for Earth, all the while being pursued by murderous Cylons, is the principal driving theme.

BSG is more than Odyssey. In nearly every episode dearly held values conflict with the reality of the desperate situation. (Beloved characters die with alarming regularity as if to stress the point.) A pro-choice president denies an abortion to a young girl because humanity must reproduce if it is to survive; humans work with their mortal enemy because of the chance that Cylons will help lead them to Earth; overworked laborers go on strike, risking mankind’s survival.

As the final season begins, humans do find Earth, but it’s a dead planet destroyed by a nuclear holocaust. The first episode deals with how people react when their entire world (universe?) view is found to be false. Depression, grief, and anger all manifest themselves, and one character commits suicide. We are compelled to watch how these individuals deal with their shattered dreams: we’ve been there or fear being there.

But the heart of Battlestar Galactica is mystery. What happened to Earth? What are the origins of humans and Cylons? And from the inexplicable events that have occurred over the past four BSG years---is there an unseen hand that has guided humanity in its search, and what does it want?

One hates to invest time in serial works of fiction because there’s a chance that the author won’t complete the tale. Think how disappointed we would have been if we had never discovered the connection between Harry Potter and Voldemort or if Richard Kimble never caught up to the one-armed man.

All the episodes of BSG are in the can, and we’ll get to see the artists’ complete vision of humanity’s probably bleak future. That’s a reason for celebration. © 2009 Stephen Yuen

An example of BSG meta-humor: it's found outside the show.

Where do the Apples Go?

One bete noire of war-on-terrorism critics has been the detention facility at Guantanamo Bay. But Gitmo was created to reduce the likelihood of torture and killing of terrorist suspects, according to former CIA analyst Michael Scheuer, no friend of the Bush Administration.
Michael Scheuer described how the rules under the Clinton administration were crafted to ensure the US would never hold prisoners. This meant, as a practical matter, that terror suspects were always shipped offshore to a foreign government where they were either tortured, killed or both. Michael Scheuer described how bad that was, not only only from the moral point of view, but from the perspective of US intelligence. If US intel wanted to know something they had to submit any questions to their foreign counterparts in writing, with the near certain knowledge it would be asked under torture, and ineffectively at that. Guantanamo was established to create an environment where terrorists might be aggressively interrogated in a manner falling short of the tortures applied by foreign governments. In the aftermath of 9/11 it was deemed important to fix what was broke. It’s easy to forget that Guantanamo was conceived as the solution to a Clinton era problem. But don’t worry the problem is back in full force.
If an unpleasant condition persists over years, we convince ourselves that our situation is untenable and upend the applecart. Sometimes it works, other times we look back with regret and call those the good old days. © 2009 Stephen Yuen

Thursday, January 22, 2009

Just Stand There

One of the things the Bush Administration did right was to let market forces play out when crude prices skyrocketed past $130 per barrel last year (now it’s back to $40). There was an enormous temptation for government to do something about the pain everyone was feeling at the gas pump. Proposals ranged from imposing a windfall profits tax to a suspension of the gas tax.

Sometimes the best answer is to do nothing. Let’s remember that lesson in the months ahead.

And What Did You Expect Him to Say?

Karl Rove on the last eight years:
He didn't get everything right -- no president does -- but he got the most important things right. And that is enough.
The Bush Presidency made mistakes, but to this glass-half-full person things could have been a lot worse. On September 12, 2001, if you had said that seven years later there would have been more no more deaths from terrorism on American soil, that the economy would have entered a severe recession only within the past year, and that oil prices would be moderately higher (meaning that the Middle East hadn't blown up in the meantime), I would take that deal.

Tuesday, January 20, 2009

Thank You, George

I’m one of those in the minority who think that George W. Bush will finally be judged a decent, if not great, president. But today there’s no point in rehashing arguments that will continue long into the future. History will play out and render its judgment. In the Sixties, more than twenty years after his death, mentioning Franklin Roosevelt made certain people apoplectic. GWB’s name will do the same.

Today George Bush looks happy to be leaving Washington. No one enjoys being vilified: he had to make some tough decisions, he’s been called every name in the book, and, with a few exceptions, he didn’t respond in kind. But it’s more than relief from the burdens of the Presidency. I don’t think that he would look that happy if he felt that Barack Obama wasn’t ready to be Commander-in-Chief. On his face we can read GWB’s judgment, which I believe has grown much better over the past eight years, about his successor. That's another reason that this is a hopeful day. © 2009 Stephen Yuen

Thursday, January 15, 2009

Thank You, Steve

"Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life." -- Steve Jobs

It’s rare that a business item that’s not related to the financial meltdown makes the front page, but Steve Jobs’ medical leave-of-absence from Apple is one such story. Steve Jobs transformed a left-behind tech company to one that is the leader of the pack. He redesigned Macintosh computers with color and rounded shapes, upended the digital music industry with iTunes and the iPod, opened Apple stores when the bricks-and-mortar model was supposedly passé, and became the cellphone leader with the iPhone in 2007. Meanwhile Apple continued to pour resources into the Mac, the OSX operating system, and its user-friendly software, and the Mac’s market share grew in a PC-centric world.

As longtime buyers of Apple products and often forlorn investors in its stock, we are astounded by the company's decade-long reversal and ascent in fortune. Great-men-of-history skeptics say that we give too much credit to individuals (e.g., they might say that the Allies would have been victorious without Churchill and Roosevelt), but it’s clear to this observer that Steve Jobs changed the history of technology.

For self-interested reasons we hope that Steve Jobs returns to Apple, but whether he does or not, we wish him recovery and happiness. Thank you, Steve. © 2009 Stephen Yuen

Wednesday, January 14, 2009

Top Ten Reasons I Should Leave California

1. The third consecutive dry year means water rationing.

2. Bay Area housing values are collapsing, and I should grab the equity that I can.

3. Mexico is disintegrating.

4. I’m too old to learn Spanish.

5. The Yellowstone caldera is going to blow its top.

6. The State deficit through June, 2010, is $42 billion (fewer government services and higher taxes on my shrinking income and wealth equal misery).

7. All the major sports teams are terrible, and they look like they'll stay that way for a long time.

8. Governor Gavin Newsom.

9. Catastrophic earthquake(s) will happen during my lifetime.

10. I can move in with my parents (in Hawaii), 2,000 miles removed from all of these troubles.

Mom, get my old room ready.

© 2009 Stephen Yuen

Sunday, January 11, 2009

Better Than That

Novelist Jonathan Raban critiques Barack Obama’s “Dreams from My Father”:
To build a political base in his adopted city, Obama had to write a book, but it's a measure of his seemingly unbounded confidence in his abilities that he set his sights on making the book a work of literary art. "Dreams" is less memoir than novel: Most of its characters are composites with fictional names; its total-recall dialogue is as much imagined as remembered; its time sequences are intricately shuffled. It has an old-fashioned plot, as it charts the progress of its hero, first met as a 21-year-old loner for whom "my solitude" was "the safest place I knew," on a Ulyssean quest for identity and community. Like a Trollope novel, "Dreams" ends with a wedding scene, in which all the warring fragments of Obama's life -- black and white, Hawaii and Indonesia, Kenya and Chicago -- finally cohere into one like pieces of an elaborate jigsaw puzzle. Married to a South Side native, and, by inference, to the South Side itself, the wandering hero has at last come home, in -- as it so happens -- the very heart of [Illinois representative] Bobby Rush's political bailiwick.

Obama is a skillful realist. By day, the I of his book is a vigilant listener and watcher, a hoarder of contingent details, who hugs his observations to himself, then broods on them late into the night. It's in the insomniac small hours when -- alone except for his burning cigarette -- he comes into his own as a restless thinker, figuring out his world in passages of eloquent interior monologue. Three o'clock in the morning is a recurring time in "Dreams," the hour at which patterns reveal themselves, resolutions are made and the reader enjoys the illusion of unhindered intimacy with the author.

But the book really takes wing when Obama wriggles out of the constraints of the first person singular and, like a novelist, imagines his way into the skulls of other people. Early on, he tries to see Kansas in the 1930s through the young eyes of his white grandparents, "Toot" and "Gramps," when they were courting. Later, his 7-year-old self is playing with Lolo, his Indonesian stepfather, in the backyard of their house in a Jakarta suburb when Obama catches sight of his mother, watching them from behind a window. For the next five pages, he leaps inside her head to observe himself and Lolo through her eyes. It's a bravado performance, as the writer feels on his own pulse the pain of his mother's expatriation and her budding estrangement from her new husband, so troublingly different in his native Indonesia from the student with whom she fell in love in Honolulu.
It’s tempting for Barack Obama’s critics to dismiss his memoir as the expanded product of a college creative writing course.

[Digression: In the past decade there’s been too much tearing down of good and talented individuals in the furtherance of political ends. Speaking as one who is for the most part on the right side of the aisle, I can understand the urge to repay the criticisms and calumnies that have been heaped upon conservatives (did you forget so soon the condescension and mocking regard of the Governor of Alaska, the comparisons of the current President and Vice President to the worst mass murderers in history, the gleeful recitation of one side’s sexual misconduct and corruption and deathly silence about the other side, at least until after the election), but as I tell my children, you are better than that.]

“Dreams from my Father” is light reading, but it’s not lightweight. It can be read quickly as narrative, but also has layers of complexity---should one look for them—that cause it to rise to the level of art. To write well requires thinking, dedication (because of the world’s distractions), and introspection. That’s what’s amazing about our next President. He rose to the top of the rough-and-tumble world of politics, while
the solitary existence of the writer, recasting the world alone in a room, generally unfits him for the intensely sociable, collegial life of practical politics.
I still harbor many doubts, but there’s a chance that Barack Obama may just be the new man foretold half a century ago. He continues to surprise and amaze, and who knows..... © 2009 Stephen Yuen

Thursday, January 08, 2009

At the Ahwahnee

The view from Room 204

The Ahwahnee Hotel, like the Royal Hawaiian of my childhood hometown, has a rich and storied history. The Yosemite landmark’s art, architecture, and ambience reek of old wealth, the kind so old that it frowns on silver certificates as disreputable tender. With the sand in my hourglass dwindling even faster than my money, however, it was time to pull my nose away from the window and go through the door.

I walked up to the Ahwahnee's front desk and inquired about a one-night stay. (The inclement weather and the half-empty parking lot suggested that my chances of securing a room were good.) The manager glanced at my, er, extremely casual garb and helpfully suggested that if I waited until 6 p.m., and if there were still rooms available, he would cut the rate. The prospect of looking for different lodging on icy roads in the dark, especially with an irate spouse, was not worth the potential savings: "I'll take it now."

Our weekend trip had begun on impulse, so we hadn't packed clothes that would pass muster as dinner attire in the Ahwahnee dining hall. No matter. We sat down to a fine meal at the Mountain Room at Yosemite Lodge and watched a movie about Yosemite's history.

We returned to the Ahwahnee and spent the evening in the Great Lounge, quietly reading, sipping coffee by the fire, and tapping on our laptops and iPhones. The atmosphere took me back to my college days, with the added benefit of the Google.

Our day at Yosemite and the Ahwahnee turned out better than we had planned (to be sure our "plans" had been quite unformed). However it turns out, 2009 has started on a positive note.

© 2009 Stephen Yuen

Wednesday, January 07, 2009

Away Too Long

We entered Yosemite National Park early Sunday afternoon. Traffic into the park was light; most vacationers had already gone home. Sunlight gleamed off the granite cliffs, and snowmen sprouted in the white meadows. We stopped to take pictures.

It had been decades since we had visited Yosemite. Our excuses: it was too crowded, the road was too winding, and the pollens gave us severe allergy attacks. After one glimpse of the waterfalls, however, we knew we had been away too long. © 2009 Stephen Yuen

Tuesday, January 06, 2009


Continuing with yesterday’s theme about how the well-off are also feeling economic pain:
Spectrem Group said U.S. households worth $1 million or more - excluding their primary residence - have seen their assets decline by 30% during the financial crisis. Almost one-fifth of the asset declines were greater than 40%, the report said. "There's a huge amount of anger," said George Walper, president of Spectrem Group.
Those who have earned, scrimped, and saved their way to what they thought would be a golden retirement are shocked at their sudden reversal of fortune. But there is no one villain in this tale (unless you entrusted all your assets to Bernard Madoff).

If you participated in real estate as a buyer, lender, developer, borrower, or investor, if you worked for a financial institution or a Wall Street law firm, if you were a politician who encourages home ownership, if you actually believed that modern finance lowered risk and raised returns, if you liked how implicit government guarantees were keeping borrowing costs low across the board, then you were complicit in the current mess. In other words, look in the mirror (it hardly needs saying, but that goes for me too).

Go ahead. Be angry and let off steam. The economy tanked just as you were getting comfortable. Sorry, that’s life. Figure out what to do. Then get back to work. © 2009 Stephen Yuen

Monday, January 05, 2009

The Worst is Over (Right?)

In 2008 the major indices fell at least 20%.

Although 08/08/08 was purportedly one of the most auspicious dates in the new century, 2008 proved to be a most unlucky year for market participants. Whether the preferred vehicle was real estate, common stocks, bonds, or commodities, for many investors their decline in net worth was likely to exceed their annual income. Yes, we’re fortunate to be in the majority who have jobs, a health plan, and houses not in foreclosure, but it’s tough not to be distracted when our assets are eroding faster than we can add to them.

If you’re over fifty and living in the Bay Area, it’s not unusual to have a net worth that summed to a million dollars at the beginning of 2008, say, $400,000 in a house, $300,000 from a 401(k) [$10,000 per year, including the company matching contribution, over 19 years at a 5% earning rate gets you there] $200,000 in savings, stock options, and company profit-sharing, and $100,000 in cars, furnishings, and other assets. When the values drop by more than 20%, one needed a healthy six-figure income just to stay even. And no, the math didn’t work for me either. I worked pretty hard, yet lost ground. Plans to retire have been pushed back.

I really have no one but myself to blame for my financial situation. [Blaming others leads to anger and diverting myself from working my way through problems.] I could easily have switched out of stocks and mutual funds into cash-equivalent investments, but I kept believing (hoping) that a bottom had been reached.

At the beginning of 2009 I’m not discouraged. I’m investing more heavily into equities. The worst is over (right?).

[Addendum: The final report on my 401(k) showed that it recovered some of its losses at the end.]
© 2009 Stephen Yuen

Sunday, January 04, 2009

Never in My Wildest Dreams

The heating element on our 20-year-old Kenmore dryer went kaput. The schematic suggested that the problem could be a fuse, but after much prodding, pushing, unbolting, unscrewing, upending, and, yes, cursing (the dryer is wedged in a tight space), I couldn’t access the fuse. Not for the first time I concluded that my father’s electrician’s certificate is of far more practical value than my sheepskin in the social sciences.

Quickly dispensing with the idea of paying for a service call on an ancient appliance, we canvassed Costco, Sears, Best Buy, and Circuit City for a replacement that could fit into the space, yet have sufficient capacity to handle the output from our front-loading washer. The few suitable models were more than $700 and had a wait time of at least two weeks. We didn’t relish the idea of hauling our clothes to the laundromat, even for a brief period.

But this is the 21st century, when people can hook up instantaneously for many purposes, among them the trading of used appliances. On Craigslist I quickly found two dryers that could fill the bill. A couple of back-and-forth e-mails eliminated one candidate, but the one in Palo Alto seemed ideal. The seller was a Stanford Humanities professor who had re-piped her laundry room with natural gas and had no further use for her four-year-old Kenmore electric. Her price was a non-negotiable $150, and I would have to come get it.

After confirming that the dryer worked, I forked over the cash. The dryer slid easily into our van. My elation over an excellent economic transaction was dampened by the thought that never in my wildest dreams did I envision myself trucking to Palo Alto 33 years after earning my MBA to pick up a used dryer. You don’t want to see that in the Class Notes. Oh well, I won't tell if you won't.

It fit, and it works.

© 2009 Stephen Yuen

Saturday, January 03, 2009

Resolution #1: Clear the Clutter

We moved the broken clothes dryer to the garage. I called Allied Waste. Every year our garbage company allows each household two special pickups, which includes one large object plus up to 12 boxes or garbage bags.

We scurried through and around the house, scooping up old garden tools, a rusty one-speed bicycle, and clothes too decrepit for Goodwill. It wasn’t difficult filling the 12 boxes and bags. Why hadn’t we done this sooner?

New Year’s Resolution #1: clear the clutter. How to measure progress: if we call Allied Waste twice for special pickups.

No going back: we watched the truck crush everything.

Friday, January 02, 2009

A Taxing New Year's Eve

While most were taking off for the holidays, I had a last-minute request from the budget people to put together some schedules for the 2009 plan. The deal that we had done before Christmas will affect the plan numbers, and the company’s financial information system is an insatiable beast that must be fed.

But the budget tables were easy compared to the task of making sense of my personal finances. The afternoon of December 31st was when I finally got a handle on our tax picture for the year. Yes, I’m a procrastinator and had been avoiding this unpleasant task, but in my defense some key pieces of information only became known recently.

It was a close call whether I could finish the calculations and get the payments to the Post Office--should that be the conclusion--before it closed.

(continued below) © 2009 Stephen Yuen

Thursday, January 01, 2009

New Year's Eve: Selecting a Retirement Vehicle

One of my tax issues in 2008 is that I’ve had some self-employment income and needed to select a retirement vehicle that would permit me to make significant tax-deductible contributions now without locking myself in to large commitments in future years. [Yes, dear reader, I do have income (unless it's "phantom", where one receives no cash but has to recognize taxable income--but I digress), and I know your tears are crocodilian.]

Creating a defined benefit pension plan would allow me to make the largest contribution and take the largest deduction for 2008, but it wasn’t clear that future SE income would be reliably steady. So I opened a self-employed 401(k) last week and partially funded it on the last day of the year.

One problem solved. © 2009 Stephen Yuen

New Year's Eve: Thinking About AMT

(This is a continuation of the above post, confirmation that I don't really have a life.)

The next big question was whether we should prepay the balance of our State income and property taxes in order to claim an itemized deduction for 2008. To answer that question, we needed to know whether we will be subject to the Federal Alternative Minimum Tax. (State taxes are not an itemized deduction under AMT.)

My hasty calculations indicated that we’re on the cusp of being an AMT-payer. The good-and-bad news is that there was little point in cutting a check on December 31st to the beleaguered State of California or County of San Mateo because we wouldn’t be able to deduct it on our 2008 taxes, yet may do so in 2009.

I made donations to the regular charities and a few new ones, and we made the mortgage payment that was due on January 1st. (Mortgage interest and charitable contributions are deductions under both the AMT and regular-income tax regimes.)

One always gets a measure of satisfaction in knowing where one stands, though the news may not be welcome. © 2009 Stephen Yuen

New Year's Eve: Tempted by That New Car Smell

For the past month I’ve been toying with the idea of availing myself of the new car discounts that have been so heavily advertised that you couldn’t avoid hearing about them. Not only are cars cheap(er), the cost of operation is a lot less now that fuel costs have dropped more than 50% from their highs. I would be doing my civic duty by stimulating the economy.

And of course there was a tax angle: if a new car was bought by year-end and used entirely in my business, I could get a 2008 depreciation deduction of nearly $11,000 (this amount is proportionately lower if business use is between 50% and 100%). But this purchase would come with a big rope attached: I would have to maintain careful driving records for at least the next five years and keep my personal mileage below 50%.

I reluctantly concluded that we don’t really “need” a new car, since our family has four functioning vehicles. If in 2009 I hope to reduce the material clutter and time-draining obligations from the calendar, buying a new car is a step in the wrong direction. The checks to the Department of Treasury and the Franchise Tax Board will be thousands of dollars larger on April 15th, but I won’t look back.

My New Year’s Eve was filled with anxiety and frustration, but in the end there was clarity. So it was a Happy New Year after all. © 2009 Stephen Yuen