Optimism

They dangled the bait before me, and I took it.

Yesterday I went down to my friendly neighborhood stockbroker and converted some of the money in my regular IRA to a Roth IRA. Withdrawals from the former are included in taxable income, while Roth distributions are completely tax-free. Converting part or all of a regular IRA to a Roth counts as a taxable distribution, so during those few minutes I increased our 2010 tax bill by thousands of dollars. I won’t reap the benefit, if any, for many years.

A Roth conversion is a complex financial decision:

How much you gain from converting depends on your own economic situation, when you take Social Security, whether tax rates are increased, the general pattern of your marginal tax rates, and your ability to alter your future tax rates.

I executed the Roth conversion because of optimism. I’m hopeful that my fund and stock investments will increase by a lot (in the financial dictionary that's more than a smidgeon) and that my tax bracket, even in retirement, will be high for the “good” reason that high income would push me into a high tax bracket. [The “bad” reason would be that tax rates would go up on the same income brackets due to the government’s fiscal problems. Of course, if the situation became really dire, then the Roth distributions might be (double) taxed, and conversions in retrospect would appear dumb.]

Like I said, I’m an optimist. Happy New Year!

Merry Christmas

John Lennon famously stated that the Beatles were more popular than Jesus. Time has softened the edges of that pronouncement, and what seemed to be inflammatory now barely provokes. But was it true?

Playing with our new toy, Google's Ngram viewer, we find that it's no contest. Jesus wins hands down; references to Him far outstrip those to the Beatles, even in 1966 when John Lennon made the statement. Sorry about that, John.

Jesus is adapting just fine to the age of the Internet. Below is the digital story of the Nativity, which as of this writing has had over six million views. It's good for a chuckle.



Merry Christmas!

The Day Before

Wednesday I was bedridden. Yesterday I was able to move about, and this morning I'm almost back to normal. By tomorrow I should be ready to go to the morning service, which probably won't be crowded.

Most of the kids will participate in today's 4 p.m. Christmas Eve pageant, while the majority of the adults will attend the late-night service. (By fulfilling their religious obligation on Christmas Eve people will leave Christmas Day open for family, food, and fun.) Whether due to luck or prescience, I'm glad I signed up to usher tomorrow and not tonight.

So I probably just had a cold virus and not an infection. It's amazing how commonplace medical knowledge dwarfs what a trained physician knew 150 years ago. In 1860 bacteria had been discovered but were not thought to be a cause of disease, and viruses were completely unknown.

Speaking of the knowledge explosion, Google's new Ngram viewer permits us to chart word usage over time. Here are "bacteria" and "virus" from 1860 to 2000.

Ngram, like most things on the Internet, is both tool and time-waster. 2000 years ago Christians believe that man triumphed over death. At the beginning of the 21st century he has triumphed over boredom. © 2010 Stephen Yuen

Irresolution

In keeping with the season of resolutions here's another article on how to keep moving forward toward one's goals. The (familiar) tips that this reader gleaned from the WSJ column are:

1) Make a plan that consists of incremental steps toward the major goal.

2) Envision success and failure (e.g., how good you will look if you lost weight or how poorly if you gained weight instead).

3) Accountability to others helps discipline.

4) Give yourself a reward for success.

I've resolved (is that a meta-resolution?) to try some of these next year.

One of the commenters to the article wrote:

To follow through consistently, we have [to] acknowledge that willpower is apt to fail us, and we need to learn how to cleverly design and put ourselves into situations that "force" us to actually do whatever we intelligently decide we should do.

That is good advice. Signing up for music instruction forced me to practice before each lesson. Upping my 401(k) withholding percentage forced me to save for retirement. Happiness is achieved not by being free but by wisely choosing the shackles to which we are bound.

The Men Who Stare At Goats

I'm thinking of scaling back our Netflix subscription. Rental DVD envelopes sit unopened for months, but we do use Netflix instant viewing (wi-fi or data connection required, but we pay for those already) on our iPads, TVs, and laptops. We would save $12 per month if we switched to streaming-only service. Streaming has proved fairly reliable even with our comparatively slow DSL connection; the Internet hasn't lately stuttered or stopped.

Why don't we watch more DVDs? The monkey mind hesitates to commit to a show for two uninterrupted hours. The monkey mind would rather flit back and forth between saved shows on the DVR, hundreds of live channels, and the Netflix instant queue.

Before making the switch I've resolved to make some headway on the DVD pile. I paid for the service, and by golly I'm going to get my money's worth. (Why don't I feel that way about my sparsely used gym membership? 'Tis a wonder.)

One movie that I liked was 2009's The Men Who Stare At Goats. It's a fictionalized version of the book about the U.S. Government's forays into psychic warfare. The big name actors--George Clooney, Kevin Spacey, Jeff Bridges, and Ewan McGregor--are able to resist mugging for the camera while spouting preposterous lines.

Ewan McGregor is the reporter outsider who gradually discovers the secrets of the highly classified government program while George Clooney plays his guide. In order to wage psychic warfare one has to have the mind of a Jedi, says the Clooney character. It took me a while to move past the joke (Ewan McGregor plays Obi-Wan Kenobi in three Star Wars movies) that is repeated several times but eventually found enough in the movie to like. Mildly recommended.

Different

Billionaires’ traits run the gamut: the world’s richest can be young, philanthropic, corrupt, ostentatious, and/or self-effacing. Perhaps the only thing they have in common with each other, besides their wealth, is that they are different from you and me.

One billionaire’s neighborhood Christmas-light show demonstrates just how different (sorry, iPhone and iPad users, it's in Flash):



Once we get past the reflexive criticisms—the energy consumption, think of all the sick and starving who could have been helped, and the usual clincher “what would poor Joseph, Mary, and baby Jesus say?”—there’s a lot to like: 1) The show is seasonal, not a lasting monument to the billionaire's munificence and magnificence; 2) in a down economy it gives employment to people who can use the work; 3) it’s beautiful (remember to get past the reflexive criticisms).

One cannot be sure about motivations, but the display does appear to be a gift with no strings. Yes, there are “better” ways he could have spent his money but there are worse ones, too.

So accept it, say thanks, and enjoy.

The Right and Painful Thing

It’s a widely held belief that the people who were bilked by Bernard Madoff’s Ponzi scheme lost everything. Thanks to the widow of an early Madoff investor, a sizeable chunk of the lost $20 billion will be returned to the victims.

The estate of Jeffry Picower, a major investor in Bernard Madoff's Ponzi scheme, has agreed to repay $7.2 billion to victims of the fraud in a settlement with the trustee overseeing the investment firm's bankruptcy and federal prosecutors in Manhattan, according to people familiar with the situation.

With such a large sum at stake, Mrs. Barbara Picower could have stalled this case for a long time. Given the fungibility of money and the length of their association with Bernard Madoff, an attempt to trace what part of the Picower estate was the fruit of the poisoned tree would have taken years. However, she quickly agreed to restitution.

"The trustee as a result of today's settlement will be in a position to make a distribution of approximately 50% of the estimated allowed claims in the liquidation proceeding," said David Sheehan, Mr. Picard's counsel. "Mrs. Picower is to be commended for coming forward and returning every cent she received from [Bernard L. Madoff Investment Securities] to the trustee and the U.S. attorney."

The 2009 Forbes 400 list pulls a number out of the air--$1 billion—as the estimate of the late Jeffry Picower’s wealth. It was obviously well below the actual number. Nevertheless, $7.2 billion had to represent the bulk of the Picower estate.

It’s convenient to say that when we become rich we will do the right thing, but somehow many people never do. Wealthy people’s lifestyles, social standing, and identities become tied up with their net worth. Signing away 70-90% of that net worth likely was difficult for Mrs. Picower, but it renews our hope in humanity to witness someone rich and powerful doing the right and painful thing. © 2010 Stephen Yuen

S.O.S.

I like to think that age confers not only wisdom but morality--as the appointment with one’s maker nears, morality starts winning (e.g., the Picower settlement) in the conflict between God and Mammon. It’s logical to believe that old people care less about the world and think more about eternity. But that would be wrong.

Another of my cherished myths has been exploded, and not just by elderly Ponzi schemer Bernard Madoff.

A grim category of crime is on the rise: senior-on-senior financial fraud [bold added]. According to regulators and prosecutors, there has been a significant increase recently in the number of cases in which older investors have been taken advantage of by elderly scam artists.

Seniors are easy prey.

Elderly investors are natural targets in part because they may be more susceptible to fraud. A 2008 study by researchers at the Georgia Institute of Technology found that older adults are significantly worse than younger people at detecting whether someone who may have stolen money is telling the truth.

What's more, according to research by Harvard University economist David Laibson and his colleagues, the typical person's ability to make astute financial decisions peaks at about age 53, then wanes with each passing year; another study found that investing ability takes a steep drop after age 70.

Adding to elders’ vulnerability are the declining size and geographic dispersion of their families.

It’s in everyone’s interest (but the crooks’) to get not only their estates in order but also make arrangements such as powers of attorney and conservatorships to help wall off the thieves. But that involves money, time, planning, and perhaps, most difficult of all, frank communication between people who may not have been talking much.

It’s too easy to put this stuff off until the appointment day, when it’s too late. There may not be much stuff left. © 2010 Stephen Yuen

Paying for Indecision

The Wall Street Journal highlights a phenomenon that has been creeping up on us for two decades but has exploded into visibility this past week:

Welcome to the world of the temporary tax code.

In the late 1990s, there were typically fewer than a dozen tax provisions that had just a limited lease on life and needed to be renewed every year or so.

Today there are 141.

Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. [snip]

The U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups.

There are obvious reasons why the temporary tax regime has arisen. Politicians find it much easier to leave the tough decisions to the next guy, and partisans won’t let them sign on to long-term solutions that imply a permanent defeat for their position.

A tax code that is subject to wholesale, frequent changes has its own consequences to the economy, quite apart from the specifics of marginal rates and which items are taxable or deductible. Planning has always been difficult, but now it’s extremely so. Public companies that normally are putting on the finishing touches to next year’s plans now have to burn the New Year’s Eve oil to ready presentations to their Boards, presentations that will be rife with qualifications and caveats.

Companies have been criticized for sitting on hordes of cash and refusing to hire, spend, and expand, but executives know that they can be fired, if not disgraced and personally ridiculed, for making wrong decisions. If delay improves the quality of the decision-making or allows some of the uncertainty to clear, then delay it shall be. And not everyone is a mogul who risks only other people’s money.

Bill Wiygul, whose family owns four auto-repair businesses in northern Virginia, estimates he and his wife would pay at least $20,000 more in various taxes in 2011 if Congress doesn't address parts of the code, including the Alternative Minimum Tax. The AMT snags a growing number of filers each year, and while Congress regularly limits the number affected—and likely will do so again this week or next—this has so far been an AMT "patch," never a permanent fix.

Mr. Wiygul says he would trade an increase in tax rates for greater certainty if the pain was shared by all. "We are petrified," he says. "We would be more actively pursuing expansion opportunities if we felt like the climate was more certain."

As we used to say back in the Sixties, not to decide is to decide.

Hallelujah!

And now for something that has withstood the test of time...

When I first heard the Hallelujah Chorus, the audience rose to its feet, in keeping with a tradition that purportedly began with England's King George II in the 18th century. (When the monarch stood, everyone had to stand.)

The custom of rising when the Hallelujah Chorus is played may no longer be widely known or followed. But it may be that the food court audience was just startled by the unannounced performance. And surely it would have been awkward to set aside the nachos, hot dogs, and sodas and rise smoothly from one's plastic chair.

The contemporary audience wasn't impolite; in fact it applauded loudly at the end. Few at the shopping center may have heard of King George, but he was likewise a stranger to shopping malls and flash mobs. What we and he all felt in common was the surge of emotion when the chorus belted out "King of Kings" and "Lord of Lords" in Handel's many-parted composition. Hallelujah, indeed.

Huge

Outside the sports-memorabilia store we saw a large man signing autographs. It was retired 49er Bubba Paris.

Bubba is remembered for his battles with weight (he famously failed to report to camp below 325 pounds as ordered by coach George Seifert) and cheerful oversized personality, but he’s mostly known as the starting left tackle who kept pass rushers from crushing Joe Montana.

Most of the younger shopping center crowd passed him by---Bubba’s heyday was over two decades ago--but the over-forties snapped away with their cellphones. Bubba admired the picture from our iPhone camera and said he was disappointed by his EVO.

Stating that the EVO camera (8MP resolution) should not be worse than the iPhone4 (5MP), the tech-savvy member of our family adjusted the white balance, auto-focus, and other controls on his camera. Now the EVO performed like a champ.

Bubba let us touch his ring from Super Bowl XXIII—the one where the Niners beat the Bengals on a last-minute touchdown. It was huge, as was the man wearing it.

Noble Calling

Our December calendars are packed with shopping, writing cards, and traveling. But there are a special few who set aside some precious time to helping strangers. One such angel is Jill, who every year assembles gift bags for senior shut-ins.

On Thursday afternoon I stopped by Jill’s house. 500 “stocking stuffers” had already gone to day care centers and homeless shelters. Another 200+ destined for Meals on Wheels and retirement homes were being assembled by members of the Santa Clara Thunderbird Club and the local Episcopal church.

For ten years, in good times and bad, sickness and health, Jill has soldiered on. (Here’s my post from 2006.) Beginning in the summer she sets aside sections of her house to stocking-stuffer paraphernalia. While she shops for wrapping materials she is always reminding us that she can use paperbacks in good condition, candies, and personal items that hotels routinely put out for their guests. Jill is extraordinarily persistent and patient, as is her family for supporting her calling.

Jill said that she doesn’t want publicity. Too late. A reporter from a local-news website stopped by, took some pictures, and published an article.

Jill set aside some extra bags for us to give out when we go caroling in a couple of weeks. Like I said, an angel. © 2010 Stephen Yuen

Most Valuable, I Dare Say

Steve Jobs is MarketWatch’s CEO of the decade. The decision wasn’t close, despite tumultuous events in the world of business: the Google (now worth $190 billion) initial public offering, the meteoric rise, plunge, and stabilization of Wall Street, the government takeover and management (some say mis-management) of the automotive, banking, and health-care industries, and revolutionary developments in medicine, transportation, warfare, and energy, not to mention the rise of China and India.

This humble writer has written about Apple and Steve Jobs before, so it’s unnecessary to do another post about Apple’s rise from the ashes.

Steve Jobs underwent a liver transplant in 2009 and now appears to be in good health. He is on the list to be Time’s Person of the Year.

Apple’s valuation was a mere $5 billion at the beginning of the decade and is now just shy of $300 billion. I don’t know if Apple will overtake Exxon/Mobil to become the most valuable company in the world, but I do know that the most valuable liver in history was the transplanted organ that Steve Jobs received from an unnamed young car-crash victim. Thanks to that person and his family, the world has been changed, and I dare say for the better. © 2010 Stephen Yuen

Red Light Mean Lots of Green

San Mateo County has made “millions” from the operation of red-light cameras. Recent average monthly citations according to the Examiner are:


Daly City:         660
Menlo Park:     630
Millbrae:           343
Redwood City: 507
San Carlos:        53
San Mateo:      587

The fine is $381 for running a red light in the City of San Mateo. Simple multiplication reveals the importance of the program's revenue to the cash-strapped City, especially when measured against its payment of $6,000 per month to the equipment vendor.

As a cautious driver I don’t mind and even applaud strict, even-handed enforcement of traffic laws. But when the government has strong financial incentive to impose fines, it makes me deeply suspicious about whether the citations are imposed impartially.

Elsewhere on the City and County websites one finds that there are several convenient ways (Internet, phone, mail) to pay the ticket. Contesting a fine, by contrast, is an involved procedure. It can be costly in both time and money, and the (un)likelihood of prevailing swings many decisions in favor of shutting up and paying up.

As government acquires more power over our daily lives (is that really open for debate?) the temptation of people who work in government--not everyone, but surely many—becomes more overwhelming to use that power to enhance their own positions. People are not saintlier if they work in private industry; it’s just that businesspeople have more incentive to be nice because they can lose their customers tomorrow.

Self-interested capitalists treat their customers well in order to make more profits. Self-interested bureaucrats make more money by expanding their own responsibilities, which means raising revenue through taxes, fines, and fees. This idea, called the theory of public choice, is not new:

Public choice theory attempts to look at governments from the perspective of the bureaucrats and politicians who compose them, and makes the assumption that they act based on Budget-maximizing model in a self-interested way for the purpose of maximizing their own economic benefits (e.g. their personal wealth).

Unlike the consumer who can switch cell-phone carriers and gas stations on short notice, the “customer” taxpayer and fine-payer has little choice but to play by the rules of the bureaucracy. He must accept its decisions or dispute them at great cost. He may even be grateful if the decision doesn’t go against him completely. As a perspicacious writer said two years ago,

In a thousand ways great and small our freedoms are increasingly circumscribed. I keep an eye on the traffic cameras and slam on the brakes when the light turns yellow. I paint black water pipes white because my neighbor's sensibilities might be offended. I have to check with the city before taking down a fence or putting a new one up. Whether I drive my car every day or once a month, it must pass the same smog inspection every two years. I refrain from making (overly) snarky remarks on this blog and even in friendly e-mails because a comment made in haste could someday come back to haunt me. We have to file all sorts of forms and payments with various agencies, and they must be complete and on time.

We're light years away from living in a 20th century totalitarian state, but more of our actions than we realize are dictated by compulsory rules, whether putting on a seat belt, reaching or not reaching for a smoke or a drink, or paying a nanny. We'll cede more and more of our freedoms during the next four years, and the pity is that we won't even realize that it's happening.

&copy 2010 Stephen Yuen

Attitude of Gratitude

The warm afterglow of Thanksgiving has been slow to fade. Last Thursday, as many families do, we went around the table and talked about the things that we were thankful for. Yes, there are qualifiers for each item, but....we and most of our loved ones are in good health (and we have a health plan!), we are financially stable, and our personal relationships are good. Objectively speaking, our situations are not much different from those in previous years [other than the Giants winning the World Series after a 56-year hiatus!!], but our attitude is.

Cultivating an attitude of gratitude not only imparts happier feelings, it also creates a virtuous circle that is likely to improve our circumstances.

Adults who frequently feel grateful have more energy, more optimism, more social connections and more happiness than those who do not, according to studies conducted over the past decade. They're also less likely to be depressed, envious, greedy or alcoholics. They earn more money, sleep more soundly, exercise more regularly and have greater resistance to viral infections.

Now, researchers are finding that gratitude brings similar benefits in children and adolescents. Kids who feel and act grateful tend to be less materialistic, get better grades, set higher goals, complain of fewer headaches and stomach aches and feel more satisfied with their friends, families and schools than those who don't, studies show.

Regularly counting our blessings, like exercising, results in all kinds of beneficial effects. According to an academic study,

Those who listed blessings each week had fewer health complaints, exercised more regularly and felt better about their lives in general than the other two groups.

Yesterday I spoke to an executive who was resentful about the way he’s been treated by his company. He’s always made a lot of money, but cutbacks have resulted in him having to adjust his plans. What he’s most upset about is that, while he’s performed well and his employer appears to be recovering nicely from the recession, the “temporary” belt-tightening in his compensation plan now appears to be permanent.

I didn’t have anything to offer but sympathy, because I’ve walked his path before. If his company doesn’t make things better, he’ll have to. Meanwhile he’ll also have to deal with his feelings of disappointment and anger. Counting his blessings—a nice family and a nice house in a nice neighborhood—will help. He just needs to see them.

30 days after the event some of the happiness is still around in our house