Big Hands Aren't a Problem But They Can Get You Off

Two hours in, from the top of the trail

A Mitt being in the news reminds me:

Ever since I've taken up hiking, I've noticed a tingling in the hands for hikes lasting two hours or longer. Yesterday, after a two-month hiatus, I went out for three hours--a little over nine miles--and my mitts became noticeably swollen. The fluid retention ("edema") subsided shortly after returning to the car.

Per the Mayo Clinic:

Hand swelling during exercise is a fairly common problem. The cause isn't completely clear, but hand swelling appears to be a result of the way your body and blood vessels respond to the increased energy demands of your muscles during exercise.

Hmm..maybe this is further evidence that the defendant in a famous trial was innocent. The hands of the killer, perhaps swollen from physical activity, presumably fit the bloody glove left at the scene. But in the courtroom the unswollen hands of the defendant, who had been seated for hours, were too big for the glove.

Another Reason to Wear Cotton

Another reason to wear cotton:

Microscopic plastic debris from washing clothes is accumulating in the marine environment and could be entering the food chain, a study has warned [snip]

"Once the plastics had been eaten, it transferred from [the animals'] stomachs to their circulation system and actually accumulated in their cells," [UCSB ecologist Mark Browne] told BBC News.

Advocates of the precautionary principle, which requires safety to be proven before products or activities are permitted [the precautionary principle is anathema to those who worry about government over-reach], may call for a ban on synthetic clothing materials or new methods of washing clothes.

We are still in the early stages of determining whether this phenomenon is yet one more danger we must worry about. But it's clear that any solution, if one becomes necessary, will be very expensive.

Mild

The cold vanished overnight. It was warm enough to amble about in T-shirt and shorts. Along the levee bikers and bladers whizzed by, forcing pedestrians to scurry onto the ice plant for self-preservation.

Sprinklers have been switched on. The ground has dried out after last week's storms.

Ducks and geese leave signs of their presence everywhere. Wildlife is beautiful at a distance or in the abstract.

The afternoon sun tinges the houses gold. The grey chill returns tomorrow. No matter, let tomorrow take care of itself.

Capital Gains

The lower tax rate on long-term capital gains has entered the national conversation. Last year Warren Buffett called for higher taxes on the "mega-rich."

The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes.....The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 [with the most reported income] was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains.

Mitt Romney's tax returns showed that the bulk of his income is also derived from capital gains, and the argument raged anew. President Obama staked out his position in the State of the Union address:

Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary....But in return, we need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes....Tax reform should follow the Buffett Rule. If you make more than $1 million a year, you should not pay less than 30 percent in taxes.

The taxation of capital gains raises issues of public policy (e.g., incentives for business investment, differential treatment of capital versus labor) and fairness (e.g., tax-rate progressivity, taxing the same income twice).

Clarity of the debate isn't helped by the inclusion of payroll taxes, which are a combination of tax, medical insurance, and savings plan, like an IRA or 401(k), for which one receives benefits later. There are even problems if we limit the discussion to the pure Federal income tax, where partisans either through ignorance or willful mischaracterization confuse marginal tax rates with effective rates. For example, in 2011 a family of four with no itemized deductions would pay Federal Taxes of $10,656 (14.5%) on Adjusted Gross Income of $100,000:

Adjusted Gross Income  $100,000
Standard Deduction      (11,600)
Exemptions  (4x$3,700)  (14,800)

Taxable Income          $73,600

Tax per Tax Tables      $10,656

The family's tax bracket is 25%--that is, the next dollar of income is taxed 25 cents--but its effective rate is 14.5%, which is lower than Mitt Romney and Warren Buffett's effective rate, excluding payroll taxes.

However this discussion plays out, one thing is certain: it's better for everyone, rich or poor, to have capital gains than not. My January 7th portfolio is performing extraordinarily well, thanks to Netflix. If these prices persist or even continue to rise during the next year, we'll have a nice long-term gain that we'll be happy to pay taxes on.

One Debate I Found Worthwhile

Robert Hegyes, who played Juan Epstein on the mid-1970's TV series Welcome Back, Kotter, is dead. The mean streets of New York City were already a cliché when the show came out in 1975. (The audience had been primed by such cultural landmarks as the 1961 Oscar-winning film, West Side Story, and 1965's best-selling Up the Down Staircase, about the trials of an inner-city schoolteacher.)

"Kotter" depicted in broad strokes how the lower-class kids of Brooklyn came together under the tutelage of wise schoolteacher Gabe Kotter, played by Gabe Kaplan. Robert Hegyes' Juan Epstein was the "Puerto Rican Jew," a strange-sounding hybrid that is still funny 30 years later. WBK wasn't a top-flight comedy in the class of "All in the Family" or "The Mary Tyler Moore Show", but its ensemble cast was worth a half-hour of our time 35 years ago.

The "debate" from episode 1 is more worthwhile than some of the debates we've been watching lately.

Good Start to the Year

There were 80 of us in the Jury Assembly Room yesterday morning. 55 names, none of them mine, were called; they shuffled upstairs to be interviewed by the judge. We had to wait another hour to see if the remaining 25 were needed for another case. No, we were dismissed before 11 a.m. Yes, I was willing to do my civic duty but didn't need to, reviving a distant memory of the happy feelings from receiving a high draft number.

This week two of the stocks that I own (and recommended on January 7th) reported much better-than-expected earnings. The share prices of both Apple and Netflix have risen, along with my mood.

The Year of the Dragon has gotten off to a good start. I suppose that it could have been even better had the Niners beaten the Giants and made it to the Super Bowl. But let's be honest--San Francisco over-achieved this year and was not as balanced as New York. Incidentally, the Chinese zodiacal magic evened out at the game: both 49er Kyle Williams, who made the critical fumble, and Giant Jacquian Williams, who caused it, were born in the Year of the Dragon.

He's No Marshmallow

Sta Puft vs Newt: from Huffington Post

During my weaker moments my reptilian brain would like to see Newt Gingrich become President. Newt would take a meat axe, not a scalpel, to our bloated government and strike fear into the hearts of America's enemies!

The main problem is, of course, that he would take a meat axe, not a scalpel, to our bloated government and strike fear into the hearts of America's enemies.

If nothing else, President Gingrich would single-handedly revive the comedy business. Whether because of political sympathy or political correctness, comics have toned down their jokes about government, despite a flood of material in the post-Bush era. I miss the edginess and vicious personal attacks. C'mon guys, root for Newt, your inner Lenny Bruce is dying to get out. © 2012 Stephen Yuen

How to Overpromise and Underdeliver

State of the Union, 2/24/09, the promise of 3,500,000 jobs:

Over the next 2 years, this plan will save or create 3.5 million jobs [bold added]. More than 90 percent of these jobs will be in the private sector: jobs rebuilding our roads and bridges, constructing wind turbines and solar panels, laying broadband and expanding mass transit.

State of the Union, 1/24/12, the delivery of minus 1,000,000 jobs:

In the six months before I took office, we lost nearly 4 million jobs. And we lost another 4 million [bold added] before our policies were in full effect. Those are the facts. But so are these: In the last 22 months, businesses have created more than 3 million jobs[bold added].

By the way, how did those solar panels work out?

[Update - 1/26/12: ABC News performs a fact-check of the President's State of the Union Address. (Some Republicans might say that is news in itself, but, as I tell the kids, you can't change the mistakes of the past, just try to do better in the future.) My interpretation of ABC's analysis: every jobs number was under- or over-stated to cast the President's policies in the best possible light.]

How to Underpromise and Overdeliver

Apple's earnings per share for the quarter ended December 31, 2011:

Company forecast $ 9.30
Analyst forecast $10.08
Actual results   $13.87

From the NY Times:

“It almost defies words in terms of the strength across all products,” said Toni Sacconaghi, an analyst at Sanford C. Bernstein & Company. “Everything about it eclipsed even the wildest expectations of analysts."

Mitt Romney's Taxes: Quick Take

Mitt and Ann Romney have released their tax return for 2010 and a detailed estimate of their 2011 taxes. Here's my 30-minute take on a 200-page document (obviously I might have missed a few items).

Their annual Adjusted Gross Income--approximately $20 million--puts them in the same league as top entertainers and athletes.

The Romneys donate over $3 million per year to charity, well above the Biblical standard of the tithe, and also pay a little over $3 million per year in Federal taxes.

More than half their income is derived from long-term capital gains. Long-term status inures to assets held over one year and is subject to a reduced tax rate, the source of recent political controversy. Whatever one's position on capital gains tax rates, there is much to admire in how the Romneys have arranged their financial affairs.

Because of the one-year-or-more holding period requirement, one may well conclude that the Romneys are not short-term traders and recipients of privileged information, unlike other politicians and their staffs. Furthermore, their investments have not been sure things: the gains in 2010 were partially offset by a $4 million capital-loss carryforward, which means that the Romneys suffered significant losses in previous years.

Nearly all of the gains are pass-throughs from family trusts, and more than half of those amounts are in "blind" trusts over which the beneficiaries have no control. The Romneys will therefore not profit directly from information Mitt may obtain or decisions he may make, except for changes in the tax law under a Romney administration.

In 2010 there was a so-called 83(b) election, which is generally used to afford capital gains treatment to investments in startup companies.

I like that the super-wealthy Romneys: 1) continue to make investments subject to real risk (no crony-capitalism guarantees against loss); 2) wall-off the bulk of their investments from a temptation to use political influence; 3) donate a sizable amount to charity.

I'll likely take a closer look if he becomes the Republican nominee.

Monday Morning Quarterback

With little experience he was given tremendous responsibility. In the national spotlight he made disastrous decisions at critical junctures. While his teammates tried to bear some of the blame, it was plain to everyone he was in over his head and, really, the ballgame was lost because of him. Those who should have known better were enamored by his enthusiasm, energy, and youth and should never have allowed him such leeway after the first fumble. Maybe they'll all remember this lesson the next time, if there is one.

Kyle Williams' two fumbles cost the 49ers ten points in their 20-17 loss. (CNNSI photo)

Happy New Year

Per the Associated Press:

The Year of the Dragon begins Monday [today], and the Chinese believe that babies born in this iteration of the 12-year Zodiac cycle are gifted with prodigious quantities of luck and strength. In ancient times the dragon was a symbol reserved for the Chinese emperor, and it is considered to be an extremely auspicious sign.

Chinese couples are freezing and unfreezing ova or undergoing other fertility treatments just so they can have a dragon baby.

"Prodigious quantities of luck and strength"?! I'm a dragon baby...so what happened?

Happy New Year!

Joe Paterno, R.I.P.

When one-of-a-kind leaders are debilitated by disease or age, it's often said that "we'd rather have 10% of X than 100% of anybody else." Organizations accommodate the long journey into night by delegating many of the leader's routine responsibilities and husbanding his flagging energy for the tasks that make him unique. We've seen this gradual, sad transition occur in organizations as disparate as Apple Computer, the Roman Catholic Church, and Penn State University.

We can see why Penn State left Joe Paterno at the helm of its football program. The Paterno name conferred a broad range of benefits--competing for desirable recruits, higher alumni donations, and more publicity, to name but a few. Evil entered into these happy arrangements, and tragedy resulted.

Child sexual abuse is a horrible crime that destroys lives. You or I, dear reader, would surely have done more than pass along the allegations about one of our subordinates to university officials. But if I were an 80-year-old executive, I'd need a great deal of proof before I blew up an organization that appeared to be running smoothly. (It also may be that Joe Paterno, like many in his generation, did not appreciate the heinousness or prevalence of child sexual abuse.)

The scandal ruined the lives of the young victims, but it also ruined the life of a good and decent man who could not see the evil rising in his midst. R.I.P.

Google - More Questions Than Answers

After enduring years of volatility I sold my position in Google at $520 last May. (I regretfully concluded that I didn't understand the company's strategy at a fundamental level--not that they were wrong, I just didn't understand it.)

Google then released a test version of Google+, its social-network answer to Facebook, and the stock soared past $650. My second-guessing was magnified when Mad Money maven Jim Cramer touted Google as the only company that was a leading player in all three Internet markets-of-the-future: cloud, social, and mobile (Apple doesn't have a major social-networking presence).

Last week Google released quarterly earnings that fell short of analysts' expectations, and the stock plunged $53.58 to $585.99 on Friday. It may look cheap to some investors, but that price is still substantially higher than the point at which I sold it. More importantly, the past year has not added to my enlightenment. I still don't understand the company, so for the time being I'm not getting back in, despite the delicious lunch Google serves at the shareholders' meeting.

Even after its plunge, GOOG has performed better than the averages since May.

[Update - 1/25/2012: the WSJ publishes more information about the $500 million forfeiture that Google paid to avoid prosecution for aiding the sale of illegal pharmaceuticals. It's not new news, but the questions about GOOG's management can only get louder.]

Biennial Lunch

I met up with T at the same place, the Sunflower Restaurant, nearly two years after our last get-together. (The Sunflower, BTW, was very crowded at noon on a weekday--quality cuisine, not expensive, highly recommended.)

Not much has changed. T is a part-time consultant and keeps up with developments in the accounting field--he is one of the best accounting technicians I know outside of the Big Four and Norwalk--but his primary focus has been raising his three-year-old daughter while his wife works full-time. T is in the enviable position of knowing that he can find a full-time job if he wants one; few of us are that confident in our own marketability.

T advised on the most expeditious approach to reactivate my CPA; there are relatively inexpensive online accounting courses that will enable me to accumulate the requisite number of continuing education credits by the end of 2012. Certificate reactivation, like physical fitness, will be more a matter of discipline than native ability. Sigh, the flesh is weak.

We couldn't linger too long because T had to pick up his daughter from the sitter. He gave me her picture, after which I understood why he's in no hurry to re-enter the rat race. © 2012 Stephen Yuen

Today

Two years ago