Monday, 30 January, 2006
It's surprising how many people view their cars or their houses as assets. "It's worth $25,000," a friend said of his new car. I didn't have the heart to tell him that although he paid $25,000 for the car last year, he'd be lucky to get $18,000 for it today. If you view assets and liabilities in the traditional way, he's a few thousand dollars in the hole with an outstanding loan balance of about $21,000.
Houses are a little bit different in that a house often is worth more than you paid for it, and unless you got one of those negative amortization loans it's almost certainly worth more than the outstanding mortgage balance. In the traditional sense, then, you're in the black: disposing the asset will more than erase any associated liability.
The traditional way of looking at things defines an asset as something that you can convert to cash. A liability is money that you're committed to paying at some point. House, car, boat, home furnishings, etc. are assets. Mortgage loans, student loans, credit card balances and such are liabilities. If you add up the assets and subtract the liabilities, you obtain a number called "Net Worth"--the amount of money you'd get if you sold everything and paid off all of your debts. Not surprisingly, a very large number of people--even "successful" people--in the United States have a negative net worth.
Net worth is a nice pretty number to figure out, but it's almost meaningless. It's a fictional number that's usually based on over-valued assets and unreasonable assumptions. And it's a worthless number because you can't spend your net worth. In most cases, the best you can do is borrow against it.
A more realistic way of viewing things, popularized by Robert T. Kiyosaki's book Rich Dad Poor Dad, is cash flow. Forget about what things are worth. Figure out instead where the money goes. How much money comes into your bank account every month and how much money goes out. From a cash flow perspective, traditional assets and liabilities are meaningless. In this alternate way of looking at things, an asset is something that puts money in your pocket and a liability is something that costs you money.
By this definition the only asset that most of us have is our daily job. Your house, even if you have it paid off, is a liability. Why? Because it still costs you money every month for taxes and insurance. Your car is a liability, requiring a loan payment, insurance, gas, registration, and maintenance. Almost anything you buy is a liability, or at best neither--that is, it costs you nothing to maintain.
The trick to getting ahead is to increase your assets and reduce your liabilities. Most of us increase our assets by putting our money in savings accounts, certificates of deposit, or mutual funds that invest in dividend paying stocks. Rental property is another popular asset in which to invest, but remember that by our definition it's only an asset if the monthly income from rents, plus any tax advantages, is more than the monthly outlay for the property. The equity you're building in the property with each payment doesn't count because it's not money going into your pocket.
I'll be the first to admit that this isn't the most sophisticated way to look at things, and that any second year accounting student could poke holes in some of the reasoning. Many people will dismiss it as being too conservative and short-sighted because it doesn't take appreciation into account. But that's okay. I've seen all too many people with high net worth figures work their way through bankruptcy court because their cash flow situation became untenable. I'd rather maintain a positive cash flow and treat any asset appreciation (in the traditional sense) as a bonus.
By the way, I wasn't terribly impressed by Kiyosaki's Rich Dad Poor Dad. Powerful as it is, the cash flow method of looking at assets and liabilities is the only "new" idea in there, and it can be explained in a few short paragraphs. The rest of the book is entertaining but not very enlightening. That said, it's probably worth the price (under $20) as a gift to your children or to a friend who is struggling with finances.
Friday, 27 January, 2006
A posting on a bulletin board that I frequent pointed me to The Political Compass--a questionnaire that's designed to gauge your political leanings. Since everybody was posting their "scores," I thought I'd take a look.
The questionnaire is actually well designed, although they could have selected more neutral wording on some of the questions. Their FAQ indicates that they purposely slanted the questions--some to the right and some to the left. All of the questions give you a four-point answer scale: Strongly Agree, Agree, Disagree, Strongly Disagree. On some of the questions I would have welcomed a non-commital response between Agree and Disagree.
It only takes a few minutes to take the questionnaire, and then you get to the results page. My major complaint about the results page is that you have to scroll down in order to see your results because the top of the page is an explanation of how the results are displayed. In particular, the top of the page contains this graphic:
All too many people see that graphic and think that it is showing their results. But it's not. That graphic and the supporting text just show what the two axes mean and how to interpret your own score that's given towards the bottom of the page. You have to scroll down to the section titled "Your political compass" in order to see your results.
My score, by the way, was 2.13 on the economic scale and -2.92 on the social scale. That puts me slightly in the "Libertarian Right" quadrant. I've long said that I consider myself fiscally conservative and socially liberal. According to this questionnaire, I'm slightly more centrist than I thought, but not surprisingly so.
I found the questionnaire and the discussion on the site quite instructive. It's worth taking a look.
Thursday, 26 January, 2006
- Honestly, I hate it when people send me jokes in email or links to jokes on the Web. And until recently I was pretty sure that I'd heard every possible blonde joke. But this one really is the Best Blonde Joke Ever.
- I've often wondered what other people learn about American history. I got a little taste of that last year when I read the Japanese interpretation of the events leading up to WWII. A friend today pointed me at History Lessons: How Textbooks from Around the World Portray U.S. History. The Amazon reader reviews look promising.
- People are more willing now than they were a year ago to admit that we are in the midst of a housing bubble. News over the last couple of days has not been encouraging. New home sales continue to decline. And yet, there are some people who refuse to believe that the bubble will pop. With house prices on average being over-valued by 35 to 40 percent, I just don't see how people can remain unconcerned.
- On the topic of the housing bubble, I guess I shouldn't be surprised by the existence of housebubble.com or The Housing Bubble blog. Seems like there's a Web site and corresponding blogs about almost every conceivable topic.
- People just don't learn. After the high tech stock bubble burst in 2000 and 2001, you'd think that people would shy away from that kind of thing. I thought all the hype about Google's stock was madness, but the recent run up of AMD's stock is just plain crazy. Mind you, I have nothing against AMD as a company, but its stock has more than doubled in value over the last 6 months for no rational reason.
- We've all heard P.T. Barnum's quote, "There's a sucker born every minute." At least, I'd always heard it attributed to Barnum. Turns out that Barnum never said that. Or maybe that Web page is just there to sucker people.
- Here's a frightening trend: Identity thieves targeting children. Get the Social Security number of a minor child, open a bank account, run up some credit card bills, and then file bankruptcy. If you're lucky, nobody will discover the crime for a few years. Some kid would be in for a rude awakening when he applies for his first credit card. "I'm sorry, sir, but your bankruptcy five years ago makes you ineligible."
Wednesday, 25 January, 2006
Slashdot today aggregated this story about how people manage to ignore facts while making political decisions. In the study, researchers monitored the brains of staunch party supportors as they evaluated information that threatened their perferred candidate. They announced the results yesterday. I'm not terribly surprised by the results, as they tend to support my own conclusions. The most telling comment from one of the researchers was this:
We did not see any increased activation of the parts of the brain normally engaged during reasoning. What we saw instead was a network of emotion circuits lighting up, including circuits hypothesized to be involved in regulating emotion, and circuits known to be involved in resolving conflicts.
As the article states, "The study points to a total lack of reason in political decision-making."
With people on both sides of the political aisle reaching totally biased opinions by ignoring information that can not rationally be discounted, is it any wonder that our political discourse is in such sad shape?
I'm afraid to read the comments about this article on Slashdot.
Wednesday, 18 January, 2006
My dad bought this car (click for a larger view), a 1972 Mercedes Benz 280 SEL, when I was in my first year at the Air Force Academy. It was a beautiful car, with a shiny dark brown paint, leather seats, and the kind of engineering that Mercedes was known for. The 4.5 liter engine pushed the car along nicely at well over the posted 55 MPH speed limit. The ride was smooth, but not cushy like in a Cadillac. I thought it was a classy car, but not ostentatious. Understated elegance.
I was never one to get emotionally attached to cars, but for some reason this one had special meaning to me. Perhaps it's because my dad and I spent a lot of time in it, driving from city to city in the early 1980's, trying to get a business going. We had some good discussions that summer. Or maybe it's because he let me borrow it a couple of times when I took a date to a special function and wanted to arrive in style. I have fond memories of one or two of those occasions.
Dad bought a different car in the late 80's, but kept this Mercedes running. I guess it started having some trouble, and by the time Dad passed away in 1992 it wasn't being driven much. It sat mostly unused in Phoenix until 1997, when I towed it out here and parked it behind the garage. My intention at the time was to restore it to its original condition. That's an expensive and time-consuming proposition, though, so after almost 9 years of watching it rot back there I finally had it towed off. The American Lung Association will part it out or have it crushed and recycled, and I'll get to claim a small tax deduction.
I find myself a little saddened to see it go, and that surprises me. But I'm also happy to get it out of the yard. That's one more long-term project that won't be weighing on my mind, and Debra's happy to see it go. It really was kind of an eyesore.
Monday, 16 January, 2006
If the Japanese characters didn't show up in yesterday's entry, it's probably because you don't have the Japanese language fonts installed on your computer. I didn't, as they're not installed by default and until recently I had no real reason to install them. Here's the procedure I followed to install the fonts on my Windows XP system.
- Select Regional and Language Options from the Control Panel.
- On the Languages tab, check the box labeled "Install files for East Asian languages" (This will require about 230 megabytes of disk space.)
- Click OK. Windows will prompt you for your install CD, and then copy the required files to your hard drive.
- When prompted, reboot your computer.
Sunday, 15 January, 2006
The book, Read Japanese Today introduces about 300 of the most common Japanese characters, giving a brief history of each character's development and explaining a little bit about how the character is used. The idea is that remembering a little bit about the character's origin will help you to remember how to identify and interpret it. At my current level of reading that seems unlikely. My brain is still fighting with the whole concept of a pictographic written language.
For example, the character 便 is a combination of two others. It is a man standing beside a horse, getting ready to mount. We're viewing from behind the horse here. This character was originally developed by the Chinese to mean "mail." The Japanese also use it to mean "mail." However, it can also mean an airplane flight, a ship departure, convenience in general, and feces. Feces? I can understand how the other meanings might be derived over the years, but feces? Much of spoken (and I assume, written) Japanese depends on context. I sure hope there's enough context in whatever signs I'm reading that I can determine the meaning of this particular character.
This could get kind of confusing. The character 不 means negative: dis-, un-, mis-, not. The word 不便 means "inconvenient," but it wouldn't be much of a stretch for somebody unfamiliar with the language to think that it means, "no shit."
Don't get me wrong. I'm not intending to poke fun at the Japanese language or imply that their system of writing is inferior or stupid or anything like that. I'm just pointing out that somebody unfamiliar with the language and culture can make some interesting mistakes.
If you're interested in seeing what Read Japanese Today has to offer, check out Leo Hourvitz's Japanese Language Study information.
Saturday, 14 January, 2006
I have finally figured out what bothers me about politics in this country. Or, at least I've figured out one of the things that bothers me, and perhaps it's the major problem that prevents me from caring much about politics. It's simply this: our political system is dominated by two opposing schools of thought, one of which believes that the individual's rights are subordinate to the whim of the majority, and the other which believes that the individual's rights are subordinate to the whim of the State. A minor voice preaches anarchy in the guise of "personal freedom." Fringe groups of all sorts that are devoted to single issues like ecology or particular social issues spring up from time to time but inevitably align themselves with one of the two major parties: holding their noses and voting for the lesser of two evils.
Political discussion in this country, in the rare circumstances when it peeks up out of the muck of tribal name-calling, revolves around mostly inconsequential issues and major battles over minor disagreements about how much to extort from each citizen and how to allocate the enormous amount of money that makes its way into the government coffers. An entire industry is devoted to collecting more money from people in order to influence the way that government can squander its ill-gotten gains, and other industries exist as a direct result of the incomprehensible pile of steaming, stinking legislation that emerges from the Congressional outhouse.
The results? Counting Federal, State, and local taxes, government directly consumes 30% of the Gross Domestic Product each year and produces little of value. When you add the cost of complying with government regulations--again producing little of value--the cost approaches 50% of GDP. In that sense, our government is very efficient: it's an incredibly effective wealth dissolver, much as a baby is an efficient food processor. The difference is that a baby grows up to be a productive person. Our government just eats more money and creates ever larger and smellier piles of dirty diapers.
In years past, our two major political parties had somewhat comprehensible platforms. The Democratic party stood for personal freedom, including equality for all regardless of race or social standing. The major criticism of Democrats was a perceived "Robin Hood" approach to government: tax the rich and spend money to increase social programs. The Republican party was concerned primarily with protecting the country from foreign entanglements and providing a friendly business climate while keeping government as small as possible. The major criticism of the Republican party was its perceived pro-business, anti-individual stance. In short, Democrats stood for personal freedom and large government devoted to social equality. Republicans stood for personal responsibility, conformity, and smaller government.
Contrast that to today. The Republican party, dominated by what's popularly called the Right-Wing Conservative Movement, appears to be devoted to squashing individual liberty into a one-size-fits-all mold, and spending money for ... for ... well, for something. It's certainly not the fiscally conservative Republican party of past years. The Democratic party, rudderless but with plenty of shrill voices of a decidedly strident Liberal bent, has as its primary goal wresting power from the Republicans, but has no coherent plan to accomplish that goal. On the rare occasion that you hear a Democrat say something that's not about the Evil Republicans, it's of a decidedly collectivist nature: it's your responsibility to take care of your neighbor.
To sum it up, today's major political parties present the following choice:
- Republican - You are a slave of the State. We will restrict your freedoms, tax you beyond all reason, and spend the money ensuring that you're free to live in the manner that we see fit.
- Democrat - You are a slave of the Majority. You are free to act any way you please, as long as you don't conform to any comprehensible standard of right or wrong. We will gladly accept the money that you are duty-bound to provide at gunpoint, and spend it to support those who are unwilling or unable to produce anything of value.
I don't know about everybody else, but of the two alternatives I just can't get past the idea of being a slave. And that's the primary reason I don't involve myself in the machinations of either political party.
Friday, 13 January, 2006
I'm making my way through the Japanese language CDs, trying to do one of the 30-minute lessons each day. I find that I need to listen to each lesson twice in order to fully grasp everything, but that's okay. Debra's going through some of them with me. It's a fun way to pass the time when we're driving somewhere or pedaling on the stationary trainers.
Right now I'm learning some useful phrases, and then studying the dictionaries I have in order to learn common words. For example, one of the exercises on the CD is learning to ask where something is. That's all well and good, but I probably won't be asking anybody where Shinjuku station is. I will be asking where to find other things, though, and the CDs aren't going to teach me the vocabulary. In Japanese you ask, "thing, where is it?" So all I have to do is memorize the phrase, "where is it," and then plug in the word for whatever I need.
The CDs don't explain everything, though. For example, I learned the words for "speak" and "understand," and the phrases for "speak well" and "understand well." (Pronouns, by the way, often are omitted and assumed from context.) What I couldn't figure out was why the word for "well" was different in "speak well" than in "understand well." I finally asked somebody. In the "speak" case, they were using the word for "skilled," as in, "You are skilled at speaking Japanese." In the "understand" case, it was, "You understand Japanese well." I wish they had made that more explicit in the lessons.
Spoken Japanese also includes a large number of honorifics that somebody who is not familiar with the culture just doesn't understand when to use. For example, the polite way to say, "good morning" is, "ohayō gozaimasu." The "gozaimasu" is an honorific or "politeness word." I haven't yet figured out what it really means. In any case, "good afternoon" is "konnichiwa." Why there is no "gozaimasu" after it is not explained. I suspect that learning the reasons for and proper use of the honorifics could prove difficult.
The Roman spellings of the Japanese words in the previous paragraph use a Romanization system called rōmaji. At first you'd think that this is a good thing because it gives Westerners some help in reading Japanese words. However, you have to be careful about it because the phonetic rules for rōmaji are different than for English. For example, the "u" in "gozaimasu" isn't really pronounced. Phonetically, "good morning" in Japanese is more like, "oh-hah-yōh goh-zye-mahss," although that's not exact. The other thing that will trip up English speakers is that syllables usually have equal emphasis. Whereas we might pronounce Shinjuku as "shin-JU-ku", the Japanese pronunciation is more like "shin-ju-ku"--equal emphasis on each syllable. I'm getting better, but it's still difficult at times not to apply the English rules when trying to pronounce words that I see in rōmaji.
Wednesday, 11 January, 2006
Debra usually opens the mail, so I get sanitized view of what actually gets delivered. I checked the mailbox when I took Charlie out for his morning walk today, and thought I'd see what was there. It's hard to believe, but the percentage of spam in my snail mail box is almost as high as the percentage of spam in my email. Let's see what today brought:
- A special invitation from Fisher Investments. Where they got the idea that I'd be interested in high-priced investment services, I'll never know. The interesting thing about that company is their web site address: www.fi.com. Somebody was on the ball.
- A business gold card offer from American Express. I can get up to 100,000 bonus points if I spend $50,000 per year, renew my membership, and maintain a $5,000 monthly average spending. They'll even waive the $125 fee for the first year. Why anybody would pay money for the "privilege" of having an American Express card is beyond me. I used to have one. It wasn't worth the $60 it cost me every year.
- A credit card offer from Delta SkyMiles. Does everybody have a friggin credit card? The AOPA and the ARRL want me to get credit cards with their imprints. Delta SkyMiles really ticks me off, by the way. I flew Delta one time back in 2002, and now they keep sending me stuff. "You have 6,432 miles on your SkyMiles account. Wouldn't you like to add just 3,568 more miles so that you can qualify for a round-trip ticket to anywhere that Delta flies?" Well, no, not really. Stop bothering me!
- Oh, hey! Look at that. The company I opened an investment account with sent me some information.
- How do these people get my name? What made the people at Antares Corporation think that I'd be interested in attending a seminar explaining how to make money in a vending machine business? And people wonder why our landfills are overflowing.
- Debra and I switched to CapitalOne for our credit cards a couple of years ago because they had some great miles or points deal or something. I don't know. I let Debra make those decisions, although it was tough for me to let go of that credit card that I'd had for 15 years. When I find a company that treats me right, I like to stick with them. In any case, today I got a "1.99% APR" offer on transferred balances. Until May of 2007! Man, that's some great interest rate. If my limit were just a bit higher, I'd pay off my mortgage with the credit card. Except the fine print says, "The transaction fee is only 3% of each transaction amount." I knew there had to be a catch.
- Oh, and the Round Rock Leader came today. I like this newspaper because it reports mostly good news, and doesn't carry most of the national news. Just your local hometown paper, which is the only way it can survive around here. I doubt it could compete with the Austin American Statesman. Which is too bad, too, because if ever a daily needed some competition it's the Austin American Statesman.
I'll call it five pieces of junk out of seven pieces of mail, or a trash percentage of about 72%. So it's still better than my email, but not by a whole bunch.
Thursday, 05 January, 2006
I think that learning to read Japanese is going to be somewhat more difficult than learning to speak and understand it. Written Japanese is composed of three (at least) different groups of characters: Kanji, Hiragana, and Katakana.
Kanji, which contains more than 3,000 characters, is used to form word roots. Kanji characters are abstract pictographs, with a single character expressing a word or an idea. There is a character for "big," and a separate character for "tree." It seems that just about every character has multiple meanings, and different pronunciation depending on whether it's used alone or in combination with other characters. I think I'll be able to understand written Japanese before I can translate what I've read into spoken Japanese language.
Fortunately, one doesn't have to know all 3,000 characters in order to function. To read at a sixth grade level, about 1,000 characters are required. A graduating high school student needs to know about 2,000 characters. You can probably read about 60% of a daily newspaper if you know 500 of the characters. To get around on the street--read signs and such--you only need to know about 300.
Hiragana is used to form grammatical endings. My limited understanding here is that in Kanji one can write "big dog run me", but you have to add the kana in order to write the complete sentence, "the big dog ran to me." Katakana is used to write in Japanese the many words that are borrowed from other languages.
Unlike Kanji, in which each character describes a thing or an idea, each kana is a syllable, much like the English alphabet. So the written Japanese language is a combination of pictographic and syllabic alphabets. It gets a little bit more confusing.
Each set of kana has 46 different symbols, and each set contains the same sounds as the other. That's right, there are two different characters for the sound, "ka," for example. Actually, I think there's a Kanji character that is pronounced, "ka," too, so I guess there are three different characters with that pronunciation. At first this seems confusing, but in practice it's quite easy even for a newcomer like me to tell the difference between Kanji, Hiragana, and Katakana characters. Hiragana are simpler than Kanji, and the Katakana are, in general, simpler and more angular than the Hiragana. An experienced reader can easily determine whether he's looking at a word, a grammatical ending, or a foreign word.
My friend David Stafford let me borrow a couple of books on the written language. Read Japanese Today is an interesting little book that introduces about 300 of the most common Kanji characters. Rather than teaching by rote (the way it's normally taught in schools), this book describes the origin of each character. Those descriptions serve as mnemonic devices to aid in learning. After spending a while with this book, I went and looked at some of my pictures from my last trip to Japan, and found that I could pick out the meanings on many of the street signs.
The other book David let me borrow is called Easy Katakana. It teaches how to read and write (learning to write helps in learning to read) the Katakana so that you can understand the written foreign words. Japanese has a lot of foreign words. Once you learn Katakana, you can sound out the foreign words. However, it's not so easy as you might think because there are many sounds in English (and other languages) that don't have corresponding sounds in Japanese. What you get is a close (most of the time) approximation. For example, if you sound out the Katakana for "cola" you end up with something like "co-ra," because there is no real "L" sound in Japanese. "McDonald's" turns in to "mu-ka-do-no-roo-do," or something similar.
It's early in my study (I've only been at it a few days), but I'm making some progress. If I can get these 300 basic Kanji and the Katakana down, I should be able to wander around Tokyo without feeling completely lost.
Tuesday, 03 January, 2006
We're nearing the end of our development cycle for the 3D project. Today we sent a version 1.0 release candidate to the client, and we're working to address any remaining issues. They'll be using it for the next four weeks, and we'll be heading over there for meetings in February. Yes, I'm heading to Japan again.
I have a bit more time to prepare for the trip than I did last year, and I'm trying to learn a little bit of the spoken and written language. Debra was kind enough to buy me some audio CDs and accompanying books to help me with the spoken language, and my friend and business associate David Stafford (who will be going, too) let me borrow a couple of books from which to learn basic written symbols. I'm back in school.
The spoken Japanese language seems quite approachable. My understanding is that a Westerner can easily duplicate almost all of the sounds common in Japanese. That's not so for most other Asian languages, which are tonal--subtle changes in tone result in different (often wildly different) meanings. Not so with Japanese. The language also appears to have a much more regular structure than English. At least, what I'm learning so far sure makes a lot of sense. It's possible that what I'm learning is simple, abbreviated Japanese.
Some of my friends asked me why I'm going to all the trouble. "Why would you want to do that?" Besides being something new and different--always a selling point to me--there are several reasons. The first time I was in Japan, I was illiterate. I couldn't read anything other than the English names of businesses. I might as well have been deaf and mute, too, because I couldn't understand a thing that was being said. I was 100% dependent on the people with whom I was traveling, and on the kindness of those Japanese who spoke English and were willing to help me out. It's frustrating and embarrassing when you have to resort to pointing and facial expressions in order to ask where to find a soda vending machine.
It's also incredibly arrogant for me to visit another country on business and expect them to speak my language. It's one thing to visit a tourist area where the people make a business of catering to Americans who want everything to be "just like home," with perhaps a few little differences to add a little exotic flair. But I'm not visiting tourist areas. I was in Tokyo for three or four days before I saw another Westerner other than David. I should at least attempt to speak Japanese to the shop keepers and others I interact with every day while I'm there.
I've just started the CDs, so I don't have a whole lot of progress to report. Right now I'm confident that I can ask somebody, in Japanese, if he understands English. And I understand the words for "Yes" and "No." I'll make another report in a week or so, after I've made my way through more of the lessons.