2008-07-17
"Follow the blue line," said the man at the gate. I had just exited the Museo Rafael Larco Herrera, a museum full of many, many pots and clay Inca men figurines with giant wangs.
So I followed the blue line. And followed it. And followed it. I finally arrived at another museum, this one focusing on the archological and anthropological past of Peru. And yeah, there were more pots there too. Also a small display on the importance of the potato. I was happy to see that.
I like the blue line idea; it's a great way for the government to get tourists to hit two museums instead of just one. And it's a convenient way to find your way somewhere, once I figured out that the line did indeed lead somewhere.
The Austrian I had met yesterday had given me her admission ticket to see the mummies; she wasn't planning on returning to Lima Cento, and I was. So I was headed to see that museum, for the second day in a row. On my way, I stopped to take some pictures in one of the plazas.
That's when I was intercepted.
A Peruvian man approached me and asked where I was from... he was a little surprised that I was American, and said I could have passed for someone fom Lima ("not Peru; only Lima"). But he was glad I spoke English, and asked to practice (this also happened yesteday while I was walking around with the Austrian). I obliged, and he showed me a colonial house, a church, and the skull of his favorite saint. Always good to see a skull once in a while. Our conversation was very much like something out of a foreign language class: what type of music do you like? what do you do on the weekends? do you have any brothers or sisters? what is your job?
He then asked if I was going to Machu Picchu. I told him I was, but hadn't arranged transporation yet. He offered (almost demanded) to take me to a ticket vendor, assuring me that it would be cheaper than buying at the airport. So we went. The ticket office was a storefront with two desks inside. For a one-way trip, they quoted me $115. This sounded about right to me, and was much better than the quote of a US deal site I had checked earlier ($400). I handed the dude some cash, and he disappeared. For like an hour. Diego saw that I was getting iritated, and asked me how we do airline tickets in the States. I told him that we pay with a credit card and print them out at home. He said he thinks that Peru needs more technology. Damn straight!
The guy finally returned (it was now dinnertime), clutching a half-sheet dot-matrix printout. "This is my ticket?" I asked. Diego looked it over and told me that everything was alright. It was around this point that I started to wonder if I had booked myself on a Poultry Express turboprop. Or was I just being ignorant about how things are done in other parts of the world? I headed back to my hotel to do some research; it turns out that Star Peru is a fine airline, they fly real jets, and $115 is an acceptable price for a ticket.
Anyway, I never did get to see those mummies.
Llama count: 0
2008-07-16
A small pitcher of yellow something is sitting on my table. Well, our table... I was seated across from a guy who doesn't seem like he wants me there. I noticed when I was ushered in that everyone had one of these pitchers on their table; no water. I asked the waitress what it was; she said, "agua y...<other stuff>". Tastes kind of lemony and sweet, but a warm beverage isn't quite what I wanted. My order of bistec y papas fritas should be here soon. There's a Coke coming with that.The waitress smiles at me as she passes, seeing that I'm writing in a notebook. Maybe she thinks I'm writing for an American travel magazine. Alternatively, she might suffer from facial muscle spams that force her to smile as she walks. I'm pretty sure those are the only two possibilities; bases covered.
I arrived in Lima last night. At around 12:30a, I cleared customs and emerged into a waiting throng of people shouting and holding signs. Usually at the airport, you'd see a handful of drivers waiting around, but this was more of an Nsync fanclub welcoming committe. Luckily for me, Augusto positioned himself well, and I spotted him quickly and we got out of there.
Augusto said he couldn't speak much English, but we were able to have a conversation as we rode back to the hotel. The hotel (like most of the tourist hotels) was in Miaflores, the district which Augusto calls "Lima's greatest victory", since it most closely replicates America. It was dark, so I couldn't assess that at the moment. Augusto dropped me at the hotel.
Can you tell that I like typing "Augusto"?
My room was smallish, with a TV, desk, A/C, and a bathroom with one towel. The window showed some neighboring rooftops. You can see in the pic (top of the grey and top of the yellow) some black metal tanks. As far as I can tell, their solar-heated water containers. Judging from the lack of water pressure in my shower, I think the hotel might be using one too.
After lunch, I went to check out the mummies, at the place where my cab driver dropped me off. But the gates were chained up and people were protesting. From the materials someone handed to me, it seems like it was university teachers upset with the president not keeping his promises (similar). So chains, a bunch of riot police on standby, and no mummies for Chris.
But also waiting at the chained gate was a girl, who also wanted to see the mummies, and spoke English. So it worked out.
Walking along, we were soon chased down by some Peruvian teenagers, wanting to interview us for a school project. They were in an English class and needed to interview English speakers. We obliged, but it was hard to answer their questions about what we thought of Peru, since each of us had been their only one day. But the students were pleased; since we counted as 2 interviews (they needed 3). By now, a classroom full of Peruvian kids know that I'm a dumb American who is visiting Peru for Machu Picchu and the papas fritas.
The Austrian and I split a cab back to Miaflores, and I eventually got some dinner.... that part is unimportant. Then I played some Time Crisis. Also unimportant. What IS important is that I happened to have some of the best ice cream I have ever tasted. At about 11, on my way back to my hotel, I decided to stop into this restaurant for a single dip cone. I asked the owner to give me her favorite flavor and paid. Five steps out the door I discovered how great it really was. I had a love afair with it all the way back to my hotel. And I have NO IDEA what it is. The texture was different too; not so much ice-y creamy, more like cookie dough. It wasn't fruity, and didn't have chunks of chocolate or nuts or anything. It's a mystery. I shall do some recon later.
"Too many cars horning their horns!"
2008-05-06
Roomba has been acting up again.I got home and walked in my back door, and there he was, waiting. It was kind of eerie:
Me: Roomba, what are you doing? I didn't put you there.I had started Roomba in the bathroom. He usually does the bathroom alone, then calls for me to move him out so he can do the rest of the apartment. But this time he didn't need human intervention.
Roomba: Bee-bee-beep!
Me: Shutup. Back in your pen!
There was a similar incident last week (I didn't blog about it, so as not to cause a panic), where he attempted to enter the bathroom on his own. He made it in, but got stuck. Not this time. Seems his abilities are improving.
This is how it starts...
2008-04-14
Came across this the other day:
"By the 1990s that talent, the knack for Want Creation, for appealing to the desire of people to buy things they don't need in some hope of proving they Are Someone, had begun to eclipse all other talents/knacks involved in propelling the modern American economy."It was from an article on American Apparel, but I think it's a pretty true sentence that can stand by itself. I've posted previously about Need Inflation, and hey, maybe it has something to do with the increase in people who have jobs creating wants, and then trying to morph wants into needs. Am I blaming "them" for the problem? Of course not; I'm a firm believer in personal responsibility. But I can see a link between Want Creation and Need Inflation.
Be aware.
2008-03-27
During my first-round interview for Morgan Stanley, one of the questions the interviewer asked was, "How many piano tuners are there in New York?"The first part of "passing" this question is not to freeze. Realize that the question is more about how you answer than the answer itself. Wrong answer is, "I don't know".
My correct answer started with a clarification ("New York City, right?) to get more data and buy some time. After that I started rolling with a series of linked assumptions until I got to a number that sounded pretty good.
Why do I bring this up? Because there have been many times since then where "I don't know" seems right, but "pretty good" got me a lot farther with only a little extra work.
tuners = (9000000 * .01 * 1) / 4 / (5 * 52 - 7)
2008-02-29
For me, one of the joys in life is a long hot shower. As a kid, I was often accused of taking showers that were "too long" by the rest of my family. A shower that is too long is the equivalent of saying that the water heater is too small. This is one of the reasons I shower at night: no complaints and lots of hot water. At Marist, I could shower for hours and no one would care, 'cause it was 1:30am.Here at the apartment, the water can get pretty hot. Turned all the way to "H", it pretty much just comes out as steam from the showerhead. I like to keep it one notch below that. It's still pretty hot. When it's on, the bottom of the shower curtain is actually blown aside as the cool air from outside the shower rushes in to displace the rising steamy air. After about 25 minutes or so, the air gets really steamy, and it becomes difficult to breathe. Then I think to myself, "What if all this water vapor in my lungs suddenly condensed? Would I drown? Could I be setting myself up for pneumonia? Am I TAKING MY LIFE INTO MY HANDS ON A NIGHTLY BASIS?"
But then I figure, hey, I drink my orange juice every morning. I'll be ok.
Did you know that Danica McKellar wrote a math book last year? That's pretty cool. I always like to find out when an actor has some brains. It doesn't happen often, but when it does, it's kind of hot. Ordinary actor? Wouldn't talk to them in public. Danica McKellar? Fo' sho'. I'd be like, "Hey Danica, lemme show you a little something about binomials raised to the power of hotness."
No I wouldn't.
"Thank GOD he stopped talking about mortgages"
2008-02-22
As soon as I submitted my last post on buying vs. renting, I knew that the following post was going to discuss things left out and other assumptions made but not stated. And I even got some help with this one, from current renters and homeowners. Here we go:Revisions/refinements:
- I had mentioned that the $40k used for downpayment on the house could be invested, but I didn't include this in my calculations. At the bond rate, $40k would compound to nearly $160k over 30 years. With the stock ETF it would be $340k.
- You can deduct property taxes levied by the city, county, and state from your income taxes.
- I forgot to include some taxes: county, town, library, and fire. These are all individually much smaller than the school property tax, but still significant (a few thousand per year). For the 18936 house, they are about $1k/yr (no fire or library taxes there).
- The way I figured the tax deductions isn't entirely correct. While the numbers are right and you do deduct them, when comparing against an apartment rental, only the amount over the standard deduction matters. Look at it this way, you always get the standard deduction, if you rent or own a house or whatever. Only if you can deduct an amount above that do the deductions become a factor. So for a married couple filing jointly in 2007, your total deductions minus $10700 would be your mortgage advantage over renting.
- I didn't account for laundry. When renting, it's assumed that you pay per load of laundry at a laundromat, whereas many homeowners have their own washer and dryer. For use of machine, electricity, and water, I spend $7 per month to wash clothes. Washing machines cost around $700, so it would pay for itself in about 8 years, excluding electricity, water, and repair.
- There was a question on why the mortgage interest tax deduction seemed low. This is because I use the interest deduction from year 15 so I could get the median deduction amount over a 30-year period. Mortgage interest payments decline over time, so using the year 1 amount would be misleading, since you'd never be able to deduct an amount that high again. A better table would show all 30 years with a side-by-side comparison.
- I didn't fill in the costs for appliance replacement, snow removal, etc. That's what the "?"s are for!
- I neglected to mention that if the savings are held in a Roth account, the gains are not subject to tax. Therefore the transaction cost would only be the trading commission.
- The $500k tax-free profit from selling a home is the amount for married couples; single people get half that
- I had said that not having a garage is hard on your car. It was pointed out to me that driving on NY's salty roads will cause more wear in the form of rust than having it sit outside in a lot. This may be true, but I didn't put a dollar figure on the wear since it's hard to quantify. Car wear is just something to consider.
- I had used the average American heating bill when factoring in the cost of heat. Someone pointed out that this might be higher in NY than in other parts of the country. I couldn't find any specific numbers for Dutchess county, but in the northeastern US (Philly, Boston, NYC, Buffalo), annual costs range from $1100-1600.
- Owning a house gives you more of a change to pursue alternative energy methods, be it burning wood or installing solar panels on the roof.
- If you are going to have kids or want to play the drums, an apartment is less of an option for you.
- I had stated that going from an apartment to a house is a lifestyle upgrade, since it's difficult to find any 650 sq. ft. houses. It was suggested that I could compensate for this in terms of space and money by renting part of the house to a roommate. This is a good idea, but would introduce landlord factors, such as vacancy rate, late payments, and crackheads.
- The expense ratio of the stock index ETF would not change
- The mortgage would never be refinanced
- All costs rise equally with inflation
- The house would not be physically harmed by an uninsured event (flood, etc.)
- Reassessment of the home property doesn't doesn't drastically affect taxes owed on it (ie: property taxes are only impacted by inflation)
- The US Federal Government doesn't default
Also, as far as researching cost of living and things, City-Data.com has a crap ton of information on housing and taxes and, well, everything really. Did you know that 1% of housing units in Dutchess County lack complete plumbing facilities? Or that 4.3% of residents speak other Indo-European language at home in Montgomery County? Strewth!
Once you say an "H", it's just hanging there, pouting, like a prostitute on a streetlamp
2008-02-15
After moving off campus, I became very aware of my personal budget. College is kind of funny in that housing is paid per-semester (a few months). Food budget is kind of a mishmash of groceries, school food, not eating, and mooching. Working and living on-campus, the car didn't get much use. And so on. But being on my own, it became very clear how much it costs to exist.The rule of thumb is that your housing cost should be no more than 1/3 your monthly income. Rent is my biggest expense, and does clock in at the expected rate (28%). But what do I get for paying rent? I pay it every month, but the only benefit I get from it is the right to stick around? Seems like a waste.
The feasible alternative to paying rent is paying off a mortgage (and living in the house that goes with it). When you make mortgage payments, part of each payment goes back to you in the form of equity, until you make the last payment and the house is all yours. On the surface, this seems like a better deal, since I would eventually get something for making these monthly payments. But is a blanket statement such as, "mortgage payments are better than rent payments" really true?
Pull out your other hand; we have another rule of thumb: "if you live in the same area for 3/5/7 years, you'd be better off buying a house than paying rent." Someone put a little thought into this rule, factoring in that the amount of home appreciation over a few years would likely be canceled out by the fee (4-7%) that the Realtor takes at the time of sale. And if there isn't any value in it for you, might as well just rent. But is even this always a true statement? 3-7 years, is that true for everyone in every housing market?
No more thumbs; I'm gonna figure this out. The only way to tell if one decision is "worth it" over another decision is to compare the price of the two with the benefits of the two. Let's do it:
| Yearly Payments | ||
|---|---|---|
| Mortgage | Rent | |
| Roof, 4 walls | 11760 | 11340 |
| Insurance | 550 | 100 |
| Int. Deduction | (1852) | - |
| Equity Gained | (4476) | - |
| Property Taxes | 6400 | - |
| Heat | 977 | - |
| Water | 200 | - |
| Sewer Rental | 600 | - |
| Trash pickup | 360 | - |
| Electricity | >960 | $960 |
| Lawn care | ? | - |
| Snow/leaf removal | ? | - |
| Appliances | ? | - |
| Repairs | ? | - |
| Furnace/HVAC | ? | - |
| Roofing | ? | - |
| Driveway upkeep | ? | - |
| Siding/exterior paint | ? | - |
| Other taxes? | ? | - |
| Total | >$17,146 | $11,440 |
Things not factored in:
- apt: wear on cars not kept in a garage
- house: having a well and septic tank instead of city water and sewer
- house: any non-maintenance home improvements
- apt: the freedom of moving out quickly
- house: the freedom to modify the structure
Ok, so it looks like owning a home costs a bit under $6k more than an apartment for a year. Between the two, all costs are sunk with the exception of the principal portion of the mortgage payment, which was taken into account. There are three more items to consider when comparing the two over time: inflation, home value appreciation, and return on savings.
Inflation: one of the benefits of having a mortgage is having your monthly housing costs fixed for a long period of time. That is, the monthly payment is not affected by inflation, so in real terms, the monthly cost is reduced over time, saving you money. We can use a calculator to figure out how inflation affects things. I used the numbers above, 3.5% for the inflation rate, 25% tax bracket, 0% for both home appreciation and return on savings (we'll cover this later), and 2% for annual rent increases (my increase this year was only 1%). Over 30 years, I'd save about $50k by renting over owning a home.
Home value appreciation: people often call their home their biggest investment. As equity increases, a home becomes a bigger and bigger store of value. Add to that home value appreciation, and you should end up being able to sell your house for more than you paid. Since 1890, home values have doubled in real terms. Interestingly enough, the same statement is true from 1945 (the Great Depression was a bitch). Using another calculator, we find that between 1945 and 2007, the compound annual growth rate for home prices is 1.12%. If you add that to the inflation rate, that's 4.62%.
Special note: home prices have increased dramatically over the past decade. Following the trend line (where home prices "should" be) instead of using current prices, the price increase of a home would be only 25% higher in real terms over the past 62 years; not 100%. This would result in a compound annual growth rate of .36%, or 3.86% factoring in inflation. If you think home prices will fall back in line with the historical trend, use this number instead of the one above.
Alright, so let's say that houses appreciate at 4.62% annually. If we throw this back into the calculator, we find that owning a home would save us about $165k over 30 years. Home value appreciation sure helps, huh?
Return on savings: We have found that the sunk costs of maintaining a home (upkeep, taxes, interest) are higher than renting an apartment by about $6k, at least for the first year. Where does that money go? And what about the $40k that was used as the down payment on the house? And closing costs on the mortgage? That money can be invested. Paying off a mortgage forces you to save, since a portion of each payment is returned to you in the form of home equity. But if you have the willpower to save on your own, you can make use of the cash not spent on sunk home costs and invest it. Let's say you're ultra conservative and invest in US Treasury I-bonds. They have a maximum life of 30 years (convenient!). Their rate varies over time; you get a fixed rate when you buy (currently 1.2%) which is added to the current inflation rate. We'll assume 3.5% again for inflation, and use 4.7% as the before tax return rate on our savings. Our calculator now tells us buying a home would result in about $14,600 in savings over 30 years.
What about other investments? Let's go with a low-cost S&P500 index fund. This is a relatively stable, diversified investment. From 1950 (close enough to 1945), the compound annual growth rate of the S&P was 7.47%. We'll assume this trend continues, and use this as our rate of return on savings. But first we'll adjust that down to 7.4% to account for the expense ratio of the fund. The calculator now tells us that renting would save us $72k over 30 years.
Special note: "value" of either a home or investment owned is not the same as the dollar value you would get upon selling, as it does not factor in transaction costs or taxes. For US treasury bonds, you will need to pay federal taxes on interest earned, although you are exempt from state and local taxes. For stocks, the tax rate varies based on income. Currently, capital gains on a home are not taxed up to $500k. However, the transaction fees for selling a house are much higher compared to other investments; 6% Realtor commission plus home inspection and other fees, compared to no transaction cost for government bonds, $30 roundtrip for stocks.
Alright, so what do we know? It looks like if you are smart with your money, you will make out better renting as opposed to buying. In Poughkeepsie, NY that is. It was a bit unfair to run these numbers for a house in NY state, since everything is comparatively expensive. Let's do a quick rerun of the numbers for the same house in 18936:
| Yearly Payments | |
|---|---|
| Mortgage | |
| Roof, 4 walls | 11760 |
| Insurance | 640 |
| Int. Deduction | (1852) |
| Equity Gained | (4476) |
| Property Taxes | 4000 |
| Heat | 977 |
| Water | 64 |
| Sewer Rental | 304 |
| Trash pickup | 360 |
| Total | $11,777 |
In conclusion, we find that the whole process is very complex. I don't like to trust a rule of thumb when dealing with so much money. Treating a mortgage payment like a rent payment isn't apples-to-apples. Think of all the things to be considered: mortgage rate, inflation, return on savings, home appreciation, insurance, heating, water, sewer, trash collection, snow and leaf removal, taxes, roofing, HVAC, driveway upkeep, appliances, repairs, freedom to move, freedom to alter, liquidity, Realtors. When you're buying a house, you're not replacing an apartment; you're getting a lifestyle upgrade. There aren't many 1-bedroom houses on the market first of all, and secondly much less is taken care of for you as a homeowner. While moving from campus to an apartment was an eye opening experience, the fact of the matter is that even as a renter a lot of costs are shielded from you. This exercise shows how much stuff really needs to be taken care of in order to live in the Average American Home.
I went to the Apartment Depot; just a whole buncha people standin' around saying, "I don't have to fix shit"
2008-02-02
I was eating baby carrots this week, and have made a startling discovery: the SIZE OF THE CARROTS IS DIRECTLY RELATED TO THE SIZE OF THE BAG they come in. Seriously. When I was young and ignorant (last week), I had just assumed that all baby carrots are, you know, baby carrots. That is to say, baby-carrot sized. Turns out that they come in different sizes! And here I thought I was getting way more carrots by buying the bigger bag. Looks like ya slipped one by, Green Giant!I'm ready for winter to be over. Right now is the precise worst time of the year (ie: any time during February), and I want out. It's not even particularly cold, and the grass isn't full of stale snow. Is it the dreariness that gets me? Doesn't help, but I think it has more to do with my need to hibernate. I should be in a cave right now, fulfilling my mammillian duty. You ever start taking a nap after lunch and wake up just in time for dinner? Isn't that the best? That's what I want, 'cept it'll be lunch on 12/30 and dinner on 3/15. Bit more of a spread.
2008-01-17
I infultrated the Dutchess County Obama campaign office tonight. It was their grand opening. Since I've been doing research on the candidates, I thought I should check it out. And if there was a time to do it, the grand opening was that time.I managed to sneak in undetected, using an alias on the sign-in sheet. The volunteers manning the door were obviously novices, as they didn't even frisk me. I could have smuggled in some Clinton campaing buttons or blackmail materials. But I'm not that kind of guy.
The place was small, but what I had expected. Watching the fouth season of The West Wing prepares me for all of this. It was a rather crowded place; shoulder-to-shoulder. Pretty much everyone there was either a man or a woman, between the ages of .7 and 200. I milled around, seeing what the Obama supporters had done to turn some empty office space into a campaign headquarters. There were buttons and bumper stickers for sale, magic marker posters on the wall, and photos of Obama. In the back, there was an older black man banging on a keyboard next to a table of doughnut holes. The other side of the room had another table; this one hosted the "Issues" poster, consisting of printouts highlighted with green marker. I used my miniature camera disguised as a cantaloupe to photograph the materials. I'll be faxing the photos to the other candidates very soon.
I left after the organizers gave their speeches (and begged for volunteer canvasers). My opinion didn't really change; I'd still like to see a McCain/Obama ticket. But it was interesting to see what type of people are Obama supporters.
In related news, I took a quiz on 2008 presidential candidates. The format isn't bad: you pick your favorite (not cited) responses to 25 campaign questions, and then weight that issue according to its importance to you. At the end you are told which candidate is right for you. I got Fred Thompson and John Edwards, both unexpected. I honestly wouldn't be able to say more than a single fact about either of them. Guess I should go look 'em up.
Democracy is the worst form of government, except for all the others