Entries Tagged 'News' ↓

Today the White House released a transcript of President Obama’s prepared speech to schoolkids on September 8th.  This is a speech that caused a lot of uproar amongst many parents because they felt like Obama was becoming a bit too Big Brother.  I think a lot of the controversy could have been avoided if the transcript were released earlier and the somewhat lame lesson plan by the DOE was scrapped.  Anyway, I read the entire speech and here are some of my thoughts.

First, the main theme of the speech  is that staying in school and working hard is the way to success.  I agree with that 100%.  If my parents did not pursue their advanced degrees here in America then I would not be here at all;  if I did not finish college I also would not be where I am; if my hubby did not get his engineering degree he probably would not be making video games now.  I definitely believe that education is the way to upward mobility here in America, and I am actually glad to see a lot of people I know going back to school this year to improve their skills or learn a new trade.  Although I have forgotten a lot of the details of things I learned in the 16 years of schooling I had, I  think I will be using the basic math and language skills for a lifetime.

Obama also gives a fairly good reason for kids to stay in school.  He says that in school you can discover what you are good at by trying out different classes.   I think that is somewhat true, but not always.  I went to  public schools in America for 9 years before going to a public state college for 4 years  so I can say with confidence that NOT all schools give kids the opportunity to discover what they are good at due to resource constraints or institutional requirements.  Public secondary schools in general are extremely structured and you have to take a core set of classes to graduate.  I have known some kids in highschool who were really talented in things that the schools just did not teach at all.  Obama is right in saying that school is where you can discover if you are good at things like writing or math because every school teaches those subjects.  However,  it is not necessarily a good place to discover if you are a good cook or great artist because not all schools have the bandwidth for those “extra” programs.  Kids still have to discover their talents on their own,  so I think college is really where people can freely experiment with a huge variety of subjects.  However, finishing secondary school is usually a prerequisite for college and not everyone could afford to go to college.

Another fairly hefty message in the speech is that failure is acceptable and the way to success always contains some stumbles along the way.  That is obviously pretty cliche, but it is also true.  Obama suggests that students should overcome failure through hardwork, practice, and seeking for help.  All of those are sound advice for kids.  Of course he had to throw in that you should not give up on yourself, because “when you give up on yourself, you give up on your country”.

Obviously this was a positive message meant to inspire kids to work hard in school and become successful.  However, I felt that it did not really clearly define what success is.  There is one short paragraph where Obama said that kids might think that it is easy to become “rich and successful” without any work because TV shows rappers and basketball stars living it up.  Honestly I think it is kind of sad that he disparages entertainers and sports stars because many of these people work pretty hard at their professions, too.  Also there is another section that talks about how kids need to be able to fight the challenges of this nation with the skills they learn in school and also “build new companies that will create new jobs and boost our economy”.  So is success financial? Is success fame?  Is success being more educated by your parents?    I don’t think that was extremely clear.  To follow the theme of the message, I guess Obama wants kids to figure out what being successful really means.

Anyway, I will stop writing this essay now because it is feeling too much like I am finishing a school assignment.  The bottom line is that I definitely feel like having at least a  college degree gives people an edge in employment and earning potential, but if you are truly good at something that the schools do not teach then you should go for it.  Traditional structured schooling is not right for everyone, and those who are successful share a passionate drive to achieve their dreams, and they all work hard at their goals.   Happy Labor Day everyone!!

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CNN recently ran a slideshow featuring seven families who utilized the $8,000 first time homebuyer’s tax credit to purchase a home.  I found the slideshow to be pretty interesting because it featured a good diversity of people, but quite a few of the examples were from California.  Here is a breakdown of the slideshow and my comments.

First,  there is a family of four from Adelanto, CA that is buying a home for $72,000.  Obviously for this family the tax credit is  a great deal.  They can only claim $7,200 because that is 10% of the price of the home, but hey, it is free money.  They are still waiting for approval on their purchase, and I hope they get it because it seems like an awesome deal for a 4 bedroom house.  However, the story indicates that they would have bought the house with the credit or not because they needed a new home and the price was right.

Next, there is a single woman from Michigan  who bought a $115,000 home for herself.  From the description she gave it seems that she has a good head on her shoulders and she has been saving for a downpayment.  This person also said that she would have bought the home anyway, and the $8,000 is really a bonus to her.  I think that is great for her, but this means that the stimulus did not really spur an additional sale here.

The next couple is actually from San Mateo County.  They bought a $750,000 home in San Carlos with an FHA loan.  This means that they put down 3.5% and their loan is somewhere around $723,000.  At 5.5% this is a mortgage of around $4100.  Throw in property taxes and that’s another $600 a month.  They will be paying pretty much all interest to begin with and  it definitely does not cost $5000 a month to rent a three bedroom in San Carlos.   This story makes me worry a bit because this couple is planning a wedding and they said that the $8000 tax credit is saving them.  If you do the math, $8000 is  1.06% of their purchase price.  Honestly $8000 would not even cover their closing costs on this purchase so it would seem that perhaps they are buying too much.  The story did indicate that they felt rushed into the decision because of the tax credit, and I don’t know if that is a good thing.

The next couple is from Baltimore and they purchased a $119,000 home that they fixed up with the tax credit and other grants for historic homes.  Again, I think in this case the $8000 is significant enough that it makes a lot of sense.

Another local couple from San Francisco is up next.  They got a $550,000, 2200 square foot home in San Francisco.  This is actually a pretty good deal if it is in a good area of San Francisco.  They used the $8,000 to partially pay for a $12,000 roof.  They indicated that they waited to buy their home because they heard that a refundable credit was coming out, but once again, $8000 is just a drop in the bucket for their purchase.  It’s great that they were pay for 2/3rd of their roof, though.

The next couple took advantage of the fact that the $8,000 could be used as a downpayment .    Essentially they got a 0% down loan from the government.  The home is $257,000 and they could not save up $9,000. It also seems that they got an adjustable loan?  In this case their only equity is the $8,000 tax credit,  so it was definitely crucial in their purchase decision.

The next guy also used the tax credit as a downpayment, but he bought a triplex and is renting out two units to pay for most of his mortgage.  So basically he became a little landlord on the dime of the US government.  That is a awesome deal for him and I hope he does well.

In conclusion, I would say that most of these folks would not have purchased a home this year if the tax credit weren’t there.  The two groups that used the tax credit as a downpayment could not have afforded what they bought.   In the two Bay Area  cases where the purchase prices were $550,000 and $750,000 the $8000 really was just a drop in the bucket so I feel like they shouldn’t have based their purchase decision solely on the credit.  Anyway,  it is nice to see that some people are able to take advantage of this in a smart manner even though I find it ironic that the government is giving out 0% down loans on one hand and wagging a finger at the “greedy bankers” with the other hand.  Honestly  I cannot wait for this credit to expire so that the housing market returns to normal.

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Earlier this year California already raised income taxes by .25%, but now it seems that our income taxes will go up a little bit once again. This time it is due to deflation and it is not widely publicized.

This change will pretty much affect everyone who pays any income taxes because tax brackets are being pushed lower due to deflation.  In this chart from the LA Times you can see how the brackets are changing this year.    For us the increase will be around $150 on top of the extra 0.25% we are already going to pay.  It is not a huge deal, but it is interesting because this instance of lowering the tax bracket is very rare.

On the flip side, it is possible that deflation will lower the assessments of property taxes for Californian homeowners next year.    This depends on the California Consumer Price Index numbers in October.  If this happens then Californians may see their property taxes go down a little bit, but it is also not significant considering that the deflation number is around 0.7% right now.  So on a $300,000 assessment with a 1.1% property tax rate, the 0.7% deflation will save a homeowner around $23 for the entire year.

I don’t think most Californians will feel the tax changes due to deflation, but it is possible that deflation could affect federal tax brackets next year, too.  Additionally, the IRS uses annual CPI to figure out limits for things such as IRA and 401k contributions, so those limits may not increase.  Although the deflation rate is quite small now, it is definitely something to keep an eye on.

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If you do not know by now, the Cash for Clunkers program is looking for another $2 billion in funding since it burned through $1 billion in less than a week.  Legislators are touting this program as the most successful program of the stimulus package and that is rather scary because how much waste it actually produces.

This program essentially scraps working cars and gives consumers a voucher to buy a brand new car.  A good illustration of what happens to the “clunkers” is here on YouTube.   The sad thing about it is that the cars being traded in have to be in working condition, and none of their parts can be reused or resold.  So the result is that hundreds of thousands of perfectly good used cars are taken off the market completely to be turned into garbage.  The gas mileage requirement for the new cars are also quite low.  In some cases consumers only have to find a car that gets 1 or 2 miles per gallon to get the voucher so I am not quite sure how big of an environment benefit this would be considering that it costs quite a bit of  energy to scrap the old cars and produce new cars.  It may be much less wasteful if the old cars that got just 1 mile less per gallon were allowed to survive a bit longer.

If this is indeed the most successful part of the stimulus package then perhaps the legislators should apply the same principles of Cash for Clunkers to the housing problem.  In order to promote new home sales, perhaps home buyers should be given a credit for “trading in” their existing homes with home builders.  The old home will have to be owned for at least a year, and in habitable condition and cannot be more than 15 years old.   The new homes have to be green and use appliances that cut down on energy use by 5%.  The government will then give a voucher for  $100,000 for the old home, and then the old home has to be burned down to the ground and none of its parts can be reused.  Lets just throw $75 billion (this is the price of the ill conceived mortgage modification plan) at this hypothetical program and sell 750,000 new homes and decrease the supply of used houses by 750,000!  Sure, some neighborhoods will get uglier due to the piles of ashes, but I am sure that will stimulate new construction and create jobs!

I know that burning down homes to stimulate new home sales sounds ridiculous, but the fictional housing program I outlined above directly parallels Cash for Clunkers. If it is implemented it would probably be deemed a “success” as hundreds of thousands of people with homes worth less than $100,000 start razing their properties and buy new homes.  The government is essentially encouraging people to destroy something perfectly usable to buy something new.  Also I am sure many of these new car purchases came with new loans so once again we have government policy that encourages people to spend and get into debt.  Cash for Clunkers  certainly is stimulative for the auto industry, but it is definitely not stimulative for the environment or prudent tax payers.

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So by now I think everyone knows that Microsoft made a “deal” with Yahoo to run search on Yahoo websites.  This is still waiting for regulatory approval, but chances are it will be fine since the two behemoths are not exactly merging and the combined search market of Yahoo and Microsoft is only around 35%. The word from inside Yahoo Search is that they will keep on developing their search engine for now while they wait for the final approval.  No one is fired as of now but most people in search are understandably dejected that their product is essentially being scrapped.  Personally, I think this is a perfect time for the codemonkeys in Yahoo to band together and use their search engine for one last hurrah.

I used to work for a leading shopping comparison engine that has  significantly less traffic than Yahoo, but that is where I learned about how much money a website could potentially make even if it has a miniature slice of the giant internet pie. (At that time the company I worked for had only 0.2% of all search traffic).   The Yahoo search engine supposedly has 20% of the search market, so the codemonkeys that control it really have some serious power.  Here are some of the ways they could “experiment” with the search engine in the next few months for their own profit:

• Change search results for products to websites that pay commissions and embed their own affiliate codes in the links.  By my estimate from my past experience in shopping comparison, these Yahoos only need to sign up as an affiliate for just a few major merchants and leave it running for one day to generate millions.
• Create websites with various content and manually rank them high on the Yahoo search engine.  Drive traffic to these personal websites and get advertising dollars.  This probably would not make money as quickly as tactic one, but it will build up a website very quickly and possibly generate revenue for years to come.

Are these tactics unethical?  I don’t think they are if the search engine still finds results that are relevant to the person making the query. In fact, both Microsoft and Google manually rank many search results for various reasons so it isn’t exactly a democratic process anyway.  The creators of the search engines can and do control what you see on top.  Is it an inappropriate use of company property?  Perhaps, but it may also be beneficial to Yahoo to see the results of the experiment and see if there is a business opportunity there. The worst thing that could happen is that the Yahoos will be fired.

The chances of this actually happening is fairly low since it would require  source and data changes, and releases of software the size  of the Yahoo search engine  would take the coordination of a good sized team of engineers.  When you have to involve so many people in such a project to subvert a giant corporation it is not likely to happen.   However, if they manage to actually do it correctly and let it last for a few months until the Yahoo search algorithms are taken offline then  they will probably all be rich enough to retire.    Anyway, if this happens and Yahoo search employees retire with millions in commissions or advertising money I would ask that they let me write the book on it.  It would be the ultimate Office Space sequel, and it would be hilarious.

Now my  serious comment on this whole deal is  that it is better for the internet as a whole that Yahoo is consolidating its search with Microsoft instead of Google.  If Google owned 85% to 90% of the search market then they will wield even more power than they do now.  With that much market share Google will not have any incentive to improve their product, and they will have way too much power over what internet publishers do.  Even now Google is able to bully website owners into drop certain types of advertising with the threat of banning from their search engine.  Competition is good, and  I was hoping that Yahoo would beat Google for a while since I have been using Yahoo since it was still hosted at akebono.stanford.edu.  Right now I sincerely hope that the Yahoo Search employees do well after this whole deal is over and perhaps start a few new companies here.

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