Monday, April 14, 2014

2013 Taxes

This year I got my taxes done a whole day early.  Hopefully things will go better than last year.  My state refunds took months to arrive and then it turned I had made a mistake on my New York return and had to file an amended New Jersey return. 

This year I have already made one mistake.  I realized shortly after submitting my federal return electronically that it was missing a form.  Fortunately this didn't affect the amount of the refund I am due so I just stuck the missing form in the mail to the IRS but it was still aggravating.  I consider this mistake partly TurboTax's fault as it gives you an option to skip things you aren't ready to do yet but then doesn't always remind you in the review phase that you may not be finished.  So you should be careful about starting your return before you have everything you need.

I had some of the same issues with TurboTax as in previous years and noticed another problem.  In the review phase it summarized my effective federal tax rate for 2013 and previous years but computed it incorrectly for 3 out of 4 years.  For 2010 and 2011 it failed to add in the AMT and for 2013 it failed to add in the Obamacare investment income surtax.

I gripe about TurboTax a lot but it really doesn't make much sense to try to do your taxes manually if they are at all complicated.  The Obamacare surtax has just added another layer of pointless complexity.          

Wednesday, April 9, 2014

Vox and Falkenblog

I have added Vox, where Matthew Yglesias is now writing, to my blog list.  This is Ezra Klein's new venture which he left the Washington Post to start.  Another of their writers is Brad Plumer.

I recently discovered Falkenblog by Eric Falkenstein, a 1994 economics PhD who has held a variety of finance jobs.  I won't be adding this blog to my list as he stopped updating it last September to avoid any conflicts with his latest job.  Also he can come across as a bit of a crank particularly when he moves away from finance to post on things like politics or evolution.  And he has a Yglesias level propensity for typos and other careless errors which can make him hard to understand.  Nevertheless I found some of his finance posts quite interesting and plan to comment further on some of his major themes which include missing risk premiums, low volatility investing and relative utility functions.

Sunday, April 6, 2014

Fifth Third Bancorp v. Dudenhoeffer

The Supreme Court heard arguments Wednesday in the case Fifth Third Bancorp v. Dudenheffer.  The case concerns the obligations of the managers (fiduciaries) of a employee stock ownership plan (ESOP) when they have some evidence that the company stock is a bad investment.  The defendants (Fifth Third Bancorp) want a rule that it is presumptively prudent for a ESOP to buy and hold company stock.  This seems sensible to me.  Some (by which I mean one or more) of the Supreme Court Justices seemed concerned about establishing a special rule for ESOPs but I see this as an application of a more general rule that it is presumptively prudent for fiduciaries to obey instructions.  It is common for defined contribution retirement plans to allow participants to direct how their contributions are invested.  Naturally some participants will make better decisions than others but I don't think it is practical (or sensible) to require a fiduciary of such a plan to routinely independently evaluate (and possibly overrule) the participant's instructions.   

There is a complication in the current case in that the negative information was "inside information" which it can be illegal to act on.  The plaintiff's lawyer appeared to be arguing that even if the defendants could not legally act on the information they could nevertheless be liable for failure to act.  The government lawyer appeared to concede that the defendants could not be held liable for obeying the law but were obligated to do everything they could without breaking the law.  Considering the rather unclear state of insider trading law this would put fiduciaries in possession of inside information in a very difficult position.  In particular the government claimed that although you could not legally sell on the basis of inside information you could legally stop buying.  Perhaps this is actually the law (although some Justices noted no lawyer from the SEC had signed off on the government brief) but it makes no logical sense.  As I understand it employees are allowed to participate in stock purchase plans in which a fixed percentage of their pay is regularly used to buy company stock even if this means they are sometimes buying when in possession of favorable inside information.  The idea is they are not buying because of the favorable inside information.  But if you allow them to suspend purchases when in possession of negative inside information this rational disappears.  Now all of their purchases are based in part on inside information, namely that there is no pending undisclosed bad news.  Thus giving them the sort of insider advantage that the prohibition against inside trading is supposed to prevent.

Tuesday, March 18, 2014

Blog Roll Changes

I have removed Moneybox from my blog roll as Matthew Yglesias is no longer writing it having left Slate to join Ezra Klein's new venture with Vox. I have wanted to include Kevin Drum's blog for Mother Jones for some time but was unable to get the link to function properly.  It now seems to be working so I have added Drum.  I have also returned Nate Silver to my blog roll as he has finally completed the move from the New York Times to ESPN with the launch of the new FiveThirtyEight site Monday.  Like Drum (and others) I am not too impressed with the new site so far but hopefully it will get better.  

Saturday, March 15, 2014

My Bondage and My Freedom

I recently read "My Bondage and My Freedom" by Frederick Douglass.  Douglass was born a slave in Maryland around 1817.  He escaped to the North in 1838.  This 1855 book (the second of three autobiographical works by Douglass) largely consists of an account of his years as a slave in Maryland (where he moved between the Eastern Shore where he was born and Baltimore).  It also contains a less comprehensive account of his life as a free man (including a 21 month trip to Great Britain) and in an appendix excerpts from abolitionist speeches and letters of his.

I found the account of his years as a slave interesting and worth reading.   For the most part I (as a layman) also found it credible although a little caution is in order as a book like this is to some extent abolitionist propaganda.  But Douglass comes across as a reasonably objective observer, noting for example that some of the mistreatment of slaves he reports was not typical (which of course was of little help to a slave who unluckily found themself at the mercy of an exceptionally bad master).  And in truth the case against slavery doesn't really need embellishment, the facts are bad enough.

One point about which I am a little doubtful is Douglass's repeated claim that harsh treatment of slaves was rational and necessary from the perspective of the (amoral) slave owner, that any leniency would just encourage thoughts of rebellion (or escape).  This seems to have been true for Douglass himself but I wonder to what extent he is rationalizing what could be seen as lack of gratitude for relatively good treatment.  Or perhaps I am just reluctant to let go of the fantasy that if I had owned slaves I would have been such a fair and generous master that I would have inspired loyalty.

I was also a little puzzled by of Douglass's seeming lack of interest regarding the identity of the (white or nearly white) man who was his father.  Perhaps he really didn't care but I wouldn't be too surprised if this was a bigger concern to him than he lets on.

I found the account easy to read and the language and style surprisingly modern (to the extent that I looked for and found a statement that the 1969 Dover edition I read was an unaltered reproduction of the original).  I found the rest of the book less interesting, it could be skipped without losing too much.

In summary I found this book to be pretty good and a useful reminder that even the life of a relatively privileged slave in the old South left a great deal to be desired.  

Wednesday, March 5, 2014

Double Double Post

As I have noted before I check my bank statements.  Once a decade or so I find an error.  The latest example was earlier this week when I noticed my bank had for some unknown reason paid two of my checks twice.  When I complained my bank assured me that this was a "rare event" and that they would fix things.  And in fact the money is now back in my account.  Although as I suspected would happen I have lost two weeks interest. But since this amounts to less than a penny I suppose I will let that go.  As for how rare this is, the statement entries reversing the errors contained 10-digit reference numbers.  6 digits clearly indicated the date leaving a 4-digit sequence number.  So it appears my bank has to correct thousands of errors every day.  Probably this is still a small fraction of their daily transactions.

I will admit that I no longer try to verify that I being credited with the correct interest.  Perhaps I should.

Tuesday, March 4, 2014

Retarded

The Supreme Court heard arguments Monday in Hall v. Florida.  I was not impressed.  This is a follow up case to Atkins v. Maryland, a 2002 case in which the Supreme Court ruled it was unconstitutional to execute the mentally retarded.  In Hall v. Florida Hall's lowest tested IQ was 71 which is above the IQ 70 cutoff for mental retardation.  So Hall was denied the exemption provided by Atkins v. Maryland.  But Hall argues IQ tests have a margin of error so even though his tested IQ was 71 his true IQ could be at or below the 70 cutoff.  This argument would have some force if the state was required to prove Hall is not retarded.  But since it was undisputed at oral argument that the burden of proof is on Hall to prove that he is mentally retarded his objection seems basically frivolous.  A tested IQ of 71 indicates it is more likely than not his true IQ is 71 or higher which is above the cutoff so it is more likely than not that he is not retarded.  Whereas he had the burden of showing at a minimum that it is more likely than not that he is retarded.  Which he has not done even if he has shown there is a substantial chance that he is retarded.  But while this seems perfectly clear to me the Supreme Court justices and advocates seemed rather muddled and confused about this point.  So it is possible, perhaps likely, that they will rule for Hall out of distaste for the death penalty and justify their decision with a confused and illogical opinion.