Social Security

The second post I made to this blog concerned Social Security.  I recently was a bit startled to learn that while the general thrust of the post was correct I had misunderstood a significant detail.  For some reason (perhaps because I had over generalized an example for someone who retired at age 62) I was under the erroneous impression that only earnings before age 62 count in determining your benefit.  However as this example clearly shows such is not the case.  Your highest earning 35 years (which determine the amount of your benefit) can include years in which you are 62 or older.

This means it will be possible for me to earn a maximum benefit (one based on 35 years of maximum earnings).  Through 2009 I had 26 such years from my job with IBM.  Through 2013 I have 4 more from my new job.  And if I continue to work through 2018 (when I will be 64) I will have 5 more for a total of 35.  So by continuing to work (after being laid off from IBM) I can potentially be credited with as many as 9 additional years of maximum earnings (instead of the limit of 6 I had assumed in my earlier post) and increase my benefit by about 15% (instead of 10%).  However it remains the case that the increase in the benefit is considerably less than the increase (35% for 9 additional years) in years worked.       

While looking into this I noticed I hadn't gotten my annual Social Security Statement since 2010.  This is because the government (in a somewhat dubious effort to save money) stopped sending them out in 2011.  I found this a bit annoying but it turned out to be fairly easy (for me at least) to create an online account with Social Security and print out my current (based on my earnings through 2012) statement.

Early Retirement

If you have a high paying job the key to retiring earlier rather than later is to avoid developing expensive tastes.  This wins in two ways, you can save more of your income and you will need less savings to maintain your accustomed standard of living in retirement.  Of course there is no free lunch, by retiring early you are reducing your lifetime earnings and hence your potential lifetime consumption.  But past a certain point there are diminishing returns to additional spending and you may sensibly prefer the additional leisure time early retirement makes possible.  Of course you may also prefer to keep working (especially if you like your job) but people with good incomes should realize they have a choice and not just default to spending whatever they make.

This is a point the "Mr. Money Mustache" blog (which I recently added to my blog list) makes with which I agree.  Although in my view the blog has a tendency to go overboard veering towards "what doesn't kill you makes you stronger" territory which discussing biking in lousy weather and the like.

Spider Solitaire

Recently I have been wasting a lot of time playing the Spider Solitaire game which comes with Microsoft Windows.  Playing the 4 suit version (without using the undo feature) I managed to win 37 out of 100 games.  This is quite consistent with internet claims that a 40% win rate is possible as I am certainly making mistakes.  Of course 100 is not a very big sample, 37 wins out of 100 is reasonably likely given a true win rate anywhere between 30% and 45% or so.

John G. Fletcher

I have set up an author page on Google Scholar for my stepfather, John G. Fletcher, who died last year.  He worked at the Lawrence Livermore National Laboratory (LLNL) from 1962 until he retired in 1993.  Although he had a PhD in Physics from Princeton (with a thesis on general relativity), at LLNL he soon moved to the computation department and most of his papers are in the field of Computer Science.  I used the Google Scholar clustering algorithm to generate the list of his papers.  It didn't work too well in his case, a fair number of the papers suggested obviously weren't by him and some papers were missed.  I removed the interlopers and added a couple of early general relativity papers.  However there may still be errors.

The Winner's Curse

I also recently read "The Winner's Curse", a 1992 book by Richard Thaler.  Like Ariely's "Predictably Irrational" it discusses situations in which people don't behave as some economic theory predicts they should.  My evaluation is similar, the book while not totally devoid of interest is not worth recommending.

This book largely consists of revised versions of a series of articles Thaler (often with coauthors) published in the Journal of Economic Perspectives between 1987 and 1991 on the general theme of economic anomalies, situations where people behave contrary to theory.  These articles summarized academic research on each topic.  I found this preferable to Ariely's book which in my view unduly emphasized his own research.  However the articles are now over 20 years old and so potentially dated.  And they are written in a style which I didn't find particularly engaging. 

But my main objection is the same as to Ariely's book, it is not clear how significant these anomalies are.  I think most people understand that economic models are approximations which are not exactly correct.  So finding a few cases where their predictions are off doesn't by itself mean too much.  As Thaler concedes near the end of this book, what is really needed are models (or theories) that predict better. 

So in summary I don't think this book offers a lot to the lay reader. There were a few points of interest but in general it isn't going to be of much help in understanding current economic issues or in making better personal finance decisions.

Predictably Irrational

I recently read "Predictably Irrational", a 2008 book by Dan Ariely, then a professor of behavioral economics at MIT.  Based largely on his own experimental work it discusses situations in which people often behave in ways which are at least arguably irrational.  Unfortunately I didn't think the book was very good.

My main problem with the book is that it is weak on the big picture.  By way of analogy human vision is generally pretty good but not perfect as the existence of optical illusions shows.  But a book just describing various optical illusions would not be a particularly good way of giving an overview of human vision.  Similarly it is hard to know what to conclude from a book describing a few experimental situations (often quite artificial) in which people behave irrationally.  I didn't get much more from this book than the observation that people sometimes behave irrationally which I already knew.   

One reason for the book's problems with the big picture is as mentioned above it is largely based on Ariely's own experimental work.  I believe a book like this should present a general overview of the field suitable for the lay reader.  This would include summarizing the most important and well established experimental results.  Just describing your own work (in what I sometimes thought was excessive detail) is not as useful.  Among other things it is difficult to be objective about your work, its importance and weaknesses.  Also I suspect there is a publication bias at work in this whole field.  I doubt it is as easy to publish experimental results concerning situations in which people do behave more or less rationally.  Which could give an unbalanced view of how pervasive irrational behavior actually is.

The book does present an useful general principle, namely that people like to evaluate things relative to other things rather than on an absolute basis.  So  B may appear more attractive when presented with a clearly inferior alternative C than when considered in isolation.  So experiments can be devised in which people prefer A to B when given 2 choices but prefer B when given 3 choices with C an inferior version of B added.  The addition of C makes B appear more attractive although this violates models which assume A and B have a definite absolute value.  Similarly people tend to evaluate their circumstances relative to their recent past (or compared to people they consider their peers).  So happiness is not as related to income as much as you might expect.  A rich person whose life is getting worse will tend be unhappy while a poor person whose life is getting better will tend to be happy even though objectively the rich person is still much better off.       

There are a few more worthwhile observations in the book but not in my view enough considering its length.  And I didn't think the book was particularly well written.  So while I don't think the book is totally worthless I would not recommend it.

Blog Roll

I have removed Nate Silver's 538 blog from my blog roll until such time as it restarts following Silver's move from the NYT to ESPN.  I have added educationrealist a blog by a high school math teacher which seems mostly consistent with my views on education.  Namely that the public schools are doing about as well as can be expected and that the main reason some kids do better academically than other kids is that some kids are smarter than other kids.

I have also added the Mr. Money Mustache blog by a man who retired (sort of) at age 30 by saving a ridiculous fraction of his income.  I find his point of view interesting although I often disagree with it.  And there would be problems if everyone tried to adopt his ideas.

I would like to add Kevin Drum's blog at Mother Jones to my blog roll but I have never been able to get the link to work properly in the Blog List widget.  For some reason it sends you someplace else in the Mother Jones website although the link works fine in the body of a post as above.  If anyone knows how to fix this let me know.

James Welles Shearer

My father, James Welles Shearer, received a physics PhD from MIT around 1950.  Around 1958 he started working at what is now the Lawrence Livermore National Lab (LLNL).  He continued to work there until his death in 1984.  While there he wrote a number of scientific papers and technical reports. These were mostly about high magnetic fields and various aspects of proposals for controlled nuclear fusion.  He seems to have generally published as "JW Shearer".     

I have set up an author page for him on Google Scholar which lists his papers with citation counts. I relied on Google's clustering algorithm to generate the list of papers.  I didn't see any that obviously aren't his but there could be omissions.

End this Depression Now

I recently read "End this Depression Now" a 2012 book by Paul Krugman about our current economic problems and what to do about them.  I thought it was fairly good although I do not share Krugman's liberal politics.  Krugman's books are more balanced and less polemical than his NYT newspaper columns making them more palatable to me.  Despite the title most of the book is devoted to discussing our current problems and how we got into them.  Less space is devoted to Krugman's ideas for fixing things.  Perhaps because, despite Krugman's protestations to the contrary, he realizes they are nonstarters politically.

Krugman's diagnosis is that our current sluggish economy reflects an overall lack of demand.  There are idle resources but businesses are unwilling to hire people and increase production because they fear (with good reason) that they will be unable to sell the resulting goods and services.  I find this plausible.  A competing explanation cites structural problems, that the economy is set up to produce the wrong things and that time is needed retrain workers and refit factories.  I don't  find this convincing.  If overall demand was adequate but not matched to supply you would expect to see shortages developing and prices rising for those goods and services in strong demand as well as idle capacity in areas of weak demand.  But for the most part this isn't happening.  Now structural problems could become a problem as the economy improves.  I am not convinced that estimates of current capacity generated by naive extrapolation of pre-crisis GNP trends are realistic.  But I don't think structural problems are currently a binding constraint.

I find Krugman's explanations for the origin of the lack of demand and ideas for fixing things less convincing.  He appears to believe that the economy has multiple equilibrium conditions and that although the economy is currently in a unfavorable equilibrium condition (into which it was pushed by the financial crisis) there is also present a preferable full capacity equilibrium.  So all that is needed is temporary government actions to push the economy into the more favorable equilibrium where it will remain by itself without needing continuing support.  For my part I doubt this more favorable equilibrium actually exists (under current conditions) making policy attempts to push the economy into it futile and potentially dangerous. 

One point of disagreement is whether the lack of demand is a chronic condition.  Certainly there was a temporary aspect, the financial crisis panicked people into trying to increase savings (or reduce debt) and due to the well known "paradox of thrift" this leads to a drop in demand.  But the acute phase of the financial crisis is long past, people are no longer panicked but demand remains depressed.  I think this reflects an underlying structural problem which needs to be addressed.  Krugman dismisses my favored explanation briefly in a paragraph on p. 83.

For example, one popular story about inequality and crisis--that the rising share of income going to the rich has undermined overall demand, because of the shrinking purchasing power of the middle class--just doesn't work when you look at the data.  "Underconsumption" stories depend on the notion that as income becomes concentrated in the hands of a few, consumer spending lags, and savings rise faster than investment opportunities.  In reality, however, consumer spending in the United States remained strong despite growing inequality, and far from rising, personal saving was on a long downward trend during the era of financial deregulation and rising inequality. 

I find this unconvincing.  Personal saving is measured on a net basis which can hide a growing imbalance as part of the population saves more and more while another part spends more than their income and goes deeper and deeper into debt.  This can maintain demand for a while but isn't sustainable indefinitely.  Eventually the indebted portion of the population reaches their borrowing limits and is forced to cutback on consumption while the savers continue to try to save leading to a drop in demand.  This looks to me a lot like conditions before and after the crisis point. 

Krugman has two main ideas for improving the economy, pushing up the inflation rate and a temporary deficit financed surge in government spending.  Both seem politically difficult at present which in my view is just as well as I find them uncongenial.

The rationale for increasing inflation is that this would allow additional cuts in the real interest rate (which is currently constrained by the inability to reduce nominal interest rates below zero, "the zero bound").  But I am unconvinced that any benefits would exceed the costs.  Krugman suggests a relatively benign sounding increase from 2% to 4% but it is unclear why this would be enough to have a significant effect.  Perhaps an increase to say 12% would be needed which sounds a lot less benign.  In any case, as Krugman acknowledges, an increase in the inflation rate also has large distributional consequences favoring debtors at the expense of  savers.  So having a lot of savings myself I am not inclined to support increased inflation.

The rational for increasing government spending is to increase overall demand encouraging businesses to expand.  I don't doubt it would have some such effects in the short run but am less convinced they would be sustainable.  As noted above while Krugman believes temporary deficits would be sufficient to push the economy into a more favorable equilibrium I am not convinced.   A political issue is what to spend the money on, there aren't that many uncontroversial and clearly temporary projects for the government to fund.  Krugman points out that crisis imposed budget problems led state and local governments to lay off many workers (deepening the crisis) and argues that this could have been prevented by increased federal aid to local governments.  But while this might have been a good idea several years ago it is entirely unclear that federal aid to hire all those workers back is a good idea now. There are other problems, some of the increased demand will be reflected in increased imports.  This could significantly reduced any benefits to the US economy.  US policy cannot really be evaluated in terms of purely domestic effects. 

Krugman also discusses Europe's troubles.  He attributes many of them to the formation of Euro zone with which I agree, the Euro was clearly a mistake.  But it is unclear how to fix things, as Krugman states unraveling the Euro would be very costly but there are also serious problems with keeping it as it forces an inappropriate uniformity of policy throughout the Euro zone.

In summary this book is a reasonable explication of conventional liberal thought about the economy.  However it is not all that original, I didn't find it to offer a lot of fresh ideas which I hadn't encountered before.  Another issue is the political discussion (which speculates about the outcome of the 2012 elections) is a bit dated.  Nevertheless it is reasonable introduction to the issues from a liberal point of view.

Obama's Lie

Over the years President Obama has made many statements to the effect that if you liked your current health insurance plan you would be allowed to keep it under his plan.  It is now obvious that these statements were incorrect.  Moreover I think it is fair to characterize them as lies.  First the blanket nature of the statements was unrealistic, even with the best intentions it is hard to make major changes in the health care system while preserving for everyone an option to continue with their existing plans.  Second and more importantly it was always a fundamental part of Obama's program that healthy and unhealthy people would pay the same rate for health insurance even if their expected claims costs were vastly different.   This meant forcing everyone into the same new risk pools where they would pay a blended rate.  Allowing healthy people to keep cheap existing plans catering to healthy people was at odds with this objective.  As a result the Obama administration didn't make a sincere good faith effort to allow as many of these people as possible to keep their existing plans (and thus stay out of the new risk pools).  Instead they wrote regulations that intentionally made it difficult for existing plans to qualify for exemptions from the law's new requirements.  As a result millions of people in the individual health insurance market are now being forced to find new plans regardless of their wishes contrary to Obama's repeated assurances that they would have the option of keeping their existing health insurance.  This was planned and not some unanticipated accident.  So it is hard for me to see why Obama's false statements shouldn't be called lies.

Of course politicians in general lie a lot so this is not some unique sin of Obama's.  He was not the first American President to lie to the American people and he won't be the last.  One of the (many) things that irritated me about President Carter was his claim that he would never lie.  In my view a more honest man would have pledged to try to minimize his lies which Carter was failing to do every time he pledged never to lie.  In any case just because many politicians have lied in the past and will lie in the future doesn't mean they shouldn't pay a political price when caught.  It appears Obama is paying such a price and he deserves to.  If he and his administration had devoted less effort to selling their plan politically and more to developing a sound and workable (which probably implies less ambitious) plan they and the nation would be better off today.

Local Supermarkets

Early this year one of the supermarkets near my townhouse, the Super Fresh in Plainsboro, closed.  This didn't bother me much as I think I had only shopped there once.  However this week I learned the Stop&Shop a few miles up Route 1 is also going to close.  This is more bothersome as I had shopped there fairly often and will miss it.  According to the article at the Stop&Shop link there are plans to build a Shop-Rite supermarket a bit south on Route 1 (which would be closer to me) so maybe things will eventually work out for the better.

Apparently the Stop&Shop is the third supermarket to fail at that spot in a 20 year period.  This is a bit surprising as it seems like a good location with easy access to Route 1.   But perhaps the population density in the immediate vicinity is not as high as it could be.  I hadn't seen any indications of distress at the store, although in hindsight perhaps the fact that (at least at the times I was there) most of the checkout stations did not need to be staffed was a bad sign.    

The Signal and the Noise

I recently read "The Signal and the Noise" by Nate Silver.  Nate Silver became well known because of the political analysis and generally accurate election predictions in his blog 538.  Earlier he had developed a successful system, PECOTA, for predicting the development of minor league baseball players.  In this book he attempts a general survey of forecasting.  I found the book a bit disappointing (perhaps in part because I had excessively high expectations).

One problem with the book is that when Silver moves away from his specific areas of expertise he makes mistakes showing he has failed to completely grasp the material.  On page 110 Silver writes:

... They are hot: the 77 trillion calculations that the IBM Bluefire supercomputer makes every second generate a substantial amount of radiant energy.  They are windy: all that heat must be cooled, lest the nation's ability to forecast its weather be placed in jeopardy, and so a series of high-pressure fans blast oxygen on the computers at all times.  ...

Here "radiant energy" is at best a confusing way of saying heat.  And I had never heard of oxygen (as opposed to simple air) cooling.  In any case according to NCAR:

Bluefire relies on a unique, water-based cooling system that is 33 percent more energy efficient than traditional air-cooled systems. Heat is removed from the electronics by water-chilled copper plates mounted in direct contact with each POWER6 microprocessor chip. ...

The chess diagram on page 271 is obviously wrong (the pawn on g2 should be on g3) and the related statement on page 270:

These databases relied on the assumption, however, that Kasparov would respond as almost all other players had when faced with the position, by moving his knight back out of the way. ...

is simply false, the usual move is bg2, retreating the knight would be very weak.

On page 374 Silver writes:

The greenhouse effect is the process by which certain atmospheric gases - principally water vapor, carbon dioxide (CO2), methane and ozone - absorb solar energy that has been reflected from the earth's surface.  ...

Here "reflected" should be "absorbed by and re-radiated".  The key point is because the sun is hotter than the earth solar radiation has shorter wavelengths than the earth's heat radiation.  Greenhouse gases absorb more strongly at longer wavelengths hence block more of the outgoing radiation as compared to the incoming solar radiation.  The effect is to warm the earth's surface.  On the other hand sunshine reflected from the earth's surface remains shortwave and leaves as easily as it arrived.

These (and other similar) errors aren't critical to Silver's arguments and could be fixed without too much trouble but they diminish the reader's general confidence in the author's reliability.  Silver would have done better to have had subject matter experts check for this sort of thing. 

The book has other problems.  At 454 pages it is quite long and there are things like the chapter on the Kasparov - Deep Blue match which could have been cut without too much loss. 

I didn't care for the analysis of the failure of the rating agencies prior to the recent financial crisis.  Silver discusses technical issues but the real problem is the agencies are paid by the people selling the securities they are rating.  This gives them an obvious incentive to fudge their ratings.  Silver understands this when it comes to political polling, polls paid for by a candidate will generally report more favorable results for the candidate than neutral polls.  In the case of political polls the amount of fudging is limited by the existence of neutral and opposition polls.  There were few such countervailing forces when it came to rating complex mortgage backed securities and the rating agency fudging got totally out of hand.  At the end nearly worthless securities were being given AAA ratings.  Silver largely ignores the bad rating agency incentives which remain in place and seem likely to cause similar problems in the future.

I don't want to be too negative, the book contains some interesting material and I agree with a lot of Silver's conclusions.  But I can't really call it a must read.      

Yarnell Hill Fire

On June 30, 2013 a crew of 19 firefighters was killed by the Yarnell Hill Fire near Yarnell Arizona.  Recently a report was released on an investigation of this event.  In my view the report is seriously flawed, showing an undue reluctance to criticize the decisions that led to 19 deaths.  The report claims it is trying to avoid hindsight bias, the tendency to label decisions as wrong when they work out badly even if they were actually reasonable under the circumstances.  This is a commendable goal but it has to be balanced against the need to identify avoidable mistakes.  Simply refusing to judge decisions is not the proper balance.

The report refers to decisions made by the crew and speculates about the thinking behind them.  But I expect the crew as a whole was not making decisions, instead the decisions were made by the crew's leaders (who appear to have been two men which the report does not name).  If 19 people are killed in plane crash the investigation will naturally focus on the pilots.  What was their training, experience, reputation?  Similarly one would expect this report to discuss the background of the fire crew leadership but in fact it provides no information at all.  Also in recent years there has been much attention paid to cockpit dynamics.  For example if the pilot makes a mistake does the co-pilot feel free to object.  Again this report does not discuss the analogous fire crew dynamics at all.      

The fire crew was killed while apparently attempting to move from one safe area to another (perhaps as the report speculates because they felt the second area would leave them better positioned for further firefighting efforts, although it should be noted the overall leadership did not expect or particularly want them to do this).  In doing so they chose a route that placed them in mortal danger.  Initially they moved on a two track road along a ridge.  This seems to have been reasonably safe at least at first as they had a view of the fire and various retreat options if it moved towards them.  However they then left the road (which would have eventually taken them to their apparent goal) to descend off the ridge through a box canyon directly towards their destination (a ranch with a cleared area).  Although this was a shorter route than continuing along the road it probably wasn't quicker as it was much heavier going.  The report speculates that the ranch appeared closer than it was and that they didn't realize how slow the going would be.  The real problem however was once they left the ridge they lost sight of the fire and (according to the report) the ability to perceive the wind shift that drove the fire towards them.  By the time they realized they were in danger it appears it was too late to do anything.  The report lists some of their options at the point they left the ridge but does not discuss one possibility.  Why didn't they leave a scout on the ridge to keep watch on the fire and warn them if it started to move towards them?  They had utilized a scout earlier in the day in what seems like a less dangerous situation so why not here?  The report doesn't discuss this.

The report doesn't want to admit that any mistakes were made.  This makes it hard to identify problems and make improvements going forward.  The report's view is that firefighting is inherently dangerous and that these 19 deaths were just one of those things.  I am not convinced.

Added 12/25/2013:  I fixed the link to the report.  Some other material including a video was also released.

Flu Shot

I got my annual flu shot last Saturday.  They have started offering a version with a shorter needle.  I tried it last year but it didn't seem any less painful, if anything it was more painful.  So this year I reverted to the standard shot which was fine.

Tax update

As noted earlier I filed an amended New Jersey state income tax return last month claiming an additional refund.  The check arrived Friday.  So it only took New Jersey about a month to process the amended return as opposed to over 3 months for the original return.  Hopefully I am now done with my 2012 taxes.

A Colossal Failure of Common Sense

I recently read "A Colossal Failure of Common Sense - The Inside Story of the Collapse of Lehman Brothers" by Lawrence G. McDonald (with Patrick Robinson).  Lawrence McDonald had a mid level job at Lehman Brothers for four years ending in 2008 (he was fired a few months before Lehman went bankrupt).  This 2009 book gives his view of the place near the end.  McDonald shares the copyright with professional writer, Patrick Robinson (who I know nothing about), but the writing is not polished.

This book is seriously flawed but it held my interest for a while (I found it dragging a bit near the end).  What value the book has is that of chronicling one person's experience and perspective, it is not good for an overall big picture view of the financial crisis or even of Lehman's collapse.  For this reason I think the complaint in the WSJ journal review that the book devotes too much space to McDonald's earlier career and background is wrongheaded.  I think it is useful to know that his parent's divorce led to a period of (at least relative) economic deprivation, that he had to make an extraordinary effort (taking a job selling pork chops just to establish that he could sell and then studying for and passing the securities exam on his own) just to get an opportunity for a Wall Street career and that he resented the rich private school kids who appeared to have an easier path.  I found McDonald's personal story of some interest and some of his anecdotes illuminating although perhaps not always in the way the author intended.  For example McDonald tells the story of a gambling trip in which one of his co-workers goes down $160,000 playing blackjack.  When McDonald sensibly suggested that perhaps it wasn't his night the co-worker gave him a "quitters never win" lecture and continued playing.  In this case his luck did turn and according to McDonald he ended up $475,000.  McDonald appears to feel this depiction of his co-worker is highly favorable but I would draw different conclusions.

The book does have numerous problems.  It is not very well written.  The explanation of some of the complex financial products Lehman dealt with is muddled at best (perhaps in part I suspect because McDonald didn't really understand them himself).  McDonald isn't very revealing about his personal finances.  At an earlier point in his career he and a friend founded a website devoted to convertible bonds which (by his account) was quite successful leading to its purchase by Morgan Stanley.  But McDonald doesn't tell us the sales price or his cut.  At Lehman he receives a bonus he is happy about but then is disappointed by his bonus the following year.  But again he does not reveal the actual amounts (perhaps he suspects many readers will be unsympathetic to complaints about a $700,000 (or whatever) bonus).  The details of his bonus are important because a large portion was in the form of Lehman stock which he was not allowed to sell for several years.  This means his opinion that the government should have bailed Lehman out is not disinterested.  In general McDonald appears to have a number of biases which I suspect color his account.  Also McDonald was not high ranking enough to have personal knowledge of top level internal conflicts and in addition he left Lehman some months before the end.  So the book's version of the key events in Lehman's collapse is third hand, poorly sourced and probably not completely reliable.  And in my view the book doesn't have much of interest to say about the larger context, the financial crisis that precipitated Lehman's collapse.

So in summary while I found this book interesting in places for the view it gives of an aspect of Wall Street I can't really recommend it.

Completely worthless

As I expected,  my Eastman Kodak stock became completely worthless last week when the company emerged from bankruptcy and the old stock was cancelled.  So I will be able to write off my loss on my 2013 taxes.

It is perhaps of some interest that although every informed person knew the stock was about to become worthless, trading continued (valuing the stock at a few cents a share) right up to the  end.  So the stock market is not perfectly efficient.

I contributed to this inefficiency in a small way by not selling my shares last year.  This was a result of my natural sloth and the fact that the proceeds would have been small relative to the hassle involved (given that I was holding paper certificates).  As it turned out this worked out well as the recent raise in the federal capital gains tax rate means the write off will be worth more to me in 2013 (although this is just luck, I wasn't considering it at the time).

Syria

President Obama has asked Congress (and by extension the American people) for authority to order military strikes against Syria.  In my view this request should be rejected.

I think American policy should embody a presumption against war.  We should undertake military actions only when they are clearly in the national interest.  The connection to the national interest in this case is extremely tenuous.  Syria poses no direct threat to the US.  There is a claim that Syria has violated an international norm.  Be that as it may I believe a more important international norm is that nations shouldn't attack other nations absent an immediate and direct threat which isn't present here. 

It is also very unclear what any American strikes are expected to accomplish.  There appears to be a significant danger of mission creep.  If our first strikes don't appear to accomplish much other than killing a bunch of people are we going to get more and more involved in an attempt to justify our earlier involvement?

In short I don't see a compelling case for military action so I would refrain.

New York refund arrives

My New York State income tax refund finally arrived on Wednesday.  It wasn't as much as I was expecting because it turned out I had made an error (using the wrong tax computation worksheet) in figuring my tax.  This was a bit annoying although I can get some (but not all) of the difference back from New Jersey by filing an amended return which I did.  Hopefully New Jersey will process this a bit faster than my original return.  I was also annoyed to learn that although New York theoretically pays interest on refunds delayed more than 45 days this only applies if the interest is at least $1 so I was out of luck there too.

While looking over the New York tax computation worksheets I noticed something bizarre.  Suppose a married couple is taking the standard deduction of $15,000 so that their taxable income (line 38) is $15,000 less than their AGI (line 33).  Then if I have figured correctly, if their AGI is exactly $2,000,000 their tax will be $135,972.5 while if their AGI is just $50,000 more (that is $2,050,000) then their tax will be $179,487 or $43,574.50 more.  This is a marginal rate of over 87%.  Taking federal taxes into account some people in this situation seem to be facing a marginal rate of well over 100% for this income range.  This makes no economic sense, it is just evidence that the New York legislature can't be bothered to write sensible tax laws.  

Millstone River Park

There is a new hospital, University Medical Center of Princeton at Plainsboro, near my townhouse.  As part of the deal to construct the hospital a park, Millstone River Park, was created next to the hospital complex.  When I first checked it out last April I wasn't too impressed, it seemed kind of barren and boring.  But just a couple of months later in June it was more impressive with a spectacular display of wild flowers.  A lot of the wild flowers have gone to seed but it still looked pretty good when I took the photo last Saturday.  The park does have some issues.  It is quite close to Route 1 and part of the park gets quite a bit of traffic noise.  And while the park is near the Millstone River for the most part it is separated from the river by a strip of private land.

The main park trail is a paved loop about one half mile long with some gravel spurs going off towards the river.  Along with the flowers quite a few trees have been planted.  Time will tell how well the trees do, some them don't look so good at the moment although perhaps some attrition has been allowed for.

Limit Orders

Wednesday I purchased stock with a limit order for the first time in my life.  While I have long owned various stocks I was not an active trader and had no need for a brokerage account until recently.  However my new employer required me to sell most of the IBM stock which I had accumulated through an employee stock purchase plan over many years.  I could have sold it through the plan itself but it was much cheaper to transfer the stock to an online broker and sell through them instead so that is what I did.  I thought I should reinvest the proceeds in the stock market.  I did reinvest the majority some time ago but my usual procrastination left some proceeds in cash (not such a great move as the market has been going up).   But I finally figured out some more stuff to buy.  When I did so I used limit orders (as opposed to the market orders I had used previously).  These are pretty simple to use, normally cost no more, and guard against getting your order filled at a completely unexpected price due to some market glitch.  Such glitches are perhaps unlikely but as news reports show occasionally do occur and it seems reasonable to guard against them.   So I placed limit orders a few cents above the bid ask spread to protect against an unexpected price spike.  As I expected my orders went through right away (although in one case at my limit) just like market orders would have.  Limit orders are a bit more work and have some potential pitfalls (like only getting a portion of your order filled) and so may not be worth the bother to protect against what are unlikely events in most cases.  However in some cases (like trying to trade an illiquid security) they seem to offer worthwhile protection so it seems useful to know how they work.              

Traffic Report

Last weekend I drove up to Connecticut.  I took the Saw Mill to I684 and was cruising along in the right hand lane when someone in the middle lane cut in front of me and then slowed abruptly.  I had to brake hard to avoid hitting them.   It turned out they weren't just being a jerk, the traffic from people trying to take the I84 exit had backed up a couple of miles on I684 creating a rather hazardous situation.  I rather belatedly (it had been a few years) recalled that I had encountered this before so it is a longstanding problem.  In this case I84 itself was fine, the issue was one exit lane wasn't enough to handle the volume.  However if I recall correctly the problem can also arise because of slowed traffic on I84 which is only two lanes at that point.   There are signs near the exit warning about slowed traffic but it appears there is a need for more warning signs a couple of miles further south on I684.

State Income Tax Refunds Delayed

I have been used to receiving any state or federal income tax refunds owed to me towards the end of May.  But this year my state income tax refunds (I was not due a federal refund) were much delayed.  My New Jersey state income tax refund finally arrived yesterday, more than 3 months after I filed.  The federal government pays interest on income tax refunds after 45 days but New Jersey gives itself a rather generous 6 months .

And my New York state income tax refund still hasn't arrived.  Apparently New York changed contractors and this has led to delays.  At least New York also pays interest after 45 days (on excess withholding).

Zimmerman Verdict

I think the verdict was correct.  Under Florida law (as would be the case in most states) the state had to prove beyond a reasonable doubt that Zimmerman didn't have a reasonable belief he was acting in self-defense when he shot Martin.  In my view the state didn't come close to meeting its burden.  The prosecution attempted to pick away at Zimmerman's version of events but never offered a compelling alternative.  This simply isn't enough to meet the proof beyond a reasonable doubt standard.  This was a very weak case.  Cases this weak are not normally prosecuted which naturally leads to suspicions of improper motives on the part of the prosecutors in this case.

On the other hand I don't agree that this case had nothing to do with Florida's "Stand Your Ground" (SYG) law.  SYG laws in general encourage (by not discouraging as in "duty to retreat" jurisdictions) people to get into violent confrontations while armed.  This will inevitably produce more shootings like this one (even if the defense didn't need to rely on the SYG law in this case).  It should be noted that in a "duty to retreat" jurisdiction Martin too would have had a duty to avoid a violent confrontation (as it appears he could have done by going inside when he got home instead of reversing his path and confronting Zimmerman).  Encouraging people to stand their ground can get them killed.   You can argue that the negative effects of SYG laws are outweighed by positive effects but I think it is disingenuous to argue that there are no negative effects.  For my part I think the law should encourage (within reason) law abiding citizens to avoid trouble.  So I generally favor a "duty to retreat".     

Great Falls

Yesterday I visited the Great Falls National Historic Park in Paterson, New Jersey. I thought it was pretty nice and worth seeing if you live nearby. It reminded me a bit (on a greatly reduced scale of course) of Niagara Falls. We have gotten some rain recently so the Falls may have been a bit more impressive than usual. There was some spray or mist from the Falls at some of the viewing locations which was fine on a hot day but might not have been as pleasant in colder weather. There is no charge to view the Falls and parking was no problem yesterday.

I took the picture near the parking area.  With a little walking you can get a closer view of the Falls from the bridge in the background and from a viewing area on the other side.

Maryland v. King

Monday the Supreme Court ruled 5-4 in the case Maryland v. King that it is constitutional for Maryland to extract (via a cheek swab) DNA samples from people arrested and detained for serious crimes.  I agree with the majority.  As a general matter I support crime fighting measures when the benefit to society clearly outweighs the costs imposed on innocent citizens.  Here the costs seem trivial and the benefits significant so I would be reluctant to find Maryland's law unconstitutional.  And I see no legal requirement to do so, the Fourth Amendment just requires that such searches and seizures be reasonable and there were no obviously controlling precedents so the Court was basically free to as it felt best.

Incidentally while Scalia's dissent accuses Kennedy's majority opinion of slanting the facts to support his argument the dissent does not appear to be perfect in this regard.  In footnote 2 Scalia claims:

By the way, this procedure has nothing to do with exonerating the wrongfully convicted, as the Court soothingly promises. See ante, at 17. The FBI CODIS database includes DNA from unsolved crimes. I know of no indication (and the Court cites none) that it also includes DNA from all-or even any-crimes whose perpetrators have already been convicted.

 

While Scalia is correct that DNA from "solved" crimes is not routinely checked against the offender database wrongfully convicted people have been exonerated after special checks.  A Westchester case with which I am familiar is that of Jeffrey Deskovic.  A somewhat weird kid he was convicted based on a false confession of the rape murder of a high school classmate despite that fact that he was not a match for DNA found on the victim (on the unsupported theory that the DNA was from a boyfriend).  After many years in prison he convinced a new DA to run the DNA against the offender database.  This hit against a prisoner serving a life term for a different murder.  The prisoner confessed and Deskovic was exonerated.  Now in this case the prisoner had already been convicted so under Supreme Court precedent it was okay to extract his DNA regardless of the outcome of King v. Maryland which concerns taking DNA samples from people who are accused but not yet convicted of serious crimes.  Still it should be clear that people in Deskovic's unfortunate situation are more likely to be exonerated when broader criteria are used to build the offender database.

 

Yaris

Back in March I spent a week in Maryland on a business trip.  I drove down in a rental car provided by my employer. When I picked the car up I was a bit disappointed to see it was a Yaris  hatchback since the only things I knew about the Yaris were that it was a low end Toyota and that Consumer Reports didn't like it.  Given these low expectations the car was a bit of a pleasant surprise although it did have some features that might explain why Consumer Reports didn't rate it highly.  The trunk was tiny (although adequate for my single suitcase) and the engine was noisy (although not in a way that bothered me).  On the plus side the car has plenty of headroom, a couple of inches more than my Toyota Solara which has barely enough for me.  It also felt more responsive and agile than my Solara.  I was also impressed that the radio continued to receive my favorite New York City stations.  This isn't really an endorsement, like Consumer Reports I might well like competitive small cars more and there is no reason to buy a good product if excellent ones are available at a similar price.  But it wasn't as bad as I expected.

Incidentally I could have used my personal car and received a mileage reimbursement.  This probably was the better option but I was deterred by the fact that my employer's insurance would not cover any damage to my personal vehicle.  But given the low value of my car and average driving ability the expected value of such damage was likely under $20 which would have been covered by the generous mileage allowance.  Also using my personal car would have meant I could have left from and returned to my house instead of from my work location (where I picked up and dropped off the rental) saving some time and hassle.  And I could have paid the tolls with EZ Pass instead of with cash again saving a bit of time and trouble.  And finally although I liked the Yaris well enough as with driving any unfamiliar vehicle there was a bit of a learning curve which meant I was probably at a bit higher risk of getting into an accident.     

Closure

I closed on the sale of my Ossining townhouse last Monday.  The sales price was 1.59 times what I paid back in 1989 off a bit from the high point of about two times for units like mine (back around 2006). At about 2% a year appreciation this didn't keep up with inflation. Even before deducting for the 5% real estate commission and other expenses. So in one sense this wasn't a very good investment. Although it wasn't terrible compared to renting. And on the other hand I got to live there 23 years rent free and I liked the place. Which is also an important consideration. 

I might done a bit better financially if I had been less slothful and gotten the place listed 6 months earlier in the Spring instead of the Fall of last year. Spring seems like a better time to list. There are more potential buyers looking and I think the complex is more attractive at that time of year with warmer weather and more greenery. Also I would have (potentially) saved some months expenses. 

I took the picture two days before the closing when I visited the place for the last time. My unit is behind the middle tree. It faced South so it was nice and sunny and I liked the views of the pond.

My Citations

I recently discovered the "My Citations" feature on Google Scholar.  It is kind of neat.  You set up a profile with a list of your papers and then Google Scholar finds, counts and lists many of papers which have cited each of your papers.  Listing my papers was easy as Google had already grouped most of them together and I just had to add the whole group and then delete a few interlopers (you would think Google would realize a paper published in the 1700s didn't belong with the others even if it was also written by James Shearer).  In order to make your profile public (so it shows up when you search Google Scholar for your name) you need a verified email address at an academic institution.  This was a bit of a problem for me as I don't have a current academic affiliation.  But then I figured out as a MIT graduate I could set up an email address at alum.mit.edu which would just forward email to my personal account.  After I did this (and waited a day for it to take effect) I was able to use it to pass Google's verification and make my profile public.

When I was at IBM I tried for a while (until I lost interest) to keep track (via Science Citation Index) of papers citing mine.  This is much easier.  And Google Scholar seems to be pretty good at tracking down free online versions of published papers.  It is interesting to see that the number of people citing my papers each year has been trending upward although I haven't been producing much in the way of new papers for a long time.  However I suspect this is mostly because the number of papers being published each year has also been steadily rising.     

In summary this seems like an interesting and worthwhile feature.  It does depend on authors setting it up for their papers.  At the moment many haven't but hopefully more will over time.

Address Change Delay

I moved out of my Ossining townhouse at the beginning of last year but it took me a while to get it listed for sale.  In the meantime I didn't file a change of address form with the post office as I was going up every few weeks to check on the place and could pick up my accumulated mail.  However I eventually got the place on the market last Fall and currently have a buyer.  If nothing goes wrong the closing should be in the next few weeks.  So when I was up there yesterday I went down to the Ossining post office and filled out a change of address form.  When I handed it in the clerk said it would be two or three weeks before it took effect which is a lot longer than I expected.  It doesn't make much difference for me as most of my mail is now going to my new address anyway but might be a bother in other circumstances.

Addendum (5/15): It seems I was likely given bad (or perhaps just highly pessimistic) information from the clerk. When I returned 2 weeks later for the final time I didn't have any additional mail in my box so it appears the change of address took effect almost immediately as I would have expected.

Tax Day

I mailed my tax returns Monday on the way to work.  I used to do my returns by hand but for the last few years I have been using TurboTax and did so again this year.  Tax software does make the process easier but TurboTax at least is far from perfect.  I had several problems with it this year.  A general complaint is that TurboTax seems to discourage using alternative more complicated tax calculation methods even though they can sometimes save substantial amounts of money.  I suppose they are worried that users will get annoyed if they work through a more difficult and complicated calculation only to find it has not saved them anything whereas if they stick to the simple method they will never know about any money they might have saved with a little more work.  This came up in two places on my return, tax refunds and estimated tax penalties.

Regarding tax refunds, these count as taxable income if you deducted the taxes in a previous year but only if (or to the extent) that the deduction saved you money.  In my case it hadn't because I was subject to the AMT (alternative minimum tax) which does not allow you to deduct state and local taxes paid.  Showing this requires refiguring your prior year's taxes which ideally TurboTax would automatically do for you (assuming you used it in the prior year) but which in any case isn't that complicated (assuming you were using TurboTax) although TurboTax explains it badly.

Regarding estimated tax payments the government doesn't want to wait until April 15th to get its money.  So it withholds taxes from your wages (and some other things) and requires quarterly estimated tax payments to cover the taxes on income (such as dividends or capital gains) not subject to withholding.  If you don't pay enough in estimated taxes you will in certain circumstances owe a penalty.  This includes cases where your total estimated tax payments were sufficient but you didn't pay them in equal installments throughout the year.  However you aren't required to predict the future, if your income comes in unevenly during the year your estimated tax payments can be uneven as well as long as they keep up with your income as received.  In my case I had large capital gains in December and made a large estimated tax payment in January.  If my income had come in evenly through the year I would have owed a substantial penalty but as it was I didn't.  However demonstrating this is a fairly involved process.   You have to figure your income (and deductions) for the first 3, 5 and 8 months of the year, annualize them, figure the tax and then show your payments (withholding and estimated tax) covered at least 90%  of the prorated tax amount.  There is unavoidably a lot of work in figuring your partial year income and deductions but once you have entered the amounts TurboTax should be able do the computations automatically.  But for some reason it doesn't, while it figures the regular tax on the annualized amounts it makes you figure the AMT yourself a fairly complicated calculation.  And then it uses the wrong threshold for the June 15 estimated tax payment.  This should cover 37.5% (90% of 5/12) of your annualized tax but TurboTax uses 45% (90% of 6/12 as if June was the seventh month of the year instead of the sixth).  This is not entirely its fault as it is following an IRS example with the same error (I am assuming this error hasn't actually been written into the tax laws).  Fortunately this didn't matter for me. 

As I recall TurboTax warns you the alternative computations above are a lot of work without providing useful guidance on when they are likely to save you money.  As a result I suspect some people are paying more in taxes than they are legally required to.

I found other aspects of the program irritating, it tries to sell various upgrades and when I printed out one copy of the return to mail and one for my records I got two copies of stuff like the filing instructions which is just a waste of paper (and ink). 

All in all I am not inclined to go back to doing my taxes by hand but I find the program irritating also.  Probably not enough to try a different program next year though.