2009

So what will 2009 hold for us? In these early days we have

1. Fed interest rates at close to zero.
2. Fighting in Gaza/Israel.
3. Somalian pirates still holding a tanker and a few ships.
4. The DJIA around 8600, the S&P around 900 and the Nasdaq around 1600.
5. Scandals that are still brewing from Madoff to the Illinois senate seat controversy.
6. Gas at around $1.60.
7. Anticipation on Obama's inauguration.
8. Money, job and home value worries.
9. Uncertainty about the economy - will it get worse or will it get better?
10. Ongoing conflicts in Iraq and Afghanistan.

A lot depends on whether a person is an optimist or a pessimist.
And a person's optimism or pessimism really depends on whether he has an income coming in and if he/she can make ends meet.

This feeble mind this that, that is the key to success in 2009. It includes

• Live within your means.
• Pay off all your debts including mortgage.
• Save a year's worth of living expenses. This should include estimated Cobra payments, home, car, flood, umbrella insurance, car and mortgage payments, school/activity fees for children, any estimated co-payments, food and clothing allowances and up to $10K as an emergency reserve on top of the other estimates. This is a tough goal and may not be achieved in one year but we need to get realistic on what a year's living expense really means.
• Hold on to you job in any way possible.
• Don't cave in to impulses small ( a new cellphone) or large ( a car or a pool).
• Stop looking at ads. You are not helping the economy by spending, you are only hurting yourself. The economy will find ways to adapt.

I guess the above proves that I have a pessimistic view, and to be honest I suppose I do. I am not overly so but just like companies tighten their fiscal policies and curtail spending in tough times, so should you.

I am however hoping that the year turns for the better

• That the economy stabilizes after the job losses and contraction.
• The middle class get some safety net that prevents them from going destitute after a illness or job loss.
• The government goes after hedge funds and regulates them better rather than imposing more burden on a regular business a-la Sarbanes-Oxley.
• The big 3 automakers produce vehicles that people buy for their mechanical merits rather than for patriotic reasons.
• We get some closure of a successful nature in our overseas military undertakings.
• We end the year with cautious optimism.

So...happy new year!

Shopping Withdrawal

Faced with a faltering economy, the Feeblemind is trying to cut back on shopping as well. It is proving to be more difficult than thought.

A tradition is to look at the ads that are inserted into most weekend editions of newspapers. Typically in the Feeble house the conversation goes like this. The Feeble wife chimes up: "Wow, Macy's is really offering a discount on the 100 piece dinner set". Feeble would look wistfully at the chipped coffee mug he is drinking from and agree - how much nicer it would be to have a coordinated set for day to day living rather than to have a mishmash of remnants from the survivors of prior dinner sets.

But then the feeble mind gets a kick. Wait, didn't we plan not to buy a single thing this month other than the essentials. So we plan on sometime in the future when we will dump all our old crockery and replace them with a shining coordinated set. It makes sense to wait after all given that our kids have slippery fingers.

Then it is Feeble's turn. There are a couple of electronic retailers whose weekly offerings Feeble studiously pursues. The six year old computer is so slow and well overdue for an upgrade. But given that Feeble and his wife have a company issued laptop, should one splurge on a newer model just so that junior can access Nick Jr. faster?

The digital camera went on the blink and Feeble's eyes lit up. This would be a justified purchase. Since the old camera was toast anyway, Feeble decided to open it up to see how it looked inside. After opening the camera, he pressed the on button and lo and behold the camera started functioning again. Dejectedly, Feeble put the camera back together again.

The point is that we have become such a shopping driven culture. I can't help but notice that some houses in our neighborhood just don't get guests. It could be that they are transplants from far away places or just that they don't know anybody to call over for a drink or a meal. These homeowners are not reclusive. They are people who smile and have a conversation if you meet them walking the dog. But there is a distance they keep that prevents one from becoming friendlier. We find it happening a little for us too. In the weekend after the kids activities are done, Feeble or his wife sometimes wander off just to browse in a store or mall. More often than not this pleasurable interlude results in a purchase or two and a mild high.

Now that we are trying to curtail these ad-hoc shopping trips, we are realizing that the shopping high can result in withdrawals - especially when one tries to curtail it cold turkey.

Food for the people!

A great essay in the New Yorker addresses the recent spike in food grains and the impact a prolonged price increase would have had for the poorer people of the world.

It is a great concise essay, the type this feeble mind is more apt to follow....but to summarize it even further, its main points are

• The growth of global crop yields has slowed dramatically since the 1990s.
• Under the pressure of the IMF and the World Bank the various national Agricultural Control Boards (ACB) were done away with in the interest of free markets
• The demise of the ACBs lead to the decrease in the stockpiling of food grains by various countries making them susceptible to food shortages since they then depended on exports and did not have any internal reserves.
• The free market did not necessarily lead to increased production and when it did, it was more for cash crops rather than staples.
• Very few 3 - 5 countries supply most of the food exports and any shortages in any of these countries can dramatically drive up prices (note the recent draught in Australia)
• Reliability is key to food supply rather than efficiency and in a business as complex as agriculture, maybe redundancy and over production is a good thing.

Some of the other concerns this feeble mind may add include the dramatically growing population which when coupled with lowered yields could precipitate a food crisis.

This Thanksgiving though, lets us all appreciate the bounty we have on our tables and be grateful for it.

And look for long term investments in the agricultural sector ;-)

Random Thoughts

I was reading about Iceland in the European papers. This country has 300,000 people and some time ago it decided to de-regulate its banking industry. Banks in Iceland started offering great interest rates to European investors who deposited huge sums of cash. Now, the banks are in trouble and many European governments fearful of investor backlash have resorted to freezing the assets of the Iceland banks in their countries and guaranteeing the deposits - in a foreign country no less! Interesting times we live in.

I have a fascination with small successful countries. Iceland was not in my radar until now but I was always a fan of Israel and its people. But Iceland is inching up my popularity index. Not because it defrauded a bunch of Europeans - I have sympathy for the people who invested - but because as I learn about this country I seem to like it more. They seem to be a tough resourceful and resilient people who cheerfully survive months of near darkness.

So I searched the web for Icelandic newspapers and came across this article. I appreciate them even more.

Another country that evokes admiration is Sweden. My fascination stems partly because many of these countries have populations that are smaller than some of the world's major megapolises. But their innate decency, concern for their people's welfare, industriousness and entrepreneurship has contributed greatly to a prosperous society in their countries.

If only many of the other countries with a wealth or resources and talent could try and replicate their models.


Stock Market

Since this is a random post, on a different topic, the stock market is not doing too well these days. So the newspapers and news sites have taken to showing the faces of traders in the floor of the stock exchange. More often than not the faces paint a picture of hyper misery, dejection worthy of the most melodramatic of Mexican soap operas.

Though I am hurting as much from the crash of the market as the next person, I can't but smile every time I see one of these images. We get it. The news is bad. Thanks for the open jawed, eyes raised toward the ticker, hand on head image to really drive home the point. I really wanted to post some of my favorite images, but did not want to run into copyright issues.
At least I have something to laugh about in the current mess.

But I am still Bullish on America!

Big Numbers

Anybody following the financial crisis unfolding would be shell shocked by the huge numbers being thrown around. A $100billion here or a $700billion there or maybe a couple of trillion.

The feeble mind begs to understand where the government is going to come by with this money. From what it understands, the feeble mind knows that:
There is a budget deficit
There is a trade deficit

A budget deficit means that tax revenues are not enough to fund current government spending.

A trade deficit means that imports are way more than export. While a trade deficit might result in currency valuation issues, it is inherently a private figure - that is it is comprised of the import and export totals for private company activity. It is not public money.

So with a budget deficit, spending the trillion dollars means
borrowing some more - by selling more treasuries and other bonds
printing more money eventually paying back the money through that most steady stream of government revenues – taxes.

I suppose in the scheme of things, greater minds can wrap themselves around these huge numbers and the miracle of the American economy can resurge and pay itself out of debt. One hopes that the preceding statement is true.

To a certain extent, tracing the current crisis, one gets the feeling that many people managed to dig themselves out of the tech bubble by creating a real-estate bubble. And people thought that there might be another bubble around the corner to salvage a real-estate bust. Unfortunately no build up immediately followed real-estate to take over where it left off. But given the huge amounts of liquidity being pumped in, which is not to say that there is not another bubble in the making?

As the economy gets more financial services oriented, companies will try harder to make money without really offering a tangible product. The current crisis is just a manifestation of that. What boggles the mind however is the number of people asleep at the wheel.

Companies start issuing sub-standard debt instruments.

Companies get away with giving the highest ratings to these instruments.

Companies insure this debt, but they label this insurance as credit default swaps so that they
don't fall under the insurance industries regulatory purview. Ironically some of the largest insurance companies offer these swaps.

Companies actively trade in the sub-standard debt instruments and swap without really understanding the mathematical models that define them - sort of reminds me when I started trading stocks and literally chose them on a whim (not that I am doing much better now).

To fuel this destructive model, more money is made available to mortgage brokers who happily sell mortgages to Joe Schmoe public. Joe Schmoe public conveniently ignores any nagging worries on affordability. And Joe Schmoe's mortgage gets lumped into a sub-prime Collaterized Debt Obligation which gets gets a great "AAA" rating and gets "insured" with a credit default swap and gets sold to a mutual fund. Joe Schmoe buys the mutual fund since it has a spectacular return for some inexplicable reason which he does not bother to understand or reason out. So in a way Joe Schmoe finacially cannibalizes himself.

Everybody is happy until it all breaks apart. Joe Schmoe can’t pay his mortgage. The Credit Default Swap cannot pay the “insurance” because –since it was outside insurance regulations- it did not have the capital to “insure”. Banks go psycho and stop lending. And the economy which has become dependent on financial services comes to a standstill.

And the Government HAS to step in.

And we pay "no" new taxes through our nose while the creative types devise another plan for another ponzi scheme wrapped around an algorithm.

Incurious Minds

A recent Vice-Presidential pick has been assailed for lack of foreign policy experience. I always wonder how people can be so incurious about the world outside the United States. People tend to generalize and stereotype everything beyond their hometown.

Mexico has a rich culture and a sophisticated economy in addition to the poor who try to illegally immigrate. China has huge backward swathes amongst the uber growth regions.

In these days of readily available news, why is it that people - even those aspiring for political office - can't be bothered to scan through the multitude of sources on the Internet to get familiar with people, news and culture around the world?

The important thing is to avoid a spotlight effect where a culture is only identified by its most popular or notorious trait. A holistic view - with both the pluses and minuses of a society, its problems, its opportunities, its social mores would make a leader more in command with dealing with that country. This feeble mind would love to have a leader who does his or her own reading rather than rely on the snippets offered to him by his advisers.

Trip to Boston

We recently went on a last minute trip to Boston. We had a wedding to attend and I was unwilling to travel so far or incur the expense. However I caved in after the seventh "fare sale" email my wife forwarded me from an airline.

All in all, it was a great trip. It helped cap an uneventful summer, but it helped in giving us a break away from home and day care.

Boston is a fun place to visit. We stayed at the Hampton Inn in Cambridge, Ma. I chose this based on the price and the fact that I could use points to pay for our stay. Also, most of the reviews in Tripadvisor seemed positive.

The reviews were accurate. It is indeed a pleasant, budget hotel in Cambridge with a good breakfast and free parking - a rarity in the Boston area. I was a little apprehensive of the neighborhood since I only planned to use the rental car to travel to the wedding but do most of the sight seeing using the T which is the Boston subway.

However, the neighborhood was just fine. Actually the subway - Lechmere station on the Green line - is only diagonally across from the hotel though it appears farther when viewed in Google Street View. So all in all, it was a very convenient location.

The great thing about travelling via subway is (for those who have not done so before) is that since the stops, lines, interconnections are so well mapped, it is very easy to figure out what trains to get on, where to go and when to change trains. I had borrowed a great guide book that listed sight seeing locations with mapped to T stops and so planning an itinerary was easy.

A couple of words of advise - if travelling on the green line, it splits into 3 destinations - so always know which branch to take. The trains are well labeled. Also, be aware of the rougher parts of town, though for the touristy things, chances are you won't have to stray so far.

Since we only had a couple of days to sight see, on day 1, we went over to the Aquarium stop after transferring to the Blue line from the Green line at the Govt. Center station. We took a water taxi (just $1.75) from Long Wharf which is a very short walk from the station to the USS Constitution
in Charlestown. This way the kids got to experience a ferry ride. Also you get a chance to take some photos of the Boston waterfront. You can spend a couple of hours there looking at both the ship and the museum. We skipped most of the museums in the trip because our kids are not at the age where they have patience for these things :-( . Because this is an active duty USN ship, admission is free and tours are conducted every half hour.

After returning to Long Wharf, we trundled down to Faneuil Hall and Quincy Market for some lunch and to wander around looking at street performers. It is pretty entertaining with a lot of crowds especially during lunch time.

Later on, we took the T to the Prudential building which offers a 50 story high view of the city. It is a little pricey at around $15 but it gives you a birds eye view so to speak.

That evening we did not do much since we had to visit some friends but the following day, we visited Boston Common (the Arlington stop on the Green Line) and went for a Swan Boat ride. After wandering around the garden for a while we walked around some of the neighborhoods which are really pretty (and expensive). There was a really old church but we couldn't find a way to get in which was a shame.

We then used the T to transfer to the red line and visited Harvard. The unofficial tour of Harvard is given by actual students and it is free but for a tip at the end. It is supposed to be entertaining but again, with small kids, we opted to just walk around. I was fortunate enough to happen upon Henry Moore's sculpture in the yard - so that was my little encounter with world class art in this trip. However there appears to be more art scattered about in plain sight if you are more curious and have the time. Of course there are several great Harvard museums in proximity which I would have liked to visit but maybe next time.


A quick word on museums - the Museum of Fine Arts in Boston is free on Wednesday afternoons for those who would like to visit. Obviously the website will provide more up to date information. Also the Go Boston card might be worth considering as it may offer savings on ticket prices. I did not research this fully since I didn't plan to buy one.

After lunch at Harvard square - plenty of restaurants - we opted for a taxi to the hotel and the friendly cabbie took us past MIT and pointed out various sights. This was a plus.

That unfortunately was the extent of our sight-seeing, though with more time we would have done the Paul Revere house, the Boston Tea Party and perhaps the Minuteman park in Concord which is about an hour away.

Again with more time, we might have opted for a day trip to Cape Cod as well.

All in all, it was a fun break and Boston being a compact city, it is easy to get around. I would advise not to drive, but to use its public transit system. The 1 day Charlie card gives you 24 hour access to the T and is about $9. And, as in any American city, food is not a problem. There are plenty of restaurants.

The front desk of the Hampton Inn provided us with a bunch of restaurant menus for local restaurants that delivered, and the Cambridgeshire Mall was a short drive away and it had some pretty good restaurants along with a decent food court. While there is a parking charge, we didn't find it excessive.

Also, we found the souvenir carts on Long Wharf offered the best price for caps, t-shirts and other memorabilia though I rued not having purchased it here and ended up paying more.