Archive for the 'Thoughts' Category

[Thought] Presidential Candidates’ Obligation

Posted Under: Thoughts

It just crossed my mind that presidential candidates have always been able to propose whatever plans during their compaign and once elected president, do whatever else the heck they want. Doesn’t that constitute as lying? It seems to be the current trend of recent election.

Because of this, it is only logical for the candidates to say whatever it is that gets them the most votes. It is in their own best interest to do so. They would be stupid to do otherwise.

It just sucks to be the people because they will be stuck with the same president regardless. All we can really hope for is a president who feels a twitch when he sees child suffering or feels like barfing when he hears children being molested by people who pray to their deity. But hoping is too passive. I propose we implement a contractual binding to hold the candidates to their words upon presidency. I’m sure they will be more cautious about shooting spits across the floor. After all, this is only integrity, something that every president should have.

[PF] Mortgage Bailout and Rate Freeze, Government Comes to the Rescue?

Posted Under: Personal Finance, Thoughts

Based on current news, the federal policy will help a selective group of subprime homeowners by freezing the rate for a period of 5 years applicable to those who are still on time with their payment but could not afford a rate reset. In a sense, the selectiveness of this plan is good news because the less government intervention the better, and it means limited government involvement with a free market that badly needs to correct on its own. Nonetheless, the concept of a government supported bailout is still scary, no matter in what scale. Notice I said concept.

Let’s walk through some implications that I had learned.

Promoting Irresponsible Spending, Investing Behavior

Let’s be honest. People who are truly responsible are not those who cannot afford their mortgage. People who are responsible would learn and understand what they are getting themselves into and buy a place they can afford down the road. These people who took an ARM made a bet, whether they think of it this way. Any betting involves risk, just like investing in stocks, starting a business, or gambling in casino. Now that they lost the bet, are they supposed to be able to kick, scream, whine, and complain to get away with it? People who lost in casino don’t get saved. People who bankrupted on their own business don’t get saved. Why this case? Sorry to sound cold-blooded but tough love is sometimes best to teach a lesson. Without consequences, it is difficult for people to learn responsibility, like how we teach kids. If they provide a bail out in this scenario, they may as well bail out people who lost money on stocks, lost money in business. Heck, they should even bail out those who are defaulting on their car loans. After all, we need to “protect the American dream”, and last I heard, that includes owning a McMansion and luxurious vehicles. And what lesson? Who needs to learn anyways?

Repurcusion for Future Home Buyers

Banks are not the owner of the money they lend out. They receive those money from lenders who are looking to receive return base on interest rate. If the government freeze the rate, that takes away the potential return that they invested their money for. They will be intimidated by what else they government can possibly do in the future and therefore, will become much more conservative about investing in the bank loans. To secure a certain income level and to entice lenders for their money, banks will start charging higher rate for all mortgage loans. For this, let me laugh at those who will take out mortgage in the near future. You just got screwed. Oh wait, I’m one of those people… crap!

Punishment for Taxpayers

This is speculation, but the government may end up paying some lenders, not the banks, who actually own the loans to compensate for their loss. Additionally, the government or the banks will need an agency to identify qualified homeowners and process their applications. Someone has gotta foot the bill. This means taxpayers are paying, including many of us who are too responsible to take out an ARM to buy a giganto house. Banks will try to come up with ways to pay for the cost of this plan. They will do things such as increase various financial charges, invent new types of financial charges, lower saving account’s rate… So why save? All you dummies should be taking out ARM you cannot afford. Wait, I don’t have an ARM either… Argh!!!

Prolonging the Housing Bubble

We can all agree on how bloated the housing prices have gotten, especially in major cities. A correction is needed and is a healthy process for the cycle. Responsible people who have been saving diligently to afford a home will benefit from the correction that will lead to more reasonable pricing. Looks like they will have to wait longer now.

Renters will also suffer

Based on the last point, less people will be able to afford their own place due to the lack of, or a delayed correction. Consequently, they will have to rent. The demand for rentals together with sustained high housing price will lead to high and increasing rental prices, which also means less saving to contribute to a down payment. Ouch, a double whammy. I’d like to point out renters in the bay area is definitely feeling the pain of the ever-raising rent. On a side note, I guess when the government says “they will protect the American Dream”, they apparently mean they will protect the American Dream just for those who already own a house, and not those who rent. Renters don’t deserve to dream. I guess I’m stuck in reality then.

Delaying the Inevitable

Last but not least, people who need to be bailed out cannot afford a rate reset on their ARM payment now, how likely are they able to do that 5 years down the road? Their possibility for this is not high, unless the interest rate drops to something like 1% again, which very very unlikely. These people stand a good chance to lose their home to foreclosures 5 years from now still. Will the government bail them out again? I guess we will have to see.

Unpredictable Outcome and Behavior

We don’t know the specifics on who and how ones qualify for a rate freeze. Once we find out, some may take drastic measures in order to qualify. The possibility for abuse simply exists.

I’m not saying that all of these things WILL happen. They are all possible ripples that may result from the government dropping this stone in the pond. However, in the grand scheme of things, this plan which supposedly “protect people from losing their homes” will hurt everyone in more ways than one and at the same time, will “save” just a small group of homeowners only within a 5 years period. You can decide if this is worth it. I personally see more political agenda for this action than the government genuinly want to do something for the people. Now they can claim they have done something. I feel the situation is dire because our economy, and therefore our life, is dictated by a bunch of halfwits who seem to be irresponsible, lacking foresight, and high on we… I mean, greed.

Thank you for reading my commentary.

[PF] People Must Stop Treating the Symptoms

Posted Under: Personal Finance, Thoughts

These days you open the financial news section, there isn’t a whole lot of good news going on in the section.
You see news about people losing their homes to foreclosures, due to “unforeseen” results of lending.
You see news about financial and investment companies losing their pants, figuratively, due to the subprime heap of mess.
You see news about toys recalls and decrease of quality in other products, due to cost cutting.
You see news about boomers retiring with inadequate savings, due to…I really don’t know, probably a bunch of reasons (excuses).

Also in the news, people argue about what kind of policy to implement to fix each of those problems, and in some cases, bailing out those people. But I say those problems are just symptoms of a rampant issue in society. By implementing policy that solve each of those problems will only provide solutions in the short term. On the long haul, they will come back to bite us once again, and probably with a vengeance.

I say the main issue is greed and irresponsibility. People are so drugged up with greed that lead to a lot of the problems we see today. Profits, profits, profits. And with only profits in mind, people took actions in order to make profits while ignoring or denying the fact that they will be responsible for the consequence later, as is happening in the market these days.

Hence, instead of solving those individual problems, I would urge people to put a tap on their greed and blatant ignorance to responsibility. If only people can learn to exercise a bit of self-control, maintain a clear mind, practice some discipline, understand responsibility… but those are not so fun to do. Such boring mumbo-jumbo. Making quick money is so much more fun! And from observation, the market and the government seem to perfer to have more fun instead of doing the boring stuff. Looks like it’s going to be a long road ahead, so we better buckle up.

[PD] Avoid Giving Up and Burning Out by Incremental Change

I had a conversation at dinner tonight where a friend of a friend mentioned her effort on a physical training program. Unfortunately, the attempt seemed to have come to an end after 12 days. Doesn’t this sound familiar? Haven’t we all heard this somewhere before? Maybe because it’s happening all around us. Perhaps you are one of them.

This is the exact same thing when we hear about someone’s new year resolution or someone’s birthday resolution or someone’s after-doctor-visit resolution. Somehow these certain events would provide people this sudden burst of energy and motivation. Then overnight, they transform into fanatics in exercising and gym. Amazing. But these effort usually ends in desertion and is completely forgotten after a few days, a few weeks, or at most a few months. All that effort wasted, sadly.

What went wrong? People burn out quickly whenever they abruptly change their entire routine and lifestyle in order to contribute to such total dedicaion. Let’s say your work suddenly requires you to work 100 hours per week when you usually work 40. I’m sure you will burn out quite quickly. Suddenly making yourself exercise couple hours everyday of the week when you don’t normally exercise is no difference. Despite feeling good for yourself at the beginning, such abrupt change puts so much stress, both physical and mental, on you that will easily lead to giving up.

How to avoid? First, you must understand that your goal is to achieve long-term, sustaining change. You may as well not waste your time if you don’t see it this way. You will need to implement incremental change over time, by doing it one step after another. You cannot learn to sprint without learning the proper way to breath and run first. You cannot lift 100 lbs before you can lift 25, 50, 75… lbs first. So, if you never run on daily basis, maybe start running 15 minutes at a comfortable pace. Then 30 minutes, 45 minutes, with gradual increase in speed. Find a suitable pace for yourself.

However, in order to improve, it is essential that you must push yourself a little over the limit each time. Run just a little longer and faster, lift just a little heavier, despite the diffuculty, despite the pain. Move outside your comfort zone. Get uncomfortable. In the end, it’s all worth it because you want to change, to improve, which is why you are doing it in the first place.

So far I have mostly focus on the health aspect of incremental change. However, the same princple can be applied in personal development and personal finance. If you spend $2000 in order to eat delicious food each month and then you force yourself to start eating fast food or only salads for $200 a month, the likelihood of you keeping up is extremely low. Worse yet, you may rebound and start spending more than $2000 later to make up for it. Instead, you can slowly lessen the frequency of eating out, at expensive restaurants, to give yourself time to get used to the change. Eventually, you will end up spending $200 a month. Or you can start saving $50 each month, then $100 after awhile, then $200…

It is important to understand that the incremental change principle suggested here is a healthy way to create sustaining change, applicable in all areas of life. It is not the only way, but it is a healthy way. It is about making a conscious choice for every action and doing it one step at a time.

Based on the incremental change principle, I suggested to the friend, “How about slow it down and start training 2 to 3 times a week?” for which I received a blank stare on her face. I sure hope this post is a bit more well received.

[Thought] What If You Receive 1 Million Dollars…

Posted Under: Personal Finance, Thoughts

Or 5 million dollars, or 10 million dollars… It doesn’t really matter. The point is, let’s assume you receive a certain amount of money that provides you financial independence for the rest of your life.

What would you do?

First, why don’t you take a look at today’s market. See how far it’s plunged. 360 points! Everyone who has 401k and stock portfolio can probably feel it, ouch! For those of us looking at long term, it maybe less relevant, but nonetheless, my net worth is taking the hit temporarily.

The reason I mentioned that… Sometimes I feel this uncontrolled impatience inside myself. I’ll look at the amount in my saving, in brokerage, and then the amount of my loan. I look at my net worth, and I feel that it’s just not growing fast enough. I save, I invest, I contribute to 401k with discipline each month, but it’s still not growing fast enough for my patience. I want to be financially independent today. I want to be done. I want to be out of the rat race right now. And honestly? Don’t we all.

Though, I brought myself back to reality, back to my calm self and without losing sight. I think about what I would do if I do receive the money that enables my financial independence, be it 1mil, 5mil, 10mil, or 1bil…

Now I have hobbies, and quite a few of them. I have things I like doing. I want to help people. But as far as what exactly I want to do with the freedom and all those time that comes with the financial independence, I cannot say I am 100% certain, which is okay because I need go through what I am going through. The experience will continuously let me better understand the world around me and learn about myself. Only with such experience, I am what I am today and what I will be. And also more appreciative I shall be when the moment arrives. That’s why, I am and will continue to do my best, and there is no hurry. Enjoying and being in each moment, including this process, is important. There is no better place and moment to be.

As the saying goes (vaguely as I can remember it):
Every moment you spent wishing to be somewhere else is a moment of your life wasted.