Survey Says

In Seattle, coffee capital of the US... 8 computer nerds are in class (4 locals, 4 people that moved here from eleswhere, including me) - the morning beverages of choice are as follows:

2 green tea, 1 black tea, 1 earl grey, 1 coffee (the Hawaiian)

Random observation.

The next 10 years.

This is from everything I've read/followed what has happened over the last decade - time may add more details/corrections/sarcasm.

- Tech boom/bust - economic downturn.
- Government issued lots of debt to the rest of the world to get cash.
- This cash was then lent out at low interest rates to banks.
- Since the stock market wasn't producing large enough gains for investors after the tech bust, the government promoted home ownership. People viewed this as the next great investment.
- Banks which could get lots of low interest cash from the government lent to consumers at low mortgage rates.
- Easier/cheaper mortgages led to increased demand for homes, which in turn raised home prices.

(Insert note here that average wages have been essentially flat since 2000)

- Given flat incomes, people reacted to the higher home prices by taking on more debt to buy a new home, or by taking out home equity lines of credit to take equity out of their investment to buy things or vacations or whatever (essentially re-buying their existing home at a higher amount).
- Banks saw huge gains in the 'value' of their mortgage portfolios, securitized them and started trading them on that speculative value.
- Long standing income ratios and documentation requirements for mortgages were relaxed so that the banks could get more mortgages to trade. (Which required more people to take on more debt to cover the resulting higher prices)

(Reminder that wages have been essentially flat since 2000)

- At some point (November 2007 by most accounts) this cycle snapped - people started defaulting on their mortgage debt since the interest payments alone in some cases were more than could be paid back.
- As these mortgages were foreclosed upon and resold at auction the value was less than that of the mortgage.
- The securities that contained these mortgages became less valuable as a result. Investment banks then rapidly stopped buying securitized mortgages.
- Since these securities couldn't be traded for a profit anymore, companies that had leveraged to buy them started failing...

- The government realized that some former-governmental entities such as Fannie Mae and Freddie Mac, along with the companies that insured them (AIG) and some companies with powerful lobbyists or people in the administration (Goldman Sachs) were involved in these trades as well and could fail.

- So, the answer, in the form of the bailout, was to attempt to 'fix' the prices of these mortgage securities at certain levels and have the government buy them from the 'too big to fail' companies.

- Simple economics has proved price-fixing impossible throughout history, the bailout money has since been basically given to the various companes without any assets in exchange so that as they encounter margin calls they can pay their losses on these securities.

(Important note here - the bailout is financed not with existing taxpayer money, but with more government debt - we as a country are taking out debt to pay for the losses on excessive debt held by our financial institutions and citizens)

- Now this bailout is being extended to any lending institution - auto loans, credit cards, so on.

What then is the incentive to play by the rules and live within your means? If there is a huge government safety net waiting if you default on your debt, why not buy the Lexus and a huge house...

There has to eventually be some huge unintended consequence of all this debt, now proxied to a national level... it's just a matter of what and when.

I thought at one point it might be currency valuation... US dollar losing serious value compared to other currencies, but it seems to some degree other countries made the same mistakes as the US so that's pretty stable for now.

What else could happen? Don't know... though it will be interesting when it happens I'm sure...

Update

So, it's been a month or so - what's been going on?

- The end of October was pretty quiet - went to a hockey game (local minor leagues team like the Charlotte Checkers - similar atmosphere too) - first event at Key arena - interesting building - too bad it is underutilized now.

- Peggle is a damn addictive game - simple entertainment - follow the bouncy ball - I think the physics model should include air resistance though.

- This weekend there are a couple of concerts I'm interested in - probably will only get to one of them though - Helio Sequence - should be an interesting show.

- Currently reading "On Food And Cooking" by Harold McGee - it's basically the next step in food-nerdiness after reading Alton Brown's "I'm Just Here for the Food (v2.0)" - gets into more of the history of different primary ingredients and what chemical reactions actually define 'cooking' of those ingredients. It's a bit of a textbook style approach, but still very well done and a good balance of entertaining and practical.

--------------- Nerd thoughts warning -----------------

- Ordered a single ended triode tube amplifier kit - should be interesting to see if I can still solder/read resistors

- As an aside to that - I have some sort of odd engineer's affliction... For the last 5 years I have been using a Sony ES amplifier - which worked great and was technically very nice - discrete power circuits per channel, very low distortion, so on... but I have always had this feeling that I was wasting it - it was a 5 channel amp with different sound environments and all kinds of other 'home theater-y' BS - I currently have 2 speakers, which are small - I didn't need all the technical overhead of the ES - so I put it on craigslist. So then I find a solution, which is more expensive, technically less sonically precise, and I have to put it together myself - just so that I will have a pure single input, stereo output, amplifier - there will be less 'waste' in the final application.

(Technically over time it will pay for itself in lower power usage as well, but that's beside the point)

It's an odd 'retro-technology' interest I have... mechanical watches, tube amplifiers, single speed bike...

All are 'old' - there are newer technological solutions which do more, more accurately (Quartz watches, solid state amplification, deraulliers). I guess I just don't like excess features... more for the sake of more... I'd rather apply modern engineering and manufacturing to old technology to get a solution that is accurate enough for everyday use and more, ah, human-understandable, than newer technology.

Perhaps modern life is more of a black box ( http://en.wikipedia.org/wiki/Black_box ) world though - the watch tells the time until the battery dies, then a new watch or battery is purchased. The 'stereo' makes music until a newer model with more 'power' or more features becomes available, so on.

For some odd reason I have to know the how/why of everything I use in normal life. And once you find out the how you see the questions arise - why does a watch have to have a battery - why do stereos have 7 channels when music is still only recorded in stereo (vast majority of music that is - however yes, some people watch lots more movies than I do) - why buy convenience food when it's possible to make something better tasting and healthier in less time... so on.

While I concede completely understanding any of these examples down to their minutiae is not practical either, it is a bit enlightening to at least open the boxes that one encounters in everyday life.

nerd time

http://www.rockthelist.com/2008/10/23/the-40-greatest-uses-of-the-super-mario-theme/

Thoughts

/News/Food/

It's local pear and apple season again - time to overdose on fruit.

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/News/Weather/

The rainy season has returned mostly - glad we were able to fit in a final camping trip at the end of the season before the clouds returned - larger pics are at www.maslows.net:12110/rainier/

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/News/Economics/

Earlier in the year I made a few semi-educated guesses about the economy and invested/shuffled the 401k accordingly... let's see how I've done so far.

- with regards to the 401k - moving a vast majority of the equity positions into money market funds was smart - even small % gains are better than nothing.

However I did leave a small bit in equities as an experiment and it has been ugly - pretty much no sector has escaped the downturn and a couple have seen ~50% declines - total amount of value 'lost' year to date has been about 1.5 paychecks - academically bad, but not so in the long term

- real estate - sold the house and have stayed as far away from the housing market as possible, economically - this has been good - and until the rental to monthly payment numbers wherever I live are comparable I'll hold this mentality

- cash - currently just living frugally (no surprise to anyone that knows me I guess) and putting the remainder into higher interest online savings accounts - this is the best use of money right now in my opinion, as the trend is deflationary - just need to be aware that it will flip eventually and not losing value in real terms will matter again

Things that have surprised me - Europe seeing as much downturn as the US - I expected their market to be more conservative than the US banks. As such I strongly considered opening a Euro or CHF denominated account earlier in the year, but if everyone's market weakens together there isn't any advantage to the other currencies. The dollar has strengthened very slightly vs. those two currencies since then, but I think it's just a question of relativity.

The current news/fear about the economy - it's not that bad - if the government would have let the first few banks go bankrupt and actually followed through with a quick and orderly valuation and resale of assets at market prices it would have prevented where we are now. This is the root cause of what is paralyzing the market. No one trusts that the other person's asset valuation is correct or that they are actually solvent. So lending slows and confidence and stock prices decline. How to fix it - throwing money at the banks to prop up 'mark to model' asset values is not the answer - correct and transparent asset valuation is the answer. Let bankruptcy courts sort out the details - they're there for a reason.

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/News/Politics/

Neither candidate has given a good answer as to how they'll deal with the economic mess. Neither has really acknowledged that their grand plans of energy independence and lower taxes will not be feasible given the debt load of the US and its nearly-nationalized banks.

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That's about all for now - now that the clouds have returned I'll probably pick up on the nerd projects I talked about earlier in the year - make a couple speaker enclosures, possibly build a tube amp, play some computer games, read more of the classics, learn a new language, so on... need to be productive with this free time.

A slavic german cooks traditional french soup:

So a couple years ago Allison gave me Thomas Keller's Bouchon cookbook. Since then I've read it but only made um, 3 things from it (I'm not big on recipes). However the french onion soup worked out so well I really should dig deeper into this massive book for more inspiration.

And it is more inspiration than actual instruction - as the recipe spends about half a page on actual ingredients and procedures, but an additional page and a half on the quality aspects of it - like where the flavors come from and why even though it sounds interminably long, it is important to cook the onions in the butter for ~5 hours over a very low heat (which essentially turned the Walla Walla local onions into what you'd call candy in a blind tasting - they were that sweet)

I do wish I made the stock as opposed to using store bought though - it didn't add much to the flavor profile of the soup. The onions dominated the soup, and combined with melted emmentaler and local aged cheddar cheese and some croutons made from homemade bread it was an excellent dish.

It's actually really easy and cheap (under $20 for 6 servings - about $3 per serving!) to make - especially if you don't mind leaving a pot unattended on the stove while the onions very slowly melt.

If you have a dollar denominated savings account, read these.

http://krugman.blogs.nytimes.com/2008/09/20/no-deal/

http://calculatedrisk.blogspot.com/2008/09/some-thoughts-on-bailout.html

Seems that they're just throwing money at the problem rather than addressing the solution. One last huge giveaway to the favored corporations/supporters before the election I suppose. It's a cynical outlook, but given the information at hand, it may not be far from the truth.

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Oh, and Lucky-Charms-Treats, in the same approach as Rice-Krispy-Treats, is a good idea in theory, but the cereal is too dense in practice. Still tastes good, but has the consistency of a dense melty granola bar rather than a Rice-Krispy-Treat.

How to spend it.

Say you had a trillion dollars. It's a nice round figure. And say you were in a position of leadership of a country.

How would you spend it?

- Destroy some bridges and bunkers on the other side of the world, then oppress the citizens of those countries for a decade?

- Give it to your friends so they can save their failed financial institutions (which they ran into the ground) and still earn their year end bonuses while simultaneously screwing over the individual shareholders and taxpayers?

- Universal healthcare for all citizens of your country, along with lots of nice brand new hosptials?

- Repair all the 50+ year old crumbling transportation and utilities infrastructure with environmentally responsible and sustainable options?

I'm rather disappointed that given this situation the former two choices won out over the later.

Why pay taxes or give time and effort to support the system that consistently makes these decisions? There has to be a better way.

I know I know - all these bad choices haven't affected day to day life yet - though yet is the key word. Other countries have lived through rough financial times and come out the other side intact - but why with all the productivity/prosperity that is possible is a rough financial time even an option for this country.

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In that day to day life - http://www.skilletstreetfood.com/ - 3 people in an old Airstream trailer serving up decent lunch food in and around downtown Seattle - different location every day - many local ingredients (the berry crisp was great) and the food is well prepared overall (fried chicken was too greasy but still flavorful).

Also the local Greek Orthodox church is holding their fall festival this weekend - looking forward to the spanakopita.

One of those 'Oh $#!^ moments

So - when is the most inconvenient time to drop a bottle of [RED] wine...

Well, when it is full, so that the splash effect/spillage is greatest...

How about when you're on a hard surface floor... like a kitchen floor...

Add in a large appliance - say, when you're putting it in the refrigerator...

And that adds up to quite the mess to clean up - wine and glass under the fridge, splashed inside the fridge, up on the wall - 750mL for paper towels to absorb...

Fun times.

At least it was only 3 buck chuck.

Is it funny or sad or scary that this is a publicly stated point of view.

A few links to the same issue:

- http://www.huffingtonpost.com/2008/09/02/palins-church-may-have-sh_n_123205.html
- http://thinkprogress.org/2008/09/02/palin-iraq-god/
- http://news.yahoo.com/s/ap/20080903/ap_on_el_pr/cvn_palin_iraq_war

We've just seen the effects of 8 years of ignorant/evangelistic leadership... is it a good idea to have someone like this behind a rather elderly presidential candidate?

Summer

Lack of posting has been due to the wonderful temperate August weather out here. It's been sunny and mid 70's for the last week or two - brilliant! Lots of walking around the city - headed to Mt. Rainier this weekend for some hiking/camping and to give the new camera a good workout.

Weekend

Parents visited last weekend - quiet week since. Was rainy for a few days. Now it's brilliant again.

Looking forward to just walking around the city for a few hours after work... maybe get a cappuccino, sit on a bench and look at the mountains for a bit. Sounds like a fine way to spend an afternoon.

Financial Nerd Time

Inflation... the current economic lightning rod of the media. People see oil/gas prices rising, food costs going up as a response, so on. However does this matter, and is this a bad thing?

First point - there are many definitions of inflation, and many different ways to calculate it. Are they referring to the expansion of the money supply (more dollars in circulation thus diluting the buying power of $1) or the change in prices of consumer goods (stuff costs more this year than last year) or one of the other measures (money supply including debt or wage inflation, so on)? What measure really matters to the individual?

It seems from the normal media that they are focusing on the consumer price index as a measure of inflation. ( Most recent numbers are here: http://www.bls.gov/news.release/pdf/cpi.pdf ) Basically - take a number of standard goods and compare prices month to month, year to year. This is commonly thought of as the price of a gallon of milk and loaf of bread measurement - what cost $5 last year now costs $6, thus there must be inflation.

However what if, over time, consumer prices go up but average wages do not. Say average wages were $10/hr and the milk/bread combo cost $5. Fast forward 5 years and assume the same job pays $12/hr but the milk/bread combo now costs $7. Wages have increased 20% but the prices of the standard consumer goods have increased 40%.

Will this person still buy the same gallon of milk and loaf of bread, or will they, over time, find those goods too expensive and just not buy them anymore? Should the prices drop to fit the wages, or should the wages rise to fit the prices?

It seems to me that wages are more the determining factor in inflation, and by all statistics I've seen, on average, in the US, wages have increased over the years, but at a rate no where close to the reported consumer price inflation levels. (Quick summary - over time nominal wages are up, real wages are down)

Over the last 5 years or so people have been able to offset this wage deflation by using debt - home equity and other cheap credit. However eventually it was realized that the actual money had to come from somewhere, and the banks and now the individuals that used debt are trying to figure out where to find some.

The answer for part of it is the federal government via taxpayers (or more accurately: debt to be repaid by future taxes) - thus the bailouts to various large financial institutions and generous lending terms to others. The homeowner assistance act and various economic stimulus checks were other tiny federal interventions in the overall market.

However statistically the actual money supply hasn't increased at a the same rate as the CPI either (http://en.wikipedia.org/wiki/Money_supply#United_States) so this isn't where the money is coming from either. There's a lot of new debt, but that is being bought up by our trading partners (mostly as political goodwill it seems at this point, as demand for their products will drop due to these problems as well)

All signs are pointing to the recent price hikes as the main measure of inflation that is notably above normal... what if prices were to drop?

Would businesses that expanded to meet the illusory demand increases over the last decade lose money- yes, would some that expanded too far fail - yes. Would businesses that had more stable, longer term projections be affected - yes as their business has probably been better than average over the last few years, but they would not have nearly as bad a time returning to business as usual as the expansionary ones.

It seems to me that left alone the market will correct all of these recent debts/excesses on its own. All this government intervention is doing is drawing out the period of the correction (with the assumption that the negative effects will be less severe, fewer businesses will fail, etc... though this is a contentious point on economics blogs) and using lots of debt/future earnings of American citizens, to do so.

Is this inflationary... in the short term no, I think we're looking at deflation in the short term. In the long term... yes, the US has many debts it must pay back... but over what time period do they have to be paid back, and who will call them in and when?

Quiet weekend.

Still on the Tues-Sat rotation - ran some errands last night - curry chicken/spinach/rice for dinner - fell asleep early - I'm old already.

Cloudy Sunday - probably going to walk around and check out some other apartments in the city - see if it's worth getting an older or smaller place to save a couple hundred a month. Probably not, but it's worth exploring at least. Good day for a cappuccino in any case.

Still undecided on what to do about advanced degrees, career options, where to go next. I just have this sense that I should do something, though what that is... no clue. As for schooling: business... it would be a good line on the resume, but as far as a path to interesting jobs... limited. More engineering... lots of work, perhaps some reward in this part of the country... and very hard to do part time. History... I read enough of it as it is... not sure where that would lead to other than writing about technical topics... which wouldn't be a bad side gig to computer nerding.

On the other hand... interesting side jobs... I'd need to find something that I both like to do, is a rather niche market (high margins) and is productive - i.e. - rebuilding old german car parts (suspension bits, alternators... could set up a webpage with order forms and all that stuff) - or making some kind of high margin food item to sell at a farmer's market on saturday mornings... not sure how to approach this yet, but there are some ideas floating around.

Vacationing

Tim and Stephanie visited this past week - so I took a few days off to tour guide/travel around the region some more. And get them addicted to Piroshki Piroshki.

Notes:

Hurricane Ridge - been there 3 times, it's been an entirely different place all 3 times. First time in April there was near 10 ft. of snow on the ground. Second time over the 4th of July there was moderate snow cover though patches of dry ground with small flowers. Latest time at the end of July there was grass and normal trail hiking and tons and tons of traffic.

The Hoh Rainforest - great place for an overnight camping trip - bit far for a day trip. Seems it would be better in winter/early spring as it would be greener - lots of the mosses were dormant presently. The Hoh river looked great at this time of year though - very light blue due to glacial meltwater.

Portland - still weird. The Japanese gardens were greener than earlier in the year - very tranquil place. Found a locally produced Absinthe - for better and for worse you can sample it along side a traditional French absinthe - it's perhaps smoother but more candy-tasting - less floral. And the necessary maple bacon donut. Since the original sampling I'm not ashamed to bring home-cooked bacon to our local donut shop and just buy a maple bar. It's that good of a combination.

Vancouver BC - still cloudy/rainy even in August - oh well, even more excuse to visit the art museum. Interesting exhibit on comics/manga/animation - not a culture I'm that familiar with outside of Pixar/Family Guy, but it explained some of the history behind the different media. At least it cleared up for the final day and a half - being able to walk around Stanley park on a clear day is worth the trip on its own.

A border crossing between WA and BC... what's the point? The roads change to km, but that's about it. Just holds up traffic... for an HOUR AND A HALF... state DMV offices are better run than this. really.

Back to the Tues-Sat work rotation. It's not bad - the Saturday calls reminded me of my previous job - rather ragged people having to implement changes on the weekend after working all week. Even if they're getting paid overtime it's not worth it. I'm really glad now to have two defined days off where I don't have to think about work at all. Even if it's Sunday/Monday - one day for errands, the other for relaxing... works out really well.

Headed into a quiet week and a half around the city before the parents fly out for a long weekend and a Prairie Home Companion show.