All posts by glyphic

General, News, Politics

There’s no shame in walking away

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Apparently there’s a growing number of people strategically defaulting on their mortgages. Or, at the very least, there’s a growing fear that this is happening. For some commentators, this is a sign of low moral fiber, that the strategic defaulters are somehow breaking their word, losing their honor, etc.

Bullshit.

Housing loans are not based on the belief that the borrower will pay the money back because his honor is at stake. They are based on a contract, which spells out exactly what the lender can do if the borrower stops paying back the loan. The lender can choose to take the house and sue the borrower for the difference between the house’s value and the loan amount (unless it is a non-recourse loan).

There’s also this refrain of unease that not only is the decision to default immoral, but it’s just too easy and trivial to do. That the borrower somehow escapes punishment-free for buying too much house or getting a terrible loan.

But losing your home and getting sued is not a trivial thing. Not to mention the massive hit your credit score will take. For the borrower who defaults, it means that credit will either be unavailable or offered at exorbitant rates. Moreover, employers and landlords often do credit checks prior to hiring or renting, which will further limit the borrower’s options.

Nor is it necessarily easy! The lender has the option to take the home, but no obligation to do so. If there’s a glut of inventory in a particular submarket, a backlog of defaults to process, etc., the lender can choose to send nasty letters to try to get the borrower to pay, but may hold off on actually seizing the property. In the meantime, the borrower still owns the property and any liabilities that go along with it.

Finally, there are those that mention other effects of the foreclosure, such as declining house values and higher borrowing costs within the submarket or economic cohort. But aren’t these effects the natural outcomes of a market? We are coming off a 7 year bubble; houses are going to go into foreclosure, prices will drop, costs will increase, and to expect anything else is insane.

The bottom line is that the decision to take a loss, just as the decision to purchase, should be evaluated rationally by the individuals involved. There are a lot of things to consider beyond the value of your house, the amount of your loan, your monthly income, and the monthly expenses, but morality is not one of them.

General

iPad for YourMom

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The iPad is the answer to your prayers. The funny thing is, it’s the answer to your other prayers.

You’d been hoping that the iPad would do for the niche occupied by netbooks what the iPhone did for cell phones. You were hoping for something revolutionary, something that expands and changes definitions, something that becomes the bar against which every other device is measured. The problem is, it’s just a device. A large iPod Touch. No camera, no GPS, no SD slot, no USB slot, no third-party apps that don’t go through the App Store’s hoops and hurdles. How do you play Rush Poker on Full Tilt on this damn thing? You don’t. No multi-tasking? So either you are on IM, or you are reading email, or you are browsing the web. But not at the same time.

What you’re forgetting–what I forgot–is that this isn’t for you. It’s for your grandma, who’s never owned a computer. Or your mom, who calls you every few months because she’s got another virus or spyware and she only knows this because every time she goes online a dozen ads and porn sites load in popunders. With the iPad, you can get grandma online, and stop being tech support for your mom. Buy the iPad 3G, pay AT&T the $15 a month (with her credit card), and forget about everything else. It’s easily worth $629.

News

What price for safety?

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I don’t really have a strong opinion about the latest proposals to keep us safe from terrorists on airplanes.

However, I thought it might be worth noting that according to the NHTSA’s Fatality Analysis Reporting System Encyclopedia, there were 37,261 traffic fatalities in 2008. For the prior 14 years, this number was north of 40,000 annual fatalities.

As far as I know, there hasn’t been much discussion about these numbers. Maybe it’s because our fatalities per 100 million vehicle miles traveled has been dropping over time, and we think that having fewer than 2 fatalities per 100 million vehicle miles traveled is an acceptable loss.

Could we apply this acceptable loss rate to air travel and reap the benefits of the recovered productivity?

Or should we strengthen our traffic laws and their enforcement so that we get traffic fatality numbers below the omg threshold?

Useful Stuff

Five email addresses

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With all the online transactions you’re making and all the spam, phishing, and malware that’s out there, using multiple email addresses to separate your email into different buckets can help keep things secure, or at least easier to manage.

Work

Use your work email address only for work. First of all, it’s company property, which means you have no privacy whatsoever. Your messages may be used if the company gets involved in some kind of legal matter or is looking for reasons to fire you with cause. Plus, you can only access your messages while you remain employed by the company. If you do leave your job, you’ll run into a big hassle when you try to make account changes on a lot of websites (which often confirm the changes by emailing your primary email address).

Money

Use a separate email address for important things like your bank, credit cards, cell phone plans, and utilities. These are the kinds of things where someone with access could take money from you, run up some fraudulent charges, or affect your credit score. Separation protects you from yourself because it’s much less likely that a separate email address will get phishing emails claiming to be from your bank, which means you won’t install malware or enter your credentials on a phishing site. If this address somehow does end up on a spam list, it’s relatively easy to set up another account and update your account details on a limited number of sites, as opposed to every single site you’ve ever signed up for.

Purchases

I would separate purchases from the banks and utilities since this address will be more widely distributed and the level of security on commerce sites is uneven. Amazon is secure, Pa’s Widget Shop is only probably secure. Worse yet, some of the sketchier commerce sites might rent or sell their email lists, especially if they get into financial trouble. Some of the poker and gaming sites definitely fall into this category: most casino sites, defunct Party affiliates, and third-tier poker sites that have no hope of being as successful as Party, Stars, or Full Tilt.

Personal

This is the email address you use for all your correspondence with real people. When you get an indication that you have new mail for this address, your brain should get a double shot of neuro-chemicals and become very excited. Separation here protects you from yourself and your friends. Unfortunately, your family and friends will give your email address to a spammer unwittingly at some point in their lives. Fortunately, you’re not expecting non-personal emails at this address and can quickly identify what is spam and flag it.

Other

Use a fifth email address for everything else. As time goes by, you might see a category of websites that merit a separate email address (e.g., poker sites), but for now, all the non-critical stuff can go here. This is the account that you use to sign up for anything and everything, so it’s definitely going to get slammed with crap. But that’s ok.

For those of you who are uber-paranoid, OCD, or otherwise troubled, you can take all this a magnitude higher by registering your own domain and setting up a separate email address for every website you interact with.

Rant

Half of all marriages end in divorce

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Or do they?

Nationwide, about half of all marriages end in divorce.

via Movement under way in California to ban divorce – Yahoo! News.

I’m really sick of hearing this “fact” being passed around. Fortunately the AP article cited a source for this data so that I can attack the reporter’s stupidity:

* Number of marriages: 2,162,000

* Marriage rate: 7.1 per 1,000 total population

* Divorce rate: 3.5 per 1,000 population (44 reporting States and D.C.)

Source: Births, Marriages, Divorces, and Deaths: Provisional Data for 2008, table A

via FASTSTATS – Marriage and Divorce.

So, let’s see… 3.5 divided by 7.1 gets you 49%! Half of all marriages end in divorce.

Let’s try that with some other numbers:

2.4 divided by 4.3 gets you 56%! Over half of all births end in death.

Of course, the reality is that 100% of all births end in death, and there’s no simple statistic you could calculate for divorce.

Here are some descriptive statistics that you could try to get:

  • For all marriages that occurred in 1980, what percentage were still intact, ended in death, or ended in divorce in 2005?
  • For all people who died in 2000, what percentage were ever married and what percentage were ever divorced?
  • For all divorces that occurred in 1995, what were the mean and decile number of months/years the marriages lasted?

But what does any of this mean for your marriage? Probably nothing.