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Sunday, September 29, 2013

Retirement Calculator 2.0

NOTE: WORK IN PROGRESS -> Normally you wouldn't see this in an unfinished state, but I need it published so I can debug the javascript.

It's not hard to create a mathematical formula to create a retirement calculator. However, every calculator I've come across in the internet has a few missing features. There hasn't been one with a complete feature set. This is my attempt to provide the best, most comprehensive retirement calculator available.

If you think my calculator is missing an important feature, let me know in the comment section below! I'll try and incorporate into my formula as soon as possible.

Note: Please only use integer values in the input fields. Good software developers are supposed to handle user stupidity/error, but I don't want to be a good software developer for this page.

Features to be added: Inflation, Pay Increases, Yield

Starting NW   

Contributions   
Monthly:    Yearly:

Time (years)   

ROI (annual %)   





Saturday, September 28, 2013

Real Time With Bill Maher: Counterpoints (9/28/13)

We got a great episode tonight. The panel was very strong and many substantive issues were addressed. But there's a lot of spin, misconceptions, and rhetoric to clear up. I'm anticipating this to be a long post, so let's dig in.

Bill Maher: The Republicans are holding the government hostage, are they not?

Robert Reich: Extortion would be a better term. The GOP wants to end the government.

The government is not being held hostage. And the GOP doesn't want to end government. The media is doing a disservice to the public by portraying one possible outcome of the debt ceiling negotiations as a shutdown of the government. The government isn't going to shut down if the debt ceiling doesn't get lifted.

The continuing resolutions that have funded the Federal government for the past 7 years stipulate that the Federal government has to spend a specific amount of money for a specific amount of purposes. Last year, it amounted to spending 3.5 trillion dollars. The debt ceiling fight is crucial because the Federal government is operating under a structural deficit, which means that the current tax code is unable to raise enough money to pay for the government's spending. That means the Federal government has to borrow money from the public to make up the shortfall.

Last year, the government was able to collect 2.5 trillion dollars worth of tax revenue. It had to borrow 1 trillion dollars from the public (individuals, corporations, foreign governments) to fund the rest. If it can't borrow, then the Federal government simply goes into triage mode. This year, our projected deficit is going to be around 800 billion dollars. So for every week that the government doesn't raise the debt ceiling, it's going to have to reduce payments made to its obligations.

That means haircuts to Social Security checks, government employee pay and benefits reimbursements, reductions in funding and grant money doled out by various agencies, etc. It will certainly shut down non-essential parts of the Federal government (park services, museums, etc) and severely curtail the operational effectiveness of the parts that are still working. That doesn't mean ending the government.

It is inevitable that deal will get hammered out and the debt ceiling will be raised within the next 30 days or so. When Social Security checks start bouncing, every elected representative in Congress will get millions of angry calls from old people, the demographic most likely to vote, and they'll fold like a house of cards. Nobody is being taken hostage. The GOP isn't extorting the country by playing brinksmanship.

Bill Maher: How can the GOP, which considers itself the stewards of the economy and the ally of the private sector, engage in all these actions that cause markets to freak out?

Short term pain, long term gain is the answer to this question. Markets always move up and down in reaction to this or that. But if the Republicans can hammer out a budget deal that puts the Federal government on firmer fiscal ground in the future, the economy will be in a better place.

Robert Reich: The President has reduced the debt in half, the fastest it's ever happened. The last deficit was just 3% of GDP. The deficit is not the problem.

Matt Welch: We don't have a deficit problem, but we do have a debt problem.

This is the sort of inside ball and statistical bullshittery that makes regular people tune out of politics. Reich is correct in the fact that the current deficit isn't a problem. But Welch is correct that we still have a debt problem. Deficits add to the debt. And even though our deficit is shrinking quickly year-over-year (reflecting a combination of tax hikes, the budget sequestration, and an improved economy), the debt we've already accumulated is the highest it's been in 50 years.

The cost to service all our debt varies year to year based on interest rates set by the Federal Reserve. In a low rate environment, it doesn't cost much. Last year, net interest payments made on 11 trillion dollars worth of net public debt amounted to 220 billion dollars, or 2%. As a percentage of the Federal budget, it was just 6.2%. But when interest rates rise, the Federal government is going to have to pay a much larger amount to service the debt. If effective rates rise to 5% (the historical average), payments jump up to 15% of the budget.

The government is trying to thread the needle by timing the economy. If it fails, times are going to get a lot tougher.

Monica Mehta: It doesn't matter whether it's Bush or Obama in the White House. Both parties are only capable of governing by ideology and not by consensus.

Bill Maher: It's a bit naive to think that either party could govern by consensus.

It's funny that they say that, because the government is running mostly by consensus. The current budget/debt fight is over 200 billion dollars in the 3.6-3.8 trillion dollar range. That means the Republicans and Democrats agree on 95% of the Federal government's agenda. Because a deal will be reached before anything serious happens, a neutral observer would remark that the Democrats and Republicans are very similar to each other in practical terms.

Modern day politics revolve around blowing up the smallest differences between the parties and then getting the electorate in a rah rah mentality to get them to the voting booth. Although there are definite and substantial differences in each party's ideal America, government is not about operating based on what the ideal should be. It's about operating based on what the reality is on the ground right now.

Big sweeping changes only really happen when there is a consensus. And right now, the American people aren't in the mood for either party's ideal America. They want what what they currently have. And that's exactly what they're getting.

Bill Maher: I don't understand why people who aren't in the 1% vote Republican.

Low taxes are always popular, even if it benefits rich people more than others. And some people aren't as concerned about keeping score. But that's overly simplistic. The real answer is most people have an instinctual understanding that it isn't the next politician's agenda that helps them out the most. The number one predictor of economic success in America is who your parents are, not whether you live in a red state or a blue state or if you vote Democratic or Republican. It's simply who your parents are and whether they were educated professionals or not.

In any given individual's life, their lot is basically predetermined. The delta between a Republican government and a Democratic government is not going to change that. So that means people will vote based on very stupid reasons. Because, let's face it, the government essentially runs itself and the politicians are simply a different class of celebrity. That's why Texans will vote for an entertaining firebrand like Ted Cruz and why Democrats like Bernie Sanders. They're entertaining and they are harmless.

Reich: Median household income is down, the middle class is getting screwed. And all this is happening because we're getting away from what we had in the 3 decades after WWII: high taxes on the rich and a unionized workforce.

We also had a country that was over 85% white, more religious, more likely to be married, had more kids, were more racist and homophobic, didn't have cell phones or computers, women in the workplace was frowned upon, and everybody drove either GM, Ford, or Chrysler barring the occasional oddball/poor person who drove AMC.

None of that has anything to do with the supposed golden age of the American economy. WWII left every other developed economy in ruins, which means that labor had a lot more bargaining power in the marketplace. Gas, in a gasoline powered economy, was also much cheaper. And the country accumulated a vast amount of savings as a result of the forced savings programs enacted during wartime which then facilitated a massive consumer spending boom.

We are never going to go back to the era where an unskilled laborer had a good chance of getting a job that could support a nuclear family on his own. And no other country today can boast of that state of affairs. It doesn't exist in either Europe or Japan and it certainly doesn't exist in emerging markets.

Tuesday, September 24, 2013

Okay, Enough Complaining

Reading back on some of my articles, it's hard to deny that there are strong undercurrents of frustration, disgust, exasperation, and condescension. Now, I have no doubt that those undercurrents will continue in my future writing, but it's also time to start offering more concrete advice.

You'll see what I mean in the coming weeks. Stay tuned. Good, actionable stuff is in the pipeline.

Wednesday, September 18, 2013

The Newsroom: Counterpoints (9/15/13)

Sorry for the late post. I had a really busy weekend and I just didn't have the time to watch The Newsroom on Sunday night. Just got around to it today and I'm doing a hasty counterpoints article.This might be the very last Newsroom counterpoints post I'll make. HBO hasn't officially announced whether it wants to renew the show for season 3 and the ratings haven't been particularly kind to the show. With that in mind, let's get to the season 2 finale (and possibly the series finale).

1. I'm a Republican who believes in national security and free markets. My party has been hijacked by social conservatives who want the term "Republican" to encompass things like opposition to gay marriage, teaching creationism in schools, fighting the drug war, opposition to immigration reform, etc.

This is the standard refrain that Sorkin resorts to when the show explains why Will McAvoy considers himself a Republican. This makes perfect sense. It is a valid point. There are many people within the Republican Party who feel like the party has been captured by the social conservative wing. This has always been an issue at the forefront of the libertarian wing of the GOP, best articulated in a book written 7 years ago.

To be honest, based on the arguments that McAvoy has expounded, it's definitely acceptable to say he is more along the lines of a Reagan Republican (pro-business, pro-military) than the current species found within the Republican genus. But this is Sorkin's show. And so he can have his main character as a Republican while portraying the Republicans harshly because the show is not Republican. McAvoy is one character who anchors a show that we only get to see snippets of every so often.

There were 9 episodes in the season, and we saw maybe half an episode's worth of the show within the show, News Night With Will McAvoy in real time. The timeline in the show itself is about a year and a half. So unless HBO wants to produce hundreds of episodes of News Night so we can statistically analyze the bias in the show, there is no point in saying that McAvoy isn't a Republican. If he says he is we have to take him at his word until proven otherwise. That's the way TV works.

2. Suddenly tort reform seems like a very good idea.

This throwaway line by Don is important because it touches upon a standard Republican refrain: we need tort reform, especially when it comes to corporate malfeasance and health care. Because the biggest corporations are worth hundreds of billions of dollars and each lawsuit can be a PR disaster waiting to happen, most large companies will quietly settle any lawsuit (no matter how frivolous) because it isn't worth it to fight it in court.

If the show truly wanted to mirror reality, both Leona and Reese would have instructed the lawyers to settle with Dantana for an undisclosed sum and no admission of guilt. It wouldn't have even been a question. But again, this is TV and the characters within it get to take the principled stands that the vast majority of people couldn't stomach in reality.

Court battles are long, costly, and can significantly dent a company's reputation. The best case scenario is that they spend millions of dollars over the course of several years fighting for exoneration in which there is absolutely no upside for the company. Worst case scenario is that they lose, spend more money paying off Dantana, and have a slow burn of negative PR crop up every time major legal deadlines loom in the case.

Companies will always settle if given the choice.

3. Republicans generate disproportionately negative press.

It sure seems like it, doesn't it? We had a GOP Senate candidate go on the record with the phrase "legitimate rape". I don't think there was anything as comparable on the other side of the aisle in such a high profile position. Looking back at key battleground Senate elections in 2010 and 2012 and it became quite clear that the GOP fumbled away Senate control due to the primary process churning out unelectable/unpredictable candidates for the general election.

Akin, Angle, O'Donnell, Mourdock all lost races that a generic Republican would have most likely won because of idiotic statements, inept campaign management, and a general perception that they are too "out there" to be a United States Senator. Primary challenges from "fringier" candidates also likely weakened Republican candidates in other races.

In the 90s and into the early aughts, the Republicans seemed to be much more organized, centralized, and disciplined while the Democrats embarrassed themselves in controversy after controversy due to embittered grassroots support. Well, the script has finally been flipped.

It's too early to tell whether the GOP will go all-in on the white vote for the '14 midterms or try and fracture the Democratic coalition via Clintonesque triangulation. I'm in favor of the latter, because the former will only ever work in midterm elections (with its power slipping eroding with each and every year) and never in the general.

4. Damn it's good to be a man.

Amen.

Saturday, September 14, 2013

Real Time With Bill Maher: Counterpoints and Retrospective (9/13/13)

Well, after a month and a half off, Real Time came back on air. The news cycle continued without it, so they had plenty of things to talk about on the show and in the panel discussion. It's time to address those issues. So let's get down to it.

Bill Maher 1: We shouldn't conduct military strikes in Syria.

Zanny Minton Beddoes came closest to advocating our best course of action: decisive ultimatum backed by a credible threat of force. The national interest is hurt when somebody challenges the current international framework. And use of chemical weapons falls under a breach of international norms. The United States has underwritten that framework by spending trillions of dollars and deploying hundreds of thousands of men and arms. And it's done so for a very good reason: stability.

Stability is the precursor to prosperity. Stability is what keeps trade routes open and prevents self-interested parties from stepping over the bounds. It's built the most prosperous and most peaceful global order in human history. Before the ascension of US hegemony, history was nothing more than constant, internecine warfare punctuated by various bouts of peace thrown in as societies rebuilt and rearmed, preparing for the next conflict.

A world without US hegemony will become more unstable and more dangerous unless another country steps up and provides stability. Currently, there is no other country that is capable of looking beyond its own immediate needs. Failure to act in Syria will only embolden others to challenge the current global order. That doesn't end well for anyone.

Bill Maher 2: It seems like the Republican Party is flip flopping on Syria because the President is going back and forth on the issue. They simply don't want to agree with him (because he's black).

Michael Steele had the best response to this. The modern Republican Party always had a libertarian/isolationist faction within it. In recent times, it was a dormant and marginalized element within the GOP. After the fall of the Soviet Union and before the US got bogged down in Iraq, neoconservative hawks ruled the roost in the GOP, riding the vestiges of the Reagan Revolution into various posts of influence inside the Beltway.

But the American public is now war weary. There has always been an isolationist impulse in the American public and it is especially pronounced now. The new class of Republicans in the House better reflects the general American attitude of "it's not our problem". Old guard Republicans, like John McCain, are still openly calling for the use of military force. There is definitely a split within the Republican Party. And Maher is assuming the absolute worst and thinking that the GOP only disagrees to spite President Obama, but the reality isn't anywhere close to that line of thought.

Bill Maher 3: Gun control is dead with the recall of those two Colorado state senators.

His argument is almost, word for word, taken from a piece in The Atlantic. And the problem is that the way it's worded is false. There is obviously still gun control in the United States. I can't stroll into Wal-Mart and buy a fully automatic assault rifle, a silencer, and a rocket launcher. The more accurate statement is that the gun control movement has currently been cowed into silence and submission.

Because while Maher and other Democrats (despite his protestations that he's an independent, if you write a million dollar check to President Obama's PAC, you're a Democrat) want to pretend that thousands of ordinary Americans are getting gunned down in the street, the statistics don't bear that at all. His refrain that 1800 Americans have died from gun violence since Assad used chemical weapons last month includes suicides, although he failed to mention that to the audience.

Gun homicides simply aren't an important issue in national politics today. Some places are more concerned about it than others (Chicago), but the fact is crime and gun homicide is mostly a local issue. The issue of gun control and its effect on crime should be litigated in a similar fashion: locally. And that's exactly what the recall issue did. It was in response to a Colorado law, not Federal statute.

Bill Nye: Republicans have gone off the deep end and they don't care about science at all. Creationism in schools is not science!

You can be a physicist or a mechanical engineer and still believe in creationism. One of my friends is an electrical engineer and he's deeply religious. It doesn't stop him from effectively applying what he learned about electric engineering to his job. Now, if Texas Republicans wanted to use the Bible in lieu of electromagnetic equations, I'd have a problem with that. But really, evolution has no practical bearing on applied science today. Let it go. The liberal fixation with the religious fixation on creationism is nothing more than liberals being smug.

Matt Taibbi: The 1% are doing better than ever. And it's because the system is stacked in their favor.

Actually, when you consider the limitations on deductions and tax rates on investment income, the system is actually stacked in favor of the middle class investor. But don't let that get in the way of cheap, effective rhetoric.

The effective tax on effective income goes up the more money you make. Tax efficient investment accounts like IRAs, 401(k)s, 529s all have contribution limits. Capital gains are also limited on primary residences as well, even though that does nothing to help the hedge funds buying up entire neighborhoods in all cash deals. Investment losses are tax deductible up to 3k, which matters a lot if you can only invest a few grand per year, but completely insignificant when your gains and losses can be measured in the millions.

The law favors small investors. The reason why big investors are doing so well is because they're the only ones investing. The big takeaway should be that investors are the winners of today's economy, not the rich. The fact that both groups are highly correlated should tell policymakers something other than "the rich are evil and rigging the system".


Bill Maher 4: We need Obamacare for college education.

College costs are rising like medical costs are because there is a great demand for it and very little hindrances to financing it. As Maher stated in the show, it's a lot like health costs. But what Maher didn't get is that health care is so expensive is because the financing system is very inefficient. People with "insurance" (in reality, they are nothing more than coverage payment plans, it's not insurance in the true sense of the word) demand too much services because their costs are predictable but their demands aren't.

For example, my health plan has me on the hook for 2000 dollars worth of medical expenses (600 deductible, 1400 in an 80/20 plan) in any given calendar year. After that threshold has been reached, my medical expenses are completely covered by the insurance company. What do you think happens to my demand for medical services after I've reached the out of pocket maximum?

Similarly, in college, we have readily available credit to finance college education. And the people taking on the debt are stupid teenagers who have never had to manage significant amounts of money before and clueless parents who don't really know the true value of college. Given those circumstances, is there really any surprise that the cost of college has exploded?

Tuesday, September 10, 2013

The Newsroom: Counterpoints (9/8/13)

We are now past the penultimate (I only ever see this word used in reference to TV episodes) episode in season 2 of The Newsroom. And apparently it's a two-parter. There was one explicit argument being made, with a few throwaway lines that are also worth addressing. So let's get to it.

1. The media does not have a Democratic bias.

There are really two arguments to be made here. Prestige media definitely has a Democratic bias. And that's the media that Republicans care about when they blather on about media bias. For Republicans living in and around the Beltway, they're living in the same socioeconomic strata that the Democrats live in. That means college and postgraduate educations, upper tier incomes, and a culture palate that doesn't really take to talk radio (predominantly low brow and generally conservative) or the very prolific conservative blogosphere.

Because elite universities tend to breed a disproportionate amount of liberals and Democrats, the Democratic Party has a stronger brand than the Republicans do. The Democratic Party has proven much more effective at sweeping the embarrassments of their party (working class unions, militant blacks, clueless college students) under the rug than the Republicans (aggrieved working class whites, fringe political obsessives). The thought leaders of the Democratic Party reside in the ivory towers of academia and mainstream news publications.

The thought leaders of the Republican Party, on the other hand, reside in business and on the fringes of academia, which also tends to attract vocal and extremist elements of the American public. The end result is that a liberal thought leader can read The Wall Street Journal and reflexively dismiss it as business fluff. But a conservative thought leader reading The New York Times will get a gnawing feeling each time because liberal publications excel at putting Republicans down. Democratic mouthpieces are a lot more polished than Republican ones.

But on the whole, it's really tough to say whether there is an overall bias. If you count the internet and radio, it's very likely that the absolute number of media "participants" out there lean conservative/Republican. If you only count the "media elite" (The Newsroom's own words), then there is a definite bias towards Democrats.

2. Our elections are the envy of the world.

They aren't the envy so much as curiosities. Contrary to McAvoy's speech in the pilot episode, America is the greatest country in the world (because of our status of biggest rich country and richest big country, to quote Megan McArdle). Therefore it will garner a disproportionate amount of international media coverage, especially when the country's elections are held. This is ethnocentrism at its best. When your 4th grade elementary school class celebrated Cinco de Mayo, it wasn't because you envied the Mexicans. It was just an excuse to eat food and listen to some mariachi music.

3. Ruling India was wrong.

We need to apply moral relativism here. And the simple fact of the matter is that the nation-state is an extremely new concept in the course of human affairs. The vast majority of human history was dominated by empires, monarchies, and other forms of authoritarian governments. The British Raj wasn't anything different from when various Indian autocrats ruled the region. One of the most persistent Indian cultural artifacts is the caste system, which codified the Brahmin ruling class that was predominantly light skinned Aryan.

Ruling India wasn't a mistake. It was historical exigency. The fact that current day precepts and morals frown upon autocracy doesn't change that basic fact. If it wasn't for the Brits, it would have been somebody else. And indigenous autocracies can be just as brutal, if not more so, than ones imposed from afar.

Tuesday, September 3, 2013

Building Bonds

When the lay public thinks of Wall Street and high finance, they invariably think of the stock market. And when mainstream news shows report on the economy, they'll always have some throwaway line about the Dow Jones Industrial Average or maybe even the S&P500 like "The Dow closed 150 points up today. The S&P 500 was up 13 points".

And stocks are risky. Even if you diversify your stocks into hundreds of companies, if all you own are stocks, it's considered a very risky investment portfolio. The primary reason is because stocks represent a claim on future profits. So if there are no profits, there's nothing for stocks to return back to the investor.

This is where the bond market comes into play. The bond market is completely invisible to the average person. They have no idea what it does and the pivotal role it plays in the economy. And this is problematic. If you combine the values of every stock market in the world, you get a nominal value of about 55 trillion dollars. That is a phenomenal sum of money. And yet, it's much smaller than the total value of the international bond market, which is 157 trillion.

The bond market is so much more important than the stock market, yet few have any idea it exists. This is a real problem because it prevents people from learning how to invest properly. Very few people in the US save a significant amount of money for investment purposes. And the majority of those who do plow all of their money into stocks and stock funds. And that's a huge mistake.

As you grow older, return on investment becomes much less important than capital preservation. Stocks have a higher growth rate in the long term, but in the short term, they are subject to wild price fluctuations that bonds simply don't have. A bond is simply a promise to pay back money. And that money comes from revenue, not profits (revenue - costs). That's why it's a much safer investment class than stocks.

When you listen to the political discourse that revolves around the privatization of Social Security, it inevitably attracts simplistic rhetoric like "how can you trust your retirement to something as risky as the stock market? Did you live under a rock in 2008?" And that works because most people don't have a concept of bond markets, which soared during the financial crisis and beyond.

President Obama wants the Federal government to educate people about the relative value of colleges. But if he wants to improve the average American's life, he'd be better off if he could educate them on the value and importance of the bond market. Because there are plenty of people out there who don't trust the stock market because they've been burned too many times in the past. But the much more stable and gentler bond market would be right up their alley.