Around The Crux

Wow. I'm shocked. I'm ecstatic. The Governor's veto of the "Holcomb bill" stands! For those who don't know, Sunflower Electric and many in the Kansas Legislature have spent much of the last months attempting to ram through one of many different versions of a bill intended to "put in his place" the Kansas Secretary of Health and Environment, and to enact a law specifically to allow Sunflower to build two large coal-fired generators. To read a blow-by-blow account of the sordid story, read a couple months of history in CEP's blog. The drama isn't over yet, but does seem to have taken a very positive turn!

On the issue itself, I laud the legislators who chose to "do the right thing" and vote either against one of the "Holcomb bills" or against the override of the Governor's veto of said bills. Coal, with proper management of its emissions, will likely need to be a part of our energy mix in the near term, although energy policy must soon turn towards sustainable sources and efficient uses for our long-term well being. An excellent summary of the issues is available from CEP.

For what it's worth, for some time I've taken the position that, though it seems as though the weight of credible scientific opinion is that we're dealing with substantial anthropogenic global warming (AGW), I don't know enough about the subject to make any bold comments. I'm still not a climate scientist, but after reading The Hot Topic I do feel comfortable saying that some of the most credible arguments against AGW have been considered, and have been adequately refuted--it's a very readable, practical book that gives an excellent survey of the science, looks at some of the costs and benefits of adaptation and prevention (and of doing nothing), and dispels myths of both the "there's no problem" and the "there's no hope, the sky is falling" varieties. But, the take-home message is: we do need to act wisely for the future. The pigheaded insistence that these plants must be built, essentially as planned, no matter what, does not strike me as an especially well-considered approach to planning.

Finally, I'd sort of forgotten the kind of pressure that people voting against forcing the coal plants through might face. I'm guessing that some of those advocating for the plants do so because it seems like "the least of evils", and though I disagree strongly with them on the wisdom of that move (and plan to use that as a negative criterion for political support), I can generally respect them nonetheless. On the other hand, Speaker of the House, Melvin Neufeld is leading the charge for the coal plants--read the linked case for a window into the methods he's used in the past. To those standing up to the pressure...thank you!

In an earlier post, I provided links to some credible sources of information on the physiological effects of artificial sweeteners. I recently gleaned a couple more relevant links from a list to which I subscribe.

One: yet another meta-review that, based on numerous studies, found aspartame to be safe. Note that, apparently unlike some other cases, the study does follow best practices of disclosing funding.

Two: The FDA sent a warning letter to Celestial Seasonings about using the "unsafe food additive" stevia--a plant-based sweetener which many promote as a "safe" alternative to oh-so-toxic synthetic sweeteners. MSNBC talks about the letter:

It also said “literature reports have raised safety concerns,” including those “about control of blood sugar, and the effects on the reproductive, cardiovascular and renal systems.”

The original letter may be found here, and the resolution here--apparently, it's fine to sell stuff with these safety concerns, as long as it's labeled appropriately. Oh well...I suppose you can't blame the company too much for supplying what the market demands.

A brief from the Third World:

I read Randy Alcorn's The Treasure Principle a while back. It was fairly light reading, but combined with other stuff to become life-changing: basically, life's about a whole lot more than money.

I arrived here a week and a half ago. In the frenzy of preparing to spend a number of months outside the U.S., I didn't have a chance to roll over my "Magic Formula" investments (a terrible name, but see Joel Greenblatt's The Little Book that Beats the Market--really, he's credible) at the scheduled time. Since arriving, it's been on my "need-to-do" list, but hasn't carried great urgency. I've checked my portfolio a few times since arriving, checked my checking account and bills a few times, but have thought much less about such matters than when stateside. In short, I've been letting my finances slide as much as I can without terrible consequences, and not caring a whole lot....it's a wonderful feeling!

Anyway...not sure what all this signifies, but it is interesting to see how much my finances have been in my thoughts stateside.

I've had a number of encounters over time with horror stories about the ill effects of aspartame, saccharin, sucralose, and other artificial sweeteners. I've done some searching for hard facts regarding such sweeteners, and came up with a few links that seem fairly helpful.

First, an excellent speech on "Poisons of the Mind", a good "backgrounder" in evaluating claims such as those above.

First, here's a review of reports that aspartame becomes toxic when stored at temperatures exceeding 85 degrees Fahrenheit (conclusion: the reports are false). The list of references at the bottom may be helpful.

Next, a couple of seemingly fairly authoritative publications: a position paper from the American Dietetic Association, and the "Sugar Substitutes and your Health" booklet from the American Council on Science and Health (click on "View PDF Version" below the image of the book to access the free online version).

Next, the FDA's evaluation of "the Ramazzini Study", a study often held forth by anti-aspartame advocates as evidence of aspartame's deleterious effects (for the "mental antidote" to citation of this study, see the papers listed above). Also, the European Food Safety Authority's evaluation of same.

Finally, a guide to "deconstructing Web pages" to determine their credibility; this is probably unnecessary for most readers of this blog, but is interesting nonetheless in providing a bit of a "critical thinking" checklist for readers.

I've just been engaged in a bit of a "cleanup" operation of my online profile. There's nothing really bad out there, but I have a fairly "searchable" name, and occasionally find myself in situations in which a fair amount of discretion is advisable.

I hope my friends, relatives, acquaintances, etc. read Blogging Basics 101: Privacy--and, please, don't use my family name! In the meantime, I've found several ways to increase your online footprint:
* Leave comments in guestbooks (d'oh!) I have a few of these from my young-and-stupid days (that time which preceded the current iteration of said state). Fortunately, all are in very innocuous locations.
* Participate with organizations with misconfigured servers. I found that one (I thought closed) list server apparently at some point made its archives searchable by Google. Another rather frightening find was that the server which my school used for online classes last semester apparently had *all* of its internal contents available to the Internet at large without authentication, and indexed by Google. These contents included a few papers written for classes. I've alerted the school and received a response (some personal information of my contact is indexed as well, so he has some incentive to get it taken offline (or at least behind walls) and removed from Google's index as well). However, when I checked today, the server's still up. I don't have anything extremely confidential on the server, but...yikes!
* Have relatives and friends who blog. The number of vectors for information leaks is amazing...but is made all the worse by having a searchable name. I'm trying to mitigate this by asking said relatives and friends at least to use a truncated version of the name, decreasing "searchability".

Simply in self-defense, I'm thinking I should perhaps start building an online profile, to crowd out some of the less-controlled search hits on my name. In the meantime...back to the Google patrol...

I've written before (here, and here) about the ways our current agricultural subsidy system militates against both free markets and poverty-alleviation efforts. The last chance to make any substantial changes to the 2007 Farm Bill may come as soon as tomorrow, in a vote on the bipartisan Fairness in Farm and Food Policy Amendment to the bill. This amendment alters the subsidy scheme to distort trade much less than the current production-based scheme, establishes new caps for subsidies (to avoid the current problem of a few huge producers walking away with almost all of the support, leaving little for smaller producers), supports conservation, fruit and vegetable producers, and low-income food assistance, increases investments in rural America, and would decrease the deficit by $10 billion over the next 10 years.

For more information, see Oxfam's briefing. My local contact summed it up well:

This vote is extremely important. After all, the 2007 Farm Bill will govern our farm, food, and conservation policy for the next five years. The current Farm Bill represents a broken promise to America's farmers and rural communities, and it falls short of meeting its obligations to families that depend on food stamps and conservation programs that protect rivers and streams. Worse yet, commodity subsidies actually hurt poor farmers in developing countries. By encouraging the overproduction of crops such as cotton, some agriculture subsidies actually create a glut that drives down world prices, undermining the livelihoods of millions of small farmers around the world.

Unfortunately, the House Agriculture Committee has approved a new Farm Bill that takes our broken food and farm policy from bad to worse. It continues massive taxpayer support to the biggest and richest farmers, while doing little for small farmers, minority producers, anti-hunger programs, or the environment, all while continuing to encourage the overproduction and dumping of agriculture surpluses on developing country farmers who are struggling to lift themselves out of poverty. THIS IS NOT REFORM.

If you want to try out a little political activism, Oxfam has set up a line to help you connect with your representative; you'll get an automated message on connecting to their number, and then can hit # to be transferred to the Capitol switchboard. This seems a rather worthwhile cause, for America and for the rest of the world.

1. Please call 1-800-977-1912
2. An automated message will give you a brief introduction.
3. When prompted, press the pound key (#) to reach the Capitol switchboard and ask to be connected to your representative's office.

I did just a little more digging on the uFirst Financial Money Merge Account (MMA) presentation that I saw last night. It seems as though my initial thinking was close, but with one major flaw: though a little benefit (in terms of mortgage payoff time, not necessarily net worth) might come from depositing your check directly in the HELOC, most of the accelerated payoff apparently comes in the old-fashioned way: brute-force paydown, with--literally--every spare cent not otherwise used going to the mortgage. As noted in my prior post on the matter, I don't necessarily see this as a good thing--the opportunity cost can be quite high, and your net worth will most likely suffer for it (though admittedly, situations will vary).

While I can't claim to have fully reviewed these sites, I think you'll come away knowing a lot more about the issues involved in payoff-acceleration schemes.

First, a site that looks like a great resource--though they could probably have benefited from a little help from an editor. Integra Mortgages describes what they see as "financial voodoo", and offer worksheets that they say will walk you through what's really happening with an MMA. Since they specifically refer to a $3500 fee, I'm guessing that they have uFirst in mind.

For a wealth of information (along with a lot of noise), check out FatWallet's forum discussion pertaining to these and a host of related subjects. For a starting point, check out drosengarden's posts; from what I picked up, he's a mortgage broker who almost got started selling the product--until he figured out the same thing as the site above, that the magic is basically in throwing all your discretionary income at the mortgage. Though you'd be crazy to do that, by doing so you could achieve the same results as uFirst's program fairly simply without spending the $3500. I haven't spent much time with FatWallet, but it looks as though they aren't lacking for smart "financial optimizers" in their online community.

Jack Guttentag, "The Mortgage Professor", offered faint praise for a similar scheme:

Well, it is neither illegal nor absurdly illogical, which is more than can be said for most of the quick-repayment schemes I come across.

Finally, there're some semi-favorable comments about similar schemes elsewhere in FatWallet's forums. These're from early 2006, when rates were quite low; apparently, the chance to arbitrage rates was at least somewhat attractive at that point.

Anyway...as one FatWallet poster said, if you're selling a rubber chicken for $10K and it changes people's behavior for the better, saving them $10,001, more power to you. However, I don't expect to sign up in the near future to pay $3500 for software telling me how to follow a simple, and IMO foolish, system.

Update:Reading on through the FatWallet thread, I came across a linked BankRate article describing a couple of similar programs with "annual fees of $30 to $60". If you really want to go this route, it's worth checking out the article. (In case it disappears, it references the "Macquarie 'Asset Manager loan" and the "CMG 'Home Ownership Accelarator' loan".)

Update 2 - more links:
Jack Guttentag addresses the uFirst Financial plan directly.

Tony Rose (and no, I have no idea who he is) runs the numbers.

I was at a meeting tonight (not a high-pressure affair, fortunately) where I saw a DVD presenting UFirst Financial's miraculous (and $3500) software and system for paying off your mortgage in the shortest amount of time possible. From what I understand, it actually seems like a fairly reasonable approach, if you ignore the cost of the software. Basically, they have you take out a HELOC (they call it an ALOC, "advanced line of credit") and then direct-deposit your paycheck into the HELOC--basically using it as a checking account, and writing out a check to your primary mortgageholder every once in a while. Although there may be more to it, I think the "secret sauce" is the direct deposit: by having your paycheck applied to a HELOC immediately, the average balance on which you're paying interest should--all other things equal--go down by about half the amount of your paycheck (assuming that you spend/invest the entire check each month). More questions, of course, would include fees and interest rates on a HELOC, convenience, increased propensity to spend if you have all of the HELOC sitting available to you, etc. That, however, isn't why I'm writing.

I was irritated this evening by something that's annoyed me, almost without exception, by all of the personal-finance "gurus" I've heard of. It's something that seems to be received wisdom by many at least somewhat concerned about their finances. On the face of it, it sounds like a "no-brainer". It's the usual story, something like this: "If you have a $100,000 mortgage at x% and you take 30 years to pay it off, you'll spend $200K in interest. But look...if we pay just a few hundred more a month, we could pay it off in 12 years...and you'd spend only $40K in interest. You'd save $160K!" (Note that I made up these numbers; they're probably internally inconsistent.)

Almost without exception, it seems as though people ignore the time value of money when they're talking about mortgages. There are other factors to consider: it's nice to not owe a bank money, to not have the hassle of sending in payments, to have some more free cash flow...for some, all rational arguments aside, they'll simply sleep better at night with a paid-off mortgage. We aren't emotionless robots, and our psychology should play a role in our decisions. Situations will vary a lot, and I don't have a panacea. In most cases, though, I'll argue that paying off your mortgage early is a lousy idea.

So...back to the time value of money. I'm going to use an extreme case: I will gladly offer to give you ten million dollars, in exchange for a mere $100K. It's a no-brainer for you, a profit of $9.9 million! However, there is a catch: you'll get your money in 80 years (or, in the likely event of both of our expiring before that time, my estate will give your heirs the money). It's a no-brainer for me; if I can make 6% annually on the $100K you give me, I'll come out about $500K ahead at the end of our contract (not that that'll be worth a huge amount). If I can make the stock market's average return of 11%, I'll be approximately $420 million to the better. In this case, I've borrowed $100K from you, at around 5.9%. I believe I'd be a fool to pay you off earlier, especially if I could deduct the interest paid (reducing effective rates to perhaps 4-4.5%), especially with the upside I'm looking at.

So...that's an extreme example. Here's the thing, though: rate differentials, even small ones, even over only 30 years, can make a big difference over time. For another simplistic example, let's say I just inherited $100K that I could use to cash off a house or invest in the stock market. I won't even consider the tax effects (on either the mortgage or stocks), since mortgage interest deductions might be somewhat offset by capital-gains taxes (though see below). Investing that in stocks at 11% would turn it into approx. $2.7 million in 30 years. If I used it to pay for a house (for which I'd otherwise get a mortgage at 8%), I'd free up $734 per month. Investing that each month for the 30 years would give me about $2.1 million of investments, plus the then-current value of the house. If the house's value goes up by about 6 times in that 30 years, I'd have been better off--from a net-worth perspective--paying off the mortgage early. Otherwise, in what seems the more likely case, I'd have been worse off. Ironically, I think this is one thing that Robert Kiyosaki may actually have gotten sort of right; if I recall correctly, he doesn't have much of a yen for early payoff either.

Anyway...just food for thought. A last word, though: I'm depressed when I see people encouraged to pay off a house early, without even a mention of putting money into an IRA. Your $4K per year opportunity comes once, and then it's gone. If it's in a Roth, you'll never pay taxes on it again. Whatever IRA your money's in, you won't pay capital gains taxes, substantially reducing "friction" on your returns. So...if the decision is between paying off a house early or funding an IRA, it seems even more of a no-brainer. Again, I write from a pure long-term-net-worth perspective; emotional factors may legitimately play a part in your decision. Obviously, your assumptions about the future behavior of markets (and of your personal investments), your tolerance for risks, and other more quantitative factors may enter in as well.

So...that's off my chest. If you're still with me, I'm now returning you to your regularly scheduled programming.

Update: Also see the followup post, "More on Accelerated Mortgage Payments".

Seriously, it's funny...www.easyshopping-travel-finance.com is now going to contain the following text, unless I miss my guess:

This website, "easyshopping-travel-finance.com", automatically uses stolen content from atthecrux.com.

Sorta fun being able to Trojan their "content".

It appears that the Texas Attorney General is no more a fan of Mannatech, a purveyor of glyconutrients, than I am. The linked WSJ article begins, "The Texas attorney general has asked a state court to bar Mannatech Inc. from allegedly illegal sales and marketing practices, saying the dietary supplement seller is falsely claiming its products cure, mitigate, treat or prevent diseases such as cancer, autism and Down's syndrome, in violation of state and federal laws."

The suit makes rather interesting reading, discussing the web Mannatech--their charity, their research institutes, their partners and associates--has allegedly woven to promote their system (I've refrained from over-using quotation marks in this sentence). It also includes other interesting tidbits: I've often heard the fact that several recent Nobel prizes have been related to glycobiology cited in support of the purported scientific basis for Mannatech's products. For some reason, I haven't heard quite as much from promoters about the cease-and-desist letter that Dr. Gunter Blobel (one of said laureates) sent them, or the complaint that Drs. Blobel, Paul Greengard, and Paul Nurse (two other laureates) filed with the NY State Attorney General against Mannatech over its use of their names. This information is included in the Texas AG's suit.

Further reading here, among other sources.