Life in the Little City and Papa John’s Couple’a Dimes
Thursday, August 16, 2012 at 7pmBy John Friedman
I’ve lived in SFCA for a long time.
And during that time I’ve grown totally accustomed to seeing all sorts of people out and about who, all things being equal, really ought to be getting help somewhere other than in the general environs of public space. Call them what you will . . .
Today I’m on Drumm Street in downtown EssEffSeeEh near the Embarcadero, and out of the corner of my eye I see an out-of-control guy grabbing some onion rings off the plate of a sidewalk-cafe lunch-eater, putting the rings into his mouth, and then forcefully spraying them out of his mouth onto the street. Simultaneously I hear the lunch-eater go eeeeeeyyyyyooooooooo and shove her plate away from her, and see many scrunched-up noses of other eaters as a collective roar of eeeeyyyyooooo‘s rises up from the sidewalk cafe, with all but one of the eeeeyyyyoooo‘ers thinking to themselves, I suspect, glad those weren’t my onion rings.
Then I walk into Walgreens a few storefronts down and hear an employee telling the manager that some guy just came in and did the most gosh-awful something-or-other-worth-telling-the-manager-about, who in turn is expressing utter amazement that someone would actually come in and do that particular gosh-awful-something-or-other so brazenly and so during-lunchtime’enly.
Onion-ring-grabbing guy, I say to myself, with the disgusted intonation and bunny-teeth gesturing of Jerry regretting Newman.
Then I’m in MUNI going home under Market Street and I see a guy there who might be — who just might be — the guy I saw out of the corner of my eye grabbing onion rings and upsetting Walgreens workers. This guy is moving weirdly — physically moving weirdly, jerkily but grander and more sweeping than that — in a way that makes you think he has something seriously wrong with him, starting in the central nervous system and continuing out into the world at large through his limbs, and not adequately treated with his current meds (or maybe he skipped his meds today?). And he’s quietly spewing angries (once — just once — I’d like to hear this sort of person-gone-awry quietly spewing happies).
Soon people are moving away from the angries-spewing weird-moving guy, and then a MUNI security guy a few feet away, who has been non-observantly standing with two other MUNI security guys, the three of them standing in a circle, facing inward, telling jokes or something to each other (is that how you do security, fellas?), eventually notices angries-spewing weird-moving guy who, after the security guy sits down next to him, immediately gets up.
I don’t see the angries-spewing weird-moving guy in the station again, but then I get on the train and, as soon as the train starts moving, I hear a commotion at the other end of the car. Urban blinders on, I look back at my reading. At a very much sub-language/sub-thought level, something within me gives a nod to my lucky fate of being at the other end of the car.
The commotion continues, and pretty soon — OH NO!!!!! — I see the angries-spewing weird-moving guy come to the part of the car I’m in and sit across from me. I like the inward facing seats, so I am looking at the angries-spewing weird-moving guy, but he is not looking at me; instead he’s fixated on yelling at a poor Joe next to him who, it appears, had accidentally brushed up against the angries-spewing weird-moving guy or vice versa. Angries-spewing weird-moving guy is kinda ballistic now — more than angry — hitting the train, over and over again, yelling, threatening the brush-against guy and, in general, acting totally unhinged.
Remember: I’ve lived in SFCA a long time, so when I say unhinged, I’m using a pretty forgiving yardstick.
Brush-against guy handles now-totally-unhinged guy well — very well — with cool calm strength, but now-totally-unhinged-guy is seriously scary in his unhingedness, and the entire train is clearly fearful. Then a fairly burly but short woman who is also near now-totally-unhinged-guy says, in a very authoritarian, assured, directing and, yes, booming manner, something along the lines of, “I’m an off-duty police officer, sir. Sit down. Calm down,” etc. (I am so *not* a police officer that, a few hours later, her words do not come back to me at all and I cannot get the tone right, but I think one technique she used was to talk continuously and forcefully, so as not to let unhinged guy verbally respond to anything she was saying, limiting the unhinged-one’s responses instead to the physical responses of sitting down, calming down, etc.).
At that point a lot of jaws attached to a lot of faces of unhappy MUNI riders dropped, and semi-smiles surfaced, because totally-unhinged-guy was now become somewhat-quieter guy.
So how cool is it that this off duty cop is there, and that both the brushed-against guy and the off-duty police officer seem to be very good at this sort of thing? Sheesh. It was the best of the city and the worst of the city (though not in that order).
At the next stop, somewhat-quieter-guy gets off the train — phew — at which point the young woman next to me and I have a nice conversation, which helps us to decompress.
I was really terrified, she says.
That was probably the scariest crazy-guy-in-EssEffSeeEh episode I’ve ever seen, I say.
* * *
So why do I bring this up? Why in here? And what does this have to do with financial health?
This past week John Schnatter, the CEO of Papa John’s Pizza, made a splash by saying that the Patient Protection and Affordable Care Act (commonly known as ObamaCare), would add 11 to 14 cents to the cost of making each pizza he sells, which in turn would lead him to increase the price of each pizza by 15 to 20 cents.
To this I have two reactions. First, where do I sign up? I’d be happy to throw in two dimes on a meal if it meant that the people who work at the business selling me the meal have health insurance. Indeed it’s common in SFCA for a bill at a restaurant to have some sort of add-on for healthcare due to a much-litigated SFCA ordinance requiring employers with 20 or more employees to provide healthcare to their employees.
I mean, if those employees have health care benefits, they’re likely to be healthier, and if the people all around the city are healthier, that’s a good unto itself, isn’t it? The world a better place and all . . .
Or, to put it more self-centrically rather than altruistically, then, hey, it’s also good for me because I’ll have fewer sick people around me — sick people who might be serving me food. EEEyyyyoooooooo — germs and things.
Second, John Schnatter, what’s with the markup? Your costs go up twelve and a half cents (averaging the range) and you increase your price by seventeen and a half cents (also averaging the range), and all of your competitors will have the same cost increase, so the playing field is as level as before, but now you and all your competitors have a good shot at increasing your per-pizza-profit (your PPP, in the lingo of the pizza world) a nickel, and you’re complaining about it? If I were in your shoes, I’m pretty sure I’d be wanting more PPACAs, not fewer!
* * *
During the conversation my seatmate and I had post onion-grabbing-weird-moving-unhinged guy meets off-duty-burly-woman-cop and calm-guy-who-might-work-with-loons, we talked about this very topic.
How much would you spend, I ask her, to not have onion-grabbing-weird-moving-unhinged guy and others like him a constant of SF CA life? A buck a day? Two?
My hunch is that most people supporting themselves and living in SFCA (and therefore making a fairly decent living) would easily pay $365.25 per year to not have this dreadful reality constantly inserting itself into their lives.
And how would all those hundreds of thousands of $365.25’s be used to alleviate this situation? That’s a really hard question. Many have had a go at solving it and, here at least, no one has succeeded.
But maybe better healthcare — including better healthcare for crazy people — would be one approach to consider. Yea, maybe, just maybe, that’d be the ticket.
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The Numb of the Moment: Slowed Growth vs. Stolen Money
Wednesday, August 15, 2012 at 12pmBy John Friedman
Ahhh . . . I now vividly remember that, four years ago, I could not but help myself from reading a lot of politics, pretty much every day — just like how, ever since the Ryan VP pick bubbled up on the Twitter-machine last Saturday night, I’ve found myself pulled back in, Al-Pacino-like. Now, as then, I feel like there is a whole lot at stake on the next Tuesday after the first Monday of November of every year evenly divisible by four — i.e., November 6, 2012.
Now, as I get ready to fully launch The John Friedman Blog, I’m torn between my long-held belief that, when discussing financial health, I should remain politically neutral on the one hand, and, on the other, my long-held belief that every aspect of a person’s financial health has a very intimately-intertwined political component to it.
And I wonder: maybe this is a false choice? Maybe I can discuss politics in a neutral way while still drawing attention to the deeply political nature of our economic lives?
And then there is also my belief that a reader capable of critical thought and analysis could easily divine my leanings. In fact, I think the Komen piece I wrote earlier this year might have cost me a long-term client, even though I tried my very best to remain neutral and, as best I can tell, succeeded.
Hmmm . . .
* * *
The Numb in the News right now is $716 billion. Last Sunday Mitt Romney went on 60 Minutes and stated,
There’s only one president that I know of in history that robbed Medicare, $716 billion to pay for a new risky program of his own that we call ‘ObamaCare.'”
That’s a lot of dough, isn’t it? And a whole heck of a lot of robbed-dough to take away from seniors and give to other people, yes?
So what is that number all about? And didn’t it used to be a number more like $500 billion?
* * *
When making financial decisions, the smart way to proceed is to compare two different futures against each other. I typically label them, at least temporarily, Scenario A and Scenario B. Usually Scenario A is what the future looks like if you change nothing, and then Scenario B is what the future looks like if you make a change in some part of your financial life.
To do the analysis, I figure out everything that stays the same under both scenarios and lock those down so they will remain in lock-step, and then I figure out everything that changes between the scenarios and have those as the main inputs with which to what-if.
And then, before I present the analysis to the client, I usually come up with more descriptive names for the Scenarios, with Scenario A usually becoming Status Quo and Scenario B becoming, say, Pay-off Your Mortgage (to just grab an example out of thin air).
As it happens, budget wonks figuring out what the future looks like after enactment of big legislative changes to Medicare do the same thing.
* * *
Sarah Kliff of, among other things, the Washington Post, has a good post today about that $716 billion number — the one that’s been in the news since Governor Romney’s 60 Minutes interview — and how it relates to the $500 billion number that we previously heard about.
I’ll let Sarah talk about the specifics of how the two numbers relate to one another (in brief, it’s a mere timing difference — a different chunk of time — with the smaller number covering a year-earlier 10-year chunk than the 10-year chunk the bigger number covers). Please do take a look at Sarah’s article, and, in general, please do think about having the WonkBlog on your radar screen. It’s a good place to do some reading of the political wonky and often number’y sort.
Instead, the topic I want to address here is how a phenomenon shown in a single graph can be seen, by one party, as a robbing, and by the other as a saving. And then, ever the Switzerland-of-Financial-Health-Writing-I, I’ll leave it to you, Rorschach-like, to decide which you think is the more appropriate perspective.
Here’s the main graph from the story; I think Sarah either took the graph directly from the Congressional Budget Office analysis or built the graph based on numbers in that analysis, but I am not 100% positive (and haven’t the time to figure it out):
Looking at this graph, you’ll see from the blue line that, left to its own devices and without ObamaCare — referred to here as the PPACA (the Patient Protection and Affordable Care Act) and the HCERA (the Health Care and Reconciliation Act) — coming online, annual Medicare spending would grow from about $500 billion in 2010 to $950 billion in 2019 (that’s a near-doubling folks, as in . . . yeeEEEE-OWWWWch). That’s what budget wonks call “the baseline”; it’s the status quo against which everything else is measured or, using the jargon I set out above, it’s Scenario A.
Scenario B is the red line; it shows what happens to Medicare spending when you bring the PPACA (which I like to pronounce PEA‘ Pack Uh, and others like to pronounce Oh BOMB‘ uh care) into the mix. And you see that skinny little wavy triangle between the two lines? When you cumulate the differences each year between the baseline and the PPACA line, you get a difference of $716 Billion (I am fluffing some details here, but that is the overall gist of the thing).
So what do you see? Which one is it? Is it a robbing or is it a saving? What does your particular Mr. Rorschach see?
In 30-second soundbite-driven politics, it’s gotta be one or the other. The truth is, though, that it’s a lot more complicated than that. And that’s where Sarah’s post from yesterday comes in, talking about some of the details of from-whence the $716 billion delta truly derives.
And from there I’ll leave it to you to decide whether Sarah is, or is not, a neutral purveyor of information about the Numb of the Moment. I have an opinion, but in here I’m doing my best to remain neutral myself . . .
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The JFF Blog Q’nD Generic Answer Series re: Hanging on to Asset’y Liabilities
Tuesday, August 14, 2012 at 2pmBy John Friedman
Here’s the setting: Fictional Terry is nearing retirement. Fictional Terry has a mortgage and is wondering whether, given the lousy returns in the bond market these days, it makes sense for Fictional Terry to reduce Fictional Terry’s cash and/or sell some of Fictional Terry’s bond holdings to pay off Fictional Terry’s mortgage.
Without knowing more, it’s hard to say. But, hey, this is the first in the JFF Blog Quick ‘n Dirty Generic Answers Series (the QnDGA Series), so here’s a Quick ‘n Dirty generic answer:
I continue to think that in many contexts a mortgage with a low interest rate (say, 4.5% or below) is likely to be a net positive over the long-term (a decade or more) — an asset’y liability, if you will. If we assume that Fictional Terry is someone who (a) currently has a steady income, and (b) has the power to increase that income if need be (e.g. something unexpected happens), and (c) has a balance sheet that is likely to be robust enough over the next ten years to pay off the mortgage whenever it appears to be a good time, and (d) has, most importantly, always shown an ability to be smart about spending, then to Fictional Terry I say:
Let it ride, Fictional Terry, let it ride. If you ever want to pay the mortgage off, you always can. If and when you do, then some of your bond prices very well might have fallen (remember the Vice Versa Rule: interest rates up —> bond prices down, and vice versa, and consider that what most likely seems to lie ahead is interest-rates-up), but, hey, your mortgage is the mirror image of that, and, as your bonds devalue some, the implicit value in your mortgage will go up, too.
6% APY years will roam the earth again. When they do, that 4.5% mortgage will look like a cashflow pump.
Note well: this answer is most definitely not for people who have spending problems.
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Today’s Jobs Numbs: Can We Handle the Nuance?
Friday, August 3, 2012 at 9amBy John Friedman
On the first Friday of every month, at 8:30 am East Coast Time, the Bureau of Labor Statistics releases a bunch of numbers — no, let’s call that a trove of numbers — about employment during the previous month. That bunch of numbers, via media echo-chamber, gets winnowed down to but two numbers, which today are 8.3 and 163,000.
The similar numbers from a month ago were 8.2 and 80,000.
Those numbers represent, using the lay terms, the unemployment rate and the number of jobs created last month (experts and the like use different, more precise, less accessible language, such as the U3 rate, but this blog is about lay ideas, and is intended for lay people with lay lives).
So today we wake to the news that unemployment went up (which is bad) and so, too, did job creation (which is good).
* * *
Most non-lay people view the jobs creation rate as the more interesting number. It is, like most statistics, susceptible to a lot of criticism because (a) in seeking to divine the number of jobs created last month in the entire country, it must necessarily rest on a sample of the entire thing, and, because (b) the BLS, like statisticians everywhere, believes that making adjustments for measurable phenomenon, such as seasonality, are not only do-able but an important part of generating statistics that measure what they are intended to measure, and therefore adds seasonal adjustments into the mix.
In JFF parlance, then, the BLS definitely sprinkles on some secret sauce which, upon a quick search of their site, is only described generally (though my hunch is that, if you’re a wonk and you want to find out how they do it, there is a decent amount of info out there to be had on the topic). The good news is that, overall, and judging by the measly pickings from a search of BLS numbers-rigging scandals online, BLS’s reputation for objectivity appears to be strong.
* * *
So what does the population do when the two main numbers that come out are both good and bad? Hmmmmmm . . .
Well, in the political realm the answer is quite clear: you accentuate the number that best supports your story. So the Repubs will stress the unemployment figure going up, and the Dems will stress the jobs-creation figure going up.
In the economics and investing realm, though, you’d have to give the nod to the jobs number. For instance, as I write this the stock market is up 2%, so clearly today’s numbs-trove leads market participants on the whole more hot-to-trot on the buying side rather than on the selling side, as in I’ll buy that from you at x, followed by, Well, you can have it at a penny more than x, after which, after a bunch of similar back and forths, it’s the seller who is mostly setting the price, which means up.
And what of the lay people of the land? What do they hear?
* * *
In 2004, just about exactly four years ago, we learned that nuance was a bad word. As someone who really, really enjoys his nuance, this was disheartening.
It’s safe to say, though, that my heart had and has no say in the matter, and that an awareness of subtle distinction is not where we, as a people, are coming from these days. We often just can’t handle the nuance.
For many people, then, only one number came out today. The one that supports the story they like.
* * *
Barry Ritholtz, via his blog The Big Picture, used to be my go-to guy for a first uptake of the jobs numbers in the morning. These days he does less writing on his blog, and he certainly doesn’t jump online to post numbers first thing in the morning on release day like he used to, so now kudos go to Meteor Blades, a regular at DailyKos, whom I thank for his early-morning wake up (he is a West Coaster) and for doing this table, which I think really screams out about what’s what in terms of overall job creation for the last ten Julys (scraped directly from his posting today):
July 2003: + 25,000
July 2004: + 46,000
July 2005: +374,000
July 2006: +209,000
July 2007: – 40,000
July 2008: -210,000
July 2009: -339,000
July 2010: – 58,000 (worsened by Census layoffs)
July 2011: + 96,000
July 2012: +163,000
Yes, my friends, over the last ten years, only two Julys — 2005 and 2006 — saw better job growth numbers than we saw today.
* * *
Do these numbers surprise you? I myself was surprised at (a) the weakness of 2003 and 2004, and (b) how 2012 was the third best July out of the last ten, and (c) what is a very clear trend over the last four years.
Am I only seeing what I want to see? Am I ignoring nuance?
Hope not. Hope I — we — are better than that.
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Facebook and Knight: Human-Fail and SkyNet-Fail?
Thursday, August 2, 2012 at 10amBy John Friedman
According to someone out there with the need to calculate this number, “the volume-weighted average price of Facebook stock on May 18, 2012, between 1:50 pm and 2:35 pm” was $40.527.
That was the day Facebook went public.
That was also the day that the modern stock market had, by some people’s reckoning, the worst initial public offering of all time (quick primer: an initial public offering, or IPO, is the first selling to the public-at-large of shares in a company; it all happens on a single day, and in most instances it’s a wonderful day for everyone involved, as in, big-bucks-made, so much so that you’ll just about always see the smiling faces of some of the highest-up heavy-hitters within that “everyone” ringing the closing bell — literally ringing it — at the market close of that IPO banner day).
As Felix Salmon points out this morning on the twitter-machine, Facebook shares have now fallen by half from that dollar-weighted price, and are trading at $19.99 as I write. Fingers point at failures in (a) the newly-minted pre-IPO market (of which Facebook was king, queen, princess and prince), (b) the failure of the stock market machinery on the day of the IPO, (c) Mark Zuckerberg, (d) Wall Street, (e) greed, and (f) all of the above.
All in all, and by most measures, at this point it’s safe to say that the Facebook IPO has been an acute fail — a fail on the day of, followed by a lingering, crawling, stupefying fail ever since.
* * *
Lots of young folks are keen on Facebook, and this might well be their first inkling of IPO-land. Fifteen years ago, in the pre-bubble-burst days, the young folks of the time imprinted on a much happier picture. There were still bad results here and there, but, back then, there were a whole lot of happy campers on IPO-day and for most of the days following.
Today? Not so much. $FB (as the stock is known in the twitter-machine) has given young folks a whole different paradigm, as in: this is where you get taken to the cleaners.
* * *
At the other end of the spectrum, market old-timers are shaking their collective heads today as, yesterday, the simple nuts ‘n bolts of trading — nuts ‘n bolts that have been happily nutting and bolting their days away with nary a hitch in the U.S. stock market for more than a century — just plain ol’ failed .
Time will tell what all happened, but it sounds like Knight Capital lost $440 million — in the span of 30 minutes — when, as best can currently be known, its computers pulled a SkyNet and started buying everything in sight! Twice!
* * *
Big things are difficult to control. Tsunamis, Mongol hordes in their heyday, huge multi-national businesses, governments, Mother Earth, etc. — none are easily lasso’ed. There is just something about size.
The U.S. stock market is big. Real big. Billions of shares of stock trade every day in U.S. stock markets and, just to zero in on one slice of that bigness, 47.8 million Facebook shares traded hands on an average day over the past three months. And that means that, in the past 21 days or so, Facebook alone accounted for a billion shares traded ($20 billion worth of stock, given today’s price).
How easy do you think it is to control all of that? To make it function smoothly?
If Knight’s $440 million problem yesterday, and Facebook’s IPO-fail is any indication, it might be too difficult for both SkyNet and for humans.
Let’s hope not.
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