patrick.net

Randy,

If you have a life insurance agent or a financial planner already, I'd recommend you talk to them first. They should be just as experienced on the basic stuff and a lot cheaper than talking to someone at $200/hr.

Your personal lawyer will probably suffice for a simple form will, advanced medical directives, etc. Chances are, they'll be straight out of a form book with few minor changes. You can probably DIY with a little research and a friendly notary public.

You can get ready by getting as much financial information together as possible. You're pretty happily married to your first wife, so your primary concerns should be (1) caring for your son in case you and your wife are both out of action (2) probate avoidance (3) dealing with long term illness/disability problems.

For meaty tax planning stuff, I'd recommend you look for someone who specialize in the area. Your lawyer or financial planner or life insurance agent should have someone good on their rolodex. You want to look for someone who spends the majority of his/her time on estate planning and related areas, has at least 5 years of experience, and frequently deals with relatively complicated estates.

disclaimer - just suggestions, always do your own homework before acting

astrid,

Thanks for the advice. We have a crack tax acct and tax attorney already due to my having been a C/S/LLC/LLP owner and my wife having had various stock options and such (not to mention her status as a Section 16 insider). I think our tax planning is well in line, except for probate avoidance. I'm more worried about legal stuff. I don't trust insurance agents as a general rule and I do the financial component of our wealth management myself. What I need is someone to ensure that we have the right legal structures in place to prevent subversion of our intent should we become dead prematurely, or other calamities and such. Both having extended families that are in quite different economic positions than we, there is a huge potential for moral hazard should something happen to us.

Otherwise it's pretty simple. First marriage, 1 child, shared intent to provide financial security to our child in a reasonable manner consistent with our values, maximize tax avoidance, minimize threat of external opportunists laying claim to a single copper plated cent that we sacrificed much of our lives to earn. Isn't this what everyone wants pretty much?

especially when you look at recent exceptional hurricanes and cyclones in the southern US, northern australia, floods in central europe, and the possibility of the entire warming Gulf Stream Atlantic currents disappearing… banks in Europe will no longer finance ski resorts under 1500 m altitude… and they’re selling off the skifields here asap…

But how can one ascertain that the "warming" be "global"? How can one attribute such "warming" to "greenhouse gases"?

testing

newsfreak,

Vegas works because losses are spread out into a series of smaller losses, whereas wins are infrequent but larger. This supports what RLA is claiming which is actually just straightforward mental accounting. To generalize, an average person will equate approximately twice as much significance to a loss than to a gain, in some circumstances much more. So Vegas works because losing lots of $2 bets doesn't hurt so bad, and you occasionally win $25. So you feel one $25 high in between a series of $4 perceived lows, all carefully engineered to cause you to pretty much always lose money but don't really feel it.

Randy,

There are bankrupt's estates, indigent's estates, etc. The word itself is just a legal jargon. With such a high federal estate tax exemption, most estate planning is a form of insurance to protect your family and avoid unneccessary legal costs.

Garth,

You can admit or deny global warming all you'd like. But I'd really appreciate it if you can bring back all the high altitude glaciers.

Astrid
Randy H is brilliant and I think he knows what 'estate' means.

I realize a lot of people in this thread disagreed with the mental accounting thing. The problem is that I've yet to see evidence of it _not_ occuring. People regularly take lump-sum payments in favor of annuities, hold losing stocks too long while selling winners too fast, eschew flat-rate plans in favor of ala carte plans, all of which are almost always de-optimizing, bad decisions. They do it because of the way they _think_ about money.

There's an old cliche that goes along with this: why can't you find a cab on a rainy day in Manhattan? The answer turns out to be that cab drivers make more money on rainy days. It's counter intuitive, until you realize that each cab driver _could_ earn more money on his shift but he instead will go home early because he thinks of it more that he's _earned his day's money already_. Those few who do stay on and rake in the profits will almost assuredly blow that windfall at the track, because it's "house money" to them, somehow different than the other money they earned an hour before.

Communication won't change things, irrational behavior is a part of being human. We all selectively listen to messages that are more pleasing to our ears, sometimes reading around is just a way of confirming what we already believe in.

However, communication will amplify the trend both upwards or downwards. I don't know the amplification factor, but it will definitely be higher than without the blogs and widely available data beyond the mainstream media. My hypothesis is, the bubble grew bigger because of internet, and will pop harder.

When the bubble pops, the sellers are comprised of TWO groups.
1) People who have no other options than selling (laid off, run out of cash)
2) People who expect the real estate to go down further

At the first stage of the pop, aka, the next 12 months, 1) will be wiped out, and continually wiped out throughout the process. 2) are usually investors, because no owneroccupier will give up his primary residence unless he has absolutely no choice whatsover. So setting the expecation of 2) is very important. If the internet amplifies the perssimistic tone on the way down, you will see more 2), stepping over each other to set the new low comps. 1) will be there anyways, it will be the marginal 2)s that are dragging the market down further.

Linda,

I would never dream of calling any of you stupid. :) We even have above average trolls!

Mental accounting is one of the ways we account for money. Housing happens to be a very special category. People equate housing to prestige, sense of security, ultimate shelter etc. Money is not the most important things when it comes to an owner-occupied house, because it is called a home.

Some guys may end up with a very pissed-off wife who determines his frequency of corporal pleasure if they don't own a home together, how do you account for this in mental accounting model?

Owneroccupier,

But what about one of the groups most likely to sell - the retirees? I'm sure some of them are extremely savvy and will continue to exploit their prop 13 position, but many will probably take the profit and relocate elsewhere.

If this was 5 years ago, I'd agree with you. At the time, most people still treated a house as a durable good. So they bought only as much as they can reasonably afford to use.

But now, many people are buying houses as investments, and in anticipation of appreciation. This misguided belief has lead many to buy much more house than they really need or can afford. I know almost everyone in my generation and many who are ten or twenty years older have told me that they bought their current home in anticipation of a big pay day 3 or 5 years down the line.

Some guys may end up with a very pissed-off wife who determines his frequency of corporal pleasure if they don’t own a home together, how do you account for this in mental accounting model?

It would fit in quite well. Every night you are denied, err, companionship. The pain you feel from this is at least 2X as "much" in your mind as every one night you do share in physical delights; probably much more than 2X knowing the typical male. For me, perhaps about 34.5X, but I'm the overambitious sort. This would predict that I am willing to pay a higher premium for a home (overpay from a coldly rational, economist's viewpoint). My Bubblizer actually lets you put this number in as a guesstimate, put it in the annual Present Value of "intangibles" assumption cell. Seems a bit unseemly to put a $ value on things like this, but you can rationalize it away that you're willing to trade this pain to avoid that pain.

...and for my wife it's $0. Luckily I found a woman more logical and rational than I.

I know almost everyone in my generation

(as Peter P would say were he here today):

Huh?

Oops. Everyone = everyone I personally know who bought into the RE since 2002.

(Or maybe I'm the Lois Weisberg of my generation :) http://www.gladwell.com/1999/1999_01_11_a_weisberg.htm )

astrid,

your investor friends fall into the investor category.

I am only familiar with the retiree situation in the Bay Area, cannot comment on the other places. Somehow the retirees here are quite satisfied, and as long as they have a paid-off home, there is really little incentive for them to go elsewhere. Retirees care about weather, a LOT! I talked to the retirement community residents here, they are mainly from the Bay Area, plus some from the east coast, citing weather as the number 1 reason for their move, of course they are quite well-off to make such a move.

I was not aware of the prop 13 pass-down gimmick until I talked to my old-timer neighbor. I don't know how many of them are aware of this, but I certainly won't "misunderestimate" (bushism) the intelligence of old-timers here. It is these people who built Norcal to what it is known today, the Silicon Valley. So financially, I don't see the need for the retirees to piss away the prop 13 goodies when they pass away either.

Owneroccupier,

I'm not intending to misunderestimate anyone either. Mental accounting theory doesn't make value judgements about people. It's much like the "herding" instinct. People behave this way because it almost always works for them and is common sense. It's just that with financial and economic things, common sense often contradicts what logical reasoning would otherwise conclude.

If RE is to fall by say 50% (and I'm not saying it will in the BA), then a retiree who sells after 20% "paper loss" may be maximizing their own situation quite effectively, where if s/he held for 10 years to regain or exceed that 20% s/he may "pay" in other ways not nearly as acceptable as the pain they feel from that payment. All I'm saying is that they'd roughly need to earn 40%+ in this stylized scenario to overcome an otherwise balanced personal decision to sell or hold.

The cost of living in the Bay Area, aside from housing and private school tuition, is actually quite low.

I need to qualify the word "low", it means for a certain minimum quality requirement you demand, Bay Area offers such service and goods at a cheaper rate than most parts of the country. It is not only the case for the Bay Area, it is the same with NYC, Boston, any big cities with tons of vendor competition.

If you want high quality Italian food, it will cost you more in Ohio, if it is available in the first place. You can go to Boston's North End or SF's North Beach for a very reasonable cost. Two buck chuck, for example, costs 3 bucks in some inland states because it is made in Sonoma. We are very close to one of the biggest veggie bowls in the world in the Salinas valley, anywhere else you will need to pay far more for fresh salads. We also have very low heating or cooling costs compared to other states.

When you retire, there is not much you can save by moving to TX or FL, if you already locked down a fully-paid home and a low property tax base, plus these states float your property tax, which may demand higher cash outflow annually.

Owneroccupier,

Great insight. However, what about the much larger number of boomers who have little savings outside of their house equity? Won't they be forced to sell in order to obtain the equity needed for retirement.

I am not saying every retiree will be able to end up in a fully paid-off home, but a certain portion will. If they do, and have a small pension or SS or if their kids are willing to step up the plate in exchange for the inherited home later, then these retirees will very likely never move out.

The calculations above were actually laid out by some retirees to me. They have a life-long relationship with their doctors, so they want to stay close to people who know their health well. They also have a family here, so the pure financial incentive to somewhere else to take advantage of that little price differential is not enticing enough. This will be the case in a down market when housing price is dropping.

They were obviously willing to cash out in the last few years because they realize this is a lifetime cash-out opportunity. I believe that these retirees have a relatively high mental bar on how much they need to let go of their home.

If you want high quality Italian food, it will cost you more in Ohio, if it is available in the first place.

It is not available, unless you consider Olive Garden high quality.

Owneroccupier,

You're assuming an awful lot of smart people. I just don't see this group as big enough to affect the overall market. Small pockets here and there, perhaps, but not the overall market. You'd also need agreement across two generations, who may have very different spending priorities and lifestyles.

Also, I think the step up in basis will be a much more important motivation to not sell. That is worth up to 15% of FMV. Prop 13 is only worth at max 1-2% of FMV per year.

It is not available, unless you consider Olive Garden high quality.

Olive Garden?

Peter P,

I refuse to believe you're that sheltered :P

astrid,

every year, the number of properties on the market for sale is only 5% or less of the entire stock. You don't need that many dumb people for the market to head down. If you have 10% dumb homeowners, that is already a big enough disaster.

I heard about the mythical dumb elderly, but I keep running into elderly here much smarter than I expect. Perhaps it is us who are dumbing down :-0

hUNTINGTON
Newsfreak is right. Buying at the top of the cycle is generally not a good idea, unless you simply can't wait to buy. I have had many properties with illegal add-ons and they can be more trouble than they're worth...especially if you plan to rent them out. Tenants can 'hold you hostage' in a sense if they find out that its an illegal addition. Neighbors can turn you in. Building and safety can make you either bring it to code(which can be prohibatively costly) or tear it down.YIPES!
Be very careful and do your homework and get the facts on this property before you get in over your head. When you are spending that kind of money, there's no reason to live in fear of your tenants or neighbors turning on you. Good luck.

Owneroccupier,

Spend two days with my grandmothers and then decide! :) I love them to death but these ladies still think in Mainland China 1978.

I actually agree that a lot of older people are quite shrewd, but I find the learning curve drops off as they drop off to the baby boomer generation. There are a lot of 50+ year olds with very little saved up outside of home equity.

Astrid,

Don't put me down in the denial camp. I am indeed concerned about the shrinking of the polar ice caps. I am certainly confused on causation.

I did read State of Fear and it was fun, the epilogue with Chrichton's notes and documentation about his own personal journey on the issue was also instructive. He is as I recall, is an MD, and he's certainly a better writer than me. He claims he started with an open mind and studied the issue for more than a year, then wound up up skeptical. I don't have the luxury of that kind of sabbatical. I'm just trying to keep an open mind.

You may recall an article we discussed in the Daily Telegraph where a prominent climatolgist said warming has stopped, whatever the cause. And of course that's not even the real issue, is it? The question is causation. We know for certain that the earth has experienced cycles of glaciation and warming. The question is where are we now and why? Also I suppose, are we in a cycle of warming that can somehow end the eons old cycle of glaciation and warming. In other words, as people have said here, "is this time different?"

Randy H,

Another reason Vegas works is that the "word of mouth" about the Vegas Experience is very self-selective. I've often heard people say "I went to Vegas this weekend and won $1,500" or some such.

People rarely come home and brag that they flushed the college fund down the pooper.

Now you’re a climato-sociologist?

polymath and instant expert... finger in every pie... staying ahead of the curve...

Randy's just pissed cos he's losing the debate by degrees on cheap labour countries in the inflation thread... ;)

anyway, i've pointed out the the issues i've raised are taken very seriously by politicians even in the US, to the point of attempting to enact 'anti-offshoring' legislation...

not sure about the postmodernist comments, in philosophy/social sciences it just means to 'read between the lines' or question the authority of a document's source. it's got different shades of meaning across everything from english lit to architecture, so you have to know which 'postmodernism' you're talking about... it's a very useful tool for evaluating claims and motivations for discourses...

i know michael crichton is an MD and a writer of science fiction, but his foray into science on this occasion has resulted in many climate scientists labelling it ... well, a work of science fiction, badly supported by actual reported facts. for instance, one team of modellers put forward 3 models -- a slight, an extreme, and an attempt at 'most likely scenario' somewhere in between. crichton took their 'extreme' results, second hand from some more vested interests, i should add, and accused them of fear-mongering, and further attributed figures to them they had not even used.

further, crichton never practised much even as an MD, he admitted himself that 'his imagination always got to work, inagining far worse diseases than the ones in the textbooks.' don't know if i'd want his scientific mind at work treating me...

note that in the Jurassic era, the average temperature of Earth was 16 degrees C higher than today and the oceans were 200 ft higher (which explains the presence of weathered cliffs everywhere). we are living in an epoch of a relative ice age. that could reverse. the only question is whether it is man-induced or part of a natural cycle or some combination of the two.

Peter P asked a simple question:
DS, have you read Crichton’s State of Fear?
DS “answered” as follows:
crichton’s a rotten right-wing apologist for the status quo, probably unintentionally representing vested US industrial interests and the fact that ….
IOTW ignore the question. Move straight to silly ad hominem.

Well, no, the answer would be then 'i haven't read the book, i don't have much time for fiction because it is fiction, but i have read several reviews of the work and crichton's other speeches and motivations behind it. further to that, i have been reading reports about shrinking icecaps, receding glaciers and dwindling snowfields.'

who knows, maybe the weather will get pleasantly warmer in england, as long as it doesn't accelerate out of control, and i can go home at last...

Garth,

No, I haven't read State of Fear. I've read some of Crichton's writing and I just don't like the style or the ideas in them. His writing seems like one from a paranoid dilettante, and so I get usually shop for facts and fictions elsewhere.

As for the Daily Telegraph op-ed. I didn't check the credentials on the fellow, but I did note that one op-ed is not enough to prove or disprove anything. Nor do the experts in denial of global warming offered an alternate reason for the disappearance of glaciers that have been around for tens of thousands of year. Or what about coral reefs dying off because of overheated water? Or the higher temperature readings in ocean waters.

I personally think it's too late to prevent global warming. It's now about damage control. I think man's impact on the planet is certain and we need to concentrate on finding and avoiding the tipping point which would cause all hell to break loose, and adapting to the inevitable climate changes, esp. in coastal regions. That's my opinion, and I don't have an MD (which, with apologies to skibum, means ????? for climatology?).

DS,

Most climate models I've read about show that global warming will alter the Gulf Stream for NW Europe. NW Europe will likely see drier climates, much colder winters and somewhat hotter summers. I wouldn't call that pleasantly warmer, but your mileage may vary.

DS,

Most climate models I’ve read about show that global warming will alter the Gulf Stream for NW Europe. NW Europe will likely see drier climates, much colder winters and somewhat hotter summers. I wouldn’t call that pleasantly warmer, but your mileage may vary.

it's very hard to know, tho, isn't it? even crichton points to a 'mini-thawing' in england and greenland from about 800-1500, which was nice for the anglo-saxons and normans, and helps explain why england thrived at that time...not like now, it's bloody wet and miserable. but yes, one model suggests colder temperatures without the gulf stream. what happens if it goes up a couple more degrees tho? all kinds of new ocean currents and effects could come into play. siberia and canada and scandinavia might become more pleasant.

i have to accept there should be a certain amount of 'que sera, sera' with this, in the case of mild periodic cooling/warming, and i agree there is increasing media hysteria over an unknown problem, and a model is a model. however, the insurance companies are pulling back from insuring hurricane-prone places like florida, which prompted my original post, regardless of whether it is decadic oscillation or GW.

p.s. there were no ice caps in the age of the dinosaurs either...

DS,

No ice caps at all in the Jurassic? Is that true? (Astrid, don't worry. I'm not trying to antagonize, just asking. I'm frankly impressed with the exchange today. And I know Sean enjoy the ludicrous Pythonic abuse. No charge.)

It's hard to question cultural icons like GW. I certainly don't have the education for it. As I've said before, I am barely conversant in the fundamental concepts of C02 & the greenhouse effect. I get the theory, but I just keep reading pesky cranks with seemingly strong credentials who want to slow down the runaway train. I'm also concerned that, in assessing industrialization's effects on thousand year climactic trends, we are dealing with such a tiny sample size in terms of years. Hard to generalize from the industrial era -- a blink in time -- to geological time. Which moves at a "glacial" pace. (Sorry about that.)

Sean, you said causation is the "only" issue. It's certainly the most controversial and where the iconoclasts catch the most flack. But there are many other issues. E.g., whatever the cause, what is the precise degree of warming and how much more, can we expect, if any? What is the degree of probability for various outcomes on the thermometer? How accurate are the various measurement models? How does the placement of measuring devices in local urbanized areas (which are hotter) skew the global model, if at all? And most of all, assuming GW, what are the consequences for humans? For the earth?

No doubt, as Astrid says, watching icebergs calve and the ice caps shrink tugs at your guts. Both sadness and fear. But our emotions serve us best when we get above them at least a little. My backwoods version of zen is not to discount my guts, but to try to be aware and objective about them. Not easy, just a goal.

Crichton is interesting to me because, unlike me, he has scientific training and seems fairly intelligent. Also, I can't suppose he really has any axe to grind, he clearly spent a long time and effort studying the issue and he writes in small words even I can understand.

Crichton cite one study that the net economic effect of GW will be a plus. I can't vouch for it -- could be pure BS. And of course economics aren't everything. It's just an interesting counterpoint to the day after tomorrow hysteria. I also believe that from our narrow perspective the loss of snowpack on Kilimanjaro is achingly sad, but is it bad for the earth? Beats me. She doesn't return my calls. Something about I'm an evil R.

Assume that mankind comes to a reasonable consensus that global warming is occurring. We don't necessarily need to understand the specific causes to determine if and what actions we should take. In fact, I don't think we can prove causality with enough certainty to convince reasonable skeptics until we have many more centuries worth of data.

But, by that point it may be too late. I think of it this way. Let's assume it's the year 2400. We finally determine that industrialization, co2 emissions and all of humanity have no material affect on the environment. Nonetheless, oceans have risen by 100', the ice caps have melted, and the peak of 50bn people on the planet die every year of mass starvation. Who cares who caused global warming? That fact would be that we missed an opportunity to potentially do something about it.

If global warming is occurring, which trend evidence supports, then we have to make serious policy decisions now, or lots of people will die later. Maybe we can do something to slow or prevent catastrophic warming. Maybe we cannot, and instead we need to figure out a way to encourage a sustainable world population size and develop forward-thinking advanced agricultural techniques (probably with genetic engineering, to the chagrin of the crunchies) which will be viable in a changed environment.

This is just another case where I think the politics of the debate are little more than narcissistic theater. No one will ultimately care which side was right, only that we did or didn't do something when we had the chance.