Business is Personal (Finance)

Fewer index options at Bancorp HSA

Wed, 04 Nov 2009 02:50:23 -0800

In this entry from a year and a half ago, Bancorp HSA seemingly was the best investment option for HSA accounts. Since then though, about half of their index funds are no longer available. I suspect the fund companies themselves have given up trying to compete with Vanguard, Fidelity, ETF providers and rolled those funds back into their regular actively managed core funds. After scanning through the updated list of funds, the following seem to be the best options available depending on whether you have $2500 minimum or $10,000 minimum to invest.

DBMIX - Dreyfus Bond Market              -  2500 - 0.40%
DIISX - Dreyfus International Stock      -  2500 - 0.60%
PESPX - Dreyfus Midcap                   -  2500 - 0.50%
PEOPX - Dreyfus S&P500                   -  2500 - 0.50%
DISSX - Dreyfus Small Cap                -  2500 - 0.50%
FINPX - Fidelity Inflation-Prot Bonds    -  2500 - 0.45%
CRSOX - Credit Suisse Commodity Return   -  2500 - 0.70%
FFNOX - Fidelity 4-in-1                  - 10000 - 0.20%
FNCMX - Fidelity Nasdaq Composite        - 10000 - 0.35%
FBIDX - Fidelity US Bond                 - 10000 - 0.32%
FSMKX - Fidelity Spartan 500             - 10000 - 0.10%
FSIIX - Fidelity Spartan International   - 10000 - 0.10%
FSEMX - Fidelity Spartan Extended Market - 10000 - 0.10%

Office Launch Soon

Tue, 20 Oct 2009 12:01:45 -0800

My office in China is nearing the opening bell. The contractor is 98% done with just some minor issues to correct. Desks and computers have been delivered and I'm working day and night setting up the networking infrastructure. I've done a half a dozen phone interviews (whittled down from 2 dozen inquiries) and a few in-person interviews.

I'll have more to write about once this home stretch is over.

Asset allocation review

Tue, 13 Oct 2009 13:54:00 -0800

I've been saving a nice chunk of my salary since I started working fulltime 15 years ago. Over time, it has grown mostly due to contributions but there have been periods of euphoric market gains. If I could split it up, I can point of several distinct periods.

Period 1: Random Fund Picks

Like most people, I knew little about asset allocation and portfolio construction. Instead, I looked at Morningstar ratings and past returns. This meant I had a slew of random funds in my T.Rowe Price 401K and a slew of random funds (Janus, Strong, Columbia, Franklin Mutual, Pioneer) in my taxable accounts. This lasted for a good decade before I finally decided to enter all my statements into a database and analyze how I was doing. The answer -- I was underperforming the market by a good 1% per year -- or roughly the average extra expense ratio I was paying in these funds.

Period 2: Index Fund Conversion

After realizing I could not pick funds worth squat, I closed all my accounts and moved everything to Vanguard. I still did not know anything on how to construct portfolios and I picked equal dollar amounts in Large Growth, Large Value, Small Growth, Small Value, Total International and REIT. To be honest, there's nothing that bad about this portfolio other than some of the asset classes would be better off in tax-advantaged accounts.

Period 3: Alternative ETF Experimentation

The next stage in my evolution came when I transfered my Rollover IRA to Wells Fargo to take advantage of the PMA free trade offer. I read up on all sorts of "neat" ETFs and ETNs and had visions of holding every single possible asset class mentioned at Index Universe. During this brief period, I held China ETFs, India CEPs, Timber REITs, Mortgage REITS, Commodity ETFs, Commodity ETNs, Gold ETFs, Dividend ETFs, International RE ETFs, International TIPS ETFs, Leveraged Muni Bond CEPs, Leveraged International Bond CEPs, Currency Carry ETFs. As you can imagine, all these holdings became quite complicated to track, maintain and rebalance. I actually ran out of my annual free trades and had to pay $5.95 commissions.

Period 4: Portfolio Planning

March 2008 was the turning point. With Bear Stearns going bust all the exotic/alternative classes I held went down at the same time. Except for SPDR International TIPS, none of the ETFs/ETNs/CEPs I had picked had provided any downside protection. When the core stock market dropped, they all dropped in lockstep. In reality, I might as well have stuck with regular equities and saved myself the hassle and extra expenses.

So I started paying much more attention to the portfolio construction threads at Bogleheads. The 2 ideas that really piqued my interest were Harry Browne's Permanent Portfolio and Larry Swedroe's Concentrated Risk Portfolio. The main points I picked up that drove my allocation decision:

Slicing Equities into smaller pieces (for example, Japan Small Cap Value) cannot provide downside protection. When bad stuff hits, all equities go down. Hence, the #1 asset class to make bear markets less severe is Bonds. Commodities come in a distant second for the case when unexpected inflation hits.
Hold only the safest bonds (U.S. Treasuries and TIPS)
Hold more Gold, Commodities, Bonds to provide a counterweight to take more risk on the equity side.
Hold Real Estate, Gold, Commodities, TIPS to provide inflation protection with all the government bailout money being thrown around.
Value and Mid/Small Cap tilt to take more risk on the equity side.
On the International side, developed markets (EAFE) are closely correlated with domestic markets. The major difference is you get currency diversification. Hence, concentrate risk and only hold Emerging Markets for currency diversification.

Ultimately, I want my target portfolio to look like the following:

15% Intermediate Treasuries
15% TIPS
5% Commodity Futures
5% Gold
10% REIT
10% Domestic Large Value
10% Domestic Mid Value
10% Domestic Small Value
20% Emerging Markets

The end result is 60% Equities, 30% Bonds, 10% Commodities. However because I'm taking more equity risk (hopefully compensated risk) by overweight on Small, Value and EM, the theory is I will get the same long-term returns as a 80% Equities, 20% Bonds portfolio but with less volatility. Entering my target AA into Morningstar X-Ray (I calculated the REIT allocations myself) produces the following report:

Country Breakdown

U.S. 55%
EAFE 0%
EM 33%
REIT 16%

Style Box

19 | 16 | 9
20 | 14 | 3
12 | 6 | 2

At the moment, I'm about 75% of the way there. My overall mix is 76% Equities, 15% Bonds (4% TIPS), 9% Commodities (4% Gold). A X-Ray of my current portfolio shows:

Country Breakdown

U.S. 37%
EAFE 20%
EM 17%
REIT 20%
Intl RE 6%

Style Box

18 | 16 | 12
18 | 12 | 6
10 | 5 | 2

My value and size tilt is almost right on target. I have a touch more REIT than desired and a whole lot of EAFE. If I liquidate EAFE to move into equally into Bonds (TIPS) and Emerging Markets, that would bring my portfolio to 70% Equities, 21% Bonds, 9% Commodities. Then over time, I would target new contributions to get to the endgame allocation.

Computers in China Follow-up

Mon, 12 Oct 2009 02:00:00 -0800

In this previous entry, I mentioned a few computer parts that were more expensive than what could be found in the U.S. These past 2 weeks, I've been asking for quotes for to put together computers for our office. It took a while but I finally found a local vendor who understood why I wanted specific parts (for example, I want SSDs with Indilinx chipset because SSDs with the Micron JF602 controller have bad stuttering problems). To compare, I went to NewEgg for prices in the U.S.

                              CNY  USD FX  -  NewEgg  +S.Tax    Diff%
AMD Athlon II X2 250          495   72.69  -   76.00   83.22  -12.66%
Asus M4A78-E SE               815  119.68  -  115.00  125.93   -4.96%
Memory DDR2 800 2G            283   41.56  -   31.00   33.95   22.42%
OCZ Vertex 30G SSD           1200  176.21  -  139.00  152.21   15.77%
Seagate 1TB HD ST31000528AS   620   91.04  -   90.00   98.55   -7.62%
Intel PWLA8391GT              350   51.40  -   27.00   29.57   73.84%
Acer 22" LCD                 1160  170.34  -  150.00  164.25    3.71%
HannsG 28" LCD               2300  337.74  -  310.00  339.45   -0.50%
D-Link DES-1228              1050  154.19  -  160.00  175.20  -11.99%
Netgear WPN824                490   71.95  -   60.00   65.70    9.52%
TOTAL                                                           1.48%

At first glance, prices looked lower across the board in the U.S. But then I remembered sales tax (9.5% in California). After factoring that in, the ending difference of 1.48% more expensive in China is data noise. The 3 items that are more expensive are:

Intel PWLA8391GT +74%. This is a very specific item because I wanted guaranteed support and stability for a Linux firewall. Most of the other items, I gave generic requests and the vendor could fill in with the closest he could find.
OCZ Vertex 30G SSD +16%. This is a bleeding edge product. I originally put down SuperTalent UltraDrive ME as my requirement as that's the cheapest Indilinx 30G drive at $113. Unfortunately, it is not sold in China so the vendor countered with a KingSpec 30G Micron JF602 SSD. However, after I googled up the specs (Pera-Kun translator for Firefox extremely helpful), I realized that was not a good drive. I queried back on a KingSpec Indilinx SSD but he could not get that drive either. I guess he then looked carefully at the difference between the 2 KingSpec SSDs, was able to find the closest thing with the OCZ Vertex.
2G DDR2 Memory +22%. I have no idea why the big difference for this product as this is just a commodity good. Oh well... let the vendor take a bit of profit I guess.

It looks like for regular commodity computer parts, buying in China is very competitive with buying in the U.S. As a theoretical exercise, I looked up a few laptop manufacturers and noticed Dell has a China sales presence. So I decided to do a quick price comparison. Luckily, the English and Chinese site versions have nearly the same layout.

                     USD/S.Tax   CNY/  FX    HKD/   FX
Dell Inspiron 15    $399/ $437  4499/ $660   3999/ $515
Dell Studio 17      $699/ $765  7999/$1170   7999/$1030
Alienware M15x     $1499/$1641 14999/$2200  15888/$2050

To buy a Dell in China, it costs roughly 50% more for the base/midrange models and +35% more for the top-of-the-line Alienwares. I guess this is why laptops are a common request for travelers from relatives in China.

Phone Service from China

Fri, 09 Oct 2009 12:21:00 -0800

Working from China, most of my communication is through online channels. However, I still periodically have to speak to a human. Luckily, VOIP (Voice over IP) makes it very simple and cheap. With just an internet connection, a VOIP service makes it seem as if you were calling from back in your home country.

For the past 5 years (in the U.S.), I have not had a landline. Instead, I used only Vonage and cellphone service. Vonage is nice in that you can plug any ordinary phone into their phone router device and get VOIP service. I have been paying $38/mo for worldwide calling which was a nice deal a few years back. (Vonage's website now shows $25/mo for worldwide calling with a 1 year contract -- I may contact them and see if I can't get that rate for locking back in.)

Nowadays though, there are more options. I now have Skype as my 2nd VOIP line. A worldwide outbound calling costs $110/year when paid at once. And with an outbound calling plan, an inbound number costs $30/year. Pro-rated over 12 months, that's $11.67/mo. Amazing how you can call the world for such a low price.

The only issue is that Skype requires a computer to make your calls. A few computer manufacturers (Belkin, Netgear, Asus, etc) have been producing Skype phones that basically are tiny computers running Skype clients inside them. Just recently, I grudgingly allowed my wife to buy iPhones for us. After a week or two of playing games on the iPhone, I decided to check out more practical uses. I semi-remembered Skype being available so I downloaded that off the App Store and gave it a spin. Not bad ... any place I could get WIFI access, I can now call back to the U.S. for free. Then as I was browsing through Cydia's repository, I noticed there was a VOIP unrestrictor that fooled Skype into working on GPMS/EDGE/3G cellphone internet. Even better .. now that let's me use Skype from anywhere in China with internet cell phone service.

The only restriction remaining in place are the data plan limits. China Mobile's data plan offers 30MB per month for 5rmb (75 cents). Cheap but no where enough data. At 5K up/5K down, 30MB would allow for 50 minutes of talk time over Skype. The other options are 300MB for 25rmb ($3.75) and 500MB for 75rmb ($11). 300MB allows for 8+ hours of Skype talk time, 500MB 13+ hours -- either would be good options. I suspect I can find enough WIFI hotspots where the 300MB/25rmb will more than work out. What about 3G plans? China Unicom starts at 90rmb ($13) for 30MB/mo and I did not ask about the more expensive plans.

College Costs, Prisoners' Dilemma

Sat, 26 Sep 2009 02:25:00 -0800

For the past few years, I've been putting money away in Ohio CollegeAdvantage 529 plan for my kids. Just recently, CollegeAdvantage brought back their referral bonus program and various personal finance sites (examples: MyMoneyBlog, The Sun's Financial Diary) are posting their referral links. Last year when this program came about, I sent the info around to co-workers and friends with children thinking at someone was interested in saving up for their kids' college expenses. Nope, not a single bite -- not even with free money in the deal. College savings appears to be way down the list for Americans.

The return of this deal got me thinking some more. Perhaps I and every other person saving for their kids' college expenses are barking up the wrong tree. After all, the cost of college depends on supply and demand. The more money that's earmarked specifically for college -- whether via student loans or 529 plans with a penalty for non-school use -- the more expense go up.

Unfortunately this is a prisoners' dilemma situation. If collectively everybody decided not to save for college and not to take out student loans, the cost of college would drop drastically. If only a few people "break the bargain", those few people benefit more than the collective. But if a large number of people decide to optimize for their personal situation, everybody ends up losing.

It sounds like the prepaid college plans may be the best option. Except these guarantees are just as set in stone as social security is for younger workers. If college costs grow faster than expected, states either have to default on their guarantees or raise taxes to cover the liabilities. We already see Texas wrestling with this issue with the Texas Tomorrow Fund facing bankrupcy.

What to do about this situation, I do not know. Again, there are steps an individual can take to reduce costs (AP exams, community college) but if everybody takes these steps, then you would see costs shift there as the industry would follow the customers.

Apple iPhones in China (or how to get a free vacation)

Tue, 22 Sep 2009 11:11:00 -0800

Now plenty of things are way cheaper here in China. In this previous post, I listed a few costs of living -- for example, breakfast for 40 cents. But some things are more expensive -- usually luxury goods. Some quick things off the top of my head:

Cars -- there is a 25% to 100% markup. A Honda Fit that might cost $15K in the U.S. costs $20K in China. A Prius is easily 50% more expensive and if you want a sporty BMW, 75%-100% more expensive would not be unexpected.
Select Office Equipment -- 100% markup. I spent $500 on Brother MFC-7840N where as the equivalent MFC-7440N would have been $250 in the U.S. (I could not get the MFC-7840W wireless version here.) The top-end color laser Brother MFC sells for $750 in the US, $1300 in China.

And the ultimate in luxury status-symbol goods is the Apple iPhone. Even with the original iPhone that only had internet access over AT&T, people in China were buying them on the grey market so they could have a super fancy phone. With iPhone 2/3G/3Gs, you now can fully utilize the iPhone over China's 3G networks and there's nothing people want more than an iPhone. How much does it cost? Well you cannot buy one yet officially in China but the 3Gs is available in Hong Kong for $1300 USD. Used 2.0s sell for $800 USD in Hong Kong.

So if you are interesting in a China vacation and have the contacts necessary, the 1st iPhone can pay for your plane ticket, the 2nd for your hotel & food expenses and all above that would be pure profit. (Sorry, don't ask me for contacts ... those are mine for when I make my periodic trips back to the U.S.!)

BSR = why ETNs suck

Mon, 21 Sep 2009 12:08:00 -0800

I've held BSR (BearStearns Alerian MLP ETN) for about 2 years now to try to capture the MLP segment. We all know that BearStearns was taken over by JPMorgan. Early March, JPMorgan released AMJ that looked nearly the same but with the JPM branding. Then in May, they announced they would delist BSR. Well I've been busy so I missed the news. So a few weeks ago, I log into my brokerage account and see:

073902835, BEAR STEARNS COS INC BEARLINX ALERIAN MLP SELECT INDEX ETN CPN 0.000 DUE 07/20/27 DTD 07/20/07 FC 08/08/07

No way to buy and sell online anymore as it appears to have turned into a bond due to mature in 2027. I spent some time Googling up how others were dealing with this. The news was generally bad. JPMorgan's official response was for BSR owners to open up a JPM brokerage account, transfer the assets over and JPM would redeem it for you. Umm -- no thanks?

After some more searching, I did run across one message saying Fidelity's bond desk was able to sell their holdings at a 10% discount. Sucks but I decided to give it a try and called up Wells Fargo trading line. After about 30 minutes on the phone (mostly waiting on hold), the WF rep said he could ask for a bid from their bond trading desk and see what they could do. About an hour later, he called me back and said he was able to get a bid for $28.62. I had already done the math based on BSR vs AMJ closing price on 6/12 and it looked like I would be selling at a 2.3% discount. No brainer decision here -- immediately gave confirmation to sell. Even better was WF charged no commissions.

I definitely will avoid ETNs from now on.

The wrong way to invest

Sun, 20 Sep 2009 08:37:33 -0800

I've been checking my investment portfolio lately and with the market rebound the past few months, my portfolio has exceeded it's 2007 peak return high. So it's not surprising that articles such as the following at Yahoo Finance have started to show up. Let me paste a few select quotes from it:

Like millions of ordinary investors, Cindy and Eric Canup are still recovering from Wall Street's big downturn. Their portfolio is off by 25 percent.
...
Recently, with help from their financial adviser, they nudged some of their cash into mutual funds and took on riskier investments.
...
Now, some of the money that fled stocks for safe harbors like money-market funds and government bonds last year is beginning to return. Even with trillions still sheltered on the sidelines, some $56 billion has poured into equity funds since April, according to the Investment Company Institute.

What we have is people selling after their portfolios dropped 25%-30% and now buying back again after the market has rebounded +20%. This is why most people lose money in the market and would be better off with pensions + social security. The idea of buying low and selling high is easy to toss around but is extremely hard to do in practice because every fiber in your body says SELL SELL SELL when the market is dropping like a rock.

My advice: if you can't stick with an investment plan -- ie, continue to dollar-cost-average and rebalance faithfully through thick and thin -- just get out of stocks altogether and put everything in bonds.

Reports from the USA

Wed, 16 Sep 2009 22:24:46 -0800

We're regularly in touch with friends back in the USA as it's pretty easy/cheap with VOIP phone services. Recently, almost everybody is saying local economy has slowed down drastically in the past 2 months. Perhaps the heart of the recession is finally hitting Fortress San Francisco. Amongst the scattering of news:

Uncle laid off after Toyota shuts down NUMI factory
Aunt no longer getting paid for lunch & break periods
Friends working as dental assistants seeing hours cut
Friends running retail businesses (restaurant, boutique shops, etc) seeing dramatic decrease in customers
Friends in construction seeing work dry up
Relatives not finding jobs and going back to school

This local downturn seems to correlate roughly to the passage of the California budget. Spending was drastically cut so much of the safety net people were depending on is gone. Over an entire economic cycle, having a balanced budget is a good plan. Unfortunately, the spending cut over the short term is putting extra downward pressure on the economy.

The optimum scenario would be to have surpluses during boom years and deficit spending during recessions. But it's hard to overcome human nature to save during boom years because when you're in a bubble, it seems like it'll never pop.

The Price of Gold

Mon, 14 Sep 2009 19:59:00 -0800

If you've read my previous article on 401K fund selection, you may have noticed I had American Century Global Gold as one of our options. I personally overweight my 401K to tax-inefficient holdings to keep low tax-drag equity investments in taxable. Hence, my 401K asset allocation is the following:

20% Vanguard Inflation-Protected Securities
20% Vanguard Intermediate Treasuries
20% American Century Global Gold
20% PIMCO Commodities Return
20% various equity funds

In the last few days, gold has hit $1000/oz so I'm feeling a bit anxious about my gold fund selection. But then a look back at the past 2 years and I see a big rollercoaster ride:

Mar 2008 -17%
Apr 2008 -12%
May 2008 +10%
Jul 2008 -11%
Aug 2008 -13%
Sep 2008 -8%
Oct 2008 -38%
Nov 2008 +25%
Dec 2008 +30%
Mar 2009 +13%
Apr 2009 -11%
May 2009 +34%
Jun 2009 -14%
Sep 2009 +15%

Luckily, I have auto-rebalancing triggered for the end of each calendar quarter (March, June, September, December). Quarterly rebalancing seems to have done a decent job in buying more at troughs and selling at peaks but monthly may even be better with extremely volatile asset classes (e.g. quarterly missed the -38% during Oct'08). I originally setup just quarterly because the gold & commodity funds have early redemption fees so I need to build up enough "old" shares available for rebalancing before I can switch to a monthly schedule. I may need to run the math on this to see if I'm at that threshold.

Moral of story -- uncorrelated asset classes are good. Uncorrelated with automatic rebalancing is even better. Now if I could only do some rebalancing on the gold wedding jewelry my wife has an emotional attachment to.

Health care costs ... in China

Thu, 10 Sep 2009 09:22:00 -0800

If you can fog a mirror, you know the big topic in the U.S. is health care reform. President Obama just made a big speech and people on both sides have been staking out their positions for months now with big words. A big point of comparison everybody is using is Canada and other European nations with government funded health care. However, it's interesting that nobody points to the other extreme where the free market reigns complete ... China. Strange isn't it that a country run by Communists can be so ultra capitalistic in many sectors of the economy. In the short time I've been here, I've used medical care a few times already. Hopefully, this extra perspective will get people thinking beyond the talking points on TV.

One of the first things we did when we got to China was to start looking for places to live. We first considered rentals but then decided to buy a condo unit for the long-term. During a visit to a condo unit, I was checking out the deck. Unfortunately, somebody else had closed the glass door and my eyes did not notice this fact. I walked right into the door and my forehead shattered it into a hundred pieces. There was no pain but I clearly had a cut as blood was flowing. My brother-in-law drove me to the hospital where a doctor examined the treated the cut. Cost of medical treatment? $6.50. The agent showing the unit was embarrassed enough for me that they gave me a red envelope (lucky money) containing 100rmb ($14.65). I ended up making money on this ordeal although I would not recommend it as a full-time job. (We ended up buying this unit.)

When we signed up our son for kindergarten, one of the requirements was that he had to get a physical and a blood test. So we went that afternoon to the hospital and was able to handle that without any wait. Cost? $5.

My wife just had a full physical exam performed. They actually did even more testing than what we have encountered back in the U.S. Cost? $50.

Right about the time my forehead destroyed the glass door, I also came down with a slight fever. A few days later, I had these head-pounding migraines. If I stood up, my head hurt. If I sat down, my head hurt. If I laid down, my head hurt. I was unsure whether it was the fever or the bump so to make sure, I went to the hospital for another examination. Because I had bumped my head, they decided a CT Scan was in order to check for a concussion. Cost of the CT Scan? $40.

Now for a U.S. expat living in China, these prices seem cheap. However, a resident of China earning $300/mo would find the CT Scan more wallet draining. So if we scale the prices based on median U.S. vs China income, the following prices would be more representative:

Emergency Room Exam + Treating Cut: $33
Simple Physical & Blood Test: $25
Full Physical Exam: $250
Emergency Room Exam + CT Scan: $200

These costs would still be very cheap in the U.S. A full exam is easily $1000 after all the lab tests come in. Walking into an emergency room costs $500, seeing a doctor then costs another $500 and then the CT Scan would be $800. Without insurance, nobody could afford to get sick or injured.

Or maybe not? For the first 175 years, the United States had no health insurance and yet people still saw doctors. It is very likely that health insurance itself is causing the cost of medical to go up.

Health insurance companies have to employ people to process and review bills. Then the executives and shareholders take a profit from this enterprise. This probably raises the cost of medical by 35%.
Health insurance often takes 60 to 90 days to pay doctors after treatment is done. This means medical providers constantly have to borrow money or use reserves that could be invested to manage cash flow. This probably raises costs by another 10%.
And most importantly, with the cost of medicine hidden out of sight (bills paid by insurance, insurance premiums paid by employers), there is no free market pressure to keep costs down. People neither shop for lower prices nor turn down procedures/tests that clearly lack benefits.

So am I advocating switching to China's model? Just ban health insurance altogether to drive prices down? Well there's a flip side here. Payment must be made before services are provided -- you bring a receipt from the cashier to the doctor/nurses/technicians. With an average savings rate of 40% in China, that gives people the reserves needed to self-insure against most problems. Unfortunately, only the rich can truly self-insurance against life's more serious challenges. A friend's son was diagnosed with leukemia. During admittance to the hospital, the staff asked how much money they had. If they did not have the assets to pay for treatment, the hospital would have turned their son away to die. Luckily, their family owns a factory ... and after 2 years of treatment and $50K spent, their son is out of the hospital. Perhaps not out of the woods yet but at least with a fighting chance to survive.

It's inconceivable that any developed country would or could go back to removing the social net just so those who have assets can sock some more money away and I would not support such a plan. However, there may be lessons to learn from both ends.

We need to make everybody a stakeholder. Give more tax incentives for both employers and individuals to choose high deductible plans.
Repayment from people who received extra tax benefits for taking a high deductible plan but still requiring tax-payers to pay the tab for the deductible.
Stop discriminating against cash payers. Cash payers should always get the lowest network fee schedule.
Single computer system for billing and records to reduce administration costs.
Clearly delineate what portions of the premiums/taxes are for your medical care and what portion is the underlying safety net for everybody. People might not have a choice in choosing this split but it would stop the rhetoric about "free $$$ for ABC population segment".

Hiring off Craigslist

Thu, 10 Sep 2009 04:38:00 -0800

During our startup phase, our hiring came from networking. But after a while, not only does the internal network get exhausted but sometimes the recommendations can even cause conflicts when the recommended people don't interview well. (Unfortunately, a small company like ours does not have a HR department so we interview and review by committee.)

Hence, the last few years, our candidate pool has come off Craigslist. If you don't know about Craigslist, it is a barebones "newspaper ad" site (but without the news) that dominates the major urban markets in the U.S. Ads posted are free except for job ads and housing ads in New York City. By running a text-only site, they keep their bandwidth to a minimum where submitted free ad volume brings in the eyeballs for the paid ads. In the San Francisco area, we usually get 50+ replies for technical positions and 200+ for office/admin/customer service positions. At a cost of $100 per ad, it's a nice deal for employers.

Unfortunately, receiving so many resumes is a huge hassle to manage. Without some way of organizing the applicants, it is very easy to forget who you've reviewed already and what everybody's verdict was. So after the first few job posting rounds, we developed a simple resume database. We give every applicant a score of 0-5 in 5 different areas:

Cover Letter
Experience
Education
Location
Extras

After a few days when the job replies stop coming in, we set an arbitrary cutoff for who gets a phone interview. The goal is to do about 10 phone interviews per job posting to winnow down to 3 in-person interviews. Sometimes it does take 2 or 3 postings per position where we tweak the job description based on the job replies.

For a small company like ours, we've had decent success hiring off Craigslist. On the average, we've spent about $200 (2 ad postings) and devoted 10-15 hours for interview time per position.

Reality check on housing

Wed, 09 Sep 2009 15:42:17 -0800

I was browsing the internet and came across this article http://www.msnbc.msn.com/id/32756481/ns/business-real_estate. The meat of the article, I don't really care about. We all already know why we're in this mess It's the secondary headline that caught my attention.

Official says a strong housing market is crucial for the economy

Why is a strong housing market crucial? We're talking about people selling houses to each other -- and wall street, banks, realtors, mortgage agents skimming off fees on each transaction. Exactly what benefit is this to the economy? I can see plenty of benefits to the parasites in the financial industry but don't see much to people who then have to pay more for housing.

The U.S. has thrown trillions of dollars at wall street and housing trying to stimulate the economy -- does anybody feel it's working? By comparison, China's stimulus has gone directly to infrastructure. This article at http://money.cnn.com/2009/08/03/news/international/china_high_speed_bullet_train.fortune/ says $50B going to high-speed rail. Another article http://news.cnet.com/8301-11128_3-10318431-54.html says China is planning the world's biggest solar plant. From my view on the ground, China's stimulus is working far better than the U.S.'s. I see people working, shopping, embarking on business ventures -- the level of activity is astounding.

To circle back, why do we have this neurotic infatuation with housing in the United States? How much better would the economy be running if people instead thought "low housing prices = lower costs = bigger return for industries that actually produced something of value"?

Labor Day

Mon, 07 Sep 2009 22:27:42 -0800

Now that people have partially recovered from a full day of BBQing hot dogs and guzzling beer, perhaps some reflection on the history of Labor Day is in order. Let me quote a snippet from Wikipedia:

"The first Labor Day in the United States was celebrated on September 5, 1882 in New York City. In the aftermath of the deaths of a number of workers at the hands of the US military and US Marshals during the 1894 Pullman Strike, President Grover Cleveland put reconciliation with Labor as a top political priority. Fearing further conflict, legislation making Labor Day a national holiday was rushed through Congress unanimously and signed into law a mere six days after the end of the strike."

http://en.wikipedia.org/wiki/Labor_Day

While people may have gripes about unions today, let's not forget where we came from. A hundred years ago, the pendulum was so tilted towards corporations that workers suffered through 7-day, 12-hour work weeks and then had to live in a company town where corporations took their money back. And if you had the audacity to strike, you were at the risk of getting killed by the police, quasi police (company security forces) or even the U.S. military.

When talking to friends, I've previously drawn analogies on current day China's economic situation (super capitalism) to the end of the 19th century United States. But when reading through history in more depth, I must revise my opinion and say China is a bit farther long ... perhaps say 1925 USA.