Tuesday, June 28, 2011

Greek Debt Crisis and Hawaii

We have been watching the Greek Debt Crisis for over a year now and wondering what effect a default of Greece’s loans will have on those of us living in Hawaii. We found evidence that Hawaii has already felt the crisis and the consequences will likely grow over the next year. Here is a list of what we have observed from the unfolding crisis and why it may matter to us:
  • The European Central Bank has worked hard to keep the Euro currency at a maximum valuation, which is making a vacation in Hawaii the most affordable in decades for visitors from the 17 member countries of the Euro Zone.
  • The daily riots in Athens is convincing many Europeans that normally vacation in Greece to go elsewhere this year. We are seeing Europeans everywhere on the Big Island, in the shops, on the beaches, at the resorts, and the traditional holiday season for Europeans doesn’t even start until August.
  • By July 16, 2011, a complex set of agreements must be reached by the IMF (International Monetary Fund), the European Central Bank, the country of Greece, and the major banks of Europe. If the agreements are not all in place on that day, Greece will technically be in default on its bonds. With the new set of international banking laws in place, this “default” will mean that many of the largest European banks will be bankrupt, overnight. It is estimated that mutual funds and other retirement funds in the US own in excess of 1 trillion dollars in equity in these European banks! So, there is the possibility that many Americans will wake up on July 17 and find that their assets, retirement accounts, and college funds are suddenly much smaller if the European banks go bankrupt. The loss of a trillion dollars in the bank stock values will probably not help overall stock prices this summer and might even cause a global stock crash if people sell off other stocks in a panic. We think a large drop in the value of stocks this summer would be negative for Hawaii’s tourism from visitors from the mainland.
  • Several of the largest European banks own major assets in Hawaii. BNP Paribas, a major French bank, owns First Hawaiian Bank for instance. Paribas is one of the largest holders of Greek debt. Deutsche Bank AG, a large German bank, has been a major mortgage lender in Hawaii over the last decade. If these banks go bankrupt it may disturb our local Hawaii banks and potentially force local assets and real estate to be liquidated. This scenario could get worse if Spain, Portugal, Ireland, and other European nations also default on their loans this summer.
  • The Greek bonds are insured by companies that created derivatives from the insurance policies; these derivatives are unregulated financial instruments owned by institutions and funds all over the world. The owners of the derivatives consider them assets so if the Greeks default on their bonds, these derivative assets will suddenly become liabilities to the institutions and companies holding them. As it is revealed who owns these derivatives, there could be a second round of global stock devaluations, and another round of bank and insurance company bankruptcies.
Although these scenarios are gloomy, it is most likely that the situation in Greece will stay the same and another round of emergency funding will be scraped together to delay the financial problems another year. But no matter what happens, the exceptional weather here in Hawaii will continue and the European tourists being drawn to Hawaii this summer may turn into regular visitors for years to come.

Friday, June 24, 2011

Calculating the value of good weather

We moved to Hawaii for the sunshine and the moderate, year-round, tropical weather. Though most things in Hawaii are more expensive than on the mainland, we find the exceptional weather is saving us money in some unusual ways. Here is our list of how Hawaii's great weather is saving us money:
  • Reduced health care costs: The abundance of Vitamin D and the swimming and walking we do every day, year-round has improved our health. Waking up to warm weather every day means we have less aches and pains and getting colds and flu’s is rare for us now. We are already saving on the cost of doctor visits, prescriptions, and medical tests, but as our health improves our savings could be even more substantial if it means we avoid heart disease, cancer, diabetes or any of the other chronic diseases of our time.
  • No need for vacations: My SAD (seasonal adjustment disorder)  has disappeared and I no longer need a mid-winter Hawaii vacation to fend off an attack. We have not gone on a vacation in four years now because every day in Hawaii is like a vacation and we have no desire to leave the islands.
  • Reduced cost for fresh foods: The vegetables and fruits we like to eat are grown locally and are fresher and cost less than what we use to get on the mainland. The weather allows these foods to grow year-round and are available at farmer’s markets and in local stores. Our local grass feed beef and local caught fish are also less expensive because of low transportation costs.
  • Reduced medication costs: There is no ragweed season in Hawaii which saves me months of misery in the Autumn, Kleenex, and the expense of allergy medicine. We are also avoiding the cost of living with air conditioning during the allergy season and running a pollen-removing air filter for two months of the year.
  • Reduced heating and cooling: The weather is so moderate we rarely use air conditioning and heating is never needed. So, we are saving money on heating and cooling. The cost of electricity is extremely high in Hawaii so these saving are offset some, but as we invest in more efficient appliances and lighting our electric expense has continued to drop.
  • Reduced clothing costs: We do not have to shovel snow in Hawaii or wear coats, long johns or special clothes for each season. In Hawaii’s weather we do not wear shoes as often and since we live in T-shirts and shorts, our clothes do not wear out as fast. We do replace our bathing suits often because we wear them every day but the cost is minimal compared to cost of keeping a corporate wardrobe up-to-date.
So here is our calculation of our yearly monetary cost benefits of good weather :

Health care savings     $5,000
Yearly vacations         $10,000
Food savings               $6,000
No allergies                   $500
AC &Heating               $3,000
Clothes and shoes      $1,000
Total savings              $25,500

When we add up our cost savings from good weather, we are confronted with how big the non-financial benefits are. What is the worth of having food that makes us feel good available all year long? How can we put a price on feeling better, having an active lifestyle, and waking up feeling really great every day?

Tuesday, June 14, 2011

Hawaii house design for high winds

We’ve been researching house designs that survive the best in Hawaii’s tropical storms with high winds. We found that hip-style roofs are considered aerodynamically superior in high winds and when combined with long overhanging eaves, they are even more stable because the eaves take some of the wind load off the walls.

Coming from the mainland, we find the look of hip-roofs unusual as they slope upward from all sides of a structure and have no vertical ends. A lot of people build gable-style houses in Hawaii because they are used to the design. Unfortunately, high winds can peel the gable roof from the house at the ends where the walls are exposed. Though gable-style roofs are easy to build and therefore common in track housing, they are not the best design for surviving the high winds of a hurricane or tropical storm.

Hip-roofs, which are more complex to build since they aren’t just a row of roof trusses, require special framing on each end where the roof slants back. The uniform height of the walls also makes it easy to attach gutters around the house which further protects the house and foundation from water and allows the water to be collected for other uses. Long overhanging eaves protect the interior walls and windows from rain and sun which reduces maintenance over time. In Hawaii, being able to keep the windows open all the time to maximize airflow greatly reduces the expense of electricity needed for fans and air conditioning.

The most simple hip-roof has a ridge over the top of the roof which creates two polygon sides and two triangle sides. Other hip-roof styles include the pyramid design where four equal triangular sides meet at a single point at the top of the roof, the cross-hipped design where two sections meet and form a seam, and the half hipped design where the standard hip roof has two sides shortened to create eaves.

Like most of the nation, we watched in horror the unbelievable destruction of Joplin, Missouri from the huge tornado. When TV cameras showed a street of houses that had been completely destroyed, one house remained with very little damage. The surviving house had a hip-roof design, a rare design on the mainland. Though we know that it does well in high winds we find it remarkable that it could survive the intense winds of a huge tornado. Driving around the island, we have a new appreciation of the roof lines in housing developments on Hawaii and are delighted to see how many new homes are being built with hip-roofs of one variation or another.