Making Better Decisions

“Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts”, by Annie Duke, describes how most people incorrectly view the outcome of a decision as being reflective of the quality of their decision process. They think good outcomes from a decision means there was a good decision process and bad outcomes are because of a bad decision process. According to the author, who was a professional gambler, the outcome is more often related to luck than a bad decision process. For example, if you decide to drive through a red light, the fact that you did not get into a crash is more related to luck than being the result of a good decision.

The author claims that people are very uncomfortable with the idea that luck plays such a big part in the outcome of their decisions and are even more uncomfortable with the idea luck plays a big part in their life. Instead of evaluating our choices as having different probabilities of success (like a poker hand), we see our choices as more black and white options with no shades of grey in which choices may be best. Like playing a game of poker, the more information you gain as the game progresses, the less luck controls the result and the better the probability of your chances of making a decision with positive outcomes. Rather than characterizing choices as black or white, her recommendation is to put a probability of success on choices and modify the probability as more information comes available.

Since reading this book, I have been looking more closely at how much information I have about my given set of choices. I noticed that as soon as I started adding a probability (my belief of the percentage chance of success) to each choice, it clarified how much I didn’t know about the future and what the overall risks I was taking with each choice.

I recently had a major decision about my car, since my 3 year lease was coming to an end. Should I buy it? Should I lease another car? Should I buy a new car? Should I use the same dealer? As I collected more and more information and calculated the costs and downside risks of each option, it became clear that a new lease had the best probability of long-term success for me. This process quickly ended my quandary as to what to do. It also made the process of leasing a new car much easier since I went into the negotiation aware of how much of the process was a gamble; would the car be great or a lemon? Time will tell.

It is fascinating to consider how much of the outcomes of my life decisions are just chance, out of my control.

This book is really well written which made understanding the concepts of probability easy to understand and enjoyable to read.
I highly recommended the book!

2018 Year of the Earth Dog

Here are our annual predictions, based on the Chinese lunar calendar, for the 2018 Year of the Earth Dog. As we predicted, the current 2017 Fire Rooster year has seen a focus on justice and more resources put toward growth. The U.S. economy is beginning to improve, the stock market has gained momentum, police and military have gained more favor. Some long-awaited justice is being served. In contrast, the 2018 Dog Year will focus on loyalty, relationships, family, and country. 

The Earth Dog New Year starts February 16, 2018. The Dog is conservative and prizes safety, protection, and tradition. This year will see an inward focus on the country, and major changes in relations between countries.

This Dog year’s impact will be increased for the US by President Trump, who was born in a Dog year (1946). A Dog president will have more influence and power in renegotiating trade and military agreements and protecting US interests during the Dog Year. The Dog year will bring increased social awareness and interest in society’s less powerful members. Generosity and selflessness will be more common. Earth Dog years also increase focus on real estate, agriculture, environment,  and religion.

During the last Earth Dog year, 60 years ago (1958):

Van Allen radiation belts were discovered,

Antarctic was crossed for the first time,

50 feet of snow fell across the Mason-Dixon line, 

NORAD was formed by the US and Canada, 

Mao Zedong started the “Great Leap Forward” movement in China, 

Castro’s Cuban government was recognized by the US, 

US approved Alaska's statehood, 

Eisenhower signed the NASA Act,

The USS Nautilus reached the North Pole,

China fired on islands in the Taiwan Strait and a Chinese civil war started, 

Japan marketed the first precooked instant noodles, 

The US Air force Academy opened in Colorado Springs, 

The National Defense Education Act was signed, 

A US Air Force C-130A was shot down when it strayed into USSR airspace, 

Doctor Zhivago was published in US, 

The first color video was recorded on magnetic tape, 

Jack Kilby demonstrated the first integrated circuit (IC), 

Rockets designed by Ernst Mohr reached the upper atmosphere,

The US manned space-flight project was renamed Project Mercury, 

The first pacemaker was installed in Stockholm, 

Pope Pius XII died and John XXIII was elected as the new Pope,

First women in the UK House of Lords,

PanAm flew the first transatlantic jet from NY to Paris

The first coronary angiogram was performed,

The US tested the first full range ICBM and launched the first guided missile destroyer,

The first radio broadcast was made from space – President Eisenhower’s Christmas message “to all mankind, America’s wish for peace on Earth and goodwill to men everywhere”.

The 2018 Dog Year will emphasize friends and family and security which will be reflected in US relations with other countries and world leaders. It is a time for caution, pragmatism, and careful growth in business, career, home, and family affairs. For the best luck in this year, keep calm and stay rational.

Happy Money

The book, Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton, summarizes current research on how you spend money changes how happy and satisfied you are in life and affects your health and well being.

This is a wonderful book that explains how you can increase your happiness by spending on experiences with the people you value rather than spending on prestige belongings that many people think will make them happy.

According to the book, research shows that spending money on leisure activities like trips, movies, sporting events, gym memberships and the like leads to more happiness than buying expensive consumer and prestige items. Experiences tend to be appreciated more as time goes by whereas things tend to be less appreciated as time goes on as better things than they bought emerge. Experiences tend to make us feel more connected to other people which improves life satisfaction. When couples do exciting and novel things together, their relationships improve. Anything we do to make the time with our friends or partners special is money well spent. Experiences make memorable stories for retelling for years to come and give us a sense of who we are or who we want to be. Experiences can’t be compared  to things purchased. Experiences that remind of us of the past and give us nostalgia, like going to a museum, watching an old movie, or hearing a favorite song, can bolster our vitality and reduce stress.

Research indicates people earning over $75,000 a year do not have an increase in happiness. High income individuals spend more time doing high stress activities like working, commuting, and shopping than those who make less. High income individuals view their time as highly valuable which makes them feel like they have less time. In contrast, buying time, called time affluence, increases happiness. You can gain time affluence by moving closer to work to reduce your commute, working in a job that requires less hours, or hiring people to do your yard work or cleaning.

Research shows that having expensive things does not bring happiness, health, or well-being. The University of Michigan found that those with cheaper cars had the same satisfaction driving them as people with expensive cars. Surprisingly, homeowners are not happier than renters, and are on average are 12 lbs heavier than renters. Those who simplify their lives by reducing their wardrobe, moving into a smaller abode, changing their consumption patterns, and reducing their stuff are happier. The enemy of appreciation is abundance; if we make everything we do special it will increase appreciation and happiness.

I highly recommend this book for people wanting more happiness, time, and life satisfaction. Five Stars. 

How to Make Your Money Last in Retirement

I just finished reading Jane Bryant Quinn’s book "How to Make Your Money Last: The Indispensable Retirement Guide”. Ms. Quinn wrote this book last year and is now 78 years old, so her concepts are not theoretical or abstract. She shares clear, concrete, and very detailed information on how to make your retirement money last which made this book useful and enjoyable to read.

 

The most basic thing she recommends to do to make your money last is to earn income as long as you can (as old as possible) and not start taking your social security until you are 70 years old. The social security payout increases 8% a year for every year after age 62.

The second way to make your money last is to control spending. The happy place to be in retirement is where your expenses are equal to or less than your income.

For most retirees, their biggest reduction comes from downsizing the cost of their housing. 

Another major expense for many are high stock trade fees and hidden commissions in mutual funds, annuities, and life insurance products. These high costs and hidden fees can eat away as much as 50% or more of the long term value of a retirement portfolio. The best way to avoid this is to use a discount broker and manage investments yourself.

An area of great savings and great risk is Medicare. You can start taking Medicare at 65 and it may be much cheaper than your employers health coverage plan, however, there are big risks to doing this. If you start Medicare, the government will automatically start your social security payments. You have to have the payments stopped or you could lose your 8% lifetime increase. If you miss a payment to Medicare, they cover it with social security and that could impact your start date. You may not even be notified and only find out about it at age 70 when you file for social security. Not a small risk.

Although I have  considered Annuities and Reverse Mortgages foolish things to do, the author pointed out some circumstances where they can be very profitable. The book does a great job of explaining the difference between an IRA, a 401K and a Roth IRA and the tax implications of each. She describes the rules for taxes and inheritances and what income is and is not taxable.

One thing I found surprising is that you can open a Roth IRA at anytime and put in any amount. The earnings are not taxed and, unlike an IRAs, there is no minimum that must be withdrawn each year or maximum that can be withdrawn each year. Even better, the earnings are not taxed when taken out. It actually seems too good to be true, so I recently bought a book on the details of Roth IRAs to see what the downside might be.

The author recommends that you pay off all credit card debt before retiring; apparently people 50 and older have a lot of credit card debt - far more than younger people. She also thinks it is best to avoid buying rentals as a source of income because they are hard to manage.

The book’s detail and depth makes it a slow read but I found the information so useful that I used a highlighter to mark the critical details and consider it an important reference.


I highly recommend this book, five stars.

The Stock Market Index Revolution

The Index Revolution: Why Investors Should Join It Now by Dr. Charles Ellis explained a lot of the changes that I have witnessed in the stock market over the last 40 years. Dr. Ellis has a great deal of experience managing large pension funds and wealth funds. He explained the reasons why investing by amateurs like me no longer works and why it makes sense to invest in indexes.

In the 1960’s 99% of stock market trades were by amateur investors who traded just a few times a year. Today, less than 1% of stock trades are by amateur investors. Now, over 1.5 million professional traders, mutual funds, pension funds, and automated trading systems make 99% of the world-wide stock trades.

Full time professional and institutional traders take advantage of underpriced stocks by finding them faster than amateur investors. They do it by getting instant and detailed information about companies unavailable to amateurs.  Stock information sources can cost over $20,000 a year, impossibly expensive for an amateur like me managing my IRA and small portfolio of individual stocks.

Over the past 40 years, the trend toward professional and institutional stock trading led to the creation and spectacular growth of professionally managed mutual funds. Although the “famously successful mutual fund managers” paid huge salaries touted that their mutual funds performed better than the overall market, academic researchers found that over the past decade only one or two of their mutual funds out-performed the S&P 500 stock index. And, after the cost of trades and the high management fees, none of the mutual funds out performed the S&P 500 index.

The stock market generally goes up about 8% per year, averaged over 10 years. The expense of trades and staff, which is commonly 4% of the gain, can cut the long term appreciation of an investment portfolio by 50% of even the best performing mutual funds. Most of the mutual funds do not come close to matching the performance of the overall stock market index, but even if they did the net result would be less because of their costs.

These findings published by academia have led to a mass exodus from mutual funds to exchange traded index funds (ETFs).

The author’s career included managing foundation portfolios as well as researching stock fund results at Yale, Harvard, and Princeton. His unique experience makes the book an especially enjoyable read. I was so impressed with the data and view he presented that I immediately started moving out of individual stocks into ETFs. It has been about 90 days since I started and I am already very happy with the greater stability of the ETFs; no more disturbing daily volatility of individual stocks.

I highly recommend the book. Five stars. 

The Downside of Low Interest Rates

Ever since the US downturn in 2008, interest rates have been dropping both for savers and for borrowers. The upside is those with debts, who were able to refinance, enjoyed a greatly reduced cost of borrowing. Low interest rates made buying a home much cheaper and easier to qualify for.  Monthly payments are almost 50% less at a 3.5% interest rate than at a 7.5% interest rate. The reduced cost of buying a home has helped keep housing prices high in Hawaii, reduced foreclosures rates, and added to local governments’ funds with higher property taxes from higher real estate valuations.

If the US economy continues to improve and interest rates return to previous rates of 8% or more, what will the downside be of this past decade of ultralow interest rates be?

The most obvious downside is that house buying will be much more expensive. A monthly payment on a 30 year, $600,000 mortgage will go from $2308 at the current 3.5% interest rate to $4195 at a 7.5% interest rate.  A $2308 payment at a 7.5% interest rate would only buy a $329,714 home, a mere 55% of what the same payment buys at 3.5%. If the return to higher interest rates drops the home selling prices and ultimately the property values as you would expect, then these lower values will reduce income to local governments from  lower real estate taxes. It seems likely that foreclosure rates will also increase along with more people having underwater mortgages.

A similar calculation can be run on how stocks prices could be affected with increased interest rates. With low interest rates, stocks are far more attractive to people wanting to earn money on their savings. Most saving banks are paying only 0 .25% interest which makes stocks that pay 1% dividends look very attractive. Risky stocks that pay a higher dividend (2% to 4%) are attractive to people who may not normally be willing to take the risk. When savings banks return to paying 7% or more in interest, it will have a very negative effect on most stocks; normal savers and investors  will be able to get better returns without the risk. Companies have benefited by being able to borrow at lower interest rates and they have improved their returns as a result. When interest rates go up, stock prices could drop up to 50%.

As we study how rising interest rates may affect the prices of real estate and stocks, we can see why the Federal Reserve (which controls interest rates in the US) is so reluctant to raise them. The interest rates offered by banks are normally higher than the Federal Fund rates for mortgages and lower for savings. If they raise the interest rates too soon or too much, the results could be a sharp drop in real estate and the stock market causing a downturn in the US economy.

The Cycle of House Prices and Foreclosures

Our first experience with a volatile housing market and mass foreclosures was in Texas after the oil crash, in the mid-1980’s. Ten years earlier Dallas and the surrounding areas had a real estate boom from a surge in oil prices and influx of people attracted to the area by the new jobs. Even in the suburbs north of Dallas, like Plano where we lived, there were labor shortages and high real estate prices. Track houses purchased in 1979 increased 30% in value in just 3 years. 

By the mid-1980’s, the crash in oil prices was severe and the massive layoffs included many of our friends. Houses were rarely for sale in Plano, so it was a shock to see “For Sale” signs lining the streets. We watched dumbfounded as the super hot Texas economy and real estate market became a calamity. Half built skyscrapers stood idle. A huge new shopping mall near our apartment  had empty shops and tumble weeds blowing through it. The Texas economic downturn was steep with dozens of banks going bankrupt and thousands losing their jobs and life savings.  The federal government created a corporation to "warehouse" all the debt from home mortgages and commercial properties until an orderly market returned to sell them off.

We experienced the Texas boom and bust during our early years of working, and although we were somewhat on the sidelines without the income or down payment to buy a house, the experience left a big impression on us.  

Twenty years later when we saw the rapid rise in house prices in Santa Cruz County we got a terrible feeling in our stomach.  Based on our experience, it was only a matter of time before the crash. But our friends and neighbors were convinced that house prices only go up. They claimed that the 32% price increase in their houses over the past three years, from 2002 to 2005, was only the beginning.

At the end of 2007, real estate prices in Santa Cruz County started to fall. From 2008 to 2012, house prices fell 33%.  The crash crushed the buyers who had purchased their homes at the height of the boom.

Now we are living on Oahu observing the island’s housing boom.  The average price for a single family home is currently $725,000, a 12% increase over the past three years. Oahu’s foreclosure rate of 1 in 3200 homes is one of the lowest rates in the US. In contrast, Maryland, the state with the highest foreclosure rate in the nation has a rate of 1 in 537 housing units. 

The income needed to afford a $725,000 mortgage for an average Oahu house is $290,000 a year, based on the conservative qualification criteria of a mortgage not exceeding 2.5 times your income. In contrast, the average salary for job postings in Honolulu is $40,000, which is 31% lower than the average salary of job postings nationwide. In our central Oahu condo complex, a 3 bedroom, 2 bath, 2 parking spot, 1100 square foot condo is listed at $525,000 (with no amenities like a gym or swimming pool or common area). 

The high cost for a house on Oahu feels a lot like California in 2005, particularly when the low wages in Hawaii are factored in. Even so, house prices continue to rise.

The extreme cycles of housing prices has taught us to expect the unexpected.

Life on Oahu versus the Big Island

We recently moved to Central Oahu from South Kohala on the Big Island. Though we are still in Hawaii with its great weather and aloha spirit, the differences between the two islands are dramatic. It is a lot like the difference between living in one stop-light town in the Midwest versus an apartment overlooking Central Park in Manhattan, NY.

Crowds

Oahu is very crowded. On a recent Saturday night at Ala Moana Mall there were so many people we struggled to walk through the mall.  Less than half of them were speaking English. It felt more like being in Hong Kong or Tokyo than the US or anywhere else in Hawaii. Everywhere you look on Oahu there are houses, cars, and people which is a major contrast from the miles of desolate lava fields, acres of pastures, and empty beaches we are accustomed to on the Big Island. At our condo complex in central Oahu, cars come and go at all hours of the day and night,  a big change for us after years of living in a mostly empty (except around Christmas) condo complex in South Kohala.  All the people on Oahu keep things very lively and there are endless activities and events, but unlike the Big Island it is surprisingly more difficult to make friends.

Distances and Traffic

Everything on Oahu is only a short distance and if you are lucky and there is not much traffic, you can get anywhere quickly. On the Big Island, everything was a long drive.  It was a long drive for us to get to COSTCO and potlucks with friends in Kona from Kohala.   On Oahu we can drive to three grocery stores, Walmart, our bank, and 20 or more restaurants in our neighborhood in less than 5 minutes.  However, it recently took us 30 minutes to drive a little over a mile on a Saturday morning near Ala Moana mall when dropping someone off at the Convention Center. We rarely ran into traffic on the Big Island.  Occasionally, the traffic from the airport into Kona would jam up a bit and it was frustrating to get behind a slow moving truck, but Oahu has epic traffic jams which we just have to surrender to sitting in the car for a very long time.

Driving Style

Folks drive slower on Oahu than on the Big Island and the speed limits are lower. Honolulu police are out in force giving tickets to speeders, a rare sight on the Big Island. In our seven and half years on the Big Island we saw maybe a dozen people getting tickets, whereas, we see one or more cars getting pulled over every day on Oahu.  Driving in Oahu requires threading your car through tiny parking lots with tiny parking spaces. The freeways are massive in Oahu compared to the two lane roads throughout most of the Big Island, but the lanes are narrower and it feels like the cars are going to scratch the paint off your car as they pass.  Freeway driving takes a great deal of concentration on Oahu. There is just more room for cars and parking lots on the Big Island.

Shopping

Shopping on Oahu is amazing. There are so many stores and malls it feels more like New York or Paris than Hawaii. On Oahu every neighborhood has a wide selection of stores and there are numerous malls.  The Big Island is just not the place to be if you like shopping, whereas Oahu has an amazing selection of things to buy and great prices.

Food

Food shopping on Oahu is easy compared to the Big Island. There are numerous grocery stores with greater selection and lower prices than the Big Island stores. But Oahu does not compare to the Big Island for fruits and vegetables.  There are fewer Farmer’s markets on Oahu with limited selection compared to we had on the Big Island.  On Oahu, there is no place like Suisan or the Kona harbor with fresh fish and the amazing Big Island Beef is hard to find. Restaurants are abundant, excellent ,and affordable on Oahu, a very unfortunate thing for our waist lines. We never found a place on the Big Island that had consistently excellent food and service at an affordable price whereas on Oahu we have trouble deciding where to go among all the choices.

Weather and Vog

The weather on Oahu depends on where you live, just like the Big Island. We live in central Oahu where it is very rainy, similar to Hilo.  When we drive to west Oahu the weather is usually hot, dry and sunny, similar to Kohala. A bad Vog day on Oahu is like a no Vog day on the Big Island. We are happy to not have to deal with the Vog.

Rent and Jobs

Rents are substantially higher on Oahu than the Big Island.  We are paying $600 more a month in rent for a much smaller condo than we had on the Big Island. The same size and quality of rental on Oahu is about double the cost on the Big Island.  The driving factors for Oahu’s high rents seem to be the large number of soldiers who get a substantial housing allowance and the job market.  Getting a job on Oahu is fairly easy and although they pay better than Big Island jobs, the pay is still very low compared to the cost of housing.  The competition for housing can make it a challenge to even find a rental.

Beaches and Parks

The gorgeous white sand and black sand beaches on the Big Island are in a league of their own.  The famous North Shore beaches on Oahu are tiny with only a few places to  park along the road.  It is a big contrast to the Big Island’s long stretches of beach with large parking lots near many of them.  On Oahu, the malls are more accessible than the parks and trails and beaches.  We miss counting the turtles, talking to the eels, and enjoying the gorgeous scenery on our daily beach walks in Kohala.

We are enjoying our new life in central Oahu but we are missing the incredible outdoor lifestyle we had on the Big Island.

Your Ideal Hawaii 2015 Day Planner

Every year we use to hunt for a day planner to keep track of our goals, events, daily to-do lists, and record the food we ate.  Although some day planners were close to what we were looking for, none provided everything we wanted and we were frustrated by their high cost.  Two years ago, we started to published our own day planner with all the tools we needed to set goals and keep track of our progress every day and month during the year.  If you are looking for a day planner for 2015, consider Your Ideal Hawaii Day Planner 2015, available now on Amazon for $5.99.

We tend to get more of the things we appreciate, so the front of the Hawaii-themed Day Planner has a page to list the things you appreciate to refer to every day.  Each day in the Planner has space to track food eaten, calories, and your daily weight, which we have found keeps us achieving our weight and health goals. Each week has a space write down your insights, which we find helpful to refer to later, sometimes years later.  We also record the events of the world and important happenings in our life in our Day Planner.

Your Ideal Hawaii Day Planner 2015  is a 9”x 6” paperback book that is sturdy and easy to carry. The front cover has a picture of a beautiful red Lehua flower from Hawaii’s native Ohia trees. The 150 pages in the interior are black and white.   The 2015 Day Planner has all the Federal holidays as well as unique holidays and special days celebrated in Hawaii.

At the front of the Planner are pages for writing your Goals for the year, what you are Thankful for, your Choices for the upcoming year, and your Plans for where you want to spend your time in 2015.  Each month has an overview calendar with a section on the side for writing monthly Goals, Health Choices, Appreciations, Projects, Adventures, and Events.  Each monthly calendar is followed by two pages for each week to plan and record each day. 

Overview calendars for December 2014 and January 2016 are also included.  At the back of the Planner are pages to record your 2015 Accomplishments and make Plans for 2016.  You can look inside the day planner on Amazon here.

If you are looking for a great Day Planner for 2015 for yourself or someone else, give this one a try and let us know how it works for you.

The Hawaii Time Share Benefit

Years ago we shunned offers for Hawaii time shares marketed to visitors to Hawaii. The sales people gave super discounts on activities and deals to stay for a week if you listened to their spiel.  But, we believed buying a time share was a bad financial deal because we viewed it as overpaying for vacation condo ownership without all the benefits.  So we bought a condominium in Kona and used it for our vacations to the island for years and rented it to other visitors while we lived on the mainland.

However, when friends were visiting last month, we advised them to buy a time share for their annual two weeks of vacation, rather than investing in a condo.  Here is why we convinced them:

First, every time we came for a “vacation” we ended up spending the first three to four days fixing a long list of issues with the condo.  It was a lot more work than we would have guessed.  Since we did not have our tools in Hawaii, we ended up buying a new set of tools every vacation. Eventually, we made a small portable tool kit that we brought with us each time.

Second, owning a condo meant that  we always came back to the same place.  If we had a time share we could have visited other places in Hawaii or the world.   We could have upgraded.  In retrospect, that is not a small thing.

Third, the great tax advantage that we anticipated did not happen.  During our high income years on the mainland we were blocked from taking the losses we had from changes in IRS rules and in recent years, our losses on the condo have given us no tax benefit because our taxes are so low from lack of income.

Fourth, any savings from staying in hotels by having a condo was more than offset by the ever increasing Home Owners Association fees that went from $300 a month to over $660 a month. Insurance, taxes, upkeep and the associated bookkeeping to track the money we lose every year is expensive and time consuming.

Fifth, our anticipated equity benefit from real estate prices going up in Hawaii has not happened.  Many properties on Hawaii Island are still down by over 50%. We could have bought a really nice time share for what we have lost in equity over the past 10 years.  Though the condo is in a great location, it is too small to live in full time so it is still a vacation rental.  Even one year of our annual operating losses would have more than paid the annual fees of most time shares.

Looking back at our ten years of our condo ownership, we can see the great benefits of having  bought a time share rather than buying a vacation condo. 

2014 Year of the Wood Horse

It is time for our annual predictions based on the Chinese lunar calendar for 2014 Year of the Wood Horse.  As we predicted, the current 2013 Water Snake year has been about rich people holding on to their wealth and countries becoming increasingly isolationist and possessive.  In contrast to the internal focus of Snake years, Horse years are about energy, expansionism, military power, physical feats, and economic change.  Although Horse years can bring good luck and fortune, they require quick thinking and decisive action.  The time for planning and introspection will be over when the year of the Snake ends on February 3^rd, (a bit unique this year since the Chinese New Year is January 31^st). During a Horse year we must be ready to react quickly to keep pace with world events and changes.

We find it useful to review what happened 60 years ago, during the last Wood Horse year, to see how events may relate to today’s world.  In 1954, the previous Wood Horse year, the new, secretive Hydrogen bomb project expanded to above ground testing around the Pacific.  The 1954 Congress was attacked by four gunmen with semi-automatic pistols who shot into the US House of Representatives chamber from a balcony and wounded 5 congressmen while they were debating an immigration bill.  The Snake year McCarthyism created new laws in the 1954 Wood Horse year that made being a “communist” illegal, authorized harsh penalties for spies, and approved the CIA opening US mail.  It would not be surprising for the wikileaks, NSA leaks, and other secrecy issues of the 2013 Snake year to result in harsh, new laws in the 2014 Horse Year Congress.

Horse years bring economic growth and chaos.  Although the last Wood Horse year of 1954 saw the Dow Jones close higher than its peak before the 1929 crash, most recent Horse years have seen major stock market crashes.  In the Horse year of 2002 the stock market dealt with the dot-com bust and in the  Horse year of 1990 the stock market took a dive after the Iraqi invasion of Kuwait.   In the 1978 Horse year, a stock market crash of 22% one day in October came to be known as black Monday and caused a global stock market decline.  No one ever figured out what caused the panic, but protective measures were installed to prevent a repeat of the disaster.

Horse years are military power and transportation minded.  During the last Wood Horse year of 1954 the US Army created the first helicopter battalion, the US Air Force Academy opened, the B52 bomber, C-130 Transport, and Air Force One all had maiden flights.  During the last Horse year in 2002, Fossett made the first solo, non-stop flight around the world in a balloon.  We expect a year of military advancements in space, the formation of drone battalions, and faster vehicles of all types.  We expect to see military coups, the unrest the Middle East and Asia to expand, and rapid changes in world leaders.

Horses are energetic and physically strong and Horse years often break records in human feats.  During that last Wood Horse year in 1954, the four minute mile record was broken and new records achieved for the 5K and marathon.  During the 2002 Horse year, records were broken in baseball, football, cycling, and other sports, by many athletes now accused of using performance enhancement drugs. 

There are health issues associated with Horse years, in particular issues with the lungs.  Smog and contaminated air may become recognized as a world-wide health problem.  Excessive heat, cold, storms, and earthquakes are also common during Horse years.

Horse years bring focus to fairness, equality, and humanitarianism.  We think sexual rights will progress in the Horse year, much like race rights did in 1954 with the ending of segregated regiments in the military and the start of school desegregation.  The Humane Society was formed in 1954 during the last Wood Horse year. 

Horse years are focused on entertainment, communication, and sociability.  During the last Wood Horse year of 1954, Disneyland was announced and construction started; Disney’s TV show and the Tonight show hosted by Steve Allen were started; color TVs became more common in American homes; and the world’s largest mall opened in Michigan. During Horse years, people spend more money and time on entertainment and fun.

From the introspection and isolation of the 2013 Snake Year, the 2014 Horse Year will bring explosive energy, a fast pace, adventure, unique forms of communication, and a focus on fun.

Finding ideal college student housing in Honolulu

Fall term just started in Hawaii and we were once again on the hunt for affordable and safe housing for our college kid.  Honolulu is renowned for being one of the most expensive places in the world to live and housing for college students is no exception.  On the positive side, there are really a lot of housing choices including vacation rentals, apartments, rooms in a house, student suites, and college dorms. But most come with big price tags or have lots of downsides like year-long leases, having to set up electric and internet services, remote locations far from a bus line, or difficult conditions with old or bug infested buildings and appliances.

We waited until the last minute to find housing this time in hopes of having more choices based on the demographics which point to college age students in sharp decline and  the cuts in federal spending which we assumed would mean less military employees to compete with rentals on Oahu.   There were more choices than last year, but when we arrived we were surprised to find Honolulu in a phase of explosive growth. 

Though it has only been four months since we were in Honolulu, every direction we saw spectacular new high rise buildings and the skyline noticeably changed.    We wonder who will live in the thousands of new condos built and under construction and how will Oahu be able to provide the infrastructure for all the new people moving in.  We saw  a large number of Japanese and Chinese families who seemed to be assessing Honolulu as a place to live.  Perhaps the earthquakes, pollution, and Fukushima related health concerns are causing people in Asia to consider relocating to Hawaii.

Honolulu’s freeway gridlock is always a shock to us coming from our unpopulated island community on the Big Island.  During Honolulu’s evening rush hour, it took us 20 minutes to go a mile on the main roads. The roads surfaces were extremely rough with frequent potholes. Honolulu’s traffic and crowds reminds us more of central Tokyo than the Honolulu we remember.  Since we watch the local (Honolulu) TV news we know the homeless problems are growing and driving around Honolulu it appeared the number of homeless had doubled since May.  Sadly, they seem more desperate and in much worse health.

We were able to find a great college housing solution with all the must-haves: cost, security, electricity included, internet access, short term lease, close to a bus line, close to food, and nearby shopping.  And as usual, we had a great time in Honolulu people-watching, shopping, and eating out.  Now back on the Big Island, the quiet and slow pace are a very welcome change and we can feel our blood pressure going back to normal.  We can only wonder what Honolulu will look like next time we visit.

Battery technology for Hawaii

Our unexpected night visitor, a rat that ate through our bedroom screen door,  led us to look for a better rat trap.  Our search resulted in a high-tech, battery-powered Rat Trap that zaps rodents rather than crushing them.  The device works because of a new type of lithium battery that reviewers are saying kills tons of rats in their barns and farms before needing to be replaced.  

The latest technology of disposable AA Lithium Batteries last 9 times longer than previous versions. These batteries no longer contain cadmium so they are also less toxic than the first generation of lithium batteries. We are excited about this new technology because we think it could make Hawaii energy independent.

Why?

Hawaii’s perpetual sunshine is great for getting electricity from solar panels, but the problem is how to store all the electricity produced during daylight for use after the sun goes down.  When we had a solar panel in Hilo, the sunlight filled the battery before lunch.  The rest of the day was wasted electricity production.  

If rechargeable car batteries could store 10 times more electricity than they do now, it would solve the problem.  Electric cars batteries would provide weeks of driving instead of hours and big energy users like data storage farms, bakeries, and other manufacturing could become viable in Hawaii with large amounts of electricity stored from low cost solar power.   A power company in Oregon is testing a giant new type of lithium battery to help stabilize their local power grid.

When these new types of  batteries become more widely available, Hawaii residents will be able to generate more low cost solar power and the island’s money spent on imported oil could instead be used to improve the land and everyone’s quality of life.

High value house design in Hawaii

We recently calculated that running an air conditioner every day to keep a small 2 bedroom home cool that was not designed for Hawaii’s tropical climate would cost between $450 to $1000 a month for electricity.   That extra monthly expense is the equivalent to an additional $100,000 to $225,000 that could have been used toward a mortgage at 3.5% interest. 

If this monthly expense for electricity was income generated from a savings account paying 0.2% interest (sadly a common interest rate these days) it would take a savings account of $2.7 million to $6 million just to generate the $5,400 to $12,000 annual cost for electricity.

Surprisingly, homes in Hawaii designed for the tropics to minimize the cost of electricity and homes designed for cold climates that are solar ovens requiring continuous air conditioning are often priced the same.

Although the financial benefits are enormous when a home does not require air conditioning, the enjoyment and health benefits of having fresh, tropical breezes blowing through your home is yet another huge value in a house designed for Hawaii.

Living in Hawaii on Less

Recently we saw an article that claimed the cost of living in Maui was 200% higher than the “average” cost of living on the mainland.  This matches our experience of the costs in Hawaii when trying to live the same way as we did on the mainland.  Over the past five years, we have modified our lifestyle in Hawaii in order to cut our costs and improve the quality of our life.  As a result, our expenses are much cheaper than they were when we lived in Northern California and our life is substantially more pleasant.  Below is a list of living expenses that we reduced by changing our lifestyle.

Utility Costs - Electricity costs 4 to 7 times more than most places on the mainland so we have learned to live with less electricity.  We live in a house that has windows that open to let the air through and we block the sun from heating up the inside.  We never use AC and rely on fans and cold showers on really hot days.  We wear thin clothes and swim in the morning to lower our body temperature in the summer.   We use only LED lights and have an LED TV  and energy efficient appliances.  We keep appliances unplugged, our lights turned off when not being used, and our water heater turned low.  We don’t use hair dryers and we monitor anything electric with an electric current meter (Kill-a-watt ).  These actions have cut our electric costs by over 75%.

Food Costs - We only eat local fruit, vegetables, grass fed beef, and fish.  When we bought grass-fed beef and Hawaiian fish in California we paid about 3 times more than we pay in Hawaii and we never were able to get Hawaiian avocados, tomatoes, lettuce, cucumbers, mushrooms, bananas, and eggplants.   We order processed foods in bulk (rice, rice pasta, almond flour, cherry juice concentrate, etc) from Amazon.  Amazon has a Prime program that gives members free shipping, so we pay a third or less than the local store prices.  We estimate eating local and ordering in bulk saves us about 75% from our grocery store costs on the mainland.   We have to keep close track of our inventory to make sure we do not run out of food and modify our plan if the food we normally order is not on Prime at a particular time.  Eating foods that are reasonably priced on the mainland or depending on meals at restaurants can break a budget in Hawaii because of the high costs of labor and shipping of foods to the island.

Housing costs - We rent and we move to take advantage of better deals as they become available.  We have learned to look at the net cost of living in a place rather than just the cost of the rent.  When we initially moved to Hilo, our rent was half of what we paid for a smaller, dumpy place in Cupertino, California.   Though our rent went up when we moved to Kona, our net cost was lower because the rent included services that we were paying for in Hilo including sewer, water, trash, and access to a gym and swimming pool.  When moved to South Kohala, we gained even more services and benefits without increasing our rent.  Signing a long term lease during off season has allowed us to cut the cost of our rent by 75% of what we paid in California.  Being able to decrease our housing costs over the past five years may not be feasible on other islands in Hawaii.  Owning a home in Hawaii can be more expensive than on the mainland because of the cost of upkeep, security, taxes, utilities, County services, and owner association fees.

Medical Costs - The cost of our medical insurance on the mainland was staggering. When we moved to Hawaii we were able to cut our cost by over 75% by buying a Kaiser policy.  Over the last five years our policy has doubled in cost, but it is still only 50% of what we paid in California.  We shop around for any services we require like eye checks, glasses, etc. since the costs vary dramatically on the island.  Maintaining a COBRA policy or mainland blue cross policy can be very expensive, so being able to switch to a low cost policy in Hawaii can make a big difference in cost of living.

Travel and Vacations - One of our biggest expenses in California was the cost of getting away from the cold, dreary winter to the sun in Hawaii.   Now that we live in Hawaii, we never “go on vacation”.  We have taken some trips to Oahu to visit our son, but we get great prices to stay in condos and hotels  since we are locals and get Kamaaina rates.  Many people we know travel back to the mainland frequently for business or family which can be a major cost of living in Hawaii.

We believe that the high cost of living a “mainland life style” is the major reason most new arrivals to Hawaii stay only a few years.  Taking the time to plan and invent a Hawaii lifestyle can make a huge difference in the cost of living as well as increasing the enjoyment of being in Hawaii.

Our College Experience in Hawaii – a parent's perspective

When we moved to Hilo, Hawaii in 2007 we rented a house near the University of Hawaii Hilo (UHH) campus so we would be within walking distance for our son to attend when he was ready.  

The University of Hawaii system has almost a complete monopoly on higher education in the state with 10 campuses on six islands including 3 universities, 7 junior colleges, and 9 education centers.  Although the tuition at UH has doubled since 2005, at $8,664 a year for residents, it is still relatively affordable compared to many universities on the mainland.  Nonresident tuition at UH is substantially more expensive at $24,912.  The tuition at UH campuses on Maui and the Big Island are lower, however all UH campuses have been scheduled for tuition increases each year until 2016.  Having so many locations around the state has increased the number of students in the UH system to over 60,000; 85% of them are Hawaii residents.

When our son returned from a high school exchange in Japan and was ready to enroll into Freshman classes, UH Hilo admissions told us that we would have to pay out of state tuition; they claimed our year of residency in Hawaii did not count since our son had been out of the country.  UHH was ranked poorly compared to other colleges in the US and their struggle to keep up with the flood of incoming students made us give up on fighting our residency case and on the UH system entirely.  We started looking at other options for college.

Many of the high school graduates in Hawaii go to universities on the mainland, because other than UH, the only other universities in the state are Hawaii Pacific University (HPU), Chaminade University of Honolulu (CUH),  and Brigham Young University Hawaii (BYUH).  HPU is a private university with approximately 7000 undergraduate and 1200 graduate students located in downtown Honolulu. Chaminade is a private Catholic university located near UH Manoa with less than 3000 students enrolled and only 1200 undergraduate students.  The BYU Hawaii campus is a Mormon university with 2500 students located in Laie, about 35 miles from Honolulu. 

We preferred a college as close as possible to us, but the private universities in Hawaii did not seem a good fit for our homeschooled son. We were looking for a college experience that would allow him to gradually settle into a formal school environment.  We even considered several colleges in Japan with international degrees.  During our search, we were very surprised to discover that the largest private university system in Japan, Tokai University Educational System, had a college in Honolulu near Waikiki. 

We went to Honolulu to tour the Hawaii Tokai campus which is contained in a single high-rise building that felt more like we were in central Tokyo than Hawaii.  Our son felt very comfortable with the students after having just spent a year in high school in Japan.  Tokai’s Hawaii campus offers an accredited AA degree in liberal arts.  American citizens are offered a tuition reduction to encourage their enrollment which made Tokai’s tuition less than UH’s tuition for Hawaii residents.  The English language courses and AA degree program at Hawaii Tokai are comprised of mostly Japanese students who live in dorm rooms above the classrooms in the high-rise building. The classes are small with 8 to 20 students and the professors are attentive to helping the students with their English skills to prepare them to transfer to an American university. Each term crams 16 weeks of a normal college semester into 10 weeks, so the college has 3 terms plus summer terms every year allowing two years of college to be squeezed into a year and a half.  Getting good grades gives parents even more of a reduction in tuition.  After a year and a half our son had accrued 50 credits and was ready to transfer to a university and take upper level courses.

One of the challenges of transferring between colleges is getting credit for classes already taken.  Most colleges have a method to determine in advance what credits will transfer.  If a lot of the credits taken do not transfer, it may take a lot more time and money to get a degree.  UH has a online tool that compares courses from most colleges in the US to their equivalent course at UH and tells you whether the credit counts toward a degree or not.  In some cases a class from a particular college will be eligible for credit one year and not another.  Other universities in Hawaii provide a free evaluation of a student’s college course work to let you know how many credits will transfer and what prerequisites for graduation they fulfill. 

When evaluating universities for our son to transfer to, our biggest concerns were tuition and living expenses.  We again considered universities in Japan including Tokai’s main campus near Tokyo and Temple in downtown Tokyo, but the earthquake and nuclear disaster in March 2011 made that option impossible.   We decided against UH after talking to students who were frustrated with class availability and having difficulty getting what they needed to graduate.  Our son visited the 3 private university campuses on Oahu and was most excited by the degree programs at Chaminade. Fortunately, almost all of the courses he took at Hawaii Tokai transferred to Chaminade and fulfilled many of the lower level prerequisite courses for a degree. 

The combination of federal loans, grants, and generous Chaminade scholarships has made tuition the past two years very affordable.  However, covering the cost of living expenses in Honolulu has been a challenge.  The cost of a dorm is about the same as the cost of a tiny apartment after factoring in the need to find another place to live when the dorms are closed and having to buy a meal plan.  Sharing a house or condo can create other problems if roommates are not compatible or able to pay their share.  The cost of living in Honolulu is much higher than our cost of living on the Big Island. A tiny studio apartment in Honolulu costs the same as a 3 bedroom 2 bath condo on the Big Island and our prices for fresh produce and meat on the Big Island are much lower than the prices for food in Honolulu grocery stores.   However, the benefit of having our son in the same time zone and only a short plane ride away has been worth the extra cost to us.

Our son has helped to offset his cost of living by working, but part time jobs in Honolulu pay low wages.  When adding the cost of clothing and transportation to a job and subtracting taxes, the amount of income does not cover the high cost of living.  Furthermore, there are risks of having a job in college if it jeopardizes scholarships by lowering a student’s grades or requires additional semesters in school when classes are dropped.  We have calculated that some scholarships are worth much more than the potential post-tax income from a part-time job in Honolulu. 

College today requires a substantially larger financial investment from parents to insure that their child’s degree does not come with crushing debt.  We think it is harder to get a degree now than it was when we attended over 30 years ago because so many more courses are required to graduate.  As home schooling parents we feel lucky to have found great college opportunities for our son in Hawaii.