Army Post Road

     I came across the following scenario at The Tao Of Making Money:

Assume you are an average 25 year old with $25,000 debt (on account of your student loan) You have been given a lump sum $10,000 and the following four choices:

1. Invest it for your retirement funds.
2. Save/invest it for your future home.
3. Save/invest it towards your child’s/children’s future college education.
4. Pay part of your student loan debt.

You can pick only one of the above choices towards which you should use the entire $10,000. Which one will you pick? ..and Why? Assume that the rate of return on the three investments choices is the same and the student loan charges you an interest rate that is equal to this rate of return. Would your answer be any different if the amount was $25,000 instead of $10,000? Again, you can pick only one of the choices.

     My response is to say: PAY OFF THE DEBT! Since the rate of return on the investments is the same as the interest charges then there isn’t any opportunity cost between the four options. The sooner you can pay off debt, especially if the interest it costs you is equal to what you could earn with your discretionary money, the sooner you can stop servicing the debt and exclusively save.

     Let’s take our $25,000 debt for example. If the interest is 5% (accrued monthly) then the accrural for the first month is $104.17. So after one month we owe $25,104.17. If we pay it down by $10,000 and then we only owe $15,104.17, the next interest accrual will only be $62.93 and you’ll owe $15,167.10. If, on the other hand, we invest our $10,000 instead of pay the debt, we accrue only $41.67 in interest and have made only our standard student loan payment.

     If we take the second scenario, we’ve just been given $25,000, paying off the debt becomes and even more enticing option. We can completely retire our debt, eliminating that as a future expense in the future, and devote the money we’ve been paying for the student loan and invest it monthly.

     If the interest rates were different between the student loan and any of our investments, that changes the whole scenario and adds a few steps to the decision-making process.

     Barry Ritholtz points out for us that the margin-of-error in the Department of Commerce’s New Home Sales numbers survey released in the last few days is so large that it renders the survey meaningless.

     Barry explains for us why the headline numbers the media hypes mean nothing:

In reality, the mathematical change was statistically no different than zero.

Why? Margin of error. It was ±12.2% — much higher than the reported gains. This means the actual increase or decrease in new home sales (according to the commerce department itself) was in a range ging from as low as -7.4% to as high as +17%.

Same with the year over year decline: December 2006 was 11.0% percent below December 2005 numbers — but it was ±11.7% . This represents a range of -22.7%, to plus +0.7%. And that’s before we even get to the now well documented cancellation issue, which according to the major builders themselves, excessively high cancellation rates may be overstating new sales by as much as 30%.

I’m a conservative. See? See? See?

     I just watched the trailer for the Transformers movie coming out in July.
     Whoa.

     I came across a new social-networking site today. It’s called Shelfari. Basically, you tell it all the books that are on your bookshelf, it compares that to other site users and you make friends. Pretty simple. I like it.

     According to Thursday’s Daily Iowan, Iowa’s most notorious rapist, Pierre Pierce, wants to have his probation curtailed so he can leave the state to try out for the Golden State Warriors. As the DI states, the terms of Pierce’s probation require him to reside only in the state of Iowa, not in sunny California.
     I say not only no, but hell no. Part of someone’s probation, as I know so dearly, is that it costs them Golden opportunities and they just have to deal with it and learn the lesson. Not only did Pierce not even spend an entire year in jail after committing a second rape, he didn’t serve any jail time after the first, but now he wants his punishment to be lightened yet again so he can join the ranks of America’s famous and highly-paid professional basketball players. His first victim, a female U of I basketball player, has no such opportunities. Her attack was so vicious she had to leave the basketball team and end her athletic career. She has no chance at a WNBA career, why does Pierce get a chance at a NBA career?
     If Pierce’s request seems reasonable to anyone, I’d really like to know why. Please tell me, enlighten me as to why repeat rapists should be given breaks.
     See what else I’ve had to say about Pierre Pierce in the Crime and Punishment in Iowa category.

     Iowa House Republican Leader, Christopher Rants, posted a memorandum from the Iowa Right to Work Coalition on his website, www.rants.us, Thursday outlining a very strong case as to why Iowa should continue to be a Right-To-Work state, without any negotiating fees or agency fees. I excerpted a chunk below.

* Unions voluntarily chose to represent non-members.

Unions fought for, and received, the authority to be the exclusive representation for a bargaining unit. They knew at that time that this would include some non-union members – yet they still advocated for this power. Now they are complaining that they are “forced” to represent non-union members, calling them “free-loaders” for receiving services and benefits that they never asked for in the first place.

     Yet another example of organized labor, and the American left as a whole, trying to have it both ways and get away with it.

     The Daily Iowan, in it’s first edition back from the Christmas break, announced that the U of I police have identified a 15-year old boy as the likely perpetrator of three sexual assaults on campus since July. I’m caught in a quandary as to what I think should be done to the young man. One the one hand, any one guilty of such a crime, let alone three of them, aught to be both imprisoned long-term and castrated. Anyone who would do such a thing to my sisters, I would happily wield the rusty knife myself. On the other side of the coin, however, is that if the 14th Amendment is to mean anything in Iowa jurisprudence, then this boy can only justly spend about a year in jail and be sent on his merry way. We could not, in all intellectual honesty, sentence this young boy to a worse fare than what our wrath was for Pierre Pierce. Pierre Pierce, as I have pointed out before, IS ALREADY OUT OF JAIL AND BACK HOME IN ILLINOIS! He served less than a year in the friendly custody of the Iowa Bureau of Prisons for second-offense rape. In this new case, the young man didn’t never brandished a weapon, unlike Pierre Pierce. Pierre Pierce’s violent, heinous actions are mitigated in no way, shape, or form that would provide for the near-forgiveness of those actions but yet they were.
     While I do not truly hope this young man gets only a year of incarceration, I do hope the people of Iowa do hang their heads low in shame for the prosecutors they have elected. We can’t say this is due to the actions of Pierce’s defense attorney Alfredo Parrish gerrymandering a jury of twelve kooks in Johnson County who let Pierce off in this matter, it’s due to the duly elected Dallas County Attorney and Iowa State Attorney General who granted the plea agreement in Pierce’s case. No jury of twelve Iowans has every judged Pierre Pierce; only prosecutors and state bureaucrats who let him slide with relative slaps on the wrist.
     Going forward with the case of this young man in Iowa City, I hope the new Johnson County Attorney, Janet Lyness, considers long and hard just exactly what precedence she wants to set and be held to in sexual crimes. One incident where the nominal punishment has not nearly risen to the commensurate level of the crime is shameful and can be a lesson for the future. Two incidents so near to each other establish themselves as the momentum pushing us down a slippery slope.

     Time.com has an article by Harvard history professor Niall Ferguson that finishes with the following paragraph.

But try rereading the events of 1914 with the place names changed. Imagine the assassination of the U.S. Vice President in Baghdad this coming June. The U.S. suspects Iranian involvement and sends an ultimatum to Tehran. Israel takes the American side; Russia lines up with the Iranians … It’s not a wholly implausible sequence. And some central bankers admit privately that they would have to struggle to counter the liquidity crunch that such a geopolitical shock would trigger. A stock-market shutdown in 2007? History warns us not to rule it out.

Read the rest of the article here. Thanks to Greg Mankiw for the pointer to the article.

     Iowa swore the second consecutive Democrat in as governor today. It’s a sad thought and it’s a pretty rare occurrence in the state. The Register phrased it oh so eloquently on dmregister.com when they said, “for one of the only times.” Well yes, everything happens only a few, specific number of times. Apparently they just didn’t want to spend the time looking up just how many times two different Democrats had consecutive terms as governor in Iowa. The Register has more details in their article published this afternoon.

     In an article I read this morning on thestreet.com talking about possible mega-mergers and aquisitions I came across the following:

They’d rather rule in Hell than serve in Heaven.

The they in the quote is referring to the Ford family and how they’d rather keep a controlling stake in a failing Ford Motor Company than a sizeable stake in a successful Boeing (the company the author speculated would be a possible candidate to acquire/merge with Ford). If you’ve been following any of Ford’s on-going trouble’s lately, you know how apt the description is.

Five Business Hook-Ups You Might See is the article in question.

     BusinessWeek.com has a eulogy of sorts for Momofuku Ando, the man who invented ramen noodles who died Friday, January 5 of a heart attack. All of you poor college students out there who have survived for weeks (myself included) on nothing but ramen, peanut-butter-and-jelly, and frozen pizza should read the article and learn a little about how this man made survival just a little easier.