Archive for January 2005

Random TV-Related Things

  1. My parents bought this plasma TV at Best Buy during boxing week. What surprises me is how integration with upconverting DVD players and HD set-top boxes is so unpolished. At the current level of integration, it’s clear that the whole HDTV thing is aimed squarely at the early adopter. The surprising thing is how much penetration it has at the consumer level – just check out how hard Future Shop is pushing HDTV for the upcoming Super Bowl.
  2. My question is, how do Joe-and-Sally-average buy HDTV equipment and set it up themselves at home? My guess is they do it sub-optimally. I picture them setting it all up, then having their own eyes tell them that it doesn’t look as good as they thought it would. Trouble is, it probably looks better than the 10-year-old CRT that it replaced, so they can’t be sure if it’s actually supposed to be so underwhelming.
  3. Lemme tell ya though, when everything’s set up correctly, 1080i and 720p HD broadcasts are absolutely breathtaking. There are only about 20 HD channels, and they’re of varying quality because a lot depends on the quality of the original source material, and also whether the broadcaster has done any detrimental post-processing. The Rogers HD demo channel seems to have the Much Music 2004 Video Awards on endless loop though. It’s a good choice – the young and nubile are particularly well suited for display at high resolution. That sounds kinda dirty.
  4. The funny thing is that Bonnie refuses to even look at the HD channels. She says that once she’s seen them, she’ll never be able to go back. No, there’s no convincing her. I tried with the “We should stop eating at nice restaurants, because we’ll never be able to go back” argument, but no dice. Meh.
  5. Since my parents got the new plasma and DVD player, Bonnie and I inherited their old 27″ Sony CRT and “high-quailty” Vsonic DVD player. This, combined with GoodLife now offering free DVD rentals to members means that we’ve been doing nothing but working out and watching movies for the past week. Not good, the TV just sucks the time away, it’s such a waste. I think this further cements the resolution that we’ll never be getting cable.
  6. Now a random selection of quickie movie reviews…

    • The Incredibles
      One-line review: Another home run for Disney/Pixar, I think it’s their best to date.
      Unanswered question: If Violet were invisible while eating, what would happen to the food? Would you be able to see it in her stomach and watch it slowly turn invisible as it was digested? That’d be kinda cool.
      Best scene: Jack-jack turning into a little devil and going postal on Buddy at the end of the movie.
    • Closer
      One-line review: Natalie Portman almost nekkid, what’s not to like? Clive Owen is also quite the nasty villian – I’m only used to him helping lost Tibetan boys and such.
      Unanswered question: I’m not quite sure I understand the ending. OK, so she fooled those handsome Englishmen good. Now she’s gonna rope in some startlingly unattractive New Yorkers too? I don’t get her deal.
      Best scene: “I don’t stalk, I lurk.“.
    • The Life Aquatic with Steve Zissou
      One-line review: Like all Wes Anderson movies, this one’s great because all of the characters are such losers that take themselves so incredibly seriously. It’s jolly good fun to watch.
      Unanswered question: No seriously, what’s with the red caps?
      Best scene: Bill Murray grooving to his piped in music.
    • The Delicate Art of Parking
      One-line review: Not a fan of the faux documentary style. The faux documentarist is kinda sleazy looking too.
    • Mona Lisa Smile
      One-line review: Meh, just your standard chick flick. As an aside, is it just me or is there something vaguely rabbit-like about Maggie Gyllenhaal?
    • Something’s Gotta Give
      One-line review: Meh, more formulaic chick flick stuff, but for old chicks I guess. Has Jack Nicholson been playing the same character since As Good As It Gets?

Why the rich get richer…

Continuing the financial theme from the last post (I promise the next post will be different!), I thought this graph would be a good illustration of why the rich get richer while the poor and middle class just kinda flounder where they are.

After Tax Income in Different Scenarios (Ontario)

The graph shows how after tax income in Ontario varies with gross income. First focus your attention on the blue and green lines. The blue line is the ideal and has a slope of 1 – i.e. you get to keep every dollar that you earn.

The green line is what happens if your gross income just consists of a paycheque from work, plus maybe some interest from GICs, Canada savings bonds, ING savings accounts, etc. In short, the primary sources of gross income for the low to lower-middle class.

This is fine at the low end of the scale because the slope of the green line is pretty close to 1. However, notice that as you move up the scale, the slope of the line decreases, meaning you earn more, but more gets taken away. In the highest tax bracket, the slope is almost 0.5, meaning you lose $0.50 of every additional dollar you earn. Not good. i.e. You’d probably have to work your butt off to go from a salary of $80,000 to $100,000, but your net income only increases from $60,000 to $70,000. Arguably not worth the effort. This is the area where the middle to upper-middle class flounders. They work harder and pull their purse strings tighter, but it doesn’t actually amount to much in absolute terms.

Ideally you want some way to push the line up, which brings our attention to the red line. Capital gains are what happens when you sell an asset (e.g. a stock) for more than you paid for it. Those gains are counted as gross income, but are taxed at a much lower rate. The important thing to notice is that not only has the red line moved up compared to the green one, but its slope is also more positive. You win twice. Plus, the more your gross income comes from capital gains, the closer the line gets to the blue one both in terms of distance and in slope.

So the red line represents half of gross income coming from capital gains, which might be kind of mind boggling. Imagine earning as much buying/selling stocks as you make at your day job. Not as difficult as it sounds if you have a high savings rate. My theory is that the rich tend to have higher savings rates because the cost of living doesn’t increase linearly with net income. A higher savings rate translates into more money available for investment, which makes it easier to obtain large capital gains that rival what you earn from your paycheque.

Like Skeletor and her lover in the last post, if you’re able to increase your savings rate far above the average, that extra money should be going towards attempts at capital gains. That way you move along the red line (or even better). If you instead put the extra money in GICs, ING, money market funds, etc., you’re moving along the green line, which is really much more work than it’s worth.

Pfft… Financial Facelift

One of Bonnie’s former classmates, let’s call her Skeletor (because she’s so bony), went for a “Financial Facelift” with her lover. It’s this thing where The Globe and Mail matches you up with a financial advisor, and well, you get advice on what to do with your money. The Globe then publishes your story in the paper and on the web. You can read about their “facelift” here.

For those too lazy to read the article, allow me to summarize:

  • The two of them are recent graduates, and they entered the workforce with upper-middle class starting salaries. They earn much more money than they were used to as poor, starving students.
  • So much in fact, that they don’t know what to do with it. Their after-tax savings rate is something like 55%, which amounts to roughly $4,000 per month. As a comparison, the typical North American has a negative savings rate (thanks to credit cards), and financial advisors usually tell you that you’re ahead of the game with a 10% savings rate. The Japanese are considered highly abnormal with their roughly 40% savings rate.
  • The pair have a couple of short term goals: 1) Save $20,000 for their wedding in two years; and 2) Save $50,000 for a downpayment on a house in 3-4 years.
  • Their long term goal is to have $1 million for their retirement fund.

The story started out interesting because Bonnie and I are in a similar position in terms of salaries and savings rate. It had my undivided attention until the “financial facelift” started to sound more like “financial sabotage”. Summarizing the advice:

  • Skeletor should put her portion of the savings into a money market account to work towards the short term goals.
  • Her lover should maximize his RRSP contribution, since his employer matches 50% of it.
  • They should drop their “poverty mentality” and spend the remaining money, because long term goals are too difficult to plan for – plans change, so why bother?
  • Besides, their company pensions, government pensions, and old age security will serve them quite well in retirement.

To quote a guy at work, “I was both shocked and awed” after reading all that. Seriously, people make a living giving out advice like this? Here’s what’s wrong with it:

  • At their current savings rate, their first short term goal would be reached in 5 months, and the second in 13 months – both way ahead of schedule. That leaves a hefty surplus for them to play around with.
  • Putting the surplus in a money market account is just about the worst thing you can do. At best a money market account will grow your money at the rate of inflation. My grandparents on a fixed income take on more risk than that!
  • Instead, Skeletor and her lover should be taking large, controlled risks with their surplus. They’re young and childless with no debts – what better time is there to be heavily invested in equities? Certainly not when there are mortgage payments and little Skeletors to feed.
  • Long term goals may be difficult to plan due to unforseen circumstances, but at least you can move in the right general direction. What boggles my mind is how the guy says they should spend instead of invest.
  • Company pensions? Does anyone nowadays plan to work long enough at any one company to save up a decent sized pension? A lot of places either don’t have pension plans, or they disappear if the company goes under or you’re laid off. Not exactly something you should be relying on.

I wonder if the shoddy advice has anything to do with the advisor being from Halifax. The east coast is the leech of the country. Government pensions and old age security indeed.