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So I'd ridden to work and this other guy, Norm, also turns up on his bike. Now Norm lives out my way, and in fact was the guy who showed me the route that I normally take to work along the M2 motorway bike path. Anyway he tells me that he's found this new, and much better route, through the park, and would I like to go with him on the way home. It was a cool, sunny day (perfect bike weather) so after work we took off on his new path.
It started off much the same, but we cut through the university and then up and down some steep hills in the suburbs behind the uni. By this point the old route would have me on the smooth, flat M2 bike path so it didn't seem like a huge improvement to me. Norm almost gets hit by some car backing out of a driveway, which doesn't improve matters. Then we got off road, and started up and down some more hills, only this time on rough, high friction dirt through the back yards of some poorly positioned houses. Once my chain actually jumped off the gear wheels it vibrated so hard.
Then we went in a tunnel under the M2, this was my opportunity to get back on it, but I figured I'd see what the fuss was about.
Now we were going somewhere. Down to be precise, though a dirt trail that switched back and forth down through the bush. This was not very cheering as I knew we would just have to go up again to reach the level of the M2 before starting the climb that I always face from the M2 up into the hills where I live.
When we reached the bottom of the valley, things got worse. We were now threading along the side of the Lane Cove river, with the path snaking backwards and forwards over the creek at concrete bridges. The
roadtrail was so rough that even when going downhill you still couldn't get out of first gear. Norm told me that on the weekend he'd been through here after a rain, and the water level was up to 50 cm over the top of the bridges, which made it interesting to ride over them. I suggested he take his kayak to work instead of his bike, but he pointed out that it would be much more difficult to go home again, upstream. There were a number of sections where we had to carry our bikes up rock ledges and boulders.
This was not what I considered an easier route.
Eventually we got back to actual roads, though there was a bit of confusion where Norm decided to try a route that he had spotted from aerial photographs, that didn't seem to actually exist in real life. Now we had the long, slow, climb up to reach the altitude where our suburb is actually located.
Conclusion, it might be slightly shorter, but it is nowhere near as easy. It depends on what you want to do. Do I want to go for a ride? Or do I want to go home?
This week I stuck to the motorway. Indeed once I left work at exactly the same time as Norm, he powered away from me (he's a much better rider, with admittedly a better bike, (though my "new" bike is much closer to the mark) though I reckon his actual ability is 95% of the difference, and the bike makes up 5%). Norm proceeded to take the scenic route and I went on the M2, later, when I was nearing home and riding through the suburbs, he passed me again. Hence his choice of route must be slower.
Now only one more ride before the bike has paid itself off in terms of petrol savings.
This is the summary of an argument I made on aus.invest. I think it has merit, but hasn't convinced me fully yet.
Let me start by saying that I am not negative on Super. But I'll play devil's advocate because it's fun.
So (speaking as the cynical young investor) sure politicians are positive on Super NOW, but as a 20 year old (not really, this is a hypothetical remember) I have to look at the next 60 years.
Over the last 60 years we saw
-The British Government, previously the original bastion of capitalism, commit mass nationalizations of private assets with clearly below market rates of compensation.
-The British (again) introduce tax rates on investment income of up to 97%, which combined with death taxes to break up many of the great estates.
-The British then reverse course again, privatise everything, and become a very pro-business place.
-British, American and Australian governments confiscate hundreds of millions, if not billions of dollars from corporations and businesses that had been operating perfectly legal businesses AT THE TIME (asbestos, tobacco, (fast food? CO2??)) retrospectively, after community attitudes to these businesses changed.
-The American government default on its entire currency (previously convertible to gold) followed by mass inflation so that long term debts were effectively defaulted on (in fact if not in the letter of the law).
-The basis of entire political party platforms being completely reversed (White Australia and socialism for the Australian Labor party for example.)
-Australia's "universal" age pensions becoming means and then asset tested.
I'm not saying all these things were bad for investors, though clearly some were. However anyone choosing to trust some government with their money, or lifestyle at the end of WW2 would not have had a smooth ride. Whether an aristocrat who lost his estate in England in the 1960s, or an English motor worker who had his government owned factory sold to the Germans and then closed down, a tobacco factory owner, or a long term bond holder, you could easily have been sent broke by complete reversals of government policy.
Now with this background, could you guarantee that none of the following would happen?
-Extreme tax rates on super funds above some "reasonable" asset/income threshold to pay for those people who didn't save anything at all/lost it all in the great nanotech crash of 2033.
-Massive confiscation of assets belonging to corporations/investment funds who earned money by exploiting (CO2, 3rd world workers, fast food addicts, gambling, some-harmless-activity-we-don't-even-suspect-yet)
(Note that confiscation can take the form of taxes, fines or damages awarded by courts. These are all different branches of the government, and it really doesn't make much difference if you are unable to grab your assets and move to Chile because your assets are locked in Super.)
-A general increase in the age of retirement so that by 2060 the super is not available until you turn 80 years old. This can be driven by all sorts of needs such as skills shortages, or a tendency for people to blow their super and then go onto the pension.
-A general level of high taxation, including on Super, to pay for whatever social/environmental/warfare/religious(including Gaia worship) spending the population as a whole has decided to support at that time.
-Extreme variability in investment results causing a government to fold everyone's super into a universal defined benefits scheme... that 2 decades after that becomes means and asset tested.
-Australia incorporating New Guinea/East Timor/Bali/Fiji... adding millions of poor people to our voting rolls, and welfare rolls.
Any politician threatening to make super less attractive is going to have a hard sell. Superannuation fund members are not a minority who can be picked on from time to time, almost every adult in Australia has a super fund... and they're all going to be extremely pissed off if super is made less attractive.
That's absolutely true... but a young man who is putting $20k into his super right now is very likely to have way above average super funds when he gets older (assuming more such investments through his life). And being way above average makes him a target.
Putting money into your Super right now, the Goverment will match you by 150%.
Assuming a retirement age of 80 in 2066 (not unreasonable given our aging population/improving health), for a 20 year old today, that works out as 1.5% per year. In addition to what you earn at a low tax rate in your super account on this capital.
Furthermore, I think that there ARE things to do with $20k that would give you such a high return. Paying off credit cards would give you up to 18% after tax, no risk at all. Not likely to be matched by a super fund.
Getting a good university education in a professional degree is another. >
This whole "my discount rate is really high" is the antithesis of the > correct mindset for a good investor.
Oh yes. Discarding my devil's advocate hat now that the fun is over, having a really high discount rate is a bad thing for investing.
But is it so silly to have a high discount rate for 60 years, even if you have a low discount rate for 20 years? The future is much more predictable over 20 years, and you are more likely to see it.
To assume a constant discount rate for a human being is not right. That way leads to the St. Petersburg paradox.
The problem is that most of the popular mathematical treatments regard the discount rate as constant for ever. Hence a $1 investment that pays off 25% pa, but with no income for 100 years and then a lump sum ($4.9 billion!), is better than one that pays 24% pa, in the form of a payout after 50 years of $47 000.
In practise, very few of us will be around for our huge payoff in 2106. This is OK if there is a liquid market so that we can sell the asset in 40 years, and the price will have appreciated to reflect the eventual value. But if not, say if there are government restrictions on selling before the final date, then the investment can only be left to your children and grandchildren (if any). It doesn't benefit you at all.
You may well be inclined to prefer the lower rate with a payout that you would actually see.
Hence your discount rate is much, much higher for the payments that occur many, many decades in the future. It's because our mathematics works fine over many decades, but our biology (and political systems) do not.
The St. Petersburg paradox is a similar problem. Imagine a bet. You pay me a sum of cash, and I flip a coin. If it's heads, I pay you $1, if it's tails I flip again. If it's heads on the 2nd flip, I pay $2, tails I flip again and so on.
If you do the math, you see that this bet is worth infinity dollars. But in real life nobody would pay more than about $15 or $20. Because in reality, the very small chance (1/10^16) that I will pay 500 trillion dollars is worthless. Because I will not pay $500t. I don't have $500t, that amount of money doesn't exist. And there is nothing you can buy with $500t that you can't buy with $250t.
The maths keeps going to infinity, the actual reality stops. So you can't rely on the maths blindly.
Doh! I needed to buy a puncture repair kit and a bike pump. This has pushed out my breakeven point by two more rides.
On the other hand, people tell me every day or so how great I look. Which either means my bodyfat content is falling, or they are desperate for a date. Which is a worry as they are mostly men at my work.
On the other hand, it was 35° today.
This is probably as bad as it gets, because soon we get daylight savings and then I'll be riding an hour earlier.
Plus.... a Haiku
Finally signed up at the video store near the new house. We got out Breakfast at Tiffany's, Love Actually and The Dukes of Hazzard.
Love Actually: The best of the modern English romantic comedies that I've seen. The scene where the guy is very shyly asking the girl he works with out for a drink, only to hesitate and ramble and be a complete embarassed introvert, only they both happen to be porno actors actually "on the job" at the time. Pure gold.
The Dukes of Hazzard: Exactly as you'd expect. The only problems being
Breakfast at Tiffany's: This was the surprise. I've watched a lot of "classic movies" and they are generally dull, dull, dull. Casablanca, Apocolypse Now, 2001, The Great Escape, The Shining... they are all yawnfests. Sure they have some great lines, and the odd great scene in them, but you've seen them all a hundred times before, because if they are any good then everyone else copies them in more modern movies. So anything original is dull. Kind of like the criticism of Shakespeare, that "he just strings a lot of cliches and famous sayings together to tell some well known stories".
Clearly they are partly victims of their own success (they are so sucessful that all the good bits are copied and retold a hundred times) and partly that they just seem to have great expanses of nothing much going on. Modern movies have far more continuous action.
But Breakfast at Tiffany's is different. Perhaps the secret is that all the other movies were Action/Adventure and this is not. Action/Adventure movies were completely revolutionized in the late 1970s with Star Wars and anything before then is crap by modern standards. But this is a romance, and that hasn't changed much.
I was also surprised that such an old movie would feature hero and heroine who are both prostitutes. I thought that sort of bohemian rejection of morality didn't come in till later. This is the 1960s when we are told that a rigid moral code was strictly enforced in Holywood. Then I suppose this is the same people who tell us about "the population bomb", "silent spring", "the coming ice age" "the pro male double standard in sexuality" "Islam means peace" and a bunch of other things that nobody believes any more.
In fact, they claim that right now we live under a strictly enforced code of Christian morality and political suppression of free speach. They tell us this in the media. Repeatedly, in between ads for prostitutes and TV shows that feature kinky sex and active opposition to traditional morality and religion. I'm actually embarrassed that I believed them about 1960s morality.
Following my successful celebration of National Tree Day I set out to cut down more trees. This was partly for magical reasons (one tree in the front yard was apparently VERY BAD for Foungsuei) and partly for practical reasons (there were a group of five dead trees that were going to fall down anyway, and could hit the house/fence/clothesline/neighbour's dog when they went, so best to get them in a controlled way).
And partly for fun. Greenies do have a point that people ENJOY cutting down trees with chainsaws. Especially the sense of achievement you get when it lands EXACTLY where you wanted it to.
And really, it was getting them to land properly that is 95% of the job. 4.5% is cleaning up after you've cut, smashed (and in some cases punched and kicked) a tree to bits. Only 0.5% is actually standing there cutting wood.
When I was learning to cut trees, working for Queensland Forestry on pine plantations, there really wasn't very much the trees could fall on. So long as it was away from you it didn't matter. But in a backyard there are many things both valuable and fragile:
So care must be taken as to where the tree will land. This takes the form of both cutting so that a large wedge is removed from the side you want the tree to fall too, and trussing the tree up in a network of rope and pulling those ropes tight (using the invaluable nested Truckie's Hitch) to haul them in the desired direction.
This worked. It worked really well. It got so I was going to mark out a little target on the ground and try for bullseyes. Except for the last tree, which landed on the roof, pulled down the guttering and bounced off onto the stairs cracking the hand rail.
Part of the problem is that cutting trees is really tiring. (Especially to someone as unfit as me.) On Saturday I woke up, did a gym workout, mowed the lawn, and then roped up, cut down and cut up one tree and haulled the bits off to a refuse pile. By the end I was exhausted. I didn't really feel exhausted, but for example I was completely unable to move the main log. It just was too heavy to move. But the next day, after a couple of good meals and 5 hours good sleep (I was planning on 8 hours, my wife got other ideas) I was using that same log as a lever to haul on the next tree. Clearly I was just too tired on Saturday.
Biking to work was going OK. In fact I had one last trip to make, and then (by my calculations) the bike would have payed for itself in saved petrol...
So I'm riding to work right? Just starting off in the morning, and a neighbour asks if I can help her open her shed door. (That is not code for anything rude, there was a shed, and the door was a bit stuck, get your minds out of the gutter.)
But what about my bike? "Just leave it here behind this bush. Nobody will even see it." 5 minutes later, it was gone.
So she gets this huge guilt trip and gives me another bike. It was her husbands, he never uses it, won't even notice it's gone....
And well...? It's heaps better than my old one. Except the tyres. I pumped up the tyres and the rear tube exploded. So I bought a new tube, and rode to work... and on the way home it exploded again! This time on the freeway, so I had to ring home and get picked up. It seems the tyre itself is worn out so that the rim doesn't stay on the bead so that the tyre lets the inner tube bulge out and then burst.
So I have to walk to the shops again and get a new tyre. All these extra tyres (and buying new lights) means than I've still got 5 trips before I've broken even again.
So I imagine everyone has seen Mythbusters? The highest point of culture achieved so far in the 21st century (along with Top Gear)? Equivalent to the 18th Century's Mozart and Beethoven, or the late 20th Century's Buffy the Vampire Slayer?
Anyway this show did a story on the old myth of some people being able to throw a playing card hard enough to kill someone. Two people were able to get the cards to stick into Polystyrene foam, and a high speed machine could get it to break the skin on a human, but that was that.
I was cleaning out the new place and found a bunch of old cards. I was going to throw them out anyway.... so I had a go. The result as shown is that I could indeed get a card to embed itself in a wooden door.
Another view from the side of the card.
Mind you, that was one card out of about 156.
So the new place has some problems, which is part of the reason it was cheap. First and most serious is the sewerage was backed up, due no doubt to roots in the pipe.
So we called out a plumber but even with the long, bendy hose with a water cutter on the end he was not able to get through to the blockage. It seems that there was a junction just before the block and the hose was getting caught there. So the secret was to find the junction, then the blockage could be attacked, and from close range.
Finding the junction wasn't too hard for him, he walked about until he could feel the vibration from the water cutter through his feet. Then he gave me a choice, he could dig the hole, at $80/hour. Or I could dig the hole. I calculated that with my marginal tax rate of 40%, I'd be getting the equivalent of $133/hour for digging the hole, so I got to work.
My hole digging fitness isn't what it used to be, back in the days of working on Dad's farm.
But I uncovered the pipe (Sticking a mattock though it naturally, which added to the repair bill, but only a little.) And so the plumber was able to come back and get things moving again. But of course the hole in the pipe meant that I finished the digging in a hole that was slowly filling with sewerage. My wife objected to allowing me back in the house after that.
I went to Sunday Yum Cha, and then my lunch companions decided to walk to the Rocks. This is fine, but I knew that this would involve 50% walking and 50% waiting for the girls to catch up. Actually we went about 100 m then we were stopped at a Gucci store when D. decided she needed to buy a handbag. She was torn between one for $800, and a good one for $2500.
I couldn't see that there was a decision to be made: when given a choice between a $800 handbag and a $2500 handbag my instinctive choice is to go home and climb into a sewage filled hole in the ground and continue digging. This was in fact what I would prefer to do as I still had a bit more to achieve, and anthing to save the plumber some of his very expensive time was worth the effort. Sadly, this was not on offer.
D. did have an excuse. She was buying for work, not for herself. I don't know why her work needed a Gucci handbag, but she deals with media and stuff so I'll go along with that story. Nonetheless, this confirmed my opinion of D. as someone who spends vast amounts of money on what I wouldn't take if it was free.
This opinion lasted about 5 minutes.
THEN, the shop filled with Arab girls. Real Arab girls, dressed in traditional arab costumes made of black silk, with gold filigree. I noticed that one was actually an older black woman, and that she (not surprisingly) was acting like a servant. Then I noticed that outside were a bunch of really big men, in suits, with walkie talkies and suspicious looks. And two black, chauffer driven new 7 series BMWs.
I suspected that these arab girls were not locals. The staff in the shop confirmed this when one whispered to the other that this was the Princess of Dubai. Who probably has her own Gucci shop. But that would be back in the Mid East, and here she is in Australia, and her bag probably got dirty or something, and so she needed to buy a new one.
So she walks right up to D. and says that she likes D.'s bag. This was D.'s actual bag, that she was carrying. And it was a Gucci. A fake one that she got in China. Now, D. did not want some Princess drawing attention to her fake Gucci bag in the middle of a Gucci shop, so she just murmured "Thanks" and tried to move on, but the Princess kept saying how nice it was until the staff, horrified at the thought of loosing such a customer, cornered her with some new stock and managed to talk her into something worth $6800.
Afterwards D. was kicking herself, "I should have offered to sell it to her, for half the price of the other one. I'd round it down to only $3000. And if she didn't have Australian dollars I'd take US$3000, or even pounds. I just didn't want the staff to look too closely at it."
Like I said, my opinion of D. as someone who spends vast amounts of money on frivolities lasted about 5 minutes..
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