Obviously the answer is no.  God is way too busy creating floods, voting Republican, and making up crazy rules about shellfish and/or hooved animals to give a crap about sports.

The best quote from the article was from Mariner DH Mike Sweeney:

“If I’m facing Andy Pettitte on the Yankees and I’m praying for a home run, and he’s praying for a strikeout, I don’t think the result is going to show who has greater faith.”

However, I do believe having a strong faith can help someone’s athletic performance.  If a player truly believes the favor of a supernatural deity is on his side, it will likely give him tremendous confidence.  And like anything else, going into the game with a “can-do” attitude is clearly favorable over thinking you’re going to lose.

But even though it’s all placebo, perception is reality.  If a star slugger thinks Jesus is helping him hit home runs, why burst his bubble?

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Let’s not make this a bigger deal than it is.  Here are the facts: membership in scouting has been in a steep decline for years, and this is just a desperate attempt to seem relevant again.  And at least in terms of getting some press and exposure, it’s working.

Second, it’s Cub Scouts.  Look at the video game belt loop requirements.  It’s not like they’re saying you have to become a professional Halo player to earn Eagle.  You don’t have to log a certain number of hours on World of Warcraft or win the Super Bowl on All-Madden mode.  Here’s the official checklist:

1. Explain why it is important to have a rating system for video games. Check your video games to be sure they are right for your age.
2. With an adult, create a schedule for you to do things that includes your chores, homework, and video gaming. Do your best to follow this schedule.
3. Learn to play a new video game that is approved by your parent, guardian, or teacher.
4. Teach adults how to play video games.
5. Participate in a family gaming tournament.
6. Learn how to comparison shop for prices.

See, it’s all very wholesome.  And probably more valuable than learning how to tie a sheepshank.

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Toyota denies any wrongdoing, but has agreed to pay the fine.

What I’m curious about is how impartial a regulator Uncle Sam can truly be, given their majority shareholder position in General Motors, one of Toyota’s top competitors.

It’s like Pepsi being allowed to dictate the regulatory environment for Coke, which clearly would put Coke at a disadvantage.

Interesting to see how it plays out.

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In fact, drivers continued to crash at the same rate as before, whether or not they were on their cell phones.  We gave up freedom in the name of safety, except we didn’t get any safer!

If A=B, and B=C, we expect A=C.  But now we have to go back and consider that maybe A didn’t really equal B after all; that driving while talking on the phone does not really increase your chances of getting in an accident.

It’s the argument tobacco execs have been making for years, that correlation does not prove causation.  Sure, smoking is correlated with lung cancer, but does that mean smoking causes lung cancer?   Sure, talking on your phone is correlated with increased accidents, but does that mean cell phone driving caused those accidents?  Since the accident rate did not decrease after the ban went into effect, something else must have been causing those accidents, right?  (The tobacco execs face a much harder battle.)

I have a theory.  Well two theories.  The first is that a certain percentage of people are just bad drivers.  They’ll wreck at the same rate whether they’re on their phones or not.

The second is about risk tolerance.   Everyone has a different risk tolerance, but it is largely unconscious.  It has to do with what you’re inherently comfortable with.  One driver might cruise by doing 80 mph, talking on his cellphone, eating a cheeseburger, radio blaring, sticking his head out the window, carrying a dog on his lap.  He’s comfortable and confident or else he wouldn’t be doing it.  Another might drive 55 mph, hands at “10 and 2″ in complete silence and concentration.  Both drivers have the same goal: get to their destination safely.  Both are driving to the limit of their risk tolerance.

They’re called “accidents” for a reason.  Nobody crashes on purpose.  Think of risk tolerance as a bucket that needs to be filled.  Now that cell phones have been taken out of that bucket, drivers are filling it with something else.  I don’t know what that “something else” is but it must be pretty significant to keep crashing at the same rate.

This concept was discussed in Superfreakonomics, where the authors argued that there is an equilibrium accident rate, and that changes to driving laws (side of the road, speed limit, cell phones) and car safety features (seat belts, child’s seats) might have an initial positive impact in reducing that rate, but over time, drivers will return to their “natural” risk tolerance and get back to the equilibrium.  (They also use available data to explain that “drunk walking” is actually riskier than “drunk driving.”)

I’ve gotten in a couple car accidents, neither of which I was on my phone.  I do miss having Sync though.

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By the end of this year, “strategic default” will be a familiar media buzzword describing the next phase of the foreclosure crisis.

In a strategic default, mortgage borrowers who owe more than their house is worth, but who can afford their loan payment, decide it is simply smarter to stop paying.  In 2009, 500,000 foreclosures, or roughly a quarter of all foreclosures, were strategic, meaning their was no financial hardship other than the homeowner was underwater.  Currently there are about 16 million households with negative equity, and about 10 million of those are underwater by 20% of the value or more.  The strategic foreclosures we saw in 2009 were just the tip of the iceberg.  If just a small fraction of those underwater homeowners choose to strategically default, the effects will be tremendous.

The Business Case for a Strategic Default

Let’s look at a typical scenario of a fictional Mr. Fish, an underwater homeowner who should consider a strategic default.  He bought his home between 2004 and 2007, and lives somewhere like California, Florida, Nevada, or Arizona, where property values are down more 50% from their peak.  He paid a full, bubble-inflated price for something that is now on clearance for half off, and he’s stuck paying the inflated price for 30 years.  Should he move down the street for half price, or bend over and honor his mortgage contract?

In round numbers:

• $500,000 purchase price
• $400,000 loan balance
• $300,000 current market value

At 2.5% appreciation, it would take Mr. Fish 21 years to “break even” and re-coup his initial down payment.  So much for the idea of a “starter home.”  That 100 grand down is the definition of a sunk cost: it’s gone and shouldn’t be a factor in his decision.  Plus, assuming any appreciation at all in the near term is foolishly optimistic, given the number of upcoming strategic defaults that will flood the foreclosure market.

Options

His monthly carrying costs are around $2800, including principal, interest, taxes, insurance, and any applicable homeowner’s association dues.   He could rent a similar place for $1800 a month, and pocket the difference.  This also rules out keeping the property as a rental, unless Mr. Fish wants to take a $1000 bath every month.  He could also buy that similar place down the street, and end up paying about $1800 a month too.  But in that case, he’d have to come up with another $60k down.

Breach of Contract

A mortgage is a contract between the homeowner/borrower and the bank.  If the borrower breaches the contract by not making his monthly payment, the bank seizes the house.  It’s written into the contract: the property is the collateral.  Unfortunately for the bank, the house isn’t quite worth what they hoped it would be.  Too bad so sad.

The laws may be different elsewhere, but in consumer-friendly states like California, that’s where it ends; the bank can’t come after any of Mr. Fish’s personal assets to settle the debt.  If he’s lucky, he might get to live in the house rent-free for several months while the bank and the county finalize the foreclosure proceedings.

Reasons to Stay

There are three reasons Mr. Fish might feel compelled to stay in this house:

• Wanting to get back his down payment.
• Wanting to preserve his good credit score.
• Wanting to take the moral high road and honor his commitment.

Let me examine these reasons individually, and explain why they’re not good ones.  First, as we learned above, it could take Mr. Fish 21 years to recoup his down payment.  If he invested the $1000 savings each month he’d realize from walking away, and earned just 5% interest, he’d have nearly $450,000 at the end of the 21 years.  If he just stuffed it under the mattress, he’d have $250,000.  Yes, it’s painful to walk away from your $100,000, but at this point, it is simply irrational not to.

It’s true, a strategic default will hurt Mr. Fish’s credit.  In most cases, the foreclosure will cost him 100-140 points on his credit score, and will stay on there for 3-7 years.  Is it worth it?  It’s just a number, and $1000 a month is a pretty steep price to pay to just for the sake of preserving a number.

Some people have moral qualms with strategic defaults, including President Obama (who obviously wants to encourage stability and stop the bleeding on the foreclosure crisis, but has yet to come up with a program that addresses strategic defaulters).  Is it immoral to foreclose, even when you can afford the payments?  Is it immoral to buy groceries at Trader Joe’s, even when you can afford the ones at Whole Foods?  Others have asked what kind of example a strategic default sets for Mr. Fish’s children.  I think it sets a great example in that it shows them the power of rational behavior.  Mr. Fish’s tax dollars have bailed out his adjustable-rate neighbors and even the bank that holds his mortgage, yet he’s got nothing to show for it.  Again, the mortgage is a legal contract with the penalties for breach explicitly spelled out.  There’s nothing moral or immoral about it; he’s not stealing anything, not killing anyone, not polluting the river.  It’s just business.

What will you do with your extra $1000 a month?  Take a trip?  Start a business?  Change the world?

Five Things to Do Before You Strategically Default

1. Contact the bank and explain your situation.  Explain how they could prevent the strategic default by renegotiating your loan principal balance, and how a foreclosure will certainly cost them more money in the long run.  They probably won’t do anything, but at least you’ll be able to say you tried.
2. Consult a real estate attorney in your state to make sure the bank can’t come after your personal assets.
3. If you have a co-borrower, try and remove them from the mortgage.  This might cost a little bit of money, since it will basically be a new loan application for just one person.  But if you’re successful, the mortgage will show “closed” on your co-borrower’s credit so their credit score remains undamaged by the strategic default.
4. If you have a co-borrower, try and remove their name from the title.  Just an extra step of precaution to try and preserve their good name.
5. If you plan on making any big purchases in the near future (car, boat, another house…), finalize the deal before you default.

And then stop paying.  It tastes like freedom!

To find out more about your home loan options, visit NWMortgageExperts.com.

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1. Improve the average fuel economy of cars on the road, reducing our dependence on foreign oil and reducing carbon emissions.
2. Stimulate new car sales for the battered auto industry.

How do you feel about your tax dollars being used to buy your neighbor’s old SUV?  That probably depends on how important you feel the two goals listed above are.  I think both are important, and am curious to see how big an effect the program could have.  Let’s take a look on how Cash for Clunkers might do.

Improve Fuel Economy

Here’s Uncle Sam finally putting his money where his mouth is when it comes to reducing America’s dependence on foreign oil.  In fact, there’s enough money in the Cash for Clunkers program to fund 1 million trade-ins.  Customers must make a minimum 4 mpg improvement to qualify, but I think most will do better than that.

So assuming that the full million people take advantage of this, and achieve an average 8 mpg improvement, how much oil will we have saved?

EDIT 7/16 ** My initial math was way wrong, which dramatically inflated the value of Cash for Clunkers **

• 15,000 miles = average distance drove in one year
• 15,000 miles @ 18 mpg = 833 gallons per year
• 15,000 miles @ 26 mpg = 577 gallons per year
• 833 – 577 = 256 gallons saved per driver
• 256 gallons x 1 million drivers = 256,000,000 total gallons saved
• 42 gallons of gas per 1 barrel of oil
• 256,000,000 gallons / 42 gallons per barrel = 6,095,000 barrels saved

How much is 6.1 million barrels?  It sounds like a lot.

But it’s not.  The U.S. consumes nearly 25 million barrels per day.  We just spent $4 billion to reduce our annual oil consumption by 0.067%, which is less than one tenth of one percent, which sadly rounds to ZERO.  It’s going to take a lot more than that to get the job done!  But to be fair, we’ve got to start somewhere and there are plenty of “intangible” environmental and international policy benefits as well, right?

To my knowledge, this is the first time the government has ever come out and put a dollar value on reducing oil consumption.  Cash for Clunkers doesn’t have a huge impact toward that goal, but it is a laudable goal nonetheless and does give us a measuring stick to gauge future projects by.  Still, I’ve got to believe there are more cost-effective ways to do this.

Stimulate New Car Sales

If 1 million people really trade-in their old rides, Cash for Clunkers will have done a much bigger job toward accomplishing it’s second goal than it did on it’s first.  If your vehicle gets less than 18 mpg and is worth less than $4500, Cash for Clunkers isn’t a bad deal.  Let’s revisit the math from above.

• 256* gallons saved x $3 per gallon = $768 dollars saved per year
• $768 / 12 months = $64 per month

Not nearly enough to cover your new car payment, but not a bad savings either.  The first half of 2009 has been dismal for car sales, with the SAAR (seasonally adjusted annual rate of sales) hovering around 10 million units.  If the full 1 million take advantage of Cash for Clunkers, it will have effectively given the auto industry a 10% bump.

Takeaways

So in the end, Cash for Clunkers appears to have a bigger upside potential for the car business than for the environmentalists.   And the $4 billion cost?  Well it’s only $1/person/month.  So for what’s it worth, you can say you did your part to go green and save jobs.

If you’re eligible and are in the market for a new car anyway, I recommend taking Uncle Sam up on his generosity while the opportunity is there.  Although if it works, (like any good car sale) I imagine they’ll do it again soon.

EDIT 7/29 ** My original post didn’t include the potential tax revenue gains the government could see from this program. **
Corporate Income Tax

Let’s say the car companies make $1000 per car, after allocating fixed and variable expenses.  And let’s say the car dealers make $500 per car, after allocating their fixed and variable expenses.

• $1000 x 1,000,000 additional new cars sold = $1 billion in additional net income for car companies.
• $1 billion x 35% corporate income tax rate = $350 million additional federal income tax from car companies.
• $500 x 1,000,000 additional new cars sold = $500 million in additional net income for car dealers.
• $500 million x 35% corporate income tax rate = $175 million additional federal income tax from car dealers.

Payroll Taxes / Personal Income Taxes

Let’s say there’s $2000 worth of labor that goes into building each car.  And let’s say the salesperson at the dealership earns $400 for each car they sell.  What impact would Cash for Clunkers have on increasing personal payroll and income taxes for the government?

• $2000 x 1,000,000 extra cars = $2 billion in additional auto-worker income.
• $2 billion x 25% income tax bracket = $500 million in additional auto-worker income tax revenue.
• $2 billion x 16% employer payroll tax burden = $320 million in additional car company payroll taxes.
• $400 commission x 1,000,000 extra cars = $400 million in additional car salesperson income.
• $400 million x 25% income tax bracket = $100 million in additional car salesperson income tax revenue.
• $400 million x 16% employer payroll tax burden = $64 million in additional car dealer payroll taxes.

So, how much of the government’s initial $4 billion investment did they earn back?

• $350M + $175M + $500M +$320M + $100M + $64M = $1.509 billion

Taking the tax revenue into account, the cost for Cash For Clunkers goes down considerably — now down to $0.69/person/month.  These numbers are of course entirely speculative estimates, but I think they illustrate how the right incentives could be used to “move the needle” on some important issues at a relatively small cost.  In fact, I’m positive the government could make wise investments in the economy, like venture capitalists, and earn great returns.  After all, their “business” relies on the success of the country so it’s only in their best interest to spend wisely.

EDIT 8/10 **

I found this interesting article on CNN about Why Cash For Clunkers Works.

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I’m sure the $400 million in tax breaks and other incentives had nothing to do with it.

Photo courtesy of CNN.

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Visiting college basketball teams usually don’t enjoy playing in North Carolina, and now Internet businesses don’t want to compete there, either. But while the state’s hoops programs are a source of pride, a new Internet tax isn’t going to win fans among North Carolina consumers.

The U.S Supreme Court’s 1992 Quill decision forbids states from forcing tax-collection obligations on out-of-state merchants, but Tarheel legislators still want Amazon and other online retailers to start taxing their constituents. The Seattle-based retailer has no physical presence in the state, but a pending North Carolina bill holds that since affiliate Web sites in the state link customers to Amazon, the company is now responsible for extracting cash from Carolina shoppers. Other proposed North Carolina legislation would apply a new tax only to Internet ticket resales, in direct defiance of the federal Internet Tax Freedom Act, which prohibits taxes that target the Internet with burdens not applied offline.

To its credit, Amazon yesterday refused to accept the expected new compliance burden and announced the cancellation of its North Carolina affiliate relationships. Said the company, “This is a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly) and signed by the governor.” So now the state won’t get the revenue, even as in-state Web retailers lose their ties to Amazon thanks to the legislature’s revenue grab. Brilliant.

Earlier this year, California tabled a similar measure after it met with strong opposition from Google, eBay, Commission Junction, and hundreds of other California companies small and large.  Unfortunately the state is in the middle of a severe budget crisis, and the “Amazon tax” has been slipped back into the budget bill and is being debated again this week.  What the revenue estimators don’t take into account is the fact that Amazon and other large online stores have proven they won’t play the game, and the state doesn’t get any money.  In fact, combined with income-tax losses from in-state advertisers, California could actually lose money on the deal.

Either way, I’ll be watching closely as it could be devastating to my business and thousands of others.  (Not because of the tax itself, but because of the loophole that lets retailers off the hook by terminating their relationships with in-state publishers like me.)

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Also, according to CNN, 13,000 people have died so far this year from complications arising from regular flu.  So take that, piggies.

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