Aren Cambre's Blog

My lovely wife poked a fatal hole in my depreciation argument.

It is true that a newer car for her would depreciate more quickly. But that doesn’t matter in our situation. We were planning on replacing Jennifer’s car in 2007 anyway. A newer car for her will depreciate regardless of whether we buy it now or in two years.

So the rule is either an inexpensive, non-project Nova for Aren or a newer car for Jennifer. That’s what’s best for the family.

Figuring out what to do for a replacement car is a mind-numbing.

Both Jennifer and I want for me to have another Nova. So I’ve established a critical criterion on a replacement Nova: it cannot be a project car. This means it has to be virtually rust-free, the exterior must be reasonably attractive, the interior has to be in good shape, and all major drive train components have to be recently replaced or rebuilt. I have time to maintain an old car and do some minor improvements, but I do not have time for a major restoration.

I got a fair valuation and settlement for my Nova from the insurance company. (Who says it doesn’t pay to have collision coverage on old cars?) I’ve been looking for replacement Novas for weeks, and I cannot find anything acceptable that doesn’t run around 150% to 200% of the settlement value.

This leads to conundrum two: if I am going to spend 150% to 200% of the settlement value, wouldn’t it make sense to replace Jennifer’s car? It is a 7 year old Chevrolet Monte Carlo with 122,000 miles. Who knows, it could give us another problem free 75,000 miles, but this is a Chevrolet after all!

So over the past few weeks we’ve been doing our Consumer Reports research and checking local classifieds. We’ve whittled down our choices to a Chevrolet Impala and a Honda Accord. With the Impala we think we can do the base 3.4L engine, but we prefer the LS trim line which comes with a 3.8L. On the Accord we only want the 3.0L 6 cylinder. We’ve been in a 2001 Accord with the 4 cylinder, and it was totally underwhelming.

Today we test drove a 2001 Chevrolet Impala LS (3.8L) at a Cadillac dealership in Plano. We were reasonably impressed with that car. Overall it was like a roomier and more spirited version of my wife’s Monte Carlo. But it just had the general GM cheap fit and finish feel. Plus it had a lot of doo-dads that we didn’t want like heated seats, sunroof, leather seats, and so on. These aren’t bad features, but we don’t want to pay extra for them. And gee whiz, what the hell is this Onstar crap? No, thanks. I’ll use my cell phone and AAA, and I’ll remember to not lock my keys in the car! Plus this is a domestic model; the fewer parts means the less stuff to break The sales manager was begging us to buy it for 75% of asking price before we left. (We are not ready to make a purchase yet, so we politely declined.)

Then we went to a Richardson Honda dealership and tested out a 3.4L Impala. It was a base model, and it was totally underwhelming. Jennifer hated the column shift. (Poor baby! I liked the extra space on the front seat. :-P) The handling was far worse than the LS; the car almost seemed to wobble every time I made a correction. We heard a lot of clunking from the front end every time I steered, so I have to wonder if something wasn’t right? Still, the 3.4L engine seemed to strain too much. Plus the 3.4L engine has problems eating intake manifold gaskets. (Oh, the memories.)

So next we tried out a 2002 Honda Accord 3.0L. I was very disappointed that I liked that Honda a lot better than the Impala, even the Impala LS. Overall it felt superior in every respect. The only flaw, if it is a flaw, is that the cabin seemed narrower. The other flaw is that a comparable Accord is about 25% to 50% more expensive than an Impala. That’s not a trivial amount of money.

In retrospect, my impression of the Honda Accord could have been colored by the fact that we drove a horrible Impala right before testing it. I want to drive an Impala LS again just to make sure my judgment is accurate.

This is where we stand on the car purchase decision. I still would really like a Nova. I think that if I ran the numbers, a Nova that fits my criteria, even if it costs 50% to 100% more than the insurance settlement, would still be a good deal mainly because it would not depreciate much. Depreciation is a real expense that a lot of people foolishly ignore. A newer car, be it an Impala or an Accord, will depreciate to next to nothing by the time we are done with it. However, Jennifer’s car is getting “up there” in mileage. I am not sure how much life is left in it before we’re going to have to shell out for major expenses.

Fortunately, we’re in no rush. It hasn’t been much of a problem to live with one car, and we don’t see any immediate need for another car. We’re going to continue eyeing newer cars for Jennifer. But hopefully the right Nova will show up…

(Jennifer just now adeptly pointed out that either of the likely outcomes will be that she “wins” or I “win.” We still support each other, but it’s just weird. Argh.)

A June storm forced our hand on our trash trees. We had to remove one large hackberry tree, we chose to remove another hackberry (was choked off with vines), and we elected to remove 9 other small hackberrys before they get out of hand and a Carolina cherry laurel that was growing too close to the house.

We got four estimates before we had the tree work done:

The variance in these prices is astounding. The company we ended up choosing, Sam Hill Tree Care, is properly insured and accredited and came in as almost the lowest price. The most expensive company was neary twice as much! When you’re talking thousands of dollars, that is a huge difference, bordering on exorbitance.

It pays to shop around!

On Wednesday I stayed at the Isle of Capri Casino in Bossier City, LA on the way back from a trip. The nickle and quarter slot machines cleaned my wife and I out of $30 within 45 minutes. That would translate to $40 a hour, very expensive for such lousy entertainment!

Sheesh! The other two times I have gambled were in August 2001 at Cripple Creek, CO and December 2001 at Vicksburg, MS.

At Cripple Creek I let myself get caught up in the gambling mindset. As I fed each slot I thought of the neat things I could buy with winnings: a video camera, down payment on a house, etc. Whatever! Stepping back I saw what a crock the whole thing is.

Now I hate gambling. I can’t stand to see my hard-earned money disappear down the drain, even though my lifetime gambling losses add up to about $70. I know that the odds are stacked way against me. Even the games that have a modicum of skill, such as solitaire or blackjack, are still mostly chance.

The Roth IRA is a riskier investment vehicle than commonly perceived. Here are a few reasons:

• If Congress shifts any of the current income tax burden to some other tax, that could destroy Roth IRA’s benefits. A partial shift to a different kind of tax could reduce future income taxes, penalizing Roth IRA holders who contribute post-current-tax-rate income. Such a shift is not inconceivable. For example, shifting current income tax burdens to gasoline taxes (to reduce the demand for gas, theoretically increasing independence from Middle East oil or reducing CO₂ emissions) has been discussed and could easily become a reality some day. (I am not advocating this; just pointing it out.)
• Some predict that income taxes will rise in the future because Social Security and Medicare costs are going up, up, and away. Payroll taxes, not income taxes, fund these programs. It is possible that Congress could fund future shortfalls through increased income taxes. It is just as possible for Congress to simply increase payroll taxes. Roth IRAs give no advantage against increased payroll taxes because payroll taxes are not paid on retirement fund distributions.
• Taxes saved now via contributions to traditional IRAs, 401(k)s, or 403(b)s are saved at one’s current marginal rate. Assuming one draws a substantial portion of retirement funds from Roth IRAs, taxes saved in the future via a Roth are saved at a rate closer to an average rate. One’s average tax rate is always lower than one’s marginal rate.
• One’s post-retirement income is usually a step or two lower than one’s pre-retirement income. That pushes one’s future average tax even lower than one’s current marginal rate.

I could go on.

What it boils down to is with the Roth IRA, you are betting heavily on specific political outcomes (total unknowns!), and you are trading a well-defined current benefit (immediate deductibility) for an unknown future benefit. That sure seems risky, especially if your retirement date is 40 years away. I am aware of the side benefits of Roth IRAs (no mandatory distribution, can withdraw contributions at any time, etc.), but risk has a cost. Given the potential risk it sure seems like the Roth is an expensive way to get these benefits.

Slow: do it by hand.

Stupid: use a Coinstar machine. These machines charge around 8 cents per dollar. That’s a whopping 8% tax just for the privilege of letting a machine do it for you.

Better: some bank branches have change counting machines that will count your money for free. Call around.

Best: just take your spare change with you next time you go to the store. Use the self-checkout isle, and cram coins into the machine until you paid your bill.

When I do self-checkout, I first empty out all my coins, then I use $1 bills, then $5 bills, etc. This way I am guaranteed that whatever change is returned is the lightest possible combination of currency.

The baby supply market has many totally pointless products. Here are some key ones:

Big honkin’ strollers: too much. We have one of those stroller systems where your kid’s car seat can snap into a monstrous SUV stroller. You can also put the kid directly into the stroller. The car seat feature is useful, but the monstrous features add so much bulk that it takes up most of the trunk of our car. We rarely use all its features. It sure would be nice to have a smaller unit. Maybe we could do without both cup holders!

Diaper wipe warmers: waste of electricity. My wife may disagree with me on this one, but I think they are pointless. In the winter the wipe gets cold by the time you get it on baby’s “cute widdle hiney.” But what’s the point of warming the wipes in the first place? Room temperature is too harsh for 21st century babies? I’ve read claims that some babies get upset with room temperature wipes. Maybe the baby would be used to room temperature wipes if Mommy and Daddy used them from the beginning. My kid gets heated wipes at home (yeah, I admit it), but he never screams when we use room temperature wipes on the road.

Bottle warmers: why? Get the baby used to room temperature liquids early and you won’t need a warmer. My kid has never objected to any reasonable temperature liquid: warm, room temperature, and refrigerator cold are just fine with him.

Car mirrors: hazardous. Baby car mirrors are irresponsible. You have to squint and roll your head around to line up the two mirrors just right to see the kid. But think about it: you can’t do anything if he is whining in the back seat, and the kid is not gonna die in the car seat! How safe is it to distract yourself while hurtling down the interstate or navigating congested side streets? Every time you stare at the goblin in the mirror you you increase the odds of a crash. Congratulations, becoming a dangerous driver is all you’ve accomplished with that baby mirror. Let the kid whine until you can safely pull off the road.

“Sanitizers” and “sterilizers”: dumb and dumber. Yes, there is a difference. “Sanitizers” just blow hot air across the toys. They don’t do anything useful. “Sterilizers” supposedly clean the germs and bacteria off the toys. But consider this: when your kid learns how to grab stuff, he is going to put every imaginable filthy object in his mouth. Think of how filthy baby’s hands are after he crawls around the floor. Guess what, Precious ain’t gonna die with his own filthy habits, so he won’t die just because Mommy or Daddy didn’t run his filthy toys through a stupid sterilizer. You should have learned that you have to use manual scrubbing to clean your hands, dishes, etc. Why then would you believe that throwing junk in a steam bath does the same? The only thing these things do is put a load on your house A/C system.

Some car toys: patently dangerous. Here’s a quick way to figure out if your car toy is safe: have a friend hurl the toy at your noggin. If it hurts, you are crazy to let your kid play with it in the car. If it doesn’t hurt, it’s safe. Some products marketed as car toys—whether directly or by implication (e.g., they fit on the car seat)—have hard plastics or just weigh too much. They have no place in a car. Hey, while you’re at it the same test is good for adult objects like umbrellas and bound maps.

SUVs: come on. Many parents buy SUVs just because they had a kid. Guess what? Your kid doesn’t need a freakin’ SUV! Great, mommy and daddy blow tens of thousands of dollars on a expensive to purchase, expensive to operate SUV in lieu of paying down debt, starting a family emergency fund, or, gasp, saving for college. (In other words, instead of doing the right thing many parents flimsily justify their own wants by making a huge donation to carmarker’s profit margins. Yeah, did you know that automakers are generally just breaking even on traditional cars? SUVs’ fat profit margins are their profit centers.) My family manages fine with two 2 door cars. Until I was 10 my family’s main car was a 2 door compact car by 1974 standards. (Oh, wait, that very car is still my car!) We manage just fine.

Enough rants for today. I expect the first comment to be a “dear idiot” note from my wife.

I sent this letter to my Congressional representatives:

I am writing to ask for the simultaneous repeal of the Wright and Shelby Amendments that restrict air travel from Love Field Airport in Dallas. By arbitrarily restricting the destinations of passenger flights, these amendments dilute the nation’s foremost discount carrier’s ability to compete with other airlines. This effectively increases Dallas-area airfares, causes a major inconvenience to passengers, and pointlessly impedes Dallas’s already-struggling economic vitality.

Aren Cambre
Dallas, TX

Last Thursday I saw a station with 93 octane gas at over $2 per gallon. Now two stations on my drive to work have $2.03 and $2.04 for 93 octane. I have never seen gas prices over $2 in my life.

A current proposal to “reform“ school finances in the Texas Legislature will transfer a substantial portion of school taxes from federally deductible property taxes to nondeductible taxes like sales taxes.

Dallas County Appraisal District says I will owe $2,410.07 to Dallas ISD for tax year 2004. At this time in my life I am able to deduct the full amount of this tax from my income taxes. The true cost of this tax to me is only $1606.71 due to the tax deduction.

If the $1.05 per $100 tax rate sticks, I will only owe $1543.50, or a true cost to me of $1029.00.

If I pay Dallas ISD $2,410.07 in year x but only pay $1543.50 in year x+1, the difference of $866.57 has to be made up with new taxes. I am not a fool; I know that no matter where the new taxes are levied—payroll, video gambling, additional sales tax, whatever—all this $866.57 is still coming out of my wallet in the end. Businesses will pass on the payroll tax in the form of higher prices or employ fewer people, video gambling will inevitably increase poverty and therefore increase the usage of social services and law enforcement (which Dallas already does not have enough of!), and sales taxes are just simply more nondeductible taxes. And that doesn’t even count snowball effects like the higher crime and higher ignorance that come from poverty, the increased poverty from potentially reduced payrolls, etc.

If that’s not bad enough, I lose the deductibility of this $866.57!

Because all these fancy new taxes will eventually hit me in the pocketbook anyway and because I lose the deductibility of that $866.57, even if net receipts to Texas school districts stay exactly the same my net school taxes will increase by $216.64 per year. In essence, removing the deductibility of our school taxes is a huge giveaway to the IRS because all of that $216.64 goes straight to Uncle Sam. And this $216.64 doesn’t even begin to take into account the snowball effects!

My high school band director called himself a “radical Republican.” He advocated ripping out the current school financing system and replacing it with an income tax. Back in high school I thought he was crazy, but now I completely understand where he is coming from. I am very willing to pay a well-implemented, simple income tax as a replacement for the current school financing system if that means I can deduct that tax.