Monday, December 28, 2009

Flying with a Toddler - Optimal Boarding Technique

Every parent seems to dread the prospect of flying commercially with a toddler, especially during peak travel seasons. After completing two round trips with an 18 month old for Thanksgiving and Christmas I think that I have identified an optimal boarding technique. My technique allows parents to carry-on all of their baggage while, more importantly, subtracting up to 30 minutes from the effective length of the flight.

General Principles

Two general principles come into play when trying to optimize flight boarding with a toddler. First, never check bags or allow your bags to be taken from you. Even without a toddler, checking a bag extends the amount of time spent on air travel by a considerable amount. Relative to carrying-on, checking bags requires time spent in an extra line at the beginning of the flight and time spent waiting at the baggage carousel at the end of the flight. Add to this the fact that airlines frequently lose bags or allow their employees to pilfer the bag's contents. Checking bags is never a good idea.

My second general principle - minimize the effective flight time for the toddler. Unless the parents have significant pull with air traffic control, they cannot do much to control the actual flight time, defined as the time from when the airplane door closes at the departure airport to the time when the door opens at the arrival airport. Parents can, however, influence the effective flight time for their toddlers, which I define as the time from when the toddler enters the plane until the time he or she leaves the plane. Regardless of whether the plane is actually proceeding towards its destination, if the toddler has to sit in a seat the toddler's parents need to expend their limited effort, energy, creativity, books, and food to keep their child content. So decreasing the actual time spent on the plane can dramatically increase the overall comfort for both the parents and the toddler.

Packing for Success

I may expand my upon my thought process for optimal packing for traveling with a toddler in a future post, but for now I will just describe how we pack for flights. We usually travel as a group of 3, two parents and our child. This means that we can carry-on two larger bags, which we place in the overhead bin, and two smaller bags, which we place under the seat in front of us. For the two large bags we use one large wheeled suitcase and a large hiking backpack, both obviously need to fit in the overhead bin. For one of the two smaller bags, we take our diaper bag, which is also a backpack. This leaves us to take either our computer bag, mom's purse, or another small bag as our second small bag depending on the circumstances. This works well for traveling through the airport since we carry two of our bags on our backs, drag one behind us, and can either carry the fourth bag or strap it hang it on the wheeled suitcase leaving 2-3 hands free to deal with the toddler.

Our Technique

So here is how we do it. In order to ensure that we can find space in the overhead bin for our larger bags, one parent, lets say Dad, boards the flight as soon as possible to find space for the large backpack and the wheeled suitcase. Hopefully we have frequent flyer status on the airline or have arranged our seats to allow early boarding. Regardless, the best way to ensure overhead space is to board early. Boarding early has the downside of increasing the effective length of the flight for the toddler. So to avoid this, the other parent, say Mom, stays in the terminal with the toddler until the last possible moment before the doors close. On extremely full flights like the ones we had over Thanksgiving and Christmas, this can delay the time when the toddler has to enter the plan by 20-30 minutes, which is significant even on long flights.

As you execute this technique keep a couple points in mind. First, technically this technique violates the airlines' policy of only allowing each passenger to carry on one large bag and one small bag because Dad carries two large bags onto the plane. So to avoid having an issue with the gate agent Mom should stand in a location where Dad can easily point her and the toddler out to explain the situation. We have actually tried having Dad carry three bags onto the plane, but were stopped by a gate agent and told to leave one bag (luckily a small one) with Mom. So we think the best approach is to avoid contact with the gate agent by having Dad only take two bags. This leads to the second point. Carrying on one wheeled suitcase and one backpack helps ensure that the process works. I cannot imagine that an agent would let a person carry on two wheeled suitcases, but agents are much less likely to notice both the wheeled suitcase and the backpack are "large" bags - especially in the rush at the beginning of boarding.

Again this has worked very well for us on our last four flights. Cutting down effective flight times by 20-30 minutes makes for a much more pleasant flying experience. Hopefully this information will help!

Monday, June 29, 2009

Killing Me Softly (with his song)

Last night in the midst of putting some of my wife Lori's old CDs in to iTunes I came across the Fugees' big album called The Score. It has been a long time since I have listened to or even thought about this album, but I instantly remembered my favorite song on the album. It is called Killing Me Softly. In the summer of 1996 I think that I listened to this song just about every morning before going to work, so I was very excited to hear it again.

I also remembered that the Fugees covered the song but I had never actually heard the original version. So with the help of the internet, which barely existed in 1996, I set out on a search for the original. An article in Blender gives the following synopisis:
“KILLING ME SOFTLY With His Song” might be pop’s most misunderstood tune of all time. It’s surrounded by so many myths, it makes Aesop’s fables look like reality TV. Millions of pop fans know that Roberta Flack wrote the song about Don McLean – killing her softly with his song “American Pie” – and that the Fugees made it a smash more than 20 years later.

Interesting, but not true. Yes, Flack took this classic lovelorn weepie to number 1 in February 1973. But she didn’t write it.

“When Roberta’s version came out,” McLean recalls, “somebody called me and said, ’Do you know there’s a song about you that’s number 1?’ I said, ’What – are you kidding?’ And they said, “The girl who originally recorded it had it written for her after she saw you at the Troubadour in Los Angeles. She went on TV and talked about it.”

The girl was an L.A. folkie named Lori Lieberman. “I thought [McLean] was just incredible,” she says. “He was singing songs that I felt pertained to my life.” But it wasn’t “American Pie” that got her scribbling – it was a lesser-known album track called “Empty Chairs.”
I was able to find YouTube videos of all three artists' versions as well as the Don McLean song that inspired Lori Lieberman in the first place. Here the are, starting with the Fugees:

Roberta Flack:

and Lori Lieberman:

Finally here is the Don McLean song "Empty Chairs":

As a post script, I have actually been made fun of for singing the Fugees version at a karaoke bar. It was a bit hard to hit the notes, but thankfully the Plain White T's have a version that might be a bit easier:

I am glad they include the counting...

Tuesday, May 05, 2009

Chrysler Bankruptcy Legal Analysis

Anyone interested in the legal aspects of Chrysler's bankruptcy case really needs to check out The Bankruptcy Litigation Blog written by Steve Jakubwoski for an excellent analysis of the laws and court decisions in play. The three key posts are here, here, and here.

Friday, February 27, 2009

Data on the CDO Mess

The Financial Times reports on a study by JP Morgan and Wachovia showing that half of all collateralized debt obligations (CDO) that were composed of the marginal pieces of asset backed securities (mortgage bonds) have defaulted. Paul Krugram and Naked Capitalism have both commented but I would like to add a few thoughts to follow up on my earlier post about the topic.

Here are the key paragraphs from the FT report:

The conclusions are stunning. From late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS.)

Out of that pile, around $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.

The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.

Let me put this in context of what was going on with structured finance at the time i.e. packaging individual mortgages in to bonds and then repackaging those bonds. The first picture below shows a typical mortgage backed security. An investment bank would purchase a bunch of mortgages (usually thousands) and pool them together so that all of the principle and interest payments would go into one fund. The investment bank would then create a series of bonds that they could sell to investors. Within this series of bonds would be low risk bonds that wold be paid first, moderate risk bonds that would be paid second, and high risk bonds that would only be paid if the first two groups were paid.

The investment banks had a fairly easy time selling the low risk bonds to conservative investors. Actually these bonds are still doing OK because even after foreclosure houses are never worth $0. They also didn't have much trouble selling the high risk bonds to risk taking investors because they had very high yields. These have turned out to be bad investments but they are really not a big part of the problem because the investors knew that they were high risk to begin with. The problem for the investment banks is that according to the FT report, from 2005-2007 the investment banks had $450bn of moderate risk bonds that were difficult to sell and if they could not find find something to do with them they would not make back the money that they spent on the mortgages in the first place. The solution was to repackage these moderate risk mortgage backed bonds with other moderate risk mortgage backed bonds to create some new low risk bonds that they could sell to conservative investors. The picture below shows how this would work.

So keep in mind what this report is saying. It says that the $450bn of asset backed bonds that were hard to sell in the first place and hence were packaged into CDOs and resold are in reality turning out to be terrible investments. So it would appear that the investors who initially balked at purchasing "moderate risk" bonds were not far off the mark. The problem of course is that repackaging these bonds as CDOs did not do anything to reduce the risk and the reason for that is that all of the "moderate risk" bonds are failing in the same way - the payouts to the low risk bonds in each series are eating up all of the principle and interest payments each month leaving very little for the moderate risk bonds. That was the correlation that everyone missed.

Also keep in mind what this report is not saying. It is not talking about how the low risk portions of the original mortgage backed security are doing. That is a much bigger piece of the total pie than this $450bn. As of now, many of the Markit indexes AAA indices are still doing ok, although they have taken significant losses since my last post on the topic. The troubling thing of course is that if the moderate risk bonds are taking such huge loses now how will the low risk bonds preform in the future?

Tuesday, February 24, 2009

A Proposal on How to Clean Up the Banks

This is an interesting proposal to limit the downside for taxpayers and give bank shareholders some hope to keep their investments from going to zero.

I have two concerns about the plan:

1. It assumes that the government can sell these toxic assets for something like their hold to maturity value sometime within the next two years. I am not sure that this is a valid assumption given that most of the MBS's and CDO's were not really meant to trade in the aftermarket. They were meant to be sold once, at their par value, and then held to maturity. Now that we know that these assets are not worth their par value, any buyer would only pay a significant discount to their hold to maturity value, which I believe is non-zero. It is not clear to me that a realistic value can be put on these assets anytime in the next two years. More likely we would have to wait 10 years to see how the assets actually performed and then calculate their value from that.

2. A related point is that this plan also assumes that bank executives and shareholders would be willing to give the government control over their destinies. Granted, they may already be past the point of stopping bankruptcy or nationalization, but if they participate in this plan they are essentially betting their jobs and/or their money on how much their assets can fetch.
About Timothy Geithner
Read the Article at HuffingtonPost

Friday, November 14, 2008

Fireproof Your Marriage

How can two people make their marriage strong enough to withstand the challenges that they and their marriage will inevitably face over the course of decades? Fireproof, a recently relased movie from Sherwood Pictures, focuses on this question by telling the story of a firefighter and his wife who come the brink of divorce, but ultimately save their marriage. Last week, our Engaged Encounter marriage prep group spent some time discussing the movie and its implications for our marriages.

It is really wonderful that Sherwood Pictures was able to make this movie about two people who were able to save their marriage. Oftentimes in popular entertainment it seems that marriage is either portrayed as overly glamorous or as the but of sitcom jokes. Firestorm makes an effort to portray a real marriage, complete with real problems but also real love. Unlike many movies that only portray a secular marriage, Firestorm acknowledges that God can play a role in a marriage and argues that this marriage could not have bee saved without His help. I think that this is really a great statement about how great our lives and our marriages can be if we let God in, but how troubled we can become when we shut out God and those around us. In a sense the movie seems to tell the story of what happens when we open up to God and our spouse.

Hopefully many people can watch this movie and consider its implications for their lives. In our society where so many marriages end in divorce we really need this kind of message.

Wednesday, October 15, 2008

McCain: Inarticulate on Health Care

So by now I realize that the presidential election is all but over and my preferred (and I use that term loosely) candidate is not going to win, but I do want to comment on the health care issue at stake in this election.

In my view, the issue of how to reform health insurance is the most important domestic issue that will be decided in the next several years. Either we grant the state a bigger role health care or we allow individuals more freedom. We really cannot have both and I would certainly choose the later.

Unfortunately, as evidenced by my friend Rob's recent post, which compared and contrasted the candidates views on health care, McCain is doing a terrible job of articulating what increasing health care freedom means for Americans. So as it becomes less and less likely that anything that I want to happen is actually going to happen let me try to explain what McCain should have said.

The government creates two big problems with health care: Employer based insurance and minimum coverage requirements. Lets take a look at each of these problems and how the government can solve them.

Problem 1: Employer Based Health Insurance

Most Americans receive their health insurance as a benefit from their employer due to federal government tax policy. The policy states that if a business purchases health insurance for its employees, it can deduct the money it spends on health insurance from its taxes just like it deducts the money spent on employee salaries. The federal government does not allow individuals to deduct money spent on health insurance from their taxes. So when most companies and their employees do the math it works best for businesses to buy health insurance for their employees. However at least three problems with this situation have become apparent:
  1. Companies have insurance options, but employees do not: If the company is the one purchasing the health insurance, they are the ones that choose which insurance to buy. They may choose to give their employees some limited options, but at the end of the day the business with likely look out for its own interests not necessarily those of its employees. Likewise, the insurance company looks at the business as their customer, not the employees. So when it comes down to making the business happy or making the employees happy the insurance company will try to please it the business, its customer. This contributes to frustration with "insurance".
  2. No portability of care: When people get their health insurance through their employer, by definition if they change jobs, they have to change insurance. This creates a problem if someone needs to change jobs when that person or a family member is going through an illness. So the person is left with either not changing jobs or potentially dealing with denial of coverage due to the preexisting condition. Just like it does not make sense to change property, auto, or life insurance when changing jobs, it does not make sense to change health insurance when changing jobs either.
  3. The Part-Time Cracks: The previous two problems make health insurance less convenient for the majority of people with a single steady job. However a significant percentage of people lack health insurance all together because they work at a part time job, or perhaps multiple part time jobs. When a business can amortize the cost of an employee's over 40 hours a week for 52 weeks per year, most times they can make the math work out in favor of supplying health insurance for their employees. When they look at an employee who works less than that, either per week or seasonal employment, they may likely conclude that the costs of health care is not worth it relative the employee's total annual salary. People in these situations fall through the cracks of the employer sponsored health insurance.
So what is the solution to all three of these problems? Easy, just shift the incidence of the tax deduction from employers to employees and make employer sponsored health insurance a taxable benefit. It takes both things not just one. The net result, at least via the back of the envelope calculations on McCain's website, is at least a push financially with the current system and has the added benefit of giving individuals increased control over their health care, which solves the three problems mentioned above.

The big open issue with this proposal is what happens if individuals choose to leave their employer sponsored insurance plan for a plan that they buy individually. The key assumption to this plan is that by taxing an employer provided health insurance benefit, employees will understand exactly what their employer is paying for health insurance and consider it an explicit part of their salary instead of a difficult to value benefit. So, an employee chooses to leave their employer sponsored plan, they should demand the full value benefit in extra salary, which would give them the extra money to buy that insurance privately.

Problem 2: State Mandated Minimum Coverage

The second government created problem with health insurance is not created in Washington D.C. but finds it genesis in each of the 50 state capitals where legislatures make rules about what types of procedures health insurance has to cover. The classic example is chiropractic care, which many states mandate health insurance cover, but few people actually have any desire to obtain. This is basically a special interest give away by making the majority of people pay higher premiums so that a minority of people can get their specialty care subsidized. Or so that the providers of that specialty care can make more money.

The simple policy change that this country needs is to allow people to purchase health insurance from a company in another state that may have fewer minimum coverages and lower costs. Personally I will never choose to visit a chiropractor, so I would prefer not to hold insurance coverage that covers chiropractic care because it is marginally more expensive and I neither need nor want it.

What is the concern with this? It is not like we are outsourcing health insurance decisions to some third world country. Health insurance would still be regulated by some state and states and insurance companies would have an incentive to make insurance policies more relevant to the individual's needs. That is a good thing as far as I can tell.

Unfortunately we will not get get it because McCain cannot articulate it.