Saturday, June 29, 2013

Introverted in English, Extroverted in Portuguese

I just got back from a Brazilian butcher shop.  I bought like 5 pounds of picanha for a churrasco some of my friends and I are going to do later this afternoon.  When I went up to the guy at the counter I struck up a pretty long conversation about how I'm going to have a barbecue with my buddies, and I'm not sure what kind of meat to buy.  I told him that its been a while since I did a churrasco and that it has been a while since I've even spoken Portuguese.  He went through various sorts of meats that might be good and in the end I asked him if he was a Gaucho (someone from Rio Grade do Sul -- where churrasco is really big).  He said he was, so I just told him that I trusted his judgement and that I'd take whatever he recommended (which really boosted his ego). We chatted a bit more about nothing in particular and I was on my way.

I would never have had this interaction with any American.  In general I'm pretty shy and introverted.  I prefer to keep my business to myself and say as few words as possible to basically everyone other than my closest friends.  For some reason, this is simply not the case whenever I'm talking in Portuguese.  When I am chatting with someone in Portuguese I want to know their whole life story, and what's even stranger, I want to share my whole life story.  I always tell them about how I learned Portuguese while living in Bahia, how I'm already forgetting how to speak Portuguese, how I went back for a week to vacation a few years ago, how I'm married, how I am originally from Utah, etc, etc.  Basically I'm pretty good at making friends, or at least friendly banter, whenever I'm speaking Portuguese.

A very real example of this happened when Gwen and I went to Brazil a few years back.  Gwen, her friend Ruth and I had just arrived at a sleepy fishing village called Saquarema (know known mostly for its amazing surfing and beautiful beaches).  When we got there we were super hungry so we stopped at a small restaurant/bar that was 100 percent empty to get some lunch (ahhhh yeahhh beans and rice!).  I struck up conversation with one of the guys who works there and within 10 minutes I found myself checking out this building he had just built and was currently setting up to be an inn.  He gave me this super long tour and we chatted about where he was going to put the furniture, how many rooms there were, how much he was going to charge, when the busiest seasons of the year are, etc.  When I came back to the restaurant (to a very confused Gwen and Ruth-- I forgot to translate that I was going to tour his new place), he invited us to his cousin's birthday party that was to be held at that same restaurant and bar.  There would be churrasco, live music, the whole thing.  So later that night we went.

Gwen was shocked at how different of a person I had become.  It was like she was on a vacation with a complete stranger.  I didn't even notice I was different until she pointed it out.  It just felt natural to wonder off with a complete stranger and get invited to a family party.  It felt natural to chat up every person I ran into.

Why do you think this is the case?  I have a few theories:

1) Brazilians are more outgoing and friendly so it's more natural to make friends
2) Introversion/extroversion/personality is learned with language.  Since when I was learning Portuguese I was talking to so many strangers every day, whenever I speak it now I just revert to that persona.
3) Since Portuguese is a foreign language to me I don't pick up on how awkward I sound when I'm speaking it so I'm less self conscious.
4) A combination of 1-3

Saturday, January 26, 2013

Economic Analysis – Should I Buy a House?


For the past year or so I’ve been thinking about whether or not after I finished paying off student loans I would consider purchasing a house.  I’ve done a little research, but it seems that there are a lot of different opinions out there and none really made the case one way or another.  Opinions ranged from: “Yes, as long as you’re planning on staying there for at least x years” to “Yes, as long as you can put x% down” to “No, you’re better off renting and investing the difference in monthly payment in the market” to “It just depends on preferences – flexibility, mobility etc”.  After reading through their reasons, I’ve decided to do my own analysis on the economic reasons to buy or not to buy.  Note that I am not concerning myself with the intangible elements that come with home ownership, but merely looking at the financial implications, because to me, it’s purely an economic decision – at least at this point in my life.


The following analysis will be based in basic economic price theory and financial mathematics.  For those of you who are uninterested in this (though I don’t see how someone wouldn’t!), I’ll provide a brief summary of my conclusions. 

Buying a house is tentatively a mediocre financial decision.  Like any investment it has its own risks.  Also, it appears that the optimal time to hold onto your house is about 10 years (this will maximize your investment yield). I’ll need to do some more analysis to be completely comfortable with the risk/reward tradeoff.


I start by calculating what my investment cash flows are.  The equation I used for my investment is the following:

Investment(t) = I(t) = Mortgage Payment(t) +Other Monthly Payment(t) - Rent(t) - Tax Savings(t)

Investment(t=0)= I(0) = Down Payment  + Buying Costs

Essentially you start with you total monthly outlay and subtract anything you would have paid if  you continued to rent (sunk costs – in this case rent) and any monthly tax savings (you can write off interest payments on your income taxes every year).  “Other monthly payment” here is for things like property taxes, insurance and condo fee (if I got a place in Cambridge or the surrounding area it’d probably be a condo or duplex of some sort). 

The next step is to calculate what the cash flow you receive when you sell the house is.  You can think of this as what all of those investment cash flows accumulated to, or your net equity.  Here is the equation I used:

Net Equity (T) = E(T) =Home Price(T) – Loan Balance(T) – Selling Costs

The capital “T” here denotes the time at which you sell the house. 

The next step is to solve for the interest rate that would make the string of investment payments accumulate to the net equity you received from the sale of the house.  Here is an illustration

The “I”s on the top represent the investment outflows and the E(T) on the bottom represents the investment inflow.  Without going into too much detail, these cash flows imply a certain interest rate which represents the yield on this investment.  The yield will tell you how good of an investment it is.


A lot of assumptions go into this analysis.  Some of the assumptions I used are probably better than others and they were all based on limited research.  I started with a base set of assumptions and then tested how sensitive they were to the financial outcome by modeling slightly different assumptions.  Here are the base assumptions:

A few notes:
  • 500k is about what I would have to pay to buy the apartment I live in now (I know it’s crazy.  Cambridge/Boston real estate is super expensive)
  • 500 additional monthly would be for property taxes, insurance, condo fee etc. 
  •   Home appreciation rate of 2% seemed conservative (just about inflation expectation)
  • My rent is ridiculous
  • Rent increase of 2% per year keeps it in line with my home appreciation rate.  It’s more likely that this wouldn’t be smooth though (probably more like a 15% increase every 5 years or something)
  • Income tax rate should be your marginal tax rate, not average
  • Value Shock = set to 0 for base scenario, I’ll use this in the analysis
  • Buyer/seller costs – a friend of mine who recently bought a house in the area gave me these numbers.  These represent lawyer fees, broker fees etc.

Running these numbers through a model I built (just in excel), I got the following yields:

In other words, with these inputs, the implied annual return on my investment in a house would be 9.4%.  Certainly not bad especially in current economic conditions!  However, this is based on static assumptions I came up with on the spot.  In order to understand the sensitivity of these results to the assumptions, I ran several scenarios, shocking the assumptions (both up and down) to see what the yields could be.  Here is tabular view of the results:

Changes in down payment and housing price assumptions

A few notes:
  • The less you put down the higher your yield is
    • This is because the less you put down the more leveraged you are in the investment.  To illustrate this, consider you have $100 and you want to purchase an investment for $1,000 that matures in one year.  You borrow the $900 more you need at an interest rate of 5%.  Suppose the asset is worth $1,100 at the end of the year implying a 10% gain.  You pay your $900 loan back with interest of $45 – (.05*900 = 45), leaving you with $1,100 - $945 = $155.  Your $100 grew to $155 or a 55% gain!  While this sounds awesome, it is very risky.  Assume your asset was worth only $900 at maturity.  You’d lose over 100% of your investment.  (By the way, this is how financial institutions make a lot of money)
  • On down shock scenarios, the implied yield is higher at later durations. This is because it takes time for the loss to be recouped
Other Scenarios without Commentary (I’m getting tired of writing)

Impact of different rent assumptions:

Impact of different loan rates: (by the way these were for 30 year fixed interest loans)

Impact of different home prices:


I feel the jury is still out, however, it does look like it could be a pretty decent investment.  Like I said in the beginning, this analysis didn’t take into account intangible benefits of home ownership (I want to paint my walls black an orange for example—fictional example), or I want to be able to move on a whim to California and don’t want a house to tie me down.  Perhaps the final decision to purchase a house should be based on these intangible criteria as I’m not convinced there is a super strong financial incentive to own (or to not own) a home (at least not for me right now).  I do think that the assumptions in my model could be flushed out a bit better and I would like to introduce some dynamic element to the assumptions.  It’d be interesting to model this with a stochastic home price forecast.  I’d like to see not only what my potential returns could be, but a full distribution of the returns.

Saturday, November 10, 2012

Post-Election Political Blog Post

Over the past few years I've tried to distance myself from politics.  It makes me a happier person to not become too invested into one candidate, party or ideology.  I heard recently that people who don’t watch the news are on average happier than people who do, and so while it may be detrimental to my civic responsibility, I've tried to distance myself from the whole “what’s going on in the world” thing.  That being said, I cannot just shake off my thoughts and opinions like they don’t exist.  So I've decided to write this blog post conveying some of my thoughts on the recent election and my hopes for the next four years.

I voted for Romney.  I certainly don’t dislike Obama -- I don’t think he’s a terrible president and in fact I think in a lot of ways he would be a better president than Romney.  However, on the issues I think are most important, I think Romney would have been a better candidate. 

But Obama won. 

Now I’m not the type of person who is going to get all upset and rage about how Americans are dumb, or uninformed, or ridiculous.  They’re not.  Rational people can disagree and I think most people who voted for Obama are rational.  I would however like to list a few of the things I hope Obama does and prioritizes. 

#1 Fix Immigration.  Let’s be honest, if George Bush Jr didn't do this while he was in office, no Republican president ever will, so Barack must.  I've long believed that a more liberal legal immigration system would greatly benefit this country.  Streamline the process for people to come here legally and allow a lot people in. The more the merrier.  It contributes to our national diversity, benefits our economy and creates a more healthy demographic mix (i.e. increased ratio of younger people to older people) to just name a few of the benefits.  It may sound like a logical narrative, but economic research shows that immigrants don’t add additional strain on our social insurance programs (in fact the opposite is true) and don’t reduce wages/job opportunities for Americans (the opposite is true, except for the very bottom 5% of workers, who see a very minimal squeeze).

#2  Reinstate Bernanke.  I think he’s a good Fed Chairman and I don’t understand why Romney said he wouldn’t reinstate him.  (Side note:  Bernanke is a Republican and Romney isn't a macroeconomist).

#3 Ease up on China.  Blaming China for our economic problems is at best misplaced blame.  Ensure trade agreements are met (on both sides) and move on.  China’s growth shouldn't be viewed as a threat to America, but as an opportunity.  Economics is not a zero sum game!

#4 Do not let tax rates on dividends increase.   My ideal tax plan would be as follows:  broaden the tax base and lower the rates for individual income tax and corporate income tax in revenue neutral way.  I’d get rid of ALL tax deductions and credits and with the savings lower rates.  To increase revenue I’d increase federal taxes on gasoline and energy consumption and/or carbon emissions.  Global climate change is real! And we must be asked to sacrifice something to curb it.  (Go Pigovian Taxation!).  Unfortunately this isn’t going to happen (it wouldn't have with Romeny as president).  With Obama as president, my only hope is that he doesn't allow the tax rates on dividend income to increase.  Increasing the income tax rate for the wealthiest American’s isn't as optimal in my view as the plan described above, but if I were a Republican in congress I’d give the president that in return for keeping all dividend taxes low (for those who don’t know, under George Bush’s tax cuts, qualified dividends started being taxed like long term capital gains as opposed to ordinary income).  Dividend taxes are essentially a second round of corporate income taxes and taxing them at such a high rate makes it so companies have an incentive to not pay dividends (and instead buy back stock so that the returns from equities are proportionality higher in the form of capital gains rather than dividend payments).  High dividend paying companies (such as USPS, Verizon, AT&T etc.) shouldn't be put at a disadvantage, and there shouldn't be a tax reason for a company to not pay dividends. 

Other things that would be nice:
  • Legalize marijuana (or at least decriminalize it) and decriminalize all other drugs
  • Phase out tax breaks for employer provided health coverage---and promote policies that promote high deductible health insurance plans with HSAs (derp derp actuary nerd)
  • Make Social Security Actuarially sound (index retirement age to life expectancy)
  • Use behavioral economic strategies to get people to save for retirement and potentially use a (gasp!) savings mandate (we already have good retirement savings plans in place, we just need to figure out how to make people utilize them more)
  • Bust up as many unions as possible (can’t I not be a moderate on at least one issue? :D)

Anyway, rant over.  I hope Obama has a successful second term and that the economy is doing so well in 4 years that the Democrats can win another presidential election (this doesn’t mean I want them to win). 


Friday, May 25, 2012

Three Wolf Moon

About eight months ago I switched departments at work. I moved from the modelling team in employee benefits group insurance to the strategic analysis team in variable annuities. When I left group insurance I got this sweet gift from my coworkers and manager.

For those who are not aware of the power of the three wolf moon t-shirt let me briefly explain. The t-shirt has super powers and everyone who has purchased it will back up that claim. Just look at the reviews! I had shared the link to the t-shirt with several months earlier so that they were aware of its epicness, and a few months later, when I was leaving the group they surprised me with it. In addition to the t-shirt they wrote a review for the shirt on my behalf (a premonition one might argue?!).

 The Review:

I'm a bit of a rebel and I enjoy expressing myself through t- shirts. However, working for a conservative insurance company, I had few chances to exhibit my preferred wardrobe. I purchased this shirt not for an purported magical element, but simply to wear at the company picnic and demonstrate my coolness. The picnic came and went without incident, but what came next could not have been predicted. 
 A few days later, I had thrown it on when I was about to study for an actuarial exam. When I sat down with the book in front of me, formulas suddenly streamed through my brain as effortlessly as singing the alphabet song. Vast volumes of text on social insurance were read and cataloged in seconds. Yes, there was magic in this shirt. Of course I wore the shirt to the exams and I passed with a perfect score. Emerging from the sitting, I confidently decided to attempt all remaining exams in the next sitting. Having quickly finished all my exams, I was on the fast track. And now, at 25, I'm the youngest CEO the company has ever had, and yes, I'm still dressed for success.
 I have been meaning to blog about this for some time and just now got around to it.  Thanks for the shirt guys!

Saturday, February 25, 2012

Starcraft Statistics

Another Starcraft Blog (and probably my nerdiest post ever!!)

I found this really cool tool to track your Starcraft Statistics called SC2Gears (or at least I think it's cool). I've been having it save my replays for the past several months and now I have a decent size number of replays (about 130) to do some analysis on.

My first question is whether or not my APM has increased over this span of time. APM stands for actions per minute, and as the name implies it counts each of the actions you make (every key you type, every mouse button you click) during the length of the game and divides it by the number of game minutes. Pro Starcraft 2 players consistently have APMs in the mid to upper 200s (meaning they literally make over 4 actions every game second--and a game second is less even slightly less time than a real second!). Here is my graph:

Based on the regression line, it looks like I have improved only very slightly (about 5 APM over the course of the 3 months). At least I didn't go down in APM.

Next, I decided to see how I'm doing when playing against each of the races. In case you didn't know Starcraft is a real time strategy game that consists of three intergalactic races--the Terran (exiled humans from earth--the race I play), the Protoss (a technically advanced alien species) and the Zerg (A bug like alien).

I suspected that I do worse against zerg and better against protoss, which was what I found.

This makes sense. I have a generally strong build order against Protoss and I am better at controlling the army composition that favors this match up (mostly bio play if you're familiar).

I thought that maybe my APM is higher against Protoss and so I checked that out:

Interestingly my highest APM(though it's pretty close)is against Zerg. Though this could also be a function of game length. Usually games against Zerg last longer, and since you do less in the very early portion of the game, it makes sense that the longer a game goes, the higher your average actions per minute would be. I'll have to do more analysis on this.

Lastly, I wanted to see how long the games I played were as well as how my APM is relative to my opponent:

I was surprised at how slow I am relative to the people I'm stacked up against. On average they are about 25% faster than I am. When you play online you are matched up against who it thinks you'll be most comparable to. This just makes me realize that my biggest shortfall is my speed. In order to be competing (and winning nearly 50% of games I play) with people 25% faster than I am, I must be doing ok in the other aspects of the game (at this level), namely in game decision making and overall strategy. Now I need to figure out ways to improve my speed, or maybe I can play this game with no APM.

Monday, August 8, 2011

Check out my new Starcraft 2 failure website!

Sunday, June 5, 2011

Back on top


I'm taking a few weeks off to prepare for my upcoming exam (on the 17th of June), so It was good to get the promotion before I went cold turkey. Note also in the background that I'm ranked #4 in my division. Woot!

If I get sick of studying and need a break in the next two weeks, I may create a blog post about how I got back to diamond. Maybe creating a blog segment called "strategy corner" or something stupid like that. I may be forbing myself from playing, but who says I can't write about playing?