Judging the Book by the Cover

It is often said that you can’t judge a book by its cover, however I respectfully disagree. If that were true, then publishers wouldn’t spend millions of dollars each year designing and printing colorful covers, not to mention it would be impossible to have a “beautiful book” contest.

When you really think about it, it is actually very easy to judge books by their covers, because the title and author of the book is right there in print. Thus if I see a book by Nicholas Sparks, I can (with a certain amount of certainty) believe the book will be a love story that has a very high chance of probability of being turned into a major motion picture.

Likewise if I see a “Dummies” book, I can probably guess the subject matter will be simplified to the point that a person of average intellect can easily understand the context, and if I see a book with a picture of a shirtless man riding a horse bareback with a long haired beautiful woman grasping him from behind… it is almost guaranteed to be a cheesy romance novel.

All of that said, I realize the reason people say you can’t judge a book by its cover is because it is an analogy for other situations. In many cases it is said in reference to people and how someone might look a certain way but their personality may not match. Here too I find fault with the concept as in many cases it seems rather easy to judge people based upon outside appearances.

Case in point, if I see a 375lb man walking in Walmart, I can easily state that his caloric intake is way too high. If I see a teenage girl who has orange skin, I can determine she spends far too much time in a tanning salon and/or misunderstood the instructions on her bottle of self-tanner, and if I see a grown man protesting a military funeral with a sign reading “God Loves Dead Soldiers” in one hand and a sign reading “God Hates Fags” in the other hand I can unequivocally state that he is a heartless, ignorant, hate-filled fool who has misinterpreted the entire meaning of Christianity, and I can even ascertain he is from Kansas and a member of the Westboro Baptist Church.

See – it really is possible to judge a book by its cover after all.

The Event

I was reading an article a few days ago about how the Super Bowl has become so much of an event, that the drama and production and all-around hoopla that surrounds it has actually overshadowed the game itself. I’m not a huge sports fan myself so I thought it was just me who in years past found myself more interested in the commercials than the actual game, but it seems I’m not the only one.

In fact, the Monday morning after the big game it seemed my fellow employees were much more interested in discussing which commercial they thought was best (the kid in the Darth Vader costume starting the Volkswagen with his ‘force’ powers seemed to be a big hit) along with how they enjoyed the half-time show or how they were shocked to see Slash rise up out of the stage to join the Black Eyed Peas on a rendition of the Guns N’ Roses hit Sweet Child O’ Mine.

Through all of that, the actual discussion of the game encompassed all of about three minutes. There were some comments about how it was closer than it should have been and a few comments about specific plays etc, but the discussion about the non-game events of the Super Bowl were far more abundant which is amazing considering I sit near three or four people who are very interested in sports including one who is a referee and another who is a coach.
This all got me thinking… is it really just the Super Bowl that suffers from this overshadowing issue? I don’t think that is the case and I actually think that our society has become so obsessed with the glitz and glamour of our big (and even not-so-big) events these days that we don’t have much time to actually pay attention to the core event itself.

Case in point, I can’t tell you a single one of the teams who made the finals or semifinals in this year’s World Cup, but I can tell you that the number one subject of conversation surrounding the World Cup itself wasn’t the game, but rather the usage (and perhaps abuse) of those rather annoying vuvuzelas. This actually may have something to do with the fact that I’m an American and thus by default I don’t really care about the game of Soccer or FIFA, but I can’t say for sure.

Truth be told I wouldn’t be shocked to learn that 97.6% of the American public thinks FIFA is an Italian automobile manufacturer, because that would almost make more sense to me. I'm not even sure what FIFA stands for and the only athlete in the sport that I could cite by memory is David Beckham... but that has more to do with his frequent appearances on the cover of supermarket tabloids and his marriage to a former Spice Girl.

All of that aside, even months after the World Cup itself if someone decides to talk about the event I can almost guarantee it has something to do with events outside of the actual games whether it be the actions of a star player off the field, or how a sanctioning body for some other major sport has decided to ban vuvuzelas from the stadiums.

This phenomenon isn’t just related to sports either. Just look at any major awards show on television from the Grammys to the Oscars to the MTV Movie awards… rarely do we remember who was nominated for an award or who even won, but we will probably remember if someone had a “wardrobe malfunction” or if someone decided to walk the red carpet wearing something that resembles a neon trash bag covered in rhinestones, or if someone bungled a speech or tripped on their way to the podium. We will also hear about the events that transpire backstage and read reports of what celebrity was offended that they didn’t win or who showed up to an after-show party and what they had to drink or who they were holding hands with.

So what is it with our society that is so infatuated with the whole experience rather than simply the main event? I can’t even fathom what it would be like to listen to a President give a State of the Union speech without someone analyzing how many times he was interrupted by applause or commenting upon the response given by the opposing political party. I can’t imagine attending a local sporting event without seeing the game actually interrupted long enough to toss t-shirts into the crowd or for the cheerleaders to do a little dance, or allowing at least one AC/DC song on the PA system to set the tone for the game itself.

Of course when you look around and notice half the people at any given event are staring at their smartphones or making a trip to the concession stand or engaging in idle chit chat with those around them it starts to become obvious that the “event” is almost a distraction. Perhaps it is to the point where we can no longer be satisfied at focusing our attention on one thing. Maybe we are so used to being tied to technology or being bombarded with information and technology that actually sitting back to relax and enjoy an event simply for the event just won’t do.

That may explain why I notice a lot of people have laptops or tablets near them even while watching television or why people feel the need to have a GPS activated in their vehicle even while making their daily commute to work which they have done hundreds of times before. To some degree it might indicate progress, but I’m not so sure it isn’t actually more reflective of a downward trend that leads to a point where people lose the ability to focus on what is really important or even worse – the ability to focus on anything at all.

Much like many of us require bifocals as we age so that we can see clearly at more than one distance, perhaps we (as a society) are evolving to require more than one stimulus at any given point in order to protect our brains from atrophy. Thus, before someone else suggests the phrase I’m going to profess that I am the first to label this condition as “Witnessed Observable Requisite Multi-Stimuli” or ‘WORMS’. That should be really interesting when someone has to tell some friends that their kid was diagnosed with a bad case of WORMS.

I have no idea if the acronym WORMS is already a trademark… but if not I call dibbs, and we all know calling dibbs is as good as any legal agreement known right?

Dentists and Oreos

Anyone that takes care of their teeth will soon realize a semi-annual trip to the dentist is well worth the trouble.  Just like automobiles, our teeth will last longer and stay in better shape with a little preventative maintenance.

If you wait until your car is smoking and overheated before taking it in for service chances are it is going to cost you a lot more in the end.  Much in the same way if you wait to go to the dentist only after you have a sore tooth or are in extreme pain, it stands to reason not only is it going to cost more and be more painful, but you very well may end up losing some of your teeth in the process.

Therefore, for the vast majority of my life I have visited the dentist twice per year whether I felt I needed it or not.  There was a period in my early 20s where I skipped a few years, but I soon realized what a mistake that was after having to play catch-up for a few years which included numerous cavities being filled, as well as a root canal complete with crown.  After that lesson learned, I now attend my dental appointments religiously* and haven't missed one in years.  

* Perhaps "religiously" isn't an accurate descriptor since I'm unaware of any religion which only requires two visits a year, but I digress.

So what is the point of all this besides me rambling on about a random subject?  Well, my point is it seems like there is a routine to all of my dentist appointments.  First, I go to the dentist and they determine if we need any x-rays this time around.  If so we get those taken care of right away, but if not they skip ahead and clean my teeth, check for any cavities (which I haven't had in well over a decade), hand me a few samples of toothpaste or a new toothbrush, and that's that.  I schedule an appointment for six months down the road, and I head out the door feeling relieved that I somehow managed to dodge the cavity bullet one more time.

However, inevitably somewhere before or after the cleaning my dental hygienist will ask me if I have been flossing.  I'm smart enough to know they can probably tell, so I don't bother to lie about it and always admit that no... I don't floss.  I typically get complimented on my brushing and am always told I have nice teeth (from the perspective of a dentist or hygienist at least) but they will usually tell me that I need to floss in order to get all of the plaque from between the teeth, yadda, yadda, yadda.  The lecture doesn't last long primarily because they probably give the same speech 15 times a day and know it likely won't do any good, but I listen anyway as the hygienist hands me a package of floss as if my lack of flossing was simply due to a matter of supply and demand.

This probably explains why I have six or eight packages of floss at home - because they give me a new one every six months and I can't seem to use them up as fast as they restock my supply.  So typically after each dentist appointment I decide now is the time I'm going to start flossing.  The next evening I bust out the floss and go between each and every tooth to the best of my ability.  The day after that I floss again, but maybe with a little less vigor and taking a little less time to do a perfect job.  A day after that and I'm down to speed flossing.

Soon enough - less than a week after my dental cleaning, I stop flossing altogether.  I know I should, but it just seems like such a hassle.  I brush my teeth so flossing just seems like it should be "extra".  As the months pass, flossing isn't even considered nor do I feel any guilt about skipping it, but next thing you know I flip the page on a calendar and there I see it... the date of my next dentist appointment.

Drat.  I know I've been slacking, and now I've got less than two weeks before I see the dentist again.  So obviously now is the time to start flossing with the hopes I can make up for the last six months in a matter of 10-14 days.  Then, the night before the big appointment I go all out.  I brush my teeth for longer than I typically would ensuring I cover each and ever side of each tooth as best as I can.  I floss with regular floss and then make a second pass with a floss pick to ensure I didn't miss anything.  I'll even go a step further and rinse with some mouthwash to get any remaining "stuff" out of my mouth and send it down the drain.

This all got me thinking one day.  Why do we always prepare for the dentist as if we are cramming for a mid-term Biology Exam?  Do we really think one or two good brushings and a few days of flossing is going to make up for six months of neglect?  Do we honestly think the hygienist won't notice that we haven't been doing as much as we should be to take care of our teeth?

When you really think about it, why should we try to impress our dentists and hygienists?  They charge the same amount for a cleaning whether my teeth are clean or if they haven't been brushed for three years, so maybe I should make them work for it a little.

So how about instead of preparing for my cleaning as if I was heading out to a Senior Prom, I decide to get my money's worth out of them by eating a mixture of peanuts, caramel, and Oreos 15 minutes before my actual cleaning?  Its sort of like driving your car through a gigantic puddle right before you take it to the car wash - it isn't going to help anything, but it surely makes the before and after a whole lot more impressive.

Is that wrong?

Vanity

Have you ever noticed how people react to someone who has had plastic surgery?  In casual conversation, I often hear people say how they would never do that or how they think it is foolish or how it is superficial etc.  I've also often heard the comments about how people should just be happy with what God gave them, but in reality isn't this just judging others for their life choices?

The thing is, what someone else does with their body has no impact upon me or my life.  If Joan Rivers wishes to have 40 different cosmetic procedures or if a guy down the street decides he wants a nose job, why should I care?

The simple truth is, most people are superficial in some way.  While some may judge someone for a tummy tuck, some breast implants, or a facelift, those very same people are comfortable with dying their hair, sitting under a tanning lamp for that perfect "glow", whitening their teeth, or wearing colored contact lenses.  So where do we draw the line on what is acceptable and what isn't?

Should we really just settle for what God gave us, or should we attempt to "improve" upon it?  God gave me crooked teeth, but I was thankful a dentist was able to give me invisalign aligners to straighten them.  God also gave me poor vision, and although I could have settled for glasses or contact lenses, I opted for LASIK surgery instead.  In the past, I have also paid for teeth whitening, tanning booths, and even highlights in my hair (no metrosexual jokes required).
So is it ok for people to get laser surgery or to straighten their teeth, but not ok for get a nosejob or a brow lift?  Is sitting under a tanning booth perfectly fine and getting hair extensions societally acceptable while hair plugs for a man or liposuction for a woman is somehow considered crossing the line?

Actually, taken a step further - what is the purpose of a pierced ear or a tattoo?  Both are forms of body modification and both (in our culture at least) are done for primarily cosmetic reasons. Personally, it all seems a little hypocritical... not to mention completely arbitrary.

As far as I'm concerned what someone does with their body is entirely up to them.  If they can afford it or if they make it a priority in their lives because they feel it will help them feel better about themselves I could care less.  Obviously if they make their kids eat oatmeal three times a day to save up for a cosmetic procedure that is a different issue altogether, but for the most part I really don't understand why someone cares what another person chooses to do with his or her body.

The fact is, our society (like it or not) is focused upon beauty and physical attractiveness, so I completely understand in this modern world why some people are so determined to have cosmetic procedures.  As children we were always told it is what is in the inside of a person that counts, but as Jim Carrey in the film "Liar Liar" so truthfully stated... "That's just something ugly people say".

I realize the film was a comedy, but you have to admit there is some truth in those words no matter how much we might like to think otherwise.

Solutions to the Mortgage Crisis

Stop right here if you are expecting some humorous post or random observation about life because this isn't it.  If you like to talk economics or discuss the current state of our economy... then by all means read on.

Obviously I don't get paid to write the occasional (and in my humble opinion sometimes witty) blog post, so I'm forced to be like most people have have a day job.  In my case, I work in the financial services industry and that introduces me to a lot of information relating to the economy.  Even though I work for a large company that has tentacles in practically every market sector imaginable, I actually do not have any connection with the mortgage industry.

However, for some strange reason the mortgage industry interests me, so from time to time I will find myself researching various trends, analyzing data, and scouring over the opinions of real experts, self-proclaimed experts, and people who don't have a clue about anything but yet are continually quoted in newspapers and shown on cable news networks.

With that said, a recent Associated Press article caught my eye regarding foreclosure mediation. The actual article written by Oskar Garcia can be found here (or about 110 other websites which have linked to the AP story).  The article included a statement attributed to UNLV economics professor Nasser Daneshvary which read that he "recommended that banks consider short-selling homes to current homeowners, and create modifications that include reductions in principal".

I've heard these types of arguments in the past, but I find some serious flaws in this logic.  Therefore, rather than rolling my eyes or attempting to speak about the issue to those around me (who would likely not share my interest in economics) I decided to simply respond to Professor Daneshvary directly.  A quick search online found me the University faculty listing, and I was able to capture his email address.

The following is the email I sent (I tend to get a little verbose in such communications):

Professor Daneshvary,

I read with interest your comments in a recent Associated Press article about Nevada's Foreclosure issues. You were quoted as suggesting "that banks consider short-selling homes to current homeowners, and create modifications that include reductions in principal." 

At first glace that would appear to be a feasible solution. It would allow families to stay in their homes, reduce the chance for neighborhood blight, stabilize and perhaps even improve the housing market by reducing the steady stream (flood) of foreclosures, and help prevent foreclosures from hitting borrower's credit reports.

However, I believe there are a lot of negatives to this idea as well. First, if banks begin short-selling homes to current homeowners, anyone with an underwater mortgage will soon realize it is in their best interests to miss a few payments. Due to income requirements this won't be feasible for some, but for those people who are renting out rooms or working second jobs or collecting rent from a live-in partner in order to make the mortgage payments it is a distinct possibility. Anyone who has suffered an income loss or a change in financial condition since the loan origination (whether they can afford the mortgage or not) would soon be in line to get what they perceive as "their share".

Second, if you create modifications to reduce principal, who should suffer the loss? Should the bank be forced to modify a $300,000 mortgage down to $220,000 and absorb the gap of $80,000 just to help a homeowner stay in their home? On what level would that type of action be sustainable? The losses to the banks would soon be so high from people purposefully missing payments in order to get into these types of programs that the cost to obtain a new mortgage would need to be increased in order to compensate. That in turn would drive down demand for housing and prolong the economic crisis.

I fail to see this as a moral issue for the banks or investors because when the housing market was booming and people were buying homes only to sell them at twice the price a few years later - do you recall any of these fortunate homeowners splitting the proceeds with the bank? Not likely. If modifications to principal are put in place now and the housing market recovers in a few years, that same $220,000 house could then be $325,000. Do you believe homeowners in this situation will go back to the bank and repay the portion of their original mortgage which was modified? If human history has taught us anything, the answer is a unequivocal no.

I fully realize people question why a bank would foreclose on a property and sell it at auction to recoup less than they would have if the simply modified the mortgage, but it would seem they are willing to accept some short term loss in order to prevent a much longer term wave of losses. Will there be cases of fraud where a friend or family member buys the home and re-sells it to the current homeowner at a reduced price? Yes, but fraud happens in almost ever scenario and can never be totally contained.

I won't claim to have all of the answers, and I understand greed on both the part of the banks as well as homeowners is one of the primary factors that led us down this road, but principle modifications and short sales to current homeowners would like not solve the issue, especially in those cases where a homeowner is able to make a payment but chooses not to because they fear their investment has lost value and may never return.

Like it or not, it would seem the current system of foreclosure and auction may very well be the best possible solution for both parties. One of the biggest mistakes made in this country is when our Federal Government, along with the banks and investment houses, attempted to tell everyone that owning a home is the American Dream. The reality is, some people are more well suited to renting. Unfortunately that is something we forgot during the boom years where low or no down payments were the norm or where interest only mortgages and adjustable rate mortgages seemed to be typical.  

Although I tend to lean towards a free market, it would seem in this case that some regulation is most certainly needed. Elimination of 30 year mortgages in favor of 10, 15, and 20 years would be a start, as would banning interest only mortgages and zero down payment options in favor of the older established threshold of requiring 20% down. Will this prevent some people from owning a home? Certainly, but as soon as we get away from the mindset that everyone needs to own a home, the sooner we will be able to sustain a well-balanced home market and economy.

Sincerely,

Craig [redacted]

Of course I did send the email with my last name (I've redacted it here because based upon the number of pageviews my blog receives I'd rather keep some sense of anonymity), and I even included a disclaimer message telling Professor Daneshvary that I work in the financial services industry although I clarified I have no connect to the mortgage division and am speaking from my own personal viewpoint rather than that of my employer (it is always wise to be transparent about such things, especially if my employer would ever hear about it).

Now obviously I understand there are differing viewpoints on the issue and not everyone will agree with me.  I also agree that a professor from the University of Nevada Las Vegas probably has more important things to do with his time than respond to a random person he has never met (and likely never will) who is not a UNLV alumni, is not a current student, is not a member of the media, and isn't even a fellow economist. 

So imagine my surprise when less than 24 hours from me sending my email that I received a response.  Below is the response I received from Professor Daneshvary:

Dear Mr. [redacted],

First, thank you for talking time to give me feedback and expressing your opinion. I have to say that I agree almost with all of your points, particularly the recommendations for future corrections (the last paragraph). If we would have followed the “traditional” way of doing business, we would have not been in this situation to begin with.

To start with, the quotation by the Associated Press is not a complete statement that I made. I followed the statement "that banks consider short-selling homes to current homeowners, and create modifications that include reductions in principal" with saying “in return for a share of future price appreciation.” This is one of the points that you raised.

I am an economist with a firm foundation on incentive-based behavior and opportunity costs. My comments and conclusions are based on the fact that, given current situation, what type of solutions may work better. The decline in home values has gotten to the point that individuals doing strategic defaults. Even, professionals with 300K pay check are asking me why I should keep repaying the 800K loan over my life time while the value of my home is only 400K. The traditional stigma that was associated with foreclosure and bankruptcy are not there anymore. Foreclosing a home does not have the long term credit/financial effect that it use to have for homeowners. There are homeowners who believe so many people are defaulting, resulting enough people with bad credit in the near future. Thus, obtaining a loan would not be an issue.

I am not saying these arguments/behaviors are right or moral. I am saying our system (bad policies combined with the lack of appropriate regulations) during the 2000s created a situation that needs to be taken care of before it completely destroys household asset accumulation.

Again, thank you for taking time to communicate with me.

Best regards.
Nasser Daneshvary
Professor of Economics and Beam Research Fellow
Director of Lied Institute for Real Estate Studies
College of Business
University of Nevada, Las Vegas
4505 Maryland Parkway
Las Vegas, NV 89154
(702) [redacted] (Assistant)
(702) [redacted](Direct)
(702) [redacted](fax)

 Now it goes without saying that I was somewhat shocked to get a response at all much less one as detailed and informative as what I did.  As it seems, the good professor and I actually share many of the same viewpoints, although I initially thought we had opposing views due to nothing other than an incomplete statement which could arguably be considered out of context.

I sent the professor another message shortly before drafting this blog post although it was more of a thank-you rather than a message intended to garner further discussion. 

So I have learned several things here.  First, always accept statements attributed to people with a certain amount of reservation - especially when they aren't direct quotations.  Second, never be afraid to voice your opinion on an issue even if you don't expect a response.  Finally, always be polite - you never know when someone might think what you have to say is worthy of their time.

The funny thing is, I have actually sent state level (not federal level mind you) politicians from my local district a couple of emails in the past and never received so much as an acknowledgment, so maybe economists are just more polite and courteous than politicians.  That really doesn't seem like much of a stretch, and I doubt it would surprise anyone.

So what is the point of all of this?  Who really knows - I just found it all very interesting and exciting at the same time.  What can I say... some people get excited when they can provoke a "tweet" from a celebrity or if they can capture the attention of an athlete from the sidelines whereas I get excited simply by a response from an economist from a large and well-respected University.

Nobody ever claimed I was 100% normal.