Blessed by the Potato

Questrade has released a new interface for their desktop/web trading platform. It looks like a bad compromise for mobile users, with only partial information displayed on several pages. For example, your positions now show either the number of shares and total value, or the share price. Three columns is not hard to fit on a screen, people…

In the trading screen, it is now a multi-step process: first choose limit order, then number of shares, then price, etc. This is a mixed bag. On the plus side, it forces your attention to one step at a time, which may help reduce mistakes. You can also click on “change balance display” to only display your cash available balance so you don’t get mixed up with what they’ll let you borrow on margin, rather than having multiple balances sitting there. The order entry also doesn’t default to entering the number of shares you currently have (as if every time you wanted to trade a position, you were looking to sell it all). The cons are that it takes longer to enter an order, and is annoying if there is any interplay between the number of shares you want and the price you want to enter: you may have to move back a step to adjust your quantity, then forward again to enter your new price. Another big con is that the order review does not display the ECN fees (note: this behaviour has also carried through to the legacy Edge setup). Instead, an ETF purchase order shows $0.00 commission, then an asterisk to some fine print that says ECN fees may apply.

If you want to go back to the way things were, you can add the old platform, called Questrade Edge, to your profile. In the top-left menu (while in Trade), click on All Platforms, then click on the Questrade Edge tab on the top, then finally the Add Questrade Edge button. When you go back to Trade, you’ll see the old (Edge) platform.

In other news, National Bank Discount Brokerage has taken their commissions to zero (and no ECN fees in the fine print that I can find). I haven’t had a chance to open an account myself yet to get a first-hand experience with it, but it’s compelling. However, I will note that the existing options (e.g., Questrade) were practically free, and even paying $9.99/trade at the other brokerages is not going to cause you to miss your financial goals. If you’re happy with your current brokerage, please don’t feel any pressure to switch. Plus there’s a decent chance that in the next year or two other brokers may follow suit. In the meantime, while the interface may be a bit different than the TD and Questrade examples detailed in the book and course, the general mechanics of placing a trade for an ETF (limit orders, ticker symbols, etc.) will still apply and I have faith that you will be able to figure it out if you choose to go with NBDB.

Yesterday I set the stage with a general discussion on plug-in hybrids with a chance that you might find some part of it useful. Today we move on to the personal blog hand-wringing part where I try to decide what to do in my own life (which you can safely skip).

To get a new car, or not to get a new car? That is the question that I had managed not to ask myself for over a decade.

A few things came together to get me thinking about getting a new car. First off were discussions with my dad before he died — he was trying to push me toward getting a new car, trying to convince me I could afford it and deserved it. But that was before the pandemic. It was also a symptom of how his values were different from mine: he was just much more of a car person than me, after all he had 4 cars in his name when he passed.

And talking about moving to a PHEV for my next car with Blueberry got me to thinking why not make that transition sooner? Now, even?

On top of that, we have the weird market dynamics during the pandemic: used car prices are up a lot, so it might make sense to sell the old car now and buy a new one.

Obviously this is not a matter purely for economics — as a personal finance blogger I may have to forcibly repeat the conventional wisdom that buying used is usually the cheaper way to go. But I bought my Prius new, and will very likely buy my next car as a new car (and then keep it for 12+ years) even if it costs a bit more. I don’t want to be too loose with my budget, but this has been one area I’m willing to splurge a tiny bit every decade or two.

It’s kind of ridiculous to think about upgrading my car when the current one works great, and looks like it will have many more years of trouble-free operation to come. On the other hand, we’re a single-car family. ‘Til the wheels fall off’ is no longer our end point, we will be trading up at least a few years before that point because our one car has to be reliable.

So let’s be ridiculous for a bit and consider it.

Part of why used car prices are up so much is the chip shortage, which is causing delays for new cars. A Rav4 Prime has a 15-month waiting list at the moment, and a 6-month delay for an Escape PHEV. There are conflicting reports on how long the supply chain chaos will ripple through the market, but the consensus building in my head is that it could be a few years (several more quarters of chip shortage, and then a few more to work through the backlog). So maybe I don’t want to upgrade now, but if I want to 2 or 3 years from now, I might need to start shopping and maybe even getting on a waiting list now. As much as this mindset contributes to delays and shortages, I don’t think you want to go car shopping when you need a new car in this environment, you want to be out ahead of it. So maybe it makes sense to be thinking about this now even though the current car is in great shape?

What to get?

A PHEV is a no-brainer even for our minimal driving, if we’re comparing similar models.

The Prius is an astounding car, we cram all kinds of stuff into that hatch… but we’re not prepared to sacrifice on cargo space from there. We went to see a Prius Prime in person, and noped right out as soon as I put a box in there to see how the cargo space truly compares. So sadly, the Prius Prime is out (though as the kind folks at PriusChat pointed out, I could get a roof rack or small trailer for the few times a year we do need all the space the regular Prius offers).

And while a PHEV SUV makes sense compared to a gas or hybrid SUV, they don’t make financial sense compared to a regular hybrid Prius, at least not for our level of usage. So do we want to move up a size class just to be able to plug in? (I am leaning strongly that way because I do want a plug-in)

We went out and test drove a Ford Escape Hybrid (no PHEVs available to test, but close enough to evaluate most aspects of the vehicle). I do have a Toyota bias, but was pleased with how it drove and how the controls were laid out (though I wish the Prius’ high-centre display had taken off in more cars). We hated the standard SE-trim seats (mostly that the headrest was too far forward for comfort, and not adjustable), but the ones in the higher trims seemed fine. I haven’t driven a hybrid Rav4 in a while, but I am somewhat familiar with what it entails, and am quite sure that it would be a close match-up.

Either would be a perfectly fine choice for our next car: but we weren’t swept off our feet, and haven’t felt that irrational lust to upgrade, which otherwise might have short-circuited all of this analysis paralysis. They’re just good choices for the next step, but really no better than what we have now in terms of driving feel or comfort.

Based on what’s out there now, I’m putting the Ford Escape PHEV at the top of the list, though it’s essentially a tie with the Rav4 Prime. I have some brand loyalty to Toyota, but I don’t like the look of the new Rav4s (too truck-like and mean-looking, though I know that’s superficial of me), while I do like the more rounded look of the Escape. I also don’t love that the SE trim only comes in 3 boring colours — as Wayfare said, if we’re going to spend all that money for a new car, it should at least come in a fun colour that we love. The Rav4’s XSE trim is a big jump in price to be able to get a fun colour and a few other features, and while the tech package is very interesting (a heads-up display!) to me, it costs a tonne (perhaps because of the moonroof, which I would prefer to do without) — at that point it’s essentially in another class. The lower-trim SE Rav4 costs ~$2k more than the fully loaded Escape, and the XSE is $7.5k more. That’s quite the premium (though to be fair, with the Toyota name it will probably keep a chunk of that on resale value) for vehicles that I liked about equally.

But the big question is what’s coming out next? The 4th gen Prius is overdue for a makeover, though reports are that the 5th gen Prius won’t hit the market until 2023. And the plug-in version took an extra year or more for each of the Prius, Rav4, and Escapes, so while there’s a chance the 5th gen Prius Prime might find a no-compromise way to hide the plug-in batteries in the floor or under the seats and be perfect for us, it might not be available until 2024 or 2025 (when my current car will be 14-15 years old) — a close enough future to maybe wait with a very high chance the current car will be fine through to then, but just far enough to trigger the worries and analysis paralysis. And looking back at past news stories, Toyota seems to only release detailed info on the next generation less than a year before it’s on sale, so it’s not like we’ll have specs in hand to answer the question about the 5th gen Prius Prime and reassure us about the plan to wait any time soon.

Timing Questions

If we were going to get just another hybrid, it wouldn’t even be a question: I’d wait at least for the 5th gen Prius, and wouldn’t even be considering the SUVs. Also, the chip shortage doesn’t seem to be hitting Priuses too hard, with many in inventory at the local dealers (i.e., no wait at all right now).

But the prospect of moving up to a PHEV to stop burning gas for a big chunk of my driving is an attractive idea, and is making me consider an early upgrade. Plus my dad put that damned idea to get a new car in my head, so I was primed for that debate to start up.

The chip shortage has of course thrown another wrinkle into the mix. It’s about a 15-month wait for a R4P now, and a 5-6 month wait for an Escape PHEV. The chip shortage and supply chain disruptions look like they’ll continue to create waiting lists for at least another year, and I’d rather upgrade while I have the luxury of wallowing in analysis paralysis on my blog rather than when something big breaks on my car and I worry that I am getting close to its end of life. Plus prices are weird — there are no discounts to MSRP to be had, but it’s acting as a cap to prices on a new car, while used cars have increased in value. Paying $1.25k more on a new car from not being able to negotiate a discount while getting $2k more back on the trade-in (if we can accomplish that — it remains to be seen how much more valuable our specific car is) seems like a situation that’s worth taking advantage of.

So here we are at the end, with no clear conclusion for what I should personally do. Wayfare says we still love the Prius, it’s still in good shape, and we’re not feeling that primal need for a new SUV after the test drive, so the smart conclusion is to wait. And she’s right, but I’m not sure how long to wait — can I wait for the 5th gen Prius Prime to make the move? And what about those worries about incoming inflation?

I think I’m going to take at least 6 months to cool off and reconsider in the spring — maybe we’ll get lucky with an early preview of the 5th gen Prius by then that will make the next step clear one way or the other, or maybe Toyota will offer the R4P SE in teal (sorry, ‘Blue Magnetism’) and the rational discussion will end.

A small part of me that has skipped ahead to the last page thinks that I’m going to be picking up a Ford Escape PHEV next year, and then is immediately replaced by the part that says we’ll have that Prius for another decade until Blueberry goes off to university (and then she can drive it fully into the ground). It’s an almost perfect superposition of two opposite states — such is life in the analysis paralysis web.

So I guess I’ll see you in 6 months with another whiny, inconclusive blog post!

I was talking with Blueberry about global warming and transportation, as one does. We drive a Prius (and not much driving at that), but even then we still burn gas just to go get groceries or go to dance class. She looked up at me and asked the fatal question: “Can’t we do better? Is there a car that burns no gas, Daddy?” I had long been interested in hybrids and electrics, but hadn’t specifically shopped for a while, so I went and did that.

PHEVs in General

Electrify most of your driving. Save money, save the planet. That’s the goal right? So how do you best do that: with a plug-in hybrid [electric] vehicle (PHEV) or a fully electric battery [electric] vehicle (BEV)?

The answer was counter-intuitive for me: wouldn’t a PHEV be more complicated and expensive than a pure BEV, having two powertrains? Maybe more complicated, yes (though not much more than a hybrid, which are also counter-intuitively more reliable than their pure gas counterparts), but to cover most daily driving you only need a small bit of batteries, so perhaps not more expensive.

I came across a very persuasive argument that helped shift my perspective: you want to electrify your normal driving, and that takes an electric motor and a certain amount of batteries, 10-20 kWh or whatever. Then you want to not have range anxiety by having barely enough juice for your daily drive, so you have to add something to provide that cushion. One way to go is to add another 40+ kWh of batteries to provide a longer range. Or, you can add a gas engine and all its accoutrements for that extra range. And it turns out that with the price of batteries still so high, the gas engine is still considerably cheaper than adding more batteries (and has some added convenience in not having to learn about fast charging networks — you can keep using regular gas stations on long trips).

On a fleet level, the PHEV approach also makes sense if batteries are in limited supply and a production constraint (and for now and the foreseeable future, they are). A GWh worth of batteries can make so many BEVs, or ~4-6X as many PHEVs, and all those PHEVs would do a lot more to reduce our emissions than a few BEVs. This article on that topic coincidentally popped up as I was writing this post, so go there for more.

Eventually when batteries aren’t a limited supply, and if battery prices come down, then that intuition about pure BEVs being the better choice will be true… but for most people with typical driving habits, PHEVs are the way to go for now. And as a bonus, you don’t have to install a charging station at home (you can recharge overnight from a regular 110V outlet) or learn about charging networks for trip planning (just switch over to gas-burning hybrid mode and hit a regular gas station).

I barely drive these days, but still came out ahead picking a hybrid, on top of the environmental benefits of burning less oil. PHEVs are nearly no-brainers (in part thanks to government subsidies) in the same way, thanks to the cheaper cost of electricity (in most jurisdictions) and better efficiency of electric motors. Even with just 8000 km per year of driving, and just 75% of that electrified, I’d come out ahead picking the plug-in version of the Escape or Prius over the hybrid version (and way ahead of the gasser version). If you drive like a normal person, the benefits can be huge.

If you’re shopping for a new car and aren’t at least looking at the PHEV options out there, well, go do that!

However, there is a trade-off with many PHEVs: those batteries and powertrain take up space. The Prius is a remarkable car for its efficiency in space and what we’re able to cram in the trunk. The Prius Prime is really cool, incredibly efficient… and unfortunately loses a hefty chunk (~1/4) of that versatile trunk space (plus the spare tire). Fortunately, the newer SUV PHEVs (Ford Escape and Rav4 Prime) have found ways to put those extra batteries under the car and are basically zero-compromise — they even keep the spare tires. But it seems you have to go up to that SUV size class to get that storage space along with everything else.

Calculator

Of course I have a spreadsheet to help do the comparison math. As always, download it or copy to your own Google drive rather than ask for permission to edit the template.

It should be pretty straightforward to use: enter your competing options, how you plan to drive, the consumption figures, and the cost of your fuel sources (electricity or gas) to get a comparison of the 15-year cost to own. Lots of simplifying assumptions: no inflation or other needless complications built in this time. It doesn’t consider resale value after 15 years, so perhaps a 20-year period would better capture full lifetime costs (which should be easy for you to change).

Getting your estimate of vehicle purchase costs should be easy (all[?] manufacturers’ build-and-price tools look to include the federal iZev and provincial [BC & PQ] incentives). Gas price is easy to estimate, though will be the most volatile in the future. Fuel consumption figures are listed, though getting kWh/100km and battery sizes can be a little harder (I added a way to estimate it from the battery size and range if you like, though it’s likely easier to just convert back from the Le/100km figure which should be listed in the specs somewhere). Electricity costs can also be a bit trickier to find as there can be delivery charges and time-of-use issues. Here in Toronto the headline number for off-peak usage is 8.3 cents/kWh, but there’s HST and a delivery charge (1.5 cents/kWh), so I’ve put 11 cents/kWh in. If you want to get fancy, you can add scenarios for off-peak and on-peak charging, but I’m already teetering at the edge of the rabbit hole.

I built in a 7% loss of efficiency for charging. Finding a more precise number will be hard until more people have the cars in their hands and try to measure it, but that should be close enough to capture that factor. (What is that, you ask? Well, it usually takes more than X kWh of electricity to fill a X kWh battery — some will be lost as heat, or used by the control electronics and cooling system during charging. It can vary depending on the model, the weather, etc., and it’s not reported in a standardized NRCan test, so unless you want another dive down the rabbit hole, take a rough estimate in the 5-10% range).

Aside: Not all PHEVs Are Created Equal

The magic of a gas-sipping hybrid car is not in the regenerative braking or cruising on EV mode, though that’s the sizzle that many auto journalists focus on. No, the big fuel savings comes from the Atkinson-cycle engine, which is more efficient at converting energy in liquid hydrocarbons to motion down the road. But you can’t put an Atkinson-cycle engine in a regular car because its acceleration (peak power output) sucks balls — the magic of a hybrid is using the electric motors and battery to cover you for those acceleration bursts, letting you get much better fuel economy from that more thermodynamically efficient engine (plus the extras like regenerative braking, turning the engine off when not needed, etc.).

For some reason, many PHEVs seem to be just a battery and electric motor slapped on to a conventional car that still has an Otto-cycle engine and conventional multi-gear transmission, and as a result get shoddy fuel economy once the battery runs out. So to me that was an important filter: is this a top-to-bottom hybrid that can also plug in (which should solve that worry about added complexity), or is it a conventional car with an electric motor hack? I almost immediately dismissed a number of offerings for that reason.

Though an alternative point of view is that it really doesn’t matter — if you do ~90% of your driving on pure electric, then who cares if it’s a gas guzzler for that occasional trip beyond EV range?

Another issue is that PHEVs have a bad history of being discontinued (perhaps “as the market evolves rapidly”, or perhaps just bad luck). The Volt had many, many issues as it was being birthed into the world (and I was super-critical of its apparent half-hearted development back in the day), but seemed to meet a genuine need once it finally made it to production, and meet it well. But now you can’t buy it any more. The Honda Clarity made it less than four years. The Ford C-Max and Fusion Engeris are both gone, and the Prius has gone through three plug-in iterations in just two overall model generations (but is still on sale and if it had a larger trunk would already be in my driveway).

However, I think that the automakers are starting to figure it out. The Rav4 Prime appears to be a massive hit (helped by the fact that it’s pleasing the moar power crowd and the green crowd at the same time with zero sacrifices). I don’t see quite as much hype for the Ford Escape PHEV, though it was delayed by over a year, and doesn’t have the perk of holding the Autobot Matrix of Leadership (i.e., it may need a cooler name to distinguish itself from a regular Escape. The Escape Lightning?).

I haven’t done a hybrid/primer post in a while, so hopefully that general stuff helps you (and nudges you to choose a hybrid or PHEV for your next car). Tomorrow I’ll get into the personal hand-wringy part of trying to decide what to do.

The Big Picture

And of course, I’d be remiss in not mentioning that as much as choosing your car well can help save money and the environment, it’s even better to not drive at all: taking public transit, walking, becoming a hermit in the woods free of the modern world’s burdens, biking, or carpooling when you do need a car to get somewhere can be good alternatives.

Adam Vaughan made himself the face of government callousness and inaction earlier this year[0]. It started with an appearance on TVO’s the Agenda, where when talking about what the government should do about housing, he said “We’re in a safe market for foreign investment but we’re not in a great market for Canadians looking for choices around housing.” Which wasn’t news to a lot of people, but it was news that the government knew and was choosing to do nothing rather than just being incompetent and unaware.

He then continued to say (and followed it up and in various Twitter battles) that the government would not do anything if it meant risking even a 10% decline in house prices — which in the context of the time (over 20%/yr increases, and not just in the big cities) would have been rolling prices back just a few months. But even that was too much for them.

In other words, he said the quiet part loud. And now we all know that they know, and that they don’t care.

He’s tried to make the case that housing prices falling is bad, as have others throughout this decade+ run-up in house prices. People don’t like seeing their biggest asset fall in value, and recent buyers could be underwater and financially stressed. If it gets rolling, it might lead to a recession.

And sure, it’s pretty obvious that if we have a housing crash, it would have many negative effects. The problem is, high prices also have negative effects, and there’s a chance prices will fall anyway in the future, and inaction just delays and exacerbates that.

Why Housing Bubbles are Bad

A housing crash and its associated harms is hard to miss, but the harms of a bubble are more subtle and insidious, but just as bad for society.

Bad? The wealth effect? Our cities becoming “world-class”? These are bad things? Well, those aren’t the only side effects of a housing bubble.

There are much more serious effects on people’s lives. There’s rising inequality, though that’s just part of it.

Housing is the biggest cost in most family’s budgets, and for young people that can be by a huge amount[1]. When housing gets more expensive, they feel the squeeze: literally, if they have to settle for being under-housed to make ends meet. That has real-world consequences.

I can write about the rent-vs-buy decision and raising a kid in a rental all I want, many people out there still want to put off starting families until they can buy sufficient housing for a family. The frenzied speculation makes rentals less secure even if rents themselves have lagged price appreciation. With higher prices (and rapidly rising prices), buying is harder — much harder — and young families have to settle for less space, and delay their purchases to save up. That means they put off having kids longer, and having fewer when they do. Toronto’s fertility rate dropped 16% in the last decade[2]. If anything else had caused our fertility rate to drop that much in just a decade (in the face of millennial demographics that we might have expected an increased fertility rate from) we would be rioting in the streets for the government to do something, holding up signs about the missing 10,000 babies. We’d be banning chemicals, exterminating mosquito vectors, or adding fertility treatments to OHIP coverage. But when it’s economic: crickets. Housing insecurity and microcondos are just the way of life here in a world-class city, and a few thousand unconceived babies are acceptable collateral damage for muh price growth.

Mike Moffat has also pointed out Toronto’s troublesome population movement patterns: the largest cohort of people leaving the city are newborns (followed by other young children and those in the parents of young children age bracket) — so even when a kid is born here, there’s a good chance its family promptly leaves.

Lots of people leaving Toronto and Peel. And who are they? People in the 30s and small children. Why? Priced out of the market. pic.twitter.com/oH8r5oGLhO

— Dr. Mike P. Moffatt (@MikePMoffatt) August 17, 2021

Lower interest rates (that somehow keep going lower) have helped support housing prices: mortgage payments have not increased as much as prices. But they have gone up quite a bit, and even if more and more of that payment goes toward principal, the principal still has to be paid back. 10 years ago, a $775k average detached house required that, at some point, you paid back $775k. Spread evenly over 25 years, that’s $31k/yr. A big chunk of a couple’s after-tax income, but doable if you were pulling in $100-120k combined (and a monthly payment including interest of $3.1k). At $1.7M, that’s $68k/yr to pay it off in 25 years, which doesn’t leave much else for having kids or supporting the economy (and the monthly is up to $5.4k at lower interest rates).

This is a big black hole for the velocity of money: more and more of our salaries are going to paying for our houses. That’s money that isn’t circulating back through the economy, or investing in something productive. Wouldn’t we be better off with lower house prices, and more of our disposable income going to services, innovation, transitioning to a low-carbon economy, charities, etc., instead of having housing sucking up all the cash flow?

In conclusion, while a crash can be harmful, high (and rapidly rising) house prices also have harms. So far the government has made it clear which set of harms they see and care about.

Election Time

A federal election has been called, and more and more people are saying that housing is a big issue for them. Each party has come out with an ineffectual do-nothing housing plan, and not one has acknowledged the elephant in the room: that a solution must allow at least the risk that house prices will drop. The cure to affordability is not to create more loan programs and tax breaks to help people pay higher and higher prices for housing[3] — it’s to get prices lower.

The first step is admitting that there is a problem[4]. I’m a left-leaning voter — often ABC — and while there are a lot of issues I care about (science funding, the environment, electoral reform, etc.), man, at this point I would vote PC if they actually came out with a housing plan that was willing to actually address prices and affordability.

[0] And stealing that crown from DoFo in a pandemic was quite the achievement.

[1] Though for the wealthy who haven’t read my book, investment fees may edge out housing.

[2] And that’s before the effect of the pandemic and lockdowns, which looks to have created its own “baby bust”. Also, other cities did have birth rate declines over the last decade too, though they were lagging Toronto’s — Calgary and Halifax had held steady through to 2016 (which would be about 9 months after Alberta’s oil bust started) and then a step down; London had a small decline in 2016, which was then exacerbated in 2018, while Toronto just heads down and down the whole decade.

[4] Update: Rob Carrick had a similar take here (and he got around to hitting publish first while I was dicking around in MS Paint). “Only a major price reversal can restore mass affordability and the federal parties won’t touch policies that would make this happen.”

Coincidentally, I had this post on grad school and mental health come up across my stream today. (It’s a coincidence because I got out 10 years ago today though the server time on that old post indicates I didn’t post until after midnight)

Grad school is about as harmful to a person’s mental health as the death of a spouse was one tweet summary. Collectively, it causes as much disability adjusted life years lost as HIV/AIDS and other STDs per the post, which yeah, tracks about right.

I had a lot of good times in grad school, faced some interesting challenges, made some friends, and learned a lot. It was far from all bad. But I also wasted years of my life, with a huge opportunity cost.

My mental health has been terrible for the last year and a half or so. But this last decade I think overall it’s been fair to good (highs and lows, of course). Part of that is that fatherhood suits me. Yet even having to face the pressures of the real world and all the monkey feces it has thrown at me, I’ve been less anxious and less depressed than in grad school. To say it plainly: I, too, suffered with bouts of anxiety and depression on that journey. Of course, I can’t place the full blame on grad school: part of that was pre-existing. It may be generalizable/self-selecting, as I suppose you don’t go get a PhD unless you’re already a little cracked in the head in the first place.

It’s also a little sad to see that 10 years on and Science-with-a-capital-S still hasn’t figured this shit out. The profession is structurally hostile to people looking to reproduce, is more than a little exploitative and pyramid-schemy, and yet absolutely vital to human progress. We’ve been talking for years about how PhD students are often poorly prepared for “alternative” careers (though academia and research are the minority outcomes, by a lot). We under-value research talent (severely in many cases), and even then can’t manage to pull out sustainable and secure funding programs. On the bright side, I am seeing more positions for people as working scientists (e.g. Research Associates) that aren’t some under-paid holding-pattern position on the mythical ladder to tenure.

I wasn’t planning on posting anything to mark the day, but when I saw that tweet I had to put something up, so this rambling mess is all the retrospective you get today.

— Doctor Potato