Blessed by the Potato

It’s been a while since I’ve posted any baby anecdotes. I don’t know, I figure it’s kind of like talking about my cat: I enjoy it, and think she’s just ever so cute — indeed, the cutest cat ever — but the rest of the world might not appreciate it to quite the same extent. Plus, I haven’t really had any post-length stories to share, so here are a few short vignettes for you to enjoy or conveniently skip in one easy step:

Me: “I see you’re eating your sock. Let daddy tell you the tale of the greatest sock of all time. It was in Super Mario 3, and appeared but once to help Mario stomp all the spikey-shelled…”
Wayfare: “That was a boot.”
Me: “What? No, it was a sock. We called it Sockey. It was green.”
Wayfare: “Yes, I know the part of Mario you’re talking about, with the wind-up key. It was a boot.”
And so it was.
Moral of the story: I need to learn some more conventional fairy tales for story time.

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So Wayfare is playing with Blueberry and she discovers what being upside-down is, and it is hilarious. Wayfare’s holding her upside-down, and baby is giggling and having a grand old time… but she is teething. Which brings with it a ridiculous amount of drool production. There she is, upside-down and giggling, with the drool pouring out of her mouth and up her face… and into her nose. She’s not happy with that. Not one bit. Coughing and sputtering, drowning in her own goobers.

Upon learning of this episode I exclaimed “You waterboarded the baby?!”

Wayfare: “OMG, I waterboarded the baby!”

Whatever the future brings, however many times I accidentally bump her into furniture with my clumsiness, get oatmeal on her nose at mealtime, or embarrass her in front of her friends, I can always say that I wasn’t the one who waterboarded the baby. (Yes, to be fair, she waterboarded herself, and she’s totally fine. But Wayfare’s exclamation was too funny not to share.)

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There was a bit of a water getting behind the siding causing rot issue at the family cottage on PEI, so some windows and part of the wall had to be replaced this year. We knew this way back in February when we booked our tickets, and were assured by many that this relatively minor renovation would totally be completed before we got there in June. Well, of course it wasn’t. So we’re down some bedrooms and forced to “rough it” and put Blueberry in with one of us. In a cute-in-the-retelling-but-not-live-in-concert it turns out that Blueberry thought sharing a room was a grand plan. Finally, she could wake up in the middle of the night, shout “Da! Da! Da! Da! Da! Da!” until I got up, asked her what was up, and have her say [sign] back “Tired!” and lay back down to go to sleep.

In the middle of the night, awoken from a nice, deep vacation sleep my attitude was all “Thanks for that update Blueberry,” and “damn but we need that bedroom window to get installed so she can sleep somewhere on her own.” In hindsight, it’s super cute that she wanted so desperately to share her current mood with her parents — though if it wasn’t for the fact that she also did it with Wayfare, I would have sworn it was a passive-aggressive commentary on my snoring.

Oh, speaking of sign language, I am so glad we did that. I wasn’t sure we should bother keeping it up when we got to 10-11 months and she still wasn’t signing anything back to us or seeming to understand the signs any better than what we were saying (the book I had read implied I should expect signing to start at 8 months). Then around 13 months a few key signs seemed to click (we only ever learned about a dozen that we use consistently with her), like tired, hungry, and want. As a parent I am a professional worrier, so of course I worry a bit that she’s not using her (verbal) words when she has signs for things and that it’s going to delay her speech a bit. But she’s so much less frustrated when she can express some things to us and have us understand where she’s coming from.

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Grammy bought Blueberry a wagon, and I took her out tearing across the lawn and sidewalk in the rain. She has this massive happy grin for going fast over rough terrain, she was just loving it.
Grammy: “She’s so brave, and so relaxed in there! She just took right to it, no fear at all of the bumps and speed!”
Me: “She’s faced death already, she has no fear of it.”

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Wayfare: “Your cookbook is DELICIOUS!”
Me: “You mean it is filled with directions to make all kinds of yummy food?”
Wayfare: “No, the residue of sugar and flour and shortening on the pages. Blueberry was over at the bookshelf, licking her fingers, wiping on the book, and doing it again and again, so I had to see what the big deal was. And I agree: It’s delicious.”

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I have recently been sucked into Doctor Who by Wayfare. I found the show strange and frightening as a kid, and kind of hard to follow, so I never bothered trying to get into it with the 2005 relaunch. Given that it’s a show about time-travelling, I’m going in mostly the wrong order, starting with the most recent Doctor, Matt Smith. And I’m loving it: it’s sweet and funny and ridiculous, and ever so quotable. There is such a strange disconnect between the really terrible, cheesy special effects and the truly excellent makeup work on the show.

Anyway, in practically no time at all (less than two weeks), Wayfare has managed to teach Blueberry the Doctor Who theme song. Basically, she bounces baby on her knee going “Bump-bump-bump-bum” and Blueberry will chime in with “Wooo oOOoooOooooo OOOoooo” and a little bit of baby dancing.

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It’s great having a baby and going out for a walk, particularly one as wonderful and happy as Blueberry is. You can just see people lighten up and smile left and right as she waves and giggles at them, or even if she’s just chilling and they think she’s cut. Wayfare says it’s like going out and hitting people with a happy stick.

Budgeting is a necessary part of life: resources are finite, and we have to allocate them somehow. Though some may revel in the min-maxing challenge of budgeting, it is at its heart a somewhat painful process of self-denial. So what mechanisms do people use to stay on budget? There are mechanical ones, such as using jam jars and cash, but for most people with access to credit psychological control must be exerted.

There are several coping mechanisms to deal with the psychic strain of not buying what you want. Myself, I think of life in terms of video games, with money being the points I can spend on my character, and there are simply some areas of spending that result in more happy points being accrued than in others, and I keep those trade-offs and opportunity costs in mind. I could buy this DVD, but I’d be happier saving that money for a video game next month. There are other similar rationalizing-based mechanisms out there, for instance you can focus on your long term goals and needs, and determine if a particular purchase fits into those.

Another one I’ve heard is to shift the money focus of budgeting to a dimension you may be more comfortable with, such as space in your house: if you buy whatever it is facing you, where will you fit it in your house (or hard drive)? There’s a limited amount of space, after all.

Wayfare presented me with a new one recently: when she comes across something awesome (a T-shirt on Think Geek, or a cute baby outfit in a store) she says to focus on the joy of the knowledge that it exists in the world, but know that you don’t need to have it in your house. It will still exist and be awesome and you can appreciate it even without spending money to have your own copy.

An investment idea a bit off the beaten track to discuss today: American Hotel REIT. This is a new REIT, still flush with cash from its IPO. They identified the small, economy hotel market as one that’s fragmented and where they could make a number of accretive acquisitions. It has purchased a set of low-end hotels from a private chain in the US. The neat thing about these hotels is that they are focused on serving railroad workers: Union Pacific pre-pays for the majority (74%) of the rooms so that their unionized employees can take their required rest periods, with some room-nights also booked by other railways.

I found it interesting that one of the words used to advertise their rooms was “dark” – not something you hear all the time to describe hotels, yet precisely what I want in a room where all I want to do is sleep and get back on the road.

In terms of cash flow, it’s a little difficult to say for sure because the REIT has only been operating the hotels for a few months, and only part of the cash raised in the IPO has been put to use. They are vastly overpaying because of that last factor, but I think we can assume they will build or buy more hotels, so we can estimate the payout for the long-term.

Looking at the statements from the hotels under the private label (available on SEDAR), it looks like if they can invest the remaining $26M they’ll have no problem covering the distribution with the raw cash flow. However, depreciation and amortization can’t be completely ignored – some maintenance capex will need to be put into keep these stick construction hotels up-to-date, especially since about 30% of the balance sheet is “equipment” with projected lifetimes of 5-15 years rather than real estate. Making some rough estimates as to what to reserve – the engineering report from the purchase identified ~$1M/year in projects – I figure that this portfolio is generating about $0.50-$0.70/unit in distributable cash. Assuming that the rest of the cash buys similar properties, that works out to about $0.80/unit – a bit under the announced payout of $0.90/unit.

Now, this is a recent IPO, and it’s nearly a sure bet that there will be more secondary offerings to come, so they may have purposefully set the distribution a bit high to attract investors. Personally, I’d prefer they set it too low and then adjust higher once the properties prove themselves, but that strategy doesn’t move shares on the TSX. Because of the virtual guarantee of future secondary offerings, the price isn’t likely to shoot through the roof. The newness and small size also means that it is not widely followed, possibly making for opportunity.

But if even being fairly conservative I figure they can support a 7% payout, with the only substantial risk being re-contracting with Union Pacific, then I’m pretty happy. Plus there’s a good chance that growth, synergies, and inflation can help them meet that $0.90 payout in short order – at least before deferring maintenance capex catches up to them. In this environment, an 8% yield with a bit of risk is a decent deal.

One area of conservatism is the loan on the properties: the private company holding the hotels before the purchase was borrowing at 3.5% with floating-rate mortgages, but HOT.UN’s new financing is 5-year fixed at 4.85%, which is nearly ten cents per unit of cashflow right there. Lowering their borrowing costs (e.g., by growing larger and becoming more credit-worthy) could help make the distribution safer.

Disclosure: currently long HOT.UN. Note that this is a new, small, illiquid REIT with many risk factors (e.g., actually putting the cash to productive use; subsequent/dilutive offerings).

One thing I struggle with is convincing people of the importance of certain elements of personal finance. I’m pretty sure it is important, and the struggle is not that I need to change minds per se, but that I need to find a way of conveying the message that resonates so people follow-through. In particular just convincing people of the very basic need to take some time to learn a bare modicum of this stuff for themselves. After all, time is at such a premium, and personal finance can be so dull.

So consider this: if you aim to be retired sometime around 60-70, and will live into your 90’s, you could be retired for 30-some years. The money to support you will in large part come from your investments. In a way, investing is going to be your career – it’s where the money to live off is going to come from in retirement. Indeed, of all the careers you will have over your life, being a professional investor/retiree will likely be the one with the longest tenure.

That’s not to say that it will be the most intensive career: you’re not going to be sitting in front of a trading desk 9-5 in your golden years. If you follow a passive strategy it might only take a few minutes a month while you sell down investments, move cash to your chequing account to spend, plus a few hours at tax time. But in terms of putting food on the table, it will be nearly as important as whatever it is you’re supposed to be doing now when you’re reading this.

It’s going to be so important, and you’re going to be at it for so long – isn’t it worth spending the time to get some education on your future career?

Now of course this side career will become important long before retirement starts, when you’re in the accumulation phase, so you don’t want to wait until your retirement party to start looking into some good reads and continuing education. Think of it this way: you’re going to spend nearly 2000 hours/year working, for four decades of your life just to save the money you’ll need to live the rest of your life in comfort. How much of that time should be spent on learning the ins and outs of investing, saving, and retirement? Taking a full weekend (16 hours) and devoting it to reading and planning how you will manage your savings is a pretty miniscule amount of time compared to even a single year’s time spend accumulating said savings.

I know, there are always excuses: while you’re young (especially if you can get freelance work) you can always say that those hours could be better spent working to get more money to save, and doing just about anything else is more entertaining. Yet taking the time is an investment in its own right. So come on, give me a weekend.

It’s summer, you’re going to spend some time reading by the pool/beach/lake anyway (I hope), so let’s start with the reading. Here’s a really quick curriculum for you (and I welcome tweaking and book recommendations in the comments). Start by identifying what “year” you’re in for the summer curriculum.

Year 1: Budgeting and Debt. You need to get your household budget in order and tackle outstanding debt before you get into worrying about saving and investing. Dave Chilton’s The Wealthy Barber Returns covers a number of topics, including paying yourself first. “Debt gurus” abound with their books — I can’t make any personal recommendations (because they haven’t sent me review copies and it’s not my area of interest) but it’s a big market and a decent one shouldn’t be hard to find. For something lighter, maybe try Findependence Day by Jon Chevreau.

Spend your weekend skimming through one or a few of these. Dig up your statements to see where your money is going. Draw up your family budget, make a plan to pay down your debt. Call your bank (most have 24/7 phone lines) and set up a pay-yourself/your creditors-first plan if you need to. Take the rest of the year to get this right, get your emergency fund in place, and we’ll see you next summer for year 2.

Year 2: Saving and Investing. Not to be too self-promotional, but start by reading my book. It barely takes an afternoon to read all the way through, and from there you can decide if you need to read more, and in which direction (it has further reading recommendations inside). Exercises: determine your risk tolerance. Set up an investing account (brokerage or mutual funds, hopefully somewhere with low-cost index funds; non-registered, TFSA, and RRSP) — you can fill out the paperwork and place some calls, though opening an account from scratch may involve waiting a few weeks. Call to set up an automatic investment plan if needed.

Year 3: Planning. What will you do in retirement? How much will you spend, how long will you live, and what do you want to leave behind for family and charities? What’s a reasonable set of assumptions for rate of return? What are your tolerances and sensitivities? What’s your backup plan, and what signals will tell you you have to cut back on spending? Have you logged into Service Canada to see what your CPP benefit will be? You can get some books and spreasheets, but at this point there’s no shame in reaching out for a consultant/planner to help. I fully believe that most people can do this on their own with a reasonable time commitment and some reading material; but I recognize that can and will are different things so many may need to hire help (even if only because writing the cheque makes it painful enough to pay attention). Just be sure that you get value for money. Remember that at the end you should have a plan with multiple plans inside of it, including how you will adapt to various future possibilities.

As the years go by set aside some time (perhaps continue with a summer weekend each year) to review your plans and progress, and adjust course as needed. Consult: join forums, as talking will stimulate ideas. If your friends and family don’t view anything remotely related to money as taboo then discuss with them, it may even help spur them to get with the program and start training for their final career.

Jenn recently linked to an interesting article about post-doc pay, and how the low pay (and other issues, like the constant moving and uncertainty and short-term contracts and lack of benefits) right at the point where women’s fertility starts to drop is one factor keeping them out of science. Go and read that article, but I think this goes well beyond just women in science, post-docs and starting families.

I keep thinking of ways to dramatically reshape the way we do science. They may not be practical, but I like thinking outside the box from time to time.

One set of related ideas I keep coming back to are the issues of compensation and focus. Grad students and post-docs are paid terribly. How terrible? Well, in my department grad students made about $14k-16k as a base stipend (and that level has not changed in almost two decades, inflation be damned), top students with national scholarships could take home about $33k. Yes, per year, with restrictions on seeking outside work. This is in part because they are said to be trainees who are learning how to be proper scientists. Except if they make it through the funnel and up the pyramid, or whatever visual metaphor you may choose, they teach and write grants and supervise — skills they are largely not being taught.

So the idea I toss around is that of a permanent post-doc, or professional bench scientist: a position for someone who will spend their life doing hands-on research, and who gets paid a professional salary for it.

Along with that would be wage/stipend increases for grad students: there is a lot of catching up to do just to get back to the inflation-adjusted level of poverty they were at a decade ago, let alone getting to the point where it is recognized that they are the driving force behind science, and that a senior PhD student is a professional with years of training and specialized expertise making less than minimum wage. One related option might be to shorten PhD programs — it runs the risk of devaluing the degree, but did the 4th and 5th years of my own slog through grad school add much to my development as a scientist that the 2nd and 3rd years did not already? How has the average time to graduation changed over the past couple of decades?

It’s a tough issue, and would represent massive disruptive changes, with no real advocate to push for it. I’m really not even sure myself if these wild speculations I sometimes have are worth any further consideration at all. I mean, even if that is a place we wanted to move to, how would we possibly get there?

In a sense, science is powered by slave labour. If we restricted entry into grad school so that a higher percentage of PhDs could stay in academia (and let the industries that end up hiring PhDs instead hire MSc grads or some newly-created in-between research-intensive 3-4 year expert degree); or reduced the graduation hurdle so that they only did 2 experiments instead of 3, and graduated before 31 years of age — or really any change along those lines — we would limit the amount of science that could get done on current budgets. Unless we truly were able to hire more efficient and productive talent (or focus and dedicate the talent we have) with the increased compensation, the fact is that less research would get done for today’s research budget. This seems an insurmountable problem.

Then I thought, what if instead of thinking of slavery as a harsh verbal rhetoric, I looked at it as an actual model? After all, that problem has been solved. Slavery doesn’t exist in the modern civilized world, but did at some point in our past. Many countries weaned themselves off, with the US having a particularly dramatic and definite end to the practice after the Civil War. How did the transition work out then? What lessons can we learn for transitioning the economic model of science? Unfortunately I’m not enough of a historian to say, so I will have to end here as some food for thought.