Blessed by the Potato

Somewhere out there, a friend-of-a-friend-of-a-friend has run into marital and financial difficulties. About 2 years ago they bought a house with ~<5% down and a long amortization mortgage. Today, they’re splitting up and have to sell the house.

Even if you plan to stay in your home for 7, 10, or more years, life happens: divorce or job loss/change can sneak up on you and you can find yourself needing to move. Even without considering a potential dip in the housing market, it can cost a good 7-10% of your home’s value to get out of it: an agent will take 4-6% as commission — a strong case can be made for selling on your own, but then you might still lose out on that much due to kicking back something to the buyer’s agent, and the fact that a buyer will expect to at least split the savings with you. The lawyers and any repairs/repainting you have to do to move it will take a chunk, as will land transfer taxes if you buy a new place (and capital gains tax if it wasn’t your primary residence). Your bank will also want a hefty fee to break your mortgage early, particularly if you’re not rolling over into a new mortgage with them. A house simply is not liquid: it can take weeks or months to sell, more months to close, and there are high fees for doing it when it does finally get done.

In this 4th-hand anecdote, the couple in question doesn’t have any savings outside their home, and in such a short timespan they’ve paid basically none of the principal back beyond that initial 5% downpayment. If they sold, they wouldn’t get enough money from the sale to pay back the mortgage and all the other fees.

They can’t afford to sell.

In this case they may default on the mortgage and let the bank foreclose. I don’t know if they tried to negotiate a “short sale” with the bank, to have the bank forgive the few percent shortfall if they sold now, but I doubt that option will be as popular in Canada as it has been in the US. After all, even after foreclosing and auctioning off the house, the bank can still come after them for the remaining money owed. If it’s substantial enough that the bank will go to the effort of suing, they’ll probably have to declare bankruptcy. They probably could have sold, lost their downpayment/equity, and worked out a payment plan for the remainder, but it doesn’t look like they consider their credit worthiness for the next decade to be worth that.

So, a lesson for all the would-be 5%-downers: be sure that if you get caught off-guard, having to sell, that you can come up with at least the extra money needed to cover the closing costs. You can call paying down your mortgage “forced savings” all you want, but nothing beats actual savings in a time of crisis. Also, consider that the first ~7% that you put into your home is not “equity”, but is actually lost to you forever, your selling costs pre-paid. A 5% mortgage then can be seen as a de facto negative-equity one.

A somewhat similar story was featured in the Globe this Saturday. It was focusing on the issue of involuntary part-time work, with the added wrinkle of a declining rather than flat housing market, but also highlighted that a job issue can force one to sell their home at a loss, and unless one declares bankruptcy, payments will still have to be made on the debt even if the house isn’t lived in anymore:

When he landed a well paying job at TransAlta Corp. in early 2008, running the electricity company’s computer systems, one of the first things Mr. Jones did was buy a house.

He wanted to live the homeowner’s dream, so he plunked down mid-six figures on a full-sized house in Calgary, which he helped finance with a salary that paid him a comfortable $120,000 a year.

It didn’t last long. Things took a turn in February when the slowing economy humbled energy prices and TransAlta, like many companies, began to slash costs. As one of the newest additions to the company, Mr. Jones, 57, was among the first to go.

Immediately, he began looking for work, but found little in the form of full-time opportunities. Instead, Mr. Jones was forced to pick up a few days of work each week to try to make ends meet.

“When you’re unemployed, people can catch you at nickels and dimes,” he said. “They know it when they have got a guy who’s probably worth a fortune, but he’s unemployed and he’s got a mortgage. So they offer him peanuts. And you take it because you’re scared. And because three days a week is better than no days a week.”

In June, unable to keep up with his mortgage payments, Mr. Jones sold the home in a hurry, in a slumping real estate market. The sale came at a considerable loss, forcing him to absorb tens of thousands of dollars on the mortgage. He now continues to make monthly payments, albeit smaller ones than before, on a home he doesn’t live in. “I was falling so far behind that they were going to take it anyway,” he said.

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There was a very bright, impressive meteor near Toronto on Friday night. It only lasted for a few seconds, exactly as the article described: a very bright flash of greenish/white light, and a break-up trail of flaming debris that only lasted a few seconds — it kind of looked like a sparkling firework, except trailing down towards the ground, and impossibly high up. I’m not an expert, and didn’t have any real data on it, but we were around Woodstock in the car heading towards Toronto on the 401, and it was east-north-east of us and looked to be perhaps above Toronto. From the size of the trail of debris, I wouldn’t be too surprised if a fragment survived, but from my point of view it looked like it was heading for the middle of Lake Ontario. Of course, from the comments in the Star article about it, some people from places as far away as Muskoka still thought it was north-east of them, so it might have been really high and really far away — which just makes how very bright it was that much more impressive! CP24 though says that someone in Ajax thought it was to the west of them, which might put it right over Toronto after all (maybe the commenter from Muskoka had his directions wrong?).

The blurb in the Star about it.
The bit on CTV, with a really terrible picture.
CP24’s story.

Douglas Adams used to say that the reason young boys had to wear short pants was because nature had perfected the self-healing knee, whereas science had not done particularly well on the self-healing pant knee.

My car, being 13 years old, seems to have started evolving self-healing features. There was the leak in the radiator: the guy at the shop said I’d need to replace it within a year, 3 years ago. It lost about 1 L of fluid, and hasn’t leaked since. Recently, they found a small oil leak in the engine (leaking around the camshaft). That lost just under a litre of oil, and hasn’t leaked since (though that’s only been a few weeks, and I haven’t driven the car much in that time, so maybe if I push the engine more it will leak again).

I didn’t think too much of the leaks closing up: it can happen, especially as parts expand and contract with changing temperatures (the radiator, for instance, only seems to leak in the winter). Or maybe some “gunk” stopped up whatever microscopic hole was forming.

However, this week my signal light burned out. Bulbs burn out all the time, and after ignoring it for a few days while I was busy, today I figured it was time to go to Canadian Tire and get a new bulb.

Except now, it was working again. That was just freaky — bulbs don’t usually fix themselves! So now I’ve either got the beginnings of an electrical ghost (which in an old car can be annoying and tough to trace and fix), and maybe I shouldn’t try to get another winter out of it… or my car is actually incredibly awesome and repairs itself.

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Margaret Wente is a columnist for the Globe, so she doesn’t tend to do as much research as a journalist would (which, as you know from my disdain for the quality of mass media reporting, I don’t hold in especially high esteem either). So usually I don’t bother commenting on her mistaken ideas in the columns she writes, but this week’s missive on why professor’s don’t teach hits a topic that’s close to the heart, and also contains some really questionable logic.

“[Professors] can make $125,000 a year, with a good pension and six months off each year to do as they please. Their duties include sharing their research at conferences in Italy or Mexico, whose popularity hasn’t waned despite the advent of the Internet. Meantime, what many of their students need most is remedial instruction in basic composition. But there’s no future in that.

Setting aside the fact that no professor I know gets six months off per year, or that going to a conference is a sweltering, stinking mess of networking, politicking, and shameful self-promotion that is just about the opposite of a beach vacation as the article implies… setting all the nonsense in that one paragraph aside, how can it make the remotest bit of sense to have a professor making 6 figures teach remedial composition?!

I agree that the quality of teaching in universities could stand to be improved, and that teaching should be a higher priority in universities, and that professors should be held to a higher standard of interaction with their students. But the issues that many people are hanging onto with the problems in undergraduate education are really problems in high school education. Remedial composition, seriously? A university-bound student that can’t write an essay is an issue; a university graduate who can’t an even bigger one. However, the universities can’t really be expected to do the hand-holding and remedial stuff that shouldn’t be getting through the cracks of the high school system in the first place. I’ve long believed that Ontario went the wrong way in trying to save a few bucks by eliminating grade 13. The labour of graduate students is nearly free, certainly cheaper than a certified high school teacher, but nonetheless, these general education issues that are not degree-specific should be handled in high school where they belong. It’s unfair to the students to make them pay tuition to learn what should have been covered in their basic, government-provided education; it’s unfair to society to misallocate resources so badly that people that are specialists, even world-experts in their field, might be expected to teach basics and hand-hold students that don’t even want to be there. Of course, many universities (including UofT and UWO) do have classes for things like how to do research in the library, how to write an essay, how to make a CV/resume, how to do remedial math, etc. It’s just not part of the “curriculum” — it’s up to the students to seek out the help from the various workshops. And again, it’s not high school: a university student is expected to be moderately capable and self-directing.

Beyond that, teaching is considered a little more highly than her column indicates: at both UofT and Western, every student evaluates every instructor (and TA) for every class. Those evaluations are looked at, and serious issues are dealt with. Beyond that though, the question is raised: what metric tells you it’s broken? How do you know when a professor is not doing a good job in their role as a teacher? Students will beat up a “hard” professor in those comment forms more than they will one that can’t teach! The article quotes one professor who says that his departmental head never came to watch him teach — and that is probably true for many professors. However, if the departmental heads did pay attention to teaching, and sat in on a few lectures, how would that make things any better? Professors don’t have to take “how to teach” courses, and perhaps some do need that sort of help, but departmental heads don’t take “how to evaluate adult education” either. They don’t have to take on large courseloads as part of their job. Indeed, universities are very research-oriented, and despite the masses of undergrads taking up space on campus, they’re a bit of an afterthought in the whole system. It’s just where we get the next generation of grad students from. Maybe it would be nice if professors could opt to take on more teaching loads, and get just as much compensation and job security. That would require more money though — all sorts of organizations, from government to private industry provide funds for research (and here I’m focusing on my own area of the sciences), but you can’t get salary support for offering to spend more time teaching. It’s publish-or-perish (or perhaps more exactly, land-grants-or-perish) out there, and only a change to that method of employment incentivisation will allow for a change in teaching philosophies to take hold.

I’d love to see that, personally, for a number of reasons. As I pointed out a long time ago when discussing women in science*, the typical professorial life is very hostile to making a family: long hours, an encouragement to move between cities to stay at different universities, and basically zero job security until one gets too old to bother with children. Focusing on your teaching is similar: it just doesn’t lead to making your career as a professor any better (except for the warm feeling that you helped your unappreciative bratty students).

We just don’t incentivise teaching, and maybe if we did it would make for a better university system, and at the same time might fix the “women in science” problem. If there was the option for a professor to spend 80% of their time teaching and only 20% doing research, we might get better teachers, and more women in academia.

As someone who’s thinking of going into academia, I’m also 100% in favour of Margaret Wente’s dream world of six months off every year off to do whatever I want along with a 6-figure salary and a pension, and where the classes I do teach don’t require any prep work. Sounds almost as good as being a newspaper columnist: spend 20 minutes a week hacking out a column, send it off to the editor to fix, and then sit back on the deck of the cottage and wonder if you should have done some research on researchers first. Plus the only qualifications are an undergrad degree that you can acquire while stoned!

* – I know I discussed it at some length somewhere, but I can’t find it in the blog archives to link to. Maybe it was a comment on someone else’s website?

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So I was out at a conference in Victoria, and while I’ve been to a lot of conferences before, it was the first physician-oriented scientific conference I’ve been to. I must say that the quality of the presentations is vastly different than that seen at a typical conference for scientists. The clinicians were much more confident, articulate speakers, like smooth salesmen, which stands in stark contrast to the introverted scientist reading his slides. Unfortunately, they also tended to present fairly shaky data as facts and guidance for future treatments.

For example, there were some presentations on the use of botox and acupuncture to treat chronic pain. The presentations were basically “this worked for these patients, everyone should try it.” Now, here’s the thing about research in medicine: you really need double-blind placebo-controlled studies before you can really say anything with a great deal of confidence, before you really have proof of a treatment working. When this was pointed out to one of the presenters, he countered by saying “Well, the proof is that these people keep coming back and paying for more treatments; these aren’t covered by provincial medicare. If it wasn’t working, they wouldn’t keep coming back.” A bit later in response to another question, another of these practitioners said that about 30% of the people he tried his alternative treatments on returned for more.

The thing is, there’s what’s known as the placebo effect: even if you give someone something that shouldn’t do anything to or for them, some portion of people will find some measure of effect from that treatment. The size of the placebo effect varies greatly depending on how the placebo is presented and what the placebo is acting on. The placebo effect is hard to understand, but we believe that it’s largely “mind over matter” and as such, it seems to work best on ailments that are largely in your head to begin with. If you’re sad, and a respectable looking fellow in a white lab coat hands you a pill and promises that it will make you feel less sad, you’re likely to feel less sad even if that pill is just gelatin-encased starch. Likewise with pain: from a number of studies, it seems that about 30% of people find that their pain gets about 30% better when damned near anything is tried. Pain is a complex phenomenon, but it is at least partly sensation and partly emotional, so it’s something that is easy prey for the placebo effect. Contrarily, something much more objective like a broken bone or open wound is less susceptible to the placebo effect.

So I found it rather disingenuous that when a self-selected sample of people (those who come in to a doctor’s office ready to pay for acupuncture must already believe it may work) has some measure of pain relief, that a doctor can extrapolate from that to suggest that acupuncture is a generally effective therapy for pain.

The double-blind part means that the subjects in a study must not know whether they have the real or placebo treatment: if they knew, it would really eliminate the point of the placebo. That’s blinding. Double-blinding is when the experimenter also does not know, since unconscious clues might be passed to the subjects. All important stuff in research, but let me get back to the placebo effect.

What’s interesting is that placebos are almost as effective as some FDA-approved treatments, and often with less severe side effects (though perhaps somewhat unsurprisingly, placebos also have side-effects; mind over matter cuts both ways). However, it’s generally considered unethical for a doctor to prescribe a placebo because it involves deceiving the patient.

Along with the placebo effect is the tendency for patients to lie and pretend they’re all better when a treatment is noxious. Take, for example, trepanation. Whether or not your chronic pain was cured by the medicine man drilling a hole in your head, you sure as hell were going to shut up about it or else he’d go and drill another one. I haven’t seen it reported, but I also have to wonder if there might be an under-reporting of effectiveness for some addictive treatments: could patients over-report their pain if they’re hooked on morphine, saying it isn’t working when it is in order to get an extra dose?

There was a good article about the placebo effect in Wired recently, even touching on the subtle aspects of pill design that can enhance the placebo effect.

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