Frank the Financially Savvy Atheist - The F.S.A.

Alright, I know I make excuses and what not, but I won't be posting much this week. I have work, but I also have an exam that I need to study for and so I will MIA again.

Until then, why not check out the new COTG, the new PF carnival, or the new Investing Carnival.

Plenty to read in the meanwhile. Until then, wish me luck!

Tags: personal finance atheism

Alright let's try this again...

Friends, freethinkers, rationalists. Lend me your ears. Welcome to the 41st edition of the Carnival of Godless. I will be your host, Frank the Financially Savvy Atheist, and while I am not that creative in my overall presentation, I strive for simplicity and ease of use. I have placed my comments in brackets [] and so without much further ado, here are our fine selections:

Stereotypes

Post: Shattering Stereotypes [Just plain good writing]

The most immediate problem faced by people who would identify themselves as atheists is the negative connotations attached to that word. Due to the lack of a strong, unified atheist presence in the media, appalling stereotypes about us spread by some theists have flourished and gone unchallenged. As a result, anyone who speaks out as an atheist is almost immediately tagged with a variety of noxious caricatures - atheists are nihilists, atheists have no morals, atheists are angry, atheists are unhappy and hopeless, atheists are unpatriotic, atheists hate religious people, and so on. Usually, we have to spend considerable time and effort just clearing these out of the way in order for our message to be heard.

[Daylight Atheism is a blog that I've been enjoying for some time now. This is another great post, and I highly recommend reading it]

Post: Is "Not Superstitious" a Better Way to Say "Atheist?" [Two posts on stereotypes in one carnival!]

David is absolutely correct that "atheist" has acquired a negative connotation, but I am not in favor of revising terminology. Replacing the atheist label with something else will not remove the negative association; it will simply create additional confusion. Instead, we need to do better about defining and explaining atheism.

[I concur]

Da Vinci Code
[Almost everyone and their mother has an opinion on this novel/movie. My wife wants to see it, so I will humor her, but from what I've heard the movie is mediocre.]

Post: In praise of hack novelists.

...The fact is, we don’t know a whole hell of a lot about what—if anything—actually happened in the alleged Earthly life of the guy the Christians now seem to feel is/was a god, a ghost, and the god’s son all at once...

[I liked the ending to this post. Excellent points made all-around].

Post: Code Red!

Okay, let me get this straight. Jesus was an ordinary man who married, had children, and died? Outrageous! Blasphemy! Impossible! Burn Tom Hanks at the stake!

[Not much to add to that one :)]

Post: The Dai Vinci Cold [From a fellow atheist in the UK]

The Dai Vinci Cold, for the many who couldn't be arsed to read it, concerns the famous painting by the Welsh/Italian Old Master, Dai Vinci - The Last Kebab - depicting the famous incident where The Holy Prophet Nhigel (May his plums dangle mightily) and His Mates are eating the fabled Last Kebabs.

[I was giggling the entire time]

Misc [The best of the rest. A really good hodge-podge of writing pertaining to this, that, and the other].

Post: What year is this again?. [Teaching the bible as literature, problematic?]

You will be shocked to hear that it is NOT, in fact, a Sunday School class designed to perform an end run around the secular public school curriculum and present the Bible and Christian doctrine as factual. Such courses, in the hands of qualified, competent instructors, allow students to read Biblical literature as literature, to unpack its archetypes and discuss the way its symbols have appeared in literature since its publication

[This person has a Ph.D in English, who else would be a higher authority on how to teach a literature class?]

Post: Bigotry and the Boy Scouts, Again.... [A kid is kicked out of the boy scouts because of his religious beliefs].

All of this because a few bigoted old men in the BSA insist on smearing the good name of the BSA, which has done so much good for so many decades. Smearing it with the stains of intolerance, bigotry and refusal to accept a diverse and changing society.

[I agree. There is so much that young boys can learn from such an organization, bigotry should not be one of them]

Post: Shawls and Bikini Tops [Quick, what do bikini tops and muslim shawls have in common? Read to find out. While this is only tangential to a carnival of the godless, it is good nonetheless and I decided to include it]

Looking at a shawl-wearing Muslim woman and saying, "oh, poor thing, she's so oppressed" is simply patronising. She is entrusted with the right to vote in general elections; surely we must assume that she can choose her own headwear.

[Join the discussion in the comment section, 14 and counting]

Post: Religion vs politics: a comparison

The question then arises : if religion is opposite to politics, how have they developed such a close symbiosis ? Well, on the one hand, extreme forms of religion or politics do try to wipe out their opposite (such as modern Islam, Nazism, Communism). But on the other hand, their collectivist nature makes them mutually supportive to a large extent. Religion subjugates the mind, while politics subjugates the body.

[Inquisitive comparison between religion and politics. Pertinent in a world where the Religious Right is striving for theocracy in the USA]

Post: Argumentum ad Ridiculum [Review your logical fallacies with Kirk Cameron providing the examples! Amazing learning experience]

Since my last foray into the evangelistic embarrassment called “The Way of the Master” was so well received, I thought I’d treat Kirk and Ray to another rational critique, courtesy of GTA

[It doesn't get much better than this]

Post: The Earth, Inc [Unusual corporate hierarchy for the concept of God]

I think that everyone would agree that THE EARTH is a dangerous place. Humanity is continually trying to destroy itself. Throw in a bitchy Mother Nature with her tsunamis, earthquakes, and hurricanes, and you have what any businessman would call a High Risk Venture

[So that's why god doesn't take a hands-on approach]

Post: Weird Science [Inside a scientology center]

It was hard at this point not to reach over and give him a big hug, a gentle pat on the head accompanied by a sympathetic ‘Bless your little starched socks! You really do believe in this shit dont you?’ Healing Hands was holding onto a half smile as if his life depended on it and I was still holding onto the pair of tin cans. I felt like a prick. I put them down. Yanni just looked pleased and slightly oblivious.

[Read it and look at the pretty pictures. Very well done post]

Post: The American View: it is fun to use history for Evil

I suppose this wiggly treatment of fact is inevitable since Christianity crashes squarely into evidence on the one hand and prejudice on the other

[Repeat after me, the United States was not founded as a Christian Nation]

Post: Perspectives -- a photo blog entry [A little sentimental]

Microbes and antibiotic resistance are all well and good, subtle and wonderful biochemical adaptations are one thing, but actually looking at nature, at observing the sheer size of some of these things really reminds you where all of this evolution business can lead.

[Sentimental but nice. I enjoyed the photos as well]

Post: Thag not center universe! [Funny, funny stuff]

“How grok Sky God angry?” Thag said. “Maybe it Snow God. Or Wind God. Earth God. Maybe it Invisible God.”

[Atheist cave man faces down Shaman. Hi-larious]

That ends this edition of the carnival. The next one will be at the Atheist Mama. If you've made it this far thanks, and if this is your first time here feel free to read the guide. And let me know if you want an ING referral link. Ok, enough pimping. Read the great posts above and enjoy!

Signing off.
Tags: atheism carnival of the godless

I am retarded. Sorry, today is Saturday, not Sunday. COTG will be tomorrow. I took some days of work and completely forgot which day it was. Once again, I am stupid. Sorry, entries for COTG will still be accepted until midnight tonight. Thanks, and sorry about that.

Tags: atheism

Back from NYC, had a great trip. It was productive, helpful,and insightful. Now I'll be able to do my job! Hooray.

Also, wanted to remind everyone again, the Carnival of the Godless comes to the FSA this Sunday! Excitement is buidling and I have several great articles so far. More is (almost always) better though, so send me those submissions.

That's all for now. I'll try to respond to some of the comments that were left while I was away. Not trying to be rude to anyone, but I just need some time.

Tags: atheism carnival of the godless

Got this from Lya. I'm 45% Conservative, noooooo. At least I'm still liberal by a majority. Does this make me a libertarian?

Your Political Profile:

Overall: 45% Conservative, 55% Liberal

Social Issues: 25% Conservative, 75% Liberal

Personal Responsibility: 50% Conservative, 50% Liberal

Fiscal Issues: 50% Conservative, 50% Liberal

Ethics: 25% Conservative, 75% Liberal

Defense and Crime: 75% Conservative, 25% Liberal

Tags:

I will be in NYC again tomorrow and Wed. Not sure if I will have internet connection, but I'll most likely be too tired to do much blogging. Hopefully nothing too exciting will happen before I get back. Then again, knowing my luck, they might declare 529 plans are taxable assets or maybe Bush will hear from god telling him that he should stay on for another term in office or sometihng like that.

Until then.

Tags: personal

Why are my people so dumb? Is it the poverty? Or is it one of those things where during a time of war, people always vote for the incumbent? Are people afraid of change? What is it, because I seriously do not understand this.

Ray "Chocolate City" Nagin has been re-elected. There's not much more I can add to this.

Tags: nagin

Don't forget, the Carnival of the Godless comes to the FSA next week Sunday. Get those submissions in to me at my gmail: frankyj009. See you then!

Tags: atheism carnival of the godless

I am the man! That's right. The program works. No longer must I beat my head against the wall. It works mother f*cka! Oh man. Now just to make one more modification...

Tags:

I'm still banging my head against a wall with that damn program, so here are some links to read while I die a slow and painful programming death:

• First up is cellardoor with An Open-Source Prosper QA tool.


• TRA is stirring sh*t up again with Colbert's Albright interview.


• Uncredible Hallq has a Memo to Christians on Da Vinci. [From what I've heard, the movie isn't all that great to begin with, of course that doesn't stop Christians from getting their panties up in a bunch]


• Mike over at the mighty middle loves New York.

That's it for now, tune in next time as the FSA launches into orbit and nukes the entire program to kingdom come (Thanks for the suggestion wyrd). Until then.

Tags: personal finance atheism

Before I actually post anything: This is NOT investment advice. This is PURE speculation and nothing else. Do not follow this advice. It might give you ideas, but if you lose money, I am not at fault. As always, do your own homework before attempting any investment action.

Ok, now here's my idea. One way to beat the S&P 500 is through the use of an "enhanced" index fund that uses the following strategy: use futures to synthetically generate exposure to the S&P 500. This requires you to put down roughly 25% of the full amount. Take the remaining 75% you have and try to invest it in short-duration bonds that will beat treasuries over a year. The sum of those two actions should theoretically give you exposure to the S&P 500 + some alpha, which is what investment managers are suppose to do.

My idea is to do the strategy myself. The added kink is that I would take out a 0% balance transfer and deposit that money with the remaining 75% to increase my leverage and I should be able to "beat" the S&P 500. I would deposit the remaining money in a money market fund to decrease my volatility.

How could I get screwed with this idea? There are several ways:
1. Tax implications: on an after-tax basis, this might be a shitty thing to do. I do not even pretend to know what the tax implications for this would be at all.
2. Futures are marked-to-market: while the end result of a future will still be the same as a forward, the marked-to-market nature adds to the fun with margin calls. While taking out a 0% balance transfer will off-set that because you are over-collateralized, you might eat into the principle amount of the balance transfer.
3. S&P 500 Tanks: Hopefully you'd get the S&P 500+ with this strategy, but if the S&P is at -15%, and you are getting -14%, that still sucks and you would still lose money.

So for right now, this will remain in the recesses of my mind as I try to go about more mundane things to increase our net worth. Just thought I would share.

Tags: personal finance investing

Apologies for the Lack of posts. Right now I'm trying to enhance a monster of a program at work that is filled with redundant code and variables names like x,y, and strF. Any idea what those variables do? Nope. Well, neither do I.

So I'm going to be MIA for a little bit. Make sure to check out the Carnival of PF up at 2million.

Tags:

HT: Dispatches

A clear and concise reference "cribsheet" for the various types of Christianity. Some choice excerpts:

Rapture
This was a #1 hit in 1980 for Blondie (#5 in the UK), from the otherwise underwhelming "Autoamerican" album. Many Christians now concede that the then-pioneering use of rap in the song sounds a little lame in retrospect. In their best-selling series of books about the song, "Left Behind (Parallel Lines)," Jerry Jenkins and Tim LaHaye defend the rap verse's hip references to Grandmaster Flash and Fab Five Freddy, and maintain that when Jesus returns, all believers will be united in accepting that Blondie's cover of "The Tide Is High" is better than the original.

The Bible
The Bible was written by God as a merchandising tie-in to His blockbuster film "The Ten Commandments." Each book of the Bible is named after a person who features prominently in it, for example, the Book of Numbers, which is named after Herschel Numbers, who invented numerals. The Bible was so successful that God wrote a sequel, "Bible II: On to Rome," now generally called "The New Testament." Protestants believe the Bible is literal and exactly true in every detail except the description of the Eucharist, while Catholics are not allowed to read the Bible.

Hilarious.

Tags: funny

Article on CNN about a controversial perk. Read it here. I think that they were able to pull this off because they were a small company. It's hard imagining a large company being able to do the same. It's a concept that I hope will catch on though, being away from the kids can be difficult. It feels like they grow up so quickly while I'm working, and I don't want to miss eveything.

Tags: personal finance

Go check out Big Heathen Mike's post to see the definition of irony. Hint, it involves the Catholic Church and The Da vinci Code.
Tags: atheism

Judgement Day for an Atheist - part 1

Judgement Day for and Atheist - part 2

An entertaining, not as blasphemous as you'd expect, short story. Then again, blasphemy is in the eye of the beholder.
Tags: atheism

First a intro econ course from a person who almost failed econ, me :). Aggregate Demand¹ is made up of four components: Consumer Spending, Investment from Businesses, Government Spending, and Net Exports. Tax cuts are designed to stimulate consumer spending. However, consumers are smart people (mostly) and if you tell them they are getting tax cuts, but they believe the cuts are going to be temporary then the effect on Aggregate Demand will be muted as most people will just save their money instead of spending it.

So in this extremely limited context, one can make the argument that Bush and the Republicans were "right" to effect the tax cuts and not only that, but they are "right" to constantly harp on the fact that they are trying to make the cuts permanent. They need to let people know to spend, rather than save so that the effect on consumer spending will be greater. Also, this is purely from a positive economics basis which doesn't begin to get into value judgements: are tax cuts only benefitting the rich? Is the American tax system fair? We're just not addressing that right now.

Now, tax cuts generally lead to deficits and deficits aren't all bad. Large, record breaking deficits however, need to be dealt with, otherwise they will be problematic. The analogy I like to use is that we hit a rough spot in 2001 and had to run up our credit cards, but now we need to do more than just pay the minimum payments.

The economy is much more complicated than what I've posted here, but that gives you an idea of how to look at it. Plus, it's better to be informed than the typical knee-jerk liberal Bush-bashing. Not that I don't enjoy the occasional knee-jerk reaction to Bush's remarkable stupidity, but I try.

This post was inspired by: A Democrat Tax Wall.

¹ A proxy for aggregate demand is GDP

Tags: personal finance tax cuts

Coturnix has the COTG #40 up now. Go check it out.


In two weeks, the carnival will be here. This will be the first time that I've hosted a carnival and I am looking forward to it. So get me those submissions: frankyj009. That's at google mail.

Tags: atheism

Go show your support for Nick's marathon over at funny money. It's for a good cause.

Tags: personal finance

Question: How much is the monthly payment for a 5-year $20,000 car loan at 6.5% interest? Answer: $391.32.

There is a really simple excel function that will get you to that answer. It is the PMT function.

PMT(rate, nper, pv, [fv], [type])

The PMT function takes 3 required arguments and 2 optional arguments.
Arguments:

• rate: the interest rate. Make sure you have the right interest rate for the period. Most rates are quoted on an annual basis, so you'll most likely have to divide the yearly interest rate by 12. So 6.50%/12


• nper: the number of periods. Once again the interest rate and period need to match, if it's a five year loan then the number of periods is equal to 60 months.


• pv: present value of the loan/face value of the loan. $20,000 loan so pv = $20,000.


• [fv]: Optional argument, but it represents the future value of the loan. Since you are paying the loan off the future value is zero, but if you leave it out excel assumes that it is zero.


• [type]: Optional argument, takes a value of 0 or 1. 0 means you pay at the beginning of the period (of the month) and 1 means the end of the period (month).

Here is a screen-shot:

The formula is: "=-PMT($B$2/12,$B$3,$B$1)"
B2 contains the interest rate
B3 is the number of months and
B1 is the loan amount.
The negative sign is to make the number positive.

So that's how you use PMT. Next time, we will put together an amortization table in excel to see how extra payments affect our scheduled payoff date.

Tags: personal finance excel

And it's a girl! Mr. and Mrs. FSA are feeling excited and I just wanted to share the news.

Tags: personal

In high school I took an intro statistics class and we touched upon the limitations of simple random sampling. One of these limitations is making sure you're giving everyone in the population an equal probability of being chosen, or you run the risk of getting screwy results.

Coincidentally, there was a newspaper article that provided a terrific example of messing up with simple random samples.

Researchers were studying sexual behavior in adults and asked in a survey one simple question: how many times do you have sex?

They found that on average men were having a lot more sex than women. Which doesn't really make sense, unless either: 1.) Women were lying about how many times they had sex to avoid looking like sluts, or 2.) Men were lying about how many time they had sex to look like studs.

While the researchers knew that some lying was taking place, it didn't seem like enough to make up for th differences they were experiencing.

Then the researchers realized that they were leaving out a key population out of their statistics: prostitutes. After correcting for that fact, the numbers were much more in-line and they also found that the average prostitute had sex about 300 times a year.

All this provided a lesson to us all: make sure you account for the right population when trying to develop your sample.

Tags: math humor sex prostitutes

Pro-life advocates celebrated approval of the new anti-abortion drug UR-86 by the Food and Drug Administration Tuesday, calling it a "safe and effective method" for terminating pregnant women while leaving their unborn children unharmed.

"This is a step forward for equality," men's rights activist Charles Hackett said. "For too long, women have had an unfair advantage in the outcome of a pregnancy. UR-86 levels the playing field for husbands and boyfriends across America."

Tuesday night, South Dakota legislators introduced a bill to impose a five-day waiting period for teenage girls and women before they can buy the pill, claiming its use does not adequately safeguard the lifestyle of the father, the laundry of the father, or the favorite meals of the father. The legislators cited Pfizer's own published list of side effects of UR-86, which include domestic messiness, already-born-child neglect, and inadequate stocking of the fridge.

Ok, it's from the Onion. But you almost believed it, didn't you.

Tags: abortion humor

Article: Miniskirts Clash with Islam as Indonesia drafts Pornography Law. Now, with a title like that, who wouldn't want to click through to the link. Here are some choice quotes:

Fauzia Damayanti stands to spend 10 years in prison unless she mends her wicked ways. Her possible crime? The Jakarta housewife wears miniskirts.

Conservatives are trying to introduce elements of Islamic law, or Shariah, through the bill, Harkrisnowo said...``There are some Muslims who are concerned about nightclubs and Indonesia becoming more liberal,'' said Arief Budiman, an Indonesian and head of Indonesian Studies at the University of Melbourne. ``They are looking for a role to play, and the only role they can play is the Islamic state.''

Read it and be glad that we still live in a theocracy-free America.

Tags: atheism

This was fivecentnickel's idea.

My worst job ever was the summer after my freshman year in college. I was hired to a physics group that was revamping physics education at my college. They needed some help with creating a test bank as well as editing the new course-book. This is what I did:
- Everyday I would go in and open up a physics textbook and begin typing in the problems at the end of every chapter. Why not use OCR you ask? Because physics likes to use vectors and greek letters and integrals and derivatives and all sorts of great stuff. Not only that, but I had to listen to great "discussions" like this one

Prof1: How should we represent vectors? I was thinking a bold capitalized letter.
Prof2: Well, I was thinking that an arrow across the top of an italicized lower-case letter would be better.
Prof1: Why not a bold capitalized letter?
Prof2: Well, because...

They literally went on like this for 10 minutes before finally deciding on:

Prof1: Ok, how about using bold, italicized capital letters with an arrow across the top.
Prof2: Ok, sounds good.

FSA: Aaaaarrrgggh! Kill me now!

So that was my worst job EVER. Hands down. On the plus side, having such a shitty summer job spurred me into action the following year and I applied for any and every internship that I could. I would watch tv and see a commercial for AIG and say to myself, Hey, AIG has computers. They could use a comp sci [I was comp sci at the time] intern over the summer!. I would then log on and send off my resume to the good people at AIG.

Then I had an epiphany: Hey, I'm always hearing about this Fortune 500 company list. That's like 500 companies right there! I'll send my resume to all of them cause everybody has computers and stuff! Brilliant!

I got to company #138 and had to quit after that.

Thankfully, my efforts proved fruitful, and I had a much better (and much higher paying) internship experience the next summer. There's a silver lining to everything I tell ya :).

Tags: no tags

Just FYI. You can get 20 free photo prints from your digital photo from walgreens and you can get 10 free photo prints from walmart.

You upload your digital photos and pick the pictures up at your local store. I was able to do it this weekend and loved how the pictures came out.

Tags: personal finance walgreens walmart free stuff

HT: Stranger Fruit.

Take 80 random people, dress them up like Best Buy employees, send them into a Best Buy store on 23rd st in New York and record the confusion that ensues. Hilarious, just hilarious.


Tags: humor

Since becoming an atheist, I've learned more about religion than when I was a Christian. Here are a few bits and pieces:

• The mark of the beast in Revelations: it's actually 616 not 666. The early manuscripts have 616 and biblical scholars believe that the writer of Revelations changed the number to 666 because he had his own numerology that he wanted to include. See more info from wikipedia


• Then there is the concept of Christian apocrypha. This is the fact that there are other books that are not part of certain protestant denomination's bible. I've always known that Mormons had "extra" books, but I didn't realize that various Christian denominations did the same thing. For example, the book of Revelations (again with that book) is considered apocrypha by the Syriac Orthodox Church.
• There is the book of Enoch, which mentions the angel Metatron (not Megatron). This angel was as tall and wide as the earth, made of fire, and had thirty-six wings and three hundred and sixty-five eyes. He was second in heaven only to god himself.
  Then there's Lilith who was the real "first" wife of Adam. However, Lilith didn't want Adam on top and so she was cast from the garden of Eden. Is that neat or what? I never realized that Christianity had such a rich mythological history.


• Even "harmless" religions like Buddhism can still cause trouble.


• Joseph Smith was an English-man, dum, dum, dum, dum, dummmmm.


• The formation of the bible and apocrypha again. Revelations was quite controversial and Martin Luther didn't like it. Here is a good post from GIFS.

So there you have it, one atheist's short list of interesting factoids about religion.

Tags: atheism religion bible

Did anyone use my ING referral link? If you did, please let me know so I can post a new link. Thank you.
Tags: personal finance ing direct

HT: Dispatches

Have people been hearing about this supposed controversy involving the National Anthem being sung in Spanish? President Bush is on record as saying that the Anthem should be sung in English, and I quote: "One of the important things here is that we not lose our national soul".

Apparently, a British music producer released a Spanish version of the anthem and it's causing quite a stir.

Now, here comes the best part:
- Not only is the version being sung the official spanish version from the US State Department, but Bush also sang the anthem in Spanish during his first campaign, and had a spanish version of "America the Beautiful" during his inauguration.

- Even better than all that, is this video of First Lady Laura Bush. For those who don't want to watch, here is the transcript (Interview with CNN's John King):

KING: One of the debates in the country right now is about immigration reform, illegal immigration. One of the controversies is this new Spanish language version of the national anthem. Your husband the president says he thinks it should only be in English. But if you go to the state department website you can find it, I think, in four languages. Secretary Rice says she’s heard rap versions.

MRS. BUSH: Well, we’ve all heard different versions like at the Super Bowl every year. I don’t think there is anything wrong with singing it in Spanish [Emphasis mine]. The point is it’s the United States national anthem and what people want is it to be sung in a way that respects the United States and our culture. At the same time, we are a nation of immigrants. We are a nation of many, many languages, because immigrants come and bring their languages.

KING: Is that an issue you disagree with your husband? He says it should be sung in English.

MRS. BUSH: I think it should be sung in English, of course

Total elapsed time, 25 seconds. Wow.

Tags: laura bush national anthem

Most people know what FDIC insurance covers, but what about SIPC Insurance. From the sipc website:

SIPC replaces missing stocks and other securities where it is possible to do so...SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons

One key thing to note is that SIPC insurance does NOT cover investment fraud. I remember reading a newspaper article that implied that SIPC insurance does cover fraud, but it does not.

The idea is that investing in the stock market is inherently risky, so SIPC insurance shouldn't be the same type of blanket-protection as FDIC insurance.

Here is a quick quiz to test your knowledge.

Tags: personal finance SIPC

Index of my notable prosper posts:
risks of prosper
formula first crack
formula - second crack
Reply to MB

Two comments that have been left on my blog regarding prosper that I wanted to share. An anonymous commentor had this to say:

The adjustment that you should make to account for the default risk is more complicated that your formula suggests. To transform an Expected yield (ie, one that is equivalent to a 0 risk rate) into the equivalent "Promised" rate for a loan with default risk the correct formula is

Promised Yield = (1 + Expected Yield) / (1 - Default Rate)

Another thing to consider is the risk free rate you use in your formula. I would argue it is too low. You are tying part of your principal up for upto 3 years on Prosper and you should demand a higher rate than an "overnight" rate like your Emigrant Direct account. I use the 2-year T-bill rate (currently 4.89%) myself. (2 not 3 years, by the way, because 3 years is too long since part of the principal is returned every month. If they posted an 18 month rate I would use that)

Personally, I also add a small "call premium" since Prosper loans are callable by then borrower (ie they can pay you back when they want). It may seem trivial but in the event that rates go down, borrowers can cancel the loan early and you won't get the benefit of the high rate. However, if rates go up, you dont have the same privalege and are stuck with a low rate. You should demand compensation for this "interest rate risk". I use 0.5%, which is standard in the corporate world for callable bonds. I dont know of a consumer equivalent or I would use that

Couple of things:
- I've mentioned the prepayment aspect of prosper loans before in this post. I do like how he/she added 50 basis points for callability. Smart move that I might want to add to my formula.
- I also like the advice to use the 2-year T-bill. This takes care of the notion that you're getting mostly interest payments in the initial years. Originally I was planning on using an average of a 3-year CD plus the yield on emigrant direct. The 2 year T-bill encapsulates that pretty well.
- Thanks for pointing out the yield calculation, another thing I'll need to take into account.

Here's another comment from cellardoor. For those who don't know, cellardoor runs a terrific blog called prosperlicious that details his experience as a prosper lender. Here is his comment that he left:

Two quick critiques:
1.Subtracting R(default) is an OK approximation for high-grade loans, but not lower grade ones.

This is also a critique of Prosper's earliest lender training session comments, where they suggest that lenders should think of expected return as:

Interest rate - Default rate

However, let me give a simple example of why this is wrong wrong wrong!

If we assume that
1.prosper loans are perfectly representative of loans that generate Experian default data (eg, ignore all effects of new vs old HR rated loans, etc)
2.Loans are 1 year in length, rather than 3 year
3.All loans are paid off fully with a single huge balloon payment at the end of the year, rather than monthly, or else default completely w/no resale value or recovery
4.The default rate % is relatively low in comparison to APR

Then as a very good first-order approximation, subtracting default rate from APR will give expected return.

More generally, if #4 is not true (in particular, for HR borrowers, default is 19% vs APR of 36%, say), one can still get an accurate expected return by taking:
APR x (1-probability of default) - (probability of default).
or
36% x (1-19%) - 19% = 10.16%

As probability of default gets close to 0%, the "APR x (1-probability of default)" term becomes APR x (1-0)
or APR x 1
or just APR
leaving us with a decent approximation of expected return as
APR - probability of default.

2.Recovery rates should factor into the master formula somehow -- I hand-wavily say that all default have 0 recovery value (which may be close to true), but in practice, one should acknowledge it (even if, like me, you acknowledge it by saying that you ignore it :) )

I like the fact that you have a concise formula, that with minor tweaking, could be very useful.

My longer, messier, and less user friendly (and perhaps, as a consequence, less useful) comments on default rates and expected returns are here:

Default Rates, Part I
Default Rates, Part II
Default Rates, Part III
Default Rates, Part IV

(Emphasis original)
Couple of things:
- Mentions the correct yield formula too, so it's nice to be getting the same info from different people
- Talks about recovery rates which I've been assuming is zero essentially. I think that a good severity assumption is 90%, meaning you lose 90% of the existing balance when the person defaults. I'm not too sure what the average severity of consumer credit, but with unsecured credit, you gottta assume it's high. I'd almost want to say just assume you're going to $50 back no matter how big the original loan. That might be a better approximation :P.
- One thing I didn't understand in one of his posts, was when he was trying to figure out the amount that would give him a $1/month monthly payment. Why didn't he use the PMT Excel function vs the method he did use? Just curious.

All this leads me to the conclusion that I have to rework my formula. Not only from the comments above, but also from the fact that propser is now giving us more information about the lender. Ideally, I would develop a model that takes into account time of default, etc, etc. Seeing as how I'm not currently a lender on prosper, a more simplistic formula will have to do for now.

For a simplistic model, take a look at this post from cellardoor. Keep in mind, that it's "horribly oversimplified".

Tags: personal finance prosper prosper.com

If you notice, at the bottom of my posts there is now an ING link. If you use it, please let me know so that I can keep a fresh rotation going. Thanks.

Update:
Fixed the font so that it doesn't look like ING link is HUGE.

Tags: personal finance ing direct

Buy hey, why not every once in a while.

The Ardent Atheist The results are in, and it appears that you have scored 79%...

You are an atheist, pure and simple. You think God is just one big lie, and consider religious people to be both annoying and beneath you. Ardent atheists will argue tooth and claw for their position, and have no truck with people that won't listen. You think being an atheist is the only way to lead an honest life, and see no reason to accept the pleas of faith. Ardent atheists are the backbone of atheism. Be proud.

My test tracked 1 variable How you compared to other people your age and gender: You scored higher than 83% on pentagrams

Link: The Atheist Test written by chi_the_cynic on Ok Cupid, home of the 32-Type Dating Test

Tags: stupid quizzes atheism

Today is the National Day of Talking to Oneself. All around the United States men, women, and children will gather around and talk to themselves in solemn monologues. It's akin to an insane person talking to an imaginary friend, expect this time around it's government sanctioned insanity.

Yep, back in 1952 a joint resolution of Congress and signed by Harry Truman set about this National Day of Talking to Oneself. As Frances has already noted:

It seems that the National Day of [Talking to Oneself] is just another unfortunate product of the anti-Communist hysteria of the ’50s...After all, it was also the mid ’50s when the words “under God” were wedged into the Pledge of Allegiance

Gotta love those Mcarthyisms.

Not everyone buys into this Day, however. There are some who advocate a National Day of Reason but alas, that day is not government-sanctioned. Which makes sense, why would the government sanction a day of reason, when it can't seem to get anything reasonable done.

My bet, though, is on the National Day of Beer Volcanoes, I think that one would be a smash. Then again, I could be wrong.

Tags: atheism national day of prayer

I know, I know, why am I always late to the party? For those who haven't heard, Stephen Colbert completely roasted the President at the Associated Press [SOMETHING OR OTHER].

I read the transcript before and thought, "Man, that took a lot of balls."

Then I watched the clips last night and saw that Bush was 2 feet away from Colbert, heard the way he delivered his lines oh-so-freaking-satirically, witnessed the almost dead silence of the audience, and pondered whether he was going to be alive at the end of the week!

Jesus tap-dancing Christ, that didn't just take balls, it was either an incredibly stupid or courageous thing to do, and I'm still trying to figure out which one.

To really get the full effect, you need to watch the videos. Absolutely astounding!


Tags: colbert stephen colbert

But verily, it looks like I've been added to ARB's blogroll.

ARB, A Rational Being, is an atheist who has a bi-polar son, likes mozart, and has a pretty good sense of humor.

ARB, thank you for adding me to your blogroll. As one of the first atheist blogs I read when I was just getting started, I consider it an honor to be on such a noteworthy blogger's blogroll.

Thank you very much.

Tags: atheism

HT: Respectful Insolence

The movie nerds is being remade. Just FYI for my fellow nerds out there. Prepare to be stereotyped some more :P

Tags: nerds

HT: Buridan's Ass

Here are a list of responses to Rabbi Gellman's (of God Squad fame) article about "angry atheist". Here is a nice list of responses.

Tags: atheism

Yesterday, in my post about "the reverse dowry", Miserly Bastard had this to say about student loans:

The problem with student loans is the often-perpetuated myth that they are "good debt."

Some student loans--e.g., medical, law, or business school--probably are "good debt." A degree in engineering, math, or business is probably "good debt." And by "good debt", I mean they are NPV+. My law school costs were around $50k all in. I have undoubtedly earned back all of this money, and more.

But had I spent the same $50k on an art history degree, the loans probably would be -NPV. Some degrees, particularly non-professional humanities degrees, aren't worth it. Getting a PhD in English probably is a -NPV economic decision.

If you make -NPV decisions, you shouldnt complain about the fact that they are financially costly.

Which lead to people asking, what's NPV? Once again MB came through with this comment:

NPV = net present value. It is a common calculation method used in business for corporate budgeting of capex.

You take the future expected cash flows (e.g., the job's future earning power), and discount these cash flows back to present value based on when they start paying out, how much they pay out, and a certain "discount rate" (typically related to the cost of capital, or, roughly speaking, interest rate). Then you compare that "discounted present value" of the future cash flows to the amount of up-front capital investment required (e.g., tuition room & board).

If the number is positive, it is considered a good investment. If it is negative, it is considered a money-losing investment.

In math terms, where CF(i) = cash-flow in year i, and k = interest rate:
NPV = CF(0) + CF(1)/(1+k) + CF(2)/(1+k)^2 + ... + CF(n)/(1+k)^n
Note: CF(0) is usually negative and represents the initial up-front investments.

Got that? NPV is really a simple calculation. However, it's simplicity marrs the complexity of figuring out two important inputs, namely the discount rate and the cash-flows. The up-front capital investment is usually pretty simple to figure out, but when you start projecting in the future you start making assumptions and things can get hairy. It can still be a worthwhile calculation, though.

Here is an example: John P Student is faced with three decisions after leaving high-school
- 1. Don't go to college and start working a 9-5 job making $25,000/year.
- 2. Go to college, major in English and teach. Expected salary after 4 years will be $30,000/yr.
- 3. Go to college, major in Business and work on wall street. Expected salary after 4 years, $50,000/yr.
Tuition is $15,000/year and he will take out loans for the entire amount. We're going to hand-wavily say the cost of his human capital is 11% (8% for student loans and 3% for inflation, highly imprecise and subjective), and his salary for each job will be increased by 3% each year. He will work for 31 years after graduating from college.

Excel has a handy NPV formula and using that, here is a table I was able to put together:

[NO TABLE] --> blogger sucks :(

The NPV of his earnings with no degree is $289,704
The NPV of his earnings with an english degree is $176,183
The NPV of his earnings with a business degree is $324,663.
As you can see, John P Student would have been better off with not getting a degree instead of getting an English degree, and he would be much, much better off getting a business degree.

Now, obviously this is a simplistic example that ignores various different costs, but it shows how to calculate NPV.

If you have any questions, please let me know in the comments.

Tags: personal finance npv

How do I add another external account to emigrant direct? I swear I've looked over the entire website and couldn't find it.

Tags: personal finance emigrant direct

In the hubbabaloo that was today, I neglected to link to the carnivals

Carnival of the Godless

Carnival of Personal Finance

Carnival of Investing

Tags: personal finance atheism carnivals carnival of the godless carnival of investing carnival of personal finance

Allow me to summarize this article clearly and consicely for you my dear readers: Wahh, Wahh. I have tons of student loans. Wahh, Wahh! My loans are so restricitive. Wahh!

I'm just in a pissy mood today. Ordinarily, I'd be sympathetic, but today, not so much. Stop bitching, start budgeting, and pay it down faster.

Sorry people, today is just not a good day for the FSA.

Tags: personal finance

Sportin' Life has a brief reflections on the new United 93 movie. Have a look.


Tags: atheism

Things appear to have reverted back to normal. Hopefully nothing else will go wrong today.

On a side note, SQL, Acces, and SQL in Acces forms all suck a big one. It's Monday alright.

Tags: blogging

My blog is still acting weird, please bear with me. Thanks.

Tags: blogging

Alright, I am back in business. Screw you blogger for trashing my template. That is not how I wanted to start my monday. Thanks to google cache for archiving my blog making it somewhat easy for me to redo it. All that was missing was the sitemeter code.

Minna-san, daizyobuu yo. Watashi no blog wa yomu onegai-simasu. Arigatoo.

Tags: blogging

Where the f*ck did my template go? Damn you blogger. Aaarrrggh.

Tags: personal finance atheism

I can't view the main page of my blog. I can view some entries but not all. What is going on?

Tags: blogging