Why are People Leaving California?

California climate is delightful. Many people or their parents move here to escape the humidity, the cold, the hurricanes and the tornadoes found everywhere else in the United States. The price we pay for this has finally become too much for most of us.

In Central Phoenix, the average list price for single-family homes is $455 per square foot.

The median sale price of a home in Los Angeles is $1.1M, and the median sale price per square foot is $643, according to Redfin.

Gasoline in California, according to AAA, which tracks national gas prices daily, costs an average of about $4.78, compared with $3.16 nationally. The cost of electricity in the state is now the highest in the continental U.S., at 30.22 cents per kilowatt hour.

The notoriously high cost of gas in the state is the result of a lot of factors — we tax gas to pay for road infrastructure and a less-polluting fuel mix in the summer months. Last year, Sacramento decided to move harder, faster toward its goal of a carbon-less future, adding disincentives for refineries and incentives for EVs that the California Air Resources Board has predicted will add 47 cents a gallon at the pump.

Overall, California’s zero-carbon climate policies — pushing EVs as your next car purchase and heat pumps to cool and heat your house — rely largely on electricity that in turn depends on expensive, and intermittent, energy sources, such as wind and solar. Come hell or high water, California’s leaders are trying to regulate, tax and incentivize their way to electricity that is 100% carbon-free by 2045.

In fact, recent analyses say California will face “acute electricity shortages” over the coming decade. Not least among the reasons: a dragged-out, exorbitantly expensive and unpredictable permitting process; the difficulty in finding appropriate locales for wind turbines and solar farms; and, ironically, objections from locals and environmentalists who don’t want renewable facilities in their backyards. Case in point: Moss Landing, where a toxic fire in a battery plant, coupled with plans for offshore wind turbines, have turned locals against green policies.

California can only prosper if it can develop affordable, reliable energy from all sources, including the state’s fossil fuel supplies. Without a change of direction, the trajectory is building toward a neo-feudal future — a state widely divided between the few rich and the many struggling.

Source for some of this article from a Joel Kotkin column in the Los Angeles Times.

Even in a Down Stock Market the S&P 500 is Still the Best Bet

When competitor Money magazine ceased print publication in 2019, Kiplinger’s acquired roughly 400,000 of its monthly subscribers.

Kiplinger continues to offer investment advice in both a printed magazine and an on-line version.

But what is the point of trying to outsmart the index low fee investments?

When I started investing in the late 1980s every fund compared itself to the S&P 500. Oh, I said to myself, those managed funds are trying to tell me that they have the formula to beat the index. Why not just invest in the index? Then I learned about a Vanguard fund that simply emulated the index.

“Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17. If I had to pick the most probable return, from appreciation and dividends combined, that investors in aggregate—repeat, aggregate—would earn in a world of constant interest rates, 2% inflation, and those ever hurtful frictional costs, it would be 6%!”

— Buffett, Fortune (1999)

Warren Buffett has been a supporter of index funds for people who are either not interested in managing their own money or don’t have the time. Buffett is skeptical that active management can outperform the market in the long run, and has advised both individual and institutional investors to move their money to low-cost index funds that track broad, diversified stock market indices. Buffett said in one of his letters to shareholders that “when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.” In 2007, Buffett made a bet with numerous managers that a simple S&P 500 index fund will outperform hedge funds that charge exorbitant fees. By 2017, the index fund was outperforming every hedge fund that made the bet against Buffett.

We Will Buy Your Car

This is a great time to sell your old unwanted car. These are the words posted on the internet ad by my local Toyota dealer. “We will buy your car even if you don’t buy from us.” Carvana is running a similar ad on their cable television ads. What’s going on? Why do they want my old car?

It’s simple. Car dealers lack inventory. After going to the Los Angeles Auto Show and sitting in their new cars I looked at my local dealer web sites to see what models they had in stock. Some had none. Some had a handful of 2021 cars and the trim choice was one. Take it or leave it. 2022 cars are even rarer. To keep their business alive those new car dealers want your old car so they will have any inventory to sell.

What’s going on here? It’s a year of shortages. The auto industry’s turmoil may be unrivaled. It’s all about the computer chips in short supply. Every car needs them and so do appliances. The chip makers are overwhelmed by the unexpected demand. Most of the chips are made overseas in China and Taiwan. Most the cargo ships are waiting to be unloaded in the ports of Long Beach and Los Angeles. Those computer chips are somewhere among the cargo containers on the ships.

2022 will be an expensive year to buy a car. This is definitely a supply demand situation. Some car dealers are actually asking for more than the sticker price. Unless you really need another car it has been advised by many to wait until 2023.

Do you have funds for the unexpected?

Owners would have to pay assessments ranging from $80,190 for one-bedroom units to $336,135 for the owner of the building’s four-bedroom penthouse, a document sent to the building’s residents said. The deadline to pay upfront or choose paying a monthly fee lasting 15 years was July 1. The association had just $800,000 in reserves.

The building was in a desirable location. Owners pocketed impressive returns when sold. All, except one apartment, sold for more than double the purchase price. Unit 508, a 1,683-square-foot condo sold for $800,000 in February, more than doubling its 2012 sale price of $370,000.

An HOA commonly maintains a type of savings account called the cash reserves or a reserve account for significant, infrequent, or unexpected common area costs.

When a development’s homeowner’s’ association (HOA) encounters large or unexpected expenses, the HOA needs money to repair or replace the damage. For example, what if a clubhouse roof starts leaking, the pool needs resealing, or a piece of equipment in the fitness room breaks down? At times like these, it is wise for HOAs to have a reserve account.

House in my neighborhood, asking price $800,000. Similar to the price of a condo.

Reserves for single family homes isn’t a bad idea either. When the bathroom tub backed up in my home the plumber said he needed to install a drain cleaning opening under the house. After he crawled under the house he reported that the main sewer line was leaking in many places. Cost for replacing the sewer system under the house was $5,000. There was no reserve fund. There was the retirement investments and that paid the bill. A similar situation resulted in installing new copper plumbing for another $5,500. Termites are lurking and the roof is 30 years old.

Owning a house is expensive but it provides us a place for both privacy and fun.

Americans are more Cautious Then You Thought

According to CNBC, a cable finance news channel, 25% of cars in the U.S. are at least sixteen years old as vehicle age hits record high.

On average, 1 in 4 cars and trucks you pass are at least 16 years old, according to new analysis of what Americans are driving. With the economy struggling due to Covid-19, prompting companies to lay off millions of Americans, the age of vehicles in the U.S. is likely to rise. It may even climb at a faster rate, according to IHS Markit the highly respected survey company that provided the data.

As someone who believes in driving a car until it is ready for the junk yard I was delighted to learn that I am not alone.

Of course we all want a new car. We might even shop for a new car. Then we hear what the monthly payment will be and that stops us from proceeding with the purchase.

It is the same thing when it comes to the purchase of any high priced item. The picture on the old TV is still good so unless the new television has some new features we can’t live without, we turn to our family members and say “What we have does the job. Let’s wait until black Friday and we’ll make it a family Christmas gift.”

Despite all of these efforts to keep our expenses under control and avoid using our credit card, the Average US Credit Card Debt is at $15,983.

Sadly many of us have been laid off as a result of the virus epidemic and are now using our credit card(s) to buy our everyday needs.

Is personal bankruptcies going to grow? Putting food on the table is a priority.

Lowering the Cost of Living

The average Social Security check is only $1,413.08 in 2018, making it hard to get by in the United States. Some retirees look to other countries, where living expenses can be lower, to make their Social Security checks stretch further.

A recent GOBankingRates survey found that more than half of people ages 55 and older have less than $10,000 saved for retirement — and a whopping 34 percent have nothing saved at all.

As the tough economic times continue in the U.S., many people are looking to cut down on their expenses by moving to more affordable cities and towns.

Or is the answer moving to another country where the cost of living is far less than the United States.

southamericaliving.com lists workable budget of $1000 – $1200 USD and up, affording more luxuries such as eating out regularily, shopping excursions, larger apartment or house. The following countries have the lowest cost of living: Bolivia, Colombia, Ecuador and Peru. Chihuahua, Mexico and Guadalajara, Mexico are two of the lowest cost cities in Latin America.

Inexpensive healthcare is often touted as a reason to retire abroad. You become eligible for Medicare at age 65. However, you can’t use this government health coverage overseas.

The annual cost to own and operate a sedan in the U.S. is $8,588, according to AAA. When you retire abroad, you might not need a car because public transit is more common and reliable.

Rent in Mexico is 4.33% lower than in United States. In Santa Ana, Costa Rica a 3-bedroom single family home currently costs about US$212,000. The cost in other Costa Rican cities housing costs are similar to Santa Ana. Consider those housing costs in your destination city. The cost per square meter of a home in Jakarta, Indonesia is $2,120 USD. The cost per square meter of a home in Richmond, Virginia is $2,128 USD.

If you think you’ll lower your tax bill by retiring overseas, think again. You still have to pay U.S. taxes. Even if you move your assets to accounts in your new country, you will be required to file an annual tax return, according to the U.S. Department of State.

If you retire abroad, you still can collect Social Security benefits, said Sally Hurme, author of “Get the Most Out of Retirement: Checklist for Happiness, Health, Purpose, and Financial Security.” In many countries, you can even have your check directly deposited into an account, she said. The Social Security Administration has a Payments Abroad Screening Tool you can use to see in which countries you can live and still receive your check.

You might also have to pay taxes in your new country, Hurme said. The U.S. does have treaties with some countries — including Canada and Mexico — that prevent double taxation. But the country you want to retire to might not.

If you own property or have assets in your new country, you’ll likely need to hire an attorney in that country to help draft an estate plan, Hurme said. That’s because any documents that you had drafted in the U.S. — such as a will, trust or power of attorney — might not have any effect overseas.

The alternative to moving to a“low cost” country is considering moving to a low cost city in the United States.

I found a survey of those low cost cities. Actually they are mostly towns that you are not likely to visit let alone move to. Excluding those small towns (less than 100,000 population) the least expensive small city is Brownsville, Texas with a Population of 180,000 and a Cost of Living 14.9% below U.S. average. Indianapolis, Indiana has a population of over 800,000 people and a Cost of Living 13% below U.S. average.

How comfortable will you feel living in another country? Your family and friends will be thousands of miles away. Visiting San Jose, Costa Rica may be fun but living there should at least cause you to wonder about the downsides. Think through the entire process before moving to another country rather than living in a country where you were born and feels like home.

Five Tax Decisons to Consider Before 2018

These tax ideas appeared in today’s Los Angeles Times. The impact on those with home loans and values exceeding $1 million will be considerable. California, New York, and Connecticut are reportedly most impacted. Accountants are going to have a busy year-end.

Self-driving Car Timeline for 11 top Automakers

As I drive a 2001 Nissan Maxima that has gone about 118,000 miles and is still a smooth operating car with dirty upholstery and cruise control that has stopped functioning, I believe it is time for something new.

Aren’t self driving cars about to be the next big thing in just a year or two?

I found the following summary of when this is likely to happen. Abridged article from venturebeat.com dated June 4, 2017

Should I wait another few years? After all the car still runs quite well.

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A company by company examination of public investments by leading car makers and statements from their top executives makes it clear that most car companies are betting self-driving technology is inevitable, and they’re all jumping in with investment and initiatives.

Defining “self-driving” by level

Level 1 automation: some small steering or acceleration tasks are performed by the car without human intervention, but everything else is fully under human control

Level 2 automation: like advance cruise control or original autopilot systems on some Tesla vehicles, the car can automatically take safety actions but the driver needs to stay alert at the wheel

Level 3 automation: still requires a human driver, but the human is able to hand some “safety-critical functions” off to the vehicle under certain traffic or environmental conditions. This poses some potential dangers as the major tasks of driving are transferred to or from the car itself, which is why some car companies (Ford included) are interested in jumping directly to level 4

Level 4 automation: a car that can drive itself almost all the time without any human input but might be programmed not to drive in unmapped areas or during severe weather. This is a car you could sleep in.

Level 5 automation: full automation in all conditions

GM: Rumors of self-driving vehicles by 2018

Unlike other big car makers, GM has not laid out a specific timeline for its self-driving cars, but the company has made it clear it’s moving aggressively in that direction. In December, GM CEO Marry Barra wrote, “We expect to be the first high-volume auto manufacturer to build fully autonomous vehicles in a mass-production assembly plant.” The focus will be on ride-sharing, rather than the individual buyer.

Ford: Truly self-driving vehicles by 2021

Ford Motor CEO Mark Fields told CNBC that Ford plans to have a “Level 4 vehicle in 2021, no gas pedal, no steering wheel, and the passenger will never need to take control of the vehicle in a predefined area.” Ford actually plans to skip right over Level 3 automation and go straight to Level 4. In the company’s tests, chief technology officer Raj Nair found that Level 3 automation would lead to engineers dozing off and not being situationally ready to take over when called on. CEO Mark Fields claims that Ford will have cars with no gas pedal and no steering wheel driving people around in select cities by 2021.

Honda: Self-driving on the highway by 2020

At the end of last year, Honda announced it was in discussions with Waymo, an independent company of Alphabet, to include Waymo self-driving technology in Honda’s vehicles.

Toyota: Self-driving on the highway by 2020

Toyota has been one of the most skeptical car companies when it comes to autonomous vehicles, but in 2015 it made a big investment to catch up. Toyota is investing $1 billion over five years in the Toyota Research Institute to develop robotics and AI technology. The company hopes to launch products based on its Highway Teammate programs in 2020, which would also be just in time for the Tokyo Olympics.

Renault-Nissan: 2020 for autonomous cars in urban conditions, 2025 for truly driverless cars

Renault-Nissan is counting on its new partnership with Microsoft to help advance the company’s autonomous car efforts. Renault-Nissan plans to release 10 different self-driving cars by 2020.

Volvo: Self-driving on the highway by 2021

Volvo CEO Hakan Samuelsson said in an interview, “It’s our ambition to have a car that can drive fully autonomously on the highway by 2021.” He envisions that full autopilot would be a highly enticing option on a premium vehicle and will initially be priced at $10,000.

Hyundai: Highway by 2020, urban driving by 2030

Hyundai is working on self-driving vehicles but with more of a focus on affordability. In an announcement, Hyundai claims it is “developing its own autonomous vehicle operating system with the goal of using a lot less computing power. This will result in a low-cost platform, which can be installed in future Hyundai models the average consumer can afford.”

Daimler: Nearly fully autonomous by early 2020s

Daimler announced this month a high-profile development agreement with Bosch, one of the largest parts suppliers. The goal is to bring both Level 4 and Level 5 autonomous vehicles to urban environments “by the beginning of the next decade.” This announcement came less than a month after Bosch announced its own collaboration with chip maker Nvidia to develop self-driving systems.

Fiat-Chrysler: CEO expects there to be some self driving vehicles on the road by 2021

Fiat-Chrysler also teamed up with Waymo last year to test some self-driving Chrysler Pacifica Hybrid minivans.

BMW: Fully self-driving vehicles possible by 2021

Last year, BMW announced a high-profile collaboration with Intel and Mobileye to develop autonomous cars. Officially, the goal is to get “highly and fully automated driving into series production by 2021.”

Tesla: End of 2017

As a smaller startup car maker, Tesla has always focused on pushing the edge of technology. Last year, Tesla began making sure all its cars had the hardware needed for full self-driving capabilities, even before the software/data was ready. Tesla constantly updates its car’s software to improve safety.

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I have no car payments now and the car still runs quite well. Maybe some new tires and I will ask the mechanic what is the cost of fixing the cruise control.