Sunday, December 28, 2014

Another Currency War Is Brewing on the Horizon

Supply-and-demand, inflation, interest rate differentials, purchasing power parity, and other economic factors will cause changes to a currency's relative worth.[1,29] For example, a country's currency tends to appreciate under the following conditions:
  • Less accommodative monetary policy or fiscal austerity[13] by
    • Raising interest rate
      • For example, Fed Chief Paul Volcker hiked interest rates to fight off inflation during the 1970s and early 1980s and subsequently the dollar surged 78% from June 1980 to December 1984.
      • Under the best practices, governments are encouraged to use interest rate tools rather than manipulate the exchange rate. 
    • Slashing budget
  • Stronger economy
    • Recently, the dollar surged to its highest level in nearly six years—weak economic data from around the world was mainly responsible for the dollar's gains.
  • Supply and demand (see next section)
  • Capital flows
    • In a deflationary scenario, funds will fly to safe havens and flee from the currencies of emerging markets.[25]
    • Capital inflows will tend to increase the value of the nation's currency[29] 
    • The Chinese yuan has been steadily losing value as capital outflows create a negative feedback loop of selling and depreciation.[30] 


Exchange Rate on Trade and GDP


Using the dollar-peso exchange rate as an example, the price of the peso in dollars is determined by U.S. demand for Mexican goods and Mexican demand for U.S. goods. Here is the sequence of events could happen based on the supply-and-demand dynamics:
  • U.S. demand for Mexican imports increased.
  • This increased U.S. demand for pesos.
  • The increased U.S. demand for pesos raised the price of the peso in dollars.
  • When Americans purchase more imports from Mexico—holding all else equal—U.S. net exports (and GDP and employment) will decrease.
  • However, the change in the exchange rate will automatically correct this situation, because
    • As the price, in dollars, of Mexican imports rises, U.S. demand for Mexican imports will fall
    • As the price, in pesos, of U.S. exports to Mexico falls, Mexican demand for U.S. products will rise
  • When U.S. exports to Mexico rise (because they are cheaper), it will reverse the trend that began when U.S. demand for Mexican products increased. It will also reverse the effect on U.S. net exports, which will increase when exports to Mexico increase, which in turn will impact on trade and GDP.

In summary, when the exchange rate changes, that affects the price of each country's goods; that price change affects each country's demand for the other's goods in ways that tend to reverse the initial trend. This mechanism depends on floating exchange rates. If exchange rates are not permitted to respond to the forces of supply and demand, these automatic adjustments cannot occur. When central banks around the world try to intervene in the currency market—the largest market in the world, a currency war will ensue.

Currency War


Published in Project Syndicate on 12/01/2014, Nouriel Roubini announced that:
The recent decision by the Bank of Japan to increase the scope of its quantitative easing is a signal that another round of currency wars may be under way.
Central banks in China, South Korea, Taiwan, Singapore, and Thailand, fearful of losing competitiveness relative to Japan, are easing their own monetary policies – or will soon ease more. The European Central Bank and the central banks of Switzerland, Sweden, Norway, and a few Central European countries are likely to embrace quantitative easing or use other unconventional policies to prevent their currencies from appreciating.
All of this will lead to a strengthening of the US dollar...

Similarly, John Mauldin echoed the same opinion on his Thoughts from the Frontline:[11]
A global currency war (kicked off by Japan last year and just now heating up) and a rising bull market in the US dollar are the big macroeconomic drivers not just for 2015 but for the next four to five years.
For different reasons, we begin to see central banks from the world pledged to defend their own currencies:
  • 12/08/2014
    • Mexico declared that it is ready to intervene in currency markets to fight the peso's fall against the dollar amid concerns over dropping oil prices and a possible increase in U.S. interest rates.[9]
  • 12/10/2014
    • Denmark resorted to negative rates for the first time in July 2012 to fight back a capital influx into its AAA-rated markets.[8]
  • 01/02/2015
    • The energy-rich former Soviet republic of Turkmenistan Thursday devalued its currency against the US dollar by 18% in the latest sign of contagion among Russia's neighbors from the plunging ruble (following Krgyzstan's 17% plunge in 2014 and Kazakhstan's 14% tumble).[18]
  • 01/07/2015
    • Vietnam devalues dong to boost growth.[19]
  • 01/15/2015
    • Swiss central bank has ditched its exchange rate peg to euro on Thursday.  At one stage, the euro had plunged a stunning 30 percent against the franc before recovering somewhat to trade 13 percent lower at 1.04 francs.[20]
  • 01/21/2015
    • Canada just joined the easing party — and now the Canadian dollar is going crazy.[21]
  • 01/29/2015
    • Singapore unexpectedly eased monetary policy, sending the currency to the weakest since 2010 against the U.S. dollar as the country joined global central banks in shoring up growth amid dwindling inflation.[23]
  • 02/03/2015
    • Australia is another country which cut interest rates. It has followed the Eurozone, China, Canada, Denmark, India, Korea, Singapore and which have all cut interest rates in recent months.[24]

The acts of intervention, self-defense, or fighting off speculators in currency markets will probably grow and flare up a full-blown currency war. If this happens, some country's currency may fall victim to the sudden movements of capitol flows.

How to Spot a Currency Is in Trouble?


Due to easy money policies, global money has chased high yields into emerging markets in the last five years. Roughly two-thirds of the emerging-market debt now is denominated in dollars. Most of these debts must be liquidated or rolled over sooner or later and be paid back in dollars, not other currencies. These risks unleashed by central bank funding of massive carry trades, policy-driven devaluations and currency crises have yet to manifest.[3]

Ideally currencies make moves measured in single digits over multiple years, which support stable trade and world GDP growth. However, the violent moves like recent Russia ruble’s or Japan yen's signal that something is seriously wrong.

For example, some $11 trillion is estimated in carry trades which the central banks have funded. Massive carry trades like these are being deleveraged in a rapidly destabilizing environment of Japan devaluing its currency, the yen, by 40% since late 2012, and the withdrawal of the Fed's $1 trillion-a-year QE programs.

To spot if a currency is in trouble, Mike "Mish" Shedlock has listed six ways that a country tends to behave:[6]
  • Crackdown on "currency speculators"
  • Accusations of foreign interference
  • Measures to stop capital flight
  • Repatriation amnesty in hopes money will return home
  • Currency action itself
  • Currency controls

Strong US Dollar and Its Implications


As fiscal austerity and asymmetric adjustment have taken their toll on economic performance, monetary policy has borne the burden of supporting faltering growth via weaker currencies and higher net exports. But the resulting currency wars are partly a zero-sum game: If one currency is weaker, another currency must be stronger; and if one country’s trade balance improves, another’s must worsen.[7]

For the US, the combination of a stronger economy and less accommodative monetary policy will put additional upward pressure on the dollar’s exchange rate against both the euro and the yen.[6] With few other countries willing to allow their currencies to strengthen, the dollar’s tendency toward appreciation will remain strong and broad-based. Moreover, as it becomes increasingly difficult for currency markets to perform the role of orderly reconcilers, friction may arise among countries. This could disturb the unusual calm that lately has been comforting equity markets.


References

  1. If a country's currency is determined by the strength of its economy, why isn't the U.S. dollar worth more than the British pound?
  2. International Finance: Effect on Imports, Exports, and GDP
  3. Where Will Risk Erupt This Time?
  4. Roubini: Another Round of Currency Wars Might Be Underway
  5. 6 ways to spot a currency is in trouble
  6. A year of divergence
  7. The return of currency war
  8. ECB’s Arsenal Draws Danish Pledge on Limitless Currency Defenses
  9. Mexico vows to sell dollars to halt peso's slide
  10. Global Renminbi Payments Are Growing Steadily as China Mulls Unrestrained Currency Liberalization
  11. The US Dollar and the Cone of Uncertainty
  12. The Strong Dollar: A Too-Rapid Rise Could Harm the Economy
  13. What Lies Behind The Plunge Of The Ruble?
  14. BIS Quarterly Report Shows China's Swap Lines Misunderstood
    • The Bank for International Settlements recently warned of currency and funding mismatches, especially for companies from emerging market countries that are particularly exposed by an appreciating U.S. dollar.
    • What the various crises over the past 40 years or so have in common is a currency or maturity mismatch that was accelerated just prior to the onset of the crisis. 
  15. 2015 Will Be The Year Of Dollar Danger For The World
    • When China's leader Xi blinks, a tool of choice may be to drive down the yuan to fight Japan’s devaluation, and to counter beggar-thy-neighbour dynamics across East Asia. 
  16. Global Investment Strategy: Pax Americana, iBubble & FX Wars
    • FX Wars:  Its catalysts include a U.S. dollar surge that negatively affects U.S. earnings, a Euro crash stemming from a failure to avoid deflation and excessive yen depreciation driven by the Bank of Japan that deepens an FX war with China.
  17. The Most Important Price: The Value Of The United States Dollar
    • "A nation's exchange rate is the single most important price in its economy." said Paul Volcker, former Fed Chief
  18. Turkmenistan Devalues Currency By 18%, Armstrong Warns Of "Economic Collapse On A Global Scale"
  19. Vietnam devalues dong to boost growth
  20. Switzerland stuns markets by giving up on currency peg
  21. The Canadian Dollar Is Going Crazy After The Bank Of Canada Cuts Rates
  22. Interest Rate Race Supplants Currency Wars
    • Such an interest rate race is not nearly as troublesome as a true currency war of beggar-thy-neighbor competitive depreciations. Currency wars are zero-sum undertakings. It allows one country to take aggregate demand from another country via exports. Lower interest rates can help foster new demand. It is not zero-sum.
  23. Singapore Dollar Is Weakest Since 2010
  24. Australia Cuts Interest Rates
  25. What Are Foreign Exchange Markets Saying?
    • As global financial markets have opened up over the past 60 years, capital flows throughout the world have not only become enormous, but they have grown beyond the capabilities of central banks to offset them and protect local currencies and economies.
    • Bubbles rise and fall as the inflows and outflows of capital proceed at the will of sophisticated investors.
  26. Currency Realignment and Export Growth (good)
    • No longer can we expect devaluation to be a panacea
      • The more a country is integrated within the worldwide supply chain, the less it can expect a currency depreciation to drive  export growth--- the high cost of imports mitigates much of the advantages of a lower currency. 
  27. The U.S. Treasury Auction - Who Is Showing Up?
    • Central Banks try to stem their currency devaluations by buying their domestic currencies (selling dollars and U.S. treasuries).
  28. FAQ: The Why And What For Of BOJ's Negative Interest Rates (Marc Chandler)
    • How is manipulating interest rates different than manipulating currencies?
      • Manipulating currencies is a zero sum exercise. 
      • Manipulating interest rates needs not be zero-sum. It can help spur demand. It trading partners could also respond by easing monetary policy; thus boosting demand further.
  29. Currency Appreciation and Depreciation
  30. Yuan Too Free? And Can the Fed Afford It?
    • Budget deficits and trade deficits tend to be linked
      • An increase in the U.S. government budget deficit will cause an increase in the real interest rate, which causes additional foreign capital to flow into the country.
      • The increase in the budget deficit leads to an increase in the trade deficit.

Friday, October 31, 2014

What Stronger Dollar Means for Your Investments?

On 10/29/2014, the dollar rallied after Fed announced the end of QE 3.[1] It seems that a bull market for the US dollar has come. As a matter of fact, John Mauldin has already predicted that for a number of years.[2] On a recent broadcast of Financial Sense News Hour, analyst Louise Yamada has also said that she believes the dollar may be beginning a new structural bull market.[3]

Assuming US dollar has entered a secular bull market, let's go over your investment options here—note that I am NOT a registered financial advisor.



What a Strong Dollar Means?


Assuming US Dollar will retain its world's reserve currency status, a strong US dollar means:
  • Lower inflation
    • See Diagram 1 ("DXY vs CPI")
    • The strengthening dollar, stagnant wages and declining oil prices all put downward pressure on prices.[7]
    • Given the disinflationary pressures around the world, the rising US dollar effectively "imports" disinflation into the US.[22]
  • Domestic labor cost becomes relatively more expensive than foreign countries'
    • This could potentially encourage manufacturers to shift away from the US (e.g., to Mexico or even Canada).
  • US exported goods or services become more expensive for foreign buyers
    • U.S. companies will sell fewer goods abroad and book smaller profits when sales are translated back into more expensive U.S. dollar.
    • This hurts U.S. companies on their earnings, particularly multinationals such as Coca-Cola, MCD, ORCL or IBM which will see less earnings coming from foreign markets.
    • Information technology, energy and materials are the three sectors with the largest foreign sales percentage.
    • Nearly half of S&P 500 revenues come from overseas.[18]
  • Lower commodity prices
    • The U.S. dollar trends inversely to commodities
    • It translates to lower costs for companies who consume raw materials in order to produce a product, which increase their profits.
    • The rising dollar and falling crude (commodity prices) point towards the US importing deflationary conditions from struggling economies around the world.
    • If you’re invested in dollar denominated commodities, such as gold, that tend to fall when the U.S. dollar is rising.[16]
  • Cheaper oil[11]
    • Citigroup estimates:[19]>/sup>
      • If oil prices stabilize near current levels, the typical U.S. household will receive the equivalent of a $600 annual tax cut. 
      • Oil that’s 20 percent cheaper than the 3-year average price amounts to a $1.1 trillion annual stimulus to the global economy.
    • Trucking companies, airlines, oil refiners, and chemical manufacturers may benefit from cheaper oil.
    • It will hurt both renewable energy industry and energy efficiency business. [25]
    • US consumers spend about 6% of their total consumption expenditures on energy,  So, cheap oil tends to help US GDP.
      • A strong dollar may not actually hurt US GDP that much because US export only accounts for 15% of its GDP.[21]
    • This essentially transfers wealth from Mid East of oil producing countries to consumers of oil importing countries.
    • But, it could at some point threaten the US shale-oil boom[2,17,20]

  • US stock market becomes more attractive 
    • Overall, until any negative effects (see section "Balance of Payment Cycle") begin to manifest, a stronger Dollar suggests money will continue to be attracted to the U.S. stock market, especially stocks whose sales are primarily domestic, and not international, and particularly for large-cap stocks.
    • The ratio the U.S. stock market to the international stock market ($WLSH:$DJW) is a leading indicator for the U.S. dollar (see Diagram 2 above). 
    • 1% move in the dollar can have a 2% impact (either positively or negatively) on the earnings of the S&P 500 companies.
      • The ETF for the US top 100 companies is OEF
      • It is the larger companies that get the biggest hit from the stronger dollar. 
    • Lower risk of appetite
      • Strengthening of US dollar (or falling UDN) may be foreshadowing a reduction of risk appetite.[10]
    • Rising long bond yields
      • High interest rates support the dollar while low interest rates do not
      • If the Dollar continues its correlation, the long bond yields could rise (see Diagram 3 below).
      • The Fed has just stopped their bond buying program altogether, and interest rates can only go in one direction—higher.


What to Invest in a Strong Dollar Environment?


As a general rule of thumb, the companies that will probably put up the best numbers and outlooks are those with a primarily domestic market (unaffected by foreign developments and the strength of the dollar), those that are typically commodity buyers (think retail), and those who have somewhat secular rather than cyclical growth prospects.

Some analysts have recommended the following sectors or stocks:
  • Equity REITs with low P/FFO ratios - Hospitality Properties Trust (NYSE:HPT) and Lexington Realty Trust (NYSE:LXP), 
  • Business Development Companies - Ares Capital (NASDAQ:ARCC), telephone companies - AT&T (NYSE:T) and Verizon (NYSE:VZ),
  • Agency mortgage REITs - Annaly Capital (NYSE:NLY)
  • MKC, TGT, SON, KMB, NNN, WGL, AFL, ITW, HCP, PBCT, ORI, T
  • PAYX, DFS
Be warned that the stock market can be short-term bullish and long-term bearish (see also the next section).  Moving forward, the market faces a cruel double-edged sword:
    • If there is strong growth, it will prompt the Fed to begin raising rates, causing investors to demand higher returns and businesses to cut back.
    • If there is weak growth, it will threaten corporate earnings and spark worries about another recession. 
Either way, stocks may fall.  On 11/01/2014, Chris Puplava has provided the following advice:[10]
We’ve seen some pretty wild swings in the market lately but what is more important than the swings is the shifting flow of money from lower quality to higher assets. This is a hallmark for aging bull markets and was exactly the same condition we saw leading up to the 2000 and 2007 tops. Tops are a process and there is no set time table for how long this late-stage phase of the bull market will continue given global central bank intervention (just look at the BOJ announcement today). What is more important than trying to spot a top is to begin focusing more on risk management as risks are always greatest near the end of a cycle, and to shift more towards higher quality assets.

Balance of Payment Cycle


Before you jump both feet all in for your strong-Dollar investments, consider this crisis looming on the horizon. Predicted by Kyle Bass in the autumn of 2009, he has said that the easy-money policy will end badly:[6]
He said that – in addtion to a likely string of sovereign defaults in Europe and an outright currency collapse in Japan – the global debt drama would end with an epic US dollar rally, a dramatic reversal in capital flows, and an absolute bloodbath for emerging markets.

In [6], Worth Wray has described a phenomenon known as “balance of payments cycle” (i.e. an inflow-induced boom followed by an outflow-induced currency crisis), which tends to occur in three distinct phases:


  • Capital Inflows
    • This generates growth boom.
  • Capital-Dependent Growth
    • Growth increasingly relies on capital inflows.
  • Capital Outflows
    • This causes growth to collapse
Due to global easy-money policies. easy money ran blindly in search of more attractive returns. Most of them find their ways into emerging markets. This broad-based, debt-fueled overinvestment may appear to kick economic growth into overdrive for a while; but eventually disappointing returns and consequent selling lead to capital flight and currency collapse.

As Bass said,  the global debt drama would end with an epic US dollar rally and that is happening in front of our eyes now.  This may be signaling the beginning of the third and final phase of "balance of payment cycle."  In this phase, Bass has predicted that we will see a dramatic reversal in capital flows, and an absolute bloodbath in emerging markets.

In a CNBC interview on 10/22/2014, Kyle Bass explained that a policy divergence is set to accelerate in the next couple of weeks, as the Fed will likely taper its QE3 purchases to zero. Two days later, Kyle notes, the odds are high that the Bank of Japan will make a Halloween Day announcement that it is expanding its own asset purchases. Such moves only increase the pressure on Mario Draghi and the ECB to pursue “overt QE” of their own.

At the time I am writing (10/31/2014), spooky thing just occurred, Bass' prediction has just come true—Bank of Japan has announced its new stimulus today.  After the announcement, we immediately saw the Dollar rallied another +0.82% (note that such move is big in currency market).

As predicted in a recent Casey Research Report, its analysts think another crash is coming and it will make the 2008 correction look like a walk in the park. We don't know how soon that scenario will play out because no one has a crystal ball.  One thing for sure is volatility will return in a big way. So, invest your money cautiously.

Disclosure


This article is for information purpose only. We do not have positions in any stock or ETF mentioned in this article.

Notes

  1. Some of the conclusions covered here may appear to be contradictory.  For example, "Lower inflation" vs "Rising long bond yields" or "Bull market" vs. "Bear market."  It all depends on your investment horizon: short term vs. long term.

References

  1. The Dollar Is Rallying After Fed Announces The End Of QE
  2. A Scary Story for Emerging Markets
  3. Louise Yamada: Cyclical Correction Likely in Stocks - New Bull Market Beginning for the Dollar
  4. Every Central Bank for Itself
  5. The Flat Debt Society
  6. The US Dollar Plays The Villain In The Emerging Markets Horror Story
  7. U.S. Growth Pace Moderate; Inflation Low, Employment Data Mixed
  8. Kyle Bass: Fed tapers to zero next week (10/22/2014)
  9. Dow, S&P surge into record territory after Japan stimulus
  10. Shift in Quality Spectrum Argues We’ve Entered Later Innings of Bull Market
  11. It Looks Like $80 Oil Is Here to Stay
  12. Japan risks Asian currency war with fresh QE blitz
    • Japan is exporting its deflationary pressures to the rest of Asia.
    • Currency war was always how this was going to end, and it risks sending a wave of deflation across the world from Asia,” Albert Edwards said.
  13. Bear Markets Don't Just Happen — They're Caused By These Two Conditions
    • Tight money, recessions, or both
    • "These conditions do not apply, nor will they until 2016 at the earliest," said David Rosenberg
  14. "Dangerous Scenario": Strong Dollar To Take Down Weak China
    • Because the link between the Chinese and American currencies, a rising dollar pushes the renminbi higher and the Chinese economy lower. 
    • As Citigroup’s Guilermo Mondino and David Lubin note, the combination of increasing short-term U.S. rates and a “more volatile” yuan could create “a dangerous scenario” of “a rather large capital outflow from China.”
  15. No Wonder The Dollar Is Up
  16. Study: Long-Term Rise In The Dollar Does Not Bode Well For Gold
  17. The US Shale Oil Bubble Is Ready to Burst
    • The basic economics of shale oil production are being ravaged by the 23% oil price drop since John Kerry and Saudi King Abdullah had their secret meeting near the Red Sea in early September to agree on the Saudi oil price war against Russia.
    • The shale oil and gas bonanza of the past five years in the USA has been built on a foundation of zero Federal Reserve interest rates and huge speculative investment by hungry Wall Street firms and funds.
  18. The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next
  19. Why a Strong Dollar Is the Ultimate Stimulus
  20. Charles Gave of GaveKal (Things That Make You Go Hmmm... 11/11/2014)
    • After all, after the 1985 crash in oil prices, the Texas banks went bust and the Texan economy did not do too well for quite awhile. Let us avoid the Texas of tomorrow, if possible.
  21. U.S. and China Exports as a Percentage of GDP, 1980-2030
  22. The Fed Concerned About 'Importing' Disinflation
  23. El-Erian: 'When You Have Very Sharp Moves in Currency, Something Breaks'
  24. Tightening by superpower Fed trumps mini-stimulus in Europe and Asia
    • More than 40 currencies have dollar pegs or "dirty floats", including China, joined to America's hip whether they like it or not.
    • Some $11 trillion of cross-border loans and bonds issued outside the US are denominated in dollars. 
  25. The Hidden Costs Of Cheap Oil
  26. Recession, Recovery, and Gold
    • Gold is not, in fact, a hedge against inflation. It’s something people buy when real returns on alternative assets are low.
  27. The Strong U.S. Dollar: Are We Ready For It?
    • A strong dollar requires companies to focus on productivity.  
      • Greater productivity requires training and education, it requires investment in better and better technology, and it requires changes to jobs and firms and startups that have not been present to the degree needed.
  28. How Much Higher Can The U.S. Dollar Go
  29. The Dollar Dog Ate Corporate America’s Homework: 6 Casualties of the Strong US Dollar (Mauldin Economics)
    • Dollar Casualties:
      • KMB, PG, JNJ, MON, DD, MMM
  30. Triffin's Paradox Revisited: Crunch-Time For The U.S. Dollar And The Global Economy
    • The core of Triffin's Paradox is that the issuer of a reserve currency must serve two entirely different sets of users: the domestic economy, and the international economy.

Sunday, October 26, 2014

Swimming Pool - How to Clean and Test Pool Water

Algae are a very large and diverse group of eukaryotic organisms. Most are phototrophic. Given them right conditions, they can grow very fast in most marine environment including swimming pools. To maintain a healthy swimming pool, the main task is to control their growth—the best process is elimination.

In this article, we will examine how to clean and test pool water to eliminate algae.

Algae Problem


Algae spores constantly enter the pool, brought in by wind, rain or even contaminated swimsuits or equipment. When conditions are right, an algae bloom can occur seemingly overnight. These conditions include out of balance water, warm temperatures, sunlight and presence of nitrates, phosphates, and/or carbon dioxide. Of course, a lack of proper circulation, filtration and sanitation may be the primary cause of the algae.

There are over 21,000 known varieties of algae! In the pool business, they avoid all of the complication by referring to algae by the colors:[1]
  • Green Algae
    • They are frequently found free floating in the water, although they also cling to the walls.
    • They reduce water clarity and are thereby distinguished from severe copper precipitation, which will impart a clear, green color to the water. 
    • Varieties of green algae also appear as "spots" on surfaces, particularly rough areas, or places where circulation is low. 
    • They also show up as "sheets", where large wall sections, or even the entire pool, is coated in green slime.
  • Yellow Algae (aka Mustard Algae)
    • A wall clinging variety which is usually found on the shady side of the pool.
    • They are sheet forming, and can be difficult to eradicate completely—re-infection is common. 
    • This variety is resistant to normal chlorine levels and must be dealt with diligently. 
  • Black Algae
    • They are perhaps the most aggravating strain of algae, they can be extremely difficult to eradicate completely.
      • Their roots extend into the plaster or tile grout, and unless the roots are destroyed completely, a new head will grow back in the same place. 
      • Their heads also contain protective layers to keep cell destroying chemicals from entering the organism.
      • Like yellow algae, black strains can bloom even in the presence of normal sanitizing levels and proper filtration. 
  • Pink Algae
    • They are not really an algae at all, but a form of bacteria. 
    • They appear as spots or streaks in corners and crevices. 
    • They are slow to spread and rare for them to bloom over an entire pool.

How to Test Pool Water?


For simple tests such as pH test and total chlorine (or bromine) test, you can use a test kit like:
  • Taylor K-1000
It is a decent test agent and simple to use.  Or you can bring pool water in a container and go to companies such as Leslie's Pool for their free testing service.  Their water analysis report typically include the following test categories:
  • Free Available Chlorine
  • Total Available Chlorine
  • Cyanuric Acid
  • Total Alkalinity
  • pH
  • Acid Demand
  • Copper
  • Iron
  • Total Dissolved Solids
  • Phosphates
These companies also recommend remedies for your pool based on the test results.

How to Clean Pool Water?


There are two cleaning mechanisms in your pool system:
  • Chemical 
  • Mechanical
We will cover those two cleaning mechanisms in our next posts.  Stay tuned.

Photo Credit


References

  1. Algae (poolcenter.com)
  2. How to Open Your Swimming Pool and Balance Pool Chemicals 
  3. How to Maintain A Swimming Pool - Clean and Test Pool Water
  4. How to Close a Swimming Pool - Clean and Cover a Pool
  5. Why don’t we winterize pools in the Dallas area?
  6. PBS Pool Products - Commercial (Skimmer)
  7. Chlor Neutralizer
    • Reduces the chlorine or bromine levels in pools and spas
    • 2.5 oz. per 10,000 gal.
  8. How-To: Know the Size of Your Swimming Pool (Travel to Wellness)
  9. Your Disinfection Team: Chlorine & pH 
  10. Leslie's Dry Acid Buckets - Leslie's Swimming Pool Supplies
  11. Chlorine in Pool Water and Nearby Plants
    • If the pool or spa water has a high chlorine content, uncover it and allow the chlorine to dissipate before using the water for irrigating the landscape. Or, chemically remove the chlorine by adding solium thiosulfate of sodium sulfite to the water.

Wednesday, September 24, 2014

Seafood Choices: Tradeoffs between Omega-3 and Mercury

On EWG web site, it has published a report on seafood choices.  We eat fish or shellfish for the benefits of omega-3s.[1] However, seafood are also high in mercury.[4] Therefore, we need to choose fish based on its omega-3 and mercury levels.  Depending on your age, weight, and gender, EWG makes the following recommendations on what kinds of seafood to eat or avoid.  Calculation are based on 4 oz. serving size.  Note that sustainability is also considered in EWG's recommendations, which is based on the Seafood Watch from Monterey Bay Aquarium.[2,6]


Species
Weekly Mercury
Sustainability
Max Servings per Week
Salmon 13% Best Choice: Wild Alaska 3
Sardines 20% Best Choice: Pacific 3
Mussels 8% Best Choice: farmed 3
Rainbow
Trout
13% Best Choice: farmed 3
Atlantic
Mackerel
10% Best Choice: Not Trawled 3
Pollock/
Imitation Crab
15% Good Alternative* 3
Shrimp 8% Variable* 3
Tilapia 5% Best Choice: Equador, U.S., Canada 3
Catfish 5% Best Choice: Farmed U.S. 3
Scallops 10% Good Alternative* 3
Pangasius
(Swai, Basa, Tra)
5% Good Alternative 3
Clams 8% Best Choice 3
Canned
Light Tuna
31% Variable* 3
Flatfish
(Plaice, Sole,
Flounder)
31% Good Alternative* 3
Orange
Roughy
145% Avoid* 0
Shark 224% Avoid* 0
Swordfish 227% Variable* 0

: Very High Omega-3s, Low Mercury, Sustainable
: High Omega-3s, Low Mercury
: Low Mercury But Also Low Omega-3s
: Mercury Risks Add Up (Pregnant Women And Children Should Limit Or Avoid)
: Avoid (Mercury Levels Too High To Eat Regularly)


Acknowledgement


This article was based on a  report from EWG.[3]

References

  1. Omega-3 Fatty Acids (Travel and Health)
  2. Seafood Watch 2013  (Travel to Wellness)
  3. EWG’s Consumer Guide to Seafood: Executive Summary
  4. Mercury Exposures and Autoimmune Diseases  (Travel to Wellness)
  5. Study: Mislabeled shrimp at restaurants, grocers
    • Oceana said it found about 30 percent of 143 shrimp products bought from 111 vendors were not what the label said. 
  6. There Aren’t Plenty of Fish in the Sea

Sunday, September 21, 2014

Social Security: Should You Retire at Age 62?

After taking a look at the "actuarial adjustments" of social security benefits below:
you ask yourself: should I retire at age 62 or not?

Tradeoffs


The Social Security Administration has designed the benefit formula to, on average, yield the same amount in lifetime benefits irrespective of when you begin receiving payments.  Here is how the U.S. Government Accountability Office explained:
"The Social Security benefit formula adjusts monthly payments so that someone living to average life expectancy should receive about the same amount of benefits over their lifetime regardless of which age they claim."
If you expect to live to average life expectancy (78.74 in 2012), maybe the decision to retire earlier at age 62 or not is irrelevant.

In [1], it has suggested that:
If you're fortunate enough to live well into your 80s or beyond, then waiting will indeed result in a larger lifetime haul.
However, if I were you, I would go with the prevalent wisdom[13] of choosing to retire at age 62 and here are the reasons why:
  1. Future money will have smaller face value
  2. You will enjoy more on traveling when you are younger
  3. Traveling could and should be more expensive in the future
  4. Resource should be more scarce in the future
  5. Travel the world earlier and maybe you can find the best place to retire

 

Money Face Value


Although social security benefits will be adjusted based on cost of living by the social security administration:[2]
The purpose of COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation.
However, COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year.  And, it has always been underestimated especially considering your main future expenses will be from foods and utilities.[16,24]

Finally, because of the easy money policy in the past five years, there is a real danger of inflation or even hyperinflation in the near futre.  As government will struggle with paying down its debts,[30] your benefits will undoubtedly be reduced by either the CPI-W being underestimated or the retirement age being increased.

Travel while You Can


You should travel while you're young because traveling:[4]
  • Teaches you to live an adventure
  • Helps you encounter compassion
  • Allows you to get some culture
As people has discussed on the Internet, traveling is tiring, which demands physical strength.  So, while you are young and healthy, hit the road as early as you can.  Remember that you won’t always be young.

Higher Traveling Costs


Traveling costs won't remain this low forever.  In June of 2014, BP has provided an intriguing update to its global oil reserves estimate in the company's latest yearly review of energy statistics. BP raised its reserve estimate by 1.1% to 1,687.9 billion barrels, which is enough oil to last the world 53.3 years at the current production rates.[3]

Jim Puplava[5] is an expert on the theory of peak oil and its consequences for the financial landscape.  He has interviewed several peak oil proponents on his radio program, including Richard Heinberg, Matt Simmons, Jim Kunstler, Robert L. Hirsch and Oxford University's Oliver Inderwildi.

Recently, here is what he has said when was asked this question: "Do you still believe in peak oil?"[14]
Well, it is a fact that conventional oil peaked in May of 2005 and we've never exceeded it. That kind of oil, which is the cheapest, has been declining in production as older wells, especially the giants, have gone into decline. However, since then unconventional oil has taken its place and helped prevent energy prices from shooting upwards. So, to be accurate, there is really no debate about peak "conventional" oil—the main issue now is on the sustainability and increased use of unconventional sources of oil, renewables and the like, which in general are much more expensive.
What are you waiting for?  While it's still cheap to drive, cruise, or fly, do it.

Resource Shortage Is Real


Based on a report from Time,[6] the world-wide resource shortage is real.  The resource demand is being driven by three factors:
  • The rising world population
  • Increasing global wealth
    • Due to the fast development of emerging market economies, it is estimated 3 billion people expected to join the ranks of the middle class by 2030
  • A marked trend toward urbanization
Without saying, growing population will cause many problems including:
  • Global warming[7]
  • Wars due to resource fights[10]
  • Deteriorated World Health[11]
While the world is still peaceful and resourceful, enjoy your retirement life earlier.

Where to Retire?


This is the question asked by all who plan to retire.  On the internet, you often find topics such as:
There are many factors to consider to make your final decision:
  • Proximity to children/grandchildren
  • Availability of health care
  • Climate  
  • Financial considerations
  • Activities and entertainments
Before you listen to any advice, why not start traveling around to find out yourself.  I would say you can make a better decision if you travel more and read more.  That also means that you need to retire earlier to find more time.

Here is just my two cents.  Please consult with your financial advisers before making any final decision.

References

  1. Why Smart People Take Social Security Benefits Early
  2. Cost-of-Living Adjustment (COLA) 
  3. The World Has 53.3 Years of Oil Left
  4. 3 Reasons to Travel While You’re Young 
  5. Jim Puplava on Peak Oil  
  6. The Resource Shortage Is Real - Time
  7. This 1 chart exposes climate-science deniers as frauds 
  8. The 15 Best Countries To Retire To In 2014 - Forbes
  9. Retire overseas on $1200 a month - MSN Money
  10. The World's Most Dangerous Water Fight
  11. Scarce resources, climate biggest threats to world health 
  12. Best Places to Retire - US News & World Report 
  13. Social Security: 3 Reasons That 62 Is the "Most Prevalent Age" to Claim Benefits
  14. Has the 2014-2016 Crisis Window Been Delayed?
  15. Social Security: How to Estimate Monthly Retirement Benefit? (Travel to Wellness
  16. CPI Distortions 
  17. Retiree Tax Map 
  18. 10 things retirees won’t tell you 
  19. Demographics - Crash Course Chapter 15 
  20. 5 Scary Things Scientists And Economists Think Could Happen By 2050
  21. Here’s the Only State Where Retirees Have Enough Income
  22. Do you have a Social Security game plan?
  23. Understanding the benefits (Social Security Administration)
  24. Markets Are Not Considering Weakness In Middle Class
  25. Retirement Withdrawal Strategies That Can Pay Off Big
    • If you are buying your own health insurance via the Obamacare exchanges, keep your taxable income low to qualify for big subsidies.
  26. When can I start collecting Social Security benefits?
    • There are more articles on the left panel under "Social Security".
    • Will Social Security still exist when I retire?
      • The government’s official position is that there is enough money saved to pay benefits at the currently scheduled amounts until 2041
      • The Social Security Administration admits on its Web site that benefits will likely be reduced after that, barring changes that improve the financial strength of the system.
  27. 3 Retirement Rules Of Thumb That Really Work
    • Save 15% a year
    • Create an investment portfolio based on your age
    • For retirement withdrawals, start with the 4% rule. 
  28. The Most Tax-Friendly States for Retirement
    • Most tax-friendly states: AZ, AK, DE, FL, GA, NV, LA, MS, SD, WY
    • Tax-friendly states: AL, AR, CO, ID, KS, KY, OK, PA, SC, TX, WA, WV
  29. Best Cities for Successful Aging
  30. Investors Everywhere Are Underestimating These 3 Massive, Predictable Forces
    • The US government takes in $3 trillion in taxes, but it owes $108 trillion. ”Do the math." 
  31. Social Security Office Locator
  32. Seven Surprising Social Security Facts
    • The tax rate that funds Social Security has already risen SIXFOLD!
  33. Where Are the Hardest Places to Live in the U.S.?
  34. Most livable cities in Canada
  35. Understanding the Benefits (www.socialsecurity.gov)
  36. How age differences in couples affect Social Security
    • It often makes sense for the younger of the two to take benefits early.
  37. Who gets grandfathered in with Social Security rules change?
    • According the provisions put forth in the Bipartisan Budget Act of 2015 (HR 1314) last year, individuals who were born before 1954 are considered to be grandfathered in as eligible to file a restricted application for spousal benefits, according to Jim Blankenship, author of A Social Security Owner's Manual: Your Guide to Social Security Retirement, Dependent's, and Survivor's Benefits.
  38. Check for errors in your Social Security statements
    • Officially, you have to correct errors within 3 years, 3 months and 15 days following the year of the mistake.

Sunday, August 31, 2014

How-To: Know the Size of Your Swimming Pool

To maintain the health of your pool, there are two main areas to be considered:
  • Chemical
  • Mechanical
For the chemical part, you always need to estimate the size of pool first.  For example, if you need to add chlorine shock,  Leslie's Swimming Pool Supplies always ask your pool size in gallons before they decide how much chlorine powder you need for your pool.

If your pool has regular shapes such as rectangles or circles, it's relatively easy to come up the pool size.  For example, for a rectangular pool, its size can be estimated by:
Average depth * width * length
If you measure your three dimension in feet, you will come up total cubic feet of your pool size.

Converting Cubic Feet to Gallons


To convert cubic feet to gallons, you can use the following formula:
1 ft3 * 7.48 gallon/ft3 = 7.48 gallons

To simplify, you may use 7.5 instead of 7.48 in you calculation.  If you have an irregular shape, say, kidney shape as shown below, it takes a bit more effort.


Kidney or Irregular Shapes


There are different methods used to calculate the capacity of irregular shapes. First, you can imagine the pool as a combination of smaller, regular shapes. Measure these various areas and use the calculations described in [2] for each square or rectangular area and for each circular area. Add these volumes together to determine the total capacity.

Here we will introduce you another method.


Volume in gallons = (Estimated surface area * Average Depth) * 7.5 
where
Average surface area = (A+B) * C * 0.45

The total of measurement A plus measurement B multiplied by 0.45 multiplied by the length (i.e., C) gives you the surface area of the kidney shape.

References

  1. How to Calculate Swimming Pool Volume in Gallons 
  2. Pool Volume Calculator

Sunday, June 22, 2014

How to Apply for a New Texas Driver License?

To apply for a new Texas Driver License, it involves three steps:
  1. Vehicle Inspection
  2. Car Registration and Title
  3. Driver License
In this article, I will describe my experience of converting an out-of-state driver license to Texas'.

Where to Go?


Except for the second step, you can go to any nearby location as you like. For car registration and title, you need to go to your own county where your new residence resides in. Below shows you the links that you can find for where-to-go in each step:
  • Vehicle Inspection
  • Car Registration and Title
    • To do this, you must visit your local county tax-assessor collector office.
      • First find out which county your residence resides in.
      • Then, search for "Texas Plano County Tax Assessor" and Google search will return this link. Google map also shows you the locations of all available county tax office locations.
  • Driver License
    • The clerk of county office will provide you a list of locations for the new driver license application, which is handled by Texas Department of Public Safety.
    • For example, here is the list I got for the Dallas suburb:
      • Denton
        • 820 N Lop 288 (940)484-6666
      • Lewisville
        • 190 N Valley Pkwy Ste 201 (972-221-8081)
      • Carrollton
        • 2625 Old Denton Rd. Ste 464 (972-245-5800)
      • McKinney
        • 400 Powerhouse St. (214-733-5350)
      • Plano
        • 2109 W Parker Rd. Ste 224 (972-867-4221)

What to Bring?


For each step, you are supposed to bring some documents before going. Here are the summary based on my own experience:
  • Car Inspection
    • Proof of liability insurance
      • Any current state insurance is acceptable.
    • Payment
      • Texas state law requires that payment is made whether your vehicle passes or fails inspection.
    • Photo ID
      • This must be current and valid. If you are registering your vehicle in the state of Texas, you will need a photo ID in order to acquire your VI-30 or green sheet.
  • Car Registration and Title (see [2] for more details)
    • Ownership evidence
      • Out of State Title, Registration Receipt, or Foreign Ownership, etc
    • Proof of Insurance
      • Some counties require you have the Texas Insurance before you go. 
      • Check out minimal car insurance requirements (i.e. 30/60/25) in Texas here.
    • Inspection Form from step 1
      • VI-30 or VI-30-A (green, blue, or white)
    • Application for Texas Title: 130-U
      • You can download and complete it in advance
      • Other forms may be required, such as RPO form VTR-272 (see [2])
        • If you do not possess the title because it has a lien, you also must complete Form VTR-272.
      • You can choose either to keep your out-of-state Title or apply for a new Texas Title (recommended).
    • Other requirements if applicable (see [2])
    • Payment
  • Driver License
    • Meet all the identification requirements (see [5] for more details)
    • Proof of Insurance (see [3])
    • Proof of Registration (from step 2)
    • Payment

When to Go?


There are deadlines for both car registration and driver license application. In summary, the deadlines are:
  • Car Registration
    • A new resident must register their vehicle within 30 days of establishing residence or becoming gainfully employed.
    • Most counties are first-come-first-served. The best time to go is around 2-2:30 pm based on my experience.
  • Texas Driver License
    • An individual can legally drive with a valid, unexpired driver license from another state or country for up to 90 days after moving to Texas. Penalty fees may apply if the title is not transferred within 30 calendar days from the date of sale or entry into Texas.
    • The individual must apply in person at any driver license office for a Texas driver license within those 90 days to continue driving legally. An unexpired driver license from another U.S. state, U.S. territory or a Canadian province must be surrendered to DPS when applying for a Texas driver license.
    • If you can, make an online appointment.
    • Office will be closed at 5:30pm or 6:00pm (on Tuesday only). But, all people inside the building before closing time will ALL be served. I saw people came in just before the closing time.
    • Avoid summer time if you can because all the teens are applying for their driving permits or new licenses during that time.

What to Expect?


At each step, you will receive something. Here the summary for each step:
  • Vehicle Inspection
    • VI-30 or VI-30-A (green, blue, or white)
  • Car Registration and Title
    • You will get your vehicle registration sticker, license plates, and/or Texas Title
  • Driver License
    • You will get your temporary Texas driver license; you should expect to receive your new driver license in about two weeks.
Finally, be warned that you could be charged with processing fees if you want to pay by credit cards.  So, bring your check book with you before you go.

References

  1. Texas Vehicle Safety Inspection
  2. New Resident Registration and Title Requirements (Collin County)
  3. Car Insurance Requirements in Texas (TxDMV)
  4. Moving to Texas (TxDPS)
  5. Identification Requirements (TxDPS)
  6. Pay Driver License reinstatement fees at www.texas.gov/driver
  7. Get your driver record immediately online at www.texas.gov
  8. Pay Driver Responsibility Program surcharges at www.txsurchargeonline.com
  9. Did you know you have...
    • 30 days to change your address when you move
    • An option to record an emergency contact phone number, directive to physician and allergic reactions to drugs on the reverse side of your card.
    • If you find any errors of your new driver license, email DriverLicenseErrors@dps.texas.gov or call the Contact Center at (512) 424-2600.
    • If there are no errors it is very important that you destroy your previous driver license or identification cad.
      • It is a violation of Texas State Law to have more than one driver license or identification card in your possession.
  10. Get a Toll Tag on line here
  11. In Texas, no portion of the registration fee is based on car value, so you can't deduct anything. See the reference here and here.
  12. Vehicle Transfer Notification
    • When a Texas-titled vehicle is sold or traded in, the seller needs to notify TxDMV.
    • YOU MUST SUBMIT THE VEHICLE TRANSFER NOTIFICATION WITHIN 30 DAYS TO REMOVE LIABILITY
  13. I sold my vehicle, why did I receive a registration renew (FAQs)

Sunday, April 6, 2014

Social Security: How to Estimate Monthly Retirement Benefit?

All workers paying FICA (Federal Insurance Contributions Act) and SECA (Self Employed Contributions Act) taxes for 40 quarters of credit (QC) or more on a specified minimum income or more are "fully insured" and eligible to retire at age 62 with reduced benefits and higher benefits at full retirement ages of 65, 66 or 67 depending on your birth date.[10]




How Is Your Social Security Monthly Retirement Benefit Calculated?


Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. They apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount”. This is how much you would receive at your full retirement age—65 or older, depending on your date of birth.

On www.socialsecurity.gov, it provides a worksheet. People born after 1952 can use this worksheet, but their actual benefit may be higher due to additional earnings and benefit increases. This worksheet[1] copied from www.socialsecurity.gov web site shows how to estimate the Social Security monthly retirement benefit you would be eligible for at different retirement ages:
  1. Enter your actual earnings in Column B, but not more than the amount shown in Column A. If you have no earnings, enter “0.”
  2. Multiply the amounts in Column B by the index factors in Column C, and enter the results in Column D. This gives you your indexed earnings, or the approximate value of your earnings in current dollars.
  3. Choose from Column D the 35 years with the highest amounts. Add these amounts. $_________
  4. Divide the result from Step 3 by 420 (the number of months in 35 years). Round down to the next lowest dollar. This will give you your average indexed monthly earnings. $_________
  5. Step 5:
    • a. Multiply the first $816 in Step 4 by 90%. $_________
    • b. Multiply the amount in Step 4 over $816 and less than or equal to $4,917 by 32%. $_________
    • c. Multiply the amount in Step 4 over $4,917 by 15%. $_________
  6. Add a, b and c from Step 5. Round down to the next lowest dollar. This is your estimated monthly retirement benefit at age 66, your full retirement age. $_________
  7. Multiply the amount in Step 6 by 75%. This is your estimated monthly retirement benefit if you retire at age 62. $_________




If you were born before 1952, please go online at www.socialsecurity.gov or contact Social Security for your worksheet.

References

  1. Your Retirement Benefit: How It Is Figured
  2. Social Security Potluck
  3. The Lifetime Income Series: Making Sense of the Retirement Plan Alphabet Soup: myRA, IRA, Roth, SEP, SIMPLE, PSP, 401k, 403B, DBP, etc.
  4. A New Study Paints a Rosier Retirement Picture (or is it?)
    • The chances of Social Security benefits staying the same are slim, given that the Social Security system continues to pay out more than it takes in, according to the 2013 Trustees Report on Social Security. The report also claims that the Social Security fund for retirees is on track to become insolvent in 2033.
  5. How Social Security Trust Funds Will Change Private Retirement Income
    • There are no real assets, but instead the social security trust funds consist of $5 trillion of unfunded liabilities.
  6. Social Security and Medicare for Expatriates: What You Must Know
    • Social Security benefits are generally available to all U.S. citizens wherever they live, with the only exceptions being places like North Korea, where sanctions prevent money transfers. 
  7. Plan a Satisfying Retirement (good)
  8. How 6 Types of Retirement Income Are Taxed
    • Whether or not you're taxed depends on what's known as your provisional income: your adjusted gross income plus any tax-free interest plus 50% of your benefits. If provisional income is between $25,000 and $34,000 if you're single, or between $32,000 and $44,000 if you're married, up to 50% of your benefits is taxable. If it exceeds $34,000 if you're single or $44,000 if you're married, up to 85% of your benefits is taxable.
  9. Why Smart People Take Social Security Benefits Early
    • The Social Security benefit formula adjusts monthly payments so that someone living to average life expectancy should receive about the same amount of benefits over their lifetime regardless of which age they claim.
  10. Social Security: Should You Retire at Age 62?  (Travel To Wellness)
  11. When Is Social Security Taxable?
    • The general idea is that for every dollar of extra income you earn above the lower threshold (i.e., Single: $25,000; Joint filers: $32,000), $0.50 of your Social Security benefits will be subject to tax.  bove the upper threshold (Single:  $34,000; Joint filers: $44,000), each extra dollar of income adds $0.85 to the total benefits that the IRS will tax.
    • How to estimate your extra income?
      • The first step is to add up all your income, including what would ordinarily be tax-exempt income from municipal bond interest, and then add in one-half of your Social Security benefits for the year. If you're over the $25,000 or $32,000 initial thresholds, then some of your benefits might be taxable.
  12. 3 Retirement Rules Of Thumb That Really Work
    • Save 15% a year
    • Create an investment portfolio based on your age
    • For retirement withdrawals, start with the 4% rule. 
  13. How Your Earnings Record Affects Your Social Security
  14. When and How Social Security Checks Are Delivered
  15. Does an IRA Distribution Count as Income to Social Security?
    • IRA distributions won't directly affect your Social Security benefits. Because of the way the tax laws work, though, they can lead to higher taxes if you don't take steps to avoid them.
    • Even though distributions from IRAs can increase your taxable income, they're never counted for purposes of benefit forfeiture.
  16. Retirement Estimator (SSA)