Mortgage Payoff?

A friend who stood to collect a windfall of money asked me what I thought of using it to pay off his mortgage. His other option, investing the proceeds for growth or income, were on the table, as well. What to do?

Equity markets are in a turmoil these days as they lose both supply and consumer demand to the COVID-19 outbreak, but for this question I want to consider more normal times. We’ll get back to there, someday.

I’ll use my own circumstance to run the numbers, so assume a $216,000 remaining balance on a mortgage financed at 4% fixed, with twenty-eight years remaining on a 30-year note. The monthly payment amortizes to about $1122 net of tax and insurance expenses.

Assume, too, that our retirement investing is already taken care of. If it weren’t, the right move would be to put the windfall to work there.

In exchange for paying off the mortgage, we can keep the $1122 I’d otherwise hand to my lender every month, or $13,464 annually. That’s 6.23% of the outstanding balance. The money has already been taxed when I earned it, and I’m assured of keeping that payment in-hand as long as I own this house. That makes the virtual dividend both tax-free and guaranteed.

This option carries significant intangible benefits, as well. There’s the peace of mind that comes from knowing that we have a place to live for not much outlay—taxes, insurance, utilities, and upkeep—no matter what.

We could invest the money in the financial markets, instead. Since the money isn’t destined for our retirement accounts, growth isn’t absolutely necessary. Increased current income would also be a welcome outcome. Stocks and bonds, respectively, fit the bill. I’m partial to mutual funds and ETFs rather than direct stock and bond purchase, so I’ll draw my comparisons from them.

We’ll have a more significant opportunity for gain if we decide to invest in equity funds. The US stock market returns roughly 8% annually over the long term. More narrowly focused funds and ETFs perform better than that, so let’s be generous and assume an overall annual gain of 10%. Over the course of a reasonably smooth decade such as the one just finished, we could see our principle rise by $344,000 to over $560,000.

But that gain is taxable. Our current long-term capital gain tax is 15%, or about $52,000 of that gain, yielding a net gain of around $292,000. And although there are no historical ten-year spans when equities returned negative results, this return is by no means guaranteed. Throughout the decade this money is invested, it’s out of reach and there’s still a monthly mortgage payment to be made. Still, a potential six-figure gain is enticing.

Finally, we could invest the money for current income. Recall that the mortgage payoff yields a virtual income gain of roughly 6.25% on $216,000, tax-free. The equivalent taxable yield for taxpayers in the 22% tax bracket is an astounding 7.99%! Any income-producing investment would have to beat that.

The closest we can come is with high-yield bonds, bond funds, and ETFs. For example, the Vanguard HY fund’s (VWEAX) dividends are paying about 5.25% annualized right now, taxable. Bond fund dividends are generally reliable, but not guaranteed.

So: pay off the mortgage and reap a 6.25% guaranteed, tax-free virtual dividend plus peace of mind; shepherd an investment in equities for a decade—on top of any retirement investments I’m already holding for long-term gains—and hope the market adds to my wealth; or sink the money into, say, high-yield bonds for an income of around 5.25% taxable.

It it were my money, I’d pay off the mortgage.

#mortgage #payoff #choices

Marc Andreessen: It’s Time to Rebuild

Marc Andreessen decries the state of our infrastructure as a failure of will to build in this essay, published today:

Why do we not have these things? Medical equipment and financial conduits involve no rocket science whatsoever. At least therapies and vaccines are hard! Making masks and transferring money are not hard. We could have these things but we chose not to — specifically we chose not to have the mechanisms, the factories, the systems to make these things. We chose not to *build*.

It does feel that America has become complacent in its comfort the last couple of decades. We see other countries, notably in southeast Asia, produce comfortable, modern, elegant cities and build out all-encompassing technological infrastructures while we’re stuck with the aging result of long ago efforts.

There’s a lot to agree with here.

#rebuilding #infrastructure

NYT: The Secretive Company That Might End Privacy as We Know It

Kashmir Hill, writing in The New York Times:

Asked about the implications of bringing such a power into the world, Mr. Ton-That seemed taken aback.

“I have to think about that,” he said. “Our belief is that this is the best use of the technology.”

The age-old response of the technologist who possesses no thought or concern for the wider world or their place in it, only their work. A child and his toy.
 
The article illuminates a new software technology for comparing an uploaded photo of an individual’s face with a vast database of stored images, which are in turn scraped from online media—including all those selfies and profile pictures we’ve added to our social media pages—in order to learn the identity of the individual.
 
Tweak that workflow slightly: Imagine how many embarrassing or compromising photos are floating around out there, waiting to be tagged with a name. Now that the technology to find those identities is available, the developer belatedly wonders at the implications. May you reap what you’ve sewn, Mr. Ton-That.

#facialRecognition #privacy

Apple Debuts Redesigned MacBook Pro

Apple, Inc.:

The 16-inch MacBook Pro takes workflow efficiency to a new level. The new Magic Keyboard features a refined scissor mechanism with 1 mm travel for a responsive, comfortable, and quiet typing experience. The Touch Bar puts powerful shortcuts front and center, and Touch ID provides fast authentication. A dedicated Escape key allows quick switching between modes and views. And the inverted-T arrow keys enable fluid navigation whether you’re flying through lines of code, navigating spreadsheets, or gaming.

Apple hit all my complaints about the current MacBook Pro keyboard in this write-up for the new, 16-inch MacBook Pro. The awful butterfly key switches are replaced by scissor mechanisms with more travel; there is once again a dedicated hardware escape key, and the arrow keys resume the traditional inverted-T formation.

The latter two items cause me no shortage of inadvertent and incorrect entry, while the overall feel of the current keyboard is a less-than-acceptable proposition. I expect an upgrade from my current machine to a 16-inch model will occur sometime in the coming year.

The Bulwark: Actor Politicians > Reality TV Politicians

Molly Jong-Fast, writing in The Bulwark:

The secret of reality television is that the emperor has no clothing at all, not a scrap, not even a gold-lamé thong. Reality television is neither reality (which is real), nor television (which is an entertainment medium), so much as a pantomime of humanity at its worst. Which is fitting, since the Trump administration is a pantomime of the presidency at its worst.

Reality stars are like actors, but without the training, or the talent or—weirdly—the reality of being people who understand what it’s like to do a job.

And it turns out that doing fake “reality” on television doesn’t translate to doing real government very well.

A well-put description of why Never-Trump and no-to-Trump were the only intellectually honest political expressions in 2016.

Howe: Why some Christians ‘love the meanest parts’ of Trump

Ben Howe, interviewed by Emma Green for The Atlantic:

Ben Howe is angry at evangelicals. As he describes it, he is angry that they didn’t just vote for Donald Trump in record numbers, but repeatedly provide moral cover for his outrageous failings. He is angry that leaders of the religious right, who long claimed to be the champions of American morality, appear to have gladly traded their values for power. He is angry that Christians claim they support the president because they want to end abortion or protect religious liberty, when supporting Trump suggests that what they really want is a champion who will mock and crush their perceived enemies.

To redeem themselves, Howe believes, evangelicals have to give up their take-no-prisoners culture war.

I’ve noticed a trickle of thoughtful conservative writers making similar arguments from within the Right-leaning, yet Trump-rejecting thought bubble, whether from a social perspective, as here—they were never more morally correct than the rest of us—as well as from a philosophical bent, as with Jonah Goldberg of The Remnant podcast and National Review..

Goldberg has expressed surprise, in hindsight, at how much of conservative backlash against Barack Obama was race-based. This was not news to the Left at the time. What was Goldberg thinking?

I don’t know how far these mea culpas will go toward resurrecting the morally craven Republican party from Trumpists and other grifters of state power. Writers and thinkers like Howe and Goldberg, and others, carry very little weight within the contemporary conservative movement, let alone influence within the GOP apparatus. But that party is going to need a new moral and intellectual center, and they could have one in these people’s writing. The key is admitting that a television huckster has suckered them.

#neverTrump #GOP #trump #BenHowe #JOnahGoldberg

Egger: Does it matter if Trump is a ‘real’ racist?

Andrew Egger, writing for The Bulwark:

You see how ludicrous the proposition is by how it requires racism to be defined down to an impossibly narrow set of attitudes and behaviors: If he’s such a racist, why isn’t he calling for genocide or burning crosses on the White House lawn? As if anything short of marching in a tiki torch parade doesn’t count as real racism. 

But let’s posit that Trump is not, in this sense, a “real” racist; that his use of racist tropes and racially inflammatory rhetoric are only political maneuvering that he thinks will give his poll numbers a jolt. The question is: What difference does it make?

Whether racism is overt or inferred by its result: What’s the difference?

#Bulwark #AndrewEgger #trump