Perfectly Imperfect Plans

A friend reminded me;
“Better is the enemy of good enough.”
which brought to mind,
“Humans are imperfect. So, if you think you’re perfect, you’re not human.”
and,
“No plan survives contact with reality.”
But it would be so nice if things were done right. Right. But striving for the perfect version of right means many things don’t get done – and there’s so much that needs to be done personally and globally.

My plans certainly haven’t worked out. Conventional wisdom holds that “If you imagine it, it will happen.” (Assuming certain levels of effort, of course.) I planned to work on the second generation space shuttle, which I did, but we didn’t build it. Alas. I planned to retire early (which I did) by living a frugal lifestyle (which I still do). It looked promising to such an extent that many people thought I was too positive. Then, partly thanks to my Triple Whammy, I was un-retired; at which point many of those same people told me I wasn’t succeeding because I was too negative. (Do they listen to themselves?) And yet, I will give myself credit for accomplishing a lot. (Now, if only I could get paid for it!)

Life isn’t dull. Ideas run around me thanks to friends who are artists, entrepreneurs, inventors, and creatives. Ideas, plans, actions, accomplishments. It’s a natural order. Ideas are in great supply. Plans are fewer, which means each plan is an accomplishment; but unless they lead to action, the accomplishment or goal is less likely to be met. Actions are impressive. People actually doing rather than just talking tend to get noticed, even if they’re working quietly. Accomplishments make the news, frequently with a suggestion that it was inevitable and that anyone could’ve done the same thing if they’d followed the same steps. Life is more complicated than that.

I enjoy planning. Want a multi-level, multi-year, program plan for your multi-million dollar project? Sign me up! I actually enjoyed drawing out plans for designing, building, certifying, and operating new types of vehicles for Boeing. It wasn’t directly my job. My job was to design to them to fly safely. Between a sketch of an outline of a concept and something airlines would buy and operate was a great gap of “invent something here.” I’ve done similar things for non-profits, and those creatives I mentioned above. A plan can be scary because it looks like it is set in concrete, but it is written in sand that will shift as soon as anything happens near it. But, without that plan, accomplishments rely on luck (or very flexible goals.)

As I mentioned in a Facebook conversation recently;

But hey, I’m the guy who bicycled across the US without a route, and walked across Scotland based on a flight in and a flight out.” That worked because I had no expectation that I’d reach Key West or Aberdeen. They were vacations based on day-to-day plans redefined every evening. But there were still plans, and actions.

Personal finance is intimidating. Someone in their twenties understandably doesn’t want to have to think about what their life will be like in seventy years. There’s no way to plan for that, especially in this time and place. Within the next seventy years the planet, technology, society, and the economy will shift. That does not mean not planning. It does mean planning for the long term by making continually updated short term plans. Spend less than you make and invest the rest will continue to be applicable as long as spend, make, and invest are applicable. Maybe they won’t be within that time. It’s easy to imagine changes to climate, weather, computers, artificial intelligence, justice and injustice, financial inequality, and even the nature of currency. If a plan assumes life in 2019 is a good guess of life in 2089 and never changes, well, that’s unimaginable.

Planning for life in 2089 is unimaginable, but look around and see how many people in 2019 are trying to plan and act as if it is 1949. Don’t get stuck in any particular period. Period.

At the other extreme is the classic “paralysis by analysis”. Prepare a plan, and before it’s acted upon notice that things changed, so go back and plan again. That can be done forever. It’s a great way to procrastinate. While I was encouraging someone else to act, I realized I was doing the same thing on another of my projects. I had a plan, but wasn’t getting to it because I didn’t want to get started until I knew the plan would succeed. Nice idea, but nothing was getting done.

So, last night I ignored my normal plans, sat down at the computer late which is not normal, and simply started even though I didn’t know exactly how I’d finish. Two hours later I produced a two minute video based on my most recent photo essay, Twelve Months at Maxwelton Beach. I was supposed to have that done months ago. I put off two hours of work for over a hundred days. It was one more item on my To Do list that was gathering electronic dust. Now, it’s available on YouTube.

Photos aren’t finances, but the principle applies. I had an idea. I had a plan, but I wasn’t acting on it. As soon as I did, the plan changed (oh, the vagaries of shifting software, or at least my memory of it), and a short time later I’d accomplished the task. Is it perfect? No. But, it’s good enough. How about plans for my finances? Sure, I have some. Working as a real estate broker means personal finance plans can shift with every sale, and with every gap between sales. 1) My goal is to get back to making more than I need to spend so 2) I can get back to spending less than I make and then 3) investing the rest. Then, I’m planning to un-un-retire or re-retire. You see, I’ve got these plans…

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My Mortgage Modification – Five Years Later

Almost five years ago I reached a major milestone.

“The short story: I get to keep my house, and here’s how it happened.” – My Mortgage Modification Chronology

This month I have progress to report. What? You thought that was the end of the story? Even episodes in our lives have sequels, and sequels have plot twists.

The Good News

I’m still in my house, my only residence in forty years that feels like home. It is the smallest and the best. I also feel sorry for it. While my financial situation is dramatically improved, there are more than enough maintenance projects to keep me and my budget busy for months or years. Even winning the lottery would mean taking a while to get everything done. That’s okay. In my time as a real estate broker, I’ve yet to find a property I like more, regardless of price. I can imagine something sweeter, but so far it is only in my dreams.

The Mortgage Reality

Thanks to Parkview Services free counseling services I was able to navigate the HAMP program and renegotiate my mortgage from about 5.75% (as I recall) to 2%. 2%! My monthly payments dropped to something affordable as long as I maintained my frugal lifestyle (and deferred some maintenance.) Everyone agreed I just needed more time to rebuild my career, business, and financial situation. That process continues, which ironically involves helping other people buy and sell homes and land. I’ve been a millionaire, and I’ve fought foreclosure. I have clients at both ends of that scale and in the middle, too. An interesting sweep of perspectives.

Browse back through those links above for how I (and Parkview) did it. Basically, HAMP would try a variety of financial mechanisms to make a mortgage affordable. Drop the interest rate to 2%. Lengthen the period to 40 years. Forgive the interest on some of the debt. Select in order as needed to make it work, if possible. My mortgage became a 40 year, 2% mortgage, with the interest for a few thousand forgiven.

I let it all slip into history as I worked and worked. A wakeup call came from a financial news interview a couple of years ago. It wasn’t a job interview, it was a news interview (Nerdwallet.com). They interviewed me to better understand why someone would accept a 40 year mortgage. Long mortgages drop monthly payments, but increase interest payments overall. Read My 40 Year Mortgage for that story. The interviewer pointed out that my new mortgage wasn’t a fixed rate. It was an ARM, a dreaded ARM, that was due to increase in 2019. Vague memories remembered that detail.

Fine by me. Interest is only a part of my monthly payment: interest, principal, taxes, insurance. The ARM has limits. This month it jumped from 2% to 3%. A large percentage increase but on a much smaller number than the whole. The difference is about what I spend on gas for my truck each month. The ARM is due to jump next year, too; but that’s only another 1% at which point it should be capped at 4% – a historically low number. It will happen about the time my pension drops, but my income should compensate by then.

The Bonus

One aspect of HAMP is a series of bonuses for good behaviour, or at least paying the mortgage on time. Every year, so quietly that the Customer Service people have to look it up each time, HAMP pays down my principal by $1,000 for a total of $5,000. That’s months of principal payments every year. It confuses the mortgage company, and requires me to double check my bills; but I’m happy that it happens. For a mortgage like mine, that’s equivalent to ~ 2% the value of the remaining debt. Thanks.

The Market

EQ6V-5rTMeanwhile, the real estate market moves on – impressively so since 2014. Remember 2014? The Great Recession? How quickly and easily we forget. For a house under 1,500 square feet (mine’s 868 square feet), the median sales price in 2014 was $191,200. May 2019, $327,200. That’s $136,300 in five years, or about $27,260 per year. My house has made almost as much as my business has made – and with a lot less effort. Basically, for every month I’ve been in the house I’ve passively accrued a month’s living expenses. Real estate can be quirky. (Understatement.) Compound growth can be phenomenal. (Another understatement.

Some people ask why I don’t sell. Easy. If I sell, I lose housing that I love, at a price that’s more affordable than renting something drearier, and I miss out on the additional appreciation without making enough to buy. Will I sell? Not if I don’t have to or want to; but I won’t say never because never isn’t a word to rely on.

Taxes

The market is up. Great! So are tax assessments. Oops. At least for now, that’s acceptable. I don’t mind paying for government services. Let’s hope my income grows faster than those taxes.

Bankruptcy

No. Not mine. Not me. I think I’ll be fine. My mortgage company, however, has filed for bankruptcy. Plot twist! Aren’t you glad you kept reading? Yes. A few months ago I received a letter with their name on it, the word ‘bankruptcy’ and I wondered if somehow they were going to make me go bankrupt, or they thought I had filed for it. Nope. It’s them. Considering some of their business practices I saw in practice, I’m not surprised. In a dream world, their bankruptcy would clear my debt; but in the real world debt operates differently. If you want a window into that weird world, check out John Oliver’s video. Still, I can dream.

What’s Next

I don’t know. Isn’t that the classic question with the impossible answers? No one knows what’s next. All we can do is guess. On a personal finance level, my income, asset, expenses, and liabilities will all shift. That’s all I know. Act as if tomorrow will be like yesterday, work and hope to make it better, repeat. I do have a new dream property in mind. It sits there with my thoughts of winning the lottery jackpot. In the meantime, I have a house that I can call home. Too few can say that. Now, about that paint, and that roof patch, and that window, and that dishwasher…

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Affording Housing

The topic came up again. How can working people afford housing? I’ve always been aware of the choices too many people must make to find a place to live. Going to school (Virginia Tech) next to Appalachia will do that. Now, as a real estate broker, I’m hearing about it much more. Thanks to the talks I’ve given at the local libraries, I was invited to yet another meeting of people struggling to help people who are struggling. The meetings have been about Whidbey Island, but one factoid from the most recent meeting proved the issue is pervasive.

One estimate suggests the nation needs 11 million affordable housing units, but only 4 million are available.” – More About Too Little Housing

As they pointed out in the meeting, this isn’t even about homelessness (which is bad enough). This is about finding places for people who have jobs.

By common guidelines, incomes under ~$60K can be considered low income, especially when measured against housing costs. From a quickly typed tweet; “a $36950 annual means a $923 rent target but $1600 is the market rate.” ” – More About Too Little Housing

It’s enough to make some people think about moving across the country. I’ll use my family’s house near Pittsburgh and my home near Seattle as examples. Zillow estimates my family’s 925 square foot house at about $130K. Zillow estimates my 868 square foot house at about $340k. Sure, mine has a view; but similarly sized houses on Whidbey without views are at about $295K. Take that $295K and go to my childhood neighborhood and get a house four times larger. I’m not planning to make that move, but others might – especially if they are driven by necessity.

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But, who wants to move? Businesses, careers, and jobs don’t pack and ship as easily as movers can move a household. Young families in dynamic industries may be able to do so; but older folks may not. Besides, sometimes culture does matter. Don’t be surprised to find members of the LGBTQ community who purposely left their family’s community, and who don’t feel welcome, or even safe, in similar regions.

Several years ago I almost lost my house. Thanks to a lot of work, government programs, and a volunteer organization I was able to keep it. (More about that soon as a critical long-term milestone approaches.) While going through that I had to consider my options in case we didn’t succeed.

Sell the house

That’s an obvious first consideration, but keep in mind that the mortgage, sales costs, and commissions get subtracted from the sales price. Even if there’s money left over, the issue of relocating work and life will cost money, too; and includes the risk that the move will not succeed. But, for some, they may find that they have been land rich while being cash poor. I can think of several people who can retire sooner than expected – but they’d have to give up their home, a view, a garden, a lifestyle.

Get a roommate

Getting a roommate works if the house works. Adding an extra person to an overworked septic system isn’t a good idea. Every house has quirks, but if everyone adjusts to them, then there’s a bonus of a pile of stories to tell later. Ideally and mathematically it can work, but divorces can happen because two people in love can’t manage to live together. Two strangers might have the same issue. Another bonus: increasing the number of people living in a house dramatically reduces the carbon footprint.

Become someone else’s roommate

Same logic, but flipped, and comes with the freedom of being able to move on if something better arises.

Go communal

Communes never really went away. They’ve resurfaced in a variety of forms: intentional communities, co-ops, community land trusts, commons, etc. Gather people with similar goals and situations, gather their money, and build to fit on common land. At least this way everyone can have their own place, share common ground and resources, and share the costs. Economies of scale don’t just apply to corporations. Ironically, corporations are now providing such services, primarily for young people. Businesses are offering dorm-style living to people just graduating from college and dorm life. It’s an option.

Get small

Sometimes affordable housing comes down to square footage. Tiny saves money, one of the prime drivers for many people buying and building tiny houses. Many Americans continue to think that bigger is better, but enough are waking up to spaces that are just big enough that governments are changing regulations. Find a friend or family member who’ll let you place an ADU (Auxiliary Dwelling Unit, or Accessory Dwelling Unity, or Another Done Undercover) on their property. Build it on wheels and if you have to move, you can. Land is required, though.

Live aboard

No. Land is not required. People have lived aboard boats, ships, and floating houses for centuries. Moorage, however, is required; but it’s probably cheaper than rent. Oh yes, and your house could sink; so, expect to use some of those savings for some very non-trivial maintenance. But, you can also move it too, as the waters and officials allow. Get rocked to sleep, whether you wanted it or not.

Buy land and build

All of the houses are too expensive? Land is usually cheap(er). Building a building isn’t cheap in time, money, or frustration; but design a house for your lifestyle and it may be so efficient that you save money – eventually. Finding a place to live in the meantime can be an issue. In the time it takes some to shop for a house, other could buy and build. Just make sure you get the right permits, and make sure you find the Fountain of Patience to get you through the process.

Buy lottery tickets

Hey. It can work. In the midst of everything else, a $1 ticket can feel as likely as the other options.

Those aren’t all of the options, but they’re the ones I hear about from those who have as they talk about those who have not. Those who have not are already exercising other options, the ones that make the news like homeless camps, living in cars, couch-surfing, squatting, sneaking back in to sleep at work, and maybe even moving back in with the folks – regardless of everyone’s age.

As I mentioned above, these are most of the options I considered when I almost lost my house. After I considered them once, I find myself continuing to consider them. The only constant is change and I realize my situation can change in a moment. Both good and bad news can happen without warning. I hear echoes of those quandaries in every housing meeting I attend. Think back to the first statistic at the top of this post. Millions of people are pondering the same thing. If the answers were easy there’d be more time to consider other big issues like health, family, and the much larger community.

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This week’s meeting’s title was “Issues That Matter – Housing, Where will we all live?” Housing is difficult, but maybe we’re talking about it because it is easier to mention than the core issue. Don’t blame the house. Lacking wealth or income is the core issue behind affordable housing, not housing. Take a look at the options above. Given enough money, people can exercise their resourcefulness and make a home for themself. Wage growth, income inequality, wealth inequality, economic issues are critical issues; but they are issues that are harder to address than finding some land, some contractors, some inspectors, and some homeowners.

Don’t blame the house. Don’t blame the homeowner.

 

Formal Disclosure:
I am a real estate broker with Coldwell Banker Tara Properties in Bayview.

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What Is My House Worth

My house can’t really be worth that!” – exclamation from a friend

Believe it or not, I steer clear of writing about real estate because there are more things in life than houses. Yet, I’m drawn back to the topic just like I’m drawn back to mentioning MVIS when I’m writing about stocks. This blog is about personal finance; and I had to remind myself that I was writing about personal finance and real estate and estimating the value of my house for years before I even considered becoming a real estate broker. Dream Invest Live coverThere’s one chart in particular that reaches into both topics, and that comes up in conversations. What’s a person’s house worth? So, building from what I’ve written about before, and adding a bit of what I’ve learned as a real estate broker, here’s some data about how hard or easy it is to estimate a house’s value.

(Apologies to renters, but keep in mind that if you ever want to own, this may be useful.)

If you’re trying to understand your personal finances, it’s important to understand your assets and liabilities. For most people that’s their house and its mortgage. This is something worth doing.

Real estate is weird. Have you noticed that? It’s almost as if it is more art than science.  Both are correct. It’s possible to throw math at the problem and crunch through to find an answer that has some mathematical basis as well as plenty of assumptions. Quite objective. Think of it as micro-micro-economics. It’s also important to realize that markets are driven by people deciding to sell and people deciding to buy, which means people are involved. Psychology becomes important, as well as emotions like fear and desire. Quite subjective.

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Just about four years ago I wrote about Will Zillow Make Me Move. My finances were struggling, but Seattle’s real estate market was bubbling. Those bubbles were about to surprise many by frothing up into much higher levels, rising over 73% until it recently settled down to ‘only’ being up 71% in that time. It wasn’t dramatically apparent, but Clinton swung up over 66%. Then, I was relieved that if I sold I would at least be debt-free, homeless, but debt-free. Now, if I sold I’d have enough to buy something small or questionable somewhere off the island, probably away from a paycheck, and debt-free. No surprise, my goal is higher: a comfortable and sustainable lifestyle.

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The most common resource I’ve seen people use is Zillow’s Zestimate. The most common resource I use now is – me. Hey, it’s my job. Frequently, I get to bridge the gap, if any. I’m a geek. Some may bridge that gap with denial or a bit of arm-waving. I decided to use data, too.

Since September 2018, I’ve usually started my day by checking Zillow, Redfin, and a couple of industry sites for estimates about my house’s estimated value. I won’t walk you through the drama of the daily swings, but just look at that chart. At first it seemed like every estimate was within $20,000. Not bad, considering no art was involved. By the middle of January, the disagreement was over $70,000. That’s a big difference in post-sale lifestyle. Then, Zillow rose up beyond them all, then dropped tens of thousands in a day.

Automated estimates - 8199 Cultus Drive, Clinton, WA

No. My house wasn’t hit by a tornado, earthquake, or volcano overnight. Something in the data or algorithm changed and whomp and whoops, there goes an estimated tens of thousands of dollars in my estimated net worth. Fickle?

Look at the other algorithms. They, too, see swings of tens of thousands of dollars in a day. How does that saying go? “The person with one watch knows what time it is. The person with two watches doesn’t.” Ignorance can be bliss. A bit of extra knowledge can actually be confusing. No wonder people who are proud of having one clear, declarative statement to live by don’t want to hear that someone else has a different clear, declarative statement for them to live by. I’m tracking four estimates and know the only real answer would be how much someone would pay if I put my house up for sale.

Something so important to managing finances as a house’s value in such a money-driven culture means understanding such things, yet there are no perfect tools to apply to the task of estimating a credible number.

The world continues despite imperfections.

Here’s where I should shout-out to my fellow real estate professionals. Real estate brokers and appraisers prepare analyses regularly. Appraisers typically talk with bankers, so they’re more conservative. Real estate brokers typically talk to homeowners, which can mean being conservative in some cases and generous in other cases. Some want to maximize profit while others want to minimize time to sell. The answers can include a bit of the subjective (from “oh the smell” to “look at that view”) as well as the objective (square feet, number of bedrooms, acreage, et al.) That’s also why the estimates can cost more in time and money. It is a hard estimate to ask for on a daily basis.

Fortunately, there are lots of sources to check. I picked Zillow and Redfin out of habit, and because I  wrote about them regularly in a previous writing job. In the nature of capitalism and competition, something else out there may be doing a better job.

Each tool is developed by a different team, possibly with different goals in mind. I’m sure they guard their algorithms and assumptions, and change them without warning. That makes them a mystery; but hey, they’re free.

I check daily because clients made me curious, and because I’m a data geek. Whether you’re updating your Big Wall Chart of personal assets, liabilities, income, and expenses; or just trying to get an idea of your net worth; or wondering if you can retire by selling your house; estimating your house’s net worth is a worthy exercise.

There’s also a difference between what we hear on the news, and what such real estate sites tell us. I recently gave a series of talks about real estate and affordability trends on Whidbey Island. Thanks to the Sno-Isle Library system, I’ll be doing so again in the autumn. The talks started with a version of the chart I showed above, the bumpy, fickle, bouncy chart of values for my house. The rest of the talks are smoother, more general, covering larger areas, and longer time spans. They also are based on actual sales, not estimates of would, could, and maybe. The smoother data is what shows up in the news. If the news needs something more dynamic, they can look at smaller datasets or shorter time spans or more particular neighborhoods. Both perspectives are valid, but they were developed for different needs.

The market data shows my hometown (Say Yay for Clinton!) median sales prices are up ~6% since September 2018. Zillow estimates my house as down ~2.6%. Redfin sees my house as up~ 4%. Three watches. Hard to know what time it is.

Can my house really be worth between $342,000 and $372,000, when

“Zillow estimated a low point for my house’s value at $236,000 in October 2014. Whether because the threat of foreclosure is removed, or because Seattle’s market is rising, or because of some fluke in their algorithm, Zillow now shows a Zestimate® of $323,838.” – Will Zillow Make Me Move

?

For my personal finance purposes, I’ll guess somewhere in the middle because the final decision will be made sometime later probably involving strangers and a market and economy that is only a guess.

If I was to need, not just want, an estimate, I’d use those other tools plus my experience.

If I just wanted to satisfy my curiosity about my house and the market, I’d use a bit of free, quick analyses, plus some general market trends.

Pick the tool that meets your needs.

If you want to know more about real estate trends on Whidbey Island, check out my previous posts based on the talks, including the videos and presentation slides – or call me. Hey, it’s my job, eh?

What’s your house really worth? Let’s find out. I’m curious.

 

Formal Disclosure:
I am a real estate broker with Coldwell Banker Tara Properties in Bayview.

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Corporations Meet Owners MVIS 2019

Photo on 2016-06-01 at 16.08

Another year, another annual stockholders’ meeting for MicroVision (MVIS). I’m somewhat speechless; but not entirely so, which shouldn’t be a surprise to people who know that I speak through writing. (In the real world I prefer to listen unless I’m in the role of public speaker, but I digress.) Ideally, annual stockholders’ meetings are for the benefit of the stockholders, an opportunity for them to hear from the people they’ve hired (the board) about how well the people they’ve hired (the managers) are managing the company and the people they hired (the employees.) In some companies it is that. In some, like MicroVision, either by choice or necessity the discussion is an exercise is ambiguity and obfuscation. You know it can be radically improved when the independent shareholders are a better news source than the official conduits. I came away wondering if these well-paid and supposedly learned people haven’t learned from the Greeks, the French, the Russians, or late night talk show hosts.

For my notes about the company and the meeting particulars, head over to the Motley Fool, Investor Village, Silicon Investor, and if I have the emotional resilience, Reddit.

This blog is more about the personal side of personal finance, what it’s like to be an independent shareholder. Don’t expect pom-poms and cheers, but don’t expect me to say stay away. Stock ownership remains an avenue for passive income or at least semi-passive asset growth in the US. If you’ve visited this blog often enough you’re probably familiar with the old refrain; “Spend less than you make. Invest the rest.” Investing doesn’t have to be hard, but it benefits from a bit of work and critical judgment.

IMG_0417MicroVision has been a story stock for the twenty years I’ve known about it. They rarely state their case this way but to me, they have the potential to revolutionize displays. Remember CRTs? They were everywhere, and within a few years were booted out by flat LCD screens. LCDs also expanded the possibilities. Only Dick Tracy had a CRT in his wrist watch. The iPhone wasn’t really possible until LCDs (and Gorilla Glass, which has an anti-MVIS connection) became possible. Now, displays are so common that some appliances and vehicles don’t have buttons. MicroVision’s technology enables tiny projectors, which could be equally disruptive and expansive. But not yet, evidently.

It’s that ‘not yet’ part that inspired many of the questions at the meeting. Why not yet? Why not now? How long do we have to wait, or is there something fundamentally wrong which means never not when?

Startup companies rely heavily on their first customers. Companies with big ambitions get involved with big customers. Big customers don’t want little suppliers besmirching their brand. So, companies like MicroVision can be constrained by non-disclosure agreements (NDAs). No news doesn’t mean no news, it just means no news that they can relay. Unfortunately, no news can mean no news, as has frequently been the case for several years at MicroVision. Deals fall through. Technology isn’t available or costs too much. Stockholders hear far after the fact, if at all – while the stock reacted as if someone else already knew. Very frustrating.

The board and management control the information, which is a powerful position. It is also a well-paid position. Compensation packages annually worth hundreds of thousands of dollars are passed around as the company loses millions of dollars. Some of those people are making several times my net worth every year. Power and profit, a nice business model. MicroVision, as well as other small companies, can mint millionaires while shareholders watch portfolios shrink. That microcosm of forty people in a room becomes a mini-play displaying wealth and income inequality in a manner that is ingrained in our economic model.

The Greeks watched hubris demolish powerful reputations. The self-confidence of empowered managers may be a sign of marvelous news yet to be released, but it can also be mutually-reinforcing as board members nod at board members while giving each other applause and raises. One reason to show up at such meetings is to assess for oneself whether management is confident for a good reason, confident as a style, (or sadly as the SEC has proven, sometimes just conning.)

The French and the Russians both saw regimes fail because one group of people saw themselves as apart from another set of people. Us versus Them is a common human characterization, but take it to an extreme and extreme things happen. Unfortunately, small company regime change rarely happens from outside the boardroom. Fortunately, independent investors can judge those characters and decide how best to invest.

The late night talk show hosts are teaching millions of people the value and folly of the recorded and repeated word. Say something this year, say something else this year, and others can compare consistency. That’s the value of attending every year and taking notes. Recordings would be better, but they’re not allowed.

My notes from 2018 MVIS ASM; “Before the Q&A period, the COB interjected and emphasized that they see the company passing from possibility to probability, hopefully with profitability in 2019.”) When asked about it this year, the board and management said the ‘discussion’ about profitability in 2019 was more along ‘goals’, ‘objectives’, etc.; not intended to be guidance. Legally, probably true. Realistically, is such a statement and distinction a reflection of desirable communication skills? You get to decide.

Dream Invest Live coverI’ve attend most if not all of the MicroVision annual meetings since 2000. Someone walking in now for the first time gets a different impression than someone who has heard the same or similar story for about two decades. I’m glad I showed up that first time, and kept coming back. I just wish MicroVision’s situation was better. If you want examples of investments where the stories were successes, go buy my book; Dream. Invest. Live. Whichever way it goes, MicroVision will be in the sequel (assuming I finish writing it.)

I built my portfolio with many local stocks precisely so I could see the company and the people in person. Sadly, MVIS is my last remaining local stock. SEC filings are official. Company press releases are too. But only a small fraction of communication is text or numbers, or even hearing them instead of just reading them. Humans communicate much more through body language. At a meeting like an ASM, that body language is amplified by everyone in the room. I attend to watch the presenter and the presentation, but I sit in the back to watch the body language of the presenter and the reaction of the crowd. It doesn’t cost much, isn’t captured in any report or analysis, and yet is valuable.

Despite my concerns about MicroVision’s communication style, I continue to hold the stock and may even buy more (after a few more house sales). The technology, industry, market, and potential impress me. I don’t expect perfection, and maybe the only thing I have to do is trust that ambiguity is by necessity, and that this year truly is different. As to us versus them, well, that would require individual revelations, a bit of compassion, and hopefully not revolutions.

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Trade Wars Ugh

Trade wars. For many people they are abstract news items, reasons to cheer or complain. They’re real, and sail past my house and cruise through my portfolio. Global news can affect personal finances, even if isn’t your job that’s affected. What to do? I’m pondering that.

My little house looks out across Puget Sound to the Olympic Mountains. Nice. I like it. That also means it looks my view includes the shipping lanes that lead to the harbors of Seattle, Tacoma, and Everett. It is more like an interstate than a backroad, but instead of long-haul trucks the traffic is dominated by container ships. Container ships work best when their holds and decks are full. Since the trade wars began, the ships are floating a bit higher as they leave the US and head to Asia.

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(photo taken from nearby Maxwelton Beach when I was there for Twelve Months at Maxwelton Beach)

Maybe they were going to add more containers somewhere else along the way. I doubt it.

One weird result from similar trade imbalances created unexpected opportunities in other regions. Lots of containers coming in with few going out means lots of containers piling up. The price of the excess containers goes down. Resourceful people buy them up. Hello, affordable housing. But, I digress. (If you want more about innovative housing on Whidbey Island check out my post on one of my other blogs, AboutWhidbey.com).

Watching the fairly empty ships burn fuel to cross the ocean has a direct effect, but only emotionally. Indirectly, it hurts the economy and the environment; but those effects admittedly aren’t perceptible in my life. For others, the effects are direct.

And then came yet another mis-informed tweet about tariffs, as if they somehow make money rather than penalizing people. I try to steer clear of politics because it is too easy to get too distracted. But, tweets from the last few days imploded one of the stocks I was considering selling to pay some bills.

Screenshot 2019-05-17 at 17.44.01

NPTN, the stock for Neophotonics, dropped as much as 44%. They have business relationships with Chinese businesses, and investors ran away from the risk. Assuming everything eventually comes back to normal, a 44% drop is a buying opportunity and a lousy situation from which to sell. The direct effect for me may be a greater reliance on my credit card for some truck maintenance. The indirect effect may be greater because Neophotonics builds the switches that helps the internet stream without buffering.

This is an echo, for me.

Screenshot 2019-05-17 at 17.38.14

AMSC’s fall is part of my Triple Whammy that I’ve mentioned before. About eight years ago, one of AMSC’s prime customers decided to become a competitor – using AMSC’s technology without permission. Hundreds of millions of dollars of revenue vanished. The stock dropped from over $70 to under $4, and stayed there for years. It’s only within the last year or two that it has climbed back up to over $10. It’s fall wasn’t the result of a trade war, but the pursuit of justice was curtailed by diplomatic concerns over trade policies. Why upset an economy the size of China’s over damages measured in less than a billion?

Now, my concern extends to MicroVision (MVIS). They, too, are heavily dependent on Asia and China for customers and producers. The MVIS stockholders’ meeting is Wednesday. There’s been too little news to prop up the promises, pardon me, ‘forward-looking statements’, from previous calls and meetings. I wonder if there’s yet another event that will impact their projections (pardon the pun, fellow shareholders.)

We live in a connected world. We are interdependent as a species and as a series of economies. Personal finance requires at least some awareness of the impersonal influences that are beyond our control. Predicting those influences isn’t easy. If it was, all economists and investors would act in unison prior to politicians making proclamations.

In the short term, international trade disruptions mean shifting my personal choices about which stocks to sell. With enough cash, it would also mean possibilities of pursuing opportunities. I won’t say I am happy about the situation, but the situation is a good example of the value of a diverse portfolio and a frugal lifestyle.

Let’s just hope my truck gets me to the MVIS ASM without requiring me to sell some AMSC while waiting for NPTN to recover.

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Inconceivable And Yet

The point is, ladies and gentleman, that greed, for lack of a better word, is good.” – Gordon Gecko, Wall Street

That wasn’t what the movie was championing, but it is probably the most quoted line. Dealing with the modern world can take a bit of looking past the memes or common catchphrases to remember the intent while contrasting that with the result. Movies and games reminded me of that.

If movies and games are the reminder, then the concept is part of the culture. Culture is something to consider when planning for finances.

Watch the movie. I haven’t in a while. But, reading some of the quotes from this 32 year old movie sounds like today.

Gordon Gekko: The richest one percent of this country owns half our country’s wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It’s bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you’re not naive enough to think we’re living in a democracy, are you buddy? It’s the free market. And you’re a part of it.

This sounds like something out of a Bernie Sanders presentation. Not much has changed, except inequality has grown considerably since then.

The movie that started this contemplation was the too subtly contemplative Rollerball. mv5bzjcwnjgxzjitnjq0ni00ogjhlwiwytitymi5mgq3mze0zjnixkeyxkfqcgdeqxvyntayodkwoq4040._v1_ux182_cr00182268_al_ The movie was supposed to be a warning about freedom versus security in a world run by corporations. The hero prevails after a violent ordeal; but the impression left on the movie industry was that of the violent ordeal, not the struggle against injustice. That’s why 27 years later the movie industry remade the movie emphasizing the violence, not the message.

People remember “Greed is good” and action, and forget the intent.

Monopoly is one of the world’s most popular games. Monopolize the market. Drive your opponents (friends away from the board) into bankruptcy. Own it all while everyone else owns nothing. The original intent of the game was to point out;

It was intended as an educational tool to illustrate the negative aspects of concentrating land in private monopolies.” – wikipedia

I doubt it sells so well because it teaches the lesson so fully.

It’s like Star Wars, where the hero isn’t celebrated as much as the villain. Darth Vader is mentioned far more often than Luke Skywalker. Besides, Luke’s costume isn’t as popular and distinctive as Darth’s.

Screenshot 2019-05-11 at 15.52.53

But Superman was all about Truth, Justice, and the American Way! Well, to paraphrase Inigo Montoya from The Princess Bride; “You keep using those words. I do not think they mean what you think they mean.” (Pardon that I had to change the plurality of those words.)

Take your pick of political approval ratings, climate deniers, flat-earthers, and entrenched anachronisms. Things that are obvious to many aren’t obvious to everybody. Welcome to a recipe for dysfunctional attitudes and governance.

When I wrote Dream. Invest. Live. Dream. Invest. Live., I tried to be clear about my assumptions. Basically, accept the system as imperfect but trust the regulatory organizations and justice in general to eventually return to some normal norm. Now, under-funded and under-supported SEC, FTC, and other governmental agencies require more due diligence from individual investors and people planning their personal finances.

Whether Superman would approve or not, we’re witnessing the reality of a diverse populace and the injustices inherent in the system. To ignore that reality is to plan for an unreal world. Advocate for the change you want to see, or at least vote. But when it comes to the rather objective and data-driven world of finance, it makes sense to acknowledge the existing risks.

Regardless of the details, the conventional wisdom continues to dominate on a personal level.

Spend less than you make. Invest the rest.

That’s true for an idealized world or a pragmatist’s perspective. Warnings about inequities have been pronounced for decades, yet misconstrued for just as long. For some people, truth, justice, and the American way include thinking greed is good, monopolies are a winning strategy, and strong villains are worth remembering more than heroes.

Do what you can, where you are, with what you have – and work to make a better future. Deal with today. Plan for tomorrow. And realize that a lot can happen between now and then.

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Is Whidbey Changing – Spring 2019 – Coupeville

Every place is the same. Every place is different. Supply and demand affect prices. But every place has its supply issues and a demand for that supply. Saturday, May 4th, was the fourth in my series of talks about real estate and affordability on Whidbey Island. 47532-Is WhidbeyChanging-LNG POSTER My work as a real estate broker is a great opportunity to dive into data, and my time as an engineer means data is a comfort zone for me. Put the two together and find a good reason to talk about data on topics that are frequently defined by anecdotes. This time the talk was at the library in Coupeville with an audience mostly from central Whidbey. It is a place in demand, with some supply issues, and plenty of stories.

Data is objective. Data can also include biases, but data about houses that were sold is data based on people making commitments measured in hundreds of thousands of dollars, at least. One bias is that this is a self-selected set. Anecdotes are enlightening and entertaining, but data about houses that sold is data about actions taken – not just talked about.

I’m familiar with central Whidbey. Besides visiting it almost weekly for dances, friends, or work I’ve also produced two photo essays of the area:

Twelve Months at Penn Cove and Twelve Months at Admiralty Head.

Penn Cove is a protected saltwater harbor that includes the tourist town of Coupeville, a mussel farm, a wide wrap of waterfront properties and yet is off the highway. It can be quiet. Admiralty Head is the forgotten, overlooked center of the island. Take the average of the latitudes of the tips at Deception Pass and Possession Point and get a line that passes through the area around Admiralty Head, Driftwood Park, Crockett Lake, and Fort Casey. That broad swing of park-like properties are neighbors to Ebey’s Landing and Ebey’s Prairie, yet more protected turf. The area is so appealing that movies are made here. The area is also known for the controversial practice airfield bureaucratically named Out-Lying Field (OLF). Around OLF converted fighters practice carrier landings over the relatively safety of land. Great for training and certification, great for folks who enjoy jet noise. Not so great for people who prefer quiet.

It is far too easy to dive into those anecdotes about nature, tourism, movies, and the military. That made it particularly interesting to compile the data about what people are willing to pay to be in the vicinity, though it includes a bias by not including those who wouldn’t pay to be there. Valuing such a non-event is difficult.

Local Affordability - 811-813

My apologies if you’re looking for definitive conclusions. All I have to show are the data.

Price per square foot - 811-813

Overly simply, in some ways central Whidbey fits nicely between the high prices of south Whidbey’s tourist and retirement neighborhoods, and the urban area that is Oak Harbor and the Naval Air Station. If anything, that trend suggests that prices go down as the search moves north, and that central Whidbey gets caught in the middle. Couple that with the trend for lower prices for inland versus waterfront and it is easy to assume the more affordable housing is in the north and between the shores.

Moderating effects don’t necessarily affect those who are particularly sensitive to a particular topic. People who moved to the area decades ago to avoid noise are justifiably upset about low-flying jets designed for performance instead of acoustics. People who moved to the area for the migratory wildlife and panoramic views may care more about the birds and the mountains than the sounds. Every place has its own balancing act. Teasing out the difference can be difficult, especially in an area with so few data points (house sales) to be statistically significant.

https://fineartamerica.com/profiles/tom-trimbath.html

The title of the talk is and was “Is Whidbey Changing”. The answer is ‘Yes’, of course. The entire Puget Sound was overlooked until Microsoft and Frasier made it popular. When there were far fewer people each issue had more negotiable room around it. Now, the area’s popularity has attracted a significant increase in population. Land and housing shortages around Seattle made Seattle’s housing situation headline news. The rest of the mainland is feeling similar effects. The island, however, have natural resource limits to growth, limits that restricted population density on the island. Technology and economic pressures are creating incentives for change. Those changes are being negotiated, possibly from perspectives that were valid years ago when there were fewer people and planes. The resolution isn’t obvious.

I grew up in Pittsburgh during the last of its dirty image era. We were told to accept the smog that was “The Smell of Progress.” Within a few decades, steel was no longer as dominant an industry. It was possible to watch steel mills be sliced up and recycled leaving tortured earth. We never expected them to leave, but they were trucked away. What they revealed was waterfront property that welcomed any clean development. Local industries shifted to robotics and biomed. The image remains but the lifestyles dramatically shifted.

Military base re-arrangements and needs shifted encouraging the Navy to post more people and planes to Whidbey. The flights are increasing. The personnel are filling the vacant properties. The neighbors are feeling the pressures in the environment, housing, and traffic. Maybe that situation will remain. And yet, maybe it will change. Imagine a seaside town with a westward view, dramatic geography, and a very capable airport. The potential value of that is impressive, but theoretical. Imagine the continued progression as the military switches from pilots to drones. Pilots need to be continually trained. Train one drone and the rest learn. Rhetorical: At what point does the best use of the land switch from military to commercial? Will it ever?

I don’t have the answers, and currently there’s an oversupply of questions (and declarations!!!).

Here’s the good news. You get to make up your own mind. That’s one of the benefits of being an adult in a democracy. Whether it is about real estate, affordability, national security, community, or any of those questions in that oversupply, I feel it helps to pick your topic, research it, dive into the objective and subjective perspectives, and decide for yourself.

For those who want a few more details than will fit in this blog post, or want to review the material, here are some links to the video, this presentation, and the previous presentations.

Why are there so many? Two reasons: every place is different, and time changes everything. The answer for a different time and place will necessarily be different – and a good reason to stay tuned.

Thanks to the various Sno-Isle Libraries and their librarians for hosting the presentations.

Formal Disclosure:
I am a real estate broker with Coldwell Banker Tara Properties in Bayview.

Informal Disclosure:
I’m happy to help.

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Nickles And Dimes

How old are you? Do you remember when stores were built around the idea of nickles and dimes, or is being nickled and dimed something that sounds dealing with insignificant details? Change the wording from pennies to dollars and the story hasn’t changed much.

Photo on 2016-03-31 at 14.14

I remember five and ten cent stores, both local stores whose names I forgot and national names like Woolworth’s that are mainly remembered as historical references. With a pocket of change a person could go shopping for enough stuff to warrant a bag (paper, of course.) It was a time of save a few pennies and work up to a nickle, and actually get something for it. Leave a nickle as a tip now; and find you delivered an insult.

The modern equivalent is the dollar store. Very much the same idea, but my imperfect memories remember stores that were nicer than the Dollar Store. They also seemed to be much bigger, but I was much smaller. Perspective matters. The name represents a ten or twenty multiple, but the basis was the same: they buy in bulk from a cheap manufacturer (first Japan, then China, then…), we buy a few items knowing we’re paying based on price, not quality. If that’s all you can afford, then price becomes more important. Even if quality provides lower costs over all, that’s a luxury to someone who only has that dollar.

One lesson is inflation. As much as we can fear or complain about inflation, inflation is relatively calm in recent US history. We worry about inflation exceeding a few percent. Americans who were adults forty years ago lived through a short period of 13% inflation. A dollar in 2019 buys as much as $0.07 did a hundred years ago. We use cents so infrequently that the symbol is no longer standard on a keyboard. (Feel free to play with the notion that “We use sense so infrequently…”, but that’s another story.) The US currently has 1.9% inflation, which is below the Fed target of 2%-2.5%.

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A little inflation is seen as a good thing because a little deflation is a very bad thing. A couple of percent keeps us on the less unhealthy side of a major economic worry. Check Japan’s worries about deflation (and their potential for a deflationary spiral) or Zimbabwe’s worries about hyper-inflation (which is so ridiculous that it was aiming at 1,000,000% recently.)

Saving those pennies made sense when they could accumulate to something. They still can, but one measure of how little we value them is how readily some shoppers leave their change at the counter, or dump nickels and dimes and maybe quarters into the save-a-penny/take-a-penny cup. At least some non-profits benefit from valuing the multitude of discarded coins donated to them at the cash register (that’s assuming there’s any real cash to register as more transactions slide over to plastic or an app on a phone.)

I’m not one of those people who say everyone should count every cent. My bank accounts must balance to that measure, but I’m not going to spend that much time worrying about such small amounts of money. I do save my change, and rarely spend it; but it rarely amounts to much. About two or three times a year I collect all of my change, load it into a rattling retail coin counter (Yay for not having to fill little paper tubes and smelling like copper!), and find that the total amounts to less than a tank of gas. Hit the Donate button, get the receipt, and it doesn’t even make a difference to my taxes. Hopefully it makes a difference to the charity. I don’t do it for me because I’ve quantified how little it adds up to relative to my expenses.

Money is value. Time is more valuable than money. Don’t spend too much of the precious resource trying to save more of the other one. Time is more than money. Decide for yourself where that line is. Don’t worry about whether it makes sense for Bill Gates to take the time to pick up a $100 bill. What will you walk past? A penny? A nickle? A dime? A quarter? A dollar bill? If all you have is $1, then pick it all up. I’ll stop to pick up any of it because of the Lucky Penny superstition, and the possibility that anything higher may be claimed by who dropped it. In reality, a Lucky Penny sits on the shelf for a while before getting dropped in to the coin sorter. The other coins sit on display a shorter time, even though they all end up in the same place.

The more practical application of the nickle and dime concept is electronic. The value of a dollar is more apparent when you have to pull one out of your wallet for every purchase. Go online. Sign up for a subscription that is ‘only’ a few dollars a month. It may be worth more than that, in which case you made a deal. But it is too easy to sign up for several subscriptions, and to sign up for more than you can remember. Debit and credit charges can drain accounts without involving wallets or checkbooks. It is true in personal finance. It is true for businesses. My streaming device readily tries to entice me with subscriptions throughout the day. Most of them have a price of a few dollars a month. Sure, they all have value. But I can only enjoy one at a time, and may not be able to get to all of them in a month. One at a time. One at a time. I turned off Netflix, switched to Hulu, and may try another one soon.

The more important and powerful but boring adage is “A penny saved is a penny earned.” Being creative and resourceful enough to realize you don’t have to buy this thing or that service is much more powerful than saving 20% or even 50%. Don’t buy it and save 100%; assuming that was for a want, not a need. Necessities are more valuable than luxuries regardless of the luxury or its price.

Now, I am curious. I wonder what a pack of gum costs. I rarely chew it, so I don’t know; but I do know it isn’t a nickle or a dime, and may be more than a dollar. Sounds like an excuse to visit the store, check some prices, and save all of the money I won’t spend on such things. Of course if there’s a sale on tea, well, that’s another story…

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Is Whidbey Changing – Freeland – Spring 2019

Give a talk three times and every time is different. Why not? Change doesn’t stop. Time and geography change the emphasis and the topics. A few hours ago I finished my third talk about real estate and affordability trends on Whidbey Island. In general, the message was the same. Thanks to the audience, we talked about new topics with new perspectives.47532-Is WhidbeyChanging-LNG POSTER

Formal Disclosure:
I am a real estate broker with Coldwell Banker Tara Properties in Bayview.

Informal Disclosure:
I’m happy to help.

If you missed it, tune in by watching the video of the livestream (bad camera angles and too-rich colors included.)

Don’t have time for the full show, or want to look at the fine print and individual squiggles? Here’s the presentation.

Is Whidbey Changing – Spring 2019 Freeland (pdf)

Want to see what was different without watching and comparing each presentation (Is Whidbey Changing? – Langley – Fall 2018 & Is Whidbey Changing? – Langley – Spring 2019)? Well, here’s my recollection of some of the new topics.

For those not familiar with Whidbey Island, Langley is known globally as a premier tourist destination. Freeland isn’t as well known, but it includes the biggest shops, the “Gold Coast” of west side waterfront properties, a couple of golf courses (depending on where you draw the boundaries, and a lot of the things that help you get things done. It isn’t the only place with those features, but it possibly has the most comprehensive set without being a Big City.

Waterfront

Median house prices are rising, but they tend to combine everything in that zip code. Break out the waterfront versus non-waterfront homes and see a dramatic increase in the median house price. Instead of a price of about $300K, expect something more like $900K. Some of those waterfront homes are along a lake. Expect an even wider dispersion if the distinction between fresh water and salt water. (An analysis I have yet to complete.)

Demographics

Freeland, as well as the rest of south Whidbey is aging. The median age is increasing a bit less than a year per year. That suggests that, as someone moves out, someone their same age moves in. It probably isn’t that simple; but in general the data suggests that Freeland isn’t seeing a trend of retirees selling to young families. Until immortality is invented, this is an unsustainable trend.

Culture

Preserving heritage, culture, and landmarks is difficult anywhere. On a rural island, families may sustain such things; but as generations disperse, so do preservation efforts. Fortunately, philanthropic newbies can accomplish amazing things, too. Such efforts won’t save everything, new money means new perspectives, and as stories fade, things change. Also fortunately, Whidbey Island has one of the highest concentrations of non-profit organizations in the US; so at least some social structure exists to help things persist.

At the core of the conversation are a few key observations:

  • Whidbey Island feels unaffordable to many, and they’re right according to many measures; but the island is actually much more affordable than the other islands, places on the mainland, and places around the Pacific Rim. (By the way, I enjoyed the observation that the comparison is among a bunch of cities sitting over volcano, earthquake, and tsunami zones.)
  • Many of the trends are unsustainable, which means something will change. Inventory can’t go below zero. Immortality isn’t here, yet. (Come on Geron.) If wages don’t keep up with expenses, then workers have to move to someplace more affordable.
  • Solutions that are available other places but not in Island County, may begin changing county policies as off-island economic pressures make it cheaper to change policies here than to live somewhere else.

There’s much more. That’s why the room was packed, and I stayed long after to talk with attendees. I encourage you to watch the video, read the slides – or attend the next presentation which will be in Coupeville on May 4th at 10AM. Every month starts with an update to the data, and Coupeville is unique in many ways, so that presentation will be different, too. I’m looking forward to it, seeing you there, or chatting about such issues online or in real life.

Stay tuned.

PS Thanks to Sno-Isle Libraries, Freeland Library, and the Friends of Freeland Library (particularly for the very sweet projector setup.)

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