This is a good article from Psychology Today: Friendship: The Laws of Attraction.

An excerpt:

But according to social psychologists Carolyn Weisz and Lisa F. Wood at the University of Puget Sound, in Tacoma, Washington, there’s another component to best friendship that may trump even intimacy: social-identity support, the way in which a friend understands, and then supports, our sense of self in society or the group. If we view ourselves as a mother first and a belly dancer only on Saturday mornings at the local dance studio, our best friend is likely to be another mom because she supports our primary social-identity (as opposed to our personal identity as, say, someone who loves film noir or comes from the Bronx). Our social-identity might relate to our religion, our ethnic group, our social role, or even membership in a special club.

Also some interesting tips on how to maintain friendships:

From young adulthood onward, our notion of what makes a good friendship changes very little, but our capacity to maintain one does. It’s a poignant reality; we know what it means to be and have friends, but after we graduate from college and go our separate ways—launching our careers, getting married, having children, getting divorced, caring for aging parents—we’re often unable to muster the time and energy to maintain friendships we profess to value. Like anything else in life, if we want to remain friends with someone, it requires a little work. Simply put, we must show up.

Communication facilitates the first two essential behaviors: self-disclosure and supportiveness, both necessary for intimacy. We must be willing to extend ourselves, to share our lives with our friends, to keep them abreast of what’s going on with us. Likewise, we need to listen to them and offer support.

Interaction is the third essential in tending to a friendship. You’ve got to write, you’ve got to call, you’ve got to visit. Find the nearest Starbucks and take time to catch up. “The specific activity doesn’t matter,” says Oswald. “The important thing is to interact.”

The last and most elusive behavior necessary for keeping friends is being positive. Social psychologists tout the necessity of self-disclosure, but that doesn’t mean an unrestricted license to vent. At the end of the day, the intimacy that makes a friendship thrive must be an enjoyable one, for the more rewarding a friendship, the more we feel good about it, the more we’re willing to expend the energy it takes to keep it alive.

It’s not that I’m against buying real estate, but for such a significant decision, I prefer to have as much objective information as I can. I’m very “left-brained”… and often a contrarian, much to the displeasure of many I talk to.

So it is with interest that I read http://en.wikipedia.org/wiki/United_States_housing_bubble:

The popular notion that, unlike stocks, homes do not fall in value is believed to have contributed to the mania for purchasing homes. This assertion has been true for the United States as a whole since the Great Depression, and appears to be encouraged by the real estate industry. However, housing prices can move both up and down in local markets, as evidenced by the relatively recent price history in locations such as New York, Los Angeles, Boston, Japan, Vancouver, Sydney, and Hong Kong; large trends of up and down price fluctuations can be seen in many U.S. cities.

and:

Compounding the popular expectation that home prices do not fall, it is also widely believed that home values will yield average or better-than-average returns as investments. The investment motive for purchasing homes should not be conflated with the necessity of shelter that housing provides; an economic comparison of the relative costs of owning versus renting the equivalent utility of shelter can be made separately … Over the holding periods of decades, inflation-adjusted house prices have increased less than 1% per year.

I won’t contend with anyone about whether a particular neighbourhood is “bound to go up”, though; unsurprisingly, I’m not good at all at predicting how people will value a particular neighbourhood ten years hence.

Someone tell me what’s wrong with this calculation? The “common sense” advice is that one should always take the shorter amortization period that you can live with when buying a mortgage, all other things being equal. When I crunch the numbers, however, it doesn’t make sense.

I whipped up a simple spreadsheet that does the major calculations: http://spreadsheets.google.com/pub?key=p4BfPAlbI_wk4TRtdFKA0MQ

I picked an arbitrary principal amount. I also picked the amortization period in a similar fashion. It’s easy to spot that five years doesn’t make a large difference in the monthly payments. However, if we assume that monthly difference is invested for a certain Return On Investment, it adds up to a pretty big amount after 30 years.

For fun, I factored in the tax refund form using a tax shelter - it makes the case stronger, but it doesn’t change the conclusion. I also took into account that with a shorter amortization period, the last 5 years of payments goes directly into the bank account.

Can someone tell me why these calculations are wrong? It runs contrary to all the accepted wisdom about mortgages. I ignored inflation, but given that inflation is economically beneficial when holding debt, it would make extending the amortization period a better case. The ROI is chosen based on a historical average of the stock market index, and the mortgage rate seems historically reasonable, too?

My only thought so far is that the underlying assumption in the standard advice is that people won’t (profitably) invest the extra monthly cash that comes from a smaller payments. Is it really simply a discipline issue, and knowing one’s self?

[Updated 2007/01/26] The comment from DX is right; if I remove the tax shelter effects and make the mortgage rate equal to the ROI, the Future Value of both amortization cases ends up the same. Another consideration I’m wondering about is if the Present Value of those last five years of mortgage-free savings is as valuable as the accrual of smaller savings earlier. I suspect, however, that is balanced out by the reduced real burden of debt due to that same effect.

So I guess it boils down to whether one’s expected ROI is greater than the mortgage rate, and whether one is forgoing any tax shelters with those mortgage payments.

After shipping my Optoma DV10 projector to Optoma’s Mississauga location, I crossed my fingers that it was a simple repair. It must have been, as a scant two working days later, I discovered UPS was trying to deliver me a package!

According to the service report, they replaced the colour wheel and all was well again. Trying it out at home, it works again!!!

I missed watching shows on the Really Big screen.