As you may or may not know, we are expecting our first child this December. Since we have a girls name picked out already, it's virtually guaranteed to be a boy (we will know in few more weeks). Since we both want kids, our thinking was that right now would be the best time to have one since the next year is essentially just a waiting period- waiting to hear back on admissions decisions. Discussing the matter with some of my professors and the doctors in the ER confirmed our suspicion. In fact, one of the doctors told me this-

"Having children while I was in residency was easy. I was never around. You see, it was easy for me, not my wife. It might sound chauvinistic, but it’s the truth."

Another academic year has come and gone. I took the MCAT on June 18^th at 2PM and am awaiting the results (July 21 after 5PM EST). After so much studying, I was expecting to feel at least a modicum of preparedness during the exam- instead I felt as though a truck ran over me.  Having taken each of the AAMC practice exams, I felt as though the “real deal” was different- much more computationally heavy in the physical sciences with nearly 80% of the questions being physics related. The computations were not difficult, but rather time consuming, so instead of finishing with 5min left as per nearly every AAMC practice exam, I finished with 17s to spare. Verbal and Biological were reasonable, although I was somewhat surprised by the quantity of genetics and immunology questions- a topic amazingly absent from nearly all of the AAMC practice exams.  Thankfully I was a TA for genetics spring quarter (and I just took immunology winter quarter), so I felt as though I understood and could answer each of the genetics related questions…. These were the ONLY questions I really felt good about on the entire 5 hour exam.

• Took all of the AAMC practice exams- on 8, 9, and 10 I was scoring 35-37. Supposedly exam 10 is the most similar to the current exam. Having just taken it, I would dispute that claim.
• Took courses such as physics, immunology, organic chemistry, etc the same year I planned to take the MCAT
• TA for genetics
• Listened to Examkrackers Audio Osmosis for about 2 hours per day (to/from school) for months. Lots of good information, although I would frequently have review material due to driving distractions. I disliked how they would talk about material/equations that would not be on the MCAT. Additionally, the CDs are poorly mastered resulting in huge differences in audio levels- especially for the sound effects scattered throughout the CD series.
• Used both the Kaplan and Princeton Review books. I liked how Princeton provided practice questions after each concept they went over- this is in contrast to Kaplan which would only provide a section exam. Kaplan was easier to read than Princeton however, so I would often read my Kaplan book and then take the assessment questions from the Princeton book.
• Used the Examkrackers books for Physical and Biological sciences. I liked how many test questions were scattered throughout the book.
• Watched the Gold Standard videos a friend in the pre-med club let me borrow. These videos were OK, although for a visual learner like myself, they did help. If you do buy these videos, don’t expect to learn everything you’ll need to know from them.

• Get some sleep- use sleeping pills if you must- I was unable to sleep the night before the MCAT, and I’m sure this cost me points. I was totally exhausted.
• Keep the gen chem knowledge fresh- pH and redox sucks to re-learn, especially when you know that you used to have this material down cold.

I have often wondered how the founding fathers would view our country as it is today compared to the nation they helped birth. When Jefferson penned the phrase “We hold these truths to be self-evident that all men are created equal” there was a conscious decision to side-step the issue of slavery so that the immediate greater good of forming the nation could be served. Jefferson, a slave owner and critic of the practice, surely saw the problems in his inspired word. Ignoring the reality of his time, Jefferson managed to capture an ideal that has been held up as the ultimate embodiment of the American ethos for generations. 232 years later, we the people have finally lived up to our famous credo and elected a man of color to the highest office in this nation. When Martin Luther King Jr dreamed that “… my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character” I wonder if he would have believed the events of today- a mere 45 years later. I have no illusion that racism and divisions still exists in our country, but today I have to believe that Jefferson could not have been prouder of this great country today. I know I am.

At CWU there seem to be several dozen different religious clubs, all of which advertise around campus. Years ago I used to be a youth group leader, although questions about my own faith caused me to stop at the end of a school year. For whatever reason, i'm unable to simply accept statements of faith- the mantra of "question everything" would be a good one for me. It's probably the same reason I have always tended to gravitate toward the sciences. For this reason, my personal faith tends to wax and wayne, and this recent round of religious advertising across campus has caused me to ask myself again what I believe.

Today I came across a good quote by Blaise Pascal-

"Le coeur a ses raisons, que la raison ne connaît point. On le sent en mille choses. C'est le cœur qui sent Dieu, et non la raison. Voilà ce que c'est que la foi parfaite, Dieu sensible au cœur. "

or in english

"The heart has its reasons, which reason does not know. We feel it in a thousand things. It is the heart which experiences God, and not the reason. This, then, is faith: God felt by the heart, not by the reason."

The main reason I enjoy this quote is that it sums up something that I realized awhile ago- faith, by its very nature, can't be proven sufficiently to satisfy the mind. Indeed, if it could be proven, it would cease to be faith and become fact. For this reason faith can never be something that comes from the mind, but can only come from the heart.

The other day our neighbor brought over a loaf of bread that she had made- apparently her second attempt at breadmaking. It was pretty good. I had been wanting to make some apple butter this fall, so I picked up 10 pounds of apples on my way home from school on Friday. That evening I peeled and chopped them, and got the apple butter cooking overnight in the crock pot. Today it was ready and delicious. I bought our neighbor a jar of the stuff as thanks for the loaf of bread. Reciprocity is delicious.

With midterms over, I can finally relax a little this weekend, although I keep wondering how I did on my chemistry exam. Despite the respite, I need to take care of two lab reports and some physics homework over the next few days. Oh yeah, I need to finish memorizing muscles too.

The other day in the ER a young patient was about to get some sutures in an uncomfortable spot and asked if it was going to hurt. To my surprise, the doctor didn't sugarcoat it and stated "this will hurt." It clearly did. Having been asked "will this hurt?" in the past, I have often responded with something like "it will sting a little", or "it won't hurt that bad" (anyone who has put alcohol on a skinned knee knows this is a lie), but seeing that there's nothing wrong with the truth, I believe that it is the best response. It's my belief now that the only thing lying accomplishes is to undermine trust, so that the next time you say "it will only sting a little", it will automatically be translated into "it'll hurt like hell" anyways.

My friends and family know of my armchair economist tendencies- I spend too much time reading about the economy and have been following it ever since I graduated from WWU in 2002. In fact, my wife knows how stressed or busy I am based on my reading levels- an increase in either one of the former results in less of the later, so she's happy when she finds me reading. In college I learned keynesian economics, but have since learned about austrian economics and tend to view economics though that lense.

My dad and I often talk about the market, and although he believes me to be somewhat of a perma-bear, he still likes to listen to what I have to say, so I thought I would share some of my insights here.

Housing- The housing market will not recover anytime soon and certainly not anytime this decade. The conditions that allowed for the housing bubble to inflate to such a degree are gone, forcing a reversion to the mean. Expect prices to overshoot on the downside before coming inline with more realistic valuations. Rent is a good proxy for the value of a house, and the traditional multiplier used by investors looking for rental income during their valuation of a house is 100-120 times the expected monthly rent, so if a house rents for $1000 per month, the value under this formula is $100-120k. NINA (no-income and no assets) and NINJA (no income, no job, or assets) loans are a thing of the past as will be no-downpayment home loans- expect a return to more traditional mortgage underwriting (ie: 20% downpayment required). Since the average savings rate in the US is negative, this will severely limit the pool of qualified buyers.

Credit- Expect credit to become much more difficult to obtain on both the personal and business level. Credit will only be offered and available to those that don't want it in the first place- those that want or need it will be left out in the cold. For a consumer this means fewer new cars or toys, and for a business this means less money for expansion or even daily operations (like payroll or purchasing of inventory). Expect this problem to become worse before it gets better- Christmas will probably be brutal across the board.

Jobs- Expect rising unemployment and underemployment. Unlike previous decades, much of the unemployment will come from white collar sectors like finance. As with previous downturns, blue-collar employees will also be affected. I have doubts that the US auto manufacturers will continue to exist in their present form for much longer. It's probably safe to say that as news of layoffs increases, consumers will reduce their consumption and think twice about making large ticket purchases- the consequences for the retail industry are obvious. Less retail activity (and unavability of credit for expansion) will reduce demand for commercial construction- which comes on top of the already depressed residential construction job sector.

Government and taxes- The federal government will run a deficit. Quite the crystal ball, no? State and local governments will be under severe financial pressure. Decreased sales tax receipts, loss of construction permit revenue, and declining property tax valuations will push many budgets into the red, just as demand for social services and unemployment insurance rise drastically. Since State and local governments must balance their books, there are only three options- issue bonds to raise cash, reduce services, or increase taxes. With a dysfunctional credit market, the first option will be difficult to accomplish at reasonable rates. Reductions in services would be political suicide, so this option is off the table leaving us with the only option of an increase in taxes. So what will be taxed? I would expect rates for the upper brackets to increase, although the lower brackets will probably be unchanged (tax the rich). Consumption taxes (sales, sin, etc) will most likely increase. Additionally, with so much money sitting untaxed in retirement accounts, it seems unlikely that the status quoe will persist.

Stocks- Down. During this time of flux, traditional valuations are worthless since they're all lagging indicators of performance. An example is the P/E ratio- if earnings have been falling, but haven't yet been reported, then the ratio isn't correct- the assumption that earnings remain stable from quarter to quarter is now flawed. Incredible bargains probably abound, but will take a lot more research to tease out of the carnage. The paradox of a severely down market is that quality items are sold in order to pay for malinvestments due to margin calls, etc. For this reason, expect investments that you believe should remain strong (like gold) to falter. Don't sell into the weakness. I intend to continue purchasing stocks in my roth account consistent with my views on peak oil.

Geopolitics- This is a real wildcard and will depend on how bad things get. China is a nation heavily dependant on exports to sustain their economy and has benefitted greatly from globalization. Increased transportation costs this summer took their toll on exports, and I would expect that reduced global demand for their goods will pack another punch. I would expect the Chinese government to implement massive public works programs, and unlike the US, they have the capital to finance such a keynesian prescription for economic woes. Russia is another country whose recent fortunes are greatly tied to exports albeit natural resources (oil, natural gas, etc). Should petroleum prices continue to decline, government revenues will contract- unlike the dollar, the ruble is not the world's reserve currency, so financing shortfalls could prove difficult. Hopefully we don't see another LTCM as a result. The current political structure of Russia concerns me, and former KGB agents in positions of power who long for a restored USSR don't improve the picture. India has profited greatly from the offshoring of back-office and front-line customer service jobs. With reduced demand for these services (coupled a cheaper US labor force), it will be interesting to watch what happens. History provides numerous datapoints showing that when the global economic situation gets bad enough, war is often a consequence.

Peak Oil and Peak Energy- Peak oil is a reality despite the falling prices at the pumps. Perceived demand destruction coupled with the selling of what should be a strong asset have served to depress crude prices and mask any shortfall in production. Production from countries still friendly to the US is falling, resulting in a corresponding decrease in their exports to us. Mexico's largest oil field- cantarell- had an amazing depletion rate of 18% in 2007. With such a rate, it's unrealistic to expect Mexico to be a net-exporter of any serious consequence to the US for much longer. In addition to importing large amounts of crude, the US also imports large quantities of natural gas. In 2007 the US consumed 63.2 billion cubic feet of natural gas while it produced 52.8 billion cubic feet. To address the shortfall in production, 89.7 billion cubic feet of natural gas was imported in 2007. The amazing fact is that this 13.7% in US consumption represented 47.5% of Canada's production. Do you believe this is sustainable? I don't. Compounding this problem is the fact that natural gas fired power plants have become the favorite for peak load electrical power plants- only increasing US demand for natural gas. As global hydrocarbon production wanes, the consequences will be dire and affect americans in much more intimate ways than any credit crunch will.

Resources-

Mish's Global Economic Analysis- http://globaleconomicanalysis.blogspot.com/

Calculated Risk - http://calculatedrisk.blogspot.com/

The Oil Drum- http://www.theoildrum.com/

The Big Picture- http://bigpicture.typepad.com/

Financial Sense Newshour- http://www.financialsense.com/fsn/main.html

Movies-

A Crude Awakening

The End of Suburbia

I'm not sure where the summer went, but with fall now upon us, it's time for some updates.

Volunteering in the E.R. this summer was a real eye opener for me, and I learned some truths about the medical profession and myself. I present them below in no particular order-

• Bodily fluids and foul smells don't bother me, but watching a young girl get a dozen jabs of lidocaine into a gaping wound was enough to make me feel faint. Since then I have observed more of the same, and I think I'm finally over the needle jabs, although my empathy remains intact.
• Physicians don't know everything- they consult reference books and each other.
• A nurse with 30 years of experience knows a lot, has seen a lot, and is someone you should probably listen to.
• ER physicians are busy and somehow manage to work on 10 patients simultaneously without taking a break. The art of eating a cheeseburger in 10 seconds or less was probably perfected by an ER physician.
• I can still cry. I haven't cried in years, but I did on midnight drive home after a woman came into the ER via ambulance. She was unconscious and her O2 sat was about 70. Her husband, teenage children, and some family friends were close behind. From what I heard, I knew that they had lost their mother, wife, and friend, so watching them as they watched her through the ER glass doors was the saddest thing in the world. The look of anguish on the husband's face was beyond words. My shift was over before the CT was completed, but I asked about her the following week- CT confirmed that she had a major stroke and she was transfered to another hospital.... I mentioned to the doc who admitted her that I had been thinking about her, and he stated the same- he had had tried to inquire on her condition, but wasn't able to reach anyone at the other hospital who knew. He assumed she had died based on what he saw on the CT.