One big fat nothing
Telling people to wise up
All of it wasted
Telling people to wise up
All of it wasted
Showing posts with label Homo investus. Show all posts
Showing posts with label Homo investus. Show all posts
Tuesday, November 10, 2015
Monday, May 04, 2015
Financial Sarcasm Roundup for 05/04/15
In some parallel universe, sarcasm does not exist. I would hate to live there. My universe's sarcasm calibration makes life way more interesting.
Warren Buffett cautions against a minimum wage increase. Every once in a while he spouts some common sense like the small business owner he used to be. The guy may not be going soft after all in his old age. He's a step ahead of the federal policymakers who don't read their own CBO and CRS reports showing clear relationships between a higher minimum wage and lower job growth.
Greek bond trading volume just went down a big hole. No one in their right mind wants to buy Greek bonds while the Tsipras government must go hat in hand to Brussels. Hedge funds still buying this junk are insane. The dumbest private investors hope debt relief will hit the troika's Greek bond holdings first. Good luck with that plan, idiots. The troika has every right to throw private investors under the bus when the time comes.
The SEC is dragging its heels in paying whistleblower rewards. That figures. The SEC couldn't catch Bernie Madoff and other fraudsters, so they spite the ones who do catch them by showing passive-aggressive behavior with payouts. I can think of a couple of local phonies I'd like to nail if it would get me some of that payout money. Waiting years for a claim would cramp my style. That's what they mean by "close enough for government work" when the check clears three years late.
Another bunch of smarty-pants studies show how men and women approach investing differently. It looks like women have a leg up by choosing target date funds and making fewer changes to their assets over time. I always like it when women get a leg up, especially when that leg is over my shoulder. Have confidence in yourselves, ladies, and you'll get rich faster than men. I look forward to seeing more rich babes in San Francisco who will buy me dinner.
Sarcasm is a freebie, just like romantic dinners from those rich babes. The Alfidi Capital philosophy incorporates as much free stuff as possible.
Warren Buffett cautions against a minimum wage increase. Every once in a while he spouts some common sense like the small business owner he used to be. The guy may not be going soft after all in his old age. He's a step ahead of the federal policymakers who don't read their own CBO and CRS reports showing clear relationships between a higher minimum wage and lower job growth.
Greek bond trading volume just went down a big hole. No one in their right mind wants to buy Greek bonds while the Tsipras government must go hat in hand to Brussels. Hedge funds still buying this junk are insane. The dumbest private investors hope debt relief will hit the troika's Greek bond holdings first. Good luck with that plan, idiots. The troika has every right to throw private investors under the bus when the time comes.
The SEC is dragging its heels in paying whistleblower rewards. That figures. The SEC couldn't catch Bernie Madoff and other fraudsters, so they spite the ones who do catch them by showing passive-aggressive behavior with payouts. I can think of a couple of local phonies I'd like to nail if it would get me some of that payout money. Waiting years for a claim would cramp my style. That's what they mean by "close enough for government work" when the check clears three years late.
Another bunch of smarty-pants studies show how men and women approach investing differently. It looks like women have a leg up by choosing target date funds and making fewer changes to their assets over time. I always like it when women get a leg up, especially when that leg is over my shoulder. Have confidence in yourselves, ladies, and you'll get rich faster than men. I look forward to seeing more rich babes in San Francisco who will buy me dinner.
Sarcasm is a freebie, just like romantic dinners from those rich babes. The Alfidi Capital philosophy incorporates as much free stuff as possible.
Wednesday, March 25, 2015
Saving For No Future
Study after study bemoans Americans' disinterest in saving money for their future lives. Behavioral finance academics are looking for an explanation. I've already found an explanation consistent with our evolutionary biology. People don't save because the future is an abstract concept.
Consider how poor people open bank accounts and forget they have money deposited there. They also think money isn't real unless it sits in their pockets as cash. The digits in their accounts are an abstraction. If something physical isn't readily available, it may as well not even exist for most people. The vast population of stupid Joe Sixpack Americans remains poor because their monkey brains cannot process abstractions.
Americans who do prepare adequately for their futures are small in number. The smallest number are autodidacts like me. We can literally see the future because our brains process information much more rapidly and in larger quantities than most humans. Desire for knowledge feeds this process, so one could say that strength of character is a factor in successful financial preparation. Another portion of well-prepared Americans may not be so smart or driven. These people succeed because someone in their bloodline who once possessed those characteristics set them up with inheritances and trust funds. A well-oiled deus ex machina does the hard work of investing for these idiots.
Digital versions of the deus ex machina are now rapidly proliferating. Robo-advisors are coming. Charles Schwab's automated portfolio rebalancing system debuted this month. The robo-trader is a decent solution for the bulk of Americans who are too dimwitted and unmotivated to grok the importance of financial preparation. Government mandates to enroll every working proletarian in a robo-balancing 401(k) are probably in our future. They may have to wait until after a hyperinflationary explosion sweeps away the detritus of the last three decades' malinvestment.
Human beings are largely incapable of imagining their future selves. The masses of humans wandering about this planet's surface are in dire need of preprogrammed solutions that will lift the heavy burden of abstract thinking from their lumpen shoulders. Robots are arriving to do physical human labor. Robo-traders can take care of financial work for people who cannot believe in the future.
Consider how poor people open bank accounts and forget they have money deposited there. They also think money isn't real unless it sits in their pockets as cash. The digits in their accounts are an abstraction. If something physical isn't readily available, it may as well not even exist for most people. The vast population of stupid Joe Sixpack Americans remains poor because their monkey brains cannot process abstractions.
Americans who do prepare adequately for their futures are small in number. The smallest number are autodidacts like me. We can literally see the future because our brains process information much more rapidly and in larger quantities than most humans. Desire for knowledge feeds this process, so one could say that strength of character is a factor in successful financial preparation. Another portion of well-prepared Americans may not be so smart or driven. These people succeed because someone in their bloodline who once possessed those characteristics set them up with inheritances and trust funds. A well-oiled deus ex machina does the hard work of investing for these idiots.
Digital versions of the deus ex machina are now rapidly proliferating. Robo-advisors are coming. Charles Schwab's automated portfolio rebalancing system debuted this month. The robo-trader is a decent solution for the bulk of Americans who are too dimwitted and unmotivated to grok the importance of financial preparation. Government mandates to enroll every working proletarian in a robo-balancing 401(k) are probably in our future. They may have to wait until after a hyperinflationary explosion sweeps away the detritus of the last three decades' malinvestment.
Human beings are largely incapable of imagining their future selves. The masses of humans wandering about this planet's surface are in dire need of preprogrammed solutions that will lift the heavy burden of abstract thinking from their lumpen shoulders. Robots are arriving to do physical human labor. Robo-traders can take care of financial work for people who cannot believe in the future.
Thursday, March 19, 2015
The Haiku of Finance for 03/19/15
The price of friendship
Time lost versus wisdom gained
Always so human
Time lost versus wisdom gained
Always so human
Tuesday, February 24, 2015
Basic Politeness Matters In Business
Being polite may be going out of style. It may be the zeitgeist. Decades of poor parenting have elevated self-esteem over self-control. The instant gratification of fast food, online shopping, streaming movies, and whatever else our smartphones can find for us has bred modern Americans to exhibit basic contempt for activities requiring patience. Brutish behaviors have a cost measured in adult reputations tarnished and business opportunities missed. Good manners should make for good business. Just examine the costs of rudeness yourself and compare them to the payoffs for doing the right thing.
Politeness shows a respect for another person's worth. I have attended private events where loudmouths continue to socialize even after a featured speaker has ascended the podium to say what everyone came to hear. It is truly a head-scratching spectacle to watch an educated crowd ignore a feature event, even when some of them paid for the privilege. Quiet down, folks.
Arriving on time shows respect for another person's time. The worst supervisors in my career had a bad habit of making me wait for our appointed meetings while they socialized or wasted time in front of my face. They sent me a clear message that whatever they asked me to bring to the table was not worth their time. One superior never even showed up to a meeting she directed me to attend, even though I had to drive far out of my way. Bad leaders enjoy wasting people's time. Good subordinates run away from those superiors as soon as they witness sociopathic behavior.
Educated San Franciscans can change for the better. The opening night galas of San Francisco's major performing arts companies typically start at least five minutes late because too many people take too long to get to their seats. I wonder if the people arriving late really respect the arts so much by making the performers wait. The VIPs in box seats can lead us by example even if they're not causing the problem.
Alfidi Capital has not always been kind to humans who misbehave. Adults should know better but those who don't sometimes invite my wrath online. My behavior in person is usually more amenable even though I no longer need to please anyone to have a career. I do behave politely when I pay my bills and taxes on time, or when I attend social gatherings that require my silence. Manners pay dividends. It really is that simple.
Politeness shows a respect for another person's worth. I have attended private events where loudmouths continue to socialize even after a featured speaker has ascended the podium to say what everyone came to hear. It is truly a head-scratching spectacle to watch an educated crowd ignore a feature event, even when some of them paid for the privilege. Quiet down, folks.
Arriving on time shows respect for another person's time. The worst supervisors in my career had a bad habit of making me wait for our appointed meetings while they socialized or wasted time in front of my face. They sent me a clear message that whatever they asked me to bring to the table was not worth their time. One superior never even showed up to a meeting she directed me to attend, even though I had to drive far out of my way. Bad leaders enjoy wasting people's time. Good subordinates run away from those superiors as soon as they witness sociopathic behavior.
Educated San Franciscans can change for the better. The opening night galas of San Francisco's major performing arts companies typically start at least five minutes late because too many people take too long to get to their seats. I wonder if the people arriving late really respect the arts so much by making the performers wait. The VIPs in box seats can lead us by example even if they're not causing the problem.
Alfidi Capital has not always been kind to humans who misbehave. Adults should know better but those who don't sometimes invite my wrath online. My behavior in person is usually more amenable even though I no longer need to please anyone to have a career. I do behave politely when I pay my bills and taxes on time, or when I attend social gatherings that require my silence. Manners pay dividends. It really is that simple.
Thursday, January 22, 2015
Everyone Who Does It Can Still Be Wrong
I recently had a very unpleasant conversation with someone who thinks that brazenly unethical actions in business are somehow excusable because "everyone does them." Her moral lapse was breathtaking for someone who claimed to possess more than one advanced degree. I might as well describe what's wrong with this mentality. Some of you will benefit.
If you had good parents, they probably told you at some point that you shouldn't do some dumb thing just because all of your idiot friends were doing it too. Phrasing it for a pre-teen goes something like this: "If everyone jumped off the Golden Gate Bridge, would you do it too?" The pre-teens who don't listen become adults like the young woman I mentioned at the top of the article. Lots of dumb kids grow up to be idiot adults.
Entrepreneurs often find the temptation to embellish their backgrounds irresistible. Those who give in to temptation invite disappointment when investors complete their due diligence and find no corroboration. Investors check out people's educational backgrounds. Alluding to a nonexistent degree in a pitch is cringe worthy behavior. Attending a couple of seminars at Stanford doesn't count as an educational qualification. People should know this, but they don't and they pitch anyway.
Lying early and often about something leads down a slippery slope. Misrepresenting product capabilities, warranty commitments, or the legal fine print of a contract is usually actionable in civil litigation. Pitching lies to a lot of very stupid people is often a quick way to riches and a long road to court problems. The court then forces disgorgement of said riches, with other penalties piled on top. Check out case histories at the FTC and SEC for businesses that tried to get away with making false claims.
Even grown-ups need reminders that the lowest common denominator behavior of crowds is not an acceptable substitute for ethical reasoning. Adults who can't take the hint need to stay far away from me forever. Business people who lie cannot be leaders.
If you had good parents, they probably told you at some point that you shouldn't do some dumb thing just because all of your idiot friends were doing it too. Phrasing it for a pre-teen goes something like this: "If everyone jumped off the Golden Gate Bridge, would you do it too?" The pre-teens who don't listen become adults like the young woman I mentioned at the top of the article. Lots of dumb kids grow up to be idiot adults.
Entrepreneurs often find the temptation to embellish their backgrounds irresistible. Those who give in to temptation invite disappointment when investors complete their due diligence and find no corroboration. Investors check out people's educational backgrounds. Alluding to a nonexistent degree in a pitch is cringe worthy behavior. Attending a couple of seminars at Stanford doesn't count as an educational qualification. People should know this, but they don't and they pitch anyway.
Lying early and often about something leads down a slippery slope. Misrepresenting product capabilities, warranty commitments, or the legal fine print of a contract is usually actionable in civil litigation. Pitching lies to a lot of very stupid people is often a quick way to riches and a long road to court problems. The court then forces disgorgement of said riches, with other penalties piled on top. Check out case histories at the FTC and SEC for businesses that tried to get away with making false claims.
Even grown-ups need reminders that the lowest common denominator behavior of crowds is not an acceptable substitute for ethical reasoning. Adults who can't take the hint need to stay far away from me forever. Business people who lie cannot be leaders.
Saturday, January 03, 2015
Some People Never Wake Up
There's a new game in town called Wake Up Now. I have no intention of playing. Listen to NPR's "This American Life" broadcast #543 from December 26, 2014 for sad tales of desperate fools. There is no need to review every network marketing enterprise on the block. It is enough to present a handy guide for aspiring network market founders, in the spirit of eternal sarcasm.
Design for stupidity. P.T. Barnum said something about suckers and how frequently they are born. Network marketers plan their enterprise with low-information participants in mind. Images of the good life conjure mental addictions in recruits' minds. Playing on insecurities breaks down resistance. Triggering greed and fear makes empty promises of easy riches believable.
Appeal to emotion. Recruiting events have atmospheres like tent revivals. Speakers obviously practice their neuro-linguistic programming techniques. Ecstatic responses to trigger words indicate success. Planting cheerleaders in the audience breaks down losers' inhibitions. The end result of the pitch meeting is a horde of imbeciles signing up for expensive training sessions and overpriced products. Mission accomplished.
Ensure recruits are the customers. All networks sales plans are built the same way. Compensation for the first people in the pipeline builds from suckers recruited later. The suckers need not make any sales themselves. Their fees for membership, training, and other useless things are enough to keep the founders at the top of the income pyramid.
Own the fine print. Recruits never read the contracts they sign. They think a recruiting pitch is a promise. The small type describes how the promoters promise absolutely nothing. One long exercise in making excuses keeps attorneys paid. Faith trumps reason.
Ignore competition. The Internet abounds with sites for coupons and discounts. Building an exclusive distribution channel for such things is pointless, but suckers don't need to worry about that. Weak-willed joiners don't perform due diligence.
Proactively distract critics. Real estate hucksters like this tactic. Setting up dummy websites filled with clickbait text like "scam" attracts skeptical people who would otherwise click on thoroughly vetted warning reports. The dummy websites redirect to positive endorsements of the membership network, in a brilliant judo move.
I wrote all of this in jest. No one who truly wants to succeed in business will execute such a plan. The ones who do will earn themselves a heap of legal trouble. I do not know how they live with themselves. The FTC has good references on multilevel marketing and pyramid schemes. Common sense checklists separate winners from losers. Real winners don't exploit people who can't think critically.
Design for stupidity. P.T. Barnum said something about suckers and how frequently they are born. Network marketers plan their enterprise with low-information participants in mind. Images of the good life conjure mental addictions in recruits' minds. Playing on insecurities breaks down resistance. Triggering greed and fear makes empty promises of easy riches believable.
Appeal to emotion. Recruiting events have atmospheres like tent revivals. Speakers obviously practice their neuro-linguistic programming techniques. Ecstatic responses to trigger words indicate success. Planting cheerleaders in the audience breaks down losers' inhibitions. The end result of the pitch meeting is a horde of imbeciles signing up for expensive training sessions and overpriced products. Mission accomplished.
Ensure recruits are the customers. All networks sales plans are built the same way. Compensation for the first people in the pipeline builds from suckers recruited later. The suckers need not make any sales themselves. Their fees for membership, training, and other useless things are enough to keep the founders at the top of the income pyramid.
Own the fine print. Recruits never read the contracts they sign. They think a recruiting pitch is a promise. The small type describes how the promoters promise absolutely nothing. One long exercise in making excuses keeps attorneys paid. Faith trumps reason.
Ignore competition. The Internet abounds with sites for coupons and discounts. Building an exclusive distribution channel for such things is pointless, but suckers don't need to worry about that. Weak-willed joiners don't perform due diligence.
Proactively distract critics. Real estate hucksters like this tactic. Setting up dummy websites filled with clickbait text like "scam" attracts skeptical people who would otherwise click on thoroughly vetted warning reports. The dummy websites redirect to positive endorsements of the membership network, in a brilliant judo move.
I wrote all of this in jest. No one who truly wants to succeed in business will execute such a plan. The ones who do will earn themselves a heap of legal trouble. I do not know how they live with themselves. The FTC has good references on multilevel marketing and pyramid schemes. Common sense checklists separate winners from losers. Real winners don't exploit people who can't think critically.
Monday, October 13, 2014
The Haiku of Finance for 10/13/14
Jealous of neighbor
Always seems to outperform
Keeping up with Jones
Always seems to outperform
Keeping up with Jones
Tuesday, June 24, 2014
Destroying The Consumer Mind
I dropped into a Commonwealth Club lecture yesterday by consumer psychologist Kit Yarrow. She elaborated on points from her book Decoding the New Consumer Mind. I don't know how much consumer psychology has changed since Edward Bernays figured out how to push people's buttons. One of Dr. Yarrow's main points was that humans haven't changed much since we stumbled out of jungles into settled civilizations, but our desire for the latest and greatest technology has led to big changes. Those broad facts don't do justice to the ease with which humans can be manipulated into thinking something they merely want is really some "need" they can't live without.
Tricking humans is a skill as old as spoken language. The erosion of written language, critical thinking, and common sense in the digital age makes manipulation easier. I don't think I have to recap a century's worth of propaganda to tell my readers that simple messages are powerful. Humans are still tribal and we look to our tribe's totems and shamans for validation of personal identity. The so-called "civilized" people I see shopping at Union Square's high-end outlets would probably go into severe depression if they couldn't get that latest Gucci handbag. I'm pretty sure San Francisco's cognoscenti experience withdrawal symptoms if they can't release their frustrations through conspicuous consumption.
The iPhone is a classic example of a luxury want that humans think is really an indispensable need. My idiot co-workers lined up all night in 2007 to impoverish themselves by paying a premium for the first iPhone. It's a phone with a computer processor, folks, but Steve Jobs convinced lame non-thinkers that they couldn't live without one. The masses use their iPhones in the same banal ways they've always used innovation. They just do the same things they've always done, like solve crossword puzzles and waste their friends' time with random chit-chat. No one really needed a smartphone and hardly anyone used it to invent the longer lasting light bulb. Everyone wanted one because one of our techno-tribe's chief shamans, the late great Mr. Jobs, turned it into a new cultural totem whose possession determined one's intrinsic human worth. No one who bought an iPhone had to actually think about the choice they made. Thinking is so unnecessary these days.
I would like to see a follow-up treatment of Dr. Yarrow's insights titled "Destroying the Consumer Mind" because that's what repetitive use of pre-rational stimuli does to human cognition. It should be a quick read because it must ideally be a how-to manual on turning bland thoughts into action items for the masses. I would write it myself but I'm quite busy destroying all of the dumb things I can find in modern culture.
Tricking humans is a skill as old as spoken language. The erosion of written language, critical thinking, and common sense in the digital age makes manipulation easier. I don't think I have to recap a century's worth of propaganda to tell my readers that simple messages are powerful. Humans are still tribal and we look to our tribe's totems and shamans for validation of personal identity. The so-called "civilized" people I see shopping at Union Square's high-end outlets would probably go into severe depression if they couldn't get that latest Gucci handbag. I'm pretty sure San Francisco's cognoscenti experience withdrawal symptoms if they can't release their frustrations through conspicuous consumption.
The iPhone is a classic example of a luxury want that humans think is really an indispensable need. My idiot co-workers lined up all night in 2007 to impoverish themselves by paying a premium for the first iPhone. It's a phone with a computer processor, folks, but Steve Jobs convinced lame non-thinkers that they couldn't live without one. The masses use their iPhones in the same banal ways they've always used innovation. They just do the same things they've always done, like solve crossword puzzles and waste their friends' time with random chit-chat. No one really needed a smartphone and hardly anyone used it to invent the longer lasting light bulb. Everyone wanted one because one of our techno-tribe's chief shamans, the late great Mr. Jobs, turned it into a new cultural totem whose possession determined one's intrinsic human worth. No one who bought an iPhone had to actually think about the choice they made. Thinking is so unnecessary these days.
I would like to see a follow-up treatment of Dr. Yarrow's insights titled "Destroying the Consumer Mind" because that's what repetitive use of pre-rational stimuli does to human cognition. It should be a quick read because it must ideally be a how-to manual on turning bland thoughts into action items for the masses. I would write it myself but I'm quite busy destroying all of the dumb things I can find in modern culture.
Saturday, April 19, 2014
The Haiku of Finance for 04/19/14
Wisdom of a fool
Keep making the same mistake
Lose cash every time
Keep making the same mistake
Lose cash every time
Recent Wisdom From Financial Fools
I have learned about as much from watching stupid people do dumb things in finance as I have from formal education and autodidaction. Fools are better teachers than they will ever realize.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Friday, April 11, 2014
Pure Internet Gold From The Minds Of Reddit Bitcoiners
I check out Reddit once in a while for random inspiration. It's a jungle out there and I like cutting through it with the brute force digital machete that is Alfidi Capital. I never know whether I'll find pearls of wisdom or juvenile ramblings. It's usually more of the latter but that's okay. Arrested development adolescents need to let their primal screams out somewhere. Better that they spew to Reddit threads than deface a bathroom stall.
The Reddit community on Bitcoin must be oodles of fun for people with no lives. It is the only corner of the financial world where overgrown infants, naive dreamers, and other cutting-edge crybabies can congratulate themselves for knowing nothing about money. They find a worshipful audience on Reddit. I've selected some of the best recent comments from the Bitcoin subreddit below in italics. Errors in spelling, capitalization, and other fundamentals of intelligible communication remain as their authors intended. I will not identify the perps because they may want to grow up someday. My own comments always follow.
So i should recommend to my 70 year old grandma to put all her savings into bitcoin (what's the easiest way to teach her bitcoin? took me years to teach her email/skype... think she might be dead before she's able to transfer funds on her own)? How will this stop the government from taking her tax refunds which are not in bitcoin? What happens if the price drops under the current 400$? I love bitcoin and what it stands for but you needa stop drinking the Kool-aid.
The Reddit community on Bitcoin must be oodles of fun for people with no lives. It is the only corner of the financial world where overgrown infants, naive dreamers, and other cutting-edge crybabies can congratulate themselves for knowing nothing about money. They find a worshipful audience on Reddit. I've selected some of the best recent comments from the Bitcoin subreddit below in italics. Errors in spelling, capitalization, and other fundamentals of intelligible communication remain as their authors intended. I will not identify the perps because they may want to grow up someday. My own comments always follow.
So i should recommend to my 70 year old grandma to put all her savings into bitcoin (what's the easiest way to teach her bitcoin? took me years to teach her email/skype... think she might be dead before she's able to transfer funds on her own)? How will this stop the government from taking her tax refunds which are not in bitcoin? What happens if the price drops under the current 400$? I love bitcoin and what it stands for but you needa stop drinking the Kool-aid.
Stop right there, dude. The apple didn't fall too far from the tree if grandma's tech learning curve is indicative of this Bitcoiner's abilities. Oh BTW, the government can and will assess the value of your Bitcoin for tax purposes since the blockchain is publicly available. I think the easiest way to learn Bitcoin is to watch a video of 1990s teens playing with "Magic: The Gathering" cards. That's kind of how the Mt. Gox Bitcoin exchange got started anyway. Kids using cards to pretend to be wizards is just like grown adults playing with digits and pretending to be bankers. See, it's really easy for granny and her quilting bee.
I bought about $1,000 worth just for the sake of holding on to it long term. It's a decent chunk of change for me but it's also an amount I'm comfortable losing. But this is exactly why I'm not discouraged over "losing" almost half of my $1k investment. There will be another spike at some point and I will either hang on until that happens or until I lose it all.
What was your cost basis for tax purposes? Can you prove it? The IRS will want to know and federal tax returns are due in four days. Oh, wait, I'm talking about a bunch of people who think they don't have to pay taxes. Never mind, idiots. Just hang on until you lose it all. It's funny that this person conflates "long term" with some point where they may "lose it all." This person is definitely not Warren Buffett.
Long term speculators don't create as much instability.
Say what? What exactly is a "long term speculator" anyway? That might be a conventional investor like me who performs a valuation analysis before committing to an investment, but to Bitcoiners I'm just another gambler. Moral equivalency is great when you don't have to account for cognitive deficiencies.
Bitcoin is way more influential than Dogecoin is. Marketing does matter, or else our dog-based coin wouldn't have gotten this far. DOGE is honestly a lot more style over substance but obviously style is important to people. I hope that Dogecoin will teach Bitcoin about style in the same way that I hope that our community looks towards Bitcoin for substance.
Dogecoin teaching style . . . means Bitcoin will need an animal mascot. Somebody already picked the honey badger. Bitcoin teaching substance . . . means Dogecoin will be based on nothing. Oh, that already happened. Maybe these Reddit people aren't as cutting-edge as I had assumed.
This sort of thing is baffling to me on the altcoins. A new business shows up and because it has an address, and an office there is immediate trust in them. We have seen large scale operations fail time and time again. We need businesses involved in the currency but we also need healthy skepticism when it comes to verification.
Dogecoin teaching style . . . means Bitcoin will need an animal mascot. Somebody already picked the honey badger. Bitcoin teaching substance . . . means Dogecoin will be based on nothing. Oh, that already happened. Maybe these Reddit people aren't as cutting-edge as I had assumed.
This sort of thing is baffling to me on the altcoins. A new business shows up and because it has an address, and an office there is immediate trust in them. We have seen large scale operations fail time and time again. We need businesses involved in the currency but we also need healthy skepticism when it comes to verification.
The above comment might be the all-time winner for far-out fantasy. It deserves a prize of some sort but Alfidi Capital has no prizes to give. Follow this one down the rabbit hole. A business with a known physical office and identifiable employees is somehow less trustworthy than a bunch of random hashes floating through cyberspace that hackers can steal and duplicate. Yeah, ooookaaaayyyy. This implies that the only thing more trustworthy than Bitcoin would be something completely unverifiable, like a fantasy land of fairies and unicorns. Wait a minute . . . that takes us right back to "Magic: The Gathering" again! Brilliant.
I just can't believe people would run scams as public figures, when it's so easy to do it in the Bitcoin crowd as anonymous figures. People around here are very trusting of anonymous figures.
OMG! OMG! Just when I thought there was an all-time winner, another gem falls out of the sky! Here's a Bitcoin fan admitting the ease of scamming the rest of the community. Anonymity is some kind of holy grail on Reddit. It allows emotional cripples and shut-ins to pretend to be knowledgeable. Anglo-Saxon cultures have long recognized anonymous communication as a form of free speech because it can shield unpopular authors from abuse. The downside is that the rest of us have to wade through Bitcoin garbage to find comedy.
In the bitcoin world embezzlement is indistinguishable from a hacker attack.
Exactly. They both come with criminal penalties in the real world. In the Bitcoin underworld, these things confer street cred. I expect the next crypto-coin fork to allow graffiti artist tags.
I still believe that bitcoin is the most regulated currency in the world. Criminals are way too vulnerable when using bitcoin.
This is awesome. Precisely one IRS decision covers Bitcoin, and that was all anyone needed to move Bitcoin into the "asset" column of a balance sheet. Calling it the "most regulated currency" ignores the wire transfer protocols, bullion holdings, transfer pricing agreements, and other facts that govern real currencies. Calling criminals "vulnerable" in Bitcoin insults the abilities of the thieves who busted Mt. Gox out of millions. They still haven't been caught. I know, Bitcoiners, facts are hard to understand. It's so much more fun just to make things up.
The bottom line on all of these Reddit commenters is that they are dumber than dumb. There may be some pseudo-intellectuals in there to give the Bitcoin community a natural ruling elite but they function much like wooden decoys on a duck hunt. They make it easier to identify the fowl that respond to hunting calls. Reddit brings out the worst in people who are too immature to be trusted with adult responsibility. Bitcoin will never be a currency but its advocates' stupidity is pure Internet gold.
Sunday, January 19, 2014
The Stupidity Of Penny Stock Investors In 2014
I have analyzed tons of penny stocks on this blog. Quite a few of them are destined to go exactly nowhere. I continue to marvel at the gullibility of investors who think penny stocks are a secret source of bonanza. The only real source of bonanza for me is the genius research at Alfidi Capital but penny stock pumpers are too dumb to understand my thinking.
I read with dismay the unverifiable claims of one investor on a blog comment stream who says the "trick" to making money in biotech penny stocks is to somehow get in front of their momentum while they're burning cash and get out before the next private placement dilutes shareholders. I've got sad news for this idiot. No one can predict when a management team will launch its next private capital raise. Any current investor who knew in advance that one was coming and tried to get out could face SEC charges of trading on material nonpublic information, especially if said trade moves the price of a thinly traded stock. Lots of penny stocks are thinly traded.
Unexpected bad news can interrupt the short-term penny stock investor's thesis of trading for quick gains. A drug company that discovers bad side effects from a trial or a mining company that discovers poor grade ore can't keep that news a secret from the market. News events move the prices of penny stocks, and bad news moves against the penny gambler crowd.
There's no good analogy between penny stocks and poker. Every hand in poker is different and the ability to calculate conditional probabilities, apply game theory, and read an opponent's expression can help reduce risk. Those abilities are not as useful in penny stock investing as the ability to read balance sheets, estimate market size, or compare the price points of comparable products. I've done that on this blog for some biotech stocks.
I once knew a fellow military veteran who bragged about her recent investment in a penny stock. Her logic was hilarious. "It's only a few cents a share, so it's a bargain!" I did not laugh in her face but she was too dense to read my expression of dismay. Her due diligence consisted of looking at the share price. That is totally stupid but lots of penny stock investors think that way.
I haven't found much peer-reviewed academic research on penny stock investing. A few web queries didn't turn up much besides the usual pumping sites and message boards. There may be some room for original thinking in this area that I could publish myself, if only to debunk some of the folk wisdom that dummies use when they "invest." I like this FMA paper, "Too Good to Ignore? A Primer on Listed Penny Stocks" because they located good source data to determine whether a penny stock portfolio generates alpha.
I don't listen to penny stock investors, or the paid touters who pump them into stupid investments. I look at underpriced stocks from a private equity perspective to understand whether a ten cent gamble will ever become a ten dollar share. That transformation happens when talented executives meet their development milestones, launch viable projects, and grow market share. It happens in hard asset sectors when academically qualified geologists and engineers successfully pull ore and energy out of the ground at costs below the historical average price of their target commodity. I have not yet invested in a penny stock. I'm not saying I will never buy one, but I have to believe in its business model.
I read with dismay the unverifiable claims of one investor on a blog comment stream who says the "trick" to making money in biotech penny stocks is to somehow get in front of their momentum while they're burning cash and get out before the next private placement dilutes shareholders. I've got sad news for this idiot. No one can predict when a management team will launch its next private capital raise. Any current investor who knew in advance that one was coming and tried to get out could face SEC charges of trading on material nonpublic information, especially if said trade moves the price of a thinly traded stock. Lots of penny stocks are thinly traded.
Unexpected bad news can interrupt the short-term penny stock investor's thesis of trading for quick gains. A drug company that discovers bad side effects from a trial or a mining company that discovers poor grade ore can't keep that news a secret from the market. News events move the prices of penny stocks, and bad news moves against the penny gambler crowd.
There's no good analogy between penny stocks and poker. Every hand in poker is different and the ability to calculate conditional probabilities, apply game theory, and read an opponent's expression can help reduce risk. Those abilities are not as useful in penny stock investing as the ability to read balance sheets, estimate market size, or compare the price points of comparable products. I've done that on this blog for some biotech stocks.
I once knew a fellow military veteran who bragged about her recent investment in a penny stock. Her logic was hilarious. "It's only a few cents a share, so it's a bargain!" I did not laugh in her face but she was too dense to read my expression of dismay. Her due diligence consisted of looking at the share price. That is totally stupid but lots of penny stock investors think that way.
I haven't found much peer-reviewed academic research on penny stock investing. A few web queries didn't turn up much besides the usual pumping sites and message boards. There may be some room for original thinking in this area that I could publish myself, if only to debunk some of the folk wisdom that dummies use when they "invest." I like this FMA paper, "Too Good to Ignore? A Primer on Listed Penny Stocks" because they located good source data to determine whether a penny stock portfolio generates alpha.
I don't listen to penny stock investors, or the paid touters who pump them into stupid investments. I look at underpriced stocks from a private equity perspective to understand whether a ten cent gamble will ever become a ten dollar share. That transformation happens when talented executives meet their development milestones, launch viable projects, and grow market share. It happens in hard asset sectors when academically qualified geologists and engineers successfully pull ore and energy out of the ground at costs below the historical average price of their target commodity. I have not yet invested in a penny stock. I'm not saying I will never buy one, but I have to believe in its business model.
Wednesday, January 08, 2014
Sociopaths Need Careers Too
I work for myself because I prefer not to work with other humans. I consider fellow members of my species to be scientific curiosities prone to random bouts of egotistical violence and subterfuge. I tried to help some of these unfortunates change their ways with no success. A large number of people are simply hard-wired for sociopathy. They can't help the way they are.
The US Army is taking its first steps toward identifying and removing toxic leaders. I think this process will take an entire generation, based on my personal experience with toxic leaders and the culture of the Army. Find the archived edition of the US Army Combined Arms center's magazine Military Review from May/June 1999. Read the article "Natural Killers: Turning The Tide of Battle" (republished here on another site) to see how sociopaths, when properly controlled, play a useful role in the military. Complicating this process is the ability of high-functioning sociopaths to "go to the dark side" and adopt the appearance of possessing emotional intelligence. This masquerade enables them to continue manipulating people and damaging organizations. Other large employers face the problem posed by a high number of high-functioning sociopaths. Wall Street stands out in particular for its sociopaths in high places and the damage they cause by deceiving clients, trading partners, and regulators. Sociopaths crave power.
I am humane and generous, much more so than our unfortunate sociopaths. These people are still human and thus entitled to life, liberty, the pursuit of happiness, and all that jazz. The trouble comes when they are left to their own devices and pursue careers that naturally lend to hierarchy, acquisition, and the control of other humans. Salespeople, for example, lie every time they open their mouths and the most skilled ones become sales managers who train other liars to lie just as well. The potential damage sociopaths cause must rule them out of many occupations whose status enables and magnifies their destructive behavior.
I have a decent solution to the social problem of employing sociopaths. Corporations and government bureaucracies should screen their entry-level hires for sociopathic traits before these people have a chance to climb the ladder to positions of higher authority. Scientific verification of sociopathic tendencies will thus serve as an automatic disqualifier for promotion past the entry level. In an ideal world, sociopaths will be confined largely to low-skill jobs regardless of what their high-functioning intellectual skills may otherwise warrant. It's hard to manipulate others when primary job tasks involve lifting boxes, driving a truck, or running computer scripts. Of course, the most creative among them may still gravitate to positions of influence through entrepreneurial efforts in business and politics. I have no solution at present for that possibility. A free society must maintain multiple paths to upward mobility.
Corporations and government agencies will not adopt any sociopathic HR screens of their own accord unless they are faced with systemic dysfunction that calls into question their basic mission. The US Army currently faces such critical fallout from soldier suicides and sexual assaults that it has no choice but to examine the role sociopathic leaders play as a contributing factor. I believe activist institutional investors can play a role by pressuring publicly traded corporations to adopt sociopathic HR screens. It may fall under a corporate social responsibility rubric. It is certainly the right thing to do.
The US Army is taking its first steps toward identifying and removing toxic leaders. I think this process will take an entire generation, based on my personal experience with toxic leaders and the culture of the Army. Find the archived edition of the US Army Combined Arms center's magazine Military Review from May/June 1999. Read the article "Natural Killers: Turning The Tide of Battle" (republished here on another site) to see how sociopaths, when properly controlled, play a useful role in the military. Complicating this process is the ability of high-functioning sociopaths to "go to the dark side" and adopt the appearance of possessing emotional intelligence. This masquerade enables them to continue manipulating people and damaging organizations. Other large employers face the problem posed by a high number of high-functioning sociopaths. Wall Street stands out in particular for its sociopaths in high places and the damage they cause by deceiving clients, trading partners, and regulators. Sociopaths crave power.
I am humane and generous, much more so than our unfortunate sociopaths. These people are still human and thus entitled to life, liberty, the pursuit of happiness, and all that jazz. The trouble comes when they are left to their own devices and pursue careers that naturally lend to hierarchy, acquisition, and the control of other humans. Salespeople, for example, lie every time they open their mouths and the most skilled ones become sales managers who train other liars to lie just as well. The potential damage sociopaths cause must rule them out of many occupations whose status enables and magnifies their destructive behavior.
I have a decent solution to the social problem of employing sociopaths. Corporations and government bureaucracies should screen their entry-level hires for sociopathic traits before these people have a chance to climb the ladder to positions of higher authority. Scientific verification of sociopathic tendencies will thus serve as an automatic disqualifier for promotion past the entry level. In an ideal world, sociopaths will be confined largely to low-skill jobs regardless of what their high-functioning intellectual skills may otherwise warrant. It's hard to manipulate others when primary job tasks involve lifting boxes, driving a truck, or running computer scripts. Of course, the most creative among them may still gravitate to positions of influence through entrepreneurial efforts in business and politics. I have no solution at present for that possibility. A free society must maintain multiple paths to upward mobility.
Corporations and government agencies will not adopt any sociopathic HR screens of their own accord unless they are faced with systemic dysfunction that calls into question their basic mission. The US Army currently faces such critical fallout from soldier suicides and sexual assaults that it has no choice but to examine the role sociopathic leaders play as a contributing factor. I believe activist institutional investors can play a role by pressuring publicly traded corporations to adopt sociopathic HR screens. It may fall under a corporate social responsibility rubric. It is certainly the right thing to do.
Monday, October 21, 2013
Down With People
The 1960s brought the apotheosis of a lot of cultural oddities that will never again see the light of day. One such phenomenon was "Up With People," some kind of song-and-dance troupe that sprang from the Moral Re-Armament movement's ineffective actions in pre-war Europe. I would like to initiate a counterpart gypsy troupe that captures today's zeitgeist. I'll call it "Down With People."
The inspiration for encouraging people to feel bad about themselves is the stupidity I've been witnessing lately in our society. People are greedier and needier than ever and they're too dumb to realize it. A temporary EBT payment glitch encouraged bottom-feeding ghetto denizens to ransack a Wal-Mart. They are too lazy to work for a living and would rather steal food. Down with those people. Middle-class Americans signing up for mandatory health insurance are learning its true costs. Entitlement addicts never figured that the whole boondoggle was a swindle to redistribute wealth and protect health sector oligopolies. Down with those people. JPMorgan's fine has cleared the way for other incorrigible bankers to be smacked. Overpaid preppies snort a few white lines and lose billions while bailout moral hazards support their bad behavior. Down with those people.
Watching vacuous morons pump themselves up is one of my favorite pastimes. I'll enjoy it even more when they're on the way down thanks to my Down With People demotivating campaign. My first recruits for the performing troupe will be found among "life coaches," those sappy performers who already have some polished song-and-dance routines. It's fun to watch an audience of suckers listen to these maudlin carny barkers. Life coaches all have thin resumes, sympathetic stories of recovery from some unspecified crash, and outgoing personalities. Their target suckers are a lot like Oprah's audiences of emotionally needy fools sharing feelings and seeking validation. They'll get all the validation they crave and then some once they see themselves parodied in a Down With People troubadour review.
My Down With People project bears one similarity to Up With People. The UWP movement flourished under corporate sponsorship. Big companies funded UWP as a cleaned-up brand to compete for cultural dominance with smelly radicals in hippie communes. Thankfully, the hippies lost the culture war (with a little help from COINTELPRO) and UWP continued to dumb down consumers at Super Bowl halftime shows for years. My DWP project will also be corporate-sponsored . . . with Alfidi Capital as the sole sponsor. I don't want anyone else getting credit for this one.
I have yet to write the song lyrics, design set pieces, or audition cast members for my Down with People extravaganza. I may never get around to it at all. It's enough that I've identified a clear market need for a corrective tonic that will counteract 'Murican culture's self-esteem meme. Postmodern performance art is best realized as an authentic presentation of self. My authentic self is the persona of a rude, obnoxious, know-it-all. Yay me! Down with everyone else. Up with Tony Alfidi.
The inspiration for encouraging people to feel bad about themselves is the stupidity I've been witnessing lately in our society. People are greedier and needier than ever and they're too dumb to realize it. A temporary EBT payment glitch encouraged bottom-feeding ghetto denizens to ransack a Wal-Mart. They are too lazy to work for a living and would rather steal food. Down with those people. Middle-class Americans signing up for mandatory health insurance are learning its true costs. Entitlement addicts never figured that the whole boondoggle was a swindle to redistribute wealth and protect health sector oligopolies. Down with those people. JPMorgan's fine has cleared the way for other incorrigible bankers to be smacked. Overpaid preppies snort a few white lines and lose billions while bailout moral hazards support their bad behavior. Down with those people.
Watching vacuous morons pump themselves up is one of my favorite pastimes. I'll enjoy it even more when they're on the way down thanks to my Down With People demotivating campaign. My first recruits for the performing troupe will be found among "life coaches," those sappy performers who already have some polished song-and-dance routines. It's fun to watch an audience of suckers listen to these maudlin carny barkers. Life coaches all have thin resumes, sympathetic stories of recovery from some unspecified crash, and outgoing personalities. Their target suckers are a lot like Oprah's audiences of emotionally needy fools sharing feelings and seeking validation. They'll get all the validation they crave and then some once they see themselves parodied in a Down With People troubadour review.
My Down With People project bears one similarity to Up With People. The UWP movement flourished under corporate sponsorship. Big companies funded UWP as a cleaned-up brand to compete for cultural dominance with smelly radicals in hippie communes. Thankfully, the hippies lost the culture war (with a little help from COINTELPRO) and UWP continued to dumb down consumers at Super Bowl halftime shows for years. My DWP project will also be corporate-sponsored . . . with Alfidi Capital as the sole sponsor. I don't want anyone else getting credit for this one.
I have yet to write the song lyrics, design set pieces, or audition cast members for my Down with People extravaganza. I may never get around to it at all. It's enough that I've identified a clear market need for a corrective tonic that will counteract 'Murican culture's self-esteem meme. Postmodern performance art is best realized as an authentic presentation of self. My authentic self is the persona of a rude, obnoxious, know-it-all. Yay me! Down with everyone else. Up with Tony Alfidi.
Wednesday, August 07, 2013
Smacking Down Greed Left And Right
Posting to my friends' Facebook walls is a great way to amuse myself and show off my intellect. I've stirred up some emotional reactions from people I thought were worldly and mature. The discount rate I now apply to the collective intellect of humanity is approaching 100% because at some point human stupidity reaches an event horizon and collapses in on itself.
My friends' opinions from the left and right of the political spectrum are almost mirror images of each other and have a common denominator: greed. No one wants to give up access to an entitlement funded by unmentioned third parties.
The Left is predictable. "I want free health care / cell phones / food stamps! I want bailouts for my blue-collar industry! I want unlimited immigration so non-citizens can all have government benefits!" Nobody wants to see the all-in costs of limitless welfare checks for the indigent and unassimilated.
The Right is also unsurprising. "I want to live where I want and drive where I please! I ignore environmental costs because socialists want to take my property away from me!" Nobody wants to see the all-in costs of suburban sprawl, excess infrastructure, and environmental damage from an economy based on hydrocarbon transportation fuels.
Neither wing of the American body politic wants to touch tax deductions or middle class entitlements. Everyone wants Social Security checks and Medicare guarantees. Everyone wants to write off their home mortgage payments and charitable deductions against their gross income. Everyone wants low interest rates on student loans. Everyone wants government subsidies for energy, trade, agriculture, and everything else.
NPR's Morning Edition had a story earlier this week on two Congressional Representatives - one Democrat, one Republican - who toured the country touting income tax reform. People were fine with the abstract concept of fewer deductions and lower rates until they learned they would give up their own favorite deductions. That means there is no consensus for change. It also means the next financial crisis will force a change and the political fallout will be ahistorical.
I will not count on the good sense of the American people to find a solution to the country's unfunded entitlements, fiscal imbalance, financial system fragility, and unsustainable suburban infrastructure. The human brain is wired to make decisions without analysis, and to perform analysis without information. I must be a genetic freak because I proceed from information to analysis to decisions using multiple methods and I leave room at the end for further adaptation. I have always believed that I am the next step in human evolution and my friends' reactions to my thinking are proof. This is why it's so easy for me to smack down human greed.
My friends' opinions from the left and right of the political spectrum are almost mirror images of each other and have a common denominator: greed. No one wants to give up access to an entitlement funded by unmentioned third parties.
The Left is predictable. "I want free health care / cell phones / food stamps! I want bailouts for my blue-collar industry! I want unlimited immigration so non-citizens can all have government benefits!" Nobody wants to see the all-in costs of limitless welfare checks for the indigent and unassimilated.
The Right is also unsurprising. "I want to live where I want and drive where I please! I ignore environmental costs because socialists want to take my property away from me!" Nobody wants to see the all-in costs of suburban sprawl, excess infrastructure, and environmental damage from an economy based on hydrocarbon transportation fuels.
Neither wing of the American body politic wants to touch tax deductions or middle class entitlements. Everyone wants Social Security checks and Medicare guarantees. Everyone wants to write off their home mortgage payments and charitable deductions against their gross income. Everyone wants low interest rates on student loans. Everyone wants government subsidies for energy, trade, agriculture, and everything else.
NPR's Morning Edition had a story earlier this week on two Congressional Representatives - one Democrat, one Republican - who toured the country touting income tax reform. People were fine with the abstract concept of fewer deductions and lower rates until they learned they would give up their own favorite deductions. That means there is no consensus for change. It also means the next financial crisis will force a change and the political fallout will be ahistorical.
I will not count on the good sense of the American people to find a solution to the country's unfunded entitlements, fiscal imbalance, financial system fragility, and unsustainable suburban infrastructure. The human brain is wired to make decisions without analysis, and to perform analysis without information. I must be a genetic freak because I proceed from information to analysis to decisions using multiple methods and I leave room at the end for further adaptation. I have always believed that I am the next step in human evolution and my friends' reactions to my thinking are proof. This is why it's so easy for me to smack down human greed.
Sunday, June 09, 2013
Why I Do Not Want To Be a Landlord
I've been doing a lot of thinking about real estate lately. Some years ago I attended free seminars that were totally worthless. Lately I've been listening to experienced real estate professionals. I now have more sources and references for my knowledge base than I could ever use. One of the more common avenues to success in real estate is owning income-producing residential property. This means investors have to manage their property and tenants as a landlord. Once I started learning about all of the responsibilities a landlord must fulfill, I realized it's a poor fit for my negative attitude toward human beings. The feudal appeal of having serfs as tenants on my land has lost its shine. Let me describe the ways in which landlording would complicate my life and inconvenience me to no end.
I wish I could charge people an arm and a leg for living under my benevolent protection, but alas many communities have rent control laws that prevent landlords from raising rents on long-term occupants. San Francisco is one such town. The City has a rent board that determines what private property owners may do with the property they own. The City is also home to a very vocal tenants union that agitates for rent control. The union's symbol is the classic workers' fist smashing a cartoonish landlord. The clear message is that radicals who believe property is theft and profit is evil will use every means available to destroy the capitalists who provide them with climate-controlled shelter from the elements. No thanks. I will not be a landlord in San Francisco if it means I become the target of idiots with no life.
Owning rental property in less restrictive areas means figuring out how much to charge for rent. Figure extra charges for after-hours service calls, inspections, and non-routine maintenance. Having a live response to an overnight maintenance call may be worth the expense if it prevents water damage from destroying property. Watch out for those leaks above the ground floor. Fees for late rents are of course limited by local laws. I'd like to charge people double rent for wasting my time and insulting my intelligence but that's probably prohibited by some do-gooder San Francisco ordinance.
Locked-out tenants are a pain in the behind. I don't want to get calls at oh-dark-thirty from someone who lost their key or left it on the kitchen counter. Having a locksmith on call is not something I relish. I can just imagine a nosy neighbor snooping as the locksmith opens the tenant's door, then calling the cops to report a break-in, and then snickering as the locksmith calls me to complain about wasted time. Yeah, Neighborhood Watch would be all about busybodies watching me lose money. That is a headache I do not need.
Keeping tenants informed is another landlord task I don't want to do. Many tenants are dumb enough to need reminders of when their rent is due, so landlords need to time their newsletter publishing so the reminder ends up at the top of the shoebox, or hatbox, or breadbox, or glovebox, or wherever ghetto tenants like to stuff their overdue bills. Landlords can sometimes use this retardation to their advantage. If the newsletter contains requests for confirmation of safety measures like smoke detectors or carbon monoxide detectors, keeping proof of confirmations can limit landlords' liability in the aftermath of emergencies. Furnaces and air conditioning units are among landlords' most expensive repairs, but I worry that reminding tenants to change filters will fall on deaf ears. Having laundry facilities on site means more maintenance expenses, plus complaints from some tenant who claims a machine ate too many quarters.
Competent businesses consider the cost of acquiring new customers. Landlording as a business means figuring the cost of acquiring new tenants through advertising. Window signs might be more effective than lawn signs that get kicked over, and some high school kid on the corner holding a sign and waving might be a source of amusement. I would give an illiterate tenant a cheeseburger just to see them wave a big sign on the street corner with my name on it. Selecting new tenants means abiding by HUD's Fair Housing regulations. Some tenants fall into legally protected classes. Others that aren't protected don't have to live with me if I don't want them around. Frankly, I don't want anyone around. I don't want animals around either and they're not a protected class, so landlords can have special fees and insurance requirements for our furry friends.
I always wondered why the rental applications I've filled out were so detailed. It turns out that landlords need to collect as much info during the intake process as possible to allow them to garnish wages and collect judgments. County tax records provide a public record of tenants' true addresses, which makes sending judgment notices easier. I sure don't want any known drug offenders on my property, because law enforcement could execute a civil asset forfeiture action against me if I rent to them in full knowledge of their activity. Checking the sheriff's records helps keep the riff-raff away. I'd rather save myself the trouble and keep everyone away.
I have difficulty believing any of the so-called asset protection strategies real estate professionals claim they use. I had an LLC structure until very recently for Alfidi Capital until I determined that paying the $800 per year to the State of California wasn't getting me any benefit. I did not have the time to treat the LLC as a separate entity that would give it corporate veil status. It also obviously carried my name, and I was the registered agent because I don't need to retain a lawyer for routine business functions. My LLC was useless and I'm in the final stages of converting Alfidi Capital from an LLC to a sole proprietorship. I will never again waste time and money using an LLC for anything that I can handle myself, including real estate. Insurance policies are probably cheaper than an LLC and land trusts are probably more anonymous. I'm no expert on land trusts but I'm wary of their potential for misuse. Would a property management company be willing to accept designation as a trustee of a land trust if the named beneficiary is the landlord's LLC, but the landlord has no property insurance? Who would sue who if something goes wrong? I don't want to spend time in court just to find out.
I'd rather take a less costly stance with my asset protection posture. The California superior court system has searchable databases of civil cases online. I've searched San Francisco Superior Court's records many times for the names of local troublemakers whom I do not wish to have in my life. It's educational to see who pops up as the initiator of frivolous lawsuits. I don't want litigation addicts as business associates. Landlords should beware of having them as tenants.
Landlords also have to manage the cash they receive and spend. It comes in by check, money order, electronic payment, etc. It goes out any way you like. You're the boss and you're running this business. I'm not. The process of evicting a bad tenant and preparing a unit for the next occupancy takes time, requiring cash reserves on hand to cover an estimated tenant failure rate. I suspect that corporate experience with uncollectible accounts receivable would be helpful here. Credit card companies sell their charge-off accounts to judgment collectors and other miscellaneous investors. Maybe landlords who don't want to pursue deadbeat tenants are a good source of deal flow for judgment recovery aficionados.
Disaster-prone areas call for their own category of Darwin Awards. I've always been fascinated by the stupidity of developers who build there, investors who buy there, insurers who underwrite there, and tenants who live there. I will never buy developed property on a floodplain. I will never buy property in the San Francisco Bay Area that does not meet seismic code requirements. I sometimes wonder whether architects who design structures that resist hurricanes and tornadoes have disruptive ideas for real estate developers in the Gulf states and Midwest. Somebody could make a buck.
Limits on landlording turn me off. Some paychecks are resistant to garnishment (like Social Security). Lawsuits and judgment collections can be a landlord's best friend. Landlords may have to pay interest on the deposits they collect. Limiting the deposit to cover first and last month's rent may or may not be helpful in avoiding interest charges. I have no desire to maintain records for thirty years that will allow me to calculate the return of some granny's deposit to her estate's executor once she croaks.
Tenants turn me off too. Low income properties are full of risky tenants who cause nightmares. I remember living in a Richmond, California apartment complex near the Hilltop Auto Mall. The City of Richmond bought it in 2003 to convert it into Section 8 housing while they spent tax dollars renovating the real low-income projects downtown. Life in my apartment complex soon deteriorated from an already low status. Tenants would enter the rental office bragging about being late on payments. Druggies left their detritus in the entryways and tenants left their human waste in the hallways. These people really were human waste with all of their behavioral problems. Section 8 of the Housing Act of 1937 now has a devoted constituency in the underclass. Housing voucher recipients strike me as the equivalent of parolees, people who leave and reenter the Section 8 program through revolving doors that affirm their victimhood. HUD even goes so far as to provide links to tenants' rights organizations, advocating against property owners whose taxes help fund HUD's operations. Bottom feeders are disgusting. I moved out of the ghetto in 2004 and I'll never live that way again. No way will any low-income tenant ever occupy my radar as a business professional.
Want to hire a property manager to do all of this work for you? Well, that requires work too. You'll have to consider how long they've been in business and whether they have the staff to handle all of the properties they manage. If they manage property out of your area, that means you're on the hook for long-distance absentee landlord status. If they have judgments against them, well, guess who they pass their bills to for payment. I'm not paying even a fraction of my income from an investment to someone else.
I had fun as a kid playing fake landlording with the Monopoly board game. The secret to success in that game is to own everything on a given street to capture renters who are highly mobile. Owning more properties means reinvesting your rent in improvements (houses, hotels) until you own the board and win by bankrupting everyone. In real life, the have-not takers will hamstring the landlord makers with regulations and lawsuits. They will also empower their political allies with subsidy vouchers, non-profit advocacy groups that subsist on foundation grants, and loudmouth activists. Everyone wants to be on the side of the angels as long as it means a free lunch. Real landlording isn't like Monopoly. The real world makes it difficult to win.
Some investors thrive as landlords. They love tracking all of the daily details and solving human problems. Good for them. They have the skills and patience to perform a very necessary market function and deserve handsome rewards for their results. They are welcome to own all of the income-producing residential property which will never see a bid from me. There are many strategies available to real estate investors who do not want to be landlords. I'd rather develop land, manage human-scale agribusiness projects, own oil and gas leases, rehabilitate vacant buildings, own rights-of-way and easements, purchase tax liens, buy REITs and ETFs, or do just about anything else. Any of those choices are more preferable to me than dealing with live human beings. Even dealing with dead human beings as a cemetery owner requires adherence to special regulations. I do not want people on my property, living or deceased. I can't wait to tell those kids to get off my lawn. All I need is the lawn so I can start yelling.
Full disclosure: I do not own real estate at this time.
I wish I could charge people an arm and a leg for living under my benevolent protection, but alas many communities have rent control laws that prevent landlords from raising rents on long-term occupants. San Francisco is one such town. The City has a rent board that determines what private property owners may do with the property they own. The City is also home to a very vocal tenants union that agitates for rent control. The union's symbol is the classic workers' fist smashing a cartoonish landlord. The clear message is that radicals who believe property is theft and profit is evil will use every means available to destroy the capitalists who provide them with climate-controlled shelter from the elements. No thanks. I will not be a landlord in San Francisco if it means I become the target of idiots with no life.
Owning rental property in less restrictive areas means figuring out how much to charge for rent. Figure extra charges for after-hours service calls, inspections, and non-routine maintenance. Having a live response to an overnight maintenance call may be worth the expense if it prevents water damage from destroying property. Watch out for those leaks above the ground floor. Fees for late rents are of course limited by local laws. I'd like to charge people double rent for wasting my time and insulting my intelligence but that's probably prohibited by some do-gooder San Francisco ordinance.
Locked-out tenants are a pain in the behind. I don't want to get calls at oh-dark-thirty from someone who lost their key or left it on the kitchen counter. Having a locksmith on call is not something I relish. I can just imagine a nosy neighbor snooping as the locksmith opens the tenant's door, then calling the cops to report a break-in, and then snickering as the locksmith calls me to complain about wasted time. Yeah, Neighborhood Watch would be all about busybodies watching me lose money. That is a headache I do not need.
Keeping tenants informed is another landlord task I don't want to do. Many tenants are dumb enough to need reminders of when their rent is due, so landlords need to time their newsletter publishing so the reminder ends up at the top of the shoebox, or hatbox, or breadbox, or glovebox, or wherever ghetto tenants like to stuff their overdue bills. Landlords can sometimes use this retardation to their advantage. If the newsletter contains requests for confirmation of safety measures like smoke detectors or carbon monoxide detectors, keeping proof of confirmations can limit landlords' liability in the aftermath of emergencies. Furnaces and air conditioning units are among landlords' most expensive repairs, but I worry that reminding tenants to change filters will fall on deaf ears. Having laundry facilities on site means more maintenance expenses, plus complaints from some tenant who claims a machine ate too many quarters.
Competent businesses consider the cost of acquiring new customers. Landlording as a business means figuring the cost of acquiring new tenants through advertising. Window signs might be more effective than lawn signs that get kicked over, and some high school kid on the corner holding a sign and waving might be a source of amusement. I would give an illiterate tenant a cheeseburger just to see them wave a big sign on the street corner with my name on it. Selecting new tenants means abiding by HUD's Fair Housing regulations. Some tenants fall into legally protected classes. Others that aren't protected don't have to live with me if I don't want them around. Frankly, I don't want anyone around. I don't want animals around either and they're not a protected class, so landlords can have special fees and insurance requirements for our furry friends.
I always wondered why the rental applications I've filled out were so detailed. It turns out that landlords need to collect as much info during the intake process as possible to allow them to garnish wages and collect judgments. County tax records provide a public record of tenants' true addresses, which makes sending judgment notices easier. I sure don't want any known drug offenders on my property, because law enforcement could execute a civil asset forfeiture action against me if I rent to them in full knowledge of their activity. Checking the sheriff's records helps keep the riff-raff away. I'd rather save myself the trouble and keep everyone away.
I have difficulty believing any of the so-called asset protection strategies real estate professionals claim they use. I had an LLC structure until very recently for Alfidi Capital until I determined that paying the $800 per year to the State of California wasn't getting me any benefit. I did not have the time to treat the LLC as a separate entity that would give it corporate veil status. It also obviously carried my name, and I was the registered agent because I don't need to retain a lawyer for routine business functions. My LLC was useless and I'm in the final stages of converting Alfidi Capital from an LLC to a sole proprietorship. I will never again waste time and money using an LLC for anything that I can handle myself, including real estate. Insurance policies are probably cheaper than an LLC and land trusts are probably more anonymous. I'm no expert on land trusts but I'm wary of their potential for misuse. Would a property management company be willing to accept designation as a trustee of a land trust if the named beneficiary is the landlord's LLC, but the landlord has no property insurance? Who would sue who if something goes wrong? I don't want to spend time in court just to find out.
I'd rather take a less costly stance with my asset protection posture. The California superior court system has searchable databases of civil cases online. I've searched San Francisco Superior Court's records many times for the names of local troublemakers whom I do not wish to have in my life. It's educational to see who pops up as the initiator of frivolous lawsuits. I don't want litigation addicts as business associates. Landlords should beware of having them as tenants.
Landlords also have to manage the cash they receive and spend. It comes in by check, money order, electronic payment, etc. It goes out any way you like. You're the boss and you're running this business. I'm not. The process of evicting a bad tenant and preparing a unit for the next occupancy takes time, requiring cash reserves on hand to cover an estimated tenant failure rate. I suspect that corporate experience with uncollectible accounts receivable would be helpful here. Credit card companies sell their charge-off accounts to judgment collectors and other miscellaneous investors. Maybe landlords who don't want to pursue deadbeat tenants are a good source of deal flow for judgment recovery aficionados.
Disaster-prone areas call for their own category of Darwin Awards. I've always been fascinated by the stupidity of developers who build there, investors who buy there, insurers who underwrite there, and tenants who live there. I will never buy developed property on a floodplain. I will never buy property in the San Francisco Bay Area that does not meet seismic code requirements. I sometimes wonder whether architects who design structures that resist hurricanes and tornadoes have disruptive ideas for real estate developers in the Gulf states and Midwest. Somebody could make a buck.
Limits on landlording turn me off. Some paychecks are resistant to garnishment (like Social Security). Lawsuits and judgment collections can be a landlord's best friend. Landlords may have to pay interest on the deposits they collect. Limiting the deposit to cover first and last month's rent may or may not be helpful in avoiding interest charges. I have no desire to maintain records for thirty years that will allow me to calculate the return of some granny's deposit to her estate's executor once she croaks.
Tenants turn me off too. Low income properties are full of risky tenants who cause nightmares. I remember living in a Richmond, California apartment complex near the Hilltop Auto Mall. The City of Richmond bought it in 2003 to convert it into Section 8 housing while they spent tax dollars renovating the real low-income projects downtown. Life in my apartment complex soon deteriorated from an already low status. Tenants would enter the rental office bragging about being late on payments. Druggies left their detritus in the entryways and tenants left their human waste in the hallways. These people really were human waste with all of their behavioral problems. Section 8 of the Housing Act of 1937 now has a devoted constituency in the underclass. Housing voucher recipients strike me as the equivalent of parolees, people who leave and reenter the Section 8 program through revolving doors that affirm their victimhood. HUD even goes so far as to provide links to tenants' rights organizations, advocating against property owners whose taxes help fund HUD's operations. Bottom feeders are disgusting. I moved out of the ghetto in 2004 and I'll never live that way again. No way will any low-income tenant ever occupy my radar as a business professional.
Want to hire a property manager to do all of this work for you? Well, that requires work too. You'll have to consider how long they've been in business and whether they have the staff to handle all of the properties they manage. If they manage property out of your area, that means you're on the hook for long-distance absentee landlord status. If they have judgments against them, well, guess who they pass their bills to for payment. I'm not paying even a fraction of my income from an investment to someone else.
I had fun as a kid playing fake landlording with the Monopoly board game. The secret to success in that game is to own everything on a given street to capture renters who are highly mobile. Owning more properties means reinvesting your rent in improvements (houses, hotels) until you own the board and win by bankrupting everyone. In real life, the have-not takers will hamstring the landlord makers with regulations and lawsuits. They will also empower their political allies with subsidy vouchers, non-profit advocacy groups that subsist on foundation grants, and loudmouth activists. Everyone wants to be on the side of the angels as long as it means a free lunch. Real landlording isn't like Monopoly. The real world makes it difficult to win.
Some investors thrive as landlords. They love tracking all of the daily details and solving human problems. Good for them. They have the skills and patience to perform a very necessary market function and deserve handsome rewards for their results. They are welcome to own all of the income-producing residential property which will never see a bid from me. There are many strategies available to real estate investors who do not want to be landlords. I'd rather develop land, manage human-scale agribusiness projects, own oil and gas leases, rehabilitate vacant buildings, own rights-of-way and easements, purchase tax liens, buy REITs and ETFs, or do just about anything else. Any of those choices are more preferable to me than dealing with live human beings. Even dealing with dead human beings as a cemetery owner requires adherence to special regulations. I do not want people on my property, living or deceased. I can't wait to tell those kids to get off my lawn. All I need is the lawn so I can start yelling.
Full disclosure: I do not own real estate at this time.
Friday, April 26, 2013
The Hidden Agenda Behind Retail Investment Proprietary Products
I despise proprietary investment products. These are investment securities specific to one brokerage, usually created by its investment bank or wholesale asset management arm. They've been around for years and need to go away. Like mutual funds, they've outlived whatever usefulness they possessed at their creation.
Internal hedge funds are stupid and probably a conflict of interest. The academic research on the inability of actively managed funds to deliver alpha over the long term is clear. The high expenses and volatility of hedge funds magnify this deficiency. Firms that create internal hedge funds use them as dumping grounds for securities they couldn't sell to retail investors and as make-work jobs for well-connected insiders who have nothing better to do for a few years.
Structured notes and principal-protected notes are just as dumb. They represent positions on a given sector or theme that knowledgeable investors can execute themselves with option strategies. Credit spreads and collars on ETFs are a whole lot cheaper than some note underwritten by an investment bank.
Proprietary products IMHO accomplish two functions very much in the interest of brokerages. They tie a client's assets to one firm and tie a broker's book of business to one firm. Think about it. A client who is dissatisfied with a broker and wants to move assets elsewhere won't normally be able to transfer the brokerage's proprietary products. They must be liquidated, incurring a capital gain, if the client wants to move all of their assets. This sets up the client for a very discouraging conversation with their existing wealth manager: "Oh gee, you can't move all those structured notes I sold you because the gains will mess up your asset allocation. You can't move your hedge funds either because you're locked in for five years."
A broker who wants to jump to another firm will face similar hurdles if she or he sold a bunch of proprietary stuff to a significant number of clients. The top-producing big shot who just had their gross payout reduced will have to think hard after realizing that proprietary products aren't portable from one firm to another. They are a crude form of "sticky" money that stays with a firm regardless of a broker's customer service skills.
Smart investors ignore sales pitches for the in-house favorite funds and notes. They cost a premium, which firms and salespeople like to collect, but add little to a well-diversified portfolio (i.e., large and small caps, laddered fixed income, hard assets, etc.).
Smart brokers ignore the internal bonuses paid for sales of proprietary products. They keep their books of business portable by focusing on widely held fund families and individual securities that any brokerage can hold.
I used to be stupid about proprietary products but I eventually got smart. I have not owned proprietary products since 2006. I tried to sell them to prospects when I was a financial advisor in 2005-2006; no one bought them from me. One prospect even ran away screaming when I described how a principal-protected note worked. I learned about structured notes' stickiness the hard way when I moved my assets from the full-service firm that fired me to a discount brokerage. The structured notes wouldn't move until I sold them. They netted out to just about zero gain after transaction costs. I will never invest in proprietary products again.
Internal hedge funds are stupid and probably a conflict of interest. The academic research on the inability of actively managed funds to deliver alpha over the long term is clear. The high expenses and volatility of hedge funds magnify this deficiency. Firms that create internal hedge funds use them as dumping grounds for securities they couldn't sell to retail investors and as make-work jobs for well-connected insiders who have nothing better to do for a few years.
Structured notes and principal-protected notes are just as dumb. They represent positions on a given sector or theme that knowledgeable investors can execute themselves with option strategies. Credit spreads and collars on ETFs are a whole lot cheaper than some note underwritten by an investment bank.
Proprietary products IMHO accomplish two functions very much in the interest of brokerages. They tie a client's assets to one firm and tie a broker's book of business to one firm. Think about it. A client who is dissatisfied with a broker and wants to move assets elsewhere won't normally be able to transfer the brokerage's proprietary products. They must be liquidated, incurring a capital gain, if the client wants to move all of their assets. This sets up the client for a very discouraging conversation with their existing wealth manager: "Oh gee, you can't move all those structured notes I sold you because the gains will mess up your asset allocation. You can't move your hedge funds either because you're locked in for five years."
A broker who wants to jump to another firm will face similar hurdles if she or he sold a bunch of proprietary stuff to a significant number of clients. The top-producing big shot who just had their gross payout reduced will have to think hard after realizing that proprietary products aren't portable from one firm to another. They are a crude form of "sticky" money that stays with a firm regardless of a broker's customer service skills.
Smart investors ignore sales pitches for the in-house favorite funds and notes. They cost a premium, which firms and salespeople like to collect, but add little to a well-diversified portfolio (i.e., large and small caps, laddered fixed income, hard assets, etc.).
Smart brokers ignore the internal bonuses paid for sales of proprietary products. They keep their books of business portable by focusing on widely held fund families and individual securities that any brokerage can hold.
I used to be stupid about proprietary products but I eventually got smart. I have not owned proprietary products since 2006. I tried to sell them to prospects when I was a financial advisor in 2005-2006; no one bought them from me. One prospect even ran away screaming when I described how a principal-protected note worked. I learned about structured notes' stickiness the hard way when I moved my assets from the full-service firm that fired me to a discount brokerage. The structured notes wouldn't move until I sold them. They netted out to just about zero gain after transaction costs. I will never invest in proprietary products again.
Saturday, March 02, 2013
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