What could happen next
Fed turns off stimulus buys
End of bull bubble
Monday, June 10, 2013
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.
Saturday, June 08, 2013
The Haiku of Finance for 06/08/13
Build on vacant lot
Home and business in one place
Sky is the limit
Home and business in one place
Sky is the limit
Friday, June 07, 2013
Verastem (VSTM) and Anti-Cancer Drugs
Verastem (VSTM) believes its drugs can destroy cancer stem cells that are notoriously resistant to chemotherapy. Scientists have been on a quest for years to find drugs that are effective on cancer stem cells. Anti-psychotic drugs recently showed promise in fighting stem cells. Nanomed treatments may be the next big thing. This is clearly a hot area for research, so Verastem needs to stand out from the crowd.
I am extremely impressed with the management team's qualifications. They probably have the best bench strength of any small pharma company I've seen in recent years simply because their key people have led life science companies that were acquired. This means they clearly know how to deliver products that Big Pharma finds valuable. The single best risk-management technique for any young company is the presence of serial entrepreneurs in the executive team.
Their main drugs are in Phase 1 studies. I'm not scientifically qualified to evaluate their characteristics, so I can only comment on their market potential for treating ailments like mesothelioma. Eli Lilly's Premextred (brand name Alimta) treats mesothelioma and had over US$1B in sales in 2012. Verastem's drugs need to be more effective than Alimta to dent those sales, so we'll have to wait for the trial data. Any Big Pharma company that wants to take some market share way from Eli Lilly should take a serious look at Verastem.
Verastem's 10-Q for May 9, 2013 said they have over $28M in cash on March 31. Their quarterly loss was -US$9M, so they can expect to raise more capital by the end of the year (unless they start tapping into their US$38M in short-term investments). Verastem is too risky for my portfolio at his time but I am optimistic that their talented management can deliver meaningful results.
Full disclosure: No position in VSTM or other companies mentioned at this time.
I am extremely impressed with the management team's qualifications. They probably have the best bench strength of any small pharma company I've seen in recent years simply because their key people have led life science companies that were acquired. This means they clearly know how to deliver products that Big Pharma finds valuable. The single best risk-management technique for any young company is the presence of serial entrepreneurs in the executive team.
Their main drugs are in Phase 1 studies. I'm not scientifically qualified to evaluate their characteristics, so I can only comment on their market potential for treating ailments like mesothelioma. Eli Lilly's Premextred (brand name Alimta) treats mesothelioma and had over US$1B in sales in 2012. Verastem's drugs need to be more effective than Alimta to dent those sales, so we'll have to wait for the trial data. Any Big Pharma company that wants to take some market share way from Eli Lilly should take a serious look at Verastem.
Verastem's 10-Q for May 9, 2013 said they have over $28M in cash on March 31. Their quarterly loss was -US$9M, so they can expect to raise more capital by the end of the year (unless they start tapping into their US$38M in short-term investments). Verastem is too risky for my portfolio at his time but I am optimistic that their talented management can deliver meaningful results.
Full disclosure: No position in VSTM or other companies mentioned at this time.
Thursday, June 06, 2013
Tungsten Corp. (TUNG) Making the Rounds
Trinity Investment Research is busy again. I never miss a chance to review the brochures they mail to me. Today's spotlight is on Tungsten Corp. (TUNG), riding a wave of Internet chatter about Warren Buffett's supposed interest in tungsten. It's true that his Berkshire Hathaway's IMC has backed Woulfe Mining, but that doesn't necessarily mean the Oracle of Omaha suddenly likes metals. He has always been averse to investing in commodified industries and prefers things with durable advantages. Korea is a dominant tungsten producer, so a presence there is rather durable.
Tungsten Corp.'s President is not a trained geologist and (based on his published bio) has not run a mining company until now. Their VP is a geologist. That's nice but I'm not impressed yet. They'd be more impressive if they could show measurable progress toward operating a mining project.
They are exploring projects in Idaho and Nevada. They have an option on the Nevada property, which in the single photo available appears to have no existing infrastructure. They have another option in Idaho near an area that used to be actively mined. I'd rather see 43-101 compliant reports than options on pieces of history. We may not see 43-101 data because this is a US-listed stock with no Canadian ticker, so there's no impetus for them to follow the Canadian reporting regime.
I've checked out their annual report dated April 26, 2013. They had no revenue and just over $5k in cash on hand. They did raise $500K on April 8 but their expense projection of $650K over the next twelve months implies they will have to raise more money later in 2013. Shareholders can expect dilution from further fundraising. I do not understand why a company with this kind of risk has a market cap of almost $64M.
It sure would be nice if Trinity Investment Research publishes a follow-up piece to tell us all how well this stock does in a couple of years. I don't need a follow-up because I'm just not interested.
Full disclosure: No position in TUNG or other companies mentioned at this time.
Tungsten Corp.'s President is not a trained geologist and (based on his published bio) has not run a mining company until now. Their VP is a geologist. That's nice but I'm not impressed yet. They'd be more impressive if they could show measurable progress toward operating a mining project.
They are exploring projects in Idaho and Nevada. They have an option on the Nevada property, which in the single photo available appears to have no existing infrastructure. They have another option in Idaho near an area that used to be actively mined. I'd rather see 43-101 compliant reports than options on pieces of history. We may not see 43-101 data because this is a US-listed stock with no Canadian ticker, so there's no impetus for them to follow the Canadian reporting regime.
I've checked out their annual report dated April 26, 2013. They had no revenue and just over $5k in cash on hand. They did raise $500K on April 8 but their expense projection of $650K over the next twelve months implies they will have to raise more money later in 2013. Shareholders can expect dilution from further fundraising. I do not understand why a company with this kind of risk has a market cap of almost $64M.
It sure would be nice if Trinity Investment Research publishes a follow-up piece to tell us all how well this stock does in a couple of years. I don't need a follow-up because I'm just not interested.
Full disclosure: No position in TUNG or other companies mentioned at this time.
Wednesday, June 05, 2013
The Rewards of Advanced Information Technology
Evgeny Morozov thinks advanced IT poses unforeseen risks. I heard him make his case at the World Affairs Council with lots of points based on his books The Net Delusion and To Save Everything, Click Here, but I don't necessarily concur with his conclusions.
He noted the trend of embedding sensors everywhere but didn't call it "the Internet of things." Most analysts would put it in that context because the way sensors collect data will be linked to Big Data in a cloud. He also noted how the sensor trend intersected with social media to redefine ethical behavior (with incentives pushed by gamefication). I just don't see why he finds the private ownership of this problem-solving architecture so objectionable. The free market can incentivize beneficial behavior in real time without waiting for any one-size-fits-all public policy prescription.
Mr. Morozov notes that fact-checking databases are widely available and browser apps can tap them while you read articles on time. I'm not convinced that political bias in any of those databases is some kind of problem that invalidates their utility. Users can tweak their media feeds to collect articles from across the spectrum and check them against a similarly broad array of databases. The information consumer in an open society is free to make an informed choice.
The kind of high-level thinking Mr. Morozov would apply to public policy might work if policy were customizable for every citizen. We see the results of such an effort in tax codes and environmental regulations whose complexity and exemptions require a cottage industry of consultants to interpret them. High-functioning lobbyists have customized plenty of exemptions into those laws that will never apply to most people. The IT revolution of sensors, Big Data, IOT, and social media allow citizens to seek customizable solutions to their problems in real time. Advocating high-level thinking might resonate in the Bay Area, home to the most highly educated people in the world. It will not resonate with the vast majority of humans who use heuristics to make it through the day. Advanced IT enables workable microeconomic solutions for the vast majority of people who won't benefit from high-level public policy.
It is a fundamental attribution error to believe mass behavior is rational. There's enough evidence from evolutionary biology to show that humans act first and then rationalize their actions immediately afterwards. Attributing high-level ethical thinking to mass behavior is a leap in logic that scientific study of the human mind cannot justify. I believe that advanced IT allows for situation-specific solutions to human-scale problems that public policy cannot and should not solve. Besides, some problems are just good to have. If a startup IPO netted me piles of money, finding a way to use it is a much better problem to have than wondering how to pay my bills. I don't need public policy to guide my thinking in that event. I need social media apps that connect me to Big Data so I can study open source intelligence in real time. .
He noted the trend of embedding sensors everywhere but didn't call it "the Internet of things." Most analysts would put it in that context because the way sensors collect data will be linked to Big Data in a cloud. He also noted how the sensor trend intersected with social media to redefine ethical behavior (with incentives pushed by gamefication). I just don't see why he finds the private ownership of this problem-solving architecture so objectionable. The free market can incentivize beneficial behavior in real time without waiting for any one-size-fits-all public policy prescription.
Mr. Morozov notes that fact-checking databases are widely available and browser apps can tap them while you read articles on time. I'm not convinced that political bias in any of those databases is some kind of problem that invalidates their utility. Users can tweak their media feeds to collect articles from across the spectrum and check them against a similarly broad array of databases. The information consumer in an open society is free to make an informed choice.
The kind of high-level thinking Mr. Morozov would apply to public policy might work if policy were customizable for every citizen. We see the results of such an effort in tax codes and environmental regulations whose complexity and exemptions require a cottage industry of consultants to interpret them. High-functioning lobbyists have customized plenty of exemptions into those laws that will never apply to most people. The IT revolution of sensors, Big Data, IOT, and social media allow citizens to seek customizable solutions to their problems in real time. Advocating high-level thinking might resonate in the Bay Area, home to the most highly educated people in the world. It will not resonate with the vast majority of humans who use heuristics to make it through the day. Advanced IT enables workable microeconomic solutions for the vast majority of people who won't benefit from high-level public policy.
It is a fundamental attribution error to believe mass behavior is rational. There's enough evidence from evolutionary biology to show that humans act first and then rationalize their actions immediately afterwards. Attributing high-level ethical thinking to mass behavior is a leap in logic that scientific study of the human mind cannot justify. I believe that advanced IT allows for situation-specific solutions to human-scale problems that public policy cannot and should not solve. Besides, some problems are just good to have. If a startup IPO netted me piles of money, finding a way to use it is a much better problem to have than wondering how to pay my bills. I don't need public policy to guide my thinking in that event. I need social media apps that connect me to Big Data so I can study open source intelligence in real time. .
Tuesday, June 04, 2013
The Haiku of Finance for 06/04/13
Super-jerk trader
Brags about really big gain
Won't mention losses
Brags about really big gain
Won't mention losses
Monday, June 03, 2013
The Haiku of Finance for 06/03/13
Case-Shiller Index
Home prices keep rebounding
All because of ZIRP
Home prices keep rebounding
All because of ZIRP
Financial Sarcasm Roundup for 06/03/13
I do exactly what I say I'm going to do. I see financial stuff, I round it up, and I get sarcastic about it all.
China is now Iraq's biggest oil customer. This is one of those no-kidding things that should have part of the forecast prior to the US withdrawal from Iraq. The message to the world is that bad things happen when the US comes into your country and good things happen when China comes in. The downside for Iraq is that China will soon be printing inflated currency to pay for Iraqi oil. Oh, so will we.
China's property prices keep rising. Maybe China could do an in-kind trade of real estate for Iraqi oil. I don't think Iraqis are dumb enough to take that trade. No investor would want to be stuck with overpriced bursts, except of course newly urbanized Chinese who will pay anything for what the believe is a step up from a farm.
We have some pretty dumb real estate investors here in San Francisco. Home prices in The City are way up so far in 2013, although they are nowhere near their 2006 highs. I'm looking to buy some property myself but not at these prices. Homes are not at fair value until they're a low multiple of the median income for a given MSA. I'm not buying anything at a premium to fair value.
I just have to note that one particular Stolen Valor fraud may be cooking up some more websites. I just can't wait to see them when they're ready. I also can't wait to watch a long string of honest people testify against him in court. They'll do exactly what they say they're going to do.
China is now Iraq's biggest oil customer. This is one of those no-kidding things that should have part of the forecast prior to the US withdrawal from Iraq. The message to the world is that bad things happen when the US comes into your country and good things happen when China comes in. The downside for Iraq is that China will soon be printing inflated currency to pay for Iraqi oil. Oh, so will we.
China's property prices keep rising. Maybe China could do an in-kind trade of real estate for Iraqi oil. I don't think Iraqis are dumb enough to take that trade. No investor would want to be stuck with overpriced bursts, except of course newly urbanized Chinese who will pay anything for what the believe is a step up from a farm.
We have some pretty dumb real estate investors here in San Francisco. Home prices in The City are way up so far in 2013, although they are nowhere near their 2006 highs. I'm looking to buy some property myself but not at these prices. Homes are not at fair value until they're a low multiple of the median income for a given MSA. I'm not buying anything at a premium to fair value.
I just have to note that one particular Stolen Valor fraud may be cooking up some more websites. I just can't wait to see them when they're ready. I also can't wait to watch a long string of honest people testify against him in court. They'll do exactly what they say they're going to do.
Sunday, June 02, 2013
The Limerick of Finance for 06/02/13
Easing has the markets in thrall
Wall Street pros cannot make the call
Ignoring what's real
Going with what they feel
None admit any risk of a fall
Wall Street pros cannot make the call
Ignoring what's real
Going with what they feel
None admit any risk of a fall
BIS Says Central Banks Drive Capital Markets Insane
The BIS Quarterly Report dated June 2013 is proof from the horse's mouth that financial markets are totally insane. Saying markets are under central bankers' monetary easing spell may be the understatement of the year. The graphs on page 2 show stock markets rising and bond yields falling. The graphs on page 3 show economic surprises getting more negative, growth forecasts falling, and commodity prices dropping. Knowledgeable practitioners are thus getting pessimistic while know-nothing investors are getting more optimistic. This divergence of market sentiment from economic reality cannot continue forever. Read between the lines of that BIS report for amusement. They hint on page 9 that Europe-wide contagion was narrowly avoided in the Cyprus bank meltdown once Eurocrats backed down from the proposed one-off levy on insured deposits. My blog readers knew about that when it was happening thanks to my extreme genius.
I shake my head in a sorrowful stupor at the people who manage money professionally in this environment. Some investors are starting to wake up but it takes a lot to rouse even so-called smart money. Investors in SAC Capital are reportedly preparing massive redemptions. Not every investor gets a wake-up call in the form of SEC investigations. That's one reason why most investors are sound asleep. Another reason is that so many money managers are just plain stupid. Portfolio managers and their supporting analysts are paid to understand basic trend data. They either don't understand it (too stupid), can't admit what's really happening (too cowardly), or don't want to upset clients with bad news (too dishonest). I don't have those problems and that's why I won't ever be hired as a portfolio manager.
Insane media shills continue to jump on the bull market bandwagon. It's a fun ride until the wagon goes over a cliff at eighty miles an hour. The weightless feeling in freefall is very short. The pain from impact at the bottom lasts a lifetime. Anyone going along with this joy ride is trusting central bankers at the wheel to steer correctly. The central bankers have the gas pedal to the floor. Go watch the last scene in "Thelma and Louise" if you need a good image.
I shake my head in a sorrowful stupor at the people who manage money professionally in this environment. Some investors are starting to wake up but it takes a lot to rouse even so-called smart money. Investors in SAC Capital are reportedly preparing massive redemptions. Not every investor gets a wake-up call in the form of SEC investigations. That's one reason why most investors are sound asleep. Another reason is that so many money managers are just plain stupid. Portfolio managers and their supporting analysts are paid to understand basic trend data. They either don't understand it (too stupid), can't admit what's really happening (too cowardly), or don't want to upset clients with bad news (too dishonest). I don't have those problems and that's why I won't ever be hired as a portfolio manager.
Insane media shills continue to jump on the bull market bandwagon. It's a fun ride until the wagon goes over a cliff at eighty miles an hour. The weightless feeling in freefall is very short. The pain from impact at the bottom lasts a lifetime. Anyone going along with this joy ride is trusting central bankers at the wheel to steer correctly. The central bankers have the gas pedal to the floor. Go watch the last scene in "Thelma and Louise" if you need a good image.
Saturday, June 01, 2013
The Haiku of Finance for 06/01/13
Crowdfund your project
Co-op, land trust, or maker
Wealth from the ground up
Co-op, land trust, or maker
Wealth from the ground up
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