Blessed by the Potato

I like the note in this story about the advisor making clients check the box “I want to buy low and sell high” or “I want to buy high and sell low.”

Michael Geist had a tonne of UBB-related posts up this last week or two. I haven’t had a chance to read any yet, but I’ll get around to it (and likely posting on it) soon. If you can’t wait, go ahead and read him yourself!

Last time around I briefly mentioned Tokyo Electric Power, with a pointer to Financial Uproar’s take. After that little bump I mentioned, it just tanked. I was surprised by that: my take was that the cleanup costs would be several billion (let’s say $10B), and the liabilities were capped by Japanese law. What transpired was that that last part looks like it may not be true: though there is a law in place to limit liability for “exceptional” natural disasters, and that it would be a no-brainer that the worst quake/tsunami to ever hit Japan would count as “exceptional”, that’s not automatic, and the government is apparently not going to make that declaration. I don’t have expertise in Japanese law to say one way or the other, but I’m anxious to see what happens in court down the road.

Supposedly the reason for that is that, because of the public scrutiny, etc., the politics wouldn’t be very good of letting them partially/mostly off the hook. But no matter what, the lay public is going to have a bee in its bonnet about nuclear plants for some time to come now. If the Japanese government leaves TEPCO out to dry on the liability thing, despite the unprecedented size of the natural disaster and the existing laws, that could send a chill down corporate spines, and that would really sink nuclear power in the country (and possibly, everywhere).

Be sure to check out the comments section of my previous post on REITs vs Condos. Rachelle had some good points about the risks of REITs, and I realized that though I much prefer REITs to condos, I didn’t quite emphasize enough that I’m not hugely keen on either. After all, REITs are only 3% of my portfolio now. I’m not sure under what circumstances I’d go to zero allocation — even in my active portfolio, passive thinking on asset allocation means that, to some extent, I’m willing to risk losses to get exposure to a sector. I also explain further what I meant by “somewhat” interest-rate sensitive (TLDR: less leverage than retail condos, and the effective rates today aren’t as far below “normal” 2007 as CMHC-insured residential rates are, so the correction shouldn’t be as bad).

The Globe had an op-ed on the housing bubble here, saying “signs point to a severe housing correction.” Nothing new to BbtP readers (though he does trot out the hot asian money meme). I think the most remarkable thing about this article is not what it says but the very fact that it not only got published as-is in the Globe, but it was featured prominently rather than buried (or in a point-counter-point pair). If I was in a more optimistic mood, I might say that the big drop-off in sales volume for the 2nd half of March and the uptick in such articles in the MSM finally marked the top… but we’ll have to have passed it by months/years before we can really say where the top was. As always, patience.

A good TED talk on apathy in politics. I like his proposed zoning notice for Toronto. The topic of apathy and politics is perhaps particularly apropos with the current federal election.

Oh, humans, can I ever get you to stop relying so much on your limbic system? On the internet today: “nothing is more horrifying or ignorant than to hear the pro-nuke faction rushing forward to boast, as they are doing these days, that nobody-has-died-yet-from-radiation-at-fukushima.” Yes! Damn them for trying to inject facts and rationality into our Fukushima fear and outrage orgy!

It’s been a tumultuous year so far, and the snow hasn’t even melted yet! The big news story has been the Japanese earthquake and tsunami, which has killed thousands of people and caused billions in dollars of damage. Oh, it also put some nuclear reactors into partial meltdown which added salt to the wounds by possibly making a few hundred more people sick, and releasing radiation into an area around the plants. But since it’s the ongoing story which will take weeks to fully play out, since people are afraid of the very word nuclear, and since fear-mongering sells papers, it’s been the headline story all week. Not that I am free of blame — I’ve re-read my radiation safety training materials and spent a lot of time brushing up on nuclear power generation this week, and have been soaking up the Fukushima stories.

While I do want to help everyone who’s going out of their minds keep perspective, I also don’t want to minimize the tragedy: the workers are being very brave while facing a terrifying situation, and are making personal sacrifices to try to minimize the damage to the rest of Japan. There have been fires, explosions, and meltdowns, leading to some radiation release (though whether the panicked mobs in Tokyo have anything to fear is an open question)…

Oh yeah, and there’s a civil war in Libya, demonstrations in Saudi Arabia, and crackdowns in Bahrain.

Joe Kelly over at Nerd Boys has a few posts on UBB up. He even tabulates the UBB fees by various ISPs.

Michael James reports that AT&T in the US has introduced UBB, which has sparked some outrage… at 1/10th the price of Canadian UBB.

Something I haven’t really drawn enough attention to is the very framework the CRTC laid out for making its decisions. They state that when congestion occurs, it should be corrected first by network infrastructure upgrades, then by economic incentives (i.e.: UBB), then by throttling and other traffic control measures. The thing is, there’s no structure to those guiding principles, leading to perverse incentives with UBB: an ISP can make more money by encouraging congestion, then charging UBB than it can by upgrading the network to stay ahead of traffic growth. Anyway, it was back in my 5-page submission if you read that, and if not, you probably want to focus on other things now.

Michael Geist, who has been debating Dan McTeague about proposed copyright reform, points out that despite calling for severe penalties for copyright infringers, Dan McTeague himself appears to fit the criteria for a repeat infringer. Zing!

Laser pulse pistol. Yes. The future is here.

On the profiteering side of the Japanese tragedy, Financial Uproar discusses investing in Tepco, which I was actually just talking about today with Netbug. I saw a lot of parallels with the BP situation there. Though there is an ADR, it trades on the pink sheets and is quite illiquid: TD Waterhouse wouldn’t let me put in a bid online, I had to call. I decided to sleep on it, but it’s now up ~20% in Tokyo tonight, so I may have missed my chance.

National Post: Language used to describe Japan’s atomic crisis borders on reckless hyperbole.

An old Scientific American article about how the emissions from coal plants are more radioactive than those from nuclear power plants. However, the mercury, particulate, and greenhouse gas emissions of the coal plants are far bigger concerns, not to mention mining issues.

And finally, I think my favourite link in the round-up: A post showing the deaths per TWh for different power generation methods. There’s lots of room to quibble about an order of magnitude here or there, but the end result is that coal is several orders of magnitude more deadly than nuclear. And coal never provided us with medical advances like radiotherapy or diagnostic nuclear medicine.

Went grocery shopping, with largely two things on my list: real food, and candy. At the intersection of the two: cocoa krispies, but they look to have discontinued them! Which is dastardly, because they were on sale this week!

Wired had a good article on magnetic navigation in sea turtles. Neat, because I was just talking about this in my lecture last week! Hope the undergrads find this. I love this quote: “A skeptic could reasonably believe that the latitudinal cue is magnetic, but that determining east-west position depends on magic,” Another recent article also discusses the radical-pair mechanism. I’ve long lamented the poor quality of journalism, especially science reporting, in these times of ours, but I have to say that I’ve been reasonably impressed with a few articles from Wired recently, in particular because they actually include the citations to the papers they’re talking about, so I’ve subscribed to their RSS feed.

The Berkshire Hathaway annual results are out, including Warren Buffet’s famous annual letter to shareholders. Worth a read even if you’re not a shareholder. Of course, many blog posts out there to help you digest the wisdom, including Larry MacDonald, Canadian Capitalist, and Michael James.

Barry Rithotlz points out that banks are writing credit default swaps on debt that doesn’t exist… if you figure out how to view the full story on the WSJ, let me know, I only got the first few lines as a preview, and there wasn’t even a link with the option to buy the article, so to me it just looks like a broken website (way to go, newspapers, you show the internet how conveying information is done!).

I got a response from my MP after my UBB letters: basically just a form response that the Liberals oppose UBB, and that they’ve received a lot of letters on the topic! Other than that, I haven’t noticed any news on the matter, so now I think we just wait and see what comes out of the CRTC.

A bunch of other bloggers got copies of various tax programs to give away (come on Intuit, it’s not a personal finance blog, but I do taxes too!). Oddly enough many of them only opened their contest up to their email subscribers. I guess people who use RSS to follow every. single. post. just aren’t worthy.

With even the permabulls like the real estate boards calling for the housing market to at the very least flatten out, it’s important to market your home’s selling features. A snazzy virtual tour may help, but might I suggest a space wall?

Toronto Realty Blog considers moving up. The post highlights a few things that I see as being horribly sick and wrong with the current Toronto market (well, it doesn’t intentionally highlight them, but they stand out to me):

• “Five years is far above the average time that a condo-owner will spend in one unit in downtown Toronto…” Transaction costs are high: so far, price appreciation has dwarfed them, but in a flat market, moving very often means more people should lean towards renting rather than buying. If people are feeling squeezed out (or bored, or whatever other reason they have for moving so frequently), then they do need to start to consider the risks of buying at the top, as they can’t just wait out a downturn in the unlikely event that it happens (even if that’s what they tell me). Five years sounds like a very short amount of time to buy a place for to me, so for that to be above the average sounds crazy.
• “As I look around the living room, I see a bookshelf with so many books stacked on top of the unit itself that I’ve begun a small pile on the floor […] and I can’t tell you how many things (skiis, snowboard, golf clubs, hockey equipment, baseball gear, winter tires) I keep in seasonal storage in my mother’s basement. Not only have I outgrown my space, but I can afford far more now as well.” The condos that are going up (even in Markham) are freaking tiny. I have trouble seeing how a single person fits in some of them, let alone a couple. That is partly due to amenities: no need to set aside room for a treadmill if your building has a gym, and space for more than two guests can be taken care of by the party room and movie theatre. But I have to wonder how much of the demand for these tiny units is driven by people buying from plans, and when the buyers will finally stop trying to get a place, any place, and start demanding livable space.
• “Let’s assume that I own my condo in cash, and I have no mortgage.[…] For whatever reason, I would rather keep my money in my condo th[a]n throw darts at the board known as the stock market […] so my all-in cost of living is only $545 per month.” Once again, the fallacy that owning your shelter somehow makes it free, or nearly so, without taking into account the opportunity cost, that is, the return one could get by investing that money elsewhere. Even a GIC-like rate added to the other costs listed would put that monthly total north of $1600 — more than what a 1-bedroom rents for. And along with it, the notion that somehow the stock market is risky but Toronto condos are not. Eventually, fundamentals will matter.

Time, I suppose, for another round-up links post. Writing went much better this week, but I have completely fucked up my sleep schedule, and the diet was out the window.

Some webcomics I haven’t seen before:

Buttersafe: I will never understand bees. Pajamaforest: Zing fail, It’s a date.

A quick post at the Globe and Mail about finance pay scales compared to other professions. As a scientist, I do have to lament the misallocation of resources in our society towards the allocators of capital. Don’t get me wrong: someone has to do that job (capital is but one of the world’s limited resources), but I don’t think it’s a profession that should be sucking away our best and brightest (especially if they insist on blowing up the economy every other decade).

Xceed mortgage, a subprime lender in Canada (they do exist!) is having trouble getting financing, and is not renewing mortgages of its clients. It’s no longer accepting mortgage applications from new customers. Though I expect most people with schedule 1 banks will have no problem renewing their mortgage even if they’re underwater in the future (though I expect some loss of negotiating power on rate), this should serve as a reminder that a renewal is not guaranteed, even if you’ve made all your payments!

A neat youtube video on side-scrollers and moving your own body with a 3rd-person perception.

Whiterock (WRK.UN) is once again doing a share split, 3-for-2. I don’t know why they keep splitting the shares: $20 is not exactly dear, especially for a REIT. I suppose it might help a few investors with synthetic DRIPs get more whole shares, but these arrangements do have a cost. A trivial one, perhaps, but not zero. I don’t get why management doesn’t just wait until it’s high enough for a 2-for-1 split. Last time this happened I sold a chunk just because I didn’t like the taste of the shenanigans, even though I still thought Whiterock was undervalued (and boy was it: WRK.UN returned approx 85% from that sale). I think in an absolute sense it’s fully valued now, but since the rest of the REITs are also up huge over the last year, I still think it’s just a touch undervalued on a relative basis, so this time I won’t sell my last little chunk of it, even though I don’t like the whiff of share price manipulation that the frequent splits suggest.

Netbug shares this video of a ketchup-dispensing robot and I have to say, if this robot neatly dispensed an appropriate amount of ketchup, the video probably wouldn’t be worth watching. I don’t know what that says about the human condition, but I’m sure it’s worth reflecting on.

How stupid are US kids that these need to be banned so they won’t choke on them? What else might they choke on? Pebbles? Bits of food? Food wrappers? Screws? Cat toys? Their socks? Where does the madness end? Does the US border guard, tasked with keeping terrorists and science fiction writers in line really need to worry about a single Kinder Surprise egg? (It’s not even like she was trying to smuggle in a case of them as contrabrand).

For fans of Community: “Fact: In 100% of fake gun related shootings, the victim is always the one with the fake gun.”

Looks like the credit tightening may be taken seriously, as Mark Carney’s warnings are being widely picked up now. There are several other articles with similar themes this week, indeed it seemed to be the Globe’s major story for the week.

In one Globe round-up, the “As one economist puts it, Mark Carney’s warning on consumer debt is akin to leaving the cookie jar in plain sight but telling you not to touch.” analogy was put out there. I don’t think that’s accurate — the metaphor there implies that Carney is being hypocritical or just downright negligent in his expectations. But the children and cookies framework would be better phrased as “Those are for guests, don’t touch!” Because there is a good reason for the cookies (low rates) to be out — to stimulate the economy, capital spending, etc. But they’re not for the kids (housing market) since they’re already hyper enough. The cookies aren’t arbitrarily out, and can’t be easily put away just because the kids are getting into them.

Ed Clark of TD explains why regulation is needed: even though they recognize the problem, the banks don’t want to move first to tighten lending because it would be a competitive disadvantage to the bank that moved first (plus, systematic risk is beyond their business plan, and these loans are essentially risk-free to them thanks to CMHC). A good lesson for deregulation in lots of other areas: competition alone doesn’t always lead to a good outcome.

Michael James had a few good posts this week. another on index investing. I’m not a people person, so I think it’s much easier to pick stocks than to pick advisors/managers…

John Hempton has a post up about some statistics on Chinese ethanol consumption (provided by a controversial producer). There’s a discrepancy between the statistics the company provides, and what the WHO (and educated guessing) suggests is the status of alcohol consumption in China. Either the stats are wrong, or there’s a massive over-capacity building up… I’m starting to worry about stories like these. Don’t know what to do about it yet, but it’s got me thinking…

Jenn sends along this article in the economist about why doing a PhD is usually a waste of time. Speaking of finishing a PhD though, Netbug sends this inspirational video with the helpful tip: “the way to finish something on time and on budget is to ship when you run out of time or money.” Just finishing something and sending it along is the problem I’m wrestling with right now – and I’m long past out of time for sending a first draft to my committee… time to just “ship” something! :)

Jeffery Simpson has a column on misinformed people. Perhaps not surprisingly, “The people who were the most misinformed – in terms of having opinions that varied the most from verifiable facts – were those who watched Fox News almost daily.” I love learning things (I should hope so, as I’ve been a student all my life), and I like being an educator: not even necessarily as a teacher/lecturer, but even just helping to correct misinformation here on the blog. I’m deeply disappointed by (deliberate?) misinformation in the media…