Blessed by the Potato

In all my years and all my learning, I have never quite got the hang of mornings. I used to be pretty good at sneaking up on them from the other side, staying up all night to get them when they least expect it, but waking up and facing a new day is just such an impossible concept. I know some people can basically just roll out of bed and be something called “chipper” and “alert”. I am not one of those people. I used to play snooze-button basketball with my alarm clock to gradually wake up over the course of an hour and a half, then search for caffeine before risking communication with other humans.

At several points in my life I have studied the evidence and become convinced of the utility of breakfast, and have woken up early to eat this mystery meal before leaving for work. Inevitably, after a few weeks of that I decide (consciously or not) to forgo breakfast in exchange for more time in bed, or less stress at cramming the rest of my routine into an unrealistically short period of time.

And time is the big problem with mornings: it doesn’t behave or flow right. I can sit there at night, when everything is sparkly and sleek and working as it should, and time myself as I perform the necessary house-leaving preparatory tasks to plan when I need to haul my ass out of bed for the morning. I can put two poptarts in the toaster, determine that it takes 90 seconds to toast them, 25 seconds to slather them with peanut butter, and all of 195 seconds to shovel them into my food hole and wash them down. Practice run done: 310 seconds for breakfast, add it to the morning time budget, set the alarm clock back appropriately and we will be able to squeeze breakfast in. But then morning comes and time stops working properly. My carefully practiced and timed breakfast routine goes horribly awry. It’s going on 12 minutes and I still have half a pop tart to eat and somehow there’s melted peanut butter dripping on my pants.

I cannot accept that this is merely a subjective time dilation effect, caused by my severe case of night owlism. My toothbrush has a digital timer so that I brush for precisely 2.0 minutes. Yet in the morning, even though it still ticks up towards 2:00, it takes five minutes to get the whole process over with — the morning effect clearly affects even piezoelectric crystal-based time measurement.

Anyway, all this is to say that I am “morning challenged” and pretty much always have been.

Then into my life comes a wonderful bouncing baby, who becomes an amazing little toddler girl. Now instead of an alarm clock I wake up to the sound of “Daddy! Come pleeeeeeeeeeeeeease!” Bopping her on the head does not get me an extra 15 minutes to snooze so I pretty much have to get up at that point. For a long, long while she was waking up too late for me to even see her before I left for work, but then over the last year that has flipped so that she wakes up crazy early, following the ancient toddler urge to be up before dawn so that they can watch the sun rise and ask “why?”

And while to me it all sounds universally crazy early, there is a big difference to waking up at 5:30am and 7:00am, and incredibly it leads to a totally non-linear relationship in the time to be ready for work, a function I call the Toddler Morning Efficiency Curve. You would think that it would take about the same amount of time to do basically the same sets of things each morning, no matter when your wake-up call happened to come in. Indeed, if there was a non-linearity, you’d expect to become more efficient as the time to get out the door for work came closer and you started to hurry or cut non-essential things out of the routine — the hurry-up hypothesis. But it’s not so simple.

If she wakes up at a “normal” time (normal for her, not for me), let’s say 6:30 to 7 am, then things proceed reasonably well. We can spend 10 minutes or so where I am just a useless bag of shambling meat, a zombie barely able to greet her and see if she needs a diaper change immediately or if it can wait a few minutes for the strength and dexterity to return to my hands. At some point shortly after waking up, I can go potty, tell her that I’m about to go potty, reassure her that I will be back in just one minute, and then go potty and listen to her wail for daddy to come back because this is a surprising and distressing abandonment and not something we do every. single. day. that daddy always comes back from.

Then we’ll get her dressed, maybe have some time to read a few books, play for a bit, or watch an episode of Mr. Rogers, then we go wake mommy up so I can have a shower and get dressed myself.

If she wakes up later, we can cut down on the playing or TV watching, but then have to deal with the whining that happens around the severe and unfair deprivation we’re causing through that action. The bigger issue though is that sleeping in just a bit seems to activate the lazy sunday lay-in region of her brain (the posterior cingulate? it’s got to be used for something, and seems to deactivate with any other active behaviour) and she no longer wants to get dressed. She wants to wear her PJs all day.

Even more inexplicable and fascinating is the phenomenon of waking up earlier. So many early theorists in parental dynamics predicted that if you had more time in the morning, you would at worst be finished everything by the same deadline — that the lateness barrier could not be breached from the left-hand side of the curve. How wrong we were.

Instead, we have the case where daddy is a nearly-immobile shuffling zombie, eyes 75% closed (often one closed entirely and the other largely closed against the harsh light of a 10 W night light), while the toddler draws unholy manic energies from the predawn night and tears circles around him. When it’s time to get dressed, she becomes and impossible squirming octopus of giggles, pleased as punch that she can so easily avoid having clothes put on her, free to live out her dream of running around the house naked.

Add to this the propensity for shuffling-sleep-zombie daddy to collapse onto any bed, couch, or other soft-looking surface “for just one more minute” of “inspecting his eyelids for holes”, and the whole thing becomes non-linear: the delays and funny effects on the flow of time from the early morning start using up more time than the extra head start provided in the first place, and everyone ends up late for school and work.

I just changed my tires over to the winter rubber. It was a gorgeous day for it, but it made me reconsider what I’ve been doing.

It may surprise you to learn this, but not so very long ago I had something called “free time” — as a grad student (and then post-doc) I had a lot of flexibility in when I could show up to work. I didn’t have a daughter so I could do pretty much whatever I wanted to on the weekends. And I didn’t lose nearly 12 hours out of my week, each and every week, to the ever-fucking TTC. Because I didn’t make much at all, giving up some of my free time to save money was a good, good deal.

Back then I paid $20 each spring and summer to get my tires changed over. Well, the last time I went and had someone else do it they seriously scratched a hubcap trying to use a crowbar to take off a tool-less wheel cover, they said they were upping the price to $30 for a change over, and I had to spend nearly three hours to get it done between the drive there and waiting on-site. I said never again: I’d start doing my own tire change-overs. It’s not mechanically complicated, and a good wrench, jack, and jack stands were only a few hundred bucks — I’d make it back in just a few years. Plus it gave me the flexibility to do it on my schedule (like Sunday afternoons), something that suddenly mattered as I had just landed a “regular job.” An added bonus was that I wouldn’t have to remove the car-seat to fit the tires in, which would add an extra half hour or so to the process of going to a shop. Everything pointed to DIY tire change-overs. That Potatomas the in-laws got me a jack and stand kit and I was in business.

So I’ve done my own changeovers for a few years now. Each year I come out aching because I am too old for this ish. But it counts as exercise, so yay I guess. It takes me way longer than I ever expect — the first two times were nearly four hours, and even now that I’m better and faster it still takes at least two. But I can do it more-or-less on my schedule. And having a proper jack and practice came in handy when I got a flat and had to change it in sub-zero weather. The math has kind of balanced out and I have all the tools now, so I just keep going with it.

This fall’s iteration has changed the equation though: I ruined a pair of perfectly nice pants*. Now that’s partly my fault for not thinking ahead: I have not-nice pants and shirts specifically for tasks like that, so not getting changed into the proper attire was sheer idiocy. I keep thinking that my time is much more valuable these days and I should just pay someone, but it still takes about the same amount of time to go somewhere — and this year I was limited more by the never-ending fall drizzle than by weekend availability. And paying someone would entail a lot less effort and sweating — and I could possibly read or write something useful while in a waiting room somewhere.

Getting the equipment for changing my tires was going to lead me on a whole automobile maintenance self-sufficiency quest: next I would start doing my own oil changes, and well… actually, that was about as far as I ever intended to go. The pros can handle the rest. Anyway, ruining pants that were only a few months old has really thrown a wrench into the frugality aspect of DIY car maintenance — that’s like the cost of two changeovers right there. I like knowing that I can do it myself, and that it’s a minor challenge I have met, but it is not a fun pastime that I would do anyway. If I have to add in the cost of ruining clothing to the DIY column, taking the car to a shop looks a lot more appealing for this spring.

* – if you must know, by being fat and attempting to squat. Riiiiiip…

Clarke’s third law:

Any sufficiently advanced technology is indistinguishable from magic.

Potato’s Third Law (of Finance):

Any sufficiently complicated analysis is indistinguishable from magic.

A few months ago, Brad Lamb posted this inane thing, suggesting that buying real estate in a highly leveraged way beat out investing in any kind of normal way because, with an average 5.5% return over 30 years and lots of leverage, you’d make scads and scads of money. Of course, that’s clearly a biased and overly simplistic analysis from a source that is, well, you get it. For instance, one important consideration in using massive amounts of leverage (95% in his example) is the cost to borrow. And if you look it up, over those same years the (simple) average mortgage rate was 9% — blowing the 5.5% appreciation out of the water.

Obviously there are lot more factors at play than just appreciation, but many people will have trouble following the red lady as these condo kings play their three-card Monte.

Similarly, Melissa Leong recently wrote about Sean Cooper‘s quest to save at an incredible rate and pay off his mortgage crazy early. While her article was very fair and level-headed, someone at the National Post decided to put this sensationalist caption to the preview: “Sean Cooper’s secret: He rents main floor of his house, while living in the basement and bikes and uses TTC instead of a car.” [emphasis mine]. While only part of the numbers are shown, if you work the math and make reasonable assumptions you get a fairly unsurprising result: he ends up paying about $800-1000/mo to live in the basement of his house. Which is what a basement apartment including utilities costs in that part of Toronto. Renting out the main floor of his house is no secret at all — the progress he’s making is solely due to the other insanely frugal and hard-working things he does, like biking everywhere and avoiding taxis or car ownership, working multiple jobs 7 days a week, and reusing everything to the maximum. The fact that he’s renting out part of his house is pretty much irrelevant to the story, but it looks like magic because it’s complicated and because for some reason being a landlord is high-status. Indeed, given the timeframes he’s been working under, he would have done much better doing all the hard working and frugal things he’s doing but plowing his money into index funds.

When there are a lot of factors in the analysis people just don’t want to deal with it. It all bleeds together and acts just like magic, so it becomes hard to critically assess what’s being presented. This happens a bit with a few topics in finance like investing, but it seems to be most prevalent — and most exploited — in real estate.

Take for example the terrible condo ads around Toronto that should be banned for what they try to get away with in the condos=magic department. Here’s a recent collection tweeted by Ben Rabidoux:

Four condo ads I just sent @preetbanerjee. Now tell me local, amateur investors aren't driving this market pic.twitter.com/bKW0HxwXLL

— Ben Rabidoux (@BenRabidoux) September 16, 2014

To pick one, the Thompson Residences in case you can’t read the image, it claims an 18.6% return on investment (such precision!) with no attempt to back it up (the fine text the asterisk leads you towards just says something about the parties not warranting or representing any of the figures). Another (Axiom) also claims 18.6% returns (they must have done some market research to show that this completely made-up number has some truthiness and feels more correct and gets people to buy than some other random number), this time on the unlevered condo. Of course they don’t provide the full details, just assuming that you’ll rent the place for $2355/mo (such precision — also that gets you a 3-bedroom detached house in many parts of Toronto, but sure, let’s just go along and assume a 1-bedroom downtown-ish is worth that because… George Brown?), and somehow make $685 in positive cashflow and $607 in principal repayment. So after interest (at just 3%) you’ll only have $227/mo for tax, maintenance, insurance, and condo fees (yes, that’s totally reasonable — oh wait, no maintenance fees for a year, of course that’s a representative calculation then). But then you take those phoney rent profits and add it to their phoney price gains ($58,993 — yes, also down to the dollar) and you know what you get? 17.8%. Not 18.6% like they say.

Clearly these ads are not targeted at the careful, numerate buyer — they can’t even be bothered to make their fake numbers internally consistent.

Where was I? Right, magic. Well, there’s clearly some smoke and mirrors going on in those ads.

Sometimes being mean can be fun. No, that’s not right. Sometimes when I’m having fun I can come off as mean. I don’t aim to be mean, so this is a tough blog post to approach because that is just about all I have to offer. Let us pretend that I have been possessed by Greg McFarlane and this is a guest post FRotM: Book Edition.

A little while ago I got a piece of email that I ignored as being basically spam: a request to review and blurb a new book (actually titled: “A Free Investment Book for You”). Pitched as “a “How to” guide to obtaining compound returns of 20 percent, 30 percent, or more annually from investing in stocks and to do so in a manner that’s worry-free for the investor.” and “The Sane Approach to Investing in Stocks for Insane Profits.” I decided to be nice and junk it. That kind of pitch turned me right off: it looked like it was either not refined enough to know it’s contradictory, or a scam.

Then he followed-up. Clearly this was a real person and not a robot emailing me, so I wanted to put him out of his misery. This is what I sent back:

“I don’t think I would be a good choice for you as a reviewer/blurber. I don’t think 20-30%+ returns and “worry-free” can be put together like that, so seeing it as the central part of your message is troubling. I work as an editor so my reviews tend to be critical in the first place, and starting off on a bad foot already might not lead to a review you would like.”

He still wanted to send me a book, calling me “an excellent candidate for reviewing my book… my desiring your participation at this stage is a testimonial to the respect that I have for you and your work.” Ok kid, flattery will get you everywhere. I got the book. I read the book. I was open to having my mind changed: maybe it was a good investing book and he just needed to work on his email marketing. Alas, it was about as bad as I feared, shy of not advocating that readers borrow money from friends or remortgage their houses to invest.

Rather than tearing into it wholly, I just want to pick on one specific part: those worry-free 20-30% returns. In the book he lays out the 10-stock portfolio that brought him a 128% return in under 5 years. He compares that to just 45% on the S&P500. But that is a mistake. This is basically a giant case of getting a little bit lucky with stock picking, and a lot lucky with timing. He bought in 10 chunks through the end of 2008 and the beginning of 2009 — yes, he just happened to start investing at a generational low in the market that was followed by a massive, unrelenting bull market. No wonder he thinks 20% returns are worry-free. Anyway, it looks like he’s comparing his portfolio purchased across several time-points that span the market lows to a single time-point for the S&P500 from before the Lehman Bros event. It was easy enough to look up the S&P500 total returns and compare an index portfolio that made purchases on the same dates as he did, and the actual comparison would then be 104%. Yes, his picks out-performed, but it’s not nearly as impressive. Oh, and most of those same picks were hit way harder in 2008/2009 than the index was, so if there’s a repeat then so much for the “worry-free” part.

Then he lays out a second 16-stock portfolio that only has a bit over a year of tenure. He boasts a 29.6% return versus the S&P500 at 26.3% [figures not audited]. Yet that portfolio includes one position that just so happened to return 243% in a year. Exclude just that one outlier, and the portfolio underperformed. By a lot. Sure, sometimes that’s how investing works, but that’s not the kind of track record you base a book around (and again, hoping for a single lottery-ticket-stock to pay off while almost half your portfolio declines in an amazing bull market year is not my definition of “worry-free”).

I cannot in any way recommend this book — I haven’t even mentioned the title because I feel bad for the kid, and I don’t want this to be the only review that comes up in Google. But I warned him, and he asked for the review anyway.

Now he did start off by thanking his editors (amongst others), and on a micro level it’s a fairly tight text. With my own self-interest in mind paying for a few editing passes can help make a book more digestible (especially a self-published one). Unfortunately, the over-arching shortcomings cannot be saved by layout and grammar. It really needed a peer review — and some robust back-testing — before being sent off for a copy edit as the basic premise appears to be flawed, based on a mistaken return comparison and a great deal of luck. Though mentioned often in how the book was presented, the issue of worrying and freedom thereof was not covered.

Page distribution:
Completely blank, not even page numbers (colouring fodder for your young daughter!), 10%.
Small investing nuggets not even fleshed out enough for a blog post (e.g. 431 words on coattail investing does not blow me away with content), 30%.
Specific information* on companies found in a stock screener that will be instantly out-of-date in book format, 25%.
Index (the kind to look stuff up, not the S&P500), 4%.
Drivel, 7%.**
The purported approach/method/secret, 2%.***

* – Includes estimated future EPS growth rates to two decimal places, though all the percentages round precisely to X.00% so I don’t know why the digits were necessary in the first place.
** – Harsh but accurate summary.
*** – Totals may not add to 100% because math is hard and fact-checking is for losers who don’t have insane profits to chase. Also, yes, depending on how liberal you want to be on what counts as part of the approach versus general rehashing of Warren Buffett quotes, just ~2% on that topic. Spoilers: use PEG, buy when below 0.75-1.

This has been an absolutely awful winter for much of North America. Unrelenting cold — actually, it relented on Tuesday but one day of relenting is still craptacular — snow that just piles up and up and up, broken only by the ice falls. You can blame random fluctuations and poor luck in weather, shifts in the climate from global weirding, but we all know the answer: the Polar Vortex. But what can we blame the Polar Vortex on? Simple:

The Obstinate policy of the Coca-Cola Company of Canada to deny Cherry Coke Zero to Canadians.

You may recall in my last plea to the company that I pointed out how they were exploiting Canadian icons (polar bears, Santa, happiness) — that Canada was their muse, and yet we were getting the short shrift on flavour selection. I took a carrot and stick approach: I asked very nicely for them to bring Cherry Coke Zero to Canada, with a promise to buy a lot of it if they did, and backed that with a threat to unleash a progression of plagues: memes, cats, and ultimately polar bears.

Now it turns out it’s really difficult to arrange for the release of polar bears with the explicit purpose of setting them loose upon downtown Toronto to terrorize the regional executives of a certain global beverage company. I mean, the paperwork is just the beginning: you have to wait for a slot in front of the Zoo’s board of director’s semi-annual meeting to pitch your case, and of course really the only approach is to use my scientist credentials to call it a research project, so that means I have to apply for a grant and ethics approval, which is another two-year-long timeline. I mean, at that point infiltrating my way into Coke’s ranks, working my way up the corporate ladder, and just making the decision myself is starting to sound easier.

So I kind of let the project slide for a little while.

Then the Olympic messaging started up, and I realized: we are winter. Right after that moment of clarity the ice storm hit and I was without power for 7 days — over Christmas. Santa saw I was in a funk and stopped by to have a good chat about the whole ordeal, and I mentioned that what would really cheer me up is a Cherry Coke Zero. The mad plan came together in that instant: rather than polar bears, Santa would use his Christmas Winter Miracle Weather Machine (CWMWM) to help his fellow Canadians put a little pressure on the company. And thus, the Polar Vortex. He even managed to send snow all the way south to head office in Atlanta.

For three months the Polar Vortex has raged and blown and blustered, freezing innocent and culpable alike.

It’s time for spring, Coke. But Santa won’t relent until all Canadians — from Windsor to the Workshop at the North Pole — can enjoy Cherry Coke Zero without having to snowshoe down to one of the few Freestyle machines sprinkled around or smuggle one across the border. George RR Martin has given us a glimpse into a world of winter without end, and it’s not pretty — anyone you get remotely attached to is at constant risk of gruesome death. Don’t take us down that road: be the hero to the people you’ve always wanted to be and bring back spring.

Our first ever cherry-flavoured spring.

#PolarVortex
#CherrySpring