Blessed by the Potato

Just got back from seeing JoCo and Paul & Storm in concert. It was a really fun concert, including at least 3 separate songs about mad scientists who are sad, so it was like they were singing right to me. Paul & Storm have a fairly large catalogue of stuff on their site, and I find most of it to be hit-or-miss, but in person (where it’s really just the hits) they were great.

It was an intimate setting with lots of feedback (often hilarious) from the audience of hard-core fans (and really, there are really only three kinds of people: those who have never heard of JoCo (yet), those who are already die-hard fans, and those who aren’t the slightest bit geeky and/or without any sense of humour and thus have heard of JoCo/P&S but aren’t fans). However, the seats in the Enwave theatre were horrendous, they weren’t deep enough to sit fully back on (it’s like when the monster truck radio guy says “you get the whole seat, but you’ll only need the edge” — well they only gave us the edge). They also were connected down the row, so whenever someone would move your seat would shake and twist. At least the venue had good acoustics.

Verdict:
Jonathan Coulton – Awesome.
Paul & Storm – Hella Awesome.
Enwave Seats – NOT awesome.

The funniest part of the concert though was Wayfare. During the Mandelbrot Set she just about lost it laughing (and when I first played the song for her, she laughed for like 15 minutes at the “best line ever in a song”). I’m pretty sure it carried right to the front, but JoCo didn’t seem to mind. Then during the encore, all 3 of them come back out to play a cover of TMBG’s Constantinople, and Paul brings out this weird mouth organ blowy thing, and JoCo and Storm comment on it and make a few jokes. Wayfare grabs my arm, turns to me, and with this really intense expression on her face says “Have you ever seen my mouth organ blowy thing? It’s red.” And partly because of how important she seemed to think it was that it was red, and mostly because of how intensely she said it, I just lost it and started laughing like crazy.

Finally, it was really weird to see so many people in “Skullcrusher Mountain” T-shirts (including me).

I haven’t done one of these for a while. There was some bad weather for a few weeks there, and I didn’t get on the bike at all for a fortnight. Not owning up to my downfalls in the exercise routine kind of defeats the point of the public update/shaming, but I also reasoned that I didn’t have any links I wanted to share, either.

The last two weeks have been much better though: I broke the 20 km barrier, and rather easily at that, returning home feeling like I still could have done more, and wasn’t much sore the next day. Now the problem is going to be that to keep pushing myself to be able to bike further (e.g., to train for the Rona/MS bike tour), I need to start committing serious time. I did a (fairly hilly) 18 km on holiday Monday, and that took me about an hour and a half — I just don’t have the time right now to push it any further than that.

Diet: aaaah, you don’t even want to know. So far the multivitamin seems to be keeping away the scurvy.

Random thoughts:

Realtors to Canadians: Chill Out

“There will be no drastic drop in Canadian housing prices, the Canadian Real Estate Association said Thursday, because house prices will stabilize and climbing household income will make owning a home more affordable.”

Wow, I barely included tautology in my list of logical fallacies because I couldn’t think of any examples where it really came up, and circular reasoning is usually fairly easy to spot. But, here it is: there will be no drastic drop in house prices because house prices will not drop drastically.

Then that last tack-on about incomes doesn’t mention a timeframe. Incomes rise at about the rate of inflation, say 2%/year. If houses are 10% overvalued on average (and 30-50% in Toronto and Vancouver), that could be a very long period of flat-lining. If even the CREA is saying that the best case is a flat-lining of house prices for years, then why be in any hurry to buy, especially with uncertainty about where rates will go?

And if everyone’s in no hurry to buy, then won’t sellers have to lower their prices to attract buyers back? I just can’t see a stagnation as a likely scenario. Yes, house prices have stagnated for long periods of time before, but not usually so far from equilibrium, and not following such epic volatility (down ~10% in ’08, and then bouncing back ~20% in ’09!).

Plus there’s the issue that Canada is not homogeneous… a nation-wide decline of just a few percent could very well mean that Toronto and Vancouver got smashed while the rest of the country stagnated…

Michael James has a good set of links in his roundup this week, including a couple on your financial advisor, and whether small investors have no choice but to become DIYers.

My Bell bill arrived for the month, and I was greeted with a $30 over-usage charge. Bell’s cap of 25 GB is way more restrictive than Rogers’ 60 GB one (and even that is getting tight as more and more uses for the internet come out but the cap hasn’t changed in years). So even though I had a fairly moderate month (~40 GB in usage, well under what my cap was when I was with Rogers), that qualified me for the full $30 overage fee. What really ticked me off is that even though they have my email address (and phone number) they never notified me that I was getting close to (or exceeding) my cap. I thought I was being good. You can bet I’ll be switching to Teksavvy (with a 200 GB cap!) when my contract’s up…

Stephen Novella has another interesting post up on science and public perceptions. “[P]eople find stories much more compelling than data.”

Spoilers ahead!

Borderlands: I finally finished this thing. I had no idea I was that close to the end… it just simply ended. I must say, it was very unsatisfying. The beginning of the game had so much promise (and with multiplayer it would probably still be fun), but it felt like they rushed through it and did a little too much cut ‘n paste, as the charm and humour from the first little bit seemed gone completely by the end. It was a grind-fest basically. The reward for beating the final boss? The ability to run through the game all over again on a higher difficulty to unlock “achievements”. Whoopee. The last boss didn’t even drop any epic loot! Oh, and there is no treasure vault: the vault is a prison for some kind of Eridian demon thing, that is unlocked every 200 years by the alignment of the moons, which gives our hero the chance to finish the demon off once and for all. To quote the PA guys: “It is at this point that people begin to question the wisdom behind moon-powered demon prisons.”

Though you wouldn’t think it from the message some housing bulls have. “It’s different here, housing will never go down, the immigrants are coming in waves and buying everything in sight.”

No matter how overpriced the market gets, somehow the magical immigrants will ride down on their rainbow with their pots of gold and buy an investment property or three. Unfortunately, immigrants aren’t going to magically sustain a housing bubble indefinitely. Immigrants are not stupid, and won’t continue buying houses at prices that no one else would touch. Even if they would, there comes a time when there just aren’t enough people with money to keep the whole thing climbing to the moon and it all falls apart.

First off, the “rich overseas investor” is a fairy tale. Ok, yes, there are a few people who come from overseas and buy a house with cash (or “really cheap” unserviced vacant land) and don’t care what interest rates do, but not enough to keep inflating a bubble when all the other buyers face rising rates. Not by a long shot. I don’t have good statistics on the matter, but I wouldn’t be surprised if the wealth and incomes of immigrants is no different than the average Canadian — and if anything, may be lower. Just because a place in Vancouver is still cheaper than one in Hong Kong or London (the Other London) or New York doesn’t mean that people coming from those places will happily cough up Hong Kong prices for Canadian real estate without thinking about it (at least, not forever, and not all of them). Indeed, they’ll probably have Canadian jobs and so the price-to-income measures are every bit as relevant to them.

Secondly, immigrants have never before saved any city from a real estate bubble and collapse. What, you think immigration was invented in 2002? The US has immigration to all its big cities too, and look what happened there. Heck, one of the biggest periods of immigration to Toronto was in the lead-up to the Hong Kong handover in 1997, and real estate crashed big time from the peak in ’89 through the 90’s.

Thirdly, immigrants are not all that different than other Canadians in their desire for housing. So it doesn’t matter whether a person is an immigrant or not — it’s population growth and household formation that drives demand. I’ve actually had people argue that immigration drives housing prices because “immigrants stop at nothing to get a house of their own; they’ll pay any price and live 3 or 4 families/generations to a house until it’s paid off and then buy the next one.” Well, multiple families/generations living under the same roof actually decreases demand (households) for the same number of people, so that argument doesn’t hold a lot of water, it’s just trying to reach for an explanation as to why anyone would pay any price for a house.

For the country as a whole, population growth has been rather steady for a long time now: any increases (real or perceived) in immigration rates are really just offsetting our natural declining birthrate. Now, I don’t have any data on growth rates by city, so it is possible that recently the immigrants have decided to concentrate more on moving to Toronto and Vancouver, though I doubt that it’s actually out of line with any longer-term trends.

Speaking of household formations though, the one fly in my bear soup comes from this graph (via stats can) of the population pyramid:

The tail-end of the baby boom would have been passing through age 25 right about 1989, which may in part explain the housing boom and crash that happened then. The echo only just started working their way through their homebuying years a few years ago, and won’t be finished for another 5-10 years. I’ve long maintained that the unsustainably high housing prices were due to lax lending, low interest rates, and the madness of crowds. If, however, demographics also play a starring role, then this may take longer to unwind than I thought.

It’s interesting to see how sharp the baby boom was though — the start in ’46 is very sudden, for obvious reasons, but even the tail end sees a 20% decrease in just 3-4 years. The echo isn’t as sudden on either end (though oddly enough, is more pronounced in men than women).

Now, all this isn’t to say that immigration can’t have an effect on a housing market, especially in the short term and when immigration is not smooth — there’s a fundamental limit* to how sharp a baby boom can be, but an influx of new people to an area can happen quite sharply, which can distort a market badly in the short term. Ft. McMurray is a good example of this. As the tar sands projects ramped up there was a huge influx of people to Northern Alberta to work the oil patch. Housing simply couldn’t be built fast enough for the people coming in, and combined with the high wages, the cost of shelter shot up there, to the point where a house in Ft. McMurray was in many cases more expensive than a house in Toronto. But that’s all short-term: as the rate of house construction has a chance to catch up to the demand, then it’s reasonable to expect prices to settle back down to whatever the incomes can support (though in Ft. McMurray those are fairly high), and then down to the cost of building a new house when the builders overshoot the demand.

* – octomoms and bunny rabbits excepted.

As an experimental scientist, I know that there is a lot you can only find out through direct experience, and more that is best learned that way. There are also a lot of questions that you really don’t want to find the answer to the hard way, such as whether there’s an afterlife, what would Stephen Harper do with an unfettered majority government, or would looking at a solar eclipse without eye protection be awesome enough to warrant the retinal damage?

To that list, I can now add: can my car withstand being kicked by a disembodied deer leg? (The answer is yes; also, deer have a lot of blood inside of them.)

PS: I’m really thankful I’m not the guy who just discovered how well his SUV took a head-on collision with a whole deer.

The S&P500 was down nearly 4% today, which is a pretty huge one-day move. We’re now below the point we were at two weeks ago before the Greek bailout package was announced (the close after the “flash crash”).

This is not purely out of partially-unfounded fears over what’s happening in Europe: some fairly bad news has been coming out of North America, including US numbers indicating that inflation has gone away, raising the probability that we are facing a protracted or double-dip recession.

So, what does that mean for the young investor? Periods of panic and weakness are generally good times to buy (or to choose to rebalance and shift more of your portfolio from strongly-performing safe assets to underperforming equities). However, in the past I’ve bought too early and used all my cash in the early innings. Since buying a car and paying rent at two places while I finish my PhD has lead to negligible savings, I don’t have any dry powder at the moment to invest. That’s forced me to sit on my hands through this and wait for some truly delicious bargains.

I am considering using some modest leverage if prices seriously decline (ala 2008/2009), though getting Wayfare to sign-off on that plan will be a challenge since she’s allergic to debt (she is also allergic to cats, so it’s nothing personal, debt). However, while I can appreciate the logic behind leverage (and bringing your future purchases forward if you’re young and saving), I’m also not one to get too comfortable with debt. Even if I maxed out my LoC, that’d only leave me about 7-8% leveraged.

The question then becomes, at what point do I start buying? When is it truly “raining gold”? I doubt we’ll go as far down as the March ’09 lows, but who’s to say how long or how deep this panic will run. The big bear lasted over a year; the two moderate corrections on the way up lasted about a month and were less than 10%. Some may argue that it’s better to wait for the bottom to be in and buy on the way up, and I don’t have a good comeback to that except to say that then it becomes easy to continue to sit on the sidelines until long after the bottom has passed. I’m not trying to get my timing perfect — I’m trying to tell myself I’m not timing at all — I just want to buy at a fairer price. So, I’ve got a few stink bids in now for a few stocks, sitting about 10% below where they are today (which for many is already 10-15% below where they were last month). After that, I’ll probably buy again when I save more money or if the market goes down another 10-20%…

The point to remember is that for many of us, this is a better time to invest than it was last month, despite the calm markets then.