Blessed by the Potato

Wow, what a week for shipping.

First up, as you all know now, my preorder for SC2 didn’t arrive on time (and then the copy I picked up to tide me over wouldn’t activate!). That was with Canada Post.

Two weeks ago, I shipped via FedEx a gift for my mom. It was guaranteed to get there the next day by 5pm, and it didn’t. So, I started the process of getting a refund with FedEx’s money back guarantee. Things on the FedEx end were going fairly well, until they asked for my tracking number. I had dropped the package off at PostNet here in London, a retail store that will send out packages for both FedEx and Purolator, and never got a tracking number at the time. They said they’d email me one later when it went out, but they never did that either. The helpful rep at FedEx tried to look up the package for me in their system, and couldn’t find it. Finally, we found that it was in there with PostNet listed as the sender, not me. We got the ball rolling on the refund process, but they said I’d have to call back after the package did arrive so they knew whether to refund it as a lost or late package.

This week, I called FedEx back to finish that process off, and they tell me the refund’s already been issued. “What?” I say, “There’s nothing on my credit card.” You’ve probably guessed this next part: they issued the refund to PostNet. So now tomorrow I’ve got to schelp on down there and try to get them to forward the refund on to me. Any guesses as to whether or not that’s going to be an easy process, if I can get it done at all?!

Today, I get a call from the Purolator robot: there’s a package for me to pick up at their depot by the airport. First up, I hate the stupid Purolator depot by the airport. It is so ridiculously far from the rest of the city. The busses don’t go anywhere near there, so I don’t know how they expect people without a car to get their packages, and even with a car it’s a 10 minute drive each way to the very edge of the city. Second, they never even tried to deliver it to my house. I was home all day waiting for my StarCraft delivery, so I know the Purolator guy never came either, and there was no “missed delivery” note on the door.

Anyhow, once I get there, this really rude lady tells me I can’t get my package with just my ID & address, I need the tracking number. Their computer system can’t look up by name or address! So I have to phone myself to pick up the message — several times to get all the digits of the tracking number down. During this time 3 other people come in and all get the same treatment — no tracking number, no package. One of them, having driven all the way out to the boonies by the airport with his ID in hand, is sent home to go look up the tracking number because they don’t have internet there for him to check his email. Then I get the package and see a note pasted on in confirming my suspicions: “construction on street, did not attempt delivery”. Seriously, there is construction on my street, a block away, but come on, it’s summer. Construction happens, and it’s not like it was anywhere near blocking the ability to get to the house, or even park the truck on the street here!

Blizzard is a company renowned for its quality. Even with World of WarCraft, which saw unprecedented demand that overloaded servers, they did their best to make the game marginally playable as soon as possible.

So far, StarCraft 2 has not lived up to the Blizzard name, the rollout being much worse than WoW, without the extraneous factor of hordes of unexpected players. My preorder never arrived, and caving to the irrational logic that I had spent the whole day waiting for it, I rushed out to the store in the evening to pick up a second copy (I’ll return the preorder whenever it arrives, or resell it to a friend that hasn’t purchased yet — nudge nudge, Netbug). So far, this is not Blizzard’s fault, but put me into a rather foul frame of mind before the disc even hit the drive.

The install took forever, literally over two hours. What game, from a single disc, takes two hours to install? It was ridiculous! Then, after all that… I couldn’t play!

I was getting a message that the Battle.net servers were “temporarily unavailable”, though nothing of the sort was true. Unfortunately, my account has fallen prey to a weird, rare bug (though how rare is tough to say, because if you have it you can’t post on the forums!). It seems to be affecting Canadian accounts the most, so beware Canuck gamers!

I of course tried all the recommendations, even going so far as to uninstall and reinstall the game (another 2 hours gone!). What’s extra infuriating about the whole thing is that I was most psyched to play the single player game tonight, and the ever fucking DRM won’t let me until it’s connected to the authorization server, which is up (and which I can connect to in my web browser!), but which the game stubbornly continues to tell me is temporarily down!

Arg!

This is so especially frustrating because not only was I looking forward to the game, but I had set aside special time today to jump in and play. This day was supposed to be special, to mark the turnaround point where my life was supposed to start getting better, damnit. Instead I’ve wasted most of a day, and even the work I did get done — submitted author proofs! I’m getting published, bitches! — can’t put me into anything less than a burning rage as I go off to bed. I want to rip my own head off, and send my unfeeling body, powered by rage and frustration alone in defiance of all known laws of physics and physiology, on a holy mission of vengeance towards Blizzard. There it will tear the buildings down around the heads of tech support until the DRM is gone and we can play once more. While that happens, teams of scientists and practised warlocks will hook my disembodied head directly into the machines, improving my reaction speed so that I can once again marshall the forces of the Koprulu sector with unparalleled efficiency and skill, crushing all opposition beneath my boot… as it was foretold.

I must say, I’m really unimpressed with the complete lockdown on SC2: no LAN means the host for a “LAN” party will have to have a robust enough internet connection and router to get everyone connected to Battle.net servers in order to play together. Even the single player requires an internet connection. Yes, after it’s authorized the first time — which is where I’m stuck at — you can play offline for up to 30 days before authorizing again, but that’s still pretty draconian. Some people have reported that there’s a crack out already to beat the DRM… sad that the pirates can play the game and I can’t.

Nuclear launch detected.

I got suckered in to preordering StarCraft 2 from FutureShop back in May. I was hoping that I could elect to do an in-store pickup, but that wasn’t an option: it had to be shipped. I remember fondly WarCraft 3 arriving first thing in the morning on release day when I preordered it from FutureShop back in the day, so I had high hopes that it would go just as smooth for StarCraft 2.

And, of course… the shipment didn’t arrive. I spent all day staking out the door, reading on the front porch for most of the afternoon to make sure the sneaky mailman wouldn’t tap quietly on my door and then leave one of those notes to visit the shipping depot and slither off. And not even that much: nothing at all.

Damned FutureShop, I should have just ordered through Amazon.

So, here I am, not playing StarCraft when I should be. I feel so very glad I preordered now.

Terence asked via email if I could comment on Garth Turner’s investment philosophy.

Garth of course is perhaps the most well-known real estate bear in Canada — it was his writing that lead me to look into the issue myself before potentially buying a house in 2006 (we ended up renting instead).

He also provides a bit of investing advice on his blog (and his book Money Road — which I have not yet read). He very often gets asked by readers (or “blog dogs”) what they should do with all the money they have if they do sell their house, or hold off on buying their first if they do have a downpayment. One of the things he recommends very often on his blog are preferred shares of the Canadian banks (and also insurers, utilities, etc) which pay in the neighbourhood of 5-6% these days, as a tax-advantaged dividend.

First up, what is a preferred share? It’s a bit of a strange beast that lies somewhere between a stock and a bond. You get a regular payout, like a bond, but it’s counted a dividend for tax purposes, like a stock. But, you don’t share in any upside of the company’s growth or progress, like a bond. Preferred shares fall between common equity (regular stocks) and bonds (and other debtholders) for getting paid back in a liquidation — something that is unlikely to be an important factor, as when companies do get liquidated these days, even the bondholders are seldom made whole, so the preferreds usually end up worthless as well (at least from what I’ve seen). The preferred dividend can, in hard times, be cancelled, but must generally be paid before the common dividend can be reinstated. As long as the company in question is doing moderately well, the preferred (and bonds) should continue to pay out, even if the common goes nowhere. Each preferred issue has its own set of rules, and even within one company there can be many series (often denoted with a letter) that play by different rules. Often they have a “par value”, a price at which the company will buy them back. Redemption though can be at the company’s option, not the holder’s.

All said, they typically offer a steady stream of income that is in-between a stock and a bond for riskiness, but far more tax-advantaged than a bond.

Now, there are several things to keep in mind when you see Garth recommending these things. The first is the audience: many people don’t think there is a way of getting more than 1% in a bank account or GIC without taking on the full risk of the equity market. He’s pointing out that there is something that will pay a consistent return — more return than many people are getting from the rent savings by owning their houses these days — and that will pay it similar to how a GIC/HISA pays out, i.e. fixed and regular, without the uncertainty of return that’s inherent to capital appreciation. Also, the audience tends to be either baby boomers who need income for retirement (or to pay the rent if they sold off their nearly-paid-for houses), or newbies who don’t know that there are ways to get their money working in a relatively low-risk way.

Related to that is the idea of tax efficiency: for someone with nearly no income (a grad student like me) or lots of tax shelter room, finding a bond at 5.5% is equivalent to a preferred at 5.5%, so why not go with the bond since it’s a little safer? But for someone in a higher tax bracket, who just sold a paid-off house, that preferred at 5.5% may beat out a bond at 8% due to the tax advantage.

Also, it’s a rhetorical device: as I said above, it’s a good example of a way to make a decent return to someone that doesn’t know anything beyond “the dutch guy’s shorts.” He’s not recommending that people buy only preferreds, but since it’s one of the less-discussed options (stocks and bonds get hundreds of times more thoughtspace and attention than preffereds do) it makes it worth talking about, both because it gives him a somewhat unique message, and because it helps educate his audience. When he does give investment advice on the Greater Fool blog, he’ll spend most of it talking about preferreds (or rather quipping one-liners about preferreds), but he’s not by any means recommending that people only buy preferreds.

Finally, Garth’s outlook is that the overall market will be choppy but generally flat, if I’ve read his message right, so he doesn’t see much of a risk premium for stepping up from preferreds to commons. If that’s your viewpoint, then locking in a mid-5% return is quite good. Vice-versa, the spread between a company’s debt and preferreds are quite high right now, also indicating they may be worthwhile, though I’m having trouble finding out what the historical spread was.

Terrence also asked about the interest rate sensitivity, pointing out that preferreds may have been a good investment recently because interest rates have gone down (similar to bonds, preferred prices go up as rates go down). Now, these will have some interest-rate sensitivity, and due to the perpetual nature of many (the company calls them back for redemption rather than the holder), you get a little less protection than a bond (which can be held to maturity). However, if you don’t have to trade them, then the changes in the price is not too much of a concern, and being able to lock in today for a ~5.5% dividend is not too shabby, considering 5-10 year bonds from the same banks are only in the 3-4% range right now. If you do need to sell within a few years, then you can get hurt by the fluctuations in price. One note though: due to not knowing when a preferred will get called, there’s the concept of “yield to worst”. If you buy a preferred with a high coupon, that is, after interest rates had dropped, so the price went up, the redemption price the company can call it at is still say $25. So if you paid $26 and are getting some quarterly payment as well, your yield to worst would be lower than the cash yield since the company could call the preferred back at $25, giving you a $1 loss at the end. Another risk to watch out for when talking about changing interest rates and buying/selling preferreds.

So all that said, what do I think? Well, I think for the target audience, they’re a great investment vehicle. But for my audience, which is typically younger, they’re not really worth looking into. If you’re a little older and starting to become more conservative in your risk tolerance, and also wealthier, then they can be great: as you shift more towards fixed income, you may very well want to subdivide your focus to spread out amongst a 5-year bond ladder, some longer bonds, some corporates, some real return, and of course, some preferreds. For a younger, poorer audience, with higher risk tolerance, I figure fixed income should be a fairly small portion of the portfolio, and what fixed income there is should be ultra-safe (HISA/GICs/Government bonds) since it’s function is to be the security blanket, or the money needed in the near-to-middle term that can’t be put at risk — and there likely won’t be enough fixed income to make it worthwhile sub-dividing the category so finely.

The added complication of each series having its own rules on redemption, dividend payout adjustments, etc., also means there can be a lot of reading involved for a fairly illiquid instrument. There are some preferred ETFs that can help make buying some easier, but still, I don’t see the point for someone who’s got decades of time to get the rewards promised in common equity.

That said, just ’cause you’re young doesn’t mean you have the same risk tolerance I do (and there may be older folks amongst our readers too!) so if anyone out there is interested in learning more about preferreds, feel free to ask any questions and I’ll try to help out!

I’ve had about 5 hours of sleep in the last 48 hours as I try to cram out (at the last minute, of course) some papers for an upcoming conference. It’s been a nightmare because, amongst other reasons, the ridiculous copyright policy of the conference means that we have to submit papers that are different enough from what we usually write that we can still have freedom to use our own work elsewhere. It’s hard enough to hammer out a paper in the first place, then to have to try to do it in the literary equivalent of a funny accent…

Anyhow, I’ve been battling with yet another nasty case of writer’s block — something that seems to hit me far too severely when it comes to my professional writing. I think Wayfare hit the issue on the head: I worry too much about how the work will be received for professional stuff and just lock up, whereas on my pseudo-anonymous blog I can just hammer away at the keyboard and not even worry about proof reading since I don’t have that much invested in it. Nothing to do but just try to get over it. In the meantime, Netbug suggested I take a quick break and put up at least a Tater’s Takes post, so here you go.

On the health/diet front, I found out that my scale got miscalibrated somewhere along the way. I’m not sure when it happened, but it was reading high by 3-4 pounds, which means I’ve really only gained about a pound from when I started. Still, wrong direction, but not quite as bad as I had thought. The last week was decent but not great: I’ve been watching what I eat more, but still had a few doughnuts at work through the week. I’ve started writing down my meal plan for a ~3 day period, and have been sticking to it reasonably well, and including lots of healthy stuff like vegetables and oatmeal, so that’s been good. I only had two good long bikerides in the week, but considering the week I’ve had, that’s pretty good (I plan on retrying the 36 km trip around Fanshawe Lake once these stupid stupid stupid papers are in).

“Today” though has been hell on the diet: I’ve resorted to undergrad cram tactics, pounding down full-sugar Coke & Red Bull and eating nothing but junk food to burn through the night. 3940 calories in the last 24 hour period (I don’t know what I consider a “day” anymore — best to try to stick to the subjective view of time the rest of you hold), which is simply not an efficient way to produce written words. As soon as the caffeine starts to wear off, I’m right into the head-bobbing vertigo stage of sleep deprivation, so I’m really hoping these stupid papers get finished soon.

In the news, BP’s latest cap attempt actually appears to be working. The stock shot up, then slid back down on perhaps fears that the shutting-in of the oil may have put too much pressure on the parts of the well below the ocean floor, causing oil to seep out (in a way that could be very difficult to control).

Also finance-related, a quick note that I sold my H&R REIT yesterday. Thanks to falling behind on my thesis and staying a grad student longer than my scholarship said I should I know that I’ll need to be raising cash, and also H&R is starting to look fully valued to me, so out it goes. Again, this isn’t a case of not liking the company, just thinking that the price was getting high enough…

I was going to look into the new Ontario “eco fee” tax this weekend and blog about it, but it looks like the negative publicity and poor roll-out has lead to it being canned… for now.

After running headlong into Bell’s very restrictive 25 GB data cap in May, I had to complain to any that would hear me that the $2/GB charge was very obviously excessive, and in no way actually reflected the incremental cost of that data usage. Plus, of course, the comparison to Rogers’ slightly more generous 60 GB cap (and 5 years ago the cap was also 60 GB, long before most users started watching videos on the internet, or Bell/Rogers themselves started rolling out video-on-demand portals). Netbug sent along an article that looks at this issue for US ISPs and concludes that indeed, most of the cost structure is composed of fixed-cost infrastructure type spending, and there’s no support in the ISPs’ business model for the caps and data charges that have been rolled out. Congestion issues are also unlikely to be the reason for the fees, since if congestion at peak times was the issue, the ISPs should instead implement time-of-use charges.