Blessed by the Potato

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.

In the Globe, a defence of market timing. An interesting dilemma, because I tend to say that timing is bad, and is so extremely hard to do that it’s not worth attempting. But value investing is good, and is one of the few time-tested ways of improving your returns. Yet if value investing is “buying when a stock is cheap” then where is the distinction between that and timing?

Market-timing, he insists, is nothing more than a way to lower portfolio risk. “If I show you an asset class that’s overvalued by any definition, and if you sell that security to buy one that we all agree is undervalued, is that a risk-reducing strategy or a risk-increasing strategy?” he routinely asks investment audiences. They always acknowledge it reduces risk, he says. “But if you do that you become a market-timer, because you won’t know when you’re at the top or when you’re at the bottom. You’ll have to make your best guess. … Any transaction that involves trying to enhance the value of your portfolio is a market-timing transaction. We should all stand up and applaud [it]. Yet it’s still one of the most vilified terms in the investment business.”

I suppose I have to agree with most of that. For example, I consider Toronto real estate to be “an asset class that’s overvalued by any definition” and I’ve avoided it. But the timing part is still hard: it could remain stupidly valued for years more to come.

“The fact that stocks, on average, deliver a 7-per-cent premium over inflation is a meaningless statistic. Just ask anyone who retired in the year 2000,” says Mr. Solow…

Though that I’d disagree with: it’s not a meaningless statistic. On average, they have, over decent time periods. Someone who retired in 2000 has had fairly mediocre returns since then, but had phenomenal returns leading up to that point (when they would have been in their asset allocation years). Indeed, understanding what average long-term return can be expected is one way of determining under- or over-valuation, if you believe in mean reversion.

One example is my own: I got the timing fairly wrong in the crash (too early), but did recognize that stocks were getting cheap, so I loaded up, and had shifted to 100% equities by October 2008. Then recently, Wayfare and I were discussing whether we should continue to be essentially 100% stocks. I updated this graph, and figured that, despite the massive returns we’ve seen over the last two years, things didn’t look terribly over-priced (certainly not cheap, and not generationally-cheap, but not pricey), so my thoughts were that going forward stocks should still outperform bonds, and, except for cash needed for safety and transactional needs, we should continue to keep it all in equities.

On another note, Bronte Capital discusses the current state of the market: basically, not pricey, but not cheap, which fits with my own general take on things. There is some lamenting that private equity firms have gobbled up all the bargain small caps, so that the companies that are still public are either expensive, or in some way less desirable. That would suggest that private equity has disrupted the normal state of things, where small caps offer a premium for the risk they present. This may be a bad time to put a small cap tilt to your asset allocation. However, I wouldn’t take that as gospel: private equity, leveraged buy-outs, etc., have been around since the 80’s, and small caps still seemed to do well relative to large caps even through the 90’s and 00’s (they did very well relative to large caps in the 80’s, but that’s to be expected if that’s when private equity really expanded and started bidding them up).

I just had my one-year oil change and service done on my Prius. My “early graduation present to myself” has proven to be comically early as I’m still not done my PhD. That aside, I think the research paid off and the Prius was a wise choice: it fits my stuff, it’s fun to drive, and it’s fuel efficient. How efficient? I averaged 5.06 L/100 km over the last year, including a lot of short winter trips (curling FTL). My best tank was 3.85 L/100 km (a summer-time trip up to the cottage, usually when I get my best fuel economy), my worst 6.19 L/100 km, a tank including a bunch of short trips around London (curling, shopping) in the middle of winter, a few hundred kilometers on the 401, and another hundred kilometers in Toronto traffic. Not only is the fuel consumption good, in real-world terms, it’s also very consistent. For comparison, on the Accord my worst tank was 14.5 L/100 km, and my best was 6.5 L/100 km… and that’s without ever having to deal with Toronto commuting. I did put on a lot fewer kilometers than I had planned/expected, figuring I’d be up somewhere around 16-20k, but came in at just 13k.

Mechanically, I’ve had zero problems with the car. The low rearview mirror still bothers me a little bit, and there are a few more scratches in the paint, which does seem thin, but otherwise no issues. The seat fabric has weathered a live-fire vomit test, so I don’t think I’ll bother getting seat covers or aftermarket leather. I also got to test out the brake assist feature when someone decided that they were going to make a left turn, no matter what the oncoming traffic thought of their green light. The car stops fast.

Right now I’m debating whether or not to get a Krown treatment for it — of course there’s no rust on the car itself, but the lug nuts on my winter wheels are rusting, which seems really weird (and I’ve been checking out other people’s wheels for the last few weeks and don’t notice that on anyone else’s car, so I wonder if I somehow got defective nuts). I’m leaning towards putting it off until I get a real job.

I’ve had a few people ask about magnetic field exposures. I keep meaning to grab a probe and measure it, maybe this spring when the weather gets nice. In the meantime, another group has published on the issue, and I updated the Wikipedia entry appropriately — which lead to a little edit war with an anonymous scare-monger. Fun times. Do you have any lingering hybrid questions, or have they been comprehensively answered over the years here?

Haven’t had one of these for a while.

The bar for the diet goals, as you may recall, was significantly lowered for the thesis writing here, because it’s just too hard to sit and try to write all day and not “fuel up” — and there is a limited supply of willpower. The goal was simply to not gain weight. Sadly, I’ve failed even that, as this last week I’ve jumped up nearly 5 pounds (I blame the 1 kg jar of cashews I just couldn’t resist buying). I got called in to spare a bunch for curling though, so I’ve been doing that about 3 times a week, and the snow keeps coming, leading to lots of shovelling-related “workouts”.

A Toronto statistician found a flaw on some Ontario lottery tickets. Interestingly, the end of the article suggests that Bingo tickets are still exploitable. I’m not sure how useful that is though — in the article, the fellow says he brought the flaw to the OLG not because he was necessarily moral, but because it wasn’t worth his time to try to scam the system. And that was for the tic-tac-toe tickets: the Bingo tickets are much “busier”, and the hit rate isn’t as high according to him, so it would be even less worthwhile trying to exploit. Nonetheless, my curiosity is piqued. If anyone wants to bankroll buying a few dozen tickets to try to find the exploit (might even get a paper published out of it!) I’d be interested in trying to analyze them.

Lenny sent me to a new webcomics site, Abtruse Goose. Lots of geek love there.

For those that like to watch rather than read, TVO has a decent video on the UBB issue, summarizing it in 3 min. And Michael Geist also caught Bell’s admission in the Industry committee hearings: there is no congestion on the last mile (and if there was, they’d have to be fair and charge UBB to their IPTV service).

The Torontoist reports on the CRTC’s cavalcade of failure, this time highlighting their decision to not allow a TV station to air more (Canadian) music videos.

“This is literally a decision that benefits absolutely nobody, which is why it’s so amazing: usually when the CRTC makes a horrendously bad decision, it at least has the appearance of being because Rogers or Bell whispered in their ear that they wanted to make more money.

“But this? This is so witless that we are forced to wonder if maybe we’ve misunderstood the CRTC all along. Maybe they aren’t a shell of a government agency beholden to corporate media giants to the point of uselessness. Maybe they’re simply so stupid that uselessness is their natural state, and all along we’ve been blaming Bell and Rogers for influencing the acts of lunatics. It’s possible. After all, the CRTC honestly thinks MuchMusic airs music videos.”

Via Reddit, an interview with Neil deGrasse Tyson on whether the goal of science (and science funding) should be to improve life. I have to disagree with Neil on the first part of the interview: not everyone would choose the video over the transcript given the option. And not just Canadians with our backwards limited-usage internet. I skip over a lot of video/audio content on the internet because I can read a transcript much faster than an effective audio podcast can convey information, because a transcript is searchable and quotable, and because I just can’t stand listening to some people talk (even more so when they amateurishly try to film from the side of a busy street), even if I wouldn’t mind “hearing” their thoughts. Yes, some content is lost without facial expressions, gestures, cadence, and tone of voice. But you know what? We’ve been communicating effectively for centuries in a textual fashion — on a hot summer’s night, there’s little I like better than curling up with a book at the cottage — so I don’t see how he can call into question the worthiness of producing transcripts.

As Canadians, I think it’s sad that we don’t get to appreciate just how awesome the US version of Amazon is. At the lab today the very real question was asked*: where do we go to buy a superconducting coil? We’re still looking for a supplier to meet our needs, but lo and behold, frakin Amazon! * – PS: science is awesome some days.

The CRTC is now seeking commentary on reviewing the 2011-44 UBB decision. Here’s the commentary I submitted.

CPAC has the committee meetings on the issue up. Video for the first one with the CRTC, and audio only for the second meeting with the independent ISPs.

The testimony by von Finckenstein was a travesty: he clearly doesn’t understand the issues at hand, the mechanics of the industry in play, and repeats verbatim Bell talking points. It was very tough to watch: the MPs didn’t even seem to know what questions to ask to get down to the core of the issue.

The independent ISPs provided much better testimony, but the technical presentation fell down (if you’re bilingual, then try that stream, as the English translation kept falling behind and dropping out). Fortunately, most of the meeting was in English.

Ellen Roseman reports that yes, Bell has some issues with its usage tracker.

An article in the Globe raises a very interesting point: “Imagine being asked to guess how much electric power you need every month, with a penalty for mistakes.” Because UBB is not a straight usage based fee. You pay out the nose if you go over your cap, but you have to, in part, choose your cap to begin with.