Not A Mystery

As readers of the blog know, I came out of the closet a while back and confessed that I married into a (wonderful) Rio Linda family. Over the past 20+ years I’ve been there more times than I can remember  for family functions, holidays, BBQ’s and whatever.

Water Seeks Its Own Level

As a result, I believe I’ve got the chops to say pretty much anything about Rio Linda that I want, as long as I don’t get too carried away.

But right now I don’t plan to say anything. That’s a relief, isn’t it?

What I do plan to do though, is share some really fine photographs of Rio Linda. These were taken by Steve Shames a Sacramento photographer. Although he’s got gorgeous photos of more famous ‘pretty’ places, he called this particular collection one of his favorites.

These were taken on high speed infra-red film, so they are a bit other-worldly, but very effective.

When I was an aspiring (amateur) photographer long ago and far away I experimented with infra red film and I can vouch for the fact that it’s not something you want to try at home. It’s easy to take a weird looking picture but impossible to take a good one.

Steve has done a great job, here’s the link to Steve Shames Rio Linda collection.

And “America’s Pinata“ can eat his heart out.

Enjoy

Is it possible that The Economist is moving towards replacing its Big Mac Index with a Big White Index?

Is The Big Burger Index About To Go White?

The Economist has been publishing their (not so tongue-in-cheek) Big Mac Index since 1986. It’s a reality check on world-wide currency exchange rates, based on the concept of Purchasing-Power Parity.

Purchasing-Power Parity (PPP) says that exchange rates are correct when the price of similar goods are the same in each country. The Big Mac survey compares the price of a Big Mac all over the world. The Big Mac is, after all, a basket of standard ingredients put together in a consistent process.

Ubiquity.

Anyway, the latest 2009 survey says that should the Big Mac price in a country translated into dollars be above $3.54, its cost in America, the currency is overvalued; if it is below that benchmark, it is undervalued.

But Never Calorie Challenged

Before you get on that plane to South Africa for your bargin bun, let’s flash forward to the latest Potential PPP candidate. (Wow, that would be PPPP or 4P’s. A candidate for our acronym Hall of Fame.)

The following chart shows the worldwide retail price of Cocaine, as published in The Economist. Again a commodity with worldwide distribution, also some service component, plus transportation and energy costs included.

At Least We Know It's Not A "Push Poll" Around Dinner Time

Is it possible that those mavens at The Economist are preparing us for an update to the Big Mac Index?

We report, you decide.

This week from the Daily Telegraph of London, it’s reported that a gang of German Pensioners kidnapped and tortured a financial adviser after he lost their money on a Florida property investment scheme.

It's More Than A Bear Market

The adviser was held in the basement of a vacation home, and over a period of four days was burned with cigarettes, beaten, had two of his ribs broken and was hit with a chair leg while chained up “like an animal.”

I was struck. Again and again they threatened to kill me. The fear of death was indescribable. I never thought I would make it out alive…

Sympathy? Perhaps, but for who?

The good news is that this would never happen in the USA. Because our seniors live in practical, single level ranch houses with wide doorways.

No basements here, just solid concrete pads. Breathe easy all you Financial Advisors.

A recent sting operation perpetuated on several Big City Banks by a smallish Hedge Fund puts my Schadenfreude Meter off the scales. This one feels even better than a vicious lawyer joke.

Let’s see if I can explain what they did. [Note: the following narrative is based on an article in the Wall Street Journal but I have not confirmed its accuracy.]

One of the Financial Products created by the rocket scientists who almost brought down the world’s financial system is called a Credit Default Swap. As originally implemented it was/is a very worthwhile instrument. Let’s say I decide to buy a bond issued by General Electric, but I’m worried that when the bond matures they don’t have the money to pay back my investment as they agreed.

We Are Your Sophisticated Money Managers

I can buy a CDS from a third party, say one of the big investment banks, who will agree to pay me in case General Electric defaults. It’s like an insurance policy. Nothing wrong with that, and as Allen Greenspan famously said, these instruments spread the risk around the market and are good for the overall system.

Only one teensy, weensy, minor detail. The way the regulations work, I don’t actually have to own the original GE bond to buy the CDS. In this case I am really just placing a bet against GE with the bank that sold me the CDS. Isn’t that neat? Of course we don’t call this gambling, because we are sophisticated money managers.

So in the case we are discussing, it wasn’t a GE bond but a collection of subprime loans that a number of large banks were convinced would default. Those banks reportedly include J.P. Morgan Chase, Royal Bank of Scotland, Bank of America plus other investors. These people bought CDSs from Amherst Holdings of Austin, Texas betting that the loans would default.

Because you don’t need to actually own the securities being insured, at one point there were $130 million of bets that had been made on the performance of around $27 million in securities! Oh sorry, I slipped and called these sophisticated investment, bets.

Now guess what is reported to have happend next. Oh, I love this. Amherst Holdings took the money they got from the sales of the CDSs to the banks who thought they were betting on a sure thing, and paid off the underlying mortgages, thus making the CDSs absolutely worthless! And they did it with the bank’s own money!

It was the ‘loophole’ that allowed the banks to buy the CDS without owning the underlying assets that essentially led them to shoot themselves in the foot. That’s because if only the real owners of the securities could buy insurance then Amherst Holdings could never have collected enough in premiums to pay off all the underlying loans.

There should be a way to expand this idea and save all those foreclosed homes and kick-start the housing market, don’t you think?

Here is your link to the original Wall Street Journal article. And below is a simplified illustration of the sting operation. Click on the graphic to expand.

More disclosures. Although I’d like to take credit for turning up this great story, it was pointed out to me by my son, Matthew. If you’d like to thank him, you can do that by clicking on the link to the right of this post and go to TreasuredFinds.com which is his website.

One final TIP. If you clicked on the Wall Street Journal link above and didn’t get the full article because you are not a paid subscriber, here’s a workaround that usually succeeds. Type the following into a google search box

Wall Street Journal A Daring Trade Has Wall Street Seething

When the links come up in google, click on the one from the WSJ’s site. You can pick it by looking at the url. I guess the WSJ lets you read articles that are searched through google. It’s a neat trick, but you need to know part of the article title.

Enjoy, no charge for that tip.

A High-Tech Orbiting Comb-Over in honor of the Father’s Day Weekend. Enjoy.

This work is by a good friend, Michael Jacobs. The real title of his piece is Orbiting Infinity; I’ve taken a small liberty here to share a bit of good-natured fun on Father’s Day.

In these tough economic times, some folks are using Reverse Mortgages to access the equity in their homes and get cash either for spending or to pay off their conventional mortgage. It’s an idea whose time has come; and not a bad option in some circumstances.

But even better, especially if you are further from your Sell-By Date and not old enough to qualify for a Reverse Mortgage is the Life Settlement agreement. Think of it as a way to tap the equity in your soul.

Life Settlement Backed Securities, Yeah!

In this clever arrangement you take out a life insurance policy, and let someone else pay the premiums and eventually receive the death benefit. So what’s not to like?

“Life settlements” are arrangements that offer people the chance to sell their policies to investors, who keep paying the premiums until the sellers die and then collect the payout. For the investors it’s a ghoulish actuarial gamble: The quicker the death, the more profit is reaped.

But if you think that this is the end of the story, not so fast. The Wizards of Finance and Corporate America have once again figured out how to make a good thing even better. They like to call it financial innovation.

The first innovation was to  ‘package’, or ‘securitize’ individual agreements into bonds backed by a CDO or Collateralized Debt Obligation, called  “life settlement-backed securities“, or F2U Rio Linda, Death Bonds. You might recall that sub-prime mortgages were famously packaged as CDO’s, now sporting the fancy nickname Toxic Assets.

And in a wicked twist of fate it turns out that our friends at AIG may be one of the first major financial firms selling Death Bonds in order for them to, hang on, repay their TARP debt. So in a way AIG not only got some of your money, they’ve also got a piece of your soul!

This could be a good theme for a Country & Western ballad.

The next innovation involved a number of upstanding corporate partners. What came to light a few years ago was the revelation that more than a few companies had been buying life insurance on their employees (without telling them), which became nicknamed Dead Peasant Policies.

Are We Dead Yet?

The companies contributed money to the policies, which then could be used to pay for a variety of company expenses. In addition, when employees, retirees and former employees die, the company receives tax-free death benefits.

You got a problem with that?

We try to make each post a Teaching Opportunity, so what have we learned?

• Contrary to popular belief, your value increases as you approach your Sell-By Date.
• Rather than fearing your final time on this earth, it’s now more appropriate to look forward to what we’ll call your Money Moment.

There you have it, negotiate in good faith.

[P.S. If you were confused by the phrase F2U Rio Linda, then hit this link.]

At this point Andy Warhol’s oft quoted “Everybody will have 15 minutes of fame…” (sic) seems hopelessly outdated, what with YouTube, Twitter, Facebook, Reality Shows and, not least of all, blogs. Warhol would probably point out that there is the small issue of dumbing-down the concept of “Fame”, whatever.

I’ve noticed a parallel phenomenon which I’ll call ‘Green Fame’. This is fame with a small footprint, where you take your 15 minutes and instead of hogging it out to 30 minutes and slopping into my 15 minutes, you just copy and paste the same 15 minutes over and over.

Efficient.

So here are some random examples I’ve stumbled upon.

Our last post used an image of a man on a couch (below right), which I used to spice up some thoughts about Sleep. I had done a google image search looking for someone sleeping and in fact had already picked out another picture when I came upon his Big Tum. After a second I thought to myself, “Whoa, haven’t I’ve seen this guy before?”

Couch + Remote = Heaven

And sure enough. Back up a few weeks in our blog, and there he is, lending credibility to a graph about Leisure Time from The Economist magazine (above left). I’ve taken the two images and combined them side-by-side so that there’s no mistaking the fact that both pictures must have been taken at the same time. I don’t know if the person who created that graph for the Economist had access to both pictures, but if so, I agree that they picked the better one.

If we roll up our sleeves and do a bit of sleuthing in the data that comes along with the picture, it turns out that the image was touched up by someone using Photoshop back in June 2007 from a picture taken on a Canon EOS 20D camera. Whoever did the touch up named it “TV Gut”.  Unfortunately the original photographer is not credited in the IPTC data on this copy of the picture.

Next is another comparison, that I discovered in a grocery store in the UK a few years ago. Leslie and I were shopping one day; actually she was shopping and I was rolling the cart along behind trying to look like I could make decisions also.

I"d Cut Off My Arm For This Cuppa Coffee

Something about the guy on the Costa Coffee package caught my eye. He was not a Starbucks kinda guy; I mean this fella knows more than French Roast. Made me want to stop what I was doing and go get an espresso.

Then a few aisles and a few minutes later I look up and see that Package of Pasta. Hey, wait a minute, this is the Coffee Guy! Since I had my digital camera I took a few photos and then lined them up for comparison…see the difference? Or course not, because there  isn’t any; except that the images are flipped left to right and they amputated his left (or right, we’re not sure which is correct) arm in the coffee picture.

We try to make each post a Teaching Moment, so what have we learned?

• You CAN have Green Fame. Green is Good.
• You WILL be discovered by some nut with not enough to do.
• To be remembered it helps to have a distinctive physical trait. A tummy or authoritative way to scrunching your hand. (Actually I think the Queen has this one down with her Royal Wave; but let’s face it she doesn’t really need the extra juice for her 15 minutes.)
• Thru the wonders of the net and ‘metadata’ you CAN get Fame credits, just remember to embed your name and phone number in the IPTC fields.
• Or, you might want to DELETE any personal metadata on all those FLIKR or Facebook photos you’ve uploaded, on the off chance that too much Fame might not be for you. Here’s a how-to on zapping metadata.

Now if I could just figure out how to copy and paste the 3 readers of this blog, I might achieve some tiny degree of fame myself.

This week was the American Academy of Sleep Medicine’s annual meeting in Seattle, appropriately named “SLEEP 2009″.

This Guy Is Becoming Famous

In the midst of some fascinating studies into how we spend a huge part of our time on this earth (sleeping), were some amusing (to me) acronyms.

So for example, the following 3 were my favorites:

• TIB – “Time In Bed”
• EDS – “Excessive Daytime Sleepiness”
• PLM – “Periodic Limb Movements”

Is it just me, or do you find these to be a little ditsy for a scientific conference? But it got me to thinking.

Why not make up an acronym of my very own!

Read more…

We’ve gotten comfortable with Eco-Tourism, and now have another great phrase entering the lexicon: “Terror Tourism”. Today we’re visiting Mumbai, six months after the attacks, thru the reporting of the Financial Times.

Farhan Jehani, co-owner of Leopold Café, said business could not be better as he pointed out the bullet and grenade marks the managers have purposely retained on the café’s walls in remembrance of the incident. “Leopold’s . . . has become more famous now following this incident [the attacks], no doubt,” he said.

Street hawkers operating around Nariman House, which is near Leopold’s and the Taj, say it has also become a tourist attraction.

“There is also a bus service that takes tourists there,” said Imran Khan, a street vendor who sells replica watches, jewellery and stickers not far from Nariman House. “So in a way it has become good for us, business-wise, after the attack.”

They used to be just a Café, now Leopold’s is a destination.

Business is Good

Come see our bullet holes!

It's A Tourist Destination Now

But hey, if it’s bullet holes you want, let’s try Bosnia. My son, Matthew, took this picture in Mostar, Bosnia and he was just an ordinary tourist, way back in ’07.

Bullet Holes? We Don't Need Your Stinking Bullet Holes.

So what’s the point? Pick your favorite.

• People are callous and stupid,
• Disneyland is becoming disintermediated,
• Life goes on.

I guess I pick the last one, that’s why I filed this post under Angst.

Shameless plug: If you like the picture, thank Matthew by going to his website www.treasuredfinds.com and purchasing a gift for Dad on Father’s Day.

This post combines our series of tutorials for people new to blogs. Because blogs look like a normal website, but work in some counter intuitive ways, it can be a bit confusing for newbies. Hopefully these Tips will help get you up to speed.

Read more…

A continuing topic of interest to this blog are time saving ideas. Last post we discussed a way to cut down on your time spent reading, by aging magazines like a fine wine.

The example we used was focused on The Economist magazine. While we managed to gain the upper hand over their Editorial staff, it was the Marketing department that one-upped us. Namely they managed to get us to buy a subscription we really didn’t need with some clever psychology.

It wasn’t until I read Dan Ariely’s book “Predictably Irrational” a year later that I understood their ploy. For a great introduction to Behavioral Economics click on the picture below for a 17 minute video of Dan at the 2008 TED Conference. He describes what The Economist did 12:30 minutes into his fascinating talk.

Dan Ariely at the 2008 TED Conference

If you don’t want to watch the entire video, after it loads in your browser just click the progress bar to get to 12:30 minutes.

By the way, the title “Got Quant?” is my shorthand for the concept that Behavorial Economics explains some Madison Avenue marketing techniques by using quantitative analysis.