Blessed by the Potato

Jenn recently linked to an interesting article about post-doc pay, and how the low pay (and other issues, like the constant moving and uncertainty and short-term contracts and lack of benefits) right at the point where women’s fertility starts to drop is one factor keeping them out of science. Go and read that article, but I think this goes well beyond just women in science, post-docs and starting families.

I keep thinking of ways to dramatically reshape the way we do science. They may not be practical, but I like thinking outside the box from time to time.

One set of related ideas I keep coming back to are the issues of compensation and focus. Grad students and post-docs are paid terribly. How terrible? Well, in my department grad students made about $14k-16k as a base stipend (and that level has not changed in almost two decades, inflation be damned), top students with national scholarships could take home about $33k. Yes, per year, with restrictions on seeking outside work. This is in part because they are said to be trainees who are learning how to be proper scientists. Except if they make it through the funnel and up the pyramid, or whatever visual metaphor you may choose, they teach and write grants and supervise — skills they are largely not being taught.

So the idea I toss around is that of a permanent post-doc, or professional bench scientist: a position for someone who will spend their life doing hands-on research, and who gets paid a professional salary for it.

Along with that would be wage/stipend increases for grad students: there is a lot of catching up to do just to get back to the inflation-adjusted level of poverty they were at a decade ago, let alone getting to the point where it is recognized that they are the driving force behind science, and that a senior PhD student is a professional with years of training and specialized expertise making less than minimum wage. One related option might be to shorten PhD programs — it runs the risk of devaluing the degree, but did the 4th and 5th years of my own slog through grad school add much to my development as a scientist that the 2nd and 3rd years did not already? How has the average time to graduation changed over the past couple of decades?

It’s a tough issue, and would represent massive disruptive changes, with no real advocate to push for it. I’m really not even sure myself if these wild speculations I sometimes have are worth any further consideration at all. I mean, even if that is a place we wanted to move to, how would we possibly get there?

In a sense, science is powered by slave labour. If we restricted entry into grad school so that a higher percentage of PhDs could stay in academia (and let the industries that end up hiring PhDs instead hire MSc grads or some newly-created in-between research-intensive 3-4 year expert degree); or reduced the graduation hurdle so that they only did 2 experiments instead of 3, and graduated before 31 years of age — or really any change along those lines — we would limit the amount of science that could get done on current budgets. Unless we truly were able to hire more efficient and productive talent (or focus and dedicate the talent we have) with the increased compensation, the fact is that less research would get done for today’s research budget. This seems an insurmountable problem.

Then I thought, what if instead of thinking of slavery as a harsh verbal rhetoric, I looked at it as an actual model? After all, that problem has been solved. Slavery doesn’t exist in the modern civilized world, but did at some point in our past. Many countries weaned themselves off, with the US having a particularly dramatic and definite end to the practice after the Civil War. How did the transition work out then? What lessons can we learn for transitioning the economic model of science? Unfortunately I’m not enough of a historian to say, so I will have to end here as some food for thought.

Here is a recent TED talk on philanthropy and advertising you should go watch.

This is an interesting perspective. As someone who is currently “overhead” I can, to a certain extent, agree. Besides my current day job, I also recently picked up an interesting freelance gig. A donor hired me to rewrite and revamp a fundraising brochure for a local hospital. Because I’m being paid directly by the philanthropist and not the foundation, my fees will not appear in their books as overhead, though I hope that the work that I’ve done indeed helps multiply the donations they eventually receive regardless. (You can see a PDF of the brochure here.)[Update: I did a second related one.]

To some extent there is a need for scale in philanthropy. A charity attempting to say fund research looking for a cure for cancer is not going to be able to make much of a dent with an annual budget of $100k — that’s barely one research grant (and even then the lab has to have some other source of core funding). It takes millions to be able to have enough to get together a panel of peer reviewers to examine grant proposals, or to buy expensive pieces of infrastructure such as PET scanners. And that takes some kind of investment to scale up — whether resources for advertising, or the volunteer effort to go viral on the internet.

But there’s a limit. At some point you could just be raising money to pay people to try to raise more money. In the talk he mentions that charitable giving has been stuck at 2% of GDP for decades. If there is some sort of mechanistic reason for that — it’s the amount people are capable of giving, or some sort of unconscious philanthropy budget in the population as a whole — then pushing for more overhead is just shifting the charity spending around, and in fact a net negative due to the overhead. It is possible that, by being able to tackle large challenges smaller organizations could not, we would be better off with one (or a few) massive billion-dollar charities spending a total of $240B than with a bunch of smaller million-dollar charities spending $275B with lower overhead costs. But if outcomes are directly related to dollars spent, more overhead would indeed simply mean more waste.

Consider a parallel with investing: you could pay a brilliant manager some percentage of your funds under management, and they might be able to beat the market for you. But there’s only so much return out there to be had: if everyone else hires an investment manager then everyone is on an even footing and is back to getting basically average returns… less the overhead to the managers.

There were three other points of his I want to discuss.

The first was on compensation. The big unanswered question for me was whether you would get value for that extra $300k spent on talent in his hypothetical. Perhaps everyone is better off if the MBAs pursue for-profit $400k salaries and donate $100k to the charity, who can then hire an $87k/year executive. If the charity tried to hire someone for $400k, would they get more than the ~$300k difference back in value? Charities, after all, don’t have all the things to manage that for-profit businesses do: maybe the extra money buys you advertising and capital markets experience, which you just don’t need as a non-profit. And why doesn’t that logic apply all down the chain? We pay grad students and post-docs a disgraceful pittance for trying to find the cures to our modern medical ailments, but brilliant technically-minded and driven people can make far more in the private sector. Would we have long since solved this pesky cancer problem if we were only willing to retain top talent in the research enterprise by setting post-doc starting salaries at $400k, and grad student stipends at $75k?

The second was on the whole comparison of the for-profit and not-for-profit sectors. You see, the two are very different fundamentally. When I give my money to Coca-Cola for a beverage, or to Amazon for a book, I am transacting with them for something. I don’t care how much they spend on overhead, because I am making my decision on whether or not to give them money based on what they are giving me in return at that moment. I need to only extend a small amount of trust to them (trust that Coca-Cola hasn’t diluted my Coke Zero, trust that my book from Amazon will arrive undamaged in a under a week), and I have recourse if my trust is violated: I can demand my money back, sue for breach of contract, etc. But once I send my money to them and receive my item, it is no longer my money. It’s their money, they can do with it as they wish.

Giving money to a charity is a completely different thing. I’m not getting a thing or a service, I’m giving my money to the charity to make the world a better place. I am trusting them to put my money to good use. Though the money is out of my hands and I have no recourse to get it back once I give, at no point do I consider it “their money” to do with as they please. Maybe they could give me a better “product” if they spent three times as much on overhead as I had reasonably expected — but that is a lot of trust for me to give. While only people donating staggering amounts of money expect to be able to direct their donations precisely, I still expect that, in general, my donation will be used for the stated purpose — ultimately mostly directed towards some kind of program spending rather than churning overhead or as risk capital. Their use and governance of the money will continue to be the concern of the donors, and so there is a very real reason for spending on overhead and risky activities to be perceived differently than in the for-profit sector.

In an analogy to investing, let’s say that there was a company that raised $100M in a stock offering to pursue a business idea. They went out the first few years and spent $90M of the money doing what had to be done (hiring people, renting office space, advertising etc.). After a few years of losing money they discover that the business model is just not viable. To continue is to throw good money after bad so they wind up operations. As a shareholder, through the first few years you would have been obliged to let management take the risk and pursue the business, spending your capital on whatever “overhead” was needed to do so. After it failed, you would expect that any residual money ($10M in this example) would be returned to you as the business was shuttered, and promptly. If they dragged their feet in the wind-up, paying salaries for years, burning through your capital with no purpose you would rightly be pissed at that loss.

In the not-for-profit sector, overhead spending that is going to have a multiplicative effect is difficult to discern from the telemarketer full employment program. How do you know whether you’re in the phase of risk capital spending that is pursuing the innovative business model with lots of potential, versus the phase that is basically the insiders stealing from the other contributors of capital? The risk-reward equation is not the same in the not-for-profit and for-profit examples, and the governance is different: profits are much easier to measure than “impact” or “do-goodery”. And as unethical and despicable as it was for the executives in the hypothetical example to burn the remaining shareholder capital after it was clear nothing would come from it, it is even more morally repugnant to live large off people’s charitable donations — hence the aversion to overhead spending.

And the last point I wanted to discuss was that of spending more overhead as a percentage to scale up. In the presentation he just kind of implicitly assumes that to scale up an organization might have to spend a larger percentage on overhead. But should this be so? Shouldn’t scaling up offer economies of scale? If instead of spending $100 to raise $1000 at a bake sale, a charity should spend $100M on organizers for a massive event and TV air time, then shouldn’t that investment be expected to pull in $1B for program spending, rather than just $250M as his 40% figure would indicate? Now again, maybe the efficiencies come on the spending side (perhaps spending $250M in one organized way with a unifying strategy does more cumulative good than spending $1B in separate $1M chunks).

So while I can see some of his points about needing large-scale charities to tackle large-scale problems, and that sometimes investments have to be made (to train people, to build infrastructure, etc.) and sometimes more overhead has to be spent (for strategy, for advertising), I do not fully agree. Sometimes overhead is just money not going to program spending, and I would hope that scaling up would bring about more efficiency rather than less. The not-for-profit and for-profit sectors are have larger fundamental differences than he suggests. And when you come right down to it, I want to be able to know that my charitable donation is going towards the stated purpose and not to the Canada Foundation for Telemarketer Employment. Maybe looking at the percentage of spending on overhead is not the best way to choose where to donate — perhaps we need some impossible measure of impact per dollar donated — but we will naturally gravitate towards metrics that are easily enumerated.

Well, scam is way too harsh, but the hyperbole may be needed to counteract all the “OMG, Shoppers Optimum is the best rewards system!” that’s out there.

I used to love Shoppers; though they’ve long been a terrible pharmacy (high dispensing fees, and we’ve experienced many frustrations with for example filling prescriptions weirdly to generate even more filling fees), I used to think that they were a pretty terrific all-night convenience store: well-lit, well-stocked, with competitive prices. And hey, Optimum.

Then that all started going away: they jacked their prices through the roof, and stopped being well-stocked on sale items. Optimum points were devalued. Customer service took a hit, and many coupons, bonus points, and sale prices were not going through at the register. The one by our house sells out of flyer items sometime before noon on the first day of the sale. I’ve almost entirely stopped shopping there (even though it’s between the bus and my house, so super convenient). To say that it’s one of the best (or to take out the qualifier entirely) because it has the highest percentage return of any loyalty program misses the catch: it’s only good at over-priced Shoppers.

There have been a few times in the recent past when Wayfare has been induced to spend $50-$100 at Shoppers due to a bonus Optimum points event. As Wayfare puts it, she only shops there on 20X the points events, and redeems her points on bonus redemption days. “It’s like 30% off!” On the surface, that looks approximately correct: you normally earn 10 points per dollar spent (truncated — so $17.40 pre-tax gets you 170 points), and points are “worth” $0.00179 each if you save up to the top tier. That works out to about 1.79% return on normal days, and as much as 42% if you only buy on 20X the points days and only redeem on bonus redemption days, and then spend exactly $200 (and not pick up a bunch of overpriced crap that you pay for at the regular rate once you’re past $200). Compare that to the ~1% you get with PC points (and only then if you qualify for the special card) or the 0.5% from Air Miles (though it may be even less than that now with the constant devaluing of points).

Here’s my thinking: yes, you get “money” back, but you can only use it at Shoppers, which is ludicrously over-priced. So you get your 30-42% back in points (including the bonus redemption at the high end), but then you have to spend those points on stuff that’s 30-42% over-priced.

I had in my head that Shoppers was roughly 30% over-priced, but I hadn’t checked it explicitly in a while. So tonight when I went shopping, I did a price comparison on a basket of 11 items at Shoppers and Real Canadian Super Store (RCSS — basically Loblaws), chosen quasirandomly (I wandered around the store and wrote down the price of stuff I might find on my shopping list, and stuck to name brands so I could compare across stores). The average was actually that Shoppers was 42% more expensive than RCSS (data at the end).

So, even on the most fortuitous bonus points days at Shoppers (20X) you spend $1.42 to get $1 worth of stuff, and also pick up $.60 in Optimum points, which you later spend to get $.42 worth of stuff. In the end, you spent $1.42 to get $1.42 worth of stuff — but paid tax on $2.02. That tax hit would mean that you’d be behind by $0.078, or just over 5%. You go to all the trouble of shopping on the 20X the points days, then saving up your points for the top tier and a bonus redemption day, and then run around the store with a notepad and calculator so you’re sure to spend as close to $200 as humanly possible… and you end up 5% behind the ball. Could have just gone to RCSS and bought on any old day (and received a bonus 1% in PC points).

To be fair, Shoppers does put stuff on sale on top of the Optimum offers… but RCSS puts stuff on sale, too, so again it’s one less variable to worry about. You could do better if the Shoppers sale price is down to the RCSS sale price and you get some kind of bonus points event (either on the collection or redemption side), but will that be true of everything you put in your cart? Sometimes, yes: when I do stoop to shopping at Shoppers, it’s to scoop up the loss leaders that are actually cheaper than other stores, and that is usually all I’ll buy. Coke and facial tissues are perennial loss leader favourites at Shoppers — though as I said above, I can’t actually do that at the store near my house since they sell out (or, as far as I can tell, never carried any inventory in the first place).

The high percentage return of Optimum really masks what a mediocre deal it is, since everything is marked up to account for that Optimum payback (which means you’re doubly screwed if you ever shop there when you’re not getting bonus points, or if you forget your card).

* - the box of Huggies in Shoppers was a 72-pack, but RCSS didn’t sell that size. The closest was a 90-pack for $23.43, so I took the price per diaper, multiplied that by 72, and put it in to get a fair comparison to Shoppers.

Did you know that there are separate categories for patents? Odd ones include a separate category for flexible bags (almost 50 patent applications per year!), knots and knot tying (8 patents issued last year), railway mail delivery (zero patents since 1971 – it’s a wide-open market! Must think about patentable railway mail delivery technologies now…), button making (one patent every other year on average – think of the archaic buttons we must be using now), and baths, sinks, and spittoons (259 patents last year – somehow I suspect more for the first third of the category than the last third). Reading that, you may be thinking that there must be tens of thousands of categories to have such specific categories. While there are a lot of categories, this isn’t because of a ridiculous level of comprehensiveness — there’s only about a hundred or so.

I thought the guy with the drugs and bioactive compounds portfolio must have it rough with over 5000 applications last year, but telecommunications blows that out of the water with over 12,000 combined between telecommunications and mechanisms for multiplexing signal transmission.

Ordnance I had assumed would fall under military secrets, but managed to rack up over 100 [public] patents per year for the last three decades running. Unless that’s a misspelling of city ordinances, in which case yeah, there’s a lot of new ways to ticket people being dreamed up… though I didn’t think you could patent that.

Finally, 2011 seems to have marked a sudden end to the innovative efforts of the world’s farriers: consistently coming up with 5-20 patents even decades after the horseless carriage made the trade all but obsolete, suddenly 0 patents were issued in the field in 2011. Yes, even as recently as 2002, when Firefly showed us that space cowboys would still be herding cattle on horseback in the future, farriers managed to come up with 18 patentable inventions for shoeing horses.

Let’s start with the nazis: grammar and food.

For the grammar issue of the week, I bring you singular they: do you think it’s wrong to say something like “A consumer of 2012 expects their laptops to be lighter and more powerful than ever?” Or do you think the “they” referring to a single consumer is the wrong pronoun, and “him/her” should be used instead?

I’ve long been fine with the singular they: tradition was to use “him” in such cases, even where the gender was indeterminate. When that became politically incorrect, “they” seemed to be an appropriate alternative: it has some parallels in the disuse of thee/thou in favour of the singular ye/you (which then just became “you”). Many writers started to use it, and I hear it all the time in casual speech. It’s certainly a damned sight cleaner than putting in the awkward “his/her” or “his or her” compound everywhere.

One alternative I don’t care for is the idea that it’s somehow more correct to use “her” in place of “him” for a gender-uncertain third person pronoun. “A student has many books to buy at university, straining her budget.” The use of “him” in that kind of sentence has been traditional and common for so long that seeing “her” in its place makes me think that the writer must somehow know the gender — it’s not serving as an effective gender-unknown pronoun. I personally find that much more distracting than the singular they.

Like all things in life, there does need to be balance: we can’t have everyone making up their own dialect and rules, but “thou/thee” has long since slipped from common usage to anachronistic, and we’ve had to recognize that evolution. Similarly for now, writing “u” in place of you, or using numerals for homophones “to” and “for” is a disgusting mark of poor upbringing and laziness — a hopefully temporary artifact of T9 phones that will forever be forgotten with the rise of QWERTY smartphones. But I do have to accept that one day in the distant future — long after I’m dead — such usage may be commonplace. (And for all my acceptance of linguistic evolution, I will still spin in my grave if it happens.) The role of the grammar nazi is to try to keep that sort of thing from getting a foothold in the first place, not to deny the common usage long after it’s happened.

On to food/grammar nazi-hybrids: if you make a dish in a non-traditional way, does it cease to be that dish? I don’t think so: language evolves, as do tastes, yet again today I heard the old saying that “chili isn’t chili if it has beans.” Well, traditional Texican chili maybe, but I think it’s more common with than without these days, and it’s not like a totally different food either way. Or like a few years ago, when a friend of Italian descent tried to tell me that there’s no such thing as “vegetarian lasagna”, because lasagna by definition has meat in it. Well, fine, think that all you want, but my vegetarian lasagna (or as I call it, “lasagna”) is pretty damned tasty, and there isn’t any confusion over what it is I’m slopping on my guests’ dinner plates (or they’re able to surmount the seeming oxymoron). [Plus as an aside, my understanding is that the word refers to the noodle, not the dish.]

I made cinnamon rolls today — kick-ass ones, I might add — and someone asked if I put raisins in them. No, as a matter of fact, I did not, nor would I ever. Raisins are gross, and I think putting raisins in your cinnamon rolls represents a serious lapse in judgement… but they do not cease to be cinnamon rolls by the addition of the raisins and their dark influence.

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Blueberry has been getting big so quickly. I’m finding that she’s already getting heavy and tough to carry around: though to be fair I had a lot of years of training with an 8-lbs cat, so when she was ~8 lbs I was well inside my comfort zone; now she’s pushing me into the feats of strength zone.

It’s amazing how fickle she is: perfectly content to screaming banshee in a second flat. And just as often, back again. I know that movement helps to settle her, so I hold her and walk, or do a little baby rain dance. I got tired today after just a few minutes of the baby rain dance, and it made me wonder if I had missed striking the right balance in terms of when to have kids: too young, and well, you’re too young: not ready, not able to handle them. Too old, and you can’t keep up.

Then she started crying again, and I lost that train of thought. I plodded on, doing laps of the house.

Singing turned to pleading. Pleading to soft moaning. “Pleeaaasseee. Hushushushushshhhhh.” Then I thought perhaps this is how the zombie apocalypse would feel: zombies shuffling across the face of the earth without end, moaning while being gummed by a smaller, unhappy zombie.

Rather than talk about myself this fortnightly update I figured I’d turn it over to my RL friends who are starting new blogs for the spring. First up is Ben, who’s launching a new business venture in southern Ontario in the form of an organic farm. Here’s Ben with the details:

Fresh Start Farm is a project Lisa and I have put together in order to test the waters when it comes to market gardening and earning a sustainable living farming. We are both huge foodies and we’ve been growing all kinds of things for our own consumption on a small scale over the years. At the same time we have both yearned for more space where we could expand our gardening into full-on farming. We both agree that the farming lifestyle is one that we would love to embrace.

After attending the Guelph Organic Conference last year, we both agreed that it was going to be our goal, over the next 5 years, to transition our current careers from what they are now, to full time farming.

We have rented a piece of land, roughly ¼ acre, in Pelham, a short drive from our house in Welland, while we continue the search for a suitable homestead to purchase.

We have invested a decent amount in seeds, soil amendments, tools and things, although the biggest investment will come in the form of our time throughout the growing season this year. In order to sell the produce we produce, we have rented a booth at the Welland Farmers’ Market, which is a fairly large and well attended market very close to our home and farm.

We have created the website in order to blog about our experience as well as get the word out as to what’s going on, what our problems and successes are, and most importantly, what we will have for sale at the market, once that time of year rolls around!

I’m sure most of your readers are in Toronto, so they would probably never attend the Welland Market, but in the future we may start offering a CSA delivery to the GTA. I still have a strong connection to North York, and I would love to get a booth at that market, if possible. In the interim, I encourage everyone to follow us as we go about doing what we do, offer comments and questions, and see that it is possible to be awesome if you want to be!

And also Lenny has launched a blog where he talks about whatever he feels like (so far, making his own pizza dough and encryption).

As for me, I’ve got my first job interview coming up later in the week. This is for a position I applied for in December, so I guess they’re not in a terrible rush to hire someone (and does give me hope for all the other applications I haven’t heard back on yet — there could yet be good news!). I’d say I’m pretty nervous to face the interview, but Wayfare’s way worse. To be fair, she knows how terrible I am at interviewing and the awful turns interviews can take, whereas I am consumed by the notion that I am generally awesome in all things, so it’ll be fine. ;)

Flag football is coming to an end, and much to my surprise attendance never got better. Who are these people that shell out over $100 to join a football league and only show up for one game? After much discussion and debate I decided not to join any leagues for the spring: as good as team sports are for motivating me to actually get out and exercise, there’s just too much uncertainty with a new job (any. day. now.) and baby on the way (same). Plus many of the spring leagues are on weeknights, and I have zero desire — nay, a full-on hatred of the very thought — of commuting around Toronto rush-hour at 6pm to try to make a game half-way across the city. Others may whine, but I’ll take a 10pm Sunday game every time.

I leave London alone for two months, and it all goes to hell…

Another article at the Globe warning about the housing market. I like the way Tom Bradley phrased this: “When I pull together the economic fundamentals, valuation and sentiment, real estate, as an investment, doesn’t look very attractive. The distribution of potential outcomes looks asymmetrical to me – limited upside and plenty of possible downside. But what really screams out at me is how many important factors are at extremes … bad extremes. One or two off-trend numbers can be explained away, but too many are jumping off the charts – price increases, mortgage rates, loan growth, consumer debt and home ownership levels.”

James Randi on scientists and trust and skepticism.

Nelson tries to find a way to short the Canadian real estate market.

Teacher Man, writing for CFB, says the Canadian real estate bubble can’t be denied any longer.

Well, it looks like the group deal fad may finally be getting to its final phase. About two years ago new group deal sites were popping up like crazy, offering steep discounts on everything from restaurants to meat to rock climbing.

I quickly soured on the concept after finding a few deals hard to redeem (one $10 offer ended up expiring before I could use it, and it ended up being a real last-minute rush to finally use my rock climbing pass the week before it expired). Some people got burned bad by the various butcher offers. Plus after the first few months there didn’t seem to be any decent deals, and far too many individual deal sites to track. I ended up signing up for Red Flag Deals’ roundup, which monitored most of the deals and just sent you one email… and really, there’s been nothing to get me excited. Many recent deals have you paying for coupons, which is confusing and stupid.

Then recently I noticed large discounts starting to come back, such as today’s wireless iphone keyboard for 60% off ($50 normally $120!!). Except… that’s not the regular price, or at least it shouldn’t be. Futureshop has it at $90, and Amazon (US) as cheap as $19. Plus the small print in the email says you have to pay for shipping as well, making that a paltry 30% off the futureshop price. There are plenty of other examples, so be sure to check if the huge percentage off advertised by the group deal is actually what you’ll be saving: it may not be worth the hassle if the so-called discount isn’t remotely realistic.

I still can’t believe how busy I am in unemployment. I figured if nothing else, having no steady income would be a chance to take some time to catch up on all the video games I didn’t play over the xmas break. Instead, I think I’ve been almost as busy as when I was working. The move didn’t help with that, so once I finish the last bit of unpacking (this week?) that might give me a bit of time back (and none too soon — Mass Effect 3 just came out!).

What I’ve found really shocking though is the complete silence on the job front. Not a single interview, even for the jobs I was perfect for. Ah, well, hopefully something will come up soon… On with the links!

An old speech of Charlie Munger’s is reposted, and it’s still good reading.

Rick Mercer epitomizes the condo insanity with the Condo Gun.

More and more housing bubble stories in the media, including the cover at Maclean’s. VREAA says this:

“Show of hands.. Anybody who hasn’t heard that Housing in Canada is in a ‘Bubble’?
Nobody?
Okay… so we’ve all heard.
Pumps are primed.
Now class… How are we going to respond to initial price drops?
Anybody?”

Larry MacDonald puts up another blog post attempting to counter the housing bear sentiment. I will admit: I simply do not understand his position. He doesn’t seem to refute the severe overvaluation — indeed, he confirms it — yet for some reason it doesn’t seem to bother him. Instead he talks about the lack of catalysts: “I agree with him that there is over-valuation—but I also believe there are other factors to consider. […]the catalyst for an end to the U.S. housing mania—a major tightening in monetary policy. I don’t see it in Canada yet;[…]” [emphasis mine]. To put it in terms of a bad analogy, it’d be like being at a party and finding a gas leak. “I smell gas. This is dangerous, I’m getting out of here” I’d say. “I smell it too,” Larry might say, “but nobody’s smoking in here. It’s fine. we can just open the windows and it’ll slowly air out.” “Well, either it blows up, or we’ll feel a chill with the windows open. Either way, this party is going to suck. Later!”

After saying he was leaving blogging and posting less frequently, TMW returns with this little post on valuing real estate. What I find hilarious is that just a week or two ago the BoC released a report saying that this was exactly the algorithm people used when valuing real estate, and that it was faulty because all it did was check to see if a particular property was over/under-priced relative to recent market moves, but implicitly assumed that both the starting price and the growth rate were rationally determined by an efficient market. If those two conditions weren’t true — and believe me, they’re not — then bubbles easily form because very few market participants are doing absolute pricing analysis. So this is a great method to use if you want to try to price a property for sale (to meet current market conditions), and a good one to use if you don’t care about overall valuation and just want to avoid being the one sucker who buys the most over-priced condo in the building… but you need an additional check as to the overall market sanity (i.e.: a rent vs buy analysis for your situation).

John Hempton at Bronte Capital explains why, despite Bronte’s small size, he isn’t chasing small caps. In short, he doesn’t think they’re as over-looked as many who chase small-caps think.

Boomer & Echo compare index funds to the big bank’s equity mutual funds. It goes about as well as you’d expect.

Michael James wonders if Berkshire Hathaway may be an index alternative and suitable for a passive investor. I figure why not: it’s diversified, the fees are low, and the long-term track record is good.

An article in the New York Times describes research that shows people with high IQs may get better investment returns. Though it doesn’t look like the returns come from digging up under-valued stocks, simply from following common sense investing principles that don’t require a high IQ to understand. “[Economists…] argued in a paper published in 2008 that many households avoid investing directly in stocks out of vague fears that they might be deliberately misled or cheated.” I know I’ve seen that kind of misplaced distrust many times when discussing investing. Somehow, over-valued under-diversified real estate is safe, and stocks are a rigged game.

Teller talks about magic and human perception. A fun little read! [HT: Barry Ritholtz]

A fairly exciting few weeks. My last lecture at UWO (at least until I get invited back), yet my first as a full-fledged PhD. It was not as polished as the version I gave last year, which is a shame since the students this year seemed a little more bright eyed and bushy tailed; that may have been helped by the fact that it was a decent day in an unbelievably mild winter, and not… ugh, I don’t even want to think of last winter.

Then I found out I won tickets to the Book Lover’s Ball, via a contest to write an attention-catching opening line to a novel. The ball is a fundraiser for the Toronto Public Library, so I entered hoping to win since it would be the perfect gift for Wayfare: a lover of both fancy parties and libraries!

The Ball was very much not what I had expected. I know of basically two definitions for ball: a fancy dance party, and a round thing you kick, bat at, or throw. The key part to the first definition being the dancing, and Wikipedia backs me up on that. There was no dancing. There were black ties and ballgowns and an excellent dinner, but no dancing. Which is just as well, because Wayfare is progressing from very pregnant to extremely pregnant, which would have made dancing awkward and painful. While I can see the poetic symmetry between Book and Ball, I think perhaps some more descriptive titles could have been chosen, such as: the Author’s Affair; Book Lover’s Banquet; the Knowledge Feast [which I particularly like since it could also apply to the library itself]; the Library Soiree; the Book Lover’s Benefit; or the Public Library Gala.

We met some famous authors, as well as a number we were assured were famous, though we had to take the organizers’ word for that (certainly more famous than me, anyway, which counts). We were asked to adopt a branch or implored to bid on the charity auctions several times, had some drinks, chatted, had dinner, and then the lights came on and we were asked to leave since people had to get up for work the next day. It was a fun night, and in support of a cause I can easily get behind.

We had a last chance to get dressed up in our finery and have a fancy night out to ourselves before having to worry about babysitters, which was fun. Please, take that as the take-home message before I get into the painful financial blogger OCD part below (in fact, feel free to skip the next two paragraphs, look for the bold text to start the link summary).

The tickets, won in a contest, were free. Given the face value (which granted is in large part a charitable donation), it was quite the contest win and a fantastic gift. Yet we spent hundreds of dollars on a tux and gown to go. Then hundreds more on a hotel room for the night. Then a surprisingly large amount on overnight parking downtown: I figured it would be expensive: $20 or maybe $30 for less than 24 hours near Front St.; I was shocked and angered to find it was $66 for 21 hours. Even though it was the least consequential cost of the evening, it really burned me up. Partly because I didn’t take a few minutes to research my parking options and to know in advance what to expect, and partly because I blindly followed the hotel’s instructions on where to park, and they should have warned me or had some kind of reasonably-priced option (a voucher or something if they don’t have their own lot). All told, the event ended up costing a majority of the vacation budget for the year, though I don’t think we had big vacation plans this year since we’ll have a newborn and I’ll have a new job which may not allow for a vacation this first summer anyway. The whole experience reminded me of the story of Diderot’s dressing gown (which is in recent memory thanks to reading The Wealthy Barber Returns — review to follow).

And speaking of Diderot’s dressing gown and creating new obligations, I now have a winning opening line to a novel, so there is some expectation that I follow that up with, if not a novel, at least a story of some kind. The thing is, I had no inkling of a story to go with that line: I was just reaching for something humourous and attention-catching that would fit within the strict character limit of the twitter contest. But if I’m unemployed anyway, no harm in trying to write a story, I guess (as long as I keep up the job applications)…

Links: The notion of housing risk goes mainstream.

A slew of articles recently on the risks associated with sky-high housing prices, like most everyone is waking up to the reality at once, including: the Globe’s connect-the-dots, Canadian Business’ prediction that the market will crash, and several others.

Macleans is surprisingly straightforward: “Yes, we’re in a bubble, and it will probably pop soon.” which was bolded in the text. I wasn’t happy to see “A whopping 75 per cent of mortgages in Canada are fully insured by Ottawa, according to the Financial Stability Board.” put forward as a reason not to worry.

The Financial Post reports that banks are dumping their exposure to even “prime” mortgages on the CMHC or securitization market. “Financial institutions are required to have mortgage-default insurance when a consumer has less than 20% equity. However, the banks have been seeking insurance on loans with even high downpayments — something not required by law — so they can securitize those bulk lending loans, thereby getting them off their balance sheets and reducing their capital requirements.” This is bringing the CMHC close to its limit for providing coverage, and it’s asking the banks to slow it down.

Just a few weeks ago, the news was dominated by the rush to the bottom in medium-term fixed-rate offerings by the banks. Now, those special offers are coming to an end.

A neat new hedge fund opportunity. Have a read, and no matter what you end up thinking of it, trust me and click on the “invest now” link to have a look at what comes next.

A very short post over at Divestor about selling Rogers Sugar after appreciating so much. I’ve had many such dilemmas this last year or so: with prices on things like Rogers Sugar, REITs, or other low/no-growth dividend payers hitting all time highs, am I being paid to take on equity risk? Sure, they’re towards the less risky, less volatile end of the equity spectrum, but I’m not sure if I’m comfortable locking in at 6%, especially when many preferreds are in the 5% range.

An article about behavioural economics.

Stats Canada is apparently going to refine the CPI calculation, which if it lead to a lowered CPI figure could lead to savings for the government (as many payments are inflation-adjusted). The article indicates that CPI is currently overstated, and I find that a bit odd, as I’ve long thought that CPI was understating inflation. Given the current government’s philosophy on stats, I wouldn’t be surprised if the revision was more about cost savings than data accuracy.

Canadian Capitalist talks about a “barbell” investment strategy. This is perhaps a good example of where combining two extremes doesn’t really give the same result as having a bunch of average stuff, or where increasing risk does not mean increasing returns.

Michael James says his MERQ measure is too extreme to be believable. But it’s really showing the impact of high fees. I still think it should be in dollars (and whenever I get off my butt will do short post on exactly that), but either way the important part of the message is that fees build up and cost an investor dearly.

Warren Buffett chimes in on investing in gold, bonds, or stocks, businesses, and other things. The summary widely picked up is that he isn’t keen on gold, but there’s also this gem: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.” John Hempton adds some colour to that notion of investing in stocks rather than gold or bonds.

And after a few posts in a row cheerleading hybrids, news comes out that the Prius is going to get cheaper and better equipped for 2012. I’m kind of torn on that news: on the one hand it’s good for future hybrid owners, as it makes the financial decision even easier (though the Matrix also got stability control standard, so you don’t need to move up as many feature packages on the comparison car), which will be good for helping to get more on the road. On the other hand, reducing the MSRP of future vehicles means mine will now depreciate faster (not that I entertain plans to sell any time soon — I kept the last car until it was ~14 years old).

The teaser page for the Prius C (for compact) is also up, indicating it will get a fuel consumption rating of 3.7 L/100 km and a price tag under $21,000. Just a bit bigger than a $17k Yaris, that could be a tough choice for those that need a cheap, efficient commuter vehicle.

Before I get to the rest of the links, an important reminder about the Canada Learning Bond for low-income families to help fund their RESP from MSB. If your net income is below $41.5k, and your child born in 2004 or later, the government will just give you money to help fund the child’s RESP — not even a matching amount like the CESG.

Larry MacDonald reports on more wariness towards stocks by younger investors. Of course, given investor psychology, it’s probably coming at the wrong time.

Spreadsheet fever hits Preet, as he gives mutual fund investors a tool to estimate how much of their return is sucked away by fees…

The housing bubble has started to get a few more mentions, perhaps because it’s a slow news period. Including:

3 of Rob Carrick’s 12 new year tips are variations on “don’t buy a house in this ridiculous market”.

Almost all of Canada’s banks have now also started to publicly fret about the state of the housing market. “There’s no question that the warning signs around the Canadian housing market have been visible for more than a year,” Mr. Downe [BMO CEO] said. The banks have mentioned that they did a stress test of their finances if house prices declined by 25%. Ideally, they should be doing these kind of stress tests regularly for risk management reasons — but the fact that it became newsworthy may be of note.

Plus, 2 segments on BNN on Wednesday, and another on Thursday (11th and 12th of January).

Nelson of Financial Uproar infamy has a guest post (is there anywhere he doesn’t guest post?) that spends a quarter of the word count on non sequiturs and still manages to be an excellent description of how easy passive investing can be (I needed a whole book to get the concept across!).

This is why I’m focusing my job search on non-academic positions, though that hasn’t gone so well so far, either.

Otherwise, not much new with me. Weight’s holding steady (not good, but not terrible). Just barely hitting one job app per week — I really need to quit it with cover letter writer’s block. The 2nd week of flag football went well, with more of our team showing up, and a slower rate of play due to the other team constantly consulting a playbook (I thought having a playbook was supposed to speed up your planning). In fact, I got so many breaks with all our spare players for subbing in/out that I started to question even going: having no subs last week was exhausting, but having enough to only play 50% of the time didn’t feel like exercise at all, and the commute down twice as long as my on-field time.