Blessed by the Potato

“You can’t time the market” is a statement that’s generally true for the stock market — it’s a highly liquid, fairly efficient market full of professionals who all have roughly the same access to information about the future of the market. The shares traded are identical, so as soon as one is traded at a new price, effectively they’re all re-priced, and they’re only traded with the goal of making money — nobody hangs onto a share because it’s what they owned when their daughter took her first steps or because it’s customized just for them. The theory says that any information that could affect the future value of stocks is priced in in short order, so you can’t successfully time the market — getting out before a crash, or in before a surge. At least, not consistently enough to make money. And for the stock market, I think that’s probably true.

The housing market is a different beast entirely. It’s composed of units which are not 100% interchangeable. It’s highly illiquid. The participants are to a very large extent non-professionals who are poorly or even mis-informed about the state and future of the market, and have emotional entanglements to their properties on top of that. Each transaction is negotiated in secret, with pricing details only released some time later — so when one is traded at a new price that incorporates information about the future, it doesn’t necessarily affect other sales.

So when I come on here and piss and moan about how the housing market is getting ridiculous, and how I really fear that there will be a crash/correction to come in the next few years, and people say “you can’t time the market”, well, that’s not entirely true for the housing market, since it’s not as efficient as the stock market. It is true that I can’t say “next June, a month before the BoC’s promise to keep rates low runs out, the market is going to tank 8.53%”. It’s true that I’ve been bearish for over 2 years now, and aside from the beginnings of a correction last fall (a tailspin broken by the low rates), Armageddon has not visited Canadian homes. So in that sense the timing is hard. Getting the exact “when” down is very difficult. It’s certainly not precise. But it’s enough to know that we’re near the “top”, even if we don’t know when the “bottom” will come — the “when” is often not as important as the “how much”.

For the stock market, there is no “renting” of stocks. There’s no set of metrics that tell you reliably when the market is over- or under-valued. P/E ratios, bond yields vs dividend yields, these might be useful clues, but nowhere near as handy as the rent-vs-buy calculation. If a landlord can’t buy a place and rent it out at a profit, then something has to change. It’s also hard to come across telegraphed messages like this:

But if home prices keep bubbling, the central bank might raise rates

If the real estate market momentum does not moderate in the coming year – “or worse still, if price growth accelerates – it could lead to an earlier and more substantial tightening in policy than currently anticipated,”

Not often you’ll see hints from that the central bank is out to keep a bubble under control.

Of course, interest rates are a blunt instrument. There are many interconnecting factors: the dollar is already getting too high vs the USD, hurting our exports in a tenuous recovery. The central bank wouldn’t want to start raising rates to control the over-heated housing sector just to doom the business sector. Even within the housing sector, urban areas have the fever the worst; the Maritimes and more rural areas aren’t too far off of realistic valuations. There are more precise ways to throw water on the housing market, such as taking away 5%-down 35-year insurance.

In all seriousness, I don’t think people have to worry about the BoC jacking rates before their self-imposed timepoint of next summer, unless non-house inflation also takes off. However, the fact that this is on the BoC’s radar at all should be troubling. We are, IMHO, near the top of the market, even if the “when” of the peak may still be another year or two down the road.

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The Daily Show (an often surprisingly level-headed source of news and commentary) had a little bit on the H1N1 vaccine last night which I recommend you give a quick watch (available online for Canadians at http://watch.thecomedynetwork.ca/the-daily-show-with-jon-stewart/full-episodes/the-daily-show-with-jon-stewart—october-15-2009/#clip223053 — Americans can watch Hulu, the bastards).

This reminded me of a question one of my cousins asked recently about the vaccine: what’s an adjuvant, “’cause I’m not able to find much positive about it.”

Indeed, if you just search the internet for information about the health effects of the various adjuvants used in vaccines, it looks like pretty scary stuff. That’s because an adjuvant is designed to trigger an immune response; to make your body’s immune system go into over-drive so that it will recognize the viral matter in the vaccine and produce antibodies against it. The risks include getting a fever or other flu-like symptoms, an allergic reaction, or even a very remote risk of developing certain autoimmune disorders like rheumatoid arthritis. If you just read up on the adjuvant alone, it sounds like something you’d never want to have in your body — but it’s only a small amount, and it’s necessary to make the vaccine effective (esp. in a single dose so you don’t have to keep going back for booster shots, which might work for hepatitis or tetanus vaccines, but doesn’t fly in the face of a potential pandemic).

“So if I don’t want those risks, don’t take the vaccines.”

Ah, well, there’s the tricky part. The risks are remote (aside from the mild cases of feeling unwell or having an acute allergic reaction), and the benefit is that you don’t get the virus you’re vaccinating against, or carry it to pass on to other people (such as seniors or those with compromised immune systems). On an individual level it can be a tricky mental calculation: on the one hand, psychologically it’s less desirable to subject yourself to something with risk before you have to, especially since it’s unknown and kinda scary. Whereas hey, you’ve had the flu before, how bad could it possibly be? Plus you can take steps to prevent yourself from getting the flu, such as wearing a space suit, or never leaving your basement, but once that shot is in your deltoid, that’s it cowboy, enjoy the ride. These psychological factors can really skew the perception of risk from the actual risks. It doesn’t help either that it’s new so there isn’t the years of testing that other vaccines have, or that there are people out there spreading the conspiracy theories that the government has put mind-control drugs in the vaccine (what, you think if they had those they wouldn’t have put it in your MMR vaccine as a kid??).

Of course, from a societal stand-point it’s a no-brainer for virtually every vaccine, including the one for the flu: society is better off when a large part of the population opts to be vaccinated. Even on the individual level the actual risk arithmetic (as opposed to the perceived risk) is also usually soundly in favour of getting vaccinated.

Update: LOL, Ben actually beat me to it with a post on the swine flu vaccine. He takes the opposite POV :)

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That is all.

ZOMG, totally hella awesome! Hilarious, heartwarming, and full of undead brain-smashing fun. At one point they even had to stop and move a burned-out car off the road so they could drive through, showing that not everyone follows the rules of apocalyptic courtesy in times of crisis. To be fair, it was an obvious accident, so maybe if they hadn’t crashed, the drivers would have pulled over.

One of the strangest things I liked about the movie was the way the special effects for inserting the text into the action (even having rampaging zombies kicking letters out of the way).

The dialogue was witty, and they kept the tone very light (the zombies aren’t particularly scary if you get scared easily). All in all well worth going out to see.

In fact, go see it now.

“Oh, this is the best; it’s where you find out who to call!”

Eschatology is big this year: in addition to the main feature, the trailers featured The Road, 2012, Legion (and New Moon, just to break the pattern).

Many years ago, when first starting my MSc, I signed up to be an Online TA (OTA) with Brainmass, an online tutoring service. At first it was fantastic: students would post questions, and bid credits to have them answered. The credits were worth in the neighbourhood of $3, and the guideline was to bid about one credit for every 15 minutes it should take the OTA to answer the question (80% of what the student paid went to the OTAs, the rest was kept by Brainmass for admin and advertising). I got an email whenever a question was submitted in my area of expertise, and could log on and sign out the problem if I liked it, or leave it for another OTA if not. Of course, some students — rather than try to get help with a concept, or the outline of a solution without the final answer worked out, or just have someone to double check their work or just with one tough problem — would submit whole problem sets and try to use Brainmass as a homework solution service rather than as an aide. The guidelines were pretty strict, and students posting that sort of thing would be asked to refine their question so that it wasn’t like trying to just pay someone to do their work for them. I really liked the project and got involved near the beginning, even writing a piece for the news and inspiration section.

For a while, it worked great. I could work for an hour or two per week from home, and pull in $50 every two months or so ($50 being the minimum payout), which was decent pizza money. The experience was also rewarding: I recall one student in particular who had some real doozies of questions in genetics that required a few follow-up postings to get fully answered. That student wrote back a few weeks later “[Thank my OTA for me], I am pretty sure I aced my quiz this week!” which is one of the great emails in my archives to go back and reread when I need a pick-me-up.

Unfortunately, things started to go downhill. It is, as you can see, a pretty sweet deal for grad students: the potential for pizza money with no real commitment. The number of OTAs quickly grew while the number of students submitting answers did not, at least not anywhere near the same rate. Soon enough, rather than having a few hours or a few minutes at least to read over a posting before deciding if you wanted to sign it out, it would be signed out as soon as it was posted, before the email even percolated out to alert the OTAs of a new posting. Some OTAs just camped on Brainmass all day long, practically turning it into a full-time job. I don’t want to stereotype too much, but being a globally accessible service there were a number of OTAs from well-known off-shoring countries who were more than willing to answer nearly any question for a single credit. That lead to credit-bidding deflation, and different student expectations: if you answered a problem by telling them which physical laws to use where, and some hints and insights into why the answer would work out the way it would, but didn’t actually calculate the numbers to hand them the final answer on a silver platter, you were rated poorly. It became somewhat of a problem-solution clearinghouse. And with the intense competition to even sign postings out in the first place, I quickly stopped seeing the point.

Of course, I didn’t quit. I still have my account there, and every now and then log in just to see if there are any interesting problems. Plus one can get residuals since problems you answer go into their library, where they can be purchased at a discount by other students, rather than getting a custom solution and paying for the OTA’s time. Now that the library is getting huge (over one hundred thousand solutions), the posting volume has started to drop off, since almost all the common problems have already been asked and answered. That means that the problems that are up for custom solutions tend to be different or off the wall. Unfortunately, I’m finding that they’re getting to be too specialized for me to answer(!), and the ones that aren’t 4th-year essays are still students looking for complete problem set answers. They don’t even add any commentary like “please help me with this” or “I don’t understand” or anything, just a list of questions, sometimes scanned right out of the textbook. I haven’t answered a question in over a year…

Anyway, I don’t want to sound bitter, because I’m anything but — it’s a good service, and the admins do what they can to try to root out the “answer service” issue. It’s just hard because they can really only do enforcement from one side. When the students come in expecting to just pay for answers and not caring about learning, and when they’re the ones with the money, it’s hard to slap them on the wrists to change those expectations… Sure, they can send them copies of the policy and ask them to resubmit their question, but beyond that there’s not much they can do to change the mindset of someone willing to pay to not learn. Even if they did manage to drill the basic concept into a potential student/customer’s head, there seems to be an endless army of lazy students behind them looking for easy answers, who can’t be bothered to read the ToS or pop-up windows that it’s not a homework-answering service…

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