Blessed by the Potato

When we told Wayfare’s parents we were expecting, the fetus was roughly the size of a blueberry. The name stuck.

When the ultrasound later told us we were going to have a baby girl, Wayfare ran out and bought a half dozen copies of Blueberry Girl by Neil Gaiman. Wrapping one up and placing it into the hands of our parents was our way of sharing the news: Blueberry is a girl.

When she started kicking around inside Wayfare and we wanted her to know her daddy’s voice, when it was bedtime and everybody needed to settle down to sleep, I read Blueberry Girl to them both.

When the delivery was complicated and she came out as blue as her namesake and the doctors were working on her, Wayfare was whispering. The words weren’t for me, she was away in some other place. If we were religious, I would have said it was a prayer… and in a way it was. She told me later: she was reciting Blueberry Girl.

To the ladies of light, darkness and never-you-mind, the ladies of grace, favour and merciful night, and those ladies of paradox, measure, and ladies of shadows that fall: thank you for our Blueberry.

To Neil Gaiman, thank you for the lovely words.

A friend linked to an article on drinking while pregnant, which sparked a spirited discussion on Facebook. I thought I’d go off on a bit of a tangent here, where the discussion is a bit more open (and where I can add in graphs).

I don’t have the free time these days to dig around in the literature to get fully up-to-speed, but basically here’s the science as I know it on drinking in pregnancy: it’s bad. We know that completely abstaining is our baseline: most moms-to-be are cautious and do this. And, we know that drinking a lot is bad. In-between, there isn’t a lot of good data: it may be a little bit bad to drink a little bit, or it may have no effect until some threshold has been hit, or it may even be slightly beneficial (as this recent article suggested). So there are some big error bars in the middle there.

To pick on this study in particular, it was a retrospective study that asked women what they drank during pregnancy many months after they had given birth. Though this kind of study can be insightful and guide further research, I wouldn’t be overturning a cautious, conservative hypothesis on that kind of data. I would caution moms-to-be out there to not go out and have a drink or two on the basis of a study like this.

This is how science works, generally: you get a weak-ass study that nonetheless is cheap to do and suggests something interesting, so you get some funding and ethics approval, and do a better study, and change your ideas of how the world works as the data comes in. But real-world considerations do get in the way sometimes.

A stronger study would be one with randomization, controlled variables, etc. The thing is, it’s unethical to run that kind of study, and I don’t know if there are good animal models for the more subtle forms of alcohol-related damage, due to the unique nature of frontal cortex development in humans. Plus, there isn’t really a demand for such a study: it’s not hard to abstain from drinking for 9 months. No serious scientist wants to spend time trying to find out what the safe limit is for alcohol in pregnancy when there are so many more pressing problems to address. Nobody would want to fund it: even the brewing companies wouldn’t touch it since even if you did show beyond a doubt that drinking some amount was safe (nay, beneficial), there would be a negligible effect on alcohol sales (if it found 1 drink/week was safe, that’s not even two cases of beer for the whole 9-month pregnancy). And it could be an expensive study if you were to follow a cohort of several thousand kids to age 10 or something in order to detect potentially subtle changes in IQ and social development.

So we’re stuck with imperfect information. We know the two ends of the curve fairly well, but have imperfect information for what lies in the middle. Our simple linear assumption may not be correct, but guessing wrong has consequences. In that case, the conservative thing to do is to assume that there is no safe level, and abstain completely. Which is what the current recommendations are.

An analogy would be radioactive materials: we know that a large amount of ionizing radiation is bad: it causes cancer, radiation sickness, necrosis, and death. We’ve seen it in accident victims and those near the WWII-era bombings and tests. But even with good animal models it’s hard to study the in-between doses. Once again we have a case with really good data at the extremes of the chart, but gaps and poor data in the middle leaving open the question of what the response looks like at intermediate doses. There is a hypothesis (called radiation hormesis) that small amounts of radiation are actually good for you, and there are some people testing that out… but there isn’t really a market for that study, either. So the principle of keeping the dose As Low As Reasonable Achievable (ALARA) is employed for those working with radioisotopes. For drinking, ALARA is zero: there is no “background level” of alcohol exposure; being pregnant is very unlike being a nuclear medicine technologist. It is very easy/achievable to just not drink while pregnant. I have no sympathies for someone who can’t abstain when presented with a good reason to do so (e.g.: someone who needs to drive somewhere, is pregnant, or is on call for some demanding job).

Now the point was raised in that long Facebook back-and-forth that women suffer a lot of second-guessing and judgment by people for what they put in or do with their bodies while pregnant. It can be harsh and unfair. For many things, yes, yes I think it is, especially since there are so many little things you’re supposed to do these days, and no one can ever be perfect (not even a pregnant woman).

One person suggested it was a double-standard to criticize a woman for drinking but not for a midnight ice cream pig-out. To that I say: there isn’t fetal mochaccino syndrome, or infant chocolate disorder (indeed, chocolate consumption seems to be beneficial), while there is fetal alcohol syndrome (and just as importantly, widespread knowledge thereof). So it’s a totally different thing to look down on someone drinking, smoking, or shooting heroin than it is to judge someone for pigging out, drinking caffeine, using a cell phone, or skipping the seafood portion — I wouldn’t consider it a double-standard at all.

As much time as I spend here turning over conventional wisdom with evidence, in this case I think the evidence is not definitive and the best course of action is to continue to abstain from drinking while pregnant.

When I first talked about Freddie Mac, political risk was one of the things I highlighted that might undermine what otherwise looked like an attractive long-shot bet. The US government has been requiring that Freddie Mac (and its sibling GSE, Fannie Mae) borrow more money than they need, and pay a punitive 10% interest rate on that — a worse deal than the TBTF banks who arguably had more to do with the cause of the global financial crisis. Part of what lead to the excess borrowing was the fact that Freddie’s been over-reserving for years now. It looks as though they’re getting to the point where even the most conservative accountants realize that those excess reserves will start unwinding, which will enable Freddie to start paying back the government — and after that, the preferred shareholders.

So it looks like the main investing thesis was playing out.

Unfortunately that political risk reared it’s head this week as the government announced it would change the deal to instead confiscate all future profits. I have no idea why the government decided to nationalize the GSEs but not AIG or the TBTF banks, or why they decided to change the deal at this late stage, just as the profitability was re-emerging. I suppose I’ll just have to pray they don’t decide to alter the deal any further.

I’m not quite sure what that means in terms of the preferreds being paid back, but my first take on it is that they’ll be worthless. The market seems to be equally panicked, as most issues were down about 60% on Friday.

This is a monthly update from the Blueberry Portfolio. The events I mention below happened approx 8 months ago.

I started this update by providing a spreadsheet to the investors with the capital gains laid out. [Specifics redacted] It’s important to remember that realized gains in a non-registered account are taxable. Add the information from the spreadsheet to your schedule 3 for taxes (if you don’t ordinarily have gains to put in schedule 3, I can show you how, it’s really easy). In addition, you’ll be receiving some tax slips (T3s) in the mail around the beginning of March for the dividends that you enter into the appropriate boxes in your tax software.

Otherwise there hasn’t been much to say.

After spending some time without (m)any bright ideas, I put more cash into the ideas I did have. That broke an unwritten rule that I’d try to stay diversified with no more than 10-15% in any one stock (Chemtrade is close to 20% of the portfolio, and Canexus over 10% — and both are in disturbingly similar businesses). As soon as I do have a bright idea, these will be the first positions I look to trim to get cash to move around.

One bright idea was Poseidon: a high-risk, high-reward play on “fraccing” in the oil business, which also pays a lucrative dividend. Our timing there couldn’t have been much better: as of this message, we’re already up about 15%. I don’t know yet how much further I’ll let this one run before locking in the profits, but I imagine I’ll wait for at least double that return over the next year before getting out (unless something changes).

Since the last monthly update, the market has been more-or-less flat, while we’ve added a few percentage points. After the first day of trading in the new year, we’re up almost exactly 10%, vs the market at just about 1%.

I haven’t posted much on the housing bubble lately because there hasn’t been much to say: I’ve been more of a bottom-up than top-down person, so each monthly release of building starts, sales numbers, or immigration figures doesn’t affect what I’ve already said about the individual decision of whether to rent your shelter or rent the money for one from the bank. I think I may have exhausted the limits of what a spreadsheet can do.

Plus, the story is all over the news now, it’s not like you really need me to keep digging up nuggets of information for you. The correction looks like it’s started in Vancouver, with both sales volumes and prices plunging over the past few months – though I’d wait a bit longer before lighting the ceremonial bonfire and starting the dance of the bear, as the typical summer seasonality is probably distorting things. I don’t have to stick to any kind of short-term news cycle, so I’d prefer to wait at least a year before calling it.

Hey, these things move slowly.

That torpid pace and the tendency for volumes to dry up as the correction starts also means that for many, it’s too late to cross over to the bear camp. The time to consider long-term implications was over the past few years — when I was most heavily posting on the matter — when it was easy to sell for a profit if you had bought, when you had the luxury of time to locate a high-quality rental. Not now that the cracks are starting to show. For most, by the time the procrastinating and hand-wringing is done there’s little to do but watch as it unfolds, particularly if they’re paralyzed at the prospect of taking even minor losses (preferring instead, as many do, to wait for major losses).

Toronto isn’t looking as strained yet: volumes are down something like 10% while prices hold steady… but there are anecdotal signs out there of realtors talking of slow-downs, buyers holding off and refusing to enter bidding wars, and new condos that aren’t sold out within minutes of the presale doors opening. But by this time next year I expect the correction to have (finally!) begun.

Meanwhile, the talking heads speak of soft landings and single-digit corrections. Many are quoting verbatim the things the US vested-interests said before the bubble collapsed there, like “it’s not a bubble, it’s a balloon, the air will come out slowly.” Kind of ridiculous.

The bank economists keep revising their forecasts down, and this by the way is a feature of bank economist predictions — for stocks as well as real estate. First they’ll predict that prices will be flat. Then maybe a 5% correction. Then 10%. As house prices fall and approach that 10% mark, the forecast will be revised again to 15%, and so on. The expectations are “walked” down. They don’t suddenly awake to the over-valued state one day and turn bearish (or at least, their writing doesn’t) which is why I’ve never put much stock in their predictions. Plus many like Scotia’s this week will talk about modest numbers for the country as a whole, leaving unsaid what happens to the particular cities driving the action.

The same is not true of home buyers: they can and do suddenly turn bearish. When prices are rising rapidly, people build rising prices into their assumptions and plans to buy (e.g., in their mental version of my rent-vs-buy spreadsheet, they’ll put in a high value for expected appreciation, skewing the decision towards buying). They don’t see a higher house price as a bad thing – the house being more expensive and shelter costing more – they see it as something positive. The opposite happens as prices fall: buyers don’t suddenly turn into value-hunters, glad to see that the house they were lusting after the year before can now be had for 10% less. Instead they put a lower number into that mental (or actual) rent-vs-buy spreadsheet, and hold off further. Why buy now if it will be even cheaper next year?

This psychology drives bubbles and crashes. It is inherently unstable, which is why all the calls for a soft landing are so misguided. There are very few examples in history of soft landings happening.

One example is recent though: Alberta. Going into the GFS, Calgary & Edmonton real estate was arguably even more over-valued than Toronto real estate. In late 2008, the market there seized as it did in Toronto and Vancouver, falling 10-15% in just a few months. Then, interest rates cratered, credit began to flow, and Toronto and Vancouver recovered and rocketed ahead to new heights in the years since while Alberta flattened out.

Alberta then has shown that a so-called soft landing is possible: a snappy 15% nominal price decline followed by a few years of stagnation while inflation helps the fundamentals catch up.

The thing is, there’s a pretty exceptional set of circumstances that lead to that soft landing: namely an incredible drop in mortgage rates that cannot now be repeated in Toronto and Vancouver – where those same rates were insanely stimulative. Without that factor, who knows? Alberta real estate might have fallen another 15% by now.

Even with that unlikely soft-landing, it was not a good time to be invested in Alberta real estate: if you had bought in the few years before 2008 without much of a downpayment, you’d still be underwater now; those who chose to rent can be proud of that decision. The soft-landing, also known as correction by stagnation, will likely continue for a few more years yet while fundamentals creep their way upwards to meet the nominal prices.

And so it is in Toronto: though they didn’t explicitly say so, Scotia implied a forecast of 9 years of stagnation ahead by comparing the previous two corrections in the city. Plug that in to the rent vs buy calculator and you’ll almost certainly decide to rent, yet this is a report that is more positive than many out there right now.

After Blueberry was born, I spent a fair number of nights up late with her playing (single-player) turn-based strategy games. The turn-based part was key: I never knew how much attention I’d be able to give the game, when I’d have to walk away, and even when I was playing, I often had a sleeping baby in one arm. So I returned to that old well-loved classic, Master of Orion 2. Indeed, if you have access to the family photo album, you’ll see a MOO2 screen in the background of one of the cute shots of me and her.

A few weeks ago I heard about a new game called Endless Space that promised to capture many of the important elements of MOO2. I bought it through Steam immediately. I’ve now had a chance to play through a few games so I can give a bit of an informed opinion. In short, it’s fun but slow, and not in the “book off a week of time” slow like a huge CivIV map on epic speed is slow, but in the inpatient “ok I clicked the damned end turn button and now I’d like the next turn to begin already” way.

Like MOO2 and many other 4x space games since, ES has a bit of backstory about ancient advanced civilizations, but the game universe is fairly sparse aside from a bit of flavour text here and there. You won’t be travelling to Orion to dig up ancient tech, and Antarans won’t be appearing over your colonies to extract vengeance and then disappear. So as a practical matter, it’s a pretty straight-forward 4X game without any underlying plot or external events to worry about.

The good: Well, I’ve played more than one round, so there’s obviously some good in there. The balance between system/planet level and galaxy level is pretty good: there’s some micromanagerial options to tweak your systems’ output, but you won’t get bogged down in minutiae. It’s not too hard to monitor your empire at a glance — though I wish there was a “take me to this planet” button when you got a notification about building being done so you could see where it was on the map.

The AI seems reasonably clever, and has put up a decent fight in the games I’ve played so far. Otherwise there isn’t a whole lot that really stands out in my mind as being note-worthy: it’s just fairly-well put together and balanced, with a few points that I’ll mention specifically below.

Travel: One item I liked was the method of faster-than-light travel: they have star lanes connecting stars that are close to each other in a cluster, and using those lanes is the starting tech, though you continue to use them later as they’re the fastest way to get around. Wormholes link different clusters, and you have to research the ability to use those. Later, you’ll be able to develop warp drive to fly between any two points without the need of having a wormhole or space lane linking the systems.

A pretty cool way to do it. The Sword of the Stars had really attracted me at first precisely because of the different FTL technologies the races had. However, I never could get into the rest of the SotS gameplay (never got past the demo, even). So I was excited to see this. However, aside from opening up more systems to explore in the galaxy, I don’t think warp drive was implemented very well. One particular feature that I found lacking was the option to force warp travel. The pathing AI automatically uses whatever combination of star lanes, wormholes, and free-flow warp drive will get your ship to its destination the fastest. But there are times when an enemy may have a natural starlane/wormhole chokepoint system, and have that planet heavily defended. If I have warp tech, I could in theory fly directly to a system in their rearguard and wreak havoc. Yet there’s no way for me to force a warp journey: the pathing AI will always try to send me through the starlanes (and thus, the enemy fleet) where possible.

Ship Battles: ES has a very simplified tactical battle system, where ships automatically engage each other while closing distance, which is broken into three phases (far, middle, near). At each phase the player gets to choose one action (termed “playing a card”), such as buffing kinetics damage by 25%, or sabotaging enemy laser accuracy by 15%. Sometimes your action will nullify the enemy’s action, which is kind of like a double bonus for you. Really basic stuff.

So I can’t for the life of me figure out why it’s so slow. If you choose to manually control a battle (picking your card(s) yourself), you’re presented with a loading screen, then a pretty 3D-rendered movie of the battle playing out. It looks good, and it can be kind of helpful to see which of the enemy weapon systems is tearing you apart… but you can’t interact with it in any way. You can’t even fast-forward once it’s started. It’s just pointless and slow. Even the automatic battle resolution is slow, with a big timer bar (a “feature” that seems to be there for the benefit of multiplayer). I’m not sure why there isn’t a hybrid option giving you the ability to pick your cards, but not actually watch the action unfold.

To complement that simple enagement, ES also has a simple 3-weapon-type combat system, with 3 corresponding types of shielding. It’s not quite a rock-paper-scissors type of arrangement: though each offers benefits, lasers don’t lose to missiles but beat kinetics. Supposedly each type is good at a different engagement range: missiles for distance, lasers for medium range, and kinetics to tear shit up in close. However, lasers have the barest of range penalties for distance, so I’ve found in practice (my whole 3 games played) that kinetics get ditched in favour of the other two technologies. Indeed, all engagements after the first few technology steps end in the first round (distance), which exacerbates the annoyance of a manual battle: all that loading just to play one card.

I wish there were more tactical options beyond just picking which buff or debuff card I wanted to play that time. For example, what if I built a ship that was faster than my opponent’s? Shouldn’t I be able to choose to close the distance faster, passing through the effective range of missiles and lasers to open up with my kinetics? Or if I had missiles myself, to kite the opponent and extend the duration of the long-distance phase of combat? Plus many of the other neat tactical options that MOO2 had that are missing, like boarding enemy ships or racing past a fleet to bomb a planet.

Indeed, that’s another missing element from the combat system: the option to bomb the enemy into submission. If they built a wretched colony on a gas giant, and the people are starving and rioting and just generally detracting from the empire rather than adding to it — or even if it’s just in your way and not something you can afford to defend — there’s no option to just glass the planet from orbit and move on. Your only option is to invade and take it over, though I have to admit that I do like the mechanism for that: you spend a certain amount of time with your fleets in orbit on an invade mission, and the ownership bar moves steadily towards your side. When it’s full you have the planet, but just barely: the people are angry and upset, and it will take very little time for the enemy to take it back — when their fleets take back the skies, they’ll find the takeover progress bar already nearly filled. No marines and transports to micromanage.

Events: There are random events, but so far they seem very dry. Except for one (you magically get a colony ship), they’ve all consisted of buffs/debuffs adding percentages to some trait, sometimes permanently, but more often for a set number of turns. There are no space monsters, hyperspace fluxes, or archaeological digs uncovering the ancient secrets of mass driver technology. Even the boring percentage effects seem to magnify their dullness by almost always affecting all players at once.

I think the space monsters are one of things I miss most from MOO2. To make up for it, ES has pirates that rampage across the skies, seeming to originate from neutral systems. Thing is, in one game the pirates were pretty much non-existent: there were so many players crammed onto that map that very quickly there ceased to be any neutral systems (at least, none outside the scanning range of the other colonies, which seems to be another pirate prerequisite). In another game, the pirates had this little arm of a spiral galaxy to themselves until after wormhole travel was discovered. By that point, the pirates had more fleet strength than all the other players combined, which was kind of nuts — and that was on “normal”. There’s another level of amped-up pirate activity available in the game options that I’m frankly afraid to experiment with for fear they will come through the screen to overtake the earth itself in our reality.

Speed: My biggest problem with ES is the speed. I don’t know if the game is just inefficiently coded, or if the delay is a carry-over from multiplayer that screws up single-player… but it is slow. You click the end turn button and a progress bar worms its way around. Even at the very beginning with nothing to resolve it takes at least 3-5 seconds per turn to complete. So even if I have all my build orders queued and am just trying to burn through turns until I discover a technology (or whatever it is I’m waiting on), it can still be a slow game to play. The slow loading and playout for combat (when all I want to do is pick my buffs) really adds to that — and even automatic combat has a timer to wait through. Indeed, the slow speed of the game is ultimately what will relegate it to the dustpile for me.

Bugs and Miscellany: There’s the option to blockade your systems with fleets so enemies can’t just sail through to the next system: they have to park it or fight. Yet even though I never seem to be able to run a blockade, the enemy never seems to be slowed by mine. In one game there was a player I just couldn’t kill because my ships simply refused to accept their system as a valid destination.

One staple of the genre is cloaked ships, which don’t seem to exist here, though one technology’s description (of spotting all ships orbiting the system) suggests that at one point in the development cycle there were. There’s also no spying or technology stealing, though there are faction traits that give you research points and/or money when you blow up enemy ships.

It’s tough to think of hidden terrain existing in a space 4X game: surely your astronomers can at least tell you where the stars are, even if you have to send ships to survey the planets. Yet in ES you’ll find that even knowing how many systems lay beyond the wormhole you just found (and thus how big your opponent’s empire might be) is left as a mystery.

Each race has a good/evil/neutral alignment, but for the life of me I can’t figure out what it is they do [a search result suggested that it indicates how the AI will play the race — so no effect on the player].

Conclusion: To sum up, Endless Space is a fun 4X game that mostly gets the strategic formula right. Though I may miss the GNN robot, the dry atmosphere is perfectly fine for multiplayer, and I think the slowness in the single-player stems from that. The tactical game leaves a fair bit to be desired, but that’s ok — except for the odd important fight auto-resolution is the way to go with these games anyway. If you’ve been looking for a 4X game that’s like MOO2 but not just another game of MOO2 (and important to some, with more modern graphics) then it’s worth a shot. Though they don’t quite get the formula right, it comes closer to the mark than many other 4X attempts out there.