Blessed by the Potato

So, despite the fact that I don’t particularly care for the word “blog” (as a bastardized contraction of the no better “web log”), and generally refer to my blog as a “site” — how very Web 1.x — I really like blogs as a thing. There are a number that I check at least weekly, from humour to personal finance, through personal diaries, to other ones that defy categorization like Whatever. And most blogs have comments (ok, this one doesn’t because my readers are non-involved zombies, or I’m not nearly as controversial as I think, but the software does allow for it). A lot of the time, I do read the comments, especially when the comments number less than about 20 and are relatively intelligent. It’s this kind of “discussion/interaction everywhere” that I like about “Web 2.0”. It’s especially nice for fact-checking, particularly when you start talking numbers in the personal finance world. I’ve taken FT at MDJ to task before for missing something in an analysis, and it looks like another silly mistake has crept in in his recent post on whether it’s better to sell stock to pay down debt. His conclusion: if your marginal tax rate is 40%, it’s better to slowly pay down credit card debt at 18.5% than to sell your investments making 5% to pay it off right away.

Wait… what?!

I think almost anyone with some personal finance common sense would immediately say that of course you sell your investments to pay off credit card debt. No way are you going to make 18.5% on your money in the stock market to make it worth it (you might get lucky, but you can’t really expect to earn that much). But FT@MDJ had a spreadsheet, so how could he have gone wrong? This is a case where making sense is more important than making numbers. It was pointed out pretty quickly in the comments that he wasn’t taking the opportunity cost into consideration. Basically, the ~$600/mo to make the minimum payments on his hypothetical $20k credit card bill were just sort of materializing to pay that debt down if the stock investments were kept, but if the stocks were sold to pay the debt off immediately, the ~$600/mo was not being used to buy more to rebuild the stock account. Once that opportunity cost was factored in again, we got back to the common sense solution that of course it made sense to pay that kind of debt off quickly, even if if means you have to pay some capital gains taxes. So it was kind of neat to see proof of that old adage “the fastest way to get information on the internet is to post something wrong and wait for corrections.” It kind of justified reading comments on blogs, though usually the discussion is worthwhile on its own, and not just for corrections.

More interestingly, is that this also serves as a special case to the conventional wisdom. There are people out there, terrible as it sounds, who can’t save. I don’t know if they spent too much time in government offices where any budget funds not spent at the end of the year would not be offered again, or what. But for them that rolling of the opportunity cost, the money that would have gone to the credit card bill, back into the investment account that was liquidated to pay the debt off wouldn’t happen. For them, if they had $600/mo that wasn’t going to their credit card, they would just spend more until it was gone. They wouldn’t save it up, and in that case FT@MDJ’s calculation shows that it might be better to just hold on to the investment account and slowly, painfully pay off the credit card than to pay it off quickly and give up what savings they have managed to acquire. Heck, for those sorts of people the fact that their credit card is maxed out is probably the only thing that keeps them from putting more on it. Likewise, all those rent vs. buy calculations that I like to pull out to show it’s better to keep renting at the moment than to buy all depend on the hypothetical person saving (and investing at some mid-to-high single-digit % return) the difference between what it costs to rent over the costs to buy. If you are not one of those people (and Wayfare and I actually know some), then buying a house is a good thing to do because it’s a forced savings plan. It is, as I’ve said before, one of the worst ways to save, but if you’re to the point where it takes the threat of getting kicked out on your arse in the dead of winter to not spend money on hookers and blow (or cars and clothes, or wine and vacations, or whatever your vice might be), then at least it’s a method of saving. Kind of like universal life.

On another note, I’ve got something like 5 or 6 posts in draft status, which is pretty typical for me; when I go a few days without a new post idea, I tend to brush one off and post that up so that I keep up my posting frequency of 1-5 (aim for ~3) posts per week. Well, now most of my backlog is somewhat topical with the election on, and I’m also going to take some time off from posting for the next two weeks. So, apologies in advance, but there’s going to be a rash of nasty political posts over the next few days, and then, apologies again, a dearth of posting. Please try to remember that I haven’t died and haven’t lost interest in blogging, and will be back in mid-October, and hope you will be too; in the meantime try to make the next few last. I might suggest only reading one every third day, even if more than one come up per day coming up :) I could go find some posting scheduling add-ons so that my pre-written posts show up spread out at some more reasonable frequency, but that sounds too much like work for the one time in 3 years it’s actually been necessary.

So the Financial Post StockStar game is on, and it’s kind of fun to make all the trades that come into my head but which I would be afraid to try in real life, or even just don’t have the money to carry out. You can play with $100k of fantasy money (up to $200k including fantasy leverage) to invest in the shadow stock market between now and January — best return wins. If you’d like to play, let me know and I can send you an invite through the game. It can be a good way to get some practice and education in how trading works, and to get used to looking at the rollercoaster ride your portfolio value will take.

Right now I’ve built up a portfolio that’s concentrated heavily in financials and energy, hoping — like I’m sure many players are — for a rebound that will take me to the top of the charts. I’m “only” leveraged about 40%, which in a game like this might hurt my chances. I’m also at a crossroads: the game is divided into two classes of players. Investors, who make 25 trades or less, and traders, who make more than that. I’ve just made my 25th trade. I’m pretty happy with my portfolio, and now have to decide if I want to face off against the active traders or the other buy-and-hold investors. Since it’s only the first week and I’ve already racked up those trades it’s very likely I’m going to end up as a trader: one more puts me over the edge. However, my gut instinct tells me that the “good” players will end up being traders, and I might have better odds in the game by just switching off now and competing against the <25 trades investors, even if it means I can’t use the rest of my margin between now and the end of the game. At the moment, just from pure odds being a trader looks better: there are 4000-some investors to 400-some traders. However, as the trades rack up through the months I anticipate most players will end up as traders.

The top guys are just making a killing: 80+% return in 4 days. I’m at about +3.5% [Update: I ended up sitting on this post for a few days; I’m now up 6%, after being up 14% last week. The top player is up over 138%]. One thing I noticed this week is that the trades now seem to be delayed 15 minutes. I think it’s because the quotes are 15 minutes delayed, and it appeared possible to use a service with real-time quotes to make “psychic” trades in the game. This happened once to my advantage last week, when I saw a stock was going up and went in to buy, and actually got it for cheaper than my real-time quote was giving me; this week that doesn’t appear to be happening any more.

Well, I spent the better part of a day on the weekend playing Spore, which is really unfortunate since I had a lot of work to do and it left me somewhat frustrated.

The game involves progressing through 5 different minigames from single-celled organism swimming for food particles in a puddle, through creature, tribal, civilization and space exploration. There are a large number of reviews out there, and I have to agree with a number of points. While each stage was fun, they often felt kind of rushed — the game was prompting me to upgrade to tribal level when I hadn’t even harvested enough resources to upgrade my creature with all the new parts I found. The cell stage only had 12(?) organelles to upgrade to. Tribal and Civilization didn’t seem to fit in with the feel from the first two stages, where you were focused solely on one creature, RPG-like. I think the transition could have been smoothed a bit by making more of the pack option.

I spent the most time in Creature phase as I had to play through it twice, and it really struck me how expensive arms and legs are, even if you put on non-stat-boosting ones. I wanted to create a 6-legged creature, but it was just too costly to pull off unless I spent a lot of time grinding after being prompted to proceed to tribal. I had to play through Creature stage twice because the first time through, as soon as I graduated to tribal, none of my units could move. Then, the same thing happened when I graduated to space stage. This just goes to show that Spore is, at the moment, a pretty buggy game. Those were just the game-ending bugs — there were numerous graphical glitches and random crashes through the game that I was ready to ignore. The big problem, however, is not the bugs but the terrible save game system. You have just one save game per planet that is always overridden when you save. There are no autosaves, either, so if it crashes and you haven’t thought to save, you’re out of luck. Plus, if you enter tribal, hit save, and then find you’re bugged out, the bug persists after you reload — you can’t go back to the creature stage to try to change your creature to see if that might help, since there’s only the one saved game. This also makes it difficult if you feel like exploring different options — going back to just before graduation to tribal to see if being more of a carnivore than an omnivore would change your fate, for instance. Skipping ahead to a stage is an option, but you lose certain bonuses you accrue for playing through the previous stages.

I’ve heard that the space stage is the most interesting and in-depth part of the game, so it was a shame I couldn’t even play it with the same creature I had taken through the other stages. When/if I get time next weekend, I might give it another whirl, but after so many crashes in one day, I’m tempted to just shelve it until a patch (or several) comes out.

It’s Monday, September 22 — the Autumn Equinox. Have you done a quarterly* backup of your hard drive yet? No? What else are you going to do on a Monday?

* – I mean to do it monthly, but somehow the planet and sun only line up right for me every 3 months or so…

Every time I do a backup, I swear I’m going to go out and get some kind of incremental backup software, rather than hunting through my hard drive and doing everything the hard way, yet every year I find that I haven’t even installed the trial version of the software that came with my hard drive. At least with my external drive it’s a little easier than it was to back up to DVD — just drag ‘n drop and walk away for an hour. The drive is big enough for a dozen full backups of my important data (if that was all I used it for), so I tend to keep 3 on the go; once it’s a year old it can be deleted in favour of a new backup — an important thing to keep in mind in case you need to restore a backup due to a virus or corruption — if you only have one backup (e.g.: by syncing to a USB stick) and sync the corrupted file, you’ll have nothing to go back to… The one thing I am negligent on is redundant off-site backups. Despite having a close call with the house being broken into but the computer, thankfully, not being taken, I still haven’t gotten around to keeping a second backup somewhere else; I’m more concerned with the drive failing than I am with it being stolen, since I have much more experience with the former.

A neat little tool my paranoid work colleagues turned me on to is TrueCrypt, which lets you create encrypted virtual partitions on what is otherwise an unsecured external hard drive so that your data remains secure in the event some thief hopped up on goofballs breaks into your house and steals your backup. For the truly paranoid, it even lets you create two levels of encryption with two passwords: just in case someone knows you have an encrypted file but not what’s in it, and forces you to give up the password. Then, you can give up the surface password, they can look at some random pirated software or pr0n or whatever you want them to think you’re hiding, while your mind control laser plans remain safely encrypted behind the second password.

In an effort to prepare a few pictures for a powerpoint presentation (and back them up), I’ve pulled my ancient flatbed scanner out of storage to scan some of these pre-digital photographs. This is a slow process… I don’t really have enough pictures to justify it, but I think there could be an opportunity for a semi-automatic scanner that would back up hard copies of pictures and documents to digital. It would have to either be a hell of a lot faster than my old scanner (which won’t even run under Windows XP, I had to connect it to my server box and boot ME), or be fairly autonomous and run through a large stack fed to it without you having to touch it. A scanner we have a work can come close to this — it’ll scan as much as you can fit into the feeder tray (about 25 pages) and put them all in a PDF or other single file for you, but isn’t quite invisible — you really can’t use the computer for anything else at the time, and you can’t quite set it up to automatically create a new file for each page/picture with incrementing file names if you were so inclined.

MGL recently shared a story about his laptop catching on fire which is another great backup reminder.

Any other tips or stories on backups out there?

PS: The Money Gardener has asked me to do a series of posts as a guest column over on his blog. You can go over there and read more about Potato Wedges.

The day’s not over yet, but it’s looking like a real killer on the market again. I had expected when news about Lehman Brothers came out on Monday that the Canadian banks would also get hit hard, as would BCE… and while BCE hass been hit hard because of new doubts about whether its takeover will go through, the banks weren’t really hit that hard until today. In fact today the market indicies are down more than on Monday, breaking through to new lows, so who really knows where the bottom is now. It makes me wish I still had some dry powder to go off and do some buying — it seems that I panic more when I can’t bargain shop. I’ve got a list of stocks I’d like to buy today as long as my arm… and while leverage is an option (I haven’t tapped my LoC for the wedding yet), I don’t want to go there with so much uncertainty and falling knives and what-not.

Oh, and this rather weak post is my 500th. Yay?