Crazy Drivers and a Crazy Jobs Report

Having returned from parts north of here late yesterday, it is a good feeling to know that the round trip just completed may never have to be made again.

Drivers are getting crazier.

The growing age gap between yours truly and the twenty-something motorists on the road today surely has much to do with it, but, with each long trip like this the perception that the country's roads are less safe as a result of a generation of drivers trained on video games is confirmed anew.

Generally hanging out in the fast lane and moving along at whatever pace seems reasonable (usually 75mph or so), time after time, vehicles approached quickly from behind only to remain about 10 feet off of the back bumper until a hasty retreat to the middle lane was accomplished and they quickly passed.

The sight of the rear view mirror suddenly occupied by a young man in a big truck or a young woman in a sedan or SUV with a cell phone to her ear - these images were equally frightening.

We're getting out of here just in time.

The vast majority of drivers today seem to be quite reasonable, but aside from the 95 mph crowd described above, there is another group that is particularly bothersome - at least to me.

These are the "latchers-on", for lack of a better word - the people who, instead of using their own cruise control, pick out another car and go at whatever speed the other driver goes.

Now, realizing that many people fail to ever use their rear-view mirror, it may come as a surprise that those who do use it get tired of looking at the same car for miles and miles and miles.

It's not clear what they are thinking, but my thoughts on this subject are pretty simple - let's do this separately.

Time after time, after adjusting the cruise control up to 85 mph (much to the displeasure of the copilot), the "latcher-on" stayed close behind. The same result was seen when 70 mph was the chosen pace.

Lane changes didn't seem to matter either - they would stay back there 8-10-15 car lengths and adjust accordingly. Only after slowing to below 60 mph would some sort of threshold be cleared where the driver would begin looking for a new host.

Acquaintances have actually told me that this is their preferred approach to freeway driving - it's weird if you ask me.

Aside from the driving, it was a good trip. We decided against the ergonomically challenged rental home with the gorgeous views and opted instead for much more practical digs on a lot that sloped less than 60 degrees.

We can always walk over to see the view.

The Labor Report

What the heck is going on in the labor market? A total of 180,000 jobs were created in February led by 56,000 in construction and 36,000 in retail trade.

What year is this - 2004?

As usual there were significant revisions to the data for the last two months, both the January and February data being revise up 16,000 to 162,000 and 113,000, respectively.

They say that the pickup in construction hiring is a result of the weather-induced slowdown in February. Another possible explanation is that home builders are rushing to complete what they've already started before lending standards are tightened too much.

We'll see.

The bulk of the new spots were in nonresidential specialty trade (34,000) as opposed to drywall nailers for single family homes (11,000), but it still constitutes a heady reversal from last month's overall decline of 61,000.

It was funny to watch the CNBC crew lamenting the closure of the stock market in observance of Good Friday. "This is another reason why we're losing ground to foreign stock exchanges", someone commented.

If only we could all be trading stocks today ...

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A Short Break

We are again headed north for a few days, this time with checkbook-in-hand, to look for a home to rent for the next year. It's pretty amazing how little it costs to rent a house in the mountains with ample space and gorgeous views.

Some of the long-term rentals now available are second homes that have been for sale for quite a while - the owners apparently have decided to try to wait out the 2007 market and hope for better conditions in 2008. Who knows how that will work out for them, but in the mean time there are mortgages, taxes, and bills to pay - that's where we come in.

If all goes well, we'll be looking out the back deck this summer at something like this for about half the rent we pay now.


No more boom-boom-boom when the kids drive by and no more sounds of a six lane freeway a couple miles away that some people claim sounds like the ocean. Whatever.

Just pine trees, two-lane roads, and weekend warriors/wine tasters to keep the businesses busy enough two days a week so we can spend time in town on any of the other five days without the crowds.

While We're Away ...

In the meantime, if anyone is interested in having a look at the investment website while waiting for something new to show up here, a temporary account has been set up just for that purpose.

The username and password shown below will provide access to the subscribers' area of the site for at least a couple days until we get back.

• Username - open
• Password - sesame

Seriously. This is no April Fool's Joke.

Try it on the most recent Weekend Update or the Model Portfolio. To get a good feel for all the material that is available, you can search the Weekend Update Archive and see what's discussed on a weekly basis including commentary on individual companies within the model portfolio.

And of course the Guide for New Subscribers is worth a look for those who might be interested in joining. To get a longer look, you can request a Free Trial - with the account info above, the links on that page will now work.

So far this year, there's been more selling than buying, but, as this is written on Tuesday afternoon, gains for the year now top six percent. This follows last year's 26 percent gain and despite what you hear about the natural resources boom having ended last year - surprise! - it's still going strong.

In today's Wall Street Journal, there was an article ($) about the new guy that runs the investment portfolio for Calper's (California Public Employees' Retirement System). Like many other institutional investors, he doesn't seem to be too scared off by the supposed bursting of the commodities bubble in 2006.

Since Mr. Read began managing Calpers' $230 billion in assets in June 2006, he has started putting money into oil, copper and other commodities and increasing its emerging-markets investments.
...
To some, Mr. Read's move into emerging markets and commodities might look like he has arrived more than fashionably late to a party, given the long run-up those investments have enjoyed in recent years. He argues that Calpers is in fact right on time, given that it is a pension fund interested in long-term returns over years or decades.

He says Asia is just starting its upward climb. China and India have reached "critical takeoff conditions," Mr. Read says. Their ultimate development is "inescapable and compelling." Investments in emerging markets now represent about 3% of Calpers' portfolio. Mr. Read says he expects that percentage to multiply in the next five to 10 years, with Asia accounting for a double-digit share of the total.

As for commodities, some analysts believe prices have peaked, but Mr. Read argues that a decades-long increase in demand for energy and raw materials is also just beginning, given economic growth in those same emerging markets.

My thoughts exactly.

Not surprisingly, the Wall Street Journal deems this approach a "risky strategy", something you might also hear on CNBC, but after only a few months in the new year, this "risky" strategy seems to be working just fine - just like it did last year and every year going back to the dot-com bust.

When you start hearing a lot of people speak glowingly about the price of molybdenum or the junior mining stock they just bought or about drill rigs in the Gulf of Mexico, then it might be time to start planning your exit, but that time is a long way off.

ooo

UPDATE: April 3rd, 6:30 PM PST

Just had to get this caricature of John (Doh!) Stephen Colbert up whilst packing. The story($) is behind the subscription wall at The Economist - the final quip is the best part, "The post-modernity of it all was illustrated when Mr O'Reilly actually appeared on “The Colbert Report” and jokingly admitted that his aggressive on-screen persona was “all an act”. Mr Colbert replied: “If you're an act, then what am I?”



UPDATE: April 5th, 6:50 PM PST

We just got home. The username and password above have been disabled, but you can still sign up for a free trial here. (There are way too many crazy drivers out there!)

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Fun with Multi-Decade Charts

Having seen more than my fair share of multi-decade charts showing one economic statistic or another, the same erroneous conclusions have oftentimes been observed based on a simple misinterpretation of the data.

Call it the "power of compounding" or whatever you wish, but many writers and commentators seem to mistake this very normal effect as a sign of impending calamity, sometimes building long and convoluted cases for or against one thing or another based on a simple chart which has been completely misread.

This same error had been made here on at least a few occasions long ago, before someone graciously pointed out the error of my ways.

Think of this post as a sort of Public Service Announcement for those of you who may feel compelled to make a case based on looking at a single data series on a multi-decade chart.

All the charts below show curves with a constant rate of change. That is, the data point for each year is calculated as "last year + last year x rate of change", where the rate of change is constant - either three, six, or nine percent.

Remember that - it is important.

The first chart shows a curve that increases at an annual rate of three percent since 1960 - a total of 46 years. There's not much there worth looking at although it does seem to be picking up pace there in the 1990s and into the new century.

Three percent over fifty years doesn't hold much intrigue, but what if you more than double the time period to get about a century's worth of data.

Now this starts to look threatening somehow - you see how it goes up there at the end? Some might claim that once the 1970s arrived, things got a little crazy, when in fact the annual rate of change is constant over the entire century at three percent. You see this sort of thing all the time when it comes to historical inflation or stock prices.

Going back to the original 46-year span and adding in a six percent curve shows just how puny that three percent growth looks by comparison.

With no other context, the three percent curves above can appear to be problematic, but when laid up next to a data set with twice the annual rate of change, it seems almost insignificant.

Now add in a nine percent curve over the same 46-year time period and both the three and six percent growth rates are pushed lower, tame by comparison, and the nine percent curve appears quite threatening.

Note how the scale has changed as well. Many times people just look at the shape of a curve without looking at the absolute magnitude which, in the chart below, is 12 times that of the first chart. Nine percent a year is a lot when sustained over many years.

Now expand back out to just over a century's worth of data and the once-menacing 100-year three percent growth (second chart above) is barely visible and the nine percent curve is nearly vertical.

Again, you could look at this chart and think that something really changed in 1980, but in fact the annual rate of change is constant and just look at the scale - 100,000!

Using a log-scale, which is probably the best way to look at all data series that span more than a decade or two, shows the real nature of the curves - the rate of change is unchanging and the lines are straight.

The lesson here?

Be careful with those multi-decade charts.

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Googling Greenspan

Not having performed this simple search in quite some time, it was a bit of a shock to see this humble blog show up in seventh place (or eighth, depending upon the time of day or who knows what).

Unlike the mysterious search algorithms employed at MSN or Live or whatever they call it now, where rankings as high as first or second were seen last year, the search below is a Google search - the real thing - the one where they name a verb after the company that invented it, like Xerox.

Naturally Wikipedia comes in first and the "other" Doctor Greenspan, Stanley, the practicing child psychiatrist and Clinical Professor of Psychiatry, Behavioral Sciences, and Pediatrics at George Washington University Medical School - he's been near the top of the list ever since the first search was done here years ago.

And The Greenspan Company / Adjusters International? What the heck are they doing there? There used to be a blog called Sir Alan Greenspan of which these pages (here and here) appear to be remnants. The author has apparently lost interest - is that what a Blogger blog looks like when it is abandoned and Google reclaims the disk space?

But seventh place is pretty good.

Another query done just a moment ago shows an eighth place result with text from a different post - the one above was from last week's two-year anniversary post while the one below was from yesterday's April Fools fun though they both point to the main page of the blog.

They probably know what they're doing there at Google.

These search results do prompt an interesting question. What, if anything, should be done if the Maestro's book publisher wrote and asked for the Greenspan material to be removed as did a representative of privately held lender Bryco Funding some time ago - What to do with the Bryco Post?

Hopefully it won't come to that but there does appear to be something going on there with the Google search algorithm that could potentially be exploited to coincide with the book release this fall.

That's an idea.

According to the initial story on the book deal last spring, Penguin Press has already advanced the former Fed Chief $8.5 million, which might explain why he's been in the news so much lately - creating buzz for the book.

Hmmm...

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The Game of Life (Plastic Edition)

Anyone looking for signs of a top in the epic credit bubble that has swept across Anglo Saxon countries during the past few decades should look no further than game maker Milton Bradley Company and their recently announced plans to make the use of credit cards integral to the classic board game The Game of Life.

What next home equity loans and cash-out refis?


According to this story in yesterday's LA Times, parent company Hasbro Inc. has teamed up with Visa International out of San Francisco to not only introduce plastic money to game players but to remove the cash.

No longer will eight and nine year olds be able to feel the imitation currency in their hands or organize it neatly in front of them along with life insurance policies, home loans, and stock portfolios.

That's infuriating some experts on children and money, who say the update, scheduled to launch in August, will unravel the game's sage money lessons and inculcate the preteen set with a credit-card mentality.

"Oh, Lord. It's terrible," said Janet Bodnar, parent of three and author of "Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them."

"It's bad enough for teenagers to have exposure to credit cards. It is really bad for a 9 year old," she said. "This is exactly the age group when you want to be teaching about cash money."

Beacham agrees. "To succeed in real life, our kids need to learn to manage money — starting with hard cash," she said. "The child who doesn't may end up back in their old room after college with nothing but a boatload of credit-card debt in tow.

"A credit card is a valid update. But I can't agree with the removal of cash from the game."

With the revised "Twists & Turns" edition of The Game of Life, players will get a Visa-branded card at the start of the game and an electronic "LifePod" that will keep track of players' financial data and monitor their game status. The player with the most accumulated cash and "life cards" — experiences such as having a child, inventing a product or earning a Nobel Prize — wins.

What a creative bunch there at Hasbro - a "LifePod". Maybe the LifePod somehow works with an i-Card.

To really bring the game up to date the company should somehow factor in inflation during the playing of the game. People are living longer and the rising price of energy and healthcare will play an increasing role in their lives and will play havoc with their finances.

Back in the 1970s, midway through the production of the then-current version, they felt the need to double all the dollar amounts for salaries and expenses in order to keep up with rapidly escalating wages and consumer prices.

Maybe in a new update to the game a player could pick up a card that says, "Core inflation remains at 2.4 percent, but your health insurance premium just rose 12 percent!"

That would be a real life lesson.

Aside from the obvious cash versus credit shift, the partnership also raises new questions about product placement and the assault on the minds of the young.

As if it weren't difficult enough to raise kids these days, parents will now have to explain credit cards and product placement to their kids before they get to experience the joys of puberty.

"Advertisers are looking for new ways to market their products because the 30- and 60-second advertising spots are not as effective as they once were," said Linda Swick, president of International Promotions, a North Hollywood-based product placement firm. "Recorders are allowing people to zap out their commercials. So wherever a company can get their brand name out there, they're going to do it."

Visa and Hasbro say that no money changed hands under their marketing deal.

"What Visa is going to do is advertise this game now in all of their different outlets," Swick said. "That's a lot of money for Hasbro. Even if it is not dollar transferred, they get a lot of advertising in all of their different venues."

A Hasbro spokeswoman said the game would still impart valid money lessons because it cannot be won without managing money wisely.

Indeed, the update may provide an opportunity to teach children to be skeptical about advertising.

"As a mom who is in the advertising world, I am constantly making my kids aware that they are being advertised to and that they have to be very careful about evaluating any messages they're receiving," Swick said.

"I have normal kids who say, 'We want this because they say this about it,' " she added. "I say, 'Wait a minute. What is the perspective that they are coming from? Is the information biased? What is best for you?' "

No wonder today's parents are more medicated than any preceding generation. Oh yeah, the kids too.

So what implications exist for other venerable board games?

One comes to mind.

After the world-wide real estate boom of recent years, just think of the possibilities for applying modern financial innovations to Parker Brother's classic board game Monopoly - bringing it "up to date".


Asset appreciation, subprime lending, negative amortization loans, mortgage backed securities, credit default swaps - the possibilities are endless.

Or, maybe those financial innovations are best suited for The Game of Life.

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We Just Bought a House!

This may come as a surprise to regular readers of this blog, but an opportunity has arisen that my wife and I just couldn't pass up - we just bought a house!

We had long planned to move to Northern California and will be doing so next month.

But we're not gonna be renters - we're gonna be homeowners again!

We got a terrific deal on a new home priced well below last year's price - only $3,000 a month.

We didn't really think we could afford it because both of us just quit our jobs, but the loan guy said, "No problem".

As many of you already know, we've been renting here in Southern California for a while now and hadn't planned to purchase anything until all this subprime, Alt-A, no-doc, low-doc, negative-amortization, no-money down, 40 year, piggy-back lending mess had sorted itself out.

But, our realtor told us that Alan Greenspan called the bottom in the housing market last December, which would put us smack in the middle of a rebound right about now.

Our realtor also told us that lending standards are being tightened and that interest rates might be going back up, so we'd better act now while prices and interest rates are still low.

The peak spring-summer real estate sales season is directly ahead and this is sure to be a good year - at least that's what the chief economist at the National Association of Realtors said.

What's his name? Dave Lereah? He should know - he's an economist.

We found a perfect home on a lake that, while some might think it to be too big for just the two of us, we think we can grow into it.

We'll have a couple of extra rooms to fill, but buying all that extra furniture on easy credit should be good for the local economy and it'll be fun too.

Speaking of easy credit, it's pretty amazing what they do with home financing today. You see it's all based on the low monthly payment.

In fact my wife and I joked after we signed the papers, "Do you even remember what the sales price was? The place has to be worth more than $3,000 a month!"

The mortgage guy said something about a "balloon adjusting" or something like that, but to be honest, we weren't really paying attention by then - look at this place! It's gorgeous!

At one point we were concerned that maybe home prices might go down further, but have you seen how the population is growing in California?

People have to live somewhere.

That's what they said when we hesitated last week.

Another buyer was apparently interested in the place and it was "either act now or forget about it".

So we acted.

Thank god we don't have to throw away any more money on rent.

What a waste that was. This is really gonna work out well.

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