Saturday, May 28, 2005

Holiday Roundup: Negotiations, Brain Boosts, and Scary Soda Facts

Holiday Roundup: Negotiations, Brain Boosts, and Scary Soda Facts

Tom Evslin has a great posting on how he learned about negotation tactics from one of his first managers. I particularly like lesson 4: "Negotiation is not debate."

The New Scientist has a neat little article on steps that you can take to boost your brain function. Not surprisingly, eating right, exercising, sleeping, and keeping the brain busy are all key techniques. But there are also some interesting tidbits on future drugs and other science fiction techniques.

Just in case my previous posts on the unhealthy American lifestyle haven't scared you enough, new research shows that the majority of American adults get more calories from soda and other sweet drinks than any other food source. As for me, I plan to live by the old jingle--"Water: the best no-calorie drink in all the world."

Thursday, May 26, 2005

Why There Is A Real Estate Bubble

Why There Is A Real Estate Bubble
In a market economy, prices are set by supply and demand. If supply is constrained or demand increases, prices will rise. Despite the efficient market hypothesis, this doesn't mean that prices are necessarily rational.

The current market has relied on every-increasing demand. People invested in real estate because it seemed like better asset class than equities (crashing) or bonds (with interest rates at all time lows, there's little yield, and little prospect of capital appreciation).

The market would have reached equilibrium in a year or two except for one fact: demand kept rising.

Normally, when an asset goes up in price, the demand for it decreases. In the case of this housing bubble, the more prices have increased, the more demand has increased. The question is why?

The answer is easy credit. The following is a true quote, though my source has asked me not to identify him too specifically:

"I work next to a mortgage loan agent, and I can't believe my ears!

She’s a very nice lady and she’s just doing her job and she does caution the buyers of *some* of the risks, but there’s this couple who emptied their 401K and bought a 300K condo for no-down payment, interest only and no documentation (ie. you don’t even have to prove you have the income to support the mortgage payments). And it turns out their entire 401K and savings can barely cover the closing costs! She kept asking them “are you sure”, “do you want to sleep this over”?.. and they were pretty adamant. Of course she could’ve asked them to consider what would happen if the house price goes down, but that would be career suicide ;-)

Apparently, if you have “good credit” ie. 700+ on the FICO, ANYONE can buy a house for no-down payment, interest only, no-documentation up to a value of 1Million dollars. Everyone seems to be operating on an assumption that house prices would go up at least 10% annually and that they would be able to “exit” their investment in a few years for a profit. It is hard to believe that Fannie Mae would not implode (since I believe they are the end buyer of these “iffy” mortgages?) if the housing markets turn south since these people would literally leave their homes as they had paid not a cent of down payment, and have no money to pay any more should interest rates go up even a little."

As we have with low interest rates, we have also reached the limits of easy credit. When you can borrow $1 million with no down payment, no principal, and with an introductory teaser rate, credit is as loose as it can get.

So to sum up:

1. There is no way to further increase the domestic demand for real estate. What are we going to do, let homeless bums borrow money to buy homes?

2. There are a large number of homeowners that will lose their homes unless A) home prices continue to increase, and B) there are no external shocks.

When the end comes, it will be swift. At first, it will be a small thing. A number of buyers will be forced to sell their homes when interest rates rise and the principal repayments begin. When they go to sell, they'll find that demand is tapped out. As a result, home prices will begin to drop. As more homes come onto the market, the prices will continue to drop. As prices drop, nervous homeowners who see their equity eroding will rush for the exits, hoping to sell and lock in profits. As homes flood onto the market, prices will drop. As homeowners find themselves unable to make payments and unable to sell their homes, foreclosures will rise. Those houses will come on to the market, lowering prices further, convincing more people to sell, and so on.

And on the day when the newpapers and magazines are running articles about "The Death of Real Estate," I will buy a house.

Isn't It Nice When Things Just Work (after 606 takes)

Isn't It Nice When Things Just Work (after 606 takes)
If you have two minutes, you have to see

All Marketers Are Liars

All Marketers Are Liars

Seth Godin has a new book out called "All Marketers Are Liars."

I've known this for some time, ever since Deb Kaplan took to referring to me as "the weasel" at my first job.

But Seth does a great job of pointing out how lying isn't about making stuff up, but about telling stories that are ultimately more true than the truth itself.

Fred Wilson writes:

"Seth tells stories with the best of them. He's an entertainer first and a business guru second."

That's true, but that's also the reason why Seth is successful. He tells stories that people remember, which is more important than just about anything else.

DNA: Dames are Not Aggressive

DNA: Dames are Not Aggressive

"Dames are not aggressive" is a classic Cliff Clavin quote from Cheers. Of course, as with the critical concept of the unreliable narrator, just because Cliff said it doesn't mean that it can't be true.

John Tierney's New York Times opinion piece highlights how controlled experimental studies show that given a choice, women are less likely than men to participate in competitive tournaments.

The experiments were designed so that the subjects were completing math problems for money. First they worked alone, getting paid $.50 for each correct answer, then they participated in 4-person tournaments, with the winner getting $2 per correct answer while the losers got nothing.

Women performed as well as men in both formats. However, when given the choice, most women chose not to compete in the tournament, even if they had done well. Most men chose to compete, even if they had done poorly.

The fact that men like competition is hardly a shock. Just look at our willingness to compete with our friends on just about anything. One game we came up with in college was seeing how long we could grip a hot cup of tea in our hands before the pain forced us to stop.

You would never find women playing such a game.

But the implication of this finding is that women will tend to opt out of highly competitive occupations, which in our economy, tend to be the most highly compensated.

Sexist? Unfair? Who knows. But it's never a good idea to pretend that such tendencies don't exist.

Somewhere, Larry Summers is slapping his forehead.

Wednesday, May 25, 2005

A Cheap And Portable Word Processor

A Cheap And Portable Word Processor

For some time, I've lamented the massive bloatware that passes for today's software. Back in college, four years worth of work fit on just 20 megabytes of hard disk. Now I get that much just in email before 10 AM.

Along with bloat comes a lack of battery life. I swear that my laptop lasts less than an hour when it's unplugged.

I've had on my wishlist a cheap and portable word processor that would let me write when I'm on the plane, at a conference etc. Plain text would be fine, as long as I could transfer it to my laptop later.

Lo and behold, I ran across this article on Slashdot. Eagerly scanning the comments, it seemed like the best choices were the QuickPad and AlphaSmart lines of portable word processors. Alas, these cost $300-600 new, and even cost $200 on eBay. I was just about to give up when I decided to give Froogle a try. There, on the first page of search results, was a used QuickPad for just $29.99.

I quickly ordered the QuickPad, and hope that it arrives in time for me to take on my trip and provide you, my loyal readers, with a review.

"Father Takes A Wife"

"Father Takes A Wife"
The last time she visited, my mother-in-law accidentally left one of her romance novels, "Father Takes a Wife." Like many such books, it had wildly overblown cover art.

Why is this relevant?

Because (once again thanks to BoingBoing) Longmire has another edition of satirically photoshopped romance novel covers. Don't forget to check out the previous set.

I'm partial to "Gimme My Shirt Back!" myself.