79 years of appreciation

A friend of mine made the claim yesterday that we had fifty years of price appreciation in a five year period.

So I went to check it.

From 1950 to 2000 price appreciation averaged 0.5% after adjusting for inflation
From 2000 to 2005 price appreciation averaged 8.2% after adjusting for inflation
[Source]


I quickly did the math. At the 0.5% appreciation rate, it would take 79 years to cause the amount of appreciation we saw in this bubble. Isn't having smart friends wonderful? he even under-stated how bad it was.

Now, about half of that rise has gone away in the previous crash, but we are still only about half way to historical averages. I have no idea if that will happen from a few decades of flat prices, or a few more years of the crash; the December home sales data looked really bad though, so I don't think this market is done yet.

Indian Restaurant

I was invited to go to a Taiwanese beer house last night to celebrate an Engineer at work passing the EIT. At some point I was handed directions by someone, at the top they said simply "Indian Restaurant." My thought was pretty much, well it is early maybe we are getting Indian food, than heading out for beer.

We get there at 5:40 just to discover the place opens at 6pm. So we had some time to kill. Being one to show off my nerdy creation I decided to head back to my car, get my generator, and show people with it. I was not sure how this would go over, everyone in the group was an engineer, and most of them had taken power courses that must have showed them similar devices. I rather expected it would be something they had all seen dozens of times. Despite my expectations, I don't get the impression that many of them had seen anything like it before. Most of the night someone in the group of ten or so people was playing with it.

Anyways, eventually we go into the place. The first thing I see is a totem pole. For some reason it hadn't quite hit me what I walked into. I then notice the waitresses. Lets face it, it is hard not to notice the waitresses. They all Asian girls in matching black mini-skirts and red feathers in their hair.

So, apparently this is a Taiwanese beer house. There is something really odd about a place full of Asians dressed as American Indians.

They didn't seem to exactly serve normal meals, but they had skewers of meat of just about any type that could reasonably be expected. Frog legs, chicken hearts, rotton tofu, and so on. Most of it was surprisingly good, but I don't think I will be trying stinky tofu again. Yes, it does taste like it smells.

I don't imagine anyone I know is looking for an odd bar to go to in an Asian part of LA very often. But if you are, that makes for a fun one. Its reviews on Yelp are all pretty good as well so I can't be the only one who thought it made for an interesting place.

Barefoot running

It is good to hear when a crazy idea I believed wasn't entirely crazy. A nature article is about the highest standard in science. If there are articles in nature that say something, they are not always correct(my time at Cornell was almost entirely wasted following some paper from nature that didn't seem to have much basis in reality) but you should pay very close attention to them. They represent the thoughts of the best scientists in the world on the topic.

So I was excited to see that they published some barefoot running articles showing that shoes really do cause problems running.

Writing on different gadgets

I don't currently have internet at home. I have it at work, and I have my iphone. One of the more odd things this has taught me is that my writing is significantly worse on an iphone. I don't really understand this, if anything having to slow down while I write seems like it should improve my writing. But whenever I am on a computer and edit anything I wrote on an iphone I am really shocked by the silly errors I make.

Queue the marijuana propaganda

Because of the ballot measure legalizing marijuana being voted on this November there will be a quite a few propaganda pieces, like this LA times article, written about marijuana legalization. They will all spout out the same lies and half truths while typically trying to make one of the following cases:

1. Marijuana should stay illegal because it is so much more dangerous than alcohol or cigarettes.

2. Making Marijuana legal will increase crime rates.

3. The money we would gain by making it legal would be insignificant.

The first argument is the most absurd. Hundreds of people a year die from alcohol overdose. None from marijuana. Withdrawal from alcohol has been known to kill, from marijuana it is unpleasant but not deadly. Both lead to similar risks from driving under the influence, but this isn't as important since the ballot measure doesn't change any of those laws.

The cancer risks are the most uncertain. Some people, like the LA times article I previously linked, claim that marijuana smoke has more carcinogens than tobacco implying it is more likely to cause cancer. This is quite a controversial claim. Many researchers have come to the conclusion cigarette smoke is more dangerous. Unlike with cigarettes there is no consensus that marijuana causes cancer at all. If it was as bad as cigarettes it would be relatively easy to show how bad the cancer risk is. As opposed to nicotine, THC is at worst a very mild carcinogen and probably not even one at all. So it is only the smoke that is dangerous. Even if marijuana smoke was worse than cigarette smoke though it probably doesn't matter. The total exposure is less leading to the total risk being much less; since a typical cigarette smoker might smoke a pack a day, while few pot-heads ever smoke nearly as much. At worse the risk is similar to cigarettes, and at best the risk is far less. This is clearly no excuse for prohibition.

Another of the more aggravating arguments I hear is that marijuana is stronger now than it was in the past. First of all, it is probably not true; but even if it is, so what? If anything that makes it safer since it is the smoke that is dangerous and less smoke is required for the same high. That should lower the cancer risk. Since overdose is not an issue there really isn't the sort of danger that say taking shots of everclear represents. And even if it was an issue, just legalize the lower THC strains. After all we first ended prohibition for low alcohol beer, than for most alcohol a bit later.



The crime rate argument one is the favorite argument of many people. It just sounds plausible. However there are a lot of good reasons to why this isn't the scary proposition people make it out to be.

Marijuana has been pseudo-legal in California for many years now. The medical marijuana bill passed in 1996. Since then, anyone with a doctor's permission can legally buy marijuana. Getting a doctor to approve you does not appear to be very difficult either. I know many perfectly healthy people with medical marijuana, so clearly there is a great deal of legal recreational use out there. So we have first hand experience with liberalization of drug laws. If making it a lot easier to smoke was going to increase crime rates, than we have over a decade of data to look at to find out how bad it has been. Guess what? Crime rates have been consistently dropping since the bill was passed(although they started to fall before the bill, so I am not saying that the liberalization caused the decline, although a good case for that could be made). If there is an increase in the crime rate we therefore know that it is a tiny one incapable of stopping a long-term decrease in the crime rate.

There are many reasons that crime rates have not increased, one of the biggest is that making something illegal gives people reason to fight over it. Drug dealers compete with guns. Liquor stores compete with price cuts, wide selection, and advertising. Therefore turning drug dealers into legitimate businessmen is one of the best things we can do to reduce crime rates. They will no longer be shooting up our neighborhoods.

Also thousands of police officers are wasting their lives arresting these drug users and dealers. If this proposition passes they will be free to spend their time chasing after violent criminals. This will almost certainly bring down crime rates.



As for the money the state will save if this bill passes, it comes from many sources:

1. Taxes on marijuana.
2. Reduced criminal justice system costs because we are arresting less people.
3. Taxes payed by citizens who would be in jail, but are now free to work.

When arguing the income is too small to matter, people typically focus only on the first source of income. But the net swing will be far more than just that. It is safe to say that the state will make billions off of the ballot measure. That won't single-handedly save the state budget, but the 1.34 billion dollars in tax money the bill is expected to make is enough money to entirely fund six Fresno State sized colleges. That would do a lot more good for our economy than locking up nonviolent criminals ever could.

Ultra-Simple Generator

My newest creation is an ultra-simple generator. It is just about the simplest generator possible. 400 feet of really thin wire, four magnets, a nail, a really low voltage light bulb, and a cardboard box.

On the one hand it kind of sucks. It can barely make a flash of light. It can at least be seen in a lit room, but it is a whole lot of work for that little bit of light.

On the other hand, it is just about the only way to get electricity without plugging something into a wall, a commercial generator which is difficult to understand, or using a battery. This generator also happens to use the same physics as real power plants but in a way that is easily seen, if still difficult to understand.


What I really want is a generator and motor that are easy to see working and connected together. If I was to make improvements I think I could spin one magnet, and have it turn another one across the room. I would just be a transformer away from have a mini version of a utility.

Next though is a Leyden Jar and Electrophorus to charge it with. Big sparks sound more fun than little flashes of light.

Now it is only twice as expensive to buy!

Fairly often articles enter newspapers that are blatent propaganda for the real estate industry. I have been seeing this for years, as the real estate industry has never predicted prices would drop, even during the worst of the crash. Their predictions of growth always recieve media attention from someone who uncritically passes it along as fact. This SF gate article, citing a forbes article, strikes me as one such piece. Its logic is so twisted I can't begin to comprehend it.

Right now in San Francisco it costs a little more than twice as much to buy as to rent. This is down from about three times as much at the peak of the bubble. So obviously it makes sense to rent. It is cheaper, you don't have to maintain it, and the money you can save is a far better investment than real estate is. No real estate bubbles will be occuring in CA for at least a decade. Bubbles almost never repeat themselves, too many people lose too much money to fall for the same story a second time. However somehow that article takes that same statistic, assumes home prices will rise a lot, than uses that as evidence it is time to buy. That logic hurts my head. It is time to buy when it is cheaper to buy than rent. Only then is the hastle worth it.

Edit: OK, so the paragraph admitting buying was a poor option makes it a bit better than I made it out to be. Still, the assumption that home prices will be increasing rapidly when it is cheaper to rent, foreclosure rates are rising, and unemployment is the highest it has been in my lifetime, is just silly.

I ran into the following quote today in a power textbook from 1948:

The sources of energy for large-scale generation of electricity are: 
1. Steam, from (a) coal, (b) oil, or (c) natural gas 
2. Water (hydro-electric) 
3. Diesel power from oil 
Other possible sources of energy are direct solar heat, windpower, tidal power, shale oil, and atomic energy, but none of these as yet has gone beyond the pilot-plant stage, for the reason that coal and petroleum are still abundantly available. But as fossil fuels become scarcer and more expensive, there is every reason to believe that. all of these, as well as petroleum manufactured from vegetable matter, 
may become useful and economical supplementary sources of energy. 
--C.A. Powell

It is remarkable how slow the utility industry changes. We have nuclear, and oil is too expensive to burn for electricity anymore but other than that we are doing things pretty much like we were in World War Two

Manufacturing

I periodically go visit factories. The last one I went to really reminded me that as an Engineer one of my main functions is putting people out of work. We were getting the sales pitch from a whole bunch of people about a new product, and most of it was based around how much quicker it was to install. We wouldn't install more if it was easier to install, we would simply hire less construction workers and do the same job as always.

This is the second most impressive accomplishment of Scientists and Engineers of the past century. The most
impressive is of course that we invented an absurd amount of new stuff that would previously be unimaginable. But besides that we also produce the same stuff with far less work. The following graph demonstrates this quite well:



Engineers keep tweaking manufacturing processes. This slow process has caused the often talked about decline in American manufacturing. It is not that we produce less. It is that we produce the same amount without needing nearly as many workers. So if you are a low skill factory worker, it feels like manufacturing is in decline; while an executive would get the opposite idea. We are making the same money without needing to pay so many people, that means more profit!

The next few years will see the economy finally facing this problem head on. Do we have enough work for all these low skill workers that used to go to manufacturing or construction but now can't? Do we have the ability to train them in professions that are in demand? I suspect we will figure out how to put these people to work, but it won't be easy.

Obsolete Professions

One of the more interesting things computers are doing today is making professions completely unnecessary. The internet allows objects to be duplicated again and again at essentially no cost. This means that once enough of something has been created there is no motivation to create more. Reproducing old product is just so much cheaper.

A great example of this is porn. There is enough porn on the internet that it just isn't possible to reach the end of it, even if you never pay a dime. The result? The porn industry is essentially dead. It never will be sble to produce significant amounts of new porn more interesting than what it made in the past decade. 

Another similar problem has occured with photography. Photographers are having a terrible time in recent years. There are already tens of thousands of pictures of sunsets already taken. Why would anyone pay for another one if all those already exist?

Music and movies don't have it quite as bad. Live shows will always keep the most talented musicians around and, unlike porn, new movies are likely to be more interesting than old ones. Still, the problem is quite similar. Every new song produced has to compete with decades of recorded music. If it is not better than most of it in some way it will get ignored. That is an absurd standard. Musicians must be better than today's musicians, as well as those in the 90s, 80s, 70s, 60s and so on. Many people will just choose to listen to that music instead of modern music leaving a small audience who is mostly unwilling to pay.

However all of this is likely to make life better for people. When I was a teenager many of my friends blew most of their money on music. Now they can download music, and buy something else instead. This is much like the movement of the economy away from agriculture. Lots of money that used to pay for food now pays for other goods. 

The problem is, what to do with all the workers these industries supported. All those porn stars are in need of a new profession. I imagine someone can think of a way to make money off of them, but I have no idea what sector of the economy it will be in.

Parrots

Apparently there are thirteen species of parrot living wild in Southern California. I still have yet to see one though. I suspect that now that I know they are here though I will see them everywhere.

China is still really poor

There has been a lot of talk about the rise of China. And it has been quite impressive, China has been improving quite a lot in the past thirty years. One simple statistic really shows where things stand. Wikipedia has a nice list of GDP per Capita for every country in the world.

The United States: $47440
China: $5900

This isn't a close race yet.

The real question that list brings up is, where the fuck is Brunei?

Long division

I was in Vancouver when a construction guy asked a question similar to "what is 1200 divided by 15" it was 5 am so I pretty much ignored the question. But it got me thinking.

"15 times 100 is 1500, so the answer is less than 100"

"1500/2 is 750 so the answert is more than 50"

"750+750/2 is 1125, so the answer is slightly more than 75"

"1200-1125 is 75, 5 times 15 is 75, so add 5 to 75 and the answer is 80."

I checked the calculator, sure enough. I can do long division in my head! I tried more obscure problems and the same technique works, the only hard parts being mistakes in addition, and converting remainders into decimals. My accuracy rate is only about 75% and it takes a minute or two, but I can do it. I don't know why this surprised me as much as it did. Long division has always been something I relied on calculators to do. But it is pretty clear that a few weeks of practice and I could spit out answers almost as quickly in my head.

Too much free time

My job gives me vacation time at the start of each year. So far I hadn't looked much at it since I would like to get out of debt before I go do much. 

I decided to look at what I have saved up the other day. It works out to 170 hours! That is four weeks and a day. Some I will probably just save for next year, but I have no idea what to do with a full month of paid vacation time. I guess I should start being less stingy about using them.  

401(k)

One of the nice things about working is I now have a new toy to play with, a 401(k). For years I have payed quite a bit of attention to theorizing about investment, so now it is time to try to put some of that knowledge to work.

The first rule I decided on is not to move around money I have previously invested. I easily fall victim to one fad or another, and some of them are probably correct, but I just don't think I can decide how well my investment strategies were for at least twenty years. So ill leave money put to see how the strategy I picked worked. Any attempts at timing the market,  or changing the ratio of investments will only be done with new contributions. 

I ended the year at $3400 after including matching contributions and this years gains. While I have moved around my future contributions a lot I have mostly stuck with two rules: diversify as much as possible, pay as little in fees as possible. 

As of now I am at:
Bonds 19%
Large U.S. Stocks 33%
Mid U.S. Stocks 27%
Small U.S stocks 1%
International Stocks 20%(12% Asian 8% European)

Mostly I would look at the expenses for every fund in the category and pick the cheapest one. So the U.S. Large and Mid Stocks are all in Index funds. The bonds are mostly in a really cheap Vanguard fund, and so on.   

Birthday concert

I happen to get my birthday off of work this year... MC Frontalot has a new album coming out in 26 days... By coincidence he will be playing in San Francisco the night of my birthday. I will have to consider that.