Geoff Simmons has a good piece at Interest where he points out that road and rail aren’t measured on the same basis and ripping up the rails could impose substantial increases in cost for maintaining and upgrading roads.
If you want to see what happens to roads when there is no rail or reduced rail have a look at the East Coast. The roads north of Gisborne are stuffed from all the forestry trucks and the roads to the south are stuffed because what used to be transported by rail now goes by road!
Over the next few decades tens of millions of dollars more than it would have cost to sort out the washed out rail link will be spent on keeping those roads alive will be wasted. Yes, the geography is difficult but forestry plantation owners not cleaning up after harvest should be sent that bill.
All of this obsession over roads and roading shows no one thinks clearly about the value of time. Yes it’s cheaper to build or buy way out in the suburbs but the cost of commuting is that you literally trade away years of your life over the course of a few decades in the labour force for the sake of “affordable” home ownership. It would be funny if it wasn’t such a tragic waste of the most valuable thing any human being has – time!
There is no political will or incentive to “solve” house prices in Auckland or even around the world. When most households having nothing outside of their home in the way of retirement assets, writing down the value of that “asset” basically impoverishes them when their labour market earnings are on the decline.
No city in New Zealand is world class nor on the same level as Sydney or London or New York. House price to income multiples will fall because of their relative over-valuation when you think about the bundle of goods attached to an Auckland house at some point, but trying to predict when is futile. Under-estimating the political power of one group of people in society and their sheer relentnessness in exercising it is the ultimate sin of columnists.
Housing affordability is a problem that can never be solved because there are simply too many vested interests in ensuring that house prices never fall and if they do fall fast, enacting policies to bail out the same group of people who would be outraged if anyone else ever received a bail out! #irony
I’ve written before about how people pick a team and then choose policy positions that they think their team would support and defend those positions as opposed to investigating the data, the literature and the law for evidence to support the validity of taking a position for or against something.
The US presidential primary season is a great example of team politics in action. But there are clear problems that arise from an individualist approach as opposed to a collective approach – all of the internal infighting and division makes it harder to “jump the message” from the primary campaign to the presidential campaign.
Jumping the message means ending the attack narratives or deep background investigations that can sometimes derail political campaigns once the nomination has been announced. Theoretically everyone should get in behind the leader of the team, but that’s not always going to happen. There is always the risk that someone acts in such a way that they’re not as concerned about in-group status as other members of the same team.
An example of how this could play out would be the reaction of talking heads sympathetic to the Obama supporting infrastructure of the Democratic party reacting to a Hillary Clinton nomination. Can we really expect a national offshoot of the Chicago political machine with exceptional voter targeting ability and social media savvy to roll over and play along?
I think that’ll be one of the more interesting things to watch over the next year or so. Will Joe Biden be thrown in at the last minute? Maybe the infrastructure that Hillary Clinton’s campaign is building at an astonishing cost will overcome all of this and this post will look really stupid.
Apparently house prices are hitting new highs, particularly in Auckland where they are up 25.4% year-on-year. The median house price in Auckland is now $771,000 so a 20% deposit equals $154,200 or about 30 times median household financial assets of about $5,000.
It will be really interesting to see what happens if prices start falling. If you read through how the ratings agencies assign ratings to Kiwi originated residential mortgage backed securities there are some really interesting details about mortgage underwriting in New Zealand and the intricacies of gross loss estimates that more commentators should understand and think carefully about when reckoning about house prices.
Robo-advisors differ from normal financial advisors in three main ways: they manage your portfolio primarily through automated software (rather than having humans pick stocks and bonds for you), they’re much cheaper than traditional financial advisors, and they custom-build an efficient portfolio for you based on your very own personal risk profile. (“Efficient”, here, is a technical term: it means a portfolio on the “efficient frontier”, where you get the lowest amount of risk for any given return, or conversely the highest return for any given level of risk.)
The excellent Felix Salmon explores one of the fastest growing segments of the wealth management industry. His exploration of the asset allocation to cash that Schwab Intelligent Portfolios take is one that many Kiwisavers might find interesting, but his broader theme that investing comes after you have no debt and emergency savings is something pretty important for Millenials.
If you read the reports you get from your Kiwisaver provider, you may find that a higher allocation to cash than you expected is there, which is an interesting situation to be in and further reinforces arguments made by the likes of NZIER that Kiwisaver is important in household asset allocation and obviously diversification away from residential property.
An interesting long article by Michael Lewis, over at Vanity Fair explores the career and life of Tom Wolfe.
This part jumped out at me:
The idea that leaving Yale and becoming a beat reporter at a small-town paper should have created anxiety—well, he doesn’t even understand my question. He had no student debt—no one did—and no sense that he had to make his way in the world immediately or be devoured by it. He seems to have been entirely free of pre-professional angst. The notion of roaming the earth and groping toward a purpose in life now seems ridiculous to 22-year-olds, but that’s the notion Wolfe more or less embraced.
This chart is from a US Federal Reserve survey of household financial wellbeing. Remember, negative equity in a house can only happen in other countries. It has never happened in New Zealand, right?*
Imagine for a moment if a similar situation arose in New Zealand.
Given what some investigations have found about marginal propensity to consume any increase in housing “wealth” through additional household borrowing, what would be the impact of tens of thousands of households facing this sort of situation?
Of course, this is New Zealand, where the only literature that matters is this week’s copy of Property Press, so move along, there is nothing to see here, house prices always go up, right?*
“Rich Formula: Math And Computer Wizards Now Billionaires Thanks To Quant Trading Secrets” is an interesting look at a quant hedge fund (Two Sigma) and that space of the actively managed market.
My favourite part of the article is this sentence, which highlights the irony of a quant fund built on computer science and data science having relatively higher numbers of employees to practically every other hedge fund strategy:
By 2008 Two Sigma already had $4.6 billion in assets and 200 employees, while other similar-size value funds had far fewer employees.
If you’re running a value or growth strategy, you need a PM, a sales team and some analysts – it would be feasible to outsource almost everything else or leverage prime broker relationships for soft billed infrastructure. If you’re running a quant strategy, you need a PM, lots of data scientists, developers, infrastructure staff and it would be a lot more difficult to outsource because of the high frequency you’re executing trades. This is quite a delicious irony.
The College Scorecard championed by the Obama administration has had generated some interesting commentary. Of course, the data is about US colleges and US graduate earnings, so we’re not comparing apples with oranges for drawing any lessons for the New Zealand situation, but it is interesting data nonetheless.
The NYT article points out how you can conflate college attended with other factors like innate intelligence and work ethic, which is problematic because if you have a pool of talented high school students applying for spots at selective universities then in the case of the US you get very talented pools of graduates coming from predominantly high socio-economic backgrounds. There is some implication that they were always going to be economically successful – see studies that look at father’s earnings etc for a broader review.
The obsession with college rankings and graduates’ earnings “is just the most recent example of a larger phenomenon, which is that the gathering of numerical information acts as a kind of wish fulfillment,” Professor Muller said. “If you have enough metrics and benchmarks, somehow people believe that’s going to solve a major problem. It rarely does.”
But the selection of what college to attend is merely the first hurdle for students from poorer backgrounds in achieving some level of social mobility. In the excellent book “Pedigree”, Lauren Rivera points out how the highest paying jobs out of college predominantly hire students who have similar socio-economic backgrounds. It’s practically inevitable because of the way different hiring systems are set up to function.
This means that even if all of the data in the world is available to the high future-time orientation high school student whose parents are also aware of all of these factors and how they affect lifetime earnings, there are still many myths and misconceptions around the less transparent ways in which desirable jobs are allocated after completing your degree or during your degree in the form of work experience, internships, scholarships or part-time work.
Perhaps people who care about these sorts of issues could explore this issue in more detail. Take the lifetime earnings of Harvard graduates for example – if the pool the undergraduates are coming from is predominantly from a wealthy background, is it really surprising that higher lifetime earnings will arise in aggregate for the graduating class but not necessarily on an individual basis? There has been a lot of work about how students from poorer backgrounds don’t apply to colleges that would give them almost 100% a free ride on financial aid because no one in their entire social circle or any of their high school advisers even understands how the most elite universities award financial aid!
I don’t understand why anyone would try and run a moral argument in the 21st century. It’s patently absurd to try and argue against adblocking because of some insinuation that it’s “unethical” to block ads when they lower the quality of your content consumption experience and the publisher of the content hasn’t offered an appropriate payment method for your jurisdiction.
I use Purify on iOS to block ads in Safari, which not only saves mobile data, it also improves page loading times. I use Adguard on my laptop and that, too, improves the browsing experience and reduces page loading times. I really couldn’t care less that some content producers can’t make money – there are so many choices of content to consume on the internet that losing a couple of marginal voices because no one wants to pay for a subscription isn’t really something to run to the barricades about.
Does this mean I don’t pay for content? Ironically, I pay for the content I value and can access on reasonable terms to me – remember, in this consumer driven era, it’s not about what the producer wants to sell it’s what the consumer wants to buy on their terms.
My current content subscriptions include:
- SKY + SKY Sport
- Apple Music
- New York Times
My one-off online content purchases include:
- Amazon – ebooks
- Apple Store – ebooks, some music
If someone wants to block ads to improve their browsing experience that’s their perogative. If content drops out of the marketplace because it can’t survive, then that’s too bad for them. The internet, like life, isn’t fair, and attempts to make moral arguments in an inherently amoral sphere are amusing.
Even with very high rates of adblocking, the major online content sites people think of when they think about who is impacted by adblocking are still generating revenue and visitors. The site founded by former Wall St analyst Henry Blodget, Business Insider, was recently sold for a pretty sum. I’m sure most of its users would block ads or their IT department would.