Financial wealth vs physical wealth

Been reading about the commodity bubble and crash of 2008. It is interesting to try to understand how the motion of money that causes the commodity bubble. At first, I was thinking that money can move into a commodity class (as in be stored) but in reality, someone is exchanging a commodity for that money, which breaks that model. I wanted to model a change in price as a function of the amount of money that goes into an equity, but that doesn't seem to be the case. What basically happens is that the money is exchanged for a commodity or equity and the transaction ends there.

The value associated with an equity is the result of it's instantaneous trading price and there is a disconnect when the value of the equity is tied directly into the "real" money supply and the physical commodity.

Assume a closed system of $1 billion dollars and 100,000,000 tonnes of copper:

• Let the price of copper be $10/tonne, the total value of this market is $2 Billion
• Let the price of copper be $30/tonne, the total value of this market is $4 Billion

Just because the price of copper was more expensive in the second case at $30/tonne vs $10/tonne does not necessairly mean that one economy is more "rich" when the amount of physical resources remain the same. I would be much happier to if I (and others could) a good $100,000 house versus a terrible $500,000 bad (top of the line) one.

I think that there is a gap if the measurement of "wealth" is "money."

The balance of living in a one room apartment

Another 3 days to move into the apartment and packing is underway. The number of belongings are less than expected; I regret not haggling with the moving company for an even cheaper price. I looked up the weather this weekend and there is a 50% chance of rain. I've never had to move in the rain before and it will be interesting to see how the moving company deals with it.

I did some more research last weekend and found out that renting a truck for a day was 8000 yen compared to the moving fee of 40,000 yen that I am paying. The only catch is though my driver’s license in Japan allows me to drive stick shift, I have little experience at it (perhaps 2~3 times). I would be interested in renting a manual car and learning stick because saving 30,000 yen for a single day's work is worth the effort.

I spent the last weekend looking at furniture for the new room as it will be a much bigger compared to what I have now. I can fit a sofa, bed, a desk and my weight training machine and the question is, do I really want to buy so many things? One of the things that I really liked about living light on belongings is that it is easy for move around (though I haven't been taking advantage of that).

Though it has been tempting to buy furniture in advance and have everything arrive on the same day, I have decided that it would be better to live in an empty space first to get a feel for the room before loading it up with stuff; I would rather have bought things to realize that it doesn't fit in well with the room. I'll be pretty happy with moving as it'll be really nice to be able to invite friends over.

On preparing to move

There are hidden costs (and benefits) to everything. I've been living in the company dorms for the past 3 years and by virtue of the age limit I am moving out by the end of the week to my own place. Leaving is a blessing because despite the savings in rent ($200 monthly), I probably have incurred plenty of social costs by living in the dorms. As a result of living in the company dorms, I am far away from Tokyo and can't invite guests over because of the building rules. As a result, I only see friends when invited to an event or when I host something elsewhere.

One part to living is the social aspects of living is knowing people and being able to do things/interact with them. The living conditions up until now have prevented me from doing as much as I would like to have done. Though in retrospect, I did end up doing more traveling around Japan from the savings from really cheap rent.

I have managed to find an apartment just outside of Tokyo, a brand new building and I will be the first tenant into my apartment. It is a fairly spacious 1 room apartment with an insulated floor and I have managed to select a corner room, where to one side is a wall shared with the outside and the other wall is shared with an elevator, meaning that I have free reign to play music and watch movies as loud as I would like and am incredibly happy about this.

I face one other dilemma; in that the room is really spacious and I would like to buy some nice furniture go into where I live. The problem I fear is having too many large belongings that eventually tie me down to a place.

The best solution I can come up with so far is to make more money to make the costs of buying the furniture insignificant to my income, making what I buy "disposable."

 

The post earthquake situation in Tokyo

For the large part, life in Tokyo has largely returned to normal. There are still some noticeable after effects of the earthquake still lingering in the city however. Since the shutdown of the Fukushima reactors, the entire Kanto region (the region surrounding Tokyo) is running at reduced power capacity and the entire region has managed to cut power consumption by at least 25% since the earthquake, alleviating the need for rolling blackouts through the region.

A link to the power charts for the Kanto region is provided here. The blue dotted line represent's last year's power consumption, the small blue bar is the total peak power available and the pinkish line represents yesterday's power consumption and the blue bars represents power consumption for the for the current day.

It's rather fascinating to see how much more power people and companies are able to cut and still maintain fairly "normal" operation. I doubt that you will see this level of power consumption elsewhere in the world however, as the attention to detail and the character to voluntarily reduce consumption is the same with other countries. The above graph could be a representation of the amount of "disposable power" Japan has.

In more detail, office buildings have reduced power to lighting, reduced the number of elevators and escalators operating. The trains have turned off the air conditioning and turned off lights inside the cabins during the days (it gets incredibly dark when going through short tunnels and really shaded regions). I expect power consumption to slowly rise as industrial regions will slowly rise as companies start brining more equipment and facilities online.

We have yet to determine if the power shortages will continue through the summer as one additional power plant is scheduled (since before the earthquake) to be taken offline for inspection through the summer, possibly bringing back the blackouts. There have been talks through the news that this might be not necessary as we have been seeing unprecedented levels of power conservation.

Supermarkets are currently short on food products as the shelves for certain products are either empty or only half full; coupling that with the current dim lightning resulting from power conservation, it presents a rather dreary atmosphere. The supermarkets are short on certain vegetables, milk, soy bean products and bottled water (which were quickly snapped up because of fears of water contamination).

The schedule for the current project that I am working on is being pushed back by about 6 months (and we are really rushing it at this rate). I expect that much production in Japan be significantly reduced and research delayed. Since the currency jump after the earthquake, I have decided to move some of my funds out of yen and into other currencies as I expect the yen to weaken throughout the year. Already in less than a month, the yen has dropped significantly.

I expect the earthquake will send slow shockwaves throughout many technology companies throughout the world as Japan produces many high tech components in many electronic devices. This might be an opportunity for other emerging market players to pick up the slack for reduced production from Japan. Right now, this probably is a very big opportunity for other Asian countries like Korea and China to play technological catch up with Japan. I expect competition to be fierce once Japan gets back on its feet.

Macbook

So I managed to get my hands on a macbook recently and started learning how to use it. There are obvious differences when it comes to using one of these machines compared to a Windows or Linux machine. One thing that drives me up the wall is that I still haven't figured out how folder navigation works other than double clicking on icons to open them; the standard "hitting enter" on files or folders doesn't work here.

There are other notable differences; for example, the function (F1~F12 keys) are actually mapped primairly to notebook functions (like screen brightness, volume control and etc) and you have to use a function key to activate their "normal" behaviors (ie function-F5 for refresh). There are, of course more things that I need to get used to, like how applications are installed and removed (things work slightly differently compared to usual Linux machines) so it'll take some time to figure those things out.

I still remember my first venture into the linux world after buying the first version of the EEE-PC. It took a good week of tinkering to really figure out how to do software installation and figure out what packages I needed for things like multi-lingual support (I also ended up killing the OS a few times by deleting the wrong things too). I suspect that I'll probably fall through similar pitfalls while learning how to use the mac.

One thing that I do like about using the mac, however is the polished multimedia editing tools, which are leaps and bounds superior compared to the open source alternatives. I guess when it comes to software that you pay for, it is what you get.

Interms of the interface, I like it because it has a cleaner look compared to the usual windows interface and the applications look pretty good. Still haven't had a lot of time to tinker with things but will be looking forward to playing around with the computer some more when I have time. After pretty much graduating from playing games on Windows, there really isn't much of a reason to stick around to a single platform anymore.

The effects of radiation being felt in Tokyo

A friend of mine posted that the "air tasted like metal," though unaware of it, those are signs of elevated radiation. The government had reported elevated levels (though not physically damaging [yeah right?]) of radiation in Tokyo this afternoon. Work has been cancelled for tomorrow and the day after so I am making plans to relocate out of Tokyo for at least until this weekend.

CNN's coverage of the Earthquate is crapy

I generally abhor news reporting just because they always focus on disaster, scandal and damage all the time. Maybe it is an American thing, but for the first time in a long while, I am currently at a friend's house watching the news with a Japanese news feed and CNN's news feed side by side. And I have to say, I am in awe of how shoddy CNN's reporting is. Nothing but the same clips of the Fukushima explosion over and over again, exceptionally dumbed down explanation (read, elementary level?) explanation of a nuclear power plant and more. I am surprised that they do not have any bilingual reporters translating and reporting on the direct press conferences from the Japanese government.

Though the Japanese news stations, through do replay some clips of the damage out here, I am far more aware of the evacuation process and the condition of people around the Sendai area; which I think is far more important compared to just talking about the "massive damage" from the earthquake.

News organizations have too much power over the way people form their opinions about the world and I don't think they are good enough to handle that kind of responsibility.

Backing up data as a precaution

Going to be leaving the home for a bit to meet up with some family. Decided to backup some critical data to the cloud, just incase I won't be able to return. In disaster, the internet is incredibly handy.

More info from a friend in Sendai

More people are coming online on Facebook reporting that they are ok. Seems like shelters are taking care of people there. One friend was able to cook several days worth of food. My friend reports that there is no power or electricity. Seems like power is up and down depending on location.

People tweeting real time on the news

Been watching the news online and there is an integrated tweet feed. Most tweets are pretty useless and I wish there was a way to block them.

Note to self: look at sources of reliable and unreliable tweets.

From the Sendai City webpage

For those that are interested. Sendai city home page is up:

http://www.city.sendai.jp/

-Bus service is intermittent in some places, operational in others
-Hospitals accepting patients in severe conditions
-People are recommended to stay home
-Natural gas service is intermittent
-People without water can have access through sources at schools
-Garbage collection not in service

Hitting the supermarket in the morning was smart

The super markets and convienance stores were busy today. People have been stocking up on food since the quake. I now have about 1 weeks worth of food cooked and prepared. Other friends have mentioned that some stores are empty of food that can be immediately consumed.

Japanese reporters on radiation levels and evacuation distances

Looks like the reporters are seeding panic by wondering if the evacuations distances are sufficient. They are worried about the government covering up information and if the evacuation distances are sufficient. Exceptionally pissed off at the talking heads that they aren't doing any research.

I wish there was some kind of market to force them into a bet... where I can bet against them.

Sendai Status via Twitter

For those that know Japanese:

Via Tetu on Twitter: http://twitter.com/mahhya94/status/46425985838620672

青葉区五橋の姉と連絡つきました。13：22現在 避難はしていない様子。街中は建物もそんなに壊れてないと。 30分前13時ごろ電気復旧。水も復旧

Translation:

Go in touch with sister in Aobaku-Itsutsubashi. As of 13:22 does not seem to be evacuated. Buildings do not seem to be that damaged. At about 13:00, power restored, water running

Via Tetu on twitter: http://twitter.com/tetumemo/status/46476055724298240

【追加情報仙台市の友人から】仙台市役所前のみ電力供給あり、取引先の会社へ避難中。　長町南から長町駅、商店街付近は建物の倒壊は無いものの道路がうねり、交通が困難

Translation:

(Further information from friend in Sendai)Power only available in front of city hall, taken refuge in company building. At south Naga-machi, objects on streets not from fallen buildings on streets. Traffic is hard.

I've heard further reports that water isn't running in some areas...

Fukushima Nuclear plant explosion:

Calculations on the radiation levels:
Current reported dosage levels @ 1000*normal.
Normal radiation dosage @ 2.4 mSv/year
need 1~2 Sv dosage to start to feel nausea or vomiting -> time to that occurs is about 5 ~10 months assuming that you are *at* the power plant.

Dosage levels will probably drop in an inverse squared power law away from the power plant. Meaning we've got plenty of time to react.

Sources:

Radiation rate @ 1000 x normal: http://bit.ly/eGht2S
Radiation poisoning levels: http://bit.ly/bRheP6

Quake notes

Random news articles:

• Fukushima Evacuation
• Japanese Strict Building codes
• Quake warning system

News Streams:

• TBS TV
• NHK TV
• Al Jazerra

Facebook, faster in disasters

Spent most of the evening and night yesterday on Facebook reading from friends reporting in that their families are ok in Sendai. SMS and cell phone contact is really slow and I thought it was ironic that it was faster for me to Skype home and contact people through facebook. I'll make a mental note of that for the future. So much information just came so fast that I hadn't the chance to organize it into a post... the damage in Sendai is extensive and we are still having aftershocks.

I think I am going to take it easy today... wonder if the grocery stores still have food.

Earthquake, I am ok

Incredibly sad the earthquake hit Sendai. I've been to some of the places they've shown on TV with damage. I am ok at least. Lots of information going through Facebook right now. Checking with friends in Sendai to see if they are ok.

Thinking about the Monkey Portfolio

In the old days of high school we used to have multiple choice scantron tests and we used to call the monkey score the score you would get if you just randomly started choosing answers. We used to have 5 possible choices on these tests so the monkey score would be 20%.

I was having a conversation with a friend recently about financial planning and the guy is a financial planner actually. During the discussion my friend proclaimed to me that he could structure a portfolio for clients with different risk characteristics with averaged annual returns ranging between 6%~12% and that he would recommend a 12% portfolio for young people for fast growth. His reasoning behind that was that you could take any 10 year window of the stock market and find that the market compounds at an average of 10%. Since he worked at a financial institution, they had better tools to get better returns which warranted that they could get that 12%. I decided to take his statements to task to really see if this was the case... unfortunately it wasn't.

To be generous, I decided to take a nearly 30 year span of the stock market starting in June 1981 until Feb 2011 (chosen at random) to calculate compounding rate. As of June 6 1981 the Dow Jones index was at 976.88 compared to Feb 1 2011 value of 12130.45, which is a 12.4x increase. Calulating for the compounding interest rate, all I would have to do it take the root of this between the time span to find that the compounding rate to be approximately 8.86% over a 30 year period. The result is striking to me that a 10% compounding rate is optimistic at best and 12% is a bit out there.

The Dow Jones Index since June 1981 to Feb 2011

So next, I decided to do take this a step further and assumed that I invested into the market at a constant rate of $1000/month for whatever the price the Dow Jones Index was going for until the beginning of Feb 2011, what would the annual compounding rate be after ~ 30 years? The result is illustrated in the graph below:

 

Compounding rate calculated while making constant contributions

Sure there is a lot of movement in the compounding rate in the initial few months but as time slogs along the compounding rate begins to stabilize at 6% but drops down to 4.7% after the recent economic crash. From the results we are nowhere close to achieving the 10% compounding rate that was initially proposed. Just as a note, the graph bottom axis is in months but has the same time span as the above Dow Jones plot, I was just too lazy to change the axis.

The gains however are still significant even at a lower compounding rate though, assuming a $1000 contribution into the fun over 356 months, the total contribution turns out to be $357k (assuming +$1000 at month 0) with a portfolio value of  $1.38 million after nearly 30 years of constant investing. Sure the market might have had compound growth in the upper 8% range, but the dollar cost averaged purchases of stocks over the past 30 years tells a different story. The guy was obviously making a pitch at me and setting reference points is a common sales tactic, but the reality of the matter is that a 10% continual compounding rate is optimistic. When it comes to financial advice and products, keep your wits about you.

 

Some notes on web programming

It seems to be taking forever for my web domain to get registered. After registering for a webhost on Sunday, 2 days have passed and my application to get a web domain is still pending. Not particularly happy about that but there isn't much else I can do except wait, though 2 days seems like an eternity to me.

While doing the waiting, I am looking into the following things:

• How to setup an Apache server and get CGI includes for Python working
• How to create interactive applications for webpages
• How to manage data using a SQL type database
• How to create web applications on infrastructure on the Google App Engine or Amazon's EC2
• How to program websites with AJAX (since I don't like web pages reloading on me after doing a query)
• How to use Python to generate html templates or generate CSS templates through Python
• How to create menus, buttons and images through programs since I am too lazy to use things like Photoshop to do tasks like these manually

I have a feeling that we are going to see a trend away from desktop data management happening as online servers will be dealing with data management and home computers will become more like clients in the future.