Is Social Media the Nirvana for Authenticity and Transparency?

TransparentWith the collapse of Wall Street and Detroit, self-promotion is the only industry America has left. Owen Thomas [Gawker]

There are no more passionate or enterprising individuals in the world than Americans. No other people in the world have embraced the idea of self-promotion and self-aggrandizement with same level of enthusiasm, shamelessness, and let’s face it, success that even closely rivals the Americans. Over the centuries, a distinctly love/loathe relationship has formed between the public and its tireless marketers.

Ultimately, marketing is a push activity. Unless you make extraordinary products like iPod, or Maserati, or limited edition Nike shoes. In that case, you push in indiscernible ways to create demand, and then sit back and manage the pull. Or you could just make a kickass product and sell it. That’s how it used to be a couple of hundred years ago. Then marketers realized there’s money to be made by hype and mass-production. Then soon enough, everyone was doing it, because not doing it was like surrendering before the battle even starts. Advertising became the bugle that signaled the legitimacy of a product, and we accepted it as so.

After decades of marketing, spearheaded by the Madison Avenue machine and sponsored by its corporate clients, the symbiotic engine began to sputter. Consumers got tired of having products pushed to them by conglomerates. The previous marketing mix management and product line expansion gimmicks started to see cracks.

Then the information revolution descended upon us. Soon enough, everyone had a voice, and everyone started talking to everyone else. Corporations realized that they were no longer in charge of their brand image, and it became increasingly difficult to hide behind PR campaigns. Many disastrous marketing campaigns and ineffective “customer outreach” programs later, businesses looked to young, hip, and mostly self-educated and self-branded social media gurus for help. Soon enough, those guys sprang up everywhere, advising dinosaurous businesses on the proper management of their “social media presence”.

When the now deified Web 2.0 first caught everyone’s imagination, it was touted as the tool that would revolutionize the way we communicate. It was supposed to be democratic, horizontal, transparent, and authentic. In other words: everything that the corporate-advertising-complex wasn’t. Gradually, businesses caught on this myth, and started blogging, facebooking and twittering – a domain of activities reserved mainly for greasy college students only a few years back.

Most businesses do not understand social media networking. Actually, most of us don’t. But we do it anyway, because that’s the way to stay current. Remember when Facebook first surfaced and sparked debates as to whether someone that pulled your hair at summer camp twenty years ago really counted as a “friend”? Well, that argument is hardly relevant anymore. Now we don’t blink twice before adding our mothers to our profiles, because that still makes way more sense than “following” hundreds or thousands of strangers on Twitter.

Gen-X readers, welcome!

welcome-to-investoralistWelcome Gen-X readers, and thank you for visiting my blog.  I write about investing, macro-economics, society, culture, career, and any other ideas and thoughts I have from my own experiences.  Some samples are available here.  If you enjoy my posts, then please consider subscribing to the RSS feed and spread the word, I would love to hear from you!

Here are some places to start that will give you a taste of this blog:

More on the Recession

On investment

Some investment ideas

Some comic relief, cuz God knows we need every bit of laugh we can get

  • Places that are doing worse than your average recession-ridden economies.  That is, unless you live in Iceland, Germany, Japan, or Ireland.  Then I’m truly sorry.  Who’s worse off than you?
  • The curious case of Berlin and how it’s able to avoid the recession. I explain my findings of the city, along with pictures from 2008.  Who is too poor to afford a recession?

What is Technical Analysis, and Why You (May) Need to Know It

analyze this This might seem like a pretty out of the character subject for me to discuss, since I write about sensible, non-hype, and long-term investing principles. Those would be exceedingly prudent and timely given the market onslaught. If you are at all familiar with general investing terms, then you would most likely associate technical analysis with the image of someone hunched over multiple LCD screens, fixated by indecipherable charts and graphs in a range of neon colours, and occasionally yell “Buy!” or “Sell!” with a touch of craziness into the phone. Needless to say, your average value investor would not approve of this behaviour. In fact, Warren Buffet famously dismissed technical analysis and quipped, “I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer.” So far not great, then why am I talking about it?

But first, what is technical analysis and why the bad rep?

It all depends on what you believe in.

Belief numero uno: Efficient market

At the crust of the matter, technical analysis is deemed the opposite of fundamental analysis. Where fundamental analysis make buy or sell decisions based on intrinsic value of a stock compared to market valuation; technical analysis disregards intrinsic value (since it assumes the market is efficient enough) of the stock, and focuses purely on supply and demand in the market.

In modern finance, this rests in something called the efficient market hypothesis (EMH). Most economists believe in a weak version of EMH, which is to say that the market does a pretty ok job when it comes to incorporating public information into the stock prices. But it’s not perfect, since insider information may still exist. On the other hand, technical analysts assume the market is perfect in incorporating valuation related information as well as market psychology into the stock price, or at least accurate enough for its purpose. The rest of the market movements are determined by more immediate demand and supply, as well as market psychology.

Belief numero dos: History tends to repeat itself

Fundamental analysts do not believe historical trading patterns serve any purpose in stock evaluation. The technical analyst on the other hand, believes that investors behave in rather predictable ways. Market psychology is believed to contribute to the repetitive nature of price movements, and technical analysts expect market participants to react in a consistent manner over similar market stimuli.

Belief numero tres: Trends

Chartists love trends, and a collection of rather imaginative terms have been created to describe them. Technicians frequently talk about moving averages, lines of support and resistance, channels, and many other obscure formations. They believe that as a result of behavioural consistency, prices also move up or down following trends. And once a trend has been established, future price movements tend to move in the same direction.

Then what’s with the bad rep?

Dichotomy of a Bootstrapping Entrepreneur

grind

I know a number of people who are in the process of starting up their business. It’s an exciting time, but also an uncertain time. Aside from the usual challenges faced by an entrepreneur: fumbling in the dark, making constant adjustments, overstretched and overworked by a myriad of tasks ranging from sales to technical support. But one thing that may ultimately separate success from failure is whether a budding entrepreneur can deal with the dichotomy that exists between his lofty vision and the daily grind.

Start with a vision

For professionals that foray into business for themselves, there usually exist visions of ecstatic social or financial breakthroughs. Needless to say, those businesses are most likely not going to be your neighbour 7/11 or Subway franchise. Not everyone sets out to change the world, but they are looking for meaningful financial returns, along with personal satisfaction in order to justify the risks they have taken with the startup.

Must bridge gap between fantasy and reality

Once the euphoria of the initial phase wears off, the industrious entrepreneur finds himself having to bridge the gap between that vision of success and the relatively uninspiring reality. Even if you are a serial entrepreneur with an enviable rolodex of your respective industry and a solid wad of cash in your back pocket, the initial phases of any business are not for the faint-hearted. The most revolutionary and unique ideas are also the most far-fetched. It requires tenacity, imagination, and an incredible, almost delusional amount of optimism. This process requires one to place all pieces of the puzzle on the drawing board, move them around, take some off, and add them back on. Rinse and repeat. Many businesses cannot even get through this phase, and fold before they begin.

Dealing with the daily grind

Many entrepreneurs nowadays bootstrap themselves up from the ground up. That means no secretary, research assistant, filing clerks, or even office space before the businesses turn a profit. It involves an inordinate amount of grunt work that may not be entirely familiar to those that came off the corporate ladder. What, no scanning over the networks, and nobody to take care of travel arrangements? Agility is a must. Because like it or not, you are now the jack of all trades.

No amount of projection or business planning comes even close to mirroring the reality of a business’ day-to-day operations. And there’s no time for day-dreaming anymore, this is hustle time. And guess what, a lot of work can be dreary and seem to do little in advancing your end goals. Even when you know they do, the progress may seem so snail-paced that it’s easy to get discouraged. And this is where the dichotomy comes in. An entrepreneur must be able to hold on to that vision, continuously tweak it and not be discouraged by the changes. At the same time, he must steadfastly perform the day-to-day tasks that bring him a step closer towards that vision. This is tougher said than done. Because a lot of times, dreamers do not make good executors.

The Economics Behind Work

work

Everyone knows what they make from their work, but many are either over or underestimating what they make on an hourly basis. A friend once told me whenever she got fed up with work, she would add up all the different components of her compensation, including bonus, pension top-ups, health and dental benefits, travel opportunities, and sum up all the time she spent getting to work and working, and figure out how much she was getting paid on an hourly basis. That number was usually motivating enough for her to finish whatever cumbersome tasks laid in front of her.

For some professionals, this kind of angst simply does not exist. Somebody who had undergone a dozen years of medical training will most likely not need to think about her hourly pay to motivate her in the operating room. My neighbour from first year dorm life used to read three-inch thick chemistry textbooks the way I used to read Stephen King novels. For him, getting paid to do a PhD now is far from an economic decision, but one that stems from, well, passion.

For those of us with less clear callings, finding work that fit us, and working out the economics behind our choices, may result in considerable anxiety. This is never too clear than during business school recruitment season, when salary and bonus offers were the barometer of someone’s worth. One guy was rumoured to have given up a position in a highly reputable firm for a better salary and bonus package with an employer less prestigious. Given we knew little about the long-term competitive landscape in the industry and future trajectory of those prospective employers, clearly, choices like these were driven purely by economics.

But numbers alone do not give you a good picture that accurately portrays the value you are providing to your work and your compensation. Some jobs come with benefits that are non- monetary. Meeting people and building connections, learning skills to be leveraged for the rest of your career, providing you with a readily available social circle – all these can open doors for the future.

At the same time, you are giving back something in return: your time, for those privileges. Consider your time spent at work, your time commuting to work, your time spent doing unpaid work, your time thinking and worrying about work when you’re not working, your time spent shopping and dry-cleaning clothes that you wear to work. Alas, most of us never break our days down to miniscule pieces. With email and Blackberry nowadays, few can truly enforce that blurry line between work and personal time. Besides, we are social animals. And the social environment at work holds too much sentimental values to us to be compartmentalized so crassly.

Japan and its Broken Social Contract

Japan

I received the following message from a friend and reader of the Investoralist that made my week.  Thank you and please keep the feedback coming!

From a Japanese friend I directed to your site:

‘It was quite accurate, and well analyzed. Without this life-time employment royalty and Samurai spirit dedication to work, teams such as [Redacted] business development may not exist. Not too few business men/women see their success at work as reflect of their worth, perhaps identity. I think it is good in a way, I like the idea a person should always have a spirit of “Samurai”. Objectives often happen to be “work”. It is fine, but social norms should not force it to people who want to pick something besides “work” as their core value.’

Every society is by and large a product of its culture, its history and choices made by its leaders through time. Most of us are no more than puppets on strings that operate within confines of a fishbowl stage – a social experiment to those on the outside. I’m not talking about the laissez-faire gold-rush culture of America, nor the joie-de-vivre way of life of the French. Today, I’m more interested in the experiment that is Japan.

Ever since Senator Charles Grassley told the AIG executives to resign or commit suicide like the Japanese, I’d begun to wonder what it was about the Japanese culture that conjured up images of immaculate suits, dedicated salarymen, and repentant businessmen doing away with themselves amidst corporate failures. When it comes to social norms, the outside world looks upon Japan with a combination of admiration, disgust, and confusion. Where else do you find a culture that fuses its very identity with the work it does?

In good times, this identity fusion means economic prosperity and steady growth at the expense of the occasional karoshi. In bad times, such as now, you have an empty national coffer, a collapsed export economy and little internal consumption, where the unemployed camp out in cyber cafes, and the government has resorted to posting signs at scenic forests to dissuade would-be suiciders. Economic inequalities are increasingly glaring. Previously unheard of, homelessness and poverty are also on the rise.

How did Japan get here?

The post-war social contract

Similar to post-WWII Western Europe, Japan was equally anxious over social stability, security, and its particular aversion towards uncertainty. In Germany, the agreement reached between the state, taxpayers, businesses and labour allowed high taxation of businesses, reduced household income, in exchange for a generous social security system and all its amenities. In Japan, the covenant was decidedly different.

From the onset, the government had a heavy hand in guiding the development of what it deemed “strategic industries”. These export-oriented firms were vertically integrated, and became mammoth conglomerates known as keiretsu. Even though large firms made up of only one third of overall employment, they were expected to carry the rest of the economy with them. Those large firms were given low interest loans, loosely regulated, and were allowed semi-monopolistic pricing. In return, they were expected to provide “lifetime employment” as the bargain price for those aforementioned privileges.

The Sky is Falling, But Whom to Blame?

finger pointing

The human mind cannot grasp the causes of phenomena in the aggregate. But the need to find these causes is inherent in man’s soul. And the human intellect, without investigating the multiplicity and complexity of the conditions of phenomena, any one of which taken separately may seem to be the cause, snatches at the first, the most intelligible approximation to a cause, and says: “This is the cause!”

Leo Tolstoy, War and Peace [via The Big Picture]

The populist pitch-forking movement has duly commenced, and fingers are pointed in all directions. In a classic case of pot calling the kettle black, all the players are now seizing populist rage to divert attention from itself. The momentum must be maintained, should the public calm down and re-assess, everyone is culpable.

Government

The whole debacle surrounding the AIG bonus is ridiculous. The government passed the legislation with the inserted lines that allowed for bonuses in the first place. Even if Chris Dodd is the culprit, surely it only serves to highlights the incompetence and indifference of the system. If what he’s saying is true (that the administration made him do it), then it shows complicity. This indignant outrage shown by politicians from both sides is nothing but political grandstanding to placate mass anger. Better this mess is channeled towards the evil executives than at the government, right?

The de-regulation of US financial system started with Clinton, and continued with the Bush administration. Policies from ten years ago directly contributed to the California black-out (Enron), and the current mortgage crisis. Without the government’s collusion in both banking deregulation and predatory lending practices, corporate greed would’ve had little opportunity to spread.

It doesn’t take much digging to see the hypocrisy of politicians now railing against exorbitant executive compensation or incompetence. For the most part, those very politicians were responsible for the rise in reckless risk-taking behaviour of those financial Einsteins. Members of the public are beginning to see the thinly-guised witch hunt as a way to deflect blame and secure public support. This kind of shameless and ingratiating behaviour from publicly-elected officials is insulting and condescending: because it pushes accountability away from itself, and props up effigies of greedy corporate executives for the public to burn.

Regulators

It’s hard to see how the phrase “financial innovation” could return with any kind of goodwill. Driven by his “Ayn Randian passion for regulatory minimalism”, and fearing lack of competitiveness that regulation weighed on said “financial innovation”, Greenspan opened the Pandora’s box.

In the aftermaths of banking collapses and Ponzi schemes, the SEC can hardly deny its failure in oversight. In one embarrassing expose after another, SEC is blasted for its inept and financial illiterate handling of warnings, its cozy relationship with the very bankers it was charged to regulate, and became a puppet that was captive to the powerful industry.  So the court can put the likes of Madoff away and the public can demonize the banking executives all they might, but the SEC deserves just as much wrath as its former wards.

The Year of Living Dutch

Netherlands

Somebody once told me that out of all the diplomats Canada send out around the world, the highest turnover usually comes from, surprisingly, their UK bureau. It may seem baffling at first, but the explanation centres on the dissonance between expectations and reality. Expectation: UK is a British version of Canada. Reality: Not. It turns out the differences in weather, geography, attitudes and habits are so out of the left field, many could not cope with it.

A couple of weeks ago, my in-laws came over for dinner, and conversation turned to my experience of living in the Netherlands. Did I find it very different? Are the Dutch weird? No, and of course, no. When you’ve been encapsulated in an environment for an extended period of time, everything just, is. I imagined explaining to them the Canadian national obsession with hockey, Timbits, curling, and poutine: not easy. Besides, I hardly expected the Netherlands to be an European version of Vancouver. But after over a year of normalizing, here are some of the funny bits I can’t help but notice whenever I try to describe the more eccentric aspects of Dutch life.

Modesty and luxury

The Dutch are modest. It shows in the way they dress: very neat, very chic, but well-covered and anything but flashy. It makes them the butt of jokes with Belgians and Germans: that they are excessively frugal that borders on cheap. Although in all fairness, Dutch thinks the Belgians stupid; Germans fat, anal-retentive, and also stupid.

Modesty also shows in the houses they live in and cars they drive. Granted, there are obvious geographical limitations at play here. At 396 people per square kilometre, this is the most crowded country in Europe. So kudos must be given to the urban planners for a job well done. Walking, driving, or sitting on the train in the Netherlands, you would never think that.

Binge drinking is not prevalent here. And if you have seen the serving size of beer, you would understand why. The Netherlands is famous for its “biertje”, which literally means “little beer”. And they are little all right. Compared to the standard North American servings, and the super-sized German variety, one can easily empty an 8 or 12-pack of Dutchinized beers without much trouble.

Home to Heineken and a close neighbour of many excellent Belgian breweries, premium beer is relatively cheap here. And so are dairy products. Everything from milk, yogurt, to cream and cheese, sell at huge discounts to what I’m used to. It’s not hard to see why. Flying into the Netherlands on a clear day, you can see black dots amidst the green. Stretches of highway are lined with farms, inhabited by contented cows, sheep and horses, are almost as ubiquitous as windmills to the Dutch landscape.

When Pragmatism Trumps Ideology – Thoughts on Immigration, Common Values and the European Welfare System

Europe

Many are describing the Obama administration as one that is pragmatic, in stark contrast with the previous presidency that can perhaps be labeled as rather ideological. In little less than two months, he has managed to placate peeved European allies and sent Hillary off to smooth ruffled feathers with the Russians. It’s hard to say whether his pragmatism stems from his personal beliefs or merely a reflection of him acting out of economic and political necessity.

This is nothing new. Thirty years of Chinese economic progress took place on the back of pragmatism. And Hank Paulson’s rescue of Bear Stearns, Fannie and Freddie, and AIG? There’s some good material for a play: “When Pragmatism Trumps Ideology – The Tragedy of Hank Paulson in Three Parts”.

This leads me to wonder about the issue of pragmatism versus ideology when it comes to immigration, partially because I spent the better part of yesterday morning forking over a handsome sum of money for a resident permit in this fair European state.

The shifting demographics of most of Western Europe coupled with its social welfare system give me the chills. Everywhere I look, I see an overly generous welfare system that create skewed incentives in education and employment, while placing immense pressures on its working members.

It’s clear what needs to be done: find ways to raise birth rates, or find value-adding immigrants.  But what will Europe choose to fight for? Preserving its welfare system at the expense of increased immigration,  or give up the comfort of the post-war social contract and make do with less based on the status quo? I dug out some research I did last year, and found an unexpected relationship between social norms and the welfare state that may shed some light on the issue.  Below is the edited version.

Immigration is a thorny issue on both sides of the Atlantic. To many, it is a pill reluctantly swallowed by many states in order to thrive, or simply stay afloat. With birth rates below replacement rates in most developed nations, demographic projections deem immigration a necessity. The effects of an aging population range from pension burdens – fewer workers supporting more gray-haired elders; to less innovation resulting from fewer prime-age workers; to the financial implications of a state turning from a net-saver to a net-spender.

Short of coercing and interfering in their populations’ reproductive lives, immigration provides one of the only lifelines available to the state. Doing so reveals the territorial character of welfare states. Europe’s unwillingness to take in more immigrants and its inability to successfully assimilate its existing immigrant groups put it at a distinct disadvantage to say, America. While America traditionally opens up her job market while limiting new immigrants access to the welfare system, Europe does just the opposite.

In Search of Sustainable Careers – 5 Reasons Why I Would Not Go Back to Business School

School

If I was eighteen, and clueless about what I wanted to do with my life, I would do business school all over again.

I’m not eighteen anymore, so I would not go back to business school.  Not when there are many other ways of learning out there.

1. I’m not fit to give you any business advice

A couple of months ago, a friend of mine headed back to school in a remote community in interior BC.  She wrote to me, excitedly about her new surroundings.  She was also excited about a business idea she’s had: the campus was set up miles away from the nearest town, so why not start a grocery delivery service for the hungry students?  I was the only person she knew with a business degree, so it found me.

I started to write back somewhat vague and non-committal, than I stopped typing, hit the ENTER key, and wrote the following: “The thing is, a business degree is probably the least helpful to someone that wants to start their business, because in business school, all we got trained on was how to service someone else.”

I wrote this to concede that I had little practical advice for her.

I was not wholly clueless when it comes to entrepreneurship – I did get my hands dirty on a business for a couple of years during university, and that has proven to be one of the biggest confidence-booster of my life.  But whatever skills I had gained during this time became neutered in a classroom setting.

School trained us to become task-masters, one that is great at driving efficiency, expediency, and a razor-sharp ability to prioritize.  We become extremely proficient at functional tasks, but terrible at matters involving creativity and imagination.  It takes a smart and able person to answer a question correctly, but a non-conformist to re-phrase the questions posed in the first place. In face of the current crisis, I think that kind of out-of-the-box inquisitiveness might have been helpful.

But perhaps that was the plan all along with business schools and their generous donors. Just like the military, business schools are probably better at training problem solvers instead of thinkers.  It didn’t profess to churn out Aristotles that philosophize.  Equipped with plenty of discipline and normalized by years of standardized training, we marched into the corporate world.  I then got into bed with Excel, let someone else worry about the bottom line, and became a cog.

2. Business school made us masochists

I was a mediocre student at best, struggling to keep up with endless lists of projects, papers, presentations.  After four years of hard labor, I barely made it out with honors.

Old Rules Out, New Rules In – What Investors Should Demand Going Forward

OLYMPUS DIGITAL CAMERA

Given the present market bloodbath, there are many ongoing discussions on what the sensible investment strategy should be going forward, and whether one should still be investing in face of economic uncertainties at all.

Most solutions favour an old-school approach. Many personal finance writers have gone back to basic principles of investing such as dollar-cost averaging, diversification, looking at the long term, be calm when the market is fearful, etc. Many are viewing investment through a mostly unchanged framework as what we have become accustomed to. But my question is, in a time when the corporate world, government bodies, and media complex have abdicated or neglected to perform their roles, why aren’t investors moving towards a different paradigm?

Here are some ways that I see the rules of investing change in the coming decades.

Long-term sustainability. Once a successful business becomes a publicly traded company, the management team willingly subjects themselves to continual scrutiny by the market. Dozens of analysts pore over the company’s quarterly and yearly forecast and issue their own estimates. After each earning call, those whiz kids compare and contrast their estimate to the actual numbers and company forecast, and issue their “buy” or “sell” recommendations. The market then reacts, sometimes violently, if the quarterly numbers greatly exceed or disappoint the analysts.

As a system, we have a stock market that rewards short-term gains and profits. By doing so, we inadvertently create unsavory incentives for the management team to maximize short-term profits at the expense of pretty much everything else.

Remember Chainsaw Al? A self-proclaimed turn-around artist, Al Dunlop infamously presided over Sunbeam over a decade ago. Within three months of his installation as CEO, Sunbeam had cut over half its employees and eliminated 87% of its products. Employees saw working for him akin to trench warfare, many exhausted from having unrealistic goals imposed on them. Upon his firing, it became clear that massive accounting fraud had taken place. Revenues had been padded through various dubious or outright illegal revenue recognition techniques. The company was cash strapped. Share prices shot up from $12 to $53, before falling back to $11.

Dunlop was an extreme example from another time. More current incarnations of companies and individuals buckling under the market pressures of high performance are numerous. Enron and Worldcom all carried on the tradition of growing through accounting trickeries.

Looking forward to the investment environment, I imagine the investors would be very wary of overly aggressive CEOs whose claims to fame are quick turnarounds accompanied by massive restructurings. Maybe investors would be more interested in slower and steadier progress that are on par with the general economy, and have long-term, sustainable trends supporting their growth.

Shafeen Charania coined the termIntegrity, transparency, accountability (ITA)” as qualities that investors will place most value on in the new investment environment. He likened the corporate imperative to act with ITA to the initial challenges faced by the green movement.

Who is too poor to afford a recession?

Berlin too poor for recession

What’s worse than getting caught in an economic crisis? How about, not? I know it’s wrong to laugh at poverty, even the first-world variety, because there are plenty of sad situations out there.

But when the tongue-in-cheek headline laments, “Can’t even afford a crisis: Berlin’s poverty protects it from downturn”, that’s practically baiting you to light up just a tad bit, no? In the article, the author contends that Berlin is just too “cool” (I’m guessing economically) for the recession.

Recession? What recession? From Berlin, it’s been hard to tell that there is a global economic downturn. A lack of industry and years of high unemployment mean that Germany’s capital can’t sink much further.

And listen to this.

“We don’t feel it at all,” he said. “It’s a lot of theory, this crisis. These financial types, they make crises and they make stimulus packages — it’s all very hypothetical. Everything can’t always keep growing; you can’t have 4 percent growth every year. It just doesn’t have that much to do with real life.”

That’s right, in the eastern frontier named Berlin, the city has long accepted the concept of a no-growth economy.  Its lengthy money problems  have bizarrely insulated the city from a crisis rippling through from rest of the continent.  Its mayor proudly proclaimed the city “poor but sexy” in 2003, when the rest of the world was growing at breakneck pace. With unemployment hovering between fifteen and twenty percent, and a debt of €60 billion, Berlin is no stranger to financial crisis. It’s been in one for twenty years. Or any crisis for that matter, it’s been at those for the past century.

Berlin, from the onset, looks like that grubby teenager with badly dyed hair that’s greasy and streaky, bitten nails, jeans that are too long and hangs too low, with a T-shirt that begs for attention, and when you stare at it for too long, he looks up and glares at your with pure venom and then gives you the finger. And then you hear about his abusive father and alcoholic mother, and learn about him having to look after his grandfather with Alzheimer, has a job in the grocery store and occasionally turn tricks to bail his drug-addicted sister out of trouble. Something like that. That’s how Berlin feels to me: wounded and indignant, angry but indifferent, stalled but trying to push through.

Because everywhere you go in Berlin, you feel it’s a city burdened, no, almost crushed by its history. There is the church with bullet holes from Allied shelling during WWII that the government doesn’t bother to fix nor hide. There are remnants of the Wall everywhere, covered by commissioned graffiti artists. The images are dreamlike, distorted, and scream the existential angst of Edvard Munch. The open air gallery is just next to the river that many died trying to cross during the separation. Some were fired upon, some drowned, some electrocuted as the Soviets put up nets that killed whoever tried to climb the wall.

One way of dealing with a broken economy: Ignore History

the past

“How do I define history? Well it’s just one f-ing thing after another.” The History Boys

As market continues to hit record lows every week, everyone and their mother has felt the “lack of confidence” that haunts the economy. Things have gotten so bad, quipped Jon Stewart, that the “British are cheering us up”, “and it’s like Seattle over there, rain, but without coffee.”

What’s setting this recession apart from all its predecessors is the fact that so many fast-and-loose rules have been broken. We’re told that young people nowadays can’t count on an ever-rising standard of living anymore. Nor can we expect the truism that housing prices have nowhere to go but up, and thus always a good investment. It’s hard to trust high-return investment brokers too, even those you’ve known for 50 years. Your corner community banks might go out of business and the next thing you know, the FDIC will be running it. All of these uncertainties, strung together, signal the utter collapse of confidence. Whatever our previously held ideas of people, institutions, and truisms may have been, that foundation is shaken and cracked.

But how sensible was it for us to subscribe to these rules in the first place? In retrospect, could all these occurrences not have been a series of lucky coincidences, happily re-enforcing themselves into our collective memory, and has since then become a self-fulfilling prophesy?

In political science, there’s a theory that addresses this issue, although in different contexts. It’s the idea of constructivism. It rose to prominence after the Cold War, as no existing theories were able to foresee and predict the sudden collapse of the Soviet Empire. In retrospect, it was hardly sudden, but hindsight is 20/20. So the idea of constructivism challenged the traditional assumption that the external environment determines one’s interest and subsequent behaviour. That is to say, too much emphasis had been placed on the power and structural limits of the system, and too little on the players within. For example, instead of thinking of these awful 10-year plans as a product of Communism, try to see how the practice of central planning shapes and even further solidifies the Soviet utopian commitment.

Do you see what that does? It implies a mutually re-enforcing snowballing effect between the system and its people. They reciprocate and mirror one another by defining and re-defining both parties’ interest, beliefs, and actions. If all goes well, the ideas or ideologies behind the momentum becomes more and more entrenched, until one day, it’s hard to distinguish cause from effect, or whether the chicken or the egg came first. It’s hard to qualify how much of the systemic responses are created by us, and how much of our behaviour is dictated by the system.

What makes a good blogger?

what makes a good blogger

It’s been a month since the Investoralist officially kicked off, and I thought I’d briefly pause and write about what I’ve learned so far.  Granted, a month is barely a blip, and some of the musings may seem pretty amateur to bloggers that have been labouring in this medium for years.  But hey, this is the Internet, everyone gets their piece.  And there’s hardly anything that I can do to prevent you from clicking away.  So off I go.

The need to provide value. Before I enrolled in politics – that was my choice for graduate studies, I was interested in the Middle East.  To prove it, I went traveling in the region and ended up living in Egypt for three months.  I took Arabic classes. Then I went to grad school, and realized that everyone was interested in the Middle East, and everyone has seen the sufferings of the Palestinians, first-hand.  I then promptly decided that I was no longer interested in the Middle East, since whatever problems it may have had, it was not for a lack of concerned political science students.  And if all these smart, motivated, and outraged graduates of political science studies around the world have yet to find a solution to the problem – other than becoming bitter and indignant and depressed, I had little to offer.  At least not through the same path.  Or not at all.

So now I find myself blogging about investing, which is a subject that’s pretty vast and covered by a lot of people.  The same issues are frequently debated up and down the journalistic and blogsophere chain.  Some opinions are fruits born from careful examinations of arguments and data, some agenda-driven, some are pure drivel and derivatives.  The issue of adding value to the discussion is never far from my mind when I write.

The need to be interesting. I’m not sure if the importance of being interesting should take a back-seat to providing value.  God knows that we are subjected to enough dull and dreary readings.  I can barely work up the will to look at my tax re-assessment from 2007 and call the government to see why they are demanding $64.36.

The issue with investment and perhaps any kind of personal finance writing is that the subject itself is not something most people naturally gravitate towards.  It’s not escapist, because reading about something that tells you how to sort out your money is usually pretty serious stuff, and you need to pay attention.  Not like reading snarky news on some dumb celebrity’s impending divorce or rehab mishaps when you are waiting for your dentist appointment or sitting in the salon chair. Because at the end of those, you roll your eyes, shake your head, slap the stuff down and get on with your life, feeling just that slightly happier and relived.  But what you read on personal finance probably just makes you more jittery and agitated.  Most writers on those subject are out to teach you something that you are doing wrong.  And there’s always a call to action at the end that more often than not leaves you feeling guilty, because you know you should do it, or at least look into it.  But that to-do list just gets longer.

Love it or hate it, demographics matter for an investor (Part 2)

demograhics

This is part two of a two part post on the importance of demographics on one’s investment choices.  Part one addresses the perils of neglecting demographics, and today’s post will discuss investment ideas backed up by demographic trends.

The more sensible consumer mentality may also be applied to investments. For years, we have invested in trends that most people do not understand – many had little fundamental support behind it other than the sheer force of market momentum. The foolishness of that collective decision is reflected in overall market returns: during the past decade, the stock market has not treated us well.

Perhaps it’s time to look at investments that have the solid support of demographics and real demand behind it? Is it any surprise that during this crisis, Best Buy is down 47% and Family Dollar Stores are up 30%? Before the fundamental disarrays of the economy are addressed, it’s safe to say that products and services that meet essential needs will stick around. On a side note, would it also make a lot of sense to retrain those laid-off workers from the previous fluff economy in those fields that have long-term demands? Now going back to the idea of ongoing demands, here are some thoughts.

Follow the demands of the aging population and pay attention to healthcare related companies not run by crooks. In most of the developed countries, healthcare needs are hardly abating. The demands for various levels of medical care in the forms of doctors, nurses, medication, medical equipments, and assisted living will continue to rise every year. Yet the broken Medicare system in the US, along with issues of patents, the emergence of scandals and ethics quandaries related to the pharmaceutical industries, have tainted the industry reputation and sidetracked the dire issue on hand. But with pressing demands that will continue rising with time, it is an industry that demographers would pay close attention to.

As the most dependent existing source of energy, oil will not stay double digits for long. The financial crisis has all but rendered the discussion of oil price obsolete. But reality remains that once we pull out of this recession, the competition for oil will resume at an ever-furious pace. The Americans still need to drive, and the Chinese still need to run their factories. The fundamental demand equation has not changed. The recession compounds the supply problem, as lack of credit and falling oil price has lead to many downstream oil drillers to halt operations. Macroeconomic uncertainties, crude price fluctuations and its consequently low break-even number have driven small and large operations to abandon exploration activities. Similar to the agriculture market, once demand picks up again, oil price will come back with a vengeance.