The absurdity behind the consulting industry.

To be a weed dealer in Amsterdam.

It’s one thing to make money as a writer, another to be prolific and respected.

Eurasia and a new great game?

Sex and real estate in China.

US and Europe converge.

Tunnel vision in the Internet age.

Business
BP’s hypocrisy problem
nymag.com- Hayward knew that what he was enduring was a ritualized necessity.
On guns, butter and broken windows, now with more oil…
economistsdoitwithmodels.com- Economists are right in touting the supposed economic benefits of the oil spill.
Retail chains are embracing their online stores
latimes.com- Traditional merchants such as Macy’s are adapting to online shoppers.
What valley companies should Kknow about Tencent
techcrunch.com- Tencent is the largest, most profitable Internet company in China. OK. It’s also the 3rd largest Internet company in the world, after Google and Amazon. Whoa.

Finance & Economics
Why European countries are like American banks?
thedailybeast.com- Greece is like Bear Stearns, Germany is JP Morgan, and guess which country plays the role of Goldman Sachs?
Canada’s economy is suddenly the envy of the world
Boston.com- And is very smug about it all.
Normal adjustment mechanisms
brontecapital.blogspot.com- When metals prices/demand falls the Australian dollar falls. Greece is not so lucky.
Dealing with Dutch disease
VoxEU.org- The recent boom in primary commodity prices has once more stimulated interest in the issue of “Dutch Disease”.

The rest
Unwed daughters in Greece catch ‘time bomb’ in pension overhaul
noir.bloomberg.com- Greek spinsters are not marrying for fear of losing their meager pension. Screwed up incentives? You betcha.
China’s real estate boom spells trouble for boyfriends
latimes.com- No house, no car, no girlfriend.  Welcome to the reality of an ever-so-materialistic China.
Soccer done right
forbes.com- Changing soccer scoring would better the underlying competitive realities than the current rules.

BUSINESS
European Commission targets ‘digital virgins’
blogs.wsj.com- Europe’s broadband penetration rate is still only 25%, 30% of Europeans have never used the Web, and only 1% of Europeans have ever used a fiberoptic connection. …
Why we shouldn’t subsidize construction
Reuters- The main way that Spaniards have become rich in recent years is by sitting back and watching the value of their real estate grow exponentially. …
Gary Vanyerchuk’s wine and social-media empire
newyorker.com- A relationship with Gary V means an ironclad guarantee that he’ll reply to your e-mail within four months, with at least a “thnx” or a “mwaa!” …
Luxury shopping is making a comeback
slate.com- Just in time for the premiere of Sex and the City 2, there are signs that the orgy of luxury shopping that made the latter years of the credit bubble so much fun are back. …

FINANCE & ECONOMICS
The electoral consequences of large fiscal adjustments
Voxeu- It is possible for fiscally responsible governments to engage in large fiscal adjustments and survive politically. …
Two million idle Italian youngsters run risk of becoming ‘lost generation’
The Guardian- On the day Rome launched a desperate package of cuts to trim its debt and avoid the meltdown suffered by neighbour Greece, figures showed that two million young Italians are now drifting, neither studying nor working. …
Spain is trapped in a ‘perverse spiral’ as wage cuts deepen the crisis
telegraph.co.uk- Spain’s unemployment was already 20.5pc even before this latest dose of shock therapy. There are 4.6m people without work. Dole payments alone account for half the budget deficit. …

MATTER OF SCIENCE
Scientist infects himself with computer virus
news.cnet.com- A senior research fellow in the U.K. says he has become the first person in the world to be infected by a computer virus. …
People with Asperger’s less likely to see purpose behind the events in their lives
scientificamerican.com- Why do we often attribute events in our lives to a higher power or supernatural force? Some psychologists believe this kind of thinking, called teleological thinking, is a byproduct of social cognition. …
Who needs time zones?
tnr.com- One economic study on television schedules suggests that our sleeping patterns are affected far more by our need to synch up with other time zones than by when the sun rises and sets. …
Celebrity product endorsements on the brain
miller-mccune.com- Brain-scan research suggests celebrity faces evoke specific happy memories, and those positive feelings rub off on the products they endorse. …

THE REST
Why England will win big before reverting to type and losing on penalties
football.fanhouse.co.uk- England will probably score first: in big games in World Cups they get almost all their goals in the first half, after which they typically recreate the retreat from Dunkirk. …
Zoopolitics
foreignpolicy.com- How caged animals became a tool of statecraft. …
Worker suicides have electronics maker uneasy in China
spiegel.de- Whether the sheer magnitude of the factory overwhelms the workers’ psyches is not a question Foxconn managers are prepared to answer. Size, after all, guarantees low overhead and high profits. …

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Image via Wikipedia

The WSJ translation of this Chinese blogger’s review [Chinese] of “Avatar” really doesn’t do it justice.

It’s pretty dry, originally interpretive, and hilariously sincere in embracing a movie previously thought by critics to be about our recurring fantasies around pantheism and racial guilt, into an Avatar with Chinese sentiments.

And the focus is on a subject close and dear to the Chinese heart – real estate.

Temporarily forgetting its own creeping neo-colonialism in certain parts of the world, the Chinese turns domestic, and sees the struggle on Pandora an analogy to Chinese government’s strong hand in evicting residents from their homes to make way for new developments.  In the past decades of economic development, this kind of forced eviction benefited mainly real estate developers and local governments officials – many in bed with real estate developers, have left a pretty permanent mark on the Chinese psyche.

Chinese netizens react. Hilarity ensues.

Here are some comments:

Strongly condemn the Western director for using Avatar to allude to China’s current situation!!

Avatar is the story of violent eviction and demolition [of people's homes] in China.

The humans actually failed to successfully evict and demolish [the aliens]? Truly embarrassing. Why didn’t they send China’s chengguan there earlier?

This film is too reactionary, encouraging China’s ordinary common people to use violence to resist demolition!!! [It is an] attempt to subvert the great China!!

“Avatar” shows the director’s deep understanding and concern for the (forceful) eviction and demolition [of people's homes] in China!!

“Avatar”, Chinese name “A Chengguan’s Vindication/Confessions”;
“District 9“, Chinese name “Director of Demolitions”;
“The Matrix”, Chinese name “State Apparatus”

When I first moved to Calgary to work in the oil and gas industry in early 2006, it was right around the top of the property boom, and affordable housing was next to impossible to find.  Not wanting to shell out half my salary for an apartment, and spending months to fill it up with furniture, I decided to go the room rental route.

Little did we know at the time, but towards the end of 2006, the market was slowly but surely moving from sellers’ to one that favoured buyers.  Ones in the know, i.e. people with family members that dabbled in real estate, already sold in late 2005 or early 2006. But the media and the rest of us general public have always been slow to catch on.  And you wouldn’t know, from the construction buzz around the city, to the countless “For Help” signs hanging haplessly outside shop windows, to stories of McDonald’s and Starbucks paying upward of $14 an hour plus benefits to attract and retain employees.

My second landlord, a sweet spinster in her 60s, believed in the power of real estate as much as she believed in the miracle that is modern medicine.  She credited her various real estate investments for her comfortable lifestyle, despite not having worked out of her home for more than decade.  Her piece of advice to any young-uns that cross her path, is the adage that we should all invest in real estate sooner rather than later.  I can’t blame her or others her generation  for their spectacular confidence in the strength of the housing market.  Their experience of ever-rising property prices facilitated that expectation.  It certainly looked good at the time, with housing prices that doubled within a few years.  Houses that were hardly 1,000 square feet would go for 400,000 to 500,000 dollars in certain parts of the city.  The gains were ludicrous.  And the whole town was drunk on the sudden discovery that, thanks to oil sands in their back yards, a lot of them were paper millionaires!

In early 2007, cracks were already apparent.  One of my bosses bought a yet-to-be-built house on a new lot on a fixed price, while trying to sell her existing dwelling.  Within the span of a couple of months between when her house was valued, and when it went on the market, the price had already dropped by 10,000.  That’s the problem with houses.  You have to live in one. So unless one can capitalize on the gains immediately, and move elsewhere, one only ends up upgrading to an even more over-valued house.  Luckily, the housing boom in Canada, even western Canada, still paled in comparison to what went on in California, the UK, and Spain.  Even the sharpest decline was contained within teen digits.  But for the people that bought into the perpetual rise of property value, is the current market decline a temporary setback, or something that will linger indefinitely?

Jon Carney at Clusterstock seems to favour the latter theory.  From a demographic perspective, this certainly makes sense.

1. Baby-boomers in the US and Europe more or less carried the property markets for the last few decades.  Their continuous demand for housing, whether they be condos, starter-homes, or suburban mansions, drove the market.  As this population ages and trade down, we might se an increase in demand of condos, retirement homes or assisted living complexes, but a drop in market demands for larger homes.

2. Those of us who belong to Gen X or Gen Ys are just not large enough of cohorts to fill the shoes.  There’s the issue of massive student debts, due to the boom and the increasing necessity of acquiring a college education.  Then there’s the shortage of Gen X to move into excess dwellings available on the market.  According to Carney, “only 44 million people were born into Generation X. There are currently 19 million empty homes in the US. That means that if Gen X pairs up through marriages, cohabitation or roommating, they can live in the empty homes without ever buying a new one.”

3. There is compelling evidence that once a bubble bursts, it hardly ever reflates.  The Tulip bubble never came back again, nor did the tech bubble.  So unless the property market can demonstrates and rationalizes rising valuation, it will not climb back to the mid-2000 level.  The public and the media will probably move on to some other new asset class.

4. Inflation or deflation, the property market doesn’t stand a chance.  Should inflation take place from the massive printing job various governments around the world participate in, it can potentially eat up gains made in real estate.  Should deflation becomes the reality, then according to Charles Hugh Smith, “debt grows ever more burdensome as money becomes more valuable and wages and income drop. As a result, assets dependent on debt ( that is, real estate) drop in value. In deflation, real estate become a “capital trap” which loses value as cash gains in value. As incomes plummet, so do rents, i.e. the income stream which real estate earns, further impairing its value.”

5. Low interest lending is gone.  Interest rates will climb higher again, particularly in the US.  The artificial low interest rates can only last as long as the rest of the world had the cash and desire to lend it.  And the spectacular failure that came out of the Democrats’ goodwill to support low-income home ownership will have people questioning the wisdom of policies that justified low interest rates, perhaps even interest deductibility on mortgages that fanned speculation and unaffordable mortgages.  As a side note, Canada does not allow interest deduction, yet home ownership is higher than in the US.  Just saying.

picture source: semideus

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