Read an article in SvD and got upset with the bullshit they published. So after writing a couple of e-mails pointing out the errors they had made, I wrote this.
As the heading indicates, I very much believe in the European cooperation efforts of EU and EMU. When it was time for Sweden to decide whether to join the EMU or not, I did a thorough analysis and came to the conclusion that we should join. Then I joined the Yes campaign and did a very fine job convincing the people on the streets of the benefits of the EU and the euro. Had we had more time we would have won, but unfortunately all the money we got backfired and the neigh sayers won.
Let's start with the arguments. The neigh sayers have no arguments. They sound like religious people when you say there is no god - they can't argument but instead withdraw to a desperate infantile state of aggression. Pathetic. The members of my team even received death threats! As the saying goes - when you run out of words you start using your fists...
There are claims that prices shot up when the euro was introduced. These are false claims. First of all, prices (almost) always rise. What the studies show is that the prices in general did not rise more than normal. Some small businesses used the situation to rais the prices a bit more, rounding up, but this was a marginal action (on eg a cup of coffee). This is a good time for a psychological note: We remember what we want to remember. People who were against the euro noticed only the prices rising, because that proved them right. They failed to notice the not rising prices (and most likely ignored the normal inflationary rise that would have occurred anyway). This is a totally normal behaviour of the human brain, we don't see what doesn't happen (see the coming blog post about the book Stumbling on Happiness for more information in this matter).
Another claim the neigh sayers like is that a monetary union would lead to taxes on an EU level and in the end a super state. That is like saying that a step towards the south would take you to Australia. I wish it was true, but I'm afraid it's not. Introducing taxes on an EU level has nothing to do with the euro, even though the cooperation a common currency needs is a good base for such an evolution. But it will not happen automatically.
When it comes to economical arguments, they don't really matter, as the pros and cons are equally strong. It's true that a small currency is more fragile in tough times (as we certainly see now), but also is it true that a monetary policy of our own would help us better in a crisis. On the other hand a small currency can rush past a big one in good times, and financial policy can be used instead of monetary policy. So forget the tech. Let's get back to basics, politics. Saying no to the euro was to say to the rest of Europe that we don't want to be with you. We're actually a bit better. I don't know what has caused this, but it seems Sweden has always considered itself to be better than Europe, wanting more to be best friends with the USA than with its neighbours. Of course such an attitude fires back, and now as you travel Europe, they don't really give a shit about Sweden. "Oh, you don't have the euro?" they say, not really caring, after all we're talking about a mere 9 million far up in the bloody cold north. Who cares? If we were in the EU, for real, then they would care - we'd be a part of the process that decides the future of Europe. And of Sweden. Because no matter what, we are in fact an intergrated part of Europe, not the 51st state of the USA (thank you Lord!).
Tuesday, October 28, 2008
Daniel Gilbert - Stumbling on happiness
This is a fascinating book about how our brains work, as we try to foresee our future. Unfortunately, the conclusion is that we can't, because our minds deceive us. The book doesn't give us any advice in how to find happiness, but it explains why we stumble while doing it.
In short, the brain doesn't have the capacity to remember everything, the amount of input is simply too huge. So it uses some tricks to cut down the amount of information. Unfortunately this has some side-effects...
One way in which we are deceived is that we don't remember feelings, but rather our own description of that feeling (p32). That we might recall ourself saying that the food was a bit bland, rather than actually feeling the taste. Another is that we have different"scales of happiness" (p51). Somebody might think it's cool to slide down a snowy slope, but that is only because she never flew down a slope on telemark skis with the adrenaline pumping at 100 km/h! These scales are individual and also change with time, so there is no way to predict how we will feel about the same thing at a later time, really.
We are born as realists - we see what we see and believe that everybody else see the same (p84). We believe the brain remembers the world like a movie camera captures it. However we soon realize that this is not the case, we are idealists. Even though we know the cookies are in that drawer it doesn't mean mommy knows (unfortunately it's usually the other way around, though). And all we see is filtered by the brain. If we want to see a Jesus walking on the water hard enough, we will, and if we totally refuse to admit the weather is shit we will think the winters in Frankfurt are lovely. This explains UFO:s, God's miracles and god knows all. "We tend to forget that our brains are talented forgers, weaving a tapestry of memory and perception whose detail is so compelling that its inauthenticity is rarely detected." (p89"
Another side-effect is that we don't think of things that are not present (p98). It totally makes sense, why think about hot-dogs when we're eating entrecote? The sad thing is it makes us not see the whole picture. In a study people were asked which two countries are the most similar - Ceylon-Nepal or West Germany-East Germany - and then which are the most dissimilar. And they answered East-West Germany on both! Because they focused on the similarities, not the lack of similarities, and the dissimilarities, not the lack of dissimilarities. In another test people were shown three-letter combinations (ABC). After seeing a few they could conclude eg they all have the latter "X". But if the pattern to find was a lack of any character, they were never able to find it out! (p97)
Just as with our eye sight, the mind sight is more clear about something close than something far away (p104). The closer we get, the more detail we see.
"Omväxling förnöjer" we say in Sweden, change is stimulating (or something like that). But this is not true! (p132) In a test people had two things to eat, a favourite dish and something ok. If they were eating at a normal pace, they enjoyed having a change every now and then, true enough. But if they ate slower, they preferred the favourite every time! (Hmm, could this somehow be translated into the realm of infidelity??? If you have sex with your partner so often you loose interest, do youl then want to sidestep?)
In the interaction with other people our brain is playing tricks on us too (p166). We surround us with people who say what we want to hear. We ask questions in a way that delivers the result we want to hear. We ignore the people not supporting us and focus on them that do. We also compare ourself with those people that make us look good. A C is not that bad after all, compared to all the D:s!
As if all this wasn't enough, there is the "psychological immune system", that steps in when we feel really bad. This makes us feel better when something that is bad enough happens. Which is great, but the odd side-effect is that we might feel better if we get our ass kicked than just being insulted! Because the psychological immune system doesn't care about the insult, but helps us overcome the beating. Also, you might feel better being the victim of that beating than being a bystander!
Another funny trigger we have is the inescapability trigger. This makes us accept things that are inescapable, and hense make us like them much more. So, having a wife knowing there is now way to get rid of her, you like her more! So, no wonder the divorce rates are rising in these days of freedom! It only explains why you like your shitty old car (it's quite charming after all, isn't it!) if it wouldn't be saleable, but the neighbour's brand new car just wouldn't do (Toyotas are bloody boring, aren't they?) (p185).
Rare and unusual events triggers our memory more than normal stuff. That's why we remember all the birds shitting on us, but not all the days this didn't happen (p188). This is one reason why unexplained events catch our attention. The other is that the brain spontaneously tries to explain things. When an explanation can't be found, the thoughts still linger on that fact. (This could be a reason for religion, couldn't it? Some things just can't find a reasonable explanation so you invent some silly idea of a man with a beard that knows it all, just to get some peace!)
"The fact that the least likely experience is often the most likely memory can wreak havoc with our ability to predict future experiences." (p200) You don't remember all the times the queue moves in a normal pace, but everytime it's painfully slow! So you think you never choose the right queue...
Our memories are also shaped but what we think we ought to remember (p207). As an example, women are supposed to be more emotional than men. So even though this is not the case, we remember it as if this was the case. No wonder people can be brainwashed! If you are told that "Pray to the Lord and you'll feel good" often enough, we eventually will start to remember that it actually works. "Our inability to recall how we really felt is one of the reasons why our wealth of experience so often turns out to be a poverty of riches." (p210)
When trying to look into the future, due to how our brains work, the best way is to listen to others. (p228) But do we do that? No. (p229) Because we think we're so different from the average person, or actually anyone that is saying anything about how he/she is feeling in a certain circumstance...
Close to the end Gilbert walks out into a hot political minefield when he explains some very interesting mechanisms that make our society work as it does. As an example we believe kids make us happy even though they don't (p221). In fact the happiness of people deteriorate as the woman gets pregnant and then doesn't recoup until the kids have left the house! Money don't make us happy either. "The declining marginal utility" shows us how we get very much more happy lifting ourselves from poverty, but then for every step further the positive effects decline. A billionaire is not happier than a multi-millionaire. And a worker is just marginally less happy than an engineer (p217). Already Adam Smith was aware of this: "In what constitutes the real happiness of human life, [the poor] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar ... possesses that security which kings are fighting for."
How come we act act such fools? Because these believes are "super-replicators" (p214). Just like some genes are passed on to the next generation better than others, some believes are passed on better than others. A belief that "you cannot have sex" will of course die, because few children will be born (there actually is such a religion, and babies were still born, but the last members are about to die by now). This explains why we think we must have kids. This explains why we think we must work our asses off. And it explains religion: "False beliefs that happen to promote stable societies tend to propagate because people who hold these beliefs tend to live in stable societies, which provide the means by which false beliefs propagate." (p217) "The belief-transmission system is rigged so that we must believe that children and money bring happiness ... while we believe we are raising children and earning paycheques to increase our share of happiness, we are actually doing these things for reasons beyond our ken. We are nodes in a social network that arises and falls by logicof it's own, which is why we continue to toil, continue to mate and continue to be surprised when we do not experience all the joy we so gullibly anticipated." (p222)
In short, the brain doesn't have the capacity to remember everything, the amount of input is simply too huge. So it uses some tricks to cut down the amount of information. Unfortunately this has some side-effects...
One way in which we are deceived is that we don't remember feelings, but rather our own description of that feeling (p32). That we might recall ourself saying that the food was a bit bland, rather than actually feeling the taste. Another is that we have different"scales of happiness" (p51). Somebody might think it's cool to slide down a snowy slope, but that is only because she never flew down a slope on telemark skis with the adrenaline pumping at 100 km/h! These scales are individual and also change with time, so there is no way to predict how we will feel about the same thing at a later time, really.
We are born as realists - we see what we see and believe that everybody else see the same (p84). We believe the brain remembers the world like a movie camera captures it. However we soon realize that this is not the case, we are idealists. Even though we know the cookies are in that drawer it doesn't mean mommy knows (unfortunately it's usually the other way around, though). And all we see is filtered by the brain. If we want to see a Jesus walking on the water hard enough, we will, and if we totally refuse to admit the weather is shit we will think the winters in Frankfurt are lovely. This explains UFO:s, God's miracles and god knows all. "We tend to forget that our brains are talented forgers, weaving a tapestry of memory and perception whose detail is so compelling that its inauthenticity is rarely detected." (p89"
Another side-effect is that we don't think of things that are not present (p98). It totally makes sense, why think about hot-dogs when we're eating entrecote? The sad thing is it makes us not see the whole picture. In a study people were asked which two countries are the most similar - Ceylon-Nepal or West Germany-East Germany - and then which are the most dissimilar. And they answered East-West Germany on both! Because they focused on the similarities, not the lack of similarities, and the dissimilarities, not the lack of dissimilarities. In another test people were shown three-letter combinations (ABC). After seeing a few they could conclude eg they all have the latter "X". But if the pattern to find was a lack of any character, they were never able to find it out! (p97)
Just as with our eye sight, the mind sight is more clear about something close than something far away (p104). The closer we get, the more detail we see.
"Omväxling förnöjer" we say in Sweden, change is stimulating (or something like that). But this is not true! (p132) In a test people had two things to eat, a favourite dish and something ok. If they were eating at a normal pace, they enjoyed having a change every now and then, true enough. But if they ate slower, they preferred the favourite every time! (Hmm, could this somehow be translated into the realm of infidelity??? If you have sex with your partner so often you loose interest, do youl then want to sidestep?)
In the interaction with other people our brain is playing tricks on us too (p166). We surround us with people who say what we want to hear. We ask questions in a way that delivers the result we want to hear. We ignore the people not supporting us and focus on them that do. We also compare ourself with those people that make us look good. A C is not that bad after all, compared to all the D:s!
As if all this wasn't enough, there is the "psychological immune system", that steps in when we feel really bad. This makes us feel better when something that is bad enough happens. Which is great, but the odd side-effect is that we might feel better if we get our ass kicked than just being insulted! Because the psychological immune system doesn't care about the insult, but helps us overcome the beating. Also, you might feel better being the victim of that beating than being a bystander!
Another funny trigger we have is the inescapability trigger. This makes us accept things that are inescapable, and hense make us like them much more. So, having a wife knowing there is now way to get rid of her, you like her more! So, no wonder the divorce rates are rising in these days of freedom! It only explains why you like your shitty old car (it's quite charming after all, isn't it!) if it wouldn't be saleable, but the neighbour's brand new car just wouldn't do (Toyotas are bloody boring, aren't they?) (p185).
Rare and unusual events triggers our memory more than normal stuff. That's why we remember all the birds shitting on us, but not all the days this didn't happen (p188). This is one reason why unexplained events catch our attention. The other is that the brain spontaneously tries to explain things. When an explanation can't be found, the thoughts still linger on that fact. (This could be a reason for religion, couldn't it? Some things just can't find a reasonable explanation so you invent some silly idea of a man with a beard that knows it all, just to get some peace!)
"The fact that the least likely experience is often the most likely memory can wreak havoc with our ability to predict future experiences." (p200) You don't remember all the times the queue moves in a normal pace, but everytime it's painfully slow! So you think you never choose the right queue...
Our memories are also shaped but what we think we ought to remember (p207). As an example, women are supposed to be more emotional than men. So even though this is not the case, we remember it as if this was the case. No wonder people can be brainwashed! If you are told that "Pray to the Lord and you'll feel good" often enough, we eventually will start to remember that it actually works. "Our inability to recall how we really felt is one of the reasons why our wealth of experience so often turns out to be a poverty of riches." (p210)
When trying to look into the future, due to how our brains work, the best way is to listen to others. (p228) But do we do that? No. (p229) Because we think we're so different from the average person, or actually anyone that is saying anything about how he/she is feeling in a certain circumstance...
Close to the end Gilbert walks out into a hot political minefield when he explains some very interesting mechanisms that make our society work as it does. As an example we believe kids make us happy even though they don't (p221). In fact the happiness of people deteriorate as the woman gets pregnant and then doesn't recoup until the kids have left the house! Money don't make us happy either. "The declining marginal utility" shows us how we get very much more happy lifting ourselves from poverty, but then for every step further the positive effects decline. A billionaire is not happier than a multi-millionaire. And a worker is just marginally less happy than an engineer (p217). Already Adam Smith was aware of this: "In what constitutes the real happiness of human life, [the poor] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar ... possesses that security which kings are fighting for."
How come we act act such fools? Because these believes are "super-replicators" (p214). Just like some genes are passed on to the next generation better than others, some believes are passed on better than others. A belief that "you cannot have sex" will of course die, because few children will be born (there actually is such a religion, and babies were still born, but the last members are about to die by now). This explains why we think we must have kids. This explains why we think we must work our asses off. And it explains religion: "False beliefs that happen to promote stable societies tend to propagate because people who hold these beliefs tend to live in stable societies, which provide the means by which false beliefs propagate." (p217) "The belief-transmission system is rigged so that we must believe that children and money bring happiness ... while we believe we are raising children and earning paycheques to increase our share of happiness, we are actually doing these things for reasons beyond our ken. We are nodes in a social network that arises and falls by logicof it's own, which is why we continue to toil, continue to mate and continue to be surprised when we do not experience all the joy we so gullibly anticipated." (p222)
Thursday, October 23, 2008
Simple rules for food
There is so much being said about food it easily makes you very confused. Once in the food shop, what the hell should you choose??? In order to make this easier I have a few golden rules that makes my life much easier.
First of all, see if there's an organic food store close to you. Then you can just buy what you need in there, with no need to think at all, really. They often don't have all you need, but maybe you should rethink then. Do you really need that super big pack of potato crisps???
The basic rule is to use as organic and natural ingredients as you can afford. Avoid fast-food as well as ready-made dinners, sauces etc as these dishes are filled with extra ingredients to make the food taste more or just anything at all!
Other rules that will help you make your food both healthy and tasty:
- As unprocessed as possible. Just plain, pure grains, vegetables, fruit etc.
- As organic and fair trade as possible. If there is a fair trade product, have that, if not, look for an organic variant. If that is also missing start considering going to another store...
- As natural as possible. No light products. No funny colours.
That's it! But the implications are vast:
- Brown sugar instead of white sugar (white sugar is a nasty industrial, artificial product invented in the 19th century).
- Butter instead of margarine (this is another industrial product, invented during WWII as a butter replacement (war is over!)).
- No TV dinners. (Make a salad!)
- No snacks, funny-coloured sweets or soda (it's just silly expensive water with weird substances to make it taste like something).
- More fruit! More vegetables!
- Eat chocolate with as much cacao as you can handle, preferably 70% (pure chocolate is healthy!), but avoid the sugar bombs also called chocolate with as little as 10-20% cacao (these will make you fat). In fact cacao will decrease your hunger and could therefore even help you keeping your weight.
- Bake your own bread. (Why do you think the bread stays tasty so long? Is so evenly coloured and shaped? Yes, it's all fake.)
First of all, see if there's an organic food store close to you. Then you can just buy what you need in there, with no need to think at all, really. They often don't have all you need, but maybe you should rethink then. Do you really need that super big pack of potato crisps???
The basic rule is to use as organic and natural ingredients as you can afford. Avoid fast-food as well as ready-made dinners, sauces etc as these dishes are filled with extra ingredients to make the food taste more or just anything at all!
Other rules that will help you make your food both healthy and tasty:
- As unprocessed as possible. Just plain, pure grains, vegetables, fruit etc.
- As organic and fair trade as possible. If there is a fair trade product, have that, if not, look for an organic variant. If that is also missing start considering going to another store...
- As natural as possible. No light products. No funny colours.
That's it! But the implications are vast:
- Brown sugar instead of white sugar (white sugar is a nasty industrial, artificial product invented in the 19th century).
- Butter instead of margarine (this is another industrial product, invented during WWII as a butter replacement (war is over!)).
- No TV dinners. (Make a salad!)
- No snacks, funny-coloured sweets or soda (it's just silly expensive water with weird substances to make it taste like something).
- More fruit! More vegetables!
- Eat chocolate with as much cacao as you can handle, preferably 70% (pure chocolate is healthy!), but avoid the sugar bombs also called chocolate with as little as 10-20% cacao (these will make you fat). In fact cacao will decrease your hunger and could therefore even help you keeping your weight.
- Bake your own bread. (Why do you think the bread stays tasty so long? Is so evenly coloured and shaped? Yes, it's all fake.)
Friday, October 17, 2008
Wise voices
Again the swedish magazine Affärsvärlden proves itself as the number one economy/business magazine with this excellent article about the current crisis.
Just as I said the other day, the writer is not happy with how gready banks is now being bailed out by tax money. And that the house prices have been kept up on artificial levels basically by the USA consuming chinese and arabian money.
The bad thing is that our politicians don't understand the impossiblility to maintain this pattern forever and once they do, it will take a long time to recover. Another important matter (that I regretfully missed earlier) is that with the current policy spending is favoured instead of saving, it's better to borrow money to consume than to save money for consumption. Hopefully this idiocy will soon end.
Just as I said the other day, the writer is not happy with how gready banks is now being bailed out by tax money. And that the house prices have been kept up on artificial levels basically by the USA consuming chinese and arabian money.
The bad thing is that our politicians don't understand the impossiblility to maintain this pattern forever and once they do, it will take a long time to recover. Another important matter (that I regretfully missed earlier) is that with the current policy spending is favoured instead of saving, it's better to borrow money to consume than to save money for consumption. Hopefully this idiocy will soon end.
Wednesday, October 15, 2008
The Great Flying Circus!
These guys are unbelievable! They come from North Korea and what they do is just awesome to watch. Look at YouTube and FlickR.
Unfortunately I can't find a homepage of them, just some info about their shows at the homepage of Stardust Circus (only in German though, for some reason). Internet isn't too well thought of by Kim Yong Il and the other bastards oppressing the poor people of the country I suppose. Funny thing they don't all just use their powers and leave! Then again, I guess they are treated very well back home... Go admire them if you can! But don't miss any chance to criticize the screwed up politics of North Korea.
Unfortunately I can't find a homepage of them, just some info about their shows at the homepage of Stardust Circus (only in German though, for some reason). Internet isn't too well thought of by Kim Yong Il and the other bastards oppressing the poor people of the country I suppose. Funny thing they don't all just use their powers and leave! Then again, I guess they are treated very well back home... Go admire them if you can! But don't miss any chance to criticize the screwed up politics of North Korea.
Keep the faith!
These are indeed turbulent times. The Stockholm Stock Exchange dropped 21% last week! I looked at my portfoilio and could conclude it had dropped 51% during the last one year period. Living in Frankfurt, with many friends in the financial sector, I hear a lot of negativity. But that is the completely wrong position to take!
Think positive! This is just great, actually. Money has been too cheap for too long (or rather risk has been too cheap, almost neglected completely). What we see now is just a market realizing it was wrong and need to adjust. Lehman Brothers went under because they had too thin margins. They borrowed 95% to their investments in the end. Now this is just awesome as long as times are good. If the investment gains 10% the return on capital will be 200%! Those numbers would make any banker have wet dreams, so no wonder they got greedy. But at the same time, a decrease of value with only 5% would eat up all you capital. Not good in normal times. So those now suffering killed themselves, don't feel sorry for them. But we must make sure the rules are changed, so such idiotic investment schemes won't hit average Joe again. (There are rules saying banks have to have that big margins, but those were elegantly circumvented by using very creative financial papers' constructions.)
The problems we have see now regarding the lack of short term loans is surely a problem, but why does the problem exist in the first place? Because there is no trust. Bankers don't trust each other, because when it comes down to it they are all egoistic greedy people and they now it, so of course you don't lend any money! But seriously, the margins on these loans are slim and with the situation being what it is it's no wonder anybody would rather keep the money under his pillow rather than lending it o somebody else. Normally that is not a risk, but with the slim margins even the slightest risk is too big of a risk. Again, this is where governments have to step in. Because as we can see now, in bad times the only thing trusted are the governments and their central banks. Even the Financial Times publish coloumns about the good of socialism! I find that very comforting indeed.
But what should then the average Joe do, when he sees his investments crash? Nothing. Just keep on buying funds, every month, no matter what happens. After many years of listening to the "experts" what I learned was that it's luck and luck only that makes a good stock deal. In fact, nobody can time to buy at the bottom and sell at the top. So, don't even try. Instead, put away as much as you can spare every month, through good times and bad.
Let me give a short example to explain: Let's say we start saving 100 euro a month in January. Unfortunately the market then drops 20% a month for two months and we might feel a bit bad. But then the market turns and increase by 5% a month for the rest of the year. This means that our funds are back on the January level in November (perfect for the Christmas shopping). This scenario is a bit too fast for what we have seen this fall, but look at the beauty of it! In March we will have lost 40% of our January money, but on the other hand every month we get more funds for the same 100 euro we invest. Look:
Note how we are on plus in June already! And by Christmas, when the market is up 5%, we have a 29% win!
Of course this effect is smaller the more money we have invested already in January. In fact, if we started these monthly payments 2 years ago and have 2400 euro at the beginning of the year, we'd have to wait until October to be on breakeven! However, money that you invest in stocks and bonds must be money you don't need for few years at least. The main thing is to make a difference between the money being used to build a fortune at money already being a fortune. With the "building money" you should play tough and keep on investing, but with a larger fortune you should apply totally different strategies. I'm not there yet, so I'll be back on that subject! ;)
Think positive! This is just great, actually. Money has been too cheap for too long (or rather risk has been too cheap, almost neglected completely). What we see now is just a market realizing it was wrong and need to adjust. Lehman Brothers went under because they had too thin margins. They borrowed 95% to their investments in the end. Now this is just awesome as long as times are good. If the investment gains 10% the return on capital will be 200%! Those numbers would make any banker have wet dreams, so no wonder they got greedy. But at the same time, a decrease of value with only 5% would eat up all you capital. Not good in normal times. So those now suffering killed themselves, don't feel sorry for them. But we must make sure the rules are changed, so such idiotic investment schemes won't hit average Joe again. (There are rules saying banks have to have that big margins, but those were elegantly circumvented by using very creative financial papers' constructions.)
The problems we have see now regarding the lack of short term loans is surely a problem, but why does the problem exist in the first place? Because there is no trust. Bankers don't trust each other, because when it comes down to it they are all egoistic greedy people and they now it, so of course you don't lend any money! But seriously, the margins on these loans are slim and with the situation being what it is it's no wonder anybody would rather keep the money under his pillow rather than lending it o somebody else. Normally that is not a risk, but with the slim margins even the slightest risk is too big of a risk. Again, this is where governments have to step in. Because as we can see now, in bad times the only thing trusted are the governments and their central banks. Even the Financial Times publish coloumns about the good of socialism! I find that very comforting indeed.
But what should then the average Joe do, when he sees his investments crash? Nothing. Just keep on buying funds, every month, no matter what happens. After many years of listening to the "experts" what I learned was that it's luck and luck only that makes a good stock deal. In fact, nobody can time to buy at the bottom and sell at the top. So, don't even try. Instead, put away as much as you can spare every month, through good times and bad.
Let me give a short example to explain: Let's say we start saving 100 euro a month in January. Unfortunately the market then drops 20% a month for two months and we might feel a bit bad. But then the market turns and increase by 5% a month for the rest of the year. This means that our funds are back on the January level in November (perfect for the Christmas shopping). This scenario is a bit too fast for what we have seen this fall, but look at the beauty of it! In March we will have lost 40% of our January money, but on the other hand every month we get more funds for the same 100 euro we invest. Look:
| Month | Shares | Value |
|---|---|---|
| January | 100 | 100 |
| February | 225 | 180 |
| March | 392 | 235 |
| April | 546 | 355 |
| May | 688 | 482 |
| June | 822 | 616 |
| July | 947 | 757 |
| August | 1064 | 905 |
| September | 1175 | 1058 |
| October | 1281 | 1217 |
| November | 1381 | 1381 |
| December | 1476 | 1550 |
Note how we are on plus in June already! And by Christmas, when the market is up 5%, we have a 29% win!
Of course this effect is smaller the more money we have invested already in January. In fact, if we started these monthly payments 2 years ago and have 2400 euro at the beginning of the year, we'd have to wait until October to be on breakeven! However, money that you invest in stocks and bonds must be money you don't need for few years at least. The main thing is to make a difference between the money being used to build a fortune at money already being a fortune. With the "building money" you should play tough and keep on investing, but with a larger fortune you should apply totally different strategies. I'm not there yet, so I'll be back on that subject! ;)
Friday, October 10, 2008
Keep the cool for god's sake!
So, finally it came. The day when the market realized money was too cheap. It was a bit dramatic seeing the "Lehman Brothers" letters being picked down from the facade of their building in New York last week...
For years I have been standing in awe, watching people pay ridiculous amounts for housing or borrow more on the housing they had, just to consume it. I was annoyed because I wanted to buy an apartment too, but the prices were already silly. At the same time companies have been increasing their return by decreasing their safety margins. Finally this ridiculous chase for easy bucks has come to a halt.
Don't be panicked because of what happens, it's just a natural, and in the long run healthy, adjustment back to reality. What we now see is a huge transfer of wealth from those in debt to them without. A fair change, as the ones in debt for a long time have been the winners. What we have to be careful about, though, is that the panic isn't used by some to gain power and wealth at the cost of others using foul tricks. We can see how companies suddenly expect billions from governments to cover their lack of business skill. Don't bail them out. They have to pay the price, just like they reaped during the golden days. That's the brutal nature of market capitalism. If bad business isn't punished it won't stop.
At the same time, be careful about what the governments do. Some claim we have never been as socialised as today, after some big bank takeovers. We must watch that it doesn't go too far. Governments shall not run businesses, they shall provide a climate where the businesses live well. And, very importantly, are controlled. A market that is not controlled will eventually commit suicide as markets are by their nature unstable. This is where the governments have failed. The USA has been screaming about free markets ever since the Reagan/Thatcher era and many governments have just danced along. Which we now suffer from.
Note that the average man is in no danger. Our money is safe. Some of us have stocks and bonds and they are loosing a lot in value, but hey! Rule number one is to never invest money on stocks that you can't afford to loose. If you did that - blame yourself, idiot. The same goes for the people who bought too expensive houses and now might even have to leave their homes. Of course the blame is to put on the banks, you can't trust the average man to be very business-minded, and this again just emphasises the need to make the businesses pay for their mistakes. Banks thought they were safe lending 100% of a house's value to anybody and for a while they did well. To make the poor idiot that borrowed the money to pay the whole price is not fair, it should somehow be split between the idiot and the greedy. This is another area where governments should step in and calm the people.
So, stay cool. Whatever you do, don't sell anything. On the contrary, if you have money, the coming year is a perfect time to invest. On a 3-5 year horizon you are likely to make a really fine profit on stocks. If you need to buy a house, keep cool too, next year will see a drop on the market.
For years I have been standing in awe, watching people pay ridiculous amounts for housing or borrow more on the housing they had, just to consume it. I was annoyed because I wanted to buy an apartment too, but the prices were already silly. At the same time companies have been increasing their return by decreasing their safety margins. Finally this ridiculous chase for easy bucks has come to a halt.
Don't be panicked because of what happens, it's just a natural, and in the long run healthy, adjustment back to reality. What we now see is a huge transfer of wealth from those in debt to them without. A fair change, as the ones in debt for a long time have been the winners. What we have to be careful about, though, is that the panic isn't used by some to gain power and wealth at the cost of others using foul tricks. We can see how companies suddenly expect billions from governments to cover their lack of business skill. Don't bail them out. They have to pay the price, just like they reaped during the golden days. That's the brutal nature of market capitalism. If bad business isn't punished it won't stop.
At the same time, be careful about what the governments do. Some claim we have never been as socialised as today, after some big bank takeovers. We must watch that it doesn't go too far. Governments shall not run businesses, they shall provide a climate where the businesses live well. And, very importantly, are controlled. A market that is not controlled will eventually commit suicide as markets are by their nature unstable. This is where the governments have failed. The USA has been screaming about free markets ever since the Reagan/Thatcher era and many governments have just danced along. Which we now suffer from.
Note that the average man is in no danger. Our money is safe. Some of us have stocks and bonds and they are loosing a lot in value, but hey! Rule number one is to never invest money on stocks that you can't afford to loose. If you did that - blame yourself, idiot. The same goes for the people who bought too expensive houses and now might even have to leave their homes. Of course the blame is to put on the banks, you can't trust the average man to be very business-minded, and this again just emphasises the need to make the businesses pay for their mistakes. Banks thought they were safe lending 100% of a house's value to anybody and for a while they did well. To make the poor idiot that borrowed the money to pay the whole price is not fair, it should somehow be split between the idiot and the greedy. This is another area where governments should step in and calm the people.
So, stay cool. Whatever you do, don't sell anything. On the contrary, if you have money, the coming year is a perfect time to invest. On a 3-5 year horizon you are likely to make a really fine profit on stocks. If you need to buy a house, keep cool too, next year will see a drop on the market.
Tuesday, October 7, 2008
Beers of the USA
Yeah, this will be a short blog entry. Not! Again, the USA struck me with a positive surprise. The fucking Budweiser bullshit you're fed with all over the world certainly exists in New York as well, but to a much less extent than feared. Instead a zillion microbreweries are all over the place and available at all places I visited at least. Here is a selection of what I tasted during a week Over There:
- Stone Mill Pale Ale - a very nice pale ale indeed
- Ithaca Nut Brown Ale - boring
- Shakespear Stout - a nice, very well roasted stout
- Rouge Imperial Porter - a really heavy porter, with many tones, complex indeed
- Black Brutal Bitter - brutal!
- Issaquah Frog Rye IPA - rich!
- Negra Modelo - a very nice ale
- El Presidente - a plain, boring pilsner
- Kelso Pilsner - boring
- Magic Hat Circus Boy - a rich butter taste, not bad at all
- Brooklyn Brown Ale - a nice ale widely available in NY at least
- Captain Lawrence Smoked Porter - tough shit, not for beginners, indeed, "edgy"
- Widmer Hefeweizen - tasteless (the porter before might have killed it...)
- Blue Point Toasted Lager -
- Captain Lawrence Pumpkin - made of pumpkins, a tasty clove twist, making the lager a bit less boring
- Goose Island Honker Ale - me like!
To be honest I think I think (funny language, English ;) the pilsners are boring due to 2 facts: I'm becoming an ale lover (the taste is so much richer!) and a pilsner should be enjoyed ice cold in a hot sauna (which is totally against the Germans' weird traditions).
A funny thing is how wheat beers (Weizen, Weissbier etc) have become popular in the USA also. The perfect summer beer. I remember my first nights in Germany when I sat on the south side of The Main, enjoying cold Weizen in the warmth, watching the sun set behind the Frankfurt skyline...
- Stone Mill Pale Ale - a very nice pale ale indeed
- Ithaca Nut Brown Ale - boring
- Shakespear Stout - a nice, very well roasted stout
- Rouge Imperial Porter - a really heavy porter, with many tones, complex indeed
- Black Brutal Bitter - brutal!
- Issaquah Frog Rye IPA - rich!
- Negra Modelo - a very nice ale
- El Presidente - a plain, boring pilsner
- Kelso Pilsner - boring
- Magic Hat Circus Boy - a rich butter taste, not bad at all
- Brooklyn Brown Ale - a nice ale widely available in NY at least
- Captain Lawrence Smoked Porter - tough shit, not for beginners, indeed, "edgy"
- Widmer Hefeweizen - tasteless (the porter before might have killed it...)
- Blue Point Toasted Lager -
- Captain Lawrence Pumpkin - made of pumpkins, a tasty clove twist, making the lager a bit less boring
- Goose Island Honker Ale - me like!
To be honest I think I think (funny language, English ;) the pilsners are boring due to 2 facts: I'm becoming an ale lover (the taste is so much richer!) and a pilsner should be enjoyed ice cold in a hot sauna (which is totally against the Germans' weird traditions).
A funny thing is how wheat beers (Weizen, Weissbier etc) have become popular in the USA also. The perfect summer beer. I remember my first nights in Germany when I sat on the south side of The Main, enjoying cold Weizen in the warmth, watching the sun set behind the Frankfurt skyline...
New York!
I must admit I was a bit sceptic. I was in Detroit last year and it only confirmed my view of the USA as a beautiful place destroyed by lazy fat occupants. But New York proved to be something else! :)
This place rocks! Or should I say jazz, because the jazz scene is phenomenal. For a night out, having some drinks or beer and enjoying live music, try the Zincbar. We saw the Jazz For Obama concert, with the best of contemporary jazz musicians and singers and it was absolutely fantastic! Most of the concert we spent sitting in awe at the equilibrists' skills. I will never ever again think any pop or rock musician knows anything about the instrument they handle... I have to go back and visit all the clubs I can manage!
The food was great too, but damn the portions were huge! No wonder most people in the USA are fat. I say most, because the New Yorkians are quite fit, as many of them use the subway system and in general have to walk to move in the city. The subway has very few escalators too, so you get a good exercise walking the stairs. Bad thing with the subway is that it's usually darn hot. The ventilation simply stinks, it's obviously not dimensioned for the amount of traffic and the fact that all subways are air-conditioned (in normal US manners way too much).
A great surprise was the amount of bike lanes. As examples I biked down from Park Slope to Coney Island, most of the way on a secluded bike lane, lined with trees, and all along the west coast of Manhattan, mostly along a narrow park. A wonderful way to see New York!
One day we took the train up the Hudson river. After about an hour we arrived in Peekskill. This is just a tiny shithole to be honest, but I had to jump into the Hudson to take a swim and then we found a wonderful little brewery! To be honest the food was quite bad, but the beers were great! They make their own beer, as well as serve other local brews, but the few kegs they produce is eagerly consumed within a week or two by people from all around the place. The Hudson, by the way, changes direction of flow 4 times a day, with the tide, and its water is salty, all the way up to Peekskill at least.
Of course I did the shopping, walking Manhattan 10 hours a day running into every little shop in Soho, on Broadway and all. Afterwards I learned, however, that the thing to do is to go to New Jersey. They don't have any tax on clothing and shoes, so the $35 I paid for a pair of Levi's on Broadway, wasn't the best deal around...
If you need a haircut (or just some candy or a fun time) visit the Brooklyn General Barber Emporium on Bedford Avenue in Williamsburg, Brooklyn. The service is great, the barber shop the cutest place you can imagine and the street, all the way between 3rd and 9th Street is as hip as it gets. There are loads of restaurants, bars and shops. I bought a nice bicycle Brooklyn T-shirt for myself as well as for my 1-year old niece at Brooklyn Industries.
Another pleasant surprise with NY was that they actually have realized the climate issue and the benefits of organic materials. The first ad I saw at the airport was about the climate change and there's organic clothes and food all over the place. I guess the bike lanes can be traced back to this issue too. But when I saw 4 helicopters running on the pier close to the Brooklyn Bridge, and then heard that you take a 'copter to the airport, I was upset...
There are all kinds of neighbourhoods in NY. The manic, intense Times Square area. The sterile, concrete, high-rising Upper East-side. The cool, shop-dense Soho and West Village. The student, cafe- and bar-filled East Village. The money-hungry Wall Street. The relaxed and lovely Park Slope in Brooklyn. The tourist-packed Broadway. The hip and happening Williamsburg in Brooklyn. The Coney Island (which isn't an island!) at the southern tip of Brooklyn. The well taken care of parks. But almost everywhere you can also find run-down houses and areas, forgotten by capitalism...
Since I'm studying Spanish I was thrilled to see all the Spanish used. All signs, on the subway etc, that were meant for the neoyorquinos (or new yorkians) had a Spanish translation. Often even was written in Spanish only. Excellent practise!
One thing that I reacted on was how divided the town is though, not only that money flows only into some areas, but also how people hang out with their own only. You never saw Jews, with their small hats and black clothing, mingling with others, as an example. The Chinese stuck to Chinatown. Could it be that in a country without any social security systems worth mentioning you tend to stick to your kin? This is sad, and maybe this could explain the violence in this screwed-up country? I mean, you don't kill somebody you know, only the "other ones", people you don't know...
But I can't end this on such a sad note, so let's go shopping! Paragon Sports is a nice, huge shop for outdoor things. There's a fun store on 33rd Street, run by Jews, that have decent deals, good service and a huge selection of anything electronic - B&H. They have a very complicated system where you line up to get serviced, they then send your stuff on a transport system down to the exit, you go to the cashier and pay (one line for cash, one for credit cards) and then finally can pick up your stuff at the exit. The shop is filled with tourists and men in green clothes and small hats. So, I doubt they have the best deals in town. In fact I bought a camera in a dodgy store somewhere on 18th Street and was easily able to cut the price by 25%. B&H don't bargain.
And as a nice finish, let's eat! :) How about some excellent cookies at Mrs Fields on Broadway (all over actually). When it comes to cookies I prefer the once we found in a street van one day in Park Slope, but how shall I ever find that again? Maybe a lovely vegetarian panini beside the Flatiron building instead? No, why not treat ourselves - L'orange Bleue at Broome/Crosby has amazingly good food, and really creative too. Of course we should have burgers in the USA. P.J. Clarke knows how to do them! And as a finish, why not read a newspaper in the european style Cafe Borgia (I don't understand the bad reviews they've received, I found the place just fine and very charming).
Wow, yeah, it's time to stop. A great place it is, New York!
This place rocks! Or should I say jazz, because the jazz scene is phenomenal. For a night out, having some drinks or beer and enjoying live music, try the Zincbar. We saw the Jazz For Obama concert, with the best of contemporary jazz musicians and singers and it was absolutely fantastic! Most of the concert we spent sitting in awe at the equilibrists' skills. I will never ever again think any pop or rock musician knows anything about the instrument they handle... I have to go back and visit all the clubs I can manage!
The food was great too, but damn the portions were huge! No wonder most people in the USA are fat. I say most, because the New Yorkians are quite fit, as many of them use the subway system and in general have to walk to move in the city. The subway has very few escalators too, so you get a good exercise walking the stairs. Bad thing with the subway is that it's usually darn hot. The ventilation simply stinks, it's obviously not dimensioned for the amount of traffic and the fact that all subways are air-conditioned (in normal US manners way too much).
A great surprise was the amount of bike lanes. As examples I biked down from Park Slope to Coney Island, most of the way on a secluded bike lane, lined with trees, and all along the west coast of Manhattan, mostly along a narrow park. A wonderful way to see New York!
One day we took the train up the Hudson river. After about an hour we arrived in Peekskill. This is just a tiny shithole to be honest, but I had to jump into the Hudson to take a swim and then we found a wonderful little brewery! To be honest the food was quite bad, but the beers were great! They make their own beer, as well as serve other local brews, but the few kegs they produce is eagerly consumed within a week or two by people from all around the place. The Hudson, by the way, changes direction of flow 4 times a day, with the tide, and its water is salty, all the way up to Peekskill at least.
Of course I did the shopping, walking Manhattan 10 hours a day running into every little shop in Soho, on Broadway and all. Afterwards I learned, however, that the thing to do is to go to New Jersey. They don't have any tax on clothing and shoes, so the $35 I paid for a pair of Levi's on Broadway, wasn't the best deal around...
If you need a haircut (or just some candy or a fun time) visit the Brooklyn General Barber Emporium on Bedford Avenue in Williamsburg, Brooklyn. The service is great, the barber shop the cutest place you can imagine and the street, all the way between 3rd and 9th Street is as hip as it gets. There are loads of restaurants, bars and shops. I bought a nice bicycle Brooklyn T-shirt for myself as well as for my 1-year old niece at Brooklyn Industries.
Another pleasant surprise with NY was that they actually have realized the climate issue and the benefits of organic materials. The first ad I saw at the airport was about the climate change and there's organic clothes and food all over the place. I guess the bike lanes can be traced back to this issue too. But when I saw 4 helicopters running on the pier close to the Brooklyn Bridge, and then heard that you take a 'copter to the airport, I was upset...
There are all kinds of neighbourhoods in NY. The manic, intense Times Square area. The sterile, concrete, high-rising Upper East-side. The cool, shop-dense Soho and West Village. The student, cafe- and bar-filled East Village. The money-hungry Wall Street. The relaxed and lovely Park Slope in Brooklyn. The tourist-packed Broadway. The hip and happening Williamsburg in Brooklyn. The Coney Island (which isn't an island!) at the southern tip of Brooklyn. The well taken care of parks. But almost everywhere you can also find run-down houses and areas, forgotten by capitalism...
Since I'm studying Spanish I was thrilled to see all the Spanish used. All signs, on the subway etc, that were meant for the neoyorquinos (or new yorkians) had a Spanish translation. Often even was written in Spanish only. Excellent practise!
One thing that I reacted on was how divided the town is though, not only that money flows only into some areas, but also how people hang out with their own only. You never saw Jews, with their small hats and black clothing, mingling with others, as an example. The Chinese stuck to Chinatown. Could it be that in a country without any social security systems worth mentioning you tend to stick to your kin? This is sad, and maybe this could explain the violence in this screwed-up country? I mean, you don't kill somebody you know, only the "other ones", people you don't know...
But I can't end this on such a sad note, so let's go shopping! Paragon Sports is a nice, huge shop for outdoor things. There's a fun store on 33rd Street, run by Jews, that have decent deals, good service and a huge selection of anything electronic - B&H. They have a very complicated system where you line up to get serviced, they then send your stuff on a transport system down to the exit, you go to the cashier and pay (one line for cash, one for credit cards) and then finally can pick up your stuff at the exit. The shop is filled with tourists and men in green clothes and small hats. So, I doubt they have the best deals in town. In fact I bought a camera in a dodgy store somewhere on 18th Street and was easily able to cut the price by 25%. B&H don't bargain.
And as a nice finish, let's eat! :) How about some excellent cookies at Mrs Fields on Broadway (all over actually). When it comes to cookies I prefer the once we found in a street van one day in Park Slope, but how shall I ever find that again? Maybe a lovely vegetarian panini beside the Flatiron building instead? No, why not treat ourselves - L'orange Bleue at Broome/Crosby has amazingly good food, and really creative too. Of course we should have burgers in the USA. P.J. Clarke knows how to do them! And as a finish, why not read a newspaper in the european style Cafe Borgia (I don't understand the bad reviews they've received, I found the place just fine and very charming).
Wow, yeah, it's time to stop. A great place it is, New York!
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