Month: April 2007

Choosing a way out of misery

Observations on two books read back-to-back:

On the surface they could not be more different. Hardin was a distinguished academic, a professor of ecology at UC Santa Barbara best known for his 1968 article Tragedy of the commons. Limits is densely written, carefully argued and creates a compelling story out of an overload of evidence. It does not make for easy reading, dwelling at length on the words of Malthus, Keynes and Smith. Mohammad is the recipient of the 2006 Nobel Peace Prize for his work with the Grameen foundation on micro-finance. His work is auto-biographical and very personal, freely mixing anecdotes from his own upbringing in Bangladesh, frustration with the disconnect of his economics department in Bangladesh from the reality of the country around it and harsh criticism of World Bank policies on foreign aid.

But both are concerned with the same problem at the end of the day: reducing misery in the world. Given their different starting points, it may have been inevitable that both also arrived at very different conclusions. Hardin insists on the importance of recognizing natural limits. These are “hard” physical limits imposed by the parameters of planet Earth, distinct from artificial scarcity created by economics. (This is our home, he argues, dismissing as an adolescent fantasy the common science fiction vision of leaving the Earth behind and colonizing other planets.) The overall message is very pessimistic: unless we learn to respect these limits and stop runaway, unsustainable exploitation of natural resources, at some point the entire race will experience drastic decline in standards of living. By contrast Mohammad is optimistic, arguing that given the necessary resources, individuals will improve their own condition.

(continued)

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Equities vs. real-estate

End of the housing bubble and resulting correction is encouraging sanity checks all around. CNN/Money published an interesting article comparing stocks against real-estate as investment vehicles. This is a good long-term view of the situation, undistorted by short term anomalies and irrational exuberance prevailing in the middle of the next contemporary tulip frenzy.

Bottom line in the eight-point comparison is stocks outperform in three categories (performance, cost, effort and diversification) while real-estate has the edge on three (taxes, leverage and volatility or more precisely lack thereof) and drawing on transparency. But the weighting of the categories will differ for each person and the story is more complex in each case.

Historically S&P 500 has returned around 12%, while real estate appreciated at a rate of 3.5%– barely keeping up with inflation. But the situation can easily reverse in the short term. For example, the same article cites 2001-2006 as one period where housing outperformed the broader indices:

Real estate has packed quite a punch of late, appreciating 12.4% annually between 2001 and 2006, according to the S&P/Case-Shiller U.S. Home Price index. That clobbered stock prices, which gained only 4.3% a year as measured by the S&P 500.

These 5 years saw the end of the dot-com bubble, followed by a recession, beginning of the second Gulf war and slow recovery. Real-estate continued to appreciate and prop up consumer spending with the equity built. But a different study looking at about 25 year stretch between 1978-2004 found stocks delivering better returns at 13.4% verses 8.6%. (That is arguably a more fair comparison because it includes a mix of strong growth periods including the 1980s, covering the later boom-bust cycle in technology and ending at the height of the real-estate bubble.) Another interesting data point was that REITs overall proved to be one of the better investment categories, combining the low transactional costs of stocks with a market valuation pegged to diversified property appreciation.

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Paying tribute to Jackie Robinson

Today is the 60th anniversary of Jackie Robinson breaking the color barrier in major league baseball.

Even though the number 42 he wore while playing for the Brooklyn Dodgers has been retired from all baseball, commissioner Bud Selig granted a temporary exception for contemporary players to wear that famed number today. Current players paying tribute to the man include David Ortiz of the Red Sox, Ken Griffey Jr. of the Cincinatti Reds and all of the LA Dodgers, descendants of the Brooklyln Bums, the very first team to undertake integration.

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Hybrid car as generator-on-wheels

CNet News is running a photo-story titled Hybrids that give back to the grid. The article centers on heavily modded hybrids exhibited at the Alternative Energy Solutions Summit at AMD headquarters in Sunnyvale, CA. One of them is the well known PRIUS+, a plug-in hybrid project from CalCars. More intriguing is the concept car from Pacific Gas & Energy, where the car can feed power back to the grid. Intended application is to reduce the power drawn from the grid, or even profit by a type of electricity arbitrage over time. During the day when air-conditioners are running full blast and stores are open, power demand is higher– and so are prices– compared to evenings. Charging at night with mains power (or simply charging from normal driving) and selling the surplus back to the grid at peak pricing time has the potential to turn every driver into a micro power-plant operator.

But a more mundane application could turn out to be the prime driver: supplying emergency power in the case of an outage. Typically power can be drawn from a vehicle in a  variety of ways:

  • From the cigarette-lighter adapter, for low consumption needs (<150 W) from charging a cell-phone to running a laptop. Unless the gadget has its own car adapter, this requires an inverter to convert DC from the battery into 110V AC that electronics in North America expect.
  • Directly from the battery, using a beefier inverter. One popular manufacturer’s models go up to 3000W. This is good enough to run most appliances, including microwave, large TVs, PCs, vacuum and even power hungry dishwashers although running them all at once may be a challenge.  (This page from the Dept of Energy lists typical consumption of gadgets.)

Neither can cope with the demands of a water-heater or clothes dryer which can go up to 5000 watts. Enter hybrid vehicles. Batteries in a bone-stock Prius are rated at around 20 kilowatts, indicating that the bank of batteries is capable of supplying all the power required to run a house. Plug-in hybrids have even more powerful batteries since they are designed to be able to run ~40 miles without having to start the internal consumption engine. But the  those batteries may not have been designed to supply large amounts of power continuously. In ordinary driving the “electric assist” kicks in occasionally for heavy acceleration or low-power cruising. (The car can always fall back on the ICE to drive the alternator and generator more power for charging the batteries as needed.)

Either way serious mods are necessary before the Prius in the garage can replace the trusty generator during an outage, which is the vision that PG&E has advocated. It is a promising concept and may well become cost-effective for buyers, considering that a moderate size 5000W generator lists over $3K. This would be one more reason for increased hybrid sales in hurricane-prone areas such as coastal Florida.

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Schadenfreude and sub-prime lending crisis

The housing bubble inspired its own tradition of nay-sayers, doomsday predictors and real-estate Cassandras. One of the first on the scene was the Housing Bubble blog, chronicling the story of excesses gone awry and  sellers in denial well into the correction. It is now joined by a growing chorus of sarcastic, bitter voices. For example there is Housing Doom, not to be confused with Housing Panic or  There are even blogs dedicated to local bubbles in some of the major metropolitan areas such as the San Diego Real Estate Chrono-Collapsometer , Seattle bubble and Boston bubble. Clearly it is fashionable to predict doom-and-gloom in real estate.

Mainstream media is taking a different approach. An article CNN/Money ran yesterday posed the question of exactly what caused the crisis in sub-prime lending. (BTW Wikipedia entry defines that as lending to borrowers with FICO rating below 620.) The blame went to mortgage brokers for steering people to incorrect loans, appraisers for wildly over-stating property values, regulators for taking a laissez-fair approach to the industry, lenders for being over-zealous to extend credit, Wall Street for trading securities backed by substandard mortgage loans and of course, real-estate agents for propping up demand with exaggerated pricing.

Curiously left out of the equation are the borrowers who rushed to snap up these loans or investors who decided to gobble up the securities offered by Wall Street. (In a strange case of deja vu, Michael Lewis’s classic Liar’s Poker about 1980s excesses on Wall Street chronicles the story of Solomon Brothers traders successfully creating mortgage-backed securities.) And this blame game is not distributing the credit equally here or taking into account incentives. Real-estate agents are motivated to close deals and sell the property at highest price possible, which leads to all types of subtle tactics to pressure buyers into over-bidding and sellers into accepting a lower bid as chronicled by  Steven Levitt and Steven Dunbar in Freakonomics. It’s hard to fault NARA for that one. But appraisers are supposed to be objective in producing a fair, unbiased estimate of the market value of a property. A real-estate agent standing smug as the client bids a fortune on low-quality, wood-frame construction mass-produced suburban schlock could fall back on the excuse that he/she is only doing the job. So are the traders pushing mortgage-backed securities on eager investors– supply and demand continues to operate in this climate. But the appraiser who sanctions an unconscionable price with speculative valuations is clearly in breach of professional obligations.

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Renewable energy hits a home-run

At the Colorado Rockies’ ball park in Denver, CO. The Rockies may not have been doing very well in the MLB past couple of seasons, but they are ahead of the curve on greening professional sports. Treehugger reports that the the team has added a 46-panel solar array at the stadium, intended to power an LED based multimedia display system.

This follows on the heels of the Cincinnatti Reds playing a carbon-neutral game  by purchasing offset credit and the San Francisco Giants announcing a solar-panel installation at AT&T Park. (Call it guilt over steroid-inflated home run totals.)

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Distributed breaking-and-entering: novel uses of Craigslist

It’s a common observation that crime online mirrors crime in real life. Fraudsters and hucksters of all stripes have been working at parting people from their money long before the Internet was designed/invented. Organized crime set up shop online, exploiting the new medium for new ways to accomplish same objectives with greater efficiency and lower risk. Identity theft, extortion, pump-and-dump stock trading, pyramid schemes etc. were not new but the web expanded their reach and impact dramatically. (It turns out that all the talk about “economies of scale” and synergies and enabled by a connected world is not limited to legitimate business only.)

But from Tacoma comes this story of influence going in the other direction: bricks-and-mortar crime inspired by its high-tech counterparts. Somebody posted a bogus ad on Craiglist to the effect that a house was abandoned and everything inside was free for the taking. Only it was not abandoned and the owner quite understandably upset at discovering the residence taken to the studs upon her arrival. Quote:

“The ad was pulled quickly, she said, but was up long enough that scavengers stripped the house of its light fixtures, front door, vinyl windows, water heater and even the kitchen sink.”

This is reminiscent of distributed denial-of-service (DDoS) attacks in the online world, but with a more damaging “exploit payload.” Instead of experiencing a temporary outage, the homeowner has unrecoverable property damage. In the standard DDoS, a large collection of machines (referred to as botnet) under the control of a single person (“bot-herder”) are all instructed to focus their resources on attacking a single target. Even with no vulnerabilities on the victim system, the volume of traffic from the thousands of machines is enough to temporarily wipe a website off the map. DDoS remains a popular extortion mechanism: “pay $$$ or else your website goes dark.” Bonus points when the website being targeted is already on shaky legal ground– think online gambling or betting services— and unlikely to seek help from law enforcement.

In this bizarre story from the Pacific Northwest, an attacker with a grudge against the owner (the story cites recent eviction of her two sisters living there) used Craigslist as the command-and-control channel for manipulating people (“bot” equivalents) into doing his/her bidding. But the parallel ends there because in principle every person who participated in the looting had free-will and made a voluntary decision, even if influenced by willfully misleading information. A bot-herder is fully aware of the consequences of issuing an attack order to his/her collection of machines– the PCs have no choice but to carry out the attack once the trigger is pulled. But the anonymous Craigslist poster can argue that it was a prank, that every person made a conscious, independent decision to break-and-enter or remove property from the premises.

Craigslist provided IP address and email for the person who posted the ad, but the question of which charges to file remains. Quote:

Detective Gretchen Ellis, a spokeswoman for Tacoma police, said that, because the case is so unusual, she isn’t sure how it will be investigated or prosecuted.

It is going to be an interesting court case– assuming the suspect is ever apprehended.

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Truth in spamming

“Fraudulent spam” cries the title of a recent unsolicited email message, pushing the limits of CAN-SPAM act. At least the FTC could not accuse this sender of false representation. The finally-out-of-beta Gmail had no problems delegating it to the junk mail folder correctly, but this one deserves points for creativity. With the exception of the unique title, there is nothing unusual about the rest of the message: same generic announcement about a mortgage preapproval, fantastically low rates, not contingent on credit history etc. (Quote: “[…] your credit is in no way a factor”– apparently these folks have not heard about the crisis in subprime lending sector.)

This is not the first time that subject has appeared in spam either. You have to wonder if it is a bug in the software, stamped on by an over-zealous intermediate gateway (in which case why is it not dropping the message completely?) or intentional attempt to exploit the relative simplicity of filters, a demonstration of how unintelligent AI can get. A person looking at a message with subject line “Fraudulent spam” is not going to get fooled. But for all their sophistication at detecting variations and creative spellings of m0r1gag3, the average antispam solution could easily get tricked by a novel approach.

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Vista upgrade– UAC quirks and Dell (un)reliability

UAC created a unique problem for the laptop, intended to dual-boot XP and Vista. More precisely, it was dual booting until a recent “update” from Windows Update rendered the XP side inoperable with a blue screen complaining that registry could not be loaded. But that can not be blamed on Vista. (Yes in principle, one could load the crash dump in a debugger to investigate in copious spare time.) Attempting to rescue files creates an interesting problem, because accessing the XP file system requires exercising the “take ownership” privilege granted to administrator accounts in Vista. UAC gates the exercise of administrator rights, in keeping with least-privilege principle. Under XP take-ownership is applied automatically and would work seamlessly from Explorer. Browse to the documents folder of the other OS and you are authorized every step of the way, because access check logic helps itself to the ownership shortcut.

Under Vista, that doesn’t work. It leads to not one but 2 UAC prompts, after which you end up with an error message to the effect that getting access will require using the Security Tab. (Right click, Properties / Security.) It is here that the ownership can be changed to one of the accounts on the Vista side, and this has to be done recursively by checking “Replace owner on sub-containers and objects.” After a few more UAC prompts, the directory is open to browsing.

But the trouble does not end there– trying to open a Word document results in an access-denied message inside word. Ownership had been changed, but the permissions on the file were not updated and still referred to the non-existent accounts from XP installation. On the other hand, copying the files to a different location, for example to burn them on a CD, required a single prompt in Explorer, suggesting that it is up to each application to detect and work-around these error cases

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Vista upgrade battle stories

So far, so good. After installing Ultimate edition on an older vintage laptop and new desktop PC, the situation is stable. No pressing need to roll-back, no application compatibility issues, no horror stories of data loss, missing drives or precious iTunes collections going up in smoke.

But installation experiences followed decidedly different trajectories, with the desktop working out much better. An AMD x2 system from Dell, it was already labelled “Vista ready” (although the definition of that phrase is in dispute currently) and shipped with a dual-monitor capable graphics card, enabling Vista Ultimate to shine with the nifty Aero Glass visuals. Strange that Dell website made no mention of the dual-monitor capability, unlike other models where customers are given the option to purchase a second monitor.

The laptop, a Dell Inspiron 700m about 18 months old, did not fare as well, perhaps because it was not designed to run Vista. As far as quality problems, that would be the least of its problems. After about 1 year– no doubt coincidentally, the warranty period– the battery no longer holds a charge more than one hour, rendering the machine an expensive brick, unless it is tethered to the wall and drawing juice. But then again given the inclination of Dell batteries towards spontaneous combustion, one must be grateful for a merely useless battery. No more Dell laptops for this blogger.

After the upgrade, the 700m runs noticeably slower but remained perfectly usable. The perceived responsiveness of the system approximates the way blogger’s favorite Compaq TC1000 tablet PC with TransMeta used to run plain XP Professional circa 2003. Vista had no problems recognizing the NIC, wireless card, Firewire controller and smart-card reader. Biggest challenge has been the integrated touch-pad which is currently recognized as a standard mouse device. One of the key pieces of software from Dell website is a custom driver for the touch-pad and associated software that allows fine-tuning the sensitivity of the tracking surface. Without that it is extremely sensitive and the slightest glancing finger movement registers as a click. When typing away at a hurried pace, clicking at random will result in moving the cursor to a different place and scrambling existing text– or worse hitting a button such as “send” on unfinished email. Very frustrating. No Vista drivers from Dell yet.

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