Category Archives: Money & Trade

Got RFID?

Upsiders complain. And they have been complaining about what new conveniences they didn’t get on the latest iPhone. One of them is a technology called NFC. I complained about the Rams in the NFC West, because of those damned Cowboys, but that’s a different story. This NFC is near field communications, a brand new technology that can best be described as secure bluetooth with a shorter range. But how secure is secure. Downsiders want to know.

How about this for a rule of thumb for downsiders? If it can be done automatically, know how to do it manually. Hmm. I like it.  I think this obviously makes sense for paying for stuff at a cash register, but the idea for NFC is that you don’t have to open up your wallet – that the cash register goes into your wallet for you and takes your money automatically. You know, just like a pickpocket. Nice and convenient.

Well what if I told you that there’s an older Upside technology that already does that? Yes, you may remember that it’s called RFID, for radio frequency ID. It broadcasts a little bit of information (and a credit card number is only a little bit) to a receiver. And what if I told you that there’s a 30% chance that you already have that on your credit card. Hey now! Thing is, any hacker can buy a receiver and swipe you. They’d have to be as close as a pickpocket, but it’s possible. Check out the following alarming 6 OClock News style video, if you have a couple minutes to spare.

Now American Express and Visa and those other guys aren’t stupid. They know that fraud limits the upside uptake of their products. That’s why they have mainframes chugging 24/7 to check all of your prior spending patterns against all new purchases. If you’ve never shopped at Nordstrom and bought $1000 worth of shoes, chances are such a transaction is going to raise hackles back at Visa’s cloud. And of course you are reasonably insured on authorizations post-hoc. You’d be surprised at how much computing goes on while you’re waiting at the register. (Enough so that ‘Free’ creditscore.com is profitable if you only pay 4 bucks a year, but that’s another story). So while it’s absolutely true that you can be pickpocketed, it is less true that crime can be profitably followed up as they showed in the video. What’s more likely is that your credit card information will go into a pile to be sold in bulk on the black market.

Nevertheless, you ought to check your wallet to see if you are vulnerable in the first place. Out of the 40 or so cards I have, only my Chase debit card (on the account that is overdrawn $20 bucks) is vulnerable. Plus, that card stays home, not in the wallet.

I promise that we’ll be getting the wiki up shortly so that you’ll have access to these Downsider facts.. Happy shopping!

Risk Aversion in Equity Markets

David P. Goldman is one of my financial gurus. Here he goes through a rather elaborate explanation to come to the conclusion which is the title of this post. A lot of people who are not economists are saying that capitalism is broken. I have a great deal more confidence in men like Goldman who actually watch what capital is doing and can explain what’s going on, instead of looking at the price of gas, panicking and listening to politicians blame each other’s character.

This is one chart among the many that makes sense to me.

Goldman says..

It is a bad time for the market when utilities trump other sectors, but they did so during the past two years (technology came close, but without Apple would have lagged far behind). Shown in Exhibit 2 are price returns only; when dividends are included, total returns to utilities rise by another 8%, bringing utilities’ two-year returns to 30%.

Another sign of times is the fact that utilities and consumer stables traded in lock step with Treasuries during the past three years – a noteworthy break from past trading patterns. Exhibits 3 and 4 below show a close relationship between bonds and the stocks with the most stable cash flows, namely utility and consumer staples. The scatter graph of bond yields against stock prices in these two sectors shows a more-or-less straight line relationship.

I’m looking for some co-hosts to sign on and be authors. If you have a good grasp of the sort of thing Goldman is saying, you could be my editor for Money & Trade. In the meantime, you can see that the handbasket is roomy and Hell may not be as close as it seems, unless you’re in mining.

Speaking of mining, now that I think about it, I did not do so well in that sector. Based on what I was hearing about China’s demand for copper in their massive electrification plans, I bought Southern Copper (SCCO) and BHP Billiton (BHP) earlier this year. Cost me. Hmm.

Downsider Investment

My little clutch of speckled eggs are doing just fine. I stayed out of the market for quite some time, having learned the very worst way back in 2000 or there abouts. You know what I’m talking about, the bursting of the Dot Com bubble. And I wasn’t even too deeply speculative. I picked some self-evident winners and ignored a lot of advice. So yes I got in on Netscape back in the day. What I didn’t do was cash in my gains on a periodic basis and ended up losing.. I still pout when I think about it. Let’s just say I ended up losing a down payment on a house that would today be worth somewhere around 1.7 million bucks, yes even now. I remain quite sanguine about all that, because in fact, I’ve had worse luck and because I’ve always had my inner peace since my daughters were born.

One of the things I hope to do here at the Downside is to gather a few experts in various fields to sign on as co-authors of various sections. Investment is going to be one of those sections. And, building on the premise that I suggested before, we are going to have to talk about means-tested disasters. Everywhere from slight downturn in the market, to fiscal cliff, to hyperinflation to global meltdown. I’ve spent some time over at ZeroHedge, and they have a mix of paranoia over there. Now is a good time for me to check them out again.

You see I’ve been picking stocks, and this year I’m proud to say that I’ve done about 23% on my portfolio (so far). With any luck I’ll be able to retain those earnings. The problem is that as I see it, the downside scenario that is the most likely to occur is continuation and worsening of economic bad times. That means first of all that my investment strategy needs to change in anticipation of the bad news.

This brings me to a number of points.
1. I need to begin to understand bond funds.
2. I will be publishing financial & investment information here at the Downside
3. I obviously expect that there’s not going to be a complete global financial meltdown any time soon.
4. Let me introduce to you my financial gurus.

On that last point a bit of background. A couple years back I determined that I was reading far too broadly and listening to too many people who didn’t deserve my attention. To help focus myself I took on what I called the T50 project -which is basically to identify the Top 50 thinkers I would bother reading. So if we could imagine the desert island scenario – which 50 books would you take, I’d take the best books of the T50. Well and also “How To Build An Airplane From Coconut Palms”.

My Financial Gurus
Niall Ferguson, Tyler Cowen, Nassim Nicholas Taleb, David P. Goldman