Saturday, March 31, 2007

Many Houses in Detroit Cheaper than the Average Car

BusinessWeek reports a strange anomaly - many houses in Detroit are now cheaper than the average car. This reflects two trends- one, the average car is now $29k- that seems like a lot to me, but I believe it. Also, it reflects how bad things have been for Detroit automakers, and consequently for Detroit. But they reap what they sow. Labor contracts negotiated long ago that pushed tons of costs to the future (especially medical payments and pensions) allowed them to be profitable for a bit. Also, they lost their edge to Japanese car firms. I personally don't think I will ever own a GM or Ford or Chrysler, and will probably only have a Japanese vehicle. I would be more likely to get a Korean car than an American car, actually.

Again, this makes me think of the importance of mobility. Think of all the autoworkers that bought their houses and then lost their jobs because of their company. They had a home they owned and couldn't just up and leave. And because lots of people lost their houses, they couldn't get the same value they could have before. If they had rented their houses and done more things to be mobile (like not have a garage and storage unit full of stuff), they could have up and moved to Indiana, Texas, or especially Mississippi, where the Japanese cos are building massive new facilities. I wonder if at some point a Japanese Co will build a major plant in Detroit, a true twist of fate.

A leading indicator for a recession?

Love hearing people talk about things like "my mechanic's guide to inflation." Here is a prominent contrarian likening a struggling wood company to a sign a recession is imminent.

RJ's method for going out

I mentioned that I am living with a lady and her daughter. The lady is the manager at the theater hear in Leblon. It's three or four small theaters of about 250 seats each. Anyway I didn't have anything to do last night so she invited me to one of the shows. I was having trouble following it, but it was fun nonetheless. After the first show, met an odd love triangle. So the lady I'm living with's name is Fatima. She has a boyfriend named George. Then a lady comes and we realize is the mother of George's youngest of 2 daughters. She looks about 50, like George. Then a guy that looks about thirty comes, who is that lady's husband, along with George's/her daughter, who looks marginally younger than her husband. Then her boyfriend comes. Then Fatima comes out, and I realized that this whole arrangement wasn't awkward to them at all. Anyway we all went and saw another play, and then I got a ride home at like 1. But I still wanted to go out.

I just started walking down the street, talking to people. Then I saw two English speaking guys and just said, "hey, you guys want to go to Lapa." They said yes, and we were off. Making friends is surprisingly easy if you just ask. They were both about 30. One was an Englishman on a business trip for Schlumberger. The other was a Brazilian that works for a networking company and spent a decade in New York so he speaks perfect English. Anyway we had a few drinks, laughed a lot, made fun of people, and then headed home. Got a microeducation of Brazilian business on the car ride. The Englishment talks about how there is no attention to details and excess bureaucracy. He is a technician that hooks up offshore platforms to the actual drills, and he said he could do his job in 2 or 3 days. But the Brazilians he was working with (at PetroBras, the gigantic Brazilian oil concern) wanted to dick him around. He had been there a week and accomplished nothing. Anyway it was fun to hear some of the details. He went into more detail about the offshore platforms and technical stuff, but I won't bore you with it.

Friday, March 30, 2007

Government Ousourcing

The WSJ today has an excellent article about how the government is increasingly using contractors and consultants for its project. The article highlights especially Booz Allen Hamilton, one of the Big 4 consulting firms (McKinsey, Boston Consulting Group, Bain, and Booz). The company has grown fast thanks to its large number of government contracts, which now make up more than 50% of revenue for the firm.

This raises a lot of questions. I suspect that a big part of the problem of why the government can't do it themselves is that they're not willing to pay talent the appropriate price, and most talented people they get leave quickly for the private sector.

Still, on one level it's probably good that the government is getting a lot of expert help. The article makes it seem like the government is wasting money. No bid contracts are a problem, even though for security reasons it might make sense, but I sense that there is some efficiency going on there as well.

Value of California Carpool Lanes

Now that California has surpassed the limit of 85,000 carpool lane permits to be given to hybrid owners, people are paying a $4000 premium (versus a similar hybrid without the permit) to get one with the sticker. Story.

Normally you must have 2 people in the car to use carpool in many parts of California, and 3 during rush hour. But most still drive by themselves for practical reasons. So there is huge value to being able to drive by yourself and still use the lanes, which can cut an hour a day off some commutes.

California raises so many interesting transportation questions. For one, how California's amazing highway network played a big role in the massive sprawl going on throughout the state. And said sprawl only necessitates more freeways. When does it end?

Thursday, March 29, 2007

Carnaval


One of the floats from Carnaval. This wasn't nearly the most elaborate (it also just shows the back part of this particular float). The best part is that everyone in the stands is dancing and singing the song, which everyone has memorized. The parade is the highlight of the Carnaval festivities. Best part is that you can get there the day of and scalp tickets for like $5 or $10. Brazil has a stadium called the Sambadromo that is built just for this parade. Each of 15 samba schools parades for 90 minutes over 2 days - and the parade ends at 5 or 6 in the morning. Each school spends approximately $3 million each year. Then they start over all again. The parade is also a competition, and Brazilians have their favorite samba school - the most popular being Estação Primeira de Mangueira (or Mangueira for short), whose float this is. Each school even has colors and flags, Mangueira's being green and pink.


This one is more typical - with lots of nearly naked dancers all over the float. Everything is fully mechanized. The giant head bobs up and down, and it shoots confetti. Strobe lights and colored lighting are popular.

But my favorite float:

It's a real life Where's Waldo! They call him Wally, and the first picture says "Where's Wally?" See if you can find him. They would reshuffle every time the doors closed.
My friend Damion just sent me a NY Times op-ed by Donald Shoup, the UCLA parking guru who is the face of the movement to raise parking meter prices. Raises meter prices makes a ton of sense. I wish policies like this could be implemented in droves. Very little downside for anyone (over the long term anyway, since the lucky few who find the cheap parking surely love it), lots of upside for everyone.

Also, I would like to see more experiments in road pricing, but that opens up a whole can of worms, so I'll settle for the small victories for now.

Wednesday, March 28, 2007

Newsweek writes about how despite what the general real estate market is doing, super-hot cities are doing well. It's interesting to see which cities make the grade. Why Seattle, for instance?

The formula is usually a large city with a large expatriate population flush with cash.

What's funny is that this is different from what some people thought - that people would flow from expensive places to cheap places as communications technologies improved. I expect this to happen to a certain extent. I mean today in Rio I made and received calls using a 520 number, instantly communicated with friends and business contacts, and chatted with my girlfriend in Argentina, who was doing the same thing. Not being with the girlfriend is genuinely sad, but incoming callers I get have no idea I'm in Brazil unless I tell them. Living this far away is an extreme example, and I would choose Buenos Aires if price is the goal, but what about more people in the US moving to Montana and Idaho, for instance?

I'm glad I'm moving to Dallas, where the average house is about $160k.

Meanwhile, the Wall Street Journal lets readers in on a secret that Wu and I discovered long ago - that owning student housing can be a great idea.
One of my favorite bloggers, Greg Mankiw, lays out what he struggled with academically.

I find it interesting that he says foreign language was hard for him because of memorization. Never thought good memorization skills were a prerequisite for foreign language excellence. Excellent memory skills I have not, yet I'm now spending a year learning my third language. We'll see if I agree with him.
WalMart (story about growing global footprint) earlier this decade quickly went from America's darling to a lightning rod for criticism. On Fortune's list of "America's Most Admired Companies", WalMart went form #1 is 2004 to #20 today. This sharp rise can be mostly attributed to the negative publicity it has spawned. My personal view is that WalMart has made some big mistakes (locking workers in stores, discriminating against women), but that conceptually WalMart doesn't deserve it's growing negative reputation. People seem to attack WalMart for the same reason they complain about outsourcing and such. WalMart is hardly worse than stores like Target, Kohl's, and KMart, but it gets the brunt of the criticism. Yet what people want WalMart to do would cause it to get crushed by these same competitors. We're talking about a business with a 3% or so profit margin.

Anyway I'm curious to see how much WalMart's negative reputation hurts the brand. I own the stock, but when I told my mom she should have her investment club invest in it, she said absolutely not. They own Costco and won't buy WalMart on principle. I make some stock decisions for my sister, and when I included WalMart, she asked me to sell it. How many customers don't shop there for the same reason?

On a random note, I'm curious to see how much a presence Tesco can establish in the US. It is a British big-box grocer/retailer like WalMart. They like WalMart focus on operations excellence and efficiency. The game is far from over. In general, I think these big box retailers will do well. I just wonder who gets more of the pie.
I'm going to try to start linking more to interesting things I read. I always wish that more people would send me links and such of the most interesting stories they read - since I spend so much time reading things that aren't always interesting.

Here is an interesting profile of Eclipse, the company that is making microjets that will cost just $1.5 million and operate at half the cost of cheap jets today. The market for private air travel is growing. Warren Buffett long ago realized the potential and bought NetJets, a company that sells fractional jet ownership. Now a company called DayJet is trying to function as an airtaxi - having lots of private planes able to be chartered on short notice.

Some of the planes don't even have toilets, but I'll be Eclipse sells a lot of them anyway.

Tuesday, March 27, 2007

Who needs Big Macs?

Seems like everywhere abroad that getting the Economist is hard, and then after finding one you get sticker shock. Prepare to pay like $8 on average or so. But today I bring it up to illustrate the difference in cost between Argentina and Brazil.

Cost of the Economist in Brazil - $12
Cost of the Economist in Argentina - $2

I am in the wrong place. And Argentina even has better steaks, but don't tell anyone I said that.
Back in Rio

I spent the last 5 days or so in Buenos Aires with my girlfriend Vanessa. It was great to see her and help her move. She made the mistake of paying her full semester's rent for her place without seeing it. And while it was in the same neighborhood as advertised, it was not in a very nice part. Furthermore, this was Argentina, so of course they have to dick her around and not let her know if she's getting any of her money back if she moves.

But we ended up finding her a good, if temporary spot. Anyway I seriously would consider buying an apartment in Buenos Aires. The price/rent ratio is outstanding. Cons: hard to get a mortgage, political risk, having to go through a designated agent. But for someone living down there, it might be worth the risk. Seriously if I had a 2 year job down there or something I would strongly look into it.

We saw her friend's place that was 1 bed, 1.5 bath, about 800 sf with a large balcony and access to a clubhouse and roof spa, in an outstanding area of town, all new, and they paid $175k. Earlier Vanessa has rented a loft that was 2 beds and 1 or 2 baths that would cost $60k. Given how nice Buenos Aires is, it could work.

Anyway that's for someone else to figure out. It just got me thinking.

Sunday, March 25, 2007

Going out in BsAs

Had a great time going out with 6 people tonight it BsAs. Went to a nice restaurant that keeps you thinking "at what point do prices go up because they have to."

Then went to a couple other places and ended up begging to get into a kareoke bar. It was well worth the effort.

Friday, March 23, 2007

In Buenos Aires for a few days with Vanessa. A few observations:

*they have delivery for seemingly everything. For example, we went to an ice cream place with about 10 delivery scooters outside. They better hurry.

*things are still cheap. I remember thinking in 04 that their consumer prices couldn't remain cheap for long, but they have. I predict that will end later this year when politicians finally let prices rise.

*so white. You swear you're walking around Europe. But as the Economist notes this week, recent immigrants are from Bolivia and Paraguay.

*lots of dog walkers. They're everywhere.

*ridiculously late dinners. Tonight: 11:30 and the restaurant was still peaking. Time we WERE going to meet people to go out - 2 AM.

Wednesday, March 21, 2007

My Favorite Way to Get to Know a City


For the past three days I've basically done nothing but ride a bunch of busses around the city. Half the time I actually am going somewhere- such as to the University where my advisor is at or to the city center. But the other half of the time I just get lost. I just see where the bus takes me. It's like a free tour. I listen to what everyone on the bus is talking about- occasionally getting into a conversation myself. When I see something cool- place that I want to eat at or something cool to look at, I just get off. Then I get back on, and see where else I may end up. It's quite fun, and you get to know the city by doing so.

Tuesday, March 20, 2007

For some reason have been thinking about "mobility" a lot lately. Maybe this is because of all the discussion about inequality stemming from the recent surge in corporate profits without a commensurate surge in wages. One of my big responses - that mobility is extremely important, hence a need for focus on education and training.

But then I read about physical mobility in one of my many RSS needs (anyone who has been around me for a full day knows I spend way too much time reading on the Internet). I'll try to find the link at some point.

But the gist is this - that a new research paper shows that higher homeownership rates correlates with higher unemployment. This seems odd - you would think more employment would let people buy more houses. But it is actually more logical when you realize that homeownership locks people into where they live. So if someone gets laid off, it is a lot harder to move to where a new job may be than if the person is just renting. Despite owning real estate, I am a big fan of renting for several reasons.

This brings up something I've been thinking a lot about lately in conjunction with mobility - the mortgage interest deduction (here's a piece in the NY Times, by the guy that wrote my favorite biography of Warren Buffett). It is one of the biggest reasons owning is so popular. There would be many benefits to removing it, and indeed as the federal government continues to need additional funding, it may become part of the political discussion (along with being more aggressive about narrowing the tax gap, which is crucially important and has been discussed by the Freakonomists). Anyway I promise to talk about it more in the future.

Monday, March 19, 2007

Alright finally going to start blogging over here again. Had an outstanding bit of travel with Vanessa in January and February. You can see some posts over at her blog vanessaadvent2007.blogspot.com. I also posted a handful of times over there, but not nearly as often as I should have.

I was originally going to have 4 days back in the US. This was because the Fulbright will pay for a plane ticket, but only directly to Brazil and on a US carrier (Congress of course mandated this. Another example of not giving taxpayers the most for their money, but hey they pay for it, so I'm not going to start a massive lobby...). Instead Vanessa was named a finalist for the Truman Scholarship, and her interview would be 2 weeks after I was going to leave originally. So I figured I'd stay, and besides it gave me a chance to be back for a bit and enjoy things.

I flew back to Rio on Friday. Two interesting tidbits about flying to South America. A) you'd be surprised how cheap it is. You can fairly easily get a round trip for $800 or so. B) not everyone realizes that South America is way east of the US. Which South American country do you first hit if you go straight south from the tip of Florida? Columbia? Ecuador? No, you go completely west of the entire continent. In fact, Rio is pretty darn close to West Africa. Twice as close or so as it is to Phoenix.

Anyway I stayed in a hotel the first day so I could take advantage of storing the two biggest of my 4 bags (backpack, small carryon, a hikers backpack, and a duffel bag, all half empty in case i end up with more than i came with) at the hotel. I was going to have an exhaustive apartment search, but the hostel I stayed in the next night was miserable. It is already hot and humid here since it is the end of summer, but there was neither AC nor even a fan in the hostel, and it was like a sauna. So I expedited my search process and now am with a family. I'll post more on them and their scary cat later, including a picture. Also plan to have retroactive pics and such from the last 2 months.

All the best,
Ryan