30 September 2008

US Economy Sinks

Here's a funny comic I found.

Markets Fall After Bailout Rejected

Tomorrow I will have to report on my net worth and I am not looking forward to it. In the US, the bailout has been rejected and world markets have crashed. Here in Australia the All Ords has fallen about 3 per cent to 4500. Some people who are geared into the stock market, such as Enough Wealth, don't seem to be posting anything. They have become very quiet.

Last week I purchased 20 shares in Woodside Petroleum, hoping the bailout would be passed, economic growth would resume, and oil and gas prices would go up. I purchased each share at $57. Today each share is $52. When I purchased the shares, the price of oil was US$106 per barrel. Now it is US$96 per barrel. I'm not complaining because I rely on petrol a lot since I drive about 50 kilometers every weekday. I think it's important that I hedge myself against rises in petrol prices. If this downturn continues and oil prices remain low, I should be able to pick up cheap shares in oil companies to prepare myself for what might be an oil boom in the future.

24 September 2008

Councils Use Google Earth to Spy on Houses

According to Eye Spy with my Google Eyes, Australian local governments are using Google Earth to see if any renovations from people comply with regulations. They also have access to satellites that are able to pick up an A4 piece of paper in our backyard.

I have listened to a Spoonman argument (on talkback radio) about this topic and many people who were for Google Earth said that the fear over privacy was caused by people being unaware of the technology. They claim that what is in our backyards as well as the look of our houses are public anyway.

Google Earth will not only catch people naked in their bathrooms through open windows but will also catch people walking into adult bookstores.

By broadcasting pictures in public and displaying it on the Internet, Google Earth has set a legal precedent that will legitimize pedophile Jack McClellan's practice of taping little girls at shopping malls and posting the videos up on the Internet for pedophiles to watch.

There are many times in public when you make a mistake. If few people are looking at you, it's not a major problem. However, if someones takes a picture of you and puts it on the Internet, you are in trouble. For example, what if you are at the beach and suddenly you accidentally let your bathers fall down so that your private parts are exposed. Then someone takes a picture and posts it up on the Internet so that your private parts are exposed for the whole world. Even if you have children your children may accidentally expose too much flesh (e.g. by taking their shirt off) and then someone like Jack McClellan may take a picture and post it up on the Internet. Since no private parts are showing the picture may not be classified as child pornography, yet your child may be traumatized by this.

Some people claim that if you ask Google to remove embarrassing pictures, they are likely to do so. This is fine, but it is the legal precedent I am concerned about. If Google is allowed to take pictures and post it up on the Internet, then what is stopping anyone from doing the same? What is stopping Jack McClellan from hunting for little girls and posting pictures online?

21 September 2008

Investing in Oil Companies

With the recent collapse of Lehman Brothers, shock waves have hit the world markets. The All Ords is at 4700, which is very low. The price of oil has gone down from US$147 per barrel to US$90 per barrel. The price of petrol here in Australia is still high because the Australian dollar has depreciated. One Australian dollar used to buy US$0.98. Now it buys only US$0.80. I am happy that my mutual fund invests about 40 per cent in non-Australian assets because that will definitely boost my returns as the Australian dollar depreciates. I have always said that a home country bias is stupid, and now this currency depreciation proves it.

If I am going to buy shares in a company, I am thinking of buying an oil company. The reason why is because oil seems rather cheap at the moment, which would have depressed the stock prices of oil companies. Another reason is because it can provide me with a hedge against rising petrol prices. Petrol prices are by far my biggest expense. Jack at The Survival Podcast believes that this reduction in the price of oil is temporary and oil will keep going up. Many people who believe in the dominance of China and India believe that oil will continue to go up in the future. The real question then is whether supply can keep up with what is expected to be rising demand. The supply of oil is highly manipulated by cartels like OPEC. In general, suppliers of oil are criminals who control countries. They sell oil to us as if they are drug dealers taking advantage of our addiction. Many say that we are near Peak Oil and that oil producers are lying to us about how much oil they hold. I am scared about the opposite, which is Deep Oil. I am worried that there is plenty of oil in the world but the suppliers are hiding it so that they can extract as much money from us as possible. The Peak Oil versus Deep Oil controversy is far too complicated for me at the moment. Most of the articles on the Internet delve into conspiracy theories.

A Study in Scarlet

I have just finished reading A Study in Scarlet, a story by Sir Arthur Conan Doyle. This was the first book to feature Sherlock Holmes.

In this book, Sherlock Holmes is called to a murder of two men in London. Together with some other characters, he chases down the killer and catches him very quickly. The book then moves into what seems like an unrelated story about a man and daughter in the desert who find a group of Mormons. At the end of story, the seemingly unrelated story about the Mormons is tied into the killings in London.

What I like about this book was the nice language used to describe the desert in the Western frontier. What I didn't like about the book was the fact that all the explanations for everything that happened were lumped in at the very end, although this I suppose may be normal for a detective novel. The character of Sherlock Holmes I find is very annoying. If I were working in the police force I would not want to work with a man with that sort of attitude.

19 September 2008

Why Wouldn't a Capitalist Support Public Schools?

I speak to many people who call themselves capitalists and many of them say they are against public schools. Many capitalists believe that vouchers should be given to parents and parents themselves choose which school they send their children to.

Let us define capitalism as a system whereby individual rights are protected. Capitalism ensures that nobody has the right to coerce others to do anything they don't want to do. Capitalism ensures freedom.

The problem with the voucher system is that parents choose for their children. The child does not choose himself. Already, the child is denied freedom and is coerced into a school by his or her parents. This lack of choice and obvious coercion already goes against the principles of capitalism.

However, many believe children are an exception because they do not have the ability to decide what is best for themselves. Hence parents make decisions for them. The child is the property of the parents.

The problem here is that parents can make poor decisions because e.g. they are lazy, unintelligent, or they don't care about their children. Let us assume that a particular parent wants to teach his child sex education and the way he teaches this child is to bring this child to a hands-on sex school that encourages the child to actually have sex with a prostitute. This would be fully legitimate under a pure capitalist system since the child is the property of the parent and the parent makes the decision of what is best for his or her child regardless of social or collective morality. Thus capitalists support child rape. If someone were to say that a particular capitalist who wants to send his child to a sex school is wrong, then the accuser can be labeled as a socialist who wants to impose his morality on others. According to capitalist principles, the father choose what he wants to do with his own property and therefore he choose how he wants to educated his son or daughter, which means he can have sex with them if he wants to educate them about sex.

If we assume that a child is better off being reared according to the morality of the community rather than the morality of whatever pervert parent he might have, then we must have public schools. Public school curriculum can be set democratically.

17 September 2008

Pay Everyone $10,000

I would like to talk about Basic Income, the idea that the government should pay every single person a living income. I estimate that a living income would be about $10,000 per year, but this would change depending on inflation rates, and so a Basic Income Commission of the government needs to be set up to increase Basic Income in line with inflation.

I think a Basic Income is important because it gets rid of wage slavery. Many people think a pure capitalist society is a free society, but it is not. It allows the most able to prosper while crushing and enslaving the poor and turning them against themselves. This was the view of George Fitzhugh in his book The Failure of Free Society.

Slavery in Egypt involves giving slaves an option to work. If they do not work, a whip is used to inflict pain. Given the choice between work and high pain from a whip, the slave opts for work. Wage slavery is similar. A capitalist gives a worker the option to work or to quit. For many workers, quitting means poverty and starvation, which mean pain and death. (Note: I am assuming a perfect idealized capitalist state, i.e. no Medicare or welfare in general.) Effectively, pure capitalism leads to slavery as the worker is slave to need.

Where will we find the money to pay everyone $10,000 per year? Simply, we abolish all other welfare. We abolish public schools, Medicare, stimulus cheques, etc. A Basic Income is capitalistic in that it allows the consumer to decide how to help himself and lets private suppliers help. This is in opposition to the State giving the poor what the State believes is right for them. Moving welfare into the private sector allows for efficiency and competition.

Paying everyone a Basic Income would require taxation. I suggest that citizens be taxed to the point where maximum revenue is extracted. This doesn't mean that citizens are taxed 100 per cent because then the economy cease to exist. If your income tax were 100 per cent, would you work? The tax rate that maximizes revenue may need to be found out by constructing a Laffer Curve (Ronald Raegan concept). It may be the case that tax revenue turns out to be greater than the transfer to people. For example, suppose that $200 million is collected in tax revenue. Suppose that $10,000 is the Basic Income and we have 1,000 people in the population. This means we need to distribute $10 million (1,000 times $10,000 = $10 million). We have $200 million collected in tax revenue and have sent $10 million in obligations to people, so we have $190 million left over. What do we do with this extra cash? I suggest bringing more people in from other countries so that more and more humans can be freed from wage slavery.

What happens if the tax revenue collected is not enough to pay everyone $10,000? Then simply the Basic Income will have to be reduced. Since the Basic Income is what we assume is the bare minimum needed for survival, there will be some wage slavery and exploitation, but this is unavoidable. This system will mitigate wage slavery but it will not get rid of it entirely.

Vanguard Too Expensive?

I invest in a mutual fund from Vanguard Australia. Vanguard loves to talk about how cheap its index funds are. They are right in that their index funds are cheap compared to mutual funds from big, well-known companies like Colonial First State. The problem is that they aren't cheap compared to direct share ownership or ETFs. Vanguard in the US provides ETFs, but Vanguard Australia doesn't. Vanguard Australia's MERs are also quite high. I pay 0.9 per cent per year. I am starting to believe that if I purchase shares directly I can replicate the broad market myself while paying zero management fees.

Some people argue that DIY indexing is more expensive because, for example, if you wanted to replicate the S&P500 (probably the most replicated index in the world) you would have to buy shares in 500 different companies and you would have to constantly buy and sell as companies go in and out of the index. The whole idea of indexing is that you follow an index. What makes one index better than another? For example, you could use the S&P500, but you could also use the Dow Jones Industrial Average (DJIA). In Australia, you could use the S&P/ASX 200 but you could also use the S&P/ASX 300 or even the broader All Ordinaries. Who ever said that 200, 300, or 500 is a sacred cut-off number? If you hold 500 companies, in reality if you added 100 more there wouldn't be much difference because each marginal company you add has a relatively small market capitalization. At some point you are overdiversified. If there is no such thing as overdiversification, then why do indexers only hold the top 500 or top 200 companies in a country? Why not hold every single company in the country or the world? I think that holding the top 20 companies is enough, but if you want to go further you can easily, and the costs will be lower if you held them directly. I think that if you factor in costs of diversification you can use calculus to derive the optimal number of companies to hold. William Bernstein claims that the best option is to hold "every single company" but I doubt he actually holds every single company in the world. If you're an indexer, you hold an index, which is a selection of companies.

Of course, companies change. Some top performers fall from grace. For example, Enron collapsed. If a certain company falls from an index, the index fund manager will sell the shares. The DIY indexer can do the same.

I happen to think that minimizing cost is more important than strictly following an index. Strictly following an index I think is quite dogmatic. I recommend buying randomly using the top companies (using market cap as weights) and then every now and then superimpose the performance of your portfolio onto to the index to see if it roughly matches. You could use statistical techniques but I think just eyeballing is enough. By doing it yourself you pay zero management fees. Vanguard argues that costs matter. If you believe them, you should ditch them.

It is true that you pay brokerage fees for buying stocks directly but you must also remember that Vanguard has a buy spread. As long as you're not putting in small amount all the time, you should be okay.

Casio W-800H-1AVDF

I like to think of myself as a thrifty person, but I have just received from a delivery man a wristwatch that I ordered from Ebay. It is the Casio W-800H-1AVDF. All up I paid A$33 for the watch. This price includes postage and handling.

My old watch was running out of batteries. The watch still worked, but the numbers were very dim, which meant I couldn't read it well.

One question I asked myself is whether I needed a watch. Many people say that because we have mobile phones now that display the time there is no need for wristwatches. This is a fair argument. The problem for me is that I don't have my mobile phone with me everywhere I go. For example, at work my mobile phone is banned, so I have to keep it in my bad in my locker. Nevertheless, many of my co-workers flout the rules and bring their mobile phones in. This is a moot point because at work I can easily get the time from the computer as well as several wall clocks.

One place where I need a watch is when I'm in the shower. My mobile phone is not water resistant. It might be able to tolerate a few splashes, but I am sure that it will die if I put it into a stream of shower water. Why do I need to tell the time in the shower? I floss in the shower and I time how long I floss with my stopwatch. I also have another stopwatch running to time how long I take in the shower. This prevents me from using up too much water.

Another time when I need a wristwatch is when I'm exercising on my elliptical trainer. Using a stopwatch, I time how much cardiovascular exercise I do and aim to achieve 210 minutes per week on average. My elliptical trainer faces no wall clocks. While I am on the elliptical trainer I usually leave my mobile phone lying on a table nearby. When I am exercising on the elliptical trainer I cannot see the display on this mobile. I don't like to put the mobile phone in my pockets because that will ruin weight distribution and affect my running.

One problem with relying on time displays from wall clocks is that they could be wrong. In fact, they often are. People care about their own time-keeping devices but don't care about public time-keeping devices. I often see wall clocks at work and then say to a co-workers, "That time is wrong." The co-worker usually just nods and walks away. Usually wall clocks are wrong because they drift away from the proper time and become either slow or fast. Often after daylight savings people don't bother to change them. If you have your own wristwatch you can regularly synchronize it to the time on an atomic clock (via the Internet) and you can walk around certain that you have the right time. However, if you rely on the time-keeping devices of others, you will get contradictory numbers, which adds to uncertainty.

Another use of this watch is when I am in bed and I need to look at the time. The mobile phone is away from my body so when I wake up in the middle of the night I have no idea where it is. However, this watch has an illuminator function that allows the watch to light up with the press of a button. I can check the time even when it is dark.

Another reason why a watch is good is because when you are having coffee, lunch, dinner, or a meeting with others, it is rude to look at the time beuase it signals to them that you want to leave. If you take your mobile phone out of your pocket to look at the time, that is very obvious. However, however a quick glance at your watch can be done with subtlety. You can put your arms on your legs and then look down as if you are tired.

I needed to look at a cheap watch that had all the features I needed, that is, accurate time, stopwatch, water resistant to 50 meters or more, and date display. It is incredible how many expensive watches don't even have these basic features.

15 September 2008


Last night I watched Underbelly on TV. Underbelly is a 13-part TV series that depicts the Melbourne Gangland Killings, which involved more than 30 people being murdered over a decade.

I never followed the killings with much interest, and with so many people killed, it's hard to make sense of everything you read in the news. But Underbelly very effectively put all the pieces together into a coherent story, which I appreciated even if elements of it were fictionalized.

Underbelly was due to come on TV many months before, but a court injunction at the last minute banned the show from airing in Victoria. Nevertheless, it became a hit in other states and many people traded DVDs or downloaded the series through the Internet.

According to Jim Schembri from The Age, the series was poor because the criminals were such dumb thugs that viewers do not care if they get murdered. The real-life Carl Williams claims that he was badly portrayed in the movie. (Underbelly portrayed Carl as a bumbling idiot.) I think it's important to emphasize that I don't think there is much correlation between morality and intelligence. You may hate someone because he is immoral but immoral people can be highly intelligent.

Something else that I found interesting is how these criminals were able to collect girlfriends and wives so easily. It's a cliche to say that women love bad men, but I suspect that most women actually know that their boyfriends or husbands have a dark side but rationalize it away because they are so attracted to the dominant personality or maybe the cash.

I watched the edited version of Underbelly. One of the characters in the show had a pixellated face.

10 September 2008

Assimilating to Australia's Fat Culture

I have been reading an article that claims that weightism is more widespread than racism. According to the article, surveys show that most people believe it's wrong to discriminate according to gender or skin color but it's okay to discriminate based on weight.

Australia is the most overweight nation on earth with 60 per cent of the adult population overweight. This means overweight people here are in the majority and that normal weight and underweight people are a minority. Wouldn't this translate into more political power for overweight people and as a result discrimination against thin people?

Because the majority of Australians are overweight, this means that being overweight is part of Australian culture. When the Howard Government was in power here in Australia they introduced a citizenship test for people who want to become Australian citizens. Ever since then I have heard people say that migrants who come here to Australia must fit in and conform to the local culture. However, since most Australians are overweight, then a migrant who is optimal weight or underweight (BMI <25) is not fitting in since he or she has a feature (low weight) that makes him or her a minority. Under the doctrine of assimilation it is therefore essential that any healthy, optimal-weight migrant who comes to Australia must start eating more and more foods with lots of refined sugar and saturated fats. The migrant must also reduce the amount of exercise he or she is doing.

After logically applying the doctrine of assimilation to these new health facts on obesity in Australia, we also reach the conclusion that anyone in Australia who is currently not overweight is un-Australian.

Given that this result is absurd, doesn't this prove that the idea of assimilation is also absurd?

Are Americans Getting Enough Vitamins?

There is nothing I hate more than contradictory findings, and in the world of health, contradiction is everywhere. For example, does the average American get enough vitamins in his diet? According to an article in the Sydney Morning Herald that advocates taking multivitamin tablets, Americans do not get enough vitamins in their diets:

Given the medical profession's history of damning vitamin supplements, the last thing you'd expect in a medical journal is advice urging all adults to take a daily multivitamin pill.

That's exactly what appeared in the June 2002 issue of the Journal of the American Medical Association, when doctors from Harvard Medical School concluded that the diets of most Americans were inadequate, and contributed to so much chronic disease that all adults needed a supplement to plug the gap.

However, according to an article that attacks Vitamin Water, most Americans do in fact have enough vitamins in their diet:

A vitamin-fortified drink may sound like a swell idea, but there are two caveats to keep in mind. First, most Americans aren’t vitamin-deficient, according to Marion Nestle, a nutrition professor at New York University. A government survey in 1999 showed that the median American adult man or woman already consumes more than the Recommended Dietary Allowance (RDA) of vitamins thiamin, riboflavin, niacin, B6 and B12, and three-quarters of the RDA of vitamins C, B9 and A (including carotenes).

08 September 2008

What I Didn't Learn at School But Wish I Had

I am reading Jamie McIntyre's book What I Didn't Learn at School But Which I Had. The man claims to have become a multi-millionaire in a few years. Of course I am highly skeptical of all his claims now that I have realized that he has received a slap on the wrist by ASIC. Nevertheless, his writing so far is fairly entertaining. He claims that when he was young he started his own business and got killed (not literally) doing so. He was $150,000 in debt. Then a rich mentor taught him how to become rich again. What surprises me is how similar this story is to Robert Kiyosaki's stories. What I can find in common are two things: (1) a disaster and (2) a mentor. Kiyosaki was a failure at school and when he started his own business he also failed. He had a rich dad and a poor dad and his rich dad acted like a mentor and taught him all he needed to know to be rich.

That being said, I would like to point out a strange inconsistency in McIntyre's book. On page 1 he says the following:

Unfortunately, now the standard of living for many Australians is dropping rapidly, despite our politicians trying to convince us otherwise. With all the wealth that still exists, why is it that so few Australians get to share in it? What is going on that limits us to sharing in only a fraction of this country’s wealth, and what can we do about it?

This suggests that it is all doom and gloom for most Australians, and we need to listen to wealth experts like him to save ourselves. However, on page 8 he claims the following:

In this country we are all incredibly wealthy. Do you think anyone in Australia in their right mind would want to trade places with someone in Bangladesh or Ethiopia? We have a tremendous amount of wealth already and I had to start to recognise that. In fact we already have everything we need to be successful. And that is a lot to be grateful for.

02 September 2008

Net Worth Report for August 2008

Cash: $136
Mutual Funds: $25,683
Superannuation Funds: $3,335
Car: $5,825
Kiva: $528

Net Worth: $35,507


My net worth has increased by over $2200 this month, but I think this is misleading. My car has just suffered from a massive oil leak that has ruined the engine. The mechanic gave me two options: sell it and buy another car or fix everything for $1100. After talking with many people, I decided to fix the car because selling it would see me lose a lot of money because the buyers will factor in the stuffed engine. Add transaction costs like stamp duty and insurance and I will definitely be worse off. In order to get enough cash to pay my mechanic (he only deals with cash) I had to get a loan from my brother.