Kuta Beach

Kuta Beach

Sunday, 19 September 2010

Has Feminism Failed?

I have been reading Are We There Yet? which is about feminism and whether it has made any progress today even though recent statistics reveale that women still earn about 20 per cent less than men. The study claims that women earn less mainly because they take time off work to have children.

Arguements can be made that companies should be more child friendly and have subsidized childcare. The Australian government has already started implementing paid parental leave. In my opinion, paid parental leave--to be paid for by increasing company tax rates--is a poor idea. Companies will likely pass on these cost increases by decreasing wages and increasing the prices of goods. Everyone who has made a lifestyle choice not to have chidlren are punished so that those who decide to have children are subsidized. But some argue that government should encourage higher population growth with subsidies. But this runs contrary to the planned reduction in immigration that both Labor and Liberal are planning. How can you on one hand reduce immigration citing too high a population and on the other hand maintain subsidies like the Baby Bonus?

Back to the topic of feminism. In my opinion, the best way to increase women's pay is to somehow encourage them not to have children or at least to get the husband to do the childrearing. But the reality I see is that women themselves want to have children. Women themselves are the ones who choose to take time off work, choose to take care of children, and choose to do the housework. It is something they like and enjoy and according to their actions they seem happy to forego money for it. If that is what they want, perhaps it is better to simply let them have what they want rather than try to push them to do something they don't want.

Women nowadays have it good. For those women who choose not to have children--or have children but get the husband to take care of them--they often do very well in their careers. I have seen very many successful women who are very focused on their careers.

The statistic that women earn less than men also hides the fact that many stay-at-home mothers get subsidized by their breadwinner husbands. The husband goes to work and earns money while the wife stays home and takes care of the children and does the housework. When the husband comes homes, he gives maybe 50 to 70 per cent of his income to the wife. The wife's earnings in this case does not show up in official income statistics but it is a legitimate source of income for the wife nevertheless.

Saturday, 18 September 2010

The Parent Trap (1998)

I have finished watching The Parent Trap, starring a young Lindsay Lohan.

The movie is about two twin sisters who meet at a summer camp. One girl has a mother who lives in England and the other sister has a father who lives in a vineyard in California. Both these people used to be together in an intimate relationship but then separated. Both little girls want their parents to get back together again, so they hatch a plan to switch places and persuade their parents to meet again.

As an obstacle to the two getting together again, the man who owns a vineyard is engaged to be married to a golddigger woman.

Lindsay Lohan who plays both the sisters Annie and Halle was adorable as a teenager. But unfortunately the the Parent Trap can be too cliched and sterotypical. The golddigger publicist who does not like camping is one such stereotype that went too far. But nevertheless, this was a very cute movie and I would recommend it to others.

Survivor Nicaragua Episode 1 - Young at Heart

This blog post contains spoilers.

I've seen all seasons of Survivor. There have been 20 so far, and Nicaragua is the 21st. In this season, the two tribes are divided by the older players (over 40) and the younger players (under 30).

Let me just say early on that after watching last season's Survivor Heroes vs Villains, the first episode of Survivor Nicaragua was quite disappointing mainly because not much seemed to happen. It was great to watch Survivor again after waiting for a bit, but all in all this was an average episode.

During the immunity challenge, the young tribe won and the old tribe went to tribal council where they voted out a woman named Wendy who looked young but was actually about 48. My opinion was that the main problem with her is that she was not physically strong (it is normal in Survivor for weaker players to be voted out early) and because she did not bond well with the rest of her tribe. She knew that she was different and tried hard to bite her tongue and not say much. She spent much of her time working by herself rather than bonding with others players. It is important for players to not only try to work and to show that they are valuable and strong but to also put some effort into socializing with others. During the tribal council she came out strong and effectively blamed everyone else in her tribe for not being nice to her. After her outburst I was sure that she would go. You don't demand respect from others. You earn it.

The preview for the second episode sort of suggests that the younger tribe (called La Flor) will go to tribal council and there will be massive argumetns involving one of the younger blonde male players, pejoratively called Fabio.

Gold Does Not Produce Income

Even though there have been fears of a double-dip, the stock market has gone up. The All Ords has moved from about 4500 last month to 4700 now. Surveys indicate that fears of a double dip are starting to go away. During this period of stock market growth, the price of gold continues to go up as the US dollar continues to deteriorate. Gold is reaching US$1270 per ounce now, citing some people to call it a bubble.

But if gold is a bubble, why would it be? Before we label any asset price increase a bubble we must ask ourselves first if there is a sensible reason for asset price going up. Gold is valuable because its chemical properties make it suitable for use as a currency (read Properties of Good Money for more information about this concept). Many currencies around the world are being devalued because of money printing by government, leading to the price of goods going up. Gold cannot be easily produced as it requires mining, which is difficult. This means that the rarity of gold, which affects its value, is out of the hands of government and therefore gold is free of corruption.

The ABC came out with an article claiming that gold is a bubble (read The Gold Rush is Fools' Gold). The reasons for this are uninspiring. The article mainly appeals to authority by citing Gearge Soros. It also claims that because gold produces no income (e.g. real estate produces rent, stocks produce dividends, etc) then gold therefore has no value and therefore it must be in a bubble. 
"Gold will never generate cash flows, so for purist investors it has no value. From this point of view, gold itself is in a bubble driven by investor fear, implying that the price of gold will collapse when investors realise the world is not ending," Ms Howitt noted in a statement.
This is the worst argument I have ever heard. An investment doesn't need to produce cash flow to be valuable. An investment is any asset that holds or increases in value. Some assets produce income, which gives it value. However, there are many assets that do not produce income that can go up in value, e.g. gold, paintings, and wine.

If you invest in stocks at the moment in Australia, you'll get a dividend yield of about 3 per cent. If you invest in bank term deposits, you'll get about 6 per cent. If we went by the rule that an investment's income is the only indicator of the investment's value, then it would be wise to invest in bank term deposits. However, many people invest in shares because even though the dividend yield is relatively lower now, there is the potential for future capital growth as companies reinvest profits back in their businesses. The most successful investment in history--shares in Warren Buffett's Berkshire Hathaway--has never produced any income. However, term deposits, which give income yields of around 6 to 8 per cent on average, have zero capital growth. Measuring gains with both capital gains and dividends shows that the historical performance of stocks and gold have been better than than that of term deposits.

Sunday, 12 September 2010

Bob Katter's Protectionist Demands

The 2010 Federal Elections in Australia created a hung Parliament. In order for one of the two major parties to gain enough seats in the lower house of parliament to form government, a coalition needs to be formed with a bunch of independents. Most of these independents are either urban socialists (Greens politicians) or rural socialists (the ex-Nationals). One of these independents is Bob Katter.

On a recent episode of Q&A, Bob went off about how Australia should apply tariffs to protect its manufacturing and agriculatural sector. He claims that Australia should do this because so many other countries do it. The problem with tariffs on agricultural goods is that they will increase the costs of food. When you go to buy your groceries you will pay more. The costs of living are high enough and a tariff will only increase those costs. Why will food prices go up if there is a rise in tariffs? Tariffs discourage imports. If there are fewer imports, there is less competition. Australian farmers can raise prices of goods without worrying about foreign imports undercutting their products. That other governments protect their agricultural industries is no excuse for the Australian government doing so. That the American government or the European governments apply tariffs only benefits the farmers at the expense of everyone else who pays higher prices for food.

Saturday, 4 September 2010

Saving Money by Collecting Coins

There are many benefits of credit cards. There are credit cards out there that have no annual cost. You don't pay anything for them but when you buy things with them you get automatic insurance as well as other benefits, such as cheaper petrol. So long as you pay off any debt you have every month, you will not have to pay any interest. Examples of free credit cards that allow this include the Bankwest Zero credit cards and the Coles Group Source credit cards. I highly recommend both of these credit cards. In fact, I have both.

There is one major problem with credit cards and it is not really an economic argument but rather a psychological argument. The problem with credit cards is that is that they make it easy for you to spend money. It is so easy to be walking in the mall and all a sudden you see something you like. It is so easy for you to whip out your credit card and then buy it. Because it is so easy to use a credit card, most people (me included) tend to overuse it.

Debit Cards Don't Help

Many people think that they can replace their credit cards with a debit card and the problem is solved. It is believed that debit cards are better because you are spending your own money and therefore you will be careful with it. If you spend someone else's money, you won't be careful with it. I think this is illogical. In fact, I think debit cards are quite bad. The problem with debit cards is that it is linked to your transaction account and if your balance becomes zero, the bank will charge you a penalty (maybe $40 or so). It is much safer to simply fill up your credit card with lots of cash so that your credit card account is in surplus. Then you use your credit card as if it were a debit card. If for some reason you make a mistake an go under, it doesn't matter because you will just be using a credit card as if it were a normal credit card. It is true that the bank can slap a penalty on you if you go over the credit limit on a credit card, but having a debit card does not fix that problem.

Using Cash Helps

For small purchases, using cash is good. Cash is good because it allows you to spend a set amount and you cannot go under. With debit cards and credit cards you can spend more than you have. With cash, it is impossible to spend more than you have. If you have only $10 in cash in your hands, you cannot buy something worth $20 with cash.

However, there is a problem with cash. If you carry around a large amount of cash, it is too easy to spend it all. If you carry around $5000 worth of cash in a mall, apart from the fact that there exists the risk of theft (assume you keep your cash in the bank and take it out via the ATM) it is still very easy to spend the money. It is easy to spend using credit card, but it is almost as easy to spend cash. In practice, any cash you have in your wallet is as good as gone. It is so easy to spend that you will find yourself spending it on lattes or sandwiches. Using a credit card at a cafe is frowned upon because it slows things down, but every shop or restaurant loves receiving cash. It is so quick and easy to hand over cash and if you carry high denominations of cash, you could lose money very quickly.

The way to fix this problem is to leave in your transaction account or wallet only the amount you need for the week and then put aside the rest. E.g. if you are paid $1500 per fortnight, you can estimate that one meal will cost $10 and you will have one meal per day for 10 days, which comes to a total of $100. You leave $100 in your transaction account and put the remaining $1400 away where it is difficult to access it, e.g. a term deposit. This is a good idea because it ensures you will only spend $100 for the forthnight. Assuming you have no credit card and only use your ATM card to withdraw money before you spend it and don't withdraw more than you have, then you will only spend $100 per fortnight, which is quite little. The problem with this is that you may be in an emergency situation in which you need money. Suppose you only have $20 in your transaction account and you are in the city on a Friday night with your friends. You have a meal and then all of a sudden you have no money in your bank account. Suppose you are driving home and all of a sudden you need to fill up on petrol. If you have no money, you may be stranded. This is why so many people carry credit cards. A credit card is useful in case of an emergency, but like a double-edged sword although the credit card can help you during emergencies, it can hurt you because it is easy to spend money. I have found a solution to this problem. It involves collecting coins.

Collect Coins

I carry around credit cards, but during periods in my life when I want to save money, I keep my credit cards locked away in my bedroom. Whenever I buy something with cash, I put all the notes in my wallet and put all the coins in a special zip pockets on my jacket. When I get home, I put the coins into a jar. Once this jar has got enough coins, I put some of those coins inside my car--in the cigarette box, in the glove box, etc. I also put coins in drawers in my desk at work. There is a risk that the coins will be stolen, which is why I tend to only keep silver coins in my car and at work, and I only keep in total about $20 to $40 worth of silver coins both at work and in my car. This means that if some thief steals the money, they won't steal much and it simply won't be worth the hassle to carry all those silver coins just to steal a small amount. I keep the gold coins locked up in my house--but I don't have much.

Why is it a good idea to do this? If I wanted to save money, I could lock up my credit cards and then use cash all the time. If in the event I run out of cash, I can simply tap into my coin stash. For example, if I am driving and I have no paper money in my wallet and all of a sudden my car needs petrol, I can simply collect silver coins in my cigarette box in my car and use that to buy petrol at the petrol station. It is true that using silver coins to buy petrol is slow and embarrassing--but that is the point! Because it is so embarrasing and slow to use silver coins to buy something, you are less likely to spend money (unlike if you have a credit card or paper cash). However, although silver coins are slow and embarrasing to spend, in the event of an emergency, you can use it.

Peter Switzer - A Prophet of the Cult of Equity

I've been reading Pep Talk Time on Yahoo!7 Finance. In this article, Peter Switzer claims that even though we are going through times of great uncertainty with many people fearing a double-dip recession, it is now that we should actually be starting to pile up into dividend-paying stocks. His analysis offers no reasons as to why things will improve in the future. The arguments for a double-dip recession are strong: massive public debt caused by massive stimulus, which will require either extreme money printing or massive taxation, which will retard future economic growth. This is black-and-white logical reasoning for why difficult economic conditions are ahead of us. But Switzer resorts to cheap tactics like name calling, calling those who are pessimistic about the economy "nervous Nellies." His reasons for why the good times are ahead are completely illogical:
  1. The contrarian argument - Everyone thinks things are bad. Therefore things are good. According to Switzer, "The best piece of analysis of why it's unlikely that we will see another stock market crash, like the one of 2008, is because there are so many prophets of doom out there who are preparing lots of people for another stock market slump." This is a horrible argument. It is wrong to believe something is correct just because everyone else believes it, but it is also just as wrong to believe that somthing is wrong just because everyone else believes it.
  2. Faith - The economy will do well in the future because it just will. According to Switzer, "I knew it would take time for the repair jobs and the stimulus to kick in but I knew or suspected on the strength of history, informed opinion and economics it would happen." I should add that nowhere in the article does Switzer actually explain what sort of "informed opinion" or "economics" he used to argue that we are in for good times ahead. His argument is simply based on faith, faith that things will be good in the future. Switzer goes on to say the following: "Eventually the global economy will turn from doubtful growth to definite growth and then stronger growth culminating in very strong growth. However, that will take a few years and the market will anticipate this gradual improvement but now is not the time." In other words, in the long run everything will be okay. But does he present actual reasons why this will happen? No. He just says it will for no reason. This is blind faith.
  3. Speculation has been retarded - According to Switzer, there are no more asset price bubbles because all the bubbles that have been blown in the past have popped. People are now parking their wealth in cash. They money on the sidelines means that there is no more rampant speculation, which is what causes bubbles and leads to crashes. According to Switzer, "all of this caution and the enormous amount of cash that's on the sidelines in bonds and bank deposits as investors play it safe, actually stops the unbridled enthusiasm that creates excessive booms and then crashes." This may have been true after the GFC when asset price bubbles popped all over the world, leading to an economic disaster. But right after the GFC, the world's government implemented a massive stimulus program, which has reinflated the bubbles again. It used to be the case that keeping your money in cash is a safe option, but this is not the case anymore. The rising price of gold shows that investors are worried about the status of government currency as an actual currency. Rampant inflation (rising prices of goods) makes dollars a poor store of wealth, and so people are forced to beat inflation by investing, either in stocks, real estate, gold, or many other assets. Does this reduce speculation? Far from it. Speculation should increase as people seek assets that hold value.
This faith that the economy will always recover in the long run looks very much like a religion or a cult. Robert Buckland from Citigroup called this the "Cult of Equity" and argued that this faith-based cult is under attack. If buy-and-hold (a more apt term is buy-and-hope) is a cult then Peter Switzer is a prophet of the cult of equity. Prophets are those religious figures who believe they have communication with God. Cult of equity prophets believe that through supernatural faith they can forecast the future and infer that the the economy will grow strongly in the long run.

Right after GFC, when I heard on the news that governments would engage in massive stimulus of the economy, I made every effort I could to buy shares. The market rallied strongly by about 50 per cent. However, the stimulus does nothing. It creates jobs and income by inducing demand for products, but where the private sector gains due to the stimulus the government sector must suffer because stimulus money comes from the government. Government must somehow make up for their losses, which means they must increase taxes inthe future. The losses of yesterday's private sector is today's government sector loss, which is tomorrow's private sector loss. If we add interest costs if government borrows money to fund the stimulus, this means that in the long run the private sector ends up paying more to cover up the losses of the past. This is crazy. It is like a teenager paying off a credit card with another credit card. I am not necessarily saying that we are in for a double-dip recession, but I am now pessimistic, and I am no longer 100% in the stock market. I have sold off shares and am now starting to load up on cash, bonds, and gold.