| thieving for open water on the edge of the cryosphere |
[30 Sep 2008|09:32pm] |
Travelling the Northwest Passage by kayak is about many things. But sea ice is what dominates the journey's feasibility. No open water, no kayaking. Where things get complicated is how much open water one needs to be able to paddle between two resupply points before running out of food or summer. I don't have any experience paddling in sea ice, nor do I know anyone who does, so this turns into a guessing game. The ice is quite mobile and so the stakes aren't trivial, as Kabloona's 18 ice locked days on Hudson Bay show. Mark Serreze observes, in his understated way in his talk at AGU last fall, that there's significant variability from year to year and the precipitous melt of 2007 makes it even harder than usual to estimate what will happen in the future. The overall decline is stark and the risk of further steep declines in the near future is clear. From a kayaking perspective this sends two messages. If you want a more historically typical artic experience and are willing to take the risks that entails, go as soon as you can. If you're willing to trade ice navigation risks for the somewhat uncertain climate changes of global warming, wait. Going as soon as one can is involved, but doesn't seem likely to be all that soon.
As I look at the parts if the Northwest Passage I'd like to paddle in NSIDC's historical animations I find myself inclined to think in terms of three ice systems. These are the Beaufort Sea and Amundsen Gulf, the ice between Canada's arctic islands and mainland between Dolphin and Union Strait and the Gulf of Boothia, and Baffin Bay. Historically, what's happened is the Cape Bathurst polynya opens in the eastern Amundsen and the Mackenzie opens a polynya of its own in the Beaufort. The ice then fractures and open water appears from Tuk most of the way to Kugluktuk fairly early in the melt season due to a combination of melt and ice transport toward the Chukchi Sea. Unusually, this system operated this winter as well, creating open water from Dolphin and Union Strait to Barrow by July 2008. The passage east of Amundsen Gulf---Dolphin and Union Strait, Coronation Gulf, Dease Strait, Queen Maud Gulf, and Simpson and Rae Straits---is not subject to this ice evacuation and hence melts out later. The route from Taloyoak to Igloolik across the Gulf of Boothia, Pelly Bay, Committee Bay, and Fury and Hecia Strait is even more iced up, with fast and pack ice persisting past the end of paddling season. Barring significant warming, the only paddling option in this area area is an out and back trip from Kugaaruk. Fast and thick first year ice persists along Baffin's east coast though the end of paddling season as well. So it's not particularly kayakable either aside from short, late season out and back trips from Qikiqtarjuag.
Looking at various ice coverage examples, it seems to me a 30% concentration is the upper end of what one can paddle without getting into lots of navigational complexity and probably ending up falling through weak ice while trying to land or portage. Concentrations under 20% seem a good bit more attractive. While Arctic Sea Kayaking Adventures ran trips in Pelly Bay this summer with concentrations above 35%, these presumably have the luxury of being out and back trips which can vary their route based on what the ice does and can probably call back to Kugaaruk for support. The other data point I have is NSIDC data which suggests ice concentrations ranged from 0 to maybe 35% during Kabloona's 1994 paddle from Paulatuk to Gjoa Haven. Ironically, despite the massive 2005 and 2007 melts, 1994 has the second lowest amount of ice the recent historical record for this part of the passage. Only 1996 had more open water.
Conveniently, Canda publishes recent weekly and daily ice charts in the Annual Arctic Ice Atlas, which offer a great deal of insight into melt patterns and season to season variability. The main challenge is melt times vary by about a month, which becomes quite significant as the paddling season's two months long at the outside. Paddling from Tuk to Kuglugtuk is the easiest part with respect to ice so long as one paddles from west to east, timing the transit of Dolphin and Union Strait and western Coronation Gulf to happen at the end of the paddling season. Paddling the rest of the passage is harder as the ice melts out later. The advantage of getting to Kuglugtuk is the southwest end of Coronation Gulf is the first to melt out, typically in late July, which means one has a decent shot at making a run to Cambridge Bay before the season closes by sticking to the south coast of Coronation Gulf and following the ice as it melts out through Dease Strait. The same approach works for getting from Cambridge Bay to Gjoa Haven but is trickier as Queen Maud Gulf fractures a couple weeks after Coronation, with a tounge of ice persisting between Cambridge Bay and Gjoa Haven until the end of the season. Rae and Simpson Straits fracture and melt out before Queen Maud Gulf, but the crossing of the gulf is likely to happen too late in the season to allow time to reach Taloyoak.
As the artic warms I suspect a year will eventualy turn up like 1996 where one can start from Kugluktuk early enough to arrive in Taloyoak. However it depends on how the artic warms. 1994 and 1996 are near the end of a period of warmer than usual years in this area. Recent years are cooler than usual, though the coolest parts are east of Taloyoak. Lately pack ice has persisted through the end of kayak season in Committee Bay. Will the cold spot persist? Move west? Go someplace else? Who knows? But I figure it'll take a string of warmer years to make paddling between Kuglugtuk and Taloyoak viable. Points eastward along the passage would require even more warming to be kayakable. Be interesting to see how this winter's freeze and 2009's melt go.
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| logistics of a dream |
[23 Sep 2008|07:45pm] |
It's hard to say where it started. I read Kabloona in the Yellow Kayak when I was in college, but certainly, the recent catalyst was a friend of mine tossing me an email asking if I was interested in running the Mackenzie River. We got to talking and agreed the trip would end best in Tuktoyaktuk. But why stop at Tuk? One thing lead to another and pretty soon I had GPX tracks from one end of the Canadian north to the other, had read pretty much everything Wikipedia had to say about the Northwest Territories and Nunavut, and was pondering what exactly it means to kayak the Northwest Passage. Victoria Jason, perhaps better known as Kabloona, is often billed as having paddled the Northwest Passage solo. While I have an enormous respect for the 1500 miles of her journey along the passage (not to mention 1200 miles on the Mackenzie River and another hardfought 1500 from Churchill to Gjoa Haven), they're perhaps a third of the total distance of the passage. It depends on how you define it, but the Northwest Passage runs from somewhere east of Baffin Island to the Bering Sea and splits into three different routes around Banks and Victoria Islands. Victoria paddled about the same distance, but not at all the same route. If one wanted to travel the Northwest Passage proper by kayak it's largely feasible to do so. At least if you're the kind of person who considers paddling open ocean north of the arctic circle feasible. It varies from year to year, but the sea ice becomes navigable by perhaps late June and it doesn't usually start snowing again until mid August or so. So if you don't mind spending a six week weather window (technically known as summer) in a human powered boat dealing with ice floes, storms off the pole, katabatics off Baffin, polar bears and grizzlies, enormous quanties of bugs, highs of 45 degrees, long stretches of inacessible rocky coastline, and going something like 400 miles between resupply points then kayaking from someplace around the Bering Strait to the southern end of Baffin Bay is the sort of thing you can do. Though there's a tricky stretch around the Boothia Pennisula where it's handy to avoid eating for a month and be able to paddle for two days straight without stopping. At a vigorous pace, it'd probably take eight years. At the rate I accumulate vacation I'd be looking at two decades, easy. And, well, there are other things I want to do in life than follow a route meant for and used by ships in a kayak.
So, if you aren't going to paddle the whole passage the question becomes how much of it and which parts. The most varied part of the passage is between Tuktoyaktuk to Qikiqtarjuaq. That's only, oh, 3000 miles or so out of 4500 to 5000. Not surprisingly, the most sheltered and southerly 2200 miles lie along Victoria's track. Either on her route from Tuk to Taloyoak or close to her route from Repulse Bay to Taloyoak. If one skips the problematic paddling around the Boothia Penninsula, namely covering the 600 some miles from Taloyoak to Arctic Bay, there's then another 1100 miles of interesting paddling down the east cost of Baffin Island. The years I'd pick work out to something like 1) 800 miles from Tuk to Kuglugtuk, 3) 300 miles from Kuglugtuk to Cambridge Bay, 3) 400 miles from Cambridge Bay to Taloyoak. Between Aklak Air, Canadian North, and First Air it's not terribly difficult to fly to any of these places. Not that it's cheap, but if you don't mind making connections daily flights can be had. So getting oneself to a put in point or back from a take out point is straightforward once you realize flying from Seattle to Vancouver to Calgary to Yellowknife to Inuvik and then finally to Tuk is the way things work. I haven't checked yet, but presumably air mailing oneself food drops would work the same way. The kayak is more problematic. NTCL's Kitikmeot (western artic) route supplies the hamlets east of Tuk via annual sealift, which is naturally timed for minimal ice and hence happens in August or September. This means shipping a boat south at the end of a paddling season is pretty easy, especially as southbound rates are quite cheap. However shipping a boat north is expensive and, if it's going any place east of Tuk, not useful until the following summer. If you want to paddle east from Taloyoak, the same problem applies to NSSI and NEAS sealifts in the eastern Canadian arctic. The logical thing to do is to start at Tuk and paddle east, leaving the kayak to winter over in Kuglugtuk and and other points along the way.
This all preliminary based on me drawing routes willy nilly across landsat imagery and making guesstimates based on historical ice data and the current sea ice forecasts. But it's probably not totally insane. I'd be more sure of plans if I had better sources for topography and bathymetry and had spent a couple years watching the ice pack and summer weather. Sustaining say, 150 miles a week for a month or more in friendlier waters seems a prerequisite as well, not to mention picking up a dry suit and rejuvenating my eskimo (inuit?) roll. And, even with all that, I don't know if it's a trip I really want. The distances are big and it seems all too easy for things to turn into a mileage oriented slugfest compelled by watching one's eating through as much food as can be crammed into a kayak.
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| politics of another presidential election year |
[13 Sep 2008|10:58pm] |
(this is a somewhat expanded version of an email I sent to a friend earlier tonight)
Let me start by saying that in every presidential election since I've been old enough to vote there hasn't been a candidate I've actually liked. So far I've end up voting against the Republican by voting Democrat. A lot of this has to do with the way current political culture structures campaigns and not the candidates themselves. For example, it's not viable for a would be politician to focus on issues where they might actually make some difference and leave say, abortion, alone. Nor can a candidate be realistic about what can be done in DC; races are run by overpromising and the congressional logjam more or less guarantees whoever gets elected will underdeliver even if you filter campaign rhetoric out of your expectations. I recognize democracy is working properly if, in the absence of any clear majority, not much changes. But IMO the present system invests waaayyy too much energy in keeping things from changing instead of just letting them be and moving on to rational, non-partisan discussion of other issues.
So, fundamentally, what I want in a candidate is someone with the integrity to call bullshit on the system and get politicians to focus on what's best for the country instead of what's best for their party. Obama has some nice talk in this direction (probably about the best any candidate could say and still be electable), but his track record is quite different from what he says. In practice Obama hasn't made waves and has let an awful lot of stuff slide. His campaign waffles like breaking the promise to stick to federal funding don't make me feel any better about his potential. In comparison, McCain has a history of integrity and working cross-party to get stuff done. Not a whole lot of stuff, mind you, but decent traction given the situation in DC. I disagree with him on some things, but not significantly more than Obama (my best match issue-wise was Kucinich). However, McCain's waffled even more in campaign than Obama, to the point where I don't feel his track record is relevant any more.
The question I find myself asking is whether Biden will do a better job of keeping Obama from being all talk or whether Palin can bring back McCain's coherency. I think Biden and Obama have a chance of turning out to be an effective team, whereas Palin looks to me like four more years of Bush incompetence. Personally, my bet is Biden will have a hard time tempering Obama until later on in the term, at which point most of the political capital will have been spent and it'll be hard to do much. But I do hope Obama will be successful and that's a much more enticing prospect than looking to congress to prevent McCain and Palin from doing anything monumentally stupid.
I keep looking for a way to take a positive perspective on this, but it's been a decade and some and I still haven't really found one. If I felt someone could actually deliver on the traditionally Republican hype of smaller, more efficient government I'd be all for it. I understand the anybody but Bush crowd, but when I come across an anti-Bush spew I'm always tempted to shut it down by asking if the person doing the ranting would rather have Robert Mugabe for president. Or perhaps Pervez Musharraf, another leader who was democratically elected in the beginning? While I would much like to see improvement in the state of affairs in DC, there are worse things than another four years of status quo.
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| bear market ruminations |
[10 Aug 2008|12:42pm] |
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Legal disclaimer covering this post is here. If you keep reading, you accept those terms. A while back I came across John Hussman’s observation US equities have underperformed US treasuries over the last 10 years. This prompted me to glance at international equities, which have outperformed treasuries, but I didn’t think too much of it at the time. Secular bear market, equities aren’t as attractive as in a secular bull, yadda yadda yadda. Over the past month Hussman’s offhand observation has slowly been sinking in. The more I think about it, the bigger it gets. What Hussman’s really saying is the equity risk premium doesn’t exist, at present, which in turn means modern portfolio theory doesn’t hold and equities are not efficiently priced. CAPM introductions usually present the efficient frontier as well formed and static, but in practice the frontier changes shape and position and inverts depending on the time periods under consideration. If you look underneath the marketing hype, Rydex raises the tangential, but telling point that all per decade efficient frontier points offered only negative real returns in the last secular bear. Essentially the only thing one could do with conventional asset allocation was to control how much money was lost, though techniques like opportunistic rebalancing offer enough of an edge breaking even before taxes was possible in the 1970s given something like a constant or concave glide path and no decumulation. While history doesn’t repeat itself, the present secular bear with high oil prices, inflation, and land wars in Asia seems close enough to for efficient frontiers from the last secular bear to offer some interesting food for thought. As a backwards looking indicator, the efficient frontier is not a good predictor but still provides historical perspective on optimal asset allocations. Using options as portfolio insurance is quite effective in controlling risk but does very little for returns and diversifying into negative beta is difficult. Solow and Kitces suggest several alternative strategies, all of which amount to attempting to generate alpha by using some form of active management to overweight certain holdings, though their weighting types aren’t exhaustive. As discussed in earlier posts here and countless other places, generating persistent alpha is extremely difficult given a good index. Fooling around with 55 years of S&P 500 historical data, I find it difficult to devise tactical or dynamic asset allocation algorithms which could reasonably be expected to yield more than 0.5% APY of alpha before costs, even when executed with perfect hindsight. This is about the same amount of alpha as accrues from exiting and reentering equities during the 1973-1974 and 2000-2003 bears and spending the other 50 years holding an index fund. Non-optimal exits and entries are assumed; selling a few months after peak and buying a few months before bottom is sufficient to obtain this alpha. A variety of conclusions can be drawn from this, among them that I’m of questionable competency to run my own portfolio much less blog about bear market strategies. Personally, I’m inclined to see variable asset allocation as a way of hedging large downside risks and look elsewhere for sources of alpha which exceed trading costs or management fees. Arguments for indexing are, for the most part, arguments against the investment practices followed by actively managed mutual funds. As only 2 to 5% of managers generate statistically significant positive alpha, a reasonable starting point if one wishes to generate alpha is to take a contrarian look at what fund managers do. Typically, active managers make moderate weighting changes in long holdings and are constrained both by acceptable downside deviation from their benchmark, by remaining fully invested, and by needing to move large amounts of money. They don’t use options or futures, don’t take stock, sector, or country concentrations, don’t invest in alternative asset classes, and don’t use leverage. Morningstar doesn’t offer screens for past use of such techniques or style box drift and the world of hedge funds is even more opaque, so identifying funds which don’t follow typical patterns is difficult without the ability to obtain and sift rich data about how funds trade. However, CGMFX’s 25% 10 year APY is thought provoking. As with other funds which make concentrated bets, Heebner’s returns are volatile and often underperform the market. What drives CGM Focus’ return is a burst of performance every three or four years. This is another way of saying Heebner, despite having prodigious alpha, is wrong most of the time, but is able to compensate for that by finding trades with enough upside to compensate for routinely incurring downsides.
While paper trading and minimally active investing—the practice of leaving the majority of one’s assets in index funds and actively investing only a small portion of the portfolio—are often seen as low risk ways of determining if one can produce net alpha, with fund manager type investments both approaches suffer from taking 15 or 20 years to show statistically significant alpha and not necessarily being accurate predictors of what one would do when fully invested in order to maximize the return on that alpha. I find “Why bother?” and “Why take the risk?” to be compelling questions here, but the answers are highly personal and individual ones. The lack of data on Heebner like approaches suggests to me either net alpha doesn’t get any easier to obtain when the rules or changed or that people who are successful in obtaining such alpha have better things to do than talk about it. However, alpha doesn’t have to sought. From a retirement perspective, success consists of not running out of money before you die and whether you incur positive or negative alpha is irrelevant. Data again seems to be thin, but even simple strategies shift the odds of remaining solvent. Arguably the best retirement position is one where alpha’s unnecessary and a secular bear’s lack of beta can be tolerated. Whether or not this is achievable depends on one’s choices about income, lifestyle, and expenses. But it seems to me to be worth considering.
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| secular thoughts |
[01 Apr 2008|08:39pm] |
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Legal disclaimer covering this post is here. If you keep reading, you accept those terms.
A while back I bumped into Hussman funds’s weekly market commentaries, which in turn lead to reading the frequently mediocre but thought provoking Unexpected Returns, and that chained over to Zeal’s essays. My pleasure in finding a few pockets of market commentary which appear to usually be worth reading aside, the theme I’ve been following of late is the same problem with long term averages which I first blogged on right about a year ago. As I remarked a while back, using buy and hold in a bear market can be asking to be economic roadkill even with massive cyclical bulls. The p/e and yield indicators of long valuation waves suggest the present secular bear market in equities is unlikely to break anytime soon. The writeups of other indicators I’ve come across Iike p/r, other structures like the Kondratiev cycle, and similar history all offer supporting conclusions. Those with bearish leanings are also prone to worrying about monetary inflation eroding real returns. Curiously, I haven’t come across any bullish counterarguments to the links above. Easterling—author of Unexpected Returns—offers some choice comments about standard financial advice still advocating buy and hold strategies appropriate to secular bull markets several years after the 1982 to 2000 equities bull switched to a secular bear. However, in my opinion Easterling overstates the relation between p/e and inflation and a period’s starting p/e and its return; there is a correlation, but it’s weaker than claimed. If one naively accepts the present global p/e of about 15 then the historical estimate for nominal equity returns over the next 20 years is 3% to 12%. As the worst 20 year return in Easterling’s data is 1.2% and the best is 15%, forecasting a 3 to 12% spread is roughly equivalent to saying there will be a stock market 20 years from now. Hardly a surprising statement. Allowing for p/e contraction due to profits reverting to the mean and bear market multiple contraction suggests nominal returns of maybe 1.5% to 4% and a slightly negative real return if inflation remains controlled.
While the future is unknown, to me all these indicators add up to a clear warning that a buy and hold strategy in equities may not yield the 4% or so annual real return I need to meet my investment goals. The question is what, if anything, one does about that. While Easterling suggests the absolute return strategies of hedge funds for secular bears, The Economist has repeatedly published data indicating average hedge fund performance is somewhat worse than the average mutual fund, largely due to higher fees. The survey in their March 1st-7th 2008 issue further suggests enough assets are now in hedge funds (close to US$ 2 trillion) returns are flattening due to the amount of capital chasing the same long-short opportunities. Morningstar’s data indicates the returns of the more accessible long-short fund category are similarly disappointing, though as usual there are funds like DIAMX.LW which have gotten lucky. Zeal argues that since timing of bear market swings is difficult one should pursue a buy and hold strategy in assets with secular bulls. While the fundamentals of the idea are attractive, the argument is that since market timing is hard it’s preferable to engage in sector bets based on secular market timing. Zeal flogs a commodities bull, which is a common theme but one I find questionable both on grounds of how futures contracts work and the general sparseness and general lack of transparency in commodities funds and indices. Getting historical or current index data is hard and the indices are heavy on energy and thinly constituted. For example, the four largest crops are maize, wheat, rice, and potatoes but most indices track only wheat. Commodities funds’ short track records makes assessing volatility and performance difficult and the lack of index data against which to compare further complicates the problem. VGENX and VGPMX are more transparent and have respective p/e of 14 and 18 at the moment, versus a global p/e of 15. If one is reluctant to buy equities in general due to their current price, the commodities sector doesn’t look especially attractive on fundamentals. Unsurprisingly, the sector with the lowest p/e at the moment is financials, which is certainly unattractive on momentum.
The sense I get from all this is the fundamental differentiator of secular bear and bull markets is the risk required by a given return, with bulls offering more favorable risk-return characteristics. While I doubt this is an original insight, I’m finding almost no discussion of how risk-return in secular bulls compares to secular bears. Present recession indicators are not encouraging so I find myself pondering both downside risk over the next year or so as well as the secular downside. Mostly, though, I find myself wishing I knew what I now know about market cycles back in August and acted on my temptation to pile into VFIUX. At least the time it's taken me to realize I screwed up with this market cycle has fallen to months instead of the years it took me to realize I goofed with the 2000 to 2003 cyclical bear.
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| another meme |
[23 Jan 2008|06:41pm] |
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From my Pick Your Candidate results.
| Score | Candidate | Disagreements, Unknowns, Other (brown) | | 22 | Kucinich | Disagreements: (4) Iran Sanctions, Iraq War, Iraq Troop Surge, Iraq Withdrawal
Unknowns/Other: (0) | | 16 | Gravel | Disagreements: (4) Iran Sanctions, Iraq War, Iraq Troop Surge, Iraq Withdrawal
Unknowns/Other: (4) ANWR Drilling, Assault Weapons Ban, Guns - Background Checks, Wiretapping | | 14 | Clinton | Disagreements: (7) Patriot Act, Border Fence, Iran - Military Action, Iraq War, Iraq Troop Surge, Iraq Withdrawal, Same-Sex Marriage
Unknowns/Other: (0) | | 13 | Richardson | Disagreements: (6) Assault Weapons Ban, Patriot Act, Iran - Military Action, Iraq Troop Surge, Iraq Withdrawal, Same-Sex Marriage
Unknowns/Other: (2) ANWR Drilling, Iraq War | | 13 | Edwards | Disagreements: (6) Patriot Act, Iran - Military Action, Iraq War, Iraq Troop Surge, Iraq Withdrawal, Same-Sex Marriage
Unknowns/Other: (2) Kyoto, Border Fence | | 12 | Dodd | Disagreements: (6) Patriot Act, Border Fence, Iran - Military Action, Iraq War, Iraq Troop Surge, Iraq Withdrawal
Unknowns/Other: (3) Same-Sex Marriage, Same-Sex Civil Union, Universal Healthcare | | 11 | Obama | Disagreements: (6) Patriot Act, Border Fence, Iraq War, Iraq Troop Surge, Iraq Withdrawal, Same-Sex Marriage
Unknowns/Other: (3) Kyoto, Torture, Iran - Military Action | | 10 | Biden | Disagreements: (6) Patriot Act, Border Fence, Iraq War, Iraq Troop Surge, Iraq Withdrawal, Same-Sex Marriage
Unknowns/Other: (4) Kyoto, Iran - Military Action, Same-Sex Civil Union, Universal Healthcare | | 8 | McCain | Disagreements: (8) Abortion Rights, Kyoto, Assault Weapons Ban, Patriot Act, Border Fence, Iran - Military Action, Same-Sex Marriage, Universal Healthcare
Unknowns/Other: (1) Same-Sex Civil Union |
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| guitar picks |
[13 Jan 2008|05:08pm] |
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Guitar, like most instruments, are all individuals. While not nearly as finicky as violins and bows, I find getting a good pick for what you're playing and the guitar you're playing it on makes significant difference in the resulting tone. As part of guitar shopping and playing I've developed a bit of fascination with trying out picks of different materials, thicknesses, and shapes. As well as the general lack of decent discussion of picks, so I hope those of you who google your way here find this to be of some use.
I did some catalog digging on the net and the only plastic picks I could find which aren't mentioned below are some 1.5 mm D'Andrea thermoplastic picks which I've not bought as they're too heavy to be of use to me at the moment. The remaining picks I've not tried are metal ones; brass, copper, and stainless steel along with various oddball materials like rubber. Though I've fooled around with various objects as picks, including metal ones like coins. For the most part I prefer the standard pick shape that's like a rounded off isosceles triangle with a fairly sharp but still rounded point. Unlike, say, jazz picks which would have a sharp point at the same location. So this is mainly a post about materials and thicknesses and as such is mainly about pick stiffness and tone. Different instruments have different string tensions and different gauge strings. Use too flexible a pick for the piece you're playing and the pick grip you're using and you'll get slapping sounds as the pick flaps across the strings. Typically, the faster the attack, the firmer the grip, and the heavier the strings, the stiffer the desired pick. Tone is more complex; personally I like to match pick materials to guitars and play more or less everything on a guitar with a particular pick, but there's no reason not to change picks to match the mood of a piece if you so desire.
acetal, 1.0 mm (Clayton)
The most flexible of the pick materials described here, acetal is also the brightest sounding of them to my ear. As the softest material it has the least attack.
celluloid, 0.7, 1.0 mm (Planet Waves)
The original guitar pick material and the stiffest material mentioned here, celluloid has clear, fairly balanced sound that's a touch bright.
delrin, 0.6, 0.73, 0.88, 1.0, 1.14 mm (Wedgie)
More flexible than celluloid and ultex, delrin has a sound quite similar to celluloid but slightly darker. I hear little difference on the lower strings but delrin's highs don't project quite as much and aren't as clear as celluloid's.
nylon, 0.73, 0.88, 1.0 mm (Dunlop)
Second most flexible after acetal, nylon has a fairly balanced sound but lacks the attack of ultex.
polycarbonate, 1.0 mm (Dunlop)
About as stiff as delrin, with tonal balance very similar to celluloid and delrin but somewhat woodier.
tortex, 0.6, 0.73, 0.88, 1.0, 1.14 mm (Dunlop)
Tortex is Dunlop's attempt at faux tortoiseshell. I've never used a real tortoiseshell pick and hence have no idea how close tortex is to the real thing, but it has the darkest, woodiest tone of any of the materials here. Similar in stiffness to polycarbonate and delrin.
ultex, 1.0 mm (Dunlop)
Second stiffest after celluloid, ultex has the most balanced sound of any pick material I've tried so far.
I've three guitars lying around at the moment, my steel string 2006 Breedlove Atlas AD20/SM (six string spruce/mahogany dreadnought, D'Addario EXP 16 strings) and circa 1997 Art & Lutherie (twelve string cedar/cherry dreadnought, Nanoweb Elixir strings) and a friend's 1970 Wilson S-75 (classical spruce/rosewood, not sure which strings but they're of standard gauge). The Breedlove has a balanced sound and flexible voicing due to scalloped bracing and a thin top combined with Breedlove's JLD bridge truss. To me it cries out for controlled, precise picking and a transparent pick which gets out of the way and lets the guitar's tone come through. So a 1.0 mm ultex is my preferred pick with it at the moment. (A 1.0 celluloid and either of the 1.14s I have are too stiff anyway and for some weird reason Dunlop doesn't make a 0.88 ultex.) I find the Art & Lutherie to be on the bright side and, as a twelve string dreadnought, it has plenty of punch. The pick I like best with it is a 0.88 mm nylon and so I adjust for the brightness by strumming up by the fretboard edge of the soundhole instead of the more usual bridge edge. The classical has lower string tension than the steel strings and anyway wants a lighter touch by its nature. As such nearly all my picks are too stiff for it, including the 0.6 mm delrin and 0.73 mm nylon. The best sounding one I have is a 0.6 mm tortex, though it's still a bit on the stiff side. If I were to go buying picks for it the first ones I'd try are a 0.5 mm tortex and 0.6 mm nylon, though a 0.63 mm acetal might work if it doesn't come off overly bright.
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| further derailleur silliness |
[20 Dec 2007|07:35pm] |
The M960 derailleur I eBayed as a replacement for the suicidal M960 started getting cranky a while back. A third M960 popped up in the local Craigslist a few weeks ago so I called up the seller, talked him down a few bucks, and---eyes rolling---picked up yet another high end derailleur to back up the one and a half I already had. Having procured a replacement, I took a more serious look at fixing the second M960 and discovered what I'd thought were stripped threads on the cable binder bolt was actually a walked helicoil. Evidentally Shimano's using magnesium or something for XTR bodies and it's too soft to hold screws directly. So I rode over to the local bike shop to see about a replacement helicoil, which led to a call to Shimano about parts, at which point Shimano offered to inspect and possibly warranty the derailleur. So I took M960 number two off the bike, put M960 number three on, and the LBS called back a couple weeks later saying Shimano had sent a brand new M960 back. I'm now riding M960 number two, have half of M960 number one in the toolbox in case it comes on handy, and M960 number four sitting around while I figure out what to do with it. I guess the suicidal derailleur and the warranty deralleur cancel each other out. So I don't feel too bad.
Until I look at my other bike, whose ten year old XT derailleur has 15,000 miles on it without any problems whatsoever.
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| your password sucks |
[10 Dec 2007|10:05pm] |
One of the less commonly talked about cracking techniques is rainbow tables, which are basically databases of hash value pairs. They've been around for years, but recent algorithmic improvements and ever cheaper hardware have made generation of rainbow tables with a couple hundred trillion entries feasible. From an academic perspective these are interesting in that they allow 99+% of 14 character passwords to be broken by unsalted hash reversal in a few minutes. From a practical perspective, cracking password hashes isn't very interesting since an attacker in possession of the hash you can replay the hash at need without needing the plaintext password. Systems with public hashes anyway salt the hashes to make table based cracks computationally infeasible, so rainbow tables aren't useful for much most of the time. However, given a sufficiently low entropy salt table cracks are feasible. Particularly with a compromised hash like MD5.
The most common occurence of such a case is the client challenge response in NTLM v2, which is the authentication protocol used between newer Windows workgroup machines. NTLM v2 superceded the very weak "hashes" used in NTLM v1 with MD5 based hashes in Windows NT SP4. Many years and many processor iterations later, a realtime, brute force, man in the middle attack against the MD5 password hash was demonstrated at BlackHat 2002 using a cluster. This was easily defeated through password length and of limited interest until the follow on publication of an optmized, rainbow table based, man in the middle attack at BlackHat 2004 with crack times in seconds for typical password sizes. Windows domains moved to Kerberos authentication ages ago, and NTLM workgroup authentication usually occurs in small networks with limited scope for men in the middle who couldn't simply walk off with one of the workgroup machines instead. So the optimized attack is still of limited interest, but not nearly as limited.
I find this bit of history an interesting demonstration of how protocols which were cryptographically strong at their time of introduction can eventually be compromised through algorithmic and hardware improvement and thought it worth sharing. It also underscores just how weak passwords are in a cryptographic sense; a point I often make is guessing a password is equivalent to guessing a symmetric key. Only easier, since passwords don't change as often. A strong password from a rich character set has maybe six bits of entropy per character, so a password equivalent to a 128 bit key requires 22 characters chosen in a cryptographically random way. At 14 characters, the present upper end of rainbow tables corresponds to an 84 bit key. So, loosely speaking, to begin to be secure against guessing attacks requires a cryptographically strong 16 character password. The entropy of most languages is around 50%, so that's roughly equivalent to a 32 character passphrase. Strings of this length are humanly unweildy, so security becomes more about protection of the hash than robustness of the key. And, as NTLM v2 shows, protection of the hash is not always as easy as it seems.
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| World Geography Quiz Meme with Optimization |
[06 Dec 2007|09:23pm] |
So it turns out Africa is the hardest optimize since African country names provide the fewest clues as to where the country is:
World: Continents and Oceans: 36/36
Africa: 133/162
Asia: 93/96
Europe: 129/138
Australia/Oceania: 83/96
South America: 38/39
Caribbean: 53/66
Central America: 39/42
Middle East: 73/75
TOTAL: 90% (677/750)
I found Oceana and the Carribbean to be fairly straightforward guessing games. It helped time jogged my memory of World War II naval battles, but both Oceana and the Carribbean are easily binary partitioned at the top level based on whether the name is singular or plural. That significantly improves the odds since if it's plural it's a box in Oceana and some careful mouse hovering shows which islands come in pairs in the Caribbean. I made a string of lucky guesses in the Caribbean so the score there's likely a bit high.
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| World Geography Quiz Meme |
[03 Dec 2007|10:46pm] |
In support of ![[info]](http://l-stat.livejournal.com/img/userinfo.gif?v=91.7) idahoev, visit The Geoquiz and take all the geoquizzes there through the Middle East (the world, continents, and "zoom ins" ... all the ones where you click on nations). Cut and paste the list below and post your scores! No Cheating!
World: Continents and Oceans: 36/36
Africa: 57/162
Asia: 78/96
Europe: 112/138
Australia/Oceania: 24/96
South America: 36/39
Caribbean: 3/66
Central America: 27/42
Middle East: 63/75
TOTAL: 58% (432/750)
Note that the numbers here are slightly inflated relative to knowledge of the world as certain countries, mostly in the vicinity of Afghanistan, show up on multiple quizzes and I happen to know that area well.
I did this with a twist; the quizzes give you three guesses. So, if you want to you can play the memory game and use the guesses to boost your score; there is a penalty in that you get three points for getting something right on the first try, two points on the second, and one point on the third. However, if you know a bit about a particular map and take the time and effort to memorize carefully you can reasonably get a two point average per guess as opposed to the three point average from knowing it all cold. This isn't cheating per se, but if done well it leads to scores which make you look like you know more than you do. So I interpreted the No Cheating! injunction as either you know it or you don't and banged through to the next question if I didn't know an answer. If I get time I'll go back and redo the quizzes for optimal scoring and see how much I can inflate the numbers; the differences should be interesting, but I'm actually rather pleased to remember 55% of the world off the top of my head seeing as the only comprehensive memorization of geography I've ever undertaken was the 50 US states and their capitals when I was in third grade. Most everything else comes from reading. Many of the countries I don't know exactly I can locate approximately so I ought to be able to do a decent job with guessing. For example, I forget if Lithuania's north of Latvia or if it's the other way around. But I know both are between Estonia and Kaliningrad so I'm guaranteed five points out of the pair and have a 50% chance of getting six.
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| thoughts on benchmarking |
[19 Nov 2007|06:27pm] |
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Legal disclaimer covering this post is here. If you keep reading, you accept those terms. I’ve been spending a lot of time lately on a revisit of the active fund versus index fund debate, which seems to be one of those things which generates a lot of noise and not very much data. This is ironic considering the wealth of studies have sliced and diced the market and mutual funds using all manner of statistics and data sets and unanimously reached the conclusions that actively managed funds typically lag their index by about 1.5%, that active fund underperformance or outperformance is almost completely random, that underperformance is most common situation in which a manger’s have a statistically significant effect, that only about 3% of managers show statistically significant outperformance, that there is no way to predict in advance who those managers will be, and that success is usually an indication of future underperformance. Virtually every big name in investing, ranging from the quintessential Warren Buffet to high profile active fund managers like Bill Miller to boffin Eugene Fama, supports this analysis and recommends index funds for at least the majority of investments. Among the dozens of papers and discussions I’ve read probably the most eloquent stating of this case is by John Bogle. There really isn’t a coherent counter argument; most writing billed as arguments against indexing amounts to quibbles with details and the most serious discussion centers on whether market capitalization is the optimal weighting for indices. Probably the best source I’ve come across is IndexUniverse, which keeps tabs on how well index funds are doing and sponsors interesting things like panel discussions on the various tradeoffs around and limitations of indexing and probes into how much active management really costs. Some of the more scurrilous practices of active management, such window dressing, overcharging for what amounts to indexing, hidden costs, and speculatively launching funds in order to flog the best performers while hiding the worst, come up for discussion. Another interesting source is Vanguard Research which, while reasonably suspected of a pro-index bias and the occasional jab at BGI, DFA, or Fidelity, creditably debunks the conception active managers do better in small cap stocks and publishes very interesting US data and commentary on the active versus index debate in The Case For Indexing. A theme I see running through all this discussion is actively managed funds regularly game their benchmarks by diversifying into categories not covered by the comparative index stated by the fund. Active funds also naturally like to choose whatever index makes them look best. As Vanguard points out, large cap indexes closely track each other while considerable spreads exist among small and mid cap indices. In all fairness, passive funds can be called to account for not openly disclosing the tradeoffs between different indices, which is the same sort of manipulative behavior active funds engage in. While index funds allegedly have low manager risk in day to day operations compared to active funds, the choice of index to track can have a huge effect on where an index fund lands in the market and there are large spreads among funds following the same index. Since markets are a negative sum game after costs, the quality of an index outperformed by more than 45% or so of funds is questionable, as is the quality of an index fund with significant tracking error. Perhaps the best point I’ve seen made is standard measures of index versus active fund performance weight all funds equally and therefore don’t reflect the actual returns obtained—a US$ 100 billion fund beating the market by 1% gives investors a lot more money than when a US$ 100 million fund beats the market by 1%. However, such detailed data seems hard to find; the same can be said for equal weight excess return distributions for international indices. The best source I’ve come across is S&P’s SPIVA reports, which cover a few non-US markets and include asset weighted aggregate figures which don’t deviate much from equally weighted figures. My conclusion for now is both active management and indexing techniques evolve over time as fund managers change strategies to try to get an edge and indices adapt the managers’ habits. Wise investors will check indexes and monitor index funds in much the same way they’d keep an eye on active funds. Benchmarking, therefore, is of the most value when informed by multiple data points instead of the commonly used comparison to a single index. For some markets such as the US, where at least five different sets of granular indices are available, benchmarking against only indices is feasible. But not necessarily desirable. For other markets, only a single index exists and sometimes there’s no readily available index at all. In such situations, benchmarking is necessarily done against different funds operating within the same market or even via comparison with other markets. Even for US funds, such comparative data is often of value as it indicates what sort of opportunities were lost or taken advantage of. For example, as I write this the total US market has a 6.1% 1 year return, versus 17% for the MSCI World ex US index in dollars. In local currency the World ex US’s one year return is 3%, so anyone who thinks international markets are doing better than the US market should revisit their understanding of the US dollar. The broadest off the shelf comparative figure I know of is Morningstar’s percent rank in category, which makes it easy to see how a fund is doing relative to what Morningstar considers to be its peers. This has several advantages, such as comparing a fund which games its assigned benchmark to a bunch of other funds which are probably also cheating in similarly creative ways. There are three major drawbacks. One is the comparison is only within funds Morningstar assigns to the same category and not a composite based on the fund’s holdings across different categories. As a result, you can look at a total market fund and see how it’s doing relative to other large blend funds but not how it’s doing relative to the total market. Which probably isn’t the desired data. A second drawback is a single number provides no information on the distribution of returns and therefore gives no indication as to how much downside loss was avoided or upside gain was sacrificed by holding the fund. Third, Morningstar provides a performance snapshot on several time periods but doesn’t show the range of a fund’s performance. As a result, I tend to benchmark by combining Morningstar category rankings, total return APYs, and X-Rays with multiple indices and relative graphs like this one and this one for the US and this one for international. The category rankings provide broad contextual data, the total returns capture details like dividend reinvestments, the X-Rays give you some sense of what the fund’s actually doing, and the graphs provide some degree of robustness against particularly good or bad looking data samples and make it easy to flip through different timescales to get different perspectives. Charts are sensitive to choice of starting date. If one’s simply looking at what line’s on top, it’s easy to extract what looks like decent performance and what looks like poor performance from exactly the same data. Another problem is the charted data. For example, Morningstar and MSN show a 13% APY performance spread for LLPFX because MSN plots NAV while Morningstar plots total return. A different example is FCNTX, FOSFX, and NIIVX’s 10 to 15% nosedives in NAV when dividends were paid in December 2006. As with rankings and total returns, charts provide data for consideration, not answers. Risk is another factor not well captured by most benchmarks. Comparing the performance of say, a large value fund with a large value index, is reasonably fair if the fund manager sticks to trading within the fund’s stated category and doesn’t use window dressing or other manipulations. Comparing such a fund to a large value index fund is arguably more fair since the index fund also has to make trades, is subject to fees, and so on. However, the active fund, index, and index fund are all taking slices of the market and therefore incur selection risk relative to a total market index fund. So category benchmarks, while ostensibly equanimous, don’t provide information about whether incurring selection risk pays off in greater return. Unlike an index, which cannot be bought or sold, a well implemented total market index fund typically offers the lowest risk position in a market by reducing selection and costs as much as is feasible. So, from a risk aware perspective, the first question to ask in benchmarking is how a fund’s performance compares to a broad index and the second is how the fund’s performance compares to the relevant market slice. As the discussion a few paragraphs back points out, if the broad index fund is a good one most funds will not come out favorably on the broad comparison which, in turn, should provide interesting context for the narrow comparison. However, it remains benchmarking is one of the less efficient ways of checking on how far an active fund’s gone toward taking John Bogle’s oft repeated advice on beating the market.
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| 2007 investment review |
[06 Nov 2007|08:16pm] |
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Legal disclaimer covering this post is here. If you keep reading, you accept those terms. I know 2007 doesn’t end in November, but I started educating myself about investing just about a year ago and began blogging about it not too much later than that. So if I stay on top of the homework my yearly planning cycle’s stuck starting and ending in November. Which isn’t a bad thing; November’s something of a quiet time since it comes after the weather starts to turn and before the holidays. The trails are getting snowy, but it isn’t snowy enough to ski yet and the formalism of starting a new set of year to date returns is a couple months away. It also happens Microsoft made some 401(k) changes which came into effect October 31st and affect a third of my holdings in the plan. This has led to some interesting discussion with the folks who run the plan and I’m learning about how 401(k)s tick. The details are irrelevant to the world at large, but some resources are of general interest. PlanSponsor is a primary source of 401(k) comparative data. The aggregate survey results are available at no cost, though you do have to register. There are also two company filings which contain detailed information about a 401(k); IRS Form 5500 and SEC Form 11-K. Some companies post their 11-Ks online, but if they don’t you can request a copy from the plan provider for any plan you participate in. If you’re interested in another company’s 11-K, track it down in SEC’s EDGAR database and get a copy that way. As to Form 5500, PDFs of the filings can be gotten at no cost from FreeERISA, after another registration. Companies have 250 days after the end of a calendar year to file and it takes a while for the Department of Labor to send the PDFs over to FreeERISA but even the old data’s still pretty interesting if you’re curious about things like employee participation or average holdings. Looking backwards, 2007 was about getting my house in order. Having settled on global indexing as an investment strategy I got the excess cash out of my high yield savings account at HSBC and into a brokerage account at Vanguard. I started up a Roth IRA, closed my Intel 401(k), moved it to a rollover IRA at Vanguard, finished selling all my Intel stock, and moved the proceeds to Vanguard brokerage as well. I did the same with Microsoft stock, which may seem strange as tech stocks came back into favor in 2007 and the NASDAQ’s currently sitting at a healthy one year return of 20%. The motivation’s simply diversification; I’m not planning to leave Microsoft until well after my current set of stock grants complete. Since I trust I’m not about to get fired, the result is a shadow portfolio of unvested MSFT shares which, if booked at current value, is close to 25% of my total equities portfolio. So I’m stuck being roughly three times overweight in tech and additional holdings in the sector simply compound that problem. Consider Microsoft pays my salary as well, and there’s more risk here than I’d like (though hopefully that risk comes with better odds of someday being able to follow the Microsoft practice of calling in rich). Incidentally, selling my townhome in August happens to be a risk mitigation since I no longer own real estate in an area where values are sensitive to how well Microsoft does. Combined with proving to be an excellent time to take real estate profits and the logistical convenience of not owning property 350 miles from where you live the sale’s been a happy expediency. It has, however, gotten me doing hard thinking about short term risk. Most of the effort I’ve invested has been aimed at retirement planning or 5+ year structural cycles, but at present a third of my portfolio’s the cash pile from the townhome. That’s sitting in a prime money market fund at Vanguard and chugging along happily enough, but if I’d moved it into an overseas fund I’d have 10 or 20 times the three month return on it. It’s a large enough amount the spread adds up to serious money. It doesn’t help any I recently did the math on my disastrous mismanagement of tech overexposure in 2000 and concluded if I’d had a clue back then I’d now be looking at buying a house cash instead of taking out another mortgage. One way to measure risk is the amount of money involved in something, in which case the townhome was about 65% of my total risk. Curiously, this implies some 55% of my current risk is tied to Bend real estate prices. Even though I don’t own a house here. Just having a plan to buy one in maybe the next year or so incurs a bunch of opportunity cost around where the Bend market moves and where I invest the proceeds from the townhome. In comparison, some 35% of my risk is in global equities and 10% is concentrated in Microsoft. Consider the additional risk of houses being poorly fungible assets and the extremely limited diversification of the market for plots of dirt in a town of 75,000 people and, to borrow Steve Ballmer’s diction, my risk is all about real estate, real estate, real estate, baby. To some degree, I’d recognized this last year. However, my sense of the importance of real estate and the dangers of market timing have been forcibly strengthened. I was planning to hold my townhome about a month and a half longer than I did, and it’s only luck events conspired to get it on and off the market within a few days of the top of the condo boom in Kirkland. Another surprise was Microsoft’s breakout, which I failed to anticipate as I was ignoring my unvested stock grants. A mistake easily remedied in the future. Harder to change is my decision to hold tax managed funds in Vanguard’s brokerage account. I did this since tax management tends to result in a touch better performance in taxable accounts, but I failed to fully consider the reduced diversification of the tax managed funds and the expense ratio changes which occur when a Vanguard fund converts to admiral shares. VTMGX is a developed markets fund and hence the figures below clearly show the hurt from missing out on emerging markets. Vanguard Total International Index (VGTSX): 29% one year total return Vanguard Tax Managed International (VTMGX): 23% Despite China’s bubble, Vanguard’s Emerging Market Index’s (VEIEX) p/b and p/e forward are still below both the US market and the overseas Developed Market Index (VDMIX). There’s risk of contagion from a bust in China, but emerging markets added about 2.5% to global market capitalization in my FY2007 and rose from 14.9 to 19.1% of VGTSX’s assets. All signs point to robust and sustained economic growth in developing countries, so choosing VGTSX introduced a structural deficiency in the portfolio relative to my strategy of global indexing. Vanguard launched an FTSE All World ex US Index (VFWIX) this year which provides coverage very close to VGTSX but without the fund of funds structure which somewhat hampers VGTSX. If Vanguard follows past form, the expense ratio will drop, purchase fees will be removed, and an admiral share class will be introduced. All of my VGTSX holdings are in tax sheltered accounts so it may make sense to flip to VFWIX in a few years. The other goof I made was buying into Tax Managed Capital Appreciation (a large cap fund), Tax Managed Small Cap, and filling in with the Mid Cap Index. I did this because I figured I’d tune my portfolio’s style box allocation by moving different amounts of new money into these three funds based on what I held elsewhere. It turns out such adjustments weren’t really needed and, in computing how much to put into these funds I failed to correct for the mid and small cap exposure of overseas funds. As a result, US large caps are underweighted and US mid and small caps overweighted. Embarrassing. However, the exercise has served to demonstrate such fine tuning isn’t significant unless there are large spreads in performance, so having the allocations be off isn’t a big issue at present since the Total Stock Market Index (VTSMX) returned 13% for the year. Vanguard Tax Managed Capital Appreciation (VMAX): 13% one year TR Vanguard Mid Cap Index (VIMSX): 14% Vanguard Tax Managed Small Cap (VTMSX): 9.8% Another problem is I misread a key sentence in Vanguard’s information about admiral shares and thought Vanguard required US$ 100,000 in an account to convert any eligible fund within it to admiral. It’s actually US$ 100,000 in the specific fund, so splitting up funds makes it considerably more difficult to eventually go admiral. If I were doing it over again I’d think much harder about buying VTSMX with an eye to converting to VTSAX or simply using FSTMX, but the expense ratio spreads and management overhead of dealing with three funds instead of one are small enough it seems toss up as to which approach is likely to come out ahead in the long run. A 9:1 ratio of just VMCAX and VTMSX very closely approximates VTSMX and VMCAX has an admiral share class (VTCLX) whose 0.10% expense ratio is only 0.01% higher than VTSAX. My biggest misstep was in the 401(k). FOSFX has underperformed historically, but Ian Hart turned the fund around and notched up a heck of a year. It still lags VGTSX today and was far enough behind NIIVX a year ago I decided to move into NIIVX to hedge manager risk. Unfortunately NIIVX has had a terrible year and staying in FOSFX would have boosted returns in my 401(k) by 5% or so. The plan administrators and advisors, a bunch of folks responsible for something like US$ 5.5 billion in employee assets, reached the same conclusion and, ironically, announced their decision to remove FOSFX from the plan just as the fund broke into the top 3% for one year returns. Such unfortunate timing didn’t go over well, but after chewing on it for a couple weeks I decided all I really care about is FOSFX’s replacement does better than NIIVX. In the meantime, I can’t see a better way to allocate holdings in the present 401(k) within the context of my portfolio. So I’ll let these numbers ride: Fidelity Contrafund (FCNTX): 25% one year TR Fidelity Overseas (FOSFX): 36% ING International (NIIVX): 18% FCNTX looks impressive at first glance, but like FOSFX it’s making up for lost ground and still has a five year return after fees a touch behind VTSMX. Considering 20% of FCNTX is overseas and VGTSX beat VTSMX by 16% due to the dollar falling 10 to 18% against most currencies of interest, this is not an impressive showing. Amazingly enough, my 2006 crystal ball came up clear on this regard; a year ago I was guessing markets would slow down some in 2007 but international returns would stay strong on a falling dollar. I’m inclined not to prognosticate on 2008, not that it really matters since I’m basically not sure what will happen anyway. Overall, 2007 seems a reasonable start at being an investor whose head’s not in the sand. Nothing went majorly wrong and the opportunity cost of the mistakes I could reasonably have avoided is maybe 2.5% of total capital. Three of the four international funds I hold have emerging market exposure (VGTSX, NIIVX, and RIGA, FOSFX’s replacement) so VTMGX’s indexing against the developed market MSCI EAFE is not a major issue. Vanguard’s pretty conservative with tax managed funds, so I suspect it will be a long time before they offer tax managed emerging markets coverage. Holding some VEIEX somewhere would tune the allocation even if I’d prefer to avoid its purchase and redemption fees. This year’s spread between VGTSX and VTMGX is dramatic due to VEIEX’s high returns, but amounts to an opportunity cost of 0.5% of the entire portfolio. Emerging markets won’t sustain their present momentum indefinitely so the problem is, to some degree, self correcting without action on either my part or Vanguard’s.
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| weapons and hope |
[08 Oct 2007|11:15pm] |
So I've been on a Freeman Dyson kick lately since coming across excerpts of his most recent book a couple months ago. Partly it goes back to growing up reading Dyson's kayak building, adopted son, George. But these days it's more about Dyson's writing, which is usually a tour de force of wacky innovation, raw brainpower, and scintillating insight. About what you'd expect from someone who's best known for proposing such small scale ideas as dismantling Jupiter to build a shell around the sun and several hundred kilometer tall trees. Dyson's less known ideas are equally entertaining, such as an off the cuff suggestion in The Sun, The Genome, and The Internet that the best way to look for life in Europa's inner ocean is to scan Jupiter's rings for freeze dried fish. Last weekend I finished a book Dyson published in 1984, Weapons and Hope, which, while unusually focused on nuclear weapons, still leaves Dyson room to ramble through 50 odd years of family and military history. Dyson actually calls Weapons and Hope obsolete in his 2006 book, but I found the strategic, tactical, and moral calculus he applies to nukes completely relevant in this era of a resurgent Russia and concern over terrorist possession of fissionable material. It's a brilliant read and, in 300 pages of pointed discussion of the political, military, scientific, and ethical difficulties surrounding possession of atomic force, I found only one paragraph to be dated. 27 years later, his dissection of the fundamentally different approaches to defense taken by NATO and Soviet Union are just as valid for Putin's Russia as they were for Brezhnev's. The same holds for disarmament and proliferation; Dyson's observations on deterrence, the risks of tactical weapons, the limitations of first strike policies are more relevant in a world of rogue states and Himalayan cold wars than they were three decades ago. As a synopsis, Dyson maintains that, while the consequences of nuclear war can be predicted, they cannot accurately be predicted since we fortunately possess no actual data about what happens when a nuclear war occurs. NATO's nuclear policy is based on the assumption predictions are sufficiently accurate to guarantee destruction of Russian society and military capability. Russian policy is based on the observation past strategic bombing campaigns have neither destroyed society nor military capability and, therefore, a nuclear exchange may not assure destruction. Dyson points out there is therefore a fundamental and irreconcilable difference between the western policy of mutual assured destruction and Russian policy of victory at all costs. This prevents effective disarmament negotiations, both due to the thought gap and western politicians' inability to exchange the grossly inaccurate concept of mutual destruction for a more flexible conception of weapons management. Dyson observes the fundamental failing of assured destruction is its moral and ethical bankruptcy and that a policy of live and let live would be more viable in every respect.
What struck me the most though was Dyson's core observation on how concepts influence people's thinking. In speaking of the moral deficiency of assured destruction he writes An immoral concept not only is bad in itself but also has a corrosive effect on our spirits. It deprives us of our self-respect and of the good opinion of mankind, two things more important to our survival than invulnerable missiles. If this is not an accurate description of the United States' present position in the war on terror I do not know what is. The present administration's position of assured destruction of terrorism is strikingly similar to the west's mistaken policies of thermonuclear war. As Afghanistan and Iraq have demonstrated, the results of fighting a war with terrorists are not predictable and the terrorists' destruction has proven anything but assured. The massive resulting civilian casualties are, to my mind, not much different than targeting a nuke at military installation with the understanding it'll obliterate a couple nearby cities as well. I find little difference in the ethical repugnance of the two. Grahib and Guatanamo are as moraly bankrupt as well. Perhaps I'm overly influenced by my recent reading of Greg Mortenson's Three Cups of Tea, but it seems to me Mortenson's efforts to provide education and alleviate poverty are a way of living and letting live which is just as much at odds with the government's anti-terrorism policy as Dyson is at odds with mutual assured destruction. It is most unfortunate the option to perform as easy a rethink of terrorist policy as Dyson performed on nuclear policy no longer exists, but the present sense that the surge in Iraq may be working should not prevent the consideration of structural reform. Nor should it preclude a more reasoned, though certainly not pacifistic engagement with Putin's Russia.
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| more subtle forms of diversification |
[02 Oct 2007|07:41pm] |
I'm rethinking some 401(k) allocations and, while style box and manager diversification are easy to measure, country diversification is not. While the domestic versus overseas classification of stocks is easy to measure, globalization means the international exposure of a given stock more complicated than which exchange the company's listed on. 44% of the S&P 500's 2006 revenue is from foreign sources. So even that most pedestrian of investments, the S&P 500 index fund, arguably has a good bit more international exposure than the standard 20% of a portfolio. The US economy's cooling while the rest of the world remains fairly strong, so you'd expect segments of the US market with more international exposure to do better than ones with less. Both YTD and recent returns support this, both if you slice by sector and style box.
It'll be interesting to see if this trend continues to hold up. It'd also be interesting to see if overseas stocks with more US exposure were trailing ones with less but I don't have handy access to such data. Personally, I'd like to dump everything in a world index and let somebody else worry about what the right ratio is between US and non-US holdings.
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| absolutely nothing: 1, XTR: 0 |
[18 Sep 2007|06:14pm] |
Flat trail, low speed, no bumps, no rocks, no brush, brand new hanger, no shifting issues, but the rear mech somehow wound up in the spokes anyway. The body of the derailleur is fine, but the cage and hanger both ripped in half and Shimano doesn't sell replacement cages (the hanger's obvious; you can see where the cage tore out in the second photo). And I need a new chain since converting a non-URT full suspension to single speed home in the rain racked up about 30 mils of chain stretch even with max platform and upping the air pressure in the rear shock. On the plus side, the dude at the Jamis dealer here in town had an excellent crack about not stocking the two piece version of the derailleur hanger.
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| business as usual |
[10 Sep 2007|11:04pm] |
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Sigh. It would be nice if the press could manage to get a clue after seven years.
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| endless cycles, grasshopper |
[25 Aug 2007|02:34pm] |
A couple years back I blogged about escrow and driving and, having moved to Bend, am still doing the same thing. Without trying to it looks like I hit absolute top of the market up in Seattle and flipped the townhome for 42.5% more than I paid for it, which is enough appreciation to put my total cost of living in Seattle at zero for the three years and few months I was there (which is either better or worse than it looks, depending on what you think about my having lived in Bend for most of the past year and a half). Closed last Monday, three days after a sale was no longer subject to captial gains, and all that's left is waiting for the check to clear. In the past year prices in Bend have fallen 20 to 30% (the equivalent of, oh, 10 years' rent or so), with fairly nice houses now selling for around 80% of what I sold at in Seattle. It's a nice direction to be moving and the present ratio of housing to rental costs makes it cheap to watch and wait, but it's a one way street; unless Seattle real estate crashes I'll probably never be willing to pay what it would cost to move back. My kayak seems doomed to a thick layer of dust.
This week's trip up to Seattle was an especially nice couple of drives. The mint fields south of Madras and Toppenish are nearly ready for harvest and make the car smell heavenly when driving by. Last night's sunset around Moro was fabulous; great drive up Spanish Hollow running my rollerskate of a new Civic right up the terminator. The harvested wheat fields especially golden in the last light of the sun and the wind farm standing pylons of purple twilight against the penumbra. Unlike James Lovelock I'm not anti-wind energy, but while the plateau was prettier without the powerplant, the cirrus clouds shining overhead, silhouetted Hood and Adams against an orange sky, and rising moon made for a very nice scene anyway. I'm still contemplating ways of rewiring speakers and am partway through the IPCC's fourth assement report, which makes for highly interesting reading.
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