AskDong

There’s just one word way to describe the Markets in June . It sucked. All the major indexes were down well over 5 percent. My own portfolio fared little better. I keep telling myself that I’m in it for the long haul. Eventually, I’ll have myself convinced.

Below is my historical performance for the last 6 months.

Brokerage Accounts: Accounts in which I pick individual stocks and some mutual funds. My IRA account(s) are amongst these accounts.
Asset Account: Accounts in which I managed on basic asset allocation principles. These accounts accounts consist of my 401k and Vanguard accounts.
All Classes: Total from all accounts

Is there any disadvantage selling your home in a buyer’s market if you are going to buy in the same market? In reality, isn’t a wash if you sell and buy in a slow market?

How would you go about finding comps for a condo? Does it cost to ask a realtor to do a price analysis and are you bound to use them when you sell your place?
-stevie

I’ll answer the 2nd question first. Unless you sign a contract you’r not bound to do anything. When a realtor does a price anaylsyis, he or she’s really making a sales pitch. Getting a price analysis is not a obligation to work with that broker. That said, you should be clear on your position. Always deal in good conscience. Don’t tell a broker that you’re definitely going to work with him or her if know you won’t. As for finding comps, the Internet really has really made things much easier. Websites such as Zillow not only give it’s estimate on prices, but will also report the last sale. I find the best way to get a sense of comps is to start monitoring listing in the area you’re interested in. That way you have all the info from the listing, and then it’s easy enough to determine what those properties eventually sell for.

As for selling your home in a buyer’s market is trickier question. In buyer’s market, buyers have more leverage and that makes selling harder. In a perfect world buyers would only buy in buyer’s markets, and sellers would only sell in a seller’s market. In this non-perfect world of ours, we usually buy and sell homes not because of the market but because of life. The best you can do is try to manage the process smoothly.

You do bring up a good point about selling and buying once you already own a place. Given that you’re selling and buying into the same market, the changes in price is less relevant. If anything if you’re looking at upgrading, it’s most likely that you’re better off, all else the same. Let’s say your home is worth 200k, and you want to buy a place that’s worth 400k, and the market comes down 10%. In absolute terms your house is worth 20k less but the house that you’re buying is 40k less.

The far bigger difference that people often lose sight of is that the housing market is incredibly inefficient, and non-objective. Outside of the cookie cutter developments, homes are unique. One person may pay 300k for a house that I wouldn’t think of paying more 250k for. So if you’re looking to make a change, I would spend time on thinking about how you want to sell your home, and carefully assessing the market rather than worrying about timing.

Do you know that it’s illegal to trade Onion futures? I certainly didn’t, and they do make a fascinating study on the how futures trading might or might not affect commodity prices.

Onion prices have been fluctuating more wildly than even other food commodities. Many think this is because of the ban on the trading of Onion futures. The conventional wisdom today is that speculators in the future markets drive price volatility. A great deal of blame has been laid at the feet of oil speculators. However, a properly functioning futures market should do exactly the opposite. When properly used futures create price certainty that helps smooth volatility.

For example without oil futures, oil production companies are less likely to make infrastructure investments for future supply as they cannot guarantee the price at which they can sell the oil at a later date. By trading futures, an oil company can lock profits that can be put towards infrastructure. If oil prices end up moving lower, the oil company is in no worse financial shape. Without futures, the oil company might drilling oil that uneconomic to recover. If oil companies must bear all that risk then are likely to be more conservative in it’s infrastructure investments.

Of course many the proponent of additional regulation in futures market want only to restrict speculators who have no natural position in the commodity. An oil producer, and airlines have natural positions in the oil market. The oil company needs to sell future production while airlines need to purchase jet fuel for flights in the future. A financial participant has no such interest, but this is not to say they do not have a proper role in the market. Speculators should on the most part drive volatility down. Without speculators, the liquidity in the market would be less and lead to wider price variations.

I was reading Ask the Pilot at Salon, and Patrick Smith the writer used his column to defend against criticsm that Pilots are overpaid. I agree. I don’t think Pilots are overpaid. After reading through the comments, it dawned on me, is anyone paid fairly? Teachers? The Police? Doctors? High School Principals?

While I think most people tend to think CEOs and Hedge Fund Managers are overpaid, plenty of people also think that many a doctor is overpaid. I’ve even met a people who think teachers are overpaid. The person you never meet is the person who thinks he or she is overpaid. Talk to most people, and they’re express the feeling that they’re underpaid. Clearly something isn’t right. How is that we feel others are overpaid and yet somehow we’re all underpaid?

The ugly truth of the matter is that people are paid whatever someone else is willing to pay. I say this not because I think people are paid effciently and economically. I believe the job market is less than efficient. There are many jobs by virtue of being very specialized or artificial barriers of entry are compensated very well. In many way’s it’s a false concept to think of what people are paid as having anything to do with fairness. Fairness implies that’s there some objective measure of work. Should people be paid better if they hate their job? Our labor is more akin to a product that’s being sold. For example, I would never pay more than $100 for a watch, but plenty of people pay not just thousands but tens of thousands for watches from the likes or Rolex, Cartier, and Bvlgari.

Ultimately, we all need to escape the trap of thinking that others overpaid. If we truly believe that then we should be doing what they’re doing. Ultimately people work for one of two reasons. 1) because they love what they do 2) to earn money. Ideally our work satisfied both reasons, but if we’re only doing it for the latter it’s best only to worry about what others make in a way that helps us to get there.

A reader recently wrote,

Dong, Having stood in line at 7:30 a.m last Sunday for a wii I had to wonder if I was just being tooled with via Nintendo’s marketing department or whether or not there truly is a shortage.
-JC

I did JC one better and stood in line at 6 AM in the dead of winter. I’ve had the Wii for over a year now, and there are still shortages. Nintendo’s new “game”, Wii Fit is even harder to find. Recently, I was lucky enough to obtain Wii Fit despite the shortages. I didn’t get it through any effort of my own, but via a good friend who always has his finger on the pulse of the Internet. Circuit City online had the game in stock - for about ten minutes. It seems like all things Nintendo are hard to come by. It’s really quite amazing. The Nintendo ADRs haven’t been too shabby either.

Is the Shortage Real?

I think it is. Recent sales data consistently points to incredible sales of the console. However, that is not to say there isn’t anything going on. Nintendo has not increased production of the Wii as much as demand might warrant. Nintendo is intentionally playing it conservative. Some of this is related to how the company lost it’s mojo in the late 90s. Nintendo of course denies that it’s intentionally creating a shortage. Call me naive, but I believe that Nintendo did not set about creating a shortage when the launched the Wii nearly two years ago. This is not to say that I believe that Nintendo is not contributing to the shortage today. They may not be holding back on supply, but their conservative customer expectations are leading to the shortages. It’s in Nintendo’s interest to make sure as many consoles as possible are in the hand of consumers. Ultimately, Nintendo makes more money from game licenses than it does from hardware sales.

Wii Fit Shortage
Part of the reason for the shortages in the U.S. for Wii Fit, is the weak dollar. Nintendo has chosen to shop 4 times as many products to Europe instead of the U.S. The strong Euro makes it much more profitable to sale there than it does here. It’s still a profitable product in the U.S., and if Nintendo could it would be selling more here.

While shortages may drive demand in the short run by bestowing the “IT” factor on a product, in the long run shortages on a product that requires market penetration hurts console makers. Success breed success. You can have the best game system in the world, but if no one has it, no games will be made. Nintendo is not in this position as the Wii has sold better than the XBox 360 and Play Station 3, but there’s nothing such as excess market domination. The name of the game is to crush your enemies and hear the lamentations of their fanboys.