Housing transaction costs are really high!

April 22nd, 2017


For Singapore, it’s around 5%. In Taiwan, it’s north of 10%. This is a ridiculous hurdle for an investment. If you bought an apartment in Singapore and pay a 20% downpayment, transaction costs wipe out 5% of asset value right away, setting you back 25% of your equity.

Cython is awesome

January 27th, 2017

Wrote a Cython program to analyse a board game. 2 trillion combinations counted in ~30min on one 4GHz i7 core. 113 lines of Cython code. I’ve forgotten how fast C is.

Cheap entertainment and unmotivated young men

November 24th, 2016


Prior to 1985, leisure patterns were increasing for both higher-educated and lower-educated workers. So–for both men and women. So, men were taking more leisure, usually by working less, in the 1960s and 1970s. Women were taking more leisure by working more in the market but working much less in the home sector. Kind of like we were talking about before–the increases in home production technology might have freed up some time for women to both work more and take more leisure. So, higher skilled and lower skilled–at least measured by education–higher educated and lower educated men and women were tracking each other very closely in their leisure time, up through about 1985. After 1985, that breaks. And when it breaks, it’s right around the same time period–people have tried to estimate it–that the skill premium started to change. And this isn’t my work but work by Larry Katz and David Autor and Kevin Murphy–a whole bunch of people show that the earnings of the higher educated have been growing faster. So, Mark and I have been puzzled: Do we believe that income effects or substitution effects are important in determining labor supply? What do I mean? If your wage goes up, do you work more or less?

It scares me how much of this I see in myself (the video games, not the education). I spend a lot of time online, and much of the entertainment I consume on a daily basis is dirt cheap. I think back to when I was single in Hong Kong and working on my startup – the very thing that allowed me to tolerate such low expenditure was the cheap/free entertainment. 80 hours of Skyrim, watching the entirety of Band of Brothers in a week.

Corporate Intellectualism

November 19th, 2016

Corporate Intellectualism is a bizarre imitation of Academic Intellectualism, embracing badly constructed abstractions and peddling platitudes which confer a vague sense of insight and understanding but do nothing to improve the quality of judgments.

Popular business education overemphasises Thought Leadership, the addition of structure to problems and facilitating effective analysis. It’s pretty high up the Maslow’s hierarchy, and rarely what is most needed. There are many more basic yet more important activities involved in running a business:

  • fostering a culture of accountability, with explicit commitments and commensurate payoffs
  • defining job responsibilities more robustly
  • formulating clear policy about day-to-day actions
  • encouraging goal ownership and intrinsic quality control
  • being aware of the nature of engagement and motivation

All those are difficult to get right, more explicit, addressable, and more directly connected to success.

Throat clearing

October 18th, 2016

My written voice is a separate part of my consciousness. It slumbers for months at a stretch, roused by emotional outbursts every few months. Others are driven to drink, I am driven to write.

I have the impulse to write about the follies of others, how clear things are to me and how hopelessly muddled it is to them. It isn’t a pretty impulse, and writing was easier when I was younger and less concerned with appearances. That voice IS genuine – underneath I am every bit as arrogant and unmeasured as what I sound like when I speak with my loudest voice.

With age, I have lost space. The known world shrank and shrank as the unknown beyond proved its limitless depths again and again. I know so little, so little is certain. The simple logic games and puzzles still delight me, but appear to me as nostalgic toys and not the bludgeoning weapons I once thought they were. Words matter only if people care. Words persist only if they are supported by clarity of thought. Without the company of minds for which clarity is a virtue, these two goals tug in different directions.

The resulting strain makes for much confusion. I am no sophist, I will not corrupt my logic just so you will listen. I am no hermit, I have not the independence of mind to hide away for decades nursing a novel proof. Such is my human condition.

Low-cost passive ETFs and magical thinking

October 13th, 2016

Reduced activity, low fees and tax efficiency are reasons given for why passive investing is low-cost for the investor. This logic is wrong. Those are reasons why passive investing is low-cost for the fund management company. The reason those cost-savings get passed to the investor is because the product is standardised by virtue of tracking a standard, named index like the S&P 500, and multiple companies compete to provide the same product.

Without competition, there’s no reason for an ETF to be low-cost. Companies offering unique ETFs have no directly, easily comparable competition, and you should not expect them to be as efficient as SPY, IVV and VOO are.

Comparing SP500 and housing leverage

July 1st, 2016

According to


The quarterly standard deviation of unleveraged housing returns is 3.4 percent, which is 6.8 percent annualized. With a 20% downpayment, that’s a 34% stdev.

The SP500 has a standard deviation of around 20%, so to get the same amount of risk I want to be 1.7x leveraged.

How does Germany compare to the USA in terms of median income?

May 13th, 2016

Article with the surprising claim that the median income in Germany is lower than that in most US states, when PPP adjusted – https://mises.org/blog/if-sweden-and-germany-became-us-states-they-would-be-among-poorest-states

Conclusion: I would say the weak points that bear more looking at are whether the household adjustment (the square root mentioned above) is significant, and also whether if there are net transfer payments that it’s really not an expense, but rather a form of savings, in which case it would be inaccurate to subtract net savings from the disposable income.


The original data linked to is http://stats.oecd.org/Index.aspx?DataSetCode=IDD where the income number that was used was the “median disposable income”, which was in 2012,

  1. 20857 EUR for Germany
  2. 30355 USD for the USA

The “Purchasing Power Parities for GDP and related indicators table” has National currency per US dollar as

  1. 0.786 EUR for Germany
  2. 1.000 USD for USA (by definition)

The exchange rate for the EUR, as obtained from (http://www.x-rates.com/average/?from=USD&to=EUR&amount=1&year=2012) was between 0.755436 and 0.813635, so not significantly different.

Dividing by PPP, then, we get

  1. 26536 for Germany
  2. 30355 for the USA


The definitions are in http://www.oecd.org/els/soc/IDD-ToR.pdf

The income unit is an individual, and there is this adjustment they make for household size which divides the income by the square root of the household size, instead of just dividing by household size. This has the effect of adjusting incomes up when households are larger. This is for the purposes of accounting for economies of scale.

The components of disposable income are

E: employee income, including wages and salaries, cash bonuses and gratuities, commissions and tips, directors’ fees, profit sharing bonuses and other forms of profit-related pay, shares offered as part of employee remuneration, free and subsidised goods and services from an employer, severance and termination pay.1 Sick pay paid by social security should also be included.

KI: capital and property income, including income from financial assets (net of expenses), income from non-financial assets (net of expenses) and royalties. Regular receipts from voluntary individual private pension plans and life insurance schemes should also be included in this income component.

SEI: income from self-employment, including profits and losses from unincorporated enterprises, as well as goods produced for own consumption (net of the costs of inputs). [The inclusion of this latter variable aims to adjust the OECD income concept to the realities of middle-income countries (such as Brazil, South Africa and others), where subsistence agriculture represents a significant income source for people at the bottom of the distribution. Countries that do not collect information on this income item should indicate so in the metadata sheet of the OECD questionnaire].

TRR: current transfers received, including transfers from social security (including accident and disability benefits, old-age cash benefits, unemployment benefits, maternity allowances, child and/or family allowances, all income-tested and means-tested benefits that are part of social assistance), transfers from employment related social insurance, as well as cash transfers from both non-profit institutions and other households

TRP: current transfers paid, including direct taxes on income and wealth, social security contributions paid by households, contributions to employment-related social insurance, current transfers paid to both other households and non-profit institutions. [Values for transfers paid should be reported in the OECD questionnaire with a negative sign].

which certainly looks like social welfare has been accounted for.

Conclusion: I would say the weak points that bear more looking at are whether the household adjustment (the square root mentioned above) is significant, and also whether if there are net transfer payments that it’s really not an expense, but rather a form of savings, in which case it would be inaccurate to subtract net savings from the disposable income.

The Grammar of Graphics

March 8th, 2016

R’s ggplot2 has the most elegant graph API that I know. This article by Hadley Wickham himself is a great introduction to some of the ideas underlying The Grammar of Graphics that he implemented. I think it contains a lot of great ideas for API design.


Passive investing is cheap, but not free

March 5th, 2016

Excellent article by Matt Levine

Passive investing is a way to make different fund managers compete with each other by forcing them to offer the same product. That competition lowers management fees for the customer. Unfortunately, the predictability of passive funds also makes them targets for other players in the market.

On one hand you have actively managed funds that are opaque and difficult for the consumer to monitor, and that charge high management fees which have to be balanced against their difficult-to-monitor performance. On the other hand, you have a low management fee passive fund which loses money to other market participants in an open market.

Seen this way, passive funds are still a better deal for consumers because it’s difficult to imagine anyone making an outsized profit without facing competition and having those profits be competed away / shared with the consumer.