Saturday, 31 March 2012

financial relativity

If you've ever sat on a train at a station you may have noticed sometimes that its hard to know if the train beside you is leaving or your train is leaving (well ok, not in Australia where trains never depart so smoothly).

People who look around for investments occasionally point to Gold as a good investment option (some people call them gold nuts). Its easy to see why when you look at the basic data (say on or kitco) as it seems that Gold has gone high lately.

Well an important question to ask yourself here is:
"has gold gone high or has money gone low".

Its a difficult question to answer and I reckon that it can only be done by comparing things relatively. After all, money "floats" these days and its creation is regulated by the government.

If you're a property owner in Australia (and certainly in Queensland) you get occasional notifications of the value of your property from a State Government agency (the name varies from state to state and often from year to year). This seems like a nice service, but in essence its a harbinger of taxation as land value is used as one of the basis of taxation.

I just got my notice the other day and noticed that our value had gone down (again). I pulled out some previous notices and found something interesting over the period from 2001 to now.

First thing which was obvious was that between 2001 and 2004 the value of my land doubled. Thankfully (for my local government taxes) this trend settled down and has now started to reverse.

Got to love all that property speculation back in that period. People got locked into loans over 20 years and the only real beneficiary seems to have been the banks and the real-estate brokers.

Now lets look at my property with respect to the price of Gold.

I've put them in separate scales for ease of comparison, but you can see that property prices peaked at about 2007 (no data for 2008 I'm sorry) and interestingly Gold kept climbing.

To a casual eye this would tend to suggest that Gold was a better investment. There is another interesting view. If we consider gold itself as a currency of exchange (as would have money been if it was not floating and was still pinned to Gold) what would be the house prices in gold: how much gold would you need to buy a my land? This graph is perhaps a little confusing as the Gold columns show how many Oz are needed to buy while the Land Valuation column is just the money. So the amount of gold needed to buy my land has actually gone down between 2001 and 2012.

So in 2001 it was just over 150 Troy Oz to buy my land and in 2011 it returned to just over 150 Troy Oz of gold to buy my land.

So it would seem that if we are trading commodity for commodity that the value of my property has remained stable from start to end of that period and that only the relative exchange in the middle period has changed.

There could be quite some argument as to just why this happened but looking at the curves on those trend lines, the value of property rose faster than that of gold (seen in the price of property vs gold earlier) and that gold has just "caught up" as people realised that one commodity was moving faster in value than another.

You will note that in the 2nd figure I only have data to 2011, while in the 3rd I've inserted a value for 2012 in property value. I don't actually have valuation data for 2012 so I 'extrapolated it' which is of course guess work. I do have data for Gold in 2012 (like spot prices right now) so we can sort of see something.

If property prices do not stabilise (or go down) then we'll see that the price of real estate was over valued (based on the other trading commodity of Gold) in the period from 2001 to now. If it goes down further we will know that land was really over valued in that period.

Fellow blogger Bullion Barron has an analysis of this topic in full house prices over a longer period over here. Where he produces this graph:

Suggesting that whole house land prices were well under this valuation being less than 100 Troy Oz back in the 1980's (when Gold was just recently uncoupled from the US Dollar and that the Australian Dollar was at record highs against the US Dollar).

Makes me wonder how much further it has to fall yet. Perhaps my "estimation" on my land value is too low, and rather than staying static (as I 'estimated') it will continue to fall. In that case even with modest rises in the price of Gold we could see house and land back in the 1980's value with respect to Gold.

So getting back to the original question (is Gold an investment), I don't think it is. You don't easily make money out if it (which is the purpose of an investment) but it sure seems a safer hedge than money in the bank ... or bricks and mortar (well often pine and gyproc these days anyway).

Sunday, 11 March 2012

vows of poverty

This is sort of a missive on the change from the tangible to the intangible. While what I have owned may become increasingly ethereal the concept of ownership sort of hasn't.

One of the things which many religions seem to have is the notion that
giving up material possessions is a benefit to the spirit. The ideal of being a free spirit with nothing more than the clothes on your back is appealing. It makes sense in some ways as the more stuff you own the harder it is to keep it clean, safe and housed.

Over the last 10 years or more I've increasingly moved over to a digital world where the things I own are of lesser consequence than the record of them. Increasingly my writings are digital, my photographs are digitised (even the large format negatives). Increasingly its not about what gear I have (which camera, which film, what stereo, which car) its instead about the content. Digital has sort of helped me move from being about the gear to being about the experiences.

This has been facilitated starting back in about the year 2000 with my move away from desktop PC's to a preference for ultralight laptops. The lighter the better, the faster the better. Desktop users often criticised my move saying that I'd get better bang for buck with desktop PC's, which is of course undeniable.

What I would of course be is chained to the location, and for someone who did not live in the same place for long it quickly became apparent that having less stuff was indeed a release of burden.

The internet of course extended the usefulness of computers, so my PC has extended from being a typewriter and programming tool (essentially another sort of typewriter, writing things for other computers to use). One could argue that without internet access connecting computers together they would be far far less useful tools.

{note: for the paranoid Mac users out there, PC means Personal Computer. So a Mac is a PC just as a Windows OS is a PC or a Linux box can be your Personal Computer}

The nature of internet access of course shapes how we see mobility. It may be less than obvious for young folk today to grasp this point, but before there was WiFi one connected to the internet via fixed line connections (be they dialup, ISDN, ADSL or via your phone). We still thought very much of the internet as being a connection for transfer (email, chatting, skype) and access to information (websites).

Even email was on a server only for transfer and you'd used POP (Post Office Protocol and then later IMAP) to get and then transfer your mail to your PC where it became mine.

So we get back to my point ... the ownership of what I'm interested in, my documents, my pictures, my emails, my receipts, my business dealings. On my PC they remain mine. Mine to access at my choosing, and my responsibility to look after (backups). I have transferred my stuff from machine to machine over twenty years and via a variety of media.

Not only is it mine to access any time,
but by having it in my possession I also get something else: privacy. I can be more sure that noone is looking at my data because I have it on my machine.

Back for a moment to the Internet Access, in the last 5 years there has been quite a revolution in Internet Access, particularly access to internet via phones.

Things have transformed from using your phone to allow your PC to access the internet to your phone being a PC in itself.

Seriously, my humble Nokia (well I say that to keep the iPhone users happy, its really quite powerful) has more grunt than my first IBM Thinkpad laptop.

My IBM had a 266Mhz CPU and when I bought it had a massive 64MB of memory on it. With that I could write documents, design and publish web pages, edit photographs, run a photo scanner, and use Skype telephony to make calls via the internet.

My Nokia here has about double that memory, can load an external 16GIG micro SD card, and do much of what I was doing on my PC ... heck you can all sorts of things if you want to harness this power, you could even run Windows 3.1 on it.

Clearly more phones are becoming more powerful and bringing internet access to become so accessible as to increasingly blur the bondaries between stuff you have and stuff you don't have.

For instance, I wonder how many people now directly upload their photographs to Flickr, have their documents on Google Docs, their email only on Gmail (Yahoo, Hotmail or yadda) and what ever manner of stuff only on 'cloud' based services. Heck internet access is so pervasive and nearly totally dependable that you would even wonder what the hell would you keep it (your own data) for yourself?

Well for one thing, as soon as you stop paying for these services (such as Flickr professional) they stop giving you access to them (don't forget to back them up ... and how long will that take?).

Increasingly these devices are just about useless without the online services back them up and make them useful. Apple "voice recognition" only works when you are online (and paying for that data).

Its essentially a massive subscription industry. As long as you subscribe you get to have access to your stuff.

But this is not how it was for most of my computing history.

Sure, most people will want the latest and greatest device. Having one of the new Tablets / Smartphones will be tantalizingly dangled before you, offered as "free" as part of the contract to pay for the "service". So for as long as you are willing to pay your data will be there ... or will it?

Nokia just recently announced the closure of Ovi Share, and Google has recently withdrawn Google Notebook. Many new phone / tablet systems like Microsofts new incarnation with Nokia as well as Google Android and Apple iPhone iPad encourage you (nay often constrain you) to have nothing on the phone and everything on the cloud. This seems odd when you consider how powerful these devices are. So while these things may seem attractive they are not without penalty.
  • Do your care about that data?
  • Can you afford to loose that data?
  • Can you migrate that data somewhere else (do you know how and where to?)?
Heck, even the devices themselves become useless without the 'net access'. In contrast my laptop still has its software, my phone can still use IMAP or POP to access any mail service I point it to and I still have all my documents, photos and emails.

So while it looks like I have nothing much when I'm walking through the airport with my laptop, I do actually have my stuff. Like the ideals of the monks freeing themselves from the tyranny of ownership with my move to digital life, I have not as a result become bereft of my stuff because a free service I entrusted it to has vanished.

So when you look at the contract you may take up for latest and greatest, ask yourself this question:
is it liberating you or is it working towards impoverishing you.
it could be that you're starting to take vows of poverty ... which aren't even free

Thursday, 1 March 2012

Taking candy from a baby

A quick word of warning about Smartphones for the less than savvy smartphone users (and perhaps even those who think of themselves as savvy).

Smartphones are computers, no less (and often more) powerful than many we had on our desktops a few short years ago. They are more connected than our PC's often were and we store more personal data on them nowdays.

Putting something somewhere makes it possible to take it, and as anyone in security knows, internet access makes it vulnerable. How easy is it to get at your data? its as easy as taking candy from a baby it seems.

Sure, this is about facebook, but it can easily apply to Smartphones.

I've been doing computing for something like 30 years and been "online" for about 20 of those years now. Gosh things were different back then, and while there was the Internet there was now WWW, only stuff like FTP GOPHER, NNTP and the suchlike.

There's been a lot of changes over that time, but one thing seems to have remained constant: people try to hurt you or steal from you. There were Trojan horses, boot sector viruses and all manner of man in the middle attacks.

Yesterday I was in a conversation where I mentioned that while iPhones and Android devices were slicker and slicker with Nokia being left a little behind in the "sexy" look and feel there is something about Nokia that I still like ... and that's its OS Symbian.

Then today I read this article in the paper:

George Kurtz, co-author of Hacking Exposed, former McAfee security champion and now at the helm of Crowd Strike alongside Dmitri Alperovitch, demonstrated how the team designed a smartphone remote access tool (RAT) and eavesdrop operation, then set about purchasing the necessary items to make it happen, later coding and executing the attack on their demo phone.
“We believe we are here today and on the cusp of what we're going to see in the future. If you think of what a smartphone has the capability to do, it's the ultimate spying tool. Always powered on, always connected, travels around with us at all times,” Kurtz began.

and it reminded me of the conversation I had yesterday.

Next time you install an app from the Android market, or in your iPhone have a read of the sort of terms and conditions you have to accept. Heck and these are from the trusted sources.

I don't know how smart the general public is, but personally I value my privacy highly. Anyone remember the scandals surrounding GPS tracking via iPhones ?

So while people seem to make a point about "how their phone is easy to configure here or there" (as if they made it) I wonder seriously, what difference does it make? Most people don't fiddle with their phones, and arguing the point about OS is only what some of us geeks do.

It may even be that in the future people react against the Google and iPhone terms and (invasive) conditions and seek something less ... intrusive?

Here is a sample of "terms and conditions" you need to agree to to install an app on your Android device.

I'm sure that iPhone is not much less invasive.

Nokia is no saint here, its just that perhaps they didn't think people would fall for this sort of stuff. Since everyone else seems to be getting away with it stuff like Nokia Messaging has popped up and is slowly weedling its way into my email credentials is Nokia's attempted grab at my personal information via another method. Insidious really.

Perhaps I credit the General Public with too much thought and capacity for decision making, but should they wake up to this. Perhaps then they may demand a platform which just offers them what they need in apps and some privacy as well.

One thing for sure, you can count on the fact that noone's going to make money out of selling you that ... perhaps thats why iPhones and Android is so well marketed lately?