Archive for July, 2008

Until recently, the best way for individuals to gain exposure to commodities was through exchange-traded index funds such as IGE. Unfortunately, the exposure was indirect as you were essentially investing in the equity of companies that dealt in commodities. In the case of IGE, you were mostly holding the stocks of oil-companies. As of 2008, there are better commodity index funds, such as GSG (the Goldman Sachs Commodity Index) which gives you direct exposure to a broad array of commodities. Even better, GSG exhibits less correlation with almost every asset class when compared to IGE.

In very rough numbers (good enough for government work) for 2009:

US GDP: $15 trillion

Federal Government spends 20% = $3 trillion

Breakdown of the $3 trillion

• 20% Defense
• 20% Medicare/Medicaid
• 20% Social Security
• 10% Interest on Debt
• 30% Everything else

The full budget (and historical trends) is available online. Despite the din, not much has changed. The inexorable rise of medicare / social security continues, though. Medicare and social security represented 20% of the federal budget in 1971. Today they represent 40% and growing…

As online advertising matures it is likely that ad targeting will be increasingly fine-grained. It strikes me that whoever has the most valuable social graph will have a formidable edge in the online ad wars. There is a lot more additional information that can be gleaned from most social graphs: hierarchy of connections (weighting each graph connection by importance to each user), relationship (co-worker, family member, close friend, casual acquaintance), type of content exchanged along that connection etc.

The candidates who seem likely to win are:

1. Facebook – their graph has rich content due to the additional data they derive from tagging, email and other activities which reveal the strength of social connections.
2. Skype – the people we call often are likely to be close friends or co-workers
3. Xobni – located on the most valuable enterprise real estate, this application has insight into who you email, how quickly you respond to them, and even what you write about
4. MySpace – the denser graph (more “friends” per user) has diluted the value of the graph compared to Facebook.
5. LinkedIn – heavy business focus but a lot more information is volunteered at each node. Connections between nodes probably yields minimal extra information.
6. Verizon – they have the data but are probably restricted from mining it.

Of course, pooling the data between all these graphs would result in a tremendous database.

I have to question the need for the wide variety of international country index funds. The AssetCorrelation website has an excellet correlation matrix which covers exchange-traded index funds from various countries around the world.

Take a careful look at the matrix for the various countries. Other than Brazil and Israel (with correlations of 0.73 and 0.35 respectively versus the S&P 500) the rest of the countries’ index funds are all tracking the S&P 500 with >0.90x correlation coefficients.

It might be that the time period is only 90 trading days (about 4 months) and this represents a time in the market which has seen a greater herd mentality than usual. Or it might be that global inflation fears do justify a simultaneous downward revision in global equity asset prices. Either way, lately it has been hard to see the benefits of international equity exposure. Even emerging markets like Turkey, Mexico and Chile have been strongly correlated recently. Inflation really is the great leveller.

Another article on differences in philanthropy: the short version is that people who are a) American, b) conservative, and c) religious give a lot more of their time and money.

Brooks has uncovered other fascinating findings. In 2000, the Americans who attended a house of worship at least once a week were 25 percent more likely to give charitably than those who participated in a religious service less frequently or participated in no religion at all. Further, religious people donated nearly four times more in dollars per year than secularists. And religious persons were 23 percent more likely to volunteer their time.

Interestingly, households headed by a conservative gave 30 percent more dollars to charity in 2000 than households headed by a liberal, though liberal-headed households tend to have higher incomes. Both these facts—the higher income of leftists, and the greater giving by conservatives—run counter to the mythology that the left holds in both Europe and the United States.

As the author says, this runs counter to the the mythology of the Left.

If you’re running your low-volume Ruby on Rails app on mod_rails (Passenger) and have wondered why the first page takes 5 seconds or more to load, there is an excellent explanation here.

Every now and then it is forcefully driven home to me that Linux is not yet ready for mass adoption. I have been trying to set up my back / forward mouse buttons on Feisty Fawn. There is no reason why this should be difficult but the official instructions are alarmingly non-deterministic! Exhortations to “experiment” are just plain annoying. Plug and Play (TM) might not be perfect but it gets the job done most of the time.