January 28th, 2015

Delays

Our most recent bust was the result of the securitization industry going binky bonkers because they thought they had some math that made highly risky stuff risk free (NOTE: THEY WERE WRONG. PERPETUAL MONEY MACHINES DON'T EXIST). A side effect of the securitization industry going binky bonkers was that they needed people to borrow money so they would have debt to securitize. Thus, national housing boom (because the securitization industry wasn't regional). And then, national housing bust. We have largely returned to the pre-securitization insanity phase (that is, there seems to be widespread understanding that PERPETUAL MONEY MACHINE TYPE A IS FAKE), that is, real estate is once again regional. Sucks in Detroit. Not great in the Midwest in general with some local exceptions. Coastal north around metros is good. Rest of the coast is improving. Etc. There's something weird going on around Atlanta that I don't understand at all (maybe someone could explain it to me in simple words).

Nothing ever happens instantly. There are delays. Securitization was already toppling before the real estate crash really happened. And real estate was recovering in some areas before commercial lending recovered, much less securitization. Etc.

Delays in economics are Normal. Knowing the probable length of a delay turns out to be super valuable, if other people do not (actually, it can be worth knowing even if too many people know to take advantage of it, because you can at least be less foolish). Delays in the intersection of politics and economics are super unpredictable. See Bill Ackman. If anyone _could_ get good at predicting delays at the intersection of politics and economics, they would never need to worry about having enough money for whatever they wanted to do, for ever and ever. Predicting what the Fed is going to do with rates is a perfect example of predicting a delay at the intersection of politics and economics.

But before digging into that, I want to revisit the inflation (including hyper inflation) fears of a few years ago. Inflation happens (over simplification) when you have too many people chasing too few goods. Inflation contributed to the crash when increasing demand for fuel in the developing world (China making crap for us) combined with increasing demand for fuel in the developed world (drive till you qualify in an SUV) and met up with not-increasing-fast-enough supply. The oil spike messed up household balance sheets (among other things) and that disrupted the perpetual money machine and BOOOM. But the developing world experienced a delay in demand for the crap they were selling us (and their political regimes were pushing them anyway -- and discouraging domestic demand from taking up the slack), so their demand for commodities continues. For a while.

The combination of a horrifyingly bad and international financial crash and liquidity crunch with continuing high demand for a variety of commodities and the apparent health of BRIC nations led some people to believe that inflation (including hyper inflation) was next. Right when everything around them indicated deflation was rampant.

A little side light here: hyper inflation only occurs when people distrust their own currency and swap it for a different currency. Which obvs wasn't going to happen with either the euro or the dollar or the yen or whatever. History and theory agree on this; I still don't understand how people got confused about this but whatever.

Where was I? Oh, yeah. It should have been obvious (was to me at the time -- I had excruciatingly painful, long arguments with people about exactly this topic, trying to understand why they were so convinced inflation was in the offing) that the global demand for commodities was going to drop after some delay. Once producer countries figured out that they couldn't sell stuff to consumer countries, they weren't going to keep churning it out so fast, and they wouldn't be buying oil so fast, etc. In the meantime, everyone in developed nations was figuring out bus and train schedules, buying a bike (okay, the hyper inflation people were buying guns), moving in with their mom, moving closer to their job, driving the best gas mileage car in the household to work, car pooling, buying a commuter car, etc. Voila. Demand for all kinds of stuff drops. And eventually, _that_ delay gets worked through and the prices on commodities drop. (Altho not until every single fucking place to park oil and wait for the price to recover was full of that tarry black goodness.)

I do not think that anyone would disagree with the proposition that if you offer money at zero interest, long term, to all comers, and there _are_ people willing to borrow that you are willing to lend to, you will eventually generate some inflation. There is essentially ONE reason for the Fed to raise rates: inflation is (about to) occur(ing). But there is ANOTHER reason why a lot of people would like the Fed to raise rates: because they hold ultra-safe, cash like debt instruments, and they want some return. If you are too skeered to buy anything (other than pay down your own debt), or invest in anything (like, say, a stock), then you hold cash and cash like debt instruments, but you want some income, because you don't want to have to "spend your principal". The Fed appears, in your mind, to be what is getting in the way of the juicy income stream you believe you deserve, because, hey, everybody got it before you.

IF THERE ACTUALLY WAS INFLATION, people wouldn't sit in cash and cash like debt instruments, because it would be easy to find something that offered a better return -- and the rapid decrease in the value of their pile of money would be apparent. And then the Fed would raise rates.

But as long as a huge fraction of the money people are holding is sitting in their checking account, that's a fair indication that people don't perceive the money sitting in their checking account as losing value very quickly. That is, inflation is no concern of theirs.

And thus, inflation is no concern of the Fed's, either. NO rate raise for you, people sitting and quaking in fear in your ultra safe debt instruments. You'll get a rate raise _after_ you realize you're better off in an index fund because the market is going CRAZY and you finally feel like you need to get in on that action before you miss out entirely, like every other time this has happened.

ETA: There's a much simpler way to think about when the Fed will raise rates. They'll raise rates when they have to, in order to convince people to want to buy our national debt. Lots of people kept believing this was gonna happen any day now. For years. While demand for that debt just kept growin' and growin'.

Fed statement

http://www.federalreserve.gov/newsevents/press/monetary/20150128a.htm

The fed is not stupid. And they _are_ prepared to overshoot, because, they are not stupid.

Don't believe things that imply that the fed is stupid.

I am _particularly_ satisfied with this paragraph:

"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

EVEN AFTER inflation at/near 2%, "economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run".

It is extremely difficult to get this message across apparently.

ETA: Typo in the subject line. Wow. Two snow days in a row and my brain rots.

This is CR's post on net equity extraction last month.

http://www.calculatedriskblog.com/2014/12/mortgage-equity-withdrawal-still.html

I'm gonna go out on a limb here and say that we'll see the Fed raise rates right around the time that number turns positive.

Decluttering: Receipts

I have been aware of the existence of receipt trackers for a while now, however I didn't really see the point. I don't (alas!) have someone else willing to reimburse me for my spending and I don't (thank the living stars) have to worry about what is deductible or not (because I am not running a business here, as much as a household resembles a business except the trying to make more money part. So, you know, not really).

Over the course of the last few years, however, I have reduced the amount of paper in the household to the point that receipts are actually a significant chunk of what is left. I have been debating about the relative merits of just Instantly Throwing Them All Away (I do this if I paid cash), letting them age in a messy pile so I can dig through it if something on the credit card statement looks funny, and attempting to impose order by either returning to my old filing system (not gonna happen) or imposing some new, digital strategy on them.

And to be clear, if I am offered the option of an e-receipt, I do take that option.

I have decided to try an app. I went looking for one that looked like _all_ it did was store receipts: none of this expense tracking, deductibility, integrate with wtf, etc. or if it was there, it had to be NOT on the main line of usability. I picked OneReceipt. It has cloud functionality, so I can look at it through their website or through my app. It is free (I'm a little suspicious of that, but I'll come back to that in a minute) and it doesn't do anything suspicious like integrate with EverNote. It also offers an email address to so you can email receipts to it.

It's easy to enter receipts. There is some kind of transcription service, and I don't know if that's fancy programming or if that is a bunch of Bangladeshis (or wherever you get cheap labor currently -- maybe Morocco?) transcribing stuff in a pseudo-manual way. (If there are people in the developing world transcribing this for me, I think I want to (a) apologize and (b) I want to know how this can be free. But you know, cc numbers are not included in full on receipts so maybe I don't care too much.)

OneReceipt does have a nice merchant input system that uses your location (at least on the app). Very easy to use. I grabbed my aging stack of receipts, tossed all the one's that were more than a month old (that's the aging theory) and entered the remainder. Then I threw those away, too. My plan is to just enter stuff as it is handed to me, and dispose of it before ever putting it into my wallet. I will either update this post (possible, especially if this things turns out to be really awful) or update later on in my blog, when I've used it for a while.

There is integration with emailed receipts also, so there actually is a post-paper path forward, if this thing ever turns out to be a real business.

ETA: Oh, OneReceipt appears to be in Beta?

Lifehacker review of OneReceipt:

http://lifehacker.com/5865345/onereceipt-tracks-both-your-online-and-offline-purchases-in-one-convenient-location

If you use Gmail or Yahoo (and soon Outlook?) for your email that receipts go to, you can connect that account to OneReceipt and it will grope through your email and pull out receipts auto-magically. I would do that --- except my gmail account isn't my primary, so I'd have to redirect all my shopping to that email address from my main email address AND I'd have to deal with the fact that I routinely get ereceipts that were sent to the wrong address. So, that's not gonna happen. Also, not sure I'm overjoyed about OneReceipt groping through my email? You may feel differently, in which case that might be awesome for you. I'll be using the OneReceipt email address to forward stuff to, if I decide to use this thing for all receipts, vs. just paper.

ETAYA:

I'm a little confused, because the email that OneReceipt sent me suggests that it thinks my email with them is my first name @onereceipt.com -- but I thought it was going to be username@onereceipt.com, and I'm having trouble figuring that out for sure. I'm doing a little experimenting, starting out with username, because that is a rare email -- where as my first name @ is going to be common. It has not bounced OR appeared on the list of receipts yet. Hmmm. [I have now submitted a question and am awaiting a reply.]

2 of the receipts have been processed. Both were restaurant checks, and I never write the tip line when I am filling out my copy -- I just put in the total after the tip. But OneReceipt back-calculates what the tip was. Which is sort of interesting.

Funny transcription! TWNG CHINA OBLNG TEA -- it's Twining's Oolong tea, obvs, and equally obvs how that mistake was made. HOLY SHIT NOT A TRANSCRIPTION ERROR! Error is on the original receipt. Wow. That is humorous.

Laboriously reducing the size of the inbox revisited

So, I've recluttered by signing up for OneReceipt, and I thought, hey, let's try to get rid of one of the remaining, persistent messages in the inbox, a $40 off thing from Lane Bryant, usable between Jan 27 and Feb something or other. The usual can't combine it, etc. apply. I literally could not find anything that let me apply the code. At all. It was the weirdest thing. I finally resorted to picking out single, full-priced, new items, and they wouldn't let me apply the code.

So, I got to delete the email! Because that clearly is not an actual promotion. That is what I generally call A Lie.

Tracking currency serial numbers

I was watching TRMS and Loretta Lynch's role in catching the thieves who hit all those ATMS in NYC thing a year or so back. And I wondered why they felt like they had to launder the cash they got. Did the banks know the serial numbers of the cash they dispensed?

I asserted that there was no technological or cost issue at this point associated with OCR'ing serial numbers on inbound deposited cash outside of an envelope, never mind _outbound_ cash. So even a self-replenishing machine should be able to associate notes with individuals appearing on the camera at the ATM. Which seems, from a law enforcement perspective, kind of useful.

R. was skeptical, but it turns out that there have been desktop money counters with serial number capture since around 2011 -- and a bunch of ATMs now have that retrofitted into them. In the course of figuring this out, I ran across some forums discussing whether or not money was ever tracked by serial number (excluding things like bait money in a teller drawer). People popped up with an Enid Blyton story, Dorothy Sayers, and someone said their wife used to work at a school where they logged all cash by serial number.

So I sat back, and thought, well, if you look at inflation in the US, a $20 bill through when I was born was _definitely_ worth tracking -- in today's money, more than a hundred dollars. I'm betting a lot of institutions tracked serial numbers on some or all of their cash (the petty cash drawer seems like a great candidate, since there is so little security on it, and you really don't want people thinking they can just dip into that at will) until the inflation of the 1970s made it just a Pain in the Ass, at which point they quit and we all never knew they were doing that except for things like schools that hung onto the practice by switching to photocopying in the late 1970s or early 1980s.

It is sort of interesting to realize that everyone who is avoiding loyalty cards and credit cards and other instances of the Number Of the Beast are now going to have to start worrying about the serial numbers on the folding green stuff. Because in a few years, we're going to be able to track all those bills moving from business to bank and bank to individual and individual to business and so forth.

Ah, who am I kidding. I'm sure the paranoid folks out there have been worrying about this for a while, and that's why they want to go back to gold. Or something. [ETA: Yup. Barcodes on currency. Something about Donald Regan and John Kerry and currency recall and blah blah bleeping blah.]