Twenty Third Floor
Technical Business Advantage

Lightstone have a trick up their sleeves. Their raison d’être is collecting, analysing, understanding and packaging data for themselves and others to use to understand past, current and future property valuations.

Their housing price index is more robust (and more independent) than those of the banks based off their own data and target markets. Rather than consider only the average price of houses sold in that particular month (which is a function of house price growth / decline but also how the type, condition, size and location of the houses sold that month differ from the prior month and year) they consider repeat sales where the same property has been bought and sold more than once.

This data is combined or “chain-linked” to provide a continuous measure of house price inflation over time.

House Price Inflation 2010 source: lightstone.co.za

The result of all of this data, best-in-class methodology and analysis? When Lightstone says “opportunities abound in local market” I actually listen. Since their business model is to sell information, I’m more likely to trust what they say.

In researching my previous post on accurately measuring the risks associated with vehicle crimes based  on colour, I stumbled across another colour related risk measure.

Red cars, supposedly, attract more than their fair share of traffic fines.

Turns out this is incorrect.  Snopes.com has (as usual) an excellent article on red cars, including references to research showing red cars are not more likely to be fined than other vehicles. Unfortunately, the underlying research isn’t available online (as far as I could find).

Apparently, car thieves don’t want your pink car. It’s not because they don’t like the colour (although they probably don’t). It’s also not only that it’s too distinctive and will be easily spotted (see the discussion later about red cars).

It’s that nobody else wants it. The resale value is much lower than other vehicles, and the risks and costs of stealing it are no lower.

Unlike the conclusion around high risk vehicles in my post on hijacking, this actually means you should be safer in a pink car. Just not safer from ridicule.

Dutch professor, Ben Vollaard, studied theft rates for vehicles as part of his research area of the economics of crimes. The data covered 109 vehicles from 2004 to 2008. Not the largest sample size, but enough to start thinking. (more…)

Humans, unlike other creatures, have the  incredible ability to consciously think about tomorrow. We can imagine different scenarios playing out, and plan for them accordingly. The same approach also allows us to consider the impact of our actions on others in simple and sometimes complex ways. We’re not just squirrels hoarding nuts because we feel it’s right deep within our bones.

It’s a pity we fail so miserably to make use of these skills.

Innumerable and seemingly unconnected issues stem, at least partly, from the focus of individuals and lobby groups on immediate self-interest. We are the me, now peoples of the world.

Unions in Spain are protesting the increase in retirement age from 65 to 67. It’s understandable they’re unhappy – many of them having worked for many years to be told they need to work longer. The problem is, people are living longer so the cost of retirement is greater. Workers are healthier at 65 now than they were at 60 not that many years ago. Spain is struggling with a crippling budget deficit. The cost of retirement will be born by others, in the future. For the me, now peoples of the world, somebody else’s problem at a distant date in the future is not a problem at all. (more…)

Statistics are dually known as useful and misleading. Another relevant saying is that a little knowledge is a dangerous thing.

photo credit: star5112

CAR magazine used to have a short section covering the number of complaints received from readers separated according to car brand. The problem with that sort of analysis is that it ignores the relative number of cars from each brand on the road. The “exposure” of toyotas to problems is much higher than maseratis since there are rather more toyotas on our roads. If CAR magazine received an equal number of complaints from drivers of maseratis and toyotas, it would suggest anything but an equal likelihood of having problems from each of those brands. I obviously wasn’t sufficiently convincing when I offered to help them devise a less biased measurement criterion.

This is an example of a common problem with random events – it is important to consider what could have happened as well as what did happen when understanding the results.

In a related example, iAfrica has an interesting article on car hijackings in South Africa. They include a list of the top ten hikacked cars. The list is interesting, but difficult to interpret without knowing how many of each vehicle were hijacking AND how many were on the road, able to be hijacked. If the Maserati Gran Turismo were on the list, I would be wary of driving one! (more…)

CNN has a story on house price declines being at their highest in 30 years. Turns out the headline is misleading in two ways. Firstly it proclaims house prices at a 30-year low, which is fortunately not quite the reality. However, the largest decline in 30 years is still pretty shocking. The second item is that the 12.4% decline in US house prices in 2008 is the worst since they have been systematically recorded.

Home prices fell 12.4% during 2008, the largest yearly decline since the National Association of Realtors began keeping comprehensive records in 1979.

As always, averages are a useful measure of overall market movements, but hide some truly enormous declines in individual areas: (more…)

From FT.com

Official data showed the UK economy contracted 1.5 per cent in the last three months of 2008, the biggest quarterly slump in 28 years. The figures confirmed that Britain had entered its first recession since 1991. The figures, a preliminary official estimate of output, showed a contraction in services, manufacturing and construction.

But that 1.5% is much worse than it might sound. We’re used to hearing Seasonally Adjusted Annual Rates (SAAR). But this is a 1.5% decline in a 3 month period. In the US or South Africa, where GDP is reported on an SAAR basis, this would be equivalent to a 6% decline.

Sounds more serious now, doesn’t it?

What do the names Oneway, Bull, Kansvatter, Inthemoney, The Bull! and Millionaire in the making have in common? They’re all optimistic, aggressive names used in the Make A Million competition. They’re also, as of right now, all in the bottom ten out of nearly 300 entrants and have all lost everything but a few rand from the R10,000 they started with on their chance to Make A Million speculating with Single Stock Futures. None can even take what’s left of their R10,000 and watch a Movie (except maybe at a Sterkinekor Classic, on Tuesdays, in PE).

These aren’t the unlucky few. As I warned in a previous post on how the Make A Million competition is a bad idea and encourages wild speculation and ill-advised risk-taking, the performances of the best and worst entrants is dramatically different after just two months, with rather more entrants looking at poor returns.

The highest return (so far as of about the time this blog is posted) based on the live leaderboard is a massive, impressive return of 735% in two months. That’s over a 30 million percent return on an annualised basis. That is also where the good news ends.

Some more stats:

• Highest return 735%
• Average return -27%
• Median return -53%
• Worst return -107% (yes, someone lost all their fund and more thanks to the geared danger of SSFs)
• Approximate percentage of entrants with negative returns 82%

It’s abundantly clear that entrants have been massive losers in just a short space of time.  The average return translates to an annual return of -85%. Of course, the position would have looked much better had the markets boomed during the period, and it’s still possible there could be a huge rally from now until the competition ends. It’s just that I wouldn’t give any of my money to Bull! or Spitfire or Druggies or even Fantastic.

Not in a million years.