Google - Is the Tide Turning?

America is a funny place. It's a place where you can become wildly successful in a relatively short amount of time. But as soon as you get to the top, people find a way to tear you down. America seems to love the rise and fall story. I think next in line is everyone's favorite search engine, Google.

2005 was Google's year. The stock has been on an absolute tear this year. Google keeps releasing great and wonderful services. Obviously I'm a fan of their Blogger service. I use their Google Maps service, and their mail service, and pretty much everything else that Google throws out there. Their mantra of "Don't Be Evil" is admirable and speaks to a lot of ordinary people tired of the Enrons and WorldComs of the world. But the tide may be changing.

Google has been wildly successful. But for some reason people don't want to see others be too successful. There was a time when people all loved Microsoft, Wal-Mart, Starbucks, etc. But at some point, these companies became pariahs. When a company gets big enough to dominate its space, people start complaining about the company being too big and too powerful for its own good. You are slowly starting to see people who don't like Google. They complain about how it is too powerful in deciding who comes out on top in search. There is the Book Scanning controversy, and very soon there will be even bigger uproar of Google's Video plans.

Is it jealousy? Fear? I'm just not sure. I will be interested in seeing the evolution of this company to see if it suffers from the same fate as other market dominators.

The Housing Bubble

Most of the readers who read my blog know that I believe there is a housing bubble going on right now. I believe the top has been reached and that we are going to start to see price declines over the next year. How steep those declines will be remain to be seen.

What is interesting to me is the talk on the other side of the isle by those who do not believe a bubble is formed, who believe that prices will rise or stagnate.

I am a huge fan of real-estate. I believe it is normally an excellent investment. You get to live in the asset while the price appreciates. It is tax-favored so you can realize large captial-gains without having to fork anything over to Uncle-Sam. But what has gone on over the last three years is bordering on mania.

Economics is called the dismal science and it is a aptly named. You see, economics is not kind. We are witnessing a huge asset bubble that, when it burst, is going to hurt a lot more people than anything before it. Most everyday American's don't own stocks, and certainly didn't participate in the internet stock bubble. But most American's do own homes. And many new home owners have bought homes on exotic mortgages. It would be like all these Americans not only buying Microstrategy and Pets.com at the height of the bubble, but buying them on margin!

Of course the naysayers say that houses aren't stocks. Well stocks aren't tulips either, and we all know how that one ended up. An asset is an asset. And any asset can be prone to speculation. It is true that housing is more illiquid than stocks, but that may just compound the problem as pepole will be unable to get out of their homes and thus be upside down in their mortgage. The problem with the dot-com bubble was that the assets were illiquid. When everybody went looking for the way out, nobody was left to buy. They had to dramatically drop the price because the asset wouldn't sell. It wasn't liquid.

During the Dot.com bubble it seemed like any idiot could become a millionaire. He just needed an idea, a web-page, and Bam! he would issue an IPO and make millions. Well the same thing is going on in real estate. Idiots are making money. People who have no experience in housing, who wouldn't know a closing statement is or a 1031 exchange is, are making lots of money.

Near the top of any bubble, you will see that even idiots can be richly rewarded. But it can not last. You see, housing prices can not rise indefinitely, no asset can. Housing prices can not diverge from its underlying fundimentals for long, and real estate has. Stock prices are tied to the earnings the company is able to produce. Over the long haul, stocks MUST be tied to the earnings created. The price of a house MUST be tied to the rental income that it could generate if rented out. Over the long haul, a renter must be cash-flow positive, no one can sell at a loss forever. There is no magic behind it. It just must be. It's simple economics. Ignore reality at your own peril.

Because of the above facts, most recent homeowners are in for a scare. Wages have not increased. Rents have not increased. How can housing prices be justified? The answer, they can't be. When people realize the game is up, don't be standing in front of the door; you will get trampled. When nobody is left stupid enough to pay what you paid for your asset, what are you going to do?

People are hopeful. They always want to believe that this time is different. Economics tells us that it never is. Believe me on this one. The housing market is on the cliff, and its about to take a dive.

Reality Real Estate

I should be a journalist. At the very least I'm starting to think like one.

The other day I was sitting on my couch flipping through the channels when I came across a real estate show on HGTV. I don't remember exactly what the show was titled but basically it was about people trying to sell their homes and all the hassles that they face when doing it. They weren't getting as much as they thought they were going to and the process was much harder than they realized so they were extremely frustrated.

I thought to myself, "If this doesn't signal a Housing Bubble I don't know what does." I mean reality TV about sellling a home? Have we hit a point where we are actually interested in how others are doing selling their property? Are we that real-estate crazed? That can only say one thing to me. The bubble is about to burst.

Then I flip to the Washington Post and there is an article on the exact same thing I was thinking about. Maybe I should be a journalist. Then again, maybe its just that psychic thing kicking in again.

A Muted Christmas

I didn't have much of a Christmas this year. My girlfriend got me a gift but that was about it. I gave gifts to a few people but otherwise, I didn't really give gifts out this year only because I find it is a big hassle. I usually give gifts because other people are getting me a gift and out of a sense of guilt, I do it too. Other people tell me its the thing to do this holiday season so I have always begrudgingly done it so that I don't look like some sort of Scrooge. I believe in giving gifts to those who are close to you like my family and my girlfriend. I even believe in giving gifts to the people who work for me because its important to show you appreciate all their hard work during the year. But this year, I have no one left reporting to me, so that part of it was easy.

But in the end, if I'm honest with myself, I find that I wish people wouldn't get me a gift so that I wouldn't have to get them a gift. It's not that I'm cheap, it's just I find it to be extremely stressful during the holidays to try and get gifts for everyone. I hate crowded malls and I hate spending hours trying to come up with the right gifts for everyone. When you add that to all the other stress that comes around this time of year it can be overwhelming.

So this year I decided to do myself and others a favor. No gifts. This helps me out because I don't have to worry about shopping, and I hope it has helped my friends out by letting them do the same for me. It probably has helped them more than me since I'm told I'm notoriously difficult to shop for.

The funny thing is, I'm not alone this year. It seems to me that most of my friends also didn't do much gift-giving this year. For one reason or another, most of my friends couldn't give gifts this year. This is probably a bad thing because many are just facing financial difficulties. I'm not sure if this is an epidemic or what but I certainly hope it is not. Anecdotally, you can probably chalk this up to increased energy bills, sky-rocketing home prices, etc. But I'm curious, what are other people seeing this year? Was your gift-giving or gift-receiving impacted this year and if so why?

Merry Christmas

One thing I love about Christmas is that the freeways are always clear right before and right after Christmas. I came into work today and there was almost no traffic on the freeway. It was beautiful. If only Los Angeles could be like that all the time.

Of course there is the flip side that I hate. I can't step into a mall for month before and several weeks after Christmas. If anyone is going to brave the malls either tomorrow or on Monday, please don't get crushed.

I hope everyone has a safe and wonderful Christmas, Happy Hanukkah, or whatever else you may celebrate in this Holiday Season!

NYC Subway Strike

It looks like the NYC Subway Strike may be over. I don't really take either side on the issue as I think both the city and the workers are wrong. Here's why.

I don't like unions but I also beleive they have a right to exist so long as it is a voluntary association. If a group of workers wants to strike to gain concessions in wages and benefits, I have no problem with that. My only beef with them is there fairly unrealistic expectation. An operator can expect to make on average in $63,000. Even in NYC that's a lot of money for relatively low-skilled work (Yes you can live in the city on that. I did with much less). They then want to insure that they can retire, with full benefits, at 55. Compare this with Private-sector employees and the gap is just huge.

However, I think Bloomberg's comment that the workers are being "selfish" is dead on; I just don't think that's a bad thing. People have to do what people have to do. If you believe you are not getting paid enough for your job, you need to be able to leave the job. The $1 million fine is pretty ridiculous. Forcing these workers to work because of some "public need" is just outrageous. Is it making it harder to live in the city? Yes. Is it hurting the city economically? Yes. But tough. If you are going to live in a city that depends so much on its public transportation, and then allow the operator of said system to unionize, then you run the risk of this exact thing happening. Nobody should be allowed to compel someone else to work just because they "need" them to. Slavery ended a long time ago.

I guess my big problem is (big surprise) the Federal government. The federal government mandates that workers are allowed to strike, and that employers can hire temporary workers to replace them. The problem is that the employer MUST take back the striking workers after the strike has ended. This is just stupid. If you want to strike you forefit your job. Why on earth should I take you back?

Of course labor loves this law but it is now backfiring in their face. Again, just another perfect example of what happens when government makes up illogical laws to try and "protect" a class of citizens. How did it backfire? Simple. NYC just made it illegal for public employees to strike. That is why they are now being fined $1 Million a day. That is why union leaders are facing criminal charges. They have made it illegal for someone to leave their job. Doesn't that scare anybody else?

You give government an inch, they will not only take a mile, they will take serveral miles.

Cute Overload

If you want to say "awww" go check out this site, Cute Overload. I won't still the sites thunder by posting one of its pictures here but they have found some seriously cute critters over there.

Should The Lakers Go After Ron Artest?

The Indiana Pacers are trying to trade Ron Artest. For those who don't follow basketball closely, Ron Artest is Indiana's very volatile but very talented forward. In my opinion, Ron Artest is a top 15 player in the league. He is an absolute beast on the defensive end and he has a pretty decent offensive game as well. He has won a Defensive Player of the Year award which is extremely difficult from any perimeter position.

But Ron Artest has his issues. He makes Dennis Rodman look almost sane. He was the main player in the whole Detroit fiasco where he went into the stands to fight the fans. He was the player who asked for some more time off so he could work on his rap album (which by the way flopped). But like in all sports, the more talented you are the more people are willing to forgive you. In fact, it isn't just like that in sports, its like that in all aspects of life.

The question becomes, should the Lakers go after a player like Ron Artest and what should they give up for him if they do pursue him. There is no denying is on-court performance. But is a potential time bomb worth it. If I'm the Los Angeles Lakers, I have to think it is. I say that only because the Lakers have the best coach in the history of the game, Phil Jackson. Players like Ron Artest are few and far between. I greatly value defensive ability and few can bring it to the table like Artest.

But what is he worth? In my mind there are only two untouchable players Kobe (duh) and Lamar Odom. Many pundits however think the Lakers should part with Odom to get Artest. I am not one of those people. Lakers have gone one a decent little run as of late, going 5-1 on a recent 6 game road trip. The team looked horrible at the beginning of the season but seems to have turned it on as of late. If Artest didn't have his head problems, I do the trade in a second. But the fact remains that he does have mental issues which means you just can't depend on him. You can depend on Odom. He is inconsistent scorer but he is by far the Lakers best rebounder and playmaker. He is a matchup nightmare for the opposing team.

Is Artest worth some of the Lakers young players, namely Andrew Bynum? I think Bynum is going to be a great player. For an 18 year old kid, he has shown tremendous ability. But I think this is one instance where the gamble might pay off. There is no doubt that Artest is a top-tier player when his head is on straight (the problem is it is so rarely on straight). Andrew Bynum may never be as good as Artest is right now, so it may be worth the gamble.

Stanley "Tookie" Williams Executed

Tookie Williams, founder of the notorious L.A. gang The Crips, was executed last night for the murder of four people in 1979. Over the last several weeks, there has been a call for clemency from various groups because Tookie is a reformed man. While incarcerated, Tookie has worked to write books and encourage youth to turn away from the gang life.

Let me say first that I'm opposed to the death penalty as it is actually practiced in the United States. In theory, I support the death penalty. I have no problem with the execution of a person who has taken the life of another. It is not that I'm a vengeful person, actually quite the opposite, but I do believe that ones life becomes forfeit when they take the life of another. It might be better said that I don't necessarily care what happens to someone after they commit the most unforgivable of sins.

However, I do not condone the death penalty as practiced. My reasoning is thus:

• It needs to be applied uniformly and fairly and it is not. Minorities and the poor face a much larger percentage of executions.
  
• Mistakes happen. Innocent men have been executed. And as soon as you execute someone, there is no taking it back. I believe that if one innocent man is executed it is one too many.
• I don't think its all that bad. Maybe it's because I don't really fear death, but to me, it would be much worse to waste away in prison for the rest of my life.

But that being said, I have no problems with the execution of Tookie Williams. While he maintains his innocence in this particular case, there is little dispute that he founded an organization that is responsible for hundreds if not thousands of deaths in the last 25 years. It matters very little for me that he is a "redeemed" man. It is easy to reform when you are locked up away from society and facing certain death. Regardless of his reformation, the facts remain that he is responsible for numerous deaths. And as I stated before, in my mind a person's life becomes forfeit the moment they take another's life. It doesn't matter what happens after that point.

Christian groups have been calling for compassion. But if we as a society are going to condone the death penalty, I see little reason why the state should show compassion. If Tookie is indeed reformed, than these Christian groups should take solace that he will find compassion in the eyes of God. But lets let God make that determination, not the state.

Owner vs. Workers

Jennifer made a comment on my last blog about how McDonalds depends on needing to have access to its workers 24/7 or else face bankruptcy. This came on the heels of a discussion I had with someone else about the importance of executive compensation so I might as well touch on the subject.

I'm not sure exactly how McDonalds and access to their workers even got into the conversation, but the argument that McDonalds would go bankrupt without their workers is specious at best. Are workers at the lowest levels important to the success of any company? Absolutely. No company can succeed without the people doing the work that makes a company run. But, are they more important than executives and company owners? No. I feel I do very important work at my company, am I more important than the CEO or the shareholders? Hardly.

Now, where would the McDonalds' workers be without McDonalds? They wouldn't have a job. Now if the counter argument is that they could easily find another job somewhere else, the logical next question is why don't they? If working at McDonalds is so miserable, and other jobs are so plentiful and easy to come by, wouldn't all the McDonalds' workers leave en masse?

It is much easier for a company to find low-skilled labor in this country than it is for a low-skilled worker to find a willing employer (I believe the opposite is true for high-skilled workers). Further, it is much more difficult to start, finance, and maintain an new enterprise than it is to provide low skill labor. So the employer is faced with the more difficult job and easier replacement than the low skilled employee. Now who is dependent on whom?

I am not trying to diminish the importance of working Americans. I'm a working American. But the idea that employees are somehow more important than executives and owners gets a lot of traction in this country and it is a notion that is simply untrue. Is it true in some circumstances? Are some executives and owners idiots? Absolutely. But idiot executives do eventually get replaced. And owners? Well its their money to lose, if they want to take a big pile and money and burn it for heat, its perfectly within their right.

Providing capital and executive and strategic direction is hard. If it were easy, everybody would be doing it. Can a company function without either this or its low-skilled labor? No. They are both important. But one should never make the argument that the worker plays a more important role or is somehow more crucial than his employer.

Digital TV - A Right?

George Will has an interesting Op-Ed about Congress and its $3 billion bill to ensure that all Americans will have access to television when the Digital revolution comes around. I had a chance to have dinner with George Will once when I was at Princeton. I won a drawing, one of the few things I have won in life, but passed on the opportunity. Don't know why. I wish I hadn't.

Anyway, the switch will actually mean very little to most people. The only people it means anything to are those who have neither cable nor satellite TV. Of course, the people this most likely affects are the poor, those who can't afford cable or satellite TV.

Why no doubt this would not be fair to the poor, the question becomes should it really matter? I have to agree with George Will on this one. For me, it isn't the specific question of digital television. The problem I have is with the general sense of entitlement. I have a very limited view of what government should and should not do. Clearly there is no "right to television" outlined in the Constitution but where does one draw the line?

What's next? The right to video games? I mean the Xbox 360 just came out, so very soon, game publishers will stop making games for the old Xbox. Should we force them to make all the video games compatible with the old Xbox? Don't laugh. Video games are slowly but surely becoming ubiquitous, at least as much as television was in the mid 20th century. Someday soon, we might get to see a "No Video-Game Left Behind" act and then we will really know we have all gone straight to hell.

Why I Don't Buy Gas at Arco

Someone the other day asked me why I don't get gas at Arco. Besides the fact I believe the gas is of inferior quality, I have my own personal reasons for never getting gas there.

About 4 years ago I stopped by an Arco to get gas. It normally has the lowest posted price for gas and I was running low so I said what the heck. I walked up to the center isle to pay for my gas using my credit card, filled up my tank, and then left. I remember, I only put in $9.00 of gas. But when I checked my credit card a week later, I noticed I had been charged $9.35. I knew for sure I had not put in $9.35 so what the heck? I suddenly realized I was charged $0.35 for the privilege of using my credit card.

Now, I for one have no problem with companies charging people who use their credit cards more than people who use cash. It cost the business more money and why should the cash customers subsidize the credit customers? However, the policy should be clear and readily apparent. Nowhere was their a sign that I could find that told me I would be charged the $0.35. Maybe there was a small one somewhere near the credit station, but it was clearly not apparent to someone like me who tends to be fairly observant.

So I have never gone, and will never go back, to Arco. All because they charged me $0.35 and didn't let me know about it. With so many other options I would just rather not bother with this company. Just goes to show you how one little thing can really set off a customer.

What's With Restaurant Service Lately?

In the last few weeks, I've been to several restuarants where the service was severely lacking. I was even forced to not leave a tip on two occasions and only reluctantly left one in another instance.

I like to tip, even though I do not believe tipping should be mandatory. But the service at these places was just atrocious. In one instance, they got the order wrong. Then, they didn't bring out all the food at once but insisted the rest was coming. The food that did come was spicy and my girlfriend was drinking lots of water. Did they come by to fill her glass? No. She ended up drinking my glass. Fifteen minutes later they had still not brought the rest of the order. So I asked again. They hadn't even started on the food so I canceled the order and left hungry.

Now, I can be a pretty patient guy. I can understand if the place was busy then the service might be slower. But seriously, we were there at lunch and there were two other tables of two there! And there were two servers. So two servers, three tables, six guests. Doesn't sound like impossible odds to me. To make matters worse this was a sushi place, you write down your own order. How do you mess up an order when the customer checks what he actually wants? I use to go to this place regularly just because it was conveinent. I won't go back again. It is Woomi Sushi in the Santa Anita Mall. I suggest you don't go there either if you like a restuarant that actually has service.

Expensive Jeans

My one guilty pleasure, the only thing I really waste money on, is designer jeans. Since I have bought my first pair of designer jeans, I have never gone back. The other day I was in the store with my girlfriend and we saw a beautiful pair of jeans from Citizens for Humanity. They were however $200. I don't mind spending $160 but $200 is starting to be a little ridiculous. Still, I was so tempted to buy them. Besides, what is $40 when you are already paying $160

I'm not the only one though. Here is an article about expensive jeans. It seems there are some jeans that retail for $10,000. Makes my $200 seem little in comparison.

Trade Imbalance? Look in the Mirror

I always get a kick when politicians rant about the trade deficit. It's one of those easy political topics that everyone can agree with and the only enemy are those bastard Asians and their cheap products.

I have an idea for America. Why don't you quit blaming other countries low wage workers and look squarely at yourself. There is little doubt that there are some disadvantages that the United States faces when it competes with cheap foreign labor but that is hardly the whole story.

The United States discourages savings. It discourages companies from doing business here and provides foreign competition a tax break. It puts American companies at tremendous disadvantages in the global market. How? By having an absolutely horrendous tax structure.

Want to save money? Good. We will tax you on anything you earn from saving your money.

Want to do business here? Good, we will put a tax on your corporate profits.

A foreign company doing business here? Guess what, you don't have to deal with taxes because the US only taxes corporate and income taxes and you are responsible for neither here.

Are you a U.S. company and want to business abroad? Guess what, you owe the US taxes even if that good was never made or sold here.

All this does is make foreign goods cheaper here and U.S. goods more expensive abroad. You add to the fact that all U.S. goods have income taxes built into them, and you can see why they are more expensive abroad.

America has some of the brightest, hardest-working people around. We have the advantage of higher-education, more capital, and the experience to use all of them. Let's quit whining about how unfair it all is and deal with the reality of the situation. Globalization is here and it isn't going away.