Jordan's Economic Outlook

Here is a link to an excellent full report my friend authored on the risk profile for investment in Jordan.

This is the executive summary:
[CLICK ON THE IMAGE TO OPEN A READABLE VERSION OF THE EXEC SUMMARY].


I definitely recommend reading the full report, by his firm PIRC, if you have any interest in economic development especially in the Middle East.

Credit Card Rewards: Redeeming for Goods is a Scam

When presented with two identical goods, any logical consumer should choose to purchase the lower priced option. But this obstacle is apparently overcome in the case of credit card point redemption.

For example, many credit cards (such as the one I have) offer points as rewards for purchases, and give the option of redeeming those points for cash or goods. The conversion rate for points to cash maxes out a 1/100, so 25,000 points can be redeemed for $250, and 50,000 points could be redeemed for $500.

But purchasing goods offers a much lower conversion rate. For example, a camera that on Amazon.com costs $160 in cash would cost the equivalent of $332 dollars (33,200 points) from the credit card company. A GPS that from Magellan costs $150 would cost in points $350 (35,000 points). By buying the goods with points, the consumer forgoes the cash and therefore pays an extra $172 dollars for the camera and an extra $200 for the GPS.

Obviously it would most benefit the consumer to redeem points for cash and buy the goods separately. (Additional benefit from this option is that the consumer would receive points for the additional purchase.)

So why do people redeem points goods? After all, the option wouldn't be available if no one used it. I think they are taking advantage of a psychological phenomenon whereby the consumer thinks (falsely) that they are getting something for free, and therefore become price insensitive. I would welcome your thoughts on this as well as further examples.

Financial meltdown prediction from a year ago

Click here for a must see video clip of Peter Shiff predicting the financial meltdown over a year ago.

Interviews

My first interviews of the season are tomorrow (or I guess actually later today). Wish me luck!

Complete Streets

Here's a link to a great initiative for improving our cities:

The streets of our cities and towns ought to be for everyone, whether young or old, motorist or bicyclist, walker or wheelchair user, bus rider or shopkeeper. But too many of our streets are designed only for speeding cars, or worse, creeping traffic jams. They’re unsafe for people on foot or bike — and unpleasant for everybody.

Now, in communities across the country, a movement is growing to complete the streets. States, cities and towns are asking their planners, engineers and designers to build road networks that welcome all citizens.

The big news is that Governor Schwarzenegger signed this into law in California.

Ex-communication: useful for entrepreneurs in emerging economies and medieval Jewish communities

I crossed the bridge to BU last week to attend Kol Nidre, the opening service of Yom Kippur, after which Rabbi Polak invited us to a class. (As he said, what else could you possibly have planned for tonight?) His teaching focused on a line from tractate “Yoma” of the Mishnah (alt link):

On the Day of Atonement it is forbidden to eat, drink, bathe, put on any sort of oil, put on a sandal, or engage in sexual relations.

The Torah portion is not as explicit as the Midrash in its list of prohibitions:

In the seventh month, on the tenth day of the month, you shall practice self-denial; and you shall do no manner of work, neither the citizen nor the alien who resides among you. For on this day atonement shall be made for you to cleanse you of all your sins; you shall be clean before the Lord. It shall be a sabbath of complete rest for you, and you shall practice self-denial; it is a law for all time.

(Other relevant verses)

Since the midrash prohibitions are so extensive, the Rabbi asks, in what other situation is eating, drinking, bathing, anointing, and wearing leather on the feet prohibited? Answer: The frequently persecuted Jewish communities of medieval Europe used the threat of a limited form of excommunication, called niddui, to keep their members in line. The niddui was announced by the blowing of the shofar, after which the community members weren’t supposed to come within ~6’ of the offender or eat with him, and the offender was not supposed to cut his hair, wear shoes, etc. So on Yom Kippur, we are essentially placing ourselves in niddui for the day due to our sins over the year, and that’s why we blow the shofar, don’t eat, don’t bathe, and don’t wear leather shoes.

As a business student the concept of niddui is interesting also for its implications in emerging markets. For class we read this article “Private Order under Dysfunctional Public Order” from the Michigan Law Review (Recommended read. Most of the article is available online.), in which the authors demonstrate how in emerging markets that do not have strong institutions to support small businesses, such as a functioning court of law or credit bureaus, entrepreneurs still manage to flourish by creating extra-legal systems of their own. For example, in the ethnic Chinese community in Vietnam if one business cheated another business then the entire community would boycott the cheater. By looking at these communities which have created niddui of their own, we can perhaps better understand the context in which the concept evolved in the Jewish tradition, and what life may have been like in a Jewish village in medieval Europe.

Boston Real Estate Market

I put together some numbers for an email on the Boston real estate market, and thought I'd share them here with you. Below I pasted the spreadsheet with some stats (click on it for a readable view), but here are two highlights:

• I estimate that the total commissions collected by real estate firms for sales in Boston has decreased 24% (from $177MM to $142MM) this past year compared to the year October 7, 2004 to 2005. However, the decline in commissions has not been steady, with the sharpest decline this past year. I expect this to translate to market consolidation of brokerages.
• Looking at all property types, average sale prices and listing prices have not fallen significantly over the past year, and in fact have risen 5% to 7% over October 2004-2005 in Boston. Rather than affecting price, the market slowdown has most affected volume and the number of days it takes for a property to sell. This may not be true for all market segments, but it is at least superficially promising that value has not decreased.

[click on the image for a readable view of the spreadsheet]
I'd be interested to hear your comments on what you think this means.

Fast Fluffy Eggs

So you want a real breakfast but are in a rush? These are my weekday morning quick breakfast recipes. Minimal prep time, minimal cleanup, and the eggs come out fluffier than if you'd fried them.

Fluffy microwave egg omelet:
-beat an egg in a microwave-safe bowl
-toss in whatever filling you desire (veggies, cheese, cheerios)
-microwave on high for 45 seconds. (or until fluffy)
-salt and pepper to taste. eat. (be careful, it's hot.)

Mountain bread:
-Place a slice of bread in a microwave-safe bowl, so the edges of the bread curve up slightly against the bowl.
-Crack an egg on top of the bread
-microwave on high for 45 seconds. (or until fluffy)
-salt and pepper to taste. eat. (be careful, it's hot.)

New Hedge Fund

The financial sector has traditionally supplied a good portion of new MBA's with jobs, but with the current financial crisis those jobs are drying up. This affects me because all those finance people are now applying for jobs that I want. So let me suggest instead that they consider this new hedge fund: Strategery Capital Management.

From their website:

Strategery has several competitive advantages compared to other hedge funds.

1. We have approximately as much in capital as all other hedge funds combined, so we can negotiate best-in-the-business terms with counterparties.
2. We have an unlimited ability to raise more capital even in times of distress. Therefore the traditional limits to arbitrage (irrational return-chasing investors) does not apply.
3. We have a close relationship with the federal courts so counterparties seeking to terminate a transaction with us face not only civil litigation costs and losses, but potential criminal liabilities.
4. We are not limited to looking for opportunities with positive expected returns and so can cast a broader net across the investment universe, thus extending our efficient frontier beyond what other hedge funds can offer.

P.S. Yes, this is a joke.

sensitivity analysis

Quote from an invitation explaining the reason for the event, a soccer match between two ethnic-group clubs :

Why: To increase awareness of all ethnic groups at [school] (and to show that Africans/Minorities are better than the Latinos at Soccer).

I'm glad we don't go overboard with political correctness here.

busy busy

Hello all, I've been back at school now for a month. I haven't blogged more due to the crazy pace of events. I'm taking a heavy course load with classes finance II, industrial economics, two different marketing classes, global entrepreneurship, a negotiation class, and a leadership class with a well-known CEO. Also, recruiting is in full swing and I'm trying to make a good impression on my potential future employers, and I'm putting together a team for my start-up. Recently I told my Reserve commander that I'm planning to leave the Army, and so now I've got to start the paperwork.

But I will try to post more. =) To start, here are links to the company Endeavor, an interesting non-profit that invests and mentors entrepreneurs in developing countries, and an article in the Economist about them. I'm going to South America over the winter with a team from school to assist one of their companies.

Update - Skype call forwarding

Update to my review of Skype service: the cost of call forwarding is included in the subscription cost, and they've updated their help page to say so. Here is the email from Skype Support:

Thank you for contacting Skype Support.

You can set up a call forwarding feature, and let all the incoming calls to a number you wish to receive while you are away from your computer. If the country of your forwarding number is included in your subscription, the call cost will be covered with your subscription as well.

Please feel free to contact us again if you have any questions or concerns, and we will assist you further.

Best Regards,
Skype Support

The Final Medal Counts

By popular demand, this is an update to my previous post looking at the final Beijing 2008 Summer Olympic Medal rankings by GDP, population, and a few other things:

Athletes from 86 countries received at least one medal.

The Bahamas receive top honors for total number of medals in proportion to their population. (2 medals and a population of around 307,451), followed by Jamaica and Iceland. Armenia drops to ninth place. Guess the islands got something.

Top 10 - Ranked by Total Medals to Population
Rank	Country	Gold Medals	Total Medals	Population
1	Bahamas	0	2	307,451
2	Jamaica	6	11	2,804,332
3	Iceland	0	1	304,367
4	Slovenia	1	5	2,007,711
5	Australia	14	46	20,600,856
6	New Zealand	3	9	4,173,460
7	Norway	3	10	4,644,457
8	Cuba	2	24	11,423,952
9	Armenia	0	6	2,968,586
10	Belarus	4	19	9,685,768

Meanwhile, Zimbabwe led for number of medals in proportion to per capita GDP, followed by China and Kenya.

Top 10 - Ranked by Total Medals to Per Capita GDP
Rank	Country	Gold Medals	Total Medals	Per Capita GDP
1	Zimbabwe	1	4	$ 179
2	China	51	100	$ 5,256
3	Kenya	5	14	$ 1,551
4	Ethiopia	4	7	$ 795
5	Cuba	2	24	$ 4,474
6	Russia	23	72	$ 14,840
7	Ukraine	7	27	$ 6,960
8	North Korea	2	6	$ 1,704
9	Uzbekistan	1	6	$ 2,269
10	US	36	110	$ 45,553

Pakistan is the most populous country not to receive any medals, followed by Bangladesh and the Philippines. The 10 largest countries not to receive any medals are:

Country	Population
Pakistan	167,762,040
Bangladesh	153,546,901
Philippines	92,681,453
Congo	66,514,506
Burma	47,758,181
Tanzania	40,213,162
Uganda	31,367,972
Nepal	29,519,114
Peru	29,180,899
Iraq	28,221,181
Saudi Arabia	28,161,417

The 5 smallest countries to receive medals:

Country	Population
Iceland	304,367
Bahamas	307,451
Bahrain	718,306
Trinidad and Tobago	1,047,366
Estonia	1,307,605

Within the Axis of Evil North Korea led in total medals, gold medals, medals to population, and medals to per capita GDP. Iraq was pretty much out of the running

Country	Gold	Total	Population	Per Capita GDP
North Korea	2	6	23,479,089	$1,704
Iran	1	2	65,875,223	$11,431
Iraq	0	0	28,221,181	$3,625

For additional rankings, check out the links on this previous post.

Review of Skype Service

In my fancy new graduate apartment building there are no phones, at least not the traditional analog sort. Noting that most students have cell phones, we were informed by email that in lieu of landlines there would be four Ethernet jacks per bed and we could certainly use one of the jacks to connect a VOIP (Voice Over Internet Protocol …i.e. a phone that uses the internet) phone service. The suggested list of providers was: Skype, AOL, Gizmo, AT&T Callvantage, Verizon Voicewing, and Vonage.

I chose Skype because it seemed like the best deal. The basic service is free and lets you call other Skype users from your computer. For, $3 per month however, you can make unlimited calls in the US and Canada, and for an additional $30 per year you get a phone number at which people can call you (and you can choose your number from a list of available numbers). It includes voicemail but not call forwarding for which you must pay extra for the forwarded calls. [8/30/08 UPDATE: Call forwarding is included]

Also, I bought a special VOIP phone on Amazon, the Belkin Desktop Phone for Skype, for $80, although you can certainly use the service from your computer without a special phone. I bought the phone because it plugs directly into the Ethernet jack completely independent of my computer so I can use the phone even when my computer is off. So all told, I’ve got unlimited domestic phone service for under $9/month ($3 to call out, $2.50 to receive calls, and $3.33 for the phone if you depreciate it over 2 years).

The sound quality is surprisingly good. I’ve been making calls to landlines and cell phones for a week now using the Belkin and the call quality is almost as good as on a landline, and certainly better than on my cell phone. The only disadvantage so far is that to dial to the US from the Belkin phone I have to precede each number with +1, but that’s hardly an obstacle. (Other disadvantages include that the phone won’t work when the power is out, won’t work when the internet is down, and won’t identify your location to emergency services, but also having a cell phone mitigates those risks.) One feature I really like is that I can enter my contacts either on the phone or on my computer to the Skype program and the phone automatically updates to include these so I can speed dial them.

One piece of advice to others setting up their VOIP phones in a dorm room: give the phone half an hour to register itself with the network. My phone returned the message “cannot connect to the internet” for that long while I waited on hold for tech support before resolving itself.

A Race of Convicts

I was flipping through the book I Hear America Talking, a history of American words and phrases and came across this entry for "A Race of Convicts:"

...a term that angered the colonists and was a fairly common insulting sobriquet used by the British... It was an awful thing to say, especially insulting because it contained a lot of truth: between 1607 and 1776 about 40% of the English who came to the colonies were convicts, drunks, run-aways, debtors, and others who had less than idealistic reasons for starting over in a new land.

Our contemporary anti-immigration advocates should keep that 40% figure in mind concerning their ancestors since in the current wave of illegal immigrants/undocumented workers, the vast majority of the 12 million illegal aliens estimated to be in the US are otherwise law abiding.

Privatized Mass Transit

If you've travelled in developing countries, chances are you've seen shared taxis. Depending on the country they range from safe and efficient to incredibly dangerous, and in their best cases provide an example for a system of privatized mass transit that could be adopted to supplement automobiles and the traditional mass transit systems in the developed world.

One example that bears holding up: the Sherut of Israel. These vans are privately owned and operated and supplement the extensive traditional bus system. Some operate on fixed routes, both inter- and intra- city, and they often will deviate to accommodate a drop-off. They have every incentive to respond instantly to the market, and they do. You want to get picked on this corner and go to that super-market? Sure. The bus service is offering a fare discount on Thursdays? We'll beat it.

Used in conjunction with other approaches, our cities could greatly reduce traffic congestion and improve their mass transit systems without massive public investment simply by licensing private shared taxis.

The Other Oil Crisis

We've all heard about the oil crisis: the price of oil is high, we may be running out, the car exhaust causes health problems, and, oh yeah, it's contributing to global warming (or weirding.) And we're all familiar with the innovation the crisis is spurring in automobiles: electric cars, hybrid cars, fuel cell cars, and solar cars to name a few. But those innovations fail to address deeper concerns with an automobile centric society:

1. DEATH AND INJURY. The US Department of Transportation announced that in 2007 there were 41,059 deaths and 2,490,000 people injured in vehicle accidents, and those were the lowest figures in fourteen years. (As Robert Reich points out, the only reason the numbers are down is because the economy is slow and so people are driving less.) If a foreign country attacked and injured 1% of those numbers we'd be at war and spending billions of dollars, so why not address this issue. Also, as the developing world aspires to the US standard of living, we should consider that already over 1.2 million people die worldwide in vehicle accidents.
   
2. LOST TIME. In the US it is estimated the average driver spends 38 hours stuck in traffic per year. (In Los Angeles 98 hours, Houston 56 hours). This is not just frustrating, it is time away from families and time lost from productive working. Unlike time on a train, you can't work (safely) while driving. The cost of congestion is estimated to be over $78.2 billion annually.
   
3. SOCIAL INTERACTION. Cars are bubbles. The only way drivers communicate with others on the highway is with horns, lights, and often the middle finger. How many people have met their husbands or wives while commuting in separate cars on the highway? Sharing a public space, like a train compartment, would result in increased public discourse and a greater feeling of community, which we could use when addressing some of our other problems.
   
4. RESOURCE USE. The roadways are publicly funded for construction and repair. From 1998 to 2003 US highway spending alone cost approximately $80 billion per year. And building more roads only adds to the cost, and uses up more land.
   

Cars are of course an attractive method of travel. But often we think they are so attractive simply because they are the only reliable option. The time is for our leaders to make a serious commitment to building a public transportation system worthy of a first rate nation. Yes, there will always be times when an automobile is simply the best way to go, like on moving day, or to transport people to the hospital. For the rest of the time, we need reliable, clean, safe, fast public transportation.