How did Zillow become the world’s dumbest buyer of real estate?

I used to pride myself on being the world’s dumbest buyer of real estate. I like to overpay for a house, overpay for renovations, contract at fictitious prices for non-existent products, fail to account for the risk that a state could revoke residents’ freedoms and necessitate a move, etc. It seems, however, that I’ve been unseated. “Zillow Quits Home-Flipping Business, Cites Inability to Forecast Prices” (WSJ, November 2):

Real-estate firm Zillow Group Inc. is exiting from the home-flipping business, saying Tuesday that its algorithmic+ model to buy and sell homes rapidly doesn’t work as planned.

In a statement Tuesday, Chief Executive Rich Barton said Zillow had failed to predict the pace of home-price appreciation accurately, marking an end to a venture the company once said could generate $20 billion a year. Instead, the company said it now plans to cut 25% of its workforce.

The move represents a big hit to Zillow’s top line. Home-flipping was the company’s largest source of revenue, but it has never turned a profit.

Zillow, which released earnings Tuesday, said its home-flipping business, Zillow Offers, lost $381 million last quarter, as measured by adjusted earnings before interest, taxes, depreciation and amortization. That resulted in a combined adjusted Ebitda loss of $169 million across all of Zillow.

They were using the fraudulent EBITDA measure, which excludes the interest they had to pay to hold onto these houses. So $381 million/quarter would have been the minimum loss.

How is it possible for people who do nothing but real estate all day every day to lose their own money in this spectacular fashion? It isn’t surprising when some big developers go bust. They are in an arrangement where they keep the upside if a high-risk project goes well and stick a bank with the downside if the economy tanks (1990 calling!). But Zillow didn’t have this incentive to take crazy risks. And the real estate market did not tank. To the contrary, we’re in a period of inflation not seen since around 1980. A monkey should have been able to make money buying houses in this market since the cost of borrowing is lower than the rate of inflation in house prices.

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Is 5G a total fraud?

Mobile phone service back in Maskachusetts was generally terrible, whether the iPhone 12 Pro Max indicated “LTE” or “5G” up at the top right. I attributed this to hills generating multipath and the righteous demanding that cell towers be built in someone else’s town.

We’re living in Florida, though, where a municipal landfill is the only hill, and the government encourages any kind of useful infrastructure. I think that all of the preconditions for awesome mobile data service have been fulfilled:

  • I’m fully vaccinated and so is our golden retriever, Mindy the Crippler
  • The Verizon bill is on autopay
  • the iPhone usually shows 3 or 4 bars of 5G
  • there are no tall buildings or hills around

Yet the service simply doesn’t work. It can take minutes to send a single photo via iMessage, for example. Looking up stuff on Google can be impossible. Navigating via Google Maps results in an “offline” display, even when the phone shows 3 bars of 5G.

Could it be that there is a working LTE service in most locations, but the phone sees 5G and latches onto it even when the 5G radios are simply broken? I’ve experimented with telling the phone to use LTE only, but that didn’t seem to help. Sometimes the Verizon network yields impressive numbers on a Speedtest, comparable to high quality home broadband circa 2010, but for any given request it is unpredictable whether it will take a fraction of a second or minutes.

Is this issue unique to my iPhone 12 and it will be #ProblemSolved when I upgrade to the glorious world of iPhone 13? Or are other folks having similar issues (3 or 4 bars of coverage yet it is tough to download an ordinary web page)?

Waiting for a page to load on 5G:

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Urban/rural divide in Virginia Gubernatorial election

Readers will recall that one of my pet themes here is the diverging interests of urban/suburban Americans who get richer when government gets bigger and rural Americans for whom a bigger government brings higher taxes and few benefits (since government buildings and programs tend to happen in cities).

The New York Times illustrates this nicely with a per-county map of the Virginia election results:

Virginians near the state capital (Richmond) or the Nation’s Capital (D.C.) just loved hearing about the Democrat’s promises to expand government. Virginians elsewhere were more enthusiastic about the Republican’s expressed dream of eliminating the state’s income tax. The rich folks in Fairfax County (median household income $125,000/year in 2019), bordering D.C., preferred Democrat to Republican by 65:35. Folks in Lee County, at the southwest corner of the state, have a household income of less than 1/3rd that of the government-affiliated people in Fairfax: $33,000/year in 2019. They voted 88:12 in favor of the Republican candidate.

A good illustration of my pet theory?

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How’s the Climate Change summit in Glasgow going?

For nearly two years, the global elite have been telling the peasantry not to gather across households for fear of spreading deadly SARS-CoV-2. The global elite have closed borders as well (except for the U.S. southern border, which must remain open), because one certainly wouldn’t want to give a variant virus a chance to infect a new area. It is doubly bad when people from different countries mix.

Since at least 2015, when elites gathered in Paris via Gulfstream, elites have been telling the peasants not to emit CO2.

Where are the elite right now? They’ve gathered in Glasgow via Gulfstream, Boeing Business Jet (#WhenAGulfstreamIsTooSmall), and Airbus Corporate Jet for a climate change conference: COP26. And they’re encouraging the rabble to gather and spread coronavirus as well in an indoor “Green Zone”:

From all over the globe, youth activists, Indigenous Peoples, small and large businesses and grass roots communities will be bringing COP26 to life with cultural performances, exhibitions, talks, film screenings and technical demonstrations, all open to the public. Located in the iconic Glasgow Science Centre, on the south bank of the River Clyde, the Green Zone will welcome visitors from 9am – 6pm each day.

Over 200 events will take place in the Green Zone over the 12 days of the summit. Tickets will be available free of charge to the public.

This post is to ask “What news on the Rialto?” Does it look all of our climate dreams will be coming true soon?

Sadly, the G800 was not certified in time for this event…

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A graphic from the Daily Mail that attempts to calculate the carbon emissions from flying four heavy jets (two B747s plus two C-17s with the helicopters, limousines, etc.) across the Atlantic and then driving around.

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How was Karen’s Halloween party?

How did everyone enjoy Halloween? In our Jupiter, Florida neighborhood, not a single mask was observed (other than costume masks). Substantial gatherings were observed in the next neighborhood over (Jupiter Heights), with candy for the kids and what appeared to be booze for the adults. Children were invited to grab candy from common bowls, thus risking the spread of COVID-19 via surface contamination that the righteous have been fighting for 20 months with obsessive disinfection.

(How is the Coronagod punishing the wicked unmasked partyers of Florida? The state is tied for lowest daily case rate among all U.S. states (NYT), at 9 per 100,000 (compare to 44 in Minnesota, 50 in Colorado, and 89 in Alaska).)

Meanwhile, email addressed to a Bethesda, Maryland neighborhood:

While we can’t have our traditional party in the Bent Branch courtyard …

Trick or Treating: In order to facilitate safe trick or treating for neighborhood kids on Halloween (Sunday, October 31st), we are providing recommendations that allow everyone to maintain distance but still participate in this most favorite tradition. Below please find a list of ideas for neighbors who wish to pass out candy, but using alternatives to doing a candy bowl (that all the children reach into)…

Purchase and pre-stuff Halloween baggies…

“Candy sticking” – purchase popsicle sticks that you can tape the candy to and stick along your front walkway [link to photo below]

With so many people having been at home for 1.5 years, my impression is that many more houses are profusely decorated, both in Maskachusetts and here in Florida. From Newton, MA, last week:

I’m playing around with a Canon EOS R5 camera. Here are a few tests from last night in Jupiter, Florida (RF 50/1.8 STM lens):

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  • “Get the candy bowl ready. Dr. Fauci says Halloween is a go this year” (NPR): “I think that, particularly if you’re vaccinated, you can get out there and enjoy it,” Fauci told CNN’s State of the Union this weekend. … “This is a time that children love. It’s a very important part of the year for children,” he said. HealthyChildren.org recommended that families stick to outdoor trick-or-treating and doing so in small groups. For handing out candy and other goodies, the website recommended sitting outside and lining up individually prepackaged treats for children to take.
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Leasing a car a bad idea now that nobody in the U.S. wants to work?

I used to love the idea of leasing a car. Interest rates were almost zero. Technological improvements seemed like they had the potential to devalue used cars suddenly, e.g., if self-driving cars actually worked or if electric cars became inexpensive. The lease shifted the risk of devaluation onto the manufacturer. As with most things, my instincts were dead wrong. Instead of used cars being devalued, they’ve spiked to historic high valuations. As part of our move to Florida, I’ve discovered that a leased car is a huge headache if anything changes, e.g., state of residence. We couldn’t just pull the title out of a file folder and go to the nearest “tag and title agency” to get our Florida plates.

Moving our leased Honda required some interaction with people at Honda Financial Services. But now that half of America’s workers have decided to go home to play Xbox, smoke essential marijuana, etc., this turns out to require one-hour waits on hold for every question. It would be the same one-hour wait for anything related to insurance claims, e.g., if you got into a fender-bender.

If it is safe to say that customer service in the U.S. has degraded permanently (a high percentage of the long-term unemployed permanently leave the labor force and companies have learned that they can inflict any amount of pain on consumers by saying “#BecauseCOVID”), maybe it is smart to cut the number of situations in which one is a customer and/or deal only with enterprises that have figured out to do absolutely everything via Web form?

Separately, who is getting a Z06 Corvette? Does one need a flat-plane crank to be happy on trips to the supermarket?

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Why are there so many Americans still working?

Happy Halloween! It has felt like Halloween for the past 20 months or so, with ordinary Americans dressing up as surgeons or asbestos remediators in masks.

I’ve recently had occasion to take some prison galley-style JetBlue flights, in which flight attendants walk up and down the aisle looking for people who aren’t wearing masks correctly. The ticket counter at PBI has a high clear plastic barrier that makes communication between agent and customer almost impossible (while simultaneously providing no protection against COVID, according to the New York Times). The workers behind the plastic, have been stuck wearing masks for 8 hours per day for all 20 months of “14 days to flatten the curve.” I asked a 13-year veteran of the ticket counter how many of her colleagues had quit. “Everyone who could retire has done so,” she responded. She was sick of wearing a mask, found it frustrating to try to make herself understood, and did not think the mask was effective at preventing COVID infection. Like most other customer service businesses, the airport is extremely short staffed and, despite a reduced passenger volume, lines can get long (except at TSA, which seems to have infinite capacity!).

There has been a lot of media coverage regarding how few Americans are working. And, indeed, the stats do show that Americans are passionate about relaxing at home:

What I find confusing, however, is that so many Americans are working at these masks-all-day jobs (though I am grateful for their service!). It can’t be because the masks don’t bother them, since the people I’ve talked to say that they do find the masks uncomfortable. It can’t be because there aren’t any no-mask-required jobs available because, at least here in Florida, there are plenty. It shouldn’t be because it is too hard to transition to disability, because “Long COVID” is a recognized disability and the symptoms encompass almost any medical malady.

I’m not saying that labor force participation should be 0%. After all, there are plenty of high-paid masked jobs (surgeon) and plenty of medium-paid no-mask jobs (work from home, e.g.). But why isn’t labor force participation rate down closer to the Puerto Rican number (42 percent)? It can’t be fun to spend the whole day wearing a mask and asking in-a-rush airline passengers to repeat themselves.

Related:

  • “4.3 million workers are missing. Where did they go?” (WSJ, 10/14; paywall-free version): More than a year and a half into the pandemic, the U.S. is still missing around 4.3 million workers. That’s how much bigger the labor force would be if the participation rate—the share of the population 16 or older either working or looking for work—returned to its February 2020 level of 63.3%. In September, it stood at 61.6%. … Of 52 economists surveyed by The Wall Street Journal, 22 predicted that participation would never return to its pre-pandemic level.
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The decline of China, explained by population boom

The Fall and Rise of China, a course by Richard Baum (late professor at UCLA), asks how it was possible for an empire that had been so successful for 1,000 years to fall apart in about 100 years. The decline of China relative to Europe was anything but predictable, in his view, and the real question is why China didn’t continue to lead the world economy.

The professor’s thesis is that population growth doomed China. The Manchus improved the control of floodwater from China’s major rivers, thus enabling more stability in agriculture. Instead of an improved standard of living, however, this lead to a huge increase in what had been a stable population size, from about 125 million to 450 million over 200 years (1700 to 1900). Agricultural productivity per acre did not improve significantly and the cultivated land per person fell, thus reducing both the standard of living for the typical citizen and tax revenues for the government (people at a Malthusian level of subsistence can’t pay tax).

(The doom was accelerated to some extent, according to Professor Baum, by the corrupt and incompetent Empress Dowager Cixi, who ruled China for 47 years and obstructed efforts to modernize the military (partly by stealing money that had been appropriated for that purpose). Without her, China might have had a chance to go more in the Japanese direction.)

I’m not sure that the “overpopulation” answer is correct, but the question seems like the right one to ask. How did a country that was so far ahead of the rest of the world suddenly (when viewed through the lens of history) collapse?

Venezuela certainly didn’t thrive once its oil wealth was divided by a larger population. Chart from the World Bank:

Venezuela was producing roughly 2.5 million barrels of oil per day in 2010 at about $80 per barrel. That would have been $36,000/year in walking-around revenue for a family of 4 if total revenue were divided by the 1960 population of 8 million. Divided by 28 million, though, and revenue per family was down to $10,000 (and don’t forget that Venezuelans had to take care of the Big Guy and his family before oil revenue could be distributed more widely).

Are there lessons for the U.S.? As the U.S. population has grown (10 million in 1820, 180 million in 1960, 333 million today), Americans have gotten fatter, not thinner. We’re not running out of food like the Chinese did. On the other hand, folks who show up in the U.S. expect an endowment of land/housing. The standard of living to which Americans believe themselves entitled is now, absent taxpayer-funded subsidies, out of reach of roughly half of the people who live in the U.S. and the situation gets worse every day (see “Hundreds of Haitians arrive in Massachusetts from southern border lacking housing, health care” (Boston Globe, 10/10/2021), for example: “Advocates scramble to find homes and help for the new arrivals.” (if every Massachusetts homeowner with an “immigrants welcome” lawn sign and a spare room would host just one Haitian, a substantial fraction of the 1.1 million Haitians in the U.S. could be accommodated in just this one righteous state!).)

The NYT, 8/10/2021 says the situation is dire, but Biden’s central planners have a plan to fix this and we just need “a once-in-a-generation effort”. Harvard agrees that Biden, whose name occurs 6 times in this report, will make all of our housing dreams come true. The NYT article cites Japan favorably. Rents in Tokyo are no higher than they were 20 years ago (it looks as though the indices are adjusted for inflation because San Francisco rent is up only 150 percent and New York up only 100 percent). Not mentioned is that Japan’s population, over the last 20 years, is essentially flat (127 million down to 126 million). You shouldn’t need the world’s finest central planners to manage housing for a constant-sized population.

The Chinese, according to the professor, also suffered from insularity. They mostly stopped traveling to foreign countries (compare to our border-crossing restrictions since February 2020). They didn’t keep up with the Industrial Revolution (compare to our current dependence on Asia to fabricate semiconductors). Due to Internet, container ships, and air freight, however, it is tough to imagine the U.S. ever being truly disconnected from innovation centers around the world.

So history may not repeat itself nor even rhyme, but it is still an interesting question to ponder. Why were Michelle Faraday and Katherine Clerk Maxwell the pioneers in electromagnetism rather than physicists in Beijing? Why was it Mileva Marić who explained the photoelectric effect and figured out that gravity distorts spacetime, rather than someone in Shanghai? Why was it Louise-Hélène de Lesseps who created the Suez Canal rather than the Chinese, who had more than 2000 years of canal experience.

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Philip Roth biography: faith in psychotherapy

I checked Philip Roth: The Biography out of the local branch of the Palm Beach County Library. One fascinating aspect is the faith that Americans had in psychotherapy, especially Freudian psychoanalysis, in the 1960s. After becoming a bestselling author and National Book Award winner, Roth was paying 50 percent of his income for psychotherapy (for himself, a blonde to whom he was briefly married, and a stepdaughter who came with the blonde).

How insightful were these physician-analysts?

In September 1967, … Roth experienced an ominous malaise that, Kleinschmidt explained, was a psychosomatic manifestation of envy for his friend [William Styron]. Roth denied it: he loved Styron’s novel and was delighted by its success, but Kleinschmidt stood by his diagnosis “right down to the day I nearly died from a burst appendix and peritonitis,” as Roth recalled.”

How did Roth respond to this direct evidence of psychiatry’s lack of explanatory power? By paying Kleinschmidt for an additional 10+ years of therapy.

What did he do with the other half of his money at the time? By order of the New York Family Court, he was paying it to his plaintiff (the blonde). Margaret Martinson had a father who served prison time for petty theft, according to the book. She had two children from a previous marriage that she had broken up via litigation and from which she had a compelling victim narrative to spin (according to the biographer, Roth was a sucker for women who claimed to be victims). She was intelligent and had taken a few college classes, but as predicted by The Son Also Rises, eventually reverted to her family’s overall level of success. The stepdaughter’s valuable relationship with Roth was severed on the advice of Roth’s defense lawyer (since the plaintiff would eventually accuse him of having sex with the girl in order to enhance her alimony claim). One of the topics that Roth discussed with his psychoanalyst was his desire to kill his plaintiff and thereby more than double his spending power. (One reason that Roth was angry with his plaintiff, aside from her continuing bids for increased alimony, was that she had obtained his agreement to marry via fraud. She purchased urine from a pregnant woman and turned that into a positive pregnancy test result, which induced Roth to “do the right thing.”) The topic was being discussed with the medial-psychiatric professional at a tremendous weekly cost right up to the point that the plaintiff was killed in a car accident (1968), thus putting an end to family court litigation that had lasted longer than the marriage and to alimony payments and legal fees that consumed more than half of Roth’s income (he borrowed to pay his lawyers, his plaintiff, and the platoon of shrinks).

Roth avoided remarriage, which, in those pre-child-support-formula days, was a viable wealth-preservation strategy. Roth had sex with a lot of young women, but if they’d gotten pregnant they wouldn’t have been entitled to $millions and couldn’t have made bank like Hunter Biden’s plaintiff. Where did Roth, pushing 40, find women aged 20-23? Teaching at elite universities. It turned out that young female aspiring writers at the time wanted to have sex with a National Book Award winner (and future Pulitzer winner) with connections to New Yorker, Farrar, Straus and Giroux, agents and critics. Given this alternative, they did not want to have sex with their fellow undergraduates who had (a) no money, (b) no connections, and (c) no talent. (Roth actually did help launch the careers of some of his young friends.) Far from discouraging these liaisons, the Chair of the English Department at Penn actually preferentially admitted the best-looking girls to Roth’s oversubscribed class with the idea that sexual relationships would be fostered. (The procurer is described as “gay” in the book, so it is unclear if he is an 2SLGBTQQIA+ victim to be protected or an abettor of Roth’s predatory behavior and therefore on track for cancellation.)

One of the students, Lucy Warner:

Philip Roth never had any children of his own, which is kind of a shame because it would be interesting to see how they turned out and if scribbling out novels is hereditary.

Americans of only moderately high income could live like lords in Europe in the 1960s. Whenever Roth felt like it, he could move to a European capital and live in splendid hotels or apartments. What we today think of as the good life was also much more readily available, e.g., a summer rental in the Hamptons. The writer could be the host of the Wall Streeter, not vice versa.

One area where I developed new respect for Roth is in physical perseverance. He suffered a back injury in the Army (involving a massive potato kettle in the kitchen, not enemy action!) and never recovered. Working at a typewriter was often torture for his shoulders, back, and neck, but he stuck to it until an entire bookcase of works had been produced. This refusal to quit is tough to imagine in our present-day society where almost anyone will quit in exchange for $600/week.

Roth was a passionate Democrat who died in 2018, during the rule of the hated dictator and before he could enjoy seeing Joe Biden deliver his promised victories over both coronavirus and cancer. New Yorker tapped Roth’s spleen in 2017 (Roth was 84 years old at the time):

Last week, Roth was asked, via e-mail, if it has happened here. He responded, “It is easier to comprehend the election of an imaginary President like Charles Lindbergh than an actual President like Donald Trump. Lindbergh, despite his Nazi sympathies and racist proclivities, was a great aviation hero who had displayed tremendous physical courage and aeronautical genius in crossing the Atlantic in 1927. He had character and he had substance and, along with Henry Ford, was, worldwide, the most famous American of his day. Trump is just a con artist. The relevant book about Trump’s American forebear is Herman Melville’s ‘The Confidence-Man,’ the darkly pessimistic, daringly inventive novel—Melville’s last—that could just as well have been called ‘The Art of the Scam.’ ”

Trump isn’t a Nazi, exactly, but he is inferior as a human to a guy who had, according to Roth, “Nazi sympathies and racist proclivities.”

“I was born in 1933,” he continued, “the year that F.D.R. was inaugurated. He was President until I was twelve years old. I’ve been a Roosevelt Democrat ever since. I found much that was alarming about being a citizen during the tenures of Richard Nixon and George W. Bush. But, whatever I may have seen as their limitations of character or intellect, neither was anything like as humanly impoverished as Trump is: ignorant of government, of history, of science, of philosophy, of art, incapable of expressing or recognizing subtlety or nuance, destitute of all decency, and wielding a vocabulary of seventy-seven words that is better called Jerkish than English.”

COVID-19 lockdown proponents can certainly thank FDR for pointing out that the Constitution’s guarantees don’t apply any time that an executive declares an “emergency” (see Korematsu v. United States, in which the Supreme Court agreed with FDR that #AbundanceOfCaution was more important than the purported rights of Japanese-Americans to own property and live outside of detention camps).

“As for how Trump threatens us, I would say that, like the anxious and fear-ridden families in my book, what is most terrifying is that he makes any and everything possible, including, of course, the nuclear catastrophe.”

In other words, Roth foresaw that there would be a military catastrophe during Trump’s administration, maybe nuclear or perhaps a peasant army would defeat our military and its puppets in a foreign capital. Do we give Roth credit for this? He was off by only seven months and even Nostradamus didn’t hit all of the dates precisely.

In the age of 77-inch OLED and streaming everything, could there ever be another Philip Roth? How many people have the patience to read serious novels? Who here has read anything by Abdulrazak Gurnah, for example, winner of the Nobel Prize in Literature 2021? Which author on the current Amazon list of best-selling fiction is in the same league as Philip Roth?

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Is Elon Musk one of the bigger winners from inflation?

Elon Musk gets paid more if Tesla’s market capitalization, revenue, and profit (using the fraudulent EBITDA number) rise, but the goals seem to be stated in nominal dollars, not real (inflation-adjusted) dollars. From Fortune:

Plainly the biggest driver of Tesla market cap is the baffling inability of mainstream car manufacturers to deliver a competitive product (they can’t even give us dog mode, a handful of lines of software for which an 18-year-old spec exists!). But what if investors are expecting the dollar to lose half or more of its value over the coming years of rule by Democrats? They’re throwing money into stocks, including Tesla, just to avoid holding the same type of cash that the government is printing like crazy. The revenue targets are easier to meet now that used car prices are rising (up 45 percent over a one-year period says New York Times).

How many other top executives are going to get a huge tailwind from inflation if this kind of nominal-dollar compensation plan is the norm?

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