Picking stocks and housing bubbles

Professor Robert J Shiller won the Nobel prize this year (with Eugene Fama and Lars Peter Hansen) for his work on the analysis of prices of various assets. He repeated his Nobel lecture at the Yale School of Management today, and I grabbed a couple of screenshots from the livecast.

His early work tested whether the value of shares is equal to their future dividend streams, and it did. Later he observed that the volatility of share prices (against his model) was mainly due to “innovation” from the companies and the market.

Picking Stocks

For me this means investors should hold stocks in companies which have secure dividend streams for regular portfolio growth (e.g. Meridian), pick stocks in companies that will deliver disruptive innovation to get outsize returns (e.g. Xero), and avoid stocks where the companies are subject to being disrupted by innovators and are unable to respond (e.g. Yellow).

Later in his career Shiller came up with the definitive house price index for the USA, which tracks prices for repeat sales:

I raise this because he then put up a slide of Los Angeles house prices versus personal income, relating a story about how extreme ratios a few years ago made it hard for people to choose move there.

So how are we doing in New Zealand? Even I, a housing price cynic, was shocked by the result when I crudely replicated the analysis.

Our latest median house price, states REINZ, was $425,000 in November last year. The latest statistic for median income in New Zealand from NZ Statistics is $29,900, from the June Quarter last year. That gives a ratio of $425,000/ $29,900 = 14.21.

That wouldn’t even fit on the chart above, so here’s how it would need to be amended to show New Zealand.

A bit more searching and I found the 2004 paper where Case and Shiller asked “Is there are bubble in the housing market?“, and showed that while for most US States the housing prices were directly related to income, but a few (about eight) states were well out of whack, showing more volatility along with higher average ratios.

Picking Bubbles

The chart that Shiller showed above shows that the LA prices dropped by over 50% versus income from 2006 until now. My own take is that there is clearly also room in New Zealand for a very very steep plunge in house prices. It would need a catalyst, but let’s remember to not blame whatever that catalyst is, but the system of incentives that has delivered us this ridiculous and very dangerous situation.

And remember – if you are selling your house, then its smart to do so using the latest tools, real estate agent experience and low commissions at 200Square.

 

Update:

I forgot to add into housing index that Shiller put together. How I would love to invest (short) on this for NZ.

Posted in NZ Business | 6 Comments

What if you knew how to stop cycling deaths. Would you do anything?

Last April Auckland Transport received a report they had commissioned on Why do Cyclists run red lights?

A decommissioning the report was an excellent move by Auckland Transport.

Sadly the report is only available as a powerpoint presentation, but what we can see is excellent. They observed over 22,000 vehicle, pedestrian and cyclist movements across five key Auckland intersections and also interviewed cyclists.

What they found is that cyclists run red lights largely due to safety reasons, and most infractions are during the pedestrian phase of the lights (they call this the Barnes dance).

The yellow part of the charts below are cyclists crossing with pedestrians – an activity which I classify as safe if done with consideration and at the speed of the pedestrians. I, like it seems the cyclists surveyed, see this as often a lot safer than crossing with the cars, and it also helps motorists as it gets the people on bicycles out of the way.

Unfortunately this is not legal under current NZ law, and nor is it legal to ride on the footpath. The only legal thing to do is to walk the bike across.

The cyclists’ comments shown in the report are all about safety.

The report concluded that road conditions were such that cyclists have to choose between safety and being legal, and often (and correctly) chose safety. They authors suggested that we must fix this, and came up with four simple, cheap and effective recommendations.

So how have we done with those recommendations in the 9 months since the report was received? Sadly from what I can see – very little or nothing has changed. I stand to be corrected on this, and would welcome any evidence to the contrary. Let’s not be too hasty in pointing the finger at Auckland Transport either, as they have done some great work here, but most likely need more political clout and resolve to make this happen quickly.

Number 1: Sadly I don’t know of any cyclist-first intersections in downtown Auckland.

Number 2: The law still prevents safely turning left on a red light for cyclists.

Number 3: The law still prevents cyclists from legally crossing with pedestrians.

Number 4: I know of no changes to sensor locations or sensitivity. This is the hardest to evaluate and may well have happened, to be fair. It’s under Auckland Transport’s direct control and is the most likely to have changed. But I’m not seeing it so:

Two of the four, lights to clear cyclists and improve cyclist detection, are under the control of Auckland Transport (as far as I can tell).

The other two will likely require changes to national road rules, to allow cyclists to turn left, and to allow cyclists to cross with pedestrians at lights.  That’s up to the Ministry of Transport and NZTA and the national Government.

The proposed solutions are clear, cheap and high impact. Let’s do what we can to help Auckland Council, Auckland Transport and the government to prioritise these.

Posted in NZ Business | 18 Comments

A typically deadly commute – let’s fix it

My partner rides a bicycle to and from work. Her town bike has a basket on the front and back, and she is small, wears normal street clothes and obeys traffic rules. This is what a ride home looks like. (She takes the long way home to get exercise).

She’s fast right?

You might have caught two or three scary moments — let’s look at the worst one, on what is essentially a random day — today.

Here she is nearing the top of College Hill Road. She is not very big and goes pretty quickly up hills — and enjoys passing the occasional middle aged man in lycra. She sometimes does that when those baskets are full of groceries.

She is approaching a carpark – and as there are no cars today she had a clear run. This is great as normally the parked cars force her into the often fast moving traffic that is chaotic due to a complex intersection ahead. This, by the way, is on the safest route she has found to get some exercise while riding home.

The cars at the front by the light are stopped, and the closest car, the red one in the car lane to the right, is slowing to a stop. There is lots of traffic so it’s pretty noisy.

With the empty carpark she has a clear run to the head of the intersection and can stay well out of the way of motorised traffic. She could alternatively choose to cross to her right to get behind the red car, but that decision would have killed her, as you will see shortly. When cycling or motorcycling making decisions about not dying are fairly constant, with the key rule to stay the away from high speed differentials with large vehicles.

From nowhere comes a bus at high speed:

The bus is trying to cut between my partner, who is riding quickly, and the parked red car, and then take the left hand turn at the end of the street. The green bus has a large amount of momentum and very little room for error on either side. My partner is still riding in the designated car park.

A few seconds later the bus and the bike have braked almost to a stop – but look how far it took the bus to do so. The bus driver chose not to hit the red car from behind, and instead cut in front of the person on a bicycle, potentially fatally. Perhaps it would have been safer to graze or hit the car than to risk squashing an unprotected rider – a potential judgement call that should be discussed in an incident investigation, but clearly won’t be because this incident is a sadly regular occurrence for both buses and cyclists, and they are never investigated as far as I can tell.

Luckily my partner, riding the bicycle, braked very hard, and a tragedy was averted. However once again I get to greet a distraught partner when she arrived home.

There really was no room for error if she had continued.

But the bus made it through, the car was untouched and the my partner got to come home physically unscathed tonight — and I am grateful for that. But for the sake of about 3 seconds of time, the bus driver’s dangerous driving was exposing the driver of the red car to an accident and injury, and the cyclist to a potentially fatal accident. That’s not worth it, and the driver should instead have slowed down to follow the bicycle.

Let’s look at it all in real time speed. What would you have done? Are you confident enough to stop safely? How about if your bike was full of groceries?

This sort of incident is, tragically, quite usual for Auckland roads. While every cycling day is packed with the normal dangers to avoid, most days also see specific dangerous driving actions like this one, and that’s what we have to stop.

Our worst story

One reason my partner gets distraught at these sorts of near misses is that she was knocked off her bike in late 2012 by a woman who works for an insurance company. That person dangerously crossed a busy road by driving her car illegally through a stop sign from one side street to another. My partner was descending and the car hit her, knocking her off her bike and she slid for quite some time, luckily avoiding hitting anything. Even more luckily she had just avoided a perhaps fatal T-bone accident, and escaped “only” with lacerations, bruising, swelling and a couple of trips to the doctor. She was also very shaken up.

Strangely, for someone I discovered to be a communications professional, the driver, provided only her first name (Michelle) and phone number. As a victim my partner wanted as little as possible to do with the driver or her insurer company, but I was glad to  help. Even then, while my Google foo was strong enough to find the driver, I had to ask her quite firmly to formally identify herself so that we could settle accounts. I also actually enjoyed jousting with her insurance company (which was not her employer), who as always are not exactly there to meet your full costs unless you fight. Incidentally — if something like this happens to you there are people out there who really enjoy negotiating with insurance companies — so don’t be afraid to ask around.

We did report the incident to the police, who were wonderful. However we were later disgusted to find that  the end result was not a loss of license or worse for what was clearly careless or dangerous driving, but essentially a traffic ticket. My partner had had enough, and didn’t feel she could handle a court case, and so we let it slide, as victims often do. I’m certain that this is very common, and it’s just sad that dangerous driving against cyclists seems to be treated as irrelevant.

What we did

The first thing we did afterwards was to purchase Go Pro cameras for riding. They provide great evidence of dangerous driving, and I highly recommend riding or driving with a camera to everyone. If in doubt, search for “Russian driving video” or similar.

I did not write about the incident at the time, also because my partner did not feel she could cope with it. Overall I do not feel that there was natural justice, and feel that at the very least the driver should be compelled to go through some sort of remedial course.

However as with all accidents, it was not all the fault of one person. The real fault is the design of the road where vehicles have to cross a large road with cars traveling at high speeds. The side roads should either be closed, for example, or some sort of traffic control put in place. There should be no surprise to learn that nothing has happened yet, but we did go to the Ponsonby Road Masterplan public hearing.

What can we do?

Do buy a camera and use it to name and shame, but most of all to show other road users that their behaviour will not go unobserved.

Please do respond, and drown out, the vocal minority of selfish commenters on a variety of forums who seem to think it’s okay to mow down people with their car.

Please consider riding a bike yourself – as the more people on bicycles commuting to work, the faster we will change behaviour.

Please ask your local and national politicians what they are doing to stop the killing of cyclists and to make Auckland, Wellington, Christchurch and all of New Zealand have vibrant life-filled streets and the best urban and rural cycleways in the world.

Let’s make it happen.

Posted in NZ Business | 17 Comments

How simple it can be to create protected bike lanes

This is a piece received via email from Gloria Williams (@caniwiwilliams) that she has given me permission to post.

 
I read your thoughtful column on cycling safety this morning and I thought I’d send along this photo which shows just how simple it can be to create protected bike lanes. This is Vancouver, a city similar in size to Auckland and this photo is on a main street within the CBD.

Yesterday I walked to St Heliers on the footpath and made these observations about the so called cycle path ( the one on the footpath, not the road)

  1. There are signposts cemented into the middle of the bike path in places ( bus stop signs, crossing signs etc etc)
  2. When parked cars open their passenger doors it blocks the entire bike oath ( witnessed a near accident because of this) Car passengers don’t look of course.
  3. Of course we know how bumpy and uneven it is (tree roots etc)
  4. It’s very narrow, not wide enough for bike travelling both directions.
  5. It’s poorly marked. The little painted bicycle sign is not used near enough and they are quite faded anyway.
  6. People and their leashed dogs, strollers, scooters, skateboards, joggers etc all stray into the lane, or use it intentionally.

So no wonder cyclists take their chances on the road, where the haphazard attempt at bike lanes are just as bad, too narrow, used by cars, intermittent, car door hazards, etc etc.

What all this shows me is that bike lanes are just an afterthought, we are trying to fit them in around very other usage without dedicating any real space to it.

 

Posted in NZ Business | 3 Comments

Confronting death

Today I arrived very early on the scene of a cycle versus truck fatality in Auckland today. The sight of a person lying motionless in the street with mangled bicycle in the background is chilling enough. The sounds of grief-stricken people comforting each other, the shock on the face of the woman in the car stuck in full view of the scene, the general feeling of despair – these things are not easy to portray. All of us were changed today.

For the family and friends of the deceased – utter devastation. For the witnesses who saw the event happen, that event will replay for years. For the police, ambulance and other emergency staff – another brutally tough day. I don’t know how they cope.

What can we do?

Today’s accident was, like all accidents, preventable. Like all accidents the root and contributing causes of the accident will be varied and troublesome, but are also able to be eliminated. However like all cycle accidents in NZ they likely won’t be, and we should all be very angry and upset about this.

Most of the causes of this and other accidents are fairly obvious, and have been observed time and again by cycling and safety advocates. They come down to one core goal, to seek to limit human-vehicle interactions:

  • That means physically separating trucks and cars from cyclists, and cyclists from pedestrians, through a system of bike and pedestrian paths that criss-cross cities and form commuter routes. This increases bike use, boosts the retail economy and reduces motorised traffic, reducing associated infrastructure costs as well.
  • It means investing serious dollars into this human-scale infrastructure, and rather happily this also creates a lot more jobs per dollar than truck-scale infrastructure.
  • It means putting in place short term solutions immediately, such as smart use of painted lanes to widen cycle lanes, removing lanes of car traffic from Parnell Rise, removing car parks from Tamaki Drive (where a person was injured today) and laws which increase the incentive to give cyclists their space.
  • It means accelerating and building from the liveable city changes that have already happened in Auckland, removing car parks in favour of wide boulevard footpaths, bike lanes and multi-use zones. If it works for New York’s economy and people, it can work better here with our weather.
  • It needs a Mayor and Council and transport authorities and ministers to lead, and to take responsibility for just making changes happen.
  • And it also means asking seriously why we needed the truck there in the first place – and that goes back to whether we even want a working port in downtown Auckland. 

It’s an election year, and this is a great time for all parties and candidates to take a tough stand. Cycling and work safety are not Green, Red, Blue or other party-affiliated issues, but ones that offer benefits across the board. Improving cycling safety and work safety generates more retail and manufacturing revenue, saves on medical expenses, prolongs lives, saves money for individuals and families and delivers better environmental outcomes. It’s cheaper than building roads and rail, and will make it far safer for our children to walk and cycle to school. It seems obvious, and will attract a decent number of voters looking for a better life.

It’s a great time for us voters to ask the candidates and existing MPs what they are doing about safety on the streets and work, but we also need to ask and apply pressure to the recently elected mayors and councillors to follow through on their promises. I am particularly concerned with Auckland and Wellington mayors and councils, who have delivered little for cyclists on a mandate of change. Too many people are dead and I think we would all like to see a genuine sense of urgency before more people die.

Posted in NZ Business | 31 Comments

When will the next fatality happen at Lyttelton, Port of Christchurch?

 

I don’t know when, but this is a dreadful picture. The incident happened at Lyttelton Port of Christchurch on Saturday 4th January, 2014. It was a near miss to a fatal injury – the driver is lucky to be alive and was reported to be taken to hospital. Let’s hope that their injuries are minor.

The near miss is more evidence, on top of the two recent fatalities, that the port is not providing a safe work environment. It’s a situation that needs serious intervention before the next tragedy, which can clearly happen at any time.

Something needs to change, and now. Two fatalities and this incident are well beyond any normal signalling required for a site to recognise it is in crisis and for major change to occur.

 

As a postscript – the person just visible in the bottom right of the picture is not wearing gloves, nor hardhat and has their sunglasses (protective perhaps) on their hat, but not covering their eyes. They also look to be quite close to the incident, and if there is anything flammable being emitted then they are using a device (iPhone) that is not intrinsically safe and could cause a spark. I would argue that none of this would be acceptable on a true Zero Harm oriented site.

Posted in NZ Business | 1 Comment

When people die at work it’s always a safety issue

Another tragic fatal injury from a work accident in New Zealand, this time on board a fertiliser ship berthed at Lyttelton, Port of Christchurch.

My heart goes out to the family, friends and colleagues of the deceased man.

What went wrong?

Every accident is preventable, and there is never an acceptable excuse for placing any worker into harm’s way, let alone repeatedly exposing workers to fatal risks. These tragedies were preventable – and so why weren’t they?

For one, the Maritime Union Maritime New Zealand (a government agency) spokesman who said:

“There doesn’t appear to be any safety issues or equipment failures that have lead up to this. It seems to be a wrong place wrong time sort of thing”

clearly does not, to me, understand that the site and its safety management systems have failed this deceased man and his family. It’s good that the Maritime Union is supporting the family and colleagues, and calling for a meeting, but I am not convinced that they anyone understands the magnitude change in culture required.

<Update – I incorrectly attributed the quote above to the Maritime Union, rather than to Maritime New Zealand. My apologies to all concerned. Updates are in italics.>

Even more sadly this is the second fatality at the Lyttelton, Port of Christchurch facility within a month, showing with arguable certainty that this worksite has broken safety systems and processes, leadership and culture.

Is safety even a priority for the Port?

One crude indicator which we can all see, aside from these twin tragedies, is that the Lyttelton Port of Christchurch website carries no reference I can find to either fatality, not even in their media releases. Sure, the fatalities may (or may not) have happened by workers not employed by or contracted directly to the Port, but they occurred on their site.

Another indicator is that finding out about safety on the website is hard – it’s buried within the menu structure, and the result when there is underwhelming.

What should happen?

The Port has faced tremendous challenges following the earthquake, and no doubt the challenges will continue as the rebuild evolves. But challenges to operations should never be a priority over safety.

LPC is a listed company, but 80% is held by Christchurch City Holdings (CCH), who are generally very smart. CCH and the board should be entering crisis management mode, and ensuring that the company responds with appropriate seriousness. At the very least I hope they all understand that this is arguably a lapse in duty of care that could elsewhere remove the site’s “license to operate.”

The board and management team should not rest until they can state unequivocally that the safety systems and culture have changed, and changed for good, and that people on their site can go home unharmed each day.

What would I do?

If this were under my control the port (and any other facility) would be shut down immediately after any fatality, and not reopened until control of fatal risks was regained. I would conduct an all-hands meeting (as suggested by the union) and ask everyone to commit to a tougher set of site safety rules – and enforce them. The rules would include the obligation to stop any observed unsafe work, and I’d hire in external experts to stick around for months to coach everyone through the process. Not everyone will get the new Zero Harm approach, and a small percentage may need to be prohibited from accessing the site.

As an uninformed outsider in any case like this I would stand the CEO down. I would replace him with a new leader with a mandate to place Zero Harm back at the top of the site priorities. I am sure the CEO in this instance is going through hell, and I appreciate that me saying this will not make that better. He may well be superb at his job, but the priorities the board and he agreed to were not correct and an epiphany is required.  So while the CEO may be able to change his approach, he is also somewhat caught in the crossfire here, and in my experience removing the CEO (and at times the management team and/or board as well) is the strongest signal that owners can send to a site that things simply have to change. 

Finding a new CEO who will drive change will not be an easy job, and neither will that person have an easy time of it. He or she will need to work top down and bottom up, and get the support of the Union, employers and all the other players on site to make sure that safety outcomes improve. It’s a challenging job, but one that has been successfully done across a wide range of industries – I’d start by calling recruiters for senior staff in the Australian mining sector.  

The standard is quite simple really – we should all fight to ensure that everyone gets to go home safely at the end of each day. 

Posted in NZ Business | Tagged | 1 Comment