Capitalism 2.0

Real Estate Investment in Possible Non Bubble Areas

By Randolph

According to the 2006 HSBC report, A Froth-Finding Mission, Detecting US Housing Bubbles and associated spreadsheet model, not all local real estate bubbles are created equal.  In fact, the Case Shiller Index reveals that a handful of metro markets may well be seeing price recoveries.  Denver, for example, looks to be one of those on the leading edge of the recovery, having potentially already come through the worst of it.  Others, such as my own San Francisco, have yet to really even start into an honest correction cycle (another CSI view of superbubble San Francisco).

Is it time to start investing, or at least preparing to invest in non-bubbly metro areas?

(Topic suggested by a reader)

Housing Market Fiction

By Randolph

Fact or Fiction: The US Housing Market is "gently correcting".  In fact, "now is a great time to buy!".

...and here's some carefully staged, professionally smoothed, and attractively presented data from the NAR et. al. to prove it...

But wait a minute, someone has actually taken the time to go get the same source data sets and draw the same graphs.  But they've come to a very different conclusion...

The Linden dollar Game

On Schemes Resembling Objects of Intersecting Trilateral Sides upon a Polygonal Base

In a previous article I asked some very tough questions about the Second Life virtual economy.  That article provocatively proposed a case as to why I believe Second Life's much hyped economy resembles a pyramid Ponzi, or more accurately a type of high yield investment program (HYIP) scheme.  After posting that article I was partially convinced by many respondents that Second Life probably is not a Ponzi scheme as a precise legal definition -- at least probably not in most jurisdictions.  Indeed, after learning more about HYIPs, and in particular HYIP Games, Second Life and the game's system of "virtual currency" satisfy many of the attributes of such schemes.  More about HYIPs later.  First, some background:

Are Second Life “Businesses” Worth Anything? Willing to Prove It?

[Comments Closed]

After writing a highly controversial analysis of the Second Life economy, asserting that it resembles a ponzi pyramid scheme in structure, I received any number of testimonials from apparently profitable Second Life business operators.

This started me thinking. Perhaps media hype aside, these virtual ventures really do have quantifiable value, a claim which can be tested. Second Life ventures should be measurable by widely accepted, standard methods, if they are indeed legitimate. This is a critical issue. The media is trumpeting the virtues of Second Life, with the passive and sometimes more active support of the game’s maker, Linden Research (Privately held, “Linden Labs”, “LL”). A brief sampling of news links from the official Second Life website operated by LL in support of Second Life include:

• Second Life: It's not a game Fortune's David Kirkpatrick reports on why IBM's Sam Palmisano and other tech leaders think Second Life could be a gold mine.
• I got my job through Second Life Looking for work? Your best bet may be an interview in virtual reality. Fortune's Katie Benner explores the cutting edge of corporate recruitment.
• Starting a Second Life Business Find out what entrepreneurial opportunities the virtual world of Second Life has to offer.

SecondLife: Revolutionary Virtual Market or Ponzi Scheme?

[Comments reopened.  Deutsche Bemerkungen begrüßt.]

Follow up article on the Linden dollar is here.

In 2005 I began working as a venture consultant for some entrepreneurs and investors trying to develop a fairly ambitious “real-money-trading” (RMT) business idea. My work resulted in my collection of a large amount of RMT market data for most of the popular massively multiplayer games and virtual worlds. Although the new venture was never pursued due to my analysis of the true RMT market, one game caught our particular interest: SecondLife, operated by Linden Research Inc. (privately held, San Francisco CA).

Unlike the makers of nearly all other online games, the operators of SecondLife not only allow and encourage the exchange of game currency for real money, but they actually facilitate it. As early as 2005 I began noticing a rumbling in interest-focused blogs about the exploding market that was SecondLife. Touted as a pioneering future Metaverse on the industry’s most informed blog, TerraNova, an array of journalists, academics, and company executives have claimed that SecondLife boasts an economy complete with in-game banks, multiple currency exchanges, a floating currency exchange rate, and a burgeoning in-game commerce and business base.

Hard or Soft Landing for Real Estate?

There is no shortage of punditry on how this real-estate bubble will end.  Every week it seems more data pours in supporting both a hard and soft landing.  Here are four ETF indicators that represent the current confusion...

ETF: DBC – Liquidity

Commodities are hot, but difficult to invest in directly, even for sophisticated individual investors.  The ETF:  DB COMMODITY IDX TRK (AMEX:DBC) offers cost effective returns of the commodity market through an exchange traded fund from Deutsche Bank.  Details of the ETF are here or you can download the “Fund Card” here (PDF).

CME Housing Futures and Options: DOA?

We first started covering the CME Housing Futures and Options products in April.  The first day of trading was May 23rd.  By May 30th we started worrying about the resounding lack of interest, and thus non-existent liquidity.  The question now:  Is there a future for Housing Futures?

US Real Estate Derivatives

As we begin the second week of the CME's housing futures and options market trading (real-time quotes for futures are here), anyone who has been watching this market debut is immediately struck by the lack of liquidity.  In the first week of trading there was effectively no volume.  Of course, new market products like this take time to develop, but questions remain about the viability of the concept of a residential real estate derivatives market.

Some comments from the Tuesday, May 30, 2006 (US ed.) Financial Times...

Personal Hedge Strategies

In April we started discussing ideas about how to create personal hedges utilizing various ETFs (and a few major stocks).  In light of the recent market turmoil, commodities volatility, and the ominous shadow of inflation, I again began playing with some of the hedge-friendly ETFs that we've compiled over the past year.  Let's take another look at this list and adjust it based on anything new we've learned in the past months.

The idea here is not to offer speculations about the future, but instead to create hedges against reasonably likely future events.