About philipganderton

A university professor, forensic economist, father, woodworker, driver, bicycle rider, former oenophile

You learn something new everyday

if you are lucky!
And today I learned that one of favorite woods to make spinning tops from – Lignum Vitae – belongs to the same family as one of my most hated organisms, the goathead or puncture vine. These two plants/trees belong to the family Zygophyllaceae or Caltrop family of plants. Lignum Vitae, or Guaiacum officinale, is an incredibly dense and oily wood that uniquely turns green as it ages, making it a wonderful wood to use in spinning tops because of it’s ease of working, weight, and color. Goatheads (Tribulus Terrestris) on the other hand are the bane of cyclists everywhere. As they dry out and separate from the plant they are easily moved by the wind, or animals on to the bike paths they surround.

A Lignum Vitae spinning top:

Lignum Vitae and Burmese Blackwood spinning top


Is a NFT a good investment?

There’s lots of talk about NFTs these days, because they use blcokchains, the technology undergirding cryptocurrencies, and there can’t be anything more exciting these days than cryptocurrencies. All this chatter encourages some people to consider investing in NFTs.

Traditionally, assets are what we invest in, and securities are financial assets. Bonds and shares in companies are securites. In the simpllist way, and most basically, securities are claims: a share is a claim to the profits due to owners of a company, a bond is a claim to be repaid, and possibly earn interest on the loaned amount. Investors buy shares and bonds because they expect the claim to be valued at least as much as what they paid to buy those claims. They expect some positive return on investment.

This is how a share works, for example. The company issues shares to raise capital. These shares offer a claim to a share (!) of the profits (or losses which are just negative profits) of the company to the holder. The company has the money, which presumably they will use to guarantee those future profits for the owners/shareholders of the company. If the company does well, it will make more profits, now and in the future, and the share value of the company will increase. This increase in the value of the share will be reflected in a higher price for the share and a positive rate of return on the investment of the shareholder-investor. What I’ve just described is the basic tenet of equity investing, and of course there are many variations including shorts, options, and other derivatives. All, however, can be tied back to some real productive assets owned and used by the company to undertake economic activity and generate profits.

Now, how does a NFT work? First, what is a NFT? It’s a non-fungible token, and the important word there is token. The non-fungible part just means it’s unique and can’t be copied easily. Most definitions you’ll read for NFTs will concentrate on the NF part, ignoring the T bit. But what is a token? It’s an artifact, a convenient manifestation of a claim. For example, you go to the pinball machine and drop in a token to play. It’s not a real coin – those you exchanged for tokens at the arcarde counter – and has no intrinsive value, and cannot be used outside the arcade. The same is true for a NFT. It’s not real money, and it only has value inside the system or institution in which it was created. Back to what an NFT is. A NFT is a code in a blockchain ledger that says you “own” something. The most famous NFT is probably Beeple’s Everydays: The First 5000 Days which is described as a digital piece of art and is a collage of thousands of images created by the artist Mike Winkelmann. The NFT was sold by Christie’s auction house for $69.3 million in 2021. Now, the artwork is a digital file, available to anyone, and easily downloaded and shared. Maybe the original zillion-megapixel file is not public, and maybe it has a digital watermark on it, but the point is that’s not what the NFT is. The NFT is not the piece of digital art. Remember, it’s a token. As a token it’s a claim to something – the right to pull three balls in the pinball machine, or the right to the digital piece of art. Ah, no…that last bit isn’t true. And this is where NFTs become both weird and scary, in my opinion.

Everydays: The First 5000 Days, 2021 (Image created by Beeple, owned by ??)

NFTs are considered assets – digital assets, financial assets, or maybe some other type of asset, by some people. They are viewd as an investment opportunity. The hope is that you can buy a NFT, and subsequently find someone willing to pay you more than you bought it for, to pocket a nice return on investment. They can be traded, just like shares and bonds, and many other financial assets. They have a price determined by supply and demand. Just as people have bought land on Uranus, investing in a NFT will only have value if the token has value, and the value of the token is determined by the supply and demand for that token. When each token is unique (the supply is fixed at one unit), the price is determined by the demand for that token, which means the price is determined by what some other person is willing to pay to own that token. NFTs might be thought of as derivates in that their value is determined, in part, by the value of the underlying piece of art, or thing, that the NFT as issued on. However, what the relationship to the underlying thing is remains unclear, and might not even exist.

If you’ve ever read about stock options, or even invested in them, they are complicated and scary financial derivatives. Complicated because there are two positions to take on two types of transaction, as well as issue date, purchase date and expiration date to add a time dimension to options. Scary because those complications make decisions harder and options are a zero-sum game.

When will the bubble burst?

The last two days have seen the US stock market open down, only to end up. The rollercoaster ride is attributed to coincide with the earnings report season, Russian threats at the border of Ukraine, and the threat of tighter monetary policy from the Fed. One financial guru, Jeremy Grantham, is calling it a “super bubble”. (See the Guardian article.)
But how many times have we been told that the bubble must burst, and it’s about to do it any moment now? As an economist I am often asked if it’s a bubble, and when will it burst. I usually say yes, and anytime now. And I’ve never been right. I didn’t predict the tech crash of 2000 and I didn’t predict the mortgage based crash of 2008. I sure didn’t predict the pandemic, and when the next crash happens, I’ll be the first to admit I didn’t predict it.
My gut says this all has to come crashing down at some point. But that prediction feels similar to me declaring that the sun will rise again tomorrow morning – but without the accurate timing.
See you on the other side.

Djokovic is a Joke

and the Aussies aren’t laughing.
I don’t give a shit if you’re the King of Egypt, or the greatest living male tennis star, rules is rules! Australia denied Novak Djokovic entry into the country to compete in the Australian Open tennis championships because the fucker is not vaccinated and does not qualify for an exemption.
Earlier the Victorian government and the tennis association had granted him an exemption because they want him to defend his title and ensure them the financial success the championship represents. Fuck them. If there’s one thing Australian’s care about, it’s fairness, and treating that fucker as if he were immune from the same rules the rest of the population have to abide by is just plain unfair, and wrong.
I hope he gets all upset and in a childish response decides never to set foot in Australia again. Good riddance I say!

UPDATE Jan 10. The Joker-vitch has been let in to play his tennis matches, unvaccinated. The court ruled on a technicality that the authorities had given him to 8:30am to object, but an hour before denied his visa application, so bad luck Aussie authorities, you fucked up. Fuck legal technicalities.

The basis of value

What makes something valuable? According to Dictionary.com value as a noun is the worth, merit, or importance of something, or more specifically monetary or material worth. The same dictionary defines worth as the usefulness or importance of something, or its value, as in money. Despite the somewhat circular definitions, value derives from usefulness in many cases, and the importance in some other cases. I think people place value on something for very personal reasons. As an economist I like to distinguish between cost, price, and value. Cost is essentially an accounting of the value of the things that went into producing a good or service. I make wooden spinning tops, and I can easily figure out the cost of making a top: there’s what I paid for the wood and the thread and the ball bearing, there’s the cost of buying the machines and running them, there’s my time (labor), and then there’s packaging and shipping. I will set a price for the top, based perhaps on the cost of making it as set out previously, but also based on what I think people will be willing to pay for it, and perhaps what I think is a fair price given what else they could buy if not my top. But finally there is what value a person places on that particular top. Economics theory has always been vague on the origins of value, saying value is an expression of preferences: fundamental enjoyment or utility, satisfaction derived from owning, using, or perhaps consuming the item in question.
For items that are not directly consumed or used by those who possess them, there is the possibility of transferring ownership to another person who places some value on the item (presumably a higher value than the current owner for the transaction to go through.) Although not always the case (some automobiles and some antiques are among the exceptions) most tradeable items are not diminished, or “used”, by ownership. Financial assets are perhaps the most obvious examples. A financial asset reflects some claim on some real thing – usually, but there’s an entire class of financial assets called derivatives that derive their value based on an underlying claim to a real thing. For example a share in General Motors is a claim to a share in the value of the company, in general its assets but also its future profits.

Work in Progress


I was listening to a podcast and it was sponsored by a company called Anatha. It’s a company that provides services related to trading in cryptocurrencies. Well, I *think* that’s what it is…
Consider the Intro “About Us” blurb:

Disrupting structural violence isn’t simply a moral imperative; it’s an economic opportunity waiting to be unlocked. At Anatha, our mission is to help enable global human self-actualization by replacing structural violence with structural flourishing. The ability to deliver value and utility at zero marginal cost creates an environment in which our economic tools can move from being based on exclusivity and scarcity to inclusivity and abundance. Information is a renewable, sustainable resource.  We are simply proposing we leverage that resource to ensure no human being gets left out in the cold. We are contributing towards the creation of a global economy premised on equality, regeneration, altruism, and self-actualization. Platform activity directly aids its community with real, spendable value. Yes, it’s ambitious. But the advent of information age economic systems makes what once seemed impossible — a fair and rational economy that puts human needs first — not only possible but inevitable.

What the fuck? A mission to enable global human self-actualization? What IS that? What does it mean? Does this company, which issues its own cryptocurrency, provides wallet services, and distributes some share of “profits” back to subscribers (so it seems), really believe it has the “ability to deliver value and utility at zero marginal cost”? Does anyone working at this company even know what that sentence means?

Gobbledeegook bullshit like this has me really worried about the future. Yes, so too do global warming and the erosion of democratic institutions, but selling snake oil to gullible people using smoke and mirrors is something that really irritates me. Deeply.

I can only hope that nobody believes any of this crap, and steers clear of this company, and they go belly up – an outcome they not only deserve, but which is the only reasonable outcome.

Around town on my fixie

As I ride my bike around Albuquerque I spot these outdoor murals and artistic backdrops, and take profile photos of my bike against them. My favorite is the Brutalist dam in northeast heights. Not really a mural, but hell, what are the chances you going to see such such awesome architecture, such bold statement art, in a quiet town like Albuquerque?

John B Robert Dam, Juan Tabo, Albuquerque
Moon and Menaul, Albuquerque
Moon and Menaul, Albuquerque
Menaul and Morningside, Albuquerque

I hate exercise

I have often said that I don’t ride my bicycle, now for over 40 years, because I like to exercise. In fact I have never seen riding as exercise. My love for bicycles and riding derives from the pure joy of riding. The aesthetics of the machine, the mechanism by which human movement is converted to motion by a bicycle, and the ability to move around an environment, whether urban or wilderness, are the things I love about riding.

Almost every morning I ride my bicycle, at least ten miles. I continue to dress in clothes designed for bicycle riding, tight fitting lycra shorts and tops with back pockets, shoes with rigid soles and special clips to attach to the pedals, gloves and a helmet. I look the part but the motivation is to feel comfortable and maximize the efficiency of the link between man and machine. I ride a mix of multi-use paths and suburban roads. The roads are smoother, but more dangerous. Go figure.

Staying healthy into retirement

I’m not retired, yet. But I have plans. A divorce (in 2019) and a heart attack (in 2020) have altered my perspective significantly. I always believed, sort of joking, I’d die in my university office. I don’t think many academics actually kck the bucket in their offices, but there are a lot of old professors for sure. So I might be retiring sooner than later, for a few good reasons.

The divorce forced me to consider the financial side of retirement. All those Sixty Minutes investigations into the retirement crisis in the United States revealing how poorly so many Americans have planned for their retirement constantly remind us we all need money to retire, and we all probably don’t have enough. Retirement income is certainly lower than when working, but there are fewer deductions from income and expenses can be much lower. Pay off the mortgage and a huge monthly expense evaporates. A pension, and social security, might actually provide enough to live comfortably, if modestly, in retirement.

The heart attack forced me to reckon with my health. A father that died of a heart attack in his sleep at 62 stacked the cards against me, but we all know that lifestyle is the main factor contributing to both the enjoyment of life and our longevity. At my recent one-year followup with the cardiologist he suggested I make a lifestyle change to reduce my “bad” cholesterol from 75 to 70. I was taken aback at this suggestion since I’m pretty much living a total denial lifestyle already. No alcohol, no meat, no caffeine. Regular exercise. Geez, what more can I deny myself? But losing a little weight has been a goal for some time, ever since my dress slacks (non-elastic waist band) haven’t been a comfortable dress choice. So I am now working on the intermittent fasting program with less sugar and processed foods. (I’ve never been a big bread eater.) Apparently losing weight will lower my cholesterol. And make me live longer.


Investing in options – a good idea?

Most individual investors take long positions on stocks within their portfolios. They buy Apple shares (AAPL) and hold the shares expecting (hoping?) they will rise in value (price) over time. At some point in the future the stocks are sold and a capital gain is realized. Fewer investors take short positions, mainly because they don’t really understand the mechanics of shorting stocks, but essentially there is a symmetry between these positions that make them more alike than is nornally thought. Even fewer investors trade options, and of them a fraction understand how options work.

I am constantly surprised that so many people I meet tell me they are investing in options. Options are risky, but through leverage offer the potential for high returns. There are many online shills happy to tout the profits possible through trading options, usually by subscribing to their guides and newletters, or buying their software. They are quick to debunk the myths surrounding options. But the truth of options trading is in the mathematics of the market, which differs from the mathematics of the standard stock market. Options belong to the family of derivate – contracts with value determined by the value of underlying securities. The stock market deals with those underlying securities, including shares in the ownership of publicly traded companies, but the options market deals in contracts written on those underlying securities.

An option is a contract written between a buyer and seller. The buyer gets a right and the seller takes on an obligation. In return for the right (to buy or sell an underlying security), the buyer pays the seller a premium. In return for the premium, the seller has the obligation to fullfil the contract if it is exercised. Options can act as insurance, or a hedge, against adverse changes in a related position in the underlying security. But a lot of options trading is purely speculative and traders are expecting to make money either by selling options that go unexercised, or exercising options that are in the money.

While holding stocks provides positive returns on average, and in the long run, options trading is mathematically a zero-sum game. (https://www.investopedia.com/articles/investing/052216/4-benefits-holding-stocks-long-term.asp) Every dollar “won” in an option trade is a dollar “lost” by the other party to the contract. Given this fundamental nature of options trades, the only way an investor can make profits in the long run is to be smarter, or luckier, than the other investors. If you believe you are smarter, or luckier, than the average options trader, then I wish you all the best. Otherwise, my advice is to take your money to the casino, and enjoy the free drinks…