Black Swans

Recently, Nassim Taleb, author of Fooled by Randomness, just finished a new book The Black Swan. He was on WealthTrack talking about his theory as applied to investing, and, I must say, it is both astonishing and insightful. His main concern is people take too much risk. So, he thinks people should hold about 90% of their investments in extemely safe short-term treasuries (from a diversified set of stable countries). That is an amazingly conservative stance, at first glance (but read on...). This protects the investor from downside risk. And, the remaining 10% should be in very risky investments (think biotech, technology, etc) which have a chance of a major positive black swan event. So, low risk stable base, and small amounts in high risk investments for profiting from black swan events. It's a very interesting theory.

Heads up- more bad news

At the start of every year, I do a look back at how my investments did, and a look forward at what I see coming. In January, 2007, I wrote:

"According to analysts, 2007 should be a good year for large cap stocks. It should be good for markets too, as interest rates should stay low. I've noticed a large number of private equity LBOs. These seem to be keeping stock prices high. I think I need to watch those events closely, as, if that money dries up, stocks could tank."

Well, events are unfolding now! According to Bill Gross, of Pimco:
Enough is Enough.

"Several hundred billion dollars of bank loans and high yield debt wait in the wings to take out the private equity and leveraged buyout deals that have helped propel stocks to Dow 14,000. And lenders…mmmmm, how do we say this…don’t seem to have much of an appetite anymore. Six weeks ago the high yield debt market was humming the Campbell’s soup theme and now, it’s begging for a truckload of Rolaids. Yields have risen by 100 to 150 basis points in response" - Bill Gross

This looks to me like an ominous sign of more worries yet to come. It's usually wrong to be to reactionary to news- after all, every day something else unexpected comes along. However, the long-term implications of a slow, long, declining housing market, rising foreclosure rates in the subprime loan market, and increasing interest rates for LBO loans is not looking good.

FeedUp.com Launches! Personalized News+Blog Search Delivered via RSS

Well, at last, the project I've been working on for the past few months has been launched (it's in beta)! FeedUp.com is a personalizable news+blog search engine. You simply enter a list of things you're interested in, and it generates an RSS feed of the search results, which you can then subscribe to with your favorite news reader. Or just bookmark it in your browser. In addition, you can even get a widget to put your feed results on your web site or blog.

As someone who reads news all the time, on a large variety of topics, this is really a project that I personally have loved to work on. Although there are Google Alerts and Yahoo Alerts, which let you subscribe to individual queries, I have so many interests (hundreds of queries) that emails to my inbox would be way too difficult to manage. FeedUp takes all your interests specified in a feed and ranks the results to deliver to you the best articles to read. Anyways, try it out!

By the way, FeedUp.com is a Kosmix product, but, we chose not to brand it as Kosmix so as not to confuse it with our existing vertical search products.

Why the iPhone Changes Everything

I was one of the early adopters that bought the iPhone. I even wrote a review of it here. So, after two weeks, I have to say, it is a device that really does change everything. In my opinion, it's the first mobile device that really works as a multi-function cell phone, internet browser, PDA, and music player. For example, here are some of the things I used the iPhone for just today.
* I woke up to the morning alarm I programmed for every Monday-Friday.
* I checked email at least 10 times on it.
* I checked my stocks at least half a dozen times during the day.
* I looked up the address of a restaurant for lunch using the Google Maps app.
* I listened to music a couple of times throughout the day, both with headphones and with the built-in speakers.
* I checked the weather forecast with the built-in app.
* I took a picture of some notes I made on a whiteboard.
* I added a calendar event with an alarm for next week.

It's really a multi-function device that works. And on top of all its features, it's stylish and beautiful too. Being a first generation device, it's obvious there are so many ways that the applications and device could be improved. All of that will happen soon enough. But, today, you can get a glimpse of the future of tomorrow with the iPhone. I am quite certain that the iPhone will follow the path of the iPod. The first generation is an aspirational device, a luxury gadget. But, soon enough, cheaper, better versions will move down the price ladder and into the mass market. Each new version will be a refinement of the previous version, bringing new features, improvements on existing features, cheaper prices, and more variety.

My biggest criticism is that I think Apple needs to be more developer-friendly. That they graciously allow people to develop web-based applications is laughably inadequate. Their closed-platform mentality is very disappointing, both from a developer perspective and a consumer perspective. I hope they will embrace the huge developer community that can make the iPhone a platform for the future.

Prosper Update- It's now a Lenders' Market!

I've been using Prosper.com as a lender for over a year now, and it has been great! I liked the Prosper lending experience because I felt like I was really helping people. Even now, one year later, I still look forward to browsing the new listings. I especially like entrepreneurial listings- I think it's great to help people live their dreams.I have about 24 loans, of various amounts, and so far, I have had no payment problems and no defaults (but, being realistic, I am sure eventually I will see some defaults). My average loan interest rate is an outstanding 14.49%. When I was first starting with Prosper a year ago, it was very difficult finding good loans I wanted to lend to. However, lately it seems to definitely be a lenders' market- there are so many good borrowers now that I am unable to lend to everyone I'd like to.