I stumbled upon this post in Scientific American about the Mind of the Market. I don’t post about behavioral economy much but I still find the topic fascinating – especially when ideas challenge outstanding notions.

The premise of the article is that humans have been hardwired by evolution to be psychologically fair and we still haven’t deviated from this moral high ground. An experimental procedure was conducted called the Ultimatum Game. Given a $100 to split between a subjet and their game partner, most partners would refuse a share of anything less than $30. Now why would anyone refuse free money?

The answer is moral fairness.

Primates exhibit this behavior as well. When working on a task together, if one monkey gets a cucumber and the other gets a juicy grape, the cucumber recipient gets mighty peeved off – at times refusing future tasks. And even though it’s still free food, I wouldn’t blame them. Choking with anger, that cucumber must taste like a piece of crap.

So, despite the popular conclusion that we have become more selfish in our evolution of the survival of the fittest, it’s nice to know that some of us are still hardwired to do the right thing. And while other have evolved into something else… well, they are just mutants.

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I’m pretty sure the New York govenor scandal of Eliot Spitzer with a call girl is pretty old news now. However, when your blog name is Money Relations, anything related to money goes.

It’s interesting what you can learn on the web. In personal finance, tracking your money is a big thing. So here’s a twist in a Forbes article on how authorities track your money  when you do bad things. Basically, don’t do it.

The net is tighter now after 9/11 with new anti-money laundering rules in place. They were designed to capture terrorist and drug dealers when large amounts of money are transfered but as we see in the Spitzer saga, johns are getting caught as well. Dumbasses.

Here’s a news flash: cash is king. Haven’t they ever seen movies where they tell you to get off the grid and don’t use your credit cards? I could scoff in bewilderment at what poor choices these politicians are making but frankly, I’m sure that there are countless others doing exactly the same thing but haven’t been caught – yet. But they are doing their job… well.

All I can say is if you pull a stunt like that, be prepared be humiliated and pay. So the call girl went for $4k plus? What went through my mind was how much it’s going to cost him when I saw his wife stand at his side during his public announcement of shame. That’s got to be a few million at least. Cha-ching.

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I’m paraphrasing a cliché, but if it walks like a duck, quacks like a duck – it’s a recession for the U.S. economy.

Just by going through the American pf blogsphere, you can read numerous articles on the rising cost of everyday goods. The American dollar is falling, inflation is rising, homes are foreclosing and the latest news is the sale of investment bank Bear Stearns to JPMorgan Chase due to the sub-prime mess.

Admitting to the term recession is very clinical and academic. According to Wikipedia: “a recession is a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.”

Let’s also define GDP. Again from Wikipedia: “GDP is defined as the total market value of all final goods and services produced within a given country in a given period of time…”

But, if you look up the 2007 fourth quarter GDP for the United States, you’d find that it actually rose 0.6%.

So how do you make sense of the numbers when for all intents and purposes, most economists would admit the American economy is in a recession?

In an article from the Economist, it suggests that looking at GDP growth per person is a better indicator of economic performance than crude GDP. Immigration and population growth should be factored into economic progress as you take into account the output of each individual.

The following graph shows how slow growth population countries like Japan would actually be seen as more productive than the U.S. in recent years.

This could also explain why despite what the GDP says, the average American knows that individually, he isn’t any better off.

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Warren Buffett is rich.

Some news flash, eh?

According to Forbes 2008 World’s Richest People list, Buffett made it to number one this year at an estimated fortune of $62 billion. Mexican telecom tycoon Carlos Slim Helú takes the number two spot at $60 billion and poor Bill Gates has to settle for third with $58 billion after thirteen years of dominance at the top.

How did this come about?

Class A shares of Berkshire Hathaway shares rose 25% between July and the time Forbes compiled this list. This is exactly the timeline of the sub-prime crisis when ABCP and the credit crunch came to the forefront of mainstream media. So, you can say that in times of recession in “Warren Buffett We Trust”.

This is in stark contrast to the early days of the dot com era and entering the new millennium. At that time, Buffett was blasted for being old fashion and out of touch with his technophobia.

I guess Buffett is having his laugh now – not a belly laugh but maybe a chuckle.

Despite the fact that 2007 was a glorious year for Berkshire, Buffett proclaimed in his latest letter to shareholders that the “party’s over” for the insurance business. And the insurance business is the corner stone of Berkshire.

The property and casualty business runs in cycles. Obviously, no one can predict catastrophes but when things are calm, the vigilance declines and so does insurance premiums as companies compete for new business of first home buyers.

Buffett is warning of “lower insurance earnings during the next few years”.

While Class A shares are cost prohibitive for most investors, Class B shares are more attainable – pegged at 1/30 of Class A shares. But would buying now be overpaying for Berkshire’s intrinsic value given Buffett’s warning?

An article published in December’s Barron’s magazine entitled “Sorry, Warren, Your Stock’s Too Pricey” certainly seemed to think so. But keep in mind this was when the Class A shares were trading at over $140,000. Its bottom line calculation was that for fair value, the shares should trade at $125,000 to $130,000. Therefore, the Class B shares should fall within the range of $4167 – $4333.

As you can see by the first graph above, Berkshire is still overpriced according to the Barron’s article. But, as we’ve also seen recently in the last decade, never count out Buffett.

When bond insurers like Ambac Financial Group and MBIA were struggling to keep their triple-A bond ratings, Buffett seized the moment to set up Berkshire Hathaway Assurance – his own bond insurer for municipalities. And I’m sure Buffett’s keen eye has spotted other opportunities as well.

So while the tech era was not made for Buffett’s investing style, this recession certainly is in his wheel house. As always, it will be interesting to track his investments as it might be his last hourrah.  When you want to learn to invest money, there’s no better person to follow.

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I came across an interesting article about iPods being responsible for the recent rise in U.S. crime rate. There is no doubt that iPods have become very mainstream and the telltale white earphones can be seen dangling from a lot of ears just by walking down the street. Here are some stats:

In late 2004, Apple had sold about 5 million iPods. By the end of 2005 that had ballooned to 42 million, and in 2006 the number neared 90 million.

But is the surge in iPod popularity responsible for the jump in robbery rate?

FBI statistics show the robbery rate went from 137 per 100,000 people in 2004 to 141 per 100,000 in 2005 and 149 in 2006.

How very Freakonomics.

Well, I really don’t know if this is a huge jump or if there’s a strong correlation but I do think people pay less attention to their surroundings when they are absorbed with their gadgets.

It happened to me once.

A few years ago, I was on the bus on my way home from work. It was still light out and I was sitting by the door playing with my PDA with my little knapsack/purse on the ground by my feet. The bus stops and this punk ass kid swipes my bag from behind me and rushes out the door. The wheels in my brain turned as I had a little internal dialogue with myself. Should I run after him? I had no money in my purse and the most expensive thing I had was already in my hand. It would be a bitch to replace the ID though. What the hell, let’s go for a run.

The dude had taken off but I still had my wits about me even under stress: I looked both ways before I crossed the street running after him. No sense in being roadkill.

It had been awhile since I ran track in school but I can get a move on. Still, after only a block, I started feeling resentful. Dumbass was making me run. And why was I wasting my breath this way? Changing tactics, I did what any normal woman would do under the circumstances. I let a blood curling scream: STOP THIEEEEEEEEEEEEEF!

That made him drop my purse real fast.

I picked it up and he continued running. I made my way back to the bus which was waiting for me after I had stormed off. The driver asked if I wanted to report it but I said no. I only got the back of his head anyways.

That’s my story about gadgets and crime. The incident did leave a lasting impression on me: keep the music volume down and always be aware of your surroundings. I was a robbery attempt statistic but I needn’t have been if I had been more careful.

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