Welcome To Josh's Blog O' Thoughts: Human Behavior

This winter has been one heck of a ride. Here in the Midwest it's been one of the worst winters we've seen in years. Very cold temperatures, high winds, and lots and lots of snow and ice. You learn a lot about a person by how they drive in the snow. The way I see it, there are basically 4 types of snow drivers:


1. Those who know basically nothing about snow driving.

The tell-tale signs of this driver are excessive amounts of fish tailing, spinning tires when trying to gun it out of an intersection, sliding into an intersection with brakes locked, and of course the car in the ditch so long it's been drifted over. These drivers end up in accidents and in the ditch quite often.

2. Those who are OVERLY cautious.

You can recognize this person when they start driving 25MPH on the highway at the slightest flurry, they completely change their travel plans when snow might be in the forecast, they will follow a snowplow whenever possible, and they are often the type of person that is obsessed about snow blowing (not shoveling) their driveway and putting down ice melt.

3. People with four wheel drive (4WD).

These are the people who think that because their truck/SUV can spin one wheel in back and one wheel in front that they are automatically impervious to the perils of snow driving. Signs of this driver are a big truck/SUV barreling down the highway at 70MPH in the snow. Often there will be a sticker of Calvin urinating on another logo. Granted, 4WD DOES have its advantages, but it is not the holy grail of snow driving by any means, and it has little effect on a sheet of ice. We have a Ford Escort and a Dodge Durango (4WD) and more often than not, we have found that the Escort gets around in the snow just as good as (and sometimes better than) the Durango with 4WD on. (The Durango does better in DEEP snow because it rides higher).

4. Those who know how to drive in the snow.

These are the drivers who judge the slipperiness of the road and adjust their speed/braking/turning accordingly. These are the people who make it to work when it's a blizzard. These are the people who DON'T get in accidents. This is the type of snow driver that YOU ought to be.

Now, which type of snow driver are you?

I'm sure you've seen the massive amount of new headlines stating that the economy is headed for the hole. Well so have thousands and thousands of investors. The result is a massive flock of scares shareholders selling off all their investments because they think the stock market is going down the tubes. Well, I got news for them: YOU'RE CAUSING THE DECLINE!

By over saturating the market with sell orders, the demand for these shares diminishes and so does the selling prices. Other investors see their stocks going downward and they decided to jump ship also which only enhances the downward spiral. Smart investors (the people that get rich off of times like this) are just waiting for the right time to start snatching up all of these stocks at discounted prices. Once these big time investors start buying, the little guys will say "Hey, they know something I don't so I will follow their lead and buy also." And low and behold, demand increases and stock prices go back up. The people who made the most money were the ones who bought in at the bottom and started the upward climb.

So, to those of you who are private investors, don't dump your declining stocks just based on outlook. Don't be part of the problem. Hold on to those stocks. If it's a decent enough company the price will come back. In fact, many of you may want to pad your investments by buying some more of these companies at discounted prices. I know I will be looking heaving at this.



Disclaimer: I'm just an amateur investor and have had no formal training. Please do your own research on a company before deciding to invest wisely. I can not be held responsible if you lose money on the stock market.

Lately, with crude oil hovering near $100 a barrel and setting record highs nearly daily, I have been wondering if all of these price increases are simply due to the economic principles of supply and demand or if a large part of it is driven by assumptions that demand is higher (or going to be higher) than it really is. Or for that matter an under estimation in supply could cause the same situation. At any rate, there could be a certain amount of panic being caused that is helping drive these prices higher.

Additionally, with crude being traded on the commodities market, it wouldn't surprise me if the demand is being created simply by traders and investors rather than actual consumers. Normally, with a supply and demand situation you would expect the price to rise if consumers were demanding more of the product. However, in this situation the product passes through a middle-man first. The middle-man wants to make a profit too. People have seen that oil is on the rise. When that happens, they think "Maybe I should buy into that and make some money for myself?" They think they can buy in at $90 and sell at $100 and make a profit. This causes extra demand, not by actual consumers but by people trying to make a profit by trading oil commodities.

So, does anyone else see how this might resemble another situation in the past decade. Let's think back to the late 1990's. Tech stocks were a huge boom. Any little startup company could get funded, go public, and have their stock skyrocketing. The reason is that people had seen the successes being made in the technology sector so they didn't bother to think about real consumer demand. So you had investors buying into a lot of companies that were losing money and had no customer base. What happened? The technology bubble burst around the year 2000. Stocks across the board fell.

Now if we apply the same thinking to oil trading, we could expect to see a peak point before a bubble burst. The bubble burst will be caused by some big holders selling off or some bad news about actual demand. Once some people sell off others will follow suit and prices will fall.

Again, this is one of my things that is totally up for debate. I'm no economic wizard so this seems feasible to me. Let me know if you have other opinions.

In a recent story, it was reported that some employers are going to begin implementing programs which will charge overweight employees a higher insurance premium. This move is hopefully an inventive for these people to lose weight and lead a healthier life thereby reducing health care costs in the long run. Other companies are going to use programs which give incentives to healthy people.

I doubt that this will have much effect, unless the penalties are VERY steep. One thing I learned in the book Freakonomics is that incentives or disincentives have to be very high in order to cause change in behavior. Without this, people will likely continue their behavior and pay the fine, because the cost of the fine is outweighed by their enjoyment of their current lifestyle.

Anyway, it's an interesting idea. We'll see how much people complain about the companies infringing upon their rights.

This this map today, over at CNN.com. It is really cool to see the distribution of obesity across the country. From the map, it's obvious that obesity has risen steeply over the past 20 years. However, what was kind of surprising was the distribution of obesity in the South. Many of the Southern states have the highest incidence of obese people. I wonder what the reason for that is.

If you have any theories, let me know.

I just finished reading a very good book called Freakonomics. The authors shed some light on some unknown correlations between everyday information. This is all done through the perspective of economics, but is written in a easily understood, yet informative way. I would highly recommend this book to anyone.

Among the correlations and conclusions drawn is the apparent cheating of school teachers for pay incentives, the correlation between legalized abortion and lower crime rates, nature versus nurture in regards to a child's school test scores, and the importance of having the 'right' name. These topics bring to light some interesting correlations while putting others to rest as myths. For instance, children who watch more television do NOT do worse in school than children who do not watch a lot of television. There is no correlation between the two.

Now then, I'd like to relate some of this to my own blog entries. If you've been here before, you know that I have taken issue with the rising price of gas. So a good economic question to ask is "Are gas prices too high?". The answer, surprisingly, is No. From an economic stand point, price points are set based on the balance of supply and demand. Since the price point of gasoline has been increasing with no major change in demand, it can be said that gas prices are not too high, and that gas was, in fact, under priced before. If people are able and willing to pay $3.00 a gallon, the laws of economics would say that this is an appropriate price point.

This, however, contradicts posts that I have made griping about these rising costs. But, in my view, just because the laws of economics say that these are fair price points, doesn't mean I can't complain about them.

Apparently, men are doing more grocery shopping these days. Most people wouldn't think anything of it, but retailers could actually be losing money because of this. Guys are unlikely to ask for help in finding a product, and are ulikely to buy a substitute product if they can't find what they are looking for. This can lead to lost sales for the retailer. But how can they fix this problem?

I know. Incorporate something that guys love: gadgets. Give shoppers a PDA-style device that would let them browse through products in a categorized way, and allow them to type in a product keyword to search for the product. The device could tell them the price and location of the product. They could make this even better and allow access to this system over the Internet so you could create your shopping list and have the system organize it by physical location. The ultimate solution would also include putting RFID (radio frequency id) tags on the shelves so the hand-helds could direct you to the product you're looking for.

I could see this being very helpful in any store that has thousands of products. Probably cost-prohibitive though.