Zombie Houses

ABC News reports that foreclosed and neglected houses are driving down neighborhood house prices.

The reason why the houses are neglected is because until the foreclosure process ends, the bank has no responsibilities to take care of the house, which takes many years.

This is a text book case of production of negative externalities when an agent does not internalize the costs. The bank does not suffer from the debilitating house in the short term, instead the neighborhood suffers from it. Of course, the bank would pay the cost eventually given that it would cost money to fully fix up the house or demolish it in the longer term. But at the short term, the bank does not care and the neighborhood suffers. And this is a terrible loss for the bank and the neighborhood.

From freedigitalphotos.net

So how can this issue be resolved?

1. Change the laws so that the bank takes care of the foreclosed house. This sounds ideal but  maybe problematic legally due to the foreclosure laws.

2. Let the neighbors take care of it. This is also problematic because the neighbors should not really be on the hook and it might be quite costly for them as well.

3. Let the bank and the neighborhood workout a deal. Yes, the classical Coase style, where the two parties negotiate to maximize their utilities. One might argue that the bank might have the upper hand given their expertise and money but I believe that this is a better solution than the previous two solutions. Yes, the bank may be better at negotiating but they will have to consider the welfare of the neighborhood as well, in order to maximize its own utility. Plus, some neighborhood associations are quite organized and strong. An example of an efficient solution may be like an agreement where the neighborhood takes care of the house  and the bank gives part of its proceeds of selling the house later to the neighbors. Of course, the devil is the in the details but this solution seems more effective than having the foreclosed house disintegrate.

Give Thanks [2015/3/4]

I am thankful for the great weather in LA.

Thank you God for the seven hour sleep.

Thank you Jesus for letting me learn more about the book of revelations.

Thank you Jesus for the relatively productive day ^^

Thank you that I have water, electricity, and internet.


*From Snapshot Serengeti

Some Pictures that I took and that I like

I usually don't take pictures because I usually stay home and work so no pictures. But when I take pictures, I like to take pictures that tell a story. So here are some of my favorites.



Title: Slowly but surely.

Comment: I just like the turtles sun bathing. Reminded me of my life, kind of slow but surely going somewhere.




Title: Pelican's dream

Comment: This is Malibu and I just happen to find this lonely pelican just gazing at the horizon. It stayed motionless for at least two minutes. I am sure it was thinking of something....may its future or lost dreams? Or what it will have for dinner....




Title: A perspective

Comment: I took this picture because I like the rectangular angle that was formed by the fences and the contrast between the white bars and the blue ocean color. I thought the sea gull was thinking about the two fences deciding which way to walk, sort of like which road it will travel.

Give Thanks [2015/3/3]

I always thank God for you because of his grace given you in Christ Jesus. 

For in him you have been enriched in every way--in all your speaking and in all your knowledge. (1 Corinthians 1:4-5)

*From Snapshot Serengeti

Today, I am so thankful ^^

• I am thankful for the wonderful weather

• I am thankful for the relatively high productivity today

• God thank you so much that I am able to worship you and praise you

• Thank you for the great chat with my parents

• Jesus, thank you for everything :D

Saturday Night Live coming to China~

According to Bloomberg, Saturday Night Live (SNL) is coming to China by partnering with Sohu.com.

As a person who likes SNL for its comedy and creativity, I believe this is great news for China. Chinese people can laugh more and also realize certain issues around the country and the world through satire. However, here are two concerns regarding the launch of Chinese SNL.

First, the Chinese government is like to either put pressure or engage in some sort of censorship. This is especially concerning, given that the current government is not so US friendly.

Second, rip-offs. China has copy-right issues and it won't be surprising if there is a lot of ripping off the SNL sketch.

I look forward to seeing the Chinese SNL ^^

Why I am not investing in Russia right now...

Jim Rodgers, one of the best investors (plus, one of my heroes), is bullish about Russia.

I agree with  Jim Rodgers  but I am not going to invest in Russia right now for two reasons.

First, Putin...Yes, he has improved the Russian economy and brought back pride to Russia. But with his dictatorship style and corruption, I don't see a bright future in Russia in the near future. Bloomberg shows that many of those who oppose Putin were either incarcerated, kicked out, or killed. Now this is a big red flag!  Until Russia starts handling with its corruptions, establishes rule of law, and starts reforms, Russia will be crippled by corruption.


Second, Russia's economy is heavily dependent on energy. According to Wikipedia, Oil-and-Gas industry accounted for 16% of the GDP, 52% of the Federal Revenues, and 70% of exports. With the oil prices quite low, the Russian economy will not recover. Although the oil price ($50) is higher than the estimated Russian oil production cost ($40), the economy cannot grow and oil prices can stay low for quite sometime



Hence, although I remain optimistic about Russia (+10 year horizon), I will not invest in Russia until corruptions are somewhat addressed and oil price starts picking up.

Granny Theft [Fraud Series 2]

A 62 year old granny accountant stole $3.5 million for quite some time from a trucking and warehouse company.

Wow...talk about lack of internal controls. Always remember to trust but verify. Indeed, she worked for  over thirty years but remember that most fraudsters are those who seem the most trust worthy. Also, the fraud could have been detected earlier if there was a separation in control and accounting functions. It is likely that she was in charge of all of the money coming in and coming out, which enabled her to steal the money.

For a good reference about fraud, I suggest reading the book, "Forensic Accounting and Fraud Examination." The book is a bit dry but it is quite comprehensive and provides the framework to understand and deter fraud.