Just came home from Columbus, OH Airport and outside of Athens, OH on Route 33 a roadside billboard ad caught my attention. The large billboard featured a stately home covered with a red brick veneer and a steep roof (likely 12 on 12) and black dimensional shingles. The company advertising is Schumacher Homes and the home featured (my estimate) would be around 5,000 ft2. Now for their ad: They are offering to make your house payments for a full year! Now, all of us know there ain't no free lunch and somebody will have to pay for the year's worth of mortgage payments, right? Most likely scenario will be that the payments for the first year will be built into the mortgage and either will lengthen the loan or make the payments higher when they ' kick in' after the first year. It is creative advertising — flawed though the concept may be.

Vitaliy Katsenelson adds:

I saw a Jeep commercial advertising $3 per gallon gas for a year (limited to 12k miles) if you buy a new car. I guess automakers are using similar tactics to try to sell gas-guzzlers.

Jeff Watson recalls:

I remember telling my wife that the real estate market was hitting a top when I saw signs everywhere, offering mortgages for 130% value with no income verification.

Adam Nelson explains:

I think these sorts of gimmicks are a way for the builder to offer a discount without lowering the house price (which would thereby officially lower the price of the houses they sold to your neighbors as well). Because appraisals are made in part via property records or MLS sales figures which don’t include discounts structured as something given in addition to the house, the builder hopes to preserve the valuation of the other houses by giving this kind of sneaky discount.



 I think I've found a key to the "gun issues" that many people have. I really think it's a phobia or deep-rooted fear. The people that are the most avid anti-gun law supporters tend to be those who also can't stand being around guns, or even fear them. It's like there is a snake in the room. Even if the gun is not loaded they fear it. It could have a trigger lock, be shelved or encased, and they still get jittery.

Is it similar to those that are afraid of heights? It's not being high up that makes them scared, it's the thought of actually being compelled to jump. Equally with guns, just because a rifle or pistol is in the room doesn't mean it's going to go off. Is it really the fear that they can't hold themselves back from picking it up and discharging it? If so, why would they think it has to be aimed at a person? The statistics behind such an event's taking place are way to the left tail.

Similarly with the markets and speculation. "Don't trade options or any other derivatives because they're too risky!" I understand risk. Why would people say that? Is it because they fear it themselves and to actually own something in that category would cause them great angst? Is it more that they lost money when they tried? Is that why there is always a great pull for the pessimistic to be in hard assets such as gold, timber, real estate?

Adam Nelson replies:

With derivatives it is the leverage that causes many people to fear them. Also, they are more complicated — you have to understand not only the movements of the underlying but also the relationship between the underlying and the derivative.

The fear arises from a lack of understanding of how they work and what they do. If all someone knew about guns were knowledge obtained from the media, it’s entirely likely he would have a very different impression of what they do and how they operate than that of someone who shoots regularly. Also, the stories about derivatives are almost always about a fund's blowing up often due to its exposure being larger than expected or misunderstood. If the only knowledge one had of derivatives were stories from tail events, it would likely skew the risk profile a bit.

I agree on the hard asset exposures and have no explanation for why pessimists prefer them (especially gold).


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