What Privacy - Orwellian Indexing of Social Media Websites

“Orwellian describes the situation, idea, or societal condition that George Orwell identified as being destructive to the welfare of a free society. It connotes an attitude and a policy of control by propaganda, surveillance, misinformation, denial of truth, and manipulation of the past, including the "unperson" — a person whose past existence is expunged from the public record and memory, practiced by modern repressive governments. Often, this includes the circumstances depicted in his novels, particularly Nineteen Eighty-Four.” (~Wikipedia)

This is a technique that came to my mind when a friend mentioned that most of the popular dating websites actually charge money to initiate contact and have someone else’s identity revealed to you. As a matter of fact, some of those commercial websites will not even allow you to put any contact information in your public profile and screen all pictures for any signs of text when you upload them. Another issue you will encounter is that the other party may actually attempt to cheat you by uploading a picture of some low ranking celebrity. Being frugal in such matters (that is either meet someone in real life, or do not pay money for such websites), I was suggesting a different approach.
Another use case of the technique that I am going to describe is to go beyond hidden profiles on social media websites. Let’s say you met someone that has put some personal information on Facebook or even Google+ that is only visible to a close circle of people and you do not have access this information. Ironically most people are so verbose that they may leak this information somewhere else (forum post, personal website, publicly available job search engine). So the issue is to link the information of the hidden profile to the other piece of information that is currently out there.
A simple yet powerful way to correlate those bits of data is to use a similarity image search, such as Google Image Search. What people do not know is that you can actually search images by similarity there instead of just indexing terms. In order to do so, you need to click on the “camera button” on the Google Image search website then a window will pop open where you can upload any image file that you want to search for.

So the curious task is to go though the profiles that you are interested in, download the profile pictures, and upload them to the search; finally this will link you to the appropriate website. Chances are high that you may actually hit some useful information, especially in the case someone wants to cheat you with a celebrity picture on a website. In addition chances are very high that for convenience people tend to consolidate the images that they use for different social media websites. You can bet that Google already indexed all of them.
For all those computer scientists out there, Google image search actually had a remote API that allowed people to remotely query the search engine. Interestingly they decided to deprecate the interface earlier this year. I guess I am not the only one who figured that there are several interesting games to be played with the search. I bet it is not hard to emulate a simple interface using simple HTTP post and get commands. There are APIs out there for web GUI testing that allow you to simulate form editing.

In Summary

First of all there is no such thing as privacy. Even if you use unique images for each of your presences on social media websites, it will not take long until such image searches embed facial recognition. I used to do research (briefly) in computer forensics before and can assure you that many of those facial recognition algorithms are close to fool proof.
If you on the other hand want to be found the best way to do so is to consolidate the images you use on different social media websites; this is what many people already do, that's why this technique is so effective. In addition to linking profiles of the same person together, you can actually link profiles of different persons together. Think about people using group photos of their club, foundation, or interest group as profile picture. If more than one person of that group does it, you have got them connected.
The technique is especially useful for dating websites or finding people across different social media websites. An image is probably even better than putting that persons email into the search. People tend to protect their email address to avoid spam but are totally unaware of “advances” in image recognition.
If you are looking for more information about these techniques, I can highly recommend Image Processing, Analysis, and Machine Vision. I used to work with this book and forensics in the past (~2004) it has case-studies and hands-on examples how to do magic with image processing and recognition algorithms.

If you find this post creepy, well then thing about various intelligence services, search engines, and large corporations who engage in such activities on a large-scale. Their intentions are not to make a friendly contact with you but to spy you out or market stuff to you that you probably do not need in the first place.

Derivatives Black Magic

“Poor is spending 10% of your income on lottery tickets.
Frugal is putting 10% of your income in investing.
Poor is spending money. Frugal is saving money.
[...]
Poor is watching TV and wanting things.
Frugal is reading books and doing things...”
(“The Mental Prison of Being Poor” ~ Jakub Lund Fisker)

I have been investing in stock markets and precious metals in the past little while. Over the past three year a lot of people, including me, have been driven into dividend (and yield-) investing. If you cannot make money by buying low or selling high, you want to be paid for waiting.

What we have seen over the past couple months however, drove several “average” investors out of the market again. Stocks have been going down; markets went crazy, precious metals shot high. Ironically people like to buy things when they are going up and run crying from them when they are going down. Some people actually bet against such herd mentality make much money.

So if you find yourself in a similar situation and you want to increase your income, the obvious thing to do is to decrease your spending and increase your income again. Since my spending side did not offer much potential for cutting since I’m already somewhat frugal, working on the income side had the higher potential.

The Risky Part...

Disclaimer: If you indent to do what follows, you do it at your own risk. This is just a report on what I figured and no investment advice. There are substantial risks involved, some of which are mentioned at the end. If you’re a greedy person who never did options trading and shorting stocks before … skip this and take a part-time job :).

Ok here it becomes suicidal, because that approach stands against almost everything that was posted with regards investing on this blog so far. Being a vivid viewer of Max Keiser who is a declared enemy of the current banking establishment, I became a fan of precious metals. However, when you have been following his very cynical show about markets, finance scandals you actually realize how this bad establishment makes money. Derivatives and alternative investments (such as options) usually play a major role for the current crisis that we are in right now. Picking up a couple books on financial engineering and derivatives trading will actually provide you with some of the black magic (excluding insider trading) that people use to make money. I suggest anyone to get a financial education, so that you first of all do not get fooled by the hot real estate babe close by, avoid doing stupid investment mistakes, and realize how your savings are devalued; and a plus, you actually learn techniques that make you realize short term gains.

The idea of this technique is to pair derivatives with stocks to generate high-yield, low risk fixed income. The ingredients that you need for this black magic cocktail are:

• Margin: An existing pool of assets that you can borrow against
• Basic experience of shorting dividend-paying stocks
• Basic experience of options trading

(OPTIONAL Step 1.) One way to not touch your existing investments is to borrow money against them. Most brokerages allow you to buy stocks on a margin. I’m not getting into detail of margin calls, maintenance margins here. But as a rule of thumb for most brokerages, the maximum you borrow needs to be backed up by 50% (usually large cap stocks) - 100% (penny stocks) of the other asset in your portfolio. That means you are on the brink of trouble (i.e. toast!!!!), when you borrow 20.000$ to buy a large cap stock against a 10.000$ portfolio. You are toast if the value of the asset you are borrowing against goes down, or the stuff you buy goes down. In addition, you have to pay interest on the margin (~4.5% at my brokerage). In short, do not leverage yourself too much.
So suicide banking lesson 101, you need something that you can borrow against. The “suicide bankers” in Max’s show usually leverage themselves 20-50 times over. However, they are doing it with their deposits and not their own money.

2.) Having established the risk of margin. You need to invest the borrowed money in a way that what ever you buy with that money does not go down. It is absolutely essential to mitigate downside risk if you take out margin. A rather unconventional way to do this is to buy a pair of investments; one investment that goes up when the other one goes down. This is referred to as a neutral position. You can do this for example by buying a stock and shorting it at the same time. If the value of the stock goes down, you make gains on the short position, if the value of the stock goes up you make money with the long position.
Since investing into individual stocks and short-selling individual stocks incurs management, you better buy ETFs that do this for you. In addition you’d be liable for all the dividends to be paid on your short position, which makes crunching the numbers harder.
On the web you can find various pairs of “bear” and “bull” ETFs for various investments. Better, some ETFs actually imitate the performance on the order of two (double-bear/bull) or three (triple-bear/bull). Since ETFs incur some marginal management fees and do not exactly track the inverse of the underlying asset, be prepared for some joyrides there. So up to this point you are not making money yet, instead you’re paying margin interest. Now the interesting part...

3.) Once you own a stock (whether bought on margin or not) you can write options on it. Options are usually used to insure against various risks. You can buy a put option to sell your stocks at a fixed price below the current purchasing price. You can buy a call option to reserve the right to purchase a stock at a fixed price. Buying such “insurance” against market conditions is expensive. But acting as the other party, who actually sells the insurance you can make money. The amount you make is usually determined by the volatility of the underlying asset and how you price the so called “strike-price”. If you’re reading this you should already know what I’m talking about here.
One thing that you can do is covered-call writing. In which you sell call-options above the current price of your asset (and hope it does not get there). Given the position we established earlier, you can write call options on the long side of your position, and pocket the call premium. In a very volatile market that we have right now, the premiums to be made are significant.
Since you are not a day trader, in order to minimize the management overhead you better buy a covered-call ETF directly that does this stuff for you.
If you manage to pair a covered-call ETF with a double- or triple-bear-ETF on the underlying asset you can actually magnify the returns. For example, (in theory!) in order to establish a neutral position you can take a 75% position in a covered-call ETF and a 25% position in a double-bear ETF, which means you (in theory!) mitigated all your downside risk and pocket about 75% of the premiums compared to a full position in the covered-call ETF.
Let’s crunch the numbers for a theoretical example. Let’s pick TSE:HEX (Covered-Call TSX60 ETF) and TSE:HXD (Double-Bear TSX60 ETF). Say you have taken out 25.000$ to invest, and your margin interest rate is 4.5%. At the time of writing the price for HEX is 8.63 and for HXD is 10.12. That makes up for the following

25000$ invested in
2170 shares of HEX ~ 18750$
617 shares of HXD ~ 6250$

The yield & maintenance costs:
HEX pays somewhere between 0.12$ - 0.14$ per share depending on the volatility of the market per month. That means you pocket

HEX distribution per month (assuming 0.12 ct): 260$

and you have to pay the margin interest on 25000$ ...

Interest on 25.000$ (assuming 4.5%) per month: 93.75$

So in theory you’d be pocketing a ball-park of approximately 150$ extra per month (~8% p.a. on the margin) on top of your current investments. That excludes trading commissions. In addition, you might have to re-balance the neutral position once in a while to remain neutral.

Note that in practice you make less! There substantial liquidity risk associated with these ETFs and those ETFs charge management fees. In addition you are falling for the volatility trap in the leveraged ETF. Do not use this technique for a very volatile instrument. Because if the leveraged position (i.e. 2x inverse ETF etc) does not follow a sustained tend, you loose money (as shown here). I have been monitoring a not fully neutral position and witnessed quite some divergence of both funds over the past while. Be prepared for a wild ride and to make a little less money. I highly suggest making a spreadsheet to monitor your initial- and re-balancing commissions, the interest payments, and your yield and portfolio value.

Once you establish your income, you can pay the margin down and gradually sell (some of) the down-side protection (if needed). Think about it as a money-printing machine that pays itself off. 
And especially for all those property virgins out there, think about how much you need borrow in order to buy and maintain a house or apartment to be able to rent out a room to a poor student to make like 200$ per month. I bet the risk involved in that calculation is much higher than “this gamble” described here. Note in order to qualify for a real-estate mortgage you would have to liquidate some of your savings in my scenario this would be the collateral that you borrow against to establish the neutral position. I have been able to make consistently between 5-8% in fixed income on that amount which is opportunity forgone when buying a house.

With respect to the introduction, think about this as frugal only if you’re not gambling on margin :).

Comments, praise and curse, welcome....

Some References

• http://www.m-x.ca/f_publications_en/options_strat4_en.pdf Covered-call writing.
• http://www.coveredcalletfs.com/ Some very comprehensive introduction
• http://www.google.com/finance?q=TSE%3AHXD TSE:HXD
• http://www.google.com/finance?q=TSE%3AHEX TSE:HEX
• http://www.investopedia.com/terms/m/margincall.asp Margin Call
• http://rt.com/programs/keiser-report/ Keiser Report
• http://earlyretirementextreme.com/the-major-risks-of-buy-and-hold-index-investing.html ... A good case why you need to mitigate against downside risk.

Door Boards - Vinyl Repair (Attempt)

Sadly a common problem with older cars is that as the plastics also age. In the heat of the sun the softener evaporates from the material, the materials become hard, shrink and become brittle. This is especially nasty if you get a car from the 1980s and onwards where plastics and vinyl were favoured over more durable materials like leather. Having a 1989 Mercedes 190D, I was struck by this curse as well.

A common weakness in the 1980s Mercs are the vinyl interior linings. Usually they do not crack but substantially shrink from their original size. This especially applies to the inside roof lining and the lining on the door panels. If left untreated the linen will tear off and the bottom wooden panel structure appears. A quick fix in the early stages of the process is to staple the linen down (preferably under the window gasket) so that it cannot shrink to expose the underlying structure. I did that about five years ago to my door panels back in Germany.

Now the car has been in Canada since 2007 and the hot continental summers took their toll on that fix. Instead of shrinking and exposing the underlying structure, the vinyl got many tiny nasty scars. In Germany, there was a rust-protection company that also sold a “Vinyl and Leather Repair Kit” that I used on several other occasions. Usually this is something to fix individual scars in leather and vinyl. It comes with filler that can be mixes with several different colors to match the color of the leather and several samples of texture paper to imitate the surface of the leather. It also comes with a tiny stamp that you heat up in order to “bond” the filler through the texture paper with the leather. Being ambitious to apply it on large surfaces, I used a regular iron instead of the stamp.

Here is what you need

• Vinyl repair kit (comes with colors, filler, applicator and stamp)
• Regular iron
• Knife and eraser
• Degreaser

Approach

(after, texture paper, and before)

First clean the surface throughout. Then use the knife or a set of keys to roughen up the damaged surface such that the filler can stick to it. At the same time heat the iron up already.

Second degrease the surface and mix the appropriate color. Hitting the right tone is a pain in the ass, because the color seems to change a little after the filler hardens. As long as you do not heat the filler up you can always wash it off with the degreaser. That way experiment a little until you have something that comes close to the original color.

Third, depending on the type of repair apply the coloured filler boldly on the surface. In my case the surface was a little large so that I got a little cheap with it, which caused some of the bigger cracks to shine through the surface afterwards.

Fourth, apply the texture paper and press it down firmly (see above picture).

Sixth, use the heated iron and iron the texture paper. Move the iron slowly and hold the paper down at the edges. Be careful some vinyl or leathers do not take a lot of heat. If the iron is to hot it might burn right through it. For small patches use the stamp of the kit instead of the iron.

After about 30-60 seconds remove the iron. If the surface is not glossy anymore the filler is dry and you can progress to the next patch.

After you are done you can use a (pencil) eraser to soften up the edges of the vinyl filler a bit, and use a sharp knife to cut off any excess filler, if needed.

This is a very neat and simple way to fix scars and tears in vinyl. Even though it is not perfect, it looks much better than before. If you have lots of filler left it probably makes sense to apply it in multiple layers as you may not fill in all of the tiny scars at the first attempt. Unfortunately, I ran out of filler fairly quickly because of the large surface to fix.

This stuff also gets you involved with neighbours: "Why are you ironing your car?"