It is difficult to make rational decisions when the "data" is garbage

Mrs ERJ went to a bridal shower yesterday and my brother who is an accountant was the designated "responsible adult" who volunteered to watch me.

We had a very wide ranging conversation with a heavy emphasis on investing. My brother likes to invest in "Value" plays. Those are companies that are making money the old-fashioned way. They make and distribute goods and services that customers are willing to pay more for than those goods and services cost to produce.

Non-recurring items

The challenge is that special accounting entries for non-recurring items like tax-writeoffs, divestments and the like dominate the gross financial metrics like Price/Earnings ratios. My dear brother is looking for businesses with solid core businesses. He is looking for businesses that make solid profits from normal operations year-after-year.

The non-recurring items are so pervasive and so large that it is hard to see the dog that is being wagged by the tail. That frustrates my brother.

Scrubbing away the accounting fou-fou is a big job and you cannot understand issues unless you can do it. The problem is not limited to the world of financial investments, either.

For example, most intellectuals in New York City would agree that it would be desirable to have every state in the US to urbanize to reduce energy consumption. They might point to the fact that New York State ranks 49th in terms of per-capita energy consumption as support for that argument.

Source

Surely, they think, we would all be better off if we just followed the enlightened example of New York State.

The devil is in the details

New York State uses very little energy in their industries because finance and media and hospitality use very little energy.

Compare and contrast to Texas, a state that NYC dwellers like to look down upon.

Twenty-three percent of the energy used in industry in the United States is used in Texas. It takes a lot of energy to extract oil and gas from underground, especially off-shore. It takes a lot of energy to refine it and strip the sulfur from it and then to ship it to the end-users.

The spread between the two states narrows considerably if one were to take the energy costs of extracting-and-refining and assign those costs to the point-of-use.

Those costs can be stunningly large if you scrupulously account for every cost. For instance, the US Military determined that once all costs were rolled in, the cost of a gallon of fuel (probably diesel) delivered to a forward operating base in Afghanistan was $600 a gallon.

Life in the city may give the appearance of  a small resource foot-print but that illusion is subsidized by expenses in other places: Energy in TX and LA, heavy pesticide use and Cartel violence in Mexico, child-labor in Asia and so on. The moral high-ground they claim is not all that high.

Embedded, difficult to maintain infrastructure

Another complication is that the infrastructure that supports NYC was never designed with ease-of-maintenance in mind. Sewers, water distribution lines, underground wires, subway tunnels, elevators, steel reinforced concrete and the like all have finite lifespans.

Lower population density areas will have higher per-capita infrastructure costs due to longer runs of pipe between residences and more square-feet of pavement, it is two orders of magnitude easier to service that infrastructure at 2500 residents per square-mile than it is at 25,000 residents per square-mile.

Bonus: Update on recovery

I thought I had a relapse yesterday morning.

I am an early morning person and Mrs ERJ is at her best after noon. So I was awake in bed waiting for her alarm to go off.

I had been doing some leg lifts with my broken leg on previous mornings to pass the time. Nothing radical, just a few inches off the surface and just a few reps.

Yesterday morning I was not able to lift my leg. Not an inch. It was pretty distressing.

The problem resolved itself after Mrs ERJ woke up. She reminded me that I had asked her to tuck in the blankets at the foot of the bed. Not only was I fighting gravity, I was also trying to yank the edges of the blankets out from beneath the mattress.

This morning the blankets were not tucked in and leg-lifts went off without a hitch.