Hsiufan

The hidden taxonomy of hipster coffee shop names. LDN edition.

» See the graphic

In this song by Hawaii-based reggae musician Mike Love, a seemingly random assortment of syllables slowly grows into a song over a period of three minutes. The song takes 12 loops to build before you can discern all of the lyrics plus layers of harmony, incredible considering a single mistake would essentially ruin the entire thing. It’s fun to listen all the way through first without any sort of reference, but if you’re interested, redditor Cybot made this handy chart to better visualize what Love is doing.

Across India an entire category of architecture is slowly crumbling into obscurity, and you’ve probably never even heard it. Such was the case 30 years ago when Chicago journalist Victoria Lautman made her first trip to the country and discovered the impressive structures called stepwells. Like gates to the underworld, the massive subterranean temples were designed as a primary way to access the water table in regions where the climate vacillates between swelteringly dry during most months, with a few weeks of torrential monsoons in the spring.

Thousands of stepwells were built in India starting around the 2nd and 4th centuries A.D. where they first appeared as rudimentary trenches but slowly evolved into much more elaborate feats of engineering and art. By the 11th century some stepwells were commissioned by wealthy or powerful philanthropists (almost a fourth of whom were female) as monumental tributes that would last for eternity. Lautman shares with Arch Daily about the ingenious construction of the giant wells that plunge into the ground up to 10 stories deep:

Construction of stepwells involved not just the sinking of a typical deep cylinder from which water could be hauled, but the careful placement of an adjacent, stone-lined “trench” that, once a long staircase and side ledges were embedded, allowed access to the ever-fluctuating water level which flowed through an opening in the well cylinder. In dry seasons, every step—which could number over a hundred—had to be negotiated to reach the bottom story. But during rainy seasons, a parallel function kicked in and the trench transformed into a large cistern, filling to capacity and submerging the steps sometimes to the surface. This ingenious system for water preservation continued for a millennium.

Because of an increasing drop in India’s water table due to unregulated pumping, most of the wells have long since dried up and are now almost completely neglected. While some stepwells near areas of heavy tourism are well maintained, most are used as garbage dumping grounds and are overgrown with wildlife or caved in completely. Many have fallen completely off the map.

Inspired by an urgency to document the wells before they disappear, Lautman has traveled to India numerous times in the last few years and taken upon herself to locate 120 structures across 7 states. She’s currently seeking a publisher to help bring her discoveries and photographs to a larger audience, and also offers stepwell lectures to architects and universities. If you’re interested, get in touch.

You can read a more comprehensive account of stepwells by Lautman on Arch Daily.

I have no idea what's going on here, and I prefer to keep it that way.

Tags: government, humor

super inside baseball, an existential crisis over whether the site is "too mean"  

Looking out for the not-so-little guy.

Visiting the small-horse-size lobster that turned up at Jordan Lobster Bar is this week's big Thing to Do if you're summering on Long Island. The 23-pounder showed up as part of Monday's daily catch at the Island Park restaurant and fish market. Owner Stephen Jordan tells CBS it's the biggest he's seen in a decade — an unexpected get when he saw the monster staring up at him: "We received it yesterday morning from one of our fisherman, John Price, who's in the Bay of Fundy. He shipped it in, he didn't even tell us. He said, 'Look in the crate.' We opened it up and we were like, 'Whoa!'"

At that size, it's estimated to be 95 years old, which means this particular lobster predates the internet, World War II, and the invention of Old Bay seasoning. As such, it's become a local celebrity, and Jordan has gotten kind of close with his new crustacean pal, literally — he keeps posing for pictures with it. He's decided he doesn't want anybody eating the old guy, so it becomes the property of the Long Island Aquarium in a few days. "It's almost like a dinosaur," he says. "You'd like to see it continue on, and I think they would take good care of it."

[CBS NY]

Read more posts by Clint Rainey

Filed Under: giant lobster, jordan lobster farms, long island

Created by Artori Design, these fun metal bookshelves give the impression a stealthy superhero is saving your books from certain doom. The sideways version uses a magnet to harmlessly attach the end of the books, while the other model is a wall-mounted floating shelf that gives the impression a caped crusader is giving your books a boost from below. The shelves are currently available through Designboom. Suggestion to Artori: a lot of my favorite book superheroes are women.

David Leonhardt and Alicia Parlapiano compared public opinion over time for various social issues, based on estimates from the Pew Research Center and Gallup. The issues fall into two categories.

In one category are the rights-based issues in which the future can be safely predicted. In the other category — which includes abortion, gun control and climate change — there is far less clarity about the direction of public opinion.

I like the blocked time series on the single time axis. Each is self-encapsulated, but you can also compare the rate of change across issues. A white horizontal line for each provides the majority marker, and I think the the white vertical lines indicate years in which an estimate was not available.

See the full comparison.

Tags: public opinion, Upshot

If you’re like most Amazon shoppers, you don’t like buying anything unless it has a lot of positive 4 and 5 star reviews. But that makes it really hard for new brands and products to gain traction. Good ole’ capitalism has created a new breed of websites that offer limited amounts of heavily discounted products in exchange for honest reviews. Here’s how most of them work:

• You are given a special discount code that lets you purchase a product at a steep discount, for example a $20 value product for $1 or $2. Most of these products will work with Amazon Prime, so that your $1 item can ship free on its own (otherwise you’ll have to add it onto a larger order to get free shipping).
• By purchasing this product at discount, you agree to leave an honest review after using it. Don’t leave a review before receiving the product.
• Your review must state that you’ve “received this product at a discount in exchange for a review” or a similar disclosure.
• You will not be able to claim another discount until your review is verified live on Amazon.com.
• You agree not to resell the items you bought, under penalty of removal from future promotions.

You may think this sounds shady, but the Amazon Vine program works in a very similar way with the manufacturers and vendor supplying free review samples to their “top” reviewers. Amazon’s own policies state that sellers cannot provide compensation for a review, but sellers can offer a free or discounted product in exchange for an unbiased, unedited review.

You don’t need to be a high-volume reviewer for these sites, but you will need to have an Amazon customer account that you’ve actually bought something with, and I think you should have at least one previous review under your belt as well.

Here are the “discount-for-review” sites that I am aware of. I’m sure I’m missing some.

• Snagshout
• Amazon Review Trader
• Secret Deals Club (formerly 1bucktoday.com)
• Amazing Deals Group (hat tip to Adam)

While some these sites give the impression that they prefer staying in the shadows (“secret”), Snagshout actually hired a PR firm and sent me a press release:

Snagshout, a new social deals website, launches today to provide a unique shopping experience to consumers by offering deep discounts on a wide range of retail products for purchase, use and review. The site connects shoppers looking for deals with merchants looking to gain traction with new items on Amazon. With deals organized into nine categories such as beauty, toys and media, users can easily search for new products. Most of the deals are between 30-90% off of regular retail price for Snagshout users who are willing to try the product and leave an honest review within two weeks of purchase.

I was a former member of 1bucktoday and just signed up for Snagshout, but really the only thing that interested me there was this instant-read thermometer that I bought for $2 even though the historical price is around $18. (Summer is here and I’ve been grilling a lot recently.) I noticed that there are a lot of non-FDA-approved nutritional supplements on these sites.

While these sites may not currently violate Amazon’s terms and conditions, that could always change. Amazon has already had to deal with bad press from websites that just straight-up sell fake reviews. While this is not the same thing, I doubt that Amazon likes it. Enjoy these sites while they last!

Note: I am not affiliated with any of the review websites mentioned in this post.

Snagshout: Discounted Amazon Products In Exchange For Honest Reviews from My Money Blog.

---

© MyMoneyBlog.com, 2015.

The console is an essential part of Web Inspector. Evaluating expressions in the quick console is one of the primary ways of interacting with the inspected page. Logs, errors, and warnings emitted from the page show up in the console and exploring or interacting with these objects is a given while debugging.

We recently improved both the Console and Object views in Web Inspector to make it more powerful and fun to use. Our main focus was getting quicker access to useful data and modernizing it to work better with the new changes in JavaScript.

Basics – Object Previews, Trees, and $n

Object previews allow you to see the first few properties without needing to expand them. You’ll notice that each evaluation provides you with a “$n” debugger variable to refer back to that object later. These special variables are known only to the tools, so you won’t be cluttering the page with temporary variables. $0 still exists and refers to the current selected node in the DOM Tree.

When expanded, the full object tree view cleanly separates properties and API. Again, we use object previews where possible to reveal more data at a glance. The icons for each property correspond to the type of the value for that property. For example, in the image below you’ll see properties with number values have a blue N icon, strings with a red S, functions a green F, etc. The icons give objects a visual pattern, and makes it easy to visually find a particular property or an unexpected change in the normal data an object holds.

Supporting New Types

Web Inspector has always had great support for inspecting certain built-in JavaScript types such as Arrays and DOM types like Nodes. Web Inspector has improved those views and now has comprehensive support for all of the built-in JavaScript types. This including the new ES6 types (Symbol, Set, Map, WeakSet, WeakMap, Promises, Classes, Iterators).

WebKit’s tools are most useful when they show internal state of objects, known only to the engine, that is otherwise inaccessible. For example, showing the current status of Promises:

Or upcoming values of native Iterators:

Other interesting cases are showing values in WeakSets and WeakMaps, or showing the original target function and bound arguments for bound functions.

API View

When expanding an object’s prototype you get a great API view showing what methods you can call on the object. The API view always provides parameter names for user functions and even provides curated versions for native functions. The API view makes it really convenient to lookup or discover the ways that you can interact with objects already available to you in the console.

As an added bonus, if you are working with ES6 Classes and log a class by its name or its constructor you immediately get the API view for that class.

Interactivity

Object trees are more interactive. Hover a property icon to see the property’s descriptor attributes. Hover the property name to see the exact path you can use to access the property. Getters can be invoked, and their results can be further explored.

Context menus also provide more options. One of the most powerful features is that with any value in an Object tree you can use the context menu and select “Log Value” to re-log the value to the Console. This immediately creates a $n reference to the live object, letting you interact with it or easily reference it again later.

Console Messages

Console messages have also had a UI refresh, making logs, errors, warnings, and their location links stand out more:

Feedback

These enhancements are available to use in WebKit Nightly Builds. We would love to hear your feedback! You can send us quick feedback on Twitter (@JosephPecoraro, @xeenon), file a bug report, or even consider contributing your own enhancements!

The evolution of software architecture

Design Objective

Avoid the Butt-Brush Effect

I don’t think this effect is limited to the products in the physical world. There’s a mental butt-brush effect, and it happens every time that a software product makes its’ customers feel awkward, clumsy, or stupid.

...

Customers who feel stupid don’t buy. They find excuses not to use, and not to switch.

unknown

And the users exclaimed with a laugh and a taunt: "It's just what we asked for but not what we want."

---

Tools of the Trade

@bromanko

Note: Please proofread your resume. Dockers are very different from Docker.

asciinema This is just awesome in so many ways. Easy CLI tool for recording terminal sessions and sharing them on the web. Embeds like a video, but it renders text, so looks great at any resolution, and lets you copy & paste.

Bootcards A cards-based UI with dual-pane capability for mobile and desktop, built on top of Bootstrap.

the-art-of-command-line Master the command line, in one page.

@tomstuart

It may be possible to write a post criticising agile without giving off a strong “I’m too good for this” smell, but nobody’s managed it yet.

DRIFT And in that spirit, introducing DRIFT, the "do whatever, whenever" development methodology:

How do you get started with DRIFT ?

• Make a list of tasks
• Tackle tasks as and when you want
• Add other tasks as they occur to you
• Drift in the current of your productivity

@kinshasha

Working in quantum computing tech support is gonna be a severe PITA: "Have you tried turning it off, and on, at the same time???"

---

Lingua Scripta

ECMAScript 2015 is now an Ecma Standard Congratulations.

javascript.com Also, JS gets its own domain.

WebAssembly: a binary format for the web Introducing a new binary format for asm.js, which will make it easier to write JavaScript in every language but JavaScript.

Is it CrossFit or JavaScript? Hmmm …

---

Lines of Code

Reusability Trap Sustrik's law:

In a long-lived project, components are being replaced. Nice reusable components are easy to replace and so they are. Ugly non-reusable components are pain to replace and each replacement means both a considerable risk and considerable cost. Thus, more often then not, they are not replaced. As the years go by, reusable components pass away and only the hairy ones remain. In the end the project turns into a monolithic cluster of ugly components melted one into another.

This mechanism seems to account for most of the complexity in legacy codebases.

Let's call it Sustrik's law:

"Well-designed components are easy to replace. Eventually, they will be replaced by ones that are not so easy to replace."

---

Devoops

An Inside Look at Facebook’s Approach to Automation and Human Work

But these are really dumb things – things that are really, really trivial to automate. And thereby, it allows us to take that engineer we really worked hard to recruit, and trained to deal with higher-level things, away from doing something pretty remedial – work that is not fun, and they’re not growing or learning anything, yet it’s time consuming – and say: “Hey, help us figure out how to architect this new service. Go figure out how to make this thing run faster, or help build this new automation to tackle the challenges we have in mobile applications. Help us design our new data center.”

---

Peopleware

Contributor Covenant A code of conduct for open source projects. If your project has any participation policy — coding convention, contributing guidelines, etc — why no code of conduct?

@raganwald

There are only two hard problems in social discourse: Experience invalidation, and naming things.

Inside Obama's Stealth Startup In which the Obama administration decides to take tech seriously, hire top talent, and fix our broken systems. Including, making all works available to the public domain, and agile delivery methods:

Publish a repository consisting of all prototype source code, design assets, and all associated documentation that went into the creation of the prototype, to an online and publicly accessible version control system (e.g., GitHub, GitLab, BitBucket) that supports git. The uploaded repository shall be in git. Posting a repository in a different version control system will not be accepted.

---

Locked Doors

How to hack into an email account, just by knowing your victim's mobile number The problem with verification codes as password alternatives is that they're incredibly easy to social engineer.

Serious OS X and iOS flaws let hackers steal keychain, 1Password contents From the category of vulnerabilities known as Cross-App Resource Access, or XARA. I sense we'll see more of these in the future. As always, AgileBits has an insightful writeup on their blog.

How DuckDuckGo Rode A Wave Of Post-Snowden Anxiety To Massive Growth 600% growth over the past two years, as more people realize privacy is an opt-in, not a default.

Encryption “would not have helped” at OPM, says DHS official

… the Unix systems administrator for the project "was in Argentina and his co-worker was physically located in the [People's Republic of China]. Both had direct access to every row of data in every database: they were root.

Stuxnet spawn infected Kaspersky using stolen Foxconn digital certificates

… raises troubling questions about the reliability of the entire digital certificate mechanism that Microsoft, Apple, and most other software makers rely on to establish the legitimacy of applications and drivers.

---

None of the Above

Lego Jurassic World

Move over, Turing In which the author gives the Rorschach test to four AI software and then analyzes their personality.

@CompSciFact

I'll raise a glass to the first news site that ever has a home page that says "nothing much happened today in this field"

The Rise and Fall of Two Florida Stoners Who Made It Big as Gunrunners Florida man x2.

@labyrwa

It's kinda ironic when you're watching a show about building a compression program for great streaming quality and it won't stream

@Atheistican "Hey... If you're going to shave a cat, this is how you do it."

Seth Bling made a bot — MarI/O — that automatically learns how to play Super Mario World. It's based on research by Kenneth O. Stanley and Risto Miikkulainen from 2002 that uses neural networks that evolve with a genetic algorithm. MarI/O starts out really dumb, just standing in place, but after enough simulations it get smart enough to navigate the world.

Code available here and the paper from Stanley and Mikkulainen is here.

See also: the genetic algorithm walkers.

Tags: algorithm, machine learning, Mario, neural networks

creepy surveillance art by Kyle McDonald [via] 

until recently, Minecraft never hosted servers, so it wasn't an issue for them  

Ukranian crafter Hanna Dovahan makes some pretty fantastic wool objects including animals, arthropods, and food which she sells in her Etsy shop. This avocado love piece is on a slightly higher plane of amazing.

Earlier this month, photographer Vincent Laforet spent two hours in a helicopter at 6,000 feet above London to capture these surprisingly futuristic aerial views of the sprawling metropolis. The photographer’s approach to image processing and perspective creates electrified cityscapes that look like something right out of a scene from Tron or Blade Runner. But perhaps the most significant aspect of the shots is the attention to color and light. Laforet discusses this a bit on Storehouse:

Big Ben is a wonderful example of the different types of lights and their color temperatures due to the older yellow (sodium vapor) and the green (fluorescent) mixed in with magenta (fluorescent) and white daylight balanced LED lights. I find this to be one of the most fascinating aspects of this AIR project: had we shot it just a few years ago, you’d have see much more monochromatic (mostly yellow) lighting throughout the cities … It would simply not be the same and not nearly as visually appealing.

This new series of London photos is part of an ongoing project and soon-to-be book by called Air, featuring similar aerial photos of Las Vegas, Los Angeles, New York, and San Francisco. Laforet will continue to travel around Europe over the next few weeks with stops in Paris and Berlin. You can see many more photos and read a detailed account of the London photoshoot on Storehouse. The entire Air Series in Europe is sponsored by G-Technology. (via Sploid)

Here is a selection of images the Reuters news agency pulled from its files showing cities shrouded in weather that make them appear to be living among the clouds. -- By Lloyd Young

Heavy fog rolls by early in the morning near the Dubai Marina, United Arab Emirates, on Nov. 21, 2007. (Steve Crisp/Reuters)

Youtube – The play button smoothly animates into the pause button

clustering 86 million photos found online  

ASCEND [via] 

the security lead took over the character in-game, stripped, killed, and deleted him  

In San Francisco, there are 21 "secret" public parks, atriums, and beautiful rooftops hidden behind unmarked doors or accessible through guarded elevators. Commercial developers are legally required to build these Privately Owned Public Open Spaces (POPOS) but they'd mostly prefer people not use them. Matthew Lew, a hypertalented design intern in my group at Medium, created a guide to these delightful POPOS.

The 21 Secret Parks of San Francisco

Hang around software companies long enough and you'll certainly hear someone proclaim "the best interface is invisible." While this adage seems inevitable, today's device ecosystem makes it clear we may not be there yet.

When there's no graphical user interface (icons, labels, etc.) in a product to guide us, our memory becomes the UI. That is, we need to remember the hidden voice and gesture commands that operate our devices. And these controls are likely to differ per device making the task even harder.

Consider the number of gesture interfaces on today's smartwatch home screens. A swipe in any direction, a tap, or a long press each trigger different commands. Even after months of use, I still find myself forgetting about hidden gestures in these UIs. Perhaps Apple's 80+ page guide to their watch is telling, it takes a lot of learning to operate a hidden interface.

So how can we make hidden interfaces more usable? Enforce more consistency, align with natural actions (video below), allow natural speech, include clear cues, and ....?

Two years ago we stumbled onto the story of a girl in Japan who was going through her father’s old belongings when she discovered a hand-drawn maze rolled up in a tube. Kazuo Nomura spent 7 years drawing the sprawling labyrinth while working as a janitor and it hadn’t seen the light of day since 1983. After posting photos of it to her Twitter account, Nomura’s work went viral around the web, and it was quickly turned into a print so others could have a try at solving it.

Responding to pressure from his daughter to draw a second maze, Nomura initially said he had “had enough of mazes.” But, after a 32 year hiatus, he finally sat down to try again earlier this year with the hope of drawing a puzzle that was a bit clearer and easier to solve. After two months of drawing he’s finally done, and if you posess the patience of a saint you can try your hand at solving it: Papa’s Maze 2.0. Nomura assures the maze has a solution, but according to reports from people insane enough to try, it’s actually more difficult than the last, and takes about two days to work through. Read more on Spoon & Tamago.

My iOS app, Pomodoro Pro, is a constant work in progress. This post discusses how Apple Watch support was added to v1.1.0. Pomodoro Pro is a free, easy to use app for getting work done in continuous work & break cycles.

If you’ve looked into Apple Watch development, you’ve learned that the watch portion is an extension of your phone app. Your phone app is the brains of the operation, and your watch app relies on the phone app to do anything.

2 Way Event Binding Demo

From watch to phone

From phone to watch

App Lifecycle

With mobile development, it’s necessary to understand when a user will come into contact with your application. If the user comes across your application and starts using it when the visuals are incorrect, the user will lose confidence and not trust your application.

Working with Xcode and the watch simulator, my app has the following key lifecycle events:

• watch starts up
• watch resumes
• watch actions (button presses) are reflected on both the watch & phone
• phone actions (button presses) are reflected on both the phone & watch

Each of these events are essential for maintaining a consistent user experience that does not surprise the user.

Implementation

My implementation used MMWormhole for 2 way event binding. This means that the phone should know when a button was pressed on the watch and vice versa. Curtis Herbert has a great blog post on sharing data and events.

In order to have the phone app be responsible for the correct timer state, my phone app is responsible for returning a NSDictionary of the current timer properties. My watch app is able to get the NSDictionary and update the watch screen accordingly. It is important to note that my phone app is the ONLY source of the canonical current timer state. Trying to sync state between the phone and watch app would be a nightmare and a lot of work.

When the watch app starts, the watch app asks the phone for the current timer state (a NSDictionary) in order to set itself up correctly. When the watch app resumes from inactivity, it also asks the phone for the current timer state (a NSDictionary).

Using MMWormhole, I’m able to listen on events from the watch or the phone. When the user presses a button on the watch, the watch app passes a message to notify the phone, and the phone updates the timer state. Similarly, when the user presses a button on the phone, the phone app updates the timer state and notifies the watch app with the latest state.

Lessons Learned

1. The phone app (not the watch app) is responsible for the correct state
2. Use a Framework or shared classes (in File Inspector, add Target Membership) to DRY (don’t repeat yourself) out your codebase

Summary

With Pomodoro Pro, it was essential for a user to be able to start / pause / resume / stop the timer from either the phone app or the watch app. This required a way to manage the timer state (phone app) and have user actions occur on all screens (phone & watch).

In order to build a user friendly watch app, you should anticipate & identify where your app’s state and events come from. Make sure to account for those scenarios.

Pomodoro Pro v1.1.0 went live on 4/14/2015. Please let me know what you think @rexfeng

The brilliant minds at ThinkGeek just launched this set of 10 glass coasters printed with sequential illustrations of the brain. When stacked in the correct order they reveal a complete three-dimensional “scan” of human brain. Available here. (via Laughing Squid)

For his ongoing series Flying Cars, French designer Sylvain Viau digitally edits photographs of cars into sleek, wheel-less hover cars that appear to float just above the ground. Viau not only uses his own photography to create these sci-fi cars, but is fortunate to claim many of the actual cars among his own collection. He originally worked only with 80s Citroën vehicles because of their classic space-age design, but has continued to branch out over the last few months to include cars from Peugeot, Toyota, and Renault. You can see many more here. (via Designboom)

Update: Photographer Renaud Marion created a similar series of works in 2013.

Justin Wolfers, David Leonhardt, and Kevin Quealy for the Upshot explore the gender gap between the black male and female populations in the United States. It's wide.

They are missing, largely because of early deaths or because they are behind bars. Remarkably, black women who are 25 to 54 and not in jail outnumber black men in that category by 1.5 million, according to an Upshot analysis. For every 100 black women in this age group living outside of jail, there are only 83 black men. Among whites, the equivalent number is 99, nearly parity.

The 1.5 million number is interesting in itself (although a margin of error mention would've been nice), but the possible reasons and social implications behind it are what make the piece worth the read. We're getting into the human part of demographics.

See also the methodology.

Tags: census, race, Upshot

Google Maps — Directions for cyclists show elevation so you know how difficult a ride will be.

/via @PaulAnnet

The Vanguard High-Yield Corporate Bond Fund (VWEHX, VWEAX) is a low-cost, actively-managed bond fund that invests in medium- and lower-quality corporate bonds and is advised by Wellington Management Company. I don’t own any in my retirement portfolio, but while reading the book The Affluent Investor by Phil DeMuth, I was intrigued by this interesting tidbit:

If you have settled on buying them anyway, at least wait until the spread between treasury bonds and junk bonds of the same maturity is wide (say, 4 percentage points). The fund to own is Vanguard’s (ticker: VWEHX), which has a gimmick: it buys the highest rated junk bonds. Many institutional investors can only hold investment-grade bonds as a matter of policy, and they are forced to liquidate bonds that get downgraded even when it makes no sense to do so. Vanguard lies in wait to take advantage of their mistake. This is a hedge fund strategy in a bond fund wrapper.

(I should add that this is after the author warns you about the high-yield bond asset class in general, and how if you adjust the higher yields to account for higher defaults, the net advantage can be small or even zero. He also adds that high-yield “junk” bonds are also quite volatile and should be treated like equities.)

But going back to the quote, DeMuth is saying that this fund tries to take advantage of a specific market inefficiency. I’ve never seen this strategy mentioned in either any Vanguard materials or financial media coverage. I went back and took a closer look at their prospectuses and other investor documents.

I was aware that VWEHX tends to invest in the higher-quality portion of the junk spectrum. From the Product Summary on their website:

Created in 1978, this fund seeks to purchase what the advisor considers higher-rated junk bonds. This approach aims to capture consistent income and minimize defaults and principal loss.

From the Fund Prospectus (dated 5/28/14):

The Fund invests primarily in a diversified group of high-yielding, higher-risk corporate bonds—commonly known as “junk bonds”—with medium- and lower-range credit- quality ratings. The Fund invests at least 80% of its assets in corporate bonds that are rated below Baa by Moody’s [...] The Fund may not invest more than 20% of its assets in any of the following, taken as a whole: bonds with credit ratings lower than B or the equivalent, convertible securities, preferred stocks, and fixed and floating rate loans of medium- to lower-range credit quality.

Digging further into the Prospectus, we find the following under the “Security Selection” heading:

Wellington Management Company, LLP (Wellington Management), advisor to the Fund, seeks to minimize the substantial investment risk posed by junk bonds, primarily through its use of solid credit research and broad diversification among issuers. [...]

The Fund will only invest in bonds and loans that, at the time of initial investment, are rated Caa or higher by Moody‘s; have an equivalent rating by any other independent bond-rating agency; or, if unrated, are determined to be of comparable quality by the advisor. [...]

Wellington Management selects bonds on a company-by-company basis, emphasizing fundamental research and a long-term investment horizon. The analysis focuses on the nature of a company’s business, its strategy, and the quality of its management. Based on this analysis, the advisor looks for companies whose prospects are stable or improving and whose bonds offer an attractive yield. Companies with improving prospects are normally more attractive because they offer better assurance of debt repayment and greater potential for capital appreciation. [...]

To minimize credit risk, the Fund normally diversifies its holdings among debt of at least 100 separate issuers, representing many industries. As of January 31, 2014, the Fund held debt of 172 corporate issuers. This diversification should lessen the negative impact to the Fund of a particular issuer’s failure to pay either principal or interest.

Here’s a quick summary of the Moody’s Credit Rating hierarchy, per Wikipedia:

Investment Grade

• Aaa – Highest quality and lowest credit risk.
• Aa – High quality and very low credit risk.
• A – Upper-medium grade and low credit risk.
• Baa – Medium grade, with some speculative elements and moderate credit risk.

Below-Investment Grade (“Junk”)

• Ba – Speculative elements and a significant credit risk.
• B – Speculative and a high credit risk.
• Caa -Poor quality and very high credit risk.
• Ca – Highly speculative and with likelihood of being near or in default, but some possibility of recovering principal and interest.
• C – Lowest quality, usually in default and low likelihood of recovering principal or interest.

From the Annual Report (dated 1/31/15):

This is the first time we are reporting the performance of the High-Yield Corporate Fund against its new benchmark composite index, which consists of 95% Barclays U.S. High-Yield Ba/B 2% Issuer Capped Index and 5% Barclays U.S. 1–5 Year Treasury Bond Index. As we mentioned when we made the change in November, we believe that the composite index is a better yardstick for the portfolio. It more closely reflects the portfolio’s longtime strategy of investing in higher-rated securities in the below-investment-grade category while maintaining some exposure to very liquid assets.

From Wellington Management Advisor Letter (part of Annual Report, dated 1/31/15)

The decline in commodity prices sparked a significant widening of high-yield bond spreads, and although the problems now affecting high-yield energy credits are justifiable, they are relatively isolated
to that industry. We are looking to take advantage of recent dislocations created by the sell-off in non-energy companies, where wider spreads are attractive and the credits are well-supported by strong fundamentals.

The fund remains consistent in its investment objective and strategy and maintains a significant exposure to relatively higher-rated companies in the high-yield market. We believe that these issuers have more consistent businesses and more predictable cash flows than those at the lower end of the spectrum. We prefer higher-rated credits in order to minimize defaults and provide stable income. We continue to diversify the fund’s holdings by issuer and industry and to de-emphasize non-cash-paying securities, preferred stock, and equity- linked securities (such as convertibles) because of their potential for volatility.

Costs and Fees

The expense ratio of the High-Yield Corporate Fund Investor Shares at 0.23% and Admiral Shares at 0.13% are very low in comparison to the peer group average of 1.11% for High-Yield Funds (calculated by Lipper). The fact that Vanguard itself runs at-cost and the fund advisor Wellington agrees to only takes a fee of 0.03% are quite impressive:

Wellington Management Company LLP provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the year ended January 31, 2015, the investment advisory fee represented an effective annual rate of 0.03% of the fund’s average net assets.

In comparison, sometimes the creator of an index (like the S&P 500) will want a few basis points just for allowing a fund to follow their computer-generated list of companies. Wellington is pruning through thousands of often-illiquid bonds.

Portfolio Credit Quality

Here is the breakdown of the Vanguard High-Yield Corporate Bond Fund portfolio by credit rating as of 1/31/15. Remember that Baa and above is investment grade, so the vast majority (87%) of their holdings are indeed the top two rungs of the non-investment-grade spectrum. I assume that the 5% allocation to US government bonds is in case of an increase in fund redemptions.

Recap
I am neither recommending nor discouraging investment in this fund. There are many types of risk involved: credit risk, interest rate risk, liquidity risk, poor security selection risk. I was just intrigued by a quote in a book and wanted to dig into it further.

I have read through the prospectus and annual reports and pointed out all of what I saw were pertinent mentions of their investment and bond selection criteria. I didn’t find anything particular in Vanguard’s materials about picking bonds that have recently fallen from investment-grade to just below investment-grade, but such a strategy would certainly align with their historical portfolio and stated goals of holding the “best of the junk”.

If this is indeed a significant market inefficiency, I wonder why it still exists. Perhaps you can only do it with a very low expense ratio? I don’t believe there is any other actively-managed bond fund consisting of high-yield bonds that has such a low expense ratio; 0.13-0.23% is nearly as low as many index funds.

The low costs alone create a relative performance advantage for this fund. I chose not to emphasize past performance as that can be fleeting, but this fund’s past performance numbers also beats their Lipper peer group average over the last 1, 5, and 10 years.

Now, I do own shares of the Vanguard High-Yield Tax-Exempt Fund, which has a different advisor; Vanguard Fixed Income Group. I wonder if they do a similar thing there?

Vanguard High-Yield Corporate Bond Fund Review (VWEHX) from My Money Blog.

---

© MyMoneyBlog.com, 2015.