Saturday, December 18, 2010
People that work in the financial industry tend to get paid a lot. Whether or not its justifiable is an argument that exceeds the realm of my journal. While ultimately I do think it is justifiable due to some quirky laws of economics and psychology (scale and fear), from my perspective I'm already too biased to listen to, as "who's bread I eat, his song I sing."
But continuing about workbee's in the financial field, overtime you can make even more money if you can successfully compound. Obscene amounts of money or as the industry calls it, "fuck you money." This has raised my following internal struggle:
"If in 20 years I have 5X (X being whatever I need for retirement), why should I stay in the field?" I'm not saying I'm going to achieve this, as I readily recognize that I can be laid off tomorrow and start day 1 of a long career as an underpaid bank teller, but it is nice to think about the upside as well, especially when I spend most of everyday thinking about compounding.
While the obvious answer is that I'm passionate about the game and that alone will make it worthwhile, a secondary answer that's been building in my head for the last few months is that it's nice to build empires. It's nice to dream about how big and influential you can become. Wouldn't it be nice to create a company, charity or foundation that could last for generations? Hob nob with the rich and famous? Many choose this path, and given the Ritz and glam, it's understandable.
But then I got sick. Albeit, only a day or two, but it was enough open to my eyes a little. Late into the second evening of my food poisoning, my Dad came over and asked if Wife or I had bought yogurt for my stomach. The reason why I needed yogurt, as retold by a financial analyst who knows zilch about the human body, is that yogurt has good bacteria that I had lost with my food poisoning. Wife and I told him no, and he immediately left to Safeway (SWY, a cheap stock that I own with a cost basis around $19.50 per share) to buy 4 different varieties of yogurt.
It was an eye-opening moment. My dad is retired after a 30 year career as a psychiatrist. He now spends most days relaxing. Reading a good book, bike riding with my Mother, and watching whatever netflix (NFLX - an expensive) has arrived. He's enjoying leisure, and yet he's not looking to build an empire. He was there for me, when I needed him. He wasn't looking to build things he didn't need, he was looking to take care of the ones he loved. It was a moment I realized that I'd rather be the Dad who provides the invisible hand of a happy, and well-functioning family, than to strive to be an empire builder.
As I'm writing this, I'm in a rush to get over to my in-laws house for lunch when my Mom came in "asking for a favor". My immediate response, under the influence of being late and in a rush was "I can't right now as"...and then I thought for a second about what I'm writing..."I'm sorry Ma, what can I help with?" My Mom asked if I could try a french pastry she just baked for a party tomorrow and give her my opinion.
Wow. Maybe I need to spend some more time internalizing this post and less time trying to compound.
Saturday, November 20, 2010
1. Ever since I was a kid (under 5) my greatest fear was losing my parents. This fear has compounded not only as they have remained consistently nurturing (and now to my wife as well) but I have also become closer with them over the years as they have evolved in my eyes from parents to people who had to make life choices. As an example, I am deeply in awe at how seamless their parenting felt as I grew up as they always offered the right cures for my maladies whether it was body, spirit or mind. There were a lot of bad detours I could have taken growing up, misinformed by the flexible morals of my peers or my own insecurities of youth, that was easily prevented by a few words of advice and encouragement from my parents. Now, as Jess and I think about having children of our own in time, I am deeply intimidated by all that I don't know which appeared so natural to my parents.
It doesn't help to have grown up somewhat unconventionally. I never really left home or tested my ability to become fully independent. I never needed to escape, when I knew how good it was here. Perfect weather, the culture and appeal of a major city, supporting family and a warm meal with TLC every Friday night. Would you really leave your own "Eldorado" for the sake of adventure and proving your own independence? I chose not to.
But the fear has remained that someday I will lose these monumental pillars and I will be left unwhole. This is an advantage my brother will have someday, as he has chosen differently, but until then I love the proximity. What I have recently learned however, is that while I certainly will be shaken when the darkness arrives, I hope to find solace in what I have created with my wife. And I have realized that this process of creation is the most powerful thing a man can do. Create. Create love, create a happy marriage, create children. My parents did this and that's what made them so strong in the face of struggle. These creations will be the new pillars in my life too. My old pillars are there too, I love my parents, but these new pillars, the warmth of marriage and the immense love in rearing children, will help me stand tall.
2. From a spiritual understanding this brings us closer to the Creator in my mind, as it allows us to partially comprehend the joy He felt upon creating the masses of this universe and the physical laws that govern it. This process of creation is a Holy light.
Sunday, November 14, 2010
I've closed the page on a prior chapter in my life, and together, my wife and I have started a new chapter. The last chapter was about discovery. Discovering first loves and heartbreaks, first gains and losses, first jobs and new friends. It was a lot of firsts. It opened my eyes to how big the world is and how small I really am. It was about defining the goals for the journey ahead and it was about "Timshel". It was about saying, "this is my life, there's a lot of things I can do, but it's what I choose to do that defines me." I look back over the years and at my friends and loved ones, even the ones that I will likely never speak to again, and I say thank you. I am deeply grateful for the gifts they've given me in time, love and experience. It was an amazing chapter and they defined me just as much as I defined myself.
But I am also evolving. My goals and priorities are morphing. It's no longer me, my family and friends, but its my wife and I, my family and friends. I'm no longer hunting, but instead I'm farming. I'm now cultivating for the next generation. Pretending to act like an adult. Preparing for the unknown, unknowns that wait in this chapter and constantly, every day, striving to improve. Its time for my partner and I to do our best on what we choose to do. It defines us, together.
Saturday, September 25, 2010
On the one hand I can't find very many stocks that trade under 8x FCF (I really only like to buy at 6x or under) but at the same time holding cash is not generating any returns.
The squared part comes from the fact that Ben Bernanke is doing everything in his power to reflate all assets by printing more dollars(while deflating the power of the U.S. dollar). I can't buy gold because it's against my discipline to buy non-cash producing assets, but its a little painful watching it go up everyday when it seems so obvious. It also doesn't help to watch my short position eating away at me. Bernanke's also buying long-term debt to keep the market interest rates artificially low. And he can buy as much as he wants because he can print as much money as he wants. Argh. I'm not finding cheap stocks, the recovery seems like a headfake, and junk bonds are yielding miniscule yields over risk-free treasuries.
What's an investor to do?
I think this is why investing is so freak'n hard. You need to have the discipline not to fuck things up. Not to want to buy just because Bernanke says that he's not going to let the economy double dip. Good luck pal, there are some forces beyond your control. I have to stick to my guns, my game plan, my strategy.
Wait, wait, wait, wait. Strike.
People panic. Mood's swing. Optimism fades to fear. In the next 3-5 years there will be opportunities for me to buy large positions in stocks trading at 6x FCF. Until then I just need to sit and wait.
You can't control the debt markets forever Bernanke, eventually they will control you.
"In 2009, hedge funds generated about 3% of trading volume in U.S. government bonds. This year, that share jumped to roughly 20%, according to consulting firm Greenwich Associates."
The sharks are sitting at the table. They will pounce when they're ready.
YTD: +1% (up 10% on the net ~10% long exposure established throughout July and August - but should I have put on more exposure / larger positions?).
Monday, September 20, 2010
Things to appreciate about the new job:
Waking up later helps me get more sleep. I used to wake up at 3:30 most mornings, now I get to wake up at 4:40. That's huge.
Shorter commute - Approximately 10-15 minutes vs. 20 - 40 minutes.
Constantly Feed - Breakfast and Lunch on the house everyday vs. rarely, if ever, treated at the old job. I also don't have to wait on any group orders.
No headaches (yet) - During my last month at the old job I literally got a headache nearly every day. It seemed like a physiological response that I needed to get out of there.
Better pay - 30%+ higher with the opportunity to hit my life targets in the next 10 years.
Better resources - Access to Bloomberg, sell-side research, transcripts, financial times, factset, wall st. Journal, Barron's, pretty much anything I could possibly need.
Calm and Patient Boss(es) - While I'm sure I will someday have a valuation disagreement with my boss, he is very considerate (as is most of the people I have met at the firm) and listens to what I have to say. That's not to say that everything will be rainbows and sunshine, but it's certainly not thunderheads on the horizon. At my old job I would be asked complex questions and would be cut off 5 seconds into a response. I would get yelled at for nothing. In comparison, my first week at the new firm, the founder had a meeting with the new guys (me and one other new hire) for lunch to get a chance to talk with us and ask questions.
Stimulating Work - This is my favorite part and I must never let myself take it for granted. Even if there are periods of pay fluctuation that are disappointing, this is by far one of the most important components to my professional happiness (2nd only to doing my best). Don't forget it.
Sunday, September 12, 2010
Thursday, September 09, 2010
"Creative thinking will also be blocked quite successfully by such factors as mental and physical exhaustion, petty irritations, noise, worry over domestic or financial matters, depression, anger or working under pressure. The Scientist must learn to design his whole way of life in such a manner as to protect himself against such sterilizing influences or he will not be able to succeed in his work, no matter how great his special talents may be."
- Hans Selye (a Dr. that studied the symptoms and coined the word we now commonly know as "stress")
I'm not sure 100% why, but it makes me proud that it's now sitting on my desk at home.
Friday, September 03, 2010
It was a need to work. The feeling of getting work done. Completing assignments, tackling new ideas. Sure I can do investing on my own, but I needed to feel the demand. A boss requesting items. A "to-do" list. Yellow pads and stacks of paper. Time management, priorities and deadlines. Fear and greed. The heat. The discipline. The hunger.
I must remember this need when in the years to come, I don't feel like I need a firm to work for and should branch out on my own. Before I commit, I must ask myself if I can sustain this hunger on my own.
Monday, August 30, 2010
Damn its stressful. I feel like I'm eating too much and my hair is shedding. I really need to get these habits under control otherwise I'm going to end up looking like jabba the hutt. Even when you have the conviction that you're right, the sheer volatility is nauseating. Welcome to the world of small-cap investing. Welcome to the world of opportunity. Tread carefully.
Today I bought some stock in an education materials company, RLRN. It fits as one of my typical plays (rock solid balance sheet, significant cash flows, strong insider ownership, recurring revenues, understandable business, diversified customer base, buying into extreme selling pressure) but I paid up for it (10x FCF vs. my normal 6x) mostly because of some timing constraints I'm currently facing. In retrospect I shouldn't have rushed it. Really dumb.
In the first hour the stock dropped significantly and by the end of the day it had closed ~13% down on no news. This decline equates to roughly half of one month's salary pre-tax.
While Mike Tyson would say, "everybody's got plans until they get hit," my plan is to triple the bet closer to $5-6 when I'm looking at a 50% drop from my purchase price. I just need the stomach to pull the trigger (and obviously quadruple check my assumptions and any news updates that would bust my thesis).
YTD Return: Flat.
% Invested: 12%
% Short: 4%
Wednesday, August 25, 2010
As I've discussed in the past, my responsibilities as an investor has increased significantly over the last few months and its been incredibly challenging and rewarding. One the one hand, I'm wooping the market, on the other, its very, very challenging. My initial fund (less capital) was up ~6.5% through July this year. So from January 2008 through July 2010 (the total period of my initial fund), I was up 134%. During this same period the S&P 500 was down ~20% (an estimate which includes dividends). While this was a great run, it could have been much better had I also invested unallocated resources. As John Wooden would say, it wasn't a success because I didn't strive to reach my full potential.
Starting July I took on a greater role. I've made two moves that have worked favorably. First I quadrupled my short position (mostly to offset new purchases), and I also bought a spinoff (VPG at ~$11) which subsequently rallied 30-40% in a matter of a few weeks. VPG is doubly enjoyable as I also told a few people that I was buying it at $11 when it was still an opportunity for them to tag along (whether they did is I'm sure another story). Yet, despite two good bets, I'm only flat from July through today. So what am I doing wrong?
I know its a lousy ending to the post, but I still don't have a concrete answer. My initial takeaway is that I'm not making big enough bets to really make a difference (I'm only 15% invested including a 4% short stake) despite buying stock in 8 companies. Largely I think I need to get over the fact that I'm concerned the market could retest its March 2009 lows, which would create all the companies I'm currently buying 30% cheaper. Wouldn't you save most of your buying power for the lower prices, or do you just say, I know it's cheap here and I'm willing to buy 30-50% of a full position with the risk that I could have a huge paper loss in the months ahead? Tough choices. Do I potentially miss the upside (my VPG position could have been double its size easily) for an uncertain downturn?
Regarding GE, who the hell creates a marketing campaign suggesting that they're willing to make bad loans? That's just on top of the fact that if they're loan portfolio declines more than 10% the company is insolvent. Poor GE pensioners / employees, they would never know what hit them.
One of GE's recent ads below, and unlike the ad suggests, it is simply about the money.
Tuesday, August 24, 2010
Over this past year if you opened a newspaper or surfed a news portal, you were bombarded with unfortunate events. They ranged from devastating earthquakes to a record oil spill. The near term doesn't look that much brighter with rising crime, debt and taxes. Millions of unemployed face stiff competition for limited openings as our government faces tough choices to prevent its own insolvency.
Yet, despite this global adversity, which will inevitably impact all of us in some form, we have all been blessed with a record year:
Mr. & Mrs. Banrock are having a child, my brother and his fiance are getting married, and Jess and I are getting married.
Despite the adversity of the times, it is this merger and growth of our families that remains our true wealth.
It is a wealth that can not be taxed, spent or polluted.
It is a wealth that remains unadulterated whether we are employed or jobless, rich or poor, lost of found.
It is a wealth that grows or wanes based on the bonds we form and the love we share.
It is a wealth we must remember when confronted with the challenges of our lives and the noise of our generation.
It is a wealth I hope we all continue to grow in the years ahead.
It is this wealth that I toast to. To children, parents, wives, husbands, brothers and sisters. Or, just family, happy and healthy.
Thursday, August 12, 2010
And should I be successful and make millions, what do I want to do with it?
I want to be a force for good. Yeah it's tacky, but honestly, I think giving money even if it's just $300K a year to poor people either in my direct community or abroad can make a freak'n huge difference. The other day Jess met a family of 6 (5 kids) that were living in a van down by my dry-cleaners. Imagine if I could give them an apartment to live in for a few years what difference that could make? Apartments in Hollywood can go as low as $12K a year. That’s 25 homeless families in rent-free homes per year. $300K goes even further in countries where people are living on less than $2 per day (i.e. I could feed 150K people for 1 day or 400 people for one year).
If I can amass $10mn the possibilities for good are endless. I can probably compound at 5% after-tax with little difficulty thereafter (assuming lumpy returns) or roughly $500K a year. Spend $200K on my family (if that), and the rest goes to improving the world. Maybe these are delusions of grandeur, but they are my dreams.
It doesn't help that Her Mother doesn't have time to throw a wedding so the bulk of the responsibilities fall on Jess. And so Jess gets stressed out because she's building our home while also developing her graphic design business. So as more wedding work flows her way, a bottleneck occurs with current projects. Right now, for example, our kitchen is partially painted while the contents of the kitchen have been spread throughout the apartment. That said,the invitations got out this week. The kitchen has been and will be like this for the rest of the month which is partially a result of a recent vacation we took and one we are about to take.
There's also the human element. My parents, who's wedding consisted of less than 10 people and walking out of a dim sum restaurant, see the hoopla for the wedding and feel the pressures of keeping up with the "Joneses" to step it up for the rehearsal dinner. Now instead of subway sandwiches at the beach (something Jess and I advocated) where renting out a restaurant for the evening.
But these stressers are nothing compared to what Jess is experiencing. Her parents are divorced and some parts of the wedding have seemed like walking a mine field. The bio-dad wasn't there for Jess as a teenager, but Jess still wants to make him feel welcomed without offending her step-dad who is one of the coolest persons I've ever met. So bio-dad invited, but the mom walks Jess down the isle. Father daughter dance probably goes to step-dad, but not sure how that's going to work. I really don't care if bio-dad is offended by Jess' decision, he doesn't have to come if he can't behave like an adult.
In the grand scheme of things, these are all very minor frustrations from what they could have been.
While I recognize that it's slightly sacrilegious to discuss ex-girlfriends when thinking about wedding plans, I don't think I could have handled in-laws that would view me as damning their daughter to hell on top of everything else. I resented Diana for a long time for the ease in which she ended our relationship over religion, but in retrospect, she made the right decision for both of us, even if I wasn't emotionally prepared to accept it.
Wow, there's a lot going on right now and I even have the month off.
I'm getting married. My brother is getting married and Jess' brother is getting married. In all honesty it's kind of annoying how everyone is getting married at the same time as it feels like too much is being pact into one short period. I guess that just how life shakes out sometimes.
In the new additions to the family section, my asian-brother-from-another-mother is having his first baby and my private equity mentor is having his first baby. So exciting. I wonder what parenting thoughts are going through their heads? I wonder when Jess and I are going to have kids? It always makes me so excited when good people have children. It's like the inversion of the abortion / crime correlation chapter in Freakonomics.
Did I forget anyone?
My old college roomate finished his first year in med school and is going to move in with his girlfriend. Another friend from middle school and high school, Chris, just finished his second year at UCLA law and was offered a job at a law firm nearby. I'm actually proud of Chris. I've told him since middle school that he was a smart but lazy bastard and just needed to apply himself. After barely passing highschool he finally got the drift and is rocking out in law school. It really is amazing watching good people develop / grow up.
I quit my job last month after a terrible bonus. They gave me a 75% haircut from what I expected following a terrible 2nd quarter for the firm. Luckily I had a backup job already lined up with a hedge fund in Los Angeles. David Mamet once wrote, "I never tie my shoes without a backup plan." People laugh when I quote Mamet, but I believe him. I quit within 5 minutes of my bonus funding the next day.
While it doesn't hurt that the pay is 30-50% better, I'm more excited about the prospect that this new venture will be more inline with the life goal of spending my working day buying cheap stocks.
Thursday, July 22, 2010
Sunday, July 18, 2010
Thursday, July 08, 2010
They are days when the stars line up and something memorable, expected or unexpected, happens. It's a day filled with defining moments, where all the stars feel like they've lined up in your favor, "Jupiter aligns with Mars," and you only have green lights in your future as your driving down the road of life.
October 23, 2006 was one such day. So was July 16th 2007, May 9th 2010, and today, July 8th 2010, my mother's birthday .
I'm sorry for the teaser as its time for bed, but I look forward to writing about it more in the future. I'll end the post however on an upbeat note:
"Let the sunshine in."
Wednesday, June 23, 2010
"I love my kids, but I don't respect them."
He said it several months ago, but it has stuck with me as a reminder that no wealth can compensate for a disappointing household. It has also served as a reminder that perceived wealth is the ultimate corrupter of our youth.
The analogy my Dad likes to use is that if you have kids, and you have money, you shouldn't drive a nice car. Not because you can't pay for it, but because you can't afford it. It sends the wrong signal (or "data point" as my old NY mentor would say) to your children. Instead of learning about the hard work and discipline it took to earn the car, your children learn complacency and entitlement. And it's not like you just wake up one day, and find out that your children are brats. It takes years of constant reminders, cars, vacations, clothes, credit cards, phones... it all adds up to a bill your children ultimately pay as they struggle to adapt to a world without handouts or the required skills (industriousness and passion) to survive . That's not to say that you shouldn't have nice things in your life, but be careful on what you let your children see and experience.
My 2nd favorite quote, came much more recently.
With summer time comes summer interns. I was working with a summer intern who also happens to be a 30 something year old MBA student from one of the top 10 business schools in the U.S. I attempt to be a good mentor. I start by showing him how to do certain short-cuts in excel after he bungles a first, second and third attempt at putting together a basic financial overview. After about 2 minutes he laughs and says, "don't you see the humor in this," [I look at him quizzically] "Here it is, I'm 30 years old, and you're teaching me how to use excel."
Great, lesson over. I can go back to my work and you can figure this shit out on your own.
Instead I responded, "when I started here I never used excel, so you clearly have the opportunity to learn a lot in a little time."
And oh, go fuck yourself.
Monday, June 21, 2010
Friday, June 11, 2010
That said, I'm currently working to prepare for a crash. I'm doing this because I expect it to happen soon, and I need to be prepared to act when the opportunities exist.
This means building a shopping list of ideas to buy at 6x or under free cash flow (its like buying a bond with a 16% interest rate that's either paid to me or is reinvested into the company) and finding companies that have the liquidity to weather a terrible downturn involving many years of stagnation or declining revenue. If the investment also happens to be a good company that's growing with high returns on invested capital, that's great, but I don't need to have it. If a stock doesn't have the two key qualities (low P/FCF and liquidity), I'm not interested.
While it is exhilarating, I'm a little drained mentally and emotionally as I've been working on this list in any free time I have (excluding time at work or with the fiance) pretty much for a month now (and less diligently for the last year).
My personal return in 2008 and 2009 was over 50% each year largely through a combination of good fortune and preparation. In November 2008, one idea that I had been following for a year fell in my lap, dropping 70% in 1 day on hogwash headlines. The market overreacted, and I put 30% of my assets in the stock. Other than this one pick, I effectively sat in cash most of the crash, with my eyes focused almost entirely on this one idea. In retrospect, while I beat the market, I did not succeed (a la Wooden - doing the best in which you are capable). Had I been better prepared I would have invested the remaining 70% of my portfolio in the opportunities available at the time which included some companies trading for 2-4x normalized free cash flow. Instead I froze. I had never made a bet so big and I needed inactivity.
This next crash I must be better prepared. I need more ideas and I want to be fully invested when everyone else is panicking. I need to emotionally brace myself for a down year as I average down into my cheapest positions. I've learned so much since then, and the stakes are so much higher now.
Saturday, June 05, 2010
Failed in business 1831
Defeated for legislature 1832
Failed in business again 1833
Elected to legislature 1834
Sweetheart died 1835
Had nervous breakdown 1836
Defeated for speaker 1838
Defeated for elector 1840
Defeated for congressional nomination 1843
Elected to Congress 1846
Defeated for Congress 1848
Defeated for Senate 1855
Defeated for Vice President 1856
Defeated for Senate 1859
Elected President of the United States 1860
"The model Mr. Lincoln gave us with his persistence is one we can remember in the face of our own setbacks. And what is most wondrous of all is that persistence is a quality that we ourselves control. You, and only you, can decide whether you will stay the course." - John Wooden
On June 4th, 2010, John Wooden passed away. While I am happy that he will be reunited with Nellie, his childhood sweetheart of 60 years, I am also sad and a touch scared.
In some ways its like building a bridge. Upon completion, you remove the support beams to see if it can stand on its own. My life was built on the collective wisdom of a few role models, and when they pass, as they will in time, I must stand on my own, in living and practicing their life lessons.
Below are a few of my favorite quotes or writings of John Wooden:
"I am just a common man who is true to his beliefs."
"I am happy my teams at UCLA and elsewhere did well and we earned a measure of recognition. But all of this is nothing compared to my family: Nellie, our two children, our seven grandchildren, and all ten of our great-grand children. All that love is immeasurable."
"True success is attained only through the satisfaction of knowing you did everything within the limits of your ability to become the very best that you are capable of being."
Remember this your lifetime through -
Tomorrow, there will be more to do
And failure waits for all who stay
With some success made yesterday.
Tomorrow, you must try once more
And even harder than before.
How much more pleasant this world would be if we magnified our blessings the way we magnify our disappointments - Unknown
No written word
nor spoken plea
Can teach our youth
what they should be.
Nor all the books
on all the shelves.
It's what the teachers
are themselves. - Unknown
"I have prepared for death all my life by the life I lived" - Socrates
Sunday, May 16, 2010
The Dad - "Don't f*** it up"
The Mom - "Before I say yes, there are 3 things I want you to do: 1) be her "champion" 2) Don't let fear prevent you and her from living life or trying new things and 3) Don't stick to the conventional advice of others, this is your life, you should do what works for you."
The friend from high school - "I'm surprised she said yes too!"
My Psychologist / Jedi / Trader Mentor - "So this means she has 24 hours to shop for competing offers?"
My old private equity boss and friend - "Don't do it... just kidding"
Sunday, May 09, 2010
Saturday, May 08, 2010
One analogy that CM gave on opportunity cost was incredibly powerful to me. After Berkshire bought $300mn of BYD (Chinese electric battery / car company) and the stock has proceeded to rally ~400%, CM has gotten several solicitations to consider investing in other Chinese companies. Your logical instinct should probably be that after this initial success he would be all over any potential Chinese ideas. But its the exact opposite!
CM, indicated that he wouldn't even looking at them, just given that the opportunity cost was so high given that he liked BYD, the product, the management, even though it had traded up 400%! He had more faith in BYD growing over time, (and had already done the work) than considering other investments!
It doesn't make 100% sense to me (as I'm younger - mid-twenties vs. 86 and try to be constantly looking at new ideas), but it's something I've been reflecting on, when considering potential investments (i.e. does this meet the opportunity cost? Even better, does it raise the opportunity cost for future investments?).
7th Inning (autobiography - where this blog got its name - November 2003):
8th Inning (At the Citi testimony before the Financial Industry Inquiry Commission explaining why Citi needed $45 billion in bailouts and $300 billion in tax payer guarantees under their watch - April 2010):
Thursday, May 06, 2010
I'd be lying if I said I didn't have the evil "muah haha" laugh in my head today as I watched my short position lurch 8%+ today (and ultimately pullback). I don't expect tomorrow's performance to be anything like today, and if I had to bet on a direction I'd probably say up.
That said, to paraphrase WEB, I have no idea what the market will do in the next day, month or year. The game I play, is that I look for small, cheap companies at 10x or under free cash flow (mostly looking at companies under 6x free cash flow unless management is active in paying out the cash or it's an amazing business) that make a lot of sense to buy and don't warrant the corresponding 10% yield equivalent. There's less competition and the returns can be disproportionate with the uncertainty taken.
Wednesday, April 14, 2010
Admittedly this is one of the dumber trades I've done from a risk reward stand point given that I usually invest in situations where I have at minimum 50% upside.
In this case, what's my upside, 20%? 30%?
Dumb trade. The worst part about it, is that I knew, wrote and spoke against my betting against the market. Don't do it. Don't fight it. "The markets can remain irrational longer than I can remain solvent..."
In the last 3 years I've had 3 bad trades out of 11. Two of which were from betting against the f'ing market. Of my total loss amounts over 99% have been from these 2 bets.
GAAAAAAA!!!!! I'm a security analyst. Not a market timer.
2010 YTD Return: ~2%.
Friday, April 09, 2010
1. The P/E10 Ratio (a 10-year avg. of the S&P 500's earnings divided by the current price) is in pricey territory:
2. It's a hedge against the long positions already established (25% net invested mostly Berkshire, American Physicians, Fairfax)
3. Commercial real estate is an easy catalyst leading to bank mark downs, and further credit reductions).
"Between 2010 and 2014 about $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present "under water"- that is the borrower owes more than the underlying property is currently worth. Commercial property values have fallen more than 40 percent since the beginning of 2007. Increased vacancy rates which now range from 8 percent for multifamily housing to 18 percent for office buildings, and falling rents, which have declined by 40 percent for office space and 33 percent for retail space, have exerted a powerful downward pressure on the value of commercial properties."
4. The fed recently stopped buying mortgage backed securities. This has provided a steady demand, which has kept yields artificially low.
5. PIIGS (Portgual, Italy, Ireland, Greece and Spain) Headline Risk - Paul Krugman's excellent article here.
6. Several investors I read are even more pessimistic.
David Rosenberg (but he's been way to early, starting May 2009 - then again so was I).
Friday, April 02, 2010
Sunday, March 21, 2010
This list is not intended to have any meaning to anyone other than myself, as I think each person has to choose their own defining activities.
In no particular order:
Family meals. My own home. Exploring new adventures with Jess and friends. Jewish traditions. Researching unlevered companies that generate significant cash flow. Eating delicious foods. Restful sleep. Staying healthy. Playing cards with friends. Cooperative video games. Mini golf. Jacuzzi time. Walks on the beach. Hikes. Sunsets and sunrises. Listening to music while driving with the windows down. Thought provoking books and conversation. Living in a town with beautiful weather. East Coast vacations. Violin. Imaginary stories in my head.
And a few that I have yet to experience:
Good husband. Good dad (teach kids to be good and add value to world). Walk my own obedient dog.
Sunday, March 14, 2010
Monday, February 15, 2010
A week later and I walk up to Jess and tap my inner arm and say “I need the good stuff.” With Netflix I can get my fix of season 1 or 2 of Dexter at anytime online. It used to be Heroes but the show doesn’t give me the high I need anymore. On Friday we finished Season 2 of Dexter in a 4 hour marathon session. I started thinking of a 12 step program for my dark demons when I got an email from Kelvin…
In the last 24 hours, I’ve played 5 games of Craps on my iphone due to Kelvin’s recommendation. I won $300 (fake dollars) in one, won $100 in another, and crapped out in the rest. Just enough of a net win to keep me going into the next week.
With friends like these, who needs enemies?
Saturday, January 30, 2010
It raised a lot of thought-provoking questions (would you have sex with a robot? As a robot?) and also had a iRobot like story.
The ending also wrapped everything up so nicely.
Man, that was awesome.
I haven't been this pumped after watching a movie since I saw Taken.
Monday, January 18, 2010
"If the bad things that happen to us are the results of bad luck, and not the will of God, what makes bad luck happen?" I was stumped for an answer. My instinctive response was that nothing makes bad luck happen; it just happens. But I suspected that there must be more to it than that... Can you accept the idea that some things happen for no reason, that there is randomness in the universe? Some people cannot handle that idea. They look for connections, striving desperately to make sense of all that happens. They convince themselves that God is cruel, or that they are sinners, rather than accept randomness. Sometimes, when they have made sense of ninety percent of everything they know, they let themselves assume that the other ten percent makes sense also, but lies beyond the reach of their understanding. But why do we have to insist on everything being reasonable? (pg. 46)...
Laws of nature do not make exceptions for nice people. A bullet has no conscience; neither does a malignant tumor or an automobile gone out of control. That is why good people get sick and get hurt as much as anyone. No matter what stories we were taught about Daniel or Jonah in Sunday School, God does not reach down to interrupt the workings of laws of nature to protect the righteous from harm. (pg. 58)
I found out today that a family acquaintance passed away unexpectedly on Friday. He was a year younger than me (~23 yrs old), a friendly trumpet player in the high school marching band, and died from complications associated with his diabetes. I am both shocked and saddened by his death.
We live in an uncertain world.
Thursday, January 14, 2010
“I swear by my life and my love of it that I will never live for the sake of another man, nor ask another man to live for mine.” - Ayn Rand (John Galt's Oath from Atlas Shrugged)
"Then I grasped the meaning of the greatest secret that human poetry and human thought and belief have to impart: The salvation of man is through love and in love. I understood how a man who has nothing left in this world may still know bliss, be it only for a brief moment, in the contemplation of his beloved." - Victor Frankl (Sharing how he survived Auschwitz from Man's Search for Meaning)
I don't think Ayn Rand knew what she was missing.