Quinn’s Brain, aka QBrain

I am tired of hearing that the stock market is the place to invest, long term it has returned X%, and X% is greater than anything else. Buy and hold is still the way to go with the latest market downturn.

If academics where financial geniuses, they wouldn’t be academics.

From 1871 to 2008, the average rate of return for the stock market has been 8.76%.

That number and similar long term numbers are thrown around regularly as to why the stock market is still the best place to invest long term. This is absolutely true if you are Yale or Harvard, and your trust fund really will survive for hundreds of years, but for mere mortals, we need to take a few other things into consideration.

First, most people don’t start saving seriously when they first start working. Second, even those serious savers aren’t saving number initially, because their income increases so much the first 5 to 10 years of their careers. So instead of looking at a 137 year window of investing, the window should be much smaller.

Most people who do a good job saving will be looking at a 30 year window before they have need to start making draws against their retirement funds. So instead of looking at the average rate of return over 137 years, people should plan for the worst 30 year period that we have experienced, and know that it could be worse than that.

Doom and gloom I say? It could be worse than that? The average rate of return ending Feb 28, 2009 was -5.8% for the last 10 year period (45% loss overall). There are two strong bull markets and two strong bear markets in that time period, and the bears won.

I am not even considering inflation. If you retirement started at the end of Feb, you were probably worth about half what you were a year earlier. You could have stuck everything in a savings account in the beginning of 1998, missing out on another 56% gain from the internet boom, and still been much better off than if you had left everything in the market from 1998 to 2008.

Instead of using 8.76% in your calculations, use 5%. 5.09% was the lowest compounded rate of return I found for a 30 year period. If you plan for 5% growth, and get lucky enough to average 10% growth, it is much easier to live on extra money then not enough.

April 9th, 2009 | Category: Finance | Leave a comment

I have been reading a lot about underfunded pensions. This isn’t just a problem with GM and Chrysler, this is a problem with pretty much every pension fund in the US. If I wasn’t being force feed so much news on the topic, I wouldn’t give a shit, because I will never have a pension, but since I have, I gave a little thought to the math behind pension funds.

My conclusions, pension funds managers are idiots.

First, lets say you are a company that has been around forever, has grown considerably over that time, employees pay into the pension 20-40 years and the payouts lasting 20 years. The company has grown and so has the number of employees funding the pension. In good times like these, the pension should be net positive cash flow. By this I mean the outgoing retirement benefits being paid are less than the incoming funds from existing employees, thus the pension fund has a growing net asset base and the existing base is never touched.

Now, in this ideal situation, I believe that this is true.

Next, take a company (or government) that provides a pension and has grown linearly with time, or just at a much low exponential rate than a highly successful company. The cash flow should still be net positive, because you have more people paying in then are taking a draw.

In this situation, I do not believe this is true, because pension fund managers allow companies (and governments) to underfund the pension, creating a cash flow problem, and thus to meet current obligations, assets have to be sold, thus decreasing the size of the pension. Thus, pension fund managers are idiots.

Finally, take a company that offered a pension, but is now bankrupt. If this company has met all obligations to date, the remaining balance in the pension should allow the pension to make payments for 20 years.

In this situation, the funds start out underfunded and the asset base, the portfolio of the pension, contains too much risk. Not only could the pension not meet obligations because it started out underfunded, but being invested in risky assets means that there is variable chance that the pension will even last as long as its current value would indicate. Thus, pension fund managers are idiots.

April 9th, 2009 | Category: Finance | Leave a comment

Just in case you were wondering, I did not win the 28 million that I joked about investing in last night. That is what I get for not investing

March 15th, 2009 | Category: Finance | Leave a comment

LAC Masters swim team will be no more as of March 20th, 2009.

This kinda sucks, because it is one week before Zones, but I am already training on my own once or twice a week. The question is, can I train hard on my own all the time, or do I need the team practices to keep my consistency.

I have the following options. The CAC pool has a team that trains there 3 times a week, and if we joined there, it would eliminate the need for our Lifetime Fitness membership. Lifetime has a team, but the setup Lifetime has for the team is so pathetic it isn’t even a consideration. The final team option, and by far the best option as far as teams go, is to join DAM and swim at their Southlake practices.

DAM has a very large team, and the Southlake practices typically have 8 lanes with about 3 people a lane. That is 24 people regularly showing up to practice compared to LACs 5 people. The downside to swimming at Southlake? It is more than 30 minutes away, and the practice is at 5:15. I already am used to getting up at 4:30, but what I am not used to is having to get ready in a gym locker room for work and not being able to cook a hot breakfast for myself. Spoiled am I.

The alternative, and likely choice at least initially, is to workout at Lifetime from 4:30 until 5:45 every morning. No one is using the pool at that hour, so lane space is not a problem, and I can get out and get back to the house to shower for work and eat a hot breakfast and still make it to work by 7am.

Brook and I would really like to swim with a team, and Brook is strongly considering CAC. I have kind of already discarded it because I don’t think the intensity will be there, but this is an area where more research would easily change my mind.

As for Southlake. Next Saturday I am planning on swimming with DAM in Southlake (next Friday is my last LAC practice), and that will determine if I think it is feasible. If it is, I will probably check out a Sunday practice at SMU, just for fun, and then finish out the month practicing in Southlake in the mornings and getting ready there to gage if I think I can tolerate doing that on a regular basis. Practice is over at 6:30, and Southlake pool is only about 10 minutes from work, so I would not be adding to my commute.

Now if I could afford a nice house close to the Southlake pool, it would be a done deal. Brook would become a full time trophy wife, and living in Southlake would decrease her commute to the salon and spa, and I could train 5x/week and still enjoy a hot breakfast and a nice shower before work.

Since afford and Southlake don’t go well together at this current time, Brook will continue to be a full time veterinarian and a part time trophy wife and the most likely scenerio will be that I train at Lifetime for a while.

Lotto Texas is at $28 million, maybe I will invest a dollar.

March 14th, 2009 | Category: Swimming | Leave a comment

I got first place in catching a cold division.

Here are the full meet results: http://www.damswim.com/meet_results/2009_dam_scy_spring_meet.pdf

Here are my results:
100fr: 55.86
splits: 27.42, 28.44

50fr: 25.30

200fr: 2:04.54
100 splits: 1:00.04, 1:04.50
50 splits: 28.61, 31.43, 32.41, 32.09

The meet went 500, 100, 50, 200, with the 500 being the 3rd event and the 200 being second to last. There was less than an hour between events, which was fine, but the heat was not turned on until an hour after the meet started, so it was very cold on deck. Pool temp was fine.

I ate my goggles on the start of the 500, so I stopped, put them on, and swam a pretty easy 6:20, with 200 being back. Swam just fast enough so I didn’t get last

I am happy with my 100 time and my 50 time, but I think my 200 should have been 1:57ish. I think I have the speed, just not the endurance. My last season US times were 25.x, 55.x and 1:55.x consistently in season SCY.

Outdoor pool was not open, but I did head to Lifetime and do 900 cool down after the meet. Felt pretty good until I couldn’t breath through my nose anymore later that night.

March 3rd, 2009 | Category: Swimming | Leave a comment

Baby Mop from Chris Milk on Vimeo.

February 19th, 2009 | Category: General | Leave a comment

I have been thinking about how to insure a portfolio and have been attacking the problem with options.

My thought process was that I wanted to risk no more than 10% loss from the price in January, and in January I would buy PUT options with a strike price 10% the current price, with an expiration one year away. This would insure that my portfolio would be worth no less than 90% what it was worth in January.

Good idea, and I am sure we all would have liked to do that last January.

The problem is that the cost to do this would be about 10%/year. No one can afford to give up 10% a year and still come out ahead over time. Even selling covered calls to offset the cost of the insurance, it seems like a lot of risk.

What I noticed, but have not fully researched, is that in the money calls might be cheaper long term, but more expensive short term. In the money options always cost more than out of money options, because they have intrinsic value. If they were executed immediately, the executor would be on the favorable side of the transaction. An in the money call option has a underlying stock price worth more than the strike price, so executing immediately would allow you to follow up with a sale for a positive return. It makes sense that an in the money option costs more than an out of money option.

So how does in the money options work for insurance? You would buy a PUT option with a strike price higher than the current trading price of a stock. For example, SPY is about $83 right now, and a PUT with a strike price of 100 is $17 in the money. If I bought a PUT with a strike price of $100, I could execute it immediately, and someone would pay me $100 for my $83 SPY. Now the PUT will cost more than $17, and the difference between the $17 and the real price of the option is the time value of the option. For a option that expires in a year, that time value should be quite a bit.

The question is, if I buy in the money PUTs, will the time value be cheap enough that I can afford to insure my portfolio?

February 8th, 2009 | Category: Finance | Leave a comment

When I got up this morning, I didn’t think it was going to happen. I didn’t sleep well last night, which has become a little too common, slept in this morning and when I did finally get up my back was sore, so I planned on skipping practice.

Around 10am, when I finally decided it was time to take a shower, I turned on the water and said, “I feel fine now, maybe I will swim later.” Realized how stupid that was, turned the water off and headed directly to the gym.

I am focusing on going fast on the weekend, and not really worrying about yardage. Saturday, I hopped in and did a 200m warm up (very short warm up for me) and then immediately did a 200m free for time. This will be very similar to a meet, where I will have a shorter than usual warm up and than an all out sprint. I actually swam faster from a push (not off the blocks), than I did in the November meet. The bad news is, I am still 20+ seconds off my goal time and 10 seconds off what I need to be able to go from a push to realistically hit my goal time (1:49.99 yards).

Today, instead of doing a fast 200, I did 8×50 all out on a minute. My goal currently on this set is to swim 50s on a 30 and this morning is was swimming 32-33. Not where I need to be yet.

I am happy that I finally got to swim 5 days out of 7, and hopefully I can maintain that. I am moving in the right direction toward my goal, and it will be obvious in a couple weeks if I am progressing fast enough to achieve it by the end of March.

I might go to a meet at the end of the month by myself so I can get a real race in before Zones. Entries are due on the 25th, so I will probably wait until the last minute to enter. Don’t really like the pool hosting the meet

February 8th, 2009 | Category: Swimming | Leave a comment

I am feeling much better, probably at 90% right now.

This was my yoga-swim workout at Lifetime.

• 600m free warm up
• 4×100m back on 2:00 working on long stroke with solid kick
• 10×50m flutter kick on 1:30 odds down on left side back on right side, evens on back
• 2×50m dolphin kick on 1:30
• 4×100m back on 2:00 same as above
• 12×50m IM on 1:00 1st 50 fly drill, 2nd 50 back, 3rd 50 breast, 4 times through
• 8×50m free on 1:00 odds catchup drill, focus on early vertical forearm, both with strong kick
• 1×200m for time 2:35
• 300m cool down 200 back, 100 free

A 2:35 in meters converts to a 2:18 high in yards. I would like to get the 2:35 down to a 2:10 from a push. For comparison, my 200m free from the November meet was a 2:26.44, but a 2:10 is where I need to be to break 1:50 in yards, if not a little faster.

Back to normal practice and weights tomorrow. Hopefully I did not lose too much aerobic ground this week.

February 1st, 2009 | Category: Swimming | Leave a comment