Quinn’s Brain, aka QBrain

My fastest 200 free time is a 1:50.0x when I was a Jr. in high school. I have decided to try and beat my best time, now that I am old and fat.

After discussing this goal online in a Masters swimming forum, I need to make a few changes to accomplish my goal. I need to swim a couple more times a week, and my focus needs to be training to actually achieve my goal. It will be really interesting (to me at least), if I can go faster than I did in high school.

That is it. Just stating it publicly, so I can be humiliated if I die before accomplishing it. If it is going to happen this year, it will have at the end of March, which is the end of the short course yards season. I think it is more likely that it will happen next year, but the closer I can come in March, the easier it will be to achieve next year.

January 18th, 2009 | Category: General | Leave a comment

A thought crossed my mind, “How great would it have been to short Ford a go long on Toyota.” By betting Ford is going to go down, and Toyota is going to go up, what I am really doing is saying Ford is that Toyota is going to outperform Ford.

Lets say I thought of this last January, and I bought an equal dollar value of long Toyota and short Ford.

• January 2, 2008, sell 1,515 shares of F (Ford) at $6.60/share and buy 93 shares of TM (Toyota) at $106.46/share.
• December 30, 2008, sell 93 shares of TM at $65.44/share and buy 1515 shares of F at $2.29/share.

Uh oh, those numbers don’t look good. Both Toyota and Ford devalued.

I bought about $10,000 of Toyota stock and sold $10,000 worth of Ford stock, which I borrowed from my broker and have to return at some point. When I sold my Toyota, I made $6,085.92 (Ouch!). I bought 1515 shares of Ford for $3469.35.

So how much money did I lose on my virtual trade?

I made $2,714.79, or 27% return on the $10,000. The return on investment is not really correct, because this strategy actually carries unlimited risk since Ford could have gone up infinitely, while Toyota stayed the same or went down. The odds of that happening seem acceptable to me.

Now, after I thought of these little scenario, I also realized that I picked Ford, which is the healthiest of all the American car companies. I should I picked GM, since it is on the verge of bankruptcy and Chrysler is privately held.

If I would have picked a worse American car company, how would I have faired?

If I would have picked the GM over Ford, I would have made 48.6% return on my $10k.

This makes a lot of assumptions. One, that there are no costs associated with a short sale (there are and they are about 10% APR for me). Two, that I could have picked this scenario last year, but all i picked was that Toyota would out perform Ford, not exactly genius.

What wasn’t an assumption but is necessary for these kind of returns is a catastrophic event for the short company in a bear market or a outstanding return for the long company in a bull market. Without the best company significantly out performing the worst company, the cost of the short sale will likely create a losing trade in real life.

What I don’t know is if I could structure the same approach with options, providing a fixed risk and eliminate the costs associated with the short sale. I am pretty sure I can, and I imagine that the sector spread is not uncommon or original.

January 1st, 2009 | Category: Finance | Leave a comment

My last paycheck this year actually happened on the last day of the year, and since I actually had a day off, I decided to look at my electronic paystub and see the damage for the year.

After looking at my gross pay for the year, and my net pay, I have come to the conclusion that I need to start a government. For every two subjects of government QBrain, I will make the same income I do now, assuming my loyal subjects make the same salary I do. If they don’t make the same income I do now, I will just get a LOT of subjects to pay me, and then not really worry about how I spend. I can always deficit spend if my subjects are not generating enough revenue to meet my needs. Does my plan seem a little willy nilly compared to my typically detailed grand schemes? Well, it is a government, and you never know what need might arise over the horizon, so I just plan to what I need when and need and let the details work themselves out this time around.

So, come and join government QBrain. Just send me a third of your income, and I promise to make grand promises, and show you very little direct benefit to how I spend that money.

January 1st, 2009 | Category: Finance | Leave a comment

I read a lot of financial news, and I have to wonder who these morons are who come up with these theories.

You know who buys the majority of Luxury goods? Is it the ultra rich? No, it is the normal Joes who are splurging on an up market product. Look around and you will see a fair share of 20 somethings driving around in Lexus and BMW. Good financial decision? No, but credit was easily available, and it was a status symbol so it was purchased, or leased.

This isn’t something that is limited to status focused 20 somethings, everyone does it. It might be a purse, or a car or a pair of shoes, and when there is extra disposable income, everyone has an upgrade they would like to partake in. If luxury brands truly only catered to the super wealthy, they wouldn’t have stores in malls.

I believe this happens at all levels, and during an economic downturn, people return to the level the are most comfortable at. If this is true, and Wal-Mart is the bottom rung retailer in the US, then Wal-Mart isn’t actually going to experience some growth. This is also a financial theory I have seen in the news a lot, but if everyone is stepping down their spending, how can luxury goods be immune to economic downturns.

Two economists, two theories that cannot both simultaneously exist. Good job guys! And thanks Big News for repeating their rubbish.

December 27th, 2008 | Category: Finance | Leave a comment

I hope that quote was taken out of context. But Kiplinger’s published that quote and attributed it to Bob Veres of Inside Information newsletter. While it would be great if financial advisers actually provides such valuable insight that they should be held accountable if their advice ever under performed the market, in reality that is total and utter bullshit.

Now, don’t get me wrong. I think most financial advisers are worthless at best. But if you have an adviser that is leading you down a path that is better than the path you would have chosen on your own, then they are providing a valuable service.

If your plan, that you developed with strong input from your adviser, that you followed, was to mitigate market risk, by taking lower return for more security and your portfolio dropped faster than the market in general, you should fire your adviser.

But, if your adviser and you decided that you were young, and you had many years of growth ahead of you and you were ready and willing to suffer increased risk for higher return? Your portfolio should, quite acceptably, have dropped faster than the market.

There are three types of long term individual investors in my eyes (highly generalized). There are the people under 40, who are looking from strong returns and have the years to deal with increase market risk that goes along with them. There is the 40 to 60 crowd, who is starting to shy away from market risk, and are selling off their more risky investments and reinvesting the money in less risky assets. Finally there are the 60 and up crowd, who really can’t tolerate risk and bang their head against the wall trying to figure out how to invest their large portfolio, risk free, and still keep up with inflation.

All three of these groups, sadly, are still exposed to under performing the markets. They all still have needs of growth, and even the groups who want to move to riskless investments still have to deal with tax consequences finding those “riskless” investments.

Advisers should be fired because they typically impede financial growth, not because they underperformed the shittiest market since the Great Depression. If you are saving because you meet with someone twice a year, but otherwise would spend that money, than that adviser is worth the 1% fee he charges. He is the difference between having savings and not having savings. Preparing for retirement or living off of social security checks when you can no longer work. He has value, even if his plan underperformed the market in 2008.

December 26th, 2008 | Category: Finance | Leave a comment

This morning I had the day off of work. Swim practice was from 5:30am to 7am, but about half way through the coach told me that I could stay for the entire workout if I wanted to. The masters team gets the kids workout, and sometimes I can finish it, but today it was extra long since the kids don’t have school. Today the workout was 7900 yards.

That is a little less than 4.5 miles. I swam the whole workout in about 2 hours, with my normal workout being right around 4,000 yards and taking a little over an hour.

It was a good workout, and I left tired but not exhausted. Or so I thought. All I have done today is lounge around the house, eat, drink and take a short nap. Now it is the day after Christmas, so I didn’t exactly expect to be running around all energetic, but I am in sloth mode. Slowly moving from one room to another, doing tasks that don’t take much physical effort.

Christmas Eve at practice, our coach asked what we asked Santa for. I told her that I asked for a 10k yard workout, and I think this was her way of granting my wish. I could have done another 2,000 yards, but it would have been rather slow, and probably would have wiped me out for the rest of the day.

As it is, I am moving my lifting from tonight to tomorrow, so I don’t kill myself.

Merry Christmas to me!

December 26th, 2008 | Category: Swimming | Leave a comment

http://www.pcworld.com/businesscenter/article/15598/10_things_you_wont_see_after_the_recession.html

This article has some solid ideas when you think about them in an investing light. I don’t agree that the internet is the driving force for many of these changes, but I agree that most of the items listed are going to happen.

One of the major items on the list that I don’t really agree with is that Yahoo is going away. I totally agree that Yahoo is a poorly run company that someone with the right vision needs to restructure the company. And by restructure, I mean 90% of Yahoo probably needs to go. Yahoo is an idea cadidate for someone to take private and turn the company into a cash cow. If someone can swoop in at the bottom of the recession, pick up the company for a song, take it private and know WTF they are doing, Yahoo will make someone who is already really rich, much richer. Yahoo will also become a much much smaller company focused on its revenue generating strengths.

After this latest debacle in the finance industry, I am a firm believer that most companies should be held privately. When the upper management are actually partners who have a vested interest in the future profitability of the company, and are making decisions for the long haul, instead of maximizing value targeted at their option maturity date, we are going to see better run companies. Take a look at Goldman Sachs the private company versus the public company.

Back to the 10 things you won’t see after the recession. I believe none of them are actually happening because of the internet and every one is actually happening because our over consumption lifestyles no longer have the funds to continue. What the internet allows is for the diversity that we have come to enjoy in retail to continue to exist with a much lower overhead. For the products that can be sold well online, this diversity will move online, but for the products that don’t, that diversity will disappear.

December 24th, 2008 | Category: General | Leave a comment

“There’s too much retail in the U.S.” – Bruce Berkowitz, The Fairholme Fund

The interview is about value investing and the economic meltdown, not about retail, but that one side comment really caught me. We really do have too much retail in the US.

Lets start with cars. Off the top of my head, Jeep, Eagle, Saturn and Hummer have all been introduced as American brands and Infiniti, Lexus and Acura have all been introduced in the last couple decades. The only brand that actually died that I can think of is Eagle.

During that same time, the US population, and I am assuming the buying public, only increased about 20%.

This is rather tangential logic, but think of all the stores that exist now that didn’t exist 20 years ago. Not only is there a larger variety, the concentration of stores is greater. Twenty years ago you didn’t have Lowes across the street from every Home Depot, outlet malls were in the middle of no where, and the outlet stores only carried defective product and end runs.

Some growth in variety and quantity was justified by population growth, but it looks like the majority of it was our love of the credit card. If the economy contracts to a sane level, we will probably loose a lot of the variety that we have become used to. Instead of Mr. Gatti’s, Pizza Inn, Pizza Hut, Papa John’s and the local guy all offering 30 minute pizzas, we might have to deal with just two.

We have already lost most CompUSA, Oshman’s and Albertson’s to poor management and poor market demand as well as several hundred Starbuck’s to over expansion. I expect we will see more of this contraction, where companies cull the weak performers to build stronger, but much smaller companies. Expansion is no longer king.

Sadly, I have not figured out how to take advantage of this epiphany financially. I certainly don’t want to own a strip center in a low traffic area.

December 20th, 2008 | Category: General | Leave a comment

We decided between Austin or San Francisco for this vacation, and two things tipped the balance towards Austin, even though we had a ton more to do in SF.

First, we have considered moving to Austin one day, and I have never spent more then two days there. I am interested in moving downtown, and wanted to experience what it was like. I have already lived 3 months in downtown SF, and Brook has spent a week with me while I was living there, plus a couple trips back. Since the cost of living is so much lower in Austin then in SF, it is much more likely if we ever decide we want to live downtown.

Second, airlines suck. And I mean this in the nicest way, but I fucking hate airlines and airport bullshit.

Now the economics worked out that the Austin trip cost about a fifth of what the SF trip was going to cost, and we were not planning on staying at the Ritz in SF, but this really wasn’t much of a factor. We started planning the trips this summer, before the economic melt down and everyone started counting their pennies. I was counting my pennies long before the meltdown and I always cringe when I look at the vacation budget, but it always seems to be money well spent.

Since I have complained about the Four Seasons previously, the real sticking point is their price. They are the most expensive 4 star hotel downtown by at least 33% and as much as 100%. I would have to get out the calculator, compare actually dollar differences to the value that FS provided and see if it was worth it. We really liked the view, that it might have been worth a couple hundred dollars, which still surprises me to think that I would pay that much for a view for 3 days.

Overall, it doesn’t seem like we did much on our trip. We didn’t. We just had fun hanging out with eat other. It is so easy to have fun when there exist no timelines and no stress that is associated with real life. It was a great vacation.

December 8th, 2008 | Category: General | Leave a comment