Wednesday, February 09, 2011

Quote of the Day: Einhorn on JOE

"With the company trading at more than three times its value, it is easy to see why the Board wants to sell, but hard to fathom why anyone would buy. The lack of cash flow creates a particular challenge for any financial buyer," a spokesman for Einhorn's Greenlight Capital said in an e-mailed statement on Tuesday.  -Reuters


disclosure: no positions in JOE

Equal Weight Index Funds and the Sin of Portfolio Management

Josh Brown pointed his readers toward an intelligent WSJ article about the trend toward equal weighted index funds.  As a refresher - indices like the S&P 500 are market cap weighted - indexers own shares in proportion to the market caps of the companies.  This obviously results in index performance that is dominated by the performance of the larger companies, which have larger component weights.

As a "remedy" to this phenomenon, index providers are starting to roll out "equal weight" versions of these same indices.  In the NDX - Nasdaq 100 - for example, which is a modified cap-weighted index, the top handful of components dominate the index (rough weights as of today):

AAPL: 20%
GOOG: 4.7%
QCOM 4.5%
MSFT 4.1%
ORCL 3.1%
AMZN: 2.5%
CSCO: 2.4%
INTC: 2%
TEVA: 2%

That's roughly 47% of the index made up of only the top 10 names.

In an equal weighted Nasdaq-100 basket, however, each component would get a 1% weight, and the smaller companies have a significantly higher impact than they do in the modified cap weighted (ie, "regular") NDX.  The top 10 names would make up 10% of the index (after a rebalancing).

The thing that strikes me as most unsavory about the equal weighted indices, though, is their rebalancing schedule.  The funds generally rebalance quarterly to get back to the equal weightings - selling the stocks that have appreciated, and buying more of the stocks that have depreciated.  To me, that reeks of one of the cardinal portfolio management mistakes that every new trader learns at some point - hopefully as quickly as possible:  you don't want to sell your winners and let your losers run, and you don't want to sell your winners and increase positions in your losers. 

That's not to say that equal weight indices will perform worse than their market cap weighted counterparts - I'll get to that in a minute - but rather, that I'd prefer it if the equal weight funds rebalanced less frequently.  If the rebalancings occurred annually, or even bi-annually, it would give the winners a chance to run a little bit, while at the same time making sure that the weights don't get so out of whack that a few big boys dominate the index.   In other words, I think that an improvement to equal weight funds could be "slow rebalance equal weight funds" that don't constantly trim their winners and re-load on their losers.

So how do the equal weights perform vs. the cap weights? It shouldn't be hard to deduce that when smaller cap stocks are outperforming, the equal weight indices will do better - since they give larger relative weightings to the smaller capitalization companies.  Similarly, when large caps are outperforming, the market cap weighted ("regular") indices should do better.

We'll keep an eye on the equal-weight fund sector and watch how their assets grow.  As the WSJ article notes, the $40B in ETFs tracking alternative indices is a small fraction of the $1.8 Trillion in traditional index products.

ps - to my Grammar Ninjas - do you prefer the word "indexes" or "indices?"  I have always used "indices" - is one more correct that the other?

What Would You Ask Ben Bernanke?

I returned home from my soccer game at 11:30pm last night, and found an interesting email.  A friend of a friend is involved with the Bernanke testimony today, and had asked "If you could ask Ben Bernanke any 2-5 questions under oath, what would they be?"

Unfortunately, I didn't have time to come up with anything thoughtful, although two of my friends came up with what I thought were pretty good sets of questions.
from one:

1.       Do you believe that a sustained period of low (short-term) interest rates can create asset-bubbles, and does the Fed see any evidence of such bubble forming as we approach 2.5 years of near zero short-term rates?  If "no" to evidence, how are you monitoring this risk and what would signal to you the early stages of such bubble?  If "yes"to evidence, how does the Fed identify such bubbles?
2.       If inflation stays muted, at what level of unemployment would the Fed start raising its target overnight rates?
3.       What fiscal policies would he recommend to the Congress to maximize short and long-term economic recovery? 

From the other:
1) We have had near zero interest rates for 2 1/2 years and there is no sign that will change in the near-term.  What are the repercussions of near zero interest rates for 3+ years?

2) What is the new level of "full" employment?  How long will it take us to get there?

3) You are only charge in monetary policy, but what would you suggest if you had any influence on fiscal policy to maximize the economic health of our nation?

What would you have asked BB?

Tuesday, February 08, 2011

Gold Collateral and "42 Wild Italians"

Remember, folks, bad information can spread around the internet just as quickly as good information can.  Did anyone see the Super Bowl ad last night for the Chevy Cruze?

The hard-of-hearing misunderstand "42 miles per gallon" As "42 wild Italians."  They quickly get off track, and start babbling about random stuff, blissfully ignorant of the facts of the situation.  I couldn't help but think of this as I read GoldCore's piece yesterday about JP Morgan's new collateral process. GoldCore writes:

"JP Morgan announced today that from now on they will accept physical gold bullion as collateral. This is a sign of gold’s further remonetisation in the global financial and monetary system. It may signal that JP Morgan is having difficulty in securing gold bullion in volume. JP Morgan is the custodian for many of the gold and silver exchange traded funds. They will not accept ETF trust gold as collateral. "

Now, there is fact, speculation, and error in this short paragraph.  The fact is that JP Morgan announced that they will accept physical gold bullion as collateral. - that is exactly what JP Morgan announced, and interested parties should read the press release here.  The speculation is that this could have impacts on how the world views gold as money, etc etc, and that JP Morgan is desperate to get their hands on bullion.  The error is the statement "They will not accept ETF trust gold as collateral,"  hyped up of course, with the preceding sentence reminding readers that JP Morgan is the custodian for many metals ETFs.  The readers on the other end of the internet telephone then start screaming "OMG!  JPM won't accept gold ETFs as collateral because they know that there's no actual gold in them!" Unfortunately for the hypesters, that is not correct.

In fact, if you read the JP Morgan press release:

"Gold can now be used as collateral to satisfy securities lending, repo, pledge and other
obligations with counterparties. As the only tri-party agent able to offer this innovative,
integrated solution, J.P. Morgan combines its market-leading commodities, vault and collateral management capabilities to extend the range of collateral types available to tri-party clients."
followed by a list of the benefits of using gold as collateral, and then the concluding paragraph:

"Additional precious metals and commodities will become available for use as collateral. The ability to support any collateral type, settlement platform or region is a key component of J.P. Morgan’s Global Collateral Engine initiative. Designed to be asset and obligation neutral, Global Collateral Engine offers clients greater flexibility in how they mobilise collateral to extract maximum value."

You'll notice that JP Morgan certainly did not say anything about refusal to accept ETFs or "ETF trust gold" as collateral.  This is a press release about a new collateral type.  Thus, JP Morgan did not go into detail about each type of collateral which they already accept, and GoldCore misread this as "they didn't say that they accept gold ETFs, so therefore they don't!"  However, the press release clearly notes other types of collateral accepted in the right sidebar:

Broad range of collateral types
-Corporate Bonds
-Government Bonds
-Convertible Bonds
-Asset Backed Securities
-Exchange Traded Funds

ETFs are already accepted as collateral, that's why this press release didn't say "We are now accepting GLD as collateral" - because it's already accepted.  Similarly, the press release also didn't say "We are accepting 10 year Treasuries as collateral" - they are already accepted.   Now, stepping back a moment, what GoldCore actually wrote in their post is "They will not accept ETF trust gold as collateral."  Although it looks like readers interpreted that as "They will not accept Gold ETFs as collateral," (which we already know is false), perhaps GoldCore was trying to say something else, like "JP Morgan will not allow the GLD ETF Trust to pledge its gold bullion as collateral."  That would be a good thing, of course, although irrelevant, since the GLD Trust doesn't pledge its gold as collateral anyway - they have no reason to - their mandate is to own only gold bullion.  GLD holders certainly wouldn't want the GLD Trust to pledge their gold bullion as collateral to speculate in other instruments or asset classes, but the GLD prospectus prohibits that anyway, so it's a moot point.

note: I confirmed with a contact at JP Morgan that GLD can absolutely be used as collateral in tri-party repo settlements.

If you're trading gold based on the incorrect "news" that JP Morgan is refusing to accept the GLD ETF as collateral, then you're trading on bad information.


disclosures: no position in GLD, long SLV

Sunday, February 06, 2011

Doritos - The Best Part!

I have a feeling this Doritos Super Bowl Ad is destined to go down as an all-time classic:

The finger licking is classic.


Thursday, February 03, 2011

It's Super Bowl Prop Betting Time!

Dov brought the massive list of Bodog Super Bowl Props to my attention.  In his professional handicapping style, Dov writes:

"The bookmakers have really taken the breadth of props to a new level. Check out my early faves and then click the link at the bottom to see some outrageous new props.

Some early hedged trades I've just drawn up:

"Melisma's Last Stand"
C. Aguilera national anthem OVER 1 minute 54 seconds (-130)
C. Aguilera to hold the word "brave" UNDER 6 seconds (Even, Ties push)

The O/U line has finally caught up to the long performances; this could be the last time we cash the OVER for a while...  I think she has it in her, but I'd look for most of the heavy lifting to be done around "banner yet of the free", then close it out clean. This pair is live to go 2-0...

"BMOC Straddle"
Aaron Rodgers to win SB MVP (3:2), equates to 40%
Big Ben to win SB MVP (7:2), equates to 22%

This gets one short the field at 38%, I like that.  In this era of player safety, it's a QB's world.  If Ben's box score from last week has you spooked, you can try pairing Rodgers with the PIT Moneyline (+120)...but I'm going all in on the BMOC.

For those who want to further handicap the BMOC (Big Man on Campus) straddle, the MVP award has been won by QBs 23 times  and by other position players 22 times, leaving the QBs at roughly 51%.  As Dov notes, you're paying 62% with the BMOC straddle, but he believes that times have changed and that we're living in a QB-centric world.

I noticed a ton of other interesting props myself.  As a reminder,  -120 means you have to bet $120 to win $100.  Likewise, +130 means you bet $100 to win $130:

"How Many Times will FOX show Jerry Jones on TV during the Game?"
(Wager is on the number of times Jerry Jones will appear on TV during the Game (from kick off until final whistle). Live pictures only, Any Taped Pictures or Past Video does not count towards wager. Bodog's decisionis final.)

I like UNDER 2 1/2  -105     Jones will be all over the pregame, but he's unlikely to get much game footage unless someone punts the ball into the scoreboard or the roof gets stuck or something like that.  Perhaps there will be an interview at some point, but I doubt he'll pop up three times.

" How Many Times will FOX mention “Lockout” on TV during the Game? "
(Wager is on the number of times“Lockout”will be mentioned on TV during the Game (from kick off until final whistle). Live commentary only, Any Taped or Past Video does not count towards wager, must say“Lockout”exactly. Bodog's decision is final.)
Take UNDER 1 1/2 - 130.   The NFL probably has a shock collar around Joe Buck's neck that will zap him if he even thinks about mentioning the word "lockout."

"Who will the FOX announcers say has better hair on TV during the Game? 
Must be a direct reference on TV during the Game comparing the 2 players hair or wagers will be graded as No Action (from kick off until final whistle). Live commentary only, Any Taped or Past Video does not count towards wager. Bodog's decision is final.
Troy Polamalu -120
Clay Matthews -120

Stay away from this one, even though it's likely to end in No Action - the announcers aren't supposed to pick favorites and won't step on this one.  The halftime crew might make a comment - it's unclear from the terms of the wager if that would be included.

"Will B.J.Raji be on the field for at least 1offensive play? "
Must play for action. Special Teams do not count towards wager.
This is a slam dunk at YES  -185.  The line opened at -180, so someone is already pounding the YES.

"What will happen with the Dow Jones the day after the Super Bowl? "

Are you kidding me?  UP -140 is like free money.  The market goes up every Monday! Buy the F'n Dip!  This is probably the best bet on the entire board.  I would actually bet this if I had a Bodog account.

"Will a Steelers player do the Aaron Rodgers Championship Belt Celebration during the game?"
Must clearly appear on TV during the Game (from kick off until final whistle). Live pictures only, Any Taped Pictures or Past Video does not count towards wager. Bodog's decision is final.
I think that the YES +115 is a smart play - and I think I know who it will be - James Harrison, after delivering a brutal unnecessary roughness hit!

"If there is a picture of someone holding the Lombardi Trophy on the Cover of the USA Today on Monday February 7th, who will it be? "
If 2 or more people are holding trophy all wagers will be No Action. Must be a clear picture of 1 person holding the trophy or wagers will be No Action. Bodog's decision is final.
This is a variation of Dov's BMOC bet - I like Rodgers at 3/2 paired with Roethlisberger at 3/1.  Those two combine for a slightly worse payoff than the BMOC bet, but you get the benefit of the QB being the face of the team anyway even if he doesn't win the MVP

"What will be the Outcome of the Opening Kickoff? "

I love "Touchback" at 15/2.  Amped up kickers + indoor stadium = potential for an unreturnable kick.  Of course, amped up players mean anything less than 5 yards deep in the endzone is going to be taken out by the return team.

"Longest Touchdown Scored in the Game (Yardage)"
Offensive, Defensive and Special Teams touchdowns count towards wager. Game must go 55 minutes for action. Overtime counts towards wager. Touchdown must be scored for wagers to have action.
Under 43 1/2 -115.  

"Will both teams make a field goal of 33 yards or more in the game "

Yes: +145

"Will either team successfully convert a 4th down attempt? "
Game must go 55 minutes for action. Overtime counts towards wager.
Yes -215.  Count on it.

There you have it - Kid Dynamite's prop handicapping.  As usual, my record is better as a contrarian indicator than a "follow" indicator, so if you actually make these bets because I said so you should have your head examined.


Wednesday, February 02, 2011

Dear Penthouse? Or The New York Times? Keisel's Beard

It's time once again for everyone's favorite game - I give you an excerpt, and you have to decide if it's from a Dear Penthouse letter, or from the New York Times.

Today's snippet:

"Or, more specifically, the two-toned tangle of tonsorial madness hanging off of Keisel’s face.

“It is raw and it is real and it is healthy,” Passion said. “It is like the coat of a wolf.”"

Yowza,  I have no idea what "tonsorial madness" is, but it sure sounds like some sort of sexual frenzy.  And anything that is described as "raw," "real," "healthy," and "like the coat of a wolf," quoted by someone named "Passion"  reeks of Penthouse Letters, right?

Au contraire, my friends - this one is from the NY Times, about Pittsburgh Steeler Defensive End Brett Keisel's beard.  But wait - it gets even better - almost as if the NY Times authors are TRYING to get featured in "Dear Penthouse? Or the New York Times?"

"It has curl and body and heft. Keisel’s lips and teeth are buried deep inside the fur. (“The worst part is hairballs,” Keisel said.)"

"Buried deep inside the fur?"  Are you serious?!?!  I'm just going to leave that quote alone and let it stand on its own literary eloquence.


Groundhog Day - Bernanke Saw His Shadow - 6 More Months of QE3?

How does this Groundhog Day thing work again?

If Ben Bernanke smells deflation, we get 6 more months of quantitative easing?

If Bernanke pokes his head out in front of a Congressional committee we get 60 more pages of academic papers?  Or 6 more months of financial crisis investigations?


Tuesday, February 01, 2011

What's In A Name?

The Anal_yst sparked a solid talking point last night when he penned a post asking what people thought of anonymous blogging/tweeting etc.  Felix Salmon expanded on the topic, highlighting the most important issue:  for many pseudonymous bloggers,  especially in finance, their employers would fire them if they published under their real names.  This may seem confusing to some readers, what with "freedom of speech" and all, but my former employer (and I'm guessing most industry peers) have strict policies about communicating with the masses.  If the New York Times called me up at my old trading desk and started asking me questions, I could get fired just for answering them.  There are company spokespeople who do the press interviews, and we have to refer the reporters to such people.  The end result of this is that if you want these pseudonymous financial authors' insights, and you SHOULD want their insights, as they know a crap-ton more than the journalists who write the mainstream media stories do, you have to put up with pseudonymity. (at this point I'll point out that most people who are talking about "anonymous" bloggers really mean "pseudonymous" bloggers.  Anonymous commenters are common, but anonymous bloggers are rare.)

The important point, which I've touched on here multiple times in various forms, is that it's what's being said that matters more than who is saying it.  I've explicitly discussed this mantra previously with respect to the comments of David Einhorn and Steve Eisman.  Critics of Einhorn's and Eisman's ideas quickly snipe "Oh, they're short sellers - that's why they're saying that."  Yes - but what about what they're saying - is there anything wrong with their arguments?  

Critics of pseudonymous speech say things like "Oh, you're hiding behind a pseudonym - you should stand up to what you write."  Let me speak for myself:  Kid Dynamite is, obviously, a pseudonym, but that doesn't mean it's meaningless -  it's my online identity.  It's not as if I can just spout of irreverent nonsense because I'm not writing under my real name -  everything I say goes into the "Kid Dynamite" body of work and reputation, which I very much stand behind and work very hard to establish. As The Epicurean Dealmaker put it: "a PSEUDONYM creates an identity,a distinctive voice which persists thru time.This is OPPOSITE of anonymity"

"But Kid Dynamite," you ask, "You're no longer working at one of the repressive uptight financial firms - why are you still pseudonymous?"   Fair question, and one that I've thought a lot about.  A few colleagues said I should write under my real name, and others advised sticking with the pseudonym.  Personally, I happen to think that there are lots of crazy people out there who I don't need to know my real name.  I don't need to be worrying about them hunting me down just because they don't understand ETF mechanics and are angry that I'm not part of the Physical Silver or Die movement (even though I'm bullish on silver).  I don't need the guy who loses his money day trading coming after me because I explained that high frequency trading wasn't any different philosophically than what he was trying to do.   

My favorite "anonymous" attack came on Seeking Alpha after I wrote the post "Calling out Matt Taibbi on Dark Pools."  The article was a demonstration of Taibbi's misunderstanding of the subject, but that didn't stop a commenter from attacking my "anonymity."  I responded with some snark, including the sentence  "It doesn't matter if my name is Harry Dooker, Stephen Judge, George Washington, Ben Bernanke, or Kid Dynamite - the facts are still the same."

My attacker was satisfied, apparently thinking that Harry Dooker was my real name: "Fair enough Mr. Dooker. You've shown who you are. It's now a call-out. Respect."

What's interesting is if people would respect my blog more if it were written under the pseudonym "James Sturgeon" instead of "Kid Dynamite."  We all have cognitive biases, and it's definitely likely that the name "Anal_yst" or "Kid Dynamite" negatively biases readers from the get-go.  That's an unfortunate side effect of having chosen those monikers, and yet, as I mentioned above, I am my moniker - I have a body of work that has gone into it already, so I don't just want to create a new one.  

James Sturgeon does have a nice ring to it, though.  I mean, the fish theme seems to be working as far as pseudonyms go - right Felix?  "Felix Salmon" is a psedonym, right?  (/sarcasm)


Sunday, January 30, 2011

Vegas, January 2011 Part III - The Victory Lap

Part I and Part II are readily available, if you've missed them.

By the time Dov and I woke up on Monday morning, the other 60% of our group in the adjoining room was gone - back to reality.  We rallied, packed up, and checked out, heading north to meet up with Big Show before our 3pm flights.

We banged out brunch at BLT Burger at Mirage, complete with milkshakes, and then hauled our bags across the street to the Venetian for a few hours of serious double deck blackjack.  The 65 degree sun was a refreshing change from the frigid weather I'd faced at home, and would soon face again.

I feel at home at the Venetian, as Big Show and I have given them most of our blackjack business over the past several years, on account of their face down double deck with player friendly rules (ie, double after split).  I mean, hey - you can't give away that 12 bps of edge!

Big Show, his wife, Dov and I monopolized a table and got down to business, grinding away.  Big Show ended up stuck quickly, and took out a marker for another buy in, as Dov tilted both of us by being super slow and deliberate with his "decisions."   I tilted the dealer by showing him an ace and offering him insurance, which he of course declined, adding "I never take insurance."  I shrugged, and tucked a blackjack facedown.  I was playing two hands, and found another blackjack in my second hand. I again offered him insurance, and again tucked the blackjack facedown.  I signaled to Big Show that I had a few winners, and sat back to await Chang's reaction after the hand as he turned up my blackjacks, which of course the player is supposed to turn faceup instantly.   I feigned a shocked look, while shouting BOOM and fist bumping Dov and Big Show, who was laughing hysterically.

Dov had an epic hand where he was stuck and steaming, holding 7-7 against a dealer 3, with a big bet out.  Dov split the 7's, stacking off another bet, poker style.  He was of course rewarded with another 7, and stacked out another bet.  He proceeded to double one of the hands after receiving a 3, and then split again to 4 hands after receiving another 7 on one of the initial hands.  He ended up with 4 hands, one of which was doubled, but which amounted to only an 18 and 3 pure bluffs - hands that could only win if the dealer busted. 

The dealer, who was Dov's doppleganger, rolled over his hole card: 3.  "YES!" I howled, and started hooting like an ape, "MONKEY MONKEY MONKEY"  The dealer slapped a deuce down, making 8.  "NOOOO!" We all shrieked, and stopped the monkey whooping.  Next card:  Three, for a total of eleven.  Dov sounded like he'd been shanked in the liver, as he let out a miserable wail, but the dealer quickly painted an ace on his 11, making 12. 

Dov screamed "ONE TIME!" and the dealer slow rolled the next card.... FOUR, for a total of 16.  I banged out the gorilla whoop at the top of my lungs,.  It sounded exactly like the gorilla at the 16 second mark (and 36 second mark) of this video, only much louder:

In slow motion, the dealer turned over a king for a miraculous 7 card 26. Dov erupted from his seat, flipping it backwards, and proceeded to take a victory lap around the double deck blackjack pit (right outside the Salon high rollers area), high stepping it in slow motion with his arms raised like Rocky at the top of the Philly Museum of Art steps.

Dov's victory lap was so awesome that a pit boss from an adjacent pit came over to check things out.  "When I see a victory lap, I have to find out what's going on," he told our pit boss.  Dov stacked up his winnings, and our time was up - we had to cash out and grab a cab to the airport.  Our cabbie was a wealth of information, including the details of the odd kitchenettes in the Cosmopolitan rooms.  As he put it, from the perspective of visitors:  "I'm on vacation - I don't want to fucking cook." 

Dov and I said goodbye at the airport and headed to our respective gates.  I had a better Southwest boarding number this time: B10, but again was on the wrong side of the trade.  Instead of locking up the "known," an aisle seat next to a couple who fit comfortably into their seats, I exhibited what I think is probably normal (yet flawed) psychology in terms of seat selection - I went further back in the plane and took an aisle seat in an empty row.  This makes perfect sense if you know that the flight isn't full, but we'd already been told that this was a full flight.  Doesn't it make more sense to take the known - a seat that looks like the middle-seatmate won't be a problem - instead of gambling for the unknown, where I'd basically be allowing someone else the option of choosing to sit next to me?  Come on smallll person! Anyway, I definitely lost the gamble when the largest guy on the plane, boarding near the end,  sheepishly sat down next to me, apologizing, "sorry, no choices left."  This dude passed out quickly, and we were a lot closer than what's normally comfortable, but the jetstream had our backs and the flight home was closer to 4 1/4 hours than the 5 1/2 hour flight out.

As we landed around 11:30pm, the captain announced: "Welcome to Manchester, New Hampshire, where the current weather is three degrees."  Three?  Oy vey - I groaned - not knowing that the next few weeks would see temps dip into the negative twenties.  I layered up, pulling my hat and fleece out of the outer pocket of my carry-on, and double timed it to the parking lot shuttle, which took me to my car without incident.  

Next trip - who knows when... 


Friday, January 28, 2011

Quote of the Day: Nemo on Obama on Egypt

"Somehow, if George Washington and Thomas Jefferson and John Adams etc. were alive today, I do not think their first concern would be restoring access to Facebook."

More here, from Nemo @ Self Evident.

EDIT:  related:  Josh Brown on how the bad guys can use Twitter too, quoting from the New York Times.


NFLX - the Widowmaker

Talk about a battleground stock.  Well, I guess NFLX hasn't really been much of a battleground lately, as the shorts got their heads caved in after Thursday's 16% gap higher on earnings.  Today's late action looks to me like basic market psychology in action.  (Click for chart) The stock was right at it's all-time high at the $210 level and as soon as it took out that barrier, late in the afternoon in an absolute massacre of a general market tape, there was a march higher for the final two hours, as shorts gave up.  I can almost see the shorts and longs sitting across from each other at a table, seeing who will blink first in the battle of "do you want to hold this position over the weekend?"  It wasn't much of a fight, of course, as you can see from the chart.  Nice little straight line up from 2pm to 4pm, closing at nearly $218.

I have no position in NFLX.  I think the stock is expensive, and I think it's going higher before it goes lower. I just found the price action over the last few days to be pretty interesting and telling from a psychological point of view.


ps - If anyone has a good, simple way for me to scrape the intraday chart and embed it here, don't hesitate to share it.  EDIT:  thanks to GYC for suggesting

Thursday, January 27, 2011

Vegas, January 2011 Part II: Living In The Sports Book

Part I is here, in case you're behind.

The crew rallied Saturday morning and we headed down to breakfast at Aria's 24 hour cafe - the same place I'd eaten less than 8 hours earlier.  The breakfast burrito was perfectly adequate, but Dov and JR put me on uber-Bajungi tilt by heading off to the spa for massages and steams and other absolutely ridiculous stuff that positively should not be done while you're in Vegas with your friends and the NFL games are starting. 

The California Kid, Blazer and I headed to the sports book and used our expertise to secure seats, including seats for our spa-going compatriots who would be arriving late.  Do my readers see what I'm up against?  Big Show had ditched me, stuck all the way on the other end of the strip with his wife, and I was hanging out with some Brobos (Brooklyn Bohemians! It's like a hipster, only gayer - not that there's anything wrong with that) who ditched Sportsbook Saturday in favor of the mother f'n SPA!  Fortunately, the Cali Kid (CK) was bringing it hard, and Blazer was testing his new sports betting service that he and a friend were developing.  Blazer's boy had a "model" for sports, and we christened him The Guru. Despite my warnings that it was impossible to beat sports betting, Guru's picks went something like 18-4 on Saturday - across NFL, NBA, and college hoops.  And I"m not exaggerating.

CK and I were down on the Ravens getting 3 1/2 points, and we had the game in the bag at halftime.   Dov arrived and treated the sports book to an extended version of the Ray Lewis signature dance, but that seemed to put the Kaibash on us.   Even after Joey Flacco came out in the second half and gave the game away, our bet was still looking like a couldn't lose, even after Baltimore had a punt return TD called back on what may have been the worst holding call in the history of professional football.  But still, even after that, we still couldn't lose, as the game was tied and the Steelers were driving for a game winning field goal, which would mean we'd win our bet.  Alternatively, the game would go to overtime and we'd be sitting pretty.  All we needed was for Baltimore no NOT give up a 60 yard bomb on third and 19.  But that's exactly what happened.  Bajungi tilt couldn't begin to describe the situation.

In the late game we all pounded the Green Bay - Atlanta OVER, which started off slow but then turned into a total layup.  Unfortunately, I also got down on the Falcons, and again on the Falcons in the second half, nullifying my winnings from the TOTAL bet.  The Aria sports book is beautiful, but they really run it like a profit center.  While most casinos give you a drink ticket for roughly every $50 in bets, and the waitresses also cut you some slack after a while, Aria wanted $150 in bets (actually, they wanted minimum $150 single bets!) per free drink ticket, and the waitresses had no leeway - I think they had to pay for the drinks as the picked them up, as they required drink tickets before hand, and returned with a printed out receipt for each drink.  Beers were about $7, and mixed drinks were in the neighborhood of $10.    I took it very slow, paying $10 for a liter of Fiji, while the California Kid made up for my slack by pounding a wide array of cocktails. 

After the games, we sought out some negative EV in the Aria pits, finding a double deck blackjack game to dominate.  Most poker players are familiar with the concept of table-side massage in the poker room, but Aria brought this concept to the casino pit!  Even at $2 a minute, when you're betting $50 a hand, how can you not get a 20 minute massage?  The masseuse was actually really good, too, lulling me into a coma as I dropped 6 units in the game before heading up to the room to change for dinner.

The Brobos had booked a foodie French dinner at Andre's in the Monte Carlo, which is adjacent to Aria, yet still a 25 minute walk.  I've written many times about the signature smell at the Venetian, which drives me crazy in a bad way, but Monte Carlo's signature smell was miles worse. It was like a heavily perfumed diaper powder or hand lotion.  It made my eyes sting.  Andre's was good food, highlighted by the waiter, who described every dish in a thick Spanish accent, "eeees AMAZING."  "Is there anything that's not amazing?"  I cracked, but withdrew the question quickly upon seeing his confusion.  After dinner we rejoined upstairs to a nice little cigar/whiskey bar for an aperitif, before making our way back out to the jungle that is the Aria casino floor.

I wandered by the poker room and saw a 1-2 half NL hold'em, half pot limit omaha game.  How could that be a bad idea at 3am?  I sat down and was sad to watch the two fish immediately get up, which left me, a not-so-fearsome player on my left, a rocky pro on my right and a Finnish PLO assassin two to my right.

"Do you guys want to just make it PLO?"  One of them suggested.  "Suuuuuure."  Why not?  I have never booked a winning session in this game (0 for 2), but it provides action at least.  "How about a mandatory $5 straddle?"  the other suggested.

I laughed. Sure. No problem. I managed to get stacked within 40 minutes, after I got all in on the flop with a flush draw and a straight wrap - and was drawing DEAD!  That's actually somewhat tough to do in 4 handed PLO, probably, and it went like this:  I had 2-3-4-6 double suited (spades/hearts) on a flop of 5-7-9 with two spades.  I had the 6-2 of spades, led out, and called a pot-sized reraise that put me all in, explaining "Maybe I"ll get lucky."  My opponent had 6-8 with bigger spades.  Nice hand sir!  I headed up to bed to regroup.


Sunday morning me and Dov woke up to find that the crew in the adjoining room had ordered room service breakfast.  We were way late for the 10am PST Bears-Seahawks game, so Dov and I hit the buffet at Aria, which looked better than it tasted.  We then executed a perfect "Operation Seats" in the sportsbook, securing ample space for the big Pats-Jets showdown.  I was repping the Steve Grogan throwback jersey, and held down a few seats with a nice angle for the big screen.  Dov made eye contact with me from another side of the room, and I summonsed him, but he shook his head and made a bird motion, implying that there were a bunch of Seahawks fans who were getting ready to leave and we could take their seats too.

Cali Kid, JR and Blazer joined us.  Blazer had the Jets as a Guru pick, while Dov and I bet the over.  I didn't want to lay the 9 points, and I was trying to find a bet that I couldn't lose in the unlikely scenario that my Patriots managed to lose the game.  I decided that there was no way that the Jets would win if there weren't a lot of points scored, so I bet the over (I just couldn't bring myself to bet the Jets).   We were drawing dead the entire game yet somehow got there in a miracle 4th quarter scoring spree.  Erik the Nit (who is not actually a nit, he would like me to clarify) needed to get some action on the second half over, and asked us for the halftime total. "21 1/2" we each told him via text.  He called Dov with an order to get $300 on the over ASAP.  We had a problem though, as the line was moving like lightening.  22.  23.  Everyone was hammering the over, and Dov was still 3rd in line.  I called Erik and said "dude - the numbers are flickering on the screen - it's going crazy - 23 now - WHAT DO YOU WANT TO DO?"  "MARKET ORDER! BUY IT!" He replied, and I gave Dov the signal.  Erik ended up with a winning ticket at 2nd half over 23.  Oh, that reminds me - the Aria was not sticklers about people using cell phones in the sports book.  One guy even had an Ipad in there.  Usually that's a big no-no.

As the Patriots drove for a late touchdown that was meaningless to everyone in the world who hadn't bet on the game's total, I muttered "this place is going to EXPLODE if the Pats score."  The guy next to me groaned "not me, I have the under."   I was wrong though, as Brady's touchdown pass was greeted with utter silence except for me getting up and jumping into the air while screaming, as Dov came flying in from 15 yards behind me an did a superfly over the chairs in celebration.  We spent 5 minutes watching people bite it on the Aria sports book's camouflaged step before we left.

We had planned to head downtown to kick it old school on Sunday night, and after ditching the Grogan throwback, we cabbed it to the Venetian to dominate some double deck blackjack and pick up Big Show.  The Cali Kid put the dealer on bajungi tilt by tucking a blackjack facedown, but he got away with it by feigning ignorance, which he set up nicely by demonstrating novice tendencies earlier.  "The customer is always right!" CK fake-yelled at the dealer.  After dominating the game for 2 hours we headed downtown to the Golden Nugget - Steve Wynn's original baby.  

We ended up at some steakhouse which I believe was in the California.  To get there, we had to walk around the corner, off Fremont street, which isn't the best neighborhood.  We were so out of place that a stretch limo hummer pulled up and asked us if we needed a ride.  That wasn't the unusual part.  When we declined, he urged "are you SURE?"  Fortunately, the Brobos all had Iphones with navigation, and we followed the little red dots to the California.  We implemented the Buddy System - only travel in pairs down here - including restroom trips out in the casino's general population, away from the confines of the steakhouse.  Amazingly, even here, the steakhouse had center strip prices - $45 or so for steaks - but we all indulged in their secret special - 22 ounce porterhouse, salad, desert, sides, for $22!

It was probably around 10:30pm by now, and there was only one other occupied table in the restaurant.  When the waitstaff brought out desert for them while singing Happy Birthday, we joined in for a raucous rendition.  The peach melba birthday desert looked pretty good, and the guy explained to me "When I was in high school, peach melba meant something dirty."  I eyed him quizzically, and he told me "look it up," which I did, to no avail.

Big Show and his wife headed back to the Venetian, while the Brobos crew went to Brobos heaven, aka, the Cosmopolitan.  "How do you say "hooker bar" in Russian?" I asked out loud, and Dov replied "BAR," making everyone laugh.  We had a round of drinks at one of the many bars, and Dov actually argued with the waitress when she brought our bill, insisting that it couldn't be ours because it was too cheap!  "The beers are only $5," the waitress replied, and we were only too happy to comply.

Dov continued to pound out jokes about the Euro-hipster ambiance at the Cosmo, explaining that at their sports book you could only bet on soccer and tennis.   "No cricket?" I inquired, "of course - seasonal," he replied.  "You should see it up there - they have a bronze statue of Novan Djokavic,"  and we laughed at our own jokes.  Nearing 4am, we tired of the scene, and exited the way we had arrived, into the underground Cosmo cab staging area, which I knew wasn't right.  We were staring right into our room at Aria - literally, all  we needed was a grappling hook - but there was no way to get there. We wandered around the multi-lane side highway for 20 minutes before I bailed and walked back through Cosmo, up the stairs, and through the maze that is the Crystals shops.  Crystals is Aria's super high end retail stores, and the vacancies are staggering.  I would love to see the financials for these stores - the rents and revenues - and for the mall real estate too.

I plopped down in bed and prepared for the final 1/2 day in Vegas.


Dennis Kucinich Could Learn From Gil Meche

A little more than 6 months ago, I expressed surprise on these very pages when I found out that MLB pitcher Gil Meche was under contract for more than $11MM per year.  Today, we're brought the story of Meche's retirement, courtesy of the NY Times:

“When I signed my contract, my main goal was to earn it,” Meche said this week by phone from Lafayette, La. “Once I started to realize I wasn’t earning my money, I felt bad. I was making a crazy amount of money for not even pitching. Honestly, I didn’t feel like I deserved it. I didn’t want to have those feelings again.”

Meche had a guaranteed contract and could have shown up, chewed some sunflower seeds, maybe pitched the occasional inning of relief, while collecting his 10 figure salary.  Instead, he manned up and went out with dignity.
Congressman Dennis Kucinich, on the other hand, is exhibiting tendencies that I certainly wouldn't vote for in an elected official:

"Rep. Dennis Kucinich has rapped a U.S. House of Representatives cafeteria with a $150,000 lawsuit for selling him a vegetarian sandwich wrap in 2008 that he says caused dental damage when he bit into an olive pit. 

The lawsuit that the Cleveland Democrat filed Jan. 3 against operators and suppliers of the Longworth House Office Building cafeteria says the sandwich he bought there "on or about" April 17, 2008 "contained dangerous substances, namely an olive pit, that a consumer would not reasonably expect to find in the final product served." 

Now - I'm quite sure that Mr. Kucinich is correct, and that the olive pit was a dangerous substance, and I do think that his medical bills should be paid for.  Although I was not privy to the details of Mr. Kucinich's pain and suffering, and I'm sure the olive pit encounter was quite unpleasant, I do not think that his $150k lawsuit for damages is something that represents the qualities that I'd want one of my elected officials to exhibit.  All you legal eagles can click the link above for the actual lawsuit.


Wednesday, January 26, 2011

The Only State of the Union Summary You Need

Turn up the volume, unless you work in a place that hates freedom:


Tuesday, January 25, 2011

Vegas: January, 2011: Alone in the Desert

As usual, when I planned this trip to Vegas I put a lot of thought into analyzing my flight options.  I'm an easy 30 minute drive from Manchester (NH) airport, which offers one direct flight (Southwest) daily.  The problem with this direct flight is that it leaves NH at 7am, arriving in Vegas at 10am Left Coast time.  The alternative was to take a circa-5pm flight out of Logan, but that would require driving to Boston in Friday rush hour, which was something I didn't even want to mess around with.  

Thus, I found myself getting up at 4:30am on Friday, after having tossed and turned since 2am, paranoid about sleeping through the two alarms I had set (which would have been impossible, as my dogs go nuts when the alarm goes off).  Zombified, I cleared security, choosing not to offer a wise-assed retort when the TSA Frisker asked "Anything tender or sore?"  And headed to grab a bagel breakfast sandwich.  "You look like you're still asleep," the cashier told me, and I explained, "Yeah, I'm kinda trying not to wake up - MUST sleep on the plane."

My friends derided Southwest's "Communist" tendencies, and I blundered as I entered with my B45 boarding pass, panicking and snagging an aisle seat in row 5 next to an elderly couple.  I should have continued toward the back of the plane where there were still aisle seats available, but instead dove into this seat next to the husband who was in the middle seat, and who turned out to be far too large for his seat.  The flight was uninteresting, aside from the old lady pulling out a Nintendo DS about 90 minutes from landing, where she proceeded to give Mario Brothers a severe cursing out.  I thought she was going to smash the system on the tray table.

Landing in Vegas, I quickly arranged lunch with The Chairman, and headed over to Aria to check in.  After dropping my bags in the room, I sat for an hour in the 1-3NL hold'em game, (played with normal $1 and $5 chips, not the $3 peach chips the Wynn uses) as I waited for The Chairman to pick me up for lunch.   I played one hand of note, when an old European man stepped into the path of the KD Express.   He'd somehow managed to avoid going broke on the prior hand when his 66 flopped bottom set against an 8-9 flopped straight (6-7-T), and both players slowed down when the turn brought a potential flush.

This hand, I raised it to $10 with QcJc in early position.  The OE (Old European) called me, as did one other.  When the flop came 9c-8s-2c, I bet my overcards, gutshot and flush draw:  $15.  The OE made it $60 to go, and I paused to count his chips.  "He's got about $95 total?" I asked out loud, and the dealer countered "more like $135."  Jeez - bad counting - I'm out of practice.  I took 35 seconds, shoved out a few stacks of red chips, enough to put the OE all in, and he called.  The Qd peeled off on the turn, which was good enough for me to drag the pot.  A nit in the 2 seat piped in "So that's the kind of game it's gonna be?"  Huh?  What did you expect me to do - fold?  Please. DYKWTFIA?

I spent a few minutes chatting with one of the Floor managers in the poker room, who I knew from The Mirage.  "You're here full time now?"  I asked, and she replied "Yeah - that place is a sinking ship."  Oy - so sad - the Mirage used to be one of the centers of the Vegas poker universe.  Now they struggle with $3-$6 limit games and 1-5 Stud.   I spotted David Oppenheim in Ivey's room playing in what I believe is a 200-400 limit mixed game.  I didn't recognize any of the other players in the shorthanded game.

The Chairman arrived in short order and we headed 150 yards around the corner to Todd English's PUB - Public Urban Bar - an upscale bar with 35 beers on tap.  Our waiter asked "Have you guys been here before?" And when I replied "No," he proceeded to spend 5 full minutes explaining the menu.  This put the Chairman on BAJUNGI tilt, and he explained, "Jeezus - I haven't eaten HERE, but I've been to a RESTAURANT before! I know what a MENU is!"   My burger was incredibly disappointing - a small patty on a large bun - with undercooked streak fries to boot.  I didn't return to give the PUB a chance at redemption.

After lunch, I said goodbye to The Chairman, and had a problem.  You know that feeling that you have on Sunday morning of a standard trip to Vegas, after two nights of fitful sleep and excessive partying?  Well I felt like that at 2pm on my first day.  Major issue.  I returned to the room to regroup and wait for reinforcements to arrive.  Dov, who I was sharing a room with, had smartly noted the Fallacy of "Saving It," and explained that we would be hitting it hard that night.  The Fallacy of Saving It is as follows:  When everyone arrives at 9pm on Friday night, the tendency might be to say "Let's just hang out tonight, gamble, drink, but save the big club night for tomorrow."   No. That doesn't work at our age.  You have to hit it hard the first night, right off the bat.

So I napped, poorly, until around 6pm where I rallied and returned to the Aria poker room for a little 2-5 NLHE action.  I sat in the 2 seat next to a young gun in the 1 seat who was fully "local poker pro'd" up:  hoodie over trucker hat, sunglasses, etc.  He wasn't a douche though, and the table dynamic was pretty decent.   I later described the game to Big Show as "sneaky good" - it was a game that appeared horrible at first, until you realized that guys would call you down with second pair, and you just had to make thinner value bets.   Of course, I didn't realize this until I had a multi-barrel bluff called down, which made me nod, shrug, and alter my game plan.  The young gun (YG) had shown a propensity to make a big button raise after multiple players limped: he did this at least 3 times, once showing 8-9 offsuit after continuation betting the flop and taking the pot down.  So as I sat in the small blind with pocket tens and about $330 in my stack, I decided to pop him back after 4 people limped and he made it $35 to go.  I 3-bet to $135 and everyone folded back to the YG who went into the tank.  I shuffled my chips for a few minutes, then stopped and waited.  He finally called.  I had less than a pot sized bet left and pretty much planned on shoving any flop.  When the flop came K-T-9, my plan didn't change, and I was INSTA-called.  I turned my hand faceup as the dealer quickly peeled off the 4c and the Jd.   The player two to my left started to say something, and I quickly put up a finger to hush him, mouthing "shut. up."  He paused, and then couldn't contain himself, blurting that he had queen-ten and would have called if I hadn't reraised preflop.  The YG wasn't the kind of player who would overlook the 4 card straight on board, but everyone is capable of making mistakes, and I tried to politely explain to Mr. QT that he should keep his mouth shut until the pot is pushed.

YG held his cards, shook his head, and mucked.  "I had you crushed," he muttered, and I was temporarily confused: KK-QQ-JJ all still beat me.  "You really had AA?"  "I've played like 4 hands all night," he replied.  "Hey, you set me up," I explained, "all those button raises, and you showed the 8-9 earlier!"   He smiled and shook his head, explaining "that wasn't by design!"    He proceeded to pester me for about 20 minutes - would I have called a preflop shove?" (yes) and lament about the beat.   

After another hour, I picked up from the game and cashed out, needing to get changed for our pending night out at Marquee, the club next door at The Cosmopolitan.  First, I stopped by the sportsbook to check the NFL lines, and marveled at the camouflaged step that Aria installed in the entrance to their sportsbook.  I am willing to bet that within 6 months you will either read about lawsuits regarding trip and fall accidents about this step, or you will see it turned into a 8 inch ramp.  If you're bored at Aria, just stop by the sportsbook and count how many people almost eat it when they miss the step - you won't have to wait more than 5 minutes.  Steve Wynn would never let that happen!

I returned to the room and changed, as The California Kid, JR, and Blazer arrived in the adjoining room in short order.  Dov was stuck at McCarran, awaiting his checked bag, and Big Show was on his way over, with his wife in tow.  The team finally fully assembled, and I had to shepherd Dov to make sure he didn't primp and preen too much, finally managing to get him out of the room and on towards Marquee, which was next door, yet a 25 minute walk away.   The scene outside was a total zoo, of course, and even with our table reservation we had to wait for a half hour.  The Cosmopolitan is a hipster hell, trying WAY too hard to be the hot new place.  Of course, that's how Vegas works - there's always a hot new hip place (Hard Rock and The Palms have previously held that title) - the key will be to see if Cosmo can maintain the image.  I have some history with this place, as I had a refundable deposit down for a condo-hotel room there at the peak of the bubble in 2006.  Fortunately, I bailed, and the project proceeded to get foreclosed on, and is now owned by Deutsche Bank.   Although they had sold a full tower and part of a second tower, I think that the condo-hotel concept is now gone, and that they're all hotel rooms now - (yep - confirmed

Thankfully, our table was in The Library at Marquee, which turned out to be much better than being in the main room, which offered up colon shaking house music spun by DJ Chucky - as if I know who that is.  All I know is that it was "untz untz untz" hell, and louder than anything I've ever experienced.  Being in the "side" room Library was a blessing, even though we were out of the thick of it.  We polished off our bottles of booze, and Blazer and I went to wander around the club.  When I returned, Big Show had ditched me, so I decided it was time for food.  I wandered out alone, and ended up at the Cafe at Aria at 4am, where I enjoyed a perfectly acceptable steak and cheese sub as I listened to the drunk girl in the booth behind me blubber to her boyfriend about how she totally liked him, but like she was worried about what would happen if she got pregnant and then he was mean to her, and like what would she do then, and like she'd lose all her friends, and like then the alcohol took over and she was just bawling.   Ahhh.  Vegas.

I trodded back up to the room, where I found an early-Saturday-morning-East-coast-time text from Erik the Nit, begging for status updates.  "Got it it in bad, sucked out, bottles, noise. Standard."  I replied, before dozing off to prepare for Saturday.


Sunday, January 23, 2011

Persistent Partisan Politics

News alert:  Congress may get a teeny bit less partisan during the President's State of the Union address this week, as members of the rival gangs - sorry, political parties - are actually going to, get this: SIT TOGETHER in the House chamber!    The NY Times intro is cute:

Mary from Louisiana asked Olympia from Maine because they are BFFs, but had a backup in Bob from Tennessee in case she was rebuffed. Kirsten from New York went the Sadie Hawkins route and asked John from South Dakota, and thus the deal between two members of the Senate with seriously good hair was sealed.  

The talk in the West Wing may center on what President Obama plans to say on Tuesday in his State of the Union address to Congress about the still-ailing economy, or United States-China relations, or his education agenda. But here on Capitol Hill, the talk for the last few days has been all about the seating for the president’s speech and just who will be next to whom. 

Ever since Senator Mark Udall, Democrat of Colorado, pushed for lawmakers of both parties to mix it up rather than sit among their own in the House chamber as if the other side has cooties, there has been a mad scramble among lawmakers for just the right partner. 
Holy cow - amazing, right?  If you can't detect the sarcasm here (and yes, I know it's hard to detect online sometimes, I didn't use my Sarcmark), I apologize, and I hate to be a cynic, but why is it such a great step forward that our elected officials are actually going to sit together and perhaps even attempt to lead our country together (sorry, I'm jumping to conclusions)???  Shouldn't this have happened a long time ago?

Mind you, I'm not complaining - this is a good thing - well, unless you want to form it into a vast Liberal conspiracy.  Shocker: some people DO want to form it into a vast liberal conspiracy!  Back to the NYT article:

“I already believe very firmly that it is a trap and a ruse that Democrats are proposing,” Representative Paul Broun, a conservative Republican from Georgia, said in a radio interview. Other Republicans have also scoffed at the idea as childish and irrelevant, calling it an effort to muzzle Republicans and prevent them from expressing reservations about Mr. Obama’s speech. 

Ah - so Mr. Broun doesn't like the fact that if he wants to sit out a standing ovation during the President's speech, he will be visible as someone "sitting" amongst some "standing" (presumably) Democrats, rather than just another face in the vast crowd on one side of the aisle acting in unison.  Guess what - tough luck Mr. Broun - you should be held accountable for your decisions, and not rely on the ability to hide safely in numbers in a crowd.   It's not a "trap" or a "ruse" when everyone can see what you stand for, Mr. Broun  - that's how the system is supposed to work.   

Stand for what you believe in, sit for what you don't. 

I. Hate. Partisan. Politics.


Ice Ice Baby Too Cold

I went snowshowing with my wife yesterday.  Yep - that's just how I roll - try finding another member of the financial blogosphere who went snowshoeing this week.  Even Josh Brown can't touch this.  It's starting to feel like the Overlook Hotel up here, with a new dosing of snow every week, and roadside snowbanks piling ever higher.

The forecast for tonight is for a negative 15 degree temperature (EDIT:  new forecast is negative 23!).  Not windchill - mind you - temperature.  That's friggin' cold.  I'm pretty sure it's the coldest weather I've ever been in anywhere I've ever lived, and I've lived in the Northeast for my entire life.   I will attempt to warm myself by cranking the below video and busting out some vintage dance moves:


Friday, January 21, 2011

Muni Finances - Fix The Underlying Problem

I started to write a post about this topic this morning, but deleted it in frustration.  Instead, I'm just going to bang out a short and simple one on the topic: Muni Bankruptcies.  

Here's the bottom line - the current talk about municipal bankruptcies is designed to fix the past problems - obligations we've already rung up -  but doesn't address the underlying problem which, uncorrected, will guarantee that we have this discussion again in 15, 30 or 50 years.  That problem is defined benefit pension plans which are based on overly aggressive underlying return assumptions.

All the bankruptcy chatter is designed to alleviate the past obligations - but we also need to fix the FUTURE obligations, and I don't see that being addressed.  I come from a family of teachers - my father, my mother, my sister, my brother in-law - all teachers.  My sister says "But I contribute more to my pension than Mom did,"  and I reply, "Yeah, but that extra 2% doesn't make up for the fact that the return assumptions internal to your fund are higher than reality is likely to deliver."  I've addressed that part of the equation previously.  Switch to defined contribution plans (and yes, taxpayers, once the deficits are shored up, can provide matching funds if needed), and let the employees invest it however they want, or even have the pension fund manager invest it for them.  That way, if the return assumptions turn out to be accurate, they'll reap the benefits anyway.

End defined benefit plans in favor of defined contribution plans.  Otherwise, we're destined to repeat this pension boom-bust cycle indefinitely. 


ps - There are other modifications that should be made too, of course, like ending the "gaming" of baseline salary numbers by employees who collect massive amounts of overtime in their last few years of work and receive annual pensions based upon an inflated baseline.

Wednesday, January 19, 2011

Guard Rail: 1, Kid Dynamite: 0

A question I will delve deeper into later this week is the one: "Why blog?"  But hey, I don't want to get too existential or too far ahead of myself.  One of the biggest benefits of this blog has been that I get to soak up the knowledge of my readers, who, by definition, have more experience than I do.  Although I consider myself a blogging jack-of-all-trades: perhaps the only guy out there who can write about his dog's anal glands, giant tomato hornworms, ETF mechanics, high frequency trading, and a conversation with Treasury, I need my readers' help, and I ask you for it now! Specifically, if you're involved with auto insurance or have ever filed a claim with your auto insurance company for an accident where no one else was involved (ie, you skidded off the road into a tree), then this one is for you.

Last night, my soccer team had our playoffs in an adjoining town.  Of course, up here, "adjoining town" means a 20 minute drive, and last night the roads were about as bad as I've ever seen them, even on the highway.  Before our semi-finals loss, I texted my wife: "Roads are terrible."  And after the game, I urged my teammates, "Guys - PLEASE drive safely - the roads are AWFUL."  Somehow, still, I managed to be the one spinning out and crashing my car on the way home.  Crash may be an overstatement - I was going about 35 mph on a road that's normally 65mph, but had signs for "45MPH Winter Conditions."  The road was flat out awful, and I was in the left hand lane, a mile before my left hand exit.  The right hand lane looked better, but I didn't want to switch, as I though the toughest part was the strip of snow and slush between the two lanes, where I would be most likely to lose control.  I'm driving the official NH State Car, by the way - Subaru Forester, 2010, all wheel drive.

Anyway, I'm driving along, thinking "Don't crash the car," a mile from the exit, when all of a sudden: FUCK.  It's over.  I'm sliding diagonally toward the right late, and I have no chance.  STOPPPPP - but no - it's not stopping. I'm sliding on black ice/slush, and the guard rail will be mine.  I somehow hit the guardrail with my front right corner, and then, quickly, my right rear corner.  This was my first accident ever!  I put it in park, hit the hazards, and noticed a car behind me instantly coming to a stop. I got out to assess the damage, and the guys behind me came running up to make sure I was ok, explaining that they'd just done a triple 360 in front of an 18 wheeler up the road.  I assured them I was ok, and continued home - the car was still drivable, with damage to both the front and rear right bumpers, front headlight, and rear quarter panel.

Today, I took it to a body shop and got an estimate - $4k - while my wife and I debated if we should eat the cost or submit a claim ($500 deductible  + potential rate hikes).  We didn't want to submit a claim and have our rates go up - or have a claim like this make any future serious claim (ie, where someone else is injured) cost us much more.  Eventually, I got a hold of my account manager who told me that in an accident like this (we were speaking HYPOTHETICALLY, of course), as long as they don't have to pay out damages for property or medical bills to someone else, my rates don't change.  I pestered him with questions: "but you will have to pay for my property."  "Yes."  "And I won't lose my safe driver discount or preferred rate, or be assessed a surcharge?"  "No, not in an accident like this where no one else was involved."

I got him to put that in writing, which is obviously not a legal doc, but he wrote:

"If your accident is not at fault and we are not paying out for damages to someone else’s property or injuries, generally there are no impact on the rates.

If you are at fault in an accident and we have to pay for injuries or damages to property, then you may experience a potential loss of safe drivers discounts, loss of preferred ratings and potentially a surcharge to your policy."

Now, obviously, a guy like myself who can read and comprehend immediately worried "what about if it's NOT a "no-fault" accident and they don't pay out damages to someone else?  That could be the description of this accident - I have no idea - I mean, I was going well below the posted speed limit, but if it's not my fault, whose fault is it?  That's not really covered in his email, but the email isn't a policy statement or legal doc anyway, so I proceeded and filed a claim.  I am hoping that I can get them to label this no fault based on the weather conditions, my speed, and my record (perfect!), but that's where I ASK THE AUDIENCE. (Basically, I just want to make sure that my account manager is correct when he says that my rates won't go up based on this event.)

My account manager also told me that if I filed a claim for this, it wouldn't effect any future claims in terms of making their impact on my policy cost more severe.   The first thing I don't understand is, obviously, if I skid off the road once a month, my insurance company isn't going to just eat the cost every time without raising my rates - so how does that jive with what my guy told me?

My wife thinks that this story will end with them jacking up my rates at renewal time, and me going into a rage (and she's right, I will, if that happens).  What say ye, my readers who have experience in this area?

note:  I'm pretty much looking specifically for those of you who have filed auto insurance claims in similar circumstances: ones where the damage was covered by collision insurance, and where there was not another car involved.  I can't wait to hear your stories in the comments - I hope I'm not about to get screwed (ie, that I won't see my rates increase when my policy comes up for renewal)...


Tuesday, January 18, 2011

Back from a Long Weekend

A Vegas Trip Report will be forthcoming in the next several days, bu here's what caught my eye from the weekend reading:

"I offer one more piece of evidence that I think almost surely suggests that the end is near in this sector. While channel-surfing the other night, to the annoyance of my otherwise very patient wife, I came across a new television series on the Discovery Channel entitled 'Flip That House,'" economist David Stockton said, prompting a roomful of laughter according to the transcript. "As far as I could tell, the gist of the show was that with some spackling, a few strategically placed azaleas and access to a bank, you too could tap into the great real-estate wealth machine. It was enough to put even the most ardent believer in market efficiency into existential crisis. [Laughter]"

The Fed, the home of many of the most ardent believers in market efficiency, did not go through an existential crisis, however, and did little to slow down surging prices or warn consumers that "the end is near."

- 60 Minutes Piece:  Billy Walters - Professional Sports Bettor.  Cullen Roche has a markets analogy on this one too.

Related:  Felix Salmon:  Why is Seeking Alpha Paying Its Contributors?  I will have much more on this one in the coming days. EDIT:  Felix has a new post about me specifically, based on some questions I sent him.