Friday, February 27, 2009

The problem with dating strippers


Today I am pondering exactly how some of these handy little ETFs I like to trade actually work. For those of you not exactly in the finance game, an ETF is an Exchange Traded Fund. You can get a good primer on it in wikipedia: http://en.wikipedia.org/wiki/Exchange-traded_fund

My investigation has actually left me a little skeptical and nervous. I find them to be good trading vehicles to take advantage of market movements where I would never have the ability to trade nor the tolerance for risk to directly invest in. But, I do not think most of them are a good long term investment strategy.

The best way for me to hash this out is to make a pro and con list. First I will start with the positives:
+ A much safer way to short an index or just about anything. Compared to actually shorting an equity where you could end up owing mountains of money, the worst that can happen owning a ETF is it goes to zero.
+ Allows you to get a broader exposure to markets with a smaller investment.
+ Can be bought and sold in 15 second increments. Much better than a mutual fund. Mutual Funds only trade at the end of the day.
+ Their operating expenses are lower than most mutual funds and are alot cheaper than trying to buy and sell all 500 stocks in the S&P by yourself.
+ You can utilize leverage against just the movement of an index.
Now the negatives (these answers will be longer because this is what I am trying to figure out):

- Arbitrage is risky. Especially when it is done on large scales. Just think of the crash in 1998 and what happened to Long Term Capital Management(LTCM). In September 1998 they lost $4.6 Billion in arbitrage gone horribly wrong. I know that arbitrage is one of the great ways that ETFs stay in check and return to fair prices, but, with so many ETFs out there, this has to expose risk to other arbitrageurs going after the same piece of the action. This would mean that the faster computers are going to win each time. Thus, if you get on an ETF that doesn't have the edge, you could potentially get hosed on one of those transactions.
- ETFs are exempted from the Investment Company Act of 1940. This makes them very similar to a hedge fund in that they can use derivatives. That is a short path till you get into Credit Default Swaps and Credit Default Options which we have heard enough horror stories over the last few months to see how risky these can become. AIG needing $85Billion to just not go under, $7.2Billion at SocGen for futures mis-use... the list goes on and on...
- Volatility can be a real bitch on the long term performance of an ETF. If volatility of the market is high (think the VIX) then the deviation of the performance of the ETF from the index it is tracking will be greater.
- The whole bubble aspect. Whenever this much money moves into one place, eventually something will cause the bubble to pop. It can't go up forever. By the middle of 2008 there were 680 ETFs in the US with $610Billion in assets. Something will eventually have to give.
- And then the last one which is the foundation of why I think ETFs are good short term trades but leveraged ETFs, in particular, are terrible long term investments is because: These leveraged funds are designed to give a positive or negative multiple of an index on a daily basis and NOT for greater periods of time. Thus, the fund will not return a simple multiple of an index's return for much longer than periods of one day. This is the reason why so many of the short oil ETFs did not track along with the plunge in crude last year.

So, as much as I love my SDS (ProShares Ultra Short S&P 500)... I doubt I could ever bring myself to hold on to it for more than a few days at a time. No matter how bad the market looks for the next month, quarter, year, decade.

I will end with the great observation from Fast Money trader Jeff Macke: They’re not for buy and hold. ETFs such as the SDS are like dating a stripper, he says. “It’s fun but it’s not going to end well.”
I think that pretty much sums it up.

Wednesday, February 25, 2009

Still clinging to their guns and god....

Everyday I see stories about the outrage people have that bank executives are being paid at all and that they still have corporate outings in a time of financial crisis in their sector. There is the large argument on who is to blame and what responsibility each of us carry for this mess. But, that is not my issue today.

I want to focus on the strange inequity in the country and how the average American deems something to be just and fair. That inequity rears its head in the form of NASCAR. If I am correct, GM took $13.4 billion of tax payer money just recently to stay afloat. Chrysler took $4 billion in bridge loans also. At the same time they are going to be spending an estimated $25 million a year to have race cars go around in a circle. Aside from the outlay of taxpayer money to fund these events, this does nothing to help the environment and reduce gas consumption. I do not see how GM and Chrysler having corporate tents and sponsorship at these events is a good use of our tax dollars.

It seems as if this is something that the average American should be outraged about. But, you don't hear any outcry about it. Instead the average American is all up in arms that the oncoming CEOs of failed banks may get a salary as they try to lead these institutions back into solvency. I understand the anger over somebody who drove the banks into the ground getting a bonus, but, most of them are gone. Most of the people that the American public want to punish are the people who have come in to try to fix things.

On top of that, NASCAR itself is getting direct bailout money in addition to the money from the bailed out auto industry. They are getting $128 million to revamp some of their racetracks around the country as part of the stimulus plan.

Guess this is how a democracy works....

Sunday, February 22, 2009

Happy Rant


Last week I was inspired by an old college classmate to go hike the ridge above my valley. It turned out to be a stunning place and now I just keep wanting to go back.

I went on Saturday morning again with a friend, her dog and my dog. We had a great time and the weather was great. She summed up the experience best... She said that outings like that remind her of why she lives where she lives. I completely agree.

It is really amazing how nice of an area I live in. Sometimes you just get so into the grind of things that you forget to take the time to enjoy what you have. This inspired me to write a little about where I live and why I like it here.

I love the silence and seclusion of my valley. I love the trails and the wilderness that is around me on all sides. The creek that flows out of this valley into the Shenandoah River is as gorgeous as anything I have seen in the Rockies. My neighbors all around me are friendly and nice folk. We also have a great mix of people in the valley and they all add to the fascinating fabric. The wildlife is abundant and we are surrounded by untouched National Forest. The weather is always interesting and can make some mornings just breathtaking. On clear nights I can stand out in the yard and see a shooting star gauranteed in 5-10 minutes no matter what. You can also see the milky way very clearly and most of the major constellations. The pond is great and is so nice to swim in during the heat of the summer. During the winter when the weather is right, nothing is better than pond hockey. All in all, it is truly a wonderful place.

That isn't to say it doesn't have its struggles. We have frozen sump lines sometimes in the dead of winter. Gnats invade the valley in the summer and are annoying. To get ANYTHING not available at the general store it is 20 minutes minimum. We have zero cell service within 15 miles of the house.

But, all of these seem pretty minor when you are sitting up on that cliff hundreds of feet above the narrow passage below.

Well, that is my happy "rant" for the day.

Wednesday, February 18, 2009

I'll let the president of the EU speak for me





It is nice to see that they care enough to send a letter to the governor. But, I am afraid it won't matter much. Folks round here just love frying a black man. Sad.....

Man do I hate the death penalty. It makes me sad to be a member of this state and country.

Tuesday, February 17, 2009

Maybe a compromise?


I have a good job and the work I do is interesting.... but....

I feel like I am in a rut. I am tired of dealing with the same IT issues over and over again. I feel like I could do more with my life than fix Linux systems. I know it is a pretty glamorous job and one that many Windows Admins would dream of doing. But, it isn't really as glamorous as it looks on TV.

To remedy this, I think the only route is through grad school. I was seriously pursuing the EMBA program when I was at AOL. But, now I am going to have to throttle back that ambition a bit. I still would like an MBA more than any other degree out there, but, I fear that they are now just a dime a dozen. So, I went off searching for something outside of the MBA tract, but, still interesting to me.
I think I may have found it in the George Mason School of Management. They offer an MS in Technology Management. This would give me the MBA exposure I wanted while giving me a degree in something other than an MBA. It is also in a field I have a good bit of experience in to boot! I have signed up for the March 7th information session. This should be a good opprotunnity to find out what the program is really like and to meet some of the current students and faculty.

Last week I purchased a GMAT review book. I am going to work on a time to take the GMAT in March. I think that regardless of whether the MSTM program is a fit for me or not, I need to get the GMAT out of the way so I can work on applying for whatever program I finally decide on.

The MSTM has a possible start date of Jan. 2010. I think this may be a bit aggressive, but, we will see what I can get done between now and then.

The other bonus to this is that my wife is a Mason grad... So, I am sure she would approve of my school choice. ;)
Ok. Off to bed. I need to get up early so I can be at class on time tomorrow. I am going over inodes and hard and soft links tomorrow. So, it may be a long class.

Friday, February 13, 2009

Coding leads to distractions

Sometimes when I write code I just need to step away and let what I am doing simmer for a bit. When I come back to it I am fresh and ready to keep plugging along. That is where I am right now. I am writing a bunch of scripts to automate hardening of systems at work. It is coming along, but, it is tedious and I just need to stop for a bit. The good thing is, I finally have an excuse to take a break for a few minutes and update my blog. You would think that I was shipped off to Pakistan after the meeting based on how I have been updating my blog lately.

I went to my new contractor's orientation on Monday and it was actually fairly interesting. They are a huge company with alot of opportunities. I even have some interest in staying on with them even if my current job moves to another contract. I have only been officially working for them for 2 weeks, but, I have interacted with them frequently ever since I got up here. They treat everyone very well and to boot... when I put in my salary requirements, they came back with a number above what I asked! That is a good way to make a happy employee. So, we will see. I am sure I will have to make a decision by the summer. But, I like my options at this point.

The weight loss is chugging along. When we started the contest I was at 267. My latest weighing at home has me at 241. So, I think it is working out so far. I am happy with the results, but, I still struggle with it at times. But, the longer I do it, the easier it is to keep up. Tomorrow we have a double date for Valentine's Day. That should be fun and a change. I just need to watch my food intake. Since we are doing Japanese Steakhouse, I plan to avoid the grill and just have Sashimi. It should be filling and delicious, so that should do the trick.

Class is plugging along. I gave them their second quiz on Wednesday. Just glancing at it, they seemed to do alright. Nobody aced it, but, I think I am being fair in my questions. I will see how it is once I have all of them graded. At that point I may need to change the scale a little bit. But, we will see. It is one of the advantages of doing a class for the first time. I can adjust as I go because I have nothing to base it on outside of what I am doing.

On the should be happy, but, is just plain frustrating front.... My wife and I have some major purchases that we need to make in the near future. I am trying to budget it all out, but, of course we just won't have enough money when it is all said and done. That is just the way it is. There are three items we need, I will list them in increasingly expensive order:
- New Washer and Dryer
- Decent personal laptop for me
- Pickup Truck

Needless-to-say, the washer and dryer are important because it makes our lives ALOT easier. We are just going to have to decide on whether to go with the front loading washer to cut down on water consumption, but, pay more.

The laptop isn't an absolute necessity, but, it is a pain borrowing my wife's Mac whenever I need to be on the road or something. I can't use my work laptop for really anything due to the nature of my job and the security on it. So, I need to break down and actually buy myself one. I have not done this in years, so I am not sure. I would be happy to get a MacBook Pro, but, they are waaaay to expensive to buy for myself. I think I am going to end up buying an HP or Similar with the 17" screen. I guess I will have to get Windows on it. But, I plan to blow that away as soon as I get it. After that it comes down to what flavor of Linux I want to put on it. We will see....

The truck is (of course) the big one. Sometimes I think, "eh, I will just get a small truck and save money." But, if I do that I fear that I will tire of it after a couple years and want to sell it and buy something else. I might as well buy what I really want. I started out wanting the F-250 so I could really haul stuff, but, after a while I have settled on the F-150. I want a SuperCrew and I want the longest bed I can get with it. After that, there is a long list of items I want, but, I would be flexible if it meant getting the price down. The deals right now are awesome, so I may be buying it sooner than I planned. The other thing that is pushing up my decision is that it looks like the interest off of the purchase would be deductible. This means I would WANT to finance it instead of saving up and paying with cash. I am going to keep looking and doing my homework, but, I plan to be ready to make the purchase as soon as the time is right and the situation makes sense. I was hesitant to make the purchase with an uncertain job outlook, but, now I feel that I am looking at steady employment here for the next few years I am more inclined to make the purchase.

Ok. Back to coding. They want me to do some work with an Avaya system. Ugh... friggin phones. :)

Saturday, February 7, 2009

Should be a fun day


Today is shaping up to be a pretty enjoyable day. It is going to be in the upper 50s, we have an interesting lyceum this morning and I have a bunch of friends coming over to shoot, skate and hang out this afternoon.

I am especially looking forward to the lyceum. It is a lecture series we hold here in the valley and it always has excellent speakers. Well, except for that one guy who talked about oil last year, he (me) was a little suspect. Today's speaker is Ambassador Wendy Chamberlin who was the former ambassador to Pakistan and is now President of the Middle East Institute. She was ambassador to Pakistan during 2001-2003, so, I'm sure she will have some very interesting stories and insight on what happened there during that time and what is going on right now.

Pakistan is such an interesting country. It is not even twice the size of California, but, it has over 5 times the population. It sits at the crossroads of just about every ancient civilization on earth. The people there can trace their ancestry back to Dravidian, Indo-Aryan, Greek, Scythian, Hun, Arab, Mongol, Persian, Baluchi, and Afghan roots. It is such a diverse country, yet it is heavily Muslim (95%) and a majority Sunni (75%). It is a fairly undeveloped country, but, a nuclear power. It has been in a constant war for the last 2000 years and will probably be in one for the future due to its geographic location. So many countries would like to own and influence this section of the world due to its access to so many other places. The only way I see Pakistan being able to break the cycle of violence around it and thrust upon it is to make major gains economically. With the size of workforce available, the location of the country and the natural resources available to it, it should be able to climb up to first world status with the right goals, direction and leadership.

It has done the first most important step. It is no longer a militarily ruled country. Musharraf stepped down they now have an elected Prime Minister. This wasn't till after the main candidate was assassinated and yet another constitutional crisis. This trimming of the military's power will help redirect the goals of the country and bring many aspects of the country back under private control. While it will be a slow and sometimes unstable process, it will have some really good results in the end.

The second step is to get their economy back under control. It had a good run from 2001-2007. This was spurred by large amounts of aid in the beginning and a steady flow of foreign investment after that. They saw a GDP growth of 6-8% and even more importantly for the war on terror, a drop of 10% in the poverty levels. Unfortunately, the commodity boom of 2007-08 hurt Pakistan's economy and devalued their currency significantly. They are now seeing a spike in inflation from all of the spending over the last few years too. (America could learn alot from the right now) Inflation jumped from 7.7% in 2007 to 20.8% in 2008! Not a good sign for spurring growth and foreign investment. I am going to guess they are going to have to go to the IMF for more conditional loans if they haven't already. From this aspect, Pakistan stands at a tenuous juncture with the US. They really need the aid and support we offer, but, they are also afraid that one day we will back out, or they will be forced to give up the aid. (i.e. our continuously increasing raids into their sovereign soil) Hopefully, this issue will be addressed and a solution will be hammered out by the new administration. This is one glimmer of hope I see in the message of "change." I really hope that the US's policies with Pakistan "change." We need to cease the raids into their country, we need to help them financially wherever possible and we need help them where we can without them becoming dependent on us, nor having to answer to our directives.

I really think that with a strong economy, most of their other problems will stand down. They would become a viable trading partner with India which would do more to ease tensions than any peace talks. They would become a positive and guiding role for some of the other undeveloped countries in their region. It would help squash the rebellions in the NorthWest territories and bring that part of the country back into rule of Islamabad. It would also decrease the number of unemployed youth in the country and cut off some major feeding grounds for the less than desirable elements in the world.

Ok. I think I have rambled enough today. It was good to type out my thoughts so I could be more informed today during the talk. I really look forward to it and I will share any interesting insights when I get back.

Wednesday, February 4, 2009

Working on my resume

Since they are going to cap the pay of executives who work for companies taking TARP money, I imagine that alot of them will be hitting the exits shortly. While they may not find a $500,000/year salary acceptable...

I do.

So, I would like to use this moment to announce my intention to sign on as the CEO of one of the TARP banks. I think I am going to start with a resume and cover-letter to Citigroup. I was a heavy shareholder for quite some time and have a decent understanding of the structure and organization of the company.

I want to write more... but, I need to go work on my cover-letter. If anybody has any good ideas of what to put in it, I am all ears. :)

Tuesday, February 3, 2009

My name is Chubby

Sorry for the long hiatus. It was a fairly busy weekend and I am finally back to a decent level of rest and have most of my pressing stuff done at the farm, so I can actually blog tonight. Besides, I sorta blogged on Facebook this weekend by writing 25 things about me. It probably wasn't the most uplifting or inspiring list. But, that's what you get when you write it at 5AM.

On a humorous note, I went bowling this weekend. I hadn't done that in years. I started out with a pretty poor showing but, I rolled a 167 in the second game. So, not too embarrassing in the end. It was 10 pin, so it wasn't as much fun as duck pin. But, I made do and the company we bowled with were fun. I also got to wear one of my bowling shirts and insist that I be called "The Dude." So it was all good.

We also did a Super Bowl party at a couple friend's house. We had a really good time and I even got a little jumping on the trampoline time. The game was actually interesting AGAIN this year. I am starting to imagining myself getting excited to watch the actual Superbowl game one year. Nah...

I also made an announcement at lunch on Saturday. I have decided to go back on the Atkins diet. I have done it before and it got me down from 298 to around 210. I slowly gained the weight back on right up to the 300 mark around the middle of last year. I then brought it back down to around 260 by last October. But, I have been hovering around there ever since. This contest at work gave me the spark to get things going again. I cut my calories and shed some weight fairly well. But, I just don't think I can maintain it with the calorie method. It is too hard to decide what to eat and to not cheat. So, I have switched to Atkins and I have stuck with it since Saturday with little difficulty. I have finally pushed through the 250 barrier I had been trying to get through for a while. I really hope to continue to push this month and get through the 240 barrier by the end of it. Then I can continue to work at a good pace towards my main goal of 210.

I think Atkins isn't too bad for me due to my diet habits in the first place. I think most people picture a steak when they think of Atkins. But, I am not a real steak fan. I prefer meat in this order:
- Fish
- Fish
- Vegetables made to resemble meat
- Chicken
- Pork
- Other fowl (except for Turkey)
- Beef
- Turkey

So, with that preference tree. I actually eat a decent amount of healthy food on Atkins. My diet ends up mostly consisting of: Fish, Vegetables, Salads and Chicken. Which I would say isn't too bad. So, I will give this a run and work it with lots of exercise and see where I can get to. Maybe I can stay in this and stay focused and eventually get down to my dream weight of 185. But, that is a loooong ways off.

And to close, I will add an update on my current employment status:

I am now with a new contracting company doing the same job. I started on Monday. This contract is good through 3/4/09. We will see what happens then... or before then...