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Archive for February, 2008

Now that Valentine’s Day is behind us, I thought that maybe I’d make a couple of comments about the holiday.

If you thought that I was going to take the position that it is a contrived holiday created by the greeting card, chocolate and flowers industry to make money, then you are wrong; they were never popular.  No, instead, in my classic contrarian fashion, I actually don’t have a problem with Valentine’s Day.

First of all, even if it were a holiday created by business in order to sell more goods, so what?  Businesses are entitled to do whatever they want in order to make more profits.  We, as consumers, are free to accept or reject their logic and buy more of their stuff.  That’s the beauty of capitalism, nobody is forcing us to do anything.  It is within the corporation’s right to try to make as much money as possible, and as consumers we can do whatever we choose.

Secondly, the fact is that Valentine’s Day is a special day for people in relationships.  You might be tempted to think "So what, every day should be special so why single out this one?"  Well, that’s completely unrealistic.  Nobody can be completely devoted to their significant other all the time.  The fact is that there are plenty of times where we have special occasions that go beyond the norm.  Most of us (the good people, anyway) are patriotic, but we are especially so on Canada Day or Independence Day.  We try to be thankful, but once a year we are especially so on Thanksgiving.  Nobody can extra-patriotic or extra-thankful all the time, but on special occasions we make exceptions.  Similarly, Valentine’s Day gives people a chance to do something special.

Third, I like Valentine’s Day because of the un-altruistic nature of the holiday.  Altruism effectively says that we should devote our lives to the interest of others.  To quote Ayn Rand:

The basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value.

Valentine’s Day, then, is the opposite.  Rather than devoting ourselves to people whom we have never met, we do something special for someone who holds a very important to ourselves.  Logically, one would think that you wouldn’t be in a relationship with someone unless you got something in return (affection, intimacy, friendship, support, etc).  So, doing something special for somebody who deserves it is something that inherently makes sense to me.

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So, the market has been acting terrible over the past few months (well, about 4 months). When I was living in (near) Winnipeg, I used to spend several hours per week doing market research in preparation for trades. However, over the past year and a half, two major things have happened to force me to change my trading style.

1. My trading fees are way to expensive. TD Ameritrade sucks, and they charge way too much. So, to avoid fees I have stuck with positions longer.

2. More importantly, I simply don’t have time during the day to trade. I’m in meetings all the time and the market closes at 1 pm local time. I only check my positions twice a day, once when I get into the office and once at market or near market close.

To get around this, I have had to change my trading style yet again. Rather than actively trade several positions, I am leaning more and more towards indexing. Indexing is the act of buying an index fund that tracks the market. It’s a way to participate in what the market gives you without incurring trading fees. I think it’s the easiest way for me to trade the market without having to incur fees and trade too much. Many experts say that indexing is the best market strategy. I’m not so sure, but it fits my lifestyle at the moment.

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You’ll never guess what happened today at the grocery store.

I wasn’t feeling well today.  I had a sore throat yesterday evening and it got worse this morning.  It’s not as bad as it was when I first got up but it still hurts.  So later in the afternoon I went and bought some cough syrup (in anticipation of getting a cough later on), some kleenex and some cough candies to sooth my painful throat.

When I got to the checkout counter, they asked to see my identification in order to buy the cough syrup!  Can you believe that?  I needed ID to buy cough syrup.  Apparently, the FDA requires some brands to only be purchased by an adult (the one I bought was Robitussin, which I basically grabbed at random but selected due to the fact I recognized the name from the commercials).

I didn’t really want to show any ID, so I used the Force.  I waved my hand and said "You don’t need to see my identification."  The clerk replied "I don’t need to see your identification."  I waved my hand again and said "Move along."  The clerk replied "Move along, move along."

This is a true story.  Except for the last paragraph.

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About a month ago I blogged a post complaining about Barack Obama’s bad policies.  Well, now that’s quickly moving up the nomination probability, I thought I’d whine some more.

From his website on his position on fiscal policy:

Increasing Debt: Under President Bush, the federal debt has increased from $5.7 trillion to $8.8 trillion, an increase of more than 50 percent.

This is misleading.  I have budget data for the year ending 2006, but not yet 2007 (it’s not on the CBO page yet).  As a percentage of the GDP, debt held by the public was 35% in 2000 and 37% in 2006.  So, that’s a slight increase.  So while federal debt has increased by 50%, so has the GDP.

In addition, the average percentage of debt began to rapidly increase during the 1980’s before it finally began to go back down in the 1990’s under Clinton.  But debt as a percentage of the GDP is still lower than under any year during Clinton except the last year.

Irresponsible Tax Cuts: President Bush’s policies of giving tax breaks for the wealthy will cost the nation over $2.3 trillion by the time they expire in 2009.

This is humorous.  Notice what it is saying – giving money back to the taxpayers themselves is robbing the nation.  Since when does the government have the first entitlement to your money?  The presumption here is that the gov’t should have first grabs.  That’s just wrong.

Everybody likes this guy because he’s inspiring, but the ideas he is inspiring are wrong!  Yeesh.

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I found out via email today that my department is moving buildings within Microsoft.  I am not at all happy about it.

My commute right now consists of me getting on the freeway and taking a short drive where I get off the freeway (which takes 10 minutes) and go to the office.  In no traffic, it takes less than 10 minutes.  In normal traffic, it takes 15-20 in the morning and slightly more in the evening.

The new building is further to the south, quite a ways down.  And it’s way off the freeway unless I double-back.  I’m really not thrilled about this because it will double my commute due to traffic, taking 30-40 minutes every day (each way).  That totally sucks.

The reason I’m living where I’m living is because it was so easy to get to work.  Whereas before it was 3.8 miles, now it’s 8.3 miles.  That’s over twice as long.  In traffic it’s going to take forever.  Sigh.  Not happy about this at all.

On an unrelated note, Google is only 5 miles from my place…

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Today, Tuesday, Feb 5, the SP-500 dropped 3.2%, the Nasdaq dropped 3.1% and the Russell 3000 dropped 3.1%.  You’ll notice I omit the Dow – that’s because it’s not as relevant an indicator as the three indexes I mentioned.

Drops in the magnitude of over 3% are among the highest drops in the history of the indexes.  I don’t have the math, but I’ll bet that it’s in the bottom 1% of all movements.  And we’ve experienced a lot of them recently.  The question is why are we seeing so much downside volatility?

I have been reluctant to call this a bear market or go short.  I haven’t gone short because I don’t have much time to trade during the day anymore.  I have to convert to a long-term, more passive strategy so I need to ride out the dark times.  It’s kind of painful but it’s the trade I made when I went to a position with more responsibility.  Sometimes I wish I were still a spam analyst…

But I digress.  Why are we seeing so much movement to the downside so quickly?  I attribute it to two things:

  1. There are way more hedge funds these days that can move quickly in the market.  Specifically, they can pound the market down faster and harder than in times past and they have more influence now than 10 years ago.
  2. The stock exchanges abandoned the uptick rule.  The uptick means that you can’t sell short unless the current tick is above the previous tick (ie, you can only short in a rising market).  Because of this new non-rule, a falling market can get pounded further with no breaks in between.

That’s my theory.  But now on to the point of this post.  I just read that Asian markets Wednesday (tomorrow) dropped a large amount.  This usually foreshadows dooms for the American markets.  So here is my prediction: first thing tomorrow we will see a large down gap but then it will recover.  The market will then choke at around mid-session and will sell off to close near its daily lows.  You heard it here first.

Of course, I’m going to lose money tomorrow.  Being right is going to be painful.  The good news is that at least I’m not 100% invested, only 60%.  So 40% of my position is cash, and relative to the rest of the market, that part of my portfolio is outperforming the rest of the market by 10% at least.

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Reflections on nature

This morning, I attended a church service and in the morning they had what I guess is called a Sunday School service, but I wouldn’t call it that exactly.  It’s more of a learning series.  Today was a video lesson on silence and on hearing God during moments of silence.  Specifically, it was called out that being alone in nature is a great way to hear God because of the stillness.  General consensus is that nature best reflects the nature of God: peace, tranquility, and calm.

The problem is that I have to disagree with this assessment.  While the image of nature and the analogy to the peace given by God is emotionally reassuring, I believe that it is an unrealistic portrayal of what nature is really like.  We, in the developed world in the 21st century, have been conditioned to think of nature as a calm, forgiving, tranquil place.  In reality, the physical world around us is very harsh.

When most of us think about escaping to nature, we picture a calm, gentle brook or maybe relaxing by a lake.  However, in real life, going to lake involves driving down a paved road, coming to an area that has been developed by humans and bringing along our cars, tents, sleeping bags, pre-packaged food in coolers and other amenities.  In other words, there’s not much natural about it because after the weekend is over we drive away and go home.

I’d like to paraphrase Michael Crichton a bit.  The romantic view of a blissful nature is an illusion created by people who have no experience with it.  People who live in nature are not romantic about it at all. They may hold spiritual beliefs about the world around them, they may have a sense of the unity of nature or the aliveness of all things, but they still kill the animals and uproot the plants in order to eat, to live. If they don’t, they will die.

And if you, even now, put yourself in nature even for a matter of days, you will quickly be disabused of all your romantic fantasies. Take a trek through the jungles of Borneo, and in short order you will have festering sores on your skin, you’ll have bugs all over your body, biting in your hair, crawling up your nose and into your ears, you’ll have infections and sickness and if you’re not with somebody who knows what they’re doing, you’ll quickly starve to death. But chances are that even in the jungles of Borneo you won’t experience nature so directly, because you will have covered your entire body with DEET and you will be doing everything you can to keep those bugs off you.

I have personal experience with this.  In the place where I grew up, there were grain fields.  Growing up on the prairies, what could be more natural than taking a leisurely stroll through fields of grain?  Except it wasn’t all that great.  I have hay fever and only a couple of hours after walking in these grain fields, my sinuses would be very congested and I’d be sneezing up a storm.  Not exactly the way one might want to relate to nature.  I learned my lesson very quickly – don’t go near grain fields because the aftermath brought unpleasantness.

Even more recently, I slid down the side of a small mountain in Fiji in November 2006.  I got piles of bumps and bruises all over my legs and lower back.  I spent the night outside on a ledge and during that time let me tell you – I didn’t spend my time thinking about the irreverent awe of nature.  Quite the opposite actually, I couldn’t wait to get out of there.  Very quickly I was disabused of any romantic fantasy about nature.

I guess my point is that I don’t relate very well to the tranquil image of nature.  I relate much better to the hustle and bustle of civilization.  I like going to the store two minutes from my house to get something that I need.  I like driving down paved roads and don’t like driving down more natural bumpy roads.  I like going to indoor sports stadiums where the wind and rain doesn’t pound down on me.  I like having weather forecasts to be able to plan my day at least a little bit better.  That may be just me, but like Ayn Rand says, reality exists as an objective absolute.  Facts are facts, independent of man’s wishes, feelings, hopes or fears.

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