Peace Out O.H.C.

The One Heart Cafe (aka my annoying neighbor) is moving out of the Merlino Arts Building.  Words can not describe my excitement upon hearing this news.

It's not that I have anything against the people that frequent the cafe, or the cafe in general, it's just that I can hear everything that goes on there... from my room.

Needless to say, I will not miss the late night political discussions, crappy wifi, or "bring your own musical instrument nights" that have caused me headaches over the last 6 months.

Peace out OHC.  I wish you the very best in your new location.

-dunkie

Marathon...

Q: What's this about a marathon?

A: I'm going to run a marathon. I decided this at 10:57 am today.

Q: Okay... that's cool, I guess. When are you going to do it?

A: This Saturday.

Q: What? Are you serious? Shouldn't you train for a marathon first?

A: For the last 2 months I've been alternating between 3 mile jogs and sprint work 5 times a week. Today I ran 6.58 miles (1/4 a marathon) as a warm-up and I am confident that I can make it 26.2 miles. I plan on taking a rest day tomorrow and loading up on carbs for my run Saturday.

Q: Haha, right. Because 6.58 miles is just a hop, skip, and a jump from 26.2 miles.

A: That's exactly what I was thinking.

Q: So... did you just google "Marathon + Saturday + Tacoma" and find one to run in?

A: No. I'm going at this alone. I decided that I don't want to have to deal with traffic or distractions, so I'm going to run my marathon using the loop around CWA. It is .658 miles around and 40 laps will log me in at just over 26.2 miles.

Q: You do realize that you are going to miss some great football games, right?

A: DVR is a great thing... and I plan on being done in time to catch the Texas (No. 1) vs. Texas Tech (No. 7) game.

Q: This seems pretty random...

A: Sort of. I've randomly gone on long runs on a few occasions. The last time I attempted something like this I was slightly intoxicated and decided that I wanted to replicate a 22 mile walk I did while pledging. I left at 2am and by 7am I had eaten up 20 miles of pavement and couldn't take another step. Luckily, I had my phone on me and my roommate came to carry me home. Thanks Hoopie.

Q: Again with the fraternity references... you do realize that you aren't in college anymore, right?

A: Yeah, sorry...

Q: Forgiven. You only made it 20 miles last time. What makes you think that you will be able to do 26.2?

A: I'm in much better shape right now and I won't be intoxicated this time. Also, I'm planning ahead and making sure I eat properly the night before, as well as having some snacks to refuel along the way.

Q: Any predictions on how long it will take you, that is, assuming you finish?

A: When I ran 6.58 miles today I ran at just under a 10 minute pace. I felt fine afterwards and I feel like I can keep that pace for a good amount of time. I think 5 hours is a reasonable estimate, which would equate to roughly a 11:30 pace. Ideally, I'd like to come in at around 4 hours 30 minutes.

Q: What if you don't finish in under 5 hours?

A: My goal is to finish. If it takes me 10 hours and I have to walk half the time or stop for 3 hours, then so be it. 5 hours is just an estimate of how long I think it will take me.

Q: Walking half the time or taking a 3 hour rest stop would be pretty pathetic.

A: Agreed. Let's hope it doesn't come to that.

Q: Rewind a second... *boo boop* Why are you doing this again?

A: Life has a way of piling up every once in a while and running a long distance will be a good chance for me to clear my head. I feel like I've placed a bunch of arbitrary barriers on myself and I think that running a marathon will help me break through them.

Q: That sounds... uhh, neat.

A: Thanks, me.

Q: Well, good luck in your marathon.

A: Don't you mean, "our" marathon.

Q: Shit.

A: Hahaha...

-dunkie

Random Thoughts...

It usually takes me a while to organize my thoughts and write something down that is worth posting. Lately, I've been pretty exhausted with life and my brain hasn't had the energy to put anything together. As a result, I've decided to just post a bunch of thoughts without going into a whole lot of detail about any specific one.

In no particular order...

- Allowing the MLB Playoffs to be shown on TBS, which doesn't broadcast in HD, was an absolutely horrible idea. Bud, how did you let this happen?

- I received a speeding ticket a few months ago. The officer told me that he locked me in at 82 mph, but when he handed me the ticket it said 72 mph... nice guy right? Well, I found out last week that he wrote me the ticket for 92 mph and not 72 mph. Apparently I can't read numbers. Sadly, I don't think that is a valid argument to fight a ticket on...

- Haven't spilled any coffee on myself in over a week. It's the little victories in life that keep me going...

- I attended the Tacoma Symphony Orchestra's season opener at the Pantages Theater last weekend. The evenings theme was A Night in Old Russia and featured music from Rimsky-Korsakov, Rachmaninoff, and Tchaikovsky. This was probably my fifth time attending the symphony in the last two years and I'm finding that I actually enjoy it. Still, I doubt that I will be adding Mozart or Tchaikovsky to my ipod any time soon.

- Two weeks ago I was rooting for either a Red Sox vs. Dodgers or Rays vs. Phillies World Series matchup. In retrospect, I should have rooted harder for the Red Sox/Dodgers.

- Jamie Moyer's performance in game 3 of the World Series was nothing short of epic. I hope the Phillies win the World Series just so my inner Seattle Fan can live vicariously through him for an evening.

- I strained my left pectoral muscle last week. I've been trying to lift around it but that isn't working out so well. Today, I found out that it is a little worse than I thought/hoped and I can't even do pushups. It's looking like I'll have to give it 3-4 weeks of rest for it to heal properly. I'm pretty bummed about this.

- For those that are interested, Stompin' Steakhouse Chili is currently on sale at Safeway.

- The stock market was up 899 points today. I thought that was at least worth mentioning.

Note: Anything below a 500 point swing in the DJIA doesn't even make me blink anymore. I don't know if that is good or a bad thing.

- My new favorite song to work out to is Let it Rock by Kevin Rudolf (ft. Lil' Wayne). I've been listening to it on repeat for the last two weeks and I'm still not tired of it. Only 10 more weeks until it surpasses the Numb/Encore remix by Jay-Z & Linkin Park as my all-time favorite. Have I mentioned that I routinely listen to playlists that don't exceed 3 songs while working out? Is that weird?

- My new pet peeve is seeing police officers talking on their cell phones while driving in a marked vehicle. Seriously now...

- I realized last night that I have an odd habit of curling my wrists and putting pressure on them while I sleep. After Googling it I found out that this is a symptom of carpal tunnel syndrome. This probably isn't a good thing.

That's about it for now. Hopefully my brain will start functioning again and I'll be able to write something with some substance in the in the next few days. Until then... err nevermind. I've got nothin'.

-dunkie

The name is... Du-Mass

Every day I walk over to the place next door and buy myself a 24oz cup of French Roast coffee. I then mosey back to my office and settle in for the day as I enjoy my morning coffee and read the Wall Street Journal.

About once a week, I somehow manage to spill my coffee. On a good week, I will be leaning forward and the desk will come to my rescue. On a bad week, my shirt becomes an embarrassing brown spotted mess.

Up until today, I had a few theories about why I kept spilling my coffee. They ranged from not securing the lid properly, to me just being a complete dumbass. As it turns out, it was more of the latter.

What I discovered this morning is that due to the height of a 24oz cup of coffee, the cup (which is made out of paper) is very susceptible to outside pressure when the coffee level drops below the midpoint. Therefore, holding the cup near the top causes the paper to flex, thus creating a small gap between the top of cup and the plastic lid. What results from this is the phenomenon known as the embarrassing brown spotted mess.

Note: Please do not confuse the "embarrassing brown spotted mess" with the "embarrassing brown spot." While both are brown and embarrassing, they are completely different phenomenons.

Warning: Both phenomenons should be avoided at all costs.

-dunkie

They took the bar...

Last Friday marked the 3 year revocation anniversary of the Phi Sigma Tau Fraternity Charter by the University of Redlands. In the immortal words of Bluto,

"They took the bar. The whole ****ing bar." -Animal House

To commemorate this depressing day I had fully intended to revisit the events leading up to our extinction in the form of a blog tribute.

Sadly, when I attempted to access my Redlands.edu e-mail address to find some saved photos and reinstatement petition letters to use in my blog, I found that my e-mail had befallen the same fate as my fraternity. The University of Redlands had shut it down and it was no longer active. Attempts to revive my poor e-mail address were met with this reply:

Jeff,

There was a short time after the accounts were deactivated that we were able to reactivate them. However that time has expired and we are now unable to reactivate.

-Bruce E********

Work Order No.: 24685

To me, this is almost more depressing than losing the fraternity charter. At least with the fraternity I still have things such as my pledge book, fraternity letters, and random relics that were passed down to me by my big brother to hold onto. Not to mention the friends, brothers and lifelong lessons I learned while being in a fraternity. But as for my e-mail address, there is really no other way to describe this loss than straight up heartbreaking.

My Toshiba laptop that I had throughout college succumbed to the blue screen of death years ago, and with it went a treasure trove of college term papers and photos. While I took this loss pretty hard, I never had a printer in my room and would always e-mail papers to myself and print them out in the Fletcher-Jones Computer Center. Therefore, my Redlands.edu e-mail had essentially become a backup of every paper I ever wrote in college, as well as many other gems.

In order to commemorate the loss of my Redlands.edu e-mail, I’d like to read off a list of things that perished along with it, and say a few parting words about some of them.

Random Papers: From Government 101, to Comparative Literature, I will no longer be able to revisit countless papers from my four year tenure at the University of Redlands. While I probably wouldn’t even want claim to have written half of these papers, it would still be nice to be able to look back on how my writing style has developed/regressed over the years.

My Senior Capstone Paper: I spent countless hours throughout my senior year on this paper… ok, that’s kind of a lie. I wrote the paper in about a week at the end of my first semester, and never turned in a rough draft which was 30% of my grade. As a result I failed the course and had to repeat my capstone class second semester and revise the paper. I think the second time around I spent about one night editing the paper and ended up with a B+ in the class. Thanks Professor Pedace!

Viagra offers: I’m pretty sure I had over a thousand offers for Viagra sitting in my spam box. Luckily, I have about 366 of the same offers in my work spam box to browse through should I ever feel the need to reminisce.

Pledging photos: Granted that it may be in the best interest of my pledge class that these pictures have been lost forever due to their somewhat compromising nature; these were always good for a few laughs and will be greatly missed. Breakdown!

Phi Tau Petition Letter: This may be The Heart of the Ocean of my lost e-mail collection (wow… that’s two Titanic references on my blog now). After losing the fraternity charter for the second (and final) time during my four year tenure at the University of Redlands, I wrote this letter as President of the Fraternity in an attempt to regain our charter. Included with it was a petition that contained signatures from over 500 students that had been collected in support of the letter.

It is definitely one of more memorable things that I ever wrote in college and while it ended up being a failure (as is evident by the fact that the Phi Sigma Tau Fraternity is not recognized as an active fraternity at the University of Redlands), I am still proud of the attempt and the contents of the letter.

As for The Heart of the Ocean reference, there is a small chance that I saved a paper copy of these somewhere in one of the fraternity notebooks that I have packed away at my parents house. I’ll keep my fingers crossed…

Silly e-mails from Mom: My mom used to forward me silly e-mails that pretty much feel into the category of spam. Usually these consisted of some goofy animation bouncing up and down on my screen. While these were always somewhat annoying, they were usually good a small chuckle. Luckily, much like the Viagra adds, she still sends these kinds of e-mails to my work e-mail… and I totally just talked about my mom and Viagra in the same sentence. I am going to go shoot myself right now.

PokerRoom.com Account: I used to work in The Fletcher-Jones Computer Center as part of my work study. Basically, I would sit there for 5-10 hours a week doing homework, playing online poker, and occasionally answering a question about how to print something.

My pokerroom.com account still has about $20 on it, but since I can’t remember the login or password, and I can’t request that they send me a new password since my account was linked to my Redlands.edu e-mail, I’m pretty much up the creek on this one. RIP Andrew Jackson…

Facebook: While I haven’t yet lost my Facebook account, it is certainly tied to my Redlands.edu e-mail. Will this cause my Facebook account to eventually go inactive? Only time will tell…

In retrospect, assuming that I can locate the paper copy of the PST petition letter and my Facebook account doesn’t decide to vanish, losing my Redlands.edu email isn’t so bad. Maybe it just pisses me off that a private University with a $100 million dollar endowment can afford to send me requests for donations every month, yet decides that it is much too expensive to keep my poor e-mail active.

On second thought, that’s exactly what it is. F-U Redlands. You can take your Och Tamale and shove it up your Gazump. Until I get my e-mail and/or fraternity charter back I am officially going to boycott sending you any of the donations that I wasn’t planning on making in the first place. Take that Redlands, Rah, Rah, Redlands!

-dunkie

The Lost Kids of Willows.

If you have 15 minutes to spare in your day, I highly recommend that you take the time to read "The Lost Kids of Willows" on ESPN.com.

I don't even want to attempt to summarize it, as I don't believe my words would do the story justice. Suffice to say, it is a very well written article and will most likely bring tears to your eyes.

-dunkie

The Day After Tomorrow...

Markets around the globe, from Japan to Germany, fell dramatically this week.  While Iceland was going about nationalizing it's largest bank and suspending all trading in their stock market, Russia was busy formulating a bailout plan of their own.  Faced with the possibility of the global credit markets coming to a standstill, central banks around the world simultaneously lowered their interest rates in an attempt to provide emergency relief.

At home, the DJIA fell over 18% and the FDIC added two small banks located in the midwest to their growing list of bank failures. Meanwhile, the SEC continued investigations into possible fraud by large financial institutions, and even positive earnings reports for a small number of companies was met with trepidation by investors.

Q: I get it already.  How long until the world explodes/implodes?

A: While it is pretty certain that the world is not about to end, we are certainty looking at a global climate change in the financial markets.  Speaking of which...

I almost feel as if I'm watching the movie The Day After Tomorrow right now.  First, we had a number of major (financial) disasters across the United States.  Then, almost overnight, we found ourselves engulfed in not only a countrywide (no pun intended) crisis, but a worldwide ice age (frozen credit markets) as well.  Now, we are witnessing unprecedented co-operation with countries around the world to try and preserve as many lives (financial markets) as possible.  

To complete the story line, I'm sure there is some math genius out there that has been accepted to an Ivy League school, but due to the frozen credit markets, is unable to obtain the student loans he needs to pay for tuition.  As a result, he is being forced to live in the New York Public library while his dad searches for a way to send him to college.  Throw in a romantic subplot just for good measure and I'm certain that this could turn into a successful made for TV movie that rivals likes of The Odyssey, Sabrina: The Teenage Witch, and The Stand.

Q: First the Titanic and now The Day After Tomorrow.  What's next?

A: Well, the presidential elections are coming up... how about Dumb and Dumber?

Q: Really now?

A: Just kidding... 

Q: Right.

A: Anyways...

Q: Okay, moving on.  Have we bottomed out yet?

A: What we saw on Friday of last week was that when the DJIA briefly dropped below 8,000 investors seemed to view that as a bottoming out point and the index stayed above that point for the rest of the day.

If the drops in the stock market is the result of a lack of investor confidence, it is very hard to imagine that confidence can go any lower right now.  That could indicate that 8,000 is indeed the bottoming out point.  Then again, it might not be...

Q: Assuming this is the bottom?

A: We could see investors start coming back into the market, but it is highly doubtful that the markets will recover to anywhere near the levels we saw a year ago when the DJIA topped out just above 14,000.  Best case scenario, we are probably looking around 10,000 over the next year.

Q: Worse case scenario?

A: We continue to drop...

Q: Those don't seem like very great alternatives.  Why not stay out of the market?

A: Agreed, those are not great alternatives.  Still, that doesn't necessarily mean that you should not continue to follow an existing long-term investment strategy if you are already invested. 

What we do know, is that markets recover.  If you examine all of the recessions that the US went through over the last 100 years, most of them recovered to the same level they were at prior to the recession in under 12 months.  There were a few cases where it took longer than this, but in all cases, the markets recovered eventually.

To take a slightly different perspective, there are a few ways you can loose money right now. One is if you own stock in a company that goes under, such as Washington Mutual.  If this happens, you are left with nothing and have no chance of recouping your losses.  

A second way you can lose money is if you have money in a money market mutual fund that is unable to hold it's value of $1 per share.  If this is the case you might lose some of your investment, but not all of it.

Third, if your bank fails and you have depository accounts that exceed the $250,000 insurance (per account) provided by the FDIC, you could lose any amount that you hold above that level.

Lastly, you can lose money if you sell an investment at a loss.  By doing so you eliminate the possibility of the investment recovering it's value. 

To sum this up, if you have a long-term investment strategy that is well diversified, you do your research on any money market funds you are in, don't keep over $250,000 in cash in any one depository account, and don't sell everything in a panic to cut your losses, you will eventually recover from this.

Q: Is that it?  

A: Of course there are some cases in which you may want to sell things...

1) To harvest losses in order to offset future gains and avoid paying capital gains taxes.

2) Rebalance a portfolio to target allocations in order to better reposition your portfolio.

3) If your current investment strategy is not one that suits your long-term goals and/or risk tolerance.  In this case you may need to change your target asset allocations.  Still, this isn't necessarily a great time to make a change in an investment strategy...

Also, if you are not currently invested and have a large amount of cash sitting around, the bottom is never a bad time to buy... that is, if you think we have reached the bottom.

Q: Thanks for the...

A: Did I mention that this should not be taken as financial advice and you should consult your financial advisor before making investment decisions?

-dunkie

Economic Crisis: Which Simpsons Character are You?

I think this is somewhat self-explanatory... Enjoy!

Bart Simpson - While it is obvious to you that something bad is going on, you will most likely never see the direct effects of this economic downturn. If someone talks to you about the current state of the economy, your reply will probably be something along the lines of “Bummer, dude.”  

Lisa Simpson - You are concerned about the current state of the economy and work hard to educate yourself about what is going on. Now is not the time to… “AHHHHHHHH… BART!!!” As you were saying, now is not the time to panic.

Marge Simpson - You keep your money in a cookie jar and try not to spend much. The economy worries you and you are starting to think that finding a job would not be a bad idea… Perhaps the police department is hiring?

Homer Simpson - You have no idea why everyone is so worried about the US economy. The only question that pops into your head when someone mentions the stock market is “what kind of food you can buy there?"

Maggie Simpson - You don't speak, much less read.  Chances are that you are not this character...

Grampa Simspon - You are panicked and depressed. No one will explain to you what is really going on. Your assumption is that you are about to relive the Great Depression and that you will be forced to move in with your son.

Apu Nahasapeemapetilon - In times like these, business isn’t great. Lucky for you, "you are most happily married and have eight amazing children..." all of which you are still responsible for feeding. While life is stressful, you remain cheerful and continue to go about your job. "Thank you, come again!"

Mr. Burns - A month ago you ordered Smithers to sell everything. Now, you are sitting on a hoard of cash, watching the market fall, and muttering yourself "Excellent..." The only question you have is “when will be the right time to buy back into the US economy?”

Moe Szylak - You own your own business and have two main concerns. That Duffman will stop delivering the beer you need to serve your customers and that your customers (Barney, Homer, Lenny, Carl, ect...) will run out of money to pay for… hold on a second, phone call. "Someone’s looking for Mike Rotch. Has anyone seen MIKE ROTCH?"

Barney Gumble - The economy is tanking. The only question on your mind is “What does this mean for beer prices?” Despite the fact that you probably have nothing invested in the stock market, you decide to turn towards drinking to deal with the current state of things. Chances are that you are still in college and never make it to your Friday morning classes.  That, or you are an alcoholic and currently going nowhere with your life.  Let's hope you're the first...

Ned Flanders - Times like these are testing, but your faith in God (and the US economy) remains steadfast. If ever you need re-assurance, you can always call Reverend Lovejoy...

Reverend Lovejoy - Once a faithful believer in the US economy, you are now convinced that the world is about to end. The wrath of God is upon us. Run for the hills.

Milhouse Van Houten - You are extremely nearsighted and cannot see beyond the current economic crisis. Needless to say, your current state is one of complete panic.

Nelson Muntz - You aren't invested in the stock market and are currently laughing/pointing your finger at the people who are. However, chances are that you aren't saving money and in reality, the joke is on you.

Ralph Wiggum - Phrases such as “It tastes like burning!” and “I found a moon rock in my nose!” are the norm for you. However stupid people may think you are, even you realize that these are not good times for the US economy.  You have dreams of one day becoming the President of the United States of America...

Principal Seymour Skinner - You job is funded by the US Government. An economic crisis only means one thing... your funding is about to take another hit. Things were much simpler back in Vietnam...

Krusty the Clown - The current state of the US economy makes you miserable, and every time you look at the DJIA, it only gets worse. Still, you manage to continue on with your life, relying on a large number of cigarettes to get you through your day.

Otto Mann - Between drugs, sleeping in strange places, and driving a school bus, you are pretty used to crashing. The current stock market crash is no different.

Comic Book Guy - According to you this is the "Worst crash ever." Luckily, all of your money is invested in your vast comic book collection.

Chief Wiggum - You eat your coffee and donut every morning and remain completely ignorant to what is going on in the US economy. If something goes wrong, it isn't your fault. This crisis won't affect you, unless of course… Springfield has to cut the budget and you lose your job.

Note: You will only realize this last part a month after being laid off.

Mayor Quimby - Straight from Wikipedia... you are "a slick, opportunistic politician whose chief priorities seem to be keeping [yourself] in office, womanizing, and various forms of corruption." There is a significant chance that you are also a member of the United States Congress and are up for re-election in a month.

Santa's Little Helper - All you do is eat, sleep, poop, and chew things. The global economy, much less the US economy, is of no concern to you.

Blinky - You have three eyes... and you're a fish. You are the byproduct of this whole economic mess.  You are completely innocent when it comes to everything.

Groundskeeper Willie - You're angry.  You're angry at everyone from the the mortgage borrowers to the US government.  This mess wouldn't have happened if Mel Gibson were President.

Troy McClure - You may remember yourself from such educational firms as "How to get Rich Quick" and "Money Money Money."  Much like the economy, your career is going through somewhat of a downtown...

Martin Prince - The stereotypical nerd, you are extremely brilliant. You will come out of this economic crisis extremely rich. Watch out for Nelson... you are his personal retirement fund.

Hans Moleman - You are heavily invested in the US financial sector and had an extremely large holding in Washington Mutual. This is not your lucky day, month, or year...

Dr. Hibbert - *Chuckle* You believe that the cure for this economic crisis is to simply remove the troubled mortgage backed securities from the market in the form of a $700 billion bailout by the US Government. *Chuckle*

-dunkie

...a.k.a. Dr. Lisa Hibbert Simpson

Idiot.

One would think, that after cooking box upon box of pasta shells, night after night...

That one would quickly learn to beware of taste testing right side up pasta shells...

Least they are still filled with large amounts of boiling hot (and painful) water...

One would think.

Unless of course...

You are an idiot.  

Whose name is...

-dunkie

Buy or Sell: The Perfect Analogy

The First Word:

Once or twice a week I like to take a late lunch break and head over to my parents house to eat and watch my favorite sports talk show, Around the Horn (no, I don't still live with my parents and yes, I am 24 years old and my mom still keeps my favorite lunch foods stocked for me… thanks Suzie). Anyways, for those of you who have never watched the show, the format is basically this:

Tony Reali, the show’s host, sits at a desk in front of four large screens. Each screen has a panelist that writes a sports column for one of the many newspapers around the US. The show is split into rounds in which the four columnists debate various sports topics of the day and are awarded (or penalized) points based on their arguments. After each round the panelist with the lowest point score is cut, and by the end of the show the last man (or woman) standing is awarded 30 seconds of facetime in which to talk about whatever he or she likes.

One of the show’s rounds is called Buy or Sell. In this segment Tony Reali reads off various sports news headlines from around the country and each panelist is given a chance to buy (agree) or sell (disagree) the headline. The columnist’s reasons for buying or selling a headline range from asinine, to well thought-out arguments. In the end, the scoring is completely subjective, and it is up to Reali whether or not to award points.

Buy or Sell:

Everyday there are dozens of headlines in the news about which way the US economy is going, or what company is about to make it or break it. From an investment standpoint, you can literally choose to buy or sell each headline if you like. In the investment world this is considered active portfolio management, and each columnist is an active manager trying to beat the market.

Much like the show, less than 1 out of every 4 managers who actively buys and sells headlines will beat the market. On top of that, chances are that the same manager won’t outperform the market year after year. While you can certainly watch the show and always root for the same columnist to win every day, you are essentially "putting all of your chips in one basket” and you will live and die on that columnist’s performance.

On the flip side, you can choose to watch Around the Horn because you think it is a good show and believe that it provides some value to your afternoon. While you might agree or disagree with each of the columnist’s opinions, they don’t change the fact that you enjoy the show and will continue to watch day after day. In the investment world this is equivalent to passive portfolio management. Although the performance of each show many vary, you remain confident in what the show has to offer.

1st Cut - Out of Bounds:

If I haven’t completely lost you yet, hopefully you are now thinking to yourself “okay, so how should I watch the show to get the most out of it (i.e. which is better, active or passive portfolio management)?" Short of giving out any investment advice (this is my non-disclaimer, you know, since I’m not giving out any advice)...

Watch the show because you like it and because you think it is good. If you come to the conclusion that out of the 4 panelists, you value the opinions of two of them and you think the other two are complete idiots, then start watching the show not only because you like it, but because you like two of the columnists.

If you do that, then for the most part you will ride the performance of the show. If it is a good show like you think it is, you will reap the benefits in the long run.

As for the part of you that watches the show in order to root for the two columnists that seem to actually know what they are talking about... If they collectively win more than the other two, than you will be ahead of the game in that regard. If not, at least there is still a large part of you that enjoys the show.

2nd Cut - Showdown:

To translate into english/investment talk (again, short of giving out any investment advice)...

A typical investment portfolio is made up of multiple asset classes. Most often, managers are chosen to to manage one specific asset class. If you know that one active manager will always outperform the market index for an asset class, then it would make sense to put all of your money there. Sadly, there is no way to determine this with absolutely certainly. As a result, a logical decision is to pick multiple active managers that you feel are better than the rest.

Still, this situation exposes you to the risk that both of these managers might make the same bad bets and under perform the market. In order to combat this, by allocating a portion of your portfolio to passive management, you ensure that some of your portfolio will follow the performance of the asset class.

By combining these two investment management philosophies, you are able to lower your exposure to risk through the passively managed portion of your portfolio, and still benefit from the possibility that the actively managed portion will outperform the market.

Facetime:

If this entire post is still confusing, you can try buying a few boxes of crackerjacks in hopes that they still put decoder rings in them or post a comment and I’ll try to clarify things as best I can. Chances are however, that I have also confused myself in an attempt to make this analogy work and I’ll just pretend to have never seen your comment...

Also, you can always just chalk me up as some idiot columnist who doesn’t know what he is talking about. Either way, I hope you continue to watch the show.

Goodbye:

"We're on a 23 ½ hour break!"

*Paper Toss*

-dunkie

p.s. you know that you've made a great analogy when you have to spend an equal amount of time explaining your analogy using non-analogies... good job me.

Emergency Titanic Stabilization Act of 2008

Earlier this afternoon the Emergency Economic Stabilization Act of 2008 passed through the House (263-171) and was signed into law by G-Dub shortly after. While there are many provisions within the 450 page bill that are aimed to help stabilize the economy (I'd like to think so at least...), I'd like to focus mainly on topics relating directly to the $700 billion dollar bailout provisions in the bill.

Q: The bailout passed.... now what?

A: There is still a significant amount of work done. The Treasury and Federal Reserve have been given the tools and authority they need to start tackling this economic crisis head on. While we know that the $700 billion will go towards removing the mortgage backed securities from the market, it is still to be seen how exactly this process will take place, and how the securities will be priced when the government purchases them.

Q: Isn't all of that included in the bill?

A: Not quite. The bill set guidelines, much like a manager delegates a task to an employee, but at the same time gives them boundaries to work within. In comparison, this is opposed to having your boss micromanage everything you do, when in fact he is a complete moron who has no clue what is going on.  

Q: You said previously that passing the bailout would instill confidence back into the economy, yet today the DJIA fell 157.47 points...

A: Part of this is due to questions that investors still have about how the Treasury and Fed will go about buying/pricing the mortgage backed securities in the market. When those questions are answered in the coming weeks investors should finally start to exhale.

The other part of this is that over the last few weeks the main economic focus has been the bailout, and people have somewhat forgotten the other economic indicators that, across the board, are in the red right now. 

While many of these poorly performing economic indicators can be traced back to the US financial crisis, many have reached the point where they have become so significant that going back and removing the mortgage backed securities from the equation won't just fix them overnight.

Q: Could you give an example of an economic indicator?

A: Unemployment is a big one.  In September alone, over 159,000 jobs were lost in the US due to business trying to cut back on expenses and tighten their belts.  

If you follow the footsteps... the mortgage backed security fiasco resulted in bank failures, which caused lending to slow down, meaning businesses found it harder to borrow and consumers were finding it more difficult to buy things on credit.  This chain of events led to many businesses not reaching their revenue targets, causing them to lay people off.

Q: When is the Economy going to start moving forward again?

A: It could take a while.  In the example above, even if all of the mortgage backed securities were removed from the equation overnight, the people who lost their jobs due to the economic slowdown wouldn't just magically be rehired at the snap of a finger.

Removing the mortgage backed securities from the situation will help stabilize many financial institutions.  Slowly, banks will then start to lend money again, and as confidence improves, consumers will start to feel more comfortable borrowing money to buy things.  Eventually, with consumer spending increasing, business will start to hit their revenue goals and they will start to grow.  In order to do so, they will need to borrow money and hire more employees. Those people, who now have jobs, will then spend then their money and the whole cycle will continue, eventually putting our economy back on the growth track.

Q: Oh, so it's like a domino effect and the government buying the mortgage backed securities is just the first of many dominoes. Right?

A:  Kinda... except that in the Economic World, gravity does not cause things to fall at 9.8 meters/second².  Instead, things in the Economic World fall at 9.8 meters/month².  

Disclaimer: All other applications relating to gravity are the same in the Economic World as they are on planet Earth.

Q: So... are you saying that it will just take a few months to get the Economy back to where it was a year ago?

A: Not really.  How about this... Imagine that the economy is large seagoing vessel.  For fun, lets just call it the Titanic.  Also, lets rename mortgage backed securities icebergs, mainly because I'm tired of typing out mortgage backed securities so many times.

One day the Titanic is cruising along when suddenly it hits an iceberg.  This puts a huge hole in the Titanic and it starts to sink.  Luckily, the Coast Guard (i.e. US Government) is in the area and is able to come to the Titanic's aid in the form of 700 billion mini pumps to help bailout the water that is pouring into the ship and causing it to sink.

Seeing as how there are only a handful of people who know how to setup the mini pumps, they can only turn on 50 billion pumps every hour.  As a result, the Titanic continues to sink, even though water is being pumped out.

Eventually, enough pumps will be turned on to a point where the Titanic will stop sinking, and the Titanic will start to float again.  At that point, the hole in ships hull will be patched up, the mini pumps can be returned, and the Titanic can continue on its merry way.

Q: Ok, I think I get your drift.

A:  Good, because I don't think I have the energy to explain...

Q: Wait a second... what happens to the people on this imaginary vessel called the Titanic?

A: ...zzz...ZZZ...zzz...

-dunkie

Charmin Ultra Soft

Dear Charmin,

Knowing that I was running low on your ultra soft goodness, I decided to stop by the local Thriftway and pick some up on my way home from working out. After locating the toilet paper isle, I found the 12 pack of Charmin Ultra Soft big rolls that I was looking for and tried to stuff it into my red handcart. To my dismay, I found that in all of your infinite softness, you decided to package the 12 pack in a 3x4 fashion, rather than go with a 2 deep 2x3. In other words, your 12 pack of big rolls doesn't fit in a shopping basket.

After walking up and down a few isles I remembered why I never shop at the Stadium Thriftway. They never have anything I need, except for the awkwardly shaped package of Charmin Ultra Soft that was already under my arm.

Giving up on finding anything else that I needed, I decided that looking like that guy that is on an emergency toilet paper run wasn't so bad, and I went to check out. While paying, I quickly realized that the cashier was making no attempt whatsoever to put the toilet paper in a bag. Terrific... this now meant that I had to walk out of the store with nothing but my large, awkwardly shaped package of Charmin Ultra Soft that didn't fit in a basket, or a bag.

Let me just say that walking out of a store with, and only with, a large package of toilet paper is pretty damn awkward and embarrassing. There are probably other things that are much more embarrassing to purchase at the supermarket, but at least they fit in a freaking bag.

Seriously Charmin, is there any reason why you decided on the 3x4 rather than a 2 deep 2x3? In large quantities they would stack the same, wouldn't they? Please figure this out or I may be forced to discontinue my usage of your amazing toilet paper to avoid these embarrassing situations in the future.

Sincerely,

-dunkie

Just another day by the pool...

The University of Redlands, a private liberal arts and sciences university located in the beauty of sunny suburban Redlands, has a total enrollment of roughly 4,500 students (graduate and undergraduate). According to the U of R website, the operating budget for University exceeds $100 million annually.

Imagine that you are in charge of that $100 million. Aside from creating a budget, your responsibilities include a) putting the money in a safe spot and b) making sure the Universities bills are paid on time (i.e. salaries, utilities, taxes, ect...)

After looking at all of your options, you decide that storing this money at a bank would be much more secure than stacking $100 bills in your office safe. Responsibility a), check!

As for your second task, well that is easy. The bank you chose also has automatic bill pay. Man, this job is a cinch. Responsibility b), check!

Being the smart individual that you are, you know that the $100 million that you put in the bank is earning interest. Let's say that interest rate is set at 4%. Using your superior math skills, you calculate that you are making $4 million in interest every year. Sweet! They should really pay you more for this job...

One day, you find yourself bored at work and decide to take a break from Facebooking your BFF. You update your status to "...is stackin' chedda" and start looking into how you can earn more than 4% on the $100 million you are responsible for, while still upholding your two responsibilities (i.e. keeping the money safe, and keeping it liquid).

First, you think about investing it all in Google. After all, everyone uses Google and they are growing much faster than 4% a year... maybe even 10, or 20%! Thinking back on those economic classes you took your freshman year, you vaguely recall that the "promise" of higher return is the always the result of taking more risk. Smartly, you decide that risking the $100 million dollars that is needed to keep the University running would probably get you fired, and you certainly don't want to have to find a job where you wouldn't be able to Facebook all day. Scratch that idea.

Next, you think about buying some bonds. Bonds are currently earning 5% and are AAA rated, so they are pretty safe. Sadly, after doing some Wikipedia research, you realize that bonds aren't very liquid and you wouldn't have access to the cash you need to keep the University doors open. Damn... there goes your plan to spend that additional million dollars on an Olympic high dive platform for the pool.

While pondering what option to consider next, you get a phone call from your banker/former college roommate...

"Hey, I saw your Facebook status and hear you are looking to earn a slightly higher return on all that cash you have sitting here, while still keeping it safe and liquid. I have the perfect solution for you, it's called The Short Term Fund."

"Sweet. How does that work?"

"Basically, it's a fund that is made up of 80% commercial paper and 20% of this other stuff that will help earn a slightly higher return. It is just like cash and is very liquid. You just have to call me up and I can sell whatever amount you need from the fund and have the money to you the next day. All that and you earn a 4.5% return on it."

"Oh, so it's just like a money market fund?"

"Yeah, something like that..."

"Sweet! Let's move all $100 million over into The Short Term Fund. I'll give you a call every month or so and you can transfer the cash over that the University needs to pay salaries and stuff."

"Ok. Talk to you then. Holler at playa!"

"Peace out, cub scout."

Man, you think to yourself, you are indeed a genius. No wonder the University hired you. You just banked an additional $500,000 for the University.

Feeling like you are on top of the world, you decide to skip out of work early and go hang by the University of Redlands outdoor pool. Obviously, you are there to enjoy the sun after a hard day's work, and not scope out all of the hot freshmen co-eds... err students. Putting on your shades, you start to draw up plans in your head for a new $500,000 outdoor hot tub, and wonder how many co-eds could fit in such a facility at one time, as you drift off to sleep in the warm so-cal sun...

A month goes by and it is time to pay bills. Leaning back in your chair, you press the speed dial button for your banker and wait for him to pick up...

"Uhhh... hello?"

"Hey, I need you to free up $10 millie from The Short Term Fund so I can pay these bills.

"Umm... I can't exactly do that... the fund has been frozen."

"FROZEN?!?! WTF DOES THAT MEAN YOU @!$#%^"

"It turns out that the other 20% of the fund was invested in mortgage backed securities, and when people found that out, they started selling out of the fund. Since we didn't want the fund to close we had to freeze the fund. Don't worry, the University will get their money back, but it might take a while..."

"What the hell are we supposed to do until then? The University needs that cash now to pay their bills."

"Umm... well YOU might want to start looking for another job..."

"Go F*** yourself."

"Haha ok... we still on for the pool this afternoon?

"Yeah, but you better bring the booze."

Back to reality... Over 1,000 colleges and private schools are currently dealing with this sort of problem due to a freeze on over $9.3 billion that is held in The Short Term Fund (which is managed by CommonFund, for which Wachovia served as trustee). This is one of the many ways in which the crisis in the US economy is starting to trickle down to the point where it effects more than just the people that are directly involved. The bailout package would remove the mortgage backed securities from the market, and eliminate the underlying issue that causes problems such as this. In the words of Forest Gump...

"That's all I have to say about that."

Ok, I lied... one more thing I need to mention. I don't know if the University of Redlands actually uses this fund, and I was unable to find a list of which Universities do. Also, for sake of understanding, this example has been simplified to some degree. Obviously, the University of Redlands pool has more than just freshmen hotties hanging out there...

-dunkie

Don't Drop the Soap...

Lots of things to do today so I am going to try and make this update on the bailout quick...

- It is expected that the Senate will later vote on a revised version of the bailout bill.

- The new bill has been revised in two main ways:

1) Increase FDIC deposit insurance from $100,000 to $250,000.
2) Authorizes the FDIC to borrow as much money as needed from the Treasury for one year.

- The DJIA is currently trading at -26.36 (i.e. investors are waiting for more information on whether or not the bill will pass).

- Obama and McCain have both come out in support of the changes.

Bailout Revisions...

In regards to raising the FDIC deposit insurance, that is great. It will increase consumer confidence and help small banks stay in business as depositors won't run to larger banks in such large herds.

As far as authorizing the FDIC access to unlimited Treasury funds in the case that banks continue to fail...

The current $30 billion authorization that the FDIC has access to is basically a pre-approved loan. If they needed more than that, they would get it, although it would have to be approved by congress most likely. In taking off the limit for one year, all that changes is that instead of making them go through an approval process down the line, we are just increasing the limit of the pre-approved loan.

And now for some quick Q & A...

Q: Will these revisions be enough for the bailout to pass?
A: I really, really, hope so.

Q: Will these revisions do any good?
A: Yes. By increasing consumer confidence and increasing coverage of depository accounts from $100,000 to $250,000.

Q: I don't have $250,000, let alone $100,000...
A: Either do I, but hey, at least we can all walk a bit taller now!

Q: Will these revisions address the concerns that opponents of the bailout have?
A: Not really, unless we are talking about...

Q: Will these revisions help current House members seek re-election?
A: Yes.

Q: What will happen if this bill fails yet again?
A: The United States economy is collectively holding a big bar of soap right now. If something doesn't happen soon, we are eventually going to drop that bar of soap. While we might survive, it won't be pretty, and the effects will be with us for a long, long time...

Update: The bill has gone from 2 pages in length, to 110 pages over the weekend, and now stands at 451 pages. I almost don't even want to know what else has been snuck in there. Amazing...

-dunkie