UltraCrepidate

Prelude

It’s been a year since the official start of the recession. Many have suffered and we have all earned a few strands of white hair. But one year is just a convenient number for the media. After reviewing my trade journal, I realized that the reality of the recession is a multifaceted domino effect. Soon, the official body of finances will declare the end of the recession and we can all move on to our merry old ways.

Can we? The length of this recession is second only to the Great depression. Something of this length will always have ripples. I hope that you are all prepared to face that eventual outcome. In any case, here is my trade journal since 2006 that tracks the major events in the financial market. It’s quite long and captures what I feel at each steps of the way. I had some reserves about publishing this since it somewhat reveals the state of my financial situation, but I think my current position is sufficient different from the period this tracks that I don’t mind revealing it. You can also see me progress and evolve in my thinking as a investor and trader.

Note: There are some graphs lost during the copy and paste from my personal wiki. I will add these on as time progresses.

The Logs

September 2006, The subprime mess started where default rate started to rise and reports of illiquidity started appearing. These subprime mortgage companies have a valuation of several hundreds of millions in market value.  Amongst those, the biggest of them is CFC (Countrywide Financial). We see the first dip in the market as the smart people sold and got out of everything. However, the overall stock market continued to climb

The climb continued till summer 2007, the subprime sector has been completely wiped out and reports of defaults started appearing in Alt-A loans (the next tier).

Note: The major subprime players are: New Century Financial (NEW), Fremont General (FMT), HSBC (HBC), Citigroup (C), Countrywide (CFC), Washington Mutual (WM)

February 2007, Asian market crashed for 15%, S&P followed. In hindsight, this is also where the 100 SMA crossed 200 SMA and the net cash flow is out

March 2007, Estimated 1.3 Trillion subprime mortgage outstanding, with 600 billion made in 2006 which represents 40% of mortgage loans. In the years 2004 and 2005, it account for only 20%. The year 2007 sees the peak delinquency of loans originated in 2003 and 2004.

March 12 2007, New Century Financial shares suspended trading.

April 7, 2007, New Century Financial files for Chapter 11

July 2007, Bear Sterns seizes 3 of its hedge funds that trades subprime securities

August 6, 2007, American home mortgage files for Chapter 11

October 2007, we see the first report of the mess spreading into the traditional banking sector in the form of CDO (Collateralized Debt Obligation) and ABS (Asset backed securities). These are fancy names invented to cut up and mix different types of assets together (Mixing AAA with Alt-A) so that the rating agencies will rate it AAA+. It turns out that the ratings agency were working with companies like CFC so that they can both make money. False valuation houses and assessments of people’s financial were blurred to give as many people a mortgage as possible. The first major dip in the market occurred. CFC agreed to be bought out by BAC with a pure stock offering at approximately $4Bil.

Dec 2007, rate freeze for subprime mortgages in effect. Small market rally

Note: CDO volume: US$ 157 billion in 2004, US$ 272 billion in 2005, US$ 552 billion in 2006 and US$ 503 billion in 2007

April 2008, Bear sterns, the first reputable financial firm to fall. A case of too much exposure to subprime and overleverage. $40Bil wiped out within a week. The development was too fast due to the management hiding information from everyone. Prompting the fed to move in and force a sell while guaranteeing $25Bil in assets. The firm started by saying that it has no exposure to subprime at all. A technically valid term except that it has full exposure to the subprime from CDO and ABS due to the firesale and devaluation of houses.

July 2008, Crash in full effect. IndyMac, a deposit bank spun off from CFC recklessly loaned to home owners to get mortgage payments. Senator Schumer’s call to investigate its books brought about the first official physical bank run for a long time in the US. The failure costed 8.9Bil for FDIC. At this moment, I estimated that the FDIC can take approximately another 5 big failures like this as its fund has only $50.8 Bil

July 21~August 12 2008, SEC enacted naked short selling rule. Requiring naked short sellers to prove that they have the stock on hand before naked short selling. 19 Financial firms were protected

1. BNP Paribas Securities Corp (BNPQF, BNPNY)
2. Bank of America Corporation (BAC)
3. Barclays PLC (BCS)
4. Citigroup Inc (C
5. Credit Suisse Group (CS)
6. Daiwa Securities Group Inc (DSECY)
7. Deutsche Bank Group AG (DB)
8. Allianz SE (AZ)
9. Goldman Sachs Group Inc (GS)
10. Royal Bank ADS (RBS)
11. HSBC Holdings PLC ADS (HBC, HSI)
12. J.P. Morgan Chase & Co. (JPM)
13. Lehman Brothers Holdings Inc (LEH)
14. Merrill Lynch & Co Inc (MER)
15. Mizuho Financial Group  Inc (MFG)
16. Morgan Stanley (MS)
17. UBS AG (UBS)
18. Freddie Mac (FRE)
19. Fannie Mae (FNM)

August 2008, Warren buffet declares Fannie Mae and Freddie Mac “DEAD”

September 6 2008, Government bailed out Fannie Mae and Freddie Mac, the largest mortgage originator. They have over leveraged over the years by abusing the status of GSE (Government Sponsored Entity). Which allowed them to have leverage ratios unseen in any other financial institution. The bailout wiped out any preferred shares and normal shares, eliminating dividends. But senior debts are still paid. This move saves foreign investors asses. Otherwise, the US’s reputation will forever be tainted. FNM and FRE were seen as the equivalent of US treasuries, due to their status which is the only reason why foreign investors are interested.

September 15, 2008, Chapter 11 bankruptcy filing by LEH (Lehman brothers) and $50 bil buyout of Merrill Lynch by Bank of America (0.8575 BAC shares for each MER). Stock market plunged by 4%. LEH is a big player in credit default swaps so there are a lot of counter party claims that needed to unwind. The largest exposure to LEH are surprisingly foreign banks in Taiwan. LEH shopped for buyers for a week and couldn’t find many. By now, foreign wealth funds (dumb money according to Warren Buffett) has already overtaxed themselves and are weary of any acqusitions in the US.

September 16, 2008, the street turned to AIG (American Internationals Group), the insurer for credit default swaps as speculations about its liquidity arises. Add hurrican Ike’s 8 billion dollars in insurance claim, shorters are converging on this stock as the next one to fall. The speculation that a firesale of assets will make everyone’s book value decline. The fact that each financial system buys some pieces of the other financial systems ensures that a cascade effect will occur. Banks are increasing the interbank interest rate in order to hoard cash and sail through this storm, making it difficult for firms without a steady income stream to survive. Although the Fed said it has opened its discount window to investment banks or “anything too big to fail” AIG’s request for 40 Bil in funds was refused. Resulting in the plummet of its stock price. The fed realized its error and later lend 20Bil while allowing AIG holdings group to borrow from subsidiaries.

Summary of tresury, So far, the tresury spent 35Bil on Bear Sterns, 20 Bil on FNM and FRE (with promise of 300Bil total) and 20Bil on AIG. It seems as though the tresury has ran out of cash at 75Bil.

September 17, 2008, FED bailout of AIG for 85Bil. SEC reenacted short selling rule. Making it fraud for failure to deliver stocks on short selling. Treasury raises cash for the FED for 40Bil. Looks like the fed is running out of money.

Tally of government, The Federal Reserve has backstopped the purchase of Bear Stearns to the tune of $29 billion. It will loan $85 billion to insurer AIG. It’s letting banks borrow up to $150 billion using risky mortgage-backed securities as collateral. And it’s letting investment banks, which it doesn’t regulate, get short-term loans using the central bank’s discount window.

The Treasury, meanwhile, has pledged to backstop Fannie and Freddie up to $200 billion. Lawmakers passed legislation allowing the Federal Housing Administration to insure up to $300 billion in loans for troubled borrowers. They’re likely to loan $25 billion to the auto industry.

September 18, 2008, Gold, oil up, but other commodities down. New rules on naked short selling considers it a fraud for failure to deliver the stocks that you shorted. Making it mandatory for the transaction to settle (5 days) before you can short. Financials recovered a bit.

Note, Visa down to $60 from $75. I do not understand why since it has not assets affected. Could be because the failure of financial firms means less cards used. Also, firms with large chunks of assets are really feeling it as we are expecting a 30% decline in house prices, which directly affect the value of these assets.

September 19, 2008, SEC bans short selling. European exchange bans short selling

September 25, 2008, Warren Buffet buys 5 billion Goldman Sach’s shares. With a preferred dividend of  10%, more than anyone can get.

September 26, 2008, Congress failed to reach an agreement on the bailout due to Republican John McCain’s proposal of an insurance type of bailout by the government. Washington mutual failed and sold to JPMorgan Chase for 1.7 Billion. JPM immediately marked down 30 Bil in assets and raises 10 Bil in capital.

Note: Thoughts on the insurance method instead of the 700 billion bailout

• AAA+ rating on banks’s debt
• Banks still have to declare loss = stop lending
• Can sell assets = people willing to buy
• Default = taking the loss
• Banks pay for insuring = less capital
• Costs for banks to do business goes up = illiquid
• WHO BENEFITS???
  • Banks?? Small timers with little assets
  • Small with full subprime assets
  • Normal assets will not default, but marked down in value. So banks with “REAL” assets will suffer
  • Population? No dilution immediately, but rising cost as time goes on.

September 29, 2008, Wachovia bank failed and was taken over by Citigroup. US congress vote on the 700B bailout did not pass. Stock market in free fall.

September 30, 2008, Redemption deadline for hedge funds that require 3 months notice before years end. We will see a 20% drop from now to the new bottom. Systematic failure of each sectors of the finance industry.

Ocrober 1, 2008, SEC introduces new mark to market rule which allows banks to use internal estimates to value their assets instead of marking it down at fire sale prices.

NOTE: THIS IS HUGE and banks are allowed to include this in their next earnings’ release. Meaning the rebound should be in the 4th quarter.

Ocrober 8, 2008, Fed, with the coordination of other central banks, cut .50% from the interest rate to 1.50

October 15, 2008, Warren Buffet wrote an article on newspaper saying: Buy American

October 23, 2008, Wachovia bank reported 25Bil loss

October 24, 2008, Report of hedge fun selling assets to meet redemption starts. Expect a lot of hedge funds to fail.

October 27, 2008, Data shows that September shows the first increase of home sales. So far, no sector is recession proof. Everything went down. Even gaming and Pharma are down.

November 05, 2008, The market rallied by a lot the day before the election results, but started really low after Obama, the Democratic nominee got into power.  Because of his policy, I predict that pharma and renewable sectors are going to pick up while military contractors and others are going to go down. It’s perplexing why the market started with -1% though. I thought the financial sector wanted Obama so fixes can be done. Perhaps it is because the financial sectors has been pro Republican for so long.

Another thing to note. This election,  it is because of woman and college freshmen who got registered by the Obama campaign that made him win with such a wide margin. Otherwise, I think it will be a 50/50 like last time.

NOTE: This guy rose to fame by predicting the election result to  within 1% http://www.fivethirtyeight.com/

November 13, 2008, The treasury officially abandoned the previous plan after spending 280 billion buying up troubled assets. They are instead buying up bank shares as well as setting in place a new lendinig facility to buy up loans and bonds of consumer credit lending facility. The problem has now spread into the general economy where jobless claims and consumer spendings have declined sharply in one month.  The DOW dropped to 8000, BAC, my biggest stock owned dropped below my purchase price of 20 to 15. I have lost so much. Not sure if I can handle this.

November 14, 2008, Another redemption deadline for hedge funds. When will this end? What other sectors are there which presents a flood gate?

November 18, 2008, One of the best video game software producers Activision is dragged down and tracking the market with -40% (Tracking NASDAQ performance).  Current standing at Gamestop with three of its titles on the top 10. It recognized merger cost in the previous quarter, which is probably why its stock has been dragged down. It also initiated a 1 billion stock buy back plan.  Current EPS is at 26.92. Revenue keep on increasing and the only thing dragging it down right now is the restructuring cost. I really don’t get how the market can devalue it 45%. On a bubble economy, the EPS is around 18 on average for everyone.

November 19, 2008, List of companies that participate in the bailout. From MoneyNing

Ever wonder how many companies announced plans to participate in the US’s government TARP (Troubled Asset Relief Program)?

I did a little digging and as of November 18th, there were at least 25 companies either approved or planning to participate.  Here’s an unordered list.

1. First Midwest Bancorp Inc. (FMBI) – Received preliminary approval for about $193 million worth of investment
2. South Financial Group Inc. (TSFG) – Applied
3. CoBiz Financial Inc. (COBZ) – Plans to apply
4. E*Trade Financial Corp. (ETFC) – Applied for $800 million
5. Associated Banc-Corp. (ASBC) – Preliminary approved for $530 million
6. Capital Pacific Bancorp (CPBO) – Preliminary approved for $4 million
7. Fulton Financial Corp. (FULT) – Filed an application for about $375 million.
8. Trustmark Corp. (TRMK) – Preliminary approved and will issue $215 million in senior preferred shares and $32.3 million in common shares.
9. Pacific Capital Bancorp (PCBC) – Preliminary approved for about $188 million
10. Heritage Commerce Corp. (HTBK) – About $40 million was preliminary approved
11. Banner Corp. (BANR) – $124 million was approved in senior preferred, $18 in common shares
12. Columbia Banking System Inc. (COLB) – $76.9 million was preliminary approved
13. Heritage Financial Corp. (HFWA) – $24 million in senior preferred, $3.6 in common stock.
14. Bridge Bancorp (BDGE) – Considering participation
15. Cascade Financial Corp. (CASB) – About $39 million
16. Midwest Banc Holdings Inc. (MBHI) – About $85.5 million in preferred, $12.8 million of common stock.
17. Goldman Sachs – part of the initial 9 banks that the government bought equity stakes into, along with the 8 below
18. Morgan Stanley
19. J. P. Morgan Chase & Co
20. Bank of America
21. Merrill Lynch
22. Citigroup Inc.
23. Wells Fargo & Co.
24. Bank of New York Mellon
25. State Street Corp

As I know, the TARP is a 5 year program that allows banks to borrow at 5%, an amazingly attractive rate given the circumstances.  Do you have any relationships with these banks?  Are you scared that so many already announced their desire to participate (and many more assumed to have applied but without any announcements yet)?  Does it really matter to you?

November 20, 2008, Crude oil price falling below $52. DJIA falls below 8000 points, erasing 10 years of advancement. Canadian oil sands profitability noted as around $30. $52 is estimated based on sales and labor cost.

November 24, 2008, US government guarantees $306 billion of home loans, commercial mortgages, subprime bonds and corporate loans in citigroup. Add on to that, a $20 billion infusion of investment in preferred stocks. Getting 27billion shares that pays 8% dividend. Citigroup shares dropped 60% in value last week and jumped back 40% this Monday after the news. The deal is arranged in such a way that Citi takes the first $29 billion loss and the US citizen takes the next $250Billion

November 25, 2008, US congress promises to draft a $600 billion bailout to buy up mortgages for Obama to sign when he gets into office.

November 26, 2008, BCE buyout by Ontario teacher’s pension plan gets delayed again. The buyout prices BCE at  C$34.8 billion with $42 per share. The arbitrage was at $38 so represents a 10% premium. I was actually contemplating this yesterday as the deal is supposed to close on Dec 11. I wasn’t sure of the deal so I did some digging on the financial health of all the involved player. The first warning sign was Citigroup and the second  is the fact that the Teacher’s pension plan is losing $ 12 billion per year with total assets of $108 billion. The original plan was for Citigroup to sell bonds of this deal to hedge funds with a 10% interest. Which, if I am correct means that they are paying out 5 billion per year to bond holders.  It’s operating income is about $2.2 Billion per year with last year being the best at $4.4 billion ($2billion of which from a suspiscious “Other income” category). I am glad that I decided NOT to join in the arbitrage.

Under terms of the deal announced on June 30, 2007, Teachers Private Capital will hold a 52 percent stake in BCE, Providence 32 percent, Madison Dearborn 9 percent, and other Canadian investors 7 percent.

Decenber 04, 2008, Central banks all around the globe cut lending rates in huge chunks. Euro reduced 0.75% and New Zealand by 1%. Major banks started to cut the mortgate rate in 5 year and longer term mortgages.

Decenber 15, 2008 Bernard Madoff managed hedge fund giant 50 Billion Ponzi scheme discovered. Victims include funds of funds, rich people, charities and old rich retirees. Using current depositor’s money to pay out the 1% payout each month. Former chairman of NASDAQ stock market. 10 years +  of investing experience.

He is as close a figure to “Warren Buffett” as possible. Confidence in hedge fund is going to collapse and full liquidation is going to happen. After this, who can trust any fund manager?

December 31, 2008 More on the Bernard Madoff scheme unraveled. He basically paid the old depositor’s interest with new depositor’s deposit. FBI agents were tipped off by Madoff’s own son. The fund’s equities are insured with the SIPC. SIPC has $1.5 billion in assets. The scheme is said to be 50 billion.

People that caught Madoff’s scam: Aksia LLC, Harry Markopolos, Joe Aaron

People who might have conspired with Madoff: Avellino & Bienes, from 1983 to 1993, Fairfield and Union Bancaire Privee, Frank DiPascali, David G. Friehling, Jacob Ezra Merkin (Ascot Partners LP)

Investors who lost the most:

• Fairfield Greenwich Advisors, $7.50 billion
• Tremont Capital Management, $3.30 billion
• Banco Santander, $2.87 billion
• Bank Medici, $2.10 billion
• Ascot Partners, $1.80 billion
• Access International Advisors, $1.40 billion
• Fortis, $1.35 billion
• Union Bancaire Privée, $1.00 billion
• HSBC, $1.00 billion

January 1, 2009 Semiconductor chip slaes drop 10% year over year in Q4 of 2008. Morgan Stanley predicted that each point decline of GDP will cause a 3% decline of the ad market. Another predicted a 9% by basing the number on the rest of the world’s real data (instead of focusing only in US). So there’s a possibility of a 27% to 40% decline in online ad spending in 2009.

Luxury goods declined 35% year over year and electronics declined 27% year over year.

January 9, 2009 In 2008 the US lost 2.8 million jobs. Jobless rate increased by 2.3% translating to 113 million people working. December Intel’s chip sale figure started to show really bad signs. Walmart same store sales declined. However, Gamestop sales figure increased by 10.2%.

Jobless rate by month

1. 4.9
2. 4.8
3. 5.1
4. 5.0
5. 5.5
6. 5.6
7. 5.8
8. 6.2
9. 6.2
10. 6.6
11. 6.8
12. 7.2

At this moment, I still think that the video gaming sector is the one place where it is recession proof.

January 15, 2009 Rumours abound that says BAC requires further government fund to get through the Merill Lynch acquisition. Stock price dropped by 20%. The previous day, analyst downgrade from Citigroup saying that it is exactly like another Citi and have to cut dividends made its stock price drop 10%. From $14 to $8 all within the week.

Details says that BAC actually told the treasury that it will not complete the Acquisition with MER due to a higher loss in the last quarter. I believe a deal is struck between the treasury much like JPM’s deal with Bear Sterns where the government backs the extra losses. Most of the drop seems to be from the possibilities that they’d have to cut their dividends.

I am really scared at this moment. Guess we’ll see on Monday.

January 20, 2009 Shorters assaulted BAC’s share with everything they got. Spreading rumours of nationalization everywhere. I must’ve saw about 20 blog posts and 100 forum posts that says BAC will be nationalized.  The stock price has been dropping by 15%+ for the past 3 days. Incurring damages to everyone.  I sawy 15k of my portfolio dissappear within the past 3 trading days. I don’t believe I will get through this unscathed now.

January 21, 2009 Banking stocks jumped by 30%. Followed by JPM and BAC executive Kenneth Lewis and Jamie Damon buying their own shares. Kenneth spent 1.2 million while Jamie spent 3 million.

January 22, 2009 John Thain, CEO  of  the former Merrill Lynch got axed. Chiefs who also left and should never trust: John Thain, Tom Montag, Robert McCann, who was to lead the combined brokerage, and investment banking chief Greg Fleming.

January 26, 2009 Treasury position confirmed as Timothy Geitner. Examination paper says that nationalization of the two major banks C and BAC will not happen. Bank stocks rally very hard, but still low compared to last year. A “Bad” bank proposal is in the pipeline. Not sure if it’s a good idea right now.

On a side note, head hunter calls for job applications halved since October. The three sectors that seems to be hiring are mobile devices, gaming and Linux. Work is also getting harder with more and more problems. I am not sure if it is because of a widespread low morale in the department or if it is the economy affecting everyone. If anything, I expect to have less work because of everyone going bankrupt.

Note: In January, major companies have slashed jobs. 100,000 from them alone and the pain will be felt. It’s strange that they were not able to forecast the domino effect like I did. I was able to predictably say that the bad results should show up around September. It’s like they have to wait to confirm with the actualy financial data officially released before they take their action. I will have to take that into account in the future. My predictions are about 3~6months to early. Making me act on the wrong ripple.

January 26, 2009 Some nice numbers on the impacts in tech. Global write down of US security reached 2.2 Trillion.

Tech Layoffs

February 02, 2009, Consumer savings rate rose to 3.6% amounting to $400 billion of money saved.

February 08, 2009, Finally found the mortgage reset graph. Been looking for this for a while.

February 10, 2009, The new treasury of state unveiled plans of action. There has been a build up in the stock market until now and the plan is too uncertain which led to a huge sell off afterwards. Basically leverage the rest of the TARP $350 Billion by using that as guarantee to raise Private+Public capital to the range of 1.5 Trillion. In the same date, congress approved the bailout of mainstreet that is 800Billion or so.

February 11, 2009, Reports saying that in September there were 5.5 Trillion dollars withdrawn from the money market (Same thing happened in Euro during October). Which prompted FDIC to raise the insurance to $250,000 per account. There are 4 things that started to proliferate once this crisis began. Bank robberies, Suicides, lawsuits and psychologist counselling. the society is getting more and more extreme.

Here’s more info on the bank run. Thursday September 15 on 11 o clock in the morning, there was a $550 billion bank run in the money market within an hour. http://www.youtube.com/watch?v=-xKPcyvlfnc&feature=related. By 2PM, it would’ve been 5.5Trillion and in 24 hours the total collapse.

February 18, 2009, Stimulus plan passed and signed. The stock market tanks to the lowest level saw in November. Banks are reworking mortgages so it is based on the current home value. People who are a bit under water (Mortgage not 105% more than home equity gets help to refinance to lower rates). People who are responsible, paid down payments but saw their equity wiped out are left to fend for themselves. Looks like selective rescuing is happening to those who made the best decisions.

A second big fraud to the tone of 8 Billion is discovered. This time by Allen Stanford with Certified Deposits sold through Financial Advisers. Again, this is a guy with good standings amongst people and the return tracked the market pretty well. He actually manages to fake a 1.5% decline. He was promising to invest the fund to Antigua with lots of regulators and 3rd party auditors looking at it. Turns out that the funds are invested in housing and that the regulators are fake. It is getting harder and harder to detect who’s a fraud. Maybe the whole financial system.

February 21, 2009, The nationalization fear got spread around again. This time started with Chris Dodd (Comittee of Banking head) and Allan Greenspan (Former Fed reserve chairman). BAC saw their stock drop 50% in a week with Friday dropping 20%. Bought $2000 on Friday after selling BSX. The odds of rebound is too high. I am tyhpically not a day trader, but this is too good of an odd to pass up. It also forces me to look at investing as asset allocation instead of holding on to hopes of rebounds. I am looking at investing more as an allocation of capital to something that will most likely to rebound.

February 21, 2009,

This is a picture of comparison between crisis. We are heading into unknown territory.

Found the case-shiller graph which tracks housing prices. It tells us what is going on with housing. Taken from TIME online. Can’t find the crisis anymore

February 27, 2009, stocks have been going up since the FED the government both confirmed that there will be no  nationalization. However, today treasury announced that they will be converting their preferred shares in citi into common stock. At the same time, a revised number of GDP shows that it is down 6.2% in the last quarter of 2008. Citi stock drop by 30% bringing the rest of the market with it.

Also, Obama has unveiled its 140 pages long budget. It doesn’t look good for health care providers and it increases generic drug competition. I compared it with Warren Buffet’s purchases and it seems that Warren had a preview of that last quarter.

NOTE: Another lesson to not try to catch a falling knife. If you continue to observe the market or the sector of your choice, you will start to see who is strong and who is weak. At the moment I am writing this, Ford is definately going to prevail while GM and Chrysler are both going to fall. Their stocks all dropped because investors stopped looking at it objectively. In sum, there is still time to pick the winners once it gets to a point where people are going to declare bankruptcies. Wait till the bankruptcies.

March 01, 2009, Movie theaters saw big increase in movie ticket sales to the extend of 17.5% with attendance up about 16%. People are escaping reality and paying for lower cost entertainment.

March 03, 2009, AIG announced 61.9 Billion loss in last quarter and promptly got another 30 billion loan from the government. Citigroup trade volume surpassed 1.04 Billion when government converted preferred to common stock. Netting the government 34% control. Introduced government officials at the board of directors.

Rumors of the reinstatement of the uptick rule and suspension of Mark to market is growing. Government set in motion the Troubled Asset Loan Program to help buy up credit card and auto loans. Current estimate of the total spending is around 3.4 Trillion. Some democrats started to worry about that number. China’s promise to increase stimulus send the market rising. There seems to be a shift in power here. As China’s stimuls increases the market more than the US stimulus.

The Swiss banks were forced by the US to turn over 250 names of clients that uses them as tax heaven.

For my life, I have started accumulating food and water. Canada is relatively unhurt by this. I am sort of glad that I am not living in the US right now.

March 05, 2009, Here’s a nice chart about country vulnerabilities on their investment in eastern europe

And net foreign liability

So far Iceland’s government collapsed on Jan 26, 2009  after long riots and Latvia’s government collapsed on Feb 20, 2009.

March 06, 2009, Just some interesting notes and snapshot at this time of the crisis. Banks are held at gunpoint by what we call tangible equity ratio. Which is basically Equity minus goodwill as a percentage of tangible assets. It measures how much loss a bank can absorb before it collapses. 3% is adequate and 4% is preferred as safe in a crisis environment.

Also, there has been 17 bank failures since this begin. At a rate of about 2 per weekend in year 2009.  Short term US treasury is near 0% and longterm near 3%.

The FDIC which overseas bank bankruptcy is close to insolvent right now. At 16 billion of capital it is asking congress for approval of 500 billion loan. If it didn’t get passed, rest assured, chaos will come.

March 11, 2009, There was a 2 day rally of about 20% each for BAC which also led to a broad market rally of 6%. When everyone came out and said positive things. Bernanke further confirmed that banks will not be nationalized and BAC managed to increase its cash by selling FDIC backed debt. I called bullshit and day traded the rally for 1k.

Canadian Jobless rate at 7.4% and US at 6.4%

March 12, 2009, BAC rallied another 20% today after CEO of all 3 major banks: C, JPM, BAC all came out and made a statement.  Things like they don’t need the money and explained a bit about how limiting exec pay is hurting them. They also explained in detail how Mark to Market works and why it is hurting them. We are also seeing large mergers and buyouts happening in the pharma area. So far, Genentech with Roch, Pfizer with Wyeth and Merck with Schering-Plough. Meredith Whitney was also on an interview saying that there is still the credit card crisis to come. Normally, the default rate is about 1% above unemployment rate. Currently it is at 8%. I just doubled it and use 15% as my calculation. BAC stands to lose 15B, but even so, it will not get wiped out.

Borrowed 5K today and plan on investing that tomorrow. Heard a fund manager say in passing that you can’t have Oil at 48$ and the DOW at 6000 something has to give. I believe it is the DOW that’s going to give by going up. Intrinsic value of BAC calculated at 60B. Book value at 80B. Currently at 37B. This is one of those WTF moments that I think I should catch. Also seeing a lot of synergy between the government, the banks and the regulatory officials.

March 13, 2009, Learned today that the US is a 14 trillion dollar economy.

Data gathered by Nielsen Co says that in a recession condoms and canned food sells more. As people stay home and have too much time, but don’t want the expenses of having a kid. They also eat out less.

Thawing salt, body warmers and gift packages with candy rised by 32% due to the cold winter. Jars bags and container up 15% (canning/freezing supplies). Fresh-meat sales rose 7.3%, vegetables and dry grains were up 5.5%, dry pasta 4.4% and cheese 3.1%. Wine and liquor were also up. People aren’t heading out for alcohol, but they still want to drink at home. In these bleak days, self-medication is certainly in style.

Cookie and ice cream cone sales dropped 9.7%; people can do without dessert, and further, the boom in baking supplies shows that more people are making treats at home. Bottled water was down 11%, but that makes sense. “What’s the economical substitute for that?” asks DeMott. “It’s called a tap.”

The jams, jellies and spreads category was also down, by a sharp 12.1%. That includes peanut butter; while you might expect people to eat more peanut butter and jelly sandwiches instead of steak during a typical recession, the salmonella outbreak likely dragged down the numbers. Canned seafood, down 13.3%, is a little harder to explain. In general, seafood costs more than other products, but if consumers are trading down to canned goods, one might think they’d be buying more of it in cans. (Read “Why We Buy the Products We Buy.”)

Film and cameras, whose unit sales dropped 31.5%, was the worst of the bunch. “A camera is not something you need right now,” says DeMott. Plus, who really wants to remember these tough times? And if couples are using contraception, they won’t need a camera to snap precious baby pictures.

Sports and novelty cards were down 26.5%. “You really don’t need that,” says DeMott. Magazines slipped 17.1% (sigh — don’t we know it). Products that spruce up your home — kitchen gadgets, lawn and garden items, buckets, bins and bath accessories — were slumping. Sales of air fresheners and deodorizers also dropped. “If you’re lucky enough to have a couple of extra dollars, do you really need your bathroom to smell minty fresh?” asks Shea. Both insect repellants and cough and cold remedies were struggling. We’ll suffer mosquito bites and sniffles for a few extra bucks. (Read “America’s Shrinking Groceries.”)

Business that are booming are: Micro cosmetic surgeries. Botox and the like. Herbal meds. Microbreweries from home made alcohool (imported beer down). Candies sale are up Hersheys and Cadbury (low end chocolat) performed well in recession, but badly in good times. Higher end chocoloat did not see improvements. The side effect is a possible increase in cocoa prices. We might see margins tighten. Lottery tickets are also on the up. Google also reported several days of top search terms with the lottery. Casinos however slipped by 9%. Travels to exotic and cheap places are on the rise. Africa 11%  and Middle east  5% while Busines type travels are down 3% Europe and Asia.

March 15, 2009

The G20 finance ministers laid out a broad framework for regulatory reform and repairing the financial system at meetings this weekend.

Following is a summary of recommendations in their communique for G20 leaders to consider at their financial summit in London on April 2:

- Hedge funds or their managers should be registered and disclose information needed to assess risks they pose to the financial system. Any financial institution or instrument that could pose a risk should have regulatory oversight.

- Pay and bonuses should adhere to the Financial Stability Forum’s principles of sound practice.

- Capital reserves should be built up during good times and leverage limited in order to buffer financial firms during downturns. But in the current recession, capital should remain unchanged until recovery is assured.

- Credit ratings agencies should be registered, comply with the International Organization of Securities Commissions code and have regulatory oversight.

- Off-balance sheet vehicles should be fully transparent; accounting standards improved notably on treatment of assets of uncertain value; there should be greater standardization for credit derivative markets.

- Financial Stability Forum should be beefed up as part of strengthened international cooperation and it should conduct early warning exercises with the IMF.

U.S. Treasury Secretary Timothy Geithner also said the FSF should be elevated as lead body for overseeing the global financial system, taking its place alongside the IMF, World Bank and World Trade Organization.

Until now it has been an informal gathering of financial supervisors.

- On impaired assets, G20 leaders said a top priority for governments is to tackle toxic assets on bank balance sheets, now they have taken a range of steps such as injected bank capital, set up insurance schemes and are providing liquidity to money markets. In an attachment to the G20 communique, they released a set of principles to guide how each country handles assets of uncertain value.

The United States said it plans to release its toxic asset plan before the April 2 summit.

AIG Releases document on counter parties that demand collateral: 2lkwkr4e1ytsjjcdrbla

March 19, 2009

Fed releases information that they’ve printed $1150 billion dollars. $750 of which will be used to buy bank assets. Stock rock rose for the most part in March 18. Down in March 19.

Some observations. Citigroup is going to do a reverse stock split. HSBC just had a 12.9 billion rights issue. Meredith Whiteney, ever since she started her own firm feels like losing her touch. She’s still appearing on tv to tout her doom and gloom views. Mostly about credit card write downs. She is right of course, however, the way the show is made it seems like they are claiming for about 2~3 trillion losses. I have the feeling that Meredith Whitney is being used to spread that idea but in fact she’s just a geek who’s real intention is to get the truth out. Good intention, badly used by others.  The worst is, she doesn’t realize it herself.

The average pawnshop people used to be around 39 and have incomes of around $29,000 now we are seeing it spill over to a larger socioeconomic. Big LCD TV and gold get used as pawn a lot. While power tools gets bought more as homeowners gets more handy at repairing. These tools are from professional home builders who lost their jobs. There’s also an increase in demand for music instruments from pawn shops. Especially guitars and amplifiers. Firearm sells is also up, but this more due to the fear that the new president will enact gun control. Wii and xbox are also getting pawned a lot. Indicating that people are getting more strapped for food and are foregoing even the simplest of entertainment.

March 23, 2009 There has been a lot of mergers going on recently. Or rather, news of mergers. Starting with the Pharmaceutical sector and moving on to The tech sector now. Cisco to buy sun and ATVI announced plans for buying. I think most of the companies are projecting a bottom. From my personal point of view, this is a milestone. Sunocor merged with Petro Canada and Daimler had a 2.7 Billion dollar investment from Abu Dhabi.

The “Bad Bank” Plan was unveiled and the stock market soared by 6% DJIA soared by 500 points. BAC up 30%.

March 25, 2009 Signs of recovery are showing up. Durable goods orders are up. Mortgage origination increased. Forecast 800 billion more for the year. Housing inventory decreases as more houses are sold, even though the prices are still dropping.

March 26, 2009 Obama announced the rejection of GM and Chrysler’s restructuring plan. GM drops by 20%. Surprisingly, BAC dropped 15% along with it. Pretty stupid from my point of view, but we’ll see if my point of view is correct. Found out that BAC extended 800 million in total to GM.

April 1, 2009

March 31 (Bloomberg) — The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

April 3, 2009 There were a flurry of good news yesterday, but the stock market failed to rally much. Well DJIA did rise by 200 points or so but in terms of Banks, not much happened. The G20 meeting promised 1 Trillion dollars of aid, the Mark to Market rule is relaxed for banks (securities not actively traded can be marked to a cash model), Ken Lewis went on TV and said a bunch of things. All these gave a 7% rise at the beginning of the market, but tapered off because the initial jobless claim was 700,000. Today we confirmed that unemployment rate is 8.5% and that IBM is going to buy Sun microsystems at a reduced price. From $11 to $9.5. RIMM did release a great earning which brought the stock up 20%. So, we are in mixed signal territory and consolidation. People are saying “Show me the money.” Probably no major moves until the earnings are release, with the exception of Uptick rule on April 8.

April 9, 2009 Analysts have came out and made their stand.

Bears

• Michael Mayo is bearish
• Frederick Cannon of KBW
• George Soros,
• Chris Kotowski is bearish,
• Nouriel Roubini is bearish,
• Betsy Graseck of Morgan Stanley
• Paul Miller of FBR Capital Markets
• Wachovia’s Matthew Burnell $7 or $8

Bulls

• Dick Bove is bullish and
• Marc Faber is bullish.
• Keith Horowitz of Citigroup
• Jack De Gan, CIO of Harbor Advisory

April 10, 2009 Huge bank rally today after WFC pre released some earnings information BAC up 35%.

April 13, 2009 GS reported earnings beating estimated and initiated a stock sale to raise $5 billion in order to pay back TARP. Whitney mentioned that things might be turning around if banks are able to raise equity. I think this is it. Other smaller and more traditional banks also recorded good earnings. Like bank of Ozarks beating estimates by $0.03 per share. Tech factory workers are called back to fill orders, news of programmers finding new jobs. My work reported $40 million in earnings instead of $30 million for the quarter. My most major stock BAC jumped to $11. I blew some money away this weekend with friends.

April 14, 2009 The White House auto industry task force and negotiators for Chrysler are asking banks holding some $6.9 billion in secured debt to take just $1 billion as the automaker tries to avert bankruptcy by the end of this month.

But the banks—JP Morgan Chase, Citibanak, Goldman Sachs and Morgan Stanley, which hold 75% of the debt—are remaining steadfast in refusing the deal. Their recourse, since their debt is secured by Chrysler assets such as the Jeep brand and factories, is to take their chances in a bankruptcy filing and hope they get a better deal when the assets are sold. Other lien holders include hedge funds—Elliott Management, Stairway Capital Management and Perella Weinberg Partners.

April 15, 2009 A good site for unemployment rate http://edition.cnn.com/SPECIALS/2009/map.economy/index.html

BAC with $182 billion in card loans as of Dec. 31, according to data from American Express Co. The bank wrote off $11.4 billion of uncollectible card balances last year. Citigroup Inc., ranked first by loans in the American Express data, and No. 2-ranked JPMorgan Chase & Co. still charge 3 percent on balance transfers, according to spokesman Sam Wang of Citigroup and Stephanie Jacobson at JPMorgan. Both banks are based in New York.

April 20, 2009 The week of bank earnings is over, finished with BAC release 44 cents per share earnings. However, the market sold off and BAC is down 25%. It started with WFC pre releasing earnings to bring the market to euphoria. After that, every bank who reported earnings see their stocks sold off by 10% or more. What worries people is that the ripple is now getting into the traditional  “loan and lease” part of earnings. Where traditional banks hold the biggest assets. BAC’s Merril Lynch and Country Wide acquisition actually performed spectacularly. Mortgage origination and trading are doing well while loan and leases are defaulting.

On another news, GSX is buyinig up someone and Oracle bought Sun after IBM dropped the offer to buy SUN. We are at the final phase of the down turn. The ripple is going into the most traditional part of banks and mergers are happening.

April 28, 2009 The WSJ released a report saying that C and BAC “MAY” need to raise more capital. Bringing their stocks down 10% pre market. I am starting to see a pattern here where WSJ will release something along the line of dilution before a major event. They did the same before earnings. Which suggested the US will convert preferred to common. The housing prices is still declining but at a slower rate of 18.6% in Feb. While consumer confidence jumped to 39. Some are spreading the fear of the swine flu from Mexico in order to bring the stocks down more. Of course, the timing of the WSJ against BAC’s earnings release as well as its share holder’s meeting is too much of a coincidence to overlook. If you want to orchestrate the downfall of the US financial system. This is how you do it. We’ll see what the conspiracy is soon.

April 30, 2009 China’s stimulus comes in the form of coupons for Washer/Dryer, TV etc. I think it’s the best way to stimulate the economy since people won’t be motivated to hoard the cash. Credit Suisse give out bonuses in the forms of the SIV that was the root of the problem. If all bank executives are forced to take these by the government, there will be a very big incentive to get it working again.

May 2, 2009 US to China trade relationship

Who’s buying what

May 15, 2009 Chrysler has declared chapter 11 bankruptcy restructuring protection. 800 of the dealers are dismissed. I think this will give consumer confidence and start buying cars again after the uncertainty of whether or not the guarantee will be upheld is cleared up.

The banks stress test result was also released a while back. BAC needs $34 Billion, WFC $11 Billion, JPM none, Citi $5 Billion. The result also showed that Goldman Sachs was not properly audited. In any case, BAC shares rallied from $9 to $15 because of this and settled back to $11 at the moment because WSJ originally leaked that they need $70 billion.

June 16, 2009 The world is in a recovery. Not much to say. Most banks who received TARP has started the process of paying it back. BAC required to $raise 33.9B and raised it within a month. Eurozone’s unemployment rate finally started to skyrocket. A socialist society can only hold out for 3 months more than the US.

The 16-country euro zone lost a record 1.22 million jobs in the first quarter, official data showed. Employment during the first quarter fell 1.2 percent year-on-year, the deepest annual drop since measurements started in 1995.

June 27, 2009 I’ve taken some measures to increase my cash flow in order to increase my leverage. One of them is to rent out my second room for $400 a month as well as selling a bunch of stuff. Credit servicing should come out to about $1000 per year.

That aside, the market has basically been flat and going sideways for a while. The only thing worth noting were GM and Chrysler bankruptcies and unemployment rate potentially going above 10%. As predicted before, they still got until August to fix the unemployment rate, or we’d see some very unhappy people getting cut off from the benefit roll and eventually lead to riots.

Five more banks got shutdown this weekend the most in a weekend, totaling $1.04 Billion in assets: Community Bank of West Georgia, in Villa Rica, Georgia; Neighborhood Community Bank of Newnan, Georgia; Horizon Bank of Pine City, Minnesota; MetroPacific Bank of Irvine, California; and Mirae Bank of Los Angeles. I expect this trend to keep up now that the administration don’t have to worry about the big 20 banks failing anymore. They can move on to closing the smaller ones.

PBS frontline: Breaking the bank is a good tv documentary showing how the US government was invovled with the banking crisis.

June 27, 2009 7 banks closed today.  Founders Bank, of Worth, Illinois. City Bank.  First National Bank of Danville. Elizabeth State Bank in Elizabet. Rock River Bank in Oregon, Illinois. John Warner Bank of Clinton. First State Bank of Winchester. Millennium State Bank of Texas in Dallas.

July 20, 2009 A look at past declines

July 31, 2009

Products created for this depression targeting consumers:

Cash for clunkers: $4500 for people to trade in their gas guzzling old vehicle. (Has to be extended from 1 B to 3 B)

Home owner rebate: $8000 for first time home buyers

Mortgage companies to buy up and service the bad loan portfolio from the crash for 40 cents on the dollar.

In Canada 5% cash back credit cards. And huge one time point coupons that give rebates based on Grocery and Gas purchases.

50% off most travel (rail/plane) and hotel prices.

China force feeding loans through banks.

September 23, 2009

Fed declared the recession over today. S&P crossed 1070.  92 total banks failed so far.

I haven’t logged much lately because recovery is well underway. A few things to note.

The FDIC’s fund has about $10 billion left. The PPIP didn’t get underway as the recovery is very strong. Unemployment is around 9.7% now and should continue to recover. SEC banned naked short selling (excpet market makers) and flash trading.

From my observation, the order of recovery from a crisis of this magnitude seems to be as follows: Rebound of banks that continued to show profit and are federally guaranteed. (JPM, GS, MS, BAC etc.) alongside the commodity (back to 50% of the peak value). Then, a tech rebound back to 20% off peak followed by a rebound in medium sized banks. Transportations, REIT then casinos. To finally end with insurance companies that insures financials and mortgages. (AIG, FNM, FRE, MBIA). Currently, the banks that are in the devastating regions with 14%+ unemployment are still seeing a lot of pain and are under valued. I am constantly scanning for sectors that are still undervalued for whatever weird reason there are. I bought CRBC for $0.65. This will probably be my best purchase of my life if it ever happens.

The loan loss sequence is as follows:

Subprime, alt-A, Prime mortgage, industrial, consumer, commercial.

Underwhelmingly, Tech and healthcare didn’t perform as well as I thought and aren’t the knight in shining armor that would lead us out of the recession. They didn’t fall as much, but they didn’t rebound as hard either.  The GDP for Q2 shows that we are not out of the recession yet (While most of Europe already is and China soaring). I have a lot of doubt about Chinese GDP and their loans, but time will tell. If I am right. September GDP should show a positive number and officially ending the recession. But we won’t see that until October or November.

The cash for clunkers programs all over the world were huge successes, pushing next year’s automobile demand to this year. My only regret is that I scrapped my clunker last year and thus am not eligible for the program that’s coming out in Canada. Still, $10,000 for my Hyundai Accent that only needs $25 per week to fill up is great.

With the recession over, I have begun thinking about exit strategies. At the moment, I am 200% invested, meaning I have borrowed money to invest as things goes to hell starting last October. The move paid off and I am now sitting on a huge profit. Taking the profit will net a large tax charge, so I am planning this carefully and defining the sell conditions. Preferably, I’d like to lock in my profits into secure bonds and CDs as interest rates goes up. The initial idea is to decrease my equities by 25% with each 1% increase in the Federal interest rate. Of course, I will wait for the actual confirmation to finalize my decision. Some of my recent move are less about pure equity gains and more about a continuous stream of income. You can see that from the purchases of REIT and banks that pays dividends.

The most puzzling stock for me are ATVI and NRG. Both of which has perfect score on my fundamental analysis. ATVI has zero debt and NRG’s derivitave hedging and low P/E (5) is a mutant compared to the financial health of some of the more problematic companies (ahem AIG ahem).

In any case, hopefully I can stop updating this entry soon as the GDP confirms we are out of the wood next time.

Current holdings: AMD, ATVI, CRBC, BAC, C, NRG, CRR.UN, BMO, TD, V

October 01, 2009

The market has been stuck in the same place for the past 3 months now, waiting for the earnings to confirm the trend. FDIC is running  out of cash and are exploring the possibility to get early advance on fees from the banking industries for the years between now and 2012 for $30billion. I think it is crazy and am confused on why it isn’t using the 100 billion credit line from the treasury. Maybe Sheila Bair fears losing power?

Ken Lewis announced resignation amidsts all the criticism. I feel sad. I should really start writing that letter to him.

October 16, 2009

GE, IBM, AMD, BAC, C all posted a loss followed by spectacular results from JPM and GS. Huge drops right after earnings report. The financial crisis is now fully in consumer credit card losses and spilling into the commercial real estate market. It looks like the commercial real estate market will be the final hurdle to overcome.

November 05, 2009

We’ve broken the record and reached 100 bank failures last week. GDP for october is a positive 3.5% which unofficially marked the end of the recession. Fannie Mae started renting out the houses that they possess which are underwater back to their owners to avoid foreclosure. Punishment of Ponzi schemes has mostly completed with Madoff in jail. The officials are moving on to punishing hedge funds who did insider trading. The whipping boy right now is Galleon group.

November 27, 2009

Dubai world, a state fund for Dubai, is in technical default after asking creditors for a delay in payment.  Estimated world financial exposure to Dubai world is $40 Billion. Including off balance sheet vehicles, it amounts to $80 billion. This changes things and will probably ripple through the world if not taken cared of correctly. Oil fell in expectation that they will have to sell oil to make up for the debt and the USD + YEN rose as a safety heaven against emerging market defaults. The unwind of the carry trade might have been triggered by this.

I was hoping for peace and quiet going into thanksgiving and Christmas, but that doesn’t seem to be what the market wants. I am tired.

December 04, 2009

The dubai world problem seems to be less than anticipated (at about 26 billion) and has minimal impact on US banks. With the biggest creditor being HSBC in Europe.

Obama held a job summit with top CEOs in the country to find a way to jump start small business hiring. Today the November nonfarm payroll data got release and is a meager -11,000.  Surprisingly, the market did not rally. I find that this should be a big deal. We are almost at the point where we are gaining jobs. Then again, it could just be Christmas hiring. Another thing worth mention is that BAC is paying back 45 Billion in full by issuing 1 billion in alternative securities that has a strike price of $15 if shareholders approve. Which could be the reason why 1 billion shares of BAC traded hands today. A historical volume with a stock at this price.

January 25, 2010

Obama opened his mouth and, in a speech mandate the breaking up of traditional banks from trading. He wants to reintroduce Glass-Stegall. At the same time, Ben Bernanke’s re-election as FED chairman was questioned. The financial stocks promptly dropp by a good 15% while the overall market dropped by 4% in the period of a week. These are all due to the fact that the democrats lost a seat in a very iconic state Massachusettes. The loss spanned 2 days, just as I was on a business trip.  I can’t believe how bad the timing was and I thought that I can leave the market for 2 days.

This is an example of government getting too involved in the economy. They represent populist rage of the uneducated people who probably represent only a small amount of the nation’s wealth. What Obama and the administration probably don’t realize is that the well educated “better off” people are seeing their wealth vaporizing and no jobs returning to the market while the administration is hell bent on passing their pet health care reform.  The message is very clear, I believe. Fix the economy first.

Please, don’t screw up the rest. The government is at a fine point where it might over legislate and bring the whole market to a halt again.

January 26, 2010

CDS have started trading again since its market was frozen in 2007. In 2008, junk bonds were the high yield trade netting 10%+ in interest. Now that this yield is gone, investors are pushed to make riskier trades.

Treasury secretary Tim Geitner is seen being put behind Paul Volcker, showing that Obama has lost faith in the easy money policy of keynesian policy. However, he is going to announce a government spending freeze. Apparently the same old same old political bullet dodging as ever. People know that it is politics as usual, but coming from Obama, it is bad.

February 16, 2010

Rumours of Greece default began 2 weeks ago and have now settled down a bit. Last week the EU announced that they will back a solution to “bailout” Greece, but did not give any details since they are considering several plans. Today, they demanded the Greece CDS that is used to hide the % of debt to their GDP. EU requires members to have that ratio below 5%. Of course, the CDS was constructed by Goldman Sachs. The firm that’s been bankrupting countries since the beginning of US history.

As a person who follows the economy closely, the wait to get my copy of  “on the brink” was insufferable. It allowed me to go through the crisis chronologically from the regulator’s point of view while reminiscing my own experience and anguish felt at each major event. that led to the fall. First, some quote from the beginning of the book where Hank Paulson shared his insights on life which I find myself agreeing with more and more as I age.

P23: Real happiness, my father liked to say, came not from anything that was given to you, or that was easy to get. It came from striving to accomplish things and then accomplishing them. You had to do things right. If you left grass tufts sticking up when you mowed the lawn, you had to do it again.

P28: Never be awed by title or position.

P29: My time in government had taught me that whom you work with is as important as what you do.

P31: Remember, you are not going to get ahead, in any case, being a grunt.

P39: There are no dress rehearsals in life. Do you really want to be 75 and telling people I could have been treasury secretary?

P40: My epiphany came while I was flying out to the Microsoft meeting. As I thought through my decision, I recognized that it was simply fear that was causing me such anxiety. Fear of failure, fear of the unknown: the uncertainty of working with a group of people I had never worked with before and managing people I had never managed before.

The nature of a democratic political is such that nothing can be done until a crisis happens. The deadlock between two major political parties of equal influence means that nothing can get done during time of peace when problems are only just brewing. Everything has to wait until the last minute, until your arteries are cut open.

The congress is a glamorized version of high school popular kids who often make decisions not based on what is good for the country, but what makes them appear good in public. Or, what we want them to do to appear good. They are a reflection of our internal desires of what someone in power should be like and it doesn’t necessarily mean in depth knowledge of the economy when it comes to making economic decisions.

I’ve always wondered why the government doesn’t just go ahead and do what I think is right. What every trader in the market know they should do and eventually ended up doing too late. This book explained it all. The amount of political, legal and personal restrictions on any action that is to be taken at all makes it impossible for the ruling party to react in a fast enough way facing a crisis. We are doomed to the cycle of boom and busts and we just have to accept it as it is.

Waiting before my heat is up and to showdance in front of hundreds of people. Fighting off the adrenaline high, keeping my energy up.

Waiting, for the previous trainer to finish his topic while mentally simulating my part in the presentation. The jokes I am going to insert, the questions I am going to ask and the exercises that I will make them do.

Waiting before a board meeting with bigwigs of a company. Calming my nerves with coffee and repeating to myself what not to say or think. Forcing myself to take it easy and find a way to believe that they are my long time friends.

Waiting for many many occasions right before a big important unknown. Exciting, exhausting and emotional. Over and over again until it no longer phases me because I no longer seek other people’s approval on my performance.

Yet nothing compares to this. A large buildup to an event of something I’ve been waiting for years on. Compared to the other shorter term transitions, I can’t rely on the flow of the moment to get me through the internal turmoils. No, the prboelm with this is that I have too much time to think without being able to act on anything. Too much time to criticize, too much time to read about other’s failures and too much time for doubts.

Worst of all, I am seeking the approval of myself from myself. The most critical person in the world.

Waiting…

Call this a poem if you’d like.

When I was young, I dreamed of living the professional’s life and getting sent to different parts of the world on company money, but it rarely happened while I was still too fresh and uneducated on proper business conduct. I think most of the engineer’s my age bought into the field because of this dream. Sadly as time goes by and as the novelty wears off, the disruption to my life has greatly eroded the enthusiasm that I once exhibited. The old adage is so true. They always come to you when you least “want” it. The very fact that you are trying to push it away shows people that you are best suited to do it.

Perhaps as I have increasingly more activity going on outside of work  (courtesy of my job),  my internal calculation for the cost/benefit to my personal wealth is kicking in and telling me that it’s not worth it. Yet when asked what’s so important in my personal life that I can visit the clients on a certain date, I struggle to give one example of an event of enough importance. Rather, it’s the sum of several normal events that I need to cancel/move which made the disruption to cost me more personally. Or rather, the almost zero sum of the benefit from making the actual trip. Wait… I can’t determine that yet.

Which brings me to the actual hidden variable that actually pushed me to agree to go. The seeds that I sew during the trips. You see, I have long understood that my persona is a brand that I need to build on, an impression that people can recall as soon as the name is uttered. The only way to do that, is to completely and utterly destroy any doubt about it. I believe I am good at what I do and I will show that.

Which brought me to a comment that the client used to describe me:

We were all having a laugh about how in the past, you’ve always come off as very business like when dealing with us, but once you are here in person, you are cracking jokes and mingling like you’ve always known us.

And that is how I’ve decided to build my professional image. A bipolar existence that allows me the freedom to switch tactics when needed. It is a very suitable image for the world of business since most of the encounters are short term, the contrasts creates a longer lasting effect. I wouldn’t be able to maintain that though since, in my personal life, we all know that I am quite boring. Especially so when I am crunching numbers. You might ask why I am building a brand? Why not? I am after all, aiming to be a CEO one day. With that ideal, I have to always look at things from the perspective of a boss and evaluating the feelings while working as  a grunt.

Away from the duties of work, there is one particular quirk that I’ve noticed about myself on a business trip. I am a lot more extreme in my actions because everything’s taken cared of, paid for and insured. Does the safety net drive this behavior? If the safety net can change the behavior of someone like me who is always penny pinching and have triple redundancies in any plans, then it is something that I have to take into account as I grow in life. How do I reign myself in once I reach the point when I have created this safety net for the rest of my life?

What of 2010? What’s brewing in my lab.

Unlike in the previous year, I don’t have 10 lists of things I want to achieve. I am beginning to realize that multitasking is bullshit. This year there is only one theme and that is the execution and follow through of the secret project. For those of you who’ve followed my blog for more than 2 years, I mentioned this in the passing from time to time and you’ve probably seen it being put to the side and added back on.

This year, it will be completed.

“I have a boyfriend”

I always wondered if woman say that to all guys they first meet or if it is done because I have somehow, through my ignorance of social norm, mistakenly expressed what is regarded as romantic interest. The former would depress me to no end on the reality of the opposite sex while the latter at least give me some hope of understanding when I crossed some invisible line.

After realizing that comments like these are usually the result of an inflated ego, I have recently started retorting to comments like these in an effort to put their egos down in a coffin. Yes, it took me some 29 years to figure this out, but I can’t help the fact that I was brought up in a completely different culture, where the game of chase wasn’t too well studied and understood by the female population until the democratic revolution.

It is extremely puzzling to hear something so out of context like this, during a business discussion where I am trying to get something done. The same kind of WTF thoughts crosses my mind when I read articles where female employee sues their supervisor for patting their back on a job well done.

How can you take business and somewhow contort it enough in your mind to believe that I am actually hitting on you? Am I being too nice? Am I smiling and complimenting too often? Those are the only thing I can think of after studying various books on the subject matters. The “nice guys finishes last” complex… except I am not going after you.

For me, being nice is a formula. Just like pretty much everything else in my life. If you are not rich or powerful, be nice to suck up to the rich and powerful. If you ARE rich and powerful, you can afford to be NOT nice to save the precious time that’s left in your life.

It’s happening again.

A sense of disappointment and indifference have started overwhelming my mood after each dance class. Perhaps I have wanted it to give life some positivity so much that it couldn’t keep up with my expectations. I noticed that I went through the same cycle every time I move and decide to pick up dancing again.

I tried to rationalize what is going on, but am at a loss for the root cause of it. Originally, I had thought that the disappointment comes from dancing with woman whom I thought aren’t as good as me and that the search for perfection is deluding me from the reality of the real partnership. There is o perfect connection and I will be happier if I don’t look for it. Yet, this shouldn’t be a problem this time. This time, I started with the specific intention of socializing instead of dancing.

Still, I feel it. The mental agony cries out when the lady couldn’t match the tempo of a double turn. The cringe of a fake smile whenever the woman complains about a lead being too sudden, but a complaint caused by the lack of her connection. Could it be that once you’ve walked past certain level of expertise that you can never go back? I want to experience that high from a perfect connection someone once showed me. Or perhaps it is just in my imagination and I have already surpassed that level? As has been proven time and time again when I look at my past teachers and realizing that I am the better dancer.

Until I feel it again, I will futilely continuing working on the basics, improving my stamina and strengthening all the small supporting muscles. Wherever you are, don’t take too long in showing up, I don’t know when my hope will die.

The biggest money flow

The US has been accusing China of currency manipulation for the past several years now, with less weight in their accusations as the collapse intensified. The reason is pretty obvious and is something that you will never see printed in big media. Prepare for some wake up call: China owns your future generation’s income.

To fully understand the effect of this duopoly, one shouldn’t stop at this superficial fact . You could say that China started pegging its currency to the US as an indirect way of saying that it is inflating the Chinese Yuan without the negative connotation. Dollar pegging, is the term that countries use when they earn more than they spend, printing money is the more familiar term but it only occurs in countries who spend more than they earn. You can draw a direct equality between the two, except the context is different.

To dollar peg, China buys US treasuries in mass, turning part of the Yuan into US dollars and decreasing the value of the Yuan as dollar drops. The US, seeing this phenomena, initially called China to stop, but realized later that if China were to stop buying treasuries at the height of the collapse the US would be in deep shit. Japanese style lost two decades deep shit. So, without political clout nor the financial power to push, what does the US do? Print money i.e. sell a ton of US treasuries and effectively lowering the interest rates.

China in turn, realized that they just got royally screwed by the US as their huge treasury position got devalued by at least 15% in the past year, so they now look to diversify to other currencies. As a subtle way of saying “hey, we are going to be increasing the value of our Yuan”.

Secondary money flow

The trillions of dollars created above together with the hundreds of billions spent in stimulus resulted in what we are seeing as the “almost zero interest loan”. During a period like this, it is essentially a no-brainer for anyone to get a 0% loan and invest it somewhere abroad where the currency will appreciate. If your investment doesn’t go up, at least their currency value will. I am not sure how much of that money went into China, but I know that a lot of Chinese stimulus ended up in the real estate market there. Since their currency cannot appreciate due to the dollar peg, the properties will. Hence, a housing bubble and China blaming the US for creating the biggest carry trade using US dollars. It’s more of an American way to say “up yours” to China.

So most of these US stimulus got stuck in the US institutions and never made it into the workers. If you follow the news last year, you’ll see the US government simultaneously accusing the big banks of not lending enough while saying that their risky lending is the cause of the collapse and that regulatory policies will need to tighten. They are basically giving the big banks a truck of money and telling them to lend to risky people and not lend to risky people, effectively shifting the blame to the financial sector. Politics is a game of shifting blames. The institutions weren’t idle though. Even if they are not lending to the average Joe, they have enough sense to make money out of the cash. So everyone benefits. Sadly, because these money is not directly spent on real projects, real inflation has not happened yet.

The great unwind

Most governments are targeting June 2010 for the great unwind, with a few whose trades are tied to China having to raise interest rates prematurely. We are hoping for everyone to do it together so that it doesn’t disrupt the currency exchange rate too much. For the US-China carry trade though, the unwinding might happen as a hurricane. While the Yuan is pegged to the dollar, if the US raises interest rate the Chinese will have to sell its US treasuries in order to maintain the peg. By selling the treasuries, it decreases the demand for US treasuries, further driving up the rate. As the largest treasury holder, China’s selling pressure will influence US treasuries the most forcing the US to increase the rate more in order to attract more buyers. Of course, they could just sell less treasuries, thus keeping the rate low, but I doubt that’d be the case because they’ve already committed to huge budget deficits for the next 3 years.

Of course, at one point of the unwind, China will see that they are running out of foreign reserves (US treasury) at an alarming rate which will force them to float the Chinese Yuan. This will make a few things possible in the western world. Inflation and wage increase. Simply because China produces everything that we buy, the increase in Yuan will mean an increase in cost leading to an increase in the wages demanded by the Chinese people in dollar term. This will have the secondary consequences of making hiring in the US a more attractive term for the big corporations. Yes, you can basically thank the Chinese for record low prices on everything after the government force fed 2 Trillion dollars into the economy over 4 years. This trend will not continue and will lead to the next low of the business cycle after we experience the recovery. Currently, I place the probability of this happening in 5 years. Usually, a cycle lasts about 10 years, but I believe the boom and bust cycle has significantly sped up in the modern time.

The future

I get the feeling that this is probably the final US recovery. After this, I will be looking to invest in other countries. Mainly Brazil,  South Korea and China. At the moment, they are a bit over valued, but I will buy on any dip in their market. Especially Brazil. The western part of American will rise in activity while the eastern part falls in its glory due to the tie that they have to the different continents. The west is a bet for Asian economy while the east is a bet that the European economy will rise in power. I am going to place my long term bet soon and I hope I am not wrong.

You can basically just read the summary to know what I now know. The rest are analyst jargon, from a non-professional one at that. To download the final data: CDN real estate 2

Note: I stopped adding on to the research and improving the details before I consider the report complete because it became obvious that we are not at the point of a sbubble burst yet. In the next couple of months, you will hear some report in main stream media about 20% increase year-over-year for November and December housing. Keep in mind that these are high because last year’s oct-dec period was abysmal for housing.

Sources: Statcan, Census, Income, income 2003 to 2007, household credit, Foreign portfolio investment, CPI,

Summary:

The biggest concern for the Canadian market right now is the doubling of consumer and mortgage credit within the past ten years with half of the increase occurring between 2007 and 2009. That is about $300 billion of mortgage credit and $100 billion of consumer credit. To put that in perspective, every household is $21,428 more in mortgage debt than we were in 2007. The consumer credit increase is still linear as opposed to the exponential growth in mortgage credit so I am less worried about that. Although I can’t reach any conclusion until I get some data for 2009 when the bank of Canada lowered the rate to 0.25%.

To determine whether or not there is a bubble. I use the “average house price must be less than 5x after tax income” as a barometer, 7x if considering pre-tax income. The healthiest province is Alberta.  Their housing prices still have a while to go before catching up with the income increase from oil. For Montreal, the housing prices are about 10% away from a bubble. Vancouver is already there and Ontario (mainly Ottawa and Toronto) is about 3% from bubbling. Of course, we will never get a bubble if the median income increases along side house prices. With the recession in effect, I doubt anybody saw a raise in the past 2 years.

I estimate that we need at least one more year of 1o% price growth before the need to worry. Therefore, I will not sell my condo.

Methodology:

This is what happened to the US before the housing bubble burst.

The inflation adjusted income vs inflation adjusted house price will give you a pretty good idea whether or not you are in a bubble. Some uses (GDP per capital/price per square foot)*100. If it goes above 30 then we are in a bubble. Different methodology, but you can’t just take one measure and use it without seeing the other.

For Canada, it is actually quite frustrating to try to compile data like this. The problem lies in getting my hands on the data because our government don’t spend as much of their resources in polling people about the state of their wealth. I ended up having to scrape numbers from here and there as well as estimating them based on past data. In truth, we may never know what state our economy is in until the next census. Actually, the average Joe will not know until the next census because you’ll have to pay $3000 for the data sets to CANSIM if you do want to get your paw on the data.

Being poor and having no sponsor who would pay for this research, I opted to estimate instead.

Here are all the data I used and their sources. Hopefully I can just go to the same sources next year for the updated data.

Data: Financial Security_Family Income

Source: Human Resources and skills Canada

Source: Stats Canada

Source: CHPC

It’s scary thinking about what I am about to embark on. The excitement of new possibilities pitched in a perpetual war against the fear. Do I? Or don’t I? I thought the answer was crystal clear before, but now, I don’t know… Will I be lonely?

That loneliness factor had never entered the equation when I was deciding on similar events before. All of a sudden, I find myself confused about possibly giving up the things I’ve come to treasure. Mainly, the relationships that are already established. Am I running away? Do I have the strength to make the right decision? Perhaps I’ve lost some of the luster of youth. Desiring more for comfort of the established life and the warmth of the familiar. Will I kill the dreams for it? Have reality pummeled so hard that I have stopped daring to dream?

On the other side of the equation, pulling me on. Is the promise of certain freedom. Freedom from certain binding which seems like it can be achieved soon. The two opposite factors should have canceled the need to make a decision if you average them mathematically, but the reality of life is that they contribute to adding more tension to the rope. When the rope snaps, the momentum will be greater.

One thing I know is that I am taking this decision more seriously than previous similar ones I’ve made. Enough so that I have taken Christmas week off to think it over and look at it from all point of view.

I have never taken a Christmas vacation before.

Yeah, that’s right. I’ve always worked through Christmas since I waded into the pond of adulthood. The decision to take the days off was subconscious before the true implication of what this decision will mean was clear to me. Goes to show how my subconscious is treating this as the top issue to be sorted out in my life. Yes, more important than sex, money and chocolate. That is all I can say for now, since there are people in my readership who will be impacted by this.

Yes, I have a vague idea of who’s reading me, except for a few permanent reader from foreign countries that I am pretty sure I’ve never been to. Thanks for reading. You are my one way psychologist. Considering how cheap ass I am, I don’t see this being replaced by a real psychologist soon.

Believe it or not, this is a sun. At least it’s going to be a sun in the game I am going to make. I am really not sure what influences my art style since I don’t really recognize it from any of the existing art. Somehow, with a pen in my hand and Adobe Illustrator aiding my unsteady strokes, I managed to create something like this. How to animate this is still up in the air at the moment, but I am sure I’ll figure something out. Just like everything else in this game.

It’s feeling more and more like I am taking on something bigger than I can tackle by myself. The fact that I am not coding full time or producing graphics full time means that I wastes a significant amount of my day fumbling around or getting into the zone. Then again, I really don’t have the funding to hire somebody to do it for me. So muddle through I go.

The double dip?

As the holiday approaches and volume died down, I can no longer play the strategy I played last month for earnings month. Therefore, the type of trades I used and the type stock has to be rethought. I believe that this is the reason why most people don’t make it through their first year. They try to apply the same strategy to different months. Trading is something that has to be constantly adjusted.

I admit, I screwed up on the first week of trading. I bought a few butterfly options to speculate on merger acquisitions. However, I didn’t do much research on what potential volatility might do to the butterfly option. I should’ve used an iron condor instead, but hey, I was in a hurry and didn’t have time to research. I was in the holiday mood.

Lo and behold. Dubai is contemplating defaulting on their debt. In one day, I lost about 1/3 of the starting money. Going back to the logs. I saw that HPQ wasn’t as liquid as I originally thought. A liquidity crunch happened and instead of selling at 1.5, it sold at 1. That’s about an additional 25% loss that wasn’t necessary. Who would’ve thought that HP is pretty illiquid as an option.

Performance analysis

Starting balance: $3675

Closing balance: $2158

Trade carrying over to next week: $1517(100%)

Derivative risk: $0

Increase from opening balance: $1218.60  (41.2%)

Strategy

The theme of the month is going to be Christmas. I basically bought a few butterfly spreads and wants to sit on some merger acquisition play until the options expire. It’s the holiday season and I don’t really want to work too hard or worry too much. Because of my relative lack of experience in butterfly options, I really got my ass handed to me from picking the wrong stock and wrong options.

Reflections

I have since understood that I really need to do a lot of modeling before going into a trade so that I know what buying certain options mean. Before going rogue and trying something unknown this month, I had no idea that butterflies are best used for speculation. A $100 worth of butter fly could potentially land you a $5000 reward. Go figure.

The more I dance around, the more I understand what I am looking for. More through a yearning of something that’s lacking than being satisfied by my own progress previously. The difference is huge and I am not sure if I can convey this properly without sounding weird. I guess you have to reach where I am to feel this. It’s the difference between seeking to constantly improve (the attention towards the selfish progress) and the search for a perfect interaction (a perfection of giving and taking).

This change of concept is vastly different from the traditional belief of lead and follow to a more harmonized approach to invitation and usage. Along with the realization that you can only have a perfect dance when both parties are able to go all out at 120%. If 100% is you dancing perfectly, then 120% is both of you going faster, sharper and more emotional from leap frogging off of each others momentum. In this interaction, a guy no longer leads forcefully and a girl no longer follows blindly.  The man will have to be confident enough to not abuse the role that initiates steps while the woman has to be confident enough to take the invitation with full force.

I’ve been able to lead everyone so far into what I want to do by using the strongly lead expecting the woman to reciprocate with a strong follow. So why am I looking for that elusive connection? Because it’s the difference between having to adjust the way I dance to the woman’s need and not having to think at all and just let my body do what it wants.

I’ve been in a slumber for so long that the clarity struck me like lighting, leaving me on the spot wriggling in pain while at the same time, electrified to overflowing with life. A little insight for you on the events that led me to this clarity. As I said before, there is something missing, something I wasn’t getting about my dance. Now, that’s the only part you should retain from all my previous posts on my adventures in Salsa.

Fast forward to today and I danced with Dihilia at about 80% of my maximum ability with Salsa level 1 steps, but it was enough to awaken something in me. If you want me to describe me, I can only reference to the fight club scene where Tyler was describing how fighting changes your perspective in life. How you start sizing people up on the street and everyone you meet. With that slight disapproving scowl on his face. As if your whole life before this was unsatisfying, you can beat up anyone you meet and you are pissed that you only realized it now. To tell you the truth, I probably danced like I used to, or probably even less skillful than before when I was at my prime. What has changed is a complete synchronization of dance and life. I don’t have to pretend anymore and what I dance is what I am.

Or, another way of describing this, I have become what I pretended to be.

I get the biggest surprises when I dance with newbies and the biggest disapointments when I dance with advanced dancers. This is probably because of the expectation I have set for both groups. For some advanced dancers might look very pretty and flashy, but in reality have a very crappy frame; instantly destroying the fantasy constructed up till the moment when the music starts. All because, yes, they should know better.

Which to my surprise, proved that the opposite is actually more exhilarating as a result and requires some modification in my thinking of what is considered talent. I haven’t danced with beginners for a long time and never in my life danced with so many of them in such a short time. On top of that, salsa is close enought to dancesport so that most of the skills and techniques are interchangeable, except for my 11 somewhat years of built-in instinct to start on the 2 or the 4. Salsa starts with 1.

The similarity means that the lead and follow should somewhat be the same in both groups and that what I notice in one applies to another as well. Back to the point, I’ve been noticing that some selected few beginners possesses some talents that I’ve only felt in top dancers before. In the way they spin, in the way they respond to a connection and in how they prefer to carry their frame.  I’ve always thought that these type of thing is taught and improved over time, but if I was not delusional when I was dancing with these newbies, then I am wrong and these are things that you are born with and is inherent in your personality.

Hence, the pro’s claims to know who you are from the way you dance.

Most of my discussions about money with people goes like this:

“blah blah blah and this is how I was able to consistently earn money for the past 5 years”

“Wow you are very knowledgeable about investing, are you a financial advisor?”

“No, I just trade a lot”

~silence

You can almost see the respect drain out of them. This happened enough that I just want to get certified for the sake of saying yes with conviction at one point and find out how people would react. What is disconcerting to me though is how people rely on a piece of paper… a title to chose the advice they’d listen to on matters of money.

For me, I have lost faith in financial advisors long ago. Rather, the moment I found out that they are compensated based on a fee commission structure and their job security has nothing to do with how well their client’s portfolio ended up being, but rather, the amount of transactions. Most of the banking industry’s compensation structure are not tied to the performance of the money they manage. Get this into your head now.

Nowadays, when I encounter someone knowledgeable, I ask for their track record instead. Something so obvious, yet nobody asks for. 5 years of experience is the minimum passable grade with 10 years an ok grade. One level up if you are able to consistently make money for those years. If everyone used this as their guide, there’d be a lot less angst in the world right now. Then again, we’d just be creating another bubble if everyone made too much money.

I should be thankful for these financial advisor’s recommendations. Without them, I wouldn’t have been able to get ahead.

The cost of learning

The trading month of November closed today for me. My schedules follows options expiration day every month and the December trading month will begin next week.

I hesitated a lot before liquidating all my holdings and closing the books. The reasons mainly circles around a few bets that I’ve taken which veered more towards a long term bet. Subconsciously, I have slipped a few bets based on fundamentals into my day trading account. The cost of closing these bets is also significant in itself. I have started to doubt the benefits of my strategy. I will have to think of a way to take profit off while avoiding the complete liquidation of my assets at the end of each trading month. For now, this will continue since I am simply trying to find out if I can make profits for 3 months straight. But it really hurts my Asian pride to be paying so much in fees.

Performance analysis

Starting balance: $3000.00
Closing balance: $5519.33
Increase from opening balance: $2519.33  (83.97%)
Cost of capital: $636.17  (21.20%)

Strategy

I tried out numerous different strategies this month, including a straddle using put options in both FAS and FAZ and a saving grace straddle with a call LEAP on MBI and a November put. MBI is a stock that has fallen past its historic low. So I gathered that the downside isn’t too big. Both turned out to be terrible short term plays. For weekly day trading, it is still best to stick to TA based on S&P as well as the dollar correlation.

The best play this month is still ATM straddles on earnings in sleeper where volatility weren’t expected.

Reflections

As my health deteriorates and my focus on work intensifies, the trading part deteriorated significantly as I stopped gathering information and drawing TA graphs to understand the market, I started relying on my instinct. Instinct means FA and long term so I erred when day trading.

If anything, next month will be a slow month. I am expecting the sector cycling to get back to the Financials followed by tech, then carbon again. The big things to watch for will be the black Friday sales and any sudden credit deterioration in the financial sector. December is the time of year where mutual fund all decide whether or not they are buying or selling certain stocks so that their books will look good to their investors. So potentially, the big names will benefit as the mutual funds add those names to the list.

They were surprised that I last this long before coming in for a checkup. According to them, this is a very painful condition to be in. From my point of view, I only wanted to find out if there is a way for me to stop getting distracted by the inconvenient feeling that began 5 days ago.

Shingles is the resurfacing of chicken pox what lies dormant in a person’s nervous system. The method of storage is unknown and the method of reactivation is unknown. Apparently, something triggers the nervous system to start making the very virus that causes the pain. Yes, the liquid that oozes out of the sores are actual varicella virus and contagious, but unless you touch it with a part of your skin that has open wounds, you won’t catch it. Or if you somehow rub your open wound all over my pants.

It’s painful all right since the virus uses the nerves to travel to the surface of the skin and creates sores at the numerous nerve ending clusters. To those of you who never had it. It’s like getting stabbed randomly and repeatedly by the tip of a knife.

Supposedly, at around 50, when your immune system gets weakened, it has the most chance of surfacing. Otherwise on a healthy person like me who’ve never experience the fever that precedes the viral outbreak, the only unofficial explanation is by some nervous shock induced by psychological stress.

Consider that I have been working full time to come home and either day trade or write my game till well into the night,  while, at the same time, dancing salsa about 3 hours/week. I would say that psychological stress is the most probable cause. I am just angry that I can’t put my body on overdrive as much as I wanted to.  Not if I want another episode of shingles for a month and risk having phantom knives stabbing me for the rest of my life. Seems like I have to slow down, meaning no more programming at the doctor’s waiting room in pain while the babies around cried their crescendos.

For the right prices, I would risk it, but at the moment, nothing is worth that much yet. It is my life’s philosophy to step into my coffin with a body that’s completely ruined, but I also understand that I can only ruin the body parts once. Choose wisely.

Life and trade optimization

Yeah, I know, I didn’t update last week. It’s not because I lost big or anything. I just got too busy and didn’t get to trade much. Trading, unlike what I used to think, requires more research than a full time job. I decided that I shouldn’t make a trade, unless I’ve done enough research for a particular stock. As can be seen from my last statement update,  10% of my profits got eaten away by commissions to my broker. The solution that I applied is simply to trade less and ride the swing for a longer period of time.

On top of that, because I day trade now, the concept of money and time is even more distorted than it used to. I am basically losing and gaining thousands of dollars daily, while living a very frugal life where I barter for anything that cost more than $50. I started to realize that most of the cost cutting that I’ve been doing isn’t really worth my time. The enjoyment of life is slowly creeping to the #1 spot in my life’s goal. Which is why I took that Metallica trip and had to basically abandoned trading for 3 days because of the aftermath.

Performance analysis

Starting balance: $5149.48

Closing balance: $6368.08

Trade carrying over to next week: $4814.5 (75.60%)

Derivative risk: $21,000(329.79%)

Increase from opening balance: $1218.60  (23.66%)

Cost of capital: $241.4  (19.80%)

Earnings excluding one time lucky shot: $0

Successful bets: Lost track

Failed bets:  Lost track

Carryover bets: Lost track

Strategy

I tried a strange straddle technique by buying one put option on the FAS and another one on the FAZ. Figuring that since these two both decay, it is best to buy the put options. Also, because they are way cheaper than the calls. I am still waiting for it to play out, if the financials experience a big rally or big drop, I’ll profit greatly.

Reflections

I slipped and missed out on a few earnings release that should’ve reaped some great benefits for me. At the same time, I am abandoning the straddle strategies that I’ve been using for earnings release. Upon some initial estimations, I realized that for a straddle to earn anything, the underlying stock needs to have a wild swing of at least 10%. A great feat if you’ve seen enough of the market. At most, it’s a 5% swing for stocks that are large cap and even when it’s a small cap, the volatility is usually already discounted into the options price. You lose either way.

On another note, writing options is making my books look terrible. The risk of having everything exercised will require me to pony up $21000. Which is an astronomical number compared to the actual underlying cash. This is part of the reason why we have a financial crisis at the moment. The problem is not that I’ll lose big, but rather, when people exercise the options, I need to have that amount of cash on hand. Which, means liquidating a lot of assets just to have cash on hand, exacerbating the problem.

After much thought, I’ve decided to stop writing options because the risk/reward is not worth the small amount of income it generates. So far, for small transactions, the best risk/reward is still in the direct buying of a call or a put option.

In my opinion and this is my opinion only from observation. Critics love big failures. The down fall of the the free world brought about a flock of critics who spend their time writing articles to point out the faults of every firm that’s out there. I personally believe that it is the action of a coward. People who criticizes and bath in the glory of their prescience on how bad things are because of those “in the wrong”. Those who, instead of acting to save, acted to destroy. Through what they thought as innoncent words.

Yes, in writing this, I am also attacking, but I am only attacking because we have recovered. To tell you the truth, the only people who can survive what we survived are those who has everything that they have in hard earned cash, but even that is debatable due to inflation. Perhaps gold is a better bet, but then you also have to spend money to rent a vault somewhere.

Critics love pointing out a fact and use it to prove a weakness and how badly managed something is without looking at the details of the circumstances. As if the only actor on stage is the one that they are criticizing without bringing into focus the other players in the market.

Why were all firms being destroyed? Because they don’t have cash. Why can’t they raise cash? Because it shows weakness. Why is that a bad thing? Because once they do, shorters circle over the sky and short you to bankruptcy. I was fully invested during the crash and I went into it with my eyes wide open. The people that are the most despicable and added no value to rescue the system are the media.

Which I have a lot to say about in my next opinion piece.

It’s been a while since I last updated on the progress. Well, things has been hectic. You should probably head to the flash file itself to see. Make sure you click on the stage that opens up so that it’ll start capturing your keyboard events.

Use arrows or wasd to maneuver and space to shoot.

Bug fixes

I fully fixed the physics of bullets so that angular rotation of player ship as well as the ship’s momentum affects the bullet’s trajectory. On top of that, I fixed some trigonometry errors in my formula to calculate where the nuzzle of the ship is. While a long ship is rotating, the angular force on the bullet is greater as the nuzzles are farther away from the center of the body.

Additions

It’s beginning to take too much time to single step through the code to debug physics or some new mechanism. So I added an administrative debug interface as an overlay. It explains why the HUD is so messy right now. The released version will have it cleaned up, but I don’t have time to design the release HUD at this stage.

The major milestone reached in this build lies in the implementation of player save files as well as a working inventory system. These are done through remote loading of xml file. And yes, I had to code a xml parser for that. Eventually migrate to PHP calls to mysql databases. Again, too ambitious at this stage.

Architecture

I spent many an hour with my head in my palm chasing after chains of thoughts in the dark. Figuring out how to connect the code’s architecture through Aggregator and Singleton class. The class structure for aggregator is very alien from what I’ve learned up till this point in life. So it was equivalent of a mind fuck in exploring how to do it. All this because I want to be able to scale this up if I want to in the future. It is both a satisfying and frustrating experience because I just want to get a product out first and here I am stuck working on something that end users won’t see at all, nor appreciate.

Art

I drew a few ship designs on paper and realized the vector art through adobe illustrator. If you have seen the demo before, you’ll notice that the player ship’s style has changed dramatically. I still had some problem porting the separate parts to Flash, but the basis of the work flow has been established. The rest is just details which will be left till before the first release. As mentioned before, I will be using pure black for foreground objects in order to improve performance. Something that is very important in flash because of how cpu intensive it is.

I find it amazing that people refers to traders and investors as if they are a group of people who deserves what they get from the risk they agreed on taking. Not knowing how interconnected everyone is to the behavior of stock market. “Yes, let’s wipe out the investors of certain big name company. We should let those too big to fail firms fail and wipe out the shareholders.”

Are you fucking thinking at all?

If there is one thing you need to know about investors is that 100% of the population is invested. You just don’t know that. In some Asian countries, where people are more emotional and the regulations are more lax (especially where I was born), you see 120% population investment. Yes that’s right, through fake heads and borrowed money.

But back to the case in point. How? I’ve never touched a bank before. Sure perhaps I am exaggerating a bit, there are those special case hippies who’ve managed to stay out of the society’s structure, but even they are impacted more or less by the investment community.

The everyday guy

An average Joe is invested in the market thorugh the pension fund that they contribute to with their paycheck. The pension funds of nowadays no longer engages in the safe and secure investment routine that guarantees a small and secure interest income. Instead, they are tagged as sophiscated institutional investors who “should know better”.  After all, they are managed by executives who are paid 10s of millions of dollars each ear to screw up. The prime example being Canada’s pension plan losing $30 Billion this year. That’s about 1/4th of their capital. Mostly from investing in risky assets because they are sophisticated.

The reason for their engagement in risk is simple. The outlay of their fund will be bigger than the inflow of capital by 2018 for most western societies and the fund should be empty at around 2048 based on current projections. This is the result of the baby boomer retirement which reduces the ratio of working poplation per retired population. Thus, less people contributing than withdrawing.

The well off

Most of you belong in this category, you got left over money, you invested in mutual funds. You got burned. While the market picked up from the crash, your mutual fund is still 50% underwater. Those fund managers cares only about the fees they get from you, they don’t really look out for your wealth. Why would they if their money is not invested in the said fund and if they can charge 2% for managing it, basically shifting the portfolio around about 4 times a year.

The rest

I guess I don’t have to convince you since you are already in the market investing.

So big names are famous and pension/mutual funds loves having them in their portfolio. It shows prestige and good judgment. Most sane funds have the big names because that’s what YOU, the average chump, wants to invest in. Guess what happens when you call your government to wipe out the big names in a bout of  righteousness? YOU take a loss. You just won’t know it until 3 months later when your statements gets updated. Or a year later when the government does a review of the pension funds.

Karma is a bitch.

I am always intrigued at the audacity of some of the ladies in my class when they tell me that I am leading them wrong and that I need to do it in a certain different way. I mean HOW COULD THEY? Don’t they know that it’s their fault? Of course, that thought only flashes by for an instant before being overtaken by bemusement. This must be what an elephant feels when a cat is trying to attack its foot.

The idea leads me to an interesting conclusion which I didn’t see before. Maybe there isn’t a “universal lead”. For years, I’ve chased after the holy grail of the men’s role in dancing and that is to be able to lead everyone while believing that if only I can perfect my lead, if only I can perfect it to what a perfect lead is, then I can do it. Herein lies my mistake, in which I believed the existence of an ideal.

So perhaps I need to adjust my lead and find what the perfect lead is for each lady, in the process becoming many different perfect lead myself. But if this is the truth, then there must be a perfect follower for the natural tendencies in which I normally lead.

Finally got my backdrop/movie screen setup correctly after adding some modification to my wall. Now I just have to figure out a way to iron the muslin backdrop vertically. Next up is the sound system and I think I am done in terms of adding things to my condo.

Because I have plenty of time to think while working on the basics and my awareness of our bodies intensifies to compensate for the dance partner’s inexperience, I started to notice all these awesome things that I am doing which I wasn’t aware of before.

The most amazing feat of my subconscious is the awareness of people, where they are and what move they are about to do. A consequence of dancing waltz where floorcraft is essential in order to avoid people while keeping the whole routine going smoothly. Avoiding obstacles in your path as if your routine were planned with the obstacles in mind.

I believe that several years of dancing, looking all around and bumping into people in crowded dance floors managed to burn this ability into a subconscious routine that I don’t have to think about. Leaving my mind free to take care of other tasks. I don’t know how else to explain this to non dancers, let’s just say that if I need to take a step back and somebody is about to pass behind me in a perpendicular path, I know without looking that I have to take a smaller step and I trust in this “knowing” without questioning it.

The funny thing is, put me in a soccer field where the same skill can benefit me greatly and it doesn’t work. As if the very feeling of wood underneath the leather soles of my shoe activates the ability.

Flexing my fingers

There are 4 months in a year where I become a hermit and simply stops all social activity. If anybody asks about the strange behavior my usual truth reply is: “It’s earnings season” with an It’s-so-obvious-that-I-am-surprised-you-asked look. I guess, for non financier types, they don’t understand why. I’ll let the picture speak for itself.

Performance analysis

Starting balance: $3000

Closing balance: $5149.48

Trade carrying over to next week: $2160.5  (41.96%)

Derivative risk: $12000 (233.03%)

Increase from opening balance: $2149.48  (71.65%)

Cost of capital: $272.52  (12.68%)

Earnings excluding one time lucky shot:  -($1429)

Successful bets: 5/13 (38.46%)

Failed bets:  3/13 (23.08%)

Carryover bets: 4/13 (30.77%)

Why I am doing this

I have tried day trading before on numerous occasions and one thing that I noticed is that it has as much to do with emotional management as well as statistical analysis. To be able to trade and profit, a person need to be completely emotionless. The first roadblock to entry lies in getting past the sinking feeling of taking a loss. No matter how much you read, meditate or reason, you can only improve on this by taking actual losses in your portfolio. I have done just that throughout the past 4 years of my investment. I was able to take losses, change my position and ride the flow to profitability. It is by gaining that confidence that I am able to take losses with sound reasoning and proceed to repositioning.

I am doing this in order to be truthful to myself in order to evaluate if such a life style is possible. I post it for everyone to see to force the truth and prevent myself from pulling a Madoff. On top of that, because I am using only $3000 as a basis each month, I am not disclosing the full extend of my net worth. Which was the biggest argument against showing anything financial previously. In anticipation to the eventuality of doing full time trading, I have started learning Technical Analysis (Trading based on psychology) and options strategies. It took me around 10 months to fully explore the core of the ideas as well as utilising the platform that I will be trading on. It is not something meant for the faint of heart and learning the trade from what I remembered, is an exercise in losing money. Only once you understand and experience the complete wipe out of your capital will you be able to truly trade daily.

Strategy

A wipe out will happen eventually, therefore I have concluded that the only way to mitigate the risk is from the way I allocate capital in a way to limit the risk while maximizing the gain. The chance of meeting a consecutive series of bad bets increases as time goes by without meeting any setbacks. That is the basis of chaos theory. Therefore, it is important to reset the capitals at a predetermined time so you only lose what you’ve put in for that period, while leaving a long enough time frame to profit from the full effect of a swing trade. So here are the conditions that I’ve set for myself for training.

-Reset to $3000 capital each month
-$2000 allocated to weekly trading
-$500 allocated to LEAPS with 1 year time frame
-$500 allocated to write options with 1 month time frame
-Sell all positions allocated for weekly trading.

This way, if I make catastrophic mistakes in a month, the most I stand to lose is $3000 but stand to gain from the profits of $3000. The amount of allocation will remain until I am consistently in the positive for 3 month while getting a 70% or above in terms of correct bids. At which point I will move on to increase the trading capital to 10% of my total net worth. All these numbers are taken based on experience and calculations. I still have to perform some frequency analysis on the stock market in order to fine tune the risk profile.

Reflections

Because I am still working full time, I do not have a chance to trade during day time. All my orders are inputted in the morning before I go to work and adjusted at noon during my lunch hours. This kind of arrangement presented several inconveniences and losses because I cannot nurse my trades and react in real time. Sometimes, only have of a trade in a complete strategy gets executed, resulting in the loss of the partially traded order. Other times, people take advantage of my market order, resulting in a buy or sell out of whack to the actual value. If I have to estimate the loss due to this type of limitations, I have to place it at 30% of my net earnings.

Of all my working years, the tech industry which I belong to are mostly in recessions. The high tech bubble along with the fall of Nortel have shattered most engineer’s dreams in Canada. Still I plowed through, never thinking much about the adverse conditions that I am facing.

That’s probably why I am irritated at all the finger pointing that’s going on right now. Hindsight is 20/20, whoever is wielding it and pointing fingers right now should be taken down by a llama and spit on. On the other hand, all the ego trips and chest thumping by our elected political elite makes for a great movie. Even though the stupid dribbles that comes out of their mouth infuriates me to the point of giving up hope on our government.Then again, the dribbles and foams are probably what we wanted to hear.

What seem to skip most people’s mind right now is that the depression is not caused by bankers, predatory lenders or any political party. It is the pure consequence of you and your greed. It all started with a bunch of people defaulting and then gets exacerbated by a bunch of bad choices. What is it with people who sits on the sideline and vent their anger? Criticizing any and everyone who took what they believed at the moment to be necessary action?

If you don’t like it, do something about it. I am doing everything I can, are you?

The benefit of dancing lies in its hidden ability to pick your mood up and make what would otherwise be a very shitty day the happiest day of your week. The adrenaline rush is a double edged sword though. For there exist events in life where no amount of dancing can improve your mood, especially when you’ve come to rely on dancing for happiness. It is not the be all and end all of picker uppers.

Just like any substance abuse, the more you consume, the stronger the dose you’ll need until one point, you come down from the high the moment the music stops and you feel just as shitty if not shittier as before. That’s when you realize that the supposed happiest thing in your life did jack to improve your feelings of well being and that the event that is stressing you out is THAT serious.

I believe that I am supposed to learn an important lesson about my dancing. There was a reason why I stopped so suddenly, along with a feeling of in adequacy in terms of skill, I’ve always had this weird feeling that I am lacking something in my dancing and that something is from within. I have a feeling that I am going to find this something in my journey through the world of Salsa. It is similar enough to ballroom in style that I feel completely comfortable with the flow while at the same time providing some challenges because I know none of its steps. This gives me the time to ponder through the beginner’s journey with an expert’s mind eye for retrospection.

Before we start, my core beliefs

Politics will make or break the economy. I will go deep into this today, but before we start I just want to let you know the core beliefs from which my views come from. I am part of the minority who believe that less people with higher quality of education is the correct path for the human race instead of the model of bigger population with lower quality per person. Most of you agree with this, but please keep in mind that by agreeing to this, you also agree to a world that not every person deserves a chance and that the world is headed into an unsustainable spiral of over population.

The example for context

I wanted to write about this ever since the US government pay czar announced that he’s limiting the pay of the top executives at 7 bailed out firms. I laughed because it is the equivalent of the government shooting themselves in the foot. Politicians are hired by the ideals they sell, but when they are in office, their actions are dictated by the population’s rage. The population’s rage is not usually a good thing because on average, we cannot see what needs to be done and the underlying consequences of what we are demanding.

What happens when you do this

Here’s a short version of the money flow in a pay limitation discussed in the headlines.

On the first layer, which is what most of us sees, when you limit top performer’s pay that present itself at the company’s balance as a reduced cost of capital. Which means more profit. Investors are happy, tax payers are happy and everyone’s happy except for the top performers. Since they are rich, it shouldn’t matter.

At the second layer, things aren’t so simple. Banks have two choices about this extra cash, either they keep it in their coffers or they lend it out. Keeping it in their coffers is a bad choice since it doesn’t stimulate the economy so they usually lend it out. However, at the current point in the crisis, the borrowers that are requesting a loan are mostly ones on the brink of bankruptcy and ones with credit score that are equivalent to that of a sub-prime borrower.  Since the government owns your nuts at this moment, you lend to them like you are forced to. Congratulations! You have just taken someone’s hard earned money and created more debt for your population. Bad debt at that too. Not to mention that rich people have a better tendency to spend lavishly in the depressed economy and invest wisely. (unless of course, you are the inherited type, then it’s a 50/50 chance)

On a third level, from the point of view of the top performer it only make sense if your compensation is linked to the amount of revenue you bring. Granted, the current system doesn’t reduce your pay if you fail catastrophically, but limiting the amount of gain effectively put a cap on how much a worker is motivated to earn for the company. Here, you are getting into the gray area where a worker has to weigh the pros and cons of just managing money themselves that has compensations that are equivalent to the gains or work for something that say: “Hey thanks for making us 10 million, but we are only going to compensate you for 1 million of the profit you make”. Keep in mind that these people don’t really have to work and from my experience, only 1% of the traders has the skills and the emotional maturity to consistently make money over a 5 year time span.

Fourth layer, the people who got their pay limited have all left in doves, my approximation is that half of them will defect. And here lies the real kicker. They are going to defect to foreign investment banks, such as credit swiss and HSBC where US government can’t impose limits. Guess what they are going to do there? Make money for foreign firms from American clients and American capitals. Yep, all your profits goes to foreigners from now on, leaving the worst of the under-performers for yourself.

End

In the end, this move is mostly politically motivated. A swift action like this is more a show of force to whip people around. It shows that the government is in control to ease the outrage of the general population.  Real legislations that will correct the problem are usually passed with as little fan fare as possible. Because publicity will only bring oppositions from the industry. The recipients of this whipping isn’t even the right firms that are being lavish on their compensation too. So in essence, they are whipping the wrong person just because the person is ugly. What they need to do is give Golden  Sachs a big lashing. They are the ones giving out $16 Billion in compensation for 3 months of trading.

It was an impulsive decision. A colleague at work was contemplating taking the lesson and I was extremely bored with my life outside of work that I just want to do anything. That’s how we end up at Salsa etc, 6 hours later, at the beginner’s level. I know you might think that’s overkill for a person who’s been dancing as long as I do, but that’s actually the level that the studio owner told me to take after watching me dance with his wife.

So since then, I’ve been just tagging along and showing up to class late 4 times until one day, the teacher finally had an eureka moment and said: “Vous faites de la danse sociale!!”. Yes, he had been looking at me with a puzzled look on his face because I can miraculously catch up to anything that they show me while asking all the newbie questions. Yes, I did try to dumb it down a bit to look clumsy, but that’s because I don’t want the rest of the class to feel bad.

I think I was dancing up to 10% of my usual full performance at class 4 and I let slip a few pointed foot here and there as well as some really sharp spins that newbies can’t do. Put two and two together: someone who can dance a new move like he’s been doing it for his whole life on top of someone who is completely oblivious to salsa moves and you got a ballroom dancer.

The reason why I only dance at 10% is partly due to not wearing my dance shoes, the rest is because I don’t want to discourage new comers. Especially guys, since they are already rare enough in dancing. More importantly, I don’t want to discourage my colleague. There’s a line that dictate whether or not a guy continues dancing, it’s the difference between seeing someone who’s good and think you can catch up and seeing someone who’s so good that it devastated your confidence. I know because I’ve been there and that’s why I am being extra careful.

The other part is because losing my colleague would mean losing the reason why I took up salsa for now. I wanted to see what it’s like to see dancing as an activity to build relationships, instead of one where you compete with your fellow classmates.

According to my backup logs, this is the 11th day that I have been working on the game called Zania. No thanks to the financial crisis, I had to put this project in limbo for a while, no more. Wow, it seems like only yesterday that I was still struggling with the physics engine, today it has expanded to involve so much. At the latest tally, I am at around 5000 lines of code.

A lot of thinking went into the architecture of code, interaction between classes, but more time is spent on the art direction. I have an idea of where I want to go, but I never put anything down to say that this is it.

Graphics

Graphical style is going to be a very colorful background in combination with a black foreground. This frees me of the pain of drawing everything in detail while leveraging my already existing skills in photoshop. I can basically just convert photos of real life objects into pure black instead of drawing them. Of course, the style is still steam punk, but drawing inspiration from Braid and this picture.

Voice acting

I think I found a quick, dirty and cheap way to get voice acting in the game to move the story along. The result is something like this:

Transcript: Scanners indicates an energy build up near the last known location of the alien vessels. Dispatching scouts ..

It was a great learning experience playing around with voice. It’s not as straight forward as I thought. Of course, you can probably tell that Karen Sjet’s voice has severe influence in the voice acting. It took me several tries and rewrites to get the tone and feeling right. Who knew that a slight difference in grammar structure can convey a different personality.

Contents

I will have to cut down the content of the first release significantly.  Although the underlying architecture and design choices are made to be able to  scale up to a massive world, I decided that it’s best to test out the idea  first and see if it catches on. On that note, I am at a loss as to what part of Zania I should be presenting.  Preferably the combats, but what type of combat will catch the audience’s  fancy? I am not sure. That’s the part I have to leave to the audience to decide.

Music

I’ve made no progress in music so far. Kind of sad. Hopefully next time I update, I will have a playable demo. A playable demo will include graphics, music, sound, working physics and a functional ship that can be blown up.

Only recently do I have the unmistakable feeling of being an adult. To find myself such an alien from ideals of my brave young self. So, what happened? Realization happened.

Perhaps the biggest one of them all, is the realization that the ideals of my younger days are not ideals at all, but an imposition of the controlling group to extract work out of members of the society. Knowing how money work and its sway on our lives definitely didn’t help either.

The whole time while I was young, I was acting out someone else’s desire. To those of you still reading and still young. No, those thoughts of yours aren’t original and yes, you are there to profit somebody else no matter how much you believe you are your own boss.

The fact that I get lazier as I get richer, presents another blow to my original image of my self proclaimed honest character. In the end, I am just like any other corrupted adult. Jaded and without an aim in life.

Some days I disagree with these thoughts, some days I agree. The fact remains that I am thinking these thoughts and that alone probably places me in the jaded department. You can only get jaded about life when you’ve grown up right?

Originally password protected.

I feel guilty for shouting at my mom. For hurting her in such a way because I couldn’t hold my temper in check. Old people hide their emotions really well, but I’ve known my mom too long to miss the hurting inside of her. Can I really claim that I know my mom?

Rather, can I really claim that I know my family?

All too soon, we fell back to the routine.  Our interactions became routine, our attitude towards each other became routine. I became routine. And I thought I’ve changed for the better.

What’s not routine is the frailty of the facade of a perfect family that we are maintaining. I seldom raise my voice, but why am I all of a sudden doing that to my mom out of impatience? I think it’s about time that we drop this facade and start saying these things that we bottle up inside. These stories that we are too ashamed to say so we can start healing instead of letting the wound fester. There’s not much time left to enjoy each other’s company. When I ask myself honestly I don’t understand my parents at all and I don’t see any reason why I am uncomfortable telling them about my problems.

I worry about my parents, but often put it at the back of my mind because I am at the point of my life where I am just about to soar. The reality of life means that conflicting things usually happen at the same time and events don’t happen in a timely matter to suit yourself. The time is NOW.

The truth of the matter is, I worry about their happiness. They should be enjoying life and it hurts me to see that they are not and are instead plagued by problems. It also scares me to see their frailty, which puts into focus the fact that I have to take over and become the strength in their life instead.

I am scared that they’ll die. All these talk we had about how to take care of things in the event of their death, the preparations, freaks me out. It brings that reality that much closer and we’ve hardly shared any good memories. There are problems in our family and we just pretend that these problems don’t exist. I sometimes wonder, whether or not I should just tell them that I know and I still see them as my family.

A traditional Asian family is often one where it is hard to feel loved. My family is unfortunate enough to have seen and felt what family love should be by the western standard only to find ourselves totally lacking in facilities to love and reciprocate. Add the burden of being the landing immigrant generation and I feel the weight of loneliness and isolation that my parents endured in order to provide a semblance of family life for our first few years here. How can I not cry for them inside when I understand all these pain?

There’s a saying that goes: “Live life as if everyday is your last day”. After my quarter life crisis, I realized that I should live life as if it is everyone’s last day.

I will apologize to mom come tomorrow morning.

I’ve finished the analysis on Canadian REIT and will start with US
reit soon. The reason why I choose the Canadian market is for the
stability of their real estate market as well as the fact that it is a
resource based economy. Which means that it should only go up from now
on. Most Canadian REIT uses fixed rate long term mortgages instead of
the variable rates that are rampant in most US REIT. Some Canadian
REIT uses derivative contracts and have been booking losses left and
right during this recession. I expect to see the same result once I
dig deeper into US REIT.

The REIT play is to establish a safe place to park cash while
generating monthly income. Therefore the criteria for selection are
set as follows: Return of > 5% preferably in the high 7%. Stable
predictable operation as well as low debt to income ratio.

With that, an initial scan eliminated most REIT and narrowed my search
down to 4. First the loser.

CAR.UN: Stay away. Their derivative play is costing them a lot as they
struggle to close down its position this year. Suggesting a wild
cowboy mentality in management.

The winners:
NPR.UN: A multi family rental unit based REIT with the focus in
Alberta. Expect to see it soar as oil become king again, but stay away
for the winter decrease in gas price. Its rental revenue covers its
mortgage payment with surpluses.Return 7.5%

CRR.UN: A retail based REIT with the focus in Nova Scotia.
Particularly Sobeyes, a grocery chain who occupies most of its space.
The risk in having only one clientele is offset by the fact that
grocery stores will most likely thrive in this environment. With banks
targeting shopper’s need for groceries and giving out incentives,
expect to see increased grocery spending. Rent covers mortgage
payments. Return 9.57%

REF.UN: A retail/office/industrial REIT with the focus in Alberta and
Ontario. Alberta focuses in oil while Ontario focuses in car
manufacturing. As both sector pickup due to the recent
administration’s stimulus, expect to see this get back on its feet
after 2010. Return 11.55% Current rental income falls slightly short
of mortgage payments, other financial magic with real income covers
the shortfall.

I am personally going for a mix of REF.UN and CRR.UN with a later play
in NPR.UN around winter time.

Wanting money, no matter how I try to explain it, always seem to bring along a negative connotation to the conversation. People, it seems, look down on those who make it a goal to be rich. I had not truly understood the reason until I make it one of my life’s top priorities.

Shallow, greedy, heartless and irresponsible are the usual description of high rolling and high flying individuals from those whom I talk with. It’s almost as though rich people are all evil and those who strive to become rich are little devils in training.  But why not become rich? It’s the most responsible thing you can do.

Some tell me that it is not a good life, but what is it we are supposed to make a goal out of? Some say that money corrupts your point of view on life, making you evil and inhuman, I can only say that money makes you understand what connects everything together. Especially when you know what it is like on both extremes of the life style. Everything in life, is inadvertently connected to life because money is the most basic representation of worth and, of your time and effort that you’ve spent previously on this world.

So isn’t it your responsibility in life to gather as much as possible in the shortest time span possible so that you can move on to do other things that you’d rather do? If some of your goal in life has a time limit and must be done while your body is still young, then by all means do that. Otherwise, try to allocate a block of time in your life dedicated to make money. I suggest from the age of 25 to 35 since that’s when your body and mind is at the prime to charge.

At some point last year, I broke down and decided to take on this path. After I managed to work through the initial mental block instilled in me by “la vida doce” loving Canadians, I was able to go for it with all of my heart. I realized that my life is going nowhere and that I have half finished projects piling up because I didn’t have time to complete them. I was trapped in this perpetual feedback loop where: I don’t have enough money for the next step in a project, I work for more money, I don’t have time for the project, I work on project, I ran out of money for the next step. It frustrated the heck out of me because I cannot see myself finishing any project in time for them to be relevant or new enough to be of any use. I wanted to have the freedom to go at it with nothing held back.

Yes, I want to get enough money so that I don’t have to worry about money ever in my life. I want to be self sustaining enough that I can tackle any project I want and see the fruit of my labor. I, in my truest form, am a creator and I need the freedom of time and money in order to create. I cannot do that if either one restricts me. So I am going to be rich. No matter what you think of me.

On life…

(more…)

I take note of the stages I go through, the enlightenments glinted from day to day living. That is how I noticed the current stage that I am in. Perhaps a consequence of the quarter life crisis.

Ever since the depression started in 2007. Or at least, since I started tracking it and forecasting it in 2007, I have been leaning heavily on the spirituals to calm my nerves and ease the stress. If anything, the economic problems turns life into a constant stress, au lieu de the normal up and down swings between stress and relaxation.

Sian, or rather, Zen in its mispronounced state, offered but temporary comfort on the surface. In the end, the erosion that I felt everywhere corrupts the temporary aura of peace from whatever meditation I emerged from. I feel that there is something fundamentally wrong with the teachings of any Buddhism based ideal. In that, they feel so disconnected with my self discovered meaning of life. Life is change, death is sameness.

All my efforts to calm myself down, to logically reason myself to passivity and to ascend the current state of understanding were all eventually destroyed by this one underlying question:

ARE YOU SATISFIED?

That is the root of all my conflicts. Every excuse, effort and action to calm myself are all because I am trying to smother this question without answering it. It transcends morality, loyalty, legality and any form of restriction that I placed upon myself. Till I eventually have to face it and answer it only to be propelled into action.

NO!

Part 6 of the Morocco backpacking series: Backpacking through Morocco

Day 6: Camel ride

Google map location

Mark exchanged 2000 Dh

andreiagemea@hotmail.com

Rental car 072 641 511

Phone split: 5 Dh
Water split: 12 Dh
Lunch split: 170 Dh
Hotel split: 102 Dh
Caravan split: 1500 Dh
Dinner split: 120 Dh

An emotional goodbye

Holding hands with the little girl, the symbolism of such a picture crossed my mind. Est-ce qu’on va me prend comme paedophile? Her frail silhouette trembled against the harsh unforgiven desert wind, drawing pity and sympathy from onlookers. For that one moment in my life, I had a perfect clarity on life’s single purpose: to ensure that she doesn’t trip on her way to beg.

The desert consmes the weak. Such is the way in Merzouga.

She’s barely strong enough to hang on to my thumb and it’d be easy for me to shake my hands free, but I made an effort to let her hold on to my thumb comfortably so that I can make her life just a bit easier for the short moment that our roads cross. I couldn’t bring myself to look at her because I feel ashamed of the comfortable life I have. Yet I didn’t want to let go for fear that I will discard this meeting as irrelevant. So there our shadows walked, alone, on the sand dunes of Zagora. Life became real and this is not a crook after tourist money, but a girl begging for a few more days to live and possible reprieve from hunger.

That set the tone for the rest of the day and the rest of the trip. I believe it was a turning point worth noting. Where the party stopped and the spiritual journey began.

I was deeply humbled. For the adventure in traveling is deeply glorified. At that moment, I saw it for what it is. A safe way for sheltered people to pretend to risk our lives and hopefully gleam the excitement of a dangerous life that we wished. I can never do what these people do to survive this far so stop pretending.

How can I ever hope to change anything so problem

atic as this? How can anybody manages to do that? This scene the type of picture you’d see on National Geographic or the infomercials that asks you to support a child. You see it, hear it, read about it and talk about it but the moment you are in it, you begin to understand why these people are making an effort to reach out to us in the comfort of our air conditioned chairs.

Waking up in the desert

Like always, I woke up earlier when traveling which allowed me to enjoy the quiet desert sunrise before the other tourists wake up. When there is no wind in the desert, the sand absorbs all sounds. It made me wonder why I enjoyed the Dune series so much. Is it because I longed for a life like this? Solitude and peace with nature with simple joys of making music while eating bread and drinking water.

Rest of the journey

We asked to be dropped off at Ouarzazatte after saying good bye to our great companions and found our way to hotel Royal. For a well needed bath smack in the middle of nowhere at 102 Dh a day for 2 people with shower. We asked around for a guided tour towards El-Rachidia, but it seems like there isn’t many tourists here interested. I thought it’d be the opposite since this is closer to the camel ride destination. Because of the fact, they cannot use economy of scale to reduce prices, private tour comes down to 3500 Dh. We will probably end up renting cars.

In the end, we joined the group after at hotel royal for 750 Dh each towards the east. After hunting is done, we watched a game of soccer with the locals. I am glad that there’s one thing that everyone in the world can relate to and that is soccer.

“Don’t think, just do”

That is the current motto that I live by. I don’t try to apologize for what I say or do, I don’t take time to think about a person’s possible negative reaction to possible implied meaning that I didn’t think about.

I noticed that I go through cycles of over thinking and over doing where I touch both extremes before pulling back. Usually as a result of too much negative response from people I interact with. With time, I started calibrating the type of extremes to the type of person I am interacting with.

Thinker

When I am in the thinking extreme, I write a lot, I am also quieter than usual as I turn everything in my mind 3 times to tune it to the new personality trait I am aiming for. I read, I look for things that attracts me and analyze why they attract me. I absorb whatever comes my way and try to interact with people to find out their opinions/reactions.

Achiever

After times of thinking, comes the doing phase. I take care to completely cut myself off from influences during the thinking phase, subconsciously due to a genetic trait that makes me easily addicted to anything. I detach myself so I can create my own style, because I realize that only after finding my own equilibrium and my own way can I grow the confidence that my decision will eventually work out. I also need this so I am not forced with the dilemna of having to choose whether or not some idea is right or wrong.

Fluid self

The basis of human nature is such that whenever an opinion is presented, the self generate a very strong sense of agreement and disagreement. It strip away the choice to observe and then decide which way is best suited for your own person. This process is usually done for the other person’s benefit. So that they can have a clear mental image of who you are. The truth of who I am or who you are is fluid.

From time to time, I meet up with people I know from my past and always, I try to uphold the person that I am today, instead of the person ingrained in their memory. So far, the interaction have always fallen back to the old ways. Perhaps because my newer self is always weaker or perhaps because to communicate with that person, I have to fall back to my former self that is already molded to their liking in their memory. This is why, I always dress up during my first encounter with strangers. It is better to be known latter in a football game as dressing comfortably in a t-shirt than to be seen as in my usual attire in my Ts.

On the subjecting of pursuing your passion

The latest personality battleground for me has been the matter of a pursuit in my passion. I have been discussing this with several people who are both in pursuit or have given up their passion. I will leave this to my next post since I have ran out of motivation for writing. The zone has dissappeared, but it will make for an interesting discussion.

Update on life

(more…)

What home used to be

For the longest time I’ve asked myself: “Where is home?” And for about two third of my life I answered: “I don’t know.” It used to be a clear cut answer when I was small. When I only had one citizenship and lived in the same house in the same city for 10 years. My home town was Taipei and my home was a house there. My home country was Taiwan.

Where the line blurred

Then, things got blurry as I added citizenship after citizenship and moved around the world a bit. Moving between cities is a common event, provinces about once every 4 years. Countries… around once per decade. So you see my dilemma when I ask myself, where is home? I can’t really say that it’s the place that I stayed at the longest, not the country I was born in nor any description with “most” in anything.

My condo

Buying this condo, was an attempt at growing roots and to have something to call home, because I desperately wanted a sense of belonging. I don’t want to admit to myself that I only truly feel I belong when I am on the road, in stranger’s company. Perhaps, I prefer to be on the move because I liked the niceties of a newly formed relationship but dreaded the strain of hurting old friendships.  After all, strangers are nice to strangers and if they don’t like you, it doesn’t hurt as much because they don’t know you. I was afraid that I’d have to face the reality that I am not really good at making long term friends if I settled down. Or perhaps I find the same wanderlust in the heart’s of people who are on the road. A sense of carefree attitude that is unbounded by anything. We go where we want to and when we want to without following anyone else’s orders. Everyone is in a sense, the boss of their own lives. While in contrast, I have more bosses that have a say in what I do when I am tied down to a spot.

So I settled down to face my fear and made an attempt to do whatever I want with the place. My preference in life is reflected in the space that I occupy, especially so in the living room, where everything converges. My living room is not a living in the traditional sense where you get a TV and couches to sit in order to watch TV. Instead it has a more utilitarian function where everything is there to serve a non-entertainment related function.

I am a firm believer of less-is-more and have not bothered wasting time on TV for the majority of my life. The big empty spaces are so that I can practice and teach dance if I have to. There’s also the bowflex for muscle training and a projector for movies. The screen for the projector serves a second purpose for photography backdrops. The furnitures are as close to nature’s unchanged state as possible and are chosen due to their proximity to the ground for an informal and laid back environment. Things that are easilly moved around to make space for whatever occasion.

The Kitchen

I still haven’t invited many people  over yet, mainly because it is not finished. Nothing is fully furnished and nothing has been done to my taste except for the kitchen. The reason is very simple, my greed made me put all the cash in the stock market. Why the kitchen? I am a very big fan of good food as well as cooking them. So I am not going to skimp on kitchen appliances. Sadly, everything else suffered because of that.

The guest room

I’ve recently cleared out a guest room from what used to be my woodwork shop/ storage place. I figured that if I am tied down and can’t travel to my heart’s content, I might as well bring the travelers to me. I am offering this to international students or professionals who just moved to Canada as well as couch surfers if nobody is occupying it at the moment. Hopefully I will get to expand my horizons this way.

So that’s it, my little corner on earth, that I’d rather not expose, but glad I did. It has been too intimate a thing to reveal until recently, when I started having guests.

Let me start this post with the first song in their album to set the tone: Doo Wop Blues.

Nadia Bashalani

Nadia knew what she’s going to do with her life and so did everyone else who knew her.  At least, that’s the impression I got when we were all in high school. Like everything else, there are ups and downs in whatever path one decides to take. What counts is whether or not you get knocked out of the race during the down time.

Performing art is, from my point of view, one of the hardest to master because everything is live and there are no room to hide your mistakes. Mistakes will happen, whether or not the audience notices them is dependent on the performer’s personality. Watching Nadia on stage made me understand some of the questions I had when I was still performing and dancing. Also, probably the part I missed the most: your fans.

I am glad that she made it to this point. It gives me hope that I will be able to achieve the goals I set and inspires me to keep going. This is someone I knew, this is real.

The Tchotchkes

The band that’s playing is called the Tchotchkes. I am not really sure what their relationships are like, but from observation, it looked very harmonious. I like to watch the little interactions between its members. The questioning look to the guitarist, the reply as a nod and the confirmation back through some other form of signal. Synergies only possible when you’ve played together for a while.

And yes, the bass player’s braids are real hair.

Likes/Dislikes

Sound wise, I believe they are a band who sounds better in real life than on CD. The overall feelings I get from the song is that of optimism, a style that I haven’t delved in much and could come to like in time. They did have a few that suits my current mood: Invasion. It is a jazz type song which, along with film noir, makes up my current preference in entertainment. View from Below will be a good one for you swing kids to dance to. There were also 4 songs that is not on the CD. Two of which I really enjoyed and am anxiously waiting to be released. You can tell that they are branching out and experimenting with their style from these.

One thing about the live concert I didn’t enjoy is how loud the speakers are. Granted, I was in the front row so it stands to reason that my ears were ringing when I got out of the place. That isn’t what I am trying to get at. I believe some of the feeds were amplified too much that the speakers reached saturation at numerous points. I would’ve preferred if the guitars were tuned down a bit so it is easier to make out the durms, and the other instruments + chorus. Then again, that’s just my own personal preference.

Songs

Drifter Beside You

End of My Time

Invasion

Swinging

The City

The Indecision

Two Sides Denied

View From Below

Waterfall Serenade

Photography

I’ve been able to get all the shots I wanted thanks to my previous experiences shooting dancesport competition. It made me feel good that I am improving in night photography, the area that I am most interested in. Compared to fast moving dancers, capturing musicians performing on stage seems like a piece of cake. Sure, I still get blurry images from time to time, but I only have about 1/3 of the images that are blurry compared to my first time where only 1/500 is good enough to be used. As I progress in my knowledge, I have more time to enjoy the actual show and the singing instead of trying to capture the shots by luck.

The editing wasn’t quite as obvious. I have never investigated what style is good for concerts so I just opted to make it crisp and clear while showing a color tone that’s closest to the lightings that night. Everything turned out the way I wanted it to. I am just ignorant of what’s a better way to present them.

Contacts

If you enjoys her music and would like to find out what’s going on next, you can contact her at nadiabashalani@hotmail.com at the moment, I am not sure how you can get her CD beside going to her live conert. I guess stay tuned to find out.

Here’s the mySpace profile page which isn’t obvious: http://www.myspace.com/nadiastchotchkes

Einstein said that one of the greatest mathematical discoveries of all time is the compound interest, I agree plenty. But did you notice that he said mathematical discoveries and not financial discoveries? That is because the greatest financial discoveries of all time is debt! I will refer to debt from now with a more common jargon uttered by the financial types as leverage. Debt has so much negative intonation that comes with it.

Leverage, when used wisely to invest, is the shortest path to success. The application of debt has to be based on your income stream, the theory of which I will leave to another day. Suffice to say that at certain point of debt load with certain interest, you will not be able to pay down the principle at all. That breaking point has to be established before you try anything wild. My advice is to start small, but I want to move on and jump straight to over leverage.

DISCLAIMER: I am not a financial adviser and I DO NOT recommend taking any of the statements below seriously. YOU WILL BE RUINED if you try it.

100% leverage

I want to theoretically go over a certain death way of managing your investment. A way to gamble it all and have a do or die moment in your life. Through all this running around and raising funds, I’ve become increasingly aware of just how easy it is to get money. As long as you have a job, you can usually leverage up to 100% of your annual income. Let’s take $50,000 as an average because it is a easy and rounded number to use. The first step to start a personal hedge fund with excessive leverage is to go to your bank and get a line of credit. While at the same time, send out application to several credit cards with locked in cash advance interest period (at around 2%). The reason why you want to do this is so that they all perform a credit check on you while your profile is still on the most pristine of all conditions. Once you got approved, your risk profile increases and each subsequent request for credit score will net you less money.

So in the event you are able to do this well, you will get: $50,000. Add that to all your income, assuming that you are leeching off your parents still and you get $100,000 in a year. Now, you will want  to do this fund raising potentially during an economic crisis so that the interest rate is low and easy to pay off. I find it still tolerable at around 5%, but 6% is a bit too much. Health care professional gets a rate at prime (I recommend becoming a chiropractor or pediatrician. Easy to get into and same benefit). Engineers and financial pros gets prime + 1. Now that you have done this, you are at 100% leverage.

400% leverage

The next step is a easy part. The brokerage are usually disconnected from banks and gives you a certain amount of leverage if you request for a margin account. They then adjust the amount based on how successful you are at trading, but suffice to say that they give you double your equity to begin with. So once you deposited your $100,000, you get $200,000 of buying power. I personally recommend skipping this step. Margins are the wild card in investing since you lose all control when your broker does a margin call on you and force sell your stocks. Compounding the pain.

1200% leverage

There are funds out there that moves at 3x the movements of a given sector. Buy these ETF and you immediately triple the previous leverage. You increased your potential money power to $600,000

12000% leverage

With options on these type of funds, you enter into a different realm. I used a simple formula of 10x whatever purchasing power you have. Real options give you more leverage than that, but for simplicity’s sake, let’s just use 10x . So now you have $6 million of purchasing power on your hand.

1% movement

Now here’s the kicker. Remember that your real capital is only $50,000? Well, guess what? It still is. A 1% move up will double your money, but at the same time, a 1% move down will deplete all your cash reserve. With every 1% decline, you lose 2 year of your life at paying back the debt. So you can potentially only sustain a 30% decline before your whole life is meaningless. That’s not even including the interest payments. The S&P suffered a 50% decline since its peak, now do you understand why certain individuals feel the need to kill themselves?

DISCLAIMER: All this is theoretical and has not been attempted. Individually yes, but not as whole process. I DO recommend using this if you are an idiot or wish to ruin yourself.

The story began 8 years ago. I was living in the living room with 3 Chinese immigrants for $200 a month. My meager income was just enough to pay for the Internet connection to play Starcraft, pay for dance lessons and the rent. My parents have been bashing the Chinese ever since I was born so I was pretty hesitant when I decided to take up this living arrangement. Desperation usually pushes you to do something you would otherwise not do.

Living with them showed me that the Chinese people weren’t as bad as they were painted to be.  Chinese people makes friends out of anybody, that’s what I’ve learned. They are only misunderstood because of their language capabilities.

One of the legacies of this encounter is making sushi. One of my flat mate was a sushi chef and have transferred all his knowledge to me and this day, I have done the same.

As my skill improve, the type of modification I do to pictures are more subtle instead outer-worldly. Unlike the retouched pictures of models in magasins, my style is moving towards enhancing the everyday while maintaining the gritty feeling of life.

When the universe called me by my name, I have always answered its call without fear nor doubt. Hesitation is all but disappeared in my book of life; if only life is that simple. You see, what is vehemently frustrating about life is the fact that you can answer the calls to your heart’s content, but you are not always the chosen.

Yes, because when the universe spells out your name, or describes you in your entirety, there will be someone else with the exact same background and experience, vying to be the hero of the day. You often end up fighting a mirror of yourself in order to be the hero chosen to die for a cause. If you win, you get to die in glory. If you lose… well, you get to live, but forgotten.

My greatest rivals if life have always been someone similar to me. Similarity means we have the same goal and fight for the same limited resources. I have always known this subconsciously which is probably why, I always disliked men who are like me. Each conflict teaches me something about myself, allowing me to see who I am from the outside.

It feels as though I shouldn’t be going against myself, that I should be befriend those who are similar to me. Creating an army out of thin air. Alas I have no reached that state spiritually. So until then, I will fight and fall back with each failure in the hope that I will learn something in between battles. One day, losing will feel like winning, but until then, I will lick my wounds.

An acquaintance once tried to convince me, after I have explained to her why I sleep on a wooden board, that constantly training myself for the worst case scenario is not the way to go about living life. It pissed me off at that time and stirred some of my beliefs. Since then, I have swung into both sides of the extremes only to settle back in the gray area in between. I understand now that the truth is transient, that she’s not absolutely right, nor is she absolutely wrong.

Still, the fact remains that I am thriving because I prepared for this worst case scenario. Several years of abstinence from wasteful spending and dedication to the improvement of my skill culminated in success when everything around me is crashing and burning. Sure, it was tough watching people splurge and get ahead while I trail behind and grind away at life, but for some reason that seems to have added to my ability to get ahead when the situation turns around. I have less of an ego to get in the way and recovers faster when things don’t go my way. I am just used to it. My way has always been that of a less traveled road, because of that, moments where I can benefit and enjoy are far less frequent, at the same time and more intense.

I had always doubted my way, never fully believing that it will work out until it actually did. This crisis taught me that there is no correct way of living life and I am glad that I did it my way.

Part 5 of the Morocco backpacking series: Backpacking through Morocco

Day 5: To the desert

Google map position

salaab@gmail.com

Costs:

Camel ride split: 1000 Dh
Breakfast split: 34 Dh
Kasbah pass split: 10 Dh
Lunch split: 216 Dh

Sound for this post

This is the dinner conversation that I recorded as we all slouched around the tent high, tired and well fed. Listening to this ambient background noise at home has become a way of relaxing for me. For some reason, it reminds me of happier times. A memory of the more adventurous me. I suggest letting it play while you read the rest of the post.

Same road, different journey

By now, mingling with everyone at the places we stay for the night has become second nature to me. We joined Balarz for a brief time and convinced him to join us in our desert excursion. Balarz is a Hungarian who is taking classes in a university in Yemen, an arab country. He owns an AK-47 assault rifle like everybody else there and is on a Hashish trail pilgrimage in Morocco.

Since he speaks Arabic, he can more or less communicate with Moroccans on an equal footing, so he didn’t get the taunt and art peddler’s attention as much as Mark did. He did still get the “You want Hashih?” from everyone else. According to him. The Hashih in Morocco are cheaper and purer than other places. $20 (USD) for 100 g.

Confusing morning

We were supposed to embark on a minibus in the morning, but we forgot to ask where we were supposed to meet. All along, we had assumed that we were to meet at the agency where we signed up, but no. The whole mall was locked down at the time of meeting. Long story short, we ran around Mark and I towards different places. Woke the hotel owner, boarded the wrong bus and finally got picked up by somebody off the street. He said to us “Do you need help?” and we immediately armed our defenses against another false guide or someone trying to rip us off.

To the guy’s credit, he actually brought us to the right person and the agency has a bus waiting to round up all the stragglers like us who had no clue how their world functions. It seems to me that once you have a contract with a local Moroccan, everyone will honor that and help in the success of the deal. This is when I started doubting my initial assessment of Moroccan business practices.

Balarz was super cool about it. He just sat down and had a coffee, not even worrying about  losing the money he already paid. Making us feel like money pinchers.

What traveling is about

Andreia is a strong willed Portuguese  call center manager celebrating a bachelorette party with her girlfriends. We bonded during the bus ride between cities while Mark and I acted as the communication hub between the different races.  I find it amazing how everyone speaks multiple languages, but not the same ones all the time.

Joanna is a Master’s student in fashion currently studying in Barcelona, a kind soul who’s feelings and good intentions flowed freely from her pretty face. She came along with Andreia. The two of them were initially distant from the rest of the group, but once the common language is worked out, they warmed up pretty well (At least to Mark and I). If my memory serves me correctly, we had to speak French to Andreia and English to Joanna.

Mohammad, is our bus driver. A hard working 60 something Moroccan whom we entrusted our lives with on this trip. I say “entrust” because of the expert driving techniques he demonstrated while speeding through the winding mountainous roads of High Atlas (Wiki). He is a good man, the character of which can be sensed through his humbling demeanor. I talked with him quite a bit, at least, that’s what I thought until he finally mentioned in a apologizing manner that he had a lot of trouble understanding my French. That’s when Mark took over as the main French  communicator for the trip.  I doubt many people have heard French with Asian accents before and just like me when I first landed in Morocco, it will take them at least a few day to get used to the new accent.

Sight seeing and the trip through the High Atlas

For others making the same trip, be advised to wear something warm. Yes, your departing city probably has palm trees and is surrounded by sand, but crossing the high atlas means temperatures will be low enough to freeze water. Don’t make the mistake of wearing a T shirt and shorts.

The drive through the mountain is breathtakingly different. Red volcanic rocks with scant vegetation gives you an uninterrupted view of the steepness of the incline. From the top of each mountain, you can always look down directly to the green valley below where the water flows and supports life. If you fall, there really isn’t anything to stop you, adding some excitement of danger.

We stopped by one of the Casbah. The castles built in the old time to defend against invader. (Gladiator shot a scene in this Casbah). I guess, the will pictures speak of its beauty better than I can.

Mohammad dropped us off at a few designated stops. Mostly his “friends” shops and restaurants. Some are purely for a fair exchange of money and merchandise, but others made me think deep about what he’s trying to show

us. Because I don’t see any profit being made on these stops and it is these ones that has no clear profit motivations that disturbed me the most.

In the Casbah, I saw kids peddling wares when they should be in school getting an education. I was born in a 3rd world country, but even at my homeland, everyone had at least an education. These people will never know the possibilities that’s out there and their worlds will probably not expand beyond this Casbah. That lack of access to hope and a future of opened doors humbled me and made me realize how priviledged I am.

Joanna cried after learning why the policeman ordered her to stop giving the children chocolate cookies. We were at an observation deck overlooking a rocky valley while a swarm of kids is walking back home from school. Mohammad explained to us quietly. “If you give them the cookies everyone will swarm you and you will be injured in the process, because it is not fair to give only to a selected few in their culture. It is unjust.” But by then, the crowd already saw the cookies and were getting out of hand. You can feel their anger and need. Some shouts angry words because we are demeaning them, some begging for food because they wanted the cookies.

Luckily for everyone, an outstanding kid who seem to command respect amongst the crowd stood forward and demanded in his language that she hands him the whole pack. You can tell the voice of authority from his tone and I believe Joanna felt it too because she ended up trusting him with all the cookies. He then proceeded to distribute the cookies to those whom him deems in need. The rest shouted in anger as we turn our backs and escapes back to the bus while they were distracted. That young leader will grow up to be somebody one day. I wish him well.

Le Dromedaire (Or Camel, Dramedary)

There was a time of doubt when we finally got to the tents. Memory of street performers demanding money from us still fresh in our mind. These nomadic Moroccans are very nice and friendly as opposed to their counterparts in the city. The unnerving feeling where one of them is going to ask us all 200 Dh each after a great musical performance slowly faded away as the night dragged on into complete darkness. All they ended up asking for in return, was a simple exchange of music from each of our countries. I feel particularly inadequate when they asked for Canada because I don’t know any and Mark weren’t much help.

Once everyone got a few puff of hashish, the defense went down. By now, we have all loosened our defenses and are finally able to enjoy a care free good time with Morocco people. Abdi, the clan leader, is a short, solid and well educated man who can tell a joke using limited French and gestures. He was a “to the point” type of guy with the same essence of humor. His son is part of the clan and studies in the city during the week, they are a fairly proud and independent clan that does this as a sidejob to add some niceties to their life. I think partly because of their openenss and partly because nobody has asked me for money for a whole day, I finally began to relax and just slipped in and out of conversation with people.

This outing into the dessert along with Andreia, Joanna, Alexandre and Balarge is probably the best so far.

Of course, I couldn’t sleep at night. The experience is too new and adrenaline is still coursing through my veins. I got out of our tent in the middle of the night to enjoy the Arabian stars. Sand dunes lit with star lights guided me. With no lights from civilization around, I dared not wander too far. I chose a spot and sat down. It was then that I noticed. When there’s no wind, the only sound I can hear was the beat of my hear. It’s the first time in my life that I have experienced such quietness.

Back to series index

I passed by Rui’s computer at work one day and saw this picture I took of their wedding as the background. She told me that this is her favorite picture out of all of the wedding photos. I remember this one clearly. I remember how sad I was at missing the opportunity to capture this moment correctly with a good camera. I remember trying  to hold my hand very still, hoping that the image will not blur because of the slow sensor. Lighting was bad (at least for the crappy $150 camera I had), which explains the original grainy image you see above. Notice the reddish color? Well, that is due to the dying blue sensors of this camera.

I was quite disappointed when I opened up the picture in Photoshop. It looked beyond repair. There were color information in only 1/8 th of the color levels and most of them in red. The blue channel was completely messed up. So I decided to give it an old and damaged look. Sepia filter is best suited for that. So I isolated the super grainy blue channel and used it as a sepia overlay on top of the original image. The result is this with huge fiml grain effects. This was done approximately 2 years ago.

Fast forward to the present. I have since learned numerous repair techniques in photoshop and also worked extensively with image processing hardware that uses algorithms to compensate for sensor defects. Image processing seems to have become my field of specialization. I actually have to add more grain to the repaired image to keep the wild wild west look. In addition, I added some EPIC effect to all white colors in the picture (wedding dress!!!). Done through gaussian blur, difference filter and vivid light.

And finally, a touch of sepia filter. Just enough to give it that old aged look.

Photo taken of Jason at a wedding. Poor chap, being used by me to practice the gritty skin effect.

Part 4 of the Morocco backpacking series: Backpacking through Morocco

Day 4: wrapping up Marrakesh

Google map position

Costs:

Breakfast split: 10 Dh
Camel ride reservation split: 400 Dh
Hotel Chellah split: 150 Dh
Tips snake charmer split: 20 Dh

Fruits split: 5 Dh
Child guide split: 10 Dh
Orange juice split: 6 Dh
Coke and Sprite split: 24 Dh

Toilet Mark: 1 Dh
Eggs split: 4 Dh
Pastries split: 2 Dh

Admission palace: 40 Dh split

Dinner split: 75 Dh
Showers Mark: 20 Dh

The list

The list is an assortment of sins and must-dos which Mark and I came up with for this trip. One of the items that I wrote down was watching an authentic belly dancing show. This is from a pet peeve of mine. When I travel I want to learn everything I can about the local dance culture, their business model, people’s perception of it and the nuances that come with the lifestyle. So the previous night, we did just that.

Culture and Economy

Here’s a footage of us crossing the street to get an idea of the chaotic nature of the traffic

Here’s a list of us walking in the souks alleyways.

Between child prostitution in the new city, peddling wares or photo-ops to tourists in the old city and finally, selling hashish (better quality pot more on this in a later entry) to every white skinned people looking lost, I think Marrakesh has a pretty good economy going for them. This impression I have of this place can probably be attributed to the underlying conflicts between the French and their “Colony”. So to speak.

I’ll try to demonstrate this first with examples. There’s a very big difference in interaction with the locals between Mark and I. First of all, it’s rare for them to see a white guy walking around in with an Asian. Second they never expected me to be able to speak French let along jokingly stab back at them. For the most part, people left me alone (the reason will be revealed in a later entry). So besides the normal: “You Japonais?” while showing the Buddhist prayer hand they usually just blurt out whatever English they know and be done with me. Mark however gets a completely different treatment which includes and not limited to: “Want hashih?”, “Take pictures?”, “Cent Dirham!”. I am not sure if he gets solicitation for “Jeunne fille” sex, I did not ask and do not intend to. We did have somebody asking us if we want “Good stuff with woman” around a street corner in CasaBlanca, but I didn’t think the woman was that young or good looking.

For us, Marrakesh was a new experience, but for the French who were visiting for the 10th time in their life, it was pretty much a colony where people are to be ordered around and that everything is cheap. You can basically collect France welfare and just stay in Morroco for its low living standard if you want (based on my calculations, detail feasibility study still need to be done). So the French’s attitudes towards the locals are that of annoyance and impatience (Which is the type of attitude I ended up adopting near the end of the trip as well for a different reason).

Overall, Marrakesh is worth staying 3 days for. Western tourists pays very well since our living standards are luxurious compared to the scraps that they have to fight for. 100 Dh  (roughly $27) may be pocket change for you, but for the locals it can probably feed a person for a week (I once survived off 15 Dh/day on this trip).

What I believe will really help both the tourists and the locals, is for an effort to be put into making a transactions binding and to develop a pleasant attitude when an offer is rejected. The changing of an agreed upon amount made me suspicious of anything they say. The insults that they blurt out when I refused them, made me dread any contact with the local people. It’s true that by adopting the two, you might not get my business, but if your neighbor can get my business, it will benefit Marrakesh eventually. The way it’s going right now just pushes me to be my cruelest self without regret.

Sight Seeing

There are quite a few point of interest for sight seeing if you are into that type travel. Personally, traveling is more of a way to learn another lifestyle and a chance to interact with people that I would otherwise have not met. When you have traveled a lot, sight seeing in every country becomes the same. But this was a slow day as we waited for the next desert excursion to start, so we decided to do what all good tourists should do. Visit these places of interests. Palais Badii, La Koutoubia and Jardin Princesse Lalla Hasna. Add some more of the souks crawling and we managed to waste a whole day. As a consequence of this more leisurely pace, we got to witness more of the day to day life of Marrakesh. That includes a knife fight between a souk kid using WWF style huge metal belt against a street bum wielding a knife. Some blood were shed before people finally broke up the couple. All without the police being informed. I think the police are there more to protect the tourists than to enforce order between their own kind. There were also a rock throwing fight between kids. By rocks I mean rock the size of your fist. A police confiscated the camera of a tourist who took pictures of the royal palace which they were not allowed to.

Change of Plans

When we got back to the hotel, our hotel owner took us to a travel agency to register for a camel ride at 700 Dh each. Ralid was the person who serviced us. We were surprised by how fluent he is in English in a country with strong French influence. It turns out that he actuall graduated university in the US, go figure. For those of you who wish to take a desert excursion with a caravan, it’s best if you ask the hotel owners. Travel agencies tend to charge double the price and provide the same type of experience.

After much deliberation between me and Mark, we decided that signing up for this will not only provide for a good experience, but also allow us to travel towards the southern part of Morocco without having to worry about finding transportation. We made a conscious decision to break off from the original plan and make a leap of faith to go the less traveled road. Less protection for tourists and more potential dangers in less civilized area. By making this change, we no longer know if we will make it back in time for our plane nor do we have any idea how to travel from here on. I am scared of the numerous possibilities for error, but at the same time excited to see what I can do.

Night of Marrakesh

We spend the night at the night market in Jamaa-el-fna, splurging on food. For 75 Dh, we had: Tanjine, calamari, Pastille, Aubergine, soupe, coke and bread. This is definitely awesome and worth it. The place completely makes me feel at home. Reminds me of Taiwan’s night market but with different people. That about wrap up the day for the calm before the storm hit. It’ll be a while before I get to splurge on food like this again. But I didn’t know that back then…

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It took quite a few years to brew in my head, but I have finally finished drawing the blueprint for my wooden PC case. Huge emphasis was placed on a nail free assembly as well as a zen-like look that can also act as a desktop lamp for when I turn the lights off to enjoy my wine and candle. This blueprint showcases how I am going to cut each piece of wood and the possible look of the final assembly. The artistic part is too random to draw and will probably end up taking too long. So I will just leave that to when I finally finishes building.

The design time was prolonged due to the engineering spirit instilled in me. The design has to be able to scale up to different dimensions with only some slight changes and have to be able to accommodate different sizes of motherboard. That scaling capability is partially thought out in case I need to go through a second iteration. You can see this intention built into the redundant look of every piece. The only difference is in the length of each piece. If there were ever a second iteration, much effort will be put into making each piece exactly the same.

Until that happens, this one is custom made to my desire.

Part 3 of the Morocco backpacking series: Backpacking through Morocco

Day 3: Marrakesh Ancienne Médina

Rob: fuzzywuzzy134@hotmail.com
Interesting song: Shikari over
Jen: jetheath@gmail.com

Costs:

Taxi split: 40 Dh
Hotel Chellah split: 150 Dh
Sandals Peter: 125 Dh
Lunch Peter: 15 Dh
Lunch Mark: 25 Dh
Synagog split: 10 Dh
False guide split: 20 Dh
Sprite split: 30 Dh
Jelubu Peter: 200 Dh
Cafe d’epice split: 30 Dh
Toilet Mark: 1 Dh
Dinner + Belly dancing split: 300 Dh
Tips Peter: 5 Dh
Tips Peter: 7 Dh

Mark exchanged for 2000 Dh

Getting around

Conversations with strangers under a foreign sky, with sunshine brushing our faces through the shades of apple trees. Our morning was spent with Suzanne from Switzerland and Yum from Korea/Barcelona, both veterans of backpacking. We found a few tips on getting into Spain/Barcelona for cheap and learned about the pitfalls to watch out for when passing through customs . I can’t reiterate how much I prefer a hostel over a comfortable hotel. Not to mention that between Mark, me and finger pointing, we are able to communicate enough to have an interesting conversation with strangers from most of the countries around the globe.

Yesterday was just a taste to get our foot wet. Today we are going in for the kill and our destination is the “Ancienne Médina” of  Marrakesh. We started off cheap and wanted to hike our way to the destination, but by noon we finally learned the important rule of the game that will shape the way we travel for the rest of the trip. One cannot withstand the unbearable heat of Morocco. I was already sun burnt and have emptied my water bottled by the time we called a cab. We paid the driver 40 Dh for the ride to our riad styled hotel Chellah. Very nice and clean with an open courtroom in the center. Most of the houses and hotels are styled in this way. I think paying 40 Dh is justified for how far it is and how complicated it is to find the the roads to our hostel this time. The driver also speaks French fluently while at the same time explained the history of all the buildings around.

At last, we arrived at the hotel intact. What a heavenly sight. Here’s a panoramic view in flickr. Click on all size and check out the original for the detailed view.

Here’s a footage of us walking from outside our hotel to a major street of the souq. I apologize for how shaky and bad the video is. I had to hide the camera because the locals gets very aggressive when cameras are pointed at them.

False guides

A few years ago, the government instigated a big crackdown on false guides so I can only imagine how bad it was back then. Even with the crack down and enforcement in place, we were still heavily assaulted everywhere we went. Marrakesh is a tourist city and scammer heaven, so don’t expect any peace of mind unless you stay inside.

Imagine this, you are lost in a strange country with intertwining side streets confusing the hell out of you. You take out your map and your trusty guide book “Lonely planet” to get oriented. Out of the blue a friendly looking local approached you and asked if you need help. His smile heart warming with a few missing teeth, you welcomed the help and asked if he can tell you where is “Jemaa-el-Fna” (Central square). He said he’d take you there, but having heard stories of the false guides you told him that you don’t have money and that you are not going to pay.  Really, you just want him to point a general direction. Figuring that you can rely on your skills at asking for direction that you’ve honed in other backpacking trips. Well, you are in for some surprise buddy. This is not an European country.

Disclaimer

Perhaps Marrakesh shouldn’t be the first place that you visit, but chances are it is if you got swayed by any of the guides or vacation agency packages. And as such, you will have a misplaced sense of trust on Moroccan people if you did. I am warning you first because the real Morocco is not like what I am about to describe.

The false guide trade

Dealing with the locals of Marrakesh is tricky. The only rule that they abide by is this: 100 Dh for every service rendered. The guide promised that he’s just being helpful and said that we’d do the same for Moroccans visiting Montreal. But as we progressed, it became more and more obvious that he’s just taking us around to his friend’s place so they can gauge us. We got a full explanation of all the spices and natural makeup. 10 Dh for visiting the last synagog. The kicker is when we decided to ditch him, he had the audacity to ask for 100 Dh. We gave him 20 Dh and held on to our claims that we didn’t need hm and said so at the start.

It seems to me at the time that for Moroccans there is no such thing as business integrity. Several times we tried to work out a deal first before taking on any service but still get asked to pay different prices at the end. And when you accuse them of lying, they get really mad at you for saying that. It insults their honor (which is pretty ironic). In Morocco, theft’s punishment is having your hands cut off and I am not sure what lying is, but I am pretty sure it’s a harsh punishment too. Price changing is not equivalent to lying. So they hold you to your western guilt and honor while exercising no honorable conducts themselves. Before you bash me on this, please finish reading the rest of the journey. I understand that this happens only in the tourist towns in the tourist area, but I also need to warn anyone who decides to venture there.

For people who’s not on a budget and not afraid to splurge, you can usually find an official guide by asking the owner of your hotel. They come with official badge and are dressed in the traditional Moroccan robe but they charge more than the 100 Dh demanded by false guides you find on the street.

Sight seeing

Because of the false guide, we were pretty disoriented and had to spend the better part of the day finding our way back. This is when I discovered a unique character of Mark. He seems to have a need to know absolutely where he is. It surprises me because the whole idea of backpacking is getting lost. In any case, after much roaming around, we finally found our way and proceeded to finish the tours outlined on lonely planet.

One of the point of interest on the walking trail is Cafe d’épice. The place is shocking because of the number of white people stuffed in it. It act an oasis for weary western travelers to take a breather from the constant assaults of shopkeepers who wants to sell you stuff you don’t need. This is also where you can see the effect of lonely planet in full swing. Marked as a “Friendly place towards females” we saw a building full of white woman. All of a sudden, we don’t feel so unique anymore.

I spent some money buying some cloths to help me blend in, somehow , all that seems to do is making people mock me as “Chinese Alibaba”

When we returned to the hotel Chellah, we met a pair of British born sibling who lives in France: Jen and Rob.  We were all relieved to be able to speak English once again and to feel the proximity of people who think like us that we decided to spend the rest of the day together and go out to watch some authentic belly dancing. It is from Jen and Rob that we begin to hear about the camel excursions in desert that some of the other backpackers are participating in.

We talked and enjoyed the atmosphere in a traditional Arabian settings until well into the night. Jen and Rob decided to head back to the hostel early because by midnight, the streets have turned hostile. Especially so towards woman and we had to surround Jen to protect her from all the cat calls and potential problems that might occur. At night, the streets are back in the hands of the locals. Single woman venture out at your own risk. Even guys needs to take more precaution.

Jemaa-el-Fna was quite a impressive in the morning, however, it is nothng compared to the night. It reminds me of a Taiwanese night market with the lights food and the people. It also showed the ugliest side of Marrakesh. Everythng at the night market requires money, a rule which we didn’t know. Because of this, we severely pissed off a few people. From listening to group of people making music to taking pictures. They will get hostile if you don’t pay up as if we are intruding on their right to enjoy themselves. They will even stop the music and stare at you using crowd psychology to force you to pay.

Back to series index

I started to compare my skills against that of my peers agian. For a different reason this time. For people who knew me from long ago, you probably felt that I used to be very competitive person. To a point of absurdity now that I look back. I believe that it is the reason which lead to me asking myself: “What is wrong with my personality?”

The adjustment

I believe I went through a period of adjustment and have come out completely opposite of what I used to be. Not wanting to come out first in anything nor looking at anyone as a rival anymore. There are only people who I can work with to achieve goals together and those who don’t.

Mind you, I still get pissed off inside when someone takes something as a competition when I don’t want to do that. You know, those who taunts you in an attempt to get into a race so they can win and feel better. In that sense of view, I am still very much controlled by competition. Controlled in the sense that this type of person majorly pisses me off. I still need to work on not being affected by them.

Reason why I need to compare

So why am I comparing myself against others again? This time, I am glad that it is for a greater good. I need to do this so that I can accurately judge the facts that people spills out. Watching the news, I realize that there’s a lot of people out there who are just parrots, repeating others where in fact they have no idea what they are talking about. It is important for me to be able to accurately differentiate this so I can determine whether or not to actually consider what the person has to say or use it as a model to understand what the general population is thinking about.

What changed

To do so, I have to shed the passive aggressive mantle that is favored by my humble fellow asians and actually consider the realty that I might be better than most people at certain tasks. And that I can do things that they cannot just because of the way I am.

To be able to admit this as a fact and not do so blindly out of pride is a major step in my life.

I have started calling in sick on the day when I am actually sickest. Because people give me weird looks when I told them that I will be out sick in a few days. Perhaps people inherently don’t believe that an employee’s sick leave is actually for real medical reasons.  Nor do they trust that an employee is actually smart enough and knows his body enough to forecast when will be the most viral moment of his week long battle with the cold.

Well, that’s the reason why I usually ask for a sick day off in advance from my boss. Because I know that I woke up with a sore throat today and when the pain did not subside after 3L of water with plentiful of vitamin C, there will be a great battle in my body in 4 days. I know because I’ve kept record of all my past cold/flu infections.

So, instead of warning in advance so that the business can prepare for it, I call in sick the morning of, which usually means chaos for people who were expecting me to be there. What an illogical thing I have to do to fit into the society.

Finally got my wacom tablet installed and system restored with photoshop. It really speed up the whole process of drawing. This is a draft of the main character Ania that I will be fleshing out and coloring later. Just showing the slow progress as I learn how to draw in digital.

Of course, I superimpose them while drawing instead of panning it out like that. Another plus of having a digital medium to play with.

Showcases dark skin toning without affecting hair and clothing too much. Also added more texture to the otherwise smooth skin to create the more “roughed and weathered” feeling.

I also slightly improved the shaodws and highlights to reduce the ambient glow.

It’s always frustrating to have to wind down something you have started, but it can’t be helped. Kirk got too busy with school and do not believe that he can continue. I was prepared for the eventuality though so at least I was mentally ready.

9to5ers began at first as a joint venture to explore a hobby that we both enjoyed: gourmet cuisine. But I guess as time goes by, it became too business like and the interest faded. I went into the partnership guarded, knowing that bad business will usually ruin a great friendship, but soon threw that worry away as I increased my efforts. I wanted it to be great and I also wanted to share an experience with Kirk. Maybe it got too business like.

For about 2 years, I mostly dedicated my efforts to the improvement of 9to5ers. Some great achievements include joining 9rules, reaching about 40 visitors/day. We ate, had discussions on food and generally enjoyed interacting with the readers. I spent most of my time learning about SEO and ad placements as well as improving the site and improve cost/traffic efficiency with an unfinished project of putting up 360 degree view of restaurants in flash.

By last month, we finally managed to achieve parity where the site pays for itself and I am saddened that it has to end when the site is just about to pick up. Most of our reviews ended up on the first page of google and the amount of spams even picked up as people started aiming their bots towards our site (Thank you akismet).

The upside is that now I am directing all my focus back to the personal blog while I go through a period of consolidation that will help me streamline my life. There’s nothing else I wanted to do more than to pick up and start something else. I have the entrepreneurial bug in me.

Here is a recent correspondence I had with a friend of mine and I thought it’d be helpful for those of you out there in the same situation. It consists of all my arguments against investing in Mutual fund in your RRSP portfolio. For Americans, it is the same argument for your 401k. Here they are:

Good idea. Well, you still got about 30 years ahead of you to compound at 5%. That is what RRSP is for. That and getting rid of under-performing stock in exchange for cash tax return. You want to invest in mutual fund or stocks outside of a registered account so you can claim the loss as tax credit.

The problem with fund managers is that only 25% of them beat the market over 5 years. Whereas only 50% of them beat the market every year. You can basically calculate the odds of them beating the market by doing a calculation of (0.5)^x where x is the amount of year you are looking at. So a mutual fund will need to do about 7% return per year in order to pay you 5% per year. Now 7% is an average return if you ask me. It is what the market average return is. So for them to give you 7%, they will have to have a return of 9%. Most mutual funds has about 25% in bonds (@3%), that means that 75% of their stock portfolio will have to generate 11% return (75a + 0.75 = 9 solve for a ) to get to that target of overall 9% return. What are the chances that someone can beat the market by 4% per year? Historically there are only about 10 of them who did it in their 50 years of investing since 1927.

Another thing I have also noticed is that they usually present you with a chart of percentage rises and fall instead of the actual price of the fund. This is to hide the fact that they are actually under performing. With 1000 invested, 10% loss followed by a 10% rise in the same fund does not equal to the original 1000. Any loss in a fund is bad.  Period. Another way to look at it.  A 50% loss needs a 100% gain to get back