Blessed by the Potato

I was explaining my playlist at work today:

“This is a song about a mad scientist who is lonely, and builds himself a girlfriend.”

“This is a song about a giant squid who is lonely.”

“This one’s a love ballad from Charon to Pluto, trying to reassure and cheer up Pluto after we revoked its planet status.”

“This is a song about bedtime and how you long for the comfort of your trusty old teddy bear.”

“A whole song about Ikea! You guys all like Ikea.. for college kids and divorced men…”

“You know, sometimes, the world just wins, you know? It just fucking wins. Every. Goddamned. Time.”

“Uhh… Tater, are you trying to tell us something?”

No, I just like JoCo, ok?

Oh, fun human tricks!

So there’s this yoga pose that involves touching your nose to the ground without supporting yourself with your hands, and then sitting back up on your knees. It sounded impossible to me, but the girls say it’s super easy, and doesn’t require much back strength at all. So they do it: they kneel on the ground, with their bums right on their heels, then, with their hands behind their backs, lean forward and touch the ground gently with their nose, and then come back up. I’m amazed: it looks like magic, like that shouldn’t be possible. So they convince me to try it, and I realize why I think it should be impossible: because for a man, it is. My centre of gravity is high enough that when I start to lean over, it goes in front of my knees, and thud, I faceplant into the ground. Hard. A fun prank you can play on any male friend who doesn’t know better! (Or one who does, but is easily convinced to try stupid things that look like they should be impossible for him).

I’ve been super busy lately, and I’ve shifted my leisure habits from blogging, writing, and finance lately to playing StarCraft and fiddling with Flash animations (which had even fewer views than I had suspected, and zero comments… I guess I only find myself funny because I’m sleep deprived?).

Anyhow, this picture should give you an idea of how the diet has been going this week:

Ok, actually it wasn’t all that bad. I did get back on the bike, and aside from the last day of cookies (and tomorrow’s chocolate party), I have been pretty good with the diet. I caught up on my sleep over the weekend, which also helped a lot with feeling better and getting a workout in. However, according to my “aggressive yet totally doable thesis timeline” I was supposed to defend my thesis last week. As you have not seen a post to that effect (or even that I’ve finished the first draft of my thesis), you know that I didn’t defend my thesis last week. That made me sad, and cookies are good friends when you’re in your little box of sadness.

Despite the recent spate of results coming out of so many companies, I haven’t had time to go over any of them in any kind of detail, and haven’t listened to a single conference call this quarter. So I’m not really in much of a position to come up with any good investing posts, but that won’t stop me from spewing out a few half-baked thoughts in this quasi-weekly roundup:

BP: They capped the well, the stock recovered very nicely from the bottom… and then the stock went down and down and down again. I have no idea why. I’m ambivalent on it at this price: it’s not cheap enough to be interesting for me to buy more, but especially with the well capped so the liability is no longer infinite, I wouldn’t want to bail at this point…

DR.UN: Medical Facilities is a neat little income trust that I flagged a few months ago as one to watch for the next quarter or two to see how things go. They got really cheap there for a while, yielding up around 15% (which would likely become a ~11% dividend after conversion). I skimmed their quarterly release and things looked ok — not great, but ok — but I didn’t have time to really read it in detail. They’ve since gone up about 10%, and I’m no longer sure how much of the value is there…

The Banks: the Canadian housing market looks like it’s finally following the rest of the world back down to reality. Now, the Canadian banks have very little risk of complete loss associated with that event, but I doubt very much that even the CMHC makes the risk zero. AFAIK, they will at the very least face a reduction in their mortgage portfolios as the number of Canadian homeowners follows the American trajectory from ~69% back to the historical ~64%, and the sizes of those associated loans shrink. Once the downturn gets into full swing, they’ll probably have a few bad quarters/years until things shake out. So even though they already are starting to look cheap again, I’ve been sitting on my hands on the assumption that they’ll get cheaper in the next few years. Unfortunately, I suppose that could be described as fruitless market timing, and that this idea is already baked into the prices… that said I do still have some exposure to Canadian banks (I still hold TD), though I think I’m slightly underweight compared to the index.

Conversely, the American banks may have hit bottom already. BAC is making the top picks of several analysts, but I haven’t had time to do any research to see if it might be fore me… likewise Manulife has been getting cheaper by the day, yet again, I can’t say yet if it’s cheap enough. With these though, I’m not sure I’d ever be able to — these entities are just so big, with so many moving parts and black boxes, I don’t think I could ever fully get my head around them with the skills and tools I have at my disposal right now.

Links:

An interesting article on how scarce helium is on our planet, and how a bone-headed move by the US government is causing a large part of our reserves to be sold off at rock-bottom prices, making helium too cheap to bother recycling… for now. To be fair, we can manufacture helium from nuclear processes, but not in large quantities, and certainly not cheaply.

Also, Netbug has relaunched his blog, with a slightly new address.

Calories can be scary things sometimes. Many people let them rule their lives, obsessively counting and studying the calories in their food. But, there are many little known facts about calories that you can use to master them.

This series of helpful videos will give any would-be dieter the information they need to come up with a reason to eat the foods they love, and would be denied by other diets. Enjoy!

Meta:

I could not for the life of me make the programming to have a play/pause button within the flash animation work, so I gave up and exported the movies, then uploaded them to YouTube, which I then embedded here. Far messier than it needed to be, but it works. I wanted to dive in and get some animation going while I was in the mood, and didn’t want to spend my 15-day trial with Flash just learning how to program properly, psssh. Some of this may be clunky as a result, as I was just trying to kludge my way through making Flash do what I wanted it to do. I figured I used Hypercard, how different could Flash be? The answer: very. What I found really frustrating was that I would do the same thing at different times, and I would get different results. One particularly frustrating thing was when I tried to make a part rotate. I’d set the pivot point, do the rotate graphic, and it’d work fine. Then, I’d do it again, and instead of rotating as I expected, it would try to do a 3D-esque out-of-plane warp/rotate animation, which was just ridiculous.

Photo credits: The food pictures were both taken from Wikimedia commons:
http://commons.wikimedia.org/wiki/File:Waffles_with_Strawberries.jpg
http://commons.wikimedia.org/wiki/File:Choco_chip_cookie.png

Wow, what a terrible, terrible week for exercise and diet. Started off with a StarCraft 2 “LAN” party, which involved 2 days of nothing but junk food. Then I was busy with work and it was hot and humid out, and I got my sleep schedule all screwed up, so I did basically no exercise. Weight’s up 2 pounds (and the scale’s calibrated right this time), so I’m going to have to be extra good this coming week. Meal plan: egg whites, oatmeal, fruit, repeat.

Of course, this was also the week that I started putting together “Little Known Facts About Calories” — a semi-secret project which I am teasing you about now, and hope to unveil soon… but not today!

Links:

Gamers can beat algorithms for finding optimum protein structures in a game simulating how protein chains would contort themselves to find their minimum energy configuration in the cell (with the water-like cytoplasm, and the fatty membrane layers). Turns out the algorithms are good at getting fairly close, but can be trapped in local energy minimums, which the gamers see past. A neat read.

OK Cupid has an article up investigating what can help make your profile picture look more appealing. Also, a neat graph showing that sluts are more likely choose iPhones as their smartphone of choice.

Yet more nonsense on the census. I don’t see the problem: StatsCan is a government agency with an excellent record of protecting privacy. The long-form census is incredibly useful and should continue to remain mandatory… I can’t believe the Cons are still trying to make an issue of this.

An illustrated guide to a Ph.D.. And, from the same author, 3 qualities of successful PhD students. To quote liberally from the second article:

“Smart” qualities like brilliance and quick-thinking are irrelevant in Ph.D. school. Students that have made it through so far on brilliance and quick-thinking alone wash out of Ph.D. programs with nagging predictability. Let there be no doubt: brilliance and quick-thinking are valuable in other pursuits. […] Certainly, being smart helps. But, it won’t get the job done.
[…]
To survive this period, you have to be willing to fail from the moment you wake to the moment your head hits the pillow. You must be willing to fail for days on end, for months on end and maybe even for years on end.
[…]
For students that excelled as undergraduates, the sudden and constant barrage of rejection and failure is jarring. If you have an ego problem, Ph.D. school will fix it. With a vengeance. (Some egos seem to recover afterward.)
[…]
Science is as much an act of persuasion as it is an act of discovery. […] You will have to write compelling abstracts and introductions that hook the reader and make her feel like investing time in your work. […] You will have to learn how to balance clarity and precision, so that your ideas come across without either ambiguity or stifling formality.
[…]
That’s why I recommend that new students start a blog. Even if no one else reads it, start one. You don’t even have to write about your research. Practicing the act of writing is all that matters.

I started my site in undergrad/high school, but the blogging platform didn’t arrive until grad school, so I suppose I can use this as a backwards rationalization as to why I did it :)

Another bad week for exercising, but the diet was at least a bit better.

A NYT story on credit scores suggests that the pendulum has swung too far in the states, and now it’s becoming hard for even borrowers with decent credit to get a loan. Some mortgage brokers are lamenting that too much weight is being put on the FICO score:

In fact, FICO scores are not the best predictor. The amount of equity a person has in his home, his debt-to-income ratio, his job stability and his cash reserves are all better predictors than credit scores, according to Dave Zitting, the chief executive of Primary Residential Mortgage, a leading mortgage lender.

Now from what I’ve read I don’t know if I’d say the amount of debt-to-equity is a better predictor, but it’s certainly up there. This just reinforces my earlier point that the line “Canada doesn’t have a subprime mortgage problem” is glossing over the prevalence of CMHC-supported low/no downpayment loans, which while not quite as risky as a pack of NINJA negative-amortization loans, are still much riskier than the “conservative” banking culture played up in the media.

Aside from seeing another source to use to trot out my ongoing argument, the article isn’t all that good. It belabours the point that lending criteria use hard cut-offs sometimes (like here with FICO scores) where the difference between just over and just under the line are too small to be meaningful. Unfortunately, life is full of such arbitrary cut-offs: for instance, if you have $499 in your account but write a cheque for $500, it’s bounced all the same as if you had nothing in the account. These cut-offs can help protect the larger system (e.g., the bank) from bad risks from decisions made throughout the organization. Though the article didn’t mention it, there is one solution to the issue: make the cut-offs continuous rather than binary. Rather than someone with a credit score of 620 getting a loan and someone with 619 getting nothing, scale it in so that someone with a 650 could get a full loan right up to their debt service level of say 32%, while someone with a 620 could only get 20-some percent, and scale it down to zero over a wider range… But that’s nitpicking the point.

Rogers has tightened up their download limits again, just days after Netflix announced it was coming to Canada. Whispers of market manipulation to shut out a competitor to their own video-on-demand service arise.

An older article from the CBC goes over some of the basics of download limits, and some of the anti-competitive issues. As you all well know, I think the companies are BSing us here — first off, their “average user’s usage” figure hasn’t moved in years, despite the prevalence of things like streaming video in the last few years. I think it’s probably way out of date now, likely a factor of 10 too low.

the company says the caps were necessary because between five to seven per cent of its customers were using more than 80 per cent of its bandwidth, thus slowing service down for everyone.

This is an argument trumped out often in favour of caps or limits, but what does it really mean? Years ago, during the first round of ISPs cracking down on heavy users, these sorts of arguments were used to cut “abusers” off… but this sort of relationship is just a feature of how humans distribute resources. It’s the Pareto principle. Plus of course, data transfer is very cheap, on the order of cents per GB, yet the overage charges are $2/GB. Even with a healthy extra put in there to act as a disincentive, this is clearly a massively profitable area for ISPs, way beyond the costs of data transfer or economic disincentive. The real issue they often complain about with their networks is peak usage, i.e. time-of-use (especially Rogers’ architecture). Yet they’ve taken no steps towards time-of-use billing, even though that would make more sense.

On the StarCraft 2 front I ended up using one of my guest passes since it’s just getting ridiculous that they can’t solve the account problem that’s kept me from playing. I finished the single-player campaign, and found it quite short. There were 26 missions (Terran and a few Protoss side missions), which compares well to the number of missions in the first StarCraft. However, I found the missions to be very fast and small-scale. I don’t think there was any one level that took me more than 30 minutes to clear, whereas I remember at least one level per race taking over an hour in the original as you had to carefully pick your way through the enemy forces and win by attrition sometimes. Detaching the single-player a bit more from the multiplayer did add some neat options with unit upgrades and mercenaries, as well as a greater spectrum of units (e.g., the medic, wraith, and goliath were cut from multiplayer). Still haven’t played multiplayer though. I tried calling the support line a few times last week, only to find that I couldn’t even get into the holding pattern since the queue was full. When I did finally get through, though the fellow was nice, the problem didn’t get solved. I sent an email right away on release day, and found it ironic that the message telling people to call again since the hold queue was full suggested emailing support instead. Finally, 6 days later, a rep has gotten back to me, and after some back-and-forth going through the motions of trying steps that everyone in the support forums said didn’t help (and that I already tried on my own), it looks like I should get my account fixed tomorrow (8 days after release). Update: Just got in, woo-hoo! Now I’m too tired to play though and have to go to bed…

I’ve had about 5 hours of sleep in the last 48 hours as I try to cram out (at the last minute, of course) some papers for an upcoming conference. It’s been a nightmare because, amongst other reasons, the ridiculous copyright policy of the conference means that we have to submit papers that are different enough from what we usually write that we can still have freedom to use our own work elsewhere. It’s hard enough to hammer out a paper in the first place, then to have to try to do it in the literary equivalent of a funny accent…

Anyhow, I’ve been battling with yet another nasty case of writer’s block — something that seems to hit me far too severely when it comes to my professional writing. I think Wayfare hit the issue on the head: I worry too much about how the work will be received for professional stuff and just lock up, whereas on my pseudo-anonymous blog I can just hammer away at the keyboard and not even worry about proof reading since I don’t have that much invested in it. Nothing to do but just try to get over it. In the meantime, Netbug suggested I take a quick break and put up at least a Tater’s Takes post, so here you go.

On the health/diet front, I found out that my scale got miscalibrated somewhere along the way. I’m not sure when it happened, but it was reading high by 3-4 pounds, which means I’ve really only gained about a pound from when I started. Still, wrong direction, but not quite as bad as I had thought. The last week was decent but not great: I’ve been watching what I eat more, but still had a few doughnuts at work through the week. I’ve started writing down my meal plan for a ~3 day period, and have been sticking to it reasonably well, and including lots of healthy stuff like vegetables and oatmeal, so that’s been good. I only had two good long bikerides in the week, but considering the week I’ve had, that’s pretty good (I plan on retrying the 36 km trip around Fanshawe Lake once these stupid stupid stupid papers are in).

“Today” though has been hell on the diet: I’ve resorted to undergrad cram tactics, pounding down full-sugar Coke & Red Bull and eating nothing but junk food to burn through the night. 3940 calories in the last 24 hour period (I don’t know what I consider a “day” anymore — best to try to stick to the subjective view of time the rest of you hold), which is simply not an efficient way to produce written words. As soon as the caffeine starts to wear off, I’m right into the head-bobbing vertigo stage of sleep deprivation, so I’m really hoping these stupid papers get finished soon.

In the news, BP’s latest cap attempt actually appears to be working. The stock shot up, then slid back down on perhaps fears that the shutting-in of the oil may have put too much pressure on the parts of the well below the ocean floor, causing oil to seep out (in a way that could be very difficult to control).

Also finance-related, a quick note that I sold my H&R REIT yesterday. Thanks to falling behind on my thesis and staying a grad student longer than my scholarship said I should I know that I’ll need to be raising cash, and also H&R is starting to look fully valued to me, so out it goes. Again, this isn’t a case of not liking the company, just thinking that the price was getting high enough…

I was going to look into the new Ontario “eco fee” tax this weekend and blog about it, but it looks like the negative publicity and poor roll-out has lead to it being canned… for now.

After running headlong into Bell’s very restrictive 25 GB data cap in May, I had to complain to any that would hear me that the $2/GB charge was very obviously excessive, and in no way actually reflected the incremental cost of that data usage. Plus, of course, the comparison to Rogers’ slightly more generous 60 GB cap (and 5 years ago the cap was also 60 GB, long before most users started watching videos on the internet, or Bell/Rogers themselves started rolling out video-on-demand portals). Netbug sent along an article that looks at this issue for US ISPs and concludes that indeed, most of the cost structure is composed of fixed-cost infrastructure type spending, and there’s no support in the ISPs’ business model for the caps and data charges that have been rolled out. Congestion issues are also unlikely to be the reason for the fees, since if congestion at peak times was the issue, the ISPs should instead implement time-of-use charges.

My mom used to freak out when I’d go grocery shopping or something at 4 am, largely worried about the freaks that might prowl the nighttime.

For the most part, the people out and about at 4 am are like me: pasty, sun-starved geeks and shift workers, university kids stocking up on snacks, or sleep-deprived dads picking up diapers and pickle-flavoured ice cream.

But this weekend was different, aside from myself the people out prowling the streets seemed to be right out of my mom’s nightmares: a greaseball guy with a skinny twig of a girl 20 years younger than him who had a thick eastern european accent and dressed like a total ho, and a guy fresh from a goth/industrial concert wearing a leather vest, leather pants, and combat boots, and a grimace (probably because he was wearing head-to-toe leather in this heat).

Anyhow, while I have been consistently underperforming my daily exercise goals, my distance for bike riding has been going well. Unfortunately, I gained another pound this week, and now the heat is on, so the exercise is likely to suffer — and if not, I will (I’m sure the public health guys would agree that being fat is better than getting heatstroke in this nonsense).

Since I’ve now gone back up to the weight I was at when I started this plus a pound, I’ve opened the contingency envelope, which contains the nuclear response plan for just this dark scenario. I can only tell myself that muscle weighs more than fat and that all the exercise is doing the trick for so long, it’s time to take action. The diet has to be stepped up (or, technically speaking, down) a notch. I’m also going to have to become lamer and spend more of my time working, working out, and sleeping, and less blogging, having fun, and reading about non-science stuff. Sleeping 4-5 hours a day while trying to churn out papers leads to lots of late-night snacking, which is not helping.

Housing stuff:

Mr. Cheap at MS defuses the idea of your house being your “best investment”, but thinks that the overpricing in Canada will lead to a flat market for a few years until fundamentals catch up, rather than a crash/correction, like I’m calling for. I think that he’ll be proven wrong in short order, especially given that:

Prices in Toronto have already come down 5% last month [down 2.6% for the GTA as a whole]. I don’t know what the typical May -> June seasonality is, but I don’t imagine that June is traditionally all that weak [it was flat in 2008, and up slightly in 2009]. The TREB releases focus on year-over-year numbers, especially when the month-over-month looks bad for them (or year-over-two-years-ago when the year-over-year looks bad for them).

BNN had a housing bear on today, which may also be telling. He’s predicting prices to go back to where they were in 2005 (before the CMHC rules changed and “rampant speculation” began), which would be a 26% decline for Toronto, and he’s saying that will happen around mid-2012. I’m a little more pessimistic, counting on ~35% decrease for Toronto, but also more patient, figuring that the bottoming out will be in 2013-2015.

Other stuff:

Woot is being bought by Amazon, and their letter announcing the deal is a fun read. They also poke fun at the AP today for stealing from their amusing letter, poetic since the AP wants to charge others for quoting even short snippets from their stories.

First London StarCraft 2 LAN party planned for August. Unfortunately, SC2 won’t have LAN support (unless we can change Blizzard’s mind!), so we’re all going to have to connect to BNet over the host’s internet connection. If that fails, we may have to play something else…

Toronto Public Libraries has a new feature that lets patrons check out passes to some of Toronto’s museums. This lets library card holders get access to these venues for free. Best of all, you don’t need to return the passes to the library, just surrender them when you go to the art gallery or museum.

They say quantities are limited, so we’ll have to see how accessible this ends up being…

HT: Julie.

After last night’s crazy heavy rain in Toronto, we found a fair bit of water in our basement. Muddy water (pics to come?).

It was a very disheartening discovery, since it was very late when we found it, and since we were basically driven out of our last house due to water issues in the basement and mould. One of our only major criteria for our new place was that the basement should stay dry. Both Wayfare and I had basically lived in the basements of our parents houses, and we fully intended on making the below-grade rooms part of our usable living space — workout room, office, play room for future kids, we hadn’t quite decided exactly what form that would take, but the basement had to stay dry, damnit. We even came to visit the place on a rainy day in December while what snow we had was melting, and it was fine.

Perhaps the recent earthquake opened up a crack, or maybe the rain was just heavy enough to overwhelm the gutters and weeping tile. Either way, we had to clean it up in the wee hours of the morning. We didn’t even have a mop on hand, so I had to run out to the 24-hour Metro and pick up a mop before we could commence cleanup operations.

The ordeal was made all the worse by the giant bugs that have invaded the basement. Being the brave warrior that I am, I smooshed the hell out of a giant centipede that was trying to blend in with the furnace. I then turned around to see two large, black legs poking out of the grate to the drain in the floor. The slender black legs were comically long — they don’t really make spiders that big, do they? — I figured it had to have been one of our prop plastic spiders from the Halloween box lodged in the drain.

Then it turned, and looked at me. It followed my movement across the room. This werewolf spider had my scent, and all eight eyes were locked on target.

I knew then that I was going to die.

The centipede was but a pawn in this war, trapping me on the wrong side of the drain from the stairs and freedom. Wayfare then bravely rushed to my defense, using her shoe to shear off the creepy legs with a mighty battle cry of “Bwaaaaaahhhhhhh!”. Outmatched, the spider retreated back down the drain. I quake in fear though at the idea that her mighty blow did not finish it off, and that down there in the darkness lies a 6-legged horror plotting revenge.

And I have to wonder: what the fuck is up with these giant, terrifying spiders? I thought they were a London thing, since I’d never seen them before in Toronto, but they seemed to follow me back up the 401, plotting my ruin the whole way. Centipedes and the tiny little transluscent house spiders I’m used to dealing with, since they were endemic at my parents’, but these monstrous, dark spiders terrify me beyond all reason. Where did they come from? Why are they in our basement? Both the spiders and the centipedes are top-of-the-food-chain predators in the bug world, but aside from the odd potato bug, there are no other bugs for them to eat down there.

Are they eating my fear?

Diet was terrible again this week, and I felt pretty ill and headachy on a few days — the humidity outside seemed to put me right on my ass, just couldn’t breathe out there. Nonetheless, I did get two good long bike rides in for the week, and feel pretty good about that. I gained weight though, which is bad bad bad, so I’ll have to get better about the diet next week!

I ballparked the magnitude of the oil spill at about 50k barrels per day a while ago, choosing to believe the image analysis guys (and taking something of the midpoint of their estimates). The media kept reporting smaller numbers (and early on the reported estimates were, to my eyeballing and logic, way low). Last week though I started hearing 60k barrels per day as a new estimate in the news, and cost estimates above my $50B started appearing. I thought after my first post on the matter that I might have been pessimistic assuming the well gets capped in early August. Now I’m wondering if I might have been too optimistic! The stock is already well below my “attractive” price…

Of course, it’s hard to take the plunge on BP when some of my other calls have gone so badly. RIM released results today which looked ok to me (and to TD’s analyst), but the stock was hammered by the market, down over 10% today (and down almost 20% from where I bought it). It’s trading at about a 12X P/E now — the territory of stodgy retailers and banks, not low-debt, growing tech stars like RIM! I just can’t wrap my head around why the market isn’t more positive on RIM — their slice of the pie is undeniably getting smaller thanks to Apple and Google, but the smartphone pie keeps getting bigger (heck, now even I have a crackberry). Their EPS is growing, and should continue to grow for years to come. I think what they need to do is start issuing a dividend, since it doesn’t look like they need all the cash they’re generating for growth anymore.

I own some Freddie Mac (preferreds), even though at the time I bought it, I figured the odds were good that political risk would sink it. Yet I couldn’t resist a little nibble since if the government managed not to kill it, the payoff would be huge. So it’s only a very small portion of my portfolio. It now looks like political risk is indeed rearing its ugly head, as the government overseer has announced that FRE will be delisted from the NYSE. This is a strange move since on such a huge company, the listing fees can’t really save them all that much, and Freddie wasn’t at risk of being delisted anyway (just the opposite, Russell was about to add them back to the Russell 2000 index). Internet chatboard speculation is that this is the first step to the government canceling the private ownership of the GSEs. I can’t really refute that, since the government has definitely taken a different stance on the bailout of the GSEs than of the banks. The bailout money for Freddie comes with a 10% interest rate attached, which is rather punitive to begin with (AFAIK, the naughty banks that more directly helped cause the credit crisis woes got interest-free loans, or money for common equity). The government is also making them keep cash reserves on hand, and reserve loan losses in advance — which costs them 10% — which is ludicrous in my view, since the idea of capital reserves goes out the window once you’re already under government conservatorship.

One scenario I’ve held out hope for is rather than waiting for the company to turn around and conservatorship to end, for the government to tender for the preferreds at a discount. While they are not currently paying dividends on the junior preferreds, in theory that capital costs them ~5%. The government could have Freddie offer to buy back the preferreds at say 25 cents on the dollar, and even at the 10% rate that they’re charging Freddie, it would still end up being a cheaper source of capital for them (and a massive return for speculators like me who bought the preferreds at something closer to 5 cents on the dollar — today they’re closer to 1 cent on the dollar).

If you do decide to take a gamble on Freddie Mac, please do read John Hempton of Bronte Capital’s (long) series of blog posts explaining why he thinks they can be worth something down the road if given the chance to recover (I just bobbed my head and hummed along to his analysis). And note that the political risk means that the most likely scenario is that these things go to zero. They’re basically lottery tickets, so don’t spend more on them than you would at the casino or other gamble — it’s not a sound investment for your retirement!

Finally, on the indexed side of my portfolio (which I don’t talk about too much since it’s purposefully boring — remember, boring is often good in investing!) I saw that the Euro has gone down relative to the Canadian dollar recently (~10%). For my international portion of my indexed portfolio I originally chose the “currency neutral” version of TD’s e-series fund, not really knowing the differences or hidden costs of hedging. Fortunately, that has worked out for me, as that currency hedge helped prevent the international fund from going down quite as much. I’ve taken advantage of that and switched over to the plain C$ version.

On the TFSA SNAFU, Ottawa has decided to be lenient, and all the people who couldn’t figure out this relatively simple tax-shelter will be given leniency for over-contributions in 2009. You still have to respond to your letter from the CRA though, it’s not automatic! The deadline for responding though has been pushed back to August.