Blessed by the Potato

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.

The diet this week was horrible. Ice cream was on sale, which lead directly to ice cream being in the house, which lead to me eating ice cream (for lunch one day, no less), which lead to a 2-pound weight gain this week. Cycling didn’t go so well since the weather’s been so crummy, but I’ve got big plans to go on a personal record-breaking trek tonight to make up for it.

I figure that since BP has made such a wreck of the environment, I don’t need to be quite so good to it, so I bought a few cases of bottled water. Generally I try to avoid bottled water except for when I actually need my water to be portable, and use Brita filters at home (drinking London tap water straight is not usually a very tasty exercise… in the heat of summer it tastes slightly more chlorinated than many municipal pools). However, I’ve been so incredibly lazy that I haven’t wanted to get a glass and pour some water out to drink water; or, when I get to the fridge, I succumb to the tastier options that are in there, like Coke Zero, juice, and milk. Since I don’t mind tepid water, I now keep a case right by my office door to encourage water drinking (don’t even have to go all the way to the fridge!). Hopefully that’ll help the diet too…

Speaking of BP and the environment, I meant to focus more on the horrible nature of the situation in my post, on the Chernobyl-like precedent this tragedy might have in the public mind. How things like the deepwater drilling ban might spur us to say, tax oil a bit more to reflect the costs, or encourage better, faster implementation of crude alternatives in our power and transportation systems.

But I got on the investment thinking train, and that seemed to prove popular, so let me just continue briefly here, hopefully without going into such depth that it deserves its own post. Actually, it deserved it’s own post. This is a quasi-weekly summary/link post-a-ma-gig that I do here, and that was way too detailed.

Links!

The writers of Metatropolis were giving away copies of their books. I got an honourable mention in Karl Shroeder’s contest. That doesn’t get me a free book, but hey, saving on heating bills by using a pain ray on yourself is pretty wild… While it wasn’t a productive week for exercise, it was a productive week for writing, as I now have some drafts ready for the Scalzorc/Wil Wheaton nightmare story contest (and working on my thesis too, honest).

New Scientist has a series of articles on science deniers that look like they might be interesting — too bad they’re behind a paywall (HT: Barry Ritholtz). I’ll see if I can find them through the library later.

Michael James has a post about do-it-yourself investing and how many people want to become DIY-ers to save on fees, but for whatever reason (fear? laziness? momentum? loyalty?) end up sticking with their high-free mutual funds (which hopefully at least come with an advisor). He suggests perhaps taking baby steps, by putting new money in a self-directed account before trying to take the big step of moving out of the old funds. I can relate, as I similarly helped Netbug get set up with a TFSA and TD e-series over a year ago, but AFAIK he never ended up putting any money in that account, choosing instead to “invest with his guy.”

John Hempton of Bronte Capital is always worth reading, especially when he’s tearing apart proposed solutions to the GSE “problem” in the US.

Just got back from seeing JoCo and Paul & Storm in concert. It was a really fun concert, including at least 3 separate songs about mad scientists who are sad, so it was like they were singing right to me. Paul & Storm have a fairly large catalogue of stuff on their site, and I find most of it to be hit-or-miss, but in person (where it’s really just the hits) they were great.

It was an intimate setting with lots of feedback (often hilarious) from the audience of hard-core fans (and really, there are really only three kinds of people: those who have never heard of JoCo (yet), those who are already die-hard fans, and those who aren’t the slightest bit geeky and/or without any sense of humour and thus have heard of JoCo/P&S but aren’t fans). However, the seats in the Enwave theatre were horrendous, they weren’t deep enough to sit fully back on (it’s like when the monster truck radio guy says “you get the whole seat, but you’ll only need the edge” — well they only gave us the edge). They also were connected down the row, so whenever someone would move your seat would shake and twist. At least the venue had good acoustics.

Verdict:
Jonathan Coulton – Awesome.
Paul & Storm – Hella Awesome.
Enwave Seats – NOT awesome.

The funniest part of the concert though was Wayfare. During the Mandelbrot Set she just about lost it laughing (and when I first played the song for her, she laughed for like 15 minutes at the “best line ever in a song”). I’m pretty sure it carried right to the front, but JoCo didn’t seem to mind. Then during the encore, all 3 of them come back out to play a cover of TMBG’s Constantinople, and Paul brings out this weird mouth organ blowy thing, and JoCo and Storm comment on it and make a few jokes. Wayfare grabs my arm, turns to me, and with this really intense expression on her face says “Have you ever seen my mouth organ blowy thing? It’s red.” And partly because of how important she seemed to think it was that it was red, and mostly because of how intensely she said it, I just lost it and started laughing like crazy.

Finally, it was really weird to see so many people in “Skullcrusher Mountain” T-shirts (including me).

I haven’t done one of these for a while. There was some bad weather for a few weeks there, and I didn’t get on the bike at all for a fortnight. Not owning up to my downfalls in the exercise routine kind of defeats the point of the public update/shaming, but I also reasoned that I didn’t have any links I wanted to share, either.

The last two weeks have been much better though: I broke the 20 km barrier, and rather easily at that, returning home feeling like I still could have done more, and wasn’t much sore the next day. Now the problem is going to be that to keep pushing myself to be able to bike further (e.g., to train for the Rona/MS bike tour), I need to start committing serious time. I did a (fairly hilly) 18 km on holiday Monday, and that took me about an hour and a half — I just don’t have the time right now to push it any further than that.

Diet: aaaah, you don’t even want to know. So far the multivitamin seems to be keeping away the scurvy.

Random thoughts:

Realtors to Canadians: Chill Out

“There will be no drastic drop in Canadian housing prices, the Canadian Real Estate Association said Thursday, because house prices will stabilize and climbing household income will make owning a home more affordable.”

Wow, I barely included tautology in my list of logical fallacies because I couldn’t think of any examples where it really came up, and circular reasoning is usually fairly easy to spot. But, here it is: there will be no drastic drop in house prices because house prices will not drop drastically.

Then that last tack-on about incomes doesn’t mention a timeframe. Incomes rise at about the rate of inflation, say 2%/year. If houses are 10% overvalued on average (and 30-50% in Toronto and Vancouver), that could be a very long period of flat-lining. If even the CREA is saying that the best case is a flat-lining of house prices for years, then why be in any hurry to buy, especially with uncertainty about where rates will go?

And if everyone’s in no hurry to buy, then won’t sellers have to lower their prices to attract buyers back? I just can’t see a stagnation as a likely scenario. Yes, house prices have stagnated for long periods of time before, but not usually so far from equilibrium, and not following such epic volatility (down ~10% in ’08, and then bouncing back ~20% in ’09!).

Plus there’s the issue that Canada is not homogeneous… a nation-wide decline of just a few percent could very well mean that Toronto and Vancouver got smashed while the rest of the country stagnated…

Michael James has a good set of links in his roundup this week, including a couple on your financial advisor, and whether small investors have no choice but to become DIYers.

My Bell bill arrived for the month, and I was greeted with a $30 over-usage charge. Bell’s cap of 25 GB is way more restrictive than Rogers’ 60 GB one (and even that is getting tight as more and more uses for the internet come out but the cap hasn’t changed in years). So even though I had a fairly moderate month (~40 GB in usage, well under what my cap was when I was with Rogers), that qualified me for the full $30 overage fee. What really ticked me off is that even though they have my email address (and phone number) they never notified me that I was getting close to (or exceeding) my cap. I thought I was being good. You can bet I’ll be switching to Teksavvy (with a 200 GB cap!) when my contract’s up…

Stephen Novella has another interesting post up on science and public perceptions. “[P]eople find stories much more compelling than data.”

Spoilers ahead!

Borderlands: I finally finished this thing. I had no idea I was that close to the end… it just simply ended. I must say, it was very unsatisfying. The beginning of the game had so much promise (and with multiplayer it would probably still be fun), but it felt like they rushed through it and did a little too much cut ‘n paste, as the charm and humour from the first little bit seemed gone completely by the end. It was a grind-fest basically. The reward for beating the final boss? The ability to run through the game all over again on a higher difficulty to unlock “achievements”. Whoopee. The last boss didn’t even drop any epic loot! Oh, and there is no treasure vault: the vault is a prison for some kind of Eridian demon thing, that is unlocked every 200 years by the alignment of the moons, which gives our hero the chance to finish the demon off once and for all. To quote the PA guys: “It is at this point that people begin to question the wisdom behind moon-powered demon prisons.”