ERICOPOLY

No, my margin requriements for SSW have not changed -- Interactive Brokers.

I didn't realize this about SSW dividends until just a moment ago: Take a look at 2008 for example. They paid out $1.90 in total per share. Only $0.29 of that was taxable as a dividend -- the rest as a return of capital (not taxable as a dividend). http://ir.seaspancorp.com/distributions.cfm For U.S. federal income tax purposes, every distribution made by a corporation is made out of earnings and profits to the extent thereof and from the most recently accumulated earnings and profits. Distributions received by Seaspan's common shareholders should be first treated as taxable dividend to the extent of Seaspan's current and accumulated earnings and profits that are allocated to the common shares. To the extent the Distribution exceeds Seaspan's current and accumulated earnings and profits that are allocated to the common shares, but does not exceed the common shareholders' tax basis in Seaspan's stock, it should be treated as a non-taxable return of capital. To the extent the Distribution exceeds the common shareholders' tax basis in Seaspan's stock, it should generally be treated as capital gains. Sorry, but this does not apply to Canadians.

They might be using the dividend vs buybacks because they don't want people to get the wrong impression if insiders are selling. Look at MSFT -- Ballmer files to sell 10% of his shares and the news networks are abuzz. But that's just unloading the increased ownership due to recent buybacks. He's just bringing his ownership level back down to where it was. Had they paid that cash (instead of buybacks) out as a dividend, there would be no confusion.

He stripped it of the faux nouveau riche fixtures. He's still a good guy.

Thanks Shalab. I probably spend more than I expected, but my money has a bit more than doubled (after taxes and expenses) these past 3 years. My vacation time was limited when I had a full time job, so now we're taking more vacations -- that's led to the higher expenses. We're doing it now before our oldest is in school.

This is interesting: While he may not employ a full-time team of analysts, Berkowitz often hires experts to challenge his ideas. When researching defense stocks a few years ago, he hired a retired two-star general and a retired admiral to advise him. More recently he's used a Washington lobbyist to help him track changes in financial-reform legislation.

I worry about inflation a lot. I worry about this and that. So for me I just want the bridge to be 2x or 3x strong. A higher beginning income is margin of safety against unexpected disruptions. I used to think about this in terms of going to the moon. You need enough velocity to escape all these gravitational forces that might suck you back down to ground level. My three year anniversary of independence is coming up in January. Three years is a long time in the labor market -- my skills are getting out of date, my resume dusty... This has to work or it's really going to suck.

My definition of a speculative investment is one that you make where you only generate satisfying gains if you include price swings in your favor... AKA "The Greater Fool" method of investing. In a different video, Schilling argued that he'd make 40% from zero coupons even though the imputed yield is pathetic -- he justified this by saying "people don't buy the S&P500 for the yield". So in other words I'd call him a speculator -- he only generates a satisfying return based on The Greater Fool... and admits the return he gets otherwise is unsatisfactory.

Gary Schilling argues that the increase in the Fed reserves did not create money and that he is still positioning for deflation. Holds Treasuries expecting yields to go much lower. He says that net delevering has occured -- the private sector debt reduction as percentage of GDP has more than offset the increase in the government debt. So he argues we're closer to being deleveraged than before... even taking government debt into account. http://finance.yahoo.com/tech-ticker/inflation-vs.-deflation-peter-schiff-and-gary-shilling-discuss-debate-and-argue-535689.html

It's a starting point for discussion. If you need $5,000,000 to generate $150,000 from no brainer AAA stocks with international income diversification and reasonable inflation protection (perhaps reasonable hope of real income gains), then that is the upper bound of what you need.

I generally agree with what Broxburnboy said. It really boils down to how much income you need. I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ. But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you? If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009? Just watch the income -- stop watching the net worth. If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out? Just watch the income. For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck). I have young children so the idea of being idle really doesn't apply. It's idle empty-nesters who have issues with the lack of routine. You have the time to start new hobbies. I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try. Maybe it will become a business, maybe it will just be holiday gifts to friends. Doesn't matter, no pressure. You forget about black swan events in a person's life. What happens if a person decides that they really can't stand being around their wife with your all the new found free time? What if you mess up with your distilling and blow up your house and are severely burned, resulting in health expenses? What if you have a heart attack and need a bunch of money for surgery? One would care about market value of an investment then. Granted, I agree with your point, but, being the contrarian that I am, I just had to throw that out there... :) But seriously, why wouldn't a person still manage their investments a bit more actively (especially if they are members of this board)? It doesn't take a rocket scientist to find cheap securities. One more word about work... Make sure you aren't subordinate -- this National Geographic documentary on stress is very interesting: http://movies.netflix.com/Movie/National-Geographic-Stress-Portrait-of-a-Killer/70107420?strackid=7e9a1a85e29aac3a_0_srl&strkid=947337335_0_0&trkid=222336#height1601 According to this video: Unless you are in the alpha male role at work, work stress will decrease your health and feeling of well being. The stress of being in a subordinate role will lead to a build up of plaques in the arteries and a deterioration of your immune system. So you might want to adjust your life expectancy upwards if you retire young from a stressful job you hated. There is no question in my mind that I made the right choice for me.

I generally agree with what Broxburnboy said. It really boils down to how much income you need. I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ. But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you? If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009? Just watch the income -- stop watching the net worth. If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out? Just watch the income. For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck). I have young children so the idea of being idle really doesn't apply. It's idle empty-nesters who have issues with the lack of routine. You have the time to start new hobbies. I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try. Maybe it will become a business, maybe it will just be holiday gifts to friends. Doesn't matter, no pressure.

A quote from my grandmother: Money doesn't make you happy, but you can be miserable in comfort.

Silver right now (gold is 48x silver) is the most expensive it's been since 1984 (measured relative to gold). What is the appropriate relative valuation? What ratio of gold vs silver? 20x? 30x? 40x? 50x? 60x? 70x? 80x? I think all those ratios have held at one point or another since 1970. I would argue that since 20x only lasted for a year (until gold was free to trade as dollar got unpegged) that it is an outlier caused by artificial forces.

Yes that is easier to warm up to. There is an interesting set of data here: http://www.taxfreegold.co.uk/goldsilverratioshistoric1970onward.html I'm not sure how high the squeeze would go though -- I would expect some "mean reversion" arbitrage to take hold if silver gets too high (they'd sell it and buy gold). Since 1985 gold has never traded for less than 50x silver. At 50x today's price of silver, you get the present price of gold. (although this is a data set of 25 years, it's hardly a candidate for a "since the beginning of time" statement on silver/gold ratios. But I like it due to the fact that it mirrors the period of time when it's industrial demand has exploded -- we didn't need silver for many of it's current industrial uses back in 1500). I don't know whether or not Sprott did this basic comparison because he doesn't mention it.

Okay, you've convinced me. I have been watching the price this year and it has basically confirmed what other solid currencies are saying (like the AUD). My dithering hasn't cost me anything yet -- my gains of 25% (roughly) this year basically track these other currencies. I need something to keep that door open to Australia (I need to be able to afford to live there).

The current Fed does still have a price inflation mandate. They have said (and I think they intend to) they will undo QE once price inflation starts to move. So here the gold market believes them when they say QE3 may be necessary (to support asset prices), but the gold market does not believe them when the Fed claims that it is only a temporary thing. So gold prices adjust as if this is a permanent increase to the monetary base. It may or may not be. Some people say that by the time price inflation starts to move it will be too late -- but Volcker did it. If gold (and commodities) are merely reaction to the increase in the monetary base, then it stands to reason that they will fall immediately in reaction to a decrease in the monetary base. Should the day come where we have rising prices all over the place and people are out on the street, won't there be political will to unwind QE and thus crush gold and commodities? Wouldn't that be the politically easy approach? I'm running a devil's advocate argument here -- when the place is in tatters why won't people DEMAND the Fed just go to their keyboard and sell the Treasuries, thus reversing QE2 (and QE3 and QE4 etc). One could say that it would just put us right back into the deflationary spiral, but the longer we wait then the less leverage (the ongoing delevering). Actually so far QE2 has sent interest rates up -- not accomplishing what Bernanke said it was intended for. But it is making banking more profitable again, as this improves the net interest margin. The more profitable it is for banking, the faster the delevering can continue (a debt default or a foreclosure is a delevering event). Banks with a wide NIM can process the chargeoffs faster than a bank with a deteriorating NIM. I don't sleep well at night with all this experimentation going on, but there is the possibility of a black swan for gold (these guys are all wholly convinced that there is no risk of QE being unwound).

Rising price inflation coupled with stagnating incomes eventually forces the debtor to liquidate assets (at low prices)...if necessary all the way to bankruptcy... to delever. The 1970s inflation saw rising home prices, and rent alongside it. So the people who had bought homes as investments on fixed rates with maximum leverage did extremely well -- their interest costs were fixed (the largest expense in most rentals) while their income (rents) soared. The people who didn't buy homes saw their rents soar. Homes rose slower than inflation, but it was like 9% inflation vs 7% for home prices for some years (I'm just remembering what I read in Robert Schiller's book). Schiller argued that it was evidence that homes didn't even match pace with inflation, but I looked at that and said that because most "investors" buy the home with at least 2:1 leverage then the inflation actually earned them a real return. Anyhow, as I pointed out earlier the 1970s inflation was coupled with rising wages. That's what allowed for a lot of the measured inflation to happen in the first place (things like rents and home prices wouldn't be rising without wage pressure). What's not clear to me though is whether our next big inflation will happen independently of wages -- if wages don't go up, then you have the social unrest. We didn't get the social unrest in the 1970s because it didn't put everyone out on the street (saved by rising incomes).

As I like to point out, gold went down in late 2008 as the dollar went up. So I suppose it won't do well in a financial crisis of any kind. But that wasn't a crisis of confidence in the dollar itself. I'm having a hard time with this kind of hedging against collapse, because the kind of people who keep guns, canned food, and gold coins around the house are wackos. But I already have the guns -- (now for a funny story) I've even used them at home... we had a mink killing our chickens this year. It (there were two of them but I got one on the first day) killed all but 8 of our 30 chickens (this drove my wife crazy but personally I don't really like the chickens). The mink just chew off the head and only partially eat the chicken from the inside of the neck cavity before killing the next one... so you wind up with these otherwise perfect looking headlesss chickens lying around. So the last mink ironically I shot with a 12 guage from 7 feet away... and of all places I hit it cleanly in the head (it evaporated) and you just had the body left from the shoulders on down. I wasn't aiming for the had -- it was guided by karma I suppose.

I grew up during "The Great Inflation" -- I put "The Great Inflation" in quotes because as we all know "The Great War" was followed up by the epic sequel WWII -- history has shown that you don't want to use terminology like "The war to end all wars". I feel like (am I logical or am I getting sucked in?) the US dollar is going to devalue a lot more because the economy or political will is too fragile for austerity, but I have to hold my nose buying gold as an inflation hedge at this point. I guess I've beaten that to death, but my ongoing fear is that the price of gold is front-running the price inflation for the reasons you mentioned -- that gold is rising due to monetary inflation (monetary inflation then precipitates price inflation). My hunch is that the monetary inflation will peak before price inflation peaks -- so there is some point perhaps where one gets off the ride to buy TIPS. How do you get that right? People who got off the ride in 1980... what drove that? We still had significant price inflation after the monetary inflation was over (as measured by gold prices). I like your uranium exposure but I worry that if TerraPower succeeds it will lead to a decline in the value of uranium. Humor: this man (he is a genius) is one of the chief backers (alongside Bill Gates) of TerraPower http://en.wikipedia.org/wiki/File:Nathan_Myhrvold.jpg In that photo he is discussing his research on penguin defecation and rectal pressure! I know you like gold at the moment, but what do you think about doing with regards to exploiting the inevitable transition from monetary inflation to price inflation? Are you going to stay put throughout and let the chips fall where they may, or might you consider TIPS once you think the monetary inflation is over? I don't mean to be a pain, but do you have examples? I think that's generally said (or at least I generally say that debtors prosper) with regards to mortgages. I think that (although I'm not certain), the bank can't legally foreclose on you if you are current on payments. For a corporate example, nobody can call the long-term debt that Fairfax issued. Should interest rates go to the moon, Fairfax can buy back and retire that debt at a big discount. You say a lot of interesting things so genuinely I want to know what your sources are for that info -- I haven't come across the suggestion elsewhere. I'm increasingly with you on this one. In part because I read The Johnstown Flood, and in part because I read A Long Way Gone: Memoirs of a Boy Soldier. I don't want to be like those townspeople who say "yeah, right" and then get drowned when the dam breaks, and I don't want to lose sleep if a real crisis starts (having a bit of gold buys safe passage). A Long Way Gone really scared me... people are animals.

Maximizing taxes by pitting one income group against the other should not be the name of the game. Tax revenue is not maximized by setting different rates for different income revenues... its only class warfare. The legal, illegal and accounting overhead incurred by all segments trying to seek personal advantage negates the benefits of a graduated tax regime and ends up with less revenues to the Treasury. Revenues are maximized when private and public investments (spending) are efficient and wealth producing.... the economy is growing. Tax revenues should balance spending and the pain of taxation would in turn rationalize government spending. For example if the Bush tax cuts were accompanied tit for tat with reduced federal spending...the fiscal situation would look very much the same as the almost balanced budget of the final Clinton years.. but with reduced government presence. Unfortunately tax revenues were deliberately reduced as a sop to the ruling oligarchy at the same time that spending was ramped up for the "wars" which are in reality supply side stimulus for the war machine and associated travelers. No matter how you feel about the wars.. if taxes were raised to fund them.. there would have been a lot less enthusiasm for them in the first case and they certainly would have come to a conclusion long before now and the associated debts incurred would not be hanging over the whole economy. But that ship has sailed, it can't be undone but going forward tax revenues and spending must be balanced, by a combination of higher tax rates and eliminating ALL non productive government spending. The money supply must be further dilluted to pick up the slack because the other math doesn't work, until future public and private investments become productive. This process will take years (decades).. but it starts with raising tax revenues... not extending tax cuts. I favour wiping out the current tax code and introducing a flat income tax at say 25% (after allowances for those at the very bottom). which will generate more revenues than the current regime without the expensive overhead. Obviously this is not going to happen as it would result in the unemployment of all the sycophants.. tax lawyers, accountants, political aparatchiks, lobbyists etc. Nor will the wars or other pork barrel spending be seriously pared.. for the same reason. Therefore the hyperinflationary collapse of the US dollar is assured because the most politically doable piece of the remedy..QE.. is well under way and in absence of the 2 other necessary steps can only result in inflation and currency collapse. Eventually however the golden rule will apply... those that have the gold will make the rules. I'm actually agreeing with you more than disagreeing these days. I'm not totally sold on gold as the vehicle, but everything else you said above I agree with. I mean, pretty much everything. What percentage is your gold allocation? Do you have anything outside of that? I feel like this country is headed for soup kitchens. It doesn't have to be that way, they could cut the waste per the deficit commission findings, but will they?

MMM, hot blonds. Hopefully I meet some on vacation in December. I dont think I can get a visa there, but am thinking of trying Australia on a work and holiday visa. Why Norway in particular. yes, why norway? additionally, can someone post a link to the thread about the roth IRA and a loan that ERICOPOLY wrote?? http://en.wikipedia.org/wiki/Dividend_tax Norway does not "double tax": "To avoid (economic) double taxation, shareholders receiving dividends from Norwegian limited companies, [are] entitled to full credit.... Consequently dividends from Norwegian companies were in practice tax free on the hands of the shareholder". I think he's referring to a thread at the end of April, or was it early May. I don't remember exactly what I said at the time but it's in these archives somewhere. I was extremely raw at the time after paying my 2009 taxes. So I laid out a plan where I could effectively never pay much tax again, or worst case only pay capital gains taxes -- I have about 42% of my net worth in Roth IRA, and basically if I just let dividends accumulate there and borrow an offsetting amount on margin in my taxable account, then no taxes triggered. I'm still 37, and when I get to about 59 I can then pull the gains out of the IRA to help pay down the margin loan a bit (or entirely) -- or I could just sell some of the non-dividend paying stock, but then likely having to pay some capital gains taxes. I reasoned that if you have stocks like Berkshire in the taxable account that grow in value but don't distribute dividends (only capital gains), then you've got a situation where you never have to worry about dividend taxes. So in that thread I said that if you're counting on me to pay my fair share, then you'd better adopt some kind of VAT because it's nearly the only way to get me. I can even get out of inheritance taxes if I wish (provided I act before I die) because I'm a dual citizen and can just go to Australia and renounce my US citizenship. I think after about 5 years the IRS can no longer reach me. Australia has no inheritance tax and no gift tax -- they have other taxes of course but their dividend franking is rather interesting (you pay less in dividend tax there than you do here... even with our low 15% rate. I think with fully-franked dividends you wind up paying about 9% dividend tax in Australia). They also have a "land tax" but it's only for investment property or second homes -- not for your primary residence (I think there's an exemption for the first $1m of assessed land value if it's your primary residence). And the tax is only levied on the value of the land... not the building!

I was talking to a guy who was responsible for installing the nat gas Bloom boxes http://www.bloomenergy.com/ An in that case distributed power is actually more efficient. Power from a station many miles away loses a certain amount of energy before it reaches it's destination. Supposedly getting the nat gas directly to the site and converting it there is more efficient than doing it in a power plant. All second hand knowledge so can't corroborate one way or the other... You are correct about transmission loss -- I read somewhere that it's in the 20% range, or maybe it's a quarter of electricity generated is lost to the transmission lines. Something like that. So I could be completely wrong about the efficiency -- however if that commercial operation can acquire some efficiencies of scale then I could still be correct... for each dollar spent on equipment (including cost of installation and maintenance) maybe they can afford 40% more solar cells per dollar, for example. I think I read that a large amount of cost in a residential system is the installation -- makes sense to me so I believe it. Anyhow, even if there is not net efficiency gained I can at least feel good that a higher percentage of the dollars spent by me go into the actual solar panels themselves, and less to the installer. That helps channel more money to the companies engaged in R&D. It's also a cheap way for me to finance it -- I just pay a bill instead of sinking my dollars into owning the equipment. Then if the typical person were to finance it with a loan they would then find it harder to finance other things they wish to purchase (debt/income limits). Then there's also the trees around my house that would shade solar panels -- a commercial plant one would think is located without shade issues for part of the day. Or if they break I've got the hassle and cost of getting them repaired. If I'm a renter what do I do if my landlord won't buy them? Do I buy my own solar panels and then move them from house to house? Or if I own the house and then choose to move -- do I take them with me? If my new house already has solar panels, how much can I sell them for on the used market and how much do I lose in that transaction? etc... etc... One inefficiency of it though is that I tend to leave the lights on more and turn the heat up higher than I would otherwise do -- I have no conscience nagging me about ruining the planet. I also reason that by purchasing a greater amount of green power I am helping to accelerate the buildout of green power. Either way it's waste of capital... maybe I could have fed somebody with that money.

I tend to wonder where hardware innovation would be today if Apple had won this fight back in the 1980s. That would really have been a monopoly.

Isn't this why we got into the crisis in the first place? The loan reviewers in North America are "robots." Everything is systematized to make loan approvals quick and easy. The drawback is that the systems are not designed to deal with rare and unusual cases like yours. When I first moved here, I faced the similar problem of not being able to get a credit card - because I did not have a credit history. (Same story with mortgage). Doesn't matter what your net worth is or how much money you have in the bank - they only understand "credit score." If I had kept on using cash to pay for stuff, I probably would still not have a credit history today and still be unable to get credit. Credit scores are not a measure of ones ability to repay the loan, but of the chance that the loan will be profitable to the lender. That's why people who are likely to pay the loan off in advance have lower scores instead of higher ones. There are real up front costs to the lender (like sales commissions) which must be charged against the total profit of the loan. I have a very low credit score because I rarely take loans and when I do I have a history of stiffing lenders by paying off the loan before its full term. The credit score is an attempt to screen out both potential deadbeats and potential early payers. In the upside down world of contemporary credit risk assessment, people with solid balance sheets like Ericopoly are deemed a poor risk to pay the full pound of flesh. Thanks for that explanation -- I hadn't taken account the repayment risk to the lender. Had I thought of that at the time I might have offered to pay them cash for their commission upfront. I wonder if I were 64 years old and 1 yr from retirement -- would I qualify for the Fannie/Freddie program? Likely I'd be dead long before the 30 yr maturity -- and almost certainly not able to work for much longer. I wonder if common sense is applied, or whether for political reasons they don't want to age discriminate.