ERICOPOLY

How did you manage to drop out of the fourth grade? The police would take my kids away if I tried that on them.

Yes, exactly! They could be using retained earnings to invest in the stock market, instead they are using them to buy whole insurance businesses. That will most probably change, but right now it seems to me a good strategy. Gio We're saying different things. I'm saying the strategy is unchanged by the market level of stocks. They buy the company, then buy more stocks with the float. If market is high, they hedge. It might be... But: 1) it seems to me the trend of purchasing wholly owned insurance companies has accelerated in the last few years, expecially in emerging markets; 2) many seem to think FFH is much more static than I think it will turn out to be: if the P/E of the S&P500 were 10, I highly doubt they would be using earnings to buy insurance companies... Gio The biggest ones were the NB and ORH buyouts. They could have been buying equities instead. But even better is to buy these companies and also buy equities! (with the float). So I just see them doing this whether or not the markets are high or low. Oh well, not a terribly important point to argue about.

Yes, exactly! They could be using retained earnings to invest in the stock market, instead they are using them to buy whole insurance businesses. That will most probably change, but right now it seems to me a good strategy. Gio We're saying different things. I'm saying the strategy is unchanged by the market level of stocks. They buy the company, then buy more stocks with the float. If market is high, they hedge.

I understood it differently: 1) They take retained earnings and use it to buy whole insurance businesses. 2) They are investing a portion of the float from those businesses into the stock market. 3) They can't use the float to invest in whole businesses due to the illiquidity

I'm now approved for 3 mortgages and there is some haggling going on. The first mortgage approval came in at a 5 yr ARM -- brokered by a guy who works for one bank, but the loan he found for me was actually with another bank. Then a second mortgage approval (from yet another broker) came in on a 7 yr ARM with 150 bps lower rate than the 5 yr ARM. Then the first broker let me know that the bank offering the 5 yr ARM offered to drop their rate by 26 bps if I was willing to order loan docs right away. Of course, he let me know it was only because he called their vice president and that they don't normally make exceptions, etc.. etc... So I said no. At this point, the broker who had arranged the 5 yr ARM reminded me that he also worked for a bank and that his buddies in the bank were going to help him out by rushing a loan approval for a loan that meets the same rate as my best option, but still on a 5 yr ARM rather than a 7 yr ARM. All along, the 5 yr ARM is 2.17m and the 7 yr arm is 2m. The rate on both has been haggled down to 3.75% with no points. He then asked me if I was willing to close right away, order the loan docs etc for the 5 yr ARM. I reminded him that 3.75% on a 5 yr ARM isn't the same as 3.75% on a 7 yr ARM. So asked him what the spread typically is. He said .125% to .25%. So I told him I wanted it to be a 5 yr ARM at 3.5% with no points and 2.17m. That was yesterday and he said he'd go push for it. So now I'm waiting for the phone to ring with the news. A couple of takeaways: 1) I had no idea how much of a middle-eastern market place this business is 2) I feel like I'm hitting a pinata with that first broker/bank -- their first offer clearly wasn't their best 3) It's like shopping for a car -- you threaten to walk off the lot and he goes in the back to talk to the manager and comes back with some sort of "special approval that they don't normally do". I'm not going to post the names of the brokers or the companies. I just thought I'd share the experience. I plan to take the 5 yr ARM if he comes back at 3.5%. That allows me to keep the $170k invested for 5 more years -- the 7 YR ARM has opportunity cost which makes the rate for years 6 and 7 higher than they first look.

Carnegie is the one who fought for the inheritance/estate tax and claimed "The man who dies rich dies disgraced". He also lobbied other rich to give their wealth away: see "The Gospel of Wealth". One can see a lot of Carnegie in Buffett, but for whatever reason the media never points this out.

More Eurozone Banks Said They Eased Credit Standards for Second Consecutive Survey http://online.wsj.com/articles/ecb-says-banks-continue-easing-loan-standards-1414584031?mod=WSJ_hp_LEFTWhatsNewsCollection

I looked all the way back to when I graduated university and entered the workforce -- June 1997. The S&P500 has gained a bit less than 5% annualized since then. The market P/E today is largely the same as in January 1997: http://www.multpl.com/table Go all the way back to Jan 1993 and it has been a 7% annual index increase.

He gets $1B in tax benefits: Ballmer makes slam dunk on Clippers deal http://www.ft.com/intl/cms/s/0/67215cd2-5d00-11e4-9753-00144feabdc0.html?siteedition=intl#slide0 Steve Ballmer stands to gain as much as $1bn in tax benefits as a result of his $2bn purchase of the Los Angeles Clippers basketball team, helping to explain why the Microsoft billionaire paid a record price for the club.

I sat down with the appraiser in the dining room and he asked me a lot of questions. We talked for about an hour. He asked me how I arrived at the purchase price. I explained how I calculated the value in my offering price. I also asked him if he'd noticed a few of the recent transactions that I cherry picked (the ones that seemed both high transaction price as well as inferior comps). My angle is that I want the appraisal to match the price in our lease/option agreement -- if it comes in low, I'll have to dig up more funds of my own at closing as the loan is based on 70% of appraised value.

Shilling feels that in 4 more years, deleveraging will be complete and real GDP growth will return to 3.5% or more. "Sure, productivity (output per hour worked) grew by only 1.5 percent from 2009 to 2012, but that’s normal after a severe recession. I expect it to return to a 2.5 percent annual growth rate -- or more -- after deleveraging is completed in another four years or so. Even in the 1930s, productivity averaged 2.4 percent a year, higher than in the Roaring '20s. In the 1930s, much of the new technology from the 1920s -- electrification and mass production -- was adopted despite the Great Depression. Shilling expects that once private sector deleveraging is finished, real GDP growth will return to about 3.5% or more. He also thinks "the slow-growth-forever crowd will need to find a new theory." http://www.businessinsider.com/gary-shilling-optimistic-on-us-economy-2014-7#ixzz3GnebzoN8

Slow-growth forecasts are wrong: http://www.bloombergview.com/articles/2014-07-16/slow-growth-forecasts-are-wrong The Boom is Coming and Sooner Than You Think: http://www.bloombergview.com/articles/2014-07-18/the-boom-is-coming-and-sooner-than-you-think

I had a mortgage approval, but now a fresh wrinkle. State Farm is now backing away from the insurance policy they quoted to the lender. They won't write any new policies in the 93108 zip code due to our water rationing, dry landscaping, and consequent fire risk. Now, if all insurers follow them out the door, it would freeze the local real estate market.

Yeah! But in my experience (and I already have another apartment in the same town!) it is just like MrB has said: Gio MrB's reply was great -- thanks for pointing me to it. I'm familiar with exceptional real estate being priced like a good bottle of Scotch. Or a fine cigar. Neither are valued on their cash flow, as they don't produce any.

No. It is just a wonderful apartment… what you might call a “beautiful object” ;)… But the fact still remains: its market price a few years ago was 13-14k Euros per square meter, and I could buy it now for 7k Euro per square meter… The location is almost unique, and it is difficult to imagine how this could be anything else than a distressed sale. Actually, I know the owner quite well, and I am aware of the fact he unfortunately needs money now… Gio Why is it an "unproductive" asset? I first figured you meant raw land, but if it's been developed (an apartment) then it doesn't sound unproductive. You can rent it to produce income.

In the US: 1950s, 4.3% 1960s, 4.5% 1970s, 3.4% 1980s, 3.1% 1990s, 3.2% from 2000 to 2012 1.7% Gio That growth looks solid to me. Yet that was a period of very high debt load after WWII. So it refutes your point, doesn't it?

There were even loans that exceeded 100% of the home's value. That's got to be "predatory borrowing". I don't know what else to call it. Anyways, it seems the government has created new rules to protect the banks from predatory borrowers.

It would be more responsible for the borrower to have 0% down. In my opinion, I have responsibility to my own interests, and putting my capital at risk isn't responsible at all. But I have no choice in the matter. I'm not being offered a low risk, 0% down mortgage. The days of low risk mortgages have sailed. Unfortunately, the borrower's risk has skyrocketed.

It looks like I might finally be able to close on my house (getting a mortgage). Two different appraisers were here Thursday working to have the house appraised for the lender. The house isn't listed in the MLS, so both appraisers asked to see the purchase agreement. Are they just trying to find out the contracted price so that they can "hit the number"? Why would an appraiser otherwise be interested in the purchase agreement? I suspect that if the house doesn't appraise for the selling price, then the lender might not want to hire them ever again. 30% down payment already protects the lender quite a bit, they just want to get the deal done at this point to get their fees and they want that appraisal to protect their butts if the loan is sold to investors. Does that sound about right?

What I meant is that humanity has already dealt with the problem of too much debt many and many times in the past. And though we all associate nowadays the printing of money and the increasing of public debt with Keynesian economics, it is actually how humanity has dealt with the problem of too much debt at least since the days of the Roman Empire (during which I know of many instances when debasement of the currency and the issuing of public debt were employed). And the outcome as always been the same: slow or no growth for many years, asset bubbles followed by sudden crashes, generally difficult economic environments. I simply don’t understand how, by repeating what has already done many times in the past, we should now expect a different outcome… ??? Gio Too much debt many times in the past... outcome has always been the same... slow or no growth for many years... Gio, How fast was the growth rate after WWII?

Cessation of plan A failed. Learn from the mistake :D

The farmers certainly get their water cheaper than I do. Last month, I paid a fine of over $1,000 to water my acre. This month, it will be higher (already at $1,200 according to the water meter reader and we're only 50% through the month). That's more than $1,000 per month. This is because I'm paying penalties of $30 per hundred cubic feet. Okay... let that settle in. Now, the kicker: California rice farmer revenue was $1,370 per acre per year in 2012. I nearly spend in water per month what these guys sell their entire year's crop for. Look at the "fieldcrops.pdf" link here: http://www.cdfa.ca.gov/statistics/ Total revenue was $770,697,000 from the 2012 rice harvest. There were 556,000 acres harvested. That's $1,386 per acre. So imagine a rice paddie in the central valley of California where it's regularly 100F outside. Now, currently farmers are screaming because water (at their rates) has "soared" to $2 per hundred cubic feet in 2014. It was just 20 cents two years ago. So they are screaming that they currently pay $2 per HCF, and I'm getting fined penalties of $30 per HCF. Huh? Why does my water cost 15x as much as that of a rice farmer?

There are literally billions of ebola virus particles in a single drop of blood.

The doctor on ABC news right now (Dr. Richard Besser) is claiming that the virus can live for several hours on the skin (he was saying that if a drop of blood was on Nina Pham's skin, it could have survived for several hours on the surface of the skin). So if it can survive on her skin, and then you shake her hand, it's now on your skin. And alive for several hours -- sometime during which you pick up a sandwich, bite your fingernail, pick your nose, wipe your eye... etc....

Perhaps if you have HIV (and taking your meds) you'll be okay though: http://www.cnn.com/2014/09/27/health/ebola-hiv-drug/