Olmsted

Not investment-related, but I imagine many of you have experience and I seek your advice: I am starting a job soon with more-intense hours, and am looking to hire some part-time or full-time household help to ease the burden on my wife. You know, cleaning, shopping, maybe watching a kid for a few minutes here or there if necessary. Having no experience here, how does one go about doing this? How do buyers of services and sellers of services get matched up? What kind of all-in costs should one anticipate? How does one find someone reliable and trustworthy? And any pitfalls I should be aware of?

Wealth buys you many things. Probably the most important of which is time - to spend with family, helping others, doing things that fulfill you, etc. In that sense hiring others to help you with mundane tasks that do not fulfill you is absolutely a valid metric of well-being. I don't view relative wealth as an end in itself, but it does allow you to trade money for more free time. By the way, in that sense, the middle class of today is absolutely worse off than 50 or 100 years ago. And while we're on the topic, I am going to start a new thread looking for advice along these lines.

Go Bruce Berkowitz! Making the case very eloquently. I hope he gains traction.

Haha nice. Please do! I think I bounced around the short common-long preferred trade on twitter a few weeks ago when the common had a (at the time) "crazy" rally up to $1.20. The tricky part is, for good risk management you need some way to make the trade last until there is resolution in the GSE's status - because only then can an anchoring event force rationality on the prices. Either that or fully hedge with some way out-of-the-money options, but I'm not aware of any that trade. The common prices were almost as nuts at $1.20 as they are at $4, but I would have gotten destroyed shorting it.

Haha. Maybe that means I will have a chance to buy back in 50% lower.

.02 - nice! My buys averaged .035. I agree. The (dramatic) return to financial health was condition 1 of 2 for these to see an actual return. Condition 2 is a restructuring that recognizes that fact and recognizes the legal position of the preferred holders. Since we now have one of these two conditions in place, it is perfectly rational that the price has rallied. And the incentives should be aligned for condition 2. The froth just tells me that the rally may have overshot a bit - for now... Nevertheless, I decided I will hang on to the the ~1/3 of my shares that weren't bought yesterday, and still hope to buy more if the price is right.

Well I may regret this but I sold most of my Freddie holdings today. I'll sell the rest over the next few days if I can get a good price. I still think the case for them to be made whole is intact, but it is still a probabilities game with significant probability density at 0. Why did I sell today? F&F price appreciation just seems driven by speculative traders. My evidence is the massive liquidity premium in the common shares, and to some extent the more-liquid preferred series. Fundamental-oriented investors, wisely considering all outcomes, would not pile into common shares just because they can. Not when the preferred and common are signalling widely disparate outcomes. When risk-addled gamblers are driving valuation, it is time for me to sell and wait on the sidelines for a better entry. My plan is to wait for the blowoff I think is coming and re-enter at a lower price. If I'm wrong and these prices aren't seen again, that's okay. Freddie preferreds have been good to me, but at $.25, and with a long road still ahead for F&F, I think I can find better risk-rewards elsewhere.

Internet only, w/ Netflix subscription. For 5 years now. I don't have time to watch more than 15-30 minutes a day, so cable tv is just a waste. I will say that now that I have been conditioned to expect to start/pause something when I feel like and never watch adds, I can no longer deal with regular television. A whole generation of younger consumers are being trained the same way, and I cannot imagine "old TV" penetration among millenials being very high at all going forward. Plus I don't watch sports. I think TV keeps the sports market for now, providing a streaming outfit doesn't come in and disrupt the market by bidding for streaming rights. That would really accelerate "old TV's" decline. I think you see the smart gurus ahead of this trend - Malone and Ergen, etc.

That's insane. Thanks, government.

I was kind of thinking of catastrophic insurance as covering you past your HSA running out. Probably not the way it works now. I've struggled as I think about pre-existing conditions, which Eric brings up too. It sucks that our system is set up so that if you lose your job you get dropped and cannot get something else - this stifles labor mobility and entrepreneurialism. Then again, asking every insurance carrier to cover every pre-existing condition is not the point of insurance. That's stupid too. Plus it results in unmitigated premium increases and a pretty bad adverse selection problem (i.e. healthy people without pre-existing conditions are better off opting out if they have the means). If we go back to the model of insurance as paying someone to take your risk, it seems that whoever covered you at the time your chronic condition started is on the hook for it. Until it goes away. Not sure how the actual mechanism would work, and it would certainly force a re-think of premium pricing. But it would be more efficient than it is now. Single payer in other nations seems to be working better than the current US offering, but I'm not saying that is ideal. I quite like your proposal. Are there any countries which follow a similar proposal? If so, how are the stats? I agree that single-payer in other countries works as well or better than the US system. But the dysfunctional US market is a blatant straw man for those who argue that single-payer, in any absolute sense, is a good idea. Relative to our current system, it may be a good idea. But this choice unnecessarily limits our alternatives. Not familiar with countries that follow a functional market model. Will ask some of my health thinktank friends.

It only takes econ 101 to understand why American healthcare is so screwed up. Think about the conditions for perfect competition (infinite participants, perfect information, low barriers, low transaction costs, etc.) - and think about all the ways those conditions are currently violated. Health industry “experts” almost invariably over-think it and fail to start from first principles. My take: US healthcare is expensive because it is a dysfunctional marketplace. I am not sure the debate should be restricted to only two alternatives: the status quo vs. moving to a single-payer system. This is a false dichotomy. The debate needs to be broadened to include status quo vs. single payer vs. policies to make the market more functional. Why is the healthcare market dysfunctional? Each marginal decision on healthcare consumption is divorced from the cost of that consumption. Price and consumption are divorced because of health "insurance" – which covers virtually the entire market in some form. This means that the basic price discovery mechanism that enables capitalism to so efficiently provide goods and services in almost every other sphere of life is almost totally absent – or at least incredibly diffuse and ambiguous (i.e. opaque negotiations between provider and insurance administrative bureaucracies). Americans are not under-insured, we are over-insured, and it is killing us. In what world but healthcare does “insurance” cover routine and knowable consumption? Insurance (without quotes) is the transfer of risk from a more risk-averse party to a more risk-neutral party, for a fee. Simple. But not in healthcare. I know every year that I will require an annual physical. This is not a risk. I know I need a flu shot. Not a risk. I know I’ll probably get a cold – this is barely a risk. Yet health “insurance” pays for all that. Why? Perhaps it would help to think of another common area of consumption where everyone has insurance – car insurance. If car insurance functioned like health “insurance,” we would demand that our car insurance policy paid for every minor repair, and even for gas to get to work. Once we paid for our car insurance policy, we wouldn’t care about the price of every marginal tank of gas. We would be profligate in our gas usage - where we chose to go, how we drove there, and whether to leave the car running if we stopped along the way. We would all be incentivized to drive giant cars with terrible mileage. In an effort to contain costs, the insurance company would start negotiating directly with gas stations. Then they would tell us which gas stations is in our network, and we could only buy gas there. Gas stations would stop posting prices – it wouldn’t matter. Nobody would know what a retail gallon of gas actually costs. Finally insurance companies would require their approval before every stop at a gas station – setting up a large and expensive bureaucracy to determine whether our required trip that day complied with the terms of our policy and whether they would cover the gas that day. Car insurance premia would surely spiral out of control. Eventually, Americans would vote for socialist politicians to "fix" the issue by seizing the whole system. Fiscally-conservative politicians are too stupid to attack the issue themselves, because they feel that it should be left to “the market” without realizing that the market is failing and dysfunctional in a massive way. Sounds a lot like healthcare to me. Isn’t it just easier to pay for the damn gas ourselves? Here are some common-sense ways to make the health industry work: 1) Everyone pays the same price. Providers cannot charge different prices to those who are insured vs. those paying in cash. (Some states, like Maryland, do this already. My parents got an MRI in Maryland, paid in cash, and it was extremely reasonable). 2) Ban non-catastrophic health plans. Yep, ban ‘em. 3) Set up a health savings account for everyone in the country. You pay for routine health costs in cash out of the HSA. You get back money you don’t spend. Just watch routine medical costs plummet. 4) The first $X thousand dollars of everyone’s tax bill goes right into the HSA. Mandatory contributions. 5) If you are concerned about the plight of the poor, etc. you could easily just fund their HSAs and (private) catastrohpic plan with a tax credit. This would be infinitely more efficient than Medicaid. 6) Monitor catastrophic plans. If the proliferation of catastrophic plans becomes too complicated for consumers to choose between, set up exchanges with a limited number of reasonably standardized products that people can understand. Eventually phase out the controlled reforms if the market starts to function on its own again. Functioning markets create prosperity. If the market is failing, figure out why it is failing and address it. Make it competitive, aid price discovery, make information accessible, lower barriers to entry. Don't seize a broad swath of the US economy and an important part of our lives and turn it into a single-payer (socialist) commissariat. When has that ever worked?

+1 That said, there are probably still smart policies/charitable efforts to help break the poverty cycle and help those who can't/won't help themselves. Problem is most government policy is inertial or vote-buying, and I would argue most charity is not structured to have a long-term impact (whether through naievete, short-termism, focus on the giver's needs, etc.)

Usually that would work but here I am not sure that would help since half of the trade would be buying something related - the preferred stock.

+1. Tweeted same sentiments yesterday. It is a great time to trade up the capital structure or engage in outright capital structure arbitrage. Incidentally, the same common/preferred disparity existed in 2009-2010, but it was even more glaring - the common traded not just at a higher market cap, but if memory serves me correctly, a higher nominal price as well. So save some dry powder for the trade, once fast money gets into something they can blow prices from merely irrational to insane. I was offered a borrow of 5.5%. But I'm afraid of a squeeze, and I don't have enough experience doing risk management for short-selling in situations like these in order to enter the trade with confidence. (Tips?) Unfortunately, there are no options.

Wow - thanks to all those (especially Sanjeev) who make this place great!

I actually know several people who have consistently (i.e. over decades) done very well trading with psychologically-oriented strategies, that one could characterize as "gut feel." (Although in fairness, a couple that come to mind to have at least a vague value overlay.) Kind of like the guys profiled in "Market Wizards." I do think it takes a very special personality to do it, and most people who think they can do it that way wash out.* I realize it sounds crazy to some, but it's out there. I suspect the reason why there is no empirical validation of the effectiveness of "psychological" traders is that it is probably impossible for a researcher to systematize their methods in order to test them. You can quantify value, and momentum, and measure the results of day-traders writ large - but can you really describe, say, Soros in his prime, in a few simple rules? That said, value and event-driven investing have treated me and many on this board quite well :) *I'd bet this girl is going to end up in the latter category

I was privileged enough to witness two events like this (minus the injuries!): one when I was younger and a meteor streaked over a high school football game and subsequently damaged a parked car: http://uregina.ca/~astro/mb_5.html The car: http://apod.nasa.gov/apod/ap061119.html Another in 2009 while walking the dog at night, saw a bright streak and flash. A loud boom subsequently shook the ground: http://transientsky.wordpress.com/2009/03/31/2-bright-and-loud-east-coast-fireballs/ Wild stuff!

Good discussion. I'll be in the same boat here by the end of the year. To the point that I am starting to calculate in my head what will pay me more in 2014 - my AIG and BAC shares or my new job...

Thanks!

Locatevalue-thanks for sharing!

Transcript for those who prefer to read: http://www.valuewalk.com/2013/02/bruce-berkowitz-bloomberg-interview-full-transcript/

20% cash but only because I am going to be between jobs for 6 months and buying a house at the same time. I have made 'macro calls' in the past and it has always been a mistake. So I won't any more. I will own stuff if it is cheap. Right now I see BAC and AIG at substantial discounts to book and normal-cycle earnings. I see community banks cheap with a consolidation kicker. I see auto companies trading at single-digit PEs at what is probably the early innings of the replacement cycle. I see housing rebound derivatives that do not yet price in the revenue growth I think is coming.

Okay, special situation people: you must have full allocations by now, so hook us up! What looks interesting?

I suppose you could say that securities that fall into your circle of competence are overvalued and you are simply waiting for their prices to fall back to earth. I think your last sentence rectified your micro/macro question adequately. Even the good Mr. Buffet himself "sold out" when he couldn't find enough undervalued businesses to invest in: http://www.distressed-debt-investing.com/2013/02/one-of-warren-buffetts-greatest-trades.html

We could start putting the equivalent of hashtags at the end of the first post (and only the first post) of a new idea. For example: #spinoff #specialsituation #rightsoffering That way we could do a quick board search and get a list of situations. I'll do this in the next thread I start, maybe it will reach critical mass.