I take a late lunch, and go over to the gym to work out. I do this because the gym is much less crowded in the afternoon than if I go right at 12. While I do my 1 hr cardio workouts, I have been reading The Essays of Warren Buffett: Lessons for Corporate America. It is a fantastic read. Buffett’s style of prose is both easy to read and amusing. What is more however, is his remarkable insight into business shines through in every page.

I am reminded as I read it, of Richard P. Feynman and his book “Surely you are Joking Mr. Feynman.” While the topics are different the authors view of the world is the same. That is, they both break down topics that initially appear to be complex into their simplest components. Boiling down a subject into the easiest pieces is both the best way to understand it, and the fastest.

Feynman also said that if you can’t explain a topic to someone in 60 seconds, then you don’t really understand it yourself.

While reading Buffett’s work I came across something I had read in his financial reports before (they are all well worth reading) and it struck me just as strongly as I had read it the first time. Currently, the market is falling badly, and bank stocks in particular are taking a hit. Some of them should be taking a huge hit as they are in danger of a collapse, others should not as they are fundamentally strong.

And that brings me to Buffett. Everyone is panicking and selling bank stocks, regardless if the bank is actually strong or not. In fact, the stronger banks are falling in price, and the ones in serious danger of collapse have their share price going UP. So, in light of that, I reprint the Buffett Quiz:

A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.
But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying.
This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

This quote, attributed to Baron Rothschild in 1871 should be the mantra of any person calling themselves an investor. And by “investor” I am referring to the Ben Graham use of the term as found in his classic work, The Intelligent Investor.

There is another full market panic on today, I bought some stocks in a US based bank yesterday, and wish I had more capital to do the same again today. Are there risks associated with this purchase? Yes. Have I taken steps to mitigate this risk? Of course. Still, everyone is panicking, and bank stock prices are in free fall mode.

Strangely, no one seems to remember the “buy cheap, sell dear” advice. Everyone seems to be selling their shares to “protect” themselves. They are taking a loss so they can buy the shares back at a higher price when things are more “stable”. The funny thing is, 10 years from now, everyone will look back at stock prices today, and wish they had bought.

There is indeed blood in the streets, some big banks are in trouble and it is serious. So what to do? I say listen to Baron Rothschild.

The stock market has been taking a beating of late. However, this is the best time to buy. There has not been an opportunity like this in stocks in about the last 75 years. As Warren Buffett says, “we aspire to be greedy when others are fearful, and fearful when others are greedy.”

That is just what is going on here. I wrote on Garth Turner’s Greater Fool Blog: here, I said pretty much the same thing. I am not going to list the equities I currently hold on my blog, as I am still trying my best to buy up as many of the shares as I can at these bargain basement prices. I don’t want to encourage others to buy the same equities I am, I need to keep the prices down.

And that brings me to the other thing. If you are going to be buying equities, then make certain you are reinvesting the dividends. This gives you a massive tax break, and in times when share values are low (like now) you end up with a considerably larger number of overall shares. When the market recovers (as it will, but it takes time) you will have a larger number of great shares in a good company paying strong dividends, and a wonderful form of passive income. The catch is, you have to buy those equities now.

A few weekends ago I had a kayak trip planned, unfortunately, the weather did not co-operate. There were 40+ knot winds in the ocean around Victoria, so that put the kibosh on that. Instead, a trip out to Port Renfrew was in order. It is a long drive alongside the Juan de Fuca trail. After checking out Port Renfrew we headed out to Botanical Beach. As luck would have it, Feb 24th was the second lowest tide (after the 23rd), and we hit the beach at exactly the right time. Pure coincidence.

As you can see the weather was not great, I had a good view over to Owen Point where I was on the West Coast trail, but I did not get a picture of that. Seems like it would be an easy sea kayak though. I was sadly even less impressed with Botanical Beach than the last time I had been there. It is so horribly dead compared to the tidal pools along the west coast trail. It is a shame really, as it should be one of the best.

Checking out the starting point for the west coast trail was kind of fun as it looked just like it did when I set out on it in 2005, not that it should have changed at all. But I at least look at it now with a knowledge of exactly what it is like, and what can be expected along the trail every step of the way.

On the way back, a stop at the 17 mile pub, which has Guinness on Tap, and good food was in order. Now, the bill was around $45, which was fine on my Visa. A few days later, when I checked my bill, there was the $45 charge… and another charge for $2700!!! Now, I like my Guinness, but I don’t buy it in kegs! As it turns out, there was an error made by one of the servers, which had already been corrected, but Visa was not yet aware of that change, so it was reversed. But then, Visa flagged my card, and I could not use it at the Black Bear pub in Nanaimo to buy my mother dinner either! So, I had to contact Visa again to get the flag removed. *Grumble*.

I check my credit rating every November. It always pays to keep track of it. The last time I checked, my FICO score was 715. A bit low because of a black mark that I have, and I have to wait until 2008 for it to disappear… However, I had $350.00 sent to a collections agency by ADT alarms for an account that should have been canceled. However, they made an error on the issuing of a new contract, and failed to cancel the old contract. Since my name was also connected with the original contract, they sent the supposed “outstanding” amount to collections. And the first I heard about it was from the collections agency - about an account that was no longer mine!

After months of effort and phone calls, I managed to finally get that account removed from collections. The collections people “suggested” I pay the $350, which I refused, because it was an error first off, and secondly, that would have had zero effect on my credit rating! Thus I fought it. Today I confirmed that it was in fact removed, and my credit rating jumped up from 715 in November, to 743 as of today. I am just shy of the 750 mark, and I eventually want to stay above 800. A number of people think I am a bit silly tracking my credit rating like this, but just a few points adds up to thousands and thousands of dollars on a mortgage. In fact, with my new rating, I should be able to get a rate that is lower than what I got originally, even though the prime rate is higher than when I got my mortgage.

Of course, I am now about to take on massive levels of debt in order to finance a second home - and I have been approved for the second mortgage, which really surprised me. So I am taking some significant financial risks doing this, but I am getting closer to my goals. That does not mean of course that it is not worrisome. However, at least living out of a real home as opposed to a motel room will be nice when I finally achieve that.

I am back at a Motel in Victoria, the commute was killing both me and my car. On the upside, I managed to tear through a large number of books. I recently got through: A history of the Nazi Party (lecture), The search for intelligent life in the universe (lecture), the early writings of Abraham Lincoln (lecture), Eragon (fiction), and Eldest (fiction). I went through a few more, but I cannot remember them at this time.

On the downside, the lack of exercise has been taking a big toll on me. In this picture:

I weigh 220 lbs. That was in June of last year. I have lost 30 lbs. That is what happens when you don’t go to the gym or train at all due to a hellish commute. Sure, losing weight is not something most would complain about, except in my case it has been losing muscle mass and general fitness! However, being at the motel now, I get free passes to the phoenix gym, and I have my running gear and mountain biking gear in Victoria now, so I can start getting back into shape. I am also looking at joining one of the kayaking clubs and getting back into racing.

On the finance front, I have been approved for another mortgage, so it looks like I should have no trouble buying a house in Victoria. Of course, the downside is the huge debt load I am about to take on in doing so. I have to take out an equity loan on my current home (selling it is a very bad idea, it puts me in a horrible tax position) and that changes the terms of my mortgage, and adds a huge amount to the monthly payments. But, I should be able to scrape by and get a place in Victoria by doing this. Still, it is a bit scary. I have already been around to look at houses in the Victoria area, but it seems like it is going to be a challenge to find a place where I can really work the numbers in this market. Still, I should be able to get fairly close to my goals.

The last 4 months have been tough. Commuting for such a long time, and such a long distance was very hard. For the last little while I have had hardly any social contact outside of work, and nearly zero exercise.

Now, I am in Victoria, but don’t as yet have permanent residence. That is something I have been working on. Couple that with the other choices I have had to make in the last few years. My car is in bad shape now, commuting 1250+ km/week with a bad exhaust valve will do that. Could I afford a better one? Sure. Then I have a nicer car… and that takes me further from my goals. That just sets me back.

I am getting so much closer though. Close enough to almost taste it. I know within the next 2 years, that these constraints I have put on myself for my financial goals will pay off. Just a little more, just a little longer. Nearly there.

The worst part about these choices is not having my Attack Schnorkie with me:

Limiting myself in so many things has been hard, but not being greeted by this 10 pound furball when I get through the door is one of the harder things. Daisy, however, is probably having a blast being pampered at my Mom’s place.

So close… So close…

Returning from my Gutbuster on Saturday, I saw a weight bench sitting out on the road by my neighbors driveways. It was a higher end weight bench - with professional weights and plates, as well as a few not so great dumbbells scattered around it.

That, however, is not what attracted my attention. It was the fact that there was a sign on it that read FREE. I talked to the owner, Andrew, and the weights were indeed free. He no longer has the room, and he has a gym membership as well. So, with Andrew’s help, I got the weight bench over to my house, where I realized it was missing a few bolts, that I was able to replace for $10 at Canadian Tire.

So, now I am the owner of a real weight bench and an assortment of professional iron plates. It is rather ironic really, as if I only purchased a few other things now, I would be able to perform all the exercises that I do at my own gym, for which I have a membership.

Of course, VI fitness really does have a better assortment of fitness equipment, and it does not take up any space in my living room. However, it is a nice advantage to be able to perform over half my workouts on a bench at home.

I recently ordered some very high powered magnets for an invention that I am working on, and I got the rest of the components together to test the beginnings of my prototype, and it works! Granted, the full prototype is not yet ready, but I have verified that all the parts will function as I had anticipated. After I aquire the remaining parts (which I should have by this weekend) I can begin testing the prototype in earnest.

If all goes well, it should be fairly easy to licence this idea, in the meantime, I will end up getting myself fairly messy as I tear apart a few basic houshold items, some automotive parts and some other things, and leave a general mess around as I build a fully-functional prototype. I can’t wait to fully test a working model.

Changing Political Views.

I personally detest being crammed into a political mold where I am called such things as a “Liberal” here in Canada, or a “Democrat” as in the US. While I would categorize myself as having been a “Liberal” once, I have through various readings become exposed to the “Conservative” ideal. Then again, I don’t agree with everything that that view substantiates either. I think that Chris Rock said it best in one of his comedy routines. If you make up your mind on an issue by a political party, before even hearing the issue, you are an idiot. Rock hits the punchline with: “On crime I am conservative, on prostitution I’m liberal.”

And that leaves me with probably no real affiliation at all. If there were one for me (and again, I refuse to support a party, only issues) it would be a Libertarian position. At least that is where I stand as of this post. Who knows, with more information I could change my position. Indeed, I would be a fool if I maintained my position when new information comes along that proves that my position is untenable.

And that brings me to Milton Friedman’s movie, Free To Choose. This is an excellent PBS series from the 1980’s on economics and freedom. The point that I think that Milton makes so well is that economics is about finding out what works - not what you may or may not like. Steven D. Levitt and Stephen J. Dubner do the same in the currently popular book Freakonomics as well.

Economics, like science can produce conclusions based on data. Simple enough. But what bothers people is that sometimes those conclusions disagree with what they feel to be right, and there is a huge difference between knowing and feeling. Thus, Free to Choose challenges a good deal of assumptions that people have about how the world works, and they don’t want it to work the way that it does. This creates a problem, because despite how much they may want the world to work differently than it does, it keeps on working that way. So, you have a choice, either keep hoping that the world will change, or, you can change and realize how things really work, and work within those constraints. With science and economics, it is not about liking the answer, but understanding that the answer is just the way it is, and you have to interpret how you react to that.

Check out the PBS series Free to Choose, it is very good. Just put your feelings aside and listen to the facts. And if you enjoy it, check out Freakanomics too.