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“The King’s Friends”

One thing that may have become clear during those conflicts was that,
if criminal prosecution was controlled by the crown, the King's friends
could get away with murder

That's David Friedman, quoting something he once wrote in a book.

2631 Atlas

Today I took a drive up to Sacramento to check in on a new little project. 2631 Atlas.

2631_atlas
Well, this is California, so the beat-up house you see was actually acquired for the price of about $200,000. Yes, the stories you hear are true. It's insane. But guess what's more insane? You can still buy a high-priced fixer-upper and sell it for an even higher price. Which means, rather than being scared off by the insane California prices, you can embrace them and make more money than those comfortably paying $50,000 for a beater-upper and making a whopping $5,000 in the fix-&-flip.

It's all numbers. If you're doing your math correctly, you walk away from any potential deal that doesn't offer a comfortable 10% return on your investment, i.e., the purchase price. If you're leveraged, i.e., take a loan on the property, then your cash-on-cash return will be significantly higher. It could be upwards of 100%, provided you can qualify for the loan. The numbers here are that it was a probate property put under contract by a friend of mine, not for the asking price of $235,000, but for $190,000. I then paid him $9,000 for the contract. Comparable sales for similar houses selling in the neighborhood that are in good shape are around $265,000. It will take around $20,000 to make the house pretty. Do the math. Depending on how the spring market takes off in Sacramento, I'll do anywhere from $20,000 (10% return) to $40,000 if everything goes wonderfully.

My brother, Dave, is handling the rehab details. I won't generally touch general contractors. First off, you pay 20% of the total of the subs right on the top, as a given, but in my experience, they hide stuff and they don't manage a project as your own project manager would. We're going direct to all the trades.

I'll post some before and afters once we get it done and back on the market. Should be about a month or two. Since the extra work the windows will require just wiped out my landscaping budget, we've got to get it on the market while the grass is still green.

Loving to Hate

The most frequent criticism I endure about this blog is my tendency to focus on negative things. I suppose I can understand that. After all, one is not to be faulted for focusing on making his life good and pleasant, and for many, that requires steering clear of a lot of the downer news and comment.

In fact, I'm a bit like that. Seriously. I've never read the newspaper regularly in my life. I have only at times regularly watched TV news, and my checking of news sources on the Internet is sporadic. The one place I listen to news with some regularity is the radio, but even there, I can go weeks with it turned to the classic rock station on the FM dial.

I've always focused far more on the positive, like now: running a company and starting a second one, buying and managing rental houses, buying and fixing up fixer-upper houses, trading options in the market; and, writing. Writing is a very positive experience for me. I've found that the more passionate I can get about it, the better; the more satisfying and uplifting. Moreover, there is no passion quite like hate. I love hate. My wife says I love to hate everything, which is in a sense true about my personality.

People who wring hands about other people who hate are fucking dopes. And, oh, I hate them too.

Anyway, let me dish up some hate for you.

[I]n the ultimate display of
cruelty, a SWAT team member drove a dog trying to flee the home back
into the inferno, where it met an agonizing death.

Deputies then reportedly laughed as the dog's owners came unglued as it perished in the blaze.

"I was crying hysterically," Andrea Barker, one of the dog's owners,
tells me. "I was so upset. They [deputies] were laughing at me."

Commentary seems unnecessary. You can read the whole thing, if you're up to it. My advice is to hate and to hate proudly, with strong moral indignation. Consider that hate has never "eaten away" at anyone. I'll tell you what eats away, and that's guilt. So does living a contradiction. If you feel guilty for hating something that ought not be approached any other way, then you ought not feel guilty about hating him, her, them or it. If you do, then you have the added burden of living a contradiction, i.e., feelings of guilt over something natural and right.

One ought never to allow ancient texts, ghost stories, or bogus authorities to instruct in what and what not to feel guilty about. One ought to be able to arrive at such conclusions entirely on one's own. Human beings ought to be able to do that, anyway.

You Don’t Have To Be Right

So perhaps it's just a bit ironic that I would post something about doing well in the market last Thursday, just before Friday's fairly significant selloff. More ironic still is that the stock I chose to use for illustrative purposes, Google (GOOG), took a significant dump to close down over 39 points on Friday.

Wow.

Well, I didn't lose a penny. In fact, on Friday, four of my option positions on the SPX expired worthless, just like I wanted. Why do I want that? Because when I opened those positions (spreads), I did so at credit, i.e., my sold position was worth more than the position I bought as a hedge. Today, I opened several more positions, all at a credit (meaning, I get money instead of pay money when I trade), and all-in-all, since just before the beginning of trading Friday, my account equity has increased right around 9%.

I'm bragging, right? OK, listen, I will guarantee you that there are thousands of people out there buying individual stocks and options who just gave the market a bunch of money, and in many cases, money they could not afford to lose. Hell, even very experienced and successful full-time traders. I watched emails hitting about Google in the late morning and early afternoon. There was a lot of money lost. There are equally thousands of people who hold stocks long, or they hold mutual funds, and Friday was just a bump in the road. What's the difference between all of us?

In the case of the buy-and-hold investors, they have simply decided to invest in the market, and unless they're dumb or have fallen for awful advice, they should do about 10% per year over the long haul, just like the market does. They aren't making decisions based on market analysis, they are not taking significant risk, and they have reasonable returns to show for that. In the case of the day and swing traders trading individual stocks and options, a whole lot of them have made the decision to trade in a style that requires them to be right most of the time. Moreover, they have to be right about a lot of different things, and they have to be right at the right time. And then they have to incur significant risk. If they're right, tremendous gains, but if they are wrong, loses just the same.

And you know how the market works: it takes the stairs up and the elevator down.

The difference between all of them and me, and those who trade like me, is that we've admitted that we're usually not going to be right about what the market or any particular stock is going to do, but we want to make excellent and consistent returns nonetheless (5-10% per month and more), and we don't want to spend a lot of time analyzing or watching the market every day (especially true when you live on the west coast and trading begins at 6:30 a.m).

When I used to buy a stock or option, it had to go up to make money. If it stayed the same, I not only wasted my time, but my money was useless and I was paying for sales commissions. If it went down, then I lost all the time, the cost of commissions, and I lost capital.

SpxSo I've quit doing that. I've decided that now, when I trade, I shall make money whether the market goes up, whether it goes down, or whether it goes sideways. How convenient for me, heh?

Well, there are some limitations, of course, so let's illustrate. The chart on the right is just a little piece of the S&P 500 index, the SPX. Do you see the horizontal green lines? Those are some of my sold positions for January. When I sold each one of those, right around the end of December, I received money (usually about $0.6 or $0.7 per share, and I usually contract for 1000 shares). They expired last Friday morning at the opening price of the SPX. To bottom-line it, so long as the Friday opening price of the index does not cross either above or below those horrizontal green lines, the options expire worthless and my return is whatever I received when I sold them. That vertical green line represents expiration day, so you can see how perfectly that trading range was executed. For February, the first positions are represented by the horizontal red, with February's expiration being the vertical red. I added quite a lot of Feb. positions this morning that aren't represented here.

Now, how right did I have to be to make money in January? Not very, huh? In fact, the one time I tried to be right got me into trouble. But here's the beauty of the whole thing. I got enticed by a larger credit of $1 per share on a spread closer to where the index is actually trading than we would normally do, i.e., there's a more than reasonable chance that the index could rise to the level of my strike price where I could incur a substantial loss. Well, I decided I could be right, and before I knew it, was wrong, and the index was all the way up into my position and over. I was looking at a potential loss of $7,000.

But since it would be silly to lose money (Warren Buffett Rule #1: "Never Lose Money"), and because a trade isn't over until I say it is, I just rolled that position into February positions a little farther away from the action in both strike price and time. And instead of losing $7,000, I made an additional $1,400. I still have risk and exposure, but I lessened the risk and delayed the exposure for a month, and the market paid me $1,400 to do it. Yea, it was a tough call. Trades can be defended and rolled over and over if you know what you're doing.

The style of trading I've outlined here is called the Iron Condor. I learned this system from the great guys over at OptionsLinebacker.com. Go check them out, and if you're interested, start with their short trading guide for $15. They also have a description of the system on their website. I subscribe to the daily newsletter, which is really by far the best daily information I get (and I used to get quite a lot). The first month, I just traded their same trades. Since then, I've done some of their trades, but I also do my own, which are usually a bit more aggressive. It brings me much higher returns, but is also riskier and requires a larger trading account and access to resources in case I have to roll and up the ante in order to protect my positions.

I'm really having a good time at this, finally. I'll post updates.

Getting the Feds Out of My Shower

Well, I suppose it's no great act of civil disobedience, or anything, but the silliness of the whole thing is at least far outdone by the utter absurdity of the federal government so entwining itself in my affairs that I can't even take a decent shower without the fuckers messing in my business.

Shower_head
A little history. Back when I lived in France, 'round 1990, I hadn't been in my apartment a month when I had a leaking stem on the supply valve for the toilet. Rather than bother the landlord, I just went down to the hardware store and secured a new valve and installed it. While there, I noticed one of those cool shower heads, something like the photo on the right. It was simpler, though. Basically, it's a round disk of chromed metal with about 60 or so 1/32" holes drilled in it, all surrounded with a housing. This one didn't even have a ball socket for adjusting its trajectory. Didn't need it. It knocked out so much water over such a wide swath that it didn't need pointing towards any particular place. It was pure luxury, and for under $5, it became a prized possession that went with me to every place I was to live for the next 15 years. Installing it was always part of day #1 tasks in conjunction with any move.

Well, when we sold our home and moved last October, I decided to let it go. I left it. I'm not particularly sure why; I just didn't bother this time.

Man did I live to regret it. I haven't had a decent shower in over two months! So, today, I went out and found a good one, at OSH, of all places. You see them around, nowadays, but don't be fooled. All those ones with the little self-cleaning rubber nozzles? Vegetable sprayers. Forget it. Don't bother. I finally found one with reasonably sized holes in a metal disk. The next check was critical, though. A potential deal-breaker if not precisely correct. Did it have one of those spring-loaded flow limiters that's integrated into the plastic casing of the thing, or simply a nylon disk with its puny 1/16" hole through which no more than 2.5 gallons may pass per minute at 80 psi? Ha! A nylon disk. My pair of needlenose'll make quick work of that.

Now my only regret was that this Saturday morning wasn't one of those where I get up and start my tooling around before taking a shower, and sometimes, just letting it go by all day. Well, wait. I just realized I have to be at a family gathering at 3pm this afternoon. I think I might need a second shower. Glancing that way, it appears the coast is clear. Not a Fed in sight.

Do You Get it, Yet?

That's the twist of the knife
to these GOP scandals. Not only have Republicans grown sleazy and
corrupted by power, they've done so in pursuit of legislation that's
wholly inconsistent with everything the Republicans once claimed to
stand for.

Radley's as pissed off as I've probably ever seen him. But it really should be no surprise to understand that the only reason Republican politicians ever "claimed to stand for" [small and limited government] is because they wanted to get elected and wield political power. And, once elected, they "claimed to stand for" [small and limited government] in order to stay elected--all while rigging the process in order to give themselves a 98% chance at reelection--and all they really have to do is manage to get their miserable asses out of bed in the morning.

Hey, don't get me wrong: I've been just as fucking stupid as all of you fucking stupids for the many times I've been a little lulled and seduced by the next Republican who's going to come along and change things. Well, hell, I haven't fallen for that fantasy for well more than a decade, but I did fall for the fantasy that the Republicans were going to in any way stop or slow America's progression into becoming the equivalent of the next member of the EU. But, at this point, let's just fucking get it over with, OK?

You know, I dare anyone, anymore, to tell me that there is any real or material reason to care, one way or the other, who gets elected. Whether or not any Republicans ever started out with pure intentions is up for debate, I suppose, but let there be no debate over the fact that the entire place is a wretched cesspool through and through. Which means: it's no place to ever send good but naive people (good people who aren't naive would never want to go there). They won't stay naive and they won't stay good.

got coffee?

Well, in a world gone insane with wanting to be everyone's nanny, it's nice to get a steer once in a while to some news that things we enjoy consuming are actually good for us.

Who would have imagined?

Yea, I know. It's heresy. That hard-wired Judeo-Christian ethics has us so conditioned to think that everything we enjoy is bad for us and everything we hate is good for us. Never mind that we live longer and longer than ever.

Unfortunately, something like this is but a drop of rain in the ocean. It certainly doesn't signal any end to the general stupidity, nor to the nanny-state.

(link: Balko)