Wednesday, February 20, 2019

2018 Portfolio Review

In 2018 my brokerage account performed slightly better than the market.  As usual I will use the Vanguard S&P 500 ETF, VOO, as my benchmark.  VOO was down 4.37% (6.31% capital loss partially offset by 1.93% of income).  My account was down 4.21% (6.67% capital loss partially offset by 2.46% of income). Unlike last year I had some transactions during the year which makes breaking down my overall performance a little more complicated.  Aetna (AET) was bought by CVS near the end of 2018, I will figure the performance for the year by taking the year end value of the cash and CVS stock I received.  I also made four stock purchases in the fourth quarter, I will figure yearly performance by assuming I had set aside the cash needed for these purchases at the beginning of the year.  I will continue to ignore the interest earned on dividends I received during the year.  I included the (approximate) interest paid on the cash assumed to be set aside for investment but ignored the interest paid on the cash I received for AET.

At the beginning of 2017 I had  46.59% of the value of my account in VOO, 12.76% in other ETFs, 31.48% in individual stocks and 9.17% in cash (of which 4.50% was used near the end of the year to buy some more individual stocks).  VOO of course matched the market.  The other ETFs collectively underperformed (mostly because of the poor performance of the energy ETF, VDE) and contributed  -.31% to my overall relative performance.  My individual stocks collectively outperformed despite the fact that most (11 out of 17) of them lagged the market.  This was because of AET a big holding which was my best performer (up 11.92% even after accounting for the later drop in the CVS stock I received for it as most of the purchase price was paid in cash).   They added .44% to my overall relative performance.  My stock purchases (BLK, MET, TD and some more CVS) were largely poorly timed coming just before the year end market drop. Collectively they contributed -.28% to my relative performance. My remaining cash of course outperformed a down market contributing .31% to my relative performance.  This all adds up to .16% of outperformance as expected.

As noted above my individual stocks collectively outperformed the market even though many did poorly. Only two (AET and BBL) outperformed by at least 10% while 8 (ALL, BNS, CAT, CM, IBM, WBK, WFC and XOM) underperformed by at least 10%.  The remaining 7 (ED, INTC, JPM, NSC, PEG, SOUHY and TGT) were within 10% of the market performance.  Fortunately the outperformance of AET (whose good performance in previous years had led to it becoming an oversized position) was enough to bring the collective performance above that of the market.

As noted I purchased some stock during the year.  But not enough to use up the cash I received from the AET forced sale.  So my cash position increased to 13.19% at year's end.  I have a general intention to keep this account fully (or nearly fully) invested but in practice this requires more effort than I have been willing to devote to selecting and purchasing stocks.   As it was my buys were not all that carefully researched.  I bought the CVS to bring the share count up to match what my AET share count had been.  I have an account with TD (TDBank) and feel more comfortable investing in companies I have some sort of positive (or at least neutral) relationship with.  AET is my health insurance provider and did very well so I bought MET (MetLife) which provides my dental insurance (both through my employer).  BLK (Blackrock) was my pick in an out of favor sector (which promptly got a lot more out of favor).  I considered other investment management companies like IVZ (Invesco), LM (Legg Mason) or FII (Federated Investors Inc.) which were cheaper in terms of earnings yield but seemed more dependent on high fee active funds (which don't in my opinion have a promising future).  

Thursday, December 13, 2018

CVS Buys Aetna

A couple of weeks ago on Wednesday, November 28, 2018 (almost a year after the deal was announced on December 3, 2017), CVS completed its purchase of health insurer Aetna.  This was of particular interest to me because I owned some Aetna shares.  I had bought them in late 2012 when I had some money to invest.  I had Aetna health insurance through my employer and (contrary to the claim by some that everybody hates their health insurer) was satisfied with their performance.  The stock seemed very cheap (in terms of price versus earnings per share) so I bought some.  This worked out quite well as I paid less then $50 per share and the sales consideration (a mix of cash and CVS stock) had value in excess of $210 per share.  So I have a capital gain in excess of $160 per share.  Unfortunately the gain is fully taxable (at capital gains rates) even though part of the purchase price was paid in CVS stock.  Fortunately I adjusted my estimated tax payments throughout 2018 to account for this.  This wasn't actually required (to avoid a penalty) since you aren't required to predict the future and pay estimated tax for income you haven't received yet but convincing the IRS of this requires filling out a complicated form in which you report your income by quarter (approximately) instead of lumping all 2018 income together.  So it seemed simpler to pay in advance although this would have meant getting a large refund if the deal hadn't gone through in 2018.

I held my Aetna shares in a brokerage account.  On Thursday (one day later) the position seemed to be in limbo but by Friday (2 days later) I had the CVS shares and money in my account.  This beats locating and and mailing in paper stock certificates which I have had to do in the past.  CVS initially said (in a statement that appears to have been removed) that the fair market value (for tax purposes) of the CVS shares I received was $79.50 per share (the CVS closing price on Tuesday).  However my broker thinks it is $80.715 (the average of the CVS high and low for Wednesday) which seems more consistent with IRS regulations.  I suppose I will go with whatever the 1099 (which I haven't received yet) says. My broker valued the fractional CVS share (for which I received cash) at $80.2644 per share.  This is close to but slightly less than the CVS closing price on Wednesday of $80.27 (perhaps there was a commission paid when the fractional shares were sold).

In order for the merger to go through CVS had to get various approvals including from the US Department of Justice (USDOJ). The USDOJ approved the deal with certain conditions which CVS agreed to.  Usually such agreements are formalized in a legal settlement which a federal judge has to approve.  Such approval is usually routine and it is normal for companies to complete a merger (as CVS and Aetna did) before the judge has signed off. However in this case the judge, Richard Leon, has been expressing doubts about the wisdom of allowing the merger.  But it is my (layman's) understanding that while the judge may not like the agreement that the USDOJ arrived at, he can't actually block the deal if the USDOJ is willing to allow it since the USDOJ can just drop their lawsuit if the judge doesn't approve the proposed settlement.  Since the main condition was that CVS sell part of Aetna's business the USDOJ has little need for a formal settlement agreement once this sale goes through (as I believe it now has). We will see if this is correct.            

Tuesday, October 30, 2018

Take Back Day

The DEA periodically (every six months or so) sponsors "Take Back Days" on which people can safely dispose of unwanted prescription drugs.  Last Saturday, October 27, was the most recent.  I had been unaware of previous days but this time had been alerted by some timely internet advertisements.  My local police department had a collection site so I collected up a bunch of my expired prescription drugs and took them in.  This seems like a good idea.  The DEA is primarily concerned about controlled substances (and I did have some unused painkillers) but expired drugs can also become dangerous.  I had not taken this possibility too seriously and have sometimes ignored expiration dates but in collecting my unused prescriptions I saw in one case the pills had undergone some chemical reaction that had cause them to split open and when I (foolishly) opened the pill bottle to take a closer look I was greeted with a pungent odor. Obviously no one in their right mind would take these pills but it seems likely that pills can become dangerous in less obvious ways.    

Saturday, October 13, 2018


I recently read "Crashed" a recent (2018) book by Adam Tooze about the great financial crisis (GFC) of 2008-2009 and its aftermath.  I had previously read Tooze's book "The Wages of Destruction" about the economy of Nazi Germany and found it interesting so when I saw this book on the new books shelf at my local library I thought it might be worth checking out.  This was a mistake.

The book is very long (over 700 pages including nearly 100 pages of index and notes) but displays little insight.  There is a old saying about not being able to see the forest for the trees which seems to apply.  We are now at some remove from the GFC and so (one would hope) are better placed to identify its important features and effects.  But this book doesn't really attempt to do this. Instead it largely consists of a chronological recounting of events with little real analysis. The failure to develop any sort of convincing theoretical framework means the book is of little help in understanding and evaluating policy alternatives going forward.

For example the book states in several places that the American response to the crisis (although flawed) was more effective than the European response.  However the book doesn't consider the obvious possibility that the American response just appeared more effective because the problems in America weren't as serious as in Europe.    

Again the book seems to vaguely disapprove of the way Europe dealt with Greece but with little consideration of concrete alternatives and their advantages and disadvantages.  When the Euro was introduced many American economists thought it was a mistake because the area involved was too diverse to be adequately served by a single uniform monetary policy.  The book does not really discuss this.

One general view of the GFC is that people want to save more money than the system can safely accommodate.  That is there are more people who want to lend money than credit worthy borrowers.  In such a situation there is a great temptation to pretend certain loans are safe when they are not.  If this imbalance is real than specific regulations aimed at preventing certain types of bad loans are likely to just cause the problem to reappear in different forms.  But this sort of bigger picture view is lacking in this book making it of little value in my view.

To sum up I didn't like this book at all.  It just recapitulates events at length without adding much in the way of understanding.  I would avoid it.        

Thursday, October 4, 2018

Press 1 for English

Back in July, Paul Campos (of the Lawyers, Guns & Money blog) posted a rant in which he derided the  ""press 1 for English" myth" declaring (among other things):

The claim that people are forced to “press 1 for English” is pure racist bullshit, peddled by liars ...

I was pretty sure I had encountered this in the past  but of course it was hard to cite specific examples.  But now I can.  This morning I had reason to call New York E-ZPass service center (1-800-333-8655) and one of the first things I heard was "press 1 for English" (or some close variant).  So more confirmation of my opinion that the left is increasingly living in a fantasy world.

I was calling the service center because yesterday I received an E-ZPass statement which showed a bogus charge for using the lower level of the George Washington Bridge.  This was easy to spot since it was the only charge on the statement and I haven't been in New York State for some time.  Once I got a live person on the line this proved fairly simple to resolve.  She determined by some unspecified means that the charge was in error and agreed to have it reversed.  It was not clear what happened.  She said something about the license plate number not matching so maybe she was able to pull up a photo.

Saturday, September 22, 2018

Middlesex Jury Duty

Last Monday I was summoned for jury duty at Middlesex County Courthouse in New Brunswick, New Jersey.  This is the second time I have been summoned for jury duty since I moved to New Jersey, but the previous time I was excused when I called in the night before.  No such luck this time.  However I wasn't selected for a trial Monday which fulfilled my obligation and means I am exempt for the next three years.

There is an information page for jurors but I don't think it was as helpful as it could have been for first time jurors like myself who aren't familiar with how the system works.  So I will describe my experience in some detail.

The reporting time was 8 AM.  This is earlier than I am used to getting up so I was paranoid about arriving on time.  I left my townhouse around 7 AM.  The drive was about 30 minutes and it took another 10-15 minutes to drive up to the fifth level of the parking garage, walk back down and walk a couple of blocks to the juror entrance.  So I got there about 7:45 AM.  Although the entrance was theoretically open at 7:30 AM when I arrived they were just starting to send people through the metal detector.  So I had to wait in line for the metal detector and then in some more lines to be checked off a list and get my juror badge.  It seemed clear no one would have cared much if I had been a few minutes (or maybe as much as an hour or so) late.

Once you are processed you are sent to the juror waiting room.  This was a big room which appeared to hold about 200 people.  It is important to realize that it is not a courtroom.  So while (as the juror information page states) lots of stuff is banned in courtrooms (like reading books or newspapers) it is all fine (within reason) in the juror waiting room.  So you can bring a book or electronic device to occupy yourself with while waiting.  You should also bring a bag to stuff it all in (out of sight) if you are summoned to a courtroom lest you be asked to leave it behind.  Fortunately I had done this without knowing for sure it was okay.

Once in the juror waiting room you are shown a short movie giving general instructions and extolling the virtues of the jury system and welcomed and sworn in by a judge.  Then you wait around.  Short smoking breaks outside are allowed as long as the staff knows where you are.  From time to time a list of about 40 names is read out.  These people are led away to a courtroom where a jury is selected for a particular trial.  There were 5 such lists (two in the morning and three in the afternoon) read out while I was there.  I was the first name on the second list so there might have been more (but probably no more than one) lists read out in the morning while I wasn't there.      

Once in a courtroom you are told a few details about the case and the names of the parties, their lawyers and potential witnesses so you can make the court aware of any conflicts.  If I understood correctly this was a civil case involving an automobile accident in Pennsylvania (it was unclear to me why it was being tried in New Jersey).  You are also given a list of questions you will be asked so you can look them over and be prepared when the judge questions you.  Then you are called up individually so the judge (and attorneys) can question you (semi-privately) at what was called a sidebar.

I was the first name on the list so I was the first person called up individually.  I was soon excused when I told the judge (entirely truthfully) that I sometimes have trouble staying awake.  I felt a little bad about this as I definitely didn't want to be selected and this felt a little like shirking.  However I also didn't want the judge yelling at me for falling asleep and listening to boring testimony after lunch is legitimately the sort of thing I might have trouble staying awake through.

In any case there were other questions on the list that might have gotten me excused.  One asked if you would give any different weight to the testimony of a police officer.  I expect the answer they want is no but I was prepared to justify at length why I would.  Another was about my view of  "tort reform" and I was prepared to expound at length about the deficiencies of the American tort system in my view.  I also had an issue with the introductory video we were shown which advised (among other things) that we might want to give to more credibility to witnesses who seemed confident.  It is my understanding that academic studies have shown this is bad advice, that confident witnesses are no more likely to accurately recall events than hesitant witnesses and I would have complained about this given an opening.

After you are excused from the panel you are supposed to go back to the main waiting room which I did.  However you are also supposed to check in so they know you are available to be called for another panel.  I didn't do this immediately because I didn't realize I was supposed to (although I expect they told us this several times somehow it didn't register).  I didn't figure it out until after the first panel had been selected in the afternoon so I unintentionally reduced my chances of being picked for a jury a little.

We were given an hour for lunch.  Our parking was covered but only for one interval in the parking garage so driving anywhere would have meant paying for the afternoon parking myself.  Fortunately there are a variety of deli type eating places within a few blocks.  I walked for a while and eventually bought 2 slices of pizza and a coke for about $5.  Which was edible if not great.  Then I walked back and went through the metal detector again in plenty of time for the afternoon session.  

We were repeatedly told we were obligated to be there until at least a certain time (4:12 PM if I remember correctly) no matter what but in practice we were let out a few minutes early once they they were sure no more jurors would be needed that day.  If you are selected for a trial you are required to show up for the duration (absent some sort of acceptable emergency excuse).  A few extra jurors are selected to allow for attrition but don't participate in deliberations unless needed.  For my panel the judge said we should be prepared for the trial to last all week (until Friday) although he was going to try to finish by Thursday.  This I expect wasn't including deliberation time which can sometimes be lengthy.

So all in all a tedious but bearable exercise if you are prepared with something to keep you occupied.  And fortunately my employer will still pay me for Monday as the $5 juror pay isn't going to go very far.      

Thursday, May 31, 2018

The Undoing Project

I recently read "The Undoing Project" a 2017 book by Michael Lewis.  It primarily tells the story of two Israelis, Daniel Kahneman and Amos Tversky, who worked together for many years studying how people make decisions especially bad decisions.  Kahneman received the 2002 Nobel economics prize for this work (shared with Vernon Smith).  Tversky would probably have shared in the prize as well if he had not died in 1996 (at the relatively young age of 59) making him ineligible.

I was disappointed in this book.  It is quite long (352 pages plus notes) and unlike most of Lewis's work I didn't find it to be particularly entertaining.  It contains a lot of biographical material about Kahneman and Tversky which (while intermittently interesting) isn't especially relevant to their professional work.  It is repetitive in places (for example colleagues and students describing how brilliant they were).  It abruptly introduces other characters and then drops them without really integrating them into the narrative.  It contains chapter notes at the end of the book but no index.  It suggests that their work was very important but doesn't really explain why.

Nor did I think it was especially instructive.  It isn't technical enough to be a good introduction to Kahneman's and Tversky's professional work.  I have previously reviewed books by Ariely, "Predictably Irrational" and Thaler, "The Winner's Curse" which discuss related work on decision making.  While I didn't recommend them either they would provide a better introduction to the field.

In short I would skip this book.  It isn't a good introduction to this subject area and I didn't find it compelling as entertainment.