Sunday, March 3, 2024

Leave a Light On

 I got my monthly gas and electric bill a few days ago and was wondering why my electric use was up 64.6%.  Eventually I thought to check my basement.  It wasn't obvious from the top of the stairs (although it was night) but as I started down it became apparent that there was a light on.  Which I eventually located in a far corner.  I don't go down in my basement much so it could have been burning for months.  This was a little annoying as I have done this before.  I believe I actually checked a few times but only from the top of the stairs.

Assuming a 100 watt bulb this is 2.4 KwH a day.  Which amounts to about $.50 a day which isn't a huge amount amount but does add up.  This by itself doesn't explain the full increase in my bill.  Another factor is the billing period was 33 days this year as opposed to 29 days last year which the utility didn't adjust for.  This still doesn't account for the entire increase so possibly there was some other factor.      

 Anyway if you have an attic or basement or closet that you don't use much and that has lights in it it seems to be a good idea to check every so often that you haven't left a light on. 

Tuesday, February 20, 2024

Election Night Bet

 I recently reviewed "Going Infinite" Michael Lewis's book about the rise and fall of Samuel Bankman-Fried (SBF) and his cryptocurrency exchange FTX.  The book contains some stories about SBF's time at Jane Street Capital.  One of these stories is about trades Jane Street made on election night 2016.

As related in the book (pages 67-71) Jane Street had noted that the financial markets were moving in response to events seen as changing the odds as to whether Hillary Clinton or Donald Trump would win the 2016 US Presidential election with a Trump victory seen as bearish.  Jane Street decided that if they could figure out on election night who was winning faster than anybody else this would give them a profitable edge as they could trade ahead of (front run) the markets. So with SBF playing a major part Jane Street set up a team to rapidly analyze the returns on election night as they came in, update the odds on who would win, and trade on the new information.    By the book's account this worked well with Jane Street acting on updated information minutes before the rest of the market got the word.  To quote the book "... Around one in the morning, after twenty-four thrilling hours without a break, Sam left the trading desk to get some sleep.  The markets seemed to have fully digested the news of Trump's victory.  Jane Street was sitting on maybe the single most profitable trade it had ever done.  ..".  

But then things go wrong.  Again quoting the book "Three hours later he returned to find that the markets had changed their minds about the likely effect of Donald Trump on the world's stock markets.  .. "What had been a three-hundred-million dollar profit for Jane Street was now a three-hundred-million dollar loss," said Sam ..".

But this account leaves an obvious question unanswered.  Why didn't Jane Street nail down their three-hundred-million paper profit by closing out their positions at one in morning after the markets had "fully digested" the fact that Trump had won?   They no longer had an information edge on the rest of the market so leaving the positions on was taking a risk without any expected gain.

Possibly the markets at one in the morning were not liquid enough to easily close out their positions.    However this would suggest the markets had moved in their direction because of their trades and not because the markets were belatedly realizing that Trump was winning.  But then their three-hundred-million dollar paper profit was at least in part an illusion as closing out their trades would inevitably  move the markets against them and they would not be able to realize the full paper profit.

Or possibly there was another reason.  But as told the story doesn't really make sense.  This is one of the weaknesses of Lewis's book, for whatever reason he seems unduly accepting of SBF's view of the world. 

Monday, February 19, 2024

Going Infinite

 I recently read "Going Infinite" a 2023 book by Michael Lewis.  This book chronicles the rise and spectacular fall of Samuel (Sam) Benjamin Bankman-Fried (henceforth SBF as he was known).  Born in 1992 SBF briefly became a multi-billionaire through his cryptocurrency exchange FTX which he founded in 2019.  However it all came crashing down in late 2022 through the equivalent of a bank run.  FTX's customers lost confidence in the exchange and tried to withdraw their funds.  FTX could not meet these withdrawal demands and declared bankruptcy because there was a $8 billion hole in their books.  SBF was soon arrested in the Bahamas (where FTX was then located) and extradited to the US where he was convicted of multiple charges in November 2023. 

I have read a number of Michael Lewis's books.  I liked some of them a lot, others not so much.  In my view this is one of the lemons.  Apparently the book came about because Lewis was asked by an investor friend to meet with SBF and evaluate him.  Lewis met with SBF and formed a favorable impression.  This led to SBF granting Lewis more access so that Lewis could write a portrayal that they probably both expected to be generally positive.  While the book is not clear about sources much of it appears to be based on stories SBF told to Lewis.  But SBF must be considered an unreliable narrator and some of the stories don't make a lot sense if you think about them too much. 

SBF attended MIT graduating in 2014 with a degree in physics and a minor in mathematics.  He then worked for Jane Street Capital for a while before leaving in 2017 to strike out on his own.  He cofounded Alameda Research and then in 2019 FTX.  He maintained a controlling interest in both.  He initially was very successful as cryptocurrency took off.  But the businesses were not built to endure tough times and collapsed in 2022 when cryptocurrency cooled.  The proximate cause was FTX had in effect loaned Alameda $8 billion (of customer deposits which FTX was obligated to safeguard) which Alameda was unable to promptly repay when FTX needed the money to meet customer withdrawals.  A contributing factor was SBF's refusal for whatever reason to adopt the accounting and risk management controls normal for businesses handling billions of dollars.     

The book largely covers SBF's rise with relatively little about his downfall.  It ends before he is tried and convicted after three top lieutenants, Caroline Ellison, Gary Wang and Nishad Singh, testified against him.         

SBF seems to have been a reasonably smart guy who lacked conventional people skills.  But he did seem to have some strange form of charisma which caused people including Lewis to overlook what might otherwise have been seemingly obvious red flags like his firm's lack of a chief financial officer (CFO).  Perhaps something akin to Steve Job's purported reality distortion field.  However as Philip K. Dick famously said: “Reality is that which, when you stop believing in it, doesn't go away.”.  Perhaps SBF believed (and was able to convince others) that you could run a multibillion dollar crypto enterprise without carefully managing risk and not court disaster.  But reality is that you can't. 

One of SBF's eccentric traits was an addiction to video games which extended to playing them during zoom meetings with important people.  To some extent he seems have treated life as a video game where other people are just characters to be manipulated with no need to concern yourself about their fate.  At the end SBF seems detached from reality unable to accept that he has committed serious crimes.  Lewis also seems unwilling to explicitly say this although it is pretty clear from the facts he presents.  But Lewis takes some shots at John Ray who was in charge of administering the bankruptcy estate and recovering what funds he could for the creditors.  Which even if fair were largely irrelevant to the question of SBF's guilt.       

This book wasn't totally worthless but I found it a bit disappointing and won't recommend it.

Monday, May 29, 2023

Sourland Mountain Preserve

 

As when I lived in Ossining I sometimes take walks in nearby parks on weekends weather permitting.  In general I liked the trails in the Ossining area better than the ones around Princeton.  One problem with New Jersey is that the trails can get muddy.  However I have found some satisfactory places to walk near my new home.  Recently I have been venturing a bit further afield including to the Sourland Mountain Preserve which according to google maps is 23 minutes from my house.  A trail map can be found here.

I have mixed feelings about this park.  The trails have a lot of rocks and exposed roots which can make hiking unpleasant.  In addition while you are walking up a mountain (or what in New Jersey passes for a mountain) with several hundred feet of elevation gain the area is heavily wooded so for the most part the views aren't very good.  There is one exception, a natural gas pipeline cuts through the park and the right of way has been cleared of trees.  This leads to some good views including one on a clear day of the New York City skyline which is about 40 miles away.

Referring to the trail map linked above starting from right-hand-side of the parking lot the skyline view can reached by following the trails through the points labelled 1,2,3,C,4,5.  Then looking downhill on a clear day the NYC skyline can be seen from the right-hand-side of the cleared area where the bench is.  It is on the horizon beyond the nearby white domed building.  It is then an easy albeit a little steep in places walk down the pipeline cut back to the parking lot (through locations labelled C,13,TH). 

I took photo Sunday, May 7, from near the bench.   I used a cheap Canon camera which does however have a telephoto lens.  Photos taken using my phone or my camera without using the telephoto feature didn't show the skyline very well.  The photo is about what you can see with the naked eye.  I also had a pair of binoculars which gave a better view.  The big tall building above the center of the white dome is One World Trade Center (aka the Freedom Tower).  This was a relatively clear day, I have been there on two other days when the skyline was just an indistinct smudge on the horizon although still visible if you knew exactly where to look.

Sunday, May 21, 2023

2022 Taxes

Hopefully I am now done with my 2022 state and federal income taxes.  I received a refund check from New Jersey last Wednesday, May 17, and deposited it Friday.  As usual I did my taxes using the TurboTax Deluxe program.   Intuit (publisher of the TurboTax programs) tries to upsell more expensive versions of the program but I have always found the Deluxe version to be sufficient.  I filed the returns a few days early on April 12.  I submitted the federal return electronically shortly after midnight and mailed the NJ return on the way to work.  TurboTax tells you to expect to wait 24-48 hours to receive conformation that your return was accepted but in recent years I have gotten a federal confirmation in just a few minutes.  38 minutes this year.  I always mail my New Jersey return because TurboTax charges a fee to file it electronically.

I owed a considerable amount on the federal return.  This was largely because I had some US savings bonds come due (reach final maturity after 30 years) last year.  Tax on savings bond interest is deferred until the bonds are redeemed which is nice but means a big bill when they finally come due.  And the income is considered ordinary and doesn't receive the favorable tax treatment capital gains and dividends do.  Of course I knew the bonds were going to come due and had increased my estimated tax payments but not as it turned out by enough.  I still got a New Jersey refund because savings bond interest (like all interest paid by the federal government) is exempt from state taxes.

I didn't have any major issues with the program.  The handling of state income refunds is no longer a problem as Trump's changes to the tax laws mean I now take the standard deduction and don't deduct state income tax.  Although I live in a blue state the essential elimination of the deduction for state income tax hasn't hurt me because I had been paying the alternative minimum tax which didn't allow this deduction. 

Sunday, March 26, 2023

Rare Event

Earlier this month while reviewing my checking account I noticed an oddity.  The last four withdrawals (bill payments for somewhat random amounts) had added up to exactly $1,000.00.  This is pretty unlikely.  Perhaps roughly a one in 100,000 chance of adding up to an exact multiple of $1,000.00.  Recently I have been averaging about 10 transactions per month for this account.  So over 50 years there would be about 6,000 chances for this to occur.  Of course I might also have noticed if some different small number of consecutive transactions had done this.  Still this seems like a once in a lifetime event or close to it.

Making the event even less likely (although probably more noticeable) the before and after balance in the account was an even dollar amount.

Sunday, March 19, 2023

2022 Portfolio Review

Last year was a bad year for stocks.  The market as represented by VOO, Vanguard's S&P 500 index fund ETF, was off 18.17% (consisting of a capital loss of 19.53% partially offset by dividends of 1.36%).  My main brokerage account did quite a bit better being off only 10.79% which is outperformance of 7.38% .

During the year I made a number of moves.  Early in the year I sold my WBK ADR's.  WBK is an Australian bank that had not done well and when it was announced the ADR program would be terminated selling seemed the simplest thing to do.  Near the end of the year I belatedly sold my INTC as after many years of missteps I finally got fed up enough to sell.  At the same time I bought VGT, Vanguard's technology ETF, to keep exposure to the sector.  VGT has close to 40% of its funds in just two stocks, AAPL and MSFT.  I would prefer less concentration but bought it anyway.  I also bought RY and BMO the two of the five big Canadian banks that I didn't already own.  And I bought VIG and SCHD two ETFs that try to buy stocks with growing dividends.  Both have low expense ratios and good records.  However VIG invests more in stocks with low current yields than SCHD.  Currently VIG is yielding 2.00%, SCHD 3.63% (compare to VOO at 1.65%).

The following performance figures aren't super precise.  I calculated yearly returns for the buys, sells and dividends received as if the money was kept in cash without interest for the remainder of the year.  All interest on my cash position was attributed to the remaining cash somewhat overstating the actual yield.  As usual I added Canadian tax withheld back in as this is intended to be a before tax accounting.

At the beginning of  2022 I was 50.48% invested in VOO which of course matched the market (as measured by VOO).  I was 29.78% invested in individual stocks which with a return of -4.03% (-6.88% capital, 2.84% income) outperformed the market by 14.14% or 4.21% overall.  I was 13.26% invested in ETFs (besides VOO) which with a return of -4.38% ( -6.99% capital, 2.61% income) outperformed the market by 13.79% or 1.83% overall.  And my cash position of 6.48% (which excludes the cash used for buys made during the year) returned 2.46% for outperformance of 20.63% or 1.33% overall.

4.21%, 1.83% and 1.33% adds up to 7.37% of outperformance in good agreement with the 7.38% cited above.  My performance relative to the market had previously been pretty bad, these results make the overall comparison more respectable although I am still trailing.  However it is possible this performance in a bad market year shows that my portfolio is safer than the market something I am willing to sacrifice a little in expected total return for.  However in a generally rising market my inability to stay fully invested has been a drag on results.  And there is little justification for it as I have substantial cash reserves outside this account.