End of Year Greetings

End of Year Greetings! So much to be thankful for this year. My girlfriend of five years and I finally broke up. It was all downhill after she fell off the boat and caused us to capsize (as captain, I take full responsibility), but it wasn't until that happened that I really started living again.

Here are the highlights of 2009 (not in chronological order or level of importance . . . and keep reading as the list gets less mushy, more interesting, and funnier):

I grew as a person, healed some old wounds, discovered a lot of peace, and found a way to once again feel really excited about life; whipped myself into great shape--gained a lot of strength, developed cardiovascular endurance, and really toned up; developed a stronger, better friendship with Jim (and beat him in a footrace to a cheering crowd of bartenders and servers); accepted a job offer; participated in Sean's and Wayner's weddings as a groomsman; officially received title to a 1967 Universal sailboat that my grandfather completely restored; visited every part of Florida in a three week span; worked on NASCAR and Florida CCI (street motorcycle racing) pit crews; surfed huge waves in Jacksonville with my brother; made out with at least five different women (i.e. I have made an effort to be discerning); played a lot of golf (still suck); became closer with Dad; survived my first (and hopefully only) real fist fight--street brawl, really--two guys against me, dimly lit alley . . . you get the picture, seriously though; helped Raul and Hillary move into their first house; read "Sperm Wars," a great book that takes evolutionary biology to another level; put together an amazing, lightweight first-aid kit; spent a lot of time exploring Washington, D.C.; expanded my collection of weapons; Sarah June and Z both came home from Iraq; I participated in a number of chautauquas; co-invented the "manship"; officially became a stoic; and spent a lot of time with close family and friends, particularly the Boullosas in Tampa.

Of course, the year was topped off with Noche Buena--our annual pig roast. Here are a few photos of 2009:

Festivus Pole:

Festivus Miracle:

The Pig (after being marinated):

The Pig (after seven hours on the cooker--notice how nice her complexion remained--thanks for being a great sport, Eliza):

Hunting/Fishing Knife Sheaths that I made out of an old, sentimental football that didn't hold air:


Me on a NASCAR Pit Crew:


Tiffy Waking Me Up (I am not gay, not there's anything wrong with that):

In 2010, I have to drop the term "unemployed vagabond" from my self-description, since I will have a job and a house for at least a year and hopefully longer. I also plan to seriously chase some long-time dreams that I allowed myself to get discouraged and derailed from as young college student.

In the coming year I plan to sail my little boat--"Sueno de Pirata"--from Everglade City to Marathon in the Florida Keys with my friend Ryan. It's about 100 nautical miles each direction, and it should be fun. My ENTIRE family and many friends have been extremely supportive of the adventure, and I cannot say how thankful I am for everyone--Mom, Dad, Mimi & Pirata, Raul, the Boullosas, and Jim.

Later in the year a few of us (Jim, Tucker, and possibly Sean) are going to hike Yosemite for four days and about forty miles. I've been collecting gear and often find myself awake at night feeling excited about the trip!

This coming year, I will finish earning my pilot license, Raul and I are going to see Bobby Bowden's last game as head coach of the Noles, and I plan to compete in a couple Olympic length triathlons. I also hope to ramp up my charitable giving and volunteerism in 2010.

See you next year, when I will post some pictures of me with bigger, more masculine dogs! Just be thankful that I didn't include pictures of me wearing my elf outfit or the Michelangelo's David apron that I bought in Rome! (But those photos are available upon request.)

I wish you all many blessings in 2010--health, wealth, happiness, and lots of love!

Rasta SkyWayne

Would you trust a guy with that nickname to review pro forma statements for a major deal? Forget that I'm blaring Bob Marley all the time and wearing a visor that, according to one source, makes me look like I'm on spring break.

Tim Tebow used to be such a nice guy . . . I've been so obsessed with this picture that I haven't even changed my t-shirt in four days:

Can you say confusing?

No joke, I found this graphic on Yahoo! Finance today. Ben Stein says "Spend Prudently" while Rober Kiyosaki says "The Cheap Will Never Get Rich." I personally can't stand Kiyosaki. He's probably made more money selling the dream than living it!

Expert Opinion

Are You Craving Peace of Mind? Spend Prudently

My goal for the next 40 years is to spend prudently. If you are smart, then this will be your goal, too.

• The Power of Paying Attention- Laura Rowley
• Why the Cheap Will Never Get Rich- Robert Kiyosaki
• Desecuritization: Value There for the Taking- Jack Guttentag

The Problem with Wall Street

Transparency. That about sums it up. Investors are led to believe that common stocks can be bought and sold profitably based on readily available, quantifiable metrics that indicate value. The best example I can think of is the P/E ratio. Just about every financial professional is guilty of this sin. Take a look at Jim Cramer, for example. In one of his books, he spouts off twenty-some-odd rules for investing in the market. The truth is that Cramer probably made his money behind the scenes--in transactions not available to the average investor.

The problem with metrics is obvious--they are available to everyone and they do not predict the future. In reality, the true value of a company and its corresponding stock price could be determined with precision if we had a few key pieces of information--prevailing interest rates over long periods of time, future earnings, inflation/deflation rates, and the future P/E multiple. If one had all that information, then a simple discounted cash flow would render a fair present value for stocks.

Unfortunately, nobody knows the future, and that's the reason why stock prices fluctuate so much, even though the companies tied to the stocks do not necessarily change dramatically on a daily basis. The best book I've found relating to this subject is Rule #1 by Phil Town. That book does a good job discussing the incorporation of future uncertainty into today's stock prices.

In reality, stock prices are based on buying and selling pressure--the economic ideas of supply and demand, which assumes rational behavior on the part of investors if one wants to equate the value of a stock with the value of its underlying company. The bubbles of the past (tech, real estate, oil, etc.) are good evidence that investors are clearly irrational at times. That irrationality is the key to long-term profits. One need only buy stocks when prices are irrationally low based on overly conservative estimates of the future. Easier said than done, I know.

As a corollary to that idea, is the method of trading based on technical analysis. Admittedly, I don't know much about the theory underlying this method of trading beyond saying that it too is based on the idea of supply and demand and the notion that short-term irrational behavior must correct based on largely psychological premises. The trading methods have built in safety mechanisms such as "buying at support with a tight stop," which makes this seem to be a safer method of investing. I mean hey, if you bought the market ten years ago, you're even now. Again, Rule #1 is a good source.

The main thrust of this post is really just to point out that there's a lot happening behind the scenes on Wall Street to drive stock prices. The Street is not transparent, and market manipulation surely happens. Professional financiers bend laws to the limit in order to take advantage of average investors, which is why the methods of wealth accumulation used by those who make serious money--the same people who are selling books and giving out stock advice--are not discussed openly. So always evaluate the agendas of people who seem to want to help, because they are probably trying to help themselves to your money.

It's Been A While

I am here, nonetheless. Capsized a sailboat and spent about an hour in 65 degree water (more about that later). My grandmother fell through the ceiling while trying to organize the attic. Been doing well trading the market--still have my head above water anyway. Watched the International Space Station fly almost directly overhead. Went to the Daytona 500, which was actually more like the Daytona 380 this year. Since the last post, I have been in two weddings (one in Palm Beach; one in St. Augustine) and attended one other wedding (Austin) and one bachelor party (Florida Keys). I finally applied for a job . . . yesterday. Tonight NASA is launching a Delta II rocket. The payload (a spacecraft named Kepler) is designed to spend the next 3 to 6 years searching for earth-like planets near the constellation Cygnus (the Swan), a.k.a. the Northern Cross. Anyhow, I should be able to see the launch from my back porch in Ocala, which is awesome.

In the realm of serious pontifications, I have a theory about the stock market. It's just a fringe theory and the argument may not even be valid--actually it's more like a brainstorm than a theory, so take it with a grain of salt. Anyhow, here it is: The stock market may actually be in place primarily to benefit the "High Ups." Think about it. People who run corporations may be entrepreneurs who own lots of stock in companies they started, or they may be executives with lucrative stock options. Either way, they need liquidity. What better way to get liquidity than to sell a "piece of the pie" to the masses via pensions, mutual funds, retail investors (traders, IRAs, 401(k)s), and even hedge funds? If one looks at long term charts of the major indexes, it is apparent that the "buy and hold" mantra preached by the pros for so long just doesn't work for the average investor, and yet the "High Ups" seem to have generally benefited from it--they are immune. To that extent, our markets seem manipulated from the outset. In other words, there seems to be a systemic bias against the average investor. This idea is nothing new, of course, as efficient market theories have long held that such a bias would exist if insiders could trade on non-public information. But luckily we have laws to prevent that and people like Bernie Madoff from operating too.

In The Great Crash, 1929 (a great book that I will review in the near future), John Kenneth Galbraith talks about "The Bezzle," or the ease with which fat cats embezzle money when times are good--how the "High Ups" exploit markets far beyond the systematic biases during bull markets--and the way those greedy hucksters cause market crashes and widespread pain. Until the "The Bezzle" is fixed, until all the bastards responsible literally burn at the stake, there can be no confidence in the market. Good people will not throw money after bad for very long. Lose money once, shame on you; lose it twice, shame on me.

With all that in mind, I really do think that we have failed free market capitalism (not the other way around). Take the CEO of any major bank as an example. Most of those guys pull in $10 million plus per year. Normally four to ten others in the organization make close to that too. In a purely free market system, shouldn't the following question be asked of executives: Is there anyone capable of performing the same job function (e.g. CEO, CFO, COO, CIO . . . all the "C-level jobs") for less money? It's surely done on the ground level. If all employees were as over compensated as C-level employees, there would be no minimum wage, which effectively just keeps C-level executives from taking even more.

But does our system allow the free market to operate at the C-level--to ask if other qualified and capable persons would do the job for less money? NO!!! Why not? Because business is politicized. The CEO of company X sits on the board of directors of company Y, and CEO of company Y sits on the board of directors of company X. You scratch my back; I'll scratch yours. The whole system is inbred, which is why the market looks retarded right now. Surprise surprise, Gomer!

Executives of publicly traded companies should have compensation capped at 30 times the income of the company's average employee. Including bonuses. Hell, 30 is an arbitrary number, but it works for this example. Once a company goes public the number of stakeholders in the company expands dramatically, because "the public" is involved via pensions, mutual funds, IRAs, and 401(k). I am all for allowing executives to have the option of taking any portion of their salary in stock or options . . . but not options for stock to be issued in the future or newly authorized stock (in other words, not if shareholders are diluted by the stock or stock options). In fact, a portion of compensation should be through stock as a mandatory requirement, but not through options granted way in the money or stock awarded for free. Why should these people be given anything for free? When was the last time your boss gave you a few hundred of thousand dollars worth of stock options just for showing up to work? It happens every day on Wall Street!

No, compensation should be based on the value that executives add to a public company. So award executives half of their salary in stock bought through an open market transaction and half in cash. Then let them add value to the stock through their efforts.

Hey, if they can make more money in the private market, then stay there!!!! My hypothesis is that most executives could not make equivalent money in the private market, because the private market does not provide a systemic bias in favor of executives, namely removing risk from the venture and placing more value on politics than performance.

As an aside, I believe that the sky should be the limit for compensating entrepreneurs and executives of privately held businesses. These people are risk takers and should be rewarded accordingly. But the moment a company goes public, the game changes and so should compensation structures . . . even if the people running the business are the original founders, because their risk is diminished to the extent of public financing and they will be amply rewarded for the risk they originally took by large ownership interests in the newly public enterprise. In essence, going public is a way of cashing out, and continuing to run the business profitably and thereby raising the stock price should be the main component of compensation for such entrepreneurs turned executives.

Warren Buffett has operated under a similar system since the inception of Berkshire Hathaway, and he's doing pretty well. His annual salary is $100,000.00! None of the people on Wall Street making $10 million, $20 million, and upward have created nearly as much value as Mr. Buffett over the years, and yet they continue bringing in the huge salaries and bonuses. Once upon a time bank robbers used guns. Today they all have M.B.A. degrees. It's absurd, and that's all I have to say about that.