Re: Brilliant...

Thursday, June 17, 2010 – 8:20 PM

Well, crap.

I clearly missed out on the link on my prior 'Brilliant' post. One month later, here you go.

http://republicanwhip.house.gov/YouCut/


ps - I fine myself 1157 Deanbucks for the blunder.

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Idea...

Wednesday, June 16, 2010 – 10:04 PM

I have an idea, and I'm completely serious.

Have you thought about donating money to help affected people in the Gulf? My suggestion: buy BP bonds. That's right. Lend your money to BP.

BP currently has a little under $7 billion in cash on hand. They have just agreed to fund $20 billion to support those who have suffered loss due to the oil spill. Whatever they use to back that funding, they are no doubt borrowing money to do so. Right now, Atlantic Richfield Co., a BP subsidiary, is offering short, mid, and long term bonds with high coupons and high yields at a very small premium. In laymans terms, they're offering some killer bond deals, cause they're desperate for money. Here are the possible outcomes of investing in BP bonds.

Worst Case

BP goes bankrupt. In restructuring, assets will be sold off to cover their debts. These debts includes your bond principal, and it includes the relief fund your bond helped to fund. You will likely get some or all of your money back. Either way, as a bondholder, you have priority of repayment over BP's stockholders, so you are in good position to recoup. 

But this is a worst case, right? So lets say BP folds, can't pay your bonds back, and you lose your investment. As unlikely as this is (and it is highly unlikely), you could still claim a capital loss on your bond position, meaning your income taxes are deducted the amount of your losses multiplied by your income tax rate. So, say you invest $5,000 in BP bonds, lose it all, and your tax rate is 25% that year. Your tax liability is reduced by $5,000, and your tax refund is suddenly $1250 greater. In case you weren't counting, that's the same tax effect as donating that same $5,000 to charity!

Best Case (and the likely case) 

BP continues to service their bonds, and pay coupons. This means that, over the life of your bond (which should closely mirror the life of the oil spill restoration efforts), your bonds will earn a rate near 6.5%. Savings accounts might earn 1% right now, at best. T-Bills are about the same, and so are CDs. 6.5% is better than 1%. Say your same $5,000 bond runs for 2 years, and earns 6.5%. That means that, over the life of your bond, your $5,000 will have turned into $5,650. That is assuming you took your coupon payments and either spent the money, or in some way just did nothing productive with it (like a savings account ;). 


In recap, assuming you have $5,000 you're thinking about donating to help people with the oil spill. You can either:

A. Donate the money to charity. 
You get a $5,000 tax credit = $1,250 refund.

B. Buy BP bonds that fund the recovery. BP can't pay, you lose all your money.
You get a $5,000 tax credit = $1,250 refund.

C. Buy BP bonds that fund the recovery. BP pays on time, and the bond matures, no biggie.
You get $5,650 in 2 years, and pay taxes on the $650 gain = $162.50 tax payment = $5,487.50 in your pocket, or $487.50 more than you started with. And you funded the recovery effort.

What say ye?

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Brilliant...

Friday, May 14, 2010 – 11:22 AM

Whichever side of the aisle you lean, this is a fun and brilliant idea by the Republican Party.


If you listen closely, you can hear the collective groan of the Democratic Party as they say 'Why didn't we think of this first!'

Now that I've said that, I fully expect someone to show me that they really did think of it first and the Pubbies ripped it off. Until then, credit is given where due, and I'm a big fan of this idea. The right side earns 1246 Deanbucks, and is hereby bestowed gloat privileges for the next 87 hours.




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Warren Buffett

Monday, May 03, 2010 – 11:26 PM

I was in Omaha this weekend attending the Berkshire Hathaway shareholder's conference. In list form, here were a few notables from the weekend:


- Warren defended Goldman Sach's Abacus deal --- and his reasoning (shocker!) made a lot of sense. They aren't completely out of the woods in my book, but his perspective helped calm and shift a lot of perspectives away from some of the more ravenous reporting that has taken place on the issue.

- Charlie Munger is a funny, funny man. I'm sure he knows he is, but he's so subtle that one wonders if he is brilliant or if he is an old loon. My money says he's both, but alas, I have no money.

- Buffett was on stage, and Bill Gates was in the front row. Very cool.

- Omaha's Old Market is a fine, quaint public square with some great restaurants and a great local scene. Omaha the city continues to leave an impression. I declare it impossible not to love.

- If you ever plan on attending the conference, I recommend flying to KC and driving up to Omaha. Beautiful drive, and you'll save hundred$ in the process. Then, once you get there, Warren will sell you on Geico, and you can save hundred$ more.

- The Warren & Charlie show is a can't miss. B shares are $85ish. Completely worth the price tag, both as an investment, and as a ticket to an incredible, funny, insightful conference.

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Graduation...

11:16 PM

Well, I'm graduating in a few days. I can't believe it's this close. I can't believe how fast it's gone by. Somewhere in this big, life event I have a blog entry. I mostly just wanted to get that out there to keep some blogging activity going, but I am also running desperately low on battery life.


For the moment, I'll just say that it's been a great journey, I've learned and grown so very much, and I trust that God is leading me where he wants. I know that sometimes he's going to lead me to places I don't want to go, and that's ok; for now, I'll celebrate that I enjoy this direction.

I'll write more later. I promise.

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