ERICOPOLY

So... they will formalize the higher unofficial capital rules already in place? (aka: The Fed Stress Tests) Or, they will increase it, and then add even more by stressing those new regulations. A good way to go about it would be to first get the banks ready (via stress tests) and then hike the "official" capital rules. That way, nobody is in a serious shortfall when new official rules are proposed. So that fits the current pattern, anyway. Would it change anything at all if BAC were hiked to 10% B3? Not really. The Fed already holds them to that level anyhow via the stress tests. I'm just worried they hike to 10% and then require that the they be above 10% on the severe stress scenarios as well (e.g., making it effectively 12% or something along those lines). They might even be at 11% already (unofficially) -- don't they get that far by the end of this year roughly if the economy keeps on plodding along? So 12% isn't that much further.

So... they will formalize the higher unofficial capital rules already in place? (aka: The Fed Stress Tests) Or, they will increase it, and then add even more by stressing those new regulations. A good way to go about it would be to first get the banks ready (via stress tests) and then hike the "official" capital rules. That way, nobody is in a serious shortfall when new official rules are proposed. So that fits the current pattern, anyway. Would it change anything at all if BAC were hiked to 10% B3? Not really. The Fed already holds them to that level anyhow via the stress tests.

So... they will formalize the higher unofficial capital rules already in place? (aka: The Fed Stress Tests)

Isn't it still a model if you don't write it down in a spreadsheet as such? Market is high, go to cash -> redeploy after crash. Isn't that a model?

I noted many times that the capital return would likely disappoint and be low. My views on this were hissed by many of the true believers on the board. People believe what they want to believe. The capital return was pretty much maximized I felt. At least, based on what was left to return after the Fed stress test dictated how much they would need to hold onto to stay above the minimums in their scenario. The part that I didn't expect was how little would be left to return in the stress scenario. The Fed didn't seem to have any problem letting them return all of the excess -- there just wasn't much "excess". The Fed stress test is sort of a back-door means of raising capital levels well above what the B3 guidelines allow.

Interesting. I always thought it was the same size as European cars such as: BMW 7 series Aston Martin Rapide Jaguar XJ Perhaps the $9 a gallon gas has made small cars popular in Europe. How much gas does it take to fill up a Tesla Model S? I figure the Aston Martin buyers aren't too concerned with the price of gas.

The stress tests have been a back-door means by which the Fed can increase capital levels at the big banks. Each year, the effective capital level goes higher as the stress test gets meaner. Recently, the Fed indicated that some banks will be allowed to return 100% next year. This is perhaps a message that the stress tests have peaked in scenario intensity. Meaning, if you passed the stress test this year and were allowed to return some capital, then it makes sense that if the test is identical next year you would be able to return 100%.

Perhaps BAC expects cost reductions that the Fed isn't accounting for? Multiplied by two years it gets big.

Circuit breaker? Why bother? Just put a satellite phone transmitter with battery backup with gps receiver. Have that in the tail of the plane or somewhere that pilot and crew can't access. That way, when the power goes out it still runs off of the backup battery. This is obviously all easy stuff that can be implemented in a way that can't be shutoff mid-flight by anyone.

It appears a company has been trying to sell a real-time streaming flight data recorder to the airlines for $100,000 per plane: http://money.cnn.com/2014/03/21/technology/flyht-flight-data-streaming-black-box/index.html?iid=HP_Highlight Of course, the airlines won't go for that because they aren't responsible for paying for the massive search for this missing plane. Isn't this a multinational government bailout of Malaysian Airlines? Could the airline be asked to reimburse all of the nations involved for the hunt for it's own damn company's plane, especially since they could have prevented the cost for $100,000? Seeing it seems some evidence is pointing to multiple tracking devices being shutoff/disabled. How would have an $100,000 dollar device have worked any better if shutoff or disabled. I think that's obvious. You put the shutoff/disable switch in an area of the aircraft so that only a ground-crew can access it. Perhaps it is behind a panel that can only be accessed from the external belly of the aircraft. Let me ask you a question? Can the pilot shutoff the existing flight data recorder? This is no different -- it's just streaming it live to a database.

It appears a company has been trying to sell a real-time streaming flight data recorder to the airlines for $100,000 per plane: http://money.cnn.com/2014/03/21/technology/flyht-flight-data-streaming-black-box/index.html?iid=HP_Highlight Of course, the airlines won't go for that because they aren't responsible for paying for the massive search for this missing plane. Isn't this a multinational government bailout of Malaysian Airlines? Could the airline be asked to reimburse all of the nations involved for the hunt for it's own damn company's plane, especially since they could have prevented the cost for $100,000?

The momentum traders perhaps help concentrate the capital into the hands of efficient allocators.

Thanks for your sincere response. That is very interesting how you got started full time. I truly recommend "Free Capital", it talks about how 12 people in Europe got started investing full time. So are you saying you manage money for other people? For me one thing is the opposite though, I hated trying to invest full time. I just couldn't deal with the pressure and the apparent idleness. I find that working at least helps me be more patient and take my mind off it, esp. when there is a market pullback. In terms of my getting started - I consider it "fate meets luck" - it was not planned, but worked out well that I was sort of forced to make a decision. Investing full time leaves me plenty of time to work on other peoples portfolios, friends and family. Since that can occupy plenty of time, and I like it, I am less likely to do I something stupid, like trade. I agree with you - the idleness can be filled up with something really dumb - like trying to "make things happen". Idle time is better spent reading, thinking, going over models a second/third time, and research. Patience and good decision making is a critical element. So I spend lots of time attending conferences as well - there is a lot of time for learning. But I agree - the people I have seen "blow up" are the ones that try and make things happen by trading when they get bored. I'll check out Free Capital - thanks. I don't understand how is managing other's portfolio work? If you trade for them don't you just shadow your own porfolio? Trading is zero work. I've decided that I do not want to manage money for anyone else. 1) It's work to communicate with lawyers, accountants, etc... to setup and maintain the fund structure 2) It's work communicating with people who want to join the fund 3) It's work communicating to people who are already invested in the fund 4) It's work when you get worried that you may lose their money and how angry they would be 5) The phone rings a lot when the market is down. Sounds like work to me.

There is a fallacy to what your saying Eric, you are saying you produced this money and the government gets a cut, as well as those who produce goods that you buy. But what about the capacity that you took it away from. What you said could apply to playing poker. I don't think poker is doing good in the sense of the title of this thread, although it seems to be digressing. Now I am not saying you aren't doing any good. I just asked you and all here what they think of themselves. It is subjective. I just find your argument puzzling. I mean, you could have taken it away from some hedge fund that manages some old lady's pension. Mind you still in a perverse way I feel that hedge fund and even that old lady deserved it! Perhaps I'm a better capital allocator than that hedge fund manager and I've done society a favor by boosting the return on that capital? Therefore, society will get an inproved return on capital if I keep the money rather than having it taken from me by the tax authorities.

Here is what I think. This money that I made came to me because I put my balls on the line. I'm not some tycoon that exploited vulnerable workers. I didn't get rich on crony capitalism. I'm not a "fat cat" banker. I didn't get rich while hiding behind a corporate veil. I didn't inherit my money. I'm not getting handouts for political influence. However, here is how I get treated by society going forward: A) I share 30+% on my gains. B) If I lose a lot of money, nobody will share in my losses. Somebody is getting one hell of free ride and it clearly isn't me. Therefore, I must be a net benefit to everyone who gets something for no skin off their back. If I win, so do they. If I lose, too bad for me alone.

I'm pretty sure it's going to lead to pay increases for my "staff".

I hope you guys understand that I'm extremely polite to our housekeeper and I don't really "order" "our staff" around. I overpay them by local standards. We give them paid holidays off. I just joke around with you guys on the rhetoric. Like for example, when I say I'm a "job creator", I'm just playing dressup in Mitt Romney's "douchy" costume. I treat everyone who works for us as if I were doing that job myself. After all, I was a software tester at Microsoft. I was paid $36,000 in 1997 when I started. I was never a big shot, and I never want to behave like one simply because I made some money flipping stocks around. I just joke around with words because it's really funny to be retired with this much money at 40 and really at heart I'm still just a deck jockey that takes orders from my wife ::)

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent. Some are healthier. Some are more predisposed to falling sick. Capital allocators choose which cows to milk. I don't know where we disagree then, because I agree with all of that. He wants you to get a job :) I have a job -- the guy on Downton Abbey is like an executive that stays home and order the staff around. A CEO goes into the office and orders the staff around. Hmmm.... I could just incorporate my family compound and then I would "have a job" as a "corporate officer".

Ok, but he has still added value by choosing the best cow to milk. This is the point I made at the beginning. Passive investors benefit society by shifting capital along the spectrum from the less productive assets towards the more productive assets. Then the most relatively unproductive assets become so cheap that an active investor will buy it discounted and break it up, sell off the assets, and then the capital will be unlocked and can flow to productive uses again.

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent. Some are healthier. Some are more predisposed to falling sick. Capital allocators choose which cows to milk. I don't know where we disagree then, because I agree with all of that.

To the extent you are retired, your life is being sustained by the the current work of others, paid for by your deferment of spending of earnings from your past work. IE, you are still living off of the current work of others. Think about it this way, if every other member of society aside from your family were for some reason to die overnight tonight, does it matter how many ounces of gold you have, real estate you own, or factories you own? I spent more money on taxes last year than I spent on my living expenses for my own family. So if they all died, my costs would go down.

Given a world with only Warren Buffett and his billions of genetic clones, we've be totally screwed because nobody would start a new business. Nobody! Not a single one of them! Never! Why? Because each and every one of them would only buy a business with management intact and a long track record. He is not an entrepreneur. He does not take risks. He does not see holes and fill them. He just buys the cows that produce the best milk. Has no idea how to create a cow that produces the best milk. He's entirely dependent on others to get him cows that can be milked.

I don't know if I "live off of" the people who take home my paychecks. I write paychecks to babysitters, housekeepers, pool service guys, gardeners, electricians, etc... They live off of me more than I live off of them. I could let the yard die, leave the house untidy, leave the kids alone at home... etc... But can they get by without a paycheck?

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much. If you have one productive job in a world with billions of productive jobs, you've contributed a massive amount? I think "per capita" contribution is the relative metric. And a few million dollars on a per capita basis is statistically significant.

I'll stop you right there... I am a passive investor. (I buy shares in companies and also allocate dividends) Buffett is a passive investor. (Berkshire buys companies with management intact and just allocates the dividends) So if I work "like Buffett"... then... what will happen? this is false. neither of you are passive investors. a passive investor owns an index fund. youve made buy/sell decisions on individual stocks, and so has buffett. Okay, I mean in the tax jargon sense of the word. An "active investor" gets involved in the management of the business (doesn't take a "passive" role) and is somebody who really makes an impact. My method of investing is in fact classified as "passive investments" under the tax code. It's a fact. Elon Musk starts a company that can build reusable rockets to save society a lot of money. He starts a company that puts more solar panels on rooftops. He was a driving force behind Paypal. He is a change agent. He is seeing a unfilled need, and then filling in those gaps. Guys like me and Buffett -- we just either buy shares in those companies or buy them. No entrepreneuirial risk taking. We like companies that already succeed with management intact. We just milk the cow, we don't create better strains of cows. If a geneticist can create a better strain of cow, we'll milk that one too.