Family Festivities

Rob and Rachel like to think of themselves as extreme weekend warriors (in a cosmopolitan way). Until the moment when our family expands by a kid or two, we have tried to see as much of the world as possible. Although Seattle has been home for only six months, we've seen more of the greater Puget Sound area than many locals. We have been known to plan and execute weekend trips to Dallas, Oregon after a five minute discussion. October and November have been no exceptions. We managed to pack an absurd amount of activities into eight small weekends including 1 trip to Tampa to see Andy and Joanne, 1 trip to Houston to see Katherine and Jarrod, 1 "Octoberfest" weekend that included bratwursts and a corn maze in Woodinville, 1 lazy weekend of family photos (Photogenic Family), 1 trip to the Oregon coast for Rachel's grandparents' 60th anniversary, 1 birthday weekend for Rachel, and 1 upcoming Mardock Family Thanksgiving Extravaganza (pictures in a week or so) in beautiful Porterville, CA. Below are a selection of pictures and links to pictures from the past few weeks.

Andy and Joanne recently moved to Tampa, FL for a big promotion. We visited them a few weeks ago and saw Myakka State Park (closer than the Everglades). Below, we're crossing a "canopy walk" in the trees. We also saw gators, wild pigs, and about a hundred hungry turkey vultures. We also visited the Tampa Bellamy's favorite coffee shop, Sumatra Coffee, and enjoyed a great iced mocha. Late night the next day we visited a highly rated coffee shop close to USF with the worlds most expensive coffee. I won't revel the name, but I did submit a clever review here. In addition to coffee, Andy, Joanne, Rachel, and Rob intricately carved pumpkins for a few hours and ate very good BBQ at a local dive. Fun times all around. If you're wondering what to do one weekend, go visit Andy and Joanne in Tampa. I'm sure they would be happy to have visitors.

Canopy Walk, leading to a scary-high observation tower

• View from the scary-high observation tower. Rachel felt dizzy
• Myakka pictures: guidebook to Myakka, Andy with four of the hundred turkey vultures, Rob and Rachel posing, gator and marsh
• Very Amazing Carved Pumpkins, part 1 and part 2
• Andy and Joanne torture their cat - graphic image
• Sumatra Coffee in Tampa

A couple of weeks later, Rob and Rachel visited their good friends in Houston. Below are Katherine, Jerrod, Ryan, and Rachel. We also saw Jude, Suzy, Ejituru, and Zach. It was exciting to be back in our home of two years. It always feels strange when you return after a long time. Like everything will have somehow changed. But the only change was that Rachel and I felt a big warm fuzzy inside for being back "home."

The best part about Houston is the people

• Corn maze and kettle corn, part of our little "Octoberfest"

Obligatory beach photo at Yragui 60th anniversary (Rob's always the one taking the picture)

• Jackson has hops, at the beach
• Desi and Jeff - recently engaged - at the Yragui reunion. Congratulations!

Rachel turned one year the same a couple of weeks ago, and family from the Bellamy and Mardock side came over to say hello. Unfortunately, Rob's habit of taking candid snapshots reveals none good enough to post here (unless you want to see a photo of Chris tormenting Jackson with a party favor).

• Rachel's birthday weekend - a trip to Stumptown's new Seattle location

Jeanne made the amazing spice cake from the recent Sunset Magazine cover

Photogenic Family

About five years after our last family photo (from Romania), we finally broke down and took more. Here's one of about fifty poses. To maintain the sanctity of Christmas gift-giving, we're withholding the rest for the time being. In a couple of days we'll post many more pictures of our recent trips to Tampa, Houston, and the Halloween corn maze!

The Economics of Wastefulness

The price you pay for everything is too cheap. Gas should be $10 per gallon, homes should be constructed to last 100 years, and Happy Meals should provide kids with food only, not with a plastic toy.

I’ve had this reoccurring thought for the past several years about how the basic commodities that make up our stuff are too cheap for the benefits they provide. Land, wood, oil and gas, milk, etc. Imagine 300 years from now, when oil is as rare as a Chupacabra, how much they would be willing to pay for a gallon of gas that today costs $3. Likely they would pay upwards of $100 or even $500 a gallon (adjusted for inflation). How annoyed would they be, knowing that we wasted millions of gallons of high-quality gasoline on NASCAR.

I believe managers and policy makers diminish the importance of resources in their financial analyses. Perhaps they should add an additional discount for a factor I call “what would people 300 years from now pay for this.” When performing NPVs and cost-benefit calculations, analysts should be concerned not only about the current market’s supply and demand curve, but future generations’ as well.

The wastefulness of resources is especially a problem in the housing industry. Since post WW-II, new homes last for only about 20 years before they become unfashionable and torn down for more fashionable 20-year house. Isn’t it a waste that all of those materials were mined, chopped down, or chemically composed for a 20-year house? But the problem of wasteful economics is prevalent in all industries. Pizza companies, oil companies, car companies, you name it. The main concern with business leaders is providing the cheapest product at the highest margin the current market will accept. Little concern is given to future generations and how they would much rather use that barrel of chemicals not to create Happy Meal toys, but to create a future power turbine (or maybe a Star Trek phaser).

This is a topic that could easily be developed into a doctoral thesis. So many areas of this theory to explore. Here’s another tangent: Saudi Aramco (biggest, scariest oil company of them all) has reached a point of inflection in its oil extraction rates. Saudi oil production is decreasing, not increasing (as our population and demand is increasing)…

Three Clever Sites

1) Pandora Radio (www.pandora.com) "Create your own radio stations."

This is especially important if you live in Seattle, Houston, or other cities with miserable radio stations. Pandora asks you to "create" a radio station by asking for a song or artist. Then, based on clever algorithms, it plays you a whole string of similar songs. If you don't like one of the songs it plays, you can give it a "thumbs down," and your station grows smarter. I currently have 6 stations. I've found "Coldplay Radio" and "Jack Johnson Radio" to offer wonderful suggestions. I'm still working to perfect "Muse Radio" because Pandora seems to think Muse is related to some pretty wacky stuff. One opportunity for Pandora is to allow listeners to cater their musical tastes to attributes other the sound of the song. For instance, a station that only plays music from the Mid-Atlantic or Northwest. Likewise, my "Caedmon's Call Radio" station doesn't play other CCM music - it actually attempted to play Shakira!

2) FlightStats (www.flightstats.com) "Flight data galore"

Truly the best flight data website in existence. Before you book your flight - or before you go to the airport, check out FlightStats to find out reliability of your route, flight, airport, etc. Chris (brother-in-law) works on FlightStats and promises that its current functionality is merely the beginning. Great things are on the horizon for this project. I want to buy into that company's IPO. Check out Chris' post on FlightStats (I commented about how it saved my day last week).

3) Wayback Machine (www.archive.org) "You are what you write."

I've admonished my little bro's and sisters that what they write on their social networking sites are published forever on the information superhighway. The Wayback Machine is easy proof of this. Wayback has literally archived the internet. Enter a website you want to see from 2002 and it will show you. See what Banana Republic was selling last year. One fun hour was spent reliving Enron. Check out its progression from the 1990s websites until the day before the company's collapse. Note the company news that says Jeffrey Skilling is leaving Enron, but "it's all okay. Enron is a solid company." What a hoot!

A Fun September

Camping with the Bellamy girls includes, among other things, full-service espresso drinks.
Chris working his stovetop milk frother:

Jeanne working her espresso Presso:


Recent trip to Leavenworth, WA (cute Bavarian town in the Cascades).
Rob's favorite people, Rachel and Jackson:

Jackson's favorite driving position:


Rob and Rachel's 6th anniversary at Cannon Beach, OR.
Our oceanfront lux view from the Stephanie Inn:

Stephanie Inn from the beach. Our room is 2nd floor, first room on the right of the middle.

Subprime Meltdown

The most important Socrates quote worth remembering may be “the more I know, the more I know I don’t know.” In the spirit of this sage advice, I proudly admit my ignorance when it comes to interest rates, credit management and derivatives, and debt securities. I want to know. It’s all very fascinating. I’ve found the recent “credit crunch” news to be especially interesting.

An interesting byproduct of the subprime meltdown / “credit crunch” is that, once again, we see just how interconnected the financial markets are. We see how increased credit availability popularized HGTV and home flippers (my parents) who increased the price of homes, which makes home ownership impossible for anyone except prior home owners (see previous post), which caused home prices to drop, which impacted subprime borrowers and their reverse amortization mortgages, which impacted credit availability, which impacted buyout firms (who else would buy Chrysler) and hedge funds, which is impacting your 401(k) (especially if you’re a teacher or firefighter), which is contributing to lower sovereign debt ratings of Romania and Argentina, which will impact a simple Transylvanian peasant trying to make a living raising chickens, which will cause the price of poultry to increase, which may contribute to world hunger, suffering, World War III, and the end of this common age. Pretty fascinating!

Financial markets and investment product complexity reached new heights during the 1990s boom years. As the market began to cool and plummet following the tech bubble burst, investment managers took their money elsewhere. Since every segment of the economy was suffering, managers began to invent new ways of seeking alpha. If managers couldn’t rely on tried and true methods of earning returns on their investments, maybe they could print their own money. Enter the arcane world of financial derivatives, credit, securitization, and the ills we find ourselves in today. Suddenly debt became a much more interesting possibility as post pet.com level equity returns leveled off.

Debt could be a way to keep growth alive. But where to start with debt? Real estate! Real estate is tangible – so much more tangible than a dot-com with fictional cash flow. People need a home. Shelter is a basic need. It’s inelastic. People will fork over anything for a place to sleep. But the demand for a $100,000 home is limited by the number of qualified borrowers. The private sector, realizing that growth is everything, asked a pivotal question: “how can we increase demand?” Answer: increase the number of borrowers. Take away those unpatriotic barriers to home ownership. Credit problems? Bankrupt? No job? No documents? No problem.

But the banks and mortgage lenders themselves knew it was a problem. They didn’t want to take on these risky loans. Wall Street was one step ahead of them. Securitization: pooling assets together (like home loans), putting a bow on it, and selling it to someone else. This type of security would be dubbed a Collateralized Debt Obligation (the home is the ‘collateral’). CDOs would allow banks and mortgage companies to unload their risky loans onto Wall Street, who would then sell them to hedge funds and money managers. Now more home owners took out loans to “flip that house” to earn a quick $100K, and suddenly that $100,000 home is $500,000. CDOs were a great way to diversify a portfolio: non-equity securities with equity-like returns. When those really bad loans on the bottom of the CDOs went into foreclosure, the CDOs began to lose value. When the CDOs lost value, hedge funds lost value, and totally non-related industries and securities lost value.

Now the financial markets are extremely volatile. Disney’s short-term commercial paper is worth less than it was one month ago, and last week, investors were demanding more of Countrywide’s commercial paper than it cost Countrywide to service its own debt. In essence, its asset became a liability.

Experts with less foresight than I predict that home prices will “level off sometime in the near future.” But homes aren’t like stocks. You can’t buy back homes and add value like Intel can buy back stock to add value to other stockholders. You need a liquid market to accurately price something. But if there is no market to buy homes, why would anyone pay $800,000 for a poorly constructed stucco track house (with hardwoods and granite counters mind you). Home prices will continue to decrease because people simply can’t afford a home. No more free money and no-document mortgages.

The media will tell you home prices decreasing is a bad thing, but if you take yourself away from the drama of the situation, it’s clear that one can’t expect home prices to continue to increase indefinitely when inflation-adjusted median income is stagnant or decreasing. When income and the things you buy with that income go in different directions, and there’s no credit (fake money) to fill the void, you can expect that home price to keep decreasing until poor people like Rachel and myself can finally afford it. In the meantime, that lack of credit is hurting completely unrelated people like the chicken farmer in Romania. It’s true! Because of HGTV, home flippers, Wall Street, lax regulation, and myopic policymakers, that Romanian chicken farmer can honestly no longer afford the cost of credit to allow him to increase capacity or buy an apartment. He’s probably considered a subprime borrower anyway…

Summertime in the NW

So many things to do, so little time. Washington has a plethora of fun day trips, and we mostly just have the weekends to experience as many as possible before rainy season comes our way. The other week, the Mardock gang (Mardocks / Steeles / Ratzlaffs) descended upon Whidbey Island for a weekend at Camp Casey. A few decades ago, the US military sold off Camp Casey to the highest bidder - Seattle Pacific University. As an administrator at SPU, Rob's uncle reserved a weekend in the swanky "Colonel's House" for a reunion.

The other main event of the summer was Andy and Joanne's wedding and move. We had a great time saying "welcome to the family" and "don't let the door hit you on the way off to Tampa" all within the same month. The Bellamy clan (Woods / Mardocks / Bellamys / Forbes) celebrated their departure at Chris and Jeanne's place where once again, Jeanne created some Sunset Magazine-worthy deserts.

Snoqualmie Falls

Rachel, Andrea, Kelleigh, Grant, Colonel's House at Camp Casey on Whidbey Island

Jackson, Rob, Dad & Deception Pass (Whidbey Island)

Jeanne and her famurs turtle cheesecake (Andy's smiling mug in background)

Alternative Nation

I'm feeling a little bamboozled, having now moved to what many consider to be the alternative rock capital of the world, only to discover that Seattle radio stations contain a dearth of my much needed musical sustenance.

Enter the most self-proclaimed ambasadors of the alternative rock capital of the world:
103.7: Claims to play "world class rock." Emperically, most songs belong in the same genre as "I Can See Clearly Now the Rain is Gone, Pave Paradise & Put Up a Parking Lot," and the newest and lamest Dave Matthews songs available, such as "Beautiful Baby and Stand Up."

107.7: Plays 8 hours of music, 8 hours of commercials, and 8 hours of morning, mid-day, and afternoon DJ tomfoolery. The topic of conversation the other morning was a Swiftian diatribe about how legalizing prostitution would bring about a more stable family unit.

90.3: What I like to call "Myspace Radio." Music so random and bizarre, my simple words can't describe it. Poetry reading to an African drum beat, followed by a hard core punk / ska trio. Tollerable jazzy tunes mixed throughout.

What Seattle lacks in music, it makes up for in dialogue. Not even in Houston, where every station is owned by Clear Channel, have I heard as much small-talking, questioning, answering, pondering, and laughing as I hear in Seattle.

The best alternative radio station in the country may be 94.7 in Portland, OR. Check out their website, where you can listen no matter where you live. (I requested a Ben Folds song when I lived in Houston). Austin, TX also has a truly world-class alternative rock station (101.5).

Mr & Mrs Belldar

We wish many happy nights (and days) to Andy and Joanne. Their vows exchanged, Andy and Joanne are off to an exciting start as a married couple. Their wedding was one of the most fun we've been to - and not just because it was family. (Any wedding that avoids "Celebration" and "YMCA" automatically earns bonus points). The greatness was due to the combination of great weather, low-key environment, excellent food / cake / beverages, and great conversations with over a hundred down-to-earth cool people. We were both thrilled to have no responsibilities other than looking nice and socializing.

Zany Bellamys: Brecia, Heather, Jeanne, Rachel, Andy.

Good looking couple and Pastor Rick

Starter Home Blues

A quick back of the envelope calculation reveals that virtually no one can afford a home. Below is the average household, but with no children. Both working adults are young, receive health insurance, and have no student loans. In other words, the most "financially ideal average household."
All in very gross approximations:

Average household salary:	$60,000
Less 25% Federal Tax:	$45,000
Less state tax & SS:	$40,000
Monthly Equivalent	$3,333
Less food, gas, insurance,
utilities, etc.	$1,600

That leaves the average household with about $1,600 to a) save for retirement (experts suggest young workers max out their 401(k) limits, currently $15,500 / yr or $1,300 / month), a child, life insurance, coffee addiction, a rainy day, and b) pay monthly mortgage payments.

Say the misses wakes up one morning and - taking my father's advice - says, "I think I'll make more money. Yes, I think ... yes, that's what I'll do. Make more money." Her boss, agreeing with her sound logic, increases her income 133% to $60,000. With their household income now at $100,000, well above the 25th percentile of all American households, this fictitious family should have no trouble affording a home. Unfortunately, because the family is young (or because they were stuck in the Peace Corps for two years) and this would be a first home purchase, the couple still cannot afford a house in the hyper-inflated market.

If any young couple wishes to buy a home where they work (not move to Porterville or Detroit to pursue a career in home flipping), then it takes superstar circumstances: income in the top 10% of all Americans, rich parents donating 10% for a down payment, or buying a home and renting out the downstairs to a random family from Craigslist. This is not the way our parents or grandparents experienced first-time home buying. For many of them, the difficulty of buying a $450,000 first home is inconceivable because they are already sitting on an $800,000 track home.

On a similar vein, Rachel and Rob find it tragically amusing that home sellers can't seem to find anyone to buy their $500,000 nondescript homes with hastily installed granite counters and hardwood. We know that the intrinsic value of the home is probably closer to $200,000, and that the other $300,000 is "entitlement equity." If you want your home to sell, don't lower the price by $10,000, lower it by $150,000. That's still a reasonable return on investment.

Open House

We are happy to finally post pictures of our furnished house. Granted, collecting furniture hasn't been a priority over the past few years, but do note the groovy rugs we found at the Pottery Barn outlet in San Marcos (TX). The upstairs "master bedroom" (not pictured here) is still a work in progress due to the bizarrely constructed 1940s staircase that prevents shimmying up anything bigger than a bookshelf.

Couch from Austin-American Statesman.com, rug from Pottery Barn outlet, coffee tables from Craigslist. So everything together is like 50 bucks.

We have cable tv, the first time ever (except in the Peace Corps ... in Eastern Europe)

Out guest room, in many ways, is much nicer than our "master bedroom" which has no dresser.

Our dining room has a view of Puget Sound, Vashon Island, and Mt. Rainier.

Our retro bathroom ensures a fun and invigorating bathing experience.



Other than our home, I must say that we simply love our area - West Seattle. The other Sunday we visited the West Seattle Farmer's Market, picked up a glass of strawberry-lavender lemonade, a 4 lb. marionberry pie, some veggies, a bouquet of flowers, and samples of goat cheese. Above us stood the stunning, snow-capped Olympic Mountains, across the street one of 5 amazing local coffee shops (serving Stumptown and cupcakes). We feel very fortunate to be living in a resort-like community. If any of this sounds fun, come by and stay the night! We like company.

Mid June Update

...sort of tired these days. Rob just started his new job in Seattle and Rachel has started her new job in Tacoma. We live right in between. This still follows our "live where you work" anti-urban sprawl ideal - at least as much as possible. We've now realized that Jackson is a chub - an 8 lb yorkie is twice the size as a normal "teacup" yorkie. Jeanne is currently visiting us from Portland. Rachel and Jeanne made apple pies - we gave one to our neighbor as a "welcome to the neighborhood but in reverse" gift. Eric (the neighbor) had taken our mail and newspapers from our front porch last week so potential thieves wouldn't know we were gone. I just sent an e-mail to my old Peace Corps colleagues. I'm sure we're all making the world a better place in our own ways. I say that only half jokingly. The other half is serious - our team of volunteers was pretty fun, talented, and motivated. Back to our house: it smells much better. Yes, old houses have a bit of a funk. But nothing that those Pier 1 scenty-oily-sticks can't fix.

This Old House

A few days ago we said goodbye to our friends in Houston and boarded a plane for Seattle (special thanks to Katherine, Jerrod (visit their blog), Ryanne, and Jude for your help, encouragement, and party-planning skills). The movers had already come, packed, loaded up boxes and our cars. On the plane, sedated Jackson was a trooper. He didn't make a sound until we exited in Seattle. At which time he started squealing like a pig, reminding us that he hadn't gone to the bathroom in about 7 hours.

We are now officially Seattle residents. Home is ours for the next 13 months. It's tucked into the Fauntleroy area of West Seattle, between downtown and the airport. We have two extra bedrooms, an extra bed, and extra sleeping pads, so we hope our family and friends visit us often. Consider it Rob & Rachel's Bed & Breakfast. Caffe Ladro is just down the street, and we have a nice little view of Puget Sound, Vashon Island, and Mt. Rainier.

Photo tour of our new (rental) house:
White picket fence
Front door & yard
Side angle
Dining room
Living room
Another dining room angle
Cozy kitchen
Retro bathroom
Bedroom # 3 (office)
Master bedroom (loft)
Another master (loft) angle
Back patio
Back of house
View of Puget Sound

Winding Down in Texas

Rachel and Rob have lived, learned and grown much these past three years in Texas. Many new friends, coworkers, and classmates have enriched our lives considerably. We now move on to a new adventure in Seattle. The movers come tomorrow, the plane leaves the next day. A bit of uncertainty and excitement remain on the horizon. After five years living in Romania, Austin and Houston, we are now returning to our native Pacific Northwest. What a journey. Drum Bun!

Rice Graduation

Rob is done with grad school - here is proof:



(PS - Rachel was done with grad school back in 2005)

We Don't Need No (more) Education

Quick update to family on what you probably already knew:

Rachel is now Rachel, CPA. Her certificate finally came last month, so she is fully licensed to do your taxes or be called to court as an "expert witness." Ask her about energy derivatives and FAS 133. Once you get her going, she won't quit. Its like talking sports to her. She's also a graduate of The University of Texas, McCombs School of Business, Master in Professional Accounting.

Rob just finished his MBA from Rice University's Jones Graduate School of Management. I'm not about to toot my own horn, so I won't say much, except that I'm happy to finally be done. Without a doubt the best two year investment in my young life; I now know how to create a forward interest rate curve, value your company, and identify your companies' strengths, weaknesses, and how to fix them.

Prior to graduate studies, both Rachel and Rob are proud graduates of George Fox University in Newberg, Oregon.

GOOG 411

A very handy tool for road warriors and soccer moms alike: 1-800-GOOG-411. The good folks at GOOGLE (NASAQ: GOOG) have integrated their online service with a toll-free number that lets you get directions, phone numbers, and information about almost every company in America. For instance, you're driving through Centralia, WA. You know there's a McMenamins somewhere off I-5, but you don't know where. A quick GOOG-411 cell phone call reveals its location and connects you for free. Repeat this for almost any situation you find yourself in. This is yet another way that technology is making the world a smaller place.

News Junkie

According to the Pew Research Center, only 4% of America potentially (but not likely) knows more current events than I do. What do I do with this vast pool of mostly useless knowledge? Maybe one of you will be a contestant on a game show, and you'll use me as your "phone a friend."

I'm sure Rachel would score highly too. She's become quite the current events buff since the Peace Corps provided us with 2-years worth of Newsweeks (one of the "perks" of service to our country). She's busy creating energy forward curve benchmarks, otherwise her score would be listed here too.

Where do you score? Check it out here: Pew News IQ Quiz

PSA: Allergy Season

If you have allergies, give Allernone a try.

As a kid I lived with horrible allergies, 365 days a year. I downed Benadryl, Claritin, and Allegra, which caused my heart to race, gave me bad dreams, and required that I never miss a dose. Eventually, an allergist (ie, a “super expensive” luxury) concocted a unique mixture of inactive allergens that she shot into my arm every week for three years. When I moved away from Texas, my allergies went away. Six years later (I thought I was “immune to all allergies” by this time), we moved back to Texas, and the allergies came back overnight. It was horrible. Rachel was frustrated, maybe she was reconsidering her 3 year marriage with me – I don’t know… A lady at Whole Foods begged me to try Allernone. “But it’s $30 a bottle!” Her response: “Do it for me!” Unnecessary story short, I tried it, and it worked like a charm. 3 years later, my allergies are nonexistent. All I do is take about 10 drops of Allernone, 2x a day (I’m down to 1x per day), and I have no allergies whatsoever. Dog, ragweed, mold, whatever. Allernone uses the same ingredients in expensive allergy shots, but instead of injecting it into your arm, you drop it under your tongue. It doesn’t make your heart race and it doesn’t make you sleepy, because it isn’t medicine. It’s just inactive allergens that your body uses to build up an immunity. Long story short, if you’re suffering like I was, give this stuff a try. I laugh when I see those ridiculous Claritin commercials, because they are so expensive and ineffective compared to Allernone.

Scootin Around Texas

A few weeks ago, Rob and Rachel visited the San Jacinto Monument. Not many people know it exists (even in Texas), but it's worth a trip if you happen to be visiting Houston. At 567 feet, it's 12 feet taller than the Washington Monument, and situated in the actual spot / swamp of the battle where Sam Houston exclaimed, "Remember the Alamo!" Given its size and the sacredness of its location, we found it a little bizarre that it was so unkempt. Let's just say there is a lot of opportunity for improvement around the facility. For starters, the sidewalk that surrounds the reflecting pool is sinking into the water...







Recent photos of Jackson for Grandma (Carol):
Jackson at 4 months
Jackson eating flowers
Jackson getting air

From yet another trip to Austin (3.30)
Rachel at the Blue Bell factory
Rob at the Blue Bell factory
Bluebonnets in Hill Country

Houston Rodeo and Livestock Show

For now I have just posted pictures from the event - but seriously, the calf scramble was the funniest part of the rodeo so I might have to at least explain those pictures...


Rob wore his Texas shirt to fit in with the cowboys.


The calf scramble... a bunch of kids are given the challenge of wrestling a calf to the ground and pulling it into the middle of the arena - If they succeed, they are awarded $1,000 to buy their own calf to raise.


Rob was most excited about the fried food offerings of the rodeo. He ate a bag of fried Oreos - they will seriously fry anything.

Off to Fredricksburg

In honor of Rob's last day of Spring Break (and his birthday), we took a little trip to Fredricksburg, TX. For those of you who are not familiar with hill country, it is about an hour and a half west of Austin. We took Jackson with us. He does okay in the car and loves meeting new people. It was a beautiful day!

We came home and enjoyed a nice long weekend of watching Smallville episodes on DVD and checking out rental properties in Seattle. We also went to a swanky restaurant called Brennans to celebrate Rob's birthday!



Here is one more picture of Jackson... We will find out on Saturday for sure, but I'm pretty sure he's about 4.5 lbs now. He just keeps getting bigger and bigger.

Deconstructing WACC

"Business School is WACC!" Google that in quotes. Looks like this catchy Urban Outfitter-like jingle has never been used before in the capitalist history of the world. You heard it here first. I would TM it, but it doesn't really identify a product or service offered by Rob & Rachel Co.

What is WACC (weighted average cost of capital), how do you calculate it? You may not care, but it is sort of interesting. It's a great way to impress potential employers if they ever cared to ask how one values something. In short, to determine the value of something that makes money (like a rental property, a baseball player, a dump truck, or a company), simply add up the cash you expect to get. Then divide the cash by a small amount. That's the value. Why divide? Time value of money. For example, if inflation stayed a constant 3% for the next couple of decades, then $1M in 2020 would be worth $681K today. You have to divide future cash by something. In the world of valuing companies (or anything with a debt and equity component), we use an average of the cost of debt and cost of equity - hence WACC:

[equity/(equity+debt)]*cost of equity + [debt/(debt+equity)]*cost of debt*(1-tax rate)

Here's the step by step on how to calculate from scratch:

1. Equity, debt & tax rate = available and easy to find. Equity & debt are in actual dollars, tax is a percentage.
   
2. Cost of Debt = percentage of what you're paying for your debt / loans. If it's a home, what is your loan interest rate? If it's a company, how much are you paying for your debt? This is super easy, found in the 10K or easily calculated by taking interest expense divided by debt. It's usually less than cost of equity.
3. Cost of Equity = A fluffy but important (percentage) measure of how much equity-holders (investors) expect to be compensated for gracing you with their money. If you search the textbooks, you'll get a doctoral thesis on whether or not humanity can accurately measure cost of equity. Never mind the fluff. Use the CAPM method of calculating cost of equity: Rf + Beta*(Rm - Rf)
   

• Rf = Risk Free Rate. Basically Rf = interest rate for treasury bills. Granted, in 50 years when China dumps our bonds on the world market, our t-bills won't be quite so risk free.
• Rm = Market Risk. Use whatever you think is a good representative market for that which you're valuing. If it's a company - use an appropriate benchmark like S&P 500 (if you're valuing a big company), NASDAQ (if valuing a tech company), or Fidelity Aggressive International Fund (if valuing a small Romanian toy company).
• Beta = measure of risk for your firm. Obtain from Yahoo! Finance, or calculate it yourself - it's very fun!
• Download onto Excel the daily returns for your firm & the daily returns of an appropriate market benchmark.
  
• Calculate the daily percentage change for each
• Beta = Covariance (% changes for firm & % changes for benchmark) / Variance (% changes for benchmark).
  

I proudly admit that knowing how to decompose WACC sealed me an internship last summer (even though, ironically, Intel discounts at 15% for everything).

Yet Another Roadtrip

Up to Austin this time. Had a weekend, took advantage of it. No great stories to speak of, but Trudy's was amazing as always. Whole Foods' HQ + flagship store was great, and Town Lake was a blast with little Jackieboy.

Trudy's - our favorite Mexican restaurant in Texas. If you're only there once, get the stuffed avocado with suiza sauce (in foreground).










Town Lake is always a fun destination if you are visiting Austin. If you visit between July and October, you can see the bats.

Galveston Field Trip

The day after Aggieland, we ventured down to Galveston... had no idea it was during Mardi Gras (Texas-style - just as much drunken debauchery, but with a redneck tinge). Needless to say, we tried our best to avoid the trashy beer fest and stick to the beach. Galveston ... what can you say. It's there. I bet it would have been a rockin' town if the 1900 hurricane didn't wipe it off the map.

Running into the sunset










Obligatory hold-out photo










Dirty dog

Road Trip to Aggieland

Whoop!

Hey, let's go to College Station! It's a lazy Saturday, not much going on (final exams maybe...). And bonus points - we'll have something to talk about with our Aggie friends and coworkers other than, "so uh, how about that Freebirds. They sure do make a mean burrito." Often misunderstood, Texas A&M to many (including Rob and Rachel) seems like America's biggest cult. It is home to over 40,000 students any given year, but the school does such a great job of integrating every one of them that after graduation your classmates end up being lifetime friends and business contacts. Even the two- or three-dozen Aggies at Rice's MBA program share a kindred spirit that the rest of us can't quite understand.


We return to Houston super impressed with pretty much everything and everyone. We started our day at Messina Hof Winery where we enjoyed a fabulous yuppie lunch. We highly recommend the place. Their facility reminds us a lot of a typical vineyard in Oregon, but they also have a 4-star restaurant and a bed and breakfast. If we were in Texas another year or two, we would have enjoyed a restful weekend stay.

Not sure what else to see, the server recommended we walk our dog around Barbara Bush's pond. Okydoky... not sure what that means, but it's next to the Bush presidential library. We never saw ourselves visiting the Bush library in College Station of all places, but it was right there - when else would we ever go? We paid our $6 and ran around the museum. We were very impressed - one of the finest museum's we've been to (and we have seriously been to a lot in the seven years we've known each other). George was a great guy - hopefully he will be known as one of the best 1-term presidents.



After driving by Kyle Field (in Rob's opinion, in the pantheon of college football stadiums, this is in the top 5), we stopped for a caffeine pick-me-up at Starbucks, and ate dinner at a local dive, the Dixie Chicken! Yes, it was a dive of a place, but it's so popular! We are sure to bring it up in conversation with any Aggie we run across in the future.

What a good day... who knew College Station was so fun and quirky...

Li'l Jackson Hole

We're not going to be like "those people" who talk about their dog all the time ... but our family and friends asked for more pictures of little Jackie Boy. Click here:
Acting coy
Family photo
Attack dog
Those silly yorkie totes

F-Score

Want to earn a free buck? How do Wall Street analysts justify their rock-star lifestyles? By taking their job seriously. They take the time to learn about obscure advances in finance and use quantitative tools discovered by PhD students from around the country to outsmart the average Main Street investor. One such tool is the "F-Score." A quick background and summary:

• For years, smart people (Fama, French, et al) have known that companies with low market to book ratios outperform companies with high market to book ratios. This in itself is no doubt a tool that traders look for on their Bloomberg screens.
• Among low M/B (or B/M) stocks, Joseph Piotroski sought to discover some characteristics that separate the winners from the losers. I'm guessing he ran a whopper of a regression with dozens/hundreds of lagging ratios and indicators against prospective stock returns.
• In the end, he came up with the insanely simple F-Score model that Wall Street uses (among many other models) to help allocate their portfolios.

And here it is:
Look at the most current financial statements for a company. Ask yourself the 9 questions listed below. If the answer is "yes" enter a 1, "no" enter a 0:

1. Is net income positive?
2. Is operating cash flow positive?
3. Is operating cash flow > net income?
4. Has return on assets increased (from the prior year)?
5. Has gross margin improved?
6. Has asset turnover improved?
7. Has LT Debt / Total Assets decreased?
8. Has the current ratio improved?
9. Has there been no new equity issuance?

Sum up the numbers. Buy and hold companies with a score of 8 or 9, and short stocks with F-Score of 0 or 1.

Seriously, a Female President?

Rachel wanted her colleagues to know that, indeed, the "world" is ready for a female president. However, whether or not "America" - the most enlightened corner of the free and democratic world - is ready for a female president, remains to be seen. Though we don't have the time to exhaustively research the many female presidents and prime ministers of the world, I (Rob) do know that since 1960, the following countries have had female presidents or prime ministers: Sri Lanka, India, Israel, Argentina, Central African Republic, Great Britain, Portugal, Bolivia, Dominica, Iceland, Norway, Yugoslavia, Malta, Netherlands Antilles, Philippines, Pakistan, Lithuania, Nicaragua, Ireland, Ecuador, Haiti, East Germany, Burma, Bangladesh, France, Poland, Canada, Burundi, Rwanda, Turkey, Bulgaria, Bermuda, Guyana, New Zealand, Switzerland, Mongolia, Panama, Latvia, San Marino, Indonesia, Serbia, Georgia, Austria, Liberia, Chile, Germany.

Several countries have had more than 1 or 2 female heads of state. Yes, that list includes such bastions of female empowerment including Pakistan, Indonesia, and Bangladesh. This list also does not include queens or heads of state prior to 1960. I can name another couple biblical heads of state (or "kingdom"), as well as a couple leaders of ancient China and medieval Europe. Probably the history books of most other countries list other female heads of state.

Is the world ready for a female president? Yes. Is Good Ole' America? I don't know, what do you think?

Sharin' the Love

We have a new addition to the family! Li'l Jackson! A little 2 lb bundle of spitfire and nervous joy. We're not sure of his full name yet, but we're leaning towards Jackson Cannery Mardock. We will have more to update soon. Maybe tomorrow after our first funny story.































Update: Night two was very bad. Who is the poorer of the two: poor Jackson, missing his mom, dad, and brother ... whining, whimpering, and barking all night long? Or poor Rob and Rachel, who missed out on a good 3 - 4 hours of sleep? This will be great practice for children!

Update # 2 : Li'l J-Dawg and his parents are doing much better now. Here are some photos: 1, 2, 3.