patrick.net

SQT,

The market looks to be set for at least a short term rally but I doubt seriously boomers will have a lot to do with it either way. There was a really great article (and HARM linked several others that echoed the same sentiment) that the vaunted boomer wealth effect never really existed to begin with. In fact I believe the orig. source was the GAO.

Further, a poster at Ben's did a very effective job explaining why the "extended deadlines" for becoming one is faulty logic as well. Through the expanded guidelines men (born in the 1920's) would still have an insatiable and unprecedented "drive" to procreate well into their 40's! Yeah, right.

I've speculated that boomers broadened definition was done for political pull but when you look at it, the explanation is even more simple than that.

It was done to sell products. Plain and simple. Everything from Beatles albums to Chevy's and then some! Corp. America seized on this like never before and capitalized on this for all it was worth. When the original definition failed to suit their business model it was later expanded. It's just that boring.

Peter P,

My profound disagreements with you about the nature of randomness aside, I think Glen is implementing a primarily Gamma + Vega approach, because Delta should be reflected in the premium very efficiently over that long of a period. I tend to stay away from long-dated options for speculation, but as Glen said, they are effective for hedging.

My profound disagreements with you about the nature of randomness aside, I think Glen is implementing a primarily Gamma + Vega approach, because Delta should be reflected in the premium very efficiently over that long of a period.

In some sense, I agree with you. However, I think Glen is implementing this as a directional bet. He may not be trying to exploit the "mispricing" of the option premium.

I definitely agree that his options (being long-dated, OTM options) have more gamma/vega exposure than delta exposure.

I tend to stay away from long-dated options for speculation, but as Glen said, they are effective for hedging.

I agree too.

Well, VIX is quite low anyway.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=my

Peter, Randy, Glen,

It might be helpful for those that don't walk, talk and sleep option trading if we described some of these terms? Even for those of us that are licensed a "refresher course" might be in order!

www.investopedia.com

Use the search function to look up gamma, delta and vega to get up to speed. I swear these options guys have their own language! My buddy used to trade the "butterflies" on the CBOE (Chicago Board of Options Exchange) and yes, he's a little "out there".

My buddy used to trade the “butterflies” on the CBOE (Chicago Board of Options Exchange) and yes, he’s a little “out there”.

I was interviewing someone (for a programming job) and the guy said that he traded butterflies in order to make time premium. I said I would rather go naked.

At that moment, my manager walked in.

Randy and Peter P:

You're both right. Partly the options are a hedge against my exposure to the market. Partly they are a directional bet. My best guess is that the market will be down significantly by this time next year. (As in S&P down to 1100 or lower.) But I acknowledge the strong possibility that I could be wrong.

If I'm right, then my stocks will probably get hammered, along with the rest of the market. But I'm not selling my underlying stocks because (a) I could be wrong and the market could rally; (b) If I'm wrong, I can take a tax deductible loss on the options (in my taxable account) and the rest of my portfolio should perform decently (in tax deferred accounts); and (c) I am hopeful that even if the market crashes, my stocks will hold up better than the market as a whole, since my portfolio is tilted toward low PE/PB/PCF value stocks.

I have nothing about butterflies. It is great if you pay next-to-nothing in commission.

But if you are charged a ticket-fee for each leg... it has at least 3 legs!

-about
+against

I am hopeful that even if the market crashes, my stocks will hold up better than the market as a whole, since my portfolio is tilted toward low PE/PB/PCF value stocks.

There are "style ETFs" that may better track your value-stocks portfolio:

http://finance.yahoo.com/etf/education/09

However, their options are not nearly as liquid as SPY.

not investment advice

"At that moment, my manager walked in"

Murphy's Law in action Peter! It's always the least trash talking guy in the office that gets busted and it's when you're not even looking for juicy gossip somebody drops a bombshell in your lap! I'm laughing with you, not at you!

Murphy’s Law in action Peter!

Another Murphy's Law: Murphy is an optimist.

Glen,

What you've shared basically describes my mindset over much of the last two years. The reason I take the pains to bother hedging is b/c housing is just such a wild card!

Had we not turned "flipping" into a cottage industry (along with lax lending facilitated by mort. brokers operating out of the trunk of their car) much of this would not be necessary.

Using your taxable account for your hedging options is just good business. I wish more people would look at it that way.

stop spending their money and start hoarding it for retirement

Stop spending? Perhaps in a mirror universe.

Boomers will spend their retirement now and go "huh?" later.

There are “style ETFs” that may better track your value-stocks portfolio:

I'm not really aiming for a perfect hedge since my general view is that if value stocks get hit hard, then the S&P as a whole will get hit harder.

DinOR,

Thanks for bringing us back to Earth (weak pun....Vega).

Peter P,

Damnit. We just keep agreeing even when we try to disagree. Myself, I tend to stay away from SPY options due to what I see as way too much Hedge Fund action in that part of the market. If I had a lot more money to risk I'd consider setting up bets against "hazardous" hedge fund activity in options & futures, and try to mop up against funds that are ticking time bombs.

Here's a question: can Prime Brokers for Hedge Funds take their own "hedge" bets against those very funds their trading for?

SQT,

My understanding is that the Census Bureau shows boomers as "net sellers" of RE over the last 5 years. (But only by a narrow margin). Will they sell of their RE and begin swarming equity markets buying with both fists? Like many here, I am so wore out waiting to see what boomers do or don't do I'm at the point where I couldn't care less!

I could take the low road here by saying they're unlikely to relinquish their access to "grow operations" but rather I'll stay with my earlier comment that boomer wealth has been grossly over estimated.

Remember, I was 1 of 3 reps. to handle 18,000 account relationships the vast majority of which where in their 50's and 60's. Upon their parents death they couldn't wait to get their hands on the money and have it all sold out (much at market lows) and converted to cash ASAP. "Mind if I ask what the money is needed for?" We're going to be debt free! Really? O.K here ya' go! (In as little as a few months later their own accounts started to bleed down to zero). It was a frustrating and thankless job.

Hiding,

That hope only works if boomers die quickly, otherwise, the res tof us are just stuck with huge bills for chronic diseases.

I suppose we can toss them unbearable socialized medicine. It makes me fume that medicare pays for private doctors when the rest of us are stuck with crummy HMOs.

Or in my case, no health coverage whatsoever.

I hope my illnesses and injuries come in the form of an asset rich/well insured entity and easy to demonstrate chain of causation.

Hey guys; I need your help understanding something. I'm on a number of realtors' autoMLS email service and received an email a couple of hours ago. The MLS generated the email because of a price change so it pops my inbox. Then, just a minute ago I get another email and it's the same listing, but now it says "New Listing". Same number....same pictures...how can this be? LOL

Sorry, but I've been dealing with realtors lately and I'm stuck in the "dummy down mode" so I can communicate with them. Surely they don't think I would keep a record of all the houses and pertinent information.

austingal,

The recent run up seem to push some well off empty nester boomers I know to go and buy bigger houses, on the assumption that housing is a good investment. My question would be, now that this asset appreciation merry-go-round ends, is 10,000 sqft for 2 people (because these homes are very children friendly anyhow) ever a good idea?

I predict that the recent trend of adults moving in with their parents will continue unabated. Boomers can keep their mcmansions so long as the gen-x and gen-y kids are paying rent. More multi-generational cohabitation = even less demand for residential RE.

are = aren't

Doug... maybe you'll even see one of Outlook's "The sender wishes to recall this message" emails. Then again, for an automated list, perhaps not.

Astrid: Thanks for the gardening link! I was off at a biology lecture so I missed most of the GMO discussion. This blog is currently the most likely thing to drive me to getting a blackberry.

10,000 ft^2: when you want an indoor tennis court, pool, and other amenities. Although, I prefer more open air designs; I guess similar to courtyards in chinese and roman styles.

I've seen a few indoor pools, but haven't personally seen an indoor tennis court or bowling alley yet. Mostly, these houses just seem to have bigger rooms, esp. foyer and "great room" type areas.

With indoor pools, you can open an indoor skateboard rink for extra income.

requiem,

GMO discussions flare up here with some regularity. I've really enjoyed your imput on the subject in the past.

Mostly, these houses just seem to have bigger rooms, esp. foyer and “great room” type areas.

I like foyers. How about a 2000sqft bathroom? :)

What would you put in a 2000 sqft bathroom? a fountain? a massage bed? a sofa? a bar? a kitchen? bath girls' quarters?

Foyers are very space inefficient and make HVAC hard to control. Foyers are fine for English castles and public buildings, but I don't think they make sense in the average McMansion.

mmm... 2000 ft^2 bathroom?

Let's see... you could have a shower space, and a couple tubs of water at varying temperatures. (Soak in the hot one, jump in the cool one, etc.) I wonder how hard it would be to establish a decent humidity gradient for the different use areas?

SFWoman,

I've thought about getting insurance, but my (rather meager) assets are sheltered in retirement funds, so I just would just go into bankruptcy if anything really bad happens.

Hopefully it's just a short phase of my life. Eventually I'll obtain gainful insurance giving employment or at least gainful employment + my boyfriend's coverage (thank goodness for SF liberalism).

If you want lot of soaking tubs, you should probably build your bathroom over a geologically active location. Maybe on a volcano...

Also, re: health insurance, it's been my observation (from various articles) that it tends not to cover significant expenses. I.e., it will cover basic doctor visits, tests, basic care, etc., but a serious problem involving long-term hospital stay or intensive surgery will quickly punch through the insurance "shield" and bankrupt the family.

What would you put in a 2000 sqft bathroom? a fountain? a massage bed? a sofa? a bar? a kitchen? bath girls’ quarters?

* One large shower stalls (10 x 10)
* One jetting shower stall
* One large tub (10 x 10)
* One cozy tub
* Two large water closets, one with urinal, both with 42" plasma TVs
* Extremely large vanity areas, double sink
* Center courtyard with palm tree

Hey, 2000 sqft may not be enough. :)

BK would come with out rather neutrally for me. My current credit card limits more than cover my sizeable but not huge student loans and I have enough liquid assets to wait out 90 days lookback.

I wouldn't ruin my credit over $30-40K in student loans, but a forced BK sure won't ruin my life. I look at it as my stick my middle finger out on Uncle Sam (who ought to cover higher education and health insurance, like every other industrialized nation) strategy. I could run any business or RE acquisition through my boyfriend or my parents til my 7 years run out.

Bwahahahaha!

I walked around the (idioticly planned) house and when I went upstairs and walked to the end of the hall the door didn’t open. It was for show. A hallway overlooking the living room leading to a door that didn’t open .

Perhaps that was for spiritual reasons. The door leads to a different world. I remember something like that in the Winchester House.

Foyer makes feng shui sense.

SFWoman,

I predict lots of first world long term care will be offshored to Asia.