The Big Picture for the Week of May 27, 2012

It looks like the ordeal with the Gladiator Fire is over (it would not be a Black Swan if something did happen). A week ago there was no certainty about any aspect of the fire but the uncertainty seemed to fade slowly over the course of the week–thankfully. This was the first Type One Incident to threaten our area so obviously it was my first Type One Incident. There was another large fire in 1972 that I believe predates the current typing system. I made certain decisions on preparing for just in case based on trying to avoid Walker Rd turning into a parking lot under a get out now type of evacuation. Going in it was obvious that not everyone would be happy regardless of the outcome–this is true of every decision made by any fire chief on any topic. We’ve had very little push back but there was a little which again is to be expected. The interesting thing is how some of the biases and fallacies we talk about with investing came out during this event, an event that would seem to be much different than the process of managing an investment portfolio. This isn’t necessarily a shock but it is interesting to see these sorts of behaviors exhibited in a completely different context. One final note (hopefully) on the fire is the extent which I learned a lot, was able to get a structure protection plan devised by people with far more experience and (hopefully) raised the profile of our department made this a net positive despite some serious uncertainty early on. Unfortunately fires this...

The Big Picture for the Week of May 27, 2012

It looks like the ordeal with the Gladiator Fire is over (it would not be a Black Swan if something did happen). A week ago there was no certainty about any aspect of the fire but the uncertainty seemed to fade slowly over the course of the week–thankfully. This was the first Type One Incident to threaten our area so obviously it was my first Type One Incident. There was another large fire in 1972 that I believe predates the current typing system. I made certain decisions on preparing for just in case based on trying to avoid Walker Rd turning into a parking lot under a get out now type of evacuation. Going in it was obvious that not everyone would be happy regardless of the outcome–this is true of every decision made by any fire chief on any topic. We’ve had very little push back but there was a little which again is to be expected. The interesting thing is how some of the biases and fallacies we talk about with investing came out during this event, an event that would seem to be much different than the process of managing an investment portfolio. This isn’t necessarily a shock but it is interesting to see these sorts of behaviors exhibited in a completely different context. One final note (hopefully) on the fire is the extent which I learned a lot, was able to get a structure protection plan devised by people with far more experience and (hopefully) raised the profile of our department made this a net positive despite some serious uncertainty early on. Unfortunately fires this...

Sunday Morning Coffee

This week’s Striking Price column in Barron’s (the column about options) had a recommendation from some brokerage firm of buying Bank of America (BAC) common and selling the January 10 call and selling the January 7.50 put for a total premium of $1.59 with common currently at $8.83. That all sounds like very juicy options premium but anecdotally speaking it seems like with trade ideas like this the frequency with which the stock goes way above the $10 strike price plus the premium (so in this case $11.59) or way below the $7.50 and factoring in the premium is shockingly high. This typically results in being stuck in the position if this starts to occur fairly early on when the volatility can go up (thus increasing the price) but before there is any meaningful decay in the option premium sold. And as a function of Murphy’s law the stock won’t come back in between the strikes until the options are rolled forward (meaning rolling forward frequently does not go well). I wrote about this same thing a few years ago with a trade on Mastercard and selling calls that was recommended on CNBC. This is just anecdotal so do with it what you want. Alan Abelson had his funniest line ever in this week’s column: Silver, on the other hand, strikes us an awfully good hedge against capital gains. Yesterday the fire department had its annual pack test. This is where each of the firefighters must go three miles on a track wearing 45lbs in 45 minutes or less. This is an annual requirement for fighting wildfires. I beat...

Sunday Morning Coffee

This week’s Striking Price column in Barron’s (the column about options) had a recommendation from some brokerage firm of buying Bank of America (BAC) common and selling the January 10 call and selling the January 7.50 put for a total premium of $1.59 with common currently at $8.83. That all sounds like very juicy options premium but anecdotally speaking it seems like with trade ideas like this the frequency with which the stock goes way above the $10 strike price plus the premium (so in this case $11.59) or way below the $7.50 and factoring in the premium is shockingly high. This typically results in being stuck in the position if this starts to occur fairly early on when the volatility can go up (thus increasing the price) but before there is any meaningful decay in the option premium sold. And as a function of Murphy’s law the stock won’t come back in between the strikes until the options are rolled forward (meaning rolling forward frequently does not go well). I wrote about this same thing a few years ago with a trade on Mastercard and selling calls that was recommended on CNBC. This is just anecdotal so do with it what you want. Alan Abelson had his funniest line ever in this week’s column: Silver, on the other hand, strikes us an awfully good hedge against capital gains. Yesterday the fire department had its annual pack test. This is where each of the firefighters must go three miles on a track wearing 45lbs in 45 minutes or less. This is an annual requirement for fighting wildfires. I beat...

Repeated from Sunday; Finally some fire department business. In order for Walker Fire to keep up with how the fire industry is evolving we had to buy a vehicle for fighting structure fires. Our previous orientation had just been wildland in terms of our vehicles and our training. This is changing. We have nine firefighters going through structure training over the next few weeks and the truck pictured will be Engine 86 once it is fully stocked. Engine 86 is a 1986 International that we bought from out of state and it is in fantastic shape (no rust coming from back east) with very low mileage. It was obviously babied and given that we had to do something we really lucked out. The new truck will play a huge role for us. You probably know where I am going with this. The truck cost $30,000 and we have allocated $10,000 more for stocking the truck with hose, nozzles and other equipment. In the past, blog readers have been very generous toward the department for large capital outlays like this and I hope that will be the case again. There are two ways to donate. Our web page can accommodate credit cards or a check can be sent to; Walker Fire Protection Association5881 S Walker RdPrescott, AZ 86303 The website does not allow for specifying the reason for the donation and there can be no guarantee that the check memo will be looked at but there is a way to track how much comes from the blog that I would ask anyone kind to make a donation to do. Whatever...

Repeated from Sunday; Finally some fire department business. In order for Walker Fire to keep up with how the fire industry is evolving we had to buy a vehicle for fighting structure fires. Our previous orientation had just been wildland in terms of our vehicles and our training. This is changing. We have nine firefighters going through structure training over the next few weeks and the truck pictured will be Engine 86 once it is fully stocked. Engine 86 is a 1986 International that we bought from out of state and it is in fantastic shape (no rust coming from back east) with very low mileage. It was obviously babied and given that we had to do something we really lucked out. The new truck will play a huge role for us. You probably know where I am going with this. The truck cost $30,000 and we have allocated $10,000 more for stocking the truck with hose, nozzles and other equipment. In the past, blog readers have been very generous toward the department for large capital outlays like this and I hope that will be the case again. There are two ways to donate. Our web page can accommodate credit cards or a check can be sent to; Walker Fire Protection Association5881 S Walker RdPrescott, AZ 86303 The website does not allow for specifying the reason for the donation and there can be no guarantee that the check memo will be looked at but there is a way to track how much comes from the blog that I would ask anyone kind to make a donation to do. Whatever...