Everyone has a plan until they get hit

“Everyone has a plan until they get hit.”

~Mike Tyson.

Studying French for 1.5 months and then arriving in France thinking I’m a badass knowing how to sling a few sentences together was a notion rudely trussed, cooked, carved up and served back to me on a giant silver platter called humility by a certain French checkout girl yesterday at Decathlon.

I’d already been to the Bordeaux Apple Store (which is awesome), Animal’s World for pet supplies (also awesome), Orange and Ikea and flattered by people taking my money into thinking that I’m doing OK. Standing at the back of the line at Decathlon at the end of the day a checkout girl hurls a handful of words at me and waits while the entire line turns around and stares at me. I completely froze and couldn’t utter a word of french. I leaned over and in squeaky english said “I don’t speak french” and wanted to die. She gesticulated wildly at the line next to me and I walked over there and she stopped gesticulating. I still have no idea what she said.

I started today screwing up my first verb “parlez” instead of “je parle” after I was sure I’d at least get that right. Learning French and actually speaking it is like going from boxerobics to Mike Tyson swinging at your head.

France Notes Day #1

I’ve moved to South Western France for a year (The Bordeaux region) and will be keeping a few concise notes on my experience getting here and living here. Mostly bullet form and you’re welcome to ask me anything in the comments.

  • French embassy in San Francisco is great for visas but make sure you have absolutely all paperwork presented exactly as they ask for it. It took us roughly 4 weeks after our appointment to get a long stay visa granted.
  • Getting pets into europe means you need to get a USDA certified rabies vaccination certificate for all of them. It cost us over $1000 to get all this done. We got domestic health certs too even though we didn’t strictly need them.
  • The folks at Delta or on the US side didn’t ask for any of the pet certs.
  • We transported the two cats in the cabin under the seats in front of us, although putting them under my legs turned out to be more comfy.
  • We used this pet carrier for the cats after much research – size large. it’s 12 X 12 by 18, the largest delta takes, and it changes shape so you can smoosh it into place. Here’s a product link.
  • Joey travelled in a medium sized crate in the hold. I used ice as usual in his water bowl so it wouldn’t spill during loading. Two absorbent pads, one for pets in the base, his cushions, then adult incontenence pads on top of his mattress.
  • None of the pets used the loo on the 10 hour flight from SLC to CDG in Paris.
  • On the French side customs didn’t even take a second look at us as we walked into the customs hall with 3 pets. I walked up to the desk. Got completely ignored, so walked onto french soil with my 3 pets and $1000 of documentation not being examined at all.
  • Both the Delta, Salt Lake City TSA folks, French Delta and French airline and security staff were really amazing about letting us watch our dog board and deplane, and just being really friendly and helpful.
  • We hired a van and drove down to Blaye, a small town outside Bordeaux where we’re spending the next year. Eurocar was unbelievably slow and it’s not because we’re special, they have a reputation with just about anyone who has rented a car at CDG in Paris.
  • The GPS in the van caused more trouble than it helped – next time I’ll just use the blue signs.
  • French cars are unbelievably fuel efficient, this was a large diesel van and the 5 hour drive from Paris to Bordeaux only used half a tank of gas. Americans take note.
  • As far as I can tell there are no photo speed cameras on the A10, they manually pull you over, but I’ll let you know in a few weeks as the tickets arrive.
  • As usual the French roll up the sidewalks at 9pm, and small towns are dead off-season after 7pm, so absolutely nothing was open when we rolled into Blaye at around 8pm.

I was in Blaye for 3 weeks about 2 months ago and knew no French. It was really frustrating in the sense that I wasn’t able to really communicate with all the people I met. And in a small town where everyone is really friendly, it’s doubly frustrating.

So I threw myself into learning French starting about 1.5 months ago. I’m using Michel Thomas beginner, advanced and language builder tapes. He’s a former Nazi prisoner of war, then turned interrogator of Nazi guards, then language tutor to Hollywood stars. Towards the end of his life (he died in 2005) he put his lessons on CD’s which are truly amazing for learning a language, particularly French. I’ve worked through all the basic and intermediate material he created and am working on advanced verb forms, grammar etc. Arriving in France this time around and being able to have a basic conversation in my peasant French is an amazing experience.

Here’s an amazon link to a few of his products. There seem to be 10 CD sets that I don’t recognize, but just get the beginner audio program which is at least 8 CD’s. I’ve used the 8 CD beginner/intermediate program and I’m halfway through the 4 CD advanced program. I intend to do the language builder at some point, but I’m building up my vocab on my own time.

If you have doubts about how amazing this program is, check out the BBC documentary on YouTube titled “Michel Thomas, language master”. Here is:

We need to visit the OFII in the next week or so to register as residents. I’ll keep taking notes that will hopefully help someone else who decides to spend some time here. I’ll also be writing an entry on working remotely including french bandwidth, cell networks, etc.


To borrow or not to borrow: Thoughts on US government debt

A reputable investment bank approaches you and says they’ll lend you as much money as you want for a very low interest rate. The rate depends on how long you want to hang onto the cash:

  • 1 Month will cost you 0.01% APR interest
  • 6 months: 0.07%
  • 1 years: 0.11%
  • 5 years: 0.88%
  • 10 years: 2.02%

If you earn 3.5% on the money over 5 years which simply keeps pace with US inflation, when you pay back the principle you will be able to keep a 2.62% annual return on whatever you borrowed, based on the 5 year borrowing rate above. So if you borrow 1 million over 5 years you earn $138,046.62 in pure interest over 5 years (compounded annually).

Sounds like a pretty good deal right? $138K earned 5 years from now for nothing. I’d take it, assuming I could find somewhere to invest the money that would give me a 3.5% return, which shouldn’t be too hard.

However, if I’m fiscally irresponsible and rather than investing the cash I’m likely to spend it on hookers and blow, then it’s probably a bad idea for me to borrow as much as I can.

However, if I am that irresponsible and have a history of being a nut job, the interest rate that the investment bank charges me on my borrowings will reflect my lifestyle and will be more like 30% APR which is what many credit card companies charge once you’ve missed a payment.

The interest rates above are what America currently pays to borrow money. It’s the treasury yield curve rates. They are below inflation which means that the rest of the world pays the United States to store their money. And the United States makes money if they can get a very moderate return on any of that cash they invest. If the return simply keeps pace with inflation, they’re rolling in dough.

The interest rate the United States gets charged reflects how investment banks, sovereign wealth funds, companies and individuals feel about the United States “lifestyle” or fiscal and monetary level of responsibility.

So the question is: Can our country borrow trillions of dollars, put it to work in a responsible way and make out like a bandit? Or will it spend it all on hookers and blow and leave our grandkids in the hole struggling to pay off the principle?

Footnote: The answer to this question is usually along ideological lines. Keynsian economists like Paul Krugman who dominate the Democratic party will say Hell Yes! Government knows best and should borrow like there’s no tomorrow. Hayekian economists like Russ Roberts and economic conservatives on the other hand will tell you that the private sector knows best, government should limit it’s size and balance sheet and should never engage in massive borrowing no matter how low the interest rate or the potential return on investment, because it’s not government’s place to act like an investment bank.

Footnote2: I’m still feeling pretty good about my bull market prediction yesterday and am now long Apple (AAPL). I’m expecting it to churn during the next 6 months and have a 18 to 24 month price target of $550 (bought at $418).

Bull On.

I am long the stock market. I’ve been accumulating stock in businesses I understand for the last month or two. Why? I’m predicting a bull market starting in the next 12 months.

My reason for writing this is purely selfish. I want to be able to say I told you so. I’ve also been predicting armageddon for the last 10 years in the USA and it’s getting boring.

Here’s why a bull market is imminent:

  • We’ve so far dealt with a crisis in housing, money markets, mortgage backed securities, credit default swaps, commercial real-estate, municipal bonds, hedge funds collapsing due to over-exposure, the collapse of many small banks and collapse or almost-collapse of many larger ones, the risk of the FDIC running out of cash, our own country’s budget crises, legislative deadlock and sovereign debt crises both in the USA and Europe.
  • We’ve shone sunlight on all financial crises and there appears to be nothing coming down the pipeline except the latest report that China isn’t going to grow as fast as it was. Oh poo. Hell, the municipal bond crisis in the USA turned out to be the best performing fixed income investment in 2011 returning over 10%. Turns out local governments managed to cut costs, increase revenue and actually pay their debts.
  • American consumers have been paying down debt since 2008 and are flush with cash.
  • The DOW has been flat for 10 years. If you invested in the DOW 10 years ago your money is now worth 20% to 30% less in inflation adjusted terms.
  • Housing has flattened out and even Schiller is beginning to sound mildly optimistic that house values will start heading up within 12 months.
  • In real terms (inflation adjusted terms) housing isn’t down 30%, it’s down more like 45%. There isn’t anywhere else to go.
  • US corporations are more profitable than they’ve ever been and are priced attractively by any measure: P/E, P/S, Price/Book, etc. Companies like Intel are getting so frustrated at the crappy valuations they’re getting that they’re borrowing money to buy back their own stock and are paying 3% on debt rather than a 4%  to 5% dividend yield.
  • Europe doesn’t really matter and isn’t that bad. To use a recent example from James Altucher, Greece to the European economy is like Rhode Island to the USA. It just doesn’t matter.
  • Unemployment is 8.5%. During the great depression it was 25% so enough with this “things are so bad” bull. Even if you assume 16% real unemployment if you factor in those that have stopped looking for work, it’s still nowhere near great depression levels.
  • Besides reducing our debt, everyone I know has been living frugally and actually accumulating cash.

When I say I’m long the market, I’m long specific stocks that are awesome businesses, have growth potential, have a monopolistic like advantage that makes them very hard to compete against. Two examples:

  • Intel (INTC): Basically they have a monopoly on server CPU’s world wide. I’m betting that the massive growth in data centers world-wide is going to continue to drive record revenue at Intel. The machine you’re reading this on has a 90% chance of having an Intel CPU inside. More importantly, the data center that served this page is full of Intel CPU’s and it keeps growing.
  • Amazon (AMZN): I love Jeff Bezos. There, I said it. He almost literally gives investors the finger and just puts his head down and keeps growing. Amazon’s revenue growth in the last 10 years has been stellar and consistent. Bezos is investing heavily for the future, including building his own platform and app store to compete with Apple and Google and continuing to expand warehouse capacity. The business is also wonderfully diversified into retail, cloud services and digital media. AMZN is valued using Price/Sales since it doesn’t have net income to speak of or dividend yield, and in historical terms the P/S is low right now.
  • Apple (AAPL): So I was avoiding this stock just because there’s way too much hype around it, but turns out it’s undervalued in historical terms. Check out AAPL’s P/E for example. Also check out Apples market cap relative to Microsoft’s peak market cap in late 99 early 2000’s. If Apple is truly the next big platform, it’s cheap when you adjust MSFT’s peak market cap for inflation.

Other businesses I’m interested in: WalMart, Costco, Visa (although I don’t understand financial stocks so will probably avoid).

Keep in mind I’m taking a 18+ month view on these companies and to me a 10% annual return would be spectacular considering a 2 year CD will give you 1.2% if you’re lucky. I’m also comfortable losing the principle – I have a strong stomach for risk.

Disclosure: I’m currently long Intel and Amazon and will probably go long on Apple as soon as the current rally dies.

Guns, lots of guns

So for my xmass present I got a gun handling course from my wife for the two of us. I wouldn’t normally write about this, but the course was so impressive that I thought I”d say something.

It was at BlueCore in Denver which is run by a handful of ex special forces folks including former Navy SEAL Eric who took our booking and who we chatted to on arrival. [No jarhead, he rocks long blonde hair.]

Our trainer was Tom who is a competitive shooter and has competed on a national level. His teaching style is awesome – totally relaxed and he knows his subject very well.

We played with two 9mm handguns and an AR-15 assault rifle.

The course was a full 2 hours one-on-one instruction starting with half an hour classroom instruction. Much of their approach can be applied to rifles or handguns so you don’t have to re-learn when you switch. e.g. Their rapid load and fire technique applies to both rifles and handguns.

After 1.5 hours of instruction we were starting with hands flat on the table, target starts moving towards you, pick up assault rifle, load magazine, cock, empty 5 rounds until mag is empty, put down, pick up 9mm, load mag, cock, empty 10 rounds in rapid succession all while the target keeps coming towards you.

After 2 hours we walked out there and couldn’t believe how much there is to gun handling. We could both just spend a year at the range working on our 9mm accuracy with the knowledge Tom gave us.

So if you want to learn about guns and are in Colorado or passing through, check out http://blucoreshootingcenter.com/

Disclosure: I don’t own any guns and don’t have a gun license.