Eric Warmenhoven

When I first started working at Brocade, we were in Con-6, and I was on the eighth floor. This posed a slight problem for me since I was the only one in my group who wasn’t on the seventh floor. So eventually I was moved down to the seventh floor and given a cube with a really great view.

After we bought Rhapsody, engineering was slowly migrated over to Skyport-3, where we all currently are. Originally I was on the second floor with the rest of my group, but then something weird happened. I changed groups at the same time that my old group moved up to the sixth floor. I moved up to the sixth floor, but my new group was on the fifth floor, so a few weeks later, I also moved down to the fifth floor.

A month or so ago, there was yet another reorg, and my old group and my new group merged. This past Friday, the people who had been on the fifth floor moved up to the sixth floor. This means that I’ve moved cubes five times in less than four years. The awful part is that when I was on the second and fifth floors, I was right next to the printer, and now that I’m on the sixth floor again, I’m right next to the printer yet again.

One of the cubes on the sixth floor has freed up, and I want it. The problem is, it’s a window cube, and so everyone wants it. My boss has said that it’s usually distributed based on tenure and rank, which means I’m likely not to get it, which really pisses me off, since I’ve had a really awful cube for a long time.

One other thing that really pisses me off is that the soda machine on the sixth floor charges $0.60 instead of $0.50 like the fifth floor machine, and also the sixth floor machine only has Coke products, whereas the fifth floor had a healthy mix of Coke and Pepsi products, and I’m a Pepsi drinker. So I’m thinking about getting a cube mini-fridge. My space requirements are max 23″Hx19″Wx19″D and preferably less than 17″W and 15″D, so I’m thinking about getting this fridge from ThinkGeek. Any reviews on it? Any other ones that anyone would suggest?

The other night, Lisa and I were in bed reading, and our cat Pixel jumped up on the nightstand, stared at us for a while, and then sighed. This is the first time that I can recall that she’s told us to our face that we’re boring.

In other cat news, Pixel just got a new water fountain yesterday. For the past few years, we’ve had a couple PetMate Fresh Flow fountains. We replaced the first one because it had started to leak, and when the second one started to leak after a while, we decided it was time to try a different brand. At first we got a Drinkwell fountain, but the pump was so loud and the waterfall similarly noisy that we took it back to the store the same day we got it. Yesterday we received our Catit fountain, and while it isn’t as cool as advertised, it’s still much better than the other two, which seem to be the only ones on the market.

Continuing the cat-related news, Lisa has taken up knitting and crochet, which has provided an abundance of yarn for Pixel to attack and chew on. Unfortunately, most of the time Pixel chooses to attack the yarn that Lisa’s in the middle of using.

I had a wonderful little entry written up talking about how I’m going to become a godfather, and how I switched web browsers, and other meaningless stuff, when it got eaten. I was nearly done with it too. I don’t know exactly what caused the crash, but I do know that it took down the entire screen process, and all the windows with it. This happens to me probably once a week. It only happens to me on DreamHost’s shell server though; it doesn’t happen to me on any of the other computers I run screen on. They all run Debian, but DreamHost is the only one that runs sarge; all the others run etch. So I blame you, Debian, and will keep blaming you until I actually look into the issue enough to figure out where the problem is.

Also, I continue to hate LiveJournal, even after I’ve stopped using them. Lately they’ve started tinkering with what cookies they send and when, and which ones you need in order to read protected entries. When you request the RSS feed for a LiveJournal blog, first it redirects you to a place where it checks your ljmastersession cookie, then it redirects you to a place where it sets your ljdomsess.ljuser cookie, then redirects you back to the original page you requested. This works fine in standards-compliant browsers but in half-hour hacks that you put together yourself it sends you through an infinite loop of redirects. So I had to spend another half hour working to fix that fun problem. (It really wasn’t a problem for me, other than I wasn’t able to read LJ users’ blogs for a while; the UI still worked fine, since everything is done with libnbio.) I should have just used curl, and would have except their non-blocking IO API is crap.

And in other obscure software news, my viwp plugin is occasionally broken, so I’ve stopped using it, which pisses me off. I don’t like the WordPress web authoring UI for a variety of reasons (largely because it’s just a textarea), and it’s not convenient for me to use a GUI tool, and I didn’t see a TUI tool worth using. So at some point I’m probably going to have to figure out why viwp is buggy and fix it. Until then I blame WordPress.

Lisa has been thinking for a short while that she’d like to get a Motorola RAZR phone. We were AT&T Wireless customers, which now makes us a weird type of Cingular customer where we not only have our AT&T plan, but also special AT&T customer service representatives (which I’ll get to in a bit). So we went into our local Cingular store and she asked about getting the shiny new black RAZR, and they said that it wouldn’t be a problem, they’d just need to upgrade our service, and since we’re on the same plan and the service is changing, I’d need to upgrade my phone as well.

AT&T Wireless has a email-to-SMS gateway and gives every phone its own email address, yournumber@mmode.com. Since AT&TWS only charges if you send a message but not if you receive a message, I use it all the time (mostly for stock quotes but also for various other things). So in an average month I probably receive 30-50 emails on my phone, as well as the occasional spam, all of them free.

Cingular has the same service, yournumber@cingularme.com. But unlike AT&TWS, Cingular charges you both for sending and receiving messages. (”Text, Instant, and Multimedia messages are charged when sent or received, whether read or unread, solicited or unsolicited.”) So my 30-50 messages a month are going to cost me $3.00-$5.00 a month. Of course, I could always get a package, which will limit those 50 messages to just $3.00. Or I could get a $20 package that lets me receive 2500 messages. That’s not the point.

The point is that once that limit is hit, it goes back to $0.10 per message, regardless of the plan. That means that some evil person can send you thousands of messages and you could end up owing hundreds of dollars. The only way to prevent that is to call Cingular and turn off the E-Mail Messaging feature from your service. (You can use the Message Center to “Create block and allow lists to limit e-mail messages received” and “Control what times of day your phone can receive e-mail messages.” Also it looks like you can block email containing some spam attributes. But none of those things guarantee that you’re not going to get a bunch of junk.)

I tried calling Cingular to confirm this, and when I entered my phone number, it redirected me to AT&TWS customer service, who confirmed that AT&TWS does not charge for receiving text messages, and confirmed that Cingular does charge for receiving messages, but did not have an answer for how Cingular deals with spam. In fact, they didn’t seem to have a lot of information about the Cingular service at all, other than how to “upgrade” my account to a Cingular account. I had to call Cingular sales, who also didn’t know the answer to how to prevent abuse; but they were able to transfer me to Cingular customer service, who confirmed that yes, I really do have the potential to get screwed if I don’t turn off E-Mail Messaging.

For a while now I’ve been thinking that I’d like to get my private pilot’s license, so I’ve decided that once daylight saving time begins, I’ll start taking lessons. Does anyone have a recommendation for a good instructor? I’d prefer one based out of Reid-Hillview, since I live just off Capitol. Also, how long should it take, and how much should it cost? (I know those answers are dependent on how much flight time I need before I feel comfortable taking the exams, but I’m just looking for an average.) Lisa’s dad has his license so he was able to give me a bit of an idea, but he got his out of Hollister so I’m not sure if there’s a difference. Also, I’d like to get my IFR and probably also multi-engine; but I’ve heard some people say that it’s a good idea to wait a while after getting VFR before getting IFR. Is there any merit to that?

Lisa and I are also getting serious about buying a new home, and this time we’ve even got a realtor helping us find houses that we might be interested in. It’s sort of off to a slow start, since the market is kind of slow right now anyway, but I’m hoping it will pick up soon. Also I don’t think we’ve adequately explained to the realtor quite what we’re looking for, and how little work we’re actually willing to do to the house. We’re hoping to move sometime this year, but I’m not sure whether that’s realistic. Fortunately we don’t have any urgent need, so we don’t have to settle for something; but I’d still like to get it over with as quickly as possible.

There are lots of cases where you can have a positive view of a stock, but still want a bit of investment protection. A fairly typical way of getting some protection against a drop in price is to place a stop-loss order with your broker, so that if a stock hits a certain price that you set, the broker will automatically sell the stock. This limits your loss (known as downside protection), and if the price doesn’t go down, then you keep all the stock, and you get to take full advantage if the price goes up (known as upside participation). Also, it should be free to place a stop-loss order with your broker, unless the price is hit and the stock is sold. So, stop-loss orders have three benefits: downside protection, upside participation, and no up-front cost.

Unfortunately, there are a couple downsides (no pun intended) to stop-loss orders. The first is that if a stock is really plummeting (there aren’t any buyers at all), then it may be difficult or impossible for your broker to get the price that you’ve specified. That’s sort of an extreme situation though and only happens about once every thirty years (think October 19, 1987). The other, much more likely, scenario is that the stock goes through a temporary decline (causing your stock to be sold), but then recovers. In that case, you’ve sold for a loss and you miss out on the recovery.

So instead of placing a stop-loss order with your broker, you can purchase what’s called a protective put. A “put” is a contract that says the buyer of the put has the right (not an obligation; it’s the buyer’s choice) to sell stock on (or before, in most cases) a predetermined day at a predetermined price to the person who sold (”wrote”) the put. For example, today RHAT closed at $23.22; you can buy an option to sell 100 RHAT shares at $22.50 (the strike price) anytime between today and November 18, 2005 (the option expiration date) for $55 (as reported by Yahoo!). So you get downside protection and full upside participation, for a price. (There’s also a married put, which is the same thing as a protective put, except you buy the stock at the same time as the put; a protective put implies that you already own the stock.)

But there is still the annoying up-front cost. If you’re willing to risk missing out on some of the potential upside though, you can offset the costs. A collar is when you buy a protective put and at the same time selling a call option. By selling (writing) a call, you give someone else the right (again, not the obligation) to buy shares on a predetermined date for a predetermined price. For example, say you do buy the protective put above, and at the same time, write a call option for 100 RHAT shares that expires on November 18, 2005 for a strike price of $25. The proceeds from this sale will be $30 (again, minus fees). So for a cost of $25 ($55 to buy the put minus $30 to write the call), you’ve got downside protection, and upside participation up to about 7.7%.

All of this assumes that your preference is to keep the stock. But say that your stock has done very well and it’s gotten to be a sizeable part of your portfolio, and you’d like to diversify a bit. That means that you’re serious about selling it, regardless of what you think the price is going to do. (There are lots of good reasons to sell a stock that’s enjoyed nice gains, not the least of which is that nice gains are generally caused by nice growth, and a company can only grow so big.) Selling the stock outright is one technique; another is a variant of dollar-cost averaging, but instead of buying a fixed dollar amount, sell a fixed number of shares. But you can combine either of these with writing call options to potentially achieve even better results.

A covered call is when you own a stock and write a call option on it (like a married put, a buy-write is when you buy the stock and write the call at the same time). Instead of selling the stock immediately, you give someone else the option to buy it from you at a predetermined future date. Because the date is in the future, there’s a bit of a premium that buyers will pay (which means more money for you). For example, November 18, 2005 calls for RHAT with a strike price of $22.50 are selling for $120 for 100 shares; that means that if the option is exercised, you make $22.50 from the sale, plus $1.20 per share from the option, for a total of $23.70 as your effective sale price. If the option is not exercised though, then your shares are not sold, but you get to keep the $120, and do the whole thing over again.

(Unfortunately for me, Brocade has a company policy prohibiting collars and covered calls. But fortunately for me, I don’t own very much BRCDE stock.)

Continuing on the reading binge, I’ve read:

The Warren Buffet Way by Robert G. Hagstrom: This book got really repetitive after a while. Warren Buffet is a disciple of Benjamin Graham, the original value investor, who is referred to heavily in all three books. According to Graham, the theories of an efficient market don’t apply very well, and it’s occasionally very easy (especially during a recession) to buy companies (or their stocks) for far less than they’re worth. Buffet simply buys the whole company. The best advice is that “the market is only useful as a reference to see if anyone’s offering to do something foolish”. It’s a theme that’s echoed in all three books.

One Up On Wall Street by Peter Lynch and John Rothchild: Not as good as I’d hoped, but in some ways better, and worth reading. The title comes from the idea that individual investors are actually better placed to take advantage of the market before institutions, since they often have access to information to assess a company with before analysts even take a look at the company. He then follows this up by saying that you should treat it as a tip, and that you should treat all tips the same: as a reason for investigating a particular company. All of the preceeding didn’t impress me much. But he then tells you how he goes about assessing a company, especially reasons why he won’t buy a company, which I found very helpful.

The Intelligent Asset Allocator by William J. Bernstein: The best of the three. This book picks up where Random Walk leaves off; that book encourages diversification, while this one shows you how to do it. Also, Random Walk focuses largely on the stock market, whereas this book discusses lots of asset classes and the correlations between them and how to pick a portfolio designed to maximize return while reducing risk. Also he spends a lot of time on specific details about which mutual funds are good for various asset classes, as well as various tips for really squeezing out as much return as possible through things like tax-conscious funds.

So yesterday Google announced their earnings, beating estimates, sending their stock even higher. Every time someone says GOOG can’t possibly go any higher, they’re promptly proved wrong. So I’m not going to say that GOOG can’t go any higher. I am going to say though that it’s overpriced given the cards that are showing.

Peter Lynch compared the stock market to a game of seven card stud, where every new piece of information released about a company is like a new card showing. The more you find out about a company, the more accurately you can gauge the value of a company, and thus whether it’s worth buying.

The problem with Google (and similarly with Apple, but to a lesser extent) is that they try very, very hard not to release any information. What’s worse is that Google has built up a mystique about itself, so that any little piece of information (like an otherwise irrelevant partnership with Sun) gets turned into wild rumor and speculation (like that Google will make a web-based Office suite). If you believe the speculation will come true, that means that it will effectively break one of Microsoft’s monopolies, thereby entitling Google to its current market cap. But that means that Google has to deliver on something they’ve never even hinted that they’re working on.

If Google’s going to keep its stock from going through a “correction”, it better start showing some more of its cards, and they better be good. Otherwise, they may end up like another company that valued secrecy and was going to take down a different monopoly.

In order to help me deal with my then-upcoming liquidity event, and because I’ve had a lot of time in airports and on airplanes recently, I’ve read the following books.

A Random Walk Down Wall Street by Burton G. Malkiel: By far the best of the books that I read. The basic premise is than in an efficient market, there’s no possible way of predicting which way the market will move, so any investment in any particular stock is a gamble, not an investment. The current intelligent way to invest is to diversify, which means that you get returns roughly equal to the market, and the only way to increase returns is to increase risk. Also, he mentions very briefly that extraordinary returns can be made if you happen to come across inefficiencies in the market, but gives the caveat that as soon as other people also figure out that there’s an inefficiency, the inefficiency will promptly disappear.

The Millionaire Next Door by Thomas J. Stanley and William D. Danko: This book is a three-page research report that got turned into a three-hundred page book. The basic statement is that millionaires live below their means, meaning that the people who live the millionaire lifestyle almost certainly aren’t millionaires. Other than that, there wasn’t anything that I thought was very specific to millionaires.

Rich Dad, Poor Dad by Robert T. Kiyosaki and Sharon L. Lechter: My least favorite of the books, especially when taken in combination with the previous two. The most practical advice was to “pay yourself first”, which was also mentioned in The Millionaire Next Door as one of the ways that people help themselves live below their means. There were two pieces of advice that I took issue with. The first was that “the rich invent money”, or rephrased in terms of Random Walk, the rich are extremely adept at finding market inefficiencies, which given the previous two books, is unlikely and generally wrong. The second piece of advice is to live off the income from your assets.

The first problem I have with this piece of advice is that it’s unrealistic to live solely off the income from your assets. Say, for example, that you’re in a typical 4-person family in California, which means that your income is roughly $70,000. Let’s also assume that you’re rather adept at avoiding taxes, and so your take-home pay is $50,000. Now, assume you want to match that, living solely off investment income. With marginal risk you can generally get about a 7% rate of return (riskier investments can get you up to 12%, but those investments aren’t suitable for income). After adjusting for taxes (assume all of it is subject to capital gains at 20%) and inflation (assume 3% per year), that’s roughly a 2.5% return per year that you can live off of. To get $50,000, you need two million dollars in assets. That ignores a lot of things (including housing, which distorts the whole thing greatly) but generally, if you want to live solely off your assets, you need at least a million dollars in assets not including your home. By the time most people accumulate that much, guess what: they’re ready to retire.

The second problem is that since it’s unrealistic to think that you can live solely off the income from your assets, it’s detrimental to try to use it for assistance at all. The reason is because of compound interest. That’s all I’m going to say about that.

Inside the Tornado by Geoffrey A. Moore: Did not meet expectations. The overriding thought in my mind as I was reading it was “this book is so 1998″. The other one that kept creeping in was “where are all the tornados now?” Seriously. Where are they? VoIP hasn’t even crossed the chasm yet, to use his terminology.

Freakonomics by Steven D. Levitt and Stephen J. Dubner: Amusing but pointless. This was definitely worth a read, but the whole time it felt completely aimless, which is only made slightly better by them telling you at the outset that it’s completely aimless. Lots of interesting information is presented in a very humorous and easy-to-read style, though I wouldn’t really call most of the information particularly useful.

So now I don’t actually own any other books on related topics. Any recommendations?

There’s a subtle difference between a replacement and an upgrade, and in my mind it has something to do with the relative qualities of the old and the new. I like my current car and don’t expect that my next car will be particularly better, but different, and for a different purpose. My old and new RSS aggregators are both complete crap.

Lisa and I have been living in our home for almost exactly one year now; the exact day that we moved was July 23. It’s been a good starter house, but there are a few factors lately that have convinced us that it’s getting time for an upgrade. Recently we discovered that the air conditioning didn’t work; it didn’t cool the air that came out, and it no longer blew into the downstairs area. It’s taken us two weeks to get it working, and it’s still not fixed; there’s a leak and it’s so slight that to find it will take a week, during which we won’t be able to use the system. Since it’s the middle of summer we opted to postpone fixing it and will just have it refilled periodically, until we’re willing to not have heating or cooling (like October). It’s under warranty so it’s not our expense. Also, being in a townhouse has made us keenly aware of our neighbors, and our desire to have a bit of distance from them. So last weekend we started getting an idea of places and types of homes that we’d be interested in looking at. We’ll probably end up moving in a year or so.

As a housewarming gift, my dad bought us a rather nice television. We have DirecTV with TiVO, but it’s not the HD service, so recently I’ve been thinking about getting it. The satellite dish is actually currently owned by our homeowners’ association, and they’re absolutely miserable to try and get anything done through. So I think since I’m the only one in my building who has DirecTV, that I’ll just replace the dish myself, and put back the original one when I move out. Is there more than one HD DirecTiVo box? The one that Best Buy has on their website is $700 for 250GB.