The Apple Hedge Fund

I’m an AAPL shareholder, along with everyone else who has a dime in stocks. Because of people like us, Apple was sitting on $117 billion in cash at the end of June, and probably closer to $130 billion by now, given how much its share price has grown.

AAPL cash and investments, March 2007 – June 2012

Now, Apple isn’t stupid. They’re not going to sit on this pile of cash and watch the dollar devalue. They have their own subsidiary investment firm, Braeburn Capital:

CapitalIQ has the following description of the firm: “Braeburn Capital Inc. is the asset management arm of Apple Inc. The firm invests in the public equity markets. Braeburn Capital Inc. was founded in 2006 and is based in Reno, Nevada.” And that’s it – there is no breakdown of which “public equity market” investments Braeburn is invested in.

The great thing is that Braeburn is not an investment advisor, thus it has no reporting obligations. Furthermore, it can act preemptively on Apple’s immense ability to move the market.

So Apple is the biggest unregulated hedge fund in the world. What more, it is accessible to all investors, unlike regulated hedge funds which require that investors meet a $1.5 million net worth requirement.

From a performance perspective, can it beat the likes of Ray Dalio and Paulson & Co.? Doesn’t matter, because the biggest hedge funds are all holding AAPL.

Presenting The World’s Biggest Hedge Fund You Have Never Heard Of –ZeroHedge

See also:
How Apple Sidesteps Billions in Taxes –NY Times

A Man Can’t Just Sit Around

Walters and his weather balloons

I was too young to remember the historical balloon flight of Larry Walters back in 1982, so when my friend Mark told me this story, I was amazed.

Larry Walters, a truck driver, wanted to fly. He tied 40 weather balloons to a lawn chair with the intention of floating around 100 feet above the ground. However, when he cut his tether, he unexpectedly flew to 16,000 feet and into Long Beach airspace. He eventually used his BB gun to shoot out some balloons and land. I don’t know how he managed to do this at 16,000 feet without soiling himself.

When asked why he did this, Walters said “A man can’t just sit around.”

That’s just fantastic. This is someone who is awesome at life. But then the sad part: A little over a decade later, Walters went into Angeles National Forest and shot himself. It must have been hard to live up to the extraordinary expectations set by that first feat.

Larry Walters for Timex

“Lawn Chair Pilot” — Check-Six

The Wrong Way to be Successful

I came across this blog post by Greg McKeown and, while I disagree with most of it, it reminded me of a transcript of a speech by Richard Hamming that I really ought to go back and read more often.

Greg McKeown advocates a disciplined elimination of clutter, along the lines of this:

First, use more extreme criteria… If we ask, “Do I absolutely love this?” then we will be able to eliminate the clutter and have space for something better. We can do the same with our career choices.

Right idea, but discarding a career path isn’t “eliminating clutter”… it’s an overhaul of your life. Besides, clutter isn’t all bad. It leaves options on the table. If you eliminate all clutter, then decide you want to toss out your career, what are you left with?

And that brings us to Richard Hamming’s 1986 talk, “You and Your Research”. One excerpt:

When you are famous it is hard to work on small problems. This is what did Shannon in. After information theory, what do you do for an encore? The great scientists often make this error. They fail to continue to plant the little acorns from which the mighty oak trees grow. They try to get the big thing right off. And that isn’t the way things go.

Here’s another great quote:

Somewhere around every seven years make a significant, if not complete, shift in your field. Thus, I shifted from numerical analysis, to hardware, to software, and so on, periodically, because you tend to use up your ideas. When you go to a new field, you have to start over as a baby. You are no longer the big mukity muk and you can start back there and you can start planting those acorns which will become the giant oaks.

There is a lot of good stuff in his talk, and I can’t just paste the whole damn thing right here, so I’ll just leave this link.

You and Your Research –Richard Hamming

Boundaries

The best part of being unemployed… I don’t have to wear pants!!

Back when I had to report to a cubicle for a living, everything I did on weekdays had constraints. I would take my morning dump while blowdrying my hair, and brush my teeth while getting dressed. I had to optimize my precious morning minutes to meet the boundary conditions of arriving to work in presentable order before my boss got in.

On non-working days, entropy prevailed and everything decayed into a natural state of sloth. I would stroll into the bathroom with my iPad and read the news and decide to go back to bed if the world wasn’t to my liking. I usually never got as far as putting on clothes, because no one was gonna see me.

Now, every day can be a non-working day. How am I supposed to optimize my actions to zero boundary conditions? It’s been one day, and already I look something like this:

the oatmeal

Some people manage to run their own successful business from home without succumbing to the urge to run off and go on permanent holiday. It’s doable. I’m trying to force myself to be productive by disconnecting the internet during the day. I created a list of tasks that I should be working on, so I know where to direct my attention if I start feeling shiftless.

We’ll see how it goes. I’m leaving for Portland in a few days to visit Jenny, so I guess I already screwed up my plan of not treating unemployment as a long-term vacation.

Investing in Life Insurance

Are You Worth More Dead than Alive?

Terminally ill patients sell their life insurance policies to intelligent investors. Terminally ill patient gets a small pile of money upfront to make their last days more bearable, and the investor gets a huge payout at the end of the day. Brilliant investment idea. I should sell my life insurance policy too! Over 50% of Americans die within 2 years after retirement. That’ll be my selling point.

Selling your life and selling a house have more in common than you’d think. The seller puts a listing on the market. Prospective buyers do research and get inspections; there are offers and counteroffers until the seller accepts a bid. The seller doesn’t literally peddle his own life, of course, but his life-insurance policy. The distinction is in many ways moot, however, as the sales value is inextricably linked to a cold-eyed estimation of how much longer the seller has to live.

I can’t believe an entire market already exists for this sort of thing.

Large portfolios also allow mortality to be packaged for sale in ways that, for better or worse, recall the byzantine ingenuity of the subprime era. Settlements can be pooled, sliced and recombined into a dizzying array of financial instruments, including ‘’death” bonds, derivatives, notes and swaps.

Are You Worth More Dead Than Alive? –NY Times