Recently, I made a mistake. It was a very expensive mistake. I decided to experiment with trading options, which belong to a class of financial instruments you may have heard of: “derivatives.” Essentially, an option gives you the option, but not the obligation, to buy or sell shares of a stock at a set price, regardless of what the market price is. Options expire on a set date, and if the stock behaves in particular ways between when you buy the option and that date, you can make a lot of money. If the stock behaves otherwise, then the option expires worthless. But they are cheap, in general, and are often used as a hedge on a stock you own. For instance, if I own Apple stock, which I do, I can buy an option relatively cheaply that pays off if the stock declines. So if Apple stock declines, my shares lose value but I make money on the option, which offsets my total loss. If Apple stock goes up, then the option expires worthless but I’ve made money off the appreciating shares. It works something like insurance in this scenario. I pay a small flat fee to cover my butt in an the event of something unexpected or inconvenient. These are not necessarily intuitive concepts, but after doing some research, I thought I'd see just to see how the theory played out in reality by making a small practice trade. I decided to buy a cheap option on a different stock, an option that was a bit “out of the money,” which means that as things were at the time, it would likely expire worthless, which is why it was so cheap. But if this particular stock went up, which I believe it will in the not-too distant future, then the option would pay off many times what I paid for it. A little like a lottery ticket, I suppose, but educational and not completely dependent on random chance.

My mistake concerns another aspect of options that I didn’t encounter in my research. The crucial detail is that a single option is actually an option to buy a bundle of shares, usually 100. The option also costs 100 times as much to buy as the amount listed. So when I placed the order for y options costing $x each, my account was immediately charged $100x, and I was granted the option of buying 100y shares of stock. This is not intuitive behavior at all, which I understand now, in retrospect, is one of the many reasons why every page that mentions options on the online trading company’s website has a huge warning plastered at the top: “Options are not suitable for all investors, as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.” Or, in short, “Chumps best watch out.”

For me, $y was pocket change, because I knew I was making a practice transaction. But $100y was not pocket change. And there is no way to undo a trade. So I’m fairly like to lose a lot of money when this particular option expires in late October. The upside is that there’s a tiny but nonzero chance that I’ll become a multithousandaire instead. Given that this is the only basket available to me, it’s the one into which I’ve put all my eggs. If either of my readers knows anything about manipulating stock prices, drop me a note. We’ll chat.

The thing that bothers me most about this loss is not that the money will be gone. That’s painful, but the real pain comes from the giant flushing sound that indicates where it has gone, and all because I didn’t read far enough into the manual. I’d gladly have given $100y to any number of charities or individuals, but that is not an option available to me now. No pun intended.

Corinne found me banging my head against a wall (figuratively) and asked what was wrong. I admitted my gaffe, and by way of making me feel better, she told me about this Guatemalan gentleman who recently lost a lot of money. He came to the US illegally and worked for 11 years as a dishwasher, making $5.50 an hour for most of it. Over the course of 11 years, he managed to save $59,000. If you’ve ever made $5.50 an hour, you know that it’s very difficult to cover all your expenses on such a wage, let alone save over $5000 a year. From this we know that Pedro Zapeta is a very frugal man, and probably did not enjoy many of the material comforts that were available to him in his adopted home. I suspect that he worked more than eight hours a day, and he perhaps shared a small apartment with several other people not related to him, probably more than one to a bedroom. I further suspect that he did not particularly enjoy his life here, but instead got through many days by thinking of the life he would have many years hence, back in Guatemala, living off the wad of cash he was working so hard to save. 11 years. That’s a very long time to live a life in the name of diligent delayed gratification. For the average person, that’s 20 percent of an adult life.

One day, Pedro decided he’d saved enough to realize his dreams, so he packed up his $59,000 into a duffle bag and headed for the airport. He apparently didn’t pick up much English while he was in the US, and as a result didn’t understand the part of the customs paperwork that informed him he was required to declare any cash in excess of $10,000. He didn’t declare it, and when it was discovered, it was seized. At that point they realized that he was in the country illegally, so they called in the INS, who promptly deported him.

My day was a walk in the country compared to this story, but hearing it didn’t make me feel much better. In fact, I think it made me feel worse. When his case became public last year, folks who sympathized chipped in and raised $10,000 in donations for him. However, he is not allowed access to that money for a reason that is not explained in the article. For me, though, the clincher of Pedro’s story is how the federal prosecutors assigned to his case tried to buy him off. According to CNN, “Robert Gershman, one of Zapeta's attorneys, said federal prosecutors later offered his client a deal: He could take $10,000 of the original cash seized, plus $9,000 of the donations as long as he didn't talk publicly and left the country immediately.” But Pedro stuck to his guns, which explains why his case is still wending its way through the courts two years after the incident. Go Pedro!

Possibly more disturbing than the ass-headed reaction of the authorities in this case (who are, admittedly, just following the ass-headed laws), is the reaction of the ass-headed right wing (in this case, self-appointed exposers of Liberal Media Bias), who are outraged that this man admits to not paying income taxes the whole time he was in the country, that he was illegal, that he never learned English, that he is brown. Um, excuse me, right-wing. Having spent several years earning $5.50 an hour, I can tell you confidently that, come tax time, you always get 100% of your deductions back, due to convenient reality that the federal minimum wage places you safely below the poverty line.

Nonetheless, the bloggers (who are far more kind than the commenters, as you’ll see if you dare read down to the kind of hateful, xenophobic comments posted by the kind of people who read right-wing blogs) have things like this to say about Pedro:

It is an insult to all law-abiding Americans to frame Zapeta's “mistake” as being his failure to successfully flee the country with his ill-gotten, untaxed cash. Zapeta’s “mistake” was entering this country illegally in the first place. Zapeta compounded his error by failing to pay income taxes—which over 11 years would likely comprise a significant portion of the $59,000. Wouldn’t we all like to keep 100% of our earnings for the next 11 years?    

Now I’m definitely more sad than I was. I can handle losing some cash. I can even handle the ass-headed way in which I lost it. But I am becoming less and less able to handle the fact that public discourse in my country, whose founding rhetoric is among the most beautiful and inspiring rhetoric ever crafted, is ever more dominated by small-minded, hate-filled regurgitators of bullshit rhetoric that would have made certain hate-filled fascists of the twentieth century proud. Like this commenter:

Had you came legally and attempted to learn english you wouldn't have this problem. You are a crimminal, be happy that we are only keeping the money and sendng you home, In my world we would keep the money, sentence you to hard labor, force you to pay back taxes and any tax payer paid services you scammed. We woyld also shave your head and brand you with a huge "I" in the middle of your forehead. We would allow you to choose what the "I" stood for though, illegal or idiot, your choice.

“Frankly, I’m embarrassed. I’m embarrassed for our party and I’m embarrassed for those who did not come, because there’s long been a divide in this country and it doesn’t get better when we don’t show up.”

—former Arkansas Governor Mike Huckabee

He was speaking at a GOP debate at historically black Morgan State University in Maryland, commenting on the fact that McCain, Romney, Giuliani, and Thompson decided not to attend, citing “scheduling conflicts.”

Full article here. I don’t feel like I have to add a thing.

I bought a new iMac a couple of weeks ago. It’s pretty nice. I bought the 24" model with the new brushed aluminum case. It’s roughly ten times faster than my old computer, depending how you do the math, with double the memory and ten times the storage. The screen has two-and-a-half times as much real estate. Everything is bigger, better, faster, stronger, and more robust. My computing life has really turned a corner.

Normally the frugal sort, I justified the purchase of the hugest iMac because the price was brought down—by a combination of a $100 student discount and the offer (to students only) of a free iPod nano (which could then be sold on eBay) with the purchase of any computer—to within $50 of the smaller iMac. I divided the $50 by the five years I expect to own this computer, and figured that I'd be willing to pay $5 a year to have the luxury model. Who could argue with that math?

The selling of the iPod on eBay was more of a challenge than I thought. About two days after I ordered the computer and the iPod, Apple released a whole new line of iPods and lowered the prices. This sort of put a hole in my plan to recoup some of the cost of the luxury iMac. I bought the 4 GB iPod Nano (tall thin model) for $199 and before it even arrived at the house you could buy an 4 GB iPod Nano with video (short fat model) for $149. So I was surprised when my first auction ended at $157. But I am already familiar with the pattern of people getting so caught up in the auction that they overpay for used stuff on eBay.

It made sense when I got an email from eBay saying that they had “administratively” cancelled the winning bid because it was made by someone using a hacked account. I tried contacting a few other high bidders, but they were suddenly uninterested or tried to bargain me down. So I relisted it. Finally, about 16 days after I started the first auction, it sold for $141. Not bad.

Along the way, I had this sort of weird exchange with this sort of weird guy who seemed not to understand that I, as a guy selling stuff on eBay, am not in control of the eBay computer system. It started off with a standard question, but by the end it became clear that he thought I was eBay, both customer service and tech support.

Why is the UPC removed? Has this ever been used? Does it come with the warranty from apple?

The UPC was removed because I received a rebate on it as part of Apple's back-to-school deal. From the original listing:

"It was purchased with Apple's back-to-school promotion, and to process the rebate it was necessary to open the package to remove the original UPC information. However, a copy of this information (serial number, etc) will be included with the iPod. The iPod itself has never been used."

The iPod has never been used. It is under the standard warranty from Apple.

Thank you. I need to replace my daughter's iPod that got washed and dried. It is for her birthday.

Oh, it really hurts when that happens (an iPod gets washed).

This iPod is perfect for a gift. She'll be so excited to open it that she's not going to care if it has a UPC code or not.

I'll include in the box a photocopy of the part of the packaging I removed. It has the UPC code and the serial number.

Thanks for your bid.

I sure hope I win. I can't stay on the computer 24/7. Do you know anyone else who may have a red ipod nano.

Hi, sorry, don't know anyone else who has one.

eBay's bidding system works by letting you just enter one bid, which is the maximum bid you're willing to pay. It automatically bids in small increments up to that amount, but no more than it has to do to keep you in the lead. Once it hits the maximum, only then does the other person get ahead. So just bid the maximum amount you're willing to pay and let eBay do all that micromanaging for you. (Keep in mind that the brand new ones from Apple go for $150, so you'd be silly to pay more than that on eBay).

Last night I went online and placed a maximum bid of $145 for the iPod for my daughter and the bid was confirmed. I come in this morning and it shows that someone outbid me with $141.00 and my $145 maximum bid does not even show up. Please explain.

Sorry, I have no idea. That's a technical matter for eBay to explain. In my list of bids, I see your maximum bid being $123.46.

It was last night around 8:30 and it said bid accepted. Now I cannot locate another one for my daughter's birthday. Who should I get in touch with?

If you're willing to pay $150, which you seem to be, you can get one of the newer models right from the Apple store (online or physical). http://www.apple.com. That way, you don't have to wait for an auction to end. Otherwise, eBay is probably your best bet.

I offered to buy my daughter the new one, but she wants the exact same one I purchased for Christmas which was the red 4gb nano. I had it engraved. It lasted for about 3 weeks until it got washed and dried.

Have you ever been caught telling a story at a party as though it happened to you, but really you read it on a blog or saw it on TV? That can be really embarrassing when someone calls you on it. “Naw, dude, that didn’t happen to you. That was on Wonkette last month.” Well, it appears that we’ve caught our president recycling someone else’s sound bites. Only ‘recycling’ doesn’t quite capture it. Regardless of whether you agree with the assessment of Ambassador Ryan Crocker, who last week testified about the military’s progress in Iraq before a joint session of the House armed services and foreign affairs committees, you have to admit that the statement was crafted with some attempt at eloquence:

Evaluating where Iraqis are today only makes sense in the context of where they have been. Any Iraqi under 40 years old—and that is the overwhelming majority of the population—would have known nothing but the rule of the Ba’ath party before liberation four and a half years ago. Those 35 years were filled with crimes against humanity on every scale. Saddam Hussein ruled without any mercy, not hesitating to use lethal force and torture against even those in his inner circle. His genocidal campaign against the Kirds and savagery toward southern Shi’a are well known. But he also used violence and intimidation as tools in the complete deconstruction of Iraqi society. No organization or institution survived that was not linked in some way to regime protection. He created a pervasive climate of fear in which even family members were afraid to talk to one another.

That is the legacy that Iraqis had as their history when Saddam’s statue came down on April 9, 2003. No Nelson Mandela existed to emerge on the national political scene; anyone with his leadership talents would not have survived.

Our president liked that idea. He thought it had some merit. So today he decided to try his hand at it. However, from the mouth of the leader of the free world, it comes out sounding like this:

Referring to former South African president Nelson Mandela, who led the fight against apartheid to become a symbol of reconciliation and hope, Bush said of Iraq: “I heard somebody say, ‘Now where’s Mandela?’”

“Well, Mandela is dead. Because Saddam Hussein killed all the Mandelas.”

“No Nelson Mandela existed to emerge on the national political scene, anyone with his leadership talents would not have survived,” he said.

The next question, of course, is whether someone had to tell him who Mandela was, or whether he already knew. “Now hold on a minute, Dick. You want me to say Saddam Hussein killed Josef Mengele. You mean that Nazi doctor? Why’d he do that? Did he hate Nazis?”

UPDATE: 9/23/2007 9:50 AM

Thanks to wizbangblue, I’ve become aware of a couple of other interesting facts about the Mandela reference. The first is that Condoleezza Rice also tried it out between Crocker’s speech and Bush’s.

I think the Iraqis are trying to pull it together. Look, what they’re doing is very hard. Saddam Hussein destroyed the fabric of that society. Someone asked me, “Why is there no Nelson Mandela that, you know, a general, a huge figure who’s appeared to unify Iraq?” Well, the truth of the matter is that Saddam Hussein killed people, a lot of the leadership of Iraq.

Who is this person who keeps asking everyone in the administration about Mandela?

The second is that Dick Cheney, when he served in Congress, repeatedly called Nelson Mandela a terrorist and a communist, and in fact in 1986 voted against a non-binding resolution that called for the apartheid government of South Africa to release Nelson Mandela from prison and negotiate with the African National Congress, on the grounds that Mandela and his organization were terrorists who would establish a Communist dictatorship. But now Mandela’s a hero. How quickly we can change our minds when it suits us to do so.

Nelson Mandela can speak from personal experience on the matter. On Larry King:

KING: When did—were you a—you were a revolutionary. Were you a terrorist? Did you ever commit acts of aggression, violence?
MANDELA: Well, terrorism depends on...
KING: ... who wins.
MANDELA: That's right. I was called a terrorist yesterday, but when I came out of jail, many people embraced me, including my enemies, and that is what I normally tell other people who say those who are struggling for liberation in their country are terrorists. I tell them that I was also a terrorist yesterday, but, today, I am admired by the very people who said I was one.

For five years, everyone who has dared to opine that the Iraq war is largely about oil has been dismissed as a liberal nut job, if not a traitor or worse. The truth, said the administration (and talk radio, and the network news, and the cable news) is that the war was about the imminent threat that Saddam Hussein would use weapons of mass destruction to launch an attack on the United States. Then, after that proved to be false, it was in the name of liberating the Iraqis from living under the oppression of a ruthless dictator. Then it was about stopping the terrorists, who later became insurgents. Then it was about ending the sectarian strife. Now it’s about trying to contain the civil war. Here we are, li’l Dutch boy, finger in the dyke.

The story has been changing all along. Some of us (a pretty lonely minority for a while) suspected, from the first bellicose speeches in 2002, that it was about oil, or oil combined with the desire to project a major American military presence into the Middle East for decades to come. But that’s really only a priority because there’s so much oil there, right? For example, Robert Mugabe is a ruthless dictator who has practically broken his country. Inflation in Zimbabwe is over 10,000%, and something like 3 out of every 4 adult males has left the country because there are no jobs there. People push wheelbarrows full of cash to the store to buy cooking oil, when they can find it. But no one’s proposing to launch a war to free the poor Zimbabweans from their vile oppressor. Zimbabwe has very little oil, so we are busy elsewhere. (For details on Zimbabwe, see this article in the Economist.)

So along comes Alan Greenspan, who apparently included one inflammatory sentence in his new book: “I'm saddened that it is politically inconvenient to acknowledge what everyone knows—the Iraq war is largely about oil,” and all of a sudden the media is ablaze with speculation. “Was it really? All this is about oil? Couldn’t be. Why are we just hearing about this now? Everyone knows it? We thought it was about freedom!”

Alan Greenspan is a very smart man. His adroit spinning of the interest rate knob did, after all, avert a potential financial disaster after the dot-com bubble. And hey, if you played it right, you cashed out a small fortune in equity when your house tripled in value. (You did cash out, didn’t you?) However, back then it was primarily investors who would have borne the brunt of the disaster. Well, I suppose that means pension funds, many states, your 401(k), and a lot of other parties. But now that everyone’s leveraged to the hilt with home equity loans left over from those heady days, the risk has been spread across the 60-odd percent of us who own homes. We’ll see what a tidy solution it really was to let all that froth foam over from equities to housing. I suspect that, in the end, it will be less than tidy. So does Mr. Greenspan. As the Financial Times reported today,

Mr Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.

That’s the nationwide average, by the way. By some measures, property values in California and Florida are already down 10% or more from their peaks and probably have more to go. For the nationwide average to fall by 10%, the coasts are going to fall by a much larger number.

The FT article also said (and this is my favorite part):

As Fed chairman, Mr Greenspan had talked about “froth” in the housing sector, but never said there was a bubble in the market as a whole. His successor Ben Bernanke has also avoided the word “bubble”.

But Mr Greenspan told the FT that froth “was a euphemism for a bubble”.

He said he still thought froth—a collection of bubbles—was a better description, because of the variation in house price appreciation in different local housing markets. But he said “all the froth bubbles add up to an aggregate bubble”.

Now he tells us. All that froth does add up to a bubble. I knew it! And that gets me back to my point: Why are you telling us only now, Mr. Greenspan, that there’s a housing bubble, now that you’re retired and can float around being an insanely well-paid pundit? It’s patently obvious now anyway. We don’t need your penetrating insights to see it now.

And why are you telling us only now that the invasion of Iraq was about oil, now that it’s way too late to do anything about it? Where were you, and all the other people in positions of power, who knew back in 2003 that Bush was making all this shit up? We needed you. 92% of people, or something almost as ridiculous, thought Saddam Hussein had been involved in the 9-11 plot. The Republican house and senate were all in lockstep. The network and cable news outlets, and the Rush Limbaughs and the Fox Newses were all banging their drums and flashing their infographics and animated “War on Terror ’02: Invadistan” logos. And then there were the rest of us, all five of us or so, looking at each other incredulously, asking “What the hell is going on here, and why is no one asking any real questions?” We could have used your penetrating insights back then, Maestro.

Hindsight is always 20/20, as the cliché goes. Fine and good. But what about foresight? Not everyone has it. We can’t fault our past selves for not being omniscient. But sometimes, intelligent people who have the capacity for foresight decide to remain silent, when one might argue that it’s their responsibility to edify the rest of us. Or at least to contribute to the conversation and make a thoughtful point of view more widely understood. We certainly could have used it then.

Well, folks, it’s only been a couple of weeks since we returned from Oaxaca, and already the photos are ready for posting. As I mentioned, we took only disposable cameras, so these pictures were all developed from film to CD. You can see graininess and scratches in many of them, and for that I most profusely and humbly apologize. There is very little excuse for appearing analog in this bright new digital world.

So to compensate, I shined them up, cropped a couple of them where appropriate, straightened some of them out just a hair, and otherwise prettified things for the consumption of the larger audience. Then I penned some more or less relevant captions, loaded them up onto this here Internet, and now I’m sharing them with you. I hope you enjoy.

You can find the link over to the right in the Photoblog section, or you can just click this one: Oaxaca Photoblog. There are plenty more travel pic sets from our other adventures in the photoblog, and written stories about many of them in the Travel Stories section of StrPrpn.