As I grow older, I’ve become more and more interested in finance. I consider myself a somewhat sophisticated individual investor and so I like to hear about interesting new finance products that bankers want to sell. There’s two in particular that caught my eye.

The REX agreement is a new, alternative to a home equity line of credit. For most people, I think it’s a more attractive way to use home equity than a HELOC. If a HELOC is a loan backed by the equity in your house, the REX agreement is a contract which gives you an immediate cash payment in return for a portion of the proceeds of the sale of your house. It’s like selling a fractional call option on your home equity. You can sell up to %50 of the equity of your primary residence(otherwise you might not have enough incentive to maintain your house), and you get to keep all the value and appreciation of any capital improvements you make. There’s a lot of caveats here. I’ve only seen Rex & Co offer this. I have no idea how good the valuation is on the cash payment they give to you. The rest of the caveats are reasonable. They currently only offer it in a limited number of states. They can repossess your house if you fail to maintain it or you use it as collateral for more than the equity you have in it, they require independent appraisals. The advantage over a HELOC is that it’s not a loan, there is no interest to pay on it. It’s more like a reverse mortgage which liquidates when you sell your house instead of when you die. If there were a competitive market for the valuation on the house instead of being offered by just one company then I’d say this is better than all the other ways to use home equity, because we already have plenty of ways to create new debt from our home equity.

The other new thing to arise in the past few years besides ETFs are Structured Products. They are packaged products created by investment banks for a specific risk profile and outlook. They are usually the kinds of things that can be done by an individual investor with a combination of options, futures, or other derivatives but they are packaged together to sell simply as one security. For instance, a couple of years ago I bought a product which for 18 months tracks the S&P 500 returns, but if the return was > 0% and < x% the return was triple, but if the S&P return was greater than x%, the return was exactly x%. The exact value of X was set by market rates on the derivatives bought at issuance required to make the product(it was about 18% at the time I bought it 2 years ago). So it was a product with leveraged, but capped return which means you need a specific market outlook to want to buy it. It worked out, I made a bit of extra money over market returns. But there are all kinds of these products, tied to a variety of different underlying instruments and a lot of different outlooks. Unfortunately because structured products aren’t really marketed to retail investors, information on all of them is hard to find. I only know about them because my broker told me about them. If someone could build a good search engine for all structured products, it’d make me happy.

Lucas is really fun these days and I’m really excited about having another baby. Being a parent is busier and better than I expected. Every day Lucas does something unexpected. He learns really quickly and his vocabulary is growing rapidly. His cognitive skills are even more impressive. I think babies just learn a lot faster than I thought. I heard another parent say their child was reading by age 4, and that seemed unreasonable to me 12 months ago, but now I’m pretty sure Lucas will do that.

Tracy’s pregnancy is going well. She’s a great mom too. I think overall we do everything pretty well, with the exception of giving Lucas a bit too much TV. But I grew up with too much TV and I don’t think it hurt me.

Friends at work wanted to go out for sushi today, so we went to Sushi Sam’s in San Mateo. They have amazingly good sushi, but when the bill came my jaw dropped because it was a $60 meal. That is by far the most I have ever spent on a lunch. I’ve probably only spent that much on a meal 4-5 times in my life. On the plus side, I’ve been pretty successful playing poker online lately(pot limit omaha/8) so I’ve been meaning to treat myself a bit.

Only 13 weeks until baby #2 is due. We’re still trying to pick out names for her. On top of my list are Huberta and Hubertina. However I might be in the minority on this one. We’re still searching for some more options, so if you have ideas, tell me.

The reason I can’t vote for Clinton has nothing to do with likability or charisma or being a woman. I generally like her, but her vote supporting the war in Iraq is a deal breaker. The fact that she went along with neocons on the war means she was either weak, naive, or stupid. It seems so silly to think that we’d just go into Iraq, eliminate Hussein, find WMD and be done with it in a few months. Anyone who bought into that line of thinking doesn’t deserve re-election in my mind.

I’m psyched about the new economic stimulus package, because around here you can’t get a house without having to go to a jumbo loan of 417k or more. The stimulus package means most homebuyers will actually be able to get a conforming loan because the new limit is 730k. And at current rates, the spread between conforming and jumbo rates is huge, more than %1.0. So a lot of california buyers will now save a full %1 in interest on their mortgages. This will translate into hundreds of dollars per month for a typical buyer. Unfortunately, these limits are only going to be in effect for mortgages between Jul. 1 and Dec. 31 so get your refinancings ready to go because there will be a big rush.

I heard that most applications for college financial aid don’t take into account equity in your home to determine how much aid your kids get. With the skyrocketing cost of college tuition, there is an obvious way to take advantage of this. If home equity doesn’t count for financial aid purposes, then you simply hide all your net worth from financial aid by putting it all in home equity.

For instance, you have a $500k house which you owe $350k on, and you have $100k in savings. You could just do a full refinance and put the extra $100k into your house leaving you with $0 savings and a $500k house which you owe $250k on. College financial aid probably considers the cost of the debt you have, so probably a better idea is to buy a bigger house and use your savings and put it in home equity, so you’d have a $600k house which you owe $350k on and $0 savings.

I’m not saying that this is a good idea because I don’t know the real ins and outs of college financial aid. But it does seem like a slightly broken idea to try and calculate someone’s net worth without looking at their biggest asset.

I’ve had a HDTivo for years and I was pretty happy with it, but DirecTV has been trying to push its own DVR for a while now. I’ve resisted change because I was happy with my Tivo and I heard pretty bad things about the DirecTV DVR. I knew I was missing out on a number of HD channels, but it didn’t bother me much I got the few that I wanted. But this year with the SuperBowl on Fox again(which for some reason we couldn’t get in HD) and now that the DirecTV unit has been around a while I figured it was time.

The upgrade to DirecTV’s HD21 DVR went smoothly(we had them do it) and everything seems to be working well. The UI isn’t quite as nice as Tivo, but so far I don’t have any complaints, and it’s really nice to have another couple of dozen channels in HD like HGTV, Food, Sci-fi and the Science. There might even be hundreds, but there’s only a couple dozen we watch. There are a couple of small annoyances, but nothing much.

Ah HDTV, the pinnacle of human achievement.

What’s wrong with grid computing? It’s simple: moving the data is hard. There are very few applications which can actually make use of a grid. The problem is the setup and infrastructure to get the data you need onto the grid is prohibitive.

I’m not saying that grids are useless. Some specialized problems which are heavily CPU bound and use very little data can make use of a grid like SETI@Home or Folding@home, but business applications just don’t have those characteristics. Data mining is probably the heaviest application that most businesses will use and using a grid for that just isn’t that great.

I suspect Sun is going to do better by selling their data center in a box Blackbox than they and Amazon will do trying to sell their grid computing solution. Now if Amazon bundles their data storage and grid computing services together at a reasonable price and with great internal connectivity to get the data and the grid together, that might be something worthwhile to consider.