I have always been an aviation enthusiast, flying every rare, antique plane I could get my hands on over the last 40 years. My adventures have taken me from flying a 1929 Norwegian spruce and Irish linen constructed Belgian Stampe to a MIG-25 Soviet fighter to the edge of space at 90,000 feet (check out the curvature of the earth in the cool picture below). This was the same plane the Russians used to shoot down CIA pilot, Francis Gary Powers, in 1960.
Flying a MIG-25 at 90,000 Feet
So when a WWII era B-17 heavy bomber came on the market a few years ago, I had to buy it. The previous record price for a B-17 was $1.5 million, and this faded warplane needed at least $3 million worth of work, not flying since it appeared in the TV series, Twelve O’clock High, back in the sixties. During the war, my dad volunteered as a tail gunner on one of these because he was “bored”, not learning until later that the position incurred the greatest number of fatalities of any in the Army Air Corps. It seems they always had openings.
Bombs Away from a B-17
I dropped out when the price hit $2 million. I learned later that I was bidding against Paul Allen, Bill Gates’ former partner and a co-founder of Microsoft (MSFT), who paid $3 million, and was willing to do anything to get this one aircraft. Of the 12,275 built, there were only 17 left in flying condition, and this specific plane was built at the factory in Seattle where Paul was building a museum dedicated to local aviation.
I heard he ended up spending $6 million on repairs, returning it to the pristine condition the day it rolled off the assembly line in 1943. I consoled myself by logging a few hours in another B-17 as the pilot in command, impressing every subsequent flight examiner of mine to no end with my log entries. These things were built to carry 10,000 pounds of bombs, so when you take off empty, with quarter tanks, they rise like giant box kites, the huge wings delivering lazy sweeping turns. Moral to the story: never get in a bidding war with Paul Allen.
Flying a B-17
Today, I find myself up against another big spender with unlimited funds named Ben Bernanke of the Federal Reserve. The amount of money he is willing to inject into the economy is thought to range up to $5 trillion, assuming that all existing quantitative easing programs are taken to completion, including QE1, 2, 3, 4, and 7. Rumors swirl daily in the Treasury pits that the money is hitting the market, emboldening traders to take the ten year to a mind boggling 1.39% yield last summer. They currently levitate at 1.65%.
I often get asked the question that, “If I am a hedge fund trader, where are my shorts?” My other shorts turned out to be bombs of a different sort, stopping out of my hedges in the (SPY) and the (IWM) at great expense, reminding me of how mean, short, and brutish a trading life can be.
Given the insane prices now being paid for 30 year Treasury bonds, I have to admit to being tempted daily to reestablish my shorts. But as long as the Paul Allen of the Federal Reserve is bidding against me for all asset classes, I am not inclined to short anything.
There is no law that says you always have to have a position, no matter what your broker tells you. Tell me that QE4 has been cancelled, or that the recovery is self-sustaining without any outside assist, and then we’ll talk.
Missing in Action
A few weeks ago, I took the kids to the Berkeley Hills to watch the Blue Angels execute their daredevil maneuvers as part of the Fleet Week festivities, much like I did over Russia all those years ago. What did I see through the binoculars moored at Treasure Island, but Paul Allen’s yacht, the Octopus? It is a 413-foot monster boasting two helicopters and rated as the world’s ninth largest private vessel. It made the Oakland Bay Bridge nearby seem like a toy Erector Set in comparison. It then struck me that there is no better sound than four gigantic 1,200 horsepower supercharged Wright Cyclone engines rattling your teeth on a takeoff roll in a B-17. I hope to see that plane on my next trip to Seattle.
Meet the “Octopus”