Monday, December 31, 2007

Gold Bars

Many years ago I took a Chinese cooking class from Joyce Chen, who appeared on TV in the 1970s and ran a restaurant in the Boston area - there's a Chinese food company in her name now.

She said that making or having spring rolls / egg rolls on New Year's Eve is good luck since they resemble gold bars and will bring prosperity. In normal years I would make a batch myself and have them for New Year's Eve ... with my martinis, of course.

But this year I'll have to settle for some from the China Wok restaurant. Mom's kitchen is in the disaster area ... sigh ... what a mess !

I figure the bears will window dress today and knock stocks down to protect their paydays. On Wednesday I should be back in my office and will calculate the year's results. With the XLE near all time highs I expect it will be a good one for the Alpha Fund. But it's return will have been dragged down by my big cap fins positions. Obviously I was too early there.

Gold will help the Krypto Fund a lot as I had over 10% in it there.

Enjoy a "World's Finest Martini" tonight and look forward to a good 2008.

Just learn what you can from the past, then forget it and look forward. Big gains loom, in my humble opinion, and I am positioned to grab onto them.

Sunday, December 30, 2007

Whither Inflation ?

Gone to the lands of sun and surf, it seems. Or to the various sin cities.

Uh ... the former means Florida and California, the latter means Las Vegas, DC and NYC.

In the heartland in SE Ohio, whole milk is $3.99 per gallon, six hot wings at KFC costs $2.99, and a 14" pizza at the best place in town (now) with four or more toppings costs $10.95. The dinner buffet at the China Wok is $5.99 all you can eat. Actually, milk is 8 cents per gallon if you spend $30 at the local regional supermarket.

That's the price of good weather year round and action and nightlife and lots of people - well off people in the case of NYC and DC. And power. That's not real inflation in those places - just supply and demand and a shortage of "nice places" to live compared to an excess demand by too many geezers and too many rich and powerful people bidding the price of common items up.

Here in the heartland where land is plentiful and the weather is nothing special, homes are available at low prices as are most other items other than gasoline.

This nonscientific survey suggests the cost of good weather year round is about 30%; ditto for living in a power center.

So Ben should just keep rates low as core inflation is contained and low.

Let's not grind down the common man with common desires due to excesses in weather and power centers.

Friday, December 28, 2007

Whither Gold ?

I see gold is around to old all-time high. The actual all-time high is hard to determine as gold was ultra-volatile back then and intraday swings were huge. I guess the Bhutto news in Pakistan caused this rip. But gold was basing around $800 anyway and physical demand is strong this time of year. I wonder if we see Gold $1000 helmets before Dow 15,000. Both are within 10-15% so a solid bull move will do it.

I'm very long gold and silver as you know - both over 10% in the Krypto Fund. I'm doing nothing now, just sitting.

Still dealing with the water disaster at Mom's house. This will take weeks :-((

Thursday, December 27, 2007


A water pipe in my Mother's house broke and caused a huge water mess. So I'm dealing with cleanup crews, contractors, insurance adjusters, etc. Argghhh ! And I had to rent some rooms at a local motel that accepts dogs as Mrs. B and I had the whole team here. Obviously my prevention plan has some flaws ... grrrrrr. Any plan relying on human attention / duty is risky.

I needed mechanical backups. Darn.. That was a plan that failed.

I see Ms. Market is playing ping-pong. Sigh. And I turned Bubblevision on this AM was thought they were so depressing ... woe is us !!!! ... core inflation is 2% so we must worry about stagflation. Sheesh ! Phooey !

This is really nuts. Time will cure it as soon the reality will beat them over the head with a 2x4.

I suggest searching this blog's posts of January 2007 for the "World's Finest Martini" recipe ... enjoy yourself !

Friday, December 21, 2007

More Evidence Memories Don't Exist

The WSJ has a story about massive mortgage frauds likely causing a large portion of foreclosures. Bear, Stearns and other aggressive mortgage underwriters got scammed. Why ? They really didn't check anything. I guess they "forgot" about the equipment leasing frauds of the 1980s, etc. or the Equity Funding fraud of the 1970s; Or the "salad oil" fraud of the 1960s.

Many people take out balloon loans. Of course if anything bad happens to them when the balloon comes due, they won't be able to refinance it. Uh ... this lesson was learned in the 1930s.

MS, BS, etc. lose huge sums on "one desk" - uh ... anyone remember how Kidder, Peabody and Barings went bust ? Or how a rogue trader cost ML hundreds of millions ?

The Street pays these guys huge sums for years as they "make millions" for the firm ... then the firm loses billions when they blow up. Street management is just stupid, frankly. They are lazy and stupid and greedy. They should pay these people ultra-well ... in stock and tied up cash based on a moving average of profits. So if the guys blow up, the bonus gets yanked back.

Then the hotshots might actually think a bit ... playing with their own money at risk might actually induce some thinking.

And now I read Cerberus is in trouble. Maybe Apollo, too. No surprise. LBO and hedge funds play with others' money and blow ups from greed are quite probable there, too.

Futures are up early on this triple witching day. Europe is up as was Asia.

PS: It appears some major gaps on the S&P and Nazz were filled on this pullback. I'd be interested in comments from the "gapmeisters" if this is true.

Thursday, December 20, 2007


I'm starting slow this morning as I recevied a furniture delivery at 5AM.

ORCL had good numbers ... uh .... where is the recession ? Where are the cap ex. cutbacks ?

Friday is a triple witching day, so will likely be wild being a slow, pre-holiday trading day, too.

Hmmm ... this blog appears to be quite influential as Guiliani has fallen and Romney is now tied for the lead. McCain is now 3rd. So my preliminary endorsement really moved the polls ;-)

Obama runs better against some R's than Hillary. Makes sense ... why vote for a known liar and thief ?

The Fed does another TAFfy today ... results Friday.

Barron's Online is pumping NE: it's a 1/2 deep water driller, 1/2 shallow water that is trading in 8x 2008 eps. I own it in the Alpha Fund.

Wednesday, December 19, 2007

Do Memories Exist ?

I wonder about that ... does 21st Century man have a memory ? If he's a few years over 50 and a homeowner, he should remember one or two major declines in the value of his home. And those were paper declines from peak values. My home peaked in value 1987, then dropped about 30% in a couple of years. Did I care ? No. the trough value was still 50% over my basis and way over my mortgage and home equity loan balance. I still had a home and still had to live in it. So that paper value meant zero - an unrealizable number. Did I change any habits ? No.

Ten years past before my home reached that peak value again. Now it's about 50% over that past peak. Why hyperventilate about peak to trough numbers for an asset one has no interest or capability to live without ?

And most baby boomers are like me, unless they were and are spendthrifts. They live in a home they bought years ago and have a huge equity balance.

There was a recession in 1990 ... completely unrelated to the home value drop.

So why all this hyperventilating ? Has 21st century man become stupid ? I think not. I think most of America has no concern over this home value drop - they still have a home to live in and still need it. So nothing has changed for the bulk of people.

Speculators & spendthrifts are in trouble. So what ? Since when do they drive the US economy ? What other industry is in trouble ? None.

No recession ... buy good stocks on dips ... be patient ... It's always darkest [and coldest] before the dawn.

PS: The ECB is making the Fed look like amateurs ... ivory-tower pinheads. Financial leadership is being shifted to Europe :-((

PPS: The results of this "Term Auction Facility" of the Fed will be interesting. I don't really have an opinion, but will think about the results a lot.

Tuesday, December 18, 2007

Slogging towards 2008

The beefers and big fund managers must get their big window dressing, tax loss selling, liquidations and manipulations done this week as Friday is a big triple witching day and after Friday volume will collapse for the holidays. So wild swings are likely this week, as that wise commentor on this blog, frosty, pointed out last week. Yesterday was one of them, a "ping" and this morning is starting out at the "pong".

The Kremlin and the Russian Orthodox Church are become entwined ... Putin to become Prime Minister ... hmmmm perhaps a redux of czarism is evolving ?

A Bear Stearn's hedge fund manager under criminal investigation .. no surprise here as I stated a few months ago ... I can't give the reasons, but "a tiger doesn't change its stripes" or "once a thief, always a thief" is "enough said.

I intend to write a long blog about Thucydides and the relation of those events 2500 years ago to now. I have been amazed how much I see of modern national state situations and relations as existing in those small city states of 2500 years ago. Even military events - tactics and strategies - are quite fascinating. I wish I had read this book many years ago. Sigh ...

Futures are up significantly at 6AM EST. I am still considering buying more C.

Later this morning I need to drive to Hartford to meet my partner for our yearly strategy session with our main accountant. So I'll be away from about 10AM to 4PM EST.

The S&P cash is back to its level of early 2007, but corporate earnings are much higher. So one can get a free year of earnings in many stocks.

No recession ... buy dips in good stocks to the long term ... many good entries exist.

PS: Here is an example of how despicable and corrupt Congress is. The Earned Income Credit is a libertarian originated program that actually gives working poor families money efficiently without armies of bureaucrats. In 2004 this program supplied about $36 billion to the poor, being the largest anti-poverty program of many. I just heard the Congress - controlled by supposed Democrats "caring" for the poor - is spending $17 billion on earmark pork payoffs/bribes just now. So they rip off the taxpayer for almost 50% of the amount they supply for the poor in the EIC. Now you see why they - D's and R's are such knaves. We need more populist libertarians !!! Bunkerman for President !!!

Monday, December 17, 2007

Monday Morning Rambles

The snow blower was repaired - the plug was fouled. Sheesh ... if they made those plugs accessible with some directions, I could have fixed that with a wire brush. So I cleared off the driveway fairly well. The new plow person did a nice job, putting down some sand, too. The driveway is 1250 feet long with many twists, turns, rises & dips - good for defense but bad for Mrs. B's car when there is ice. The old plow person is now doing it, too. So I have to resolve that conflict today. More complexity in life ... sigh.

Wheat is over $10. This has nothing to do with inflation, but due to repeated crop problems in the US, Europe and Australia: droughts, ice, etc.

IR to buy Trane. Sigh ... takeovers continue.

Holiday sales are OK ... employment is OK ... no recession.

Let's see if the Fed's new borrowing facility works today. This will be interesting.
Asia markets are down big overnight - I see no real news.

I read quite a bit about C's new boss and I like him. The fact he refused a big, fancy office in his last job as embarrassing was quite heartening. So I am considering adding to C today again.

The US presidential race is heating up as voters ... real voters ... are now paying attention. I have decided to support whomever I perceive as the most honest candidate [who is intelligent], regardless of party. As the US government has so many checks and balances, I think this way something good can happen if we finally have an intelligent, honest person in office.

So far, that means Romney, then McCain. I really don't know much about Obama and he is quite inexperienced. But I do have an open mind.

Friday, December 14, 2007

Back in the Saddle

Ahhhh Las Vegas ... the dice were friendly as were the cards. I stepped up my game a bit & really had a fine time at the tables & ... the dining tables :-)

Amazingly I actually made a bit of money :-)

Mrs. B crushed them at the penny slots.

Hmm ... I see Mrs. Market has been a bit fickle ... traders must be enjoying this.

And I see Ben has not obeyed my directions fully. He seems to be trying to be a bit clever with this auction of money to the European, but at least he did cut rates and the door is open for more. Grade -> C+

The beefers who bought the banks on the dip have bailed ... ugh.

I plan to buy a bit more C this morning and some more GE, too. The reason I'm buying more C is that I noticed upon reviewing my account I had a bit of room for more of it. And the price is right.

No recession ... buy dips ... Don't Fight the Fed ... be patient. Disregarding all the hyperventilating, the Fed did cut rates again.

PS: it's been a cluster FUBAR here with the snowstorm. Luckily our flight from Las Vegas wasn't canceled - it was about 2 hours late. Then the car to pick us up at the airport was late ... then when we got to our house, the last 500 ft of the driveway wasn't plowed so we had to walk in 8" of snow :-((

PPS: So this morning Mrs. B had to take a car for abig service appt. ... and got stuck in the driveway ... so I got out to shovel & push as did a neighbor ... after about an hour we got her out & on her way. Today we will hire a new plow person & fire the old one.

P^3S: More cluster FUBAR ... my snow blower won't start :-((

Sunday, December 9, 2007

Las Vegas

Mrs. B and I will be in Las Vegas for 3.5 glorious days commencing Monday AM, returning Thursday evening.  I plan to hit the blackjack tables with my trusty pocket card to minimize my losses as I enjoy the action.  And I'll hit the craps tables in a big way with my "reduced variance mathematically minimal losses" tactics ... lol !;-).

Mrs. B will hammer those penny slots !:-)

Be patient, buy dips of good stocks.  The beefers seem to be moving to a new waterhole in anticipation of Ben coming through.  If so, a new intermediate trend should start.  

Friday, December 7, 2007

The Past, the Present and the Future

Today is December 7. That date in 1941 was a Day of Infamy, as the military empire of Japan executed a surprise attack on the US Pacific Fleet at Pearl Harbor in Hawaii. That evil, expansionist empire was crushed and destroyed. That was a win.

The US ended the war inarguably the most powerful nation on earth with sole possession of decisive atomic weapons and an industrial & scientific base undamaged - even revitalized - by the war. What did it do ? Help create peace and prosperity for others.

The US proceeded to work to create international institutions to help the world develop peacefully and helped the world recover [Bretton Woods monetary agreement, the World Bank and the IMF ]. After few years the US devoted huge resources to preventing another evil, expansionist ideological power - Soviet and World Communism - from seizing power worldwide. In 1991 Soviet Communism, the heir of Bolshevism, collapsed. That's a win.

Today I read the IMF has become ... redundant. So many developing nations have strong economies and bulging reserves that its advice and loans are not needed. And I hear on Worldwide Exchange this AM early from a ... Frenchman ... that the US economy is much less a factor worldwide now. That's significant since it's not from a US bull trying to rationalize his posture, but from a disinterested money manager focusing on the entire world. So the postwar effort has worked. That's a win.

I foresee Asia developing into self-supporting consumer driven economies and Europe living peacefully without internal wars and conflict and becoming a peaceful United States of Europe overtime.

There are major risks and minor conflict points, but overall it's a win. The belated W strategy in Iraq is winning ... finally he did what was obvious four years ago. If he had listened to Bunkerman [and not McNamara ...oops, Rumsfeld], that war would have been over in 2004. Perhaps he will apply this strategy to Afghanistan and finally win that one, too.

So perhaps the US should soon declare victory and go home to live in peace. Let's not make the mistake of the Athenians and keep sticking our nose into others' business. The big problems are solved. Live & let live, I say. Europe and other peaceful nations seem to want to be a more positive international force now. Perhaps the US should step back and let them.

The world is on a positive, morally good trajectory with improving freedom and economic conditions for the people of the earth. Let's just let it stay on that path.

Uh ... yes, I am very optimistic ;-)

PS: I'm not saying disarm. A powerful military is a guaranty of peace. There will always be evil people & groups. Speak softly and carry a big stick.

PPS: I'd like to see the jobs number come in between 50K and 100K. I am very long & strong.

Thursday, December 6, 2007

Still Waiting ...

The S&P cash index closed over its 200 DMA yesterday and that's over the neckline of a tilted inverse H&S bottom pattern that measures to the all time high of about 1575. If a second close over that line occurs today, the pattern is confirmed.

The Russell is still weak, but the Dow & Nazz shows bullish patterns, too.

The chips showed some power yesterday - I don't own any as I don't like them long term, BUT if you are a trader, those might get beefer backing as they move to the new waterhole. The SOX shows a higher high and a higher low.

I plan to buy some more CSCO today to round out my position. This is a long term hold for me, not a trade. I like Internet related tech for the long term.

Be patient. Buy dips in good stocks.

PS: It's so obvious all Congress is interested in doing are creating the earmarks payoffs for their bribe payors. Despicable.

Wednesday, December 5, 2007

Slow Start

I've been a bit sick lately so am starting slow this morning.

I see Brent is back over WTI oil ... interesting.

Futures are up for now.

ADP jobs number is this morning ... that's been more accurate lately.

Wall Street is being investigated over subprime issuance ... good ! How could anyone really think those 2/28 loans made any sense ?

Sen. Chris Dodd says Goldman should be investigated ... :-)

More later ...

PS: ADP employment number was very strong - +189K and revised October up. That's good. That last thing we need is for a weak economy picking up momentum.

PPS: The recession mongers should be twisting in the wind .. dying. They are losing a two front war badly. On one front, the Fed is attacking them with strong thrusts to prevent a future downturn. On the other front, good employment numbers are wearing them down with steady attrition show no current downturn. When will they capitulate ? There are so many of them - underinvested or short. And soon to be out of a high-paying job ... shucks.

Tuesday, December 4, 2007

Waiting ...

Ms. Market will probably take a break and go Christmas shopping this week ... at least until Friday AM and the jobs report. Will she buy a green sweater & scarf, or a red overcoat ? Time will tell, but I think she's getting a bit tired of hairy bears and will soon move to the muscular bulls, perhaps for a stampede up.

WSJ says beefers had worst month since 2000 in November - most lost money. Shucks.

Baosteel is reported to be preparing a bid for RTP. Its chairman is quoted indicating such.

Old Man Winter has arrived here - 4+ inches of snow and 20F temperatures. Heating oil prices are quite high - I just paid $700 to fill my heating oil tank. That doesn't bother me, but Joe Common Man might get a shock. The average income for a two income family is around $55,000, so that one tankful is over 1% of income.

Be patient. Some of my recent adds are "granny stocks" that I like for very long term investments. I expect they might pull my Alpha Fund return down, but I want to slowly create a portfolio with very long term stocks I can hold for 20 years or more. Over a one year horizon, I think I can get about 20-30% or more in them but obviously over longer time frames that won't stick.

If I can get a good entry and 20-30% in one year, then holding them for 20 years becomes easy. Many of Mrs. B stocks in her Sky Fund are like that: PG, PEP, MCD, etc.

I'm just explaining my strategy and tactics.

Monday, December 3, 2007

Long Term Investing

Here is an example of long term investing. About one year ago in another forum, I was criticized by a "master" for mentioning PG as an interesting stock in the disinflation environment that I foresaw as coming. I had remembered that in the 1980s, stocks like PG, MCD, KO, etc really performed very well in such a disinflation, moderate growth environment.

Of course a crucial aspect of long term investing is that one holds the stock long enough to something good to happen and/or one's views to become more widely recognized and accepted - if one is correct, but just early.

So PG one year ago was around 65. Today it's 74. So that's a 14% gain plus a 2% dividend, thus one obtained 16% under favorable tax treatment. A short term trader would need to be correct several times and realize a bit over 20% to have the same aftertax return.

Well, Mrs. B did a bit better in her Sky Fund, buying PG in March at lower prices, plus PEP and MCD. Those companies have good products, good margins, and good overseas exposure. In a disinflation environment with a declining dollar, they can outperform. And they are good long term holds for a "retired" couple having steady dividend growth.

We'll probably hold these stocks for a long time now, having gotten good entries.

To build a good long term investment portfolio really takes at least a year. Good entries don't occur every day and one needs to select stocks that will perform well in the anticipated environment.

There are good entries now under the economic trajectory that I believe is unfolding: a mid-cycle slowdown amid disinflation and solid growth in emerging market nations.

Internet related tech, energy, miners, big cap financials, select transports are my favored groups. I'd like to find one or two hot small cap growth stocks, too.

PS: A UN global warming summit in Bali ... gee .. I wonder how much fuel was burned getting all those coneheads to that far away place ? And I wonder who is paying ?

PPS: Ben Stein says GS report on credit crunch was designed to create fear so they could make money on shorts. Golly, he must read this blog, too.

P^3S: IBD says the market is in a confirmed rally. I don't see a confirm day in days 4-7; maybe they are invoking the exception that if days 2-4 are very strong overall, that can be confirmation. Perplexing ???

P^4S: There are some inarguably "smart money" groups buying distressed assets, viz. Buffet (TXU bonds) and MS (Lennar land), among others. It's starting to smell like the bottom is in or close thereto.

Sunday, December 2, 2007

Causes of War

As a long term investor, one has to be aware of major risks. War is a huge risk. I have been reading the fine book - Europe: A History by Norman Davies - and just finished the part on World War I. The New York Stock Exchange was closed for months after that war began. Prices at first collapsed, but soon a great bull market began in US stocks.

So I started thinking about the principal war risks the world is subject to now. I came up with three, but a friend pointed out that I missed a major one. First I need to review the common causes of major wars.

I. "Man makes war not out of hate and aggression but out of devotion to irreconcilable values" - so said Herodotus in general terms [source: Great Ideas of Philosophy, Part 1 notes page 22, a course on CD]

II. Revolutionary totalitarianism in one state leads to wars of expansion in furtherance of the ideology. I've written much about this here.

III. The powerful state strives to subject or feed on the weaker state for simple power or economic gain. This can lead to a small war or a big war if the weaker state has a big, powerful ally.

How does this work in practice ?

American Revolution - that's type I as I've written in the past.
War of 1812 - type III that didn't work for Great Britain.
American Civil War - ditto, type I.
Mexican & Spanish American Wars - type III
World War I - type III per Austria-Serbia, but Serbia had a big friend, Russia; and Belgium had big friend, Britain.
World War II - Type II in Europe, and type III in the Pacific [US was pressuring Japan re China war leading to Pearl Harbor]
Cold War - type II
Korea and Vietnam - Vietnam War - combination of type II and type III with South Korea and South Vietnam having the big friend, the US.
First Gulf War - type III with perhaps a bit of type II
Second Gulf War - this appears to not fit the typology, being a preemptive war to avoid a wider much conflict that might have occurred if Saddam had obtained nuclear or poison gas weapons and attacked or threatened Israel leading to nuclear retaliation or preemption. So it has characteristics of all three types of causes.

So these three types of wars work pretty well, in my humble opinion, in explaining most conflicts of the past 250 years in which the US has been involved.

Future War Risks (these are my ideas):
A. China might become more militaristic and nationalistic, invade Taiwan with big friend, the US, leading to a major type III war.
B. Russia might become more nationalistic and militaristic, and attempt to pressure states on its periphery, which now have a big friend, the US and perhaps the EU, leading to a type III war.
C. Muslim fanaticism in Iran might precipitate a major type I war, with nuclear war with Israel leading to a much wider conflagration. Or a new Muslim caliphate as envisioned by bin Laden is somehow created leading to major type II wars as it seeks to expand.

Here's the one I missed: the great power of the US might be misused by its leaders in trying to "butt in" and impose its views [economic or political or other] on numerous other states, leading to a coalition war against the US. This would be analogous to the Peloponnesian War. The powerful Athenian democracy intervened in many minor conflicts that culminated in a number of city states led by Sparta banding together to defeat Athens before it became too dominant. This is a composite type I and type III war.

I hope future US leaders show a bit more restraint in being the world's policeman. Live & let live might be a good motto for first principles in world affairs.
PS: The Serbia+Bosnia+Kosovo war was obviously a Type I war.
PPS: Poverty is not a cause of war, but it does help create victims for Type III aggression wars.

Friday, November 30, 2007

Day 4

I heard two significant comments.

First from Bill Seidman: he oversaw the clean-up and resolution of the commercial real estate mess of the early 1990s. He said that (1) banks are probably overstating write-downs for their mortgage backed securities and CDOs, and (2) the losses on the Aaa/AAA classes of mortgage backed securities are not going to be large, or any. The fact that there is a house as collateral for the loan supports that. These are not junk bonds - subordinated debt. They have solid collateral that reduces the loss realized upon default.

If a home first mortgage loan had 80% LTV and the Aaa/AAA classes are 80% of the pool, then the average losses on the entire pool would need to be 1 - 80% x 80% = 1 - 64% = 36%. That is not going to happen, except for rare cases. So most of these bank holdings will eventually suffer no losses. Most of the write-offs will be reversed unless they sell now.

Second, Bernanke: He definitely signaled more rate cuts overnight.

We get the PCE inflation numbers today. Those are important. We need to core inflation number to stay low.

Be patient. Buy dips.

Thursday, November 29, 2007

Day 3

A rally attempt is in progress - today is day 3. We await a "Sign" that the elephants are moving out to a new waterhole and have finished stomping in the mud at the old hole. A big jump in the major indices on higher volume on Day 4 or later is the "Sign".

Until then, if you are trader stand aside or just hit a few singles. When we get the sign, climb onto the backs of those elephants and ride the trend. For long term investors, you know what I think. Energies, miners, big fins, select Internet related tech are where I think I'll get my 30% feeding for 2008.

The confirmation day might not come until the FOMC meeting on December 11.

Hmmm ... on that day I'll be in Vegas on the craps & blackjack tables and eating fine food. When I was traveling on the date of the September Fed meeting we got good news. Is this an omen ?

Be patient, buy good stocks on dips.

Wednesday, November 28, 2007

Energy and Miners

The beefers are rotating out of the energy and miner groups, creating the potential for good entries for long term buys. I've followed these groups for years and have seen this game played out several time. As long at Asia demand is strong these groups will outperform long term [in my humble opinion].

If you don't own any of these and are a long term investor, I suggest watching them over the next few weeks or couple of months. There is a some seasonal basis for the pullback, too. No rush to buy - the stocks usually bounce around a bottom awhile building a base for the next leg up. I already own a lot of them, so likely won't buy them this time around. I might trade some through options.

Here are my positions in energies and miners.

Oil Sands: SU
Pure Gas; CHK
Deep Water Drillers: RIG, GSF [these two are merging soon], DO, NE
Refiners: VLO [HES and MRO have refining, too, as do the big integrated oils]
Oil Service: NOV
Uranium: CCJ

CVX and DVN have really good properties in the deep water Gulf of Mexico, so have great prospects for substantial adds to reserves. The deep water drillers have great long term prospects as that is the only place that really large oil finds are likely to be made.

Gasoline prices will likely rise in the spring, so stocks with refining could move then, viz., VLO, MRO, HES and the integrated oils.

I think PCU will eventually be bought by China. I think someone will buy AA - either another miner or a Russian aluminum firm. There have been rumors that BHP will buy FCX ... and AA ...and they are trying to buy RTP. I think MRO and HES could be bought by a major integrated.

These are all long term positions for me and I expect to hold them into 2009 or longer.

Here's a bit more rationale: these companies produce raw materials that are costs for the rest of the world economy. And the demand is going up as are the prices. So overweighting these stocks is the only way to capture the value in that sector and to offset the increased costs that negatively affects other stocks. So I overweight them through my Alpha Fund holdings.

PS: yesterday was another in a long line of "Day 1" for potential rallies. This one had higher volume. As before, these mean nothing until a follow-thru day occurs.

Tuesday, November 27, 2007

Gold Mist

The new Cadillac is really a fine car: roomy, powerful and very tasteful. So far I'm very pleased. Cadillac seems to be in the groove again. And the quality surveys show they are very strong.

Abu Dhabi to invest $7.5 billion in C - the security is like the old "equity notes" of the early 1980s. Technically it's a mandatory convertible note. The coupon is high - 11% - but the mandatory conversion price being over yesterday's close negated most of that premium in the "all-in" pricing. This is very reminiscent of that Saudi sheik's investment in C at the bottom long ago.

At some point Ms. Market should tire of the bears having their way with her, get off her back and climb onto a vigorous bull ;-))

I also wonder if some powerful groups really want to create a crash. That story in the WSJ yesterday was really odd. The purpose of the Federal Home Loan Bank board is to provide liquidity to saving banks for mortgages. That system was created in the depression around 1932 to do just that. So why is a story put out to complain about it and why does a NY politician complain when a governmental institution performs according to its purpose is ?

A market seer and others on Babblevision say that the Fed is pumping money out like a madman. Here's a fact: the year over year growth in the monetary base is ... 2.15% [source: data in Barron's Online]. That's not excessive growth - it's tight money since year over year GDP growth is more than that !!!

Are they fools or knaves ? I'm leaning to the appellation of "knave" to these bomb throwers. When a simple check of facts contradicts a charge, the knave appellation fits better.

I'm doing nothing. I might re-buy EDU soon, and add to YRCW and CSCO. If they knock the big fins down more into the end of December, I will buy a boatload of call options on them - probably one or two strikes in the money around six months out.

PS: I'm getting really tired of the stupidity of Babblevision commentators. Idiots ! They have no idea what they are talking about. The BAC investment in CFC was a convertible preferred stock with a dividend of 7.5% - that dividend has a low tax rate and optional conversion. The Abu Dhabi investment in C is a mandatory conversion in a few years at a substantial premium. And C has a big dividend [7% as of yesterday] that Abu Dhabi foregoes until conversion. So the 11% is fair, being a net of 4% over the common to compensate for the higher mandatory conversion price. I just wrote CNBC that I knew more than their commentators 25 years ago as a rookie investment banking associate. I would have gotten fired for saying the crap their commentators say in front of a client.

PPS: Here is a fair analysis of the Abu Dhabi investment in C. From the WSJ article, the average conversion price is about 34.53 and the yield is 11%. The average mandatory conversion date is about three years [between 3/2010 and 9/2011 being a mean of about 12/2010]. Taking a stock price of 30, the conversion premium is about 15%. First subtract the dividend from the coupon: 11% - 7% = 4%. So Abu Dhabi gets 4% per year for three years to pay 15% over today's price for the stock. That's a 3.75 year payback. And that's fair. Another way to look at it is to multiply the three years that Abu Dhabi gets 4% more than the dividend they get if they bought the stock today: 4% x 3 = 12%, which is 3% less than they must pay in three years. Why is this bad ? To me, it seems like C is getting that 3% extra premium vs. selling common today. That is a good deal. I suspect there are tax benefits, too.

P^3S: Here is the comment I just sent to the FOMC Board members: "I see the overnight rate for Fed funds is 4.5% while core year over year PCE inflation is 1.8%. So that spread is 2.7%. And I see the year over year growth in the Monetary Base is 2.1% vs. GDP in current dollars grew at 4.9%. And I note that consumer confidence is dropping fast. So why can you not see you have an excessively tight money policy in a weakening economy ? Even if the prospects for the economy was moderate growth in 2008, your policy is still very tight. I don't understand why obvious facts are so cavalierly denied in public statements by Board members?"

Monday, November 26, 2007

Here We Go Again

Friday was another Day 1 for a possible rally. So now we wait for a confirmation day, preferably in Days 4-7, which requires a 1% gain in the major indices on higher volume.

The WSJ says European banks are having more funding problems. It seems that community expects a bank failure. The ECB seems to be doing its job, pumping in euros. But my guess is the banks need dollars. And I think the Russians and Mideast are sucking those out of European banks. Hence the funding problems in Eurodollars.

Of course, a smaller US current account deficit also reduces the flow of Eurodollars to Europe and beyond.

RTP stock is up on a rumor that a China consortium might buy them. Materials stocks are up.

Gold is up to $836. Oil is up to almost $99. Futures are up ... so far.

GOLD MIST will be picked up this afternoon - perhaps a good omen ? The correction began about the very day I ordered it.

Saturday, November 24, 2007

New Mac

I am writing this from my new Mac computer - it's very nice.

The screen was huge - 24" and the resolution is outstanding.  So far no problems, but I haven't done much yet.

This morning I spent a long time waiting for my rather new Vista PC to do it's thing - updating, downloading, etc.  So I had to wait while it fixed itself - Grrrrrrrr

The Mac starts up really fast.  So over time I am going to try to do everything on this computer to see if I can mostly junk my Windows PCs.  I think it might take a year to get really confident.

Next step is to transfer some files and make sure my iPhone synchs OK with this.  I think I should transfer the songs first, though.

I'll post more over time about this experiment.

Friday, November 23, 2007

Perception vs. Reality

The financial press keeps talking about huge losses in subprime & CDOs and CLOs. And the major financial institutions get painted with that tar brush, as if they are holding the risky paper.

The reality is that as the subprime mortgage loans default - there are very few corporate defaults still - the real losses go to the subordinated layers of the structured debt first. And those layers are rather thick before the Aaa/AAA paper gets any.

I'm talking about real losses, not perceived market losses created by a selling panic.

So who owned the subordinated classes - the AA, A BBB and lower rated classes? The beefers - hedge funds - and some managed accounts for pension funds. That is where the "real" losses will be put.

Billions and billions of real losses go to and will go to classes owned by many beefers and they are being liquidated. That will be done by year end, or sooner.

Have you noticed how no one is talking about that paper? I haven't heard a single story in the financial press about that paper. How much of it is there? Billions and billions upon billions. And it bears the first, second, third and more layers of losses before the Aaa/AAA paper bears even $1 real loss.

When the dust settles and the actual losses show up in the trustee reports, as a group those Aaa/AAA classes are NOT going to show much, if any, real losses.

Golly, if I was paranoid, I'd think the beefers were feeding misleading stories to the financial press.

I am very long BAC, C, WB and JPM for long term. I have a trading long in CFC.

Over a long time frame, reality will rule over perception.

Thursday, November 22, 2007

A Day of Thanksgiving

I have much to be thankful for on this Thanksgiving Day: family, friends, felicity of the past and present, and old and new, and good fortune. I spent some time this morning thinking about the past year and what I have to be thankful for.

And I again read the "Review & Outlook" of the Wall Street Journal that has published the same pair of columns on the day before Thanksgiving annually since 1961. These superb expressions of some of the deep meaning behind Thanksgiving Day help one put this day into a larger context. The title of the first is "The Desolate Wilderness"; the title of the second is "And the Fair Land." I highly recommend them. I began reading them in 1981 when my partner first showed them to me. And I have read them almost every year since - every word again and again.

Wednesday, November 21, 2007

Cut Rates Now !!!

I carefully read articles about the Fed's minutes and extended forecasts. They forecast 2008 growth as 1.8 to 2.5% real growth, while expecting headline inflation to be 1.8 to 2.1% and core inflation as 1.7 to 1.9%. Unemployment is forecast as 4.8 to 4.9%. The current overnight Fed funds rate is 4.5%, which is 2.7% over the midpoint of the core inflation forecast for 2008. In Note A below from a variety of data I educe the range of reasonable "neutral" real interest rates as 1.5 to 2.5% with 2% as the central neutral level.

The inflation forecasts of the Fed itself show they have won the war on inflation: price levels are forecasted in the zone of stability - the "Comfort Zone".

The core PCE is now 1.8% year over year and the Fed midpoint forecast for 2008 is the same. So the "neutral" Fed funds rate is 3.8%. But why should the level be at "neutral" ? The Fed's own forecast shows subpar growth for 2008 and higher unemployment. So they are violating their mandate to maximize employment with stable prices. The Fed should be maintaining either below neutral real interest rates or at least a real rate at the low end of neutral, viz. either at 3.3% or lower.

Mirabile Dictu !!! Ms. Market concurs !!! The two year Treasury note is trading at 3.06% !!!

So why can't the FOMC figure this out ? Surely Ben Bernanke is as smart as his college classmate, Bunkerman. Maybe the FOMC members are still fighting the last war - inflation - and still shooting though they admit they've won. Some Fed big mouths do say that. Or it's something else. Hmmm, what could that be ? From the screeching of the press and some politicians, it's the dollar ! They are afraid the dollar will drop considerably more. Grrr, they have no statutory authority to support the dollar.

How many common men must lose their jobs & homes to support the dollar ? I'd like to hear Barney Frank ask Ben that in sworn testimony.

Let no common man be crucified on a cross of dollars ! *[see note C]

Cut rates now at least 125 bps ! Or cut 50 bps and signal continued cuts !

There is a range of Fed interest rate levels due to error and inaccuracy in knowledge. So accepting the core PCE inflation level of 1.8% [which corresponds to the recently released Fed "central tendency"], what range of real returns should be put onto that for overnight money ?

I remember learning in B-school that a 0% real return for T-bills was the empirically mean over long periods of time. Adding 1% for a bank risk makes sense. And I know that current Treasury inflation indexed notes give around 2-2.25% for multi-year money. And I know that old gold notes have long term rates of around 2-3%. So suppose a reasonable range is 1-3%, midpoint 2%. Let's take the range and divide by two to get a core centroid: (3% - 1%)/2 = 1% core centroid which is + or - 0.5% on the midpoint, viz. 2% real rate plus or minus 0.5%.

So higher math gives a neutral real interest rates as between 2% + or - .5%, viz. from 1.5% to 2.5%, midpoint 2% for overnight bank lending.

NOTE B - $10 words
For definitions of educe, adduce and conduce, see blog post "The 'duces" for November 19.

Reminiscing the famous "Cross of Gold" speech of the "Great Commoner", William Jennings Bryan, whose only vice was an inordinate fondness for a third plateful of food :-)) [I think that's a quip from H. L. Mencken - I saw saw it a few years ago & saved it.]

"Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests, and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold."

Source: William J. Bryan, _The First Battle: A Story of the Campaign of 1896_ (Chicago: 1897), 199-206.

Tuesday, November 20, 2007

On and on

The Rich Man's Panic continues. Sigh ...

HPQ beats earnings and revenue estimates and guides both up. No recession there. Sigh ...

Fed minutes come out today, plus the increased forecast disclosure. Those might be really interesting.

CFC got hammered again. I suppose that more rumors abound about liquidity and downgrades. I'm thinking about re-buying it. I didn't notice until too late yesterday that it was so low. If I can get a good entry, I'll buy some for a TRADE. I figure that someone will definitely buy them - the question is at what price. I think 18 is the logical minimum, viz. the BAC owned preferred stock strike price for conversion. This will not be a huge position.

I now have fullfilled the "Plan" for my big fin long term purchase program. The positions are BAC, C, WB and JPM in order of position size. The first three [BAC, C, WB] are rather close, though. I don't want to become a "Stakhanovite" here for these. If I decide to become one, I'll be doing it thru options and for a trade.

Otherwise, nothing has changed. Beefers with winning positions are still shedding them in panic to hold onto gains to keep their fees for the year. Find good stocks & groups on buy dips for long term positions. There are quite a few good opportunities out there. Use patient time diversification. This correction will clear soon as time and price are both playing out.

PS: yesterday's S&P drop broke the recent low, hence erasing the potential rally. So we're back to waiting for a new "Day 1"

PPS: This big cap fins position is now my largest group in my Alpha Fund, even larger than the energy stocks. Big cap fins are 33% of the Alpha Fund. Energy stocks including deep water drillers are about 30%.

P^3S: Just so all know I can admit when things go wrong, my Alpha Fund is now up only 43% year to date, vs. 68% at my year high. So that's quite a drop. The sales & partial sales I made for money management around September certainly helped keep my numbers up as all those stocks are under the selling prices. All my early buys in the big cap fins are well under water. :-(( I don't mind the first buys, but the adds in Sept. to Mid Oct. still burn me, as those violated my buying plan.

Monday, November 19, 2007

The 'duces

No, not deuces ! This post is about words formed by adding a prefix to "duce". I seem to have trouble remembering these so I thought that writing a blog & comparing them might help.

Here are the $10 "duce" words that are in my word card file: adduce, conduce, and educe. $0 words are induce and introduce. I wrote about "adduce" a few days ago.

Adduce: to offer as an example, reason, or proof in discussion or analysis; to cite as an instance or as proof or evidence.

Conduce: To lead or tend to a particular end usually desirable result: contribute

Educe: 1. To bring out or develop from latent or potential existence; elicit. 2 infer; elicit a principle, or number from data.

So can I use these words in some sentences about beefers ? :-)

Bunkman's long observations of stock movements educed the "beefer" as a prime mover of markets short term. Bunkerman further adduced recent wild swings in major groups in substantiating the profound effect of beefer actions. Investing tactics such as dip buying that recognize beefer moves conduce better long term results.

A hat trick ! :-)))

Nothing is new; nothing has changed. Be patient, buy dips, wait for the smoke to clear. When the beefers cease stomping the mud around this drying water hole, a new trend will emerge. We are waiting for a "follow thru" day to confirm a rally.

Friday, November 16, 2007


I read some research on BAC [Bank of America] that was published on Barron's Online. Punk Ziegel & Co. wrote that BAC has a large investment in China Construction Bank with the option to increase it to 19.9%. Under the new accounting rules, they will be able to write it UP in Q4. This gain will flow directly to the bank's equity and increase its capital ratios quite a bit. The total increase is ... $35 billion [sic]. BAC's market cap is less than $200 billion now. So this is huge and that capital can be used to increase loans and earnings power in the future.

Combined with the pain inflicted on the non-bank loan markets, such as CDOs, SIVs, and mortgage companies and other structures that let non-banks s compete with banks, I think BAC's earnings power in the future is really a lot more than today's excessively bearish mindset puts it.

So I am thinking of buying more BAC. I have a lot but have about 17% left to add to the big banks from the "Plan" amount (100%). Either JPM or BAC will get it. JPM is the smallest position of the "four horsemen" in my big fins holdings [BAC, WB, C, JPM]. So I have some real thinking to do.

WSJ story says Russian oil production growth is slowing very much. No surprise. Oil demand is growing and has to ration the relatively fixed supply. Oil demand elasticity is well known to be quite small - it's "inelastic". This means to reduce desired demand just 1% it takes a multiple % move in oil prices. Since oil/energy demand is highly correlated to economic growth, oil prices are going up over time. For example, if economic growth would naturally increase oil demand by 1%, oil prices must increase a lot to cut that demand to 0% as no more supply is available.

This is why oil prices are high. It's not fear or speculators. If those were causing high prices, lots of oil would be moving into storage or OPEC could not sell all it desires. But OPEC is selling every barrel. Boone is correct.

Nothing has changed. Beefer actions can make Ms. Market dance anything they wish short term. Buy good stocks & groups on dips. There have been some good dips in oils and miners and deep water drillers. Take a look if you don't own them.

PS: Per yesterday's late day comment, I bought more C around 34.50

PPS: per the comment posted, on this AM's dip I bought more BAC, WB and JPM. Around 15 I'll add to YRCW.

Thursday, November 15, 2007


Listening to my course on CDs, "Great Ideas in Philosophy" published and sold by The Teaching Company [see ], I learned an interesting concept and word: the noun, hylomorphism, and its related adjective, hylomorphic. In simple terms, hylomorphism is a theory that all physical objects are composed of matter and form. Aristotle developed this theory in his book De Anima and a few other books. I'm not going into his usage as that involves concepts of the body and soul.

Let's see how modern elementary particles fit this theory .. and stock prices !

Many have mass, or more precisely, rest mass. And they have other fundamental quantum numbers such as spin and charge. An electron has a rest mass and spin 1/2. A W and Z particle has rest mass and spin 1. A photon has no rest mass and spin 1. A quark has rest mass, spin 1/2 and charge -1/3 or +2/3. And some particles have "colors" and "flavors". A graviton (not discovered directly yet) has no rest mass and spin 2.

I suppose we could generalize "matter" to be "energy" as the special theory of relativity does by making energy the fourth component of a fundamental four dimensional vector with the three directions of momentum as the other three dimensions. But there really is a fundamental difference between rest mass and energy - that's why it's called, "rest mass".

So hylomorphism might partly right and partly wrong, or needs generalization. Not all fundamental particles have rest mass. But all fundamental particles have some fundamental properties one could characterize as "form", such as spin. I think latter day philosophers might have expected classical hylomorphism to fail on the other leg, namely that some physical objects would not have "form", but all would have "matter".

Hmmm ... can one call light a "physical object" ? Or a graviton ? We can observe light and feel gravity. But are we simply using the photon or graviton to sense a physical object that does have matter? I have to think more about that concept.

Hmmm ... what is a "stock price" ? It's the price of exchange of shares. So a "stock price" has no matter, but has form, like a photon. A stock price has two numbers, the price and the number of shares, and a time - when the transaction occurred. So it's three dimensional. The prices, share #s and times can be ordered but are not unique. At a single time, several exchanges can occur at different prices or the same price. This is analogous to a boson with integral spin - they can be stacked on top of each other while fermions with half integral spin cannot occupy the same "space". Interesting ... I'll think more about this.

Nothing is new. Wait for a confirmation day, or just buy dips of good stocks.

PS: I just realized my "beefer" theory of the stock market is a teleological theory - one that focusses on the purpose or design behind the actions :-)) I guess it sounds more intellectual now ;-)

PPS: I suppose if one includes the security identification number ["CUSIP" in the US], there are three numbers and a time - a four vector - asscociated with a stock price.

Wednesday, November 14, 2007

Whither Now ?

Hither, thither, whither, hence, thence, whence, - all are useful words now neglected as the literacy level of the US continues its decline from TV and video game induced zombie-ism.

Not here !

Whither combines the concept of "where" with the motion of going. Thus, "whither will stock prices trade now ?"

Tuesday was Day 1 of a rally attempt. IBD seems to have missed that, as they cited low volume, but a higher volume day is not required for a "Day 1". They missed the beginning of a great rally last summer for a few weeks, too. So now a confirmation 1% rise in a major index with higher volume day on Day 4 or later is needed. Friday is options expiration day and will be Day 4. Let's watch.

The PPI and CPI data will be important. Low numbers in the "comfort zone" will help give the Fed room to cut if needed.

PS: PPI number was fine - the month over month core was zero.

PPS: GE guides 2007 revenues up.

P^3S: Good retail sales numbers - uh ... I guess the consumer is normal.

P^4S: I am very pleased that Bernanke in his speech is really emphasizing the importance of the Fed's DUAL mandate: maximize employment and price stability. Too many eisegetes ignore the former requirement.

P^5S: I just bought a new top line iMac. Doing my bit to support the economy :-)

Tuesday, November 13, 2007

What's New ?


Japan growth was OK.

More "subprime" panic mongering.

There was some panic selling in former high fliers yesterday as all the beefers try to bail at the same time to save their years. Sigh ...

I might re-buy EDU if it goes lower. I sold it in October when I had a LT gain as I was lightening up. I really like that stock long term. I'll put a bid around its 200 DMA in the mid-50s. I'm in no hurry.

Be patient. Buy dips of good stocks and groups. Take your time in building a position.

I take Sky & Krypto to sheep herding today midday.

PS: WMT good earnings and revs up 8.8% year over year. Uh ... where is the pain in lower income brackets ? NFIB says no small business credit crunch. Sigh ....

Monday, November 12, 2007

Monday in the Bunker

Not much is going on.

Yesterday was Veterans Day. I sent some large donations to the USO, Operation Home Front and the "Fisher House" in Dayton, Ohio. Those are fine organizations that do a lot for servicemen and their families.

Asia was down big, but futures are up and Europe is up in early trading.

Barron's reported some large bearish sentiment numbers plus increased short interest. With so much money in beefer trading funds and no uptick rule, I think the shorts can have their evil way with Ms. Market at will. I noticed in the summer how large short interest eventually overwhelmed the markets. I think that might have happened again in early October. With trillions are their disposal, I suppose this is no surprise. We'll have to live with the increased volatility, unfortunately, since the SEC is in the pockets of the Street and the beefers.

What to do? Be even more patient in buying long term positions. I think we can expect beefer rotations and bear raids to create great buy points. So one should spread out buys even more and really wait for a bear raid to load up.

Dubai makes a huge aircraft purchase. Hmmm no slowdown there.

That big oil find in Brazil in the deep water shows that one should stick to deep water drillers for oil service buys. Long term, that's where the oil is and they have the expertise to get it out. I have RIG, DO, GSF and NE; RIG and GSF are merging soon, by the way.

These oil finds might replace lost production from declining fields over the years - they do take many years to get to production.

For US oil companies with serious deep water efforts in the Gulf of Mexico, I have CVX and DVN. Both have made large finds and have many leases.

The super SIV seems to have legs and is going forward. I would like to buy more C if I can get a good price. Plus, I want more BAC, WB and JPM. But I'm not hurry and will not buy unless I get a really good price as I already have a lot. Calling my original plans for these 100%, I recently doubled my plans to go to 200% and now have about 150%. So I have a good bit more that I want to buy.

Saturday, November 10, 2007

Vista Sucks !!!

Look, if you have any choice, don't buy a computer with Vista. It totally sucks !

I get endless updates. The computer does those "waiting" signs [the little circle spinning] for long period when I'm trying to do something.

It crashes a lot.

Shutting down or restarts can take many minutes - even an hour.

You have to run a virus checker and firewall anyway - so you get those headaches, too.

Of course Dell loads all sorts of crap onto the computer and some doesn't work.

The Windows Photo Gallery is OK, but one has to search to find where it puts the photos when I download them from my camera.

I'm never going to buy a Windows computer again.

It's 2007 - PCs have been around for 25 years. One should just be able to turn it on and have it work, like a car. Why do we have to be a techie or know a lot to use them? That's crap.

I'm going to buy a new Mac - the biggest and best - and if I like it buy a couple more.

I'll keep the Vista as a reminder of why I shift to Macs.

I think Mac will eventually get 25% of the PC market. [Btw, I am long AAPL.]

The iPhone and iPods work great with the Macs.

Why would anyone own a Windows computer unless one was require to because of work ?

Friday, November 9, 2007


I got back to the Bunker safely. I see more shelling in the markets. Sigh ....

Bought more WB, C, JPM. These are long term investments.

Thursday, November 8, 2007

In the Belly of the Beast

I'm feeling a bit vulnerable here in the belly of the Beast aka Manhattan - no defenses or personal protection devices except my boxing and self-defense skills. I expected to see droves of zombies walking around with vacant stares wearing scars of subprime defaults and other doom and gloom. Instead, the streets are crammed with shoppers - many from overseas, yes. And the New York Athletic Club where I stay is still having many parties and events.

Gosh, maybe the world is not ending.

The Apple store on Fifth Avenue was packed at 3:30 PM - long, but organized checkout lines. Those stores are so well run - plenty of people around to ask for help and they are very knowledgeable.

I heard on Babblevision - golly that is so depressing nowadays with their endless fear and crisis mongering - that Moody's was downgrading some SIVs. That's all they said. So reading the WSJ this morning I spied a vital fact. "Moody's said it wasn't taking the ratings actions because of quality of the assets themselves. Instead, Moody's said the SIVs problems stemmed from the drop in the market value of the assets the SIVs own as investors shun those investments amid the credit crunch."

So the underlying assets are not showing sufficient defaults to impair expectations of full and timely recovery of interest and principal even under today's known stressed environment. That just sums up the situation - it's fear, not reality, causing the considerable drop in "market value" of these highly rated securities. Paraphrasing Clara Peller of "Where's the Beef" fame,

Where are the defaults?

I've worked with Moody's, S&P and Fitch in the past and I have a lot of respect for their intellectual and analytic abilities. They are not perfect and make errors. But AAA securities have defaulted in the past, viz, I remember Texaco defaulting due to the Pennzoil judgement. Nowadays, everyone is bemoaning that securities originally rated BBB- will default. Sheesh, statistically quite a few of those are EXPECTED to default over their lifetime.

So if unexpected waves of defaults were showing up in the trustee reports of structured securities - they are highlighted in those, by the way - it would be known and quickly reflected in ratings IF they were beyond the expected stressed levels for the ratings. That is particularly true now when so much attention is focused on these.

I heard this AM that Costco same stores sales were up 9%. Where's the consumer stress?

Where's the recession?

Phooey! This is Rich Man's Panic, round 3 or 4 - I'm losing count. This is getting boring.

Wednesday, November 7, 2007

Turmoil in Europe

European stocks are down quite a bit this morning and some asset allocation programs seem to be pushing US stock futures down a lot, too. S&P futures are down about 18 pts as of 5AM ET.

Gold is up $20 to around $840. Oil is up to about $98.6. The Euro is up to 1.468; the pound to $2.10

There doesn't seem to be any significant news yet. ECB tough talk is driving the Euro up.

Longer term, I think Persian Gulf and Russia money is moving into euros and gold to diversify. They spend most of their money in Europe, so it makes sense. There is talk of Chinese diversification, too. For that to happen, China must de-link from the dollar.

For decades the US with its free markets and low regulation has been a great place to invest. That is good, but it also led to an overvalued currency that hurt exports. That has been and is still correcting itself before our eyes. Exports are surging, export industries and jobs are growing. So far US consumer prices are not strongly affected as many imports are from countries with dollar links like China. Basic materials and oil are priced in dollars.

Let's see how the ECB reacts. They need to step up and provide Euros to meet demand. This will maintain the global money supply growth as the flow of dollars overseas contracts.

NOTE: I will be traveling to NYC later this morning until Friday around noon. So posts might be sparse. I should be able to post a blog tomorrow, but not Friday until later in the day. Good luck. Be wary - beefers are stomping the mud in search of a new waterhole.

PS: This looks like a euro-panic. Euro-beefers or big euro-investors are probably doing big asset alloctions out of dollar, US stocks.

Tuesday, November 6, 2007


Quite a lot of recent market action is just beefer ping pong aka elephants stomping at the water hole. But some signs of real buying and selling do exist.

1. Clearly real sellers are moving out of the big banks. I suspect that growth & income funds are scared and selling a good bit to shift into other dividend payers like utilities. I also suspect that beefer shorts are magnifying this move. Notice the strength in the Dow Utilities index.

2. The weakness in the Russell over the past four week indicates that beefers are bailing out of that sector as a potential savior for their year end fees. The Russell is a favorite playground for them.

3. The strength in the Nazz 100 whilst all the turmoil has been occurring shows real buyers there, too. Big cap tech sells big money over seas, so perhaps that's the source of the real buyers, there: exports growth. But I suspect some amplification by beefers there, too.

4. The Dow transportation index has been roughly flat for weeks. If a recession was being forecast by major players, one would think that would be going down. It's not.

Interestingly, I heard a French analyst on Babblevision early who said the Euro was overvalued by 50%. Yes, 50%. He thought parity was fair value. I think the Euro strength is due to Persian Gulf money and Russian money who spend lots in Europe. Also, some of those have reasons to avoid the US$ and its banking system, viz. terrorist and organized crime connections.

Gold is about $820 as I write and oil is around $95.50. The all-time high for gold is around $850 for a closing price, but I think the intraday high was closer to $900. I'll do more research as it is getting closer.

The economic trajectory is strong and continuing onward. So it's a bull market, despite all the froth. Over time this fear should dissipate and the up trend continue.

I have sheep herding today so will be out from about 8AM EST thru 1PM EST.

PS: Back. Oil $97. Gold $825.

PPS: Sheesh. Gasparino says Dick Grass's favorite movie was Borat. That movie sucked - I turned it off after about 30 minutes.

P^3S: The S&P cash is looking like a W bottom pattern is forming. Cracking 1520 and holding two days would set it up. There must be a lot of beefer shorts out there - they could get hurt.

Monday, November 5, 2007

Monday Morning Rambles

Chuck Prince "retires" - C announces more write offs due to "subprime" . They say they held $50 billion of that paper at the end of Q3. The write off is around $11 billion. The stock is up about .67 in European trading.

Futures are down as of now [6 AM EST]. Hong Kong got smashed.

Oil is down a bit as is gold.

Nothing much in the news about the "real" economy. Friday's jobs number was quite good. Recent PCE inflation numbers are good. So the moderate growth trajectory seems to be continuing.

New England defeated the Indianapolis Colts in an exciting football game yesterday. I watched that game and part of the San Diego-Minnesota game. These fast, agile running backs are really exciting. Football has missed those for a few years in my memory. But I admit I'm not a heavy viewer.

I set up a Las Vegas trip for mid December. And I have to travel to NYC Wednesday noon thru Friday noon. I've asked a person to guest blog on Thursday and Friday. We'll see.

Sky is really amazingly good in sheep herding for a 10 month old puppy. He's now herding 10 big sheep in a big field - no nearby fence. He loves it and and does remarkably well, according to the instructor. Perhaps he's the best he's seen at this age. So I think that sheep herding will be a regular sport with us. Sky will probably be ready for trials next summer.

PS: C is trading down in Europe now.

PPS: It's darkest before the dawn. I'll probably hide in my bunker today - expecting shelling.

Sunday, November 4, 2007

Early Totalitariansm

Reading about the French Revolution in the fine book, "Europe: A History" by Norman Davies, I was stuck by the description of the Jacobin phase of the French Revolution. This period and government had most of the aspects of a totalitarian system: revolutionary ideology, need for expansion, an endless stream of victims for terror, systems of spies and informers, "laws" that made everyone a criminal, rule by a core elite or one man, etc.

I was surprised how well that period fit Hannah Arendt's description of Totalitarianism. So far I'm unable to come up with earlier examples of Totalitarianism. If anyone has suggestions, I'd appreciate them.

Saturday, November 3, 2007


Often my instinctive, non-articulable "feeling" toward a situation of a problem has proven correct over the years. I suppose many "feelings" have been wrong, but I don't remember those ;-)

Here are three instances.

In the late 1990s, I was discussing Sandy Weill with acquaintances at a NYC club bar. The WSJ article had just appeared where his favoritism towards his daughter at Citibank had been unveiled. I stated that the story inferred he was untrustworthy. My fellow debaters/drinkers vehemently disagreed. Several years later, the Jack Grubman - Worldcom case proved me correct.

A couple of years ago, Weill's performance at Citibank was being discussed in a chat room. I posted that he had really done nothing but engage in merger-itis as the long term chart of C proved. The stock had gone nowhere for the time he controlled the company. I was challenged that he "built up the company". Now we see widely accepted in the business press that he just created a mess. And the mess will likely soon come apart as Chuck Prince is resigning.

About 33 years ago, I gave a talk on the mass of galaxies. I had learned much galactic dynamics in an advanced graduate course, including the mystery of the rotation curves of galaxies and the unseen virial mass of clusters of galaxies. Putting 2 and 2 together, I knew that a uniform, very heavy distribution of "dark matter" would explain both. So I gave a short talk on the problem and solution in another graduate course where the question had come up. Being rather young [I was just a junior in college], I was unable to answer quite a few of points that captious* fellow students tossed up. A few years as a graduate student myself and a teaching assistant, later I assigned a scattering theory problem to students to illustrate how some types of matter would be unobservable. In recent years, the existence of a uniform field of "dark matter" in the universe is now accepted by astrophysicists. Its makeup is still unknown.

So one must respect one's instincts, provided they have led one well in the past.

*see Thurday's word of the day

Friday, November 2, 2007

Beefer Madness

As a victim of irreversible senescence* I remember seeing that old movie, "Reefer Madness", from high school that was used to scare us from using marijuana. We had heard about it and its laughable claims, so enjoyed it immensely. The movie was sort of pointless for me, living in an isolated small town in Ohio. I never smelled it until my first day as a freshman at Harvard when the redolence** of an adjacent dorm room caused me to ask a NYC kid what it was.

Yesterday was another recurrence of beefer madness. Any recent beefer buys of big banks were dumped into the street as one analyst suggested the C dividend, though well-covered by earnings, might be cut. Panic selling. XOM was dumped citing production declines. Uh ... Boone has been saying for a long time that finding more oil was hard. Anyone paying attention would know that a "B" rated security has a 30-50% likelihood to default over its lifetime, yet reports of possible risk to junk rated retailers is "news". Sigh. And any CDO already includes such cumulative default risks in its ratings.

Even though beefers are at four year lows in net long positions, they dumped stocks mindlessly and shorted with abandon to protect their YTD numbers. Signs of the beefer: huge ETF trading, outsized moves by the Russell and S&P midcaps, huge drops in recent gainers.

There was a bit of news. WSJ reports the head of BS is a pothead and uses illegal Cuban cigars, hence supports the tyrant Castro. Today's WSJ reports Merrill Lynch used hedge funds to hide losses. SEC investigations for both. No surprises.

Recent economic data is either good [GDP, inflation] or OK [ISM mfg].

Today's employment numbers are important. One reason the Fed moved to neutral was the revision of that negative jobs number. Let's see if they were right or got faked out again.

I have large longs in BAC, WB and C now. I might add more. I'll buy more JPM on any decline. I think the dividends are safe and the mortgage and CDO turmoil will eventually lead to more profitable business for these institutions. I still think I'll make over 30% on these over a year.

Words of the Day:
*senescence [$10] - noun from the intransitive verb, "senesce", meaning "to grow old". the adjective is "senescent". Here's another sentence using that word - [referring to concepts of the decline of mankind applied to the Dark Ages] "... and that man's weakened mind ... is an infallible sign of the senescence of the species ..." {"Social Change and History", by Robert Nisbet, p 101}

**redolence [$10] - a noun from the adjective, "redolent" meaning (1) having or emitting fragrance: aromatic; (2) suggestive : reminiscent

Thursday, November 1, 2007

The Day After

Futures are down this morning, as are European stock markets. This might be a correction of yesterday's enthusiasm or a re-thinking. I re-thought my initial annoyance of the Fed for not listening to me ;-)

To prove I am not an ingrained captious* commentator, I will say that "perhaps" the Fed made the correct move. One analysis that I heard of the Fed's actions was that they did not see much risk of a recession now. That "might" be correct. That would also explain yesterday's big move up. Much pressure on stocks had been due to recession-mongering by the bears. If the recession is fading like so many other bearish delusions, then much higher stock prices are justified.

Gold hit $800 yesterday intraday. Oil traded over $96 overnight.

An analyst downgraded C, saying they have a shortage of capital and have to cut the dividend. I'll have to check that out - since they are still profitable, I'm not sure how that makes sense.

Some important economic data come out today - the ISM manufacturing index is most significant to me. If it's under 50, then the Fed timidity will seem a bit more likely to be wrong.

Seasonal strength is upon us. Real buyers have money to put to work. The trend is up. It's a bull market. Buy dips. But be wary and pay attention !

*Captious is the Word of the Day. Captious: adj. given to finding fault or raising petty objections. I first saw that word reading Erasmus's famous work, "Praise of Folly". Here's how he used it re the Stoic philosophers - "... seeing they're so captious and far keener-eyed to pick out their friends faults than an eagle ..."

PS: WSJ story shows BSC leader Cayne as a .. prima donna jerk. No surprise.

PPS: C will probably go down until Chuck Prince goes. The WSJ article showed that his pal, Rubin, out of touch, too. He has to go, too.

Wednesday, October 31, 2007

Fed Exegesis and Eisegesis

First the eisegesis, viz. what I think the Fed "should" do today. This is quite easy. Inflation is under 2%. So the overnight funds rate "should" be 4%. Employment growth is weak. Unemployment has ticked up recently while inflation has been ticking down for months. The Fed's statutory mandate is (1) to maintain price stability and (2) maximize employment. So they are failing in standard #2, as they kept rates too high too long. I just heard another commentator screeching about the dollar. The Fed has NO statutory authority to maintain a value to the dollar. The dollar has been falling for years and inflation has been coming down for a couple of years. Finally, clearly with the SIV hubbub, more liquidity is needed for some types of asset-backed securities.

The eisegetical conclusion: Cut the overnight rate by 50 bps to 4.25%, cut the discount rate by 75 bps to 4.25%. Signal more cuts in the overnight rate in the statement, while saying that inflation risks have moderated.

Second, the exegesis. The Fed still seems infatuated with its inflation fighter merit badge. And the bankers and economists running it are susceptible to all this dollar screeching. They have to recognize, though, that inflation has come down and that employment growth is weak. Plus they are involved with Paulson and the banks on the SIV problems. So I conclude the Fed "will" cut the overnight rate by 25 bps to 4.5% and cut the discount rate by 50 bps. to 4.25% also. The statement will acknowledge that inflation has come down, but will still consider future inflation as a risk. And they will continue to stress weakness in housing as a drain on economic growth.

PS: Deutsche popping up on earnings.

PPS: Goldman yesterday said sell longs in oil. And oil fell over $3. Uh ... do you suppose the in-house trading funds were long or short oil at that time ? Lololololol :-)))

Word of the Day: autarky [$10]
"Autarky" means (1) a policy of national self-sufficiency and non-reliance on imports or economic aid, or (2) a self-sufficient region or country.

Sentence: Public statements by politicians that the US must become an oil "autarky" are either delusional or sheer buncombe, and the persons making those statements are fools or knaves, respectively, as any cursury look at the data will prove instantly such is impossible in our lifetimes.

"Buncombe" is a word dividend today ... hehehe ;-) and is the original spelling of "bunkum" and is naturally pronounced "bunk um" and means "empty or insincere talk, claptrap". The word derives from Buncombe Co. in North Carolina from a remark made circa 1820 by its congressman who felt obligated to give a dull speech "for Buncombe". I saw it first reading in the Memoirs of Gen. Sherman, a book I highly recommend along with those of Gen. Grant.

All that from my word card file I've had and added to since being about 16 years old !

Tuesday, October 30, 2007

Consolidation Tuesday ?

Markets will likely consolidate today and early tomorrow in anticipation of Wednesday PM's Fed announcement. That's fine. More stock needs to move into stronger hands for the next big move up.

Babblevision and Bloomberg keep talking about "decoupling", viz. the world economic growth "decoupling" from the US consumer and complete dependence on US economic growth as a driving force. I think it's happening. For a few years I've written about the creation of a "Asian Co-Prosperity Sphere" using the old propaganda name of the WW II era Japanese empire as a subtle joke. This does seem to be happening, but Russia, Eastern Europe, the Persian Gulf and Brazil are part of it, too.

The question in my mind for over a year has been whether the world economy could continue to grow as the US trade deficit was reduced. The US trade deficit has been pumping the world money supply with dollars that are used as bank reserves for all those growing nations. With reserve growth, they can expand their own money supplies and grow. As the US trade deficit really does seem to be shrinking, this question moves from the virtual thought phase [a geddanken experiment] to reality.

The world needs other monetary reserves to keep expanding as net US dollars flowing to the world are reduced. So far it seems the Euro is stepping up. That's a start. I'll keep studying this development and the trends. I think for the very long term examining the pressures on the world money supply as the conjoncture* of economic growth and long term stock market gains is crucial.

Word of the Day:
*Conjoncture: this is a French word that is moving into English and is not even in the Oxford English Dictionary yet so I can't value it yet.

"Conjoncture" was originally coined by the famous historian Fernand Braudel to describe the second tier of forces that drive history. By "second tier" the definition means not the kings, dukes, religions and wars that so often seem to dominate writing about the causes of historical events, but measures of the economic sphere of the "common man" that seem to explain major trends in history.

From "Europe: A History" by Norman Davies, page 425, "conjoncture" is a term of economic structuralists meaning "the foundation onto which all other historical facts are to be fitted." The example in that book was the trend and changes in Paris rents during the Middle Ages and later. A modern example might be the money supply. The book, "A Monetary History of the United States" that I've written about before uses the US money supply as the conjoncture for US economic growth and cycles, panics and depressions.

PS: I have sheep herding class today ... uh ... I mean that I am taking Sky & Krypto to sheep herding classes today ;-) I'll be out from about 8AM to 1PM EDT.

Monday, October 29, 2007

Update & More

Red Sox Win !!! Yayyyyy !!!

O'Neal out at Merrill Lynch !!! Yayyyyy !!! Finally a CEO pays for failure.

Gold at $795. Oil over $93. Asia and Europe up.

I thought that I should update on my Alpha Fund holdings. I've sold a bit to cut my overall exposure as the gains got that fund outsized. Strategically, I like to have low or no margin debt near highs, and increase margin debt on dip buys of new stocks or adds.

Here it is, with group weights and positions with largest few listed first:

Select small caps: 0% - I sold EDU in the Alpha fund - too soon. My Mom's account still has it, though as I like it. I just had to made some choices.

Select big caps: 5% - BNI, DOW

Technology: 12% - AAPL, GOOG, CSCO, ORCL. I sold a bit of ORCL after earnings as I had long term gains.

Financials: 22% - BAC, WB, C, JPM

India: 4% - HDB, IBN, SAY. I'll sell SAY when it has LT gains treatment in mid November.


Miners: 19% - PCU, BHP, RTP, RIO, AA, CCJ, FCX.

My recent adds were BNI (a new buy) and some BAC, WB and C.

My Alpha Fund is still too large. The daily swings are quite large and I need to cut down the size more. I had sold a lot in September, but need to cut back more. I just pick stocks that qualify for LT gains treatment. So I've trimmed a lot of quite large positions in every group. I'll just pick away at these. Recent sales were CLF, some SAY, EDU (darn), and some SU and some BHP.

The Alpha Fund is at an all-time high as of Friday. The financials are not contributing to gains yet. I think they will perform well as the housing problem works it way out of the mess and the Fed lowers rates more.

PS: I went to buy a Mac 24" computer Saturday - they were sold out. I guess I have to wait a couple weeks. But the store was really packed. Obviously business is good.

PPS: Word of the Day - "adduce", a $10 transitive verb meaning "offer as an example, reason, or prof in discussion or analysis" or "cite as an instance or as proof or evidence". I've been unable to remember that word for 35 years. The handwriting in my card file for it is very old. Here's a sentence: "Bunkerman adduces the current real rate of interest and the low year-over-year inflation rate to infer the Fed will cut the overnight funds rate Wednesday by at least 25 bps."

Friday, October 26, 2007

Stompin' at the Savoy

The beefer traders seem to be partying bigtime with Ms. Market with their stomping tactics, swinging her around in a wild jitterbug. "Stompin' at the Savoy" was a great 1934-36 era Jazz song first popularized by Chick Webb and later Benny Goodman. The Savoy Ballroom was a large 10,000 sq. foot dance floor in Harlem in New York City where many great jazz tunes & great performers were showcased [ see ].

They are really enjoying the wild life without the Puritanical uptick rule. For a third day they shorted like a sailor on leave drinks, trying to push the markets down and perhaps create a breakdown and panic. But it failed again and they had to cover. By the close stocks were mostly unchanged except some sectors under recycling selling like the Nazz 100.

An AIG rumor caused some panic, but it was denied. I don't like AIG and don't trust them, so think there might be something smoldering there. I shorted a bit - not a lot - and will keep it until they report earnings. I also added to BAC, C and WB and started a position in CFC.

Oil is now at $92. Coal producer BTU is back to its recent highs at $55. I have a good bit of that for the long term.

I don't see anything new. The housing overcapacity will be worked off over a year. Markets will start to see that soon and then react up for a new bull leg. Market do anticipate events. I've lived through a housing downturn in the late 1980s. It has zero affect on almost all people who own homes as they never got the money from the paper gains and simply don't sell. If they do sell, they re-buy a home elsewhere for a net zero effect. Recent buyers who overleveraged can be hurt, as are speculators. Lenders can get hurt. That's it, though.

Gold is at $780; silver is over $14. I think physical demand of both is creating a long term bull market in my view. Big swings occur as beefers make dollar related trades, but the trend is up. I have big positions in both in the Krypto Fund - 10% of my invested assets.

PS: CFC reported good numbers and guidance so the stock is up $3 premarket. Out of respect for the trading gods, I flipped my position. I am sure I would be punished severely if I held long term. I also covered the AIG short - I just don't feel like playing that game now.

Thursday, October 25, 2007

What's New ?

Hmmmm ...

O. J. indicted.
Energy traders to be indicted.
Greenies say shrubs and bugs yes, homes no.
Big Street firms show big losses in market turmoil, layoffs planned.
China grows at double digits.
EU-Russia tensions.

Nothing new there.

Is there nothing new under the sun ?

Yes, there is !

Bunkerman has the iPhone and yesterday loaded it with many old songs from the 1910-1935 period plus Julie Andrews and Judy Garland. Gosh, this thing holds a lot of songs. So far I'm not even 1/8 full and I have over 9 hours of great music.

And Bunkerman is going to buy a new Mac this weekend or next week with the new Leopard operating system.

I'm modernizing myself ... a bit !

OK: stocks.
Yesterday was a distribution day, but the reversal neutralized some of that technical negativity. Europe is up this morning. Futures are flatish. The S&P cash index held the 50 DMA yesterday. Oil is up this morning to the high $88s.

Not much new there. Yesterday was beefer ping pong. They shorted everything early to scare the common man and the weak-willed and then had to cover. Nothing new in those antics.

Wednesday, October 24, 2007

Are the Rich Stupid ?

Financially, the answer is clearly yes.

They invest trillions in thousands of hedge funds, overpaying for mediocre performance in total. Maybe that's a fad and they want something to brag about at the "club".

Last quarter I see hedge funds got another $43 billion to invest. Hmmm. the beefers lose billions for their investors with numerous blow-ups, but the "rich" get suckered into ploughing more money into them.

And the fees they pay for private banking and private wealth management are simply ludicrous. They pay 1% of assets or more for ... nothing. The dog biscuits paid to Krypto run a perfectly good, diversified fund that is run according to the methods of #1 money manager, David Swenson of Yale. And last year it crushed the hedge funds.

Of course, the beefers' pumpsters and shills point to big numbers by some funds. Hmmm. There are 7,000 hedge funds or more. Why would one think that "some" of those couldn't do quite well just by ... luck ? Maybe some have truly exceptional talent. I suppose some do. But those funds are ... closed.

Why bother ? Picking a good hedge fund from 7,000 possibilities is hard. Then again, so is picking a good mutual fund from 7,000 mutual funds. Then again, so is picking a good stock from 7,000 stocks.

So if one is picking, why not stick to stocks? The returns are much better.

I keep most of my investment money in the Krypto Fund and then run my Alpha Fund by picking stocks. The Krypto Fund is managed for dog biscuits using a mostly mechanical asset allocation among diversified index funds. The Alpha Fund has large positions in groups and stocks I like. I keep its size at a level that I can bear the swings in value. If a stocks can't earn me 30% in a year in my estimation, I get rid of it.

I manage the Alpha Fund to realize long term capital gains as long as I think the major trend is up.

Recent adds: BNI reported a blowout quarter and looks OK now. GOOG is doing great after bouncing around awhile. One needs patience when buying individual stocks if one is not a trader. The big cap banks are down some. I'll give them some time, as I did GOOG.
Futures are down this AM. I've heard nothing significant so it's likely more beefer stomping and ping pong. They never stop.

Tuesday, October 23, 2007

Stabilization ?

Ms. Market gave us a bit of stability yesterday. This morning's futures are up a bit.

APPL had good earnings - that's still my biggest position even thought I sold 1/3 last month for money management. I think AAPL will get about 25% of the PC market. Now that AAPL can run Microsoft Office, their is really no reason for any home computer to be Windows-based. Macs are far superior for ease of use.

India markets are roaring back.

I think this economic softness is a lagged effect of the Fed's overtightening up to May 2006 - they went too far. They should have cut in June but didn't listen to me ;-)

Foreclosure bottom fishers are clustering to scoop up those deals and loans are starting to be worked out. Old beefers invested in those subprime debt securities will be liquidated by year end from redemptions. I think the very end is near for this correction, which is a second phase re-test of the summer correction.

Seasonal strength for November-April period is quite strong. A consolidation base here at the old S&P highs makes sense and I think that soon Ms. Market will be thinking about Spring fashions and a new bull leg up will begin.

I still like my Alpha Fund stocks: AAPL, big US oils, miners, deep water drillers, select Internet related tech, and big banks.

Monday, October 22, 2007

Monday in the Bunker

A bunker might be a good place today to avoid more shelling and protect oneself from the bears. Futures are weak, Asia was down big except China & India and Europe is down.

The WSJ had an interesting story about high home prices in Europe hurting consumers.

I plan to just wait and think.

The Tribe lost games 6 and 7, so the Red Sox go to the World Series :-(( I'll be rooting for them since I always favor the American League over the fuddy-duddy, old fashioned National League. Go Red Sox !!!

I'm going to wait and am thinking about moving up a planned addition to my Krypto Fund. I'll do it on this dip likely.

The S&P cash is on the 50 DMA and the rough uptrend line. The 200 DMA is a bit lower, just under 1480.

After completely making a cluster FUBAR of my oft-preached time diversification, I'm a quite annoyed at myself. Expecting an October pullback and then missing it is quite inexcusable. I'm still susceptible to "buck fever", which is a hunter's term for getting excited and rushing a shot, causing a miss. That's a pretty good explanation for what I did.

So I'm being patient and am not going to rush this next add. The beefers are stomping around and looking for their payday. I suspect they are really hurting this year. I'll wait for a base consolidation and continuation pattern to form. But I think I'll send the money into the account to be ready to buy stocks at the right time.

Sunday, October 21, 2007

Ms. Market

I like to think of the markets as personified by a sultry, impetuous, flighty "Ms. Market" - that's my bit for animism ! She's a knockout and has innumerable bull and bear suitors who vie for her charms and her company.

Friday Ms. Market kicked the bulls out of bed, perhaps for insufficient earnings vigor ? Or is she tired of their action longer term ? Or did he forget their 20th anniverary ? Did the bears "get lucky" for just a one night stand or maybe it's the start of a longer, torrid affair ? Or perhaps both the bulls and bears are in for a bit of "Lysistrata" denial for a few weeks ?

Time will tell.

I think there are just too many beefers - bulls and bears - and they are suffering by underperforming ... hehe ... and Ms. Market is really tired of their antics.

A solid base needs to be built with some consolidation and some news to relieve some of the anxiety. Some beefers need to be liquidated and funds moved to longer term investments. Ms. Market wants a longer term relationship with a solid, vigorous bull.

Let's watch & see if one can arise ;-)

Friday, October 19, 2007

Memories of the Crash of 1987

I was a heavy stock and option and commodity trader in the 1980s. So I have a lot of memories of the Crash. I was also a follower of the Elliot Wave then, and actually still use the theory some in chart interpretation.

So I was minting money bigtime until August when the Elliot Wave gave a sell signal with the Dow up around 2700, I turned around to the bear side. I continued to mint money in puts on the OEX - that's the S&P 100 index which was a big trading vehicle in the 1980s. I couldn't short then since I worked for a big Street firm and the house had rules against that. But puts on indices were fine. [By the way, commissions were quite high - even for employees, so day/week trading was costly. ]

By mid October I was up over 100% and had maximal hubris. The Bear side was ruling and I was a bear. All the stars were aligning for the dark side. The Fed was raising rates (#1). During the week before the crash, Congress started threatening to stop LBOs and takeovers (#2). The dollar started to freefall (#3). Reagan shelled an Iranian oil platform in the Persian Gulf (#4). Oil prices spiked (#5). So all that week the market went down by big steps. The signals were a five pointed star - a Pentagram - the sign of the werewolf lol ;-) Friday, October 16, was a big smash down day on huge volume. The Dow was at around 2200, down 500 pts since the August high. I thought that was the bottom or at least a bounce signal.

Sooooooooooo ... I cashed out all my puts and went long in stocks & calls on margin, thinking I was a modern era Jesse Livermore. He had down that in some early Panics - covering shorts and going long after a big smash down.

Monday. October 19, I had to attend a meeting in midtown NYC for a conference of the Japan Society on real estate - the Japaneses were buying US real estate bigtime and I wanted to learn more. Remember, then there were no cell phones, etc. So around midmorning I heard the president of Nomura speak rather worriedly about how the Japanese markets would open later. Uh oh. :-(

During a break around 11:00 AM I went to a pay phone on Seventh Avenue and called my broker. He was quite worried but said it would work out. He sounded shaken. I sold some stocks and calls at the market - the prices and tape were delayed some then as volume was huge.

Early in the afternoon I called again and learned that slide was continuing. So I sold more, about 2/3 of my positions, at big losses. After the close I learned more - the Dow was down 500 pts. Ugh !!!

Well, early the next morning at my desk with a Quotron to see prices, I decided to sell all. I was shaken up and didn't want to "play" in that game for awhile. By then I just had some calls and some OTC stocks left. I got good prices on the calls as the volatility was so high, they had some value left. And selling the OTC stocks then was good since those stocks were quite illiquid and continued to slide down for many days.

The net result was I lost every dollar of my 100% profits and was flat for the year. Nine months of hard work wasted. :-(( It could have been worse, of course, had I not made partial sells and quick decisions. I could have gotten wiped out.

My investment banking business got very active soon thereafter, so I was out of the market during the rebound and for months afterward. But the memories were burned into my brain. I've told this story to many friends over the years. I suppose the Greeks had it right - my hubris was punished by the trading gods.