Friday, June 29, 2007

TGIF and the EOQ, Finally

EOQ = End of Quarter, by the way.

Perhaps we should call rebalancers, "remodelers" to correspond with the painters (i. e., tape painters) and window dressers who predominate the tape in the final week of the quarter. I think remodelers predominate the last few days of every month. I noticed that a few months ago and said I'd monitor it. I've seen enough evidence to convince me. At least for commodity-stock rebalancing - ooops, remodeling. Thanks, Frosty, for pointing out the stock rebalancing in yesterday's comments. I'm very distracted this week and hadn't put those facts together this week.

Bud gets the golden exegete award. [ I wonder what shape that should be ? ;-) ] His observation and questioning of, "working people got lobbyists" [ lolol - that still has me cackling ] was exquisitely existential and then finding they were Wall Street piranhas seeking a bailout was a fine example of exegesis. [see early comments from yesterday]

Crude is over $70 as I write.

Futures are down on a London bomb that was found before detonating. Good job, London police.

It's still a bull market. Use time diversification and rebalancing for your Krypto Fund. Find good stocks for your Alpha Fund. I thnk we grind higher or base awhile, then ramp up. Good entries might present themselves.

PS: Sheesh, my dog Spike is crazy about strawberries. She's pestering me endlessly this morning for MORE!

PPS: Santelli said year over year core PCE was 1.9%. That's an excellent number. :-)) The downtick and downtrend continues. Disinflation rules ! That's a very bullish number !

P^3S: And I like the subdued reaction. More wall of worry. Excellent number and reaction. The bump & grind up. :-))

Dirty Jobs

I watched the show, "Dirty Jobs" again. That's a fine show. It brings back memories of many hard jobs I had and have done over the years. Now I do those type of jobs as a hobby. It gets me off my butt and away from the computer monitors. So I like to grease shafts and loosen rusty nuts. ;-) And I like using my big tools ! Especially my giant open end wrenches. My biggest is a 2.5" wrench. It's a couple feet long and weighs about 20 lbs. My barn / garage is full of heavy equipment and tools. I use them on one of my hobbies - restoring my World War II half-track. You need big tools for it. The tracks weigh about 500 lbs each. Fully equipped, the half-track weighs 10 tons. Hehehe, that includes ammo :-)))

I've had it in a couple Memorial Day parades in nearby towns. The people and older veterans really like seeing the old vehicles. We festoon it with American flags and a World War II veteran rides with me.

Thursday, June 28, 2007

Post Fed Thinking

The economic trajectory remains the same with this Fed baby step move. It will take longer, but perhaps we can go higher.

Too much stock is sold short. At some point they get crushed or ground out. And those vogue investment strategies 140% long + 40% short and long-short neutral funds will go into the dustbin of history due to underperformance. Those might work when a few talented managers do them, or for skilled individuals, but in major size in trillions they won't.

Perhpas we grind out small gains this summer, or simply consolidate. Either will work. The key decision is to participate in the next big move up.

Finally Fed Day

The Fed ends its two day meeting today. The statement is important and we need to read it exegetically with an open mind. Don't listen to the dirty eisegetors ;-) It's what the Fed actually says that matters - not what some pundit says they said or should say.

I think the Fed "should" relax the inflation bias by recognizing the downtrend in core inflation and that recent measures has it in the comfort zone. They "should" explicitly say the balance of risks is equal between the economy and inflation. I think we have a decent chance of getting this statement and it would be bullish. A two day meeting and the anniversary of their last rate rise seems to be a good time for this policy change.

Remember that it's Day 2 action that matters, not the beefer induced swings in the first 15 minutes.

PS: exegesis and eisegesis: both relate to critical analysis of texts. Here's how to remember which is which. 'ex' is the prefix for "out of or from", so exegesis is analysis out of or from the text itself. "ei" has the "i' and is pronounced "ay" as in "ay-ay, captain". So "eisegesis" gives you what "I" think - what the analyst thinks, NOT what the text says.

PPS: I thought dogs were supposed to be carnivores! I took my dog, Spike, with my trip to Ohio. And she's been pestering me to get my strawberries. Bap! I get the paw smack to the leg to get my attention. And she sits up & looks like she's starving lololol. Yes, I succumbed. She got three bits of strawberry that she gobbled up. Spike likes fruits & vegetables.

P^3S: Santelli on Bubblevision keeps asking about monetary aggregates re the Fed and ECB. When I was in Fischer Black's class at B-school many years ago it was when monetarism was taking grip. So we kept asking him and using it in our class. He always asked "what's your definition of the money supply" and would proceed to demolish it. He proved in class once how money was not needed at all for credit expansion. He believed that policies based purely on "money supply" were doomed. I think the ONLY definition of "money" that works is the old monetary base or MZM or whatever they call it now. Measures like M3 are meaningless as they reflect much more and are really results, not causes.

Wednesday, June 27, 2007


Gee, it's hot and humid here in Ohio. I wonder where the humidity is coming from since the fields are dry and the river is low?

More screeching bears on Bubblevision. Why do they put on commentators to comment on structured securities who show by their statements they don't understand the structure of the securities? hehehehe ... I was being a bit poetic, eh? ;-)

The Fed meeting today is important. I'd like to see some relaxing on the inflation risk perception in the statement - a recognition of the favorable downtrend in core inflation.

ORCL had good earnings and revenue growth. The Alpha Fund has a good position there - thank you Mern. In May 2006 Mern pointed that stock out as as having good long term prospects. I now have a fine long term gain and am holding for at least $25. :-))

Tuesday, June 26, 2007

Some Old Technology is Still Modern

I watched the Discovery channel show, Dirty Jobs, just now. The host, Mike Rowe, was helping change the 500 lb. tire and repack the wheel bearings of a huge Army recovery vehicle.

Lo and behold, I see the same tools and wheel structure of my 1943 Half-track. Yes, the modern Army vehicle uses that same wheel bearing and wheel structure that was used 65 years ago. I saw the same style of axle nuts, the huge socket wrench, the wheel bearing lock nuts, the same style of lock nut wrench, and the same style of bearings. I've changed and greased my bearings and they use the SAME technique and tools I learned from my Army half-track manuals written over 60 years ago. Hmmm, they did use rubber gloves when greasing the bearings. I do it with my bare hands. All that squishy grease. Cool. The old is still new. A modern mechanical anachronism :-))

I love big tools ;-) And bearing grease ;-)

Screeching Bears

Bubblevision had a number of bears on early. One bear was blabbing about CDOs and Bear Streans. He really didn't understand the risks of the securities in them. So why was he on TV? Because he is a bear and the doom-mongers are getting all the air time.

Structured securities have default risk and prepayment risk They are completely DIFFERENT but both can hurt a securities market value. I'm not going into the details, but those differences are why one can lose money in a AAA/Aaa security. And trying to sell those illiquid AAA/Aaa securities prematurely can magnify losses. Just letting them burn off will recover their value. Most people just don't understand the mathematics of mortgage backed securities or how the risks of the underlying instruments are divided into pieces. Some of those pieces are small and illiquid and should NEVER be funded with margin debt. It seems like the BS "geniuses" made that mistake. They knew better but got greedy.

This will pass. Focus on this week's Fed meeting. That is truly important.

PS: Many corn fields here look stunted. A few of the finer fields look OK. So I think lots of the corn planted on marginal acres will have poor yields. Holding my bushels for July weather.

PPS: I've been pounding the table on GOOG for weeks. I hope you are long. Full position here.

P^3S: The BSC short suggested late last week worked, too, if you tried it. Not in due to this trip.

Learning from Ancient Greece

On my interminable drive to Ohio, I listened to the first parts of a college course called Great Authors of the Western Literary Tradition. So far I'm still on the Classical World. But I`ve learned a lot already. Here are two examples.

South Park - the TV show on the Comedy Channel - is the 21st century Aristophanes. The comedies of Aristophanes of ancient Athens contained scatological humor, wild parodies of public figures, and sexual humor and innuendo. And the plays dealt with serious issues in the undercurrent or explicitly. Just like South Park. Hehehehe.

Post Cold War US Attitudes. A learned reader commented privately that US treatment of other nations since winning the cold war was engendering resentment and might lead to a bad end. Ancient Athens won the second Persian War with the help of allies. After the war, it lead a coalition that evolved into an empire dominated by Athens. Resentment from other Greek states built up and the Peloponesian war resulted. I need to read more about the causes of that war so Thucydides is now on my book list.

The course I`m listening to is from "The Teaching Company" and the lectures are given by excellent teachers and are on CDs. I've listened to several course and I highly recommend them.

Sunday, June 24, 2007


I read Barron's while eating my scrambled eggs [ organic, high omega-3 eggs from happy cage-free chickens with sunlit porches hehehe ;-) ]. NYSE short interest hit a new record high in June. Barron' Intermediate grade bond index was 7.25%, up 2 bps for the week. From Saturday's WSJ, ML's High Yield 100 index was 7.43% up 13 bps for the week. Its spread over the 10 year Treasury widened to 229 bps. I think that spread was about 205 a couple week ago, from memory. The BS [sic] piranhas getting chewed up some this week has caused some pullbacks in the high yield markets. I remember hearing that a considerable amount of money was pulled from high yield bond funds recently, too. And new deals had to cut the optional "PIK" terms [PIK = payment in kind, giving more bonds instead of cash for interest - a sign of froth and excess leverage]

All this is a necessary & timely correction of the froth that I wrote about recently - those insane spreads & terms for high yield debt. So I'm sure the bears will say the end of the world is coming. But it's not. Unemployment is low, Asia is strong, inflation is falling and the economy is growing at moderate rate.

The Fed meeting this week "might" have a bullish surprise, viz. they "might" drop or reduce the inflation bias. They has several months of data now for both the PCE and the CPI of falling core year-over-year inflation. The lasted numbers were in the comfort zone. I don't really expect the surprise this month, but it's possible.

It's a bull market. Use time diversification and rebalancing in your "Krypto Fund". Find good stocks for your "Alpha Fund" that can grow.

PS: I'll be driving to Ohio on Monday so will not be posting.

Saturday, June 23, 2007

Inflation Data Points

Mrs. B took me shopping yesterday - she wanted to "rent" my credit card LOLOL. I had an enjoyable time & picked up a couple items on a list I had. That way I saved the gasoline cost of a separate trip ... and my time. I hadn't been to the mall for a few months. They sure sell of lot of overpriced junk & stuff that I would never consider buying. Why anyone does is beyond my puny intellect to comprehend, except for emotions & impulse buying. People grossly overpay for most popular entertainment.

Anyway, what about inflation? One item I bought cost the same as it did about two years ago. The much, much more expensive item Mrs. B had me buy for her didn't exist two years ago. But she selected a older version that was on sale. [ Mrs. B knows the value of a dollar, too ;-) ]The new version has lots of "features" that were not necessary or wanted. So we got what we needed for about 50% of its cost a year ago. No inflation there.

Then there's my cable TV+Internet bill. Those jerks at Comcast bundled together the old movie channels that Mrs. B likes into a "Sports" package including the NFL. I don't watch much football so had no interest in the sports. But I had to subscribe to that package. That's a monopoly tactic - bundling. Too bad the FCC & Congress & the administration are either on the take or asleep AGAIN. There is inflation in TV costs - lots. So I dropped HBO+Showtime+Starz and added the "Sports" package (to get the old movies only) and pay $5/month less for what I really wanted.

Much inflation is caused by local governments being stupid and wasting money. So voters collectively bring it on themselves. Vote for candidates who want to cut costs & save money, NOT promise benefits. Write letters to your local newspaper. If you can, donate to local candidates who want to save money.

A lot of "inflation" is avoidable with substitutions and refusing to pay more for "features". If you choose to pay for those new features, you are missing the benefit of technological improvements that the government data crushers use to reduce reported inflation. Fix things instead of buying a new one, if possible. That amortizes the item cost over more time. I fix things around our home all the time.

Yeah, yeah, if you "have" to live in a high cost area like Florida or NYC or LA or DC or Boston, you're probably screwed and can't make substitutions. Perhaps the benefits of life or job opportunities in those areas outweigh the costs? Or not. In either case, too many people want or have to live in those areas. That drives up the costs of almost everything - housing, services, on and on. So people living there see more "inflation" than people in "less desirable" places. That's classic inflation for them - too many $$$ chasing too few goods & services. But I think "inflation" is more localized than a national phenomenon.

The Value of a Dollar

I grew up in a pretty average middle class family in a small town in a predominantly rural area. I started working at age eight doing a dirty, smelly job for my father's business. I've been working ever since. I always had term-time jobs during college & grad school. When I graduated from business school, I owed money and had no savings, having used all for B-school tuition. I had to borrow money for a couple new suits to wear on my first job. Thankfully, Brooks Brothers would give a person with a job on Wall Street a credit card.

I rented a cheap apartment in a working class neighborhood in Queens - not Manhattan - to save money and took the Long Island Railroad & subway to work. The commute was an hour but I saved a lot of money.

The point is that I know the value of a dollar and I remember having negative net worth. [Lots of human capital, though, as Prof. Robert Merton at the MIT Sloan school told us ;-) ]. I turned the human capital into money capital. Enough to be very comfortable without working.

But I still DO NOT waste money. I don't like being overcharged. I dislike conspicuous consumption. But I do spend money to avoid stress and on some "pleasures of life" - like sushi takeout dinners and smoked salmon for breakfast. :-) And after almost 20 years of no vacations, I'm now spending money on travel. And I do tip well most of the time - I figure everyone needs to make a decent living and most people do work hard. :-)

I just wanted to give readers a little background on myself & the developmental environment for my attitudes & opinions.

Friday, June 22, 2007

TGIF and More

Looking at the index charts I again wonder if the Nazz isn't about to lead while the S&P & Dow rest. At least the big cap Nazz stocks, as the Russell seems sluggish. My Nazz big caps are AAPL, GOOG and ORCL in the Alpha Fund.

Rains have caused selling in corn. Wheat has gotten dragged along. Still sticking to my positions but I "should" have traded more aggressively. Oh well. That's harder for me now.

Remodeling & improvements here to my bunker & defenses seem to be winding down. Thank goodness. I was being driven loony by all the people working around here & the deliveries & general annoyance. At last maybe some peace.

I plan to drive to Ohio on Monday for the week to visit Mom. Posts might be sparse, but I think I will take a laptop. I'll take Spike, too. She's a real trooper on road trips and is good company.

Lyndon reported to consider closing Gitmo. What a weak-minded boob! I guess he's trying to create a "legacy" and be loved by the press, like Jimmy Carter did for years after his disastrous leadership. Ugh!

PS: S&P Futures down about 1/2% reportedly on more "concerns" about Bear, Stearns beefers & mortgage bond CMO liquidations of exotic securities. The report says that BS [sic] offered to assume $3.2 Billion in liabilities of its beefers. Very odd. Something seriously wrong there. I wonder if BS [sic] has a lot of inventory in similar securities? BSC [the real ticker] might be under real pressure today. Shorting is for you traders, but I'd look at it.

PPS: I have to reiterate that the GOOG chart & fundies seem really good. Some news this AM says their search data for May was very strong. GOOG chart shows a fine bullish C&H. Blue skies over 526. Full position in my Alpha Fund.

P^3S: Looks like stops and/or panic selling in corn. It's raining in the midwest. But July is when the corn crop is made or ruined - that's when yield is determined. Leaning towards buying some more today. The ridge still looks OK [beware - weather is weather & can change]. Moderate temps in the big eastern cities is hurting Nat Gas. Ugh. Giving back some gains in the commodity account. Holding for July heat here. :-(

BX valuation

BX valuation is really nuts. Bubblevision said it's PE was 18x and $40 billion. Lehmann is valued at 11x and $42 billion; Goldman, Sachs is 10x and $92 billion; Merrill Lynch is $11x and 76 billion. Those firms have real businesses and real assets. What are the assets of BX? Investors are getting the MANAGEMENT COMPANY - not pieces of the portfolio. No assets. Just the hope that the people there can do it again. And those people walk out the door every evening. Insanity.

All the press coverage is mostly infatuation with billionaires getting "made".

Private equity profits go to zero when the stock market gets to fair value and the butter-up takeovers don't work. I think "investors" in BX will be hurt over time.

PS: I just heard Peter Peterson's revisionism (or delusion) on Bubblevision that he started BX with Schwarzman when they had $50,000 net worth. What crap! He was a rich investment banker from Lehmann Brothers - their CEO in fact. It's incredible that he's trying to create such a false impression. Sheesh.

Thursday, June 21, 2007

CMO/CDO/CBO/CLO Fallout Will End Soon

Yesterday's selloff on no economic news made me think it was caused by beefer liquidations and margin calls sparked by the auction off assets of two Bear, Stearns CMO hedge funds. A number of CDO/CBO/CLO securities were also downgraded in the past few days due to unexpectedly high delinquencies. So every beefer holding that stuff - that's many, many - got a big haircut and probably had to lighten up on a lot of other more liquid positions to maintain a safe margin of solvency.

Mern's late comment yesterday was a good data point that this process is happening and affects some aggressive brokers, too. Thanks, Mern.

So I think this dip will create a good buy point - just like the one a couple weeks ago - when the dust settles. Perhaps at the S&P cash 50 DMA?

XLE got hit hard - again I think it is beefer liquidations and / or traders rotating or shorts. The oil inventory data is a non-event. The oil companies can make that number whatever they want by managing imports. Gasoline demand was up again year over year. That means higher oil prices over time and strong refining margins over time. Energy stocks have had a great run and might rest awhile. Again, let the dust settle and look for a good entry if you need one.

Wednesday, June 20, 2007

What Goes Around ... Comes Around

"Scared Gazans Seek to Enter Israel" ... hmmmm ... didn't they vote for Hamas in a large majority?

"Two Bear Stearns Hedge Funds To Liquidate" ... hmmmm ... didn't that firm kill other mortgage hedge funds with harsh margin calls?

An informed reader wrote me a few days ago about US foreign policy, saying that the US should treat other nations better when it's powerful [i. e. now], because otherwise the US might be treated badly if it weakens. I guess I thought the US did treat other nations well and wasn't taking advantage of them now. We know that "perception is reality". So what must change? The reality [as I see it], or the perception [of other nations]? It's obvious US leaders do a poor job of articulating US positions. What a shocker with Lyndon in charge! Perhaps a better, firmer, clearer, less mushy positions would help the perception, yes?

Decent close in the US markets yesterday - small gains in higher volume. Real buyers are being patient. Grains held overnight - waiting for more weather maps. More later.

PS: Bloomberg [the mayor] becomes an independent. I'm shocked! !NOT! Let me give the uninformed a dose of reality. ANY "liberal" Republican is really a Democrat who can't win the Democratic primary. That is true in NYC and here in Massachusetts and in other Democrat-dominated states. So all Bloomberg did was become a Republican to get on the ballot for Mayor. Once he won & is popular, he doesn't need a party affiliation or organization in NYC anymore. Non-event.

PPS: Odd non-news selloff at the open. I wonder if that liquidation of the two Bear, Streans hedge funds is pressuring prices of some debt securities [subordinated pieces of CBO/CDO/CLOs] that is pressuring other hedge funds who speculation in those complex debt securities. Just wondering?

Tuesday, June 19, 2007

Lazy Days of Summer

Friday seemed to punctuate an active spring for the stock markets & I wonder if we are now in the summer doldrums. Perhaps the close of June's quad-witching day is now the official beginning of stock summer?? Monday seemed rather dull. Volume was very light on the NYSE and the Nazz.

I'm doing very little in stocks. Just holding all my longs. AAPL came back strong yesterday. That's my biggest position. One reason I've held AAPL so long is that I'm following part of the IBD thinking, namely that companies with great new products can be great "multi-baggers" in a bull market. This is the "N" in Bill O'Neil's "CAN SLIM" system. "N" means "New Products, New Management, New Highs. I read his book, "How to Make Money in Stocks" and thought a lot of it was very helpful in getting a perspective. It also helps one get over the "fear" in buying a stock well off it's lows. [I didn't need a lot of help there, being a student of Jesse Livermore.]

AAPL seems to be one of the few companies with great new technology products that are creating huge new markets.

Corn crops ratings were down 7 pts in Monday's USDA Crop Conditions report. That's more than most expected. But a little rain fell overnight in the cornbelt, so futures didn't pop. We'll see. The weather looks like a blocking ridge is developing and hot, dry conditions seem likely for the next two weeks. That gets us into the crucial period for corn. Weather markets are volatile. I still have all my bushels of corn.

The winter wheat harvest is well behind schedule. Ukraine is still dry. Dry conditions in Kansas, etc. might help the harvest get going & pressure prices. If so, I might try to re-buy on a dip. I think wheat prices might go up later in the year as the full extent of world crop problems become more recognized. "Bad crops get worse" Remember that one? [btw, the US spring wheat crop is in great shape for now.]

PS: Peter Lynch coined the term, a "ten-bagger". That's a modified baseball term for you non-baseball lovers or fans or the international soccer set ;-) Baseball is a GREAT sport ;-) In baseball a single is a one bag hit. A double is a two-bagger, etc. A home run is a four-bagger. Peter Lynch looked for stocks with "ten-bagger" potential, i. e. a stock that could go up 1,000%. Just a few of those really help a portfolio's return.

PPS: Corn & soybeans got hit around 6AM EDT. I suppose the GFS weather map update had more rain. That US model has been having problems lately and not performing well. But it's widely follow and caused some big swings and some of the volatility I mentioned. I'm sticky with the horse "that brung me" [ ;-) I'm using a little country-speak ] and that hot & dry conditions are coming for the next three weeks for the eastern cornbelt.

P^3S: What is this infatuation with shorting? I just heard about the vogue idea of long-only funds becoming 120 long + 20 short funds and or 140% long + 40% short funds. This is nuts. Shorting makes a lot of sense in special situations & in bear markets, but not as a time-independent investing philosophy. Stocks are NOT commodities, but many participants seem to be treating them as such more & more.

Monday, June 18, 2007

Monday Morning Rambles

Futures are up small.
Corn is up. Soybeans, too.

Not much news. More later - I have to take Spikie to the groomer early today.

PS: Another guy saying, "we've gotten a year's worth of returns in five months." Such pessimism. Are there any really bulls out there except me?

PPS: And another guy saying the consumer is "spent up". Sheesh. At 4.5% unemployment rate, are these guys delusional or stupid?

P^3S: Barron's was thin gruel this weekend. Their roundtable of fund managers - what a waste of print. Just trying to "manufacture" some news.

P^4S: I saw that Pelosi is richer than the top three Republicans combined. Sheesh. She has no idea how the common man struggles to make a living. A limousine liberal wearing pearls ;-)

P^5S: I concede that Lyndon doesn't have a clue about that, either.

We Were Soldiers Once ... And Young

I watched that movie last night. And read the book a few years ago. History has repeated itself - not a perfect repeat, but a close one.

The Vietnam War was lost because the President, Sec. of Defense and top generals had a failed strategy and refused to do what it would take to win. The movie, We Were Soldiers, brings that out through the story of the initial major battle of the War in Vietnam in the Ia Drang valley. Inadequate intelligence, inadequate forces on the ground, sanctuaries for the enemy, a war of attrition ... well, that's ... history.

In Iraq we have ... inadequate intelligence, inadequate forces on the ground, sanctuaries for the enemy, a war of attrition ... that's NOW. And a refusal to do what it takes to win.

There's a memorial in Washington for the War in Vietnam that I have always thought very appropriate - every solder killed is named. And it's right in the center of DC so every politician and leader there is forced to see the personal cost of their bad leadership and mistakes.

So if there is every a memorial to the servicemen and servicewomen lost in Iraq and Afghanistan, perhaps a similar memorial is appropriate? To memorialize the human cost of stupid and pusillanimous leadership, yes?

PS: the combat correspondent in the movie was a real person - Joe Galloway, perhaps the best combat correspondent of modern times. You can see his writings on www. - here's a link to a appropriate column (or Google "Vietnam Galloway"):,,Galloway_072805,00.html

PPS: the book, We Were Soldiers Once ... And Young was written by the actual Colonel Hal Moore and Joe Galloway. Hal Moore later became a Lt. Gen and retired from the Army in 1977.

Saturday, June 16, 2007

The Sin of Hypocrisy

I was reading my stack of newspapers from the past week this morning while having a fine cup of black coffee. Lo and behold, I see a bit in the WSJ that is one of those glaring examples of hypocrisy that infuriates most of us. And it's coupled with my annoyance with the "rich & powerful" trying to force their ideas on the public. And with unfair taxation. A triple play - hat trick - third strike ;-)

Peter Peterson is a founder of Blackstone and stands to cash in about $2 billion on the Blackstone public offering. He's gotten most of that from "carried interest" aka the incentive fees he received as compensation for doing a good job running the fund. He's also a founder of Concord Coalition, an activist group that wants to raise taxes to eliminate the Federal deficit. I remember him as speaking out to raise taxes for years - maybe almost 20 years or more. He's a plain old country club Republican and served under Nixon as Secretary of Commerce. He also served on Clinton's "tax reform" commission in 1994. Hmm, soon after that taxes were raised on middle income retirees.

So his COMPENSATION at Blackstone has been largely tax sheltered to many years and now he's cashing out and going to pay only the 15% long-term capital gains tax rate. All while Joe Retiree pays a 45% marginal rate on his wages bagging groceries for extra income. And that JERK has been "speaking out" about the need for "all Americans" to pay more in taxes and having his butt kissed by the rich & powerful & the press & the black tie set all the time.

That's a five gold star gold hypocrit !!! Sheesh. Grrrrrrrrrrrrrrrr.

See why I distrust the rich & powerful trying to run the country?

1. Being a confirmed anachronist, I still receive PAPER newspapers !
2. I've never considered hypocrisy to be the worst evil or sin that a public figure can do, but the modern press seems to consider it a mortal sin - at least for a Republican.
3. I did a little research on how hypocrisy is classified as a sin in various religions. It does seem to be there in writings of early Christian church fathers and in Islam. Here's an interesting list: "Barnabas 20:3-5 arrogance, hypocrisy, rape, haughtiness, deceit, malice, self-sufficiency, poisoning, magic, having no fear of God, hate truth & love falsehood, don’t take care of the widow and orphan, impatience, abortion, partiality" [ from ]. Also, from Islam: "Some of the major sins are held to be legally punishable in an Islamic state (for example, murder, theft, adultery, and in some views apostasy; see sharia). Most are left to Allah to punish (for example, backbiting, hypocrisy arrogance, filial disrespect, lying)." [ from ]. Interesting how "hypocrisy" is grouped with other sins, eh?
4. "eh", is "Canadian" for the Frenchism, "..., no?" or other usages of "..., yes?" ;-)

Friday, June 15, 2007

TGIF and More

The S&P 500 cash chart shows a similar pattern as it did in early March - looks like a "W" minor bottom and a bullish continuation pattern. It's a bit less pronounced than March's pattern.

This morning's core CPI number will be important. And we have quad-witching adjustments today, too, at the open and the close. So be patient and think about the data. The beefers trading funds are going to try to create panic one way or the other to run stops. That's how they extract money from the market. Don't let them get yours.

The big eastern cities and Ohio valley will be very hot beginning Sunday. European models (which have been working well lately) show the heat continuing into mid July with only brief cool periods. This is bullish for natural gas & corn. But rain matters a lot for corn & a ridge need to block most of it for the eastern cornbelt to become stressed. The next 4 to 5 weeks are critical for determining yield. Weather varies & forecasts vary even more. So I expect some big moves up & down but a bullish overall trend as a weather premium is built.

The wheat market is like the Lil' Abner character, Joe Btfsplk - everything that could go wrong, is going wrong. I wish I was long, but need a good re-entry that might not occur.

Oil & miners were strong yesterday. They are the leaders until China says they aren't, imho.

The world economic trajectory seems very bullish for long term investment returns. A widely diversified long-term investment portfolio should perform well in this secular bull market.

"The Trend is Your Friend"

Use Time Diversification.

PS: Year-over-year core CPI downticked to 2.2%. Very bullish. The Fed should take off the inflation bias in this June meeting or the next one after that. Disinflation & moderate growth is a very bullish economic trajectory for stocks.

Wealthy Municipal Bondholders are Free-loaders: A Proof.

I was challenged by a reader on my statement that municipal bondholders are “free-loaders”. Wealthy municipal bond owners do not pay anything for the Federal government. That's not fair. Some say it is fair, as they take a lower interest that helps the states & localities. So I will now prove that it's not fair and they are free-loaders.

One of the appropriate definitions of "fair" is "regular and even" and "impartial" and "just to all parties"

So here's a gedanken experiment - these help work out difficult concepts. Suppose the Federal government wants to raise spending on something worthwhile to all, such as a war on terrorism? And pay for it instead of borrrowing?

They could institute an income tax surcharge like LBJ in the 1960s. This would be a uniform expansion of Federal revenues without any other changes to law.

So all pay their share of what is obviously a benefit to all people.

Uh .... not all --->> municipal bond holders don't pay anything to support such an endeavor. Hence are "free-loaders".

So their not paying any taxes to support the Federal government is obviously not "fair"

Hmm. Some municipal bond holders pay something - the middle income retiree. The marginal tax rate on incremental municipal bond income for a middle income retiree with $40,000 taxable income about 22% This is due to municipal bond income causing more social security to be taxed.

So retirees would be paying for this hypothetical war on terrorism. But not multi-millionaires with $5,000,000 municipal bond income.


Obviously the current tax system exempting municipal bond income is not fair AND wealthy municipal bond holders are free-loaders.

This type of gedanken experiment and analysis of effects due to uniform perturbations in systems is how fundamental principals can be determined. Things like laws of conservation of energy, momentum, angular momentum , and ...

Unfairness of municipal bond free loaders.

PS: The free-loaders are people ALREADY wealthy, not those high income people working to BECOME wealthy. So that’s double unfair. Free-loaders. Ptui.

Thursday, June 14, 2007

Whither Now ?

While I was digging up more silver & taking it to the bank, the bears were skewered by a strong rally. Again, I think real buyers came in to buy the dip and the shorts found themselves having to cover at higher prices. I think real bond buyers bought that dip, too.

Trying to short in a bull market is very dangerous. I think one can make a LOT more money trying bullish trades, like Frosty did in the comments of yesterday. The profits are a lot better as are the odds.

Today's PPI data and tomorrow's more important CPI data and quad-witching futures+options expiration day will be big. The resulting action will likely govern the market until the Fed meeting near the end of June. Barring bad news on the core CPI, I expect a rally into the June Fed meeting.

Corn still growing :-))
Selling wheat long was a mistake :-(

PS: What is this golf crap on Bubblevision? I want news on stocks! Switching to Bloomberg.

PPS: Year-over-year core PPI was 1.6% - a very manageble number. A good data point.

P^3S: Such pain! I just wrote out my Q2 estimated taxes :-((( Too bad the $$$ is mostly wasted & not used for useful things like aircraft carriers or new F-22 fighters or ammo for troops.

P^4S: By the way, the wheat crop problems are helping corn, too. Earlier in the season there was widespread talk that farmers would feed wheat to livestock instead of "pricey" corn. With wheat at $6, that negative for corn demand has vaporized.

P^5S: I made another mistake not re-buying wheat when its strength persisted after Monday. I guess I'm tired and looking for time off so wasn't too interested in looking for new commodity plays. I still have corn, natural gas & cocoa. That's enough at my current brain-wave level ;-)

P^6S: Arghhh! More seller's remorse on wheat :-(( I should take it off my screen.

"Fixing" the AMT

This is really easy. The AMT was designed to keep high income people from reducing their income tax excessively via tax shelters. It does work. But the system designed many years ago was improperly structured retain fairness as inflation eroded its exemption.

How large should the exemption be? To be "fair" and not "double tax" working people's incomes, the size of the exemption should be equal to the amount of income subject to social security taxes. This prevents income taxed under Social Security from being taxed again under AMT. For a single person receiving a salary, the exemption would be $97,500 or their salary, whichever is less. For a two-earner couple, it would be double that, or their combined salaries, whichever is less. Self-employment income would be treated the same as salaries, as would ANY income subject to Social Security taxation. This would be very fair and eliminate almost many, many persons from AMT. There would be no exemption phase out.

The current exemption for a single person is $42,500. For a joint return it is $62,550. So this would prevent large numbers of persons from being unfairly taxed by the AMT. And it would be fair, since their income subject to Social Security tax would never be taxed under AMT.

So how does the government make up for the lost tax revenues?

Easy. "Some" municipal bonds are subject to AMT - these are called "AMT bonds". ALL municipal bonds should be subject to AMT. This would bring a huge amount of income into the system, and prevent the truly WEALTHY from getting a free ride for all Federal government services. I'll write more about these free-loaders later. But you can see how much more fair my idea is for fixing the AMT than any being considered in Washington.

For persons with NO self-employment income, such as a retiree, a minimum exemption would be necessary, such are the old limit of $40,000. Or it could simply be the starting level for the current 25% tax bracket [for 2007, this is $31,850 for singles, and 63,700 for joint returns ] . This would increase revenues some, too, subjecting people, with large incomes not from employment for a little more AMT than the current system.

Overall, this solution to the AMT "problem" would increase fairness by equalizing taxation of different types of income.

PS: I do, and have done, my own taxes every year since I started having to file a return in the early 1970s. I also do my Mother's tax return and some returns for corporations & partnerships I manage or own. I fill out the forms by hand. So I have a lot of practical experience in how the income tax system operates in reality.

Wednesday, June 13, 2007

Waiting for Dust to Clear

The billions-trillions in mortgages in fixed income portfolios are being hedged for changes in their duration caused by the up move in US 10 year Treasury rates. This feeds on itself until they are all hedged. A similar move the other way caused those massive spikes down in Treasury rates to under 4% a few years ago. [That's when I refinanced our house at 5.41% for 30 years - since they are giving away cheap money, I took the FNMA maximum :-))) We're never going to prepay that one :-))) ]

Mortgages are priced off prepayment models. When interest rates rise homeowners do not refinance or move as much. So the duration of the mortgage securities increases a lot. If the mortgages are at a discount [many older mortgages are at a discount now]. This causes a DOUBLE hit - their price falls due to BOTH the rise in interest rates AND due to the rising duration. To maintain a constant duration AND hedge the price moves, which is necessary to match liabilities, the mortgage portfolio manager must short some Treasuries with longer maturities than the average life of the mortgages [which are often about a 5 year average life in the common prepayment models]. The housing problems are also probably causing increase duration in mortgages as many homeowners can't move since they can't afford a mortgage on a new house, or won't sell their house at a loss.

That's a long explanation of what's going on. It just takes some time to settle out. I'll try to make a profitable light-side stock futures trade once in awhile.

The real economy is fine & the current disinflation and moderate growth trajectory is extremely bullish long term.

By the way, remember part of my "Time Diversification" post about how hard it can be to buy a pullback when it occurs? It's pretty tough now, I expect. If I had uninvested cash, I'd wait until the Friday CPI and triple-witching number to put a chunk to work. Of course I bought at the all-time high the day before this "correction" began. The future is tough to predict short-term. No regrets. That was the third chunk in my time diversification investment move. Both prior chunks were at much lower prices than even now.

PS: The dollar strength is pushing gold down. Hmmm. strong economy, more global inflation is what I've been hearing. So why is gold going dow? These "explanations" are crap - we are just seeing beefers flaying around, dumping old positions & looking for new ideas. Like my "elephants at a drying water hole" metaphor. Don't get stomped. Wait for a new trend. I'm waiting to buy gold & silver, perhaps before the fall seasonal strength.

PPS: Grrr. The computer with my email & eSignal got a blue screen of death. Twice. Haven't seen that before. And I've changed NOTHING for weeks. So it's got to be some automatic update of some software. Grrr. I hate PCs. Why don't I switch all to Macs? Thinking. How can they get away with treating customers this way? It's spelled, m-o-n-o-p-o-l-y.

P^3S: The initial move that started this interest rate increase was the capitulation of the recession-mongers in bonds [such as Bill Gross]. Once the 5% level was approached, I think the hedging accelerated the move.

P^4S: I think that there are "real" buyers for the 30 year US Treasury bond over 5% and more over 5.25%. In bonds, "real" buyers are the pension funds: state, municipal & corporate funds. They can lock in good yields to match very long liabilities at those levels & will do it. Once they buy & match, they don't sell, hence are very "real" buyers.

Tuesday, June 12, 2007

Patience Grasshopper

Looks like the bears are attacking this morning. We might as well be patient and let them dig a big hole for themselves. The bulls have had a long run & lots of underinvested players will buy dips as long as nothing changes the economic trajectory.

This is a triple witching week, so don't overinterpret market moves. Wait for real news.

Friday's CPI on Quad-witching Friday might create some wild moves.

I'll probably try a light-side trade if the bears knock the S&P futures down too much.

Corn is a weather play now. Total rainfall for the next four weeks and the risk of excessive heat during pollination determine the crop. Watching, holding long December corn & calls.

PS: Sheesh. Bears are saying New Zealand is leading the world. I've been there. How idiotic. A very fine place to visit, at least in mid 1980s. But a sign of world trends ?! Phooey!

PPS: Increasing rates are bad. Falling rates are bad. A rising dollar is bad. A falling dollar is bad. An inverted yield curve is bad. A normal yield curve is bad. Everything is bad. Bearishness is so rampant. It's depressing to listen to this stuff. I'm glad I think for myself. Maybe I'll go to the range this afternoon.

If You Don't Believe Man is on Neptune ....

Then you're either a heretic to the religion of Environmentalism .... or ...

A Nut. The Environmental version of a Creationist.

[ ref. Saturday's post re Man on Neptune! ]

I admit I'm a heretic. It is indisputable that the Earth was warmer and climate more favorable in the high Medieval period than now. And indisputable that during the "Little Ice Age" the Earth was significantly cooler and had a less favorable climate. Mother Earth [ ;-) ] accomplished all that without Man. And that very strong correlations exist between several aspect of solar behavior and the Earth's temperature. These correlations are MUCH STRONGER than ANY huge climate model attains. And the Neptune data go to PROVE - yes PROVE - the causal relationship between solar behavior and the Earth's temperature.

So I'm a proud heretic. Man is NOT causing the current global warming to any significant degree.

If you believe Man is the sole cause of global warming, you are ignoring reams of real data and evidence - like the creationists do about the age of the Earth & Universe. And you rely on the writings of your Environmental scriptures printed out by the computers. Ergo, you're an Environmental Creationist. ;-)

The heretics like Galileo & Copernicus eventually were accepted as purveyors of truth over 500 years ago. And the priests of the dogma then are now considered fools or knaves. This, too, will happen sometime in the future. The Earth will evolve in the solar system irrespective of Man's puny attempts to control its destiny. Environmental creationism will go to the dust bin of history.

Monday, June 11, 2007

How 'Ya Gonna Keep 'Em Down on the Farm ...

After they're seen Shanghai !!!! Mumbai !!!

I saw an ad during the weekend in the WSJ that used the Shanghai ending. I thought of the great Al Jolson performance of the song, "How 'Ya Gonna Keep 'Em Down on the Farm (After They've Seen Paree?). That song was a huge hit post World War I, referring to the millions of US farm-boy soldiers who saw Europe and Paris, France. And who would now want a life beyond outhouses, plowing fields and shoveling .... uh, manure ;-)

So now this is being played out in the emerging markets of China and India as their rural populations move to the cities for a better life.

That's the major world driving force for a secular growth story that can last many years.

This is not my original idea. I thought, however, that after last week's US markets, we need to put the world economy in perspective. I see nothing to change the secular growth story. So far.

That's one reason I like the oils & miners for long term positions. While "extended" now, I suspect eventually the beefers might provide good entries at some time if not already long.

PS: The corn & wheat plays are working out. The USDA made no significant change in the corn outlook, but took ending wheat stocks down. And weather in Ukraine is still too hot & dry. Too much "rain in the plains" for US wheat harvest, too. Some analysts think wheat end users are "short-bought" meaning they expected a seasonal decline in prices into harvest and now must scramble to get long coverage. Forecasts of hot & dry for corn growing areas are bullish for corn as every kernel is needed. Ethanol demand is very strong.

PPS: I sold my wheat longs at 582 & will look to re-enter on a chart buy on a pullback. That last spike took Dec Wheat over 580 which was the range I was looking for. Perhaps an error, but I have a huge gain. Keeping all corn.

P^3S: I read Lyndon [aka W aka Bush] got a huge ovation & acclaim in ... Albania. That's probably the only nation on Earth where he's still popular. Arrrghhhhhh. I still need to do penance somehow for supporting him over McCain in 2000.

P^4S: I just sold that S&P 500 emini position. It was just a trade & I'm tired of watching it. I would have sold at 1532, but settled for 1529 since I want to go to the barn & work with my tools. So I got about 18 pts. OK, good enough for a two day trade. Still very bullish & long.

Paying Attention

No big LBO yet this AM [5:30 EDT here].

I did some research this weekend. Barron's Intermediate Grade Bond Index yields 7.16%. Merrill Lynch High Yield 100 Index yields 7.25%. Both are less than yields one year ago. Hmmm. The High Yield 100 is priced at a spread of 213 bps over the 10 year Treasury. The high spread over the past 52 weeks is ... 300 bps [btw, 1 bps = 1 basis point = 0.01%]. Not exactly indicating a major concern for LBO. On Tuesday WSJ reported that S&P said that "corporate loan default rates are at their lowest rate ever - about 12 times less than historical rates of 3.5%"

Obviously a recession would change that. But one has to question the rationality of all the doom-sayers we hear daily. Do they really analyse anything or are they just tossing some bones on the ground and getting they visions from reading them?

In her very forgettable book, Maria Bartiromo [the former CNBC "money honey" of the Bubble years], said that one needs to distinguish between "real" news and "noise". That's all you need to know from that book - I was unable to finish it. But Bubblevision and all the other "news" outlets must "manufacture" news and phony controversy to fill their broadcast time & printed space. That's why they put on all those "dueling heads", whether politicians, money mangers, market seers, etc. That's all just manufactured news. I listen to it & other channels to extract a few key nuggets of "real" news & "real" facts. Have you noticed they rarely bring up the track record of a talking head? Kernan points it out sometimes; Erin, too. Those are the exceptions. So if you listen, pull out the "real" news and good facts. Let the crap go - don't waste valuable memory cells storing it.

I did hear some real facts last week & am preparing a post about one - perhaps tomorrow. The info from Santelli that mortgage hedging was causing the violent US Treasury moves was a good one. I knew that from my bond market past experience, but more viewers probably didn't.

Otherwise, it's a bull market. Buy dips. Hold longs. Long & strong +150% on butter. And I still have that S&P futures long position.

Saturday, June 9, 2007

Human Life Found on Neptune !!!

No photos yet, but the existence of Man on Neptune is a metaphysical certitude ...
according to the unimpeachable logic of the environmentalism.

Here we go.

According to the dogma of that religion, only Man can cause global warming. Nothing else. That is a fundamental axiom in the creed of Environmentalism.

So a paper published in a hard science journal, Geophysical Research Letters, "found that Neptune's brightness appears to correlate with temperature changes on Earth. They also noted that Neptune's temperature warmed from 1980 to 2004" [IBD, June 1, page A14]

That's the EXACT period that the cardinals of environmentalism say evil Man was warming the Earth.


Golly gosh !!!!! That does prove that Man must exist on Neptune !!!!

Amazing the things "science" and "logic" can discover ;-)))

PS: That journal is a pretty good one. I published an atomic physics paper in it many moons ago.
PPS: I think I met one of the authors of the Neptune paper, too. Some people I know have worked with him. He's a good, thorough scientist.

What to Do if You're a Long Term Investor

That was a wild week.

I'm a long term investor now - mostly. I run the Krypto Fund & look to get 10% per year for it [mostly retirement money in index funds] and the Alpha Fund [stocks that I pick] where I look to get 30% per year.

So here's what I do & what you should do or be doing.

You've been following the general news & world events and know that nothing significant occurred last week regarding the long term prospects for world economic growth. And you know that pullbacks in a bull market are sharp & swift [you do know that NOW at least]. So if you look at the S&P 500 chart, you quickly see that this week fit that pattern precisely. So you will do nothing big. No wholesale liquidation. You'll just "tweak" your investments IF needed.

The big money in long term investing is made by SITTING, not getting whipsawed around. I heard a study of a famous mutual fund. The returns of that fund were phenomenal for about two decades. But when the performance of individual investors in that fund was examined, their returns stunk. Why? They moved money in & out of the fund at the poor times. All they really had to do was just invest using time diversification [see post a few days ago] & hold on. They let their emotions rule, not their brains.

So what do you do NOW? For your retirement money, just examine your asset class allocations this weekend. See if any class is out of its range.

I just did that for the Krypto Fund. Nothing was far enough away from its target percentage to do anything, but my gold & silver allocation is getting close to giving me a buy signal. I'll watch it for now.

For your stocks if you are running an Alpha Fund for yourself like me, look them over. You've been paying attention to the news & will know if the prospects for any stock or industry have changed a lot. If so, make a move. If not, do nothing. If you have some idle cash, perhaps a stock needs more added. Or perhaps a stock you've been thinking about starting a position looks good now [check the chart !]

My Alpha Fund's oils & miners & AAPL & GOOG & ORCL look OK to me. The India stocks I just let ride for the very long term. The China & India growth story is intact. So I'm doing NOTHING, except that I added to GOOG this week due to its great relative strength per a post I made.

That's it - you're done.

PS: Don't listen to the hucksters & bigmouths on Bubblevision. The channel has lots of good info, but they're not part of it.

Friday, June 8, 2007

Has Anything Changed ?

Hmmm. The S&P cash index closed on its 50 DMA. I'm down three pts. on my index trade.

Russia gave positive signals on a missile defense against Iran based in Azerbaijan ... very interesting. A plus.

Bill Gross got headlines saying he's changed his mind interest rates - the US note & bond yields are NOT going to 3%, but will range 4-6.5% over the next 3-5 years. He's been wrong for over a year now. One wonders if it's time for him to retire. Looking at my 100 year wall chart of interest rates, a range of 4.5-6% seems more realistic to me. So he's a recession monger who has capitulated.

W gets "sick" and leaves G-8 Summit. Hmmm. You know what I'm thinking ;-)

Yesterday's move in the 10 year UST note rates looked like a combination of recession monger capitulation and mortgage portfolio hedging. There was no significant news. Santelli on Bubblevision said the same thing based on pit trader comments. The bond markets have huge beefer players using derivatives & CDO/CBO/CLO speculation. It's unknown how many were seriously hurt.

I don't see 5.1% or 5.25% or even 5.5% UST rates as hurting any real borrower. These are incredibly cheap rates on any historical comparison. UST yields are up this AM to about 5.18%. As far as real borrower's prospects, I think it would take about 6% to seriously affect them plus some increase in corporate spreads. If medium grade bond yields got over 8%, then that could affect some expansion plans. I did a few billion $$$ in financing corporate facilities in my investment banking career so I'm basing this thinking on that experience. At 9% for medium grade bond yields, expansion plans could be curtailed. For example, an 8%, 20 year fully amortizing loan (monthly payments) has a debt service constant of 10%. So a company has to
produce over 10% return on assets to pay that off & generate free cash flow.

So far we aren't close to that level. And I don't see the economic trajectory as getting us there for a long time, if at all.

Next week we get more inflation news. That will be important. A core rate year over year flat with last month's data would be good and lead to the June Fed meeting with more data that inflation risk was lessening.

I'm going to play this move as a normal pullback in a bull market until something indicates that a real change has occured.

PS: At about 5:30 AM EDT, the beefers hit the T-note & stock futures pretty hard. I see two big red bars on the 5 minute chart. S&P futures are now down about 3 pts. vs. being up 4 pts. earlier. Heard no news. I put an order in to add to my long play at 1481 for S&P Sept. futures. That's about 20 pts below current prices and about the 50% retracement level. We could get some more panic today.

PPS: More eisegesis on Fed policy on Bubblevision. Perhaps the eisegetes should read the laws on what the Fed's legal authority & economic mandates are in "reality". It's hard to believe people get paid for that stuff.

P^3S: By the way, I was involved in financing some LBOs, too [many moons ago]. How can anyone think interest rates or spreads at these levels are going to stop them? They aren't at crazy levels or concepts by any means .... yet.

P^4S: Hey, no remodelers today !!! :-)) One day of peace & quiet. Ahhhhhhhhhhhh. Heaven.

P^5S: Good bounc-a-roo. What this market needs is ............... a big LBO announcement Monday AM to skewer the bears & shorts :-)))

Thursday, June 7, 2007

Long S&P Sept E-minis

I posted a comment [in prior post today] a few minutes ago that I just went long S&P Sept. E-minis. I have a ton of buying power in my futures account and it gets better tax treatment than if I bought SPY, etc. in a stock account.

I got mine at 1511.75 when S&P 500 cash was about 1495. I might buy more. The 1510 level in the Sept. contract was around the 31.8% Fibonacci retracement level of the its move from about 1400 to 1560 (Sept. contract). So that seems like a place to start of light side TRADE.

I think this down move has no reality & there has been three days of liquidation. This is NOT for the timid.

$10 Words

I don't know the origin of that term, but I think I learned it as a boy in smalltown Ohio so it might just be an old idiom. Anyway, I've been trying to learn the meaning of many $10 words for about 35 years. I started writing them on index cards with their definition & a sentence sometimes & sometimes where I first saw it. I still have those 4" x 6" cards and my handwriting has definitely deteriorated. The card file is a lot larger now as I've added to it over the years. I fill out a new card whenever I come across a word in reading that I don't know precisely.

[stick with me, I'll get to the stock market by the end ;-) ]

So what is a $10 word? I could say it's a "big" word that's uncommon in ordinary speech and writing. Or I could say it's a "sesqipedalian" word that's inordinary in common speech & writing [ ;-) ]. Both are wrong in my usage of $10 word. For example, I've run across "bon mot" a couple times recently. That means "a witty saying" and is a French term now used in English. I also recently added the "whence, hence, thence" trio to my file. And "golly, gosh, and gee". Those are all common terms whose meaning I "sort of" knew, but not precisely.

Here: "golly" - "used to express mild surprise or wonder".
And: "gosh" - "used to express mild surprise or delight".
And: "gee" - "used as a mild expletive or exclamation of surprise"

I use "gee whiz" quite a bit more now as I'm trying to use fewer four-letter words under request from Mrs. B :-( These three words are very useful alternatives to many old Anglo-Saxon vulgar terms. [btw, just using "bleep" works, too.]

So how do you remember the difference between "golly" and "gosh" ???

Those my age might remember country bumpkin TV character Gomer Pyle saying "gawawawawawlllllllllllyyy Sgt. Carter" when he learned something new from the more sophisticated Sgt. Carter. So that's the "wonder" part. Now you've got "golly" pinned down. Lolol, gosh is the other one - implies some "delight" with the surprise.

So where am I going with this?

I'm giving you background on why I use words like "eisegesis" that means "an interpretation, esp. of Scripture, that expresses the interpreter's own ideas, bias, or the like, rather than the meaning of the text." The person engaging in eisegesis might be an eisegete or eisegetist or eisegetor; I'm not sure - that word is more like a $1,000 word since it's not in my dictionaries. President / General U. S. Grant used in in his memories, though.

Yesterday's the babble on Bubblevison was pure EISEGESIS regarding Fed policy and the prospects for interest rates. The Fed is not going to raise interest rates in any relevant time horizon. The Fed might CUT rates one or two ticks [0.25% = one tick] IIFF the trend in core PCE inflation continues downward. That would produce a normal yield curve. Notice the bears screech "recession" when long rates go down & produce an inverted yield curve and obversely screech "higher rates" if long rates go up & remove the inversion. Both are bearish interpretations created by their "bias" and "bearish agenda"]. Those dirty eisegetes !!!

What we need is "exegesis". I was reminded of that $10 word by a very literate reader a few days ago. It's in my cardfile, but I forgot it :-( "Exegesis" means "an explanation or critical interpretation of a text". The person engaging in exegesis would be exegetist/exegete/exegetor, I'm not sure which one is best usage. There's no bias or agenda or own ideas from the exegetist; all bias for the eisegetist.

So a new epithet I really love is, "that dirty eisegete !!"

Doesn't that sound positively filthy ? ;-)

Wednesday, June 6, 2007

Woe is Us !!!

Horrible ... Devastating ... Such Torment !!!

The long term US Treasury notes & bonds are yielding .............. 5% [gasp]

Du'h. My 100 year wall chart of interest rates shows that level is still historically very low, being below the general level of interest rates since 1967.

Any company that can't make oodles of money on 5% Treasury rates should be liquidated & management fired.

Hmmmm. The long-term, academic studies give 3% as the average real return on bonds. So 2% core inflation plus 3% gives ............. 5%.

That's where the US Treasury rates should have been all along.

More "Wall of Worry" screeching. Nothing has changed.

PS: I just heard McCain support nuclear power. Maybe I'll send him my other "vote". You see, the "rich" get two votes early on while regular people don't get a vote until next year. I sent McCain my "primary" vote. I think I'll send him my "general election" vote soon. What a system! .........NOT!

PPS: I posted about GOOG recently. GOOG outperformed yesterday, making an all-time high amid a general down day. The company has great market position & growth and the stock seems very undervalued. The chart shows a break up from a long consolidation base. I'm long and if it can hold this new all-time high for today's close, I'll buy my last chunk. This is a longer term position.

Tuesday, June 5, 2007

Two Commodity Aphorisms

1. "Good crops get better."
2. "Bad crops get worse."

I heard those a few years ago and have noticed they tend to be true more often than not. So the wheat crop has problems after the freeze and with all the rain hurting the harvest, so I'm long wheat (December, Chicago). I figured the chance of a bearish surprise is more than a bullish one. And the wheat crops in Ukraine & Russia are in real trouble. And the world needs to restock its wheat stockpiles after last year's crop problems in various places, including the US.

You DO have to WAIT for the crop to become "good" or "bad". Neither corn nor soybeans are there yet - they won't be until July.

In a way, these two fundamentally based aphorisms are reasons why trend speculation in commodities can work.


I am really getting annoyed at the large number of STUPID comments I hear about water.


Unlike oil, most "uses" of water simply make it impure. The water molecule is extremely difficult to actually destroy. So the water is cleaned either in the treatment plant or in the biosphere or sea. The biosphere uses and produces water.

People DO use water stupidly. For example, a town upriver from mine pumps water out of the river [ aka watershed ] for use by citizens, and then its sewers [ after treatment ] empty into the sea. So the water is removed from the watershed for all downstream users & wildlife. That causes problems. And they have the votes, unfortunately.

That's the issue. Stupid uses that deprive others of "potable" water.

Waking Up Tired

We had a sick dog last night - Krypto must have eaten something disgusting outside. I didn't get a lot of sleep; Mrs. B got less. Krypto's fine this morning after purging her system :-((

Not much news today. Some pop in the grains overnight, not sure why. The USDA crop progress and conditions reports looked in line. Next Monday there's a USDA crop report to update the USDA expectations on this year's crops. That might be big.

Lol, speaking of crop reports, I watched that movie, Trading Places. The last 1/2 was pretty funny - when they caught onto how they were being manipulated. The first half sucked - I could have never gotten through it without guessing the happy ending.

I really don't like movies without happy endings. Normally I just stay away or turn them off. I've been through enough sadness in reality to not need to see sadness or unhappiness in my entertainment.

I'll post some "PS's" later - right now I need breakfast.

PS: I closed my sugar marker position just now. I lost hope that it can turn around. My entry was too early.

PPS: I don't think the Brazilian coffee will get a freeze near term. I'm closing my coffee marker for a small gain. I didn't like the lack of follow-thru yesterday.

P^3S: My commodity account is now at 1x leverage, pricing all the contracts at full value. I think corn, cocoa, hogs & natural gas offer the best profit prospects. I'm long all of those & will add if favorable.

P^4S: I see some research that palm oil was up big overnight in Malaysia, dragging soybean oil [hence soybeans] along. I still think I'll get a chance to re-buy soybeans later at better prices - the beefers are pretty long & might want to book some profits. If not, "that's trading".

Monday, June 4, 2007

Monday Morning Rambles

Can someone explain this: Russia threatens Europe because some Europeans want to help defend Europe and the US against Iranian missiles & future nuclear blackmail from Iran. Sort of sounds like Russia wants a submissive & compliant Europe. Thinking ................

Paris Hilton goes to a special celebrity jail for 23 days for probation violation. The South Park parody of her was pretty accurate :-)

Check out Sunday's post regarding "Time Diversification" IIFF you have a pile of uninvested cash.

Bunker investing is working well:
Krypto Fund +6.58% ytd (passive, diversified index funds & gold);
Alpha Fund +36.3% ytd (selected stocks in certain sectors);
Commodities +35.6% ytd (more active, week/month trades).

The main driver of Bunker investing is lots of thinking and some reading. I do very little short term trading anymore as (a) the return for effort expended and (b) $ risk of bad trades seems out of whack when larger sums are deployed.

PS: I bought some August Lean Hogs. I remember that last August the heat was thought to have hurt breeding [ ;-) ]. Of course corn prices hurt feeding them, too. So this August there might be fewer hogs with less weight. The chart looks like a bottom, too.

PPS: I closed my soybean long - good one. I'll re-buy on a correction, if one happens.

P^3S: Natural gas is moving - those hot weather forecasts are working. I have August now (rolled my July contracts - btw, I trade the e-minis only). A close over 8.4 in July or August seems to be a break out of an ascending triangle. CHK stock working well, too.

P^4S: Coffee has moved a lot recently, on Brazilian price support program and freeze worries. Not adding yet. That bleeding marker position is green now, though. Coffee is a tough market. I hate losing a couple $K on those markers - was down about $2K on coffee for awhile. Sugar marker still red.

Sunday, June 3, 2007

Time Diversification

So the S&P 500 just completed three consecutive days of closes over the old all-time high from March 2000. And you are sitting with a pile of uninvested money. What to do ???

I had a finance class at MIT Sloan School around 1980 with Fischer Black, who was one of the great financial market experts of the 20th Century. He taught us about "time diversification" on one day in his famous course.

Time Diversification:
One can mathematically prove that under fairly broad assumptions about the market and its distribution of returns that by making partial investments over time you will reduce your risk considerably while not reducing your expected returns. Once considered, it's almost obvious, being a form of the well-known statistics result that the variance of an average of multiple samples is less the variance of a single sample. The "sample" is your return on investment over a long period of time.

This investing theorem extends the concept of diversification to the time dimension, compared to the well known, and famous "free lunch" of diversification of investing across a portfolio of many stocks. In simple terms, you reduce your risk of investment by breaking your total investment dollars into several pools and spreading out the TIME when you make those investments. In more exotic terms, this theorem is analogous to part of Einstein's famous relativity theory that merged time & space into one four vector - here investment time and the space of stocks are merged into a single investment tactic.

You need to diversify across BOTH the space of stocks AND time to obtain the lowest risk for your return on investment.

So here is the answer of "What to do???"

Break your investment dollars into a few parts- perhaps three.
1. Invest one part (1/3 of the total) NOW.
2. Invest the next part on the earlier of a significant pullback (after the dust settles) or in a few months.
3. Then invest the last part in the late fall.

You're thinking, "why don't I just wait for the "significant pullback ?"
Because it might NOT happen for a long time, or when it does happen, the news that might have created it will then scare you into not investing even then. For example, if you were that smart, why didn't you invest everything in early March on THAT pullback? It was too scary then, that's why. But if you are putting only 1/3 to work, you might be able to pull the trigger on a pullback.

And your thinking, "Bunkerman, if you're so smart, why aren't you doing your Einsteinian time diversification ??"

D'uh, I'm smart enough to know I'm not perfect. I DID and AM doing this NOW. In late November, 2006, I had a large pile of new money to invest. I put 1/3 to work at once, even though the market was "extended" in the eyes of some gurus. And in March, I gave Mrs. B 1/3 to start her "Sky Fund" - I posted that. And on Monday morning, I'm giving Mrs. B the last 1/3 for her Sky Fund to invest immediately. We are now in the Elysian Fields of investing, the "Blue Sky" area when all prior resistance levels have been taken out and all known overhead supply is gone.

It's a bull market until something changes. The trend is your friend.

Saturday, June 2, 2007

Leaky Banks

I received a new credit card from a bank last week - it replaced another card & had a new card number & larger credit line [yes, I've been spending a lot]. So I verify it from my home phone & put it in my wallet & never took it out. Not once. Didn't use it online, either. Nothing.

So this AM I get a fraud alert call. There was a $5 charge somewhere in CA a few days ago and early this AM, multiple $39.90 charges at a "retail store". Not me, I haven't done anything. So I deny them (& the bank wasted 20 minutes of my time with disconnections & time on hold, etc.) The guy in India was polite, though. So I'll have to sign some papers they send. And they'll send a new card.

D'uh - where do you suppose the leak of that card data came from ???

The ONLY two possibilities are the bank itself or a low bid subcontractor.

My free time gets wasted because the bank is too CHEAP to have good security or use a more reliable subcontractor to issue the cards. Grrrrrrr. What a world!

Friday, June 1, 2007

Investor's Soliloquy

To sell, or not to sell – that is the question:
Whether ‘tis nobler in the mind to suffer
The slings and arrows of bear raids
Or to make some sales from a sea of green stocks
And by selling save them. To sell, to hold—
No more – and by a sale to say we save
The heartache, and the thousand small hits
The P&L is heir to. ‘Tis a consummation
Devoutly to be wished. To sell, to hold—
To hold – perchance to survive: ay, there’s the rub,
For in that calm hold what dreams may come
When we have shuffled off this bear raid
Must give us pause. There’s the respect
That makes huge gains of so long holding.
For who would bear the whips and scorns of bears,
Th’ hedgie’s wrong, the perma-bear’s contumely
The pangs of despised shorts, the move’s delay,
The insolence of gurus, and the spurns
That patient merit of th’ unworthy takes,
When he himself might close his longs
With the “Sell All” button? Who would burdens bear,
To sigh and sweat before a blinking screen,
But that the dread of something after selling,
The undiscovered roaring bull, till such end
Much gold is made, puzzles the will,
And makes us rather bear those stocks we have
Than fly to cash that we know gives little?
Thus fear does make sitters of us all,
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprise of great pitch and moment
With this regard their currents turn awry
And lose the name of action. -- Soft you now,
The fair Ms. Market! -- Nymph, in thy prayers
Be all my stocks remembered.

PS: For the not-so-literate or non-native English speakers out there, the above post is adapted from the famous Hamlet's Soliloquy written 500 years ago by William Shakespeare.

PPS: Check out the old 1948 movie, Hamlet, with Laurence Olivier for a fine performance of that play. I recommend it highly.

P^3S: See comments for today's VERY BULLISH data on the core PCE inflation.