Tuesday, July 31, 2007

Thoughts on a Tuesday

I see Democrats can be bribed, too. WSJ: "Some Democrats are having second thoughts about raising taxes on hedges funds and private equity managers ..."

Porkmeister Sen Ted Stevens of Alaska gets home raided by the FBI in corruption investigation. Corruption? Nahhhhh. Building bridges to nowhere is purely well-intentioned. LOLOL.

Will Bancroft family be fools or take the money? Their pompous antics definitely prove again that people growing up with plenty of money are mostly idiots in practical lfe.

Taliban murders another aid worker. Hmmmm. Uh, why aren't the tribal sanctuaries for them being carpet bombed? Fuel-air bombs? Napalm? 220 kiloton groundbursts? The tribes providing sanctuaries would be targeted in totality. I could go on with effective methods in any terrain. Lyndon "said" that there would be no sanctuaries in the war on terrorism. I guess he lied. W = Lyndon, btw. We need a 21st century Teddy Roosevelt.

On Monday the Asian markets ignored the Friday US drop - they were up solidly. Perhaps the Asia markets and economies are decoupling somewhat? I have thought for some time that eventually a self-supporting East and South Asian "co-prosperity zone" [hehe, get it?] would develop. India was strong overnight today.

Hedge fund Sowood to close. Shucks.

IBD calls Monday Day 1 in its rally count. A follow-thru day is needed on or soon after Day 4.

Corn and soybean crop conditions dropped last week. Both are now below average. But the corn crop is mostly "made" now. The crucial podfilling period for soybeans is early August. Hot, dry weather will hurt yields. Still long soybeans here as the weather seems bullish. But rain can sneak in at any time via thunderstorms - very hard to predict - and coverage is crucial. Risky.

Btw, the spring wheat crop is above average.

Natural gas beefer shorts are a huge record level as of last week's COT reports. So the gains of Friday and Monday are probably short covering in light of August heat and potential hurricane developments putting those on the screens - even though new wave developments are unlikely to hit the gulf. August is a big month for potential hurricanes. It would take real production shutdowns to remove the storage overhang now, though, since July didn't help due to a cool Northeast.

PS: PCE core inflation index year over year was 1.9% - right inside the Fed's range. The Fed's inflation bias has to come off soon. This trend has three months now. One or two rate cuts this fall and winter is my expectation.

PPS: I'm starting to sell India-related stocks in my Alpha Fund. I'm still very bullish on India and will buy a mutual fund relating to India in my Krypto Fund, but I can't really follow the individual India stocks. I bought the big cap financials as a replacement and need to add to those over the rest of the year, so I need some buying power.

Monday, July 30, 2007

Whither Now? Does the Past or the Future Rule?

The debt hedge funds are sitting with, or got crushed on, huge losses in investments in crappy loans. The Street was putting junky loans with terms that no serious "real" lender would accept into CLO/CDO/CBL trusts with many other types of loans, getting ratings based on diversification, and the hedgies bought the subordinated classes. Now that the subprime residential defaults rates went up a lot, the poor quality and structure of those loans got attention. All those 2-28 loans were just time-bombs - Caa/CCC quality needing something good to happen to avoid certain default. Stable or lower home prices guarantee defaults. The horrible terms of the corporate LBO loans in those trusts were such that no lender planning to hold to maturity would ever accept them, hence they are now unmarketable. So they are all stuck. The residential subprime loans are poisoning the trusts and the value of the garbage corporate loans are falling. So the subordinated class owners are being killed. If they funded those speculations with margin, they've been getting margin calls and have been - or will be - liquidated. That's the past.

New loans have to be written with terms and covenants that a "real" lender will accept, not a just a "dumb money" trust. A return to normalcy. And residential loans have to provide that the borrower can pay the debt service assuming nothing changes - real income coverage of debt service needed.

Are there lenders to make those loans? I think yes. Demographics is pushing huge sums into income oriented investments. Fannie Mae and Freddie Mac still provide liquidity to huge amounts of conventional home mortgage loans. Pension funds and insureance companies need long term income to fund liabilities. With good terms and covenants, the LBO loans can be excellent investments for a diversified income portfolio. That's means an LBO loan that requires some debt repayments BEFORE the private equity guys get a dividend. So as long as the economy grows, the future looks fine. Corporate earnings are good and the consumer is mostly fine. Stocks are cheap. Corporate defaults are very low. Commercial mortgage loan defaults are very low. This is the future.

This panic might take a awhile more to run. It seems like an old fashioned "money" panic - one that hits the street harder than the economy. As long as government doesn't do something to make it worse.

PS: the losses of FNMA and Freddie Mac on subprime loans really brings their investing policies into question again. They had no business buying those loans - loans that expressly do not meet their lending guidelines.

Saturday, July 28, 2007


That's a $10 word meaning, "the seasonal moving of livestock from one region to another", usually seeking better pasture or weather..

Hmmm, let's apply this to beefers. Beefers move from one group of stocks to another, seeking profits and fees. So beefers practice "transhumance" for stocks instead of livestock!

Here's a sentence. "The unpredictable nature of beefer transhumance of their stocks makes time diversification and dip buying a profitable endeavor for long term investors."

Hehehe. The study of the behavior of beefers is essential for one's investing health! ;-)

Friday, July 27, 2007

Profit Protection Panic

That was yesterday. Beefers fearing erasure of their year's returns - and their paychecks - dumping almost everything. They had played heavily in the energies, so dumped those. And the Russell is a favorite sandbox. Hence it's smashing. There was no real news. Just a profit protection panic. There are unpredictable and this is the third one deemed due to "subprime" in the last six months. Yet is there any sign that the real economy - the non-speculative one - has changed? No.

The debt markets of the real economy is dominated by qualified home mortgages that FNMA or Freddie Mac can buy and in the corporate sector by investment grade debt. Derivatives have turned the non-investment grade markets into beefer playgrounds, so with no defaults and no defaults in sight, they can push it around with impunity. The major markets are too large for them to move and are dominated by real buyers - big buyers.

I bought a big position in some big cap financial yesterday and Wednesday: BAC, C, JPM, and MS with the BAC position almost half of the money I invested. These are long term positions that I think will give me the 30%/year return I endeavor to achieve in the Alpha Fund. I plan to double this position over the next few months. At some point I'll flip that long S&P futures position as I now have stocks replacing most of it.

I'm going to analyze the Krypto Fund and if I sell some bonds to buy stocks, I'll post a "PS". This decision is mostly just a mathematical exercise of reallocation, but I admit I add a little of my outlook to the mix through the portfolio percentages.

PS: I do need to sell some bonds and buy some stocks. I might do that today or Monday, depending on the action.

PPS: I wrote on March 13, 2007 about how the subprime loan problems could influence other markets beyond residential mortgages, viz. through the CDO/CLO/CBO markets. That appears to be what is causing this "credit crunch" in the corporate markets - a crunch without real corporate defaults or problems. The "brains" on the street put some subprime garbage in those CDO/CLO/CLO trusts and hence the subordinated classes of some of those got hurt. That scared the beefer holders and so they've been dumping. And toss in the ease at which they can short derivatives connected to those securities, you can get a panic without reality. Without buyers for subordinated classes of CDO/CLO/CBO debt, those become impossible to create and since that's been a place for high yield debt - especially the debt with crappy terms - that debt is now unmarketable. High yield debt needs realistic terms that attract real buyers.

Re-reading my old post, I wish I had followed this closely as that fear I expressed then came true months later. Maybe I could have seen this in July and made a good trade. BUT for long term investors notice that stocks are still way over the levels of March - S&P was at 1370 then, now it's at 1470. So being scared out then was the wrong decision - a loser. That's why I wait for reality to make decisions for long term investing. These beefer panics are unpredictable and have no sustained meaning for the real economy

P^3S: Good GDP and inflation news this morning. That confirms my outlook for the economic trajectory. I'm definitely a long term big buyer for Krypto Fund either at today's or Monday's close.

P^4S: I sent the orders in to sell bonds and buy US, Europe, Pacific and Real Estate index funds. RE had really gotten smashed. My timing might not be perfect or even good, but I figure that in a year this move will show a big gain. I get the closing prices as these are index mutual funds. I figure real buyers are standing back while the beefers play, so am hoping for a lower close.

A Drinking Primer

After a day like yesterday, I thought a primer on drinking might help ;-)

Here are my favorite spirits and other "adult" beverages hehe.

Scotch: for a blended, Johnny Walker Blue neat in a shot glass is how I celebrate a great day in the market. Uh ... I didn't have one last evening :-( For less than a great day, I move down the Johnny Walker colors - gold, green, black and ... red. Actually I skip the red. For a single malt scotch, Glenlivit French Oak is my favorite. For a reasonably priced blended, I think Teacher's Highland Cream is best - it's often in my glass.

NOTE: For ALL whiskys or whiskeys other than Johnny Walker Blue and rums, I have them straight in a smallish ice filled glass. I let the ice melt a little before sipping so there's a bit less bite to hide the flavor.

Bourbon: I've tried almost all the premium bourbons and prefer Maker's Mark. Yes, I know it's owned by a big firm now. But I had it 25 years ago and know it's still a fine bourbon. I think it's finish is better than others, such as Knob Creek or Blanton's. For a standard bourbon, try Old Forester.

Irish: Jameson makes a fine 12 year old Irish whiskey. My old Irish bartender used to recommend it, but I think that's because at the time, Bushmill's was owned by an English firm ;-)

Rye: easy - Old Overholt is excellent and very smooth.

Canadian: easy - Crown Royal is best.

[by the way, I don't drink any standard American blended whiskeys - I either choose a straight rye or a bourbon, depending on my mood.]

Rum: British Navy Pusser's Rum is superb, and the best by far. Other fine rums are Plantation rums of Trinidad or other coppery-gold colored rums of Barbados made with sugar cane or pure cane juice. Put a small chunk of lime in your ice filled glass and wipe its rim with the lime, too.

Vodka: premium Polish grain vodkas are my favorites. If having it straight, I drink it freezer cold - 0 degrees F - in a shot glass. Have some buttered bread or tasty deli meat with it.

Gin: I like Tanqueray, but the other premium gins such as Bombay or Beefeaters are fine, too.

Port: Buy any "Late Bottled Vintage" port - these are superb and less costly than a Vintage Port.

Sherry: Try either a good Spanish sherry or Harvey's Bristol Cream Sherry.

Vermouth: for my World's Finest Martini, use the French White "Lillet", an aperitif wine. It has a soft gold color and a far superior flavor to common vermouths

[Note: for my World's Finest Martini recipe, see my post of February 4, 2007. Also, for this special recipe, I use Gordon's gin and vodka since those were what James Bond specified. Those are inexpensive, but still produce a fine, fine martini as the flavor comes from the Lillet]

Liqueurs: There are many, many fine liqueurs. I like B&B, Drambuie and Cointreau.

Wine: I prefer a full bodied, flavorful red wine such as the Australian Shiraz.

Beer: The locally brewed Ipswich Ale is really super - a non-pasteurized British-stye "real" ale that must be kept cold. Otherwise, I drink St. Pauli Girl, a fine German lager.

There - now you can stock your bar with only tested, quality brands - certified by Bunkerman ;-)

Thursday, July 26, 2007

Quiet Day?

Maybe today will be dull. I've had enough bullriding for awhile.

Oil is up $1 to $77. Brent is about on par with WTI.

AAPL report sounded good. Long AAPL in the Alpha Fund.

I think I'll add to my BAC position today. I like it a lot.

Not much news.

Sheesh. Now my new Vista computer is having trouble. This is the third problem I've had with Dell computers in a month. I'm really wondering if they are using shoddy components. Arghhhhh!

PS: I added money to my Alpha Fund and bought more BAC and a little MS, C, and JPM. I'm about 40% of my planned big position in the big cap financials. I might add more at the close, Friday or Monday. If not then, I'll wait a few weeks.

PPS: I checked my Blue Book of 12-year charts with earnings. I think these big cap fins [aka financials] are very undervalued vs. their long term earnings trends; even more considering interest rates are so low. I'll try to get 50% of my position in soon.

P^3S: Got my 50% position in financials for the Alpha Fund [BAC biggest, then C, JPM, MS]. Will wait awhile for the rest - time matters. I'll check the Krypto Fund early AM to see if I need to re-allocate some bonds to US stocks.

Wednesday, July 25, 2007

What is Different?

When the market suffers a fit of selling, I always re-examine my outlook and ask myself, "What is Different?" This has to be done with an open mind and after looking for new facts.

Reading the news articles on CFC I see their earnings miss is blamed on unexpected losses in "prime home equity loans". Hmmm. Reading further in the WSJ: "Many of the home equity loans that are going bad are 'piggyback' loans to borrowers who took out a second mortgage because they couldn't afford a large down payment and didn't want to pay for mortgage insurance." Naturally these people bought homes at the peak and now the home prices are below the combined 1st and 2nd mortgage balances.

What is "prime" about a second lien loan to a borrower without a standard down payment? How can this ever be considered "prime"? These loans were miss-classified by CFC. CFC wanted to put paper on its sheets with disregard of reality. This says nothing about the economy or the huge standard mortgage markets.

AMZN beats earnings bigtime. It's stock ripped up afterhours. Who are Amazon's customers? The consumer.

This is the third major selling fit that the "subprime" screech has generated [late Feb, early June, and yesterday]. I think "subprime" mortgages are the housing loan analogue to "high yield" bonds [ aka "junk bonds" ] in the corporate markets. In the 1989-90 period, there was a seize up in the junk bonds market that caused lots of problems. This was legislatively created as Congress banned junk bonds from S&L balance sheets and the insurance industry created new capital requirements that greatly cut insurance company holdings. So the junk bond market had much forced selling and few buyers. Simultaneously, there was a commercial real estate debacle as that market was overbuilt and the S&L and insurance company loans had reached idiotic levels. A major investment bank went bankrupt [Drexel Burnham Lambert]. Combined with the surprise first Gulf War and its oil price shock, we had a short recession.

Some LBOs are actually having to pay spreads and terms that are reasonable - how shocking! And the bridge loans firms are re-learning the lessons of the past. High yield spreads are actually getting reasonable - they were insanely thin in the Spring. By the way, the historical cumulative default rate on Ba/BB corporate bonds is about 20%. For B/B corporates it's about 40%. Recent corporate default rates are far, far lower. So junk spreads under 250 for Ba/BB and 400 bps for B/B are stupid. Some of those spreads were at the "stupid" levels recently. Have any major LBOs defaulted? No. Have we seen any major defaults? No. This is a move back to reasonable pricing - aka a correction.

You can see how different the 1989-1990 period was: massive dislocation in multiple problem sectors and legally forced selling plus a surprise war. And now instead of predicting a housing recover soon we hear it's a "Depression" and no recovery until 2009. No one seems to want to buy the homies now or is predicting a bottom. Last summer and fall everyone was buying homies, thinking it was the bottom. Bill Gross says a big drop in equities coming. Hmmm. Wasn't he saying that last year? Isn't he a bond guy? Hmmmm.

So without a recession and since bottom fishing seems dead, is the "bad" news all in? Is it really that "bad"? Or is this just beefer panic and profit protection selling and more shorting by the bears? And even the Fed does expressly say they are watching the housing markets closely. Uh, that means that they will consider a rate cut if it gets as "bad" as the bears say it will. I think they will cut this fall, for several reasons including the downtrend in core inflation rates.

So running threw my mind as I sat watching the birds and squirrels while listening to Tommy Dorsey with Frank Sinatra singing was how "stupid" this selling in the major financials seems. And in the past at those times I've bought stocks. So yesterday in the comments I posted that I put some fins on the sheets - just to remind me to look.

I'm going to build a big position in the major financials - only the big ones like BAC, C, JPM - maybe more as I look around. Their PE multiples are really low and I think way undervalued. My Alpha Fund target return is 30% per year and I think this sector will give me that leg next year. I'll average in over six months or so - you have to use time diversification on these type of moves to avoid overtrading.

PS: No surprise, the bears are hitting the early bounce. Be patient. Buy dips of good stocks if you have cash.

PPS: Interestingly, I heard that some beefers are stopping redemptions. Hmmm. Beefer liquidations would be a plus long term, imho.

Tuesday, July 24, 2007

Summer Tuesday Ramblings

S&P cash recovered OK and its chart looks like a bullish continuation pattern. The Nazz and Nazz 100 were flatish, but those charts were better anyway. The Russell 2000 is still the weakest - that will hurt the beefers this Q. The Dow Industrials chart looks strong. Trannies are OK, too. I still have that S&P long futures position - it's a trade, by the way.

EDU reported OK earnings - small beats of estimates on EPS and revenues. EDU is an Alpha Fund long position.

Soybeans and natural gas got smashed yesterday - ugh! My commodities trades have stunk lately. It's good I reduced my position sizes and leverage there. Still long. Joe keeps pounding the table on a very hot August. I'll give him some more rope.

Inflation data points: homeowner's insurance on my Mom's house in Ohio is down 10% year over year. This is an example of how inflation is low away from the coasts and Florida and areas overwhelmed by rich people buying everything. Starbucks raises prices - well, anyone being gouged $5 or more for a cup of coffee can't rationally complain about inflation.

Underwriters are having trouble selling some LBO debt - I hear the issue is terms mainly. The terms of last spring are long gone - they were idiotic anyway. This is a problem with bridge loans. The borrower has less incentive to agree to market clearing terms & rates, since they have a deal already. I guess underwriters are re-learning a lesson of the late 1980s.

These very large Chinese equity investments in private equity firms and deals are interesting. I'm still noodling over them.

PS: stocks went down hard today. It's wierd that I hear all this talk of disaster & panic from the traders and perma-bears like Bill Gross (wrong for over a year), yet is a single fact actually discussed? Maybe I'm missing them. Or they aren't there. Hmm. people who lend money to weak credits are ... losing some money ! What a shocker. I'll think some more. So far this looks like a beefer bear raid on the XLF. They can short that with impunity, especially in the summer. And with derivatives. Oh well. I'll have to figure out if anything is different.

Monday, July 23, 2007


Every so often I watch a sport called "Bullriding" on TV. A cowboy tries to ride a huge bull for eight seconds with only one hand holding a rope. The cowboys and bulls are experienced pros, and some bulls are very tough to last a full ride.

This bull market is a pretty tough ride, too, as Friday showed. Those beefers are doing their best to scare us off. So they use a summer Friday options expiration to paint the charts.

The S&P cash is back on support, still over the 50 DMA. The Nazz shows a choppy bullish flag; the Nazz 100 still shows an uptrend. The Dow Industrials shows a choppy bullish flag, too.

Sheesh. Bubblevision puts Sutty on - he's a bear, making a big deal of the pharmas. Since when are the pharmas leaders?

The NYSE short interest hit a new record again - five months in a row. NYSE short ratio increased to 8.4 days from 8.0 days. The Nazz reports this week, and a new record there seems certain. You readers were smart not to take my sucker bet on the record short interest.

Seems like the beefers bears uses GOOG to try to start a panic. Huh? Uh, year over year earnings were up 43% and revenues up 58%. GOOG bounced on the 50 DMA. I think the bears will get hurt on that one.

Brent still is at a premium over WTI. Nat gas has pulled back - I'm worried about that low - have a small loss now after being green. Any Green-red move mandates re-thinking a trade. Soybeans are still chopping around. Today's crop conditions reports might set the trend there. We are approaching the crucial podfilling period. A weather service I use says the first 20 days of August will be the hottest period of the summer. So that's why I'm long both those commodities.

Vermont was great fun - very tiring, but hugely enjoyable. I'm really, really good at the T&E adjustments on the M1919A4s - I use M1917 tripods. Also with handling the M60 "Rambo" style. I even was impressing line staff with my M14 handling - that has a huge kick on full auto. Few men can handle that one, but Bunkerman can hehehe ;-) The M1928 Thompson worked great with the L Drums with brass cases. Dumping a drum in one pull is a thrill every time I do it. Friday we did it in the rain hehehe ;-) Saturday weather was perfect :-)) I came home dirty, greasy, and tired, but looking forward to next year.

PS: I've been getting the "Blue Screen of Death" on my eSignal computer frequently now ["KERNEL_STACK_INPAGE_ERROR"]. I didn't install anything new - neither software or hardware. So the Windows suggestions are worthless. Anyway, I'm transferring vital files to my new Vista computer, one folder at a time since I got a Blue Screen when doing all of "My Documents". Strange error - some say it's a hard drive problem. Windows computers suck is all I can say. I'll call Dell for service once I get the vital files transferred. They might want to replace the hard drive.

PPS: RIG and GSF agree to merge in sort of a merger + recapitalization as lots of cash is included. Interesting. Alpha Fund owns both.

Thursday, July 19, 2007

TGI ... T?

Yes, TGIT! It's Thursday and I leave for the Vermont wilderness at noon with my equipment and Form 5320's in hand. I'll be there Friday & Saturday, doing my best to enjoy finely crafted automatic mechanical devices - curios and relics - historically important examples of how freedom was preserved !!! I've got about 5,000 rounds ready to let rip at targets like dynamite, old cars, fu gas and other wonderfully enjoyable reactive targets. I have lots of .50 API and APIT to light up engine blocks - I've an expert using the T&E to fine tune the aim to the oil pan :-)))

Yesterday was a fine example of beefer manipulation. They beefer bears use the "subprime" excuse to shout "Fire" and shorted ETFs and futures like madmen. They were trying to run stops and scare weak handed bulls. But it didn't work since Bernanke said nothing negative and the subprime nonsense was old news. So in the afternoon some had to cover. The day ended like a normal consolidation day. Volume was high so you know the real buyers were there to buy cheap stock. I suspect the day left many trapped shorts.

Earnings are OK. Inflation is OK. Economic growth is OK. Panic-mongers are trapped and need a miracle. I think short interest will be another record when reported soon.

I'm holding about 200% net long including the S&P eminis I re-bought yesterday morning.

PS: I found another $1000 word yesterday: "ingerence", meaning bearing in upon, intrusion, interference. [The "g" is pronounced as the "g" in ingenuous - i. e., like "j".] The word seems to be used in connection with the affairs of nations - one nation's ingerence in a neighbor's government, for example. I suppose W would say, "Iranian ingerence is harming the development of the Iraqi government" if he was literate. hehehe ;-) The OED says it is obsolete and rare, but since I found the word in a book written in 1982, obsolete seems overstated.

PPS: More computer problems on my eSignal computer - Blue Screens of Death twice in 24 hours. I could recover, but I'm worried about it. I think I need to transfer my files to the new Vista computer.

P^3S: I scanned the earnings news on Briefing.com (it's a good, relatively cheap news service) and saw many big companies beating estimates. That's bad news for the bears.

Wednesday, July 18, 2007

Inflation Data Points

Today we get the CPI number. The core number is what's important: monthly and year-over-year. A stable or downtick number is good.

My dictionary purchases mentioned in my prior post again provide data points that inflation is not as large as some think. I think the price of an unabridged dictionary is down from 20 years ago. And the Oxford English Dictionary was on sale for $1000 compared to its regular price of $3000. No inflation there.

I bought some soybeans this morning at about $8.72 per bushel. The critical period for soybeans is early August when pod formation and filling occurs. The crop needs every bushel as plantings were way down as farmers planted too much corn. Carryout is very tight, even though there was a large carryover from last year's bumper crop. The beefers have been selling heavily for two days so the selling should dry up soon. This is a risky trade.

Futures are way down this AM. Maybe due to Intel margins, or due to the Bear, Stearns hedge funds being worthless and more MBS selling and liquidations, or maybe just to beefers pressing shorts again. If the CPI data is OK, I might try another long trade in the S&P futures.

PS: Bought some Nat gas - September. Selling looks dried up and August looks very hot. Risky.

PPS: Core CPI was 0.2% expected. Core CPI year over year was 2.2% which is the same as for May. That's good news. The futures point towards S&P cash around 1540 - my re-buy point. I just bought the S&P e-minis September contract.

$10, $100 and $1000 Words

I wrote about $10 words a few weeks ago. Those are words that you read but don't know the meaning. So you go to the dictionary and look them up. I've been doing that for 35 years and writing them on 4"x6" index cards that I put in a card file. I still have that file and it's still growing as I read more. Here's an example: "supercilious" meaning "assuming an air of contemptuous indifference or superiority" according to my Concise Oxford Dictionary. I ran across that word again reading Erasmus' "Praise of Folly" yesterday - the goddess, "Folly", was describing theologians circa 1500 - hehehe ;-).

So why $10? That's an American idiom to describe a "big" word. But since one can buy a good dictionary for about $10, give or take a few bucks, the value seems right. ["order of magnitude" as the scientists say hehehe ;-) ].

Now sometimes you can't find the word in a normal "abridged" dictionary. Then you need an unabridged dictionary. I got tired of going online so bought a new one last week - my old one was 40 years old. Random House Webster's Unabridged Dictionary from Barnes & Noble online cost about $50 plus tax and shipping - close enough to my $100 label. Pretty cheap for such a huge book with so much knowledge, don't you think?

Here's an example of a $100 word: "latifundium" which means (1) "a great estate" or (2) "a great landed estate, especially of the ancient Romans". I ran across that word many times in reading histories of central European nations in the Middle Ages. Here's a sentence from the "Thirty Years' War" by Geoffrey Parker. "The Counter-Reformation state was still conceived rather like a gigantic monastic latifundium." Interesting, eh?

Now the big one. What's a $1000 word? That's a word which definition you can only find in the unabridged Oxford English Dictionary. I bought one last week, too. It was on sale for ... $1000 on Barnes & Noble online. Being "rich" I figured, why not? Spending money on intellectual endeavors is a good use of money. :-) So it came a few days ago in five large, heavy boxes with all 20 large volumes. And mirabile dictu, I needed it last yesterday afternoon! Again reading Erasmus, I came across "ecceities", plural of "ecceity". That word wasn't in my regular or unabridged dictionaries. The "OED" had it! "Ecceity" means "the quality of being present" - a surprisingly useful word! It derives from "ecce" which is Latin for "Behold". "Ecce" is prounounced, "eksi", in English. According to the Bible in John xix 5, Pontius Pilate said "Ecce Homo!" [Behold the man!] when seeing Christ at some point.

The OED even cited writings on Erasmus for the usage examples. What a great set of books! Here's the sentence I found in Erasmus, as Folly is describing things philosophers can see: "Though ignorant even of themselves and sometimes not able to see the ditch or stone in their path ... they still boast that they can see ideas, universals, ... quiddities, ecceities, things which are all so insubstantial that I [Folly, the goddess] doubt if even Lynceus could perceive them." [uh, Lynceus was a Greek Argonaut whose eyesight was so keen he could see great distances, even through the Earth, according to answers.com.]

Gosh, no doubt "ecceity" is certainly a $1000 word !!! ;-) I'm ecstatic about ecceity !!! ;-)

Tuesday, July 17, 2007


Unless some major news item occurs that indicates a change, summer doldrums are on us and the economy is on cruise control.

I just heard the subprime mortgage mess could cost $52 Billion. Sheesh, that's just like one big bankrupcty spread over the whole US. For a multi-trillion dollar economy, $52 billion is just a mosquito bite. These perma-bears sure are over-screeching that one.

Most CDO and MBS holders hold to maturity. All this screeching about mark-to-market losses means little. So what matters is real losses, not trading losses.

PPI and CPI numbers today and tomorrow are important - particularly the CPI. A stable or downtick in year-over-year core CPI would be good.

Some consolidation here would be fine for the S&P and Nazz. I think we grind up like mid-March to late May, or all last fall & winter until Feb 2007. The bears aren't likely to give up and their shorts will be bought by real dip buyers. When the bears cover, we grind up as few sellers are higher except the bears. And the cycle repeats as before.

Monday, July 16, 2007

Monday Musings

I'm reading Erasmus' famous book - Praise of Folly - written circa 1500. [Folly personified is the Greek Goddess of Folly who gives a wonderful speech in the book.] I think Folly would have really enjoyed parodying these market gurus like Sutty, who is on Bubblevision now. Maybe she would have just lumped them into her parodies of the grumpy philosophers. Or perhaps she would have taken credit for them as entertaining Fools ;-) In either case, they are such a joke.

Brent crude prices keep moving up. I think North Sea oil must be having real production problems. That's one of those huge finds of 25 years ago that is running out. Ditto Mexico. And, mirabile dictu, the oil industry now says production from convention sources will have trouble keeping up with demand. I think the "peak oil" theory is mostly right, viz., "annual production" has peaked. That's NOT saying the world is running out, just that no more production can be recovered every year, due to the losses from old, huge fields. New finds are offset by old field declines.

For the commodity story, you really have to stop being US-centric. Until China and India say "STOP", I think the oils & miners will do well. For new production, I think the companies with US Gulf of Mexico deep water exposure are the ones to hold, viz., CVX and DVN and the deep water drillers - DO, GSF, RIG and NE. They are all way up, so get a good entry. XOM does seem to have big fields in Angola and new refineries in China, too, so I like it, too.

The S&P cash chart looks fine. Those two days of closes over the old high mean it's real buyers. The Nazz 100 looks strong. The Rut looks weak. What does that mean? The true ultimate real buyer is pushing this move - index fund buying. Maybe Q2 saw money being pulled from beefers and put into indexes? That would have been smart, but we'll see. There are anecdotes of such funds shifts, though.

Year to Date:
Krypto Fund: +7.3%
Alpha Fund: +51.1%
Commodities: +28.6%

It's a Bull Market.
The Trend is Your Friend.
Buy Dips.
Use Time Diversification.
Find Strong Stocks in Leading Groups.

PS: I sold the S&P futures long trade. See comments for details. Still 150% long in Alpha Fund.

Sunday, July 15, 2007


Paris is really a fine city to visit - I've been there several times. Many fine movies are set there, such as "Gigi" and "American in Paris". And famous personalities lived there and made their mark, such as Coco Chanel and Josephine Baker. The sights are "mar-ve-lous" as Gene Kelly sang!

But imagine you were a Parisian and you were continually pestered by tourists for directions, particularly pushy, arrogant ones who deemed that you simply MUST speak English? You'd get very annoyed and try to avoid them.

I always got along fine. Mrs. B. speaks a little French - very little and they say she sounds like a person from Quebec. So she would tell me what to say, and I would say it. I didn't care what they thought of me, if I sounded like a fool or worse, butchering it surely in absolutely horrible French. It usually worked. I think that was so painful for Parisians that they'd help us a bit. ;-)

Anyway, here's the story I thought of this morning working out:

A stocky, scientist friend of ours was in Paris for a meeting. It was a very hot August day, so he sat on the edge of some memorial fountain to cool off. He was wiping his brow and had taken off his shoes, when a policeman came up and began jabbering away in rapid French. The guy looked up with a dull face and said in a tired manner, "I don't know what the hell you're saying" The policeman stopped and said in English, "Oh, you're just a stupid American. I thought you were a German being disrespectful" and he walked away. Lol.

PS: Yes, I had a cheeseburger at the McDonald's on the Champs Elysees hehehe :-)))

Sunday Papers

I spend early Saturday and Sunday mornings reading the "paper" newspapers of all week: Wall Street Journal, Investor's Business Daily and Barron's. During the week I get the current news from many online sources and a little from Bubblevision [aka CNBC]. But there's no way I could find out all sorts of interesting topics, articles and occurrences with real "paper" newspapers to scan and read. It would take hours on online searches . Real paper beats them all.

So what's up?

Blogs have existed for 10 years now. The WSJ article covered may blogs of the famous. It also mentioned terms like "feeds" and automated searches. I have to learn how to do those things to make this blog more accessible - stuff like "feeds" and "syndication". I've tried to figure those out, but the "Help" needs a lot of help. :-( Maybe in August I'll have time for that upgrade has lots of interesting.

A WSJ story illustrated how the public loses big money in commodities by not doing what I wrote to do if speculating in commodities, viz., monitor position size carefully. There were amazing stories of greed vying with greed: greedy stupid speculators and greedy unscrupulous futures brokers.

Adjacent was a story about people wanting no risk investments being put into mortgage securities. Du'h? Nuns investing the MBS? Life insurance proceeds for a widow & child into margin accounts? Hello compliance? That's definitely a growth industry - compliance officers. With all the wealth of the baby boomers needing invested for retirement income, and all the greedy piratical brokers wanting a yacht, compliance officers are going to be in huge demand. And even better, a compliance officer can't be replaced by a guy in India. He's got to be on site to check out the broker's tales. [OK, many - most - brokers are good people. Mrs. B's broker is a good person, from what I've seen.]

IBD had an interesting article on why Google leads in search and is getting more and more advertising dollars.

Barron's was thin gruel this week.

Without real "paper" newspapers - and books, I'd miss all sort of good investment ideas and important societal and political developments.

Saturday, July 14, 2007

The Estates and Power

Governments in the Middle Ages in Europe expressly divided power among groups of people that were called "Estates". For example, in Britain, power was divided among the Crown, the Lords and the Common people. In Continental Europe, there was the Crown, the Church, the Nobles and the Peasants. Some nations had other Estates, such as the Merchants in cities and the Jews. Often justice was meted out differently for persons in different estates. Certain powers, such as taxation or declaration of war, were reserved for certain estates.

What are the "Estates" in modern America? I'll generalize a bit here, but I think several Estates are clearly distinguishable.

The Crown Estate: That's Washington DC. Here I'm expanding the Crown Estate to include the entire Court of the Crown - "DC". I'm including the Executive branch high officials, all Congress and the Supreme Court and other major or special courts in DC. Besides having real executive, legislative and judicial decision power, they get many special privileges depending on rank: tax breaks, parking spaces, have taxes to pay for all sorts of perks, exemptions from waiting in many lines, and of course have real power to threaten anyone who doesn't give them what they wish. Most have de facto lifetime tenure, but the judges had de jure lifetime tenure. So all are unaccountable for most consequences of their decisions.

The Nobility: Easy again, they are the "Rich and Powerful". They also have many special privileges, tax breaks and have special access to the Crown, either directly or by special agents called lobbyists. And they get the first vote for selecting a President. No person can make a successful run for that office with securing many votes of the Nobility. Through the courts they can force almost any person to submit to their will or suffer ruin.

The Church: Again, easy. These are two groups - the Press and the Environmentalists now. Their power and privilege is legally guaranteed in many laws that give them special power over people and their actions and property of almost anyone. The Press can smear anyone with near impunity and can similarly lie endlessly to pressure the Crown; the Environmentalists can bind someone's property and actions tightly with lawsuits under increasingly broad laws. The Church in the Middle Ages claimed power over souls, analogous the the power of the Press over one's reputation. And the Church also had power over a huge range of human behavior and lands, much like the modern Environmentalists.

The Merchants and Guilds: Here I put several groups who act mostly separately, but sometimes coordinate. Major corporations, the business lobby, unions, the trial lawyers, and the activist groups. All have special tax breaks and powers, either de facto or de jure.

The Peasants: That's the rest of us. We have no special tax breaks, no special privileges, and little power most of the time. Only when strongly motivated by some event or issue can the Peasants move the government. At other times the Peasants are a disorganized rabble easily manipulated with propaganda or by demagogues.

This thinking is a work in progress, but I'm going to use this paradigm in the future to analyze modern American politics.

Friday, July 13, 2007


Stocks made a very, very strong close yesterday. The cash S&P made a new all time high on higher volume and is in blue sky country. The Nazz cracked 2700. I think 3000 is long term resistance for the Nazz. IBD says the Nazz is now leading. Perhaps. Good four letter stocks might work well here. I'm still pumping GOOG to all who listen ;-) Also, ORCL is again in blue sky country on the two year weekly chart, which is a key "tell" for me.

Some bears on Euro-Bubblevision. Good. Lots of caution. "Wall of Worry" feelings are symptomatic of a continuing bull market.

If you missed it, re-read my post of Sunday about Beefers. In a "PS" I added, the mental metaphor we always look for is when the herd of elephants find a direction to head off for the next waterhole. I think yesterday signals that move - a new leg up. We want to be on their backs and riding along ;-)

Comparing the corrective chart patterns I wrote about yesterday, the last leg gave us 90-100 points in the S&P [1440-1450 to 1540], so we could set a guideline measurement this leg to about 1640-1650. At that point it would need new "news" or it may become tired.

So what to do?

Your retirement / pension money should be at least 50% long in stocks - a little more if you are younger than me. That's analogous to my Krypto Fund. Your selected stocks should be very long - at least 100%. That's analogous to my Alpha Fund.

If you succumbed to bearish worries, [uh, got stomped by the elephants a little lately ? ;-)], you aren't there. Buy dips in your retirement / pension money. Look for market leading groups & stocks for your "Alpha Fund".

Bunkerman is going to ride the bull elephant, keeping a sharp lookout for trouble. But I'll keep riding unless something changes! Yeeeeeeee - Hawwwwwwwwwwwwww !!!!! :-)))

Alpha Fund is long 200% including that long S&P futures position.

PS: Some readers post stock ideas in the comments. Some of these guys are super traders and can find great leading stocks and groups. You might want to read those comments & think about the stocks. Make up your own mind, though. No one is perfect.

PPS: GE reported 10% year-over-year earnings growth. The world economy is fine. Forget that subprime screeching.

It's a Bull Market.
The Trend is Up.
Buy Dips.
Use Time Diversification.
Find Leading Stocks & Leading Groups.
Don't Miss the Next Leg Up.

Thursday, July 12, 2007


RTP for Alcan, $101 all cash. Guess the miners boom still has legs. RTP expects deal to be cash flow and earnings accretive in first full year of consolidation. I am long RTP.

Does anyone remember W saying his main job was to protect the people? Of course that was after 9/11. So how's he doing? Hmmmm. At the request of a Senate committee, GAO did a sting operation and obtained a license to buy enough radioactive materials to make a dirty bomb. The fake company was a phone, fax and mail drop. The Nuclear Regulatory Commission issued the license in 28 days - no inspection. GAO altered the license and then ordered the materials. Sheesh. Even a subprime mortgage gets a drive-by. And which branch of government is the NRC in? The Executive. Who leads the Executive branch? W. What a jerk and liar and rotten leader. Grrrrrrrrrrr.

Record margin debt on NYSE. But the WSJ article it's due to a pilot program changing margin rules at eight firms for hedged options transactions. Sounds like beefers.

EDU in WSJ article announcing new language schools in China. I am long EDU.

State Department official apologizes for failing to anticipate huge flood of passport applications. Sheesh. How stupid can they be? Another executive branch failure. Another W failure.

You might say, "Bunkerman, can you blame W for details like that". Easy. If he was paying attention and talking to the people, instead of being holed up in the White House, he might find out about problems. He's got huge resources and can hire all kinds of people. No excuses!!!

Barron's online has an article about bank overdraft fees. Ridiculously high! Banks and credit card companies are acting like vultures or piranhas in ripping the flesh off people who make honest mistakes. Who's trying to protect the people? No one. Not even Congress, who are in the pocket of the big banks.

We need populist libertarians [or is it libertarian populists? hmmm] to run the country!

Bunkerman for President!!!! lolololololol ;-)

PS: In respect and deference to Lady Bird Johnson, who was a classy and respected lady and wife of Lyndon Johnson, I am suspending referring to W as Lyndon for one week. Lady Bird Johnson did much to maintain and improve the natural beauty of the nation. She passed on yesterday at age 94. She set a standard for wives of Presidents that few have met.

Wednesday, July 11, 2007

So What's Different?

OK, maybe I'm an old fart. I lived through the horrible 1973-4 recession, the 1979-1981 inflation and recession, bank failures in the early 1980s, major frauds, the mid 1980s rust belt destruction, the 1987 crash, the 1990-3 real estate smashing, and the 2001-2003 tech smashing.

Recent events are a ... yawn.

All we hear are screeches about "SUBPRIME !!!!!!!!!!" We hear screeches about the rating agencies now downgrading some MBS. Since when aren't the rating agencies slow and cautious? They aren't traders. But they do a fine job and express an educated opinion on thousands of securities. More blame game. Is that an American chronic mental illness?

If you've ever owned a home over ten years, you know that home prices can drop or flatten for years. Nothing new.

I listened carefully to Bernanke yesterday talk about inflation expectations being so important. Here's my take: home prices flattening are a kick in the gut to inflation expectations. In the 1970s and early 1980s real inflation, home prices went up and up and up. So for consumers with memories, seeing home prices stabilize or go down will reduce their inflation expectations. The Fed has that powerful factor going for it.

I expect a Fed rate cut this fall to ratify the yield curve unless core PCE or CPI ramps. I don't expect that, particularly since oil prices are about the same or lower than at this time last year.

It's a bull market. Buy dips. Use time diversification. The trend is your friend.

PS: I just heard the Republican deputy whip in the House talk about the taxes on carried interest. He's either stupid or intentionally obfuscating the issue to protect big contributors. If the Republicans block this, I'll have to leave that party - the party of Teddy Roosevelt. Sickening.

PPS: Bubblevision is doing a disservice to viewers as they constantly frame the taxation of carried interest as raising taxes on private equity. That's just a flat lie or false statement. The investors who take the risk to their capital get the capital gains treatment. I just head Grassley state the tax raise is for the managers who are getting a low tax rate on compensation - lower than every other person.

Tuesday, July 10, 2007

More of the Same

Is there nothing new under the Sun?

WSJ article on work of the US-Canada border commission shows Lyndon administration is just lying about border security. As is Congress. Just lying about doing something - even anything cheap. I suppose they like to spend money on expensive sensors made by firms that contribute money, instead of just mowing the brush.

Beefers hit Monday's poparoo, but dip buyers bought it and the market closed green. The Nazz showed relative strength.

We watched South Park via Tivo - saw a hilarious spoof of AlGore. Has anyone noticed that now since he's gotten rich(er) and was anointed by the Hollywood idiots & PR propaganda machine that's he's now a "respected" leader - a member of the "rich & powerful" estate. And since the US press loves to kiss their butts and kowtow to them, I suppose we're in for a lot more of his creationist nonsense. Ugh!

Hmm. That gives me an idea for another post. Hehe. My fecund brain is working ... ;-)

HD (aka Homer) warns. No shock. New CEO has to clean the slate.

Still pumping GOOG here - it's in blue sky territory now - I figure it's worth $900. Full position long in Alpha Fund.

Monday, July 9, 2007

Alpha Fund

At the request of a reader, below are ALL my Alpha Fund holdings as of now.

India & India related: CTSH, HDB, IBN, IFOX, IGTE, INFY, MTE, PTI, RDY, REDF, SAPE, SAY, SIFY, SYNT, TTM, VSL, WIT. Largest are HDB and IBN, about equal. Smallest is PTI. India & India related are about 17% of the Alpha Fund.

Oil & gas: XOM, CVX, COP, MRO, DVN, CHK, SU, HES.
Deep water drillers: GSF, RIG, DO, NE
Other energy-related: BTU, VLO, NOV

The above three categories represent 51% of the Alpha Fund. The largest position is CVX, followed closely by DVN, COP, XOM, MRO. Hmmm. CVX is the largest overall position, too. I thought AAPL was. They're close.

Miners: BHP, FCX, PCU, CCJ, RIO, RTP, CLF. Miners are 16% of the Alpha Fund. Largest position is BHP.

Select Tech: AAPL, GOOG, ORCL. Tech is 13% of the Alpha Fund. AAPL is the largest position.

Miscellaneous: EDU, AMSC, PTN. This is only 1.5 % of the Alpha Fund.

I have losses on PTN (-30%) and SIFY (-14%). The largest gain is +149% on AMSC; second biggest is EDU at +139%. Other 100% gainers are PCU and CLF. AAPL would be over 100%, but I traded around it with calls some, and flipped & re-bought some shares lower. AAPL is +91% on my existing stock.

I don't have any idea if any of these are good entries now. I haven't checked their charts in awhile, as I follow the main fundamental story, viz., that oils & miners will lead until China says to stop.

I posted all these earlier this year and my general ideas, too. I also posted most of these stocks & the thinking in a chat room last fall and earlier.

I also posted that about 80% of my investments are in managed in my Krypto Fund. The other 20% are the Alpha Fund. About 5% in Commodities. [Yes, I know that's 105% - so renormalize them. The ratio is 16:4:1. I think of them as stated.] I can take risks in these since my Krypto Fund is very widely diversified and I consider it "safe". My long term objectives are about 10% per year on the Krypto Fund and +30%/yr in the Alpha Fund, +50%/yr in Commodities.

Summer Monday Ramblings

Gold looks interesting. It's a bit early for the seasonal physical buying, but the chart might be setting up a bottom. I see a budding H&S bottom in the December gold chart and this morning's pop puts it over the downtrend line. This might just be a beefer trying to run buy stops ...

But since my Krypto Fund asset allocation model is telling me to buy some gold & silver, I took a nibble in the futures. I'll average in, looking to convert to physical gold later this fall.

Year to Date -
Krypto Fund: +5.64% [held down by gold/silver, TIPs, bonds and real estate allocations - those total 50% of the assets in the Krypto Fund.]
Alpha Fund: +44.2%
Commodities: +27.2% [darn, high was 42%, that dumb recent corn & nat gas play cost $$$ :-( ]

I read an article in Barron's about mortgage and CDO securitizations. The guy was either stupid or being polemical using sophistry or was a plant by a bearish beefer. He seemed to make a big deal out of triple B classes losing money. Du'h. Read the definition of a BBB rating: obligations rated Baa/BBB have strong financial charateristics, but are subject to moderate credit risk. They are more likely to be affected by adverse business conditions than are higher rated obligations and as such may possess certain speculative characteristics. [I merged S&P and Moody's into an all-inclusive explantion].

He doesn't understand, or intentionally obfuscated, the diversification and other credit enhancements. The housing market is undergoing a severe downturn. The REALITY is that unless some of those structured bonds DO lose some principal, the ratings are overcollaterized, in my opinion. In 1,000 obligations, even a Aaa/AAA default rate of .1% produces one (1) bond with a loss of at least $1. And a lot more of the Baa/BBB security SHOULD lose something. That is statistics for a large sample. Why else do those Aaa/AAA holders get paid about 80 bps MORE than a US Treasury?

Otherwise, Barron's was full of bearish reasons to stay out of the market. More wall of worry. Good! :-)

The cash S&P does look like a bullish consolidation for new leg higher. The Nazz and Nazz 100 show much life - good up trends now after bouncing off their 50 DMAs. The Russell looks like a bullish consolidation pattern, too.

I still have my long futures so I'm about 200% long for the Alpha Fund.

Sunday, July 8, 2007

What is a Beefer ?

Because of some questions from newer readers, I am re-posting my first blog post from January 14, 2007. This post explains what a "beefer" is and why understanding them is crucial to one's investing health.


To understand stock and commodity markets, you need to know who are the important participants. Today the principal ones are index funds, hedge funds, Street proprietary trading funds, mutual funds, the active public, and the inactive public.

For fun and because the classification works in explaining market activity, I group hedge funds, active trading mutual funds and the Street proprietary trading operations together as the Big Evil Funds. Long Term Capital Management was one, as was Amaranth until they blew up; Janus of the 1990s was one, too. I'll going into the "evil" appellation later.

For now, imagine a large group of wild elephants at a water hole. They drink & drink & drain it, then they stop around in the mud for awhile to decide what direction to go to find another water hole. At some point they decide which way to go, and they are off in a stampede to another water hole. If they get there and it's small or dry, they stomp around more & then go off in another direction. You can see the metaphor at work.

The action in the stock & commodity markets since the first of the year is a fine example of the big evil funds at work. I call them "beefers" - derived from "Big Evil Funds" shortened to BEFunds, hence "beefer" - since "beefer" has humorous secondary meanings. Besides being a country term for cattle - hence the herd stampeding, etc. - see the Urban Dictionary for more.

Early in the year they rolled into tech stocks & out of energy. then after a few days - as they realize tech water hole was too small - they all barge out of tech & mill around. Some barge into retail, some back to energy. Always they are searching for more water. The press daily comes up with nonsense about the "market" thinking one thing and then another. Trying to put reasons on this action is silly - it's just beefers searching for a trend, milling around, stomping in the dust. Don't get confused by trying to rationalize this kind of action.

[By the way I started this post on Jan. 14 and finished today, Jan. 22 - I'm learning how the blogger dates posts and wanted to clarify the timing of this post.]


A questioning reader's comment reminded me I omitted an important thought. Here it is as a "PS" [It's in the comments, too. Thank you Bud.]

PS: A "normal" investor can imagine himself/herself as a "cute" little chipmunk trying to get some food. Some beefers can be like hawks [ hehe, hyena sounds better ;-) ] - evil predators trying to eat you. Or are like big elephants stomping around. From the point of view of a normal investor trying to make some money, beefers mindlessly or intentionally running his stops & crushing his breakout buys are "evil" and "dangerous". And the pundit explanations of all market moves as "the market is thinking xyz" are just nonsense. Most market moves are just a few "mindless" or "evil" beefers swinging a few milion shares/contracts "thinking" they are smart or trying to run stops. And then another beefer takes the other side after that beefers' selling/buying ends. So the "valueless cycle" continues. I'm warning the small mammals (i.e. we "real" investors) to avoid the thirsty elephants stomping around: Don't get stomped as they mill around. And don't get eaten by that nearby lurking beefer hyena ;-)

Here's the key point: WAIT FOR A TREND. Then climb on that "wonderful" elephant's back [safe from the hyenas] and RIDE to the next waterhole. :-))

Friday, July 6, 2007

Friday Folly

Bubblevision is hyperventilating about the monthly jobs report. With the huge revisions being so common, I don't see a big reaction unless there's a major change in trend. Any number between 75,000 and 200,000 is OK with me.

India markets near the 15,000 level on the Bombay Stock Exchange aka BSE. The index I quote is the BSE Sensex.

Today's title is partly taken from the famous book of Erasmus, "Praise of Folly" written around 1500. I heard a lecture about it on the drive to/from Ohio last week in the "Great Authors of the Western Literary Tradition" course I have on CDs. The book is styled as a "declamation" [aka a harangue at a feast] by the Greek goddess, "Folly" about why she is the greatest of all gods. It's a fun read [I not finished yet - will write more about it later].

The Nazz and Nazz 100 charts are looking OK. The S&P shows a possible bullish continuation pattern similar to March. The Rut is still in a consolidation pattern.

Earnings season will be important, as always. We might get clues about the next leg up. If new leadership groups show up, I'll try to find some new stocks in them.

I gave Mrs. B more $$$ yesterday - she wanted to buy MCD and CLX. Her broker talked her out of buying MCD in March :-( I bought in the Alpha Fund [ :-) ] and held it until April 15 when I sold it to pay taxes. So we didn't lose much of its recent move. Mrs. B is learning about stocks. I set up a full service account for her with a real broker and stay away from it [mostly ;-) hehe, I drop hints once in a while]. I wrote about it before - I call it the "Sky Fund" after our Kelpie puppy, Sky. So far it's working out well. :-)

Uh ... notice I put my $$$ where my mouth is ... buying dips.

PS: Some birds built a nest in a large rhodedendron bush in front of my ... uh ... bunker [great camo ;-) ]. This is probably a second nesting. The little birds are sure chirping away. It's very pleasant living near nature. I just saw a Blue Jay on a tree outside a window [oops, firing port hehehe] preening itself. Very, very pleasant most of the time.

PPS: Note the oil ETF - USO - should NEVER be bought as a long-term investment. It's just a trading vehicle. When it was created, the ETF's price was about equal to the nearby crude price. Now look: nearby oil is about $72 and USO is only $55. That ETF loses money every month due to the contango in the crude markets. The underlying futures contracts lose money every money as nearby crude is cheaper than forward crude. So unless that market goes to backwardation, stay away from USO for long-term investments. As a trade for a few weeks, it's fine.

Thursday, July 5, 2007

What's Going On?

The WSJ of yesterday & today has a number of buyouts announced: BX to buy Hilton for huge premium; Apollo made a higher bid for Huntsman. So the call for the death of buyouts was premature.

Two hedge funds stop redemptions - they were investors in mortgage securities.

US office rents are soaring. The WSJ article blames the "new type" of buyer - private equity - vs. public REITs. Uh ... isn't private equity the traditional real estate owner? Besides, if the market had enough excess capacity, lessees would move. Perhaps this is just catching up after years of stagnant rents. That's how markets work.

KKR files for an IPO. I guess the BX poor performance isn't a barrier. BX was just overpriced.

A junk bond deal gets pulled: the borrower insisted in PIK terms. Sheesh. I'm glad the lenders wised up and did a "Nancy Reagan" - "Just Say No" to that crap.

WSJ had an article about Islamic home financing. What a bunch of crap! They describe the structure. It's just a lease financing wrapped over a convertible mortgage. Du'h ... a fig leaf. I bet the fees are a lot more than a normal mortgage. So "usury" is avoided while ripping off the borrower in fees. Sheesh.

Most organized religions have some kind of nonsense - I wonder if those are a sort of power game exerted by the leaders? Eating meat on Friday was a sin for years for Catholics. Then, mirabile dictu, is was OK except in Lent. Du'h, was it wrong before or were the leaders wrong or just playing a power game?

I remember Jewish friends in college ordering a "big burger, hold the bun" during Passover, I think. The guy behind the counter laughed & understood why. Oh well.

Amish [protestants] will ride in a car but not drive it. I overheard one saying once that their Mennonite cousins could drive. It seemed a bit humorous even to them. Some Protestant denominations will drink wine for communion; others use grape juice. Some forbid alcohol - gasp! Du'h ... didn't Jesus drink wine per the gospels? Didn't he turn water into wine per the gospels? So what's wrong with wine? Uh .. what part of the gospels do they believe - just the parts some guy centuries later decided was right?

There. I've made sport of every major western religious group. Bunkerman believes in equality ;-)

What people do for religion - jumping through hoops just to get the nod or wave from some cleric/priest/rabbi/minister depending on the religion - always amazes me.

Glad I'm a lapsed WASP ;-)

I have many religious beliefs and greatly respect religion and the religion of people. But not the stuff some guy wrote down on papyrus or parchment centuries ago telling me how to live in details - those are mostly just superstitions or the leader's power symbols, in my humble opinion. Retaining that nonsense just makes the faith look stupid, in my humble opinion.

More pollution stories from China. They have a real problem there. I wonder if the government can handle it. Lots of the pollution probably comes from well-connected firms.

The S&P cash chart looks similar to the bottoming pattern of late February and early March. I still have my long S&P futures trade on.

PS: Sheesh. More shorting infatuation. Now more short International ETFs. I wonder how are those people shorting QQQQ via QID last fall feel now, getting infatuated with that one. This is nuts. Doesn't anyone look at a weekly index chart anymore?
Du'h ... I guess not when doing only virtual trades. ;-)
Du'h, the trend is ... UP!
Why short? Buy dips!

Wednesday, July 4, 2007

Independence Day

I have read many, many accounts of the history, causes and personages of the American Revolution. We all know the stories of how British attempts to impose taxes and more regulations after the French and Indian War [in Europe this is known as the Seven Years' War] were resisted and eventually led to the Revolutionary War and the American Declaration of Independence.

But why did this happen in 1763-1765? Why did the Americans resist? Looking back in the knowledge of the huge taxes we all pay and the regulations we are burdened with, the new British taxes and regulations seem almost inconsequential. Some historical treatments infer or say that explicitly. No doubt the rebellion was led by key people (James Otis, Dr. Joseph Warren, Samuel and John Adams in New England were very early leaders). What could they have been thinking? What was their motivation?

I have a theory on why people like them were motivated THEN - in 1763-1765 - to begin to resist.

For over 150 years, the British government has mostly left the colonies alone. During that time before 1756 when the French and Indian War began, British monarchs had been overthown twice, a Lord Protectorate had governed for two decades, a new royal house had been installed [House of Hanover], the United Kingdom had been formed, rebellion in the Scottish highlands had occurred, the South Sea Bubble burst, and Britain had been governed by the Walpole regime for many years which used patronage, political influence and local politics to rule. During all that time, the Colonies had been left alone with their own Assemblies and a single Royal Governor in many of them. The British Parliament and King had never exercised direct authority.

So in the period 1763 to 1765 when the British King and Parliament did get involved in the Colonies, that was surely very new. And the future leaders of the American Revolution certainly would have reacted to it as very, very new. A thinking man then could certainly see the implications of accepting British Parliamentary authority over their affairs. It began with prohibitions on settlement in the west. That was important as free men in the colonies needed freehold land to avoid being dominated by ... uh ... the rich and powerful. Then trade regulations were imposed on sugar and other commodities. Customs and currency regulations followed. The Stamp Act was imposed in 1765, which was the first direct tax on the American Colonies in their 150+ year history.

James Otis began speaking out in 1764 as a town meeting in Boston. Town meetings - very direct democracy - still exist in Massachusetts. I've been to them and have opened my big mouth a few times ;-)

Being very free for 150 years from direct British authority certainly shaped that attitudes of those free men and women. So seeing that "ethos of freedom" beginning to be degraded and eroded made a big impact, far beyond the details.

I think that is why the American revolution occurred at that particular time. It was the change from the 150 year past that made the difference. Thinking Americans had to choose then between resisting or being entangled forever in more and more British authority and politics. With that perspective, I think there is no question why they were motivated to fight then.

PS: One of my collateral ancestors was an early resister. He "thumbed his nose" at the King's edict and moved over the frontier with his new wife to settle on land in the current West Virgina. That was the far frontier in 1766. He built a small fort for protection against raiding Indians. There are extant stories how people ran to that fort to save their lives when marauding Indians were sighted

PPS: The above's older brother - my great, great, great, great grandfather in my paternal surname line, moved to adjacent land in 1773. He fought in the American Revolution, serving in Continental Line regiments of Virginia.

P^3S: This land was a true frontier. I really enjoy watching the movie, The Last of the Mohicans, to try to understand how these ancestors lived. The father of the above men - my great, great, great, great, great grandfather, was killed by Indians raiding his home in 1764. His wife, my 5th great grandmother was kidnapped but escaped quickly.

P^4S: Of course I have collected modern replicas of the rifles, muskets, pistols and tomahawks of that period :-) Some day I'd like try re-enacting life in that period.

P^5S: My genealogy research does not neglect the distaff [aka maternal lines]. I actually reasearch every single ancestral branch as far as possible and include collateral lines, too, for a generation or two. That helps find relatives and access their information. Note that each of us has 32 3rd great grandfparents. [3rd great = great, great, great]. I have found twelve (12) direct or collateral ancestors who served in the Revolutionary War on the American side. I'm sure there are many more, but much information is not available for that remote time. Is there any wonder I question authority? ;-)

Tuesday, July 3, 2007

Stocks - A Bull Market

The cash S&P looks like it completed an A-B-C correction. The Nazz broke up out of an ascending triangle bullish continuation pattern. The Russell looks sluggish.

Individual stock-wise (not selected for groups), my Alpha Fund has EDU, AMSC, AAPL, GOOG, ORCL as long-term holdings. I have deep water drillers & select oil service[DO, GSF, RIG, NE, NOV], oils [XOM, COP, CVX, CHK, MRO, DVN, SU], refiners [VLO and integrated oils already mentioned], miners [CCJ, FCX, PCU, BHP, RIO, RTP] and BTU as an energy & miner. Then I have many India stocks.

Alpha Fund is about 150% long. I have some S&P futures, too, in the commodity account. So the Alpha Fund is effectively about 200% net long.

I'm still looking for a S&P 500 cash to hit 1700 this year, barring unforeseen events.

The End of Good Music

I might as well start some trouble ;-)

Here are three postulates about the quality of recorded music.

1. No excellent music has been written since December 31, 1947.
2. No excellent music has been recorded since December 31, 1954.
3. The principal class of exceptions to Rules #1 and #2 is for Broadway productions and Classical Music.

For now, Rule #1 is an axiom based on the general level of complexity and taste. I'm working on a proof. ;-) I'm going to sketch out the proofs for #2 and #2 now.

I think I can "prove" the postulates #2 and #3 for the whole class of recorded music [in the US] considered as an ensemble. Perhaps there are a "few" exceptions, but these are mere outliers - singularities - and don't represent any substantial class.

Consider the widely accepted and empirically proven economic principal of "division of labor" in creating a complex good. Recorded music is a complex good, requiring skilled labor in four different skills: writing music, lyrics, instrumentals and singing. Few individual people have all four skills at any high level, even when an entire population is the source.

Assume the quality "Q" of any recorded music can be represented as the product of a normalized "skill" number [cf. an "IQ" in the skill] of the contributor in each skill, which are symbolized by M, L, I, and S for skills in music, lyrics, instrumentals and singing.

Q = M x L x I x S

The quality of "written music with lyrics" is M x L as each skill is required. For a big band jazz, lyrics are not required, BUT the performance requires many individual performances - at least 10 for a "big band". Hence its Q included I^n where n is at least 10. A "band" would require more than one I - perhaps 3 or 4.

Now assuming the likelihood of each skill being present in any single individual is independent, clearly the highest Q can be reached by selecting four individuals [more for bands]: one each with high M, L, I and S. And just as clearly, if we are required to choose only one individual, the probability of a large product of the single person's levels of M, L, I and S is exceedingly small. I think I could prove this mathematically, but I haven't done much applied math for a few years. But it does seem evident visualizing the distributions.

In 1947, Les Paul and Capital Records created the first multi-track recording where Les Paul played each of eight tracks with his electric guitar. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording.

In the early 1950s, Les Paul and Mary Ford created revolutionary recordings where Paul's multi-track guitar playing was combined with Mary Ford's singing and rhythm guitar playing were records on separate track and overdubbing. This invention broke the requirement for separate performers for I and S.

In 1954, the eight track tape recorder was developed, which was the core technology for multi-track recording for the next 30 years until the digital age commence. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording. This invention massively reduced the time and cost for creating complex sounds from very few performers.

In 1953-4, the rock & roll era began, producing growing demand for a performer to write his/her own music and lyrics - for some unknown reason, perhaps part of the "idol" phenomena. This greatly reduced the likelihood of high M and L numbers in a recorded performance.

So by 1955, the economics of creating recorded music at low cost [necessary to maximize profit] required finding a few artists of simply above average skills and using technology to create complex sounds for a band and a song. No longer were separate EXCELLENT performers combined, but merely "GOOD" performances were combined from a few people. Almost no one was excellent in all the required skills necessary for recorded music. Combining several "good" quality skills of a person with perhaps one "excellent skill of those persons creates merely a slightly above average "good" recording.

Hence nothing excellent has been recorded since December 31, 1954. QED ;-)

Rule #3 follows immediately when the distinctions of the economic of Broadway are considered. A relatively few number of very high priced tickets are sold. And all the artists MUST perform separately live. There is NO value added for having the same person write the musics and lyrics. All performers are excellent and all music and lyrics are selected from the best available. So this class of music is a clear exception to Rule #2.

Similarly, recordings produced by orchestras of classical music have no division of labor loss of quality.

That proves Rule #3. QED ;-)

So a Julie Andrews performance of a Broadway hit show is still excellent.

But a Bob Dylan performance of a song is merely good. The lyrics might be good, but the singing is ... horrible. ;-)

hehehehehehehehehe - that should start some trouble :-)))))))

PS: The coming 4th of July reminds me of George M. Cohan of "Yankee Doodle Dandy" fame - that's a great movie. And although he wrote the lyrics and musics and danced, not even such a star deigned to perform the instruments for the orchestra of the productions.

PPS: I've been thinking about this for quite awhile. Some of the dates were chosen with the help of my father-in-law, who was listening to music during the key dates. I figured I needed to post this on the Internet to claim "precedence" for my proof ;-)

Monday, July 2, 2007

Monday Morning Rambles

iPhone appears to be a sales success. Now it's gotta perform well.

One of my computers has the blue screen of death - nice homecoming surprise :-(( At least the on-site service contract has a month to go. That's the second Dell computer I have that seems to have some kind of hard disc problem. I wonder if they downgraded the quality of their hard drives a few years ago.

Uh, the world did NOT end over the weekend. Bears were wrong again ;-)

My home town definitely has the best pizza in the country. I had to go to another shop one evening. So I went to an old favorite shop from my high school days. Excellent. Pepperoni, onion, green peppers, black olive and mushrooms. :-))

I have to do some self-analysis this week about some trades - corn and natural gas. I've been really distracted the last few weeks and maybe missed something. Certainly the charts say so. I'm still long those, but gave up my profits and an very red now on those.

Stock futures are up solidly, perhaps due to new quarter money. The bears will hit the pop. Let's see if they have more ammo. The S&P cash chart shows a clear rectangular consolidation pattern. I suspect really buyers are putting money to work at the S&P cash 50 DMA.

Gee, some jerk suggesting we should let China has preferential treatment and sell harmful goods here. Are these guys just stupid?

Golly, WSJ says a prime Manhattan office building is going for $1,589 per sqare foot. That's a big price! I remember when $500 per square foot was considered a huge price. The article says the buyers are Europeans who see NYC as cheap vs. London, etc.

PS: Did anyone notice that oil hit $71 today? Demand is so strong. Prices have to rise to ration supply. The falling dollar makes oil cheaper in the rest of the world. $70 was a resistance on the weekly chart.

Sunday, July 1, 2007

Habsburgs: A Pestilence on Europe for 650 years

Subtitled: An Example of the Rich and Powerful Causing Harm to the People.

The dynasty is credited to have been begun by Rudolph I of Germany around 1273 when Rudolph was crowned Holy Roman Emperor [aka King of Germany]. He proceeded to pay off the Pope to obtain recognition, steal land of weaker lords in Bohemia, Austria, southern Germany and other places. Did he help build a nation? No. He was interested only in more power and wealth for himself and his family. In the Diving Comedy, Dante finds Rudolph sitting outside the gates of Purgatory with his contemporaries, who berate him as "he who neglected that which he ought to have done".

Moving along to around 1600 we find Habsburgs in duchies like Styria (part of present day Austria) expelling Protestants and burning books. The famous mathematician and astronomer, Johannes Kepler was one of those expelled from Graz. And the other branch of Habsburgs in Spain were trying to extend & maintain power in the area now Belgium and were fighting the Dutch Protestants who wanted to keep their freedom. In 1618, the Habsburgs start the Thirty Years' War through both prior religious tyranny in Bohemia and their then suppression of the rebellion begun by the second defenestration of Prague in said year. That war involves both branches of the Habsburgs and most of Europe, resulting in the devastation of much of present day Germany.

The Habsburgs proceeded to suppress any development in the current Czech Republic for 200 years. In the late 1700s they participated in the partitions of Poland - more Habsburg lust for power to extinguish freedom.

And in 1914 the Habsburgs started World War I. The Habsburg heir to the imperial throne in the Austro-Hungarian Empire was assassinated. He was not liked by the then Emperor and his wife was treated badly for "low birth". In fact, his heirs, if any, were specifically NOT eligible for the crown. But that didn't stop the Habsburgs from using his assassination as a pretext to grab more land, this time from Serbia. So the deaths of millions were on the Habsburg hands and their lust for power.

Overall, Dante was certainly generous. Had he know the evil and pain caused by that family, certainly Perdition and the Inferno would have been their fate.

Sources: General knowledge, Wikipedia [I could find others to back this one up if I had time], "The Thirty Years' War by Geoffrey Parker, and personal knowledge learned on a visit to Prague and surrounding areas.

PS: yeah, yeah, I know there were probably some "good" Habsburgs. But the main point stands. And as a multi-century and multi-national group of the rich & powerful, I think they are a fitting example of the evil that can befall the common people when they have real power.