Beefer Madness

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

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

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

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

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

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

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

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

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