Saying goodbye to 2008 from the perspective of an investor is a pleasant prospect. The cluster panic of the rich and of the masters of the Universe on Wall Street brought pain to the common man and the long term investors. To me, 2008 also punctuated with a big, bold, full stop "." to many other false ideas and concepts and practices.
Here is my list to receive my "au revoir". Some are New Year's wishes.
1. Hedge funds as an "asset class".
2. Hedge fund managers as demi-gods.
3. Pure libertarianism.
4. The home as a source of spending power.
5. The home as a retirement asset.
6. Credit default swaps.
7. Nominal CPI as a meaningful measure of true inflation - core rules !
8. The McMansion in exurbia.
9. The SEC as an independent agency.
10. Derivatives as unregulated markets.
11. "Market value" as a rationally derived number.
12. George W. Bush - aka "Lyndon" - as a President and leader.
13. The source of wealth of three of the world's "bad boys" (Russia, Venezuela and Iran).
14. Commodity "investing" in futures and derivatives - just speculation.
HAPPY NEW YEAR !
Word of the Day
"Oneiric" - adjective [$10]
Oneiric means of or related to dreams or dreaming
Sentence: As we live in 2009 and beyond under the leadership of Obama, will our oneiric thoughts of 2008 be memories of a single nightmare or a recurring one from which we cannot awake ?
Wednesday, December 31, 2008
Tuesday, December 30, 2008
A New Champion Crowned
The annual Southeast Central Ohio Invitational Pancake Tournament was held on Friday, December 26, 2008 under ominous signs. The sighting of a raven bode ill for the prior two-time champion, Bunkerman. A broken outdoor thermometer also portended the breaking of a streak.
Bunkerman was defending his title on the challenger's home field, aka kitchen. The local supermarket were more than adequate for his improvisational skills to let him prepare a fine entry, viz., chocolate almond pancakes made with whipping cream, sour cream, and an admixture of graham cracker crumbs with a base of Hungry Jack pancake mix. The pancakes, fried perfectly in olive oil and topped with butter and pure maple syrup had a fine delicate favor which enticed the judges to sing paeans of praise.
Then Big Al stepped up to the stove. [FYI, Big Al is a non-posting reader.] His entry evinced weeks of preparation and experimentation. The batter used the identical Hungry Jack base, adding the secret ingredient - cinnamon chips - and chopped apple bits. His cooking skill was superb. The pancakes were perfectly round and browned. But then he used his finely honed culinary skills to create a perfect presentation with a topping of apple slices, confectioners sugar and caramel drips. The final effect was pleasing to the eyes, reminiscent of fine French cuisine. The flavor was superb and the texture and mouth feel were excellent.
The discussion among the judges was cautious. Bunkerman's pancakes were deemed champion quality by all. But those of Big Al were awarded the first place by a unanimous decision, including the vote of the gracious Bunkerman. Big Al accepted the prestigious title of SEC-Ohio Pancake Champion with humility, looking at his shoe laces as he spoke a few words of thanks to the judges.
Bunkerman is planning his comeback ...
Markets
GMAC getting TARP money to convert to a bank and resume auto lending.
Trouble in Gaza .. is that news ?
The Obama Fund may deploy cash soon. A stock list will be posted tomorrow.
Word of the Day
"Eschaton" - noun [$10]
Eschaton means the final things in the order of time.
Sentence: The defeat of Bunkerman in the SEC-Ohio Pancake Tournament altered the eschaton, disturbing the currents of life everywhere. Will the Universe ever return to normalcy ?
Bunkerman was defending his title on the challenger's home field, aka kitchen. The local supermarket were more than adequate for his improvisational skills to let him prepare a fine entry, viz., chocolate almond pancakes made with whipping cream, sour cream, and an admixture of graham cracker crumbs with a base of Hungry Jack pancake mix. The pancakes, fried perfectly in olive oil and topped with butter and pure maple syrup had a fine delicate favor which enticed the judges to sing paeans of praise.
Then Big Al stepped up to the stove. [FYI, Big Al is a non-posting reader.] His entry evinced weeks of preparation and experimentation. The batter used the identical Hungry Jack base, adding the secret ingredient - cinnamon chips - and chopped apple bits. His cooking skill was superb. The pancakes were perfectly round and browned. But then he used his finely honed culinary skills to create a perfect presentation with a topping of apple slices, confectioners sugar and caramel drips. The final effect was pleasing to the eyes, reminiscent of fine French cuisine. The flavor was superb and the texture and mouth feel were excellent.
The discussion among the judges was cautious. Bunkerman's pancakes were deemed champion quality by all. But those of Big Al were awarded the first place by a unanimous decision, including the vote of the gracious Bunkerman. Big Al accepted the prestigious title of SEC-Ohio Pancake Champion with humility, looking at his shoe laces as he spoke a few words of thanks to the judges.
Bunkerman is planning his comeback ...
Markets
GMAC getting TARP money to convert to a bank and resume auto lending.
Trouble in Gaza .. is that news ?
The Obama Fund may deploy cash soon. A stock list will be posted tomorrow.
Word of the Day
"Eschaton" - noun [$10]
Eschaton means the final things in the order of time.
Sentence: The defeat of Bunkerman in the SEC-Ohio Pancake Tournament altered the eschaton, disturbing the currents of life everywhere. Will the Universe ever return to normalcy ?
Friday, December 19, 2008
Welcome New Reader ...
That's for Rush Limbaugh, who borrowed my posted ideas of a few days ago for his broadcast yesterday. A few days ago I wrote in this blog that States were going to be shocked by the low amounts that will be paid in estimated taxes for the January 15, 2009 payment date. And yesterday he used that for part of his monologue. Of course he didn't cite me. Oh well ...
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Thursday, December 18, 2008
A Long Cold Winter ...
The economic news is abysmal. California is crumbling as its cities and towns enter bankruptcy after years of profligacy [WSJ]. Its state employee pension fund shows one large loss after another on silly, speculative investments such buying raw land with recourse financing. State infrastructure spending is being canceled.
Unfortunately, more pain must be borne there as its multi-decadal mass delusion of endless real estate value increases vaporizes.
Some data:
California median sales price for single family, detached homes was $311,000 in October, down 40% from $517,000 in October 2007. Of course, in a national comparison, that California price is still very, very high. The national median price is just $181,000.
The median income for those filing joint tax returns in California is about $67,000.
What can that family afford ?
Assume a 5%, 30 year self amortizing loan at 80% of value, and that real estate taxes and insurance is 2% of value. Standard mortgage loan underwriting rules provide that 28% of income can go to principal, interest, taxes and insurance. For the median family, that is $1,563/month. The assumed mortgage loan will have monthly debt service of $537 per $100,000 of principal. Some algebra can solve for the affordable home value of $250,000 (rounded) and home mortgage of $200,000 rounded.
So assuming the median income family is the marginal buyer for the median priced home, home prices in California are still overvalued by 20%. Ugh ..
A New Reader
I must welcome Obama or his transition team as new readers. Proof ? His team is now leaking that the economic stimulus will approach $1 trillion, an amount I proposed a few weeks ago in this blog. I don't expect him to acknowledge this, but he's welcome as a non-posting reader. [joke]
Now if only he spends the money as I suggested .... and doesn't waste too much on green crap.
Actions
More stocks for Santa's list: small oils AREX, ME, GPOR, ROSE, GMET (maybe), CRZO (maybe); HWD, WFT, CETV, and FCT. FCT was suggested by a posting reader and looks good.
As of January 1, I will temporarily rename the "Alpha Fund" as the "Obama Fund" as this speculative investment fund can reach its goals only if Obama succeeds in the first two years of his regime.
A note on stock selection: all my stocks are very risky. I eliminated stocks that showed evidence of stupid CFOs who excessively repurchased stock at high prices or made acquisitions for debt at high prices. I chose sectors that performed well in the recovery from the 1974 bear market and selected other sectors since the world is somewhat different now. One obvious difference is the importance of emerging markets and resources.
I have made few purchases yet. I expect to trade quite a bit, rotating in the list. I expect to hold about 15 stocks with good diversification over sectors and time. As the list has about 25 stocks (not final yet), you can see I will maintain some flexibility.
Objective: multiple returns of 5-10x over two years.
Margin: none until a good bull market trend develops. Then I'll go to 150% on dips and return to 100% on recovery to new trend highs.
I reserve the right to change my mind at will.
Word of the Day
"Cacology" - noun [$10]
Cacology means 1. a bad choice of words; 2. bad pronunciation.
Sentence: I suppose I'll be criticized for promoting cacology for the new name for my speculative find, viz., the Obama Fund. But I'm not adulating him. I'm really using his name as a good luck charm. He's the new bull elephant in the herd and I'm hopping on his back to ride to the new waterhole, I hope.
Unfortunately, more pain must be borne there as its multi-decadal mass delusion of endless real estate value increases vaporizes.
Some data:
California median sales price for single family, detached homes was $311,000 in October, down 40% from $517,000 in October 2007. Of course, in a national comparison, that California price is still very, very high. The national median price is just $181,000.
The median income for those filing joint tax returns in California is about $67,000.
What can that family afford ?
Assume a 5%, 30 year self amortizing loan at 80% of value, and that real estate taxes and insurance is 2% of value. Standard mortgage loan underwriting rules provide that 28% of income can go to principal, interest, taxes and insurance. For the median family, that is $1,563/month. The assumed mortgage loan will have monthly debt service of $537 per $100,000 of principal. Some algebra can solve for the affordable home value of $250,000 (rounded) and home mortgage of $200,000 rounded.
So assuming the median income family is the marginal buyer for the median priced home, home prices in California are still overvalued by 20%. Ugh ..
A New Reader
I must welcome Obama or his transition team as new readers. Proof ? His team is now leaking that the economic stimulus will approach $1 trillion, an amount I proposed a few weeks ago in this blog. I don't expect him to acknowledge this, but he's welcome as a non-posting reader. [joke]
Now if only he spends the money as I suggested .... and doesn't waste too much on green crap.
Actions
More stocks for Santa's list: small oils AREX, ME, GPOR, ROSE, GMET (maybe), CRZO (maybe); HWD, WFT, CETV, and FCT. FCT was suggested by a posting reader and looks good.
As of January 1, I will temporarily rename the "Alpha Fund" as the "Obama Fund" as this speculative investment fund can reach its goals only if Obama succeeds in the first two years of his regime.
A note on stock selection: all my stocks are very risky. I eliminated stocks that showed evidence of stupid CFOs who excessively repurchased stock at high prices or made acquisitions for debt at high prices. I chose sectors that performed well in the recovery from the 1974 bear market and selected other sectors since the world is somewhat different now. One obvious difference is the importance of emerging markets and resources.
I have made few purchases yet. I expect to trade quite a bit, rotating in the list. I expect to hold about 15 stocks with good diversification over sectors and time. As the list has about 25 stocks (not final yet), you can see I will maintain some flexibility.
Objective: multiple returns of 5-10x over two years.
Margin: none until a good bull market trend develops. Then I'll go to 150% on dips and return to 100% on recovery to new trend highs.
I reserve the right to change my mind at will.
Word of the Day
"Cacology" - noun [$10]
Cacology means 1. a bad choice of words; 2. bad pronunciation.
Sentence: I suppose I'll be criticized for promoting cacology for the new name for my speculative find, viz., the Obama Fund. But I'm not adulating him. I'm really using his name as a good luck charm. He's the new bull elephant in the herd and I'm hopping on his back to ride to the new waterhole, I hope.
Wednesday, December 17, 2008
La Fed announce une baisse de taux historique
That's the headline of the story in France's "conservative" newspaper, Le Figaro, online. The front page online provided more: Les taux américains se rapprochent de zéro.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Tuesday, December 16, 2008
Green Jobs, etc.
Woke up late, but from the news, it's SOS.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
Monday, December 15, 2008
A Wasteland
The path of the financial manager and CFO since the mid 1990s is littered with trash and rotten ideas.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Friday, December 12, 2008
Kill the Credit Default Swaps Market
As usual, the Financial Times leads the way in both news and good analysis. Here is the link to an article that I read this morning at around 3AM ET in Tuesday's paper edition:
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
Thursday, December 11, 2008
California Dreamin' ...
The WSJ has an article about the California state government budget deficit growing rapidly. I'd expect that state to get a huge shock on January 15 as estimated tax payments will show a stunning drop. Everyone doing tax loss selling will be able to cut back their payments and will do so at once. And unicnorporated businesses suffering now will have overpaid prior quarters so will cut their payments, too.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
Wednesday, December 10, 2008
Economic Stupidity Increasing ...
I see a headline on Babblevision [aka CNBC] that the Federal Reserve is thinking of "selling its own version of government debt". Hello Mr. Booboise ! Open your wallet and look at that cash - it says, "Federal Reserve Note" above Andrew Jackson's portrait on the $20 bill. Well, the article does mention this fact. But aren't bank reserves held on deposit at the Fed really a form of debt of the Federal Reserve, too ? The Fed pays interest on those reserves now. So that is electronic debt of the Federal Reserve in electronic form. The reporter seems clueless.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
Tuesday, December 9, 2008
Something Good
Not about the stock casino, oops, I mean stock market.
Normally I enjoy kicking Bill Gates in the butt and pointing out all the garbage Microsoft produces: that p. o. s. Vista operating system being the latest.
BUT I found a capability of the Microsoft word processing program, Word, that is quite remarkable - amazing even.
As I teach myself French, I've started to translate selections of writing. To do that without writing and making corrections by hand, I type the passage - sentence by sentence - into Word, then work on my translation below. Somehow Word has figured out that I am writing in French for some paragraphs and will do automatic spelling checking of the French. Word gets the endings and accent marks correct, too. Even a word that could be correct in English, but not French, is marked.
So here's one cheer for Bill Gates and Microsoft -> !
Market
Another good rally.
Actions
Like Santa Claus, I'm making my list and checking it twice. That is, a list of sectors and stocks that could make really huge gains IFF the world returns to normal in a couple of years.
Here's something interesting: I looked at my "Green Book" of 35 year stock charts to see which groups overperformed coming out of the 1974 bear market, which coincided with a very severe recession.
These groups had moves of about 300% to 400% from their lows in late 1974 to a peak in early 1976: apparel & luxury goods, shoes, home furnishings, hotels & resorts, leisure products, restaurants, and environmental services.
Those are certainly not in the group of "usual suspects". The common ground for all but one seems to be products or services for consumers that are easily deferred. Once the troubles are perceived as being over, the consumer comes roaring back to spend on those items.
That was long ago and not every group of today even existed then. For example, dry bulk shipping was a completely private industry then. And today is not exactly a match for 1974. But still, the sectors are interesting for stock investigations.
The next step is to check those sectors and similar ones to see what stocks might be good picks.
PS: WSJ had an interesting article about investment banking. What was missing are the contacts with "real" investors. To me, an investment banker could be calling on potential "real" investors - not trading funds - to find out their needs and what types of investments they would consider. They do have cash flow and needs to invest to match future liabilities with "good" investments. Then go find those for them. But I suppose many of the current generation doesn't have those skills.
Word of the Day
"Beshrew" - verb, transitive [$100] a Mrs. B word.
Beshrew means to curse, invoke evil upon.
Sentence: Bunkerman today deviates from his normal mode: To borrow from Marc Antony's speech in Shakespeare's play, Julius Caesar, "He came not to beshrew Bill Gates, but to praise him".
Normally I enjoy kicking Bill Gates in the butt and pointing out all the garbage Microsoft produces: that p. o. s. Vista operating system being the latest.
BUT I found a capability of the Microsoft word processing program, Word, that is quite remarkable - amazing even.
As I teach myself French, I've started to translate selections of writing. To do that without writing and making corrections by hand, I type the passage - sentence by sentence - into Word, then work on my translation below. Somehow Word has figured out that I am writing in French for some paragraphs and will do automatic spelling checking of the French. Word gets the endings and accent marks correct, too. Even a word that could be correct in English, but not French, is marked.
So here's one cheer for Bill Gates and Microsoft -> !
Market
Another good rally.
Actions
Like Santa Claus, I'm making my list and checking it twice. That is, a list of sectors and stocks that could make really huge gains IFF the world returns to normal in a couple of years.
Here's something interesting: I looked at my "Green Book" of 35 year stock charts to see which groups overperformed coming out of the 1974 bear market, which coincided with a very severe recession.
These groups had moves of about 300% to 400% from their lows in late 1974 to a peak in early 1976: apparel & luxury goods, shoes, home furnishings, hotels & resorts, leisure products, restaurants, and environmental services.
Those are certainly not in the group of "usual suspects". The common ground for all but one seems to be products or services for consumers that are easily deferred. Once the troubles are perceived as being over, the consumer comes roaring back to spend on those items.
That was long ago and not every group of today even existed then. For example, dry bulk shipping was a completely private industry then. And today is not exactly a match for 1974. But still, the sectors are interesting for stock investigations.
The next step is to check those sectors and similar ones to see what stocks might be good picks.
PS: WSJ had an interesting article about investment banking. What was missing are the contacts with "real" investors. To me, an investment banker could be calling on potential "real" investors - not trading funds - to find out their needs and what types of investments they would consider. They do have cash flow and needs to invest to match future liabilities with "good" investments. Then go find those for them. But I suppose many of the current generation doesn't have those skills.
Word of the Day
"Beshrew" - verb, transitive [$100] a Mrs. B word.
Beshrew means to curse, invoke evil upon.
Sentence: Bunkerman today deviates from his normal mode: To borrow from Marc Antony's speech in Shakespeare's play, Julius Caesar, "He came not to beshrew Bill Gates, but to praise him".
Monday, December 8, 2008
A New Reader
I guess I have a new reader, viz. Obama, or perhaps his advisors. Maybe, or maybe this is just Tim Geitner passing on my ideas. [ joke ;) ]
From FT this morning: "Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit. Mr Obama’s proposals for government works on roads, bridges, Internet broadband and school buildings, together with energy efficiency measures and health spending ..."
They are proposing almost everything I did except direct housing market suport, but I suspect they will do something to aid that market, too.
I'd like to see money spent on high speed rail between major cities less than 300 or 400 miles apart, instead of this wasted money on"alternative energy". "Alternative energy" has been a bottomless pit for over 30 year for crackpot schemes to violate either the laws of economics or the laws of physics or both.
Markets
Futures are up substantially so far this morning, perhaps a relief rally that Obama might not screw this up.
The concerns about corporate spreads are misguided. In my long experience of placing secured notes of corporations with institutions, absolute level of the rate is very important. Long term lenders really do not want to make long term, investment grade loans under 6%. They prefer to wait.
I also read with amusement that the credit default swaps rates of numerous nations is rising, including the US. What a fraud ! Who is going to pay off those swaps in such a catastrophe ? Those are just credit betting parlors and that whole "market" is a joke. Anyway, a credit default swap bears two risks, viz. the counter party AND the named credit. How does one distinguish that ? Credit default swaps should be banned from the financial system. Only those backed by regulated insurance contracts and hard capital should be permitted.
Word of the Day
"Irrefragable" - adj [$10] a Mrs. B word
Irrefragable means 1. (of a statement, argument or person) unanswerable, indisputable; 2. (of rules, etc.) inviolable.
Sentence: An irrefragable truth about General Motors is that its top managers and management culture has been a disaster for that company for at least 15 years, perhaps as long as 40 years.
From FT this morning: "Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit. Mr Obama’s proposals for government works on roads, bridges, Internet broadband and school buildings, together with energy efficiency measures and health spending ..."
They are proposing almost everything I did except direct housing market suport, but I suspect they will do something to aid that market, too.
I'd like to see money spent on high speed rail between major cities less than 300 or 400 miles apart, instead of this wasted money on"alternative energy". "Alternative energy" has been a bottomless pit for over 30 year for crackpot schemes to violate either the laws of economics or the laws of physics or both.
Markets
Futures are up substantially so far this morning, perhaps a relief rally that Obama might not screw this up.
The concerns about corporate spreads are misguided. In my long experience of placing secured notes of corporations with institutions, absolute level of the rate is very important. Long term lenders really do not want to make long term, investment grade loans under 6%. They prefer to wait.
I also read with amusement that the credit default swaps rates of numerous nations is rising, including the US. What a fraud ! Who is going to pay off those swaps in such a catastrophe ? Those are just credit betting parlors and that whole "market" is a joke. Anyway, a credit default swap bears two risks, viz. the counter party AND the named credit. How does one distinguish that ? Credit default swaps should be banned from the financial system. Only those backed by regulated insurance contracts and hard capital should be permitted.
Word of the Day
"Irrefragable" - adj [$10] a Mrs. B word
Irrefragable means 1. (of a statement, argument or person) unanswerable, indisputable; 2. (of rules, etc.) inviolable.
Sentence: An irrefragable truth about General Motors is that its top managers and management culture has been a disaster for that company for at least 15 years, perhaps as long as 40 years.
Friday, December 5, 2008
TGIF
So The Ostrich cuts rates in Europe ... about six months too late. That means Europe's recovery will be slower. And then one of their big mouths says a "pause" now, so Europe's base lending rate will be 2.5%, well over other nations' base rates. That was disappointing. And the EU is still interferes with nations' bank recapitalization efforts. While people everywhere look for errors, mistakes and reforms, Europe obviously need to reform the EU and the ECB. I suggest copying the US institutions. Of course, they won't do that, even though the US model has worked well for over 200 years, far longer than any other democratic republic.
The damage down by the autumn panic is unfolding now. No bad news should be a surprise.
But we know that huge, positive cash flow benefits are flowing into the public now: lower oil prices, low interest rates on home equity loans, and now mortgage refinancing cash flow. The profit margin on bank loans is colossal now. More jawboning is necessary to make them lend aggressively. JPM seems to get the picture, announcing more lending programs. Other banks need to follow.
A dangerous game of chicken is occurring in DC. Congress seems to be unwilling to aid the auto makers even though huge numbers of jobs are at stake. And some in Congress seems unwilling to give Hank the Tank the second tranche of the TARP. Maybe they want maximum pain to occur just before Obama takes over. That's possible, as desire for power is the #1 focus of politicians.
Auto Industry
I favor a very large, debtor-in-possession financing for the auto industry. Bankruptcy is needed to break all those contracts that have been suffocating the industry for decades. But the technology and manufacturing base is very important and needs to be saved from liquidation.
Actions
Doing nothing. I want to know what Congress will do. Their delay in passing the Paulson plan caused the late September - October panic, in my opinion.
Word of the Day
"Cadge" - verb [$10]; a Mencken word; the 'a' is short as in 'cat'.
Cadge means 1. (transitive) get or seek by begging; 2. (intransitive) beg.
Sentence: The spectacle of the CEOs and the UAW boss of the auto industry cadging for loans from politicians was quite greasy, as they have operated grossly inefficient operations for dacades. One need only look at the "jobs bank" where people are well paid for not working.
The damage down by the autumn panic is unfolding now. No bad news should be a surprise.
But we know that huge, positive cash flow benefits are flowing into the public now: lower oil prices, low interest rates on home equity loans, and now mortgage refinancing cash flow. The profit margin on bank loans is colossal now. More jawboning is necessary to make them lend aggressively. JPM seems to get the picture, announcing more lending programs. Other banks need to follow.
A dangerous game of chicken is occurring in DC. Congress seems to be unwilling to aid the auto makers even though huge numbers of jobs are at stake. And some in Congress seems unwilling to give Hank the Tank the second tranche of the TARP. Maybe they want maximum pain to occur just before Obama takes over. That's possible, as desire for power is the #1 focus of politicians.
Auto Industry
I favor a very large, debtor-in-possession financing for the auto industry. Bankruptcy is needed to break all those contracts that have been suffocating the industry for decades. But the technology and manufacturing base is very important and needs to be saved from liquidation.
Actions
Doing nothing. I want to know what Congress will do. Their delay in passing the Paulson plan caused the late September - October panic, in my opinion.
Word of the Day
"Cadge" - verb [$10]; a Mencken word; the 'a' is short as in 'cat'.
Cadge means 1. (transitive) get or seek by begging; 2. (intransitive) beg.
Sentence: The spectacle of the CEOs and the UAW boss of the auto industry cadging for loans from politicians was quite greasy, as they have operated grossly inefficient operations for dacades. One need only look at the "jobs bank" where people are well paid for not working.
Thursday, December 4, 2008
What will The Ostrich Do ?
Today is all about the ECB.
Will The Ostrich [aka Trichet, the head of the ECB ] pick his head out of the sand and see to cut rates significantly. "Significantly" means 0.75% to 2.5% and even to signal a move to 2.0% and then lower. Last time the ECB was stingy and the markets fell worldwide. Why they see a need for tight money at a time that inflation, which never was more than a speculative oil bubble, is non-existent, is beyond comprehension ?
Bank of England needs to cuts rates, too. Sweden's central bank already cut rates by 1.75% to 2%, more than expected this morning.
So far, European stock markets are strong this mornings. That can change instantly if the ECB disappoints.
Actions
I am still working on my list of stocks to buy that might go up 5 or 10x within two years if the world survives and returns to normal in two years. I'll put some Alpha Fund money into those soon, perhaps starting in early January.
Word of the Day
"Gogue" - noun [$ ? ] not in OED or any dictionary I've seen; a Mencken word.
Gogue means (from Wiki, so beware) a piece of horse tack used for training.
Sentence: (Mencken usage referring to college students) "... and eager to dance, neck and hoodwink the poor gogues told off to struggle with them."
(Modern) Has Trichet spent enough time in the gogue to get out and really run a bit ? Or will he stay in the barn, eat and sleep in complacent comfort?
Will The Ostrich [aka Trichet, the head of the ECB ] pick his head out of the sand and see to cut rates significantly. "Significantly" means 0.75% to 2.5% and even to signal a move to 2.0% and then lower. Last time the ECB was stingy and the markets fell worldwide. Why they see a need for tight money at a time that inflation, which never was more than a speculative oil bubble, is non-existent, is beyond comprehension ?
Bank of England needs to cuts rates, too. Sweden's central bank already cut rates by 1.75% to 2%, more than expected this morning.
So far, European stock markets are strong this mornings. That can change instantly if the ECB disappoints.
Actions
I am still working on my list of stocks to buy that might go up 5 or 10x within two years if the world survives and returns to normal in two years. I'll put some Alpha Fund money into those soon, perhaps starting in early January.
Word of the Day
"Gogue" - noun [$ ? ] not in OED or any dictionary I've seen; a Mencken word.
Gogue means (from Wiki, so beware) a piece of horse tack used for training.
Sentence: (Mencken usage referring to college students) "... and eager to dance, neck and hoodwink the poor gogues told off to struggle with them."
(Modern) Has Trichet spent enough time in the gogue to get out and really run a bit ? Or will he stay in the barn, eat and sleep in complacent comfort?
Wednesday, December 3, 2008
Redux
Bill Gross wrote an honest investment outlook for the future that provides plenty of good data and some worries about the future. See http://www.pimco.com/TopNav/Home/Default.htm and click on his investment outlook link.
The Good News
The chart on the long term trend [1952 to now] of market values compared to replacement cost of corporate assets is quite interesting. It shows that equity values are very low and that a normal "reversion to the mean" could bring a 100% increase in stock values. A chart of P/E ratios from 1871 [!!] to now shows similar "cheap" valuation. In the past those were "screaming buy" situations and huge bull markets followed.
The Worries
Corporate taxes are very low based on his chart of the ratio of tax payments to profits before taxes. And Mr. Gross worries about "a world where the government fist is being substituted for the invisible hand". Demographics are a worry, too, except in the emerging markets (other than Russia and China). In other places I've seems charts of corporate profit margins being quite high historically, too.
Counter-Worries
His worry about the loss of entrepreneurial risk taking seems misplaced, though, as he cites the exit of clowns like Chuck Prince as examples of that loss. He also cites the loss of golden parachutes, options, executive compensation, etc. But to me, those are "counter-worries" aka positives.
For almost 15 years, the CEO, CFO and the executive suite has looted untold billions from the foolish stockholders who approved compensation plans and directors in the club who rubber-stamped idiotic levels of compensation. That loos of shareholder value might be gone for our lifetime - let's hope.
My memory tells me that CEO compensation alone was amounting to 10% of corporate profits. Toss in the rest of the executive suite and all those stock options and I suspect they looted about 20% of stockholders' profits "EBH" - i. e., profits before hogs.
I read in FT that the median CFO got around $2.9 million in total compensation last year. And many did not even know enough to fund long term assets with long term debt, not commercial paper. Elsewhere, I see they were rather more pre-occupied with corporate tax shelters than productive investments or stable financing. So they deserve a huge pay cut for sheer stupidity as a class.
Conclusions
Mr. Gross concludes that corporate bonds are an excellent opportunity, which I agree is true provided one looks to absolute levels of yield and ignores the false signal of credit spreads when US Treasuries are at foolish levels due to hedging mortgage prepayments.
But the counter-worries seems to balance the worries, leaving the data showing that corporate stocks are a "screaming buy" for long term investors. Remember to use time diversification if you act on this.
Word of the Day
"Fusty" - adjective [$10]
Fusty means 1. stale, smelling, mustly, moldy; 2. stuffy, close; 3. antiquated, old-fashioned.
Sentence: Will Obama and the Democratic Congress provide new ideas and energy, or just a fusty, recycled mash of new left, statist policies from the 1970s ?
The Good News
The chart on the long term trend [1952 to now] of market values compared to replacement cost of corporate assets is quite interesting. It shows that equity values are very low and that a normal "reversion to the mean" could bring a 100% increase in stock values. A chart of P/E ratios from 1871 [!!] to now shows similar "cheap" valuation. In the past those were "screaming buy" situations and huge bull markets followed.
The Worries
Corporate taxes are very low based on his chart of the ratio of tax payments to profits before taxes. And Mr. Gross worries about "a world where the government fist is being substituted for the invisible hand". Demographics are a worry, too, except in the emerging markets (other than Russia and China). In other places I've seems charts of corporate profit margins being quite high historically, too.
Counter-Worries
His worry about the loss of entrepreneurial risk taking seems misplaced, though, as he cites the exit of clowns like Chuck Prince as examples of that loss. He also cites the loss of golden parachutes, options, executive compensation, etc. But to me, those are "counter-worries" aka positives.
For almost 15 years, the CEO, CFO and the executive suite has looted untold billions from the foolish stockholders who approved compensation plans and directors in the club who rubber-stamped idiotic levels of compensation. That loos of shareholder value might be gone for our lifetime - let's hope.
My memory tells me that CEO compensation alone was amounting to 10% of corporate profits. Toss in the rest of the executive suite and all those stock options and I suspect they looted about 20% of stockholders' profits "EBH" - i. e., profits before hogs.
I read in FT that the median CFO got around $2.9 million in total compensation last year. And many did not even know enough to fund long term assets with long term debt, not commercial paper. Elsewhere, I see they were rather more pre-occupied with corporate tax shelters than productive investments or stable financing. So they deserve a huge pay cut for sheer stupidity as a class.
Conclusions
Mr. Gross concludes that corporate bonds are an excellent opportunity, which I agree is true provided one looks to absolute levels of yield and ignores the false signal of credit spreads when US Treasuries are at foolish levels due to hedging mortgage prepayments.
But the counter-worries seems to balance the worries, leaving the data showing that corporate stocks are a "screaming buy" for long term investors. Remember to use time diversification if you act on this.
Word of the Day
"Fusty" - adjective [$10]
Fusty means 1. stale, smelling, mustly, moldy; 2. stuffy, close; 3. antiquated, old-fashioned.
Sentence: Will Obama and the Democratic Congress provide new ideas and energy, or just a fusty, recycled mash of new left, statist policies from the 1970s ?
Tuesday, December 2, 2008
More Liquidations ...
Many more hedge funds are liquidating and most of the rest are restricting redemptions.
From FT: "The combination of the worst year on record for hedge fund returns and the biggest withdrawals on record mean the industry’s assets will shrink 35-45 per cent from June to the end of December, according to analysis by Morgan Stanley."
One famous hedge fund is restructuring in a manner similar to banks: "Paul Tudor Jones, who shot to fame and made a fortune when he predicted the 1987 stock market crash, plans to split toxic assets out of his $10bn flagship hedge fund and has suspended redemptions until the restructuring is complete. "
Hedge funds were NEVER a separate "asset class" as promoted to the rich and the pension funds. They were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Commodity funds were NEVER a separate "asset class" as they did NOT invest is true assets - namely the underlying oil in the ground, or the actual cows. They were just speculating in futures and derivatives. To repeat, they were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Yesterday's drop was probably a combination of these redemptions plus the public doing some selling after the recent rally plus more tax loss selling.
And the bear beefer mouthpieces and marionettes keep saying it's different this time, and nothing will ever change and an endless current of bad events will occur forever. To me, they sound like the rah rah crowd of late 1999 and early 2000 in reverse. They just don't recognize how fast the America and Americans react. change and adapt.
Let the bears and doomsters has their fun. When the liquidations are done - an unpredictable point in time - like Don Juan in that great opera, Don Giovanni, the unrepentant bears will be sucked into "l'enfer" as a great new bull market begins.
PS: Today I read the EU is interfering with an injection of capital into a German bank. How can the EU survive this ? with both the French and Germans screaming at its bureaucrats, I think the EU will have to be restructured.
Actions
My tax loss selling is done, saving me big $$$. Later this week I can re-allocate some funds in Krypto Fund. Otherwise, I'm doing research to compile a list of stocks to buy that perhaps can provide big profits on the coming bull market. And I means multiples, not mere percentages.
Word of the Day
From FT: "The combination of the worst year on record for hedge fund returns and the biggest withdrawals on record mean the industry’s assets will shrink 35-45 per cent from June to the end of December, according to analysis by Morgan Stanley."
One famous hedge fund is restructuring in a manner similar to banks: "Paul Tudor Jones, who shot to fame and made a fortune when he predicted the 1987 stock market crash, plans to split toxic assets out of his $10bn flagship hedge fund and has suspended redemptions until the restructuring is complete. "
Hedge funds were NEVER a separate "asset class" as promoted to the rich and the pension funds. They were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Commodity funds were NEVER a separate "asset class" as they did NOT invest is true assets - namely the underlying oil in the ground, or the actual cows. They were just speculating in futures and derivatives. To repeat, they were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Yesterday's drop was probably a combination of these redemptions plus the public doing some selling after the recent rally plus more tax loss selling.
And the bear beefer mouthpieces and marionettes keep saying it's different this time, and nothing will ever change and an endless current of bad events will occur forever. To me, they sound like the rah rah crowd of late 1999 and early 2000 in reverse. They just don't recognize how fast the America and Americans react. change and adapt.
Let the bears and doomsters has their fun. When the liquidations are done - an unpredictable point in time - like Don Juan in that great opera, Don Giovanni, the unrepentant bears will be sucked into "l'enfer" as a great new bull market begins.
PS: Today I read the EU is interfering with an injection of capital into a German bank. How can the EU survive this ? with both the French and Germans screaming at its bureaucrats, I think the EU will have to be restructured.
Actions
My tax loss selling is done, saving me big $$$. Later this week I can re-allocate some funds in Krypto Fund. Otherwise, I'm doing research to compile a list of stocks to buy that perhaps can provide big profits on the coming bull market. And I means multiples, not mere percentages.
Word of the Day
"l'enfer" - noun [$ ?] French
"l'enfer" means hell, the infernal regions. the underworld. An erudite reader and poster mentioned it as I asked how to tell someone to go to hell in French: Allez à l'enfer ! Doesn't it sound more polite in French ? And more sophisticated ? By the way, this is pronounced, "Allay a longfehr", roughly.
Sentence: This is not armageddon or l'enfer; World War II was that. Stop the whining. Adapt, improvise and more ahead into the unknown like a true pioneer.
Monday, December 1, 2008
Ban All Credit Default Swaps
Last Friday's Financial Times had an article about a dangerous new practice that banks are trying to foist onto corporate borrowers. The international banks want to price loans against the credit default swaps of a company on a variable, floating basis. That article points out that this would give hedge funds and speculators the power to destroy any company they wish.
The raiders could short its stock and them float the market with orders to buy credit defaults swaps of the company. As are no natural writers of these alien instruments, the price would rise explosively, and then the interest rates on the company's debt would skyrocket. And that would crush the company's earnings, in turn crushing its stock price. Payday for the raiders ... created for themselves.
A natural money machine for bear raiders. Of course we know they have already done this for those extremely credit sensitive institutions, viz. the banks and investment banks.
The solution to this is an internationally agreed edict that outlaws these contracts from any nation in the financial system.
Credit insurance - true insurance - can still exist and be available for commercial transactions only. Those would be regulated as insurance by the states or a future national insurance regulators.
To paraphrase the writer of the Financial Times article, since credit default swaps are "weapons of mass destruction" in financial transactions, let's not permit the banks to weaponize them and proliferate them to the raider community.
PS: I read the EU is blocking the French plan to add capital to its banks to increase lending. Amazingly stupid of the EU. The EU and the ECB are so far off the marks on this crisis that I wonder if the EU can truly survive.
Word of the Day
"Firman" - noun [$10] from Persian
Firman means 1. an oriental sovereign's edict; 2. a grant or permit.
Sentence: Derivatives needs to be regulated strictly and financial institutions should be required to obtain a positive firman before entering into or trading any type of derivative.
The raiders could short its stock and them float the market with orders to buy credit defaults swaps of the company. As are no natural writers of these alien instruments, the price would rise explosively, and then the interest rates on the company's debt would skyrocket. And that would crush the company's earnings, in turn crushing its stock price. Payday for the raiders ... created for themselves.
A natural money machine for bear raiders. Of course we know they have already done this for those extremely credit sensitive institutions, viz. the banks and investment banks.
The solution to this is an internationally agreed edict that outlaws these contracts from any nation in the financial system.
Credit insurance - true insurance - can still exist and be available for commercial transactions only. Those would be regulated as insurance by the states or a future national insurance regulators.
To paraphrase the writer of the Financial Times article, since credit default swaps are "weapons of mass destruction" in financial transactions, let's not permit the banks to weaponize them and proliferate them to the raider community.
PS: I read the EU is blocking the French plan to add capital to its banks to increase lending. Amazingly stupid of the EU. The EU and the ECB are so far off the marks on this crisis that I wonder if the EU can truly survive.
Word of the Day
"Firman" - noun [$10] from Persian
Firman means 1. an oriental sovereign's edict; 2. a grant or permit.
Sentence: Derivatives needs to be regulated strictly and financial institutions should be required to obtain a positive firman before entering into or trading any type of derivative.
Friday, November 28, 2008
Reflections on Value
The situation with General Motors can provide an illuminating case study of what the value of a corporation actually is for stockholders. That corporation has existed in one form or another for 100 years. Suppose one held his shares the entire time. What did stockholder receive for the equity investment in common stock ? That only tangible value received is the dividends paid.
What did stock buybacks do for him ? Nothing. Stock buybacks subsidize the sellers of the company's stock at the expense of the long term holders.
This downturn shows that all stock buyback plans are a bit of a scam. Now, just when stocks prices are very low, the companies are cutting back on stock buybacks. And many banks are issuing new shares at very low prices after buying back stock for years at much higher prices.
Dividends benefit long term investors. Stock buybacks benefit traders, hedge funds and speculators at the expense of investors.
What should a company do with its excess cash flows in good times ? That is quite easy. Pay down all short term debt due within 10 years or less. Raise its dividend to a level payable even in poor environment After all, with less debt, more cash flow can be used to pay dividends. Also, overfund the pension fund to give it a cushion for downturns.
In good times a company should have paid down all its short and intermediate term debt and funded all long term assets with a conservative mixture of long term bonds and solid equity. Then it can survive a severe downturn and have resources to make favorable investments then at low prices.
CFOs need a refresher course in corporate finance.
Word of the Day
"Rowel" - noun and verb [$10] - a Mencken word
Rowel means (noun) a spiked revolving disc at the end of a spur; 2. (historical) a circular piece of leather, etc. with a hole in the center inserted between a horse's flesh and skin to discharge an exudate; (verb) 1. to urge with a rowel; 2. (historical) to insert a rowel in.
Quote From "The Impossible H. L. Mencken", page 591 from his Scopes Trial coverage referring to the Scopes jury: "... a trial before a jury of men who have been roweled and hammered by those opponents for years ..."
Sentence: The very highly paid "managers" of US corporations are about to be given a hammering by politicians roweled by an angry public seeking retribution, who in turn were roweled by those managers who cut the pay and benefits of the common man while paying themselves colossal sums for "good management" now seen as a lie and scam.
What did stock buybacks do for him ? Nothing. Stock buybacks subsidize the sellers of the company's stock at the expense of the long term holders.
This downturn shows that all stock buyback plans are a bit of a scam. Now, just when stocks prices are very low, the companies are cutting back on stock buybacks. And many banks are issuing new shares at very low prices after buying back stock for years at much higher prices.
Dividends benefit long term investors. Stock buybacks benefit traders, hedge funds and speculators at the expense of investors.
What should a company do with its excess cash flows in good times ? That is quite easy. Pay down all short term debt due within 10 years or less. Raise its dividend to a level payable even in poor environment After all, with less debt, more cash flow can be used to pay dividends. Also, overfund the pension fund to give it a cushion for downturns.
In good times a company should have paid down all its short and intermediate term debt and funded all long term assets with a conservative mixture of long term bonds and solid equity. Then it can survive a severe downturn and have resources to make favorable investments then at low prices.
CFOs need a refresher course in corporate finance.
Word of the Day
"Rowel" - noun and verb [$10] - a Mencken word
Rowel means (noun) a spiked revolving disc at the end of a spur; 2. (historical) a circular piece of leather, etc. with a hole in the center inserted between a horse's flesh and skin to discharge an exudate; (verb) 1. to urge with a rowel; 2. (historical) to insert a rowel in.
Quote From "The Impossible H. L. Mencken", page 591 from his Scopes Trial coverage referring to the Scopes jury: "... a trial before a jury of men who have been roweled and hammered by those opponents for years ..."
Sentence: The very highly paid "managers" of US corporations are about to be given a hammering by politicians roweled by an angry public seeking retribution, who in turn were roweled by those managers who cut the pay and benefits of the common man while paying themselves colossal sums for "good management" now seen as a lie and scam.
Wednesday, November 26, 2008
Thanksgiving
Here I reprint the annual Thanksgiving editorials from The Wall Street Journal, that every year seem to have meaning even though the same editorials have been printed annually since 1961.
See http://online.wsj.com/article/SB122765706006858171.html
And http://online.wsj.com/article/SB122765723215458175.html
The Desolate Wilderness
Here beginneth the chronicle of those memorable circumstances of the year 1620, as recorded by Nathaniel Morton, keeper of the records of Plymouth Colony, based on the account of William Bradford, sometime governor thereof:
So they left that goodly and pleasant city of Leyden, which had been their resting-place for above eleven years, but they knew that they were pilgrims and strangers here below, and looked not much on these things, but lifted up their eyes to Heaven, their dearest country, where God hath prepared for them a city (Heb. XI, 16), and therein quieted their spirits.
When they came to Delfs-Haven they found the ship and all things ready, and such of their friends as could not come with them followed after them, and sundry came from Amsterdam to see them shipt, and to take their leaves of them. One night was spent with little sleep with the most, but with friendly entertainment and Christian discourse, and other real expressions of true Christian love.
The next day they went on board, and their friends with them, where truly doleful was the sight of that sad and mournful parting, to hear what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye, and pithy speeches pierced each other's heart, that sundry of the Dutch strangers that stood on the Key as spectators could not refrain from tears. But the tide (which stays for no man) calling them away, that were thus loath to depart, their Reverend Pastor, falling down on his knees, and they all with him, with watery cheeks commended them with the most fervent prayers unto the Lord and His blessing; and then with mutual embraces and many tears they took their leaves one of another, which proved to be the last leave to many of them.
Being now passed the vast ocean, and a sea of troubles before them in expectations, they had now no friends to welcome them, no inns to entertain or refresh them, no houses, or much less towns, to repair unto to seek for succour; and for the season it was winter, and they that know the winters of the country know them to be sharp and violent, subject to cruel and fierce storms, dangerous to travel to known places, much more to search unknown coasts.
Besides, what could they see but a hideous and desolate wilderness, full of wilde beasts and wilde men? and what multitudes of them there were, they then knew not: for which way soever they turned their eyes (save upward to Heaven) they could have but little solace or content in respect of any outward object; for summer being ended, all things stand in appearance with a weatherbeaten face, and the whole country, full of woods and thickets, represented a wild and savage hew.
If they looked behind them, there was a mighty ocean which they had passed, and was now as a main bar or gulph to separate them from all the civil parts of the world.
This editorial has appeared annually since 1961.
And the Fair Land
Any one whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.
This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.
And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.
So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that hangs everywhere.
For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.
His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far-off corners of the globe.
How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places -- only to find those men as frail as any others.
So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?
Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.
But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere -- in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.
We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.
And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.
This editorial has appeared annually since 1961.
Word of The Day
"Sacerdotal" - noun [$10] and "Sacerdotion" - noun [$10]
Sacerdotal means 1. of the priests or the priestly office; priestly; 2. (of as doctrine) ascribing sacrificial functions and supernatural powers to ordained priests, claiming excessive authority for the priesthood. Sacerdotion means the institution of the church and priests; compare to the imperium - the Emperor - in the Byzantine state.
Sentence: Hearing this morning another technical trader talking about yet another "retest" of the lows, I thought that as a group they must be a kind of stock market sacerdotal institution - a sacerdotion - as for them the real economy does not matter at all. Of course, both perception and reality matter; but over a long term, only reality matters. That can be a long time, though, viz. over a year.
See http://online.wsj.com/article/SB122765706006858171.html
And http://online.wsj.com/article/SB122765723215458175.html
The Desolate Wilderness
Here beginneth the chronicle of those memorable circumstances of the year 1620, as recorded by Nathaniel Morton, keeper of the records of Plymouth Colony, based on the account of William Bradford, sometime governor thereof:
So they left that goodly and pleasant city of Leyden, which had been their resting-place for above eleven years, but they knew that they were pilgrims and strangers here below, and looked not much on these things, but lifted up their eyes to Heaven, their dearest country, where God hath prepared for them a city (Heb. XI, 16), and therein quieted their spirits.
When they came to Delfs-Haven they found the ship and all things ready, and such of their friends as could not come with them followed after them, and sundry came from Amsterdam to see them shipt, and to take their leaves of them. One night was spent with little sleep with the most, but with friendly entertainment and Christian discourse, and other real expressions of true Christian love.
The next day they went on board, and their friends with them, where truly doleful was the sight of that sad and mournful parting, to hear what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye, and pithy speeches pierced each other's heart, that sundry of the Dutch strangers that stood on the Key as spectators could not refrain from tears. But the tide (which stays for no man) calling them away, that were thus loath to depart, their Reverend Pastor, falling down on his knees, and they all with him, with watery cheeks commended them with the most fervent prayers unto the Lord and His blessing; and then with mutual embraces and many tears they took their leaves one of another, which proved to be the last leave to many of them.
Being now passed the vast ocean, and a sea of troubles before them in expectations, they had now no friends to welcome them, no inns to entertain or refresh them, no houses, or much less towns, to repair unto to seek for succour; and for the season it was winter, and they that know the winters of the country know them to be sharp and violent, subject to cruel and fierce storms, dangerous to travel to known places, much more to search unknown coasts.
Besides, what could they see but a hideous and desolate wilderness, full of wilde beasts and wilde men? and what multitudes of them there were, they then knew not: for which way soever they turned their eyes (save upward to Heaven) they could have but little solace or content in respect of any outward object; for summer being ended, all things stand in appearance with a weatherbeaten face, and the whole country, full of woods and thickets, represented a wild and savage hew.
If they looked behind them, there was a mighty ocean which they had passed, and was now as a main bar or gulph to separate them from all the civil parts of the world.
This editorial has appeared annually since 1961.
And the Fair Land
Any one whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.
This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.
And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.
So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that hangs everywhere.
For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.
His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far-off corners of the globe.
How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places -- only to find those men as frail as any others.
So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?
Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.
But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere -- in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.
We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.
And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.
This editorial has appeared annually since 1961.
Word of The Day
"Sacerdotal" - noun [$10] and "Sacerdotion" - noun [$10]
Sacerdotal means 1. of the priests or the priestly office; priestly; 2. (of as doctrine) ascribing sacrificial functions and supernatural powers to ordained priests, claiming excessive authority for the priesthood. Sacerdotion means the institution of the church and priests; compare to the imperium - the Emperor - in the Byzantine state.
Sentence: Hearing this morning another technical trader talking about yet another "retest" of the lows, I thought that as a group they must be a kind of stock market sacerdotal institution - a sacerdotion - as for them the real economy does not matter at all. Of course, both perception and reality matter; but over a long term, only reality matters. That can be a long time, though, viz. over a year.
Tuesday, November 25, 2008
Ruling Class Looting ...
The list of techniques the ruling classes have used for 15 years to raid and loot companies puts any blackout rioter to shame.
Let me count the ways:
1. Golden parachutes. Today's WSJ story about Wachovia executives collecting after running the bank into the ground is a simple proof.
2. Stock options. Every single stock option issued for "performance" and "incentive" is proved to be a lie, as they merely reward poor behavior such as stock buybacks.
3. Insane pay for CEOs, etc. ... approved by their buddies on the compensation committee.
4. Private equity ... is merely as way to loot in private, sucking good assets out of companies and paying themselves big dividends and high fees. See the WSJ story about Mervyn's today.
5. Financial firm pay .. ignores the use of the firms capital and its risk. Traders get huge pay for risking the firms money to make "profits", which are not properly charged a fair cost of capital. Of course, it's a "heads they win, tails the stockholders lose game"
6. Hedge funds. Ditto. That scam is now laid bare.
7. CFOs ... many are obviously incompetent and overpaid. They financed their companies using commercial paper and now must pay huge rates to refund it into long term bonds. Financing long term assets with long term debt is Finance 101, as I learned it 25 years ago. I guess they flunked or cheated in that course.
8. Class action lawsuits ... enrich lawyers turned pirates and do nothing for consumers or stockholders.
9. Stock buybacks ... nearly single share of stock bought back for the past 10-15 years is proven to have been a very poor use of corporate funds. The management prefers stock buybacks as those prop up the value of their stock options.
10. Thinking ... Does anyone have a tenth ?
Markets
That glorious, efficient, rational and liquid market show itself well yesterday [ that's sarcasm ! ], putting in another wild move.
The bears might re-attack soon. Some recent Thanksgiving holidays have given them easy targets in low volume on the Friday after Thanksgiving.
Actions
Today I can do a bit of re-allocation in Krypto Fund, but stil must wait until late next week for most of it. I am tied up by the interplay of tax rules for wash sales and mutual fund exchange rules. I wonder if I should open a brokerage account in my main retirement accounts to enable me to use ETFs to sidestep those rules ? Thinking ...
I am thinking of investing some Alpha Fund money into a package of small, beaten up stocks the might go up 5 or 10x in a new bull market. That will require some selection. Just thinking for now.
Word of the Day
"Copyhold" - noun [$100]
Copyhold means 1. (formerly) a type of ownership of land in England, evidenced by a copy of the manor roll establishing title; 2. an estate held under such ownership.
Sentence: Stockholders need to stop being mere copyholders and start act as real owners exercising their powers to approve stocks options plans, director and other corporate actions. And they should lobby for new laws for secret voting in proxies, rights to elect the compensation committee directly, and to nominate directors themselves.
Let me count the ways:
1. Golden parachutes. Today's WSJ story about Wachovia executives collecting after running the bank into the ground is a simple proof.
2. Stock options. Every single stock option issued for "performance" and "incentive" is proved to be a lie, as they merely reward poor behavior such as stock buybacks.
3. Insane pay for CEOs, etc. ... approved by their buddies on the compensation committee.
4. Private equity ... is merely as way to loot in private, sucking good assets out of companies and paying themselves big dividends and high fees. See the WSJ story about Mervyn's today.
5. Financial firm pay .. ignores the use of the firms capital and its risk. Traders get huge pay for risking the firms money to make "profits", which are not properly charged a fair cost of capital. Of course, it's a "heads they win, tails the stockholders lose game"
6. Hedge funds. Ditto. That scam is now laid bare.
7. CFOs ... many are obviously incompetent and overpaid. They financed their companies using commercial paper and now must pay huge rates to refund it into long term bonds. Financing long term assets with long term debt is Finance 101, as I learned it 25 years ago. I guess they flunked or cheated in that course.
8. Class action lawsuits ... enrich lawyers turned pirates and do nothing for consumers or stockholders.
9. Stock buybacks ... nearly single share of stock bought back for the past 10-15 years is proven to have been a very poor use of corporate funds. The management prefers stock buybacks as those prop up the value of their stock options.
10. Thinking ... Does anyone have a tenth ?
Markets
That glorious, efficient, rational and liquid market show itself well yesterday [ that's sarcasm ! ], putting in another wild move.
The bears might re-attack soon. Some recent Thanksgiving holidays have given them easy targets in low volume on the Friday after Thanksgiving.
Actions
Today I can do a bit of re-allocation in Krypto Fund, but stil must wait until late next week for most of it. I am tied up by the interplay of tax rules for wash sales and mutual fund exchange rules. I wonder if I should open a brokerage account in my main retirement accounts to enable me to use ETFs to sidestep those rules ? Thinking ...
I am thinking of investing some Alpha Fund money into a package of small, beaten up stocks the might go up 5 or 10x in a new bull market. That will require some selection. Just thinking for now.
Word of the Day
"Copyhold" - noun [$100]
Copyhold means 1. (formerly) a type of ownership of land in England, evidenced by a copy of the manor roll establishing title; 2. an estate held under such ownership.
Sentence: Stockholders need to stop being mere copyholders and start act as real owners exercising their powers to approve stocks options plans, director and other corporate actions. And they should lobby for new laws for secret voting in proxies, rights to elect the compensation committee directly, and to nominate directors themselves.
Monday, November 24, 2008
A Monday in a Holiday Week
Should be calm, right ?
Hahahaha .... surely you fantasize !
European markets are up about 5% today as they catch up to the late Friday PM rally in New York.
This morning's WSJ had a story about the crisis at Morgan Stanly in September. The hedge funds, credit default swaps and rumors combined to cause the panic. Hedge funds and even the Street itself would buy credit default swaps and short the stock. They say they were "hedging".. Sure.
That credit default swap "market" really needs to be shut down. There really is no natural insurer of credit in size, except one who actually buys the debt for cash.
All exotic derivatives - derivatives on indices of thinly traded exotic securities - need to be eliminated. That includes derivatives on volatility. No derivative that is not traded in a central exchange should be permitted.
Hedge funds need a massive dose of world-wide regulation to stop them from being the financial Vikings - raid, rape, pillage in the world markets.
Short ETFs should be banned. They are just a loophole from stock borrowing rules via market maker exceptions. Stock borrowing rules should apply to market makers including ETFs.
Overall, the markets need to return to reality, and away from casino gambling in "notional" products.
French
I ran across an interesting usage in my French lesson yesterday:
"Le sauve-qui-peut" comes from the verb, 'sauver', meaning to rescue, save. Le sauver-qui-peut means the panic, stampede, mad rush.
Hmmm ... so le sauver-qui-peut de riches means panic/stampede of the rich.
French is fun.
Actions
I await the expiration of mutual fund transfer limits so I can re-balance Krypto Fund.
For Alpha Fund, I am thinking about putting together a package of single digit / battered stocks to buy that might give me a 10x return over a year or two. Just thinking for now. No rush.
Word of the Day
"Bodkin" - noun [$10] used in Hamlet's Soliloquy by Shakespeare
Bodkin means 1. a blunt, thick needle with a large used esp. for drawing tape etc. through a hem; 2. a long pin for fastening hair; 3. a small pointed instrument for piercing cloth, removing a piece of type for correction, etc.
Sentence: Aftermarket analysis of events in this crisis is showing that mobs of hedge funds gang up on targets to each stick a bodkin into its body, hoping to hide in the crowd.
Hahahaha .... surely you fantasize !
European markets are up about 5% today as they catch up to the late Friday PM rally in New York.
This morning's WSJ had a story about the crisis at Morgan Stanly in September. The hedge funds, credit default swaps and rumors combined to cause the panic. Hedge funds and even the Street itself would buy credit default swaps and short the stock. They say they were "hedging".. Sure.
That credit default swap "market" really needs to be shut down. There really is no natural insurer of credit in size, except one who actually buys the debt for cash.
All exotic derivatives - derivatives on indices of thinly traded exotic securities - need to be eliminated. That includes derivatives on volatility. No derivative that is not traded in a central exchange should be permitted.
Hedge funds need a massive dose of world-wide regulation to stop them from being the financial Vikings - raid, rape, pillage in the world markets.
Short ETFs should be banned. They are just a loophole from stock borrowing rules via market maker exceptions. Stock borrowing rules should apply to market makers including ETFs.
Overall, the markets need to return to reality, and away from casino gambling in "notional" products.
French
I ran across an interesting usage in my French lesson yesterday:
"Le sauve-qui-peut" comes from the verb, 'sauver', meaning to rescue, save. Le sauver-qui-peut means the panic, stampede, mad rush.
Hmmm ... so le sauver-qui-peut de riches means panic/stampede of the rich.
French is fun.
Actions
I await the expiration of mutual fund transfer limits so I can re-balance Krypto Fund.
For Alpha Fund, I am thinking about putting together a package of single digit / battered stocks to buy that might give me a 10x return over a year or two. Just thinking for now. No rush.
Word of the Day
"Bodkin" - noun [$10] used in Hamlet's Soliloquy by Shakespeare
Bodkin means 1. a blunt, thick needle with a large used esp. for drawing tape etc. through a hem; 2. a long pin for fastening hair; 3. a small pointed instrument for piercing cloth, removing a piece of type for correction, etc.
Sentence: Aftermarket analysis of events in this crisis is showing that mobs of hedge funds gang up on targets to each stick a bodkin into its body, hoping to hide in the crowd.
Sunday, November 23, 2008
Great News ...
Ohio State 42, Michigan 7. :))
COLUMBUS, Ohio (AP) — Ohio State has never dominated Michigan the way it does right now.
In the rivalry’s most lopsided result in 40 years, the Buckeyes won their fifth straight over that hated school up north for the first time, ending a dreadful first season for Wolverines coach Rich Rodriguez.“I’ve been here for one of them,” Rodriguez said. “That’s the only one I can really comment on. They have one in a row on us from what I see.”Ohio State (10-2, 7-1) used five big plays to win by the biggest margin in the rivalry since Woody Hayes was prowling and growling on the sidelines in a 50-14 rout of Michigan in 1968.
COLUMBUS, Ohio (AP) — Ohio State has never dominated Michigan the way it does right now.
In the rivalry’s most lopsided result in 40 years, the Buckeyes won their fifth straight over that hated school up north for the first time, ending a dreadful first season for Wolverines coach Rich Rodriguez.“I’ve been here for one of them,” Rodriguez said. “That’s the only one I can really comment on. They have one in a row on us from what I see.”Ohio State (10-2, 7-1) used five big plays to win by the biggest margin in the rivalry since Woody Hayes was prowling and growling on the sidelines in a 50-14 rout of Michigan in 1968.
Friday, November 21, 2008
The Panic Continues ... II ( or is that LX ? )
More of the same, as the liquidation train wreck goes on.
Congress has shown itself incapable of doing anything rational in a timely manner. so this slog will likely continue now into December or when the new Congress is installed in the first week of January or maybe even until Barry takes office.
This drop seems like a replay of the late September fall when Congress first could not act quickly on the TARP. This time it's their inability to provide the auto industry a bit of relief. When one remembers that they can waste $25-50 billion on earmark every year, their inability to provide some relief to help prevent turmoil that could endanger huge numbers of good paying jobs is quite stunning.
US Treasury bonds are at record low yields in recent times, as I suspect all that money flowing to buy fixed rate life annuities is going to buy long dated Treasuries. Why should the insurance companies take risk on those ? They'll pay a low rate and invest in Treasuries for now.
At this point, perhaps Congress should just consider providing the auto industry with $100 billion of "debtor in possession" financing so their looming bankruptcy will be an orderly reorganization, not a liquidation. That is super-senior, so the unemployed taxpayer might not "lose money" ... his job, Congress seems willing to let go to the wind.
By the way, is a bit of "inflation" really so bad ?
Actions
The bloody morning drop worried me with more insane swings in fine stocks like RIG, so I sold the oils and some miners on the minor bounce. I had written that when the bears keep knocking - kicking - on that support level, they would likely get through. And they did.
Alpha Fund now just 50% long, holding only FCX and the small shippers DRYS (ultra-risky), EXM and GNK. I bought some more of all of those yesterday and might buy more. Those stocks, IFF they work out, have huge upside.
I am waiting for some deadlines to pass so I can do a re-allocation in Krypto Fund.
The markets are like a wild brawl - or shoot-out - of drunken gangsters. Watch out, don't get hit. Protect Yourself at All Times. Big profits await the survivors.
Word of the Day
"Ennui" - noun [$10] This is an old card from my file - I can see that my handwriting - perhaps from 35-40 years ago. But since this morning I learned the French words from which it derives , I thought to use it today.
Ennui means a feeling of weariness and dissatisfaction.
Sentence: The constant wildness of the markets have been ongoing so long that "investors" must now feel ennui and certainly resignation of a long wait for recovery.
Congress has shown itself incapable of doing anything rational in a timely manner. so this slog will likely continue now into December or when the new Congress is installed in the first week of January or maybe even until Barry takes office.
This drop seems like a replay of the late September fall when Congress first could not act quickly on the TARP. This time it's their inability to provide the auto industry a bit of relief. When one remembers that they can waste $25-50 billion on earmark every year, their inability to provide some relief to help prevent turmoil that could endanger huge numbers of good paying jobs is quite stunning.
US Treasury bonds are at record low yields in recent times, as I suspect all that money flowing to buy fixed rate life annuities is going to buy long dated Treasuries. Why should the insurance companies take risk on those ? They'll pay a low rate and invest in Treasuries for now.
At this point, perhaps Congress should just consider providing the auto industry with $100 billion of "debtor in possession" financing so their looming bankruptcy will be an orderly reorganization, not a liquidation. That is super-senior, so the unemployed taxpayer might not "lose money" ... his job, Congress seems willing to let go to the wind.
By the way, is a bit of "inflation" really so bad ?
Actions
The bloody morning drop worried me with more insane swings in fine stocks like RIG, so I sold the oils and some miners on the minor bounce. I had written that when the bears keep knocking - kicking - on that support level, they would likely get through. And they did.
Alpha Fund now just 50% long, holding only FCX and the small shippers DRYS (ultra-risky), EXM and GNK. I bought some more of all of those yesterday and might buy more. Those stocks, IFF they work out, have huge upside.
I am waiting for some deadlines to pass so I can do a re-allocation in Krypto Fund.
The markets are like a wild brawl - or shoot-out - of drunken gangsters. Watch out, don't get hit. Protect Yourself at All Times. Big profits await the survivors.
Word of the Day
"Ennui" - noun [$10] This is an old card from my file - I can see that my handwriting - perhaps from 35-40 years ago. But since this morning I learned the French words from which it derives , I thought to use it today.
Ennui means a feeling of weariness and dissatisfaction.
Sentence: The constant wildness of the markets have been ongoing so long that "investors" must now feel ennui and certainly resignation of a long wait for recovery.
Thursday, November 20, 2008
The Panic Continues ...
The Panic of the Rich continues.
I suspect the common man is panicking, too. Anecdotally, I was speaking to my old insurance agent in NYC, who caters to quite a gilt-edged clientele (much more than me). He told me that stunning numbers of them had, or were, going to all cash and buying fixed rate, life annuities in huge amounts.
From my 100 year wall chart of stock prices and economic indicators, the great bear market of 1973-1975 might be a good model for this bear market. Roughly, the broad averages were down about 45% from the prior year's high. The selling continued into the end of the year, then a powerful rally occurred in 1975.
A friend sent me an interesting histogram showing annual returns of the S&P from 1825 to 2007. The worst year of all was 1931, an outlier with a drop in the range of -50 to -40% Year to date, 2008 falls in this exclusive club.
To me, it seems like the bears and panic-mongers want to push for new lows. Knocking so hard on the support levels for so long usually breaks through. If there are enough of them, they can do it.
Actions
Doing nothing. I can't even re-balance Krypto Fund due to tax loss and fund exchange restrictions. Quite frustrating. I might put more money into my Alpha Fund before year end or in early 2009.
Word of the Day
"Monism" - noun [$10]
Monism means 1. any theory denying the duality of matter and mind; 2. (philosophical & theological) the doctrine that only one supreme exists; 3. a metaphysical system in which reality is viewed as unified whole.
Sentence: A propos the stock markets, one could characterise both pure fundamental and technical analysts and adherents as believers in a form of monism: denying the duality of perception and reality. Today, clearly perception rules, as it does in extremes of fear and greed. But at some time, a panic will burn out as the fuel is consumed. The lurch to reality will then begin.
I suspect the common man is panicking, too. Anecdotally, I was speaking to my old insurance agent in NYC, who caters to quite a gilt-edged clientele (much more than me). He told me that stunning numbers of them had, or were, going to all cash and buying fixed rate, life annuities in huge amounts.
Yesterday was no doubt more than tax loss selling, but it's clearly there, too.
A friend sent me an interesting histogram showing annual returns of the S&P from 1825 to 2007. The worst year of all was 1931, an outlier with a drop in the range of -50 to -40% Year to date, 2008 falls in this exclusive club.
To me, it seems like the bears and panic-mongers want to push for new lows. Knocking so hard on the support levels for so long usually breaks through. If there are enough of them, they can do it.
Actions
Doing nothing. I can't even re-balance Krypto Fund due to tax loss and fund exchange restrictions. Quite frustrating. I might put more money into my Alpha Fund before year end or in early 2009.
Word of the Day
"Monism" - noun [$10]
Monism means 1. any theory denying the duality of matter and mind; 2. (philosophical & theological) the doctrine that only one supreme exists; 3. a metaphysical system in which reality is viewed as unified whole.
Sentence: A propos the stock markets, one could characterise both pure fundamental and technical analysts and adherents as believers in a form of monism: denying the duality of perception and reality. Today, clearly perception rules, as it does in extremes of fear and greed. But at some time, a panic will burn out as the fuel is consumed. The lurch to reality will then begin.
Wednesday, November 19, 2008
What to Do ?
I was asked yesterday by a loquacious commentor what Barry - aka Obama - should do for a stimulus plan. As this writer is NOT a purist - pharisaic - libertarian, but favors maximum freedom for the common man with strong limits on the ruling classes, you should not be surprised that I favor a large stimulus bill, properly used.
Barry should propose a $1 trillion economic stimulus that would be spent over two years - $500 billion per year.
The money should go to the following productive investments:
1. Generalized infrastructure - roads, bridges, railroads, ports, airports, air traffic control, high speed rail between major cities within 300 miles of each other, nationwide fiber optic Internet, wireless Internet in major cities, etc.
2. Purchase foreclosed homes and rent them to lower income people under a rent-to-own contract as long as they maintain the home and actually live there for ten years. This contract could be assignable with consent of government with suitable anti-speculation rules.
Barry should also request massive global regulation on hedge funds and all aspects of global hot money. Investors in hedge funds should be required to invest for a minimum of three years - complete, strict lock-up. Hedge fund managers should be taxed on all management income as ordinary income. Of course, massive regulation of all derivatives should also be required.
Current dividend and capital gains tax rates should be kept, as they really just help lesson the double taxation of corporate income.
Also, I DO favor some kind of auto industry aid, however distasteful for that failed management and labor clique. When one buys a car, one expects the company will be around to provide service, parts, etc., and a re-sale on the trade in. An auto industry bankruptcy might seriously affect that perception with fearsome unintended consequences. In addition, the chain of bankruptcies throughout the supply chain can be enormous as payments are disrupted. This unknown is not needed now. For $25-$50 billion in aid, it's worth avoiding.
Congress wastes that much on worthless earmarks every year.
Markets
More tax loss selling is and will occur, but there do seem to be "real" nibblers buying these dips.
I have more tax loss selling to do. This is really saving me a lot of money. The timing difference between realized gains and unrealized losses can be substantial if one invests for a longer time period. I mostly re-invest in something else immediately, but do wait a bit for some, as I have other wash sale rules to carefully watch.
PS: Also, doe sanyone else notice how much of this trouble is now located in Europe ? I wonder when The Ostrich, aka ECB chief Trichet, will cut rates to a realistic level. ECB and Bank of Engalnd should cut rates to 1%.
Word of the Day
"Sadduce" - noun [$10] or "Sadducee" - this word contrasts "Pharisaic"
Sadduce means a member of a Jewish sect or party at the time of Christ that denied the resurrection of the dead, the existence of spirits, and the obligation of the traditional oral law.
Sentence: Perhaps Bunkerman is more like a sadducaic libertarian, as he opposes the strict pharisaic - purist - interpretation and favors practical limits on the rich and powerful to prevent them from oppressing the common man, re-creating an aristocracy and permitting their antics from harming the global economy. And he also denies the existence of the god or demigod of the "market" as correct interpreter or diviner of the future of the world.
Barry should propose a $1 trillion economic stimulus that would be spent over two years - $500 billion per year.
The money should go to the following productive investments:
1. Generalized infrastructure - roads, bridges, railroads, ports, airports, air traffic control, high speed rail between major cities within 300 miles of each other, nationwide fiber optic Internet, wireless Internet in major cities, etc.
2. Purchase foreclosed homes and rent them to lower income people under a rent-to-own contract as long as they maintain the home and actually live there for ten years. This contract could be assignable with consent of government with suitable anti-speculation rules.
Barry should also request massive global regulation on hedge funds and all aspects of global hot money. Investors in hedge funds should be required to invest for a minimum of three years - complete, strict lock-up. Hedge fund managers should be taxed on all management income as ordinary income. Of course, massive regulation of all derivatives should also be required.
Current dividend and capital gains tax rates should be kept, as they really just help lesson the double taxation of corporate income.
Also, I DO favor some kind of auto industry aid, however distasteful for that failed management and labor clique. When one buys a car, one expects the company will be around to provide service, parts, etc., and a re-sale on the trade in. An auto industry bankruptcy might seriously affect that perception with fearsome unintended consequences. In addition, the chain of bankruptcies throughout the supply chain can be enormous as payments are disrupted. This unknown is not needed now. For $25-$50 billion in aid, it's worth avoiding.
Congress wastes that much on worthless earmarks every year.
Markets
More tax loss selling is and will occur, but there do seem to be "real" nibblers buying these dips.
I have more tax loss selling to do. This is really saving me a lot of money. The timing difference between realized gains and unrealized losses can be substantial if one invests for a longer time period. I mostly re-invest in something else immediately, but do wait a bit for some, as I have other wash sale rules to carefully watch.
PS: Also, doe sanyone else notice how much of this trouble is now located in Europe ? I wonder when The Ostrich, aka ECB chief Trichet, will cut rates to a realistic level. ECB and Bank of Engalnd should cut rates to 1%.
Word of the Day
"Sadduce" - noun [$10] or "Sadducee" - this word contrasts "Pharisaic"
Sadduce means a member of a Jewish sect or party at the time of Christ that denied the resurrection of the dead, the existence of spirits, and the obligation of the traditional oral law.
Sentence: Perhaps Bunkerman is more like a sadducaic libertarian, as he opposes the strict pharisaic - purist - interpretation and favors practical limits on the rich and powerful to prevent them from oppressing the common man, re-creating an aristocracy and permitting their antics from harming the global economy. And he also denies the existence of the god or demigod of the "market" as correct interpreter or diviner of the future of the world.
Tuesday, November 18, 2008
Tax Loss Selling
The markets are likely to be very heavy until the end of the year as tax loss selling will be substantial. I did some of that yesterday and have more to do. Why pay taxes on realized profits if one has unrealized losses to offset them, at least partially ? That is real money that can be saved. For me, I can see my January 15 estimated tax payment cut substantially, as based on current results, I've overpaid my taxes so far this year.
One can switch mutual funds to take losses, or sell one stock & buy a similar one, or just sell and regroup. I expect people all over the world are thinking about this.
I still have a lot of gains that I booked early this year to offset as much as possible.
Markets
Les Bourses mondiales sont plombées. In English, that is "The world markets are leaden."
Hmmm ... I wonder how to say, "doing nothing" in French ? That verb for "do" has a lot of idioms in French. Hehe, it has interesting idioms in American English, too.
Word of the Day
"Mere" - noun (in this usage) [$10] archaic, poetic [I am not using the common adjective, mere, here]
Mere (in this usage) means a lake or pond.
Sentence: Reminiscent of that famous headline as New York City sought Federal help in the major 1973-1975 US recession, which read "Ford to NY - Drop Dead", we have, or can at least infer, "Bush to Detroit - Go Jump in the Mere".
One can switch mutual funds to take losses, or sell one stock & buy a similar one, or just sell and regroup. I expect people all over the world are thinking about this.
I still have a lot of gains that I booked early this year to offset as much as possible.
Markets
Les Bourses mondiales sont plombées. In English, that is "The world markets are leaden."
Hmmm ... I wonder how to say, "doing nothing" in French ? That verb for "do" has a lot of idioms in French. Hehe, it has interesting idioms in American English, too.
Word of the Day
"Mere" - noun (in this usage) [$10] archaic, poetic [I am not using the common adjective, mere, here]
Mere (in this usage) means a lake or pond.
Sentence: Reminiscent of that famous headline as New York City sought Federal help in the major 1973-1975 US recession, which read "Ford to NY - Drop Dead", we have, or can at least infer, "Bush to Detroit - Go Jump in the Mere".
Monday, November 17, 2008
More Short Selling Fraud
Every rock that one picks up in the area of short selling uncovers another ugly bug, viz., more fraud. The failure to deliver stocks, bonds and loans sold short is an on-going scandal. The fraud occurs in the dealer community and in the hedge fund community. The SEC seems clueless. Perhaps that agency should just be folded into a department at the Fed along with the CFTC. Neither seems capable of acting in the interests of the markets and the common man. Both are in the pockets of the dealers and the hedge funds in conniving to create loopholes for illegal and fraudulent activity.
FT online has a long article [Nov. 10] about how dealers sell short loans that they cannot or will not delivery in a timely basis. That's just fraud. They are effectively "printing" new loans to sell short and make money. Meanwhile the value of the loans drop due to the pressure of new creation.
This behavior is equivalent to the Gould Ring's using the printing press to print new shares of Erie Railroad to sell short on the NYSE in one of the Erie wars. At one time the ink was so fresh it rubbed off on the clearing agent's hands on the floor, creating a panic.
But the SEC seems willing to permit this fraud.
And another article that I read over the weekend shows how the SEC's "market maker" loophole is being used to avoid the purported "hard" 3-day delivery rule. That was predicted here. There should be absolutely no market maker loopholes. No loopholes, period.
But does the Fed do better ? Fails to deliver in the repo market are an ongoing scandal.
And what is the SEC doing ? It's connivinng to continue the fraud.
A friend sent me an article that seems to indicate the SEC is simply trying to come up with a fig leaf to deflect public criticism. Ideas of a huge "circuit breaker" seems gaining momentum at the SEC- but of course the large limit on a down move before it would be triggered shows that this is just a scam. Here are the relevant quotes:
"It would be restricted for some kind of panic situation," he said. The idea was to rarely, if ever, need to halt short selling. "
"A circuit-breaker rule covering short sales could include exemptions for firms, order types or trading activity such as market making, Ratterman said. Enforcement of the ban would rest either with the exchanges or the brokers, Ratterman added. "
The SEC is knave central.
Let's go back to the old rule: “He who sells what isn’t his’n, must buy it back or go to prison.” attributed to the infamous bear raider Daniel Drew (1797-1879).
Hard delivery rules - no exceptions.
Markets
G20 meeting over - nothing happened this time, but actually I expect some action next spring as the details can be worked out. Some restrictions on global hot money - aka hedge funds - is needed.
I see India is taking action to provide trade finance. That is an area that governmental action is needed fast in many places in the world.
I bought some more FCX in my Alpha Fund in the pullback Friday. I have a full position in that now.
I'm working out how the best take some tax losses. I have a lot of gains and I'd like to minimize the tax bill from those. This is real money that I pay every quarter, so it's worthwhile to take the losses. I can use both short term losses and long term losses as I have some large gains in both categories that can be offset, at least partially.
PS: In case anyone is wondering how I can have gains after my WB and C debacles, I booked quite large gains in the gold & silver sales in the Spring as well as in sales of the oils when the oil prices was so high, and the miners and a large profit on AAPL sales around 200.
Word of the Day
"Crime" - transitive verb (!) for this usage [$10 or $100 depending on your dictionary]
Crime means (verb - British Military, etc.) means to charge with or convict of an offense.
Sentence: When will the markets have an regulator willing to crime any short seller who fails to delivery the promised securites sold short ?
FT online has a long article [Nov. 10] about how dealers sell short loans that they cannot or will not delivery in a timely basis. That's just fraud. They are effectively "printing" new loans to sell short and make money. Meanwhile the value of the loans drop due to the pressure of new creation.
This behavior is equivalent to the Gould Ring's using the printing press to print new shares of Erie Railroad to sell short on the NYSE in one of the Erie wars. At one time the ink was so fresh it rubbed off on the clearing agent's hands on the floor, creating a panic.
But the SEC seems willing to permit this fraud.
And another article that I read over the weekend shows how the SEC's "market maker" loophole is being used to avoid the purported "hard" 3-day delivery rule. That was predicted here. There should be absolutely no market maker loopholes. No loopholes, period.
But does the Fed do better ? Fails to deliver in the repo market are an ongoing scandal.
And what is the SEC doing ? It's connivinng to continue the fraud.
A friend sent me an article that seems to indicate the SEC is simply trying to come up with a fig leaf to deflect public criticism. Ideas of a huge "circuit breaker" seems gaining momentum at the SEC- but of course the large limit on a down move before it would be triggered shows that this is just a scam. Here are the relevant quotes:
"It would be restricted for some kind of panic situation," he said. The idea was to rarely, if ever, need to halt short selling. "
"A circuit-breaker rule covering short sales could include exemptions for firms, order types or trading activity such as market making, Ratterman said. Enforcement of the ban would rest either with the exchanges or the brokers, Ratterman added. "
The SEC is knave central.
Let's go back to the old rule: “He who sells what isn’t his’n, must buy it back or go to prison.” attributed to the infamous bear raider Daniel Drew (1797-1879).
Hard delivery rules - no exceptions.
Markets
G20 meeting over - nothing happened this time, but actually I expect some action next spring as the details can be worked out. Some restrictions on global hot money - aka hedge funds - is needed.
I see India is taking action to provide trade finance. That is an area that governmental action is needed fast in many places in the world.
I bought some more FCX in my Alpha Fund in the pullback Friday. I have a full position in that now.
I'm working out how the best take some tax losses. I have a lot of gains and I'd like to minimize the tax bill from those. This is real money that I pay every quarter, so it's worthwhile to take the losses. I can use both short term losses and long term losses as I have some large gains in both categories that can be offset, at least partially.
PS: In case anyone is wondering how I can have gains after my WB and C debacles, I booked quite large gains in the gold & silver sales in the Spring as well as in sales of the oils when the oil prices was so high, and the miners and a large profit on AAPL sales around 200.
Word of the Day
"Crime" - transitive verb (!) for this usage [$10 or $100 depending on your dictionary]
Crime means (verb - British Military, etc.) means to charge with or convict of an offense.
Sentence: When will the markets have an regulator willing to crime any short seller who fails to delivery the promised securites sold short ?
Friday, November 14, 2008
Turnaround and TGIF
Yesterday's market action was intriguing. The midday drop was scary, but the turnaround dramatic. My interpretation is that the beefers tried to push the market down to create fear and to probe for new sellers to scare out at lower prices. As stocks trade like commodities nowadays, that old commodity tactic of pushing a price through a logical place for stops occurs in stocks now, too.
So the beefers tried a bear raid, but found no new sellers and probably a few "real" buyers came in, too. After that, it was time to cover the shorts and I suspect some beefers with sideline cash came in as the "re-test" held.
That's it. Don't read "fundamental" interpretation by that demi-god, the "market" into the move.
Actions
Doing nothing. I was tempted to buy more FCX as under $22 was my price area, but decided I have enough. I don't want to get too long in this wild market.
PS: I supose this is bad luck, but decided to add a bit to FCX today on the pullback. I did some research on the stock early this AM in response to a question from a friend and felt better myself. I have room for a bit more, either later today or whenever I get a good price.
Word of the Day
"Dead-house" or "Deadhouse" - noun [ $100]
Deadhouse means a morgue.
Sentence: Based on the lack of response to their begging for handout, Chrysler seems headed for the deadhouse. GM and Ford may follow soon.
So the beefers tried a bear raid, but found no new sellers and probably a few "real" buyers came in, too. After that, it was time to cover the shorts and I suspect some beefers with sideline cash came in as the "re-test" held.
That's it. Don't read "fundamental" interpretation by that demi-god, the "market" into the move.
Actions
Doing nothing. I was tempted to buy more FCX as under $22 was my price area, but decided I have enough. I don't want to get too long in this wild market.
PS: I supose this is bad luck, but decided to add a bit to FCX today on the pullback. I did some research on the stock early this AM in response to a question from a friend and felt better myself. I have room for a bit more, either later today or whenever I get a good price.
Word of the Day
"Dead-house" or "Deadhouse" - noun [ $100]
Deadhouse means a morgue.
Sentence: Based on the lack of response to their begging for handout, Chrysler seems headed for the deadhouse. GM and Ford may follow soon.
Thursday, November 13, 2008
TARP is working so far
With all the hyperventilating and angst about the TARP, perhaps one should look at some facts before becoming awash in opinion.
What was the objective of the plan ? To save the banking system. What are the facts now ?
Source: WSJ paper edition for Wednesday November 12, 2008.
1. One month LIBOR is 1.48%.
2. Nonfinancial commercial paper for 180 days yields 2.35%.
3. Bankers acceptances (used in foreign trade finance) for 90 days yield 2.53%.
Obviously the initial phase of Paulson's effort has worked.
The principal problems now exist further down the lender food chain, viz. certain consumer loans and and corporate bonds.
Market
More hedge fund liquidations. I have no idea when that will end as the Panic of the Rich continues.
Can someone tell me why it is "news" that some economies are in a recession ? Have we not been hearing this angst for almost nine months ?
By the way, industrial output in China was up 8% in October.
Korea offers $16 billion in trade finance. This is good.
Actions
Mrs. B did a small bit of buying yesterday and is contemplating more. I am waiting to add to my long term favorites. If AAPL goes much lower, I'll have to re-buy it later this month when the wash sale window opens.
Word of the Day
"Swan" - verb, intransitive [$10 or $100 depending on your dictionary] British colloquial, usually followed by 'about', 'off', etc.)
Swan means (in this usage) to move or go aimlessly or casually with a superior air.
Sentence: As pure libertarians swan about mouthing their theories about "markets" never being wrong, facts pile up daily that markets are wrong quite often. Anyone who read those classics such as "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay and "Wisdom of Crowds" by James Surowiecki should know that.
What was the objective of the plan ? To save the banking system. What are the facts now ?
Source: WSJ paper edition for Wednesday November 12, 2008.
1. One month LIBOR is 1.48%.
2. Nonfinancial commercial paper for 180 days yields 2.35%.
3. Bankers acceptances (used in foreign trade finance) for 90 days yield 2.53%.
Obviously the initial phase of Paulson's effort has worked.
The principal problems now exist further down the lender food chain, viz. certain consumer loans and and corporate bonds.
Market
More hedge fund liquidations. I have no idea when that will end as the Panic of the Rich continues.
Can someone tell me why it is "news" that some economies are in a recession ? Have we not been hearing this angst for almost nine months ?
By the way, industrial output in China was up 8% in October.
Korea offers $16 billion in trade finance. This is good.
Actions
Mrs. B did a small bit of buying yesterday and is contemplating more. I am waiting to add to my long term favorites. If AAPL goes much lower, I'll have to re-buy it later this month when the wash sale window opens.
Word of the Day
"Swan" - verb, intransitive [$10 or $100 depending on your dictionary] British colloquial, usually followed by 'about', 'off', etc.)
Swan means (in this usage) to move or go aimlessly or casually with a superior air.
Sentence: As pure libertarians swan about mouthing their theories about "markets" never being wrong, facts pile up daily that markets are wrong quite often. Anyone who read those classics such as "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay and "Wisdom of Crowds" by James Surowiecki should know that.
Wednesday, November 12, 2008
Bits and Trends
Retail sales in China are up 22% in October - I guess that's year over year. Hmmm ... quite interesting. Perhaps China have developed considerable internal domestic demand and doesn't rely as much as one might have thought on exports.
A problem Japan has had for many years is that its economy excessively relies on exports and domestic demand is too low. Demographics partly forces that, but government policies there exacerbate it.
American Express to ask for TARP aid. Huh ? What the heck has that management been doing ? I've never liked the management of American Express. I fear there is a bug under that rock.
I think the Mexico story from yesterday about how they have hedged a very large amount of oil tells us why oil is still weak. Hedging by producer nations that need the money. Hmmm ...
Actions
Yesterday I re-bought some CCJ as the wash sale tax window is long gone. Their earnings were OK and uranium really is the only effective power source that does not produce carbon dioxide. I don't believe that global warming is caused by humans, but enough people do and I'd like to profit from their stupidity. 1/2 position for now.
I also added a bit to DRYS, EXM and GNK. These stocks are ultra risky as the chance does exist the banks won't show some flexibility in loan to value covenants. But in my experience, as long as the companies produce cash flow on the loans, the banks will, and should, forebear. These companies do not have excessive debt and did a good job locking in long term charters with good credits for enough of the fleet to cover the bank debt. Dilution is a risk, as is whether large shareholders are margined on their stock. I do not have positions that are too large in those, and will add a bit me at good prices.
Late yesterday an astute commentor skeptically asked for my 'plan". Overall my plan is to continue to buy some stocks I like at good prices. I like GOOG but cannot buy it until late in the month due to the 30 day wash sale window. I will maintain a reserve, either in the Alpha Fund itself or in the bank account from which I can easily shift $ to it. "Protect yourself at all times."
Why do I care about tax losses ? Since I plan to hold these stocks a long time in the future to get large, long term gains. I don't want to lock up valuable tax losses for years. And I can use those losses this year as I still have very large capital gains to offset - both short term and long term. This save me real money every quarterly estimated tax payment day.
Word of the Day
"Assay" - noun and verb [many usages, this usage is a $100 one from an H. L. Mencken quote]
Assay means (after meanings 1-7) 8. (metallurgy) determination of the amount of metal, especially gold or silver, in an ore, alloy, etc.; 9. a substance undergoing analysis or trial; 10. a detailed report of the findings in assaying a substance; 11. (archaic) examination, trial, attempt, essay.
Sentences:
(A) (from "the Impossible H. L. Mencken", page 207) "For seldom have these eyes encountered a document by an American politician which there was a larger assay of common sense."
(B) The assay of common sense provided by Babblevsion, Blabberg and in general the American press compares unfavorably to the assay of true gold in fool's gold.
A problem Japan has had for many years is that its economy excessively relies on exports and domestic demand is too low. Demographics partly forces that, but government policies there exacerbate it.
American Express to ask for TARP aid. Huh ? What the heck has that management been doing ? I've never liked the management of American Express. I fear there is a bug under that rock.
I think the Mexico story from yesterday about how they have hedged a very large amount of oil tells us why oil is still weak. Hedging by producer nations that need the money. Hmmm ...
Actions
Yesterday I re-bought some CCJ as the wash sale tax window is long gone. Their earnings were OK and uranium really is the only effective power source that does not produce carbon dioxide. I don't believe that global warming is caused by humans, but enough people do and I'd like to profit from their stupidity. 1/2 position for now.
I also added a bit to DRYS, EXM and GNK. These stocks are ultra risky as the chance does exist the banks won't show some flexibility in loan to value covenants. But in my experience, as long as the companies produce cash flow on the loans, the banks will, and should, forebear. These companies do not have excessive debt and did a good job locking in long term charters with good credits for enough of the fleet to cover the bank debt. Dilution is a risk, as is whether large shareholders are margined on their stock. I do not have positions that are too large in those, and will add a bit me at good prices.
Late yesterday an astute commentor skeptically asked for my 'plan". Overall my plan is to continue to buy some stocks I like at good prices. I like GOOG but cannot buy it until late in the month due to the 30 day wash sale window. I will maintain a reserve, either in the Alpha Fund itself or in the bank account from which I can easily shift $ to it. "Protect yourself at all times."
Why do I care about tax losses ? Since I plan to hold these stocks a long time in the future to get large, long term gains. I don't want to lock up valuable tax losses for years. And I can use those losses this year as I still have very large capital gains to offset - both short term and long term. This save me real money every quarterly estimated tax payment day.
Word of the Day
"Assay" - noun and verb [many usages, this usage is a $100 one from an H. L. Mencken quote]
Assay means (after meanings 1-7) 8. (metallurgy) determination of the amount of metal, especially gold or silver, in an ore, alloy, etc.; 9. a substance undergoing analysis or trial; 10. a detailed report of the findings in assaying a substance; 11. (archaic) examination, trial, attempt, essay.
Sentences:
(A) (from "the Impossible H. L. Mencken", page 207) "For seldom have these eyes encountered a document by an American politician which there was a larger assay of common sense."
(B) The assay of common sense provided by Babblevsion, Blabberg and in general the American press compares unfavorably to the assay of true gold in fool's gold.
Tuesday, November 11, 2008
Armistice Day - Veterans Day
Today is the 90th anniversary of the end of World War I. Reading Le Monde this morning, it is quite clear that today is a much larger event in France & Britain than in the US. Numerous major public commemorations include the leaders of both nations and issues of old injustices are raised. The history of World War I in both Europe and the US has much to teach modern man. If you ever get a chance, watch the DVDs that show the history of World War I. Much good footage exists and the events are far enough in the past that true history can be seen, without the influence of politics.
In the US, one element that is missed is that many personal and political liberties were crushed as the US entered World War I. Freedom of speech and the press was massive curtailed. People were fired, jailed or deported for expressing dissent. Supreme Court decisions legitimized that oppression. So while the propaganda machine touted a war to "Make the World Safe for Democracy", at home the same machine was crushing personal freedom. This is certainly not well known.
Those old Supreme Court decisions were not overturned until the 1950s and 1960s.
Markets
The significance of the China stimulus was brushed aside. That plan was real news and a quite bullish event.
American Express to become a bank. Sighhhh ...
I guess finance will now return to the old ways. CFOs will again match liabilities with assets as the god of the markets is now obviously not always around to make money rain from the sky.
Many ship building contracts are being cancelled. So over time that will make current ships more valuable. If the shipping companies can survive current conditions, they will be worth much more ... IFF the world survives..
Actions
Doing nothing. I have money to invest, but am waiting as I practice "time diversification".
Word of the Day
"Vidette" - noun [$10] = "vedette"
Vidette means 1. a small naval launch used for scouting; 2. a mounted sentry in advance of the outposts of an army.
Sentence: Hiding in the bunkers, I wonder if investors will miss noticing the videttes of the next great bull market ?
In the US, one element that is missed is that many personal and political liberties were crushed as the US entered World War I. Freedom of speech and the press was massive curtailed. People were fired, jailed or deported for expressing dissent. Supreme Court decisions legitimized that oppression. So while the propaganda machine touted a war to "Make the World Safe for Democracy", at home the same machine was crushing personal freedom. This is certainly not well known.
Those old Supreme Court decisions were not overturned until the 1950s and 1960s.
Markets
The significance of the China stimulus was brushed aside. That plan was real news and a quite bullish event.
American Express to become a bank. Sighhhh ...
I guess finance will now return to the old ways. CFOs will again match liabilities with assets as the god of the markets is now obviously not always around to make money rain from the sky.
Many ship building contracts are being cancelled. So over time that will make current ships more valuable. If the shipping companies can survive current conditions, they will be worth much more ... IFF the world survives..
Actions
Doing nothing. I have money to invest, but am waiting as I practice "time diversification".
Word of the Day
"Vidette" - noun [$10] = "vedette"
Vidette means 1. a small naval launch used for scouting; 2. a mounted sentry in advance of the outposts of an army.
Sentence: Hiding in the bunkers, I wonder if investors will miss noticing the videttes of the next great bull market ?
Monday, November 10, 2008
Waiting ...
The hot air in DC and the dens of the press is oven-like. But what is the point or use in speculating or even discussing what Obama might do, or whom he might appoint ? Why not just wait and see what he actually does ?
Here's some real news: China announces $586 billion stimulus plan. That's real money. Stock futures are up on the news worldwide.
WSJ has a story that jobs in many parts of China are hard to find. That means trouble for that authoritarian / communist government. So they had to act.
I read that five large beefer managers are called before Congress on Thursday. Good. I hope they are skewered. Hedge funds are a fundamental, root cause of much of the problems the world faces. Trillions of $ speculating in trading schemes instead of making real investments caused massive stress and dislocations.
AIG bailout is being re-written. From the looks of it, the troubles in the credit default swap "market" are quite intense. Obviously, that entire casino needs eviscerated. Writers of credit default swaps should be required to put % collateral in Treasuries in isolated subsidiaries and regulated as insurance companies. Anything less is fraud and or mere gambling.
Barron's had an article about the recent rush to "alternative" investments by college endowments and pension funds. We now see most of those "investments" were just speculation in commodity futures - not real assets at all - and hedge funds. Buying timber, farmland and venture capital are real investments. Hedge funds, commodity funds, private equity and that ilk are just leveraged speculations.
Everyone now agrees the LEH bankruptcy was a huge mistake. Some world leaders blame the US for letting it happen. Hindsight is so clear. But at the time, the "moral hazard" police were quite strident. Politically, I don't see how the US could have done anything else. The fallout from BSC was quite bad.
The LEH failure did bring to light hitherto unknown or unappreciated financial interconnections and leverage, such as from "rehypothecation".
Actions
Doing nothing. I will buy more of my stocks IFF they drop to buy points. By the way, IFF means "if and only if".
I've deferred re-balancing Krypto Fund as I am contemplating some transfers and exchanges that will let me take a valuable tax loss on some ETFs held in a taxable account. This will save me real money and not affect my overall asset allocations.
Tax loss selling for the rest of this year will be heavy. But I wonder if the money will just be shifted around. I plan to just shift the money around.
Word of the Day
"Conceit" - noun [$10]
Conceit means 1. personal vanity, pride; 2. (literary) a. a far fetched comparison, especially as a stylistic affectation; a convoluted or unlikely metaphor; b. a fanciful notion.
Sentence: All the information conveyed by one person speaking directly to another is subsumed in the Anglophone world under their conceit, "personal chemistry". [adapted from a thought in "Travels with Herodotus" a very fine book by R. Kapuscinsky, cf. page 185 top.
Here's some real news: China announces $586 billion stimulus plan. That's real money. Stock futures are up on the news worldwide.
WSJ has a story that jobs in many parts of China are hard to find. That means trouble for that authoritarian / communist government. So they had to act.
I read that five large beefer managers are called before Congress on Thursday. Good. I hope they are skewered. Hedge funds are a fundamental, root cause of much of the problems the world faces. Trillions of $ speculating in trading schemes instead of making real investments caused massive stress and dislocations.
AIG bailout is being re-written. From the looks of it, the troubles in the credit default swap "market" are quite intense. Obviously, that entire casino needs eviscerated. Writers of credit default swaps should be required to put % collateral in Treasuries in isolated subsidiaries and regulated as insurance companies. Anything less is fraud and or mere gambling.
Barron's had an article about the recent rush to "alternative" investments by college endowments and pension funds. We now see most of those "investments" were just speculation in commodity futures - not real assets at all - and hedge funds. Buying timber, farmland and venture capital are real investments. Hedge funds, commodity funds, private equity and that ilk are just leveraged speculations.
Everyone now agrees the LEH bankruptcy was a huge mistake. Some world leaders blame the US for letting it happen. Hindsight is so clear. But at the time, the "moral hazard" police were quite strident. Politically, I don't see how the US could have done anything else. The fallout from BSC was quite bad.
The LEH failure did bring to light hitherto unknown or unappreciated financial interconnections and leverage, such as from "rehypothecation".
Actions
Doing nothing. I will buy more of my stocks IFF they drop to buy points. By the way, IFF means "if and only if".
I've deferred re-balancing Krypto Fund as I am contemplating some transfers and exchanges that will let me take a valuable tax loss on some ETFs held in a taxable account. This will save me real money and not affect my overall asset allocations.
Tax loss selling for the rest of this year will be heavy. But I wonder if the money will just be shifted around. I plan to just shift the money around.
Word of the Day
"Conceit" - noun [$10]
Conceit means 1. personal vanity, pride; 2. (literary) a. a far fetched comparison, especially as a stylistic affectation; a convoluted or unlikely metaphor; b. a fanciful notion.
Sentence: All the information conveyed by one person speaking directly to another is subsumed in the Anglophone world under their conceit, "personal chemistry". [adapted from a thought in "Travels with Herodotus" a very fine book by R. Kapuscinsky, cf. page 185 top.
Friday, November 7, 2008
TGIF and more
Hmmm I guess yesterday's French sentence can be mostly re-used.
Hier, les Bourses replongent.
Translation - "yesterday, the markets plunged again." That French verb, "replonger" might be the label for this market, as it means "to plunge again."
WSJ has a story about more and more liquidations of hedge funds and redemptions. Perhaps more of this is coming. Beefers are the "root" cause of all the problems of this economy and market. Colossal sums invested by the greedy and dumb rich in speculative funds instead of new growth businesses led to the housing bubble, commodity bubble and all this insane volatility as they are liquidated.
You ask, how did hedge funds cause the housing bubble ? Who do you think bought the subordinated classes of all those subprime CDOs ? Without those buyers, the junk mortgages could not have been securitized and hence never created.
Sarkozy of France has suggested some regulations or restrictions on hedge funds. I hope other world leaders listen.
The jobs number will likely be quite bad.
Actions
Doing nothing. The DRYS secondary has crushed my shipping stocks. Ugh... I guess the lenders are pushing these companies to raise equity as a cushion. To me, they are risky, but quite valuable companies IFF they survive. Time will tell.
Word of the Day
"Viand" - noun [$10] formal
Viand means 1. an article of food; 2. (in plural) provisions, victuals.
Sentence: Will the future look back on today's financial turmoil to see the caricature of a former hedge fund manager in a tuxedo seeking viands on the streets of New York ?
Hier, les Bourses replongent.
Translation - "yesterday, the markets plunged again." That French verb, "replonger" might be the label for this market, as it means "to plunge again."
WSJ has a story about more and more liquidations of hedge funds and redemptions. Perhaps more of this is coming. Beefers are the "root" cause of all the problems of this economy and market. Colossal sums invested by the greedy and dumb rich in speculative funds instead of new growth businesses led to the housing bubble, commodity bubble and all this insane volatility as they are liquidated.
You ask, how did hedge funds cause the housing bubble ? Who do you think bought the subordinated classes of all those subprime CDOs ? Without those buyers, the junk mortgages could not have been securitized and hence never created.
Sarkozy of France has suggested some regulations or restrictions on hedge funds. I hope other world leaders listen.
The jobs number will likely be quite bad.
Actions
Doing nothing. The DRYS secondary has crushed my shipping stocks. Ugh... I guess the lenders are pushing these companies to raise equity as a cushion. To me, they are risky, but quite valuable companies IFF they survive. Time will tell.
Word of the Day
"Viand" - noun [$10] formal
Viand means 1. an article of food; 2. (in plural) provisions, victuals.
Sentence: Will the future look back on today's financial turmoil to see the caricature of a former hedge fund manager in a tuxedo seeking viands on the streets of New York ?
Thursday, November 6, 2008
Les Bourses replongent ce matin.
That's French for "the markets are plunging again this morning." To find practical current terms in French to describe the stock market actions, I turned to Le Monde at http://www.lemonde.fr/ because just simply translating American idioms might not have made sense. But I read this morning that French does use terms like "red" aka "rouge" and "green" aka "vert" to characterize gains and losses.
Did I mention that I am learning French ? I've been doing this from about six weeks now and have made fine progress.
Why ?
Simple, I need more culture and often good writers include some French phrases without translation. And the French language has innumerable works of great literature, unlike Spanish which has had little for four hundred years since Cervantes wrote Don Quixote. And one even comes across French in fine TV shows like the old "The Avengers" series with Diana Rigg as Mrs. Emma Peel. Last evening while watching some shows from that series [I bought the entire series on DVD], I understood the French that John Steed spoke.
And a bonus, research shows that learning a language helps one improve and retain memory skills as one ages. And I am aging. After 40 years of cramming science and finance into half of my brain, the verbal, literature and language side is "relatively" empty. After a session of French, I can actually feel that my head is "pumped" like a muscle after lifting weights. So this does work to "exercise" one's mind.
My guess is that since language skills were certainly a critical ability in the development and evolution of human beings from apes, to exercise and develop one's mind fully really requires learning languages.
Learning more words and usages in one's native language is one way to that. But I think learning a foreign language is another, complementary way.
By the way, English borrowed so many words from French that learning French vocabulary gets a huge boost. And so far, I think much of the grammar is a bit similar, too. I had learned some Latin and Russian in the past. To me, French is far easier and also far more rewarding.
PS: I see that web site for Le Figaro has helpful writing about stocks in French, too. See http://www.lefigaro.fr/
Markets
What will the ECB to today ? And the Bank of England ? Both central banks have base rates far too high for conditions. They need to cut rates in large steps.
PS: Bank of England cuts 150 bps from 3% to 1.5% ! Good move. Will "The Ostriche" awaken ?
PPS: I see the Sgeve Leisman on Babblevision reads this blog. He just said that there never was any inflation ... just a commodity bubble.
Actions
None. Two shippers (DRYS and EXM) posted fine earnings. Both benefit from having a majority of ships under long term contracts at good rates.
Word of the Day
"Argosy" - noun [$10] poetic
Argosy means a large merchant ship, originally especially one from Dubrovnik (aka Ragusa) or Venice.
Sentence: Every voyage of an argosy in world trade among nations requires financing the goods being transported for the duration of the voyage until delivery. This is a critical corner of credit that is having problems in recent weeks according to recent articles in FT and WSJ. Governments looking to help cure the credit crisis need to focus some resources and / or verbal suasion here.
Did I mention that I am learning French ? I've been doing this from about six weeks now and have made fine progress.
Why ?
Simple, I need more culture and often good writers include some French phrases without translation. And the French language has innumerable works of great literature, unlike Spanish which has had little for four hundred years since Cervantes wrote Don Quixote. And one even comes across French in fine TV shows like the old "The Avengers" series with Diana Rigg as Mrs. Emma Peel. Last evening while watching some shows from that series [I bought the entire series on DVD], I understood the French that John Steed spoke.
And a bonus, research shows that learning a language helps one improve and retain memory skills as one ages. And I am aging. After 40 years of cramming science and finance into half of my brain, the verbal, literature and language side is "relatively" empty. After a session of French, I can actually feel that my head is "pumped" like a muscle after lifting weights. So this does work to "exercise" one's mind.
My guess is that since language skills were certainly a critical ability in the development and evolution of human beings from apes, to exercise and develop one's mind fully really requires learning languages.
Learning more words and usages in one's native language is one way to that. But I think learning a foreign language is another, complementary way.
By the way, English borrowed so many words from French that learning French vocabulary gets a huge boost. And so far, I think much of the grammar is a bit similar, too. I had learned some Latin and Russian in the past. To me, French is far easier and also far more rewarding.
PS: I see that web site for Le Figaro has helpful writing about stocks in French, too. See http://www.lefigaro.fr/
Markets
What will the ECB to today ? And the Bank of England ? Both central banks have base rates far too high for conditions. They need to cut rates in large steps.
PS: Bank of England cuts 150 bps from 3% to 1.5% ! Good move. Will "The Ostriche" awaken ?
PPS: I see the Sgeve Leisman on Babblevision reads this blog. He just said that there never was any inflation ... just a commodity bubble.
Actions
None. Two shippers (DRYS and EXM) posted fine earnings. Both benefit from having a majority of ships under long term contracts at good rates.
Word of the Day
"Argosy" - noun [$10] poetic
Argosy means a large merchant ship, originally especially one from Dubrovnik (aka Ragusa) or Venice.
Sentence: Every voyage of an argosy in world trade among nations requires financing the goods being transported for the duration of the voyage until delivery. This is a critical corner of credit that is having problems in recent weeks according to recent articles in FT and WSJ. Governments looking to help cure the credit crisis need to focus some resources and / or verbal suasion here.
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