Friday, May 30, 2008

Summing Up

As summer is upon us, I thought that reiterating some of my more controverisal views might be fun. And might cause some trouble, too !

1. No recession has or will occur. This is a mid-cycle slowdown.
2. A rich man's panic did occur, which also brought to light some amazing cupidity and stupidity in Wall Street.
3. The housing bottom is upon us.
4. There is too much money sloshing in hedge funds.
5. Hedge funds should be regulated like mutual funds or banks, as appropriate.
6. Pension funds should be prohibited from speculating in futures markets. If they want to buy oil, buy oil in the ground or buy physical oil & store it.
7. All derivatives should be regulated and required to be traded on exchanges with pure right of set off.
8. There is no significant general inflation. Oil & some energy prices have risen hugely, mostly due to lack of new supply and increased demand. Everything else is just painful adjustments to that pressure.
9. The Fed needs to increase the monetary base more; money growth is too slow.
10. The US should declare victory in the cold war over totalitarianism and other conflicts and pull back from foreign entanglements and stop trying to unduly influence other nations' actions.
11. All earmarks are payoffs or bribes and all must be abolished.
12. Congressional terms should be limited to 12 years total service. No further office holding permitted. Cabinet-level government service should be included in this limit. Only Presidential or Vice-Presidential service is excluded.
13. Supreme Court justices and all Federal judges should be required to retire and leave office at age 80. The Senate should be required to hold votes on nominees within 90 days of submission or the candidate is deemed approved..
14. Congressional gerrymandering should be prohibited. Districts should be required to be composed on whole counties, towns, etc.
15. Former public officials should be prohibited from engaging in lobbying. Spouses, "partners", etc. should be prohibited from engaging in lobbying.
16. CEO and top corporate pay should be limited, except to stock awards - not options - voted by shareholders.
17. Hedge fund, private equity, etc. managers should pay ordinary income taxes on all compensation, including social security and Medicare taxes. If a fund manager receives pay and pays taxes on it, he can invest the net amount in the fund and then be treated as any other partner.
18. All municipal bond income should be subject to the Alternative Minimum Tax.
19. All private foundations should be required to liquidate in full within 50 years.
20. The 99 year rule against perpetuities should be strictly applied to any private trust.

That's enough for now.

"Populist libertarianism" means maximum freedom with limits to prevent the ruling classes from (1) attaining too much power & wealth, (2) creating a new aristocracy, and (3) from using their wealth and power to affect the lives of the common man. All limits are imposed on the ruling classes only, not on the lives of the common man.

PS: Item #10 does not mean cut military spending. As George Washington knew and said, one must prepare for war to ensure peace. I'm not sure what the limit under #16 should be. Maybe $3 million per year. That's enough cash ... let them get stock for the rest.

PPS: I am not using ruling classes in any Marxist sense. It's a literal, yet colorful term for the rich & powerful & a few others who connive in DC (or Brussels) to increase their power, wealth and / or to mold us into beings of their design. "Connive" ... a fine word ... reminds me of "knave".

Word of the Day

"Antimetabole" - noun [$1000 !] Rhetoric
Antimetabole means a figure [of speech] in which the same words or ideas are repeated in inverse order.
Sentence: (A) Shakespeare's sonnet #129 uses frequent antimetabole, a Greek term that denotes the rhetoric of reversal. An example is line 2, "Is lust in action; and till action, lust".
(B) Bunkerman's frequent musing about the best label for his political philosophy uses antimetabole, viz., he's a populist libertarian, or is that a libertarian populist ?

Thursday, May 29, 2008

News Needed

The markets are in the doldrums until news shows the way for a new trend. Even the beefers* are tired of stomping in the mud around the old water hole. Small, nimble mammals like us just wait in the trees to jump onto their backs when they eventually move out.

GDP and unemployment claims data come out this morning. Perhaps big news is not needed, just a seed crystal to start the process. Time will tell. Just waiting for now.

*Beefer = big, evil funds.


A new data point: I received my homeowners' insurance bill today for the next policy year. Coverage is identical replacement cost with various add-ons such as earthquake coverage. Cost was down 8.5% from the prior year. Some inflation ! Of course, I don't live in a hurricane target zone.

Words of the Day

Today's words and long quote are from "Reflections on a Ravaged Century", page 9 of the fine book by the famous historian, Robert Conquest, about the events of the 20th century.

"Accidie" - noun [$10]
Accidie means 1. laziness, sloth, apathy; 2. black despair

"Quotidian" - adjective [$10]
Quotidian means something occurring daily.

Sentences for both:
"Eric Hoffer** suggests that those who become possessed by exciting Ideas and identification with those causes are often 'selfish people who were forced by innate shortcomings or external circumstances to lose faith in their own selves.' It might be argued that, whether through temperament or accident, some who are simply bored with the quotidian turn to Ideas as stimuli. We are told of hostesses in Berlin in the early 1930s to whom National Socialism gave 'meaning to their empty lives.'
"Boredom is indeed a pitiable condition. And the feeling of meaninglessness, af accidie, can be devastating. Still, to compensate by abandoning reason for idealogy is a desperate remedy."

**From Wikipedia, "Eric Hoffer (July 25. 1902 (or 1898) – May 21, 1983) was an American social writer. He produced ten books and was awarded the Presidential Medal of Freedom in February 1983 by President of the United States Ronald Reagan. "

Wednesday, May 28, 2008

Declining Standard of Living

All the consumer confidence, "inflation" angst and other concerns of the common man and woman in the past two decades really reflect a consensus that their standard of living is declining. Standard of living is hard to measure and is a moving target. How much do you have to work to realize the same quality and quantity in your daily life ?

No governmental data captures this, if it could be measured at all.

Here's an example. You used to mow your own lawn, because you were fairly young and energetic, had the free time and liked the fresh air and exercise. But as your employer imposed new work burdens on you - unpaid - you now must hire a fellow to do it. You must pay the mower, so are poorer. Your "household profit" is lower. BUT ... GDP rises. That "domestic product" is now part of the measured GDP of the nation, so it "appears" the nation is more productive. Of course, it's not.

Of course, my ofted cited example of cooking food might fit this picture, too. Your commute has become really long as the traffic gets worse & worse every year. So your free time is less, and you now buy more prepared foods as you feel less time to cook, even if you enjoy cooking. So that personal time is again transferred to the "measured GDP" as your purchases increase it. Overall, your standard of living is less, but GDP says it's more.

Notice that neither example has any connection with "inflation". Really, one must identify and name the problem correctly to realize any telic value from analysis. Calling a broader problem "inflation" is a mistake. Certainly, much higher oil prices in the US and EU make everyone there poorer. But that's not "inflation", it's just higher oil prices.

Technology makes some work easier, but does the common man really realize the profit ? In some cases, the answer is yes. For example the iPod really has made much free time more pleasant as one can conveniently listen to music or books while performing other tasks, or just taking a walk. In other cases, no. The Blackberry or cell phone from the employer simply permits him to capture more of the employee's time off the job and make him subject to call or responsibility more hours every day or weekend. All that is unpaid. So the company or boss got the profit of that technology.

Suppose management screws up and now must cut costs. The common working man suffers more restrictions or must figure out how to perform 1.5 or 2 jobs for no extra pay. His standard of living goes down.

Suppose the government shifts spending to support rich farmers while cutting Medicaid or Medicare reimbursements. No net change in GDP results, but lots of health care workers are poorer while a few rich farmers get more money. Many people have a lower standard of living.

Suppose an educational institution's management spends more money on buildings and sports, while adding work requirements to professors/teachers - more teaching, paperwork or class size. GDP does not change but the professors/teachers have a lower standard of living.

Suppose state & local government raise taxes. They take that money from you and spend it on something wasteful, like patronage jobs for the second cousins of the state legislators. Net change in GDP is zero. The common man has a lower standard of living.

Here's another angle. Who capures the "profit" of productivity ? US tax and labor laws really favor equipment over people. A machine can be depreciated, junked as needed, can't sue, and no social security, medicare or uinemployment taxes are due. So companies naturally favor the machine. Voice mail permits a company to fire its receptionists and some secretaries, making "productivity" go up. The person loses the job. Government economic statistics seem "better", but certainly the standard of living of the people is less.

Who has captured the "profit" from great productivity gains of the past two decades ? Overall, except in a few cases such as the iPod, my opinion is that the "ruling classes" have, aka the "rich & powerful". CEOs, some lawyers, powerful governmental persons, some money managers, etc. That's the source of asset price inflation in so many places, such as the sun & surf places or in the art markets, etc. The huge growth in hedge funds is a sign of that excess profit sloshing around, creating more problems.

I'm noodling over these issues and will write more in the future. But I think inflation is not the problem It's a general decline in standard of living for the common man as the ruling classes take more and more of the admittedly growing economic pie. Not enough - or any - of the growth created by great technology and process productivity gains is shared with the common man.

I don't yet have a solution - still thinking this through to find one consistent liberty and freedom required by my populist libertarian philosophy. Transferring more wealth to the government to be redistributed is definitely NOT the solution, as it simply give more power to the DC ( & Brussels) ruling classes. The failure of that approach was proven by the success of the Reagan revolution. But something needs to be done to give the common man a square deal from this growing economy.

Word of the Day

"Ideate" - verb [$10] Psychology; "Ideation" - noun [$10]
Ideate means 1. (transitive) to imagine, conceive; 2. (intransitive) form ideas.
Sentence: Bunkerman will intensely ideate today for ways to give the common man a square deal while preserving as much freedom as possible.

Tuesday, May 27, 2008

"Hmmmmmm ?" Reviewed

The famous bond fund mamager, Bill Gross, wrote a piece about inflation titled "Hmmmmmm ?" for his June "Investment Outlook". The gist of the article is that US government inflation data are wrong.

Hmmmm ... ? My poem fits here,

Why ?

His principle evidence is a chart of a "composite" of the CPI data of 24 other nations that shows inflation near 7% now, albeit that same chart shows the inflation rate for the mid 2006 thru mid 2007 period averaging about 3.5%. The 10+ year mean for that composite for the 24 nations is about 7%. The piece then shows a similar chart for the US headline CPI which is comsiderably more volatile with a mean of about 2.6% for the same period.

The conclusion is something suspicious exists.

He never explains a theory or rationale "why" there should be a connection between US inflation and inflation in other nations. Why is that ? Because none exists. Here are the 24 nations whose inflation data are used to contruct the composite: Belgium, Brazil, Chile, Colombia, Ecuador, Estonia, Germany, Indonesia, Iceland, Ireland, Italy, Japan, Mexico, Peru, Philippines, Russia, Slovenia, South Korea, Spain, Switzerland, Thailand, Turkey, Taiwan, Vietnam. It's odd that Britain, Canada and France are not included, being large economies, nor is Australia or India. .. or China.

That list should make you think. Also, no data is shown comparing inflation in Germany or Switzerland or Japan, to the composite. That should make you think, too.

Here is some inflation data from this week's Economist magazine, issue of May 24, page 119, for selected nations on that list. These are the latest monthly numbers.

US - 3.9%
Germany - 2.4%
Switzerland - 2.3%
Japan - 1.2%
Chile - 8.3%
Indonesia - 9.0%
Russia - 13.3%

The Economist also gives the "Euro Area" inflation as 3.3% and for China, 8.5%

At this point you can see the "composite chart" is crap - a meaningless amalgamation of unrelated data to make a polemical point. All the real data show is the prices rise faster in rapidly growing, emerging markets ... or in unstable nations. And the rates of headline inflation in the US are roughly similar to the more comparable developed economies in the Euro area or Japan - which given roughly similar monetary policies and G-7 coordination, makes some sense.

So his "evidence" for something suspicious just vaporised with a simple analysis.

He then turned to the "long term" disparity between the core CPI and the headline CPI, showing a three year chart with both plotted as an index values [ not rates of change] arbitrarily setting both at 100 for January 2005. The chart shows the headline CPI continually trending over the core for that period. He says this implies the Fed policy focus on "core" inflation is wrong. Hmmmm ? I wonder what that chart would show over 10 or 20 or 30 years ? Point of original selection for polemics is so common one must really question the choice. Oil prices have risen in that period, true. But since the diffusion of steadily rising oil prices throughout the economy must take a few years as firms and people adjust behavior, why should we not expect that chart he shows to display just the effect it does ? Core will lag the headline as long as oil prices continue to rise as the adjustments must lag the impulse to make changes.

By the way, if prices for some commodities such as oil, wheat, and copper are based of world supply-demand relations, I'd like an explanation of how fed policy can affect those ? Of course, none is ever forthcoming from anyone. In addition, this week's Barron's on page shows the US monetary based grew at that rip roaring rate of ... 0.9% year over year for the week ended May 21. Gollly, the Fed sure is turning on those money spigots, isn't it ? Yes, I am being facetious.

There's more in the article criticizing hedonic adjustments and weightings, but having disintegrated its main evidence and points, why bother with the rest ?

Here's a provocative quote: "Somebody's been foolin', perhaps foolin' themselves - I don't know. This isn't a conspiracy blog ... "

Look, this is Bunkerman writing. I know about conspiracies. I've seen black helicopters fly over my house every Sunday morning for years* ... I live in a bunker with plenty of survival gear stockpiled. I own lots of gold & silver for the unknown. The US inflation data are correct. If people choose higher priced, newfangled gadgets with more capacity instead of being thrifty and maintaining their standard of living, that's their choice. The index is supposed to measure the cost of living, not the cost of living better.

PS: I might address the other points in Bill Gross's article later. But it's time to post this blog ... and get my breakfast.

*lol ... they were from a nearby National Guard facility that had weekend training sessions ;-)

Word of the Day

"Idee fixe" - noun, French [$10], usually printed with an accent on the frst "e" and pronounced "e-day fix"
Idee fix means an idea that dominates the mind; an obsession.
Sentence: In the late 1990s, investors acted under the idee fixe that "it's different now", bidding up technology stocks to bubble levels. Now investors acts under the idee fixe that inflation is roaring so bid up the prices of some commodities like oil to bubble-like levels. Sigh ... why ? Learning the wrong lesson is really dangerous to one's net worth.

Monday, May 26, 2008

Beans from the Bunker

I made my bean recipe yesterday, which I'll reheat today after the overnight sojourn in the refrigerator to increase the big flavor molecules. In my experience this cooldown and reheat adds flavor.

Here is the recipe that I made. All this comes from memory and many variations are possible. I make a large pot - enough for several meals. The leftovers are frozen in a few separate quart-sized freezer ziplock bags for use at later BBQs or dinners. I list the brands simply for specificity.

1 large [28 oz.] can baked beans [B&M], squeeze out extra sauce.
6 cans various beans [all Goya 15 oz. ], drained - 2 black beans, 1 Roman, 1 Pinto, 1 Butter, 1 Green peas, all drained
1 can [20 oz. ?] Kidney beans [Progresso], drained
2 green peppers - remove core and cut into chunks about 1/2 inch wide
1 large onion - remove out skin & cut into chunks
1 lump salt pork [about size of two fingers]
1/2 cup ketchup
1/2 cup BBQ sauce
1/4 cup mustard [I used "Jack Daniel's yesterday]
1/3 cup brown sugar
1/3 cup pure maple syrup
1 tablespoon oregano
6 bay leaves
1 teaspoon ground cloves [or about 12 whole cloves], more or less to taste
1/4 cup bourbon
1/4 cup red Lillet (or any red wine)
*1/2 teaspoon survival bunker sauce [see note * below - not essential, but adds zip]

Cut salt pork into bits and put into large pot with some olive oil to prevent sticking. Heat about medium until the salt pork sizzles bit. Add peppers & stir & cook awhile. Add onion & cook until translucent. Add all beans & mix. Add all other ingredients and mix. Cook at low medium & stir occasionally until very slightly bubbling. reduce heat a bit and cook about an hour or two, stirring occasionally, keeping the slight bubble.

OPTION A: cool overnight in refrigerator, then reheat next day. Serve hot.
OPTION B: the above is a "low sauce" version. My original recipe called for about double the sauces listed above [ketchup, mustard, brown sugar, maple syryp]. I thought the result had too much liquid and was a bit too sweet.
OPTION C: the original recipe had about 18 slices bacon, fried & cut in half. I don't often have bacon around and it's messy to cook, so I switched to salt pork which I can keep in the freezer. I also cut the amount down to reduce the fat content.
OPTION D: Use beer instead of the bourbon and red Lillet.

This recipe can be easily modified to suit your survival bunker stockpiles. Switch to 100% brown sugar, and use a can of tomato paste and a bit of vinegar instead of the ketchup & mustard, and add a bit more brown sugar. Add more onions to replace the green peppers if not available. Otherwise, all the ingredients will store well with no refrigeration. Of course, unopened containers of ketchup, mustard and BBQ sauce store well, too.

Also note the energy requirements are minimal. This can be made over a campfire or in smaller amounts using heating elements from survival kits.

*NOTE: Survival bunker sauce is just made using a good glass jar with a good lid ... completely fill it with dried red peppers, then smother in as much bourbon needed as to fill the jar.  Close and let it sit a week or so and use sparingly.  It's better than tabasco sauce with more flavor and adds zip to anything, especially unappetizing "all natural" survival foods  ;-))

Friday, May 23, 2008

Holiday Weekend

I'm thinking about having a barbeque on Monday to celebrate Memorial Day, and inviting over a neighbor who is a World War II veteran.

Menu: steaks, baked beans, garlic bread, salad, beer.

I need to clean my fine electric grill for the summer, and make the beans in advance. My bean recipe is quite famous among my friends here. They are best made a day or two early. Then all those tasty molecules have a chance to combine into even more tastier varieties with one cycle of cooling and re-heating. See, chemistry can be fun !

I might even go to the shotgun range this weekend for a bit of trapshooting fun.


Blabberg actually has an long interview this morning with a European economist about "inflation" ... he agrees with me and explains the facts. Mirabile Dictu !


Doldrums coming. I am doing nothing, except taking money from my Alpha Fund to pay my taxes for June 15, pay for my Rome vacation and for my barn renovation. I had put a lot of money into it to buy stocks in the big drops of Q1 and sold lots of those on rips. Alpha Fund was far too big for my risk level ... hehe ... as a "retired" investor. So cutting back for now makes sense.

Krypto Fund seems balanced OK with its overweight allocations to stocks and underweight allocations to cash and TIPs. Real estate and gold are at their normal allocations.

Some Arithmetic

At $4/gallon of gas and driving an SUV getting 20 miles per gallon, the cost per mile is 20 cents.

For a small car getting 40 mpg, the cost is a dime - 10 cents per mile.

So an upper middle class Yuppie family living in exurbia, and having to drive their SUV 20 miles every shopping trip, pays $4 per trip. That adds up. If they spend $100 on the trip, their cost is 4% more just for the transportation.

Now an X-er living in an older suburb, driving a 40 mpg compact and having a 10 mile round trip to shop, pays only $1.

These numbers really add up over a year and will certainly affect choices over time.

Word of the Day

"Jizz" - noun [$10]
Jizz means the characteristic (immediate) impression given by an animal or plant.
Sentence (1): A cardinal's jizz must be its bright red plumage and dignified demeanor.
Sentence (2): Unfortunately, W's jizz as a boob turned out to be correct.

Note: This definition is from The Oxford Concise Dictionary and is the only meaning given in it. I see now that the Urban Dictionary on the Internet has another slang usage derived from the "essence" of this meaning.

Thursday, May 22, 2008


For some reason, the site to create new posts did not work until now. So I didn't get to write a blog in my usual time, viz. about 5AM ET.

I was going to hit the beefers for creating this energy/oil bubble and hurting many industries and the common man. So they are creating another mess, as they did for the credit crisis, which is mostly over. All hedge funds really need to be regulated and made to file as investment companies.

They are joined by the big pension funds pouring money into the commodity funds. Pension funds should not be permitted to "invest" in commodity futures, as those derivative markets just are not designed for that huge flood on money. If they want to invest in oil, let them invest in it physically, like timber. They should be taxed on futures profits as unrelated business income.

I'll write more later.

No word of the day today as I have some things to do.

PS: Covering the TLT short, applying my "green-red" rule, viz., if a "trade" is green and turns red, I close it out. The short is flat, but likely go red at the open, so it's sayonnara for now. Might re-enter later. This rule applies to "trades", not LT positions.

Wednesday, May 21, 2008

Shortest Poem in English

Mirabile Dictu !!!

I spontaneously composed the NEW "World's Shortest Poem" for English yesterday here in this blog in the comments. A commentor was reprinting some pundit's statements about inflation, which had no reasoning attached, as usual for modern punditry. So my reply was this rhymed couplet:

Sigh ...
Why ?

Searching the Internet this morning, I see this is shorter than the stated prior "World's Shortest Poem", viz.. titled "Fleas"


Both poems have two words, but mine has seven letters while the other has nine. Also, one of the other poem's words is a contraction of two words.

A New Record For Bunkerman !!!!

I title this new poem, "Think" and reprint is again here in full:


Sigh ....
Why ?


More rotation yesterday from everything to oils and energies ... this has happened before in the past few years. And is reminiscent of the late gasp of the tech bubble in 2000. Enjoy the ride if you have those stocks, but beware the turn. I am considering buying some puts on mine or writing some very long dated calls on my CVX and DVN that would expire past my LT gains date next year.


Thinking about what areas of the US will be most hurt by the adjustments from high energy usage. This is NOT inflation, as I've proven before. In my "humble" opinion, the upper middle class will have considerable difficulty. In particular, those who live in McMansions in distant suburbs or exurbs where all services, shopping and commutes require driving long distances. And the energy usages in McMansions are be very high. Plus those homes will lose value as new buyers avoid them.

Words of the Day - from reading Shaespeare

"Troth" - noun [$10] and verb, transitive [$10] - archaic
Troth means (noun) 1a. good faith, fidelity; 1b. faith, loyalty; 2a. one's pledged fidelity; 2b. betrothal; (verb) to betroth or pledge; 3. truth. Pledge (or pklight) one's troth means pledge one's word esp., in marriage or betrothal.
Sentence: Will Hillary's superdelegates preserve their troth to her, or will they betray her ?

"Marry" - second usage - interjection [$10] archaic
Marry means (in this usage from Shakespeare's "As You Like It", Act I, Scene II around line 72) expressing surprise, asservation, indignity etc. [Middle English from (the Virgin) Mary]. This word is used similarly to some modern usage of "Christ!" as an expressive interjection.
Sentence: [these lines could apply to punditry]
Celia: How do you prove that, in the great leap of your knowledge ?
Rosalind: Ay, marry, now unmuzzle your wisdom.

Learning these words and usages helps one read and enjoy Shakespeare more smoothly.

PS: Here's another short "poem" - but it's more like an exclamation - titled "Woe".


No !

Tuesday, May 20, 2008

"Inflation" Fighting

Since there's no significant inflation, as strictly defined and measured, this post contain some ideas for making those adjustments that all must make to pay for higher energy and food costs. Need I say this is primarily required now thanks to stupid US voters who for decades continually re-elected knaves who restrict oil drilling, nuclear power and pay subsidies to wealthy farmers to grow less food. So US voters reap their own harvest of stupid voting. Hmmm ... a bit reminiscent of ancient Athens where the assembly made incredibly dumb votes that led to the downfall of Athenian prosperity.

And I use the word stupid telicly, as all these problems were forecast and available to anyone who would listen. In ancient Greece, not listening to the oracle led to punishment by the gods. Even in the past month, the knaves elected by voters passed another farm subsidy bill.

Now to the adjusting ...

1. Stop smoking. The smoking working class person can cut a pack and get a gallon of gas.
2. Stop playing lotteries, scratch tickets and keno. Why make dumb bets which are just taxes ?
3. Stop watching TV. TV is financed by ads, which raise prices on all. Pro sports is a colossal waste of money, diverting billions from the poor and working class to rich athletes and billionaries. [This is a long term adjustment.] Cut back cable to the basic service.
4. Read a book from the public library. Talk to your spouse or friends about issues and ideas.
5. Participate in a club or activity ... mostly for free.
6. Combine trips. This saves a lot of gasoline.
7. Cook your own food. Use cheap ingredients and some spices. Buy the spices in generic bulk.
8. Stop succumbing to your cacoethes to make impulsive purchases ... use a list.
9. Drop the cell phone. Life was fine before these luxuries became a ... perceived necessity.
10. Vote only for leaders who will cut spending and permit energy production growth.


Zzzzzzzzzzz. I'm waiting for the home default and price situation to hit an obvious bottom, which I "think" will lead to a big rally in the big banks and the market overall.

HD beats on eps and revs. Uh .... that question again comes to mind.

Word of the Day

"Omphalos" - noun [$10]
Omphalos means 1. (Greek anitiquity) a conical stone (esp. that at Delphi) representing the navel of the earth; 2. (Greek antiquity) a boss on a shield; 3. a center or hub.
Sentence: The omphalos of all the forces producing higher oil and food price increases - aka the "root cause" - is 10+ years of US voter stupidity in electing knaves to Congress who restrict oil and food production.

Monday, May 19, 2008

Monday Morning Ramblings


Having listened to several CD courses on ancient Greece in which the Athenian democracy was described in detail, the people of the US and Europe really don't understand the meaning of democracy. Cliches abound. How many people realize that in Athens 1) leaders had strict term limits, except for the office of "general", 2) voted for a council/senate in groups which were geographically dispersed, and 3) had an assembly which was a pure democracy with unchecked powers which made some the worst decisions leading to the downfall of the city ?

So next time someone blithly says the US electoral college is not "democratic", perhaps they show their ignorance of the meaning of the word. Democracy is a process of governing where the people are empowered under a structure to have a significant say in their governing. The form of that structure has NO absolute, pure system.


Zzzzzzzzzzzzzzz. Doing nothing. Looking to short more TLT on a poparoo. Sold some CVX on Friday for a 50% LT gain. No more sales contemplated. My thinking for a few years has been that the commodity boom will peak or plateau near to the opening ceremonies of the Olympic Game in Red China. Cautious here, but I might be early in this call. All these price increases are starting to see serious pushback now, however.


None ... nada ... zippo. There is NO money growth fueled, general inflation. The US monetary base growth was only 0.56% for the year ended May 7, 2008. Painful adjustments are being forced through the world economies as long depressed energy and food prices are moving up to levels that will ration demand for the former and increase supply for the latter. These increases must be diffused through the system: huge numbers of other goods and services must limit or forebear price rises as demand falls and / or make adjustments via productivity gains. All this takes time.

Word of the Day

"Scabrous" - adjective [$10]
Scabrous means 1. having a rough surface, nearing short stiff hairs, scales, etc.; 2. (of a subject, situation, etc.) requiring tactful treatment, hard to handle with decency; 3a. indecent, slacious; 3b. behaving licentiously.
Sentence: About 2,500 years ago the delightfully scabrous plays of Aristophanes were performed in public - filled with lurid and scatological humor that skewered the leading figures of the day. So why do we think we are so modern and free, when a similarly ribald TV show like South Park has to be shown late at night in the US ?

Friday, May 16, 2008

How to Measure Inflation

The controversy over inflation and how it's measured seems global now, as I've heard persons from Singapore to New York to Paris comment that government measures of "inflation" are out of date, not relevant or a conspiracy to rob the poor. Screeds calling for "new definitions" are broadcast weekly.

It's inarguable that simple supply and demand for specific goods can affect those prices singularly with huge shifts in level and volatility.

So what is such a broadly available item that nothing can unduly affect it's price on short term or even intermediate time scales - except inflation ? Labor.

This thought came to me while reading "Lapham's Quarterly", volume 1, issue 2, about "Money". This new quarterly is a superb read which I highly recommend. The quarterly provides one with the thoughts of the great thinkers, writers and even "common man" about a single topic. It's colorful with sources cited and my current issue has 200 pages of great reading in easily digestible 1-3 pages bites.

Page 41 has an excerpt from Adam Smith on the development and meaning of "money". The core concept is that the value of labor really determines the value of money. Exchanging money replaces barter and lets one more easily value goods and services. How much labor can one save by exchanging money for a good/service desired - buying something instead of making/doing it yourself ? That is the critical concept in understanding "money". This is why even on a gold standard, there can be considerable inflation when new mines or sources are found, such as the discovery of the South American gold stolen from the Aztecs and Incas or later mined there in the 16th century and later.

By the way, this very broad measure of inflation via labor costs even works for inflation caused by plagues or wars that substantially reduce the labor force. Data from the era of the "Black Death" in Europe prove this.

Roll forward to now. What does the price of labor tell us about inflation ?

The cost of employment in the US increased 3.3% for the year ended March 2008. For the prior year, the cost increased 3.5%. I suppose I could further say that productivity improvement means "real" inflation is about 2% less than that measure, but golly, 3.3% is pretty low already.

Inflation is decelerating. Inflation is low. Facts are facts.

Whether the great increases in some commodity prices are caused completely by emerging market supply-demand and weather, or those prices have moved to the "asset bubble" phase from investment money, time will tell. But labor prices prove that inflation is low.


Good move up yesterday as nibbling real buyers pushed up a broad range of stocks. Buy good stocks on dips. Time diversify. Diversify by asset classes and re-balance as needed. The trend is up. Hold until something changes. Be patient.

Word of the Day

"Cacoethes" - noun [$10] - that "oe" is the German dipthong "oe" with the dots on top of the e, pronounced oi-e, sort of swallowing the combined sound.
Cacoethes means an urge to do something inadvisable; also an irresistable urge; mania
Sentence: Investors must control their cacoethes to sell to take small profits, or they'll miss the really big 100%+ gains on holding a good stock for a year or two. That's where the big money is made.

Thursday, May 15, 2008

Back in the Saddle

Ahhhhh ... home again.

Rome is a great, wonderful place to visit. The city is loaded with fine sites of antiquity, fine paintings and sculptures, fine food and the people are quite friendly and helpful. It's easy to get around, too, as much is within walking distances. And did I walk ... up and down the seven hills of Rome. Or at least up and down a few of them many times. Mrs. B strongly prefers walking over taxis and so I obeyed.

We had fine weather every day except some rain on half of one day. The temperatures were comfortable at 75-80F midday when sunny, which was most of the days. I'll write more later about Rome. Also, this "one city" or "one country" method is really the way to travel if one expects to do it a lot over a decade or two. Staying in one hotel and then using walks and tours to see the area is really comfortable and not stressful at all.

OK, I admit I did not live as a "common man" on the vacation. Regarding the flight, "business class" is about 90% of what "first class" was in the 1980s when I experienced it with frequent flyer miles on a few long flights overseas. So it's really worth it if you have the extra money [quite a lot, actually] or can get the seats with mileage awards.

I did not eat at McDonald's, but went into one to see. The place was fabulous with a Travetine marble floor, and sold fine coffees, gelato [a form of ice cream] and the usual foods. There were places to sit and enjoy the coffee, etc. Prices were high vs. Bunkerman's town, but about equal to NYC Manhattan prices. One of our guides said, jokingly, that churches and McDonalds were everywhere in Rome. But I asked and the Vatican state has no McDonald's.


I hear that AIG re-invigorated the financial bears ... sigh. Why did anyone believe that company ? They can manufacture whatever numbers they wish from the bag of assets.

The S&P is about where it was when I left for Rome. Hope all enjoyed the beefer ping-pong games.

Core CPI is at 2.3% year over year - very low inflation. The BLS has it right. Energy and food prices rises are purely supply and demand related. Energy price increases are due to the emerging market demand bumping into no new supply growth. Food is weather-related and idiotic US ethanol policies.

The monetary base is growing about 1-2% - there is no money fueled "inflation". The Fed should really force that to grow faster to accomodate growth.

Word of the Day

"Moloch" - noun [$10]
Moloch means 1a. a Canaanite idol to whom children were sacrificed; 1b. a tyrannical object of sacrifices; 2. a grotesque spiny slow moving Australian lizard.
Sentence: [from "Shah of Shahs" by R. Kapuscinki, pg. 64 - a really fine book, ref the corruption of the Shah of Iran in the 1970s] "As prices rose, the bribes got bigger and ordinary people complained that more and more of their earnings went to feed the moloch of corruption."

Tuesday, May 6, 2008

What's New Under the Sun ?

Not much.

French company Alstom is in a scandal regarding paying bribes for business. That's a common problem in European business. US laws lessen that for stodgy, moralistic America.

OPEC member Indonesia is a net importer of oil, mulls leaving OPEC to save costs.

US ISM non-mfg. index was reported at 52 on Monday, indicating expansion in the service sector, which is the majority of the US economy.

YHOO stock price collapses.

Energy and miners rise Monday. In my opinion the easy money is made in that sector via the price rises of the commodities. Now one must look at those companies as normal stocks with PEs, growth rates, etc., not just asset plays That applies to gold stocks, too. Earnings will determine the future price appreciation in them as I think the commodity prices will stay on a high plateau now, and the companies must manage costs and seek new output. I own DVN, CVX, FCX and CCJ in reasonable amounts - not overweights.

There is not now nor has there been a recession in the US. We have a midcycle slowdown somewhat aggravated by a rich man's panic, caused by Wall Street stupidity and greed.

No armageddon occured nor will occur from the current situations. The Fed did its historical and statutory job correctly, although a bit belatedly.

Inflation will fall this year to the Fed's "comfort zone" in both core PCE and in the headline numbers.

The Asian Co-Prosperity Zone of interlocking, self-reinforcing consumer demand-driven growth will continue to develop. This is very positive for world economic growth for years to come [... provided the Chinese communist politboro does nothing stupid militarily].

Eastern Europe will grow rapidly as the freedom of people there continues to let them create better lives for themselves. That area benefits from huge markets in Western Europe, Russia and even the Near East.

"Protect Yourself at All Times" - those instructions for boxing apply to active investing and trading. Mind your money management and position size.

Buy dips in good stocks in good groups.

OK, that's my outlook in review. Mrs. B and I travel to Rome this afternoon to see some sights and culture. Next blog will be May 15. Good luck.

Word of the Day

"Peregrinate" - verb, intrasitive [$10] and peregrination - noun [$10]
Peregrinate means to travel, journey, esp. extensively or at leisure.
Sentence: After many years of focussing on creating a sturdy base of wealth for retirement, Bunkerman hopes now to peregrinate among the major cities of Europe to experience - borrowing that 1970s psychobabble word - their culture and art in "one city" and/or "one country" vacations of approximately eight days each.

Monday, May 5, 2008

Endless Knavery

MSFT walks from YHOO bid. Good.

R's lose House seat in Louisiana. "R" Senate seat in New Hampshire in danger. The R's send me requests for money for these House & Senate seats, touting "conservative" values like keeping spending low. Uh .... for almost years they controlled both the Presidency and both houses of Congress. Did they control spending ? No ! They looted billions for their earmarks and payoffs and bribes. So they are mostly knaves. The R's squandered a generation of support created by Ronald Reagan in their lust for power and greed, led by George W. Bush. So I use the Nancy Reagan reply, "Just Say No". I only support individual potential leaders with principles.

Obama makes promises to Teamsters union to reduce anti-corruption oversight in exchange for endorsement. Sheesh, he's making shady deals already. What a knave !

Congress destroyed student loan profitability, driving lenders from the market. Now they reverse course. Are these guys "leaders" or just fools ... or knaves ?

Yes, "knave" has become one of my favorite words. "Knave" is so appropriate to American government in the 21st century. "Knave" means an unprincipled, crafty person. "Knavery" means 1. dishonest dealings; 2. a piece of mischief or trickery. Congress is now the Houses of Knavery. Chief knave is George W. Bush - now blathering about controlling spending after slathering his own supporters with billions for years when the R's controlled the both Houses of Knavery.

Now I read about the Houses of Knavery wanting huge amounts for farm subsidies and sugar subsidies. This is really despicable when the common man is already being gouged ... thanks to the knaves prior payoffs for farm votes. Arghhhhhhhhhh!!!

Ex-financials, Q1 earnings are up about 8%. Hmmmm.
Mrs. B and I travel to Rome for a vacation on Tuesday evening. I will post tomorrow, but then will not be able to post until May 15. Why Rome ? Reason #1 - it's a nonstop flight from Boston. Reason #2 - the weather is pleasant in May. Reason #3 - there are many fine sites of culture. Reason #4 - I have never been to Rome. We have two travel days and six touring days in this "one city" method of vacations. We stay at the same hotel and go on tours or just walk around ourselves, seeing the art, sculpture and sites of antiquity. Plus eat fine meals.
Word of the Day
"Quondam" - attributive adjective [$10]
Quondam means that once was, sometime, former.
Sentence: My quondam support for the Republican Party evaporated as they morphed into a party of knaves under the "leadership" of George W. Bush, spending like the "drunken sailors" so often decried by Ronald Reagan.
"Cacodemon" - noun [$10] also cacodaemon.
Cacodemon means 1. an evil spirit; 2. a malignant person.
Sentence: After Ronald Reagan lead America to be that "shining city on a hill" with clear principles, his Republican Party became infected with, and eventually taken over by numerous cacodemons whose only operative principle is "more" - more spending on greed, bribes, and payoffs - aka "earmarks".

Friday, May 2, 2008


TGIH = Thank God I'm Home. Traveling is stressful ... ugh !

Yesterday was a delayed reaction to the Fed announcement - I think the late Wednesday reversal was beefers playing ping-pong, but Thurdays showed the real buyers had been active on the dip.

The dollar is rallying and commodities are falling ... they were quite overbid by large investment pools chasing the asset class, a bit late, as usual.

Alpah Fund is long about 150%. I will be doing some money management soon as some stocks like GOOG are getting too large. I really want to keep any single stock to less than 15% of the equity in my Alpha Fund, or less than 10% of the total assets. So when a stock has a big move, I need to sell a bit. Usually these are LT profits as time diversification usually gives favorable tax treatment for these partial sales. Sometimes I accelerate a sale if I had bought a lot more shares lower, so the sale can be a ST loss on early, higher priced sales. This will be the case for some of my big bank holdings. The point I am making is the time diversification has this secondary tax benefit in addition to its primary, risk reduction benefit.

Economic numbers are OK. The "touch & go" trajectory is still working.

PS: the times posted here are Pacific Coast time, as this is a Google-sponsored site probably situated on the west coast somewhere. I am writing this post just after 5AM ET.

Word of the Day

"Piquant" - adjective [$10]
Piquant means 1. agreeably pungent, sharp or appetizing; 2. pleasantly stimulating or disquieting, to the mind.
Sentence: The piquant writings of Ryszard Kapuscinki about his travels in the Third World as a Polish press corresondence contain wonderful first hand accounts of the period of revolution and turmoils there from the mid-1950s to more recent times.

"Picaresqe" - adjective [$10]
Picaresqe means (of a style of fiction) dealing with the episodic adventures of rogues.
Sentence: The 2008 Democratic presidential nomination battle might be described as a picaresqe confrontation between a knave and a knavette in seeking votes while trying to hide their true beliefs.

I saw both these words in the fine book, "Travels with Herodotus" written by Ryszard Kapuscinki, the famous Polish writer and overseas correspondent for decades. He's written many fine books - I've read two now. I heartily recommend them all.

Thursday, May 1, 2008


Ben obeyed me yesterday ... good job. The inflation-mongers and some trader beefers wanted him to start screeching about inflation, but he was ... patient. Now they'll let time work its medicine on the economy and the markets. Take a vacation to Nantucket, Ben. Go sailing. Tell the other governors to shut up awhile. But tell Geitner at the NY Fed to get that monetary base growing.

There are lots of numbers today: ISM mfg and unemployment claims.

I checked pizza prices here in SE Ohio. No inflation. One can get a fine 14 inch pie with four or more toppings for $10.95, same price for years.

C stock offering was oversubscribed. I think that's quite interesting, being so successful well off the lows. One thing C has done is create solid relationships with major international investment funds. I suspect they will use those in the future to get lots of major international finance deals and more corporate finance with companies in those areas. That's what they should do.

XOM raised its dividend 15% and reports earnings today. I'm sure the press will trumpet them. I hold CVX due to its deep water leases and finds in the Gulf of Mexico. They report tomorrow.

Doing nothing ... being patient and taking partial LT sugar (aka proftis) as my stocks move up in rotation. This is really money & tax management as when a stock moes up a lot, I own too much, so sell some early dated shares to book LT gains.

No word of the day while I travel.