Out of Their Own Mouths ...

A few days ago I reminded readers of the old KGB-Soviet propaganda technique of accusing the West falsely of doing exactly what the Soviets were in fact actually doing themselves. This was quite effective during the Cold War as the sycophantic leftist media in the West would pick up the cue and parrot the party line stridently.

So what do I read in this morning's Financial Times online, but that old well-trained KGB agent, Vladimir Putin, falling back on his training and telling us, in essence, what has happened in Georgia. Here are his "accusations" -

"Vladimir Putin, Russia’s prime minister, on Thursday accused the US of provoking the conflict between Russia and Georgia, in the latest sign of escalating tensions between Moscow and Washington. The Bush administration dismissed his comments as 'ludicrous'.

" 'Why . . . seek a difficult compromise solution in the peacekeeping process?' asked Mr Putin in an interview on CNN. 'It is easier to arm one of the sides and provoke it into killing another side. And the job is done . . . '

"In an apparent allusion to John McCain, the Republican presidential candidate, who has taken a tough line on Russia, Mr Putin said: 'The suspicion arises that someone in the US especially created this conflict with the aim of making the situation more tense and creating a competitive advantage for one of the candidates fighting for the post of US president.' He added, in a reference to the presence of 130 US military advisers in Georgia: 'The American side in effect armed and trained the Georgian army.' "

So substitute Russia for the US, South Ossetia for Georgia, and Medvedev for McCain and one has a clear statement of what Russia actually did.

1. Russia arms and trains the South Ossetian militia.
2. The South Ossetian militia provokes the Georgians into attacking.
3. One motivation was to create nationalist support for Medvedev as the new Russian President
4. Georgia stupidly attacks.
5. Russian executes in trap and crushes them with its well-planned and well-prepared trap.

Very neat - right out of Putin's own mouth. This is backed up, by the way, by on the ground reports in the Financial Times - see issue of Wednesday, August 27: "... the speed of Moscow's reaction suggests Tbilisi [Georgia's capital] fell into a well-laid trap." That article has interviews of Russian officers that they were on the move before the Georgian attack. And that South Ossetian militia were shelling Georgian and killing its peacekeepers as early as a week before the area exploded in conflict.

Hmm ... perhaps CNN is reverting to its old form, too, in parroting the Russian line.

Markets

Good up move yesterday in US stocks. MBI speculation began working well as its long term prospects for doing municipal bond insurance business got a boost.

Lousy numbers out of DELL after hours. DELL is losing business on both sides - from HP and from Macs - so has to cut prices. Like Starbucks, another 1990s star is having has trouble.

PS: In the memory department, recall that in late 2007 superbeefer Goldman, Sach's chief economist, Jan Hatzius, predicted a recession in Q2 and Q3 of the US for 2008. Uh ... GDP grew at 3.3% in Q2 2008. I guess he was wrong, by a mile. I don't suppose he'll be admitting error.

Words of the Day

"Votive" - adjective [$10]
Votive means offered or consecrated in fulfillment of a vow.

"Votary" - noun [$10] (usually followed by "of")
Votary means 1. a person vowed to the service of God or a god or cult; 2. a devoted follower, adherent, or advocate of a person, system, occupation, etc.

Sentences:
1. Will Obama's fervent supporters continue sending him their votive contributions in sufficient size to fund his propaganda campaign ?
2. The new Demigod spoke to his votaries last evening with his gigantic image in a classical Roman setting. I was reminded of the recently discovered, giant marble statue of the Roman Emperor Marcus Aurelius. The adoration of the human-gods is back in vogue.

Ruminations on Russia

I suppose that is a $10 word. This usage of "rumination" is from "ruminate" meaning "to meditate at length: MUSE". See below for more interesting meanings and usages.

China criticizes Russian actions in Georgia. So that's good-bye to Russia's delusion of Asian hegemony and Asian support.

Investors in Gazprom must be delusional to think they will ever see a dime from that company controlled by the Capone mob in Moscow.

Speaking of the "Russian economy", is there anything else significant than the oil industry, Moscow and the government ? Since we are re-thinking that nation's outlook, perhaps we should cease optimistic expectations that Russia will evolve into a normal, free economy anytime soon. Fascist China is much broader and more diverse.

Regarding investments in Russia, I think the boxing maxim, "protect yourself at all times" applies. I have none except indirectly via whatever the Vanguard Emerging Market Fund holds. I was asked about those a few years ago and used the Al Capone analogy in saying "no" with humor. I think that still applies. Any Russian play is a short term trade.

Markets

With good durable goods numbers and a reasonable upward revision of GDP expected today, the recession-mongers have a long row to hoe. For city-slickers, that is an American slang for a lot of hard work. A "hoe" is an agricultural tool and using it is to hoe; one hoes a row of plants to get rid of weeds, etc. I suppose the Urban Dictionary can give another definition of "hoe" but that won't fit here.

Recent data indication housing is bottoming. An uptrend might commence anytime soon. But don't be a hero - the beefers can still make Ms. Market dance to any tune they wish, short term. Wait for good entries.

Word of the Day

"Ruminate" - verb [$10]
Ruminate means (intransitive) 1. to chew a cud; 2. to meditate at length: muse, not the alternative definition of "to chew a cud"; (transitive) to reflect or meditate on.
Sentence: Bunkerman ruminates about the US and world economic trajectory for quite a lot of time every week.

By the way, for any city-slickers, here is a bonus word: "cud"
"Cud" - noun [$10]
Cud means 1. food regurgitated from the first stomach of ruminant [e. g. a cow] and chewed again; 2. Somethings, as a quid of tobacco, suitable to be held in the mouth and chewed. I suppose bubble gum or chewing gum is another example of a "cud".
Sentence: I once tried chewing a cud of tobacco, but in modern setting not on a baseball diamond, getting rid of the juice was disgusting.

And another bonus word: "quid"
"Quid" - noun [$10]
Quid means a cut of something to be chewed, especially a plug of tobacco. Another usage is British slang for a pound sterling.
Sentence: I wonder if teeny-boppers chewing quids of bubble gum are representative of youthful Obama supporters, or is it activist college kids with their bongs ?

And another related bonus word for city-slickers:
"Ruminant" - noun and adjective [$10]
Ruminant means (noun) a hoofed, even-toed, usually horned mammal of the suborder Ruminantia, as a cow, sheep, goat, deer or giraffe, having a stomach divided into four compartments, and chewing a cud consisting of regurgitated, partially digested food; (adjective) 1. that chews a cud; 2. of or belonging to the Ruminantia; 3. Meditative: reflective
Sentence: My dog Sky can herd almost any domesticated ruminant; he's great with sheep and could do cattle, but we've never tried goats.

Intellectual Bear Market

The US has been in an intellectual bear market for at least 40 years, perhaps 100 years in the opinion of some writers. This morning's WSJ brought news that SAT scores are down again and gains of recent years are mostly gone. Critical reading scores are at decadal lows per the chart in that article. This is even after the "re-scoring" of the test a few years ago. Sigh ....

I don't know what is on that test anymore, as my memories date to over 35 years ago. At that time one needed to have a fairly good vocabulary to perform well on the verbal test. That's why I started my word card file about 40 years ago. Being much better in math & science than those skills of the other parts of my brain, I had to work on my weakness's - as my basketball coach had taught me.

Now, how many young people read a newspaper ? Or many books ? But even reading newspapers doesn't bring the same benefits anymore as those are now written at a much lower level than years ago. You've seen my quotes by H. L. Mencken. In nearly every column of his, I find a $10 word - either a new one or an old one in my card file. Even columnists in newspapers mostly write simple polemical pieces spouting old bromides - original thought is quite rare.

Political dialogue had been horrible since Lincoln, with few exceptions. Here is Mencken's thought on that from 1926:

"Any man engaged habitually in controversy, as I have been for twenty years past, must enter upon his declining days with a melancholy sense of its hollowness and futility. Especially in this great republic, where all ideas are suspect, it tends almost inevitably to degenerate into a mere exchange of nonsense. Have you ever examined carefully the speeches made by candidates in a presidential campaign ? If so, you know they are of bilge and blather all compact. Now and then, true enough, one of the august aspirants to the Washingtonian breeches is goaded or misled into saying something pungent and apposite [*today's Word of the Day], but not often. His daily stint is simply balderdash."

Doesn't that fit today, 80 years later ? Read a speech from the Democratic Convention - I mean read it, don't watch it.

This opinion is not just mine. Talking to a non-posting reader a couple days ago, we both agreed current newspaper writing stinks. And in my correspondence with another non-posting reader, we agreed that one must read several newspapers to get a more true understanding of the world events. I cannot remember the last time I found a $10 word in the Wall Street Journal. And its coverage of events has declined so much that I had to subscribe to the Financial Times to get more facts.

Since Mencken saw this 80 years ago in the Roaring '20s, we can't blame it all on TV, or even radio. Perhaps prosperity breeds ignorance via sloth as the midwife? I don't know. Any ideas are welcome.

Word of the Day

"Apposite" - adjective [$10]
Apposite means highly pertinent or appropriate.
Sentence: Reading three newspapers online and one international news service this morning, I did not find one single apposite analysis or fact to help me understand the economic trajectory of the world. All was just blather or short term opinions or tired restatements of fears.

Bombastic Buncombe

During the political campaign and especially the Democratic convention, I am having a field day with $ words - aka money words - like mountebank, quacksalver (see yesterday's $100 word) and today's title "Buncombe". Finding currently relevant sentences for those fine words is so easy with all the claptrap being shown on TV and in the printed and online press.

"Buncombe" is not today's Word of the Day, but after seeing Mrs. Obama with the big hair and Oprah-esq makeup on those big monitors in a TV blurb, it naturally came to mind. I first saw this word reading Gen. Sherman's memoirs. On page 55 of his memoirs, referring to a legal/political argument, "Gen. Kearny ... had no respect for this kind of buncombe."

"Buncombe" is the original spelling of "bunkum" so now you can probably guess its meaning, viz. empty or insincere talk, claptrap. The word derives from Buncombe county in western North Carolina from a remark made circa 1820 by its congressman, who felt obligated to give a dull speech "for Buncombe". Great word, no ? And it shows how long the US public has suffered from meretricious* leaders. [There, I used today's word of the day quite naturally.]

So this week is a fine week to learn many money words in a natural setting. Watch a bit of the Democratic Convention. In no time, thoughts using words like facile, factitious, mendacious, and prevaricate will pop into your head and you'll have learned those words forever ... as you now will know "buncombe" forever.

Hmmm ... how about "Barack's Buncombe" for an alliterative mnemonic about his "care" for the working classes? His specific programs are a simply jobs programs for liberal college-educated people who are his primary power base - patronage for supporters - classic machine politics, Chicago style. They have no relevance to the working classes in the US, notwithstanding the claims spouted in this factitious convention.

PS: Arghhh !! I supppose I should be used to it, but I just heard a radio blurb on a Boston radio station lying about Mrs. Obama by omission. The clip said she gave up a lucrative job at a law firm to work doing "public affairs" at a community hospital ... neglecting to say she is paid $300,000 per year for that job. How many scientists or engineers make that kind of money ?

Word of the Day

"Meretricious" - adjective [$10]
Meretricious means 1. of or relating to a prostitute; 2a. tawdrily or falsely attractive; 2b based on pretense or insincerity.
Sentence: see above

A Really Important Subject

That is FOOD. I love food ! I think I still have a high school poem that I wrote about the wonders of food - I received an "A" !

So as the news provides little stimulation for more erudite posts, I intend to write about some of my favorite foods and recipes. See below.

First, the markets. Nothing is happening. News is necessary relating to the "bottom" of the housing markets for a trend to form. Some data later this week might help.

Second, the world. It's a mess. Bush is shown to be a fool in trusting Putin. I remember that meeting of those two in Texas, thinking at the time that Putin really did not seem to be a friendly person. Bush was delusional about seeing into his soul. McCain was right, he looked into his eyes and saw KGB.

Here's a YouTube link to an interview of Zbigniev Brzezinski about the Russia-Georgia crisis. He's been a mostly reliable interpreter of international events for 30 years and speaks clearly with no BS. See http://www.youtube.com/watch?v=ZCVq7EwZL0U

Food

The Perfect Fried Egg

I prefer my fried eggs cooked "over medium" with the yolk thickened by cooking but not solid - just on the verge of solidifying. When I mash the fried eggs with my fork, the thick yolk sticks to the white for a tasty mix.

Start with either farm fresh eggs or some good organic eggs, preferably raised cage-free with sunlit porches or free-range - i., e., happy chickens ! My favorite local brand is "Country Hen".

Put a good bit of olive oil in a frying pan. I suppose butter tastes better, but I have to toss a bone to health once in a while. Heat the oil at medium [i., e., "6" on 1-10 scale on my electric stove] until a drop of water sizzles. Crack 2 or 3 eggs into the pan. Sprinkle a bit of black pepper onto them. Cook until the white is … “white” with just a bit of transparency on top. Flip over. Now count to 35. This is really 30-35 seconds as my count is a bit fast and varies a little. Remove at once and put onto your plate.

Accompaniments: whole wheat toast or toasted whole grain bagel with pumpkin butter or marmalade; fried Spam; organic banana or small bowl of raspberries/strawberries.

Word of the Day

"Quacksalver" - noun [$100] (from writings of H. L. Mencken)
Quacksalver means 1. a quack doctor; 2. a charlatan. I guess quacksalver is a close synonym for mountebank.
Sentence: Obama seems to be the quacksalver de jour for the Democratic party, as his prescription for renewed prosperity is high taxes on their designated whipping boys - those earning high amounts in a year. Of course the truly wealthy get a free ride, as usual, with their freeloading municipal bond income.

TGIF

Markets

More wasted air time on Babblevision. The "face" is asking some fellow about the "fate" of FNMA and FreddieMac. What the hell does he know ? You ask, "OK, Bunkerman, what do you think ?"

First, I define a useful abbreviation - the "Two Fs" = FNMA plus FreddieMac.

Here is the answer: Nothing should happen until the actual losses arise on the actual mortgage loans on the books of the Two Fs really do reduce their equity to near zero. Treasury should quote J. P. Morgan that markets will fluctuate and no decision about taxpayer money for the Two Fs will be made due to market speculations in the price of their stock. Treasury should say it stands ready to support the debt and mortgage backed securities of the Two Fs. Any decision on the capitalization of the Two Fs will be made with real loss data. Then shut up.

Commodities

I see the blather about the end of the commodities is vaporizing. Copper is back at $3.50, right in the middle of its trading range for about a year or more, viz. $3 to $4. Oil is bouncing a bit. I still think it slowly goes to about $100 due to demand declines. Other metals prices popped up. I guess the world economic slowdown - it it exists - isn't a collapse.

Does anyone except me realize the difference between growth and demand ? If world GDP is stagnant, would not demand for commodities stay the same as before ? If the world produces the same amount of goods & services, would not it need the same amount of commodities to do that ? So growth means an increase in demand, barring substitutions. Demand is demand; growth is an increase in demand. They are NOT the same thing at all.

OK, these two concepts are not perfectly separate as some commodity demand is to build new capacity for the growth, not current consumption. But let's not fool ourselves - most commodity demand is for current uses, not to create growth.

So mirabile dictu, as the beefer speculators stop pushing the trend down, prices on many commodities stabilize. Golly, babblevision is so vacuous !

This reasoning is why I bought DVN, CVX, FCX and RIG on the recent big dips. These positions are doing very well lately, offsetting some weakness in the big fins.

Word of the Day

"Invidious" - adjective [$10]
Invidious means (of an action, conduct, attitude, etc.) likely to excite resentment or indignation against a person responsible, especially by real or seeming injustice- an invidious position; an invidious task.
Sentence: The invidious Russian activities in Georgia will be a long term sore, as they announced intent to permanently occupy checkpoints at key locations.

More Facts ...

World

"Red" China - for all the successes economically, a story in today's WSJ shows the inherent nature of the regime: "Chinese authorities ordered two elderly women to spend a year of "re-education through labor" after they applied to stage a protest at an Olympic protest zone over being evicted from their homes." Maybe it's not "Red" anymore, but has morphed into an oligarchic tyranny. Labor camp for merely 'applying' to protest eviction from their homes ... sheeesh how oppressive it that ?

Russian occupation of Georgia continues. The lies of its government are exposed. Putin rants about "genocide" and Russian media claimed 2,000 killed. Here's a fact from FT: "A Russian commission designed to look into allegations of ethnic cleansing and genocide by Georgia in the breakaway enclave of South Ossetia says that Georgian forces killed 133 civilians in a bombardment starting on August 7, but adds that the number could climb. ... an earlier Russian estimate of 2,000 victims was challenged by Human Rights Watch, which said hospital records in Tskhinvali, the South Ossetian capital, showed only 44 dead."

I wonder how many Georgians the Russians and their killers in the "white armed band" South Ossetian militia murdered ? That would be interesting to know for both the South Ossetians shellings of Georgian villages BEFORE the invasion and then afterward. More and more evidence seems to show that the Moscow government was simply lying and accusing others of what their forces were doing as propaganda.

Georgia's government was certainly stupid and I do not support their actions, but perhaps their true "stupidity" was falling into a Russian trap ?

Markets

Bear raids do exist. From the WSJ: "In an apparent attempt to prevent a repeat of the cascading rumors that helped sink Bear Stearns Cos., the Federal Reserve last month quietly called one major bank to see if it had pulled a credit line from Lehman Brothers Holdings Inc., people familiar with the matter said. Responding to a July rumor that Credit Suisse Group planned to pull a line of credit to Lehman, Federal Reserve officials called to see if it was in fact true, according to these people. Credit Suisse told Fed officials there was no truth to the rumor and it had no intention of pulling the line of credit, the people said." So the "rumor" was simply false ... a lie probably initiated by hedge funds to help their short raids.

When will the SEC stop these ? Fraud in selling virtual shares short must be banned and the uptick rule reinstated. Of course with the SEC and staff looking for high paying jobs on the Street, the beefers and their law firms, should we really expect them to do anything their Street and beefer masters do not approve ?

Will any high profile pundits draw the logical conclusions from these simple facts ? I doubt it.

Word of the Day

"Camorra" - noun [$100]
Camorra means 1. (upper case 'C') a secret society of Naples, Italy first publicly known about in 1820, that developed into a powerful political organization and was later asscoicted with blackmail, robbery, etc. until its destruction in 1911; 2. (lower case 'c') any similar society or group.
Sentences: (A) Last fall's Communist Party Congress in "Red" China partly revealed its ruling camorra to the world, but thereafter it again disappeared under the cloak of secrecy. (B) The ruling camorra of Russia is a mystery. Which cliques and factions and people have power ? To this observer, the old Soviet Union was more transparent as at least the names it the Politburo and Central Committee members were known.

More of the Same

Energy stocks up ... for now.
GS pans its competitors.
Russia acting like a good 19th century imperialist.
HP good earnings ... odd for a "soft world economy".
Babblevision is still blathering.

Here's something new: Chinese stocks roar up. Those stocks have been trending down for a long time.

Here are my Alpha Fund positions: BAC (double), JPM, C, GE, CVX, DVN, RIG, CCJ, FCX, (BA+IR+ITW), (GD+LMT). Year to date performance sucks. But the year is not over.

Krypto Fund is balanced again, after the recent buy of gold+silver+Vanguard Precious Metals Fund with proceeds of partial sale of Vanguard REIT fund. Krypto Fund is massively outperforming the stock averages - by about 10%.

Word of the Day

"Derogate" - verb, intransitive [$10] (followed by "from")
Derogate means 1. take away a part from; detract from (a merit, a right, etc.); 2. deviate from (correct behavior, etc.)
Sentence: The events in Georgia show Russia has derogated from norms of behavior for a modern, peaceful nation.

"Derogation" - noun [$10]
Derogation means 1. (followed by "of") a lessening or impairment (of a law, authority, position, dignity, etc.); 2. deterioration, debasement.
Sentence: The mistakes and foolish decisions of the US administrations after Ronald Reagan has led to serious derogation in America's leadership capabilities in the world as a force of good.

Is There Anything Knew Under the Sun (cont.) ?

For today, the answer is no.

World

Russia seems to be occupying a small country adjacent to its borders, a pattern of behavior shown by it for about 200 years.

Russian organizations admit in newspapers in eastern Europe that they were training and arming the Ossetian militias for years; those units were heaviliy shelling ethnic Georgian villages to provoke the governement of Georgia to act.

Russian troops are looting, according to press reports from Georgia. Nothing new there. From the WSJ: "Angela Sengelia, the wife of a Georgian officer, was gathering her belongings from Senaki's officers' quarters and taking them away in a truck. She said the Russians have already looted the place, removing anything of any value including clothes, television sets, DVD players and music centers. 'They will only leave when they have nothing left to steal,' said Shota Odisharia, the deputy mayor of Senaki."

Russia occupies a key Georgian port, "a day after Moscow said it had begun pulling its forces out of Georgia." Nothing new about breaking agreements.

I wonder if the purported leadership in Moscow really control the army ? Here's an interesting statement by a Russian officer quoted from the WSJ: "When asked when Russian troops would withdraw, government officials became irritable. Russian Army Capt. Vladimir Ivanov said it was 'a process.' It had taken a long time for them to deploy and it would take them a long time to withdraw, he added."

Isn't that proof the Russian attack was preplanned and not a mere resopnse to the stupid Goergian move into South Ossetia ?

Here's another quote from the WSJ: ""We all want to go home, and we'll probably be told to do so tomorrow," said a [Russian] lieutenant who identified himself as Kolya. "You can't pull out all of our troops all at once. There are five divisions in Georgia -- all the road would be clogged."

Readers should realize that the D-Day landings in Normady in WW II had five divisions at first. That takes a lot of planning. It's becoming very clear this operation was set up by Russia in advance.

South Ossetian irregular units wearing white armbands did much of the dirty work for the Russian army under its protections. Any Georgian man was killed preemptorily. Using unofficial irregular units for massacres has occured for a few hundred years in that area of the world. The Ottoman Empire did that in the Balkans and in Armenia.

Markets

Beefers raid the financials. What a surprise ! The dopes - or is it dupes ? or is that knaves ? - at the SEC gave them the "GO" signal last week. So they brought out their puppets, Meredith, Elmer, Barron's, etc. and started to sell virtual shares short with their computers.

I bought some GD and LMT for a long term play in the Alpha Fund. Krypto Fund was rebalanced Friday and Monday with some selling in real estate and buying gold & silver & the Vanguard Precious Metals Fund.

Regarding the "stress" in LIBOR, I wonder if Russia is playing games here with its dollar reserves ? We should be on the lookout for that.

Babblevision as usual provides no data or facts.

Word of the Day

"Scurvy" - noun and adjective [$10]
Scurvy means (noun) a disease caused by deficiency of vitamin C characterized by swollen, bleeding gums and the opening of previously healed wounds esp. afflicting sailors; (adjective) - archaic - dishonorble, contemptible.
Sentence: The scurvy actions of the Russian army in protecting South Ossetian irregulars in massacring Georgians must be laid at the feet of Vladimir Putin. He was reported to be "outraged" by massacres and war crimes by Georgians. But that was the standard Soviet pattern of behavior - loudly accusing others of doing exactly what they were doing. Being a well-trained KGB operative, he's just responding as he was trained.

More Mess

Reading the newspapers - yes, real paper newspapers - over the weekend provided more facts and anecdotes about the Georgia-Ossetia mess. Balkan-style ethinc cleansing seems to be the ruling principal.

Following are some facts in order of time:

1. A South Ossetian militia shells an ethnically Georgian village.
   
2. Georgia stupidly sent in its army to South Ossetia. Many civilian casualties occur in areas occupied.
   
3. Russia sends its army into South Ossetia and thence into Georgia - this appears to be preplanned as some units were already on the move.
   
   
4. South Ossetian militia units wearing white armbands - seemingly in coordination with the Russia Army at least in this identification insignia - proceed to kill any Georgian male they can find, whether in South Ossetia or in Georgia.
   
   
   
5. Putin accuses Georgian leaders of war crimes and massacres. Whether he was aware of the protection Russian army units provide South Ossetians massacring Georgians is unclear.
   
   

The entire situation is a cluster FUBAR.

Why is Russia involved at all ? Ossetians are neither Russians nor Slavs. And Russian 19th century pretensions to be protectors of all Slavs was originally a mere pretext for Tsarist efforts to expand into the Balkans and partition the old Ottoman Empire a la Poland.

The danger arises from foolish leaders in Russia and the West using these events for their own agendas. This is quite a troubling situaiton.

Markets

The sheer stupidity of Babblevision continues to amaze me: rumor-mongering, blabbers of opinions and flimsy ideas with zero facts. They had Sutty on again early. Ugh ...

I will look at some major defense stocks today for long term positions. I have avoided then thinking major weapons programs were at risk. But now with the events in Georgia, to me they now will seem quite important. The most expensive Navy or Air Force is the 2nd best. Air superiority has been crucial for US tactics since World War II. Ditto naval superiority. So major air and naval weapons systems that can dominate Russia and Chinese technologically seem likely to be funded far into the future.

PS: I think I'll start a joint position in GD and LMT in the Alpha Fund. Obviously from the daily charts I've missed some easy money. But the PEs are reasonable and the weekly charts look like breakouts from a long base. I'll take 1/2 down this morning. I'll manage the size by considering (GD+LMT) = one position.

Word of the Day

"Deracinate" - verb, transitive [$10] literary
Deracinate means 1. tear up by the roots; 2. obliterate, expunge.
Sentence: Numerous eye witness acounts show that South Ossetian militia units deracinated ethnic Georgians under the protection of Russian army units.

Bonus Word

"Fie" - interjection [$10] archaic; appears often in Shakespeare.
Fie expresses 1. disgust; 2. shame; 3. a pretense of outraged propriety.
Sentence: (A) (usage 1. & 2.) Fie upon the Russian army in Georgia - protecting killers. (B) (usage 3.) Putin - "Oh fie, Georgia attacked South Ossetia. Let's send our army in."

TGIF

Ahhhh a summer Friday ! That means a lazy day here in the bunker. Plus I'll have circus dog party this evening with a fine martini, while listening to Louis Armstrong classics.

Gold and silver are being crushed overnight. Gold cracks $800 and silver moves under $13. I'll have to scape around and find some money in the Krypto Fund to buy some, as its asset allocation model is screaming for me to buy them.

The WSJ says that there is little evidence that "Georgian attacks killed thousands of civilians." But there is plenty of evidence that hundreds were killed. Isn't that enough to justify "some" Russian response and protection for the people of South Ossetia ? Of course, perhaps the Russians went "too far" but in my opinion, one should look harder upon those who start a war, not on those who finish it.

US policy must be very careful here and unfortunately, the old knee-jerk, anti-Russian reactions are guiding it. Besides Kosovo, what other breakaway province exists in the world where a war is possible ? Taiwan. The US insists that China should not attack Taiwan to take control of it. But why does the US defend Georgia's taking control of South Ossetia with military force ? Very troubling.

Poland and the US agreed to the missile defense to protect Europe against Iranian missiles. Poland drove a hard bargain and got frontline US Patriot aircraft defenses. I suppose the Russian move in Georgia made some minds reach a deal now. I support this in principle, as Poland is a member of NATO and an ally so defense of Poland is part of US commitments anyway. As is all of NATO. But why is the US paying for the defense of a prosperous Europe ? Europe should pay for this if Europe wants it.

Ukraine and Russia are sparing a bit over movements of Russia's Black Sea Fleet, whose base is in Ukrainian Crimea. Russia is talking big about its base, saying that its ships will go wherever they wish, whenever they wish. But the newspapers don't tell you that all the fresh water for that base in the Crimea comes from Ukraine. So it's untenable without Ukrainian cooperation.

Word of the Day

"Ingerence" - noun [$1000] rare; the "g" is pronounced like "j" in Jim.
"Ingere" - verb [$1000] rare, obsolete.
Both words are often used in diplomatic or foreign affairs writings.
Ingerence means bearing in upon, intrusion, interference.
Ingere means to carry in, put or push in, obtrude; (reflexive) to thrust oneself in, to obtrude oneself, intrude, to presume.
Sentences: (A) Russian ingerence into the affairs of Georgia and adjacent territories is causing much concern in all neighbors of Russia. (B) Russia chronically ingeres into the affairs of its neighbors. This pattern of Russian behavior dates to the 16th century and major examples are its ingerence into Poland and the lands of the Ruthenian*, Baltic and central Asian peoples.

*Ruthenian is the correct name for the peoples of western Ukraine and Byelorussia, who are the Red Ruthenians and White Ruthenians, respectively. The names "White Russia" and "Little Russia" were created by Muskovy centuries ago to imply its dominance as the "Great Russians."

An Idea

Now here is a product that might really sell: On Demand Olympics.

Suppose you're a wrestling fan like Bunkerman and want to see some exciting Greco-Roman wrestling matches at the Olympics. You could sit around endlessly channel surfing on NBC and MSNCS and CNBC to try to find those, perhaps checking the online websites for times, IF you can find them. You'll never find them at convenient viewing hours because this sport is not popular with the masses.

So this morning around 4AM ET I went to the MSNBC website and clicked on wrestling and, mirabile dictu, I found that I could watch exciting matches on my computer ! I saw Japan v. Armenia and US v. Poland. Great action ! Now if I could do that on my TV while sitting comfortably on the couch with a beer, I'd probably watch for hours. I don't care if it's live, since I have no idea who won anyway. I just enjoy the competition and action. The online show had advertising, too - I saw an Exxon ad, among others, while viewing the events.

When will the Internet become integrated to the TV ? To me, that's a big market with new products that can be huge sellers, but it has to be done correctly to provide viewer flexibility.

Markets

Elmer (aka Greenspan) said the FNMA and Freddie Mac rescues were a mistake. What a knave ! He was part of the problem and now he's obeying his beefer masters in coming out with more negativity.

And the bears on cue hit the financials hard again since they can sell short with phony, virtual shares again. Hello SEC ? Are you blind or just stupid or bought by the beefers again ? I guess you need a job for 2009 and going to work for a beefer or Wall Street firm offers a good payday, so you do their bidding again.

Sigh ... DC is such a cesspool of knavery.

EU and France GDP were down. Europeans, say "Thank you" to the ECB for your pain.

I am doing nothing. My recent buys of CVX, DVN, FCX and RIG are partially ofsetting the drops in the fins. With new money coming in soon to Krypto Fund, I plan to buy some gold & silver if they are still depressed. This is mere asset allocation, not a LT call.

Word of the Day

"Palpable" - adjective [$10] (an easy one)
Palpable means 1. one that can be touched or felt; 2. readily perceived by the senses or mind.
Sentence: The palpable disarray of Bush foreign policy is dangerous to world peace.

Bonus Word

"Copse" - noun [$10] (this word is seem often in military writings and in literature)
Copse means 1. = coppice which means a. a thicket, grove or growth of small trees; b. forest originating mainly from shoots or root suckers rather than seed; 2. (in general use) a small wood.
Sentence: (A) Small units moving might hide and regroup in a copse during the day to avoid detection from air reconnaisance. (B) A sniper would be stupid to hide in a copse, as that is the obvious place and a likely target for mortars or artillery. A well-camouflaged hole a safe distance in front of the copse is much better.*

* This observation is adapted from readings of successful snipers from World War I.

More Proof

I read in the WSJ that the cotton market suffered an unusual spike early this year, at a time when cotton supplies were ample. That is another example how the flood of pension fund "investment" into commodities has overwhelmed markets designed for "real" hedging activities. "Real" market participants such as farmers and cotton dealers got hurt. These huge pools of money need to be prohibited from the futures markets. If they want to "invest" in cotton, let them buy plantations and grow more themselves.

The arrogant US government seems to say it wants to "punish" Russia for "disproportionate" actions in Georgia. Is that not an admission that Georgia started it ? So why is the US sticking its nose into this mess ? And now I read the US is canceling a joint naval exercise with Russia. Why ? This benefits the US in trying to bring Russia into more joint activities. I don't like any of this. The US seems to be reverting to cold war behavior. Good relations between the US and Russia are extremely important. Why not focus on priorities for the US for once ?

Books

[This "Books" section is a new feature of this blog that I will include from time to time.]

"Walter Lippmann and the American Century" by Ronald Steel is an outstanding book about "the" most important political commentator of the 20th century. Walter Lippmann wrote hugely successful syndicated columns that appeared in hundreds of newspapers from about 1930 to about 1966. Prior to 1930 he was a major writer and even was involved with Woodrow Wilson's creation of the famous "Fourteen Points" which was an intellectual basis of American war aims in Wolrd War I.

Lippmann personally knew or met extensively nearly every major political figure and world leader from around 1910 until 1970, from Theodore Roosevelt and Woodrow Wilson to Charles De Gaulle and Nehru to Lyndon Johnson and Nikita Khrushchev. The book contains first hand information as it had access to Lippmann's private papers and notes and the author interviewed Lippmann extensively before his death in 1974.

If you want to understand the 20th century, this book helps enormously. Quite a few of my ideas on that period have been altered as I read this book and saw the first hand information contained therein. [The book has 600 pages and is available on amazon.com in paperback. ]

I think its perspective helps with the current "crisis" with Russia and Georgia, too.

Word of the Day

"Obdurate" - adjective [$10]
Obdurate means 1. stubborn; 2. hardened against persuasion or influence.
Sentence: The arrogance and hypocrisy of the US State Department can only make Russia more obdurate in its dealing with Georgia.

Bonus Word

[I am using these to bring out some obscure words that I might not otherwise ever be able to use as a word of the day, including terms of geography and nature.]

"Purl" - verb and noun [$10] - this is the second meaning, not the sewing/knitting term.
Purl means (verb, intransitive) (of a brook, etc.) flow with swirling motion and babbling sound; (noun) this motion or sound.
Sentence: "A river, amber tinted in the shadow of its banks, purled at the army's feet; ..." [from "The Red Badge of Courage" by Stephen Crane, the first paragraph].

More Rain

There is another heavy rain falling here at the bunker. Since I have a strong position on a hill, flooding is no problem. But the dogs really don't like going outside in the rain, so I have to be carefull and force them. Sometimes I have to go out with an umbrella to show "leadership".

Russia says its offensive is halting. Time will tell. But from the maps, they seem to now have sufficient control to impose a settlement. Whatever the causes, the Russian offensive seems to have been well prepared. Perhaps this was just a contingency plan on the shelf. Or perhaps it was more. But so far, this mess seems to be a child of the west's policies on Serbia and Kosovo, plus some petulance on the part of the Georgian President. I am wary of commenting further as I do not trust the media in reporting the truth of what actually happened to cause this or even what the situation is now.

The market held up well yesterday, extending the gains of Friday. The S&P broke through and closed over its 50 DMA*.

All the commodity gurus who were saying the commodity boom was going on forever and "it was different this time" are now saying the commodity bubble is over. And the global growth falloff is the cause. Uh... how much really changed in two months in the outlook for global growth. It's really just the speculators leaving their favorite "trade" These huge money pools are causing havoc in the real economy and need to be regulated.

*DMA = day moving average

Word of the Day

"Diachronic" - adjective [$10] from linguistics, etc. [compare to "synchronic"]
Diachronic means concerned with the historical development of a subject (especially a language).
Sentence: Understanding the turmoil in Georgia requires a diachronic analysis of the events on the ground and the creation of the province borders.

Here's another sentence for the word of the day: Chart analysis of stocks is almost purely diachronic, except when it uses current volume as an indicator.

She Wuz Robbed !

Another example of how major media malfeasance robbed Hillary Clinton of the Democratic Presidential nomination burst into the news. The major media "now" reports that John Edwards had an extramarital affair as late as 2006. This story was first reported in October 2007 by a quite reliable source [yes !] for these matters - the National Enquirer. But it was covered up by the major media.

In January 2008, Obama won the Iowa caucuses with 38% of the vote, John Edwards came in second with 30% and Hillary came in third at 29%. These results showed vulnerability for Hillary and gave Obama a huge boost of credibility. But what would have happened if the news of Edwards' affair had been widely known ? I suggest that his support would have been nonexistent, as his knavery while his wife was seriously ill would have shown him to be such a rat that he would have had to withdraw. Giving Hillary the Edwards vote seems reasonable as any Obama voters were quite committed to him already. So Hillary would win Iowa, then win New Hampshire and have such a lead in credibility that Obama might never have gotten his compaign the necessary momentum to win.

Hillary was robbed of the nomination by this press cover-up of Edwards' affair.

So the major media is so corrupted and so part of candidates' teams they hide news that might harm "their guy". Despicable.

The "What Goes Around, Comes Around" Department

EU and US policy on Serbia and Kosovo provides Russia with a near perfect justification of its attacks on Georgia. The foolish President of Georgia sent in troops to seize control of Ossetia, which had de-facto independence since 1991. Russia opposes this vigorously, just like the US and EU did for Kosovo, even bombing Georgia, just as the EU and US did bomb Serbia.

Obviously US diplomatic policy has serious problems. US policy is simply far too interventionist in far away places.

PS: Krypto Fund model wanted me to buy some gold & silver, but there was no obvious source of funds - so I will wait until new money comes in later this month.

Word of the Day

"Perspicuous" - adjective [$10] and (more common) "Perspicacious" - adjective [$10]
Perspicuous means 1. easily understood, clearly expressed; 2. (of a person) expressing thoughts clearly.
Perspicacious means having mental penetration or discernment.
Sentences: (A) Ronald Peagan's perspicuous speeches taught the American public that his policies were fundamentally based on increasing human freedom. (B) Obama speaks in such vague generalities that one must wonder if he is sufficiently perspicacious to understand the meaning of their details or perhaps he is hiding them like a mountebank hides the fact that his patent medicine is mostly alcohol.

Bonus Word

"Cwm" - noun [$10] pronounced "kum" with the "u" as in "put" [ and not as in "putt" for those with dirty minds ! ]
Cwm means 1. in Wales, = "coomb" or "combe" - a. (British) a valley or hollow on the side of a hill; b. a short valley running up from the coast; 2. (Geographical) a cirque = a deep, bowl shaped hollow at the head of a valley or on a mountainside.
Sentence: In the "western" film genre, an Indian ambush often occured in a cwm as the cavalry blindly rode into it without first scouting ahead.

TGIF

Yesterday's smackdown definitely made me pine for Friday. The bears recovered some conviction after AIG - never a good stock or company in my opinion - reported crappy numbers. The auction rate securities settlement by C in NY gave them more ammo. That story have been around so long, I wonder why anyone was surprised ?

Lost in the bearish resurgence of angst were good numbers in home sales. That was real news and potentially very significant if that shift continues.

Doing nothing. I am sitting on my positions - very long - with much pertinacity, thinking my ideas for the economic trajectory are correct and slowly being proven so.

Alpha Fund positions: BAC (double), JPM, C, GE, CCJ, DVN, CVX, RIG, FCX, (BA+IR+ITW as one), WM (small).

Word of the Day

"Nonage" - noun [$10]
Nonage means 1. (historical) the state of being under legal age, minority; 2. a period of immaturity.
Sentence: Errol Flynn's penchant for ladies in their nonage got him in trouble in 1943, when he was charged with statutory rape by two underage chorus girls. He was acquitted by an all-female jury after a sensational trial.

Another Thursday in the Summer

This summer is going by with much celerity, being 2/3 over already. It's not been a sleepy summer in the markets. Summer Thursdays should seem like Fridays of the rest of the year, but that has not been true this year. Today's news seems subdued, though.

Costco reports big increase in same store sales. Guess the consumer is not dead.
AIG reports a big earnings miss. I've never understood nor trusted that company.
Chrysler may link to Nissan. Why does Chrysler exist ?
US Gasoline demand was flat over last week, keeping that little poparoo alive.
China Olympics to start soon. As usual, I expect to have difficulty seeing my favorite sports, such as wrestling.

Jobless claims today ... since it's still seasonal layoff seaason, I put little weight on these numbers this time of year.

Mirabile dictu ! My dip buys of FCX on Monday and Tuesday paid off, as the stock popped 10% on the takeover of a similar company. A possible takeover is a major reason I selected this stock among many miners.

Word of the Day

"Pertinacious" - adjective [$10] and "Pertinacity" - noun [$10]
Pertinacious means stubborn, persistent, obstinent (in a course of action).
Pertinacity is the quality of being pertinacious.
Sentence: Usually Bunkerman's pertinacity in sticking to his thinking on a stock pays off, but that success requires paying attention to clues indicating possible error. For that cluster fubar stock investment, WB, he blew it by brushing aside WB management's cutting the dividend in April, which meant their earlier statement either showed deception or ignorance, both being bad for an investment. That was a crucial clue to the coming congeries of bad news.

Results

One cannot run experiments or collect enough data to prove or disprove many ideas about the world economy, but occasionally the time evolution of some actual observables permits one to accept or reject theories. The past few months' trajectory of oil prices does let us educe the truth of one theory, viz., that pension funds and speculators were driving up oil prices to levels unsupported by real supply and demand. On July 7, I wrote a blog post on the causes of high oil prices near $140, laying out that theory, while also detailing the causes of the long base of support for oil prices near $100 from real supply and demand causes.

From my commodity data services [see http://www.barchart.com/ and http://www.futures-research.com/ ] one can readily see that beginning about February, gasoline demand versus last year was down significantly. At that time the price of oil was struggling to break $100 per barrel. During that period, much pension money was flowing into indexed commodity "investments". So this flood of money then overwhelmed natural hedgers' capability to sell forward. And the break through of $100 per barrel created a favorable chart pattern. This led to massive speculative longs flooding market, too. All the funds saw the same pattern and barged in.

So oil prices rose parabolicly until early July. Over that same time period, the US gasoline demand continued to be markedly lower than last year and that drop increased. No summer driving season bump in demand occured. So prices rose while demand fell - odd behavior in a "rational" and "efficient" market.

Finally in early July, after the flood of pension fund money had petered out and some talk began about restricting both their "investments" and position size of speculators, too, oil prices began to fall rapidly. Did demand data change ? No, the same pattern persisted that had been in effect for months. What happened ? The pension fund and speculative buyers just ran out of new long money. The whole run up from $100 to $147 was a pure bubble, a mass delusion. And millions of people have been hurt by this flood of money chasing their Holy Grail, viz., more money.

This example explains why a populist libertarian like me wants to restrict the power of the big money pools to damage the US and world economy. I just don't like the rich and powerful - the ruling classes - fouling the lives of billions in playing their games to get more .. and more ... and more. Empires have fallen due to the greed of the aristocracy in grinding down the common man. This must not be allowed to happen again.

The big money pools need to be strictly regulated.

Word of the Day

"Sward" - noun [$10] eps. literary [used in Goethe's Faust, part II of the Great Books edition]
Sward means 1. an expanse of short grass; 2. turf.
Sentence: Golfers somehow enjoy hitting a little ball on long swards towards a little hole with a club, while bearing stress and using unusual grips like the "claw" to lower their score. Oh, man is a strange beast !

More Memorable Mencken

**First published Baltimore Evening Sun, August 19, 1935**

All government , in its essense, is organized exploitation, and in virtually all its existing forms it is the implacable enemy of every industrious and well-disposed man. In theory, it invades his liberty and collars his money only in order to protect him, but in actuality it always makes a stiff profit on the exchange. That profit represents the income of the professional politicians, nine tenths of whom are professional rogues, They employ a great many technicians to carry on the ostensible functions of government, and some of those technicians are honorable and competent men, but the politicians themselves are seldom either. Their only object in life is to do as little honest work as they can for the most profit, whether in money or in mere glory. The typical politician is not only a rascal but also a jackass, so he greatly values the puerile notoriety and adulation that sensible men try to avoid.

**End of Quote**

That thought of Mencken still fits today, and it's actually even more appropriate and correct and governmental actaivity has expanded a hundredfold since 1935.

Markets

Miners, ag and some natural gas stocks got smashed yesterday. In simple terms, all beefers remaining in that speakeasy still drinking bathtub gin panicked at once and left though every exit. As usual my patience has been inadequate so I added to FCX, DVN and CCJ too early. I wonder if "Early" should have been my middle name ? I'll wait and add more down here. Over the past few years I have done rather well buying these stocks on big dips. Maybe it's different this time. While some of those related commodities are / were overpriced, these stocks never participated much in those commodity spikes, so in my opinion are quite cheap at these levels.

But I could be wrong again.

Word of the Day

"Factitious" - adjective [$10]
Factitious means 1. specifically contrived, not genuine; 2. artifical, not natural.
Sentence: The modern Presidential nomination conventions are factitious pep rallies designed as a TV infomercial to sell you their man.

Survival

How mankind and the modern age survived the 20th century will be a rich topic for future historians. Three books which I've read or am reading have surprised me greatly in showing the ignorance and foolishness of leaders in the West. The unmitigated evil of the three 20th century tyrants is well-known (Hitler, Stalin and Mao), but the evils of Mao is still not accepted by China as his face appears everywhere there. Perhaps the story is not yet finished.

Here are the three books:

1. Walter Lippman and the American Century by Ronald Steele;
2. Reflections on a Ravaged Century by Robert Conquest; and
3. Armed Truce by Hugh Thomas.

Imagining small modifications in the distribution of power and human ability can easily create scenarios of the physical destruction of civilization; or decline to mass disorder and turmoil to a new Dark Age; or world domination by totalitarian tyrants. Freedom and modernity did survive, barely, but at huge costs in its human capital.

Perhaps this is why society and culture seems to have stagnated since around the 1920s. With little stability, no "Golden Age" can arise.

Current world problems seem miniscule by comparison to the events of the 20th century. Compare Islamic terrorism to Stalin ... Hitler ... Mao. The ratio seems similar to comparing a wife-beater to the Mafia and its Murder, Inc. Both are evil but the level and scale of the evil is massively different. Even today's economic problems seem puny. Look at the data for the Great Depression or even the severe 1974 recession. Today's "adjustion" to high energy prices and correction of housing overbuilding and speculation seem puny, too. So far, at least, the team of Battleship Ben and Hammerin' Hank has performed well. Perhaps man has learned some lessons of history.

Word of the Day

"Obtuse" - adjective [$10] (compare to "acute")
Obtuse means lacking sharpness or quickness of sensibility; 2. not sharp, pointed or acute in form; blunt.
Sentences: (A) No one paying attention can doubt that George W. Bush is one of the most obtuse Presidents in US history. (B) Raising interest rates would be quite an obtuse weapon for controlling the price of energy, certainly causing more pain than gain.

TGIF

After a volatile week, I'm thinking about the weekend. Hmmmm ... perhaps a trip to the range, a barbeque, some beer and relaxation is needed. I think the weekend will start early here in the bunker.

Markets

Yesterday the beefers performed their usual antics with one of their puppets. They pushed Elmer [aka Alan Greenspan] onto the TV in the afternoon to speak some doom and foreboding. Elmer was, of course, a principal architect of the housing bubble with his excessively long period of very low interest rates and his foolish pumping of adjustable rate loans at the same time. Since retirement, he's been doing the bidding of his beefer masters for very high pay. What a knave !

[Note for new readers: "beefer" is short for big, evil funds, the ones who bounce the market around like a ping pong ball, conduct bear raids and bull pumps while trying to shake you out of your investments.]

So "they" proceeded to knock the market down late in the day. BA was hit hard, probably by an unannounced downgrade by a major firm. The Dow Jones Industrial Avergae seems unusually volatle lately compared to the S&P 500. I wonder if the beefers have decided to use it an a tool of their manipulations, being a bit easier to bounce around as it's only 30 stocks ?

Recent data indicating a slowdown in Europe might soon give the ECB some reason to ponder its silly policy of trying to control the price of oil via interest rates.

I don't expect a good employment number today. This is seasonal layoff season. But companies are hiring if they can find people willing to work. The most important work skills are these three: 1) show up on time, 2) sober and 3) do what one is told. Unfortunately, some people don't seem to have that nowadays. A plant nearby is still trying to hire full time, unskilled labor at a reasonable entry level pay (double the minimum wage) - they have a large banner visible from a major highway advertising their desire.

PS: Added to CVX, DVN, FCX, BA, IR and ITW. At 167% long ... that's it, all full loads. NB: BA+IR+ITW is one position.

Word of the Day

"Mountebank" - noun [$10]
Mountebank means 1. (historical) a person who sells quack medicine from a platform; 2. a boastful, unscruplous pretender. Alternative definition: 1. a swindler, a charlatan; 2. a clown.
Sentence: Where is the gravitas of Obama ? So far he's shown himself to be a mountebank surrounded by his shills in the DC press, mouthing platitudes and empty slogans. "Change!" ... What Change ? He's a mere speech ... an empty head with a sales pitch for homo booboise to buy.