More Bugs ...

I’ve always jocularly used a metaphor about how during a corporate or financial or a mess of almost any type, that every time one picked up a rock, one would find an ugly bug under it. As lending tightens even a bit, all those junk investments and speculation and peculation*[today’s Word of the Day] comes out. As does sheer knavery. Today’s newspapers have plenty of examples.

WSJ: Currency Bets Backfire – “Latin American companies have suffered huge losses due to foreign-exchange gambles that, in some cases, had little to do with their core businesses.” These companies entered into currency swaps that were unrelated to their legitimate business hedging needs.

WSJ: “Yahoo Inc. announced plans to lay off at least 10% of its work force, as the struggling Internet company posted a 64% drop in profit and eked out a slight revenue increase in its third quarter.” Thanks Jerry Yang, for rejecting the MSFT bid at $33/share as the stock is now about $13 and jobs losses are now coming. Entrenched management leads to corporate destruction usually.

WSJ: “Argentina makes Grab for Pensions” – amazing knavery – now that ludicrous government is robbing the private pensions of millions of citizens to pay for more graft and pork and vote buying.

FT: Investors Suffer as US Ethanol Boom Dries Up – Oh well, that industry was a foolish contraption from the beginning, being dependent on government subsidies.

Meanwhile

WSJ has a story today that home sales are reviving in California as prices have fallen enough in some places to bring in “real buyers”.

And settlement of the LEH occurred without a pop. I guess most participants in that market had a mostly balanced book. That's quite good news - no bug under that rock.

AAPL had fine earnings, but that won't stop the beefers and bears from hitting its stock.

Screaming Buys

As gold and silver was a screaming sell in early Spring 2008 – and I did sell a very large amount of physical gold then – today’s markets have a few screaming buys

1. Municipal bonds offer fine long term yields and the relative yields (compared to US Treasuries) are better than any time in my memory. Mrs. B & I recently invested a large sum of new cash in them and continue to nibble at attractive bonds. Just make sure the call provisions are fair. For a par bond, be sure to get five years of call protection for a 20 year bonds and ten years for a 30 year bond. But for bonds offered at a substantial discount, call protection is less important as they must buy your bonds at par, giving you a nice premium over a discounted price.
   
2. US Treasury Inflation Protected Securities now offer fine real returns that are priced at very low – foolish, in my humble opinion – levels which imply long term inflation of about 1%. That’s not going to happen as government printing presses will at full speed to stop it. Asset bubbles being burst don’t affect consumer prices that much. Also, the long term chart of TIP, the ETF that tracks an index of all US Treasury Inflation Protected Securities, shows a panic bottom in the low to mid 90s after its own unreasonable rip up to almost 109 in the Spring of 2008. Again, Mrs. B and I recently purchased a large amount of those in a retirement account. That’s an important detail – these bonds produce phantom taxable income from the inflation adjustment. The Treasury gives you more bonds, not cash, for the inflation protection and that amount is taxable IFF you hold the bonds in a taxable account. So don’t.
   
3. US Stocks. I won’t go into details here, which conclusions are contested by almost the entire world of financial pundits today, it seems. Perhaps Warren Buffet, Mrs. B and I are the only “real buyers” left in the world. That’s almost like one of those New Zealand science fiction stories, about being the last people on earth after a catastrophe. Oh well, why do you think my nom de plume is “Bunkerman”.

Actions

The check cleared so with that new cash in Krypto Fund I bought some VTI, the ETF for the Vanguard Total market Index Fund, yesterday during the lunch time lull that often brings a dip as buyers go to lunch and beefers try their antics.

PS: I do practice time diversification - this new cash is less than 1/2 of the total to be invested. I'll wait a few months to see what develops.

Word of the Day

“Peculation” – noun [$10] from "peculate"
"Peculate" - verb, transitive and intransitive [$10]
Peculate means to embezzle (money).
Sentence: The government of Argentina is committing peculation on a monstrous, national scale as it grabs the private pension funds of its citizens to fund its budget and current account deficits. As one writer said in the WSJ story, the move was "just another step in Argentina's 100-year 'road to underdevelopment."