Saying goodbye to 2008 from the perspective of an investor is a pleasant prospect. The cluster panic of the rich and of the masters of the Universe on Wall Street brought pain to the common man and the long term investors. To me, 2008 also punctuated with a big, bold, full stop "." to many other false ideas and concepts and practices.
Here is my list to receive my "au revoir". Some are New Year's wishes.
1. Hedge funds as an "asset class".
2. Hedge fund managers as demi-gods.
3. Pure libertarianism.
4. The home as a source of spending power.
5. The home as a retirement asset.
6. Credit default swaps.
7. Nominal CPI as a meaningful measure of true inflation - core rules !
8. The McMansion in exurbia.
9. The SEC as an independent agency.
10. Derivatives as unregulated markets.
11. "Market value" as a rationally derived number.
12. George W. Bush - aka "Lyndon" - as a President and leader.
13. The source of wealth of three of the world's "bad boys" (Russia, Venezuela and Iran).
14. Commodity "investing" in futures and derivatives - just speculation.
HAPPY NEW YEAR !
Word of the Day
"Oneiric" - adjective [$10]
Oneiric means of or related to dreams or dreaming
Sentence: As we live in 2009 and beyond under the leadership of Obama, will our oneiric thoughts of 2008 be memories of a single nightmare or a recurring one from which we cannot awake ?
Wednesday, December 31, 2008
Tuesday, December 30, 2008
A New Champion Crowned
The annual Southeast Central Ohio Invitational Pancake Tournament was held on Friday, December 26, 2008 under ominous signs. The sighting of a raven bode ill for the prior two-time champion, Bunkerman. A broken outdoor thermometer also portended the breaking of a streak.
Bunkerman was defending his title on the challenger's home field, aka kitchen. The local supermarket were more than adequate for his improvisational skills to let him prepare a fine entry, viz., chocolate almond pancakes made with whipping cream, sour cream, and an admixture of graham cracker crumbs with a base of Hungry Jack pancake mix. The pancakes, fried perfectly in olive oil and topped with butter and pure maple syrup had a fine delicate favor which enticed the judges to sing paeans of praise.
Then Big Al stepped up to the stove. [FYI, Big Al is a non-posting reader.] His entry evinced weeks of preparation and experimentation. The batter used the identical Hungry Jack base, adding the secret ingredient - cinnamon chips - and chopped apple bits. His cooking skill was superb. The pancakes were perfectly round and browned. But then he used his finely honed culinary skills to create a perfect presentation with a topping of apple slices, confectioners sugar and caramel drips. The final effect was pleasing to the eyes, reminiscent of fine French cuisine. The flavor was superb and the texture and mouth feel were excellent.
The discussion among the judges was cautious. Bunkerman's pancakes were deemed champion quality by all. But those of Big Al were awarded the first place by a unanimous decision, including the vote of the gracious Bunkerman. Big Al accepted the prestigious title of SEC-Ohio Pancake Champion with humility, looking at his shoe laces as he spoke a few words of thanks to the judges.
Bunkerman is planning his comeback ...
Markets
GMAC getting TARP money to convert to a bank and resume auto lending.
Trouble in Gaza .. is that news ?
The Obama Fund may deploy cash soon. A stock list will be posted tomorrow.
Word of the Day
"Eschaton" - noun [$10]
Eschaton means the final things in the order of time.
Sentence: The defeat of Bunkerman in the SEC-Ohio Pancake Tournament altered the eschaton, disturbing the currents of life everywhere. Will the Universe ever return to normalcy ?
Bunkerman was defending his title on the challenger's home field, aka kitchen. The local supermarket were more than adequate for his improvisational skills to let him prepare a fine entry, viz., chocolate almond pancakes made with whipping cream, sour cream, and an admixture of graham cracker crumbs with a base of Hungry Jack pancake mix. The pancakes, fried perfectly in olive oil and topped with butter and pure maple syrup had a fine delicate favor which enticed the judges to sing paeans of praise.
Then Big Al stepped up to the stove. [FYI, Big Al is a non-posting reader.] His entry evinced weeks of preparation and experimentation. The batter used the identical Hungry Jack base, adding the secret ingredient - cinnamon chips - and chopped apple bits. His cooking skill was superb. The pancakes were perfectly round and browned. But then he used his finely honed culinary skills to create a perfect presentation with a topping of apple slices, confectioners sugar and caramel drips. The final effect was pleasing to the eyes, reminiscent of fine French cuisine. The flavor was superb and the texture and mouth feel were excellent.
The discussion among the judges was cautious. Bunkerman's pancakes were deemed champion quality by all. But those of Big Al were awarded the first place by a unanimous decision, including the vote of the gracious Bunkerman. Big Al accepted the prestigious title of SEC-Ohio Pancake Champion with humility, looking at his shoe laces as he spoke a few words of thanks to the judges.
Bunkerman is planning his comeback ...
Markets
GMAC getting TARP money to convert to a bank and resume auto lending.
Trouble in Gaza .. is that news ?
The Obama Fund may deploy cash soon. A stock list will be posted tomorrow.
Word of the Day
"Eschaton" - noun [$10]
Eschaton means the final things in the order of time.
Sentence: The defeat of Bunkerman in the SEC-Ohio Pancake Tournament altered the eschaton, disturbing the currents of life everywhere. Will the Universe ever return to normalcy ?
Friday, December 19, 2008
Welcome New Reader ...
That's for Rush Limbaugh, who borrowed my posted ideas of a few days ago for his broadcast yesterday. A few days ago I wrote in this blog that States were going to be shocked by the low amounts that will be paid in estimated taxes for the January 15, 2009 payment date. And yesterday he used that for part of his monologue. Of course he didn't cite me. Oh well ...
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Thursday, December 18, 2008
A Long Cold Winter ...
The economic news is abysmal. California is crumbling as its cities and towns enter bankruptcy after years of profligacy [WSJ]. Its state employee pension fund shows one large loss after another on silly, speculative investments such buying raw land with recourse financing. State infrastructure spending is being canceled.
Unfortunately, more pain must be borne there as its multi-decadal mass delusion of endless real estate value increases vaporizes.
Some data:
California median sales price for single family, detached homes was $311,000 in October, down 40% from $517,000 in October 2007. Of course, in a national comparison, that California price is still very, very high. The national median price is just $181,000.
The median income for those filing joint tax returns in California is about $67,000.
What can that family afford ?
Assume a 5%, 30 year self amortizing loan at 80% of value, and that real estate taxes and insurance is 2% of value. Standard mortgage loan underwriting rules provide that 28% of income can go to principal, interest, taxes and insurance. For the median family, that is $1,563/month. The assumed mortgage loan will have monthly debt service of $537 per $100,000 of principal. Some algebra can solve for the affordable home value of $250,000 (rounded) and home mortgage of $200,000 rounded.
So assuming the median income family is the marginal buyer for the median priced home, home prices in California are still overvalued by 20%. Ugh ..
A New Reader
I must welcome Obama or his transition team as new readers. Proof ? His team is now leaking that the economic stimulus will approach $1 trillion, an amount I proposed a few weeks ago in this blog. I don't expect him to acknowledge this, but he's welcome as a non-posting reader. [joke]
Now if only he spends the money as I suggested .... and doesn't waste too much on green crap.
Actions
More stocks for Santa's list: small oils AREX, ME, GPOR, ROSE, GMET (maybe), CRZO (maybe); HWD, WFT, CETV, and FCT. FCT was suggested by a posting reader and looks good.
As of January 1, I will temporarily rename the "Alpha Fund" as the "Obama Fund" as this speculative investment fund can reach its goals only if Obama succeeds in the first two years of his regime.
A note on stock selection: all my stocks are very risky. I eliminated stocks that showed evidence of stupid CFOs who excessively repurchased stock at high prices or made acquisitions for debt at high prices. I chose sectors that performed well in the recovery from the 1974 bear market and selected other sectors since the world is somewhat different now. One obvious difference is the importance of emerging markets and resources.
I have made few purchases yet. I expect to trade quite a bit, rotating in the list. I expect to hold about 15 stocks with good diversification over sectors and time. As the list has about 25 stocks (not final yet), you can see I will maintain some flexibility.
Objective: multiple returns of 5-10x over two years.
Margin: none until a good bull market trend develops. Then I'll go to 150% on dips and return to 100% on recovery to new trend highs.
I reserve the right to change my mind at will.
Word of the Day
"Cacology" - noun [$10]
Cacology means 1. a bad choice of words; 2. bad pronunciation.
Sentence: I suppose I'll be criticized for promoting cacology for the new name for my speculative find, viz., the Obama Fund. But I'm not adulating him. I'm really using his name as a good luck charm. He's the new bull elephant in the herd and I'm hopping on his back to ride to the new waterhole, I hope.
Unfortunately, more pain must be borne there as its multi-decadal mass delusion of endless real estate value increases vaporizes.
Some data:
California median sales price for single family, detached homes was $311,000 in October, down 40% from $517,000 in October 2007. Of course, in a national comparison, that California price is still very, very high. The national median price is just $181,000.
The median income for those filing joint tax returns in California is about $67,000.
What can that family afford ?
Assume a 5%, 30 year self amortizing loan at 80% of value, and that real estate taxes and insurance is 2% of value. Standard mortgage loan underwriting rules provide that 28% of income can go to principal, interest, taxes and insurance. For the median family, that is $1,563/month. The assumed mortgage loan will have monthly debt service of $537 per $100,000 of principal. Some algebra can solve for the affordable home value of $250,000 (rounded) and home mortgage of $200,000 rounded.
So assuming the median income family is the marginal buyer for the median priced home, home prices in California are still overvalued by 20%. Ugh ..
A New Reader
I must welcome Obama or his transition team as new readers. Proof ? His team is now leaking that the economic stimulus will approach $1 trillion, an amount I proposed a few weeks ago in this blog. I don't expect him to acknowledge this, but he's welcome as a non-posting reader. [joke]
Now if only he spends the money as I suggested .... and doesn't waste too much on green crap.
Actions
More stocks for Santa's list: small oils AREX, ME, GPOR, ROSE, GMET (maybe), CRZO (maybe); HWD, WFT, CETV, and FCT. FCT was suggested by a posting reader and looks good.
As of January 1, I will temporarily rename the "Alpha Fund" as the "Obama Fund" as this speculative investment fund can reach its goals only if Obama succeeds in the first two years of his regime.
A note on stock selection: all my stocks are very risky. I eliminated stocks that showed evidence of stupid CFOs who excessively repurchased stock at high prices or made acquisitions for debt at high prices. I chose sectors that performed well in the recovery from the 1974 bear market and selected other sectors since the world is somewhat different now. One obvious difference is the importance of emerging markets and resources.
I have made few purchases yet. I expect to trade quite a bit, rotating in the list. I expect to hold about 15 stocks with good diversification over sectors and time. As the list has about 25 stocks (not final yet), you can see I will maintain some flexibility.
Objective: multiple returns of 5-10x over two years.
Margin: none until a good bull market trend develops. Then I'll go to 150% on dips and return to 100% on recovery to new trend highs.
I reserve the right to change my mind at will.
Word of the Day
"Cacology" - noun [$10]
Cacology means 1. a bad choice of words; 2. bad pronunciation.
Sentence: I suppose I'll be criticized for promoting cacology for the new name for my speculative find, viz., the Obama Fund. But I'm not adulating him. I'm really using his name as a good luck charm. He's the new bull elephant in the herd and I'm hopping on his back to ride to the new waterhole, I hope.
Wednesday, December 17, 2008
La Fed announce une baisse de taux historique
That's the headline of the story in France's "conservative" newspaper, Le Figaro, online. The front page online provided more: Les taux américains se rapprochent de zéro.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Tuesday, December 16, 2008
Green Jobs, etc.
Woke up late, but from the news, it's SOS.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
Monday, December 15, 2008
A Wasteland
The path of the financial manager and CFO since the mid 1990s is littered with trash and rotten ideas.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Friday, December 12, 2008
Kill the Credit Default Swaps Market
As usual, the Financial Times leads the way in both news and good analysis. Here is the link to an article that I read this morning at around 3AM ET in Tuesday's paper edition:
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
Thursday, December 11, 2008
California Dreamin' ...
The WSJ has an article about the California state government budget deficit growing rapidly. I'd expect that state to get a huge shock on January 15 as estimated tax payments will show a stunning drop. Everyone doing tax loss selling will be able to cut back their payments and will do so at once. And unicnorporated businesses suffering now will have overpaid prior quarters so will cut their payments, too.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
Wednesday, December 10, 2008
Economic Stupidity Increasing ...
I see a headline on Babblevision [aka CNBC] that the Federal Reserve is thinking of "selling its own version of government debt". Hello Mr. Booboise ! Open your wallet and look at that cash - it says, "Federal Reserve Note" above Andrew Jackson's portrait on the $20 bill. Well, the article does mention this fact. But aren't bank reserves held on deposit at the Fed really a form of debt of the Federal Reserve, too ? The Fed pays interest on those reserves now. So that is electronic debt of the Federal Reserve in electronic form. The reporter seems clueless.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
Tuesday, December 9, 2008
Something Good
Not about the stock casino, oops, I mean stock market.
Normally I enjoy kicking Bill Gates in the butt and pointing out all the garbage Microsoft produces: that p. o. s. Vista operating system being the latest.
BUT I found a capability of the Microsoft word processing program, Word, that is quite remarkable - amazing even.
As I teach myself French, I've started to translate selections of writing. To do that without writing and making corrections by hand, I type the passage - sentence by sentence - into Word, then work on my translation below. Somehow Word has figured out that I am writing in French for some paragraphs and will do automatic spelling checking of the French. Word gets the endings and accent marks correct, too. Even a word that could be correct in English, but not French, is marked.
So here's one cheer for Bill Gates and Microsoft -> !
Market
Another good rally.
Actions
Like Santa Claus, I'm making my list and checking it twice. That is, a list of sectors and stocks that could make really huge gains IFF the world returns to normal in a couple of years.
Here's something interesting: I looked at my "Green Book" of 35 year stock charts to see which groups overperformed coming out of the 1974 bear market, which coincided with a very severe recession.
These groups had moves of about 300% to 400% from their lows in late 1974 to a peak in early 1976: apparel & luxury goods, shoes, home furnishings, hotels & resorts, leisure products, restaurants, and environmental services.
Those are certainly not in the group of "usual suspects". The common ground for all but one seems to be products or services for consumers that are easily deferred. Once the troubles are perceived as being over, the consumer comes roaring back to spend on those items.
That was long ago and not every group of today even existed then. For example, dry bulk shipping was a completely private industry then. And today is not exactly a match for 1974. But still, the sectors are interesting for stock investigations.
The next step is to check those sectors and similar ones to see what stocks might be good picks.
PS: WSJ had an interesting article about investment banking. What was missing are the contacts with "real" investors. To me, an investment banker could be calling on potential "real" investors - not trading funds - to find out their needs and what types of investments they would consider. They do have cash flow and needs to invest to match future liabilities with "good" investments. Then go find those for them. But I suppose many of the current generation doesn't have those skills.
Word of the Day
"Beshrew" - verb, transitive [$100] a Mrs. B word.
Beshrew means to curse, invoke evil upon.
Sentence: Bunkerman today deviates from his normal mode: To borrow from Marc Antony's speech in Shakespeare's play, Julius Caesar, "He came not to beshrew Bill Gates, but to praise him".
Normally I enjoy kicking Bill Gates in the butt and pointing out all the garbage Microsoft produces: that p. o. s. Vista operating system being the latest.
BUT I found a capability of the Microsoft word processing program, Word, that is quite remarkable - amazing even.
As I teach myself French, I've started to translate selections of writing. To do that without writing and making corrections by hand, I type the passage - sentence by sentence - into Word, then work on my translation below. Somehow Word has figured out that I am writing in French for some paragraphs and will do automatic spelling checking of the French. Word gets the endings and accent marks correct, too. Even a word that could be correct in English, but not French, is marked.
So here's one cheer for Bill Gates and Microsoft -> !
Market
Another good rally.
Actions
Like Santa Claus, I'm making my list and checking it twice. That is, a list of sectors and stocks that could make really huge gains IFF the world returns to normal in a couple of years.
Here's something interesting: I looked at my "Green Book" of 35 year stock charts to see which groups overperformed coming out of the 1974 bear market, which coincided with a very severe recession.
These groups had moves of about 300% to 400% from their lows in late 1974 to a peak in early 1976: apparel & luxury goods, shoes, home furnishings, hotels & resorts, leisure products, restaurants, and environmental services.
Those are certainly not in the group of "usual suspects". The common ground for all but one seems to be products or services for consumers that are easily deferred. Once the troubles are perceived as being over, the consumer comes roaring back to spend on those items.
That was long ago and not every group of today even existed then. For example, dry bulk shipping was a completely private industry then. And today is not exactly a match for 1974. But still, the sectors are interesting for stock investigations.
The next step is to check those sectors and similar ones to see what stocks might be good picks.
PS: WSJ had an interesting article about investment banking. What was missing are the contacts with "real" investors. To me, an investment banker could be calling on potential "real" investors - not trading funds - to find out their needs and what types of investments they would consider. They do have cash flow and needs to invest to match future liabilities with "good" investments. Then go find those for them. But I suppose many of the current generation doesn't have those skills.
Word of the Day
"Beshrew" - verb, transitive [$100] a Mrs. B word.
Beshrew means to curse, invoke evil upon.
Sentence: Bunkerman today deviates from his normal mode: To borrow from Marc Antony's speech in Shakespeare's play, Julius Caesar, "He came not to beshrew Bill Gates, but to praise him".
Monday, December 8, 2008
A New Reader
I guess I have a new reader, viz. Obama, or perhaps his advisors. Maybe, or maybe this is just Tim Geitner passing on my ideas. [ joke ;) ]
From FT this morning: "Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit. Mr Obama’s proposals for government works on roads, bridges, Internet broadband and school buildings, together with energy efficiency measures and health spending ..."
They are proposing almost everything I did except direct housing market suport, but I suspect they will do something to aid that market, too.
I'd like to see money spent on high speed rail between major cities less than 300 or 400 miles apart, instead of this wasted money on"alternative energy". "Alternative energy" has been a bottomless pit for over 30 year for crackpot schemes to violate either the laws of economics or the laws of physics or both.
Markets
Futures are up substantially so far this morning, perhaps a relief rally that Obama might not screw this up.
The concerns about corporate spreads are misguided. In my long experience of placing secured notes of corporations with institutions, absolute level of the rate is very important. Long term lenders really do not want to make long term, investment grade loans under 6%. They prefer to wait.
I also read with amusement that the credit default swaps rates of numerous nations is rising, including the US. What a fraud ! Who is going to pay off those swaps in such a catastrophe ? Those are just credit betting parlors and that whole "market" is a joke. Anyway, a credit default swap bears two risks, viz. the counter party AND the named credit. How does one distinguish that ? Credit default swaps should be banned from the financial system. Only those backed by regulated insurance contracts and hard capital should be permitted.
Word of the Day
"Irrefragable" - adj [$10] a Mrs. B word
Irrefragable means 1. (of a statement, argument or person) unanswerable, indisputable; 2. (of rules, etc.) inviolable.
Sentence: An irrefragable truth about General Motors is that its top managers and management culture has been a disaster for that company for at least 15 years, perhaps as long as 40 years.
From FT this morning: "Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit. Mr Obama’s proposals for government works on roads, bridges, Internet broadband and school buildings, together with energy efficiency measures and health spending ..."
They are proposing almost everything I did except direct housing market suport, but I suspect they will do something to aid that market, too.
I'd like to see money spent on high speed rail between major cities less than 300 or 400 miles apart, instead of this wasted money on"alternative energy". "Alternative energy" has been a bottomless pit for over 30 year for crackpot schemes to violate either the laws of economics or the laws of physics or both.
Markets
Futures are up substantially so far this morning, perhaps a relief rally that Obama might not screw this up.
The concerns about corporate spreads are misguided. In my long experience of placing secured notes of corporations with institutions, absolute level of the rate is very important. Long term lenders really do not want to make long term, investment grade loans under 6%. They prefer to wait.
I also read with amusement that the credit default swaps rates of numerous nations is rising, including the US. What a fraud ! Who is going to pay off those swaps in such a catastrophe ? Those are just credit betting parlors and that whole "market" is a joke. Anyway, a credit default swap bears two risks, viz. the counter party AND the named credit. How does one distinguish that ? Credit default swaps should be banned from the financial system. Only those backed by regulated insurance contracts and hard capital should be permitted.
Word of the Day
"Irrefragable" - adj [$10] a Mrs. B word
Irrefragable means 1. (of a statement, argument or person) unanswerable, indisputable; 2. (of rules, etc.) inviolable.
Sentence: An irrefragable truth about General Motors is that its top managers and management culture has been a disaster for that company for at least 15 years, perhaps as long as 40 years.
Friday, December 5, 2008
TGIF
So The Ostrich cuts rates in Europe ... about six months too late. That means Europe's recovery will be slower. And then one of their big mouths says a "pause" now, so Europe's base lending rate will be 2.5%, well over other nations' base rates. That was disappointing. And the EU is still interferes with nations' bank recapitalization efforts. While people everywhere look for errors, mistakes and reforms, Europe obviously need to reform the EU and the ECB. I suggest copying the US institutions. Of course, they won't do that, even though the US model has worked well for over 200 years, far longer than any other democratic republic.
The damage down by the autumn panic is unfolding now. No bad news should be a surprise.
But we know that huge, positive cash flow benefits are flowing into the public now: lower oil prices, low interest rates on home equity loans, and now mortgage refinancing cash flow. The profit margin on bank loans is colossal now. More jawboning is necessary to make them lend aggressively. JPM seems to get the picture, announcing more lending programs. Other banks need to follow.
A dangerous game of chicken is occurring in DC. Congress seems to be unwilling to aid the auto makers even though huge numbers of jobs are at stake. And some in Congress seems unwilling to give Hank the Tank the second tranche of the TARP. Maybe they want maximum pain to occur just before Obama takes over. That's possible, as desire for power is the #1 focus of politicians.
Auto Industry
I favor a very large, debtor-in-possession financing for the auto industry. Bankruptcy is needed to break all those contracts that have been suffocating the industry for decades. But the technology and manufacturing base is very important and needs to be saved from liquidation.
Actions
Doing nothing. I want to know what Congress will do. Their delay in passing the Paulson plan caused the late September - October panic, in my opinion.
Word of the Day
"Cadge" - verb [$10]; a Mencken word; the 'a' is short as in 'cat'.
Cadge means 1. (transitive) get or seek by begging; 2. (intransitive) beg.
Sentence: The spectacle of the CEOs and the UAW boss of the auto industry cadging for loans from politicians was quite greasy, as they have operated grossly inefficient operations for dacades. One need only look at the "jobs bank" where people are well paid for not working.
The damage down by the autumn panic is unfolding now. No bad news should be a surprise.
But we know that huge, positive cash flow benefits are flowing into the public now: lower oil prices, low interest rates on home equity loans, and now mortgage refinancing cash flow. The profit margin on bank loans is colossal now. More jawboning is necessary to make them lend aggressively. JPM seems to get the picture, announcing more lending programs. Other banks need to follow.
A dangerous game of chicken is occurring in DC. Congress seems to be unwilling to aid the auto makers even though huge numbers of jobs are at stake. And some in Congress seems unwilling to give Hank the Tank the second tranche of the TARP. Maybe they want maximum pain to occur just before Obama takes over. That's possible, as desire for power is the #1 focus of politicians.
Auto Industry
I favor a very large, debtor-in-possession financing for the auto industry. Bankruptcy is needed to break all those contracts that have been suffocating the industry for decades. But the technology and manufacturing base is very important and needs to be saved from liquidation.
Actions
Doing nothing. I want to know what Congress will do. Their delay in passing the Paulson plan caused the late September - October panic, in my opinion.
Word of the Day
"Cadge" - verb [$10]; a Mencken word; the 'a' is short as in 'cat'.
Cadge means 1. (transitive) get or seek by begging; 2. (intransitive) beg.
Sentence: The spectacle of the CEOs and the UAW boss of the auto industry cadging for loans from politicians was quite greasy, as they have operated grossly inefficient operations for dacades. One need only look at the "jobs bank" where people are well paid for not working.
Thursday, December 4, 2008
What will The Ostrich Do ?
Today is all about the ECB.
Will The Ostrich [aka Trichet, the head of the ECB ] pick his head out of the sand and see to cut rates significantly. "Significantly" means 0.75% to 2.5% and even to signal a move to 2.0% and then lower. Last time the ECB was stingy and the markets fell worldwide. Why they see a need for tight money at a time that inflation, which never was more than a speculative oil bubble, is non-existent, is beyond comprehension ?
Bank of England needs to cuts rates, too. Sweden's central bank already cut rates by 1.75% to 2%, more than expected this morning.
So far, European stock markets are strong this mornings. That can change instantly if the ECB disappoints.
Actions
I am still working on my list of stocks to buy that might go up 5 or 10x within two years if the world survives and returns to normal in two years. I'll put some Alpha Fund money into those soon, perhaps starting in early January.
Word of the Day
"Gogue" - noun [$ ? ] not in OED or any dictionary I've seen; a Mencken word.
Gogue means (from Wiki, so beware) a piece of horse tack used for training.
Sentence: (Mencken usage referring to college students) "... and eager to dance, neck and hoodwink the poor gogues told off to struggle with them."
(Modern) Has Trichet spent enough time in the gogue to get out and really run a bit ? Or will he stay in the barn, eat and sleep in complacent comfort?
Will The Ostrich [aka Trichet, the head of the ECB ] pick his head out of the sand and see to cut rates significantly. "Significantly" means 0.75% to 2.5% and even to signal a move to 2.0% and then lower. Last time the ECB was stingy and the markets fell worldwide. Why they see a need for tight money at a time that inflation, which never was more than a speculative oil bubble, is non-existent, is beyond comprehension ?
Bank of England needs to cuts rates, too. Sweden's central bank already cut rates by 1.75% to 2%, more than expected this morning.
So far, European stock markets are strong this mornings. That can change instantly if the ECB disappoints.
Actions
I am still working on my list of stocks to buy that might go up 5 or 10x within two years if the world survives and returns to normal in two years. I'll put some Alpha Fund money into those soon, perhaps starting in early January.
Word of the Day
"Gogue" - noun [$ ? ] not in OED or any dictionary I've seen; a Mencken word.
Gogue means (from Wiki, so beware) a piece of horse tack used for training.
Sentence: (Mencken usage referring to college students) "... and eager to dance, neck and hoodwink the poor gogues told off to struggle with them."
(Modern) Has Trichet spent enough time in the gogue to get out and really run a bit ? Or will he stay in the barn, eat and sleep in complacent comfort?
Wednesday, December 3, 2008
Redux
Bill Gross wrote an honest investment outlook for the future that provides plenty of good data and some worries about the future. See http://www.pimco.com/TopNav/Home/Default.htm and click on his investment outlook link.
The Good News
The chart on the long term trend [1952 to now] of market values compared to replacement cost of corporate assets is quite interesting. It shows that equity values are very low and that a normal "reversion to the mean" could bring a 100% increase in stock values. A chart of P/E ratios from 1871 [!!] to now shows similar "cheap" valuation. In the past those were "screaming buy" situations and huge bull markets followed.
The Worries
Corporate taxes are very low based on his chart of the ratio of tax payments to profits before taxes. And Mr. Gross worries about "a world where the government fist is being substituted for the invisible hand". Demographics are a worry, too, except in the emerging markets (other than Russia and China). In other places I've seems charts of corporate profit margins being quite high historically, too.
Counter-Worries
His worry about the loss of entrepreneurial risk taking seems misplaced, though, as he cites the exit of clowns like Chuck Prince as examples of that loss. He also cites the loss of golden parachutes, options, executive compensation, etc. But to me, those are "counter-worries" aka positives.
For almost 15 years, the CEO, CFO and the executive suite has looted untold billions from the foolish stockholders who approved compensation plans and directors in the club who rubber-stamped idiotic levels of compensation. That loos of shareholder value might be gone for our lifetime - let's hope.
My memory tells me that CEO compensation alone was amounting to 10% of corporate profits. Toss in the rest of the executive suite and all those stock options and I suspect they looted about 20% of stockholders' profits "EBH" - i. e., profits before hogs.
I read in FT that the median CFO got around $2.9 million in total compensation last year. And many did not even know enough to fund long term assets with long term debt, not commercial paper. Elsewhere, I see they were rather more pre-occupied with corporate tax shelters than productive investments or stable financing. So they deserve a huge pay cut for sheer stupidity as a class.
Conclusions
Mr. Gross concludes that corporate bonds are an excellent opportunity, which I agree is true provided one looks to absolute levels of yield and ignores the false signal of credit spreads when US Treasuries are at foolish levels due to hedging mortgage prepayments.
But the counter-worries seems to balance the worries, leaving the data showing that corporate stocks are a "screaming buy" for long term investors. Remember to use time diversification if you act on this.
Word of the Day
"Fusty" - adjective [$10]
Fusty means 1. stale, smelling, mustly, moldy; 2. stuffy, close; 3. antiquated, old-fashioned.
Sentence: Will Obama and the Democratic Congress provide new ideas and energy, or just a fusty, recycled mash of new left, statist policies from the 1970s ?
The Good News
The chart on the long term trend [1952 to now] of market values compared to replacement cost of corporate assets is quite interesting. It shows that equity values are very low and that a normal "reversion to the mean" could bring a 100% increase in stock values. A chart of P/E ratios from 1871 [!!] to now shows similar "cheap" valuation. In the past those were "screaming buy" situations and huge bull markets followed.
The Worries
Corporate taxes are very low based on his chart of the ratio of tax payments to profits before taxes. And Mr. Gross worries about "a world where the government fist is being substituted for the invisible hand". Demographics are a worry, too, except in the emerging markets (other than Russia and China). In other places I've seems charts of corporate profit margins being quite high historically, too.
Counter-Worries
His worry about the loss of entrepreneurial risk taking seems misplaced, though, as he cites the exit of clowns like Chuck Prince as examples of that loss. He also cites the loss of golden parachutes, options, executive compensation, etc. But to me, those are "counter-worries" aka positives.
For almost 15 years, the CEO, CFO and the executive suite has looted untold billions from the foolish stockholders who approved compensation plans and directors in the club who rubber-stamped idiotic levels of compensation. That loos of shareholder value might be gone for our lifetime - let's hope.
My memory tells me that CEO compensation alone was amounting to 10% of corporate profits. Toss in the rest of the executive suite and all those stock options and I suspect they looted about 20% of stockholders' profits "EBH" - i. e., profits before hogs.
I read in FT that the median CFO got around $2.9 million in total compensation last year. And many did not even know enough to fund long term assets with long term debt, not commercial paper. Elsewhere, I see they were rather more pre-occupied with corporate tax shelters than productive investments or stable financing. So they deserve a huge pay cut for sheer stupidity as a class.
Conclusions
Mr. Gross concludes that corporate bonds are an excellent opportunity, which I agree is true provided one looks to absolute levels of yield and ignores the false signal of credit spreads when US Treasuries are at foolish levels due to hedging mortgage prepayments.
But the counter-worries seems to balance the worries, leaving the data showing that corporate stocks are a "screaming buy" for long term investors. Remember to use time diversification if you act on this.
Word of the Day
"Fusty" - adjective [$10]
Fusty means 1. stale, smelling, mustly, moldy; 2. stuffy, close; 3. antiquated, old-fashioned.
Sentence: Will Obama and the Democratic Congress provide new ideas and energy, or just a fusty, recycled mash of new left, statist policies from the 1970s ?
Tuesday, December 2, 2008
More Liquidations ...
Many more hedge funds are liquidating and most of the rest are restricting redemptions.
From FT: "The combination of the worst year on record for hedge fund returns and the biggest withdrawals on record mean the industry’s assets will shrink 35-45 per cent from June to the end of December, according to analysis by Morgan Stanley."
One famous hedge fund is restructuring in a manner similar to banks: "Paul Tudor Jones, who shot to fame and made a fortune when he predicted the 1987 stock market crash, plans to split toxic assets out of his $10bn flagship hedge fund and has suspended redemptions until the restructuring is complete. "
Hedge funds were NEVER a separate "asset class" as promoted to the rich and the pension funds. They were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Commodity funds were NEVER a separate "asset class" as they did NOT invest is true assets - namely the underlying oil in the ground, or the actual cows. They were just speculating in futures and derivatives. To repeat, they were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Yesterday's drop was probably a combination of these redemptions plus the public doing some selling after the recent rally plus more tax loss selling.
And the bear beefer mouthpieces and marionettes keep saying it's different this time, and nothing will ever change and an endless current of bad events will occur forever. To me, they sound like the rah rah crowd of late 1999 and early 2000 in reverse. They just don't recognize how fast the America and Americans react. change and adapt.
Let the bears and doomsters has their fun. When the liquidations are done - an unpredictable point in time - like Don Juan in that great opera, Don Giovanni, the unrepentant bears will be sucked into "l'enfer" as a great new bull market begins.
PS: Today I read the EU is interfering with an injection of capital into a German bank. How can the EU survive this ? with both the French and Germans screaming at its bureaucrats, I think the EU will have to be restructured.
Actions
My tax loss selling is done, saving me big $$$. Later this week I can re-allocate some funds in Krypto Fund. Otherwise, I'm doing research to compile a list of stocks to buy that perhaps can provide big profits on the coming bull market. And I means multiples, not mere percentages.
Word of the Day
From FT: "The combination of the worst year on record for hedge fund returns and the biggest withdrawals on record mean the industry’s assets will shrink 35-45 per cent from June to the end of December, according to analysis by Morgan Stanley."
One famous hedge fund is restructuring in a manner similar to banks: "Paul Tudor Jones, who shot to fame and made a fortune when he predicted the 1987 stock market crash, plans to split toxic assets out of his $10bn flagship hedge fund and has suspended redemptions until the restructuring is complete. "
Hedge funds were NEVER a separate "asset class" as promoted to the rich and the pension funds. They were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Commodity funds were NEVER a separate "asset class" as they did NOT invest is true assets - namely the underlying oil in the ground, or the actual cows. They were just speculating in futures and derivatives. To repeat, they were just a speculative, risky way to manage money and overpaid their managers by colossal sums.
Yesterday's drop was probably a combination of these redemptions plus the public doing some selling after the recent rally plus more tax loss selling.
And the bear beefer mouthpieces and marionettes keep saying it's different this time, and nothing will ever change and an endless current of bad events will occur forever. To me, they sound like the rah rah crowd of late 1999 and early 2000 in reverse. They just don't recognize how fast the America and Americans react. change and adapt.
Let the bears and doomsters has their fun. When the liquidations are done - an unpredictable point in time - like Don Juan in that great opera, Don Giovanni, the unrepentant bears will be sucked into "l'enfer" as a great new bull market begins.
PS: Today I read the EU is interfering with an injection of capital into a German bank. How can the EU survive this ? with both the French and Germans screaming at its bureaucrats, I think the EU will have to be restructured.
Actions
My tax loss selling is done, saving me big $$$. Later this week I can re-allocate some funds in Krypto Fund. Otherwise, I'm doing research to compile a list of stocks to buy that perhaps can provide big profits on the coming bull market. And I means multiples, not mere percentages.
Word of the Day
"l'enfer" - noun [$ ?] French
"l'enfer" means hell, the infernal regions. the underworld. An erudite reader and poster mentioned it as I asked how to tell someone to go to hell in French: Allez à l'enfer ! Doesn't it sound more polite in French ? And more sophisticated ? By the way, this is pronounced, "Allay a longfehr", roughly.
Sentence: This is not armageddon or l'enfer; World War II was that. Stop the whining. Adapt, improvise and more ahead into the unknown like a true pioneer.
Monday, December 1, 2008
Ban All Credit Default Swaps
Last Friday's Financial Times had an article about a dangerous new practice that banks are trying to foist onto corporate borrowers. The international banks want to price loans against the credit default swaps of a company on a variable, floating basis. That article points out that this would give hedge funds and speculators the power to destroy any company they wish.
The raiders could short its stock and them float the market with orders to buy credit defaults swaps of the company. As are no natural writers of these alien instruments, the price would rise explosively, and then the interest rates on the company's debt would skyrocket. And that would crush the company's earnings, in turn crushing its stock price. Payday for the raiders ... created for themselves.
A natural money machine for bear raiders. Of course we know they have already done this for those extremely credit sensitive institutions, viz. the banks and investment banks.
The solution to this is an internationally agreed edict that outlaws these contracts from any nation in the financial system.
Credit insurance - true insurance - can still exist and be available for commercial transactions only. Those would be regulated as insurance by the states or a future national insurance regulators.
To paraphrase the writer of the Financial Times article, since credit default swaps are "weapons of mass destruction" in financial transactions, let's not permit the banks to weaponize them and proliferate them to the raider community.
PS: I read the EU is blocking the French plan to add capital to its banks to increase lending. Amazingly stupid of the EU. The EU and the ECB are so far off the marks on this crisis that I wonder if the EU can truly survive.
Word of the Day
"Firman" - noun [$10] from Persian
Firman means 1. an oriental sovereign's edict; 2. a grant or permit.
Sentence: Derivatives needs to be regulated strictly and financial institutions should be required to obtain a positive firman before entering into or trading any type of derivative.
The raiders could short its stock and them float the market with orders to buy credit defaults swaps of the company. As are no natural writers of these alien instruments, the price would rise explosively, and then the interest rates on the company's debt would skyrocket. And that would crush the company's earnings, in turn crushing its stock price. Payday for the raiders ... created for themselves.
A natural money machine for bear raiders. Of course we know they have already done this for those extremely credit sensitive institutions, viz. the banks and investment banks.
The solution to this is an internationally agreed edict that outlaws these contracts from any nation in the financial system.
Credit insurance - true insurance - can still exist and be available for commercial transactions only. Those would be regulated as insurance by the states or a future national insurance regulators.
To paraphrase the writer of the Financial Times article, since credit default swaps are "weapons of mass destruction" in financial transactions, let's not permit the banks to weaponize them and proliferate them to the raider community.
PS: I read the EU is blocking the French plan to add capital to its banks to increase lending. Amazingly stupid of the EU. The EU and the ECB are so far off the marks on this crisis that I wonder if the EU can truly survive.
Word of the Day
"Firman" - noun [$10] from Persian
Firman means 1. an oriental sovereign's edict; 2. a grant or permit.
Sentence: Derivatives needs to be regulated strictly and financial institutions should be required to obtain a positive firman before entering into or trading any type of derivative.
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