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.

38 comments:

Bud said...

'raw land'


lmaooooooooooooooo

Bud said...

i haven't decided yet what to rename my alpha fund on january 1st

i can't decide between 'tar baby fund' or 'cotton picker fund'

Bunkerman said...

spearchucker ?

Bud said...

Rogue trader was on last nite one of the movie channels

amazing how easily nick leeson blew up barings

you seen that flic Bman ?? must see if you have not

Bunkerman said...

have not - will put it on NetFlix list

Bunkerman said...

actually "spearchucker" is not a bad name - envision a hunter going for big game, throwing a spear at a raging beefer to get meat for his table ...

;)

mfl59 said...

Bunkerman were you aware of the MIT blackjack team when you were a student there? were you there around that time?

Bunkerman said...

no. I never heard of it until I saw a TV show.

mern said...

bman with all due respect. all u really had to do was look at bit at the dark meat back about a yr ago.

nothing he has done, so winning, has surprised me.

its y i bet on him in feb and y i voted for him in november.

palin/mccain wud have been worse than cheney/bush! MUCH WORSE!

u guys all bought into the bible thumpers and racists (like sal) that he was a leftist muslim, whatever.

SUCCESS STORY

christopher having his best week at school. was it my pep talk? NOPE! this is truly funny!

last week he was basically grounded, but i convinced his grandma to let me take him to lunch and talk to him. i picked kerrs wing house (its a rich mans hooters). it was close to his house, and is close to the house i used to have in south tampa. i used to go there ALL THE TIME! that was until i took cindy there one time. i was BANNED! she wud rather me go to strip clubs than that place.

christopher was drouling at the women working there. remember hes friggin 10! all he can talk about this week, is if he is gud at school all week, "merolli is taking me kerrs on sunday!"

lol, i thought he wanted to see a movie.

well twist my arm. a 10 yr old wants to go to a sports bar on sunday while the chargers hopefully beat the bucs (i need that to happen, for da iggles). act like i am teaching this kid math and writing. he checks out the 20 somethings and so do i.

its win, win.

what a great influence i am

pffffffft

mern said...

rogue trader GREAT FLIC!

I, Nicholas Leeson, have just lost 50 million quid, in one day!

to think he cud actually move the nikkei............. (well for a minute or 2, then SPLAT!)

mfl59 said...

Bunkerman do you think it is out of the realm of possibility that the Fed will buy municipal and maybe even corporate debt before this mess is over?

Bunkerman said...

The problem with the Fed buying those is they could never sell them.

For Freddie/FNMA, the prepaymetns to it for them.

So it's "possible", but wayyyyy down there in the reasoning curve.

I don't know about the legality.

In a new TARP, they might LEND to the Treasury who buys them for 20% cash. The Treasury could hold them or do something with them later.

Bunkerman said...

I would still vote for Mccain over Obama, even though I named my fund after Obama.

But nation needs him to be strong and successful.

mern said...

bman this has u written all over it. it wud be a fine addition to the bunker.

CAPE CANAVERAL, Fla. – NASA's soon-to-be-retired space shuttles are up for grabs.

Beware: NASA estimates it will cost about $42 million to get each shuttle ready and get it where it needs to go, and the final tab could end up much more.

recently peter on family guy got a free gas card, so he rented the space shuttle on took it for a spin. he came home 3 days later.

he said space was neat and "u can rub one out with needing a tissue, but after a couple of days its like living in one of the snow flake crystal balls"

Frosty said...

my alpha fund next year will be named, simply, NIGGA...was thinking about dirty lil nigga fund, but my plan is to keep things simple in 2009...I agree Mrs B, disgusting...but we either play by Bunky rules or we get the old heavehooooo, as you know he's never wrong.

Bunkerman said...

never wrong ... hahahahaha.

No PC police here.

Bunkerman said...

Any pejorative thoughts relating to the name of the Obama Fund are in the mind of that person.

I stated my reasoning.

My thoughts are pure.

mfl59 said...

oh maaaan....the life of a coach...how can the starting 171 lb er be walking around at 184 1/2 a day before weigh ins???? son we cant cut wieght like that anymore...ill go to jail...

Spin-em said...

why not buy Christopher a pack of Marlboro's and a bottle of Jack?.....

Bunkerman said...

perhaps suggest that if he doesn't do well in school, as an adult he won't be able to afford to go to those places more than once a year..

Spin-em said...

no shoes tossed at Barry..so weve got that going....which is nice

Spin-em said...

tell the men you want to be called Skip or Skipper..ill give it all I can skip....Sure thing skipper

Frosty said...

Bunky the specialist put call is back to the highs of 12/28/07, over 160...I know you favor these crooks presence
within the system...enjoy the holidays indeed....have you no shame sir.

Bunkerman said...

yes, every stock should have a specialist and all trades forced to go thru them..

One place to regulate ...

And eliminate computerized trades.

Then an uptick rule can be enforced.

And eliminate market maker exceptions to shorting rules..

Bunkerman said...

hope it's signalling correctly - I'd like a big pullback to start buying with Obama Fund money.

mfl59 said...

big pullback? sir what more can big beef do?

Bud said...

'every stock shud have a specialist'


LMAOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

Bunkerman said...

some more beefer liquidations would be nice ...

;)

Frosty said...

Bunky...specialist short ratio less important now than when you traded the bucket shops via telegraph, with dark pools and computer trading >50%...you still need to consider them smart money and at extremes above 160 and below 30, they still deserve respect...they are still a pack of thieves, that hasn't changed and odds are very high ther are right.

Frosty said...

NIGGA fund fists full of cash like pacman jones ready to shower the tape with $...Bunky a gold logging chain with a 50lb diamond crusted B around his neck...doo-rag with the indians cap pulled left...oh brother.

Bunkerman said...

well, they may have been thieves, but it was a lot better to just watch a 100 or so of them than let the beefers perform their games.

In my experience, though, I always felt I got a fair deal with them. I'm no beefer, just an individual.

The worst thieves were the options market makers, such as for the XAU.

I always felt the Nasdaq stocks ripped me off.

mfl59 said...

for a guy who hates electronic markets, you sure have a lot of 4 letter symbols on your wish list Bunkerman.....

Spin-em said...

good one Skip

Bunkerman said...

yes, true.

But I don't see how I can make 10x on my money without those & some judicious trading.

Dusting off the old skills ...

Even most of the three letter stocks are small ones.

mfl59 said...

just keeping you on your toes Bunkerman....lolol

Frosty said...

one time...at winter band camp...I was ice skating at 75 mph with a rocket strapped to my aazzz...oh forget it.

Frosty said...

HBC sorry Mrs B...I think Bunky talked you into that one...no worries, happens to all of us...your still the best.

Bunkerman said...

actaully her broker suggested it, but I thought it was OK.

Still do, for LT (ugh)