Monday, March 31, 2008

Finally EOQ

EOQ = End of Quarter. This has been a long, stressful quarter for investors and traders, too. I'm happy to see it go into the dustbin of history. The markets have seen endless panic and rumors and fear as this century's first Rich Man's Panic has run its course. The Street has been forced to clean up the piles of garbage securites it created and sold ... oops ... but it seems they didn't actually sell it all as they have written down major positions. How greedy ! To make directional bets and continue creating structured products that were unsaleable, hence they took them down. Sheesh !

LEH was scammed out of $250-350 billion in Japan. Uh ... why were they taking a principal position in that paper ? Greed ... stupid. These scams always show up in times of stress. Well, I think LEH overall is a fine firm and I might buy some calls for a speculation this morning IF the stock gets hammered. This will be a SMALL speculation ... perhaps about the amount I might risk on a single session on the crap tables at the Venetian in Vegas.

And we see the lemming analysts continue to pile on with the "Sell" ratings as they "see" no end in sight. The latest is Merrill Lynch putting a sell on UBS. Uh ... did they "see" the beginning ? Or are they doing the bidding of their beefer bear trading clients to window dress the short bets of them ? Who knows, but being a bit paranoid, you can guess my thinking.

Why do people think the "banks" hold all this risky paper ? We hear about loss estimates based on the total subprime and CDO and Alt-A markets. Uh ... when I was an investment banker, we really did sell the securities to long term "real" investors, such as pension funds and insurance companies. We never took down anything. Those permanent investors hold the securites to term and don't mark them to market - they just hold until the real losses occur or not. Of course, many were also sold to hedge funds. So really only a small part of the losses should be borne by banks and investment banks.

The losses taken publically by the banks and investment banks "should" represent simply the the "Stupid" holdings of the chunks of structured deals taken down for greed to book the fees and increase someone's bonus pool. I don't see them continuing. But as I said to a friend this weekend, "What I don't know, I don't know". So all should obey the boxing adage, "Protect yourself at all times".

Every weekend I read Barron's [ hehe with black coffee at about 4AM on Sunday morning ], which often has some interesting facts and insights. Page M64 has the Intermediate Grade Bond index which was flat last week vs. the prior week at about 8.42%. That index has dropped a bit recently after increasing a lot during Q1.

Page M65 has the Fed's balance sheet. The monetary base increased a bit ... up $6 billion and the year over year increase is up 2.1%. Finally we are seeing a real increase in the supply of money ... real money. Readers know I have been griping about the Fed's parsimony in increasing the monetary base for months. I hope this is a harbinger of more Fed efforts truly to supply more real money to the banking system at least congruent with the needs of normal economic growth.

Page M63 shows total short selling is up again. Sigh ...

Pages 42-45 had an interview with Larry Fink, the CEO of the huge money management firm, BlackRock. I guess he reads this blog [ ;-) ]. He asks "... why aren't all large pools of capital regulated, including private capital and hedge funds? ... BlackRock is regulated but a $20 billion or $30 billion hedge fund is not. I don't agree with that."

There's more. He also says that BS was destroyed by rumors created by short selling hedge funds and wants an SEC investigation. Hmmm. And says it's time to buy credit risk in fixed income markets. And "... we are now beginning to say it's time to dabble in financials. ... There are great opportunities, even in financials, though there could be more downside. ... We believe we are getting close [to the bottom] and we may have hit it."

No doubt I was too early and did not anticipate the extent of the panic on the Street and by the Rich, but I have yet to see anything in the real economy inconsistent with a midcycle slowdown. I've traded around some positions ... buying more on large dips and them selling a bit on rips.

My C and WB show big losses ... ugh. Those were bought in size wayyyyyyy too early and I screwed up the time diversificaion. Even this "preacher" strays sometimes to error and the trading gods did punish me. But the BAC and JPM are now well-sized postions for the long-term and still have nice profits even the selloff late last week. Ditto GE.

Alpha Fund Holdings -
Large postions: BAC, JPM, C, WB, GE, AAPL, GOOG, DVN, CVX, not in order.
Small positions: HDB, IBN, EDU, CCJ, FCX, RIG, DO

Word of the Day

"Toady" - noun and verb [$10]
Toady means (noun) a sycophant; an obsequious hanger-on; (verb - transitive) behave servilely to; fawn upon; (verb - intransitive) same as transistive, but followed by "to".
Sentence: Why do guests on Babblevision and Blabberg toady to the airhead announcers with that ubiquitous response to a question, saying, "That's a great question !", argghhhh .. when it's always really stupid or obvious one.

Friday, March 28, 2008


Whew, doing taxes is mind-numbing ! And I still have to do our own taxes Ugh ! I need a day off. Maybe today ?

The Fed's TSLF auction went off OK - decent demand. I mentally call the TSLF the "Teasle-F", by the way, thinking that fat, fascist sheriff [ the "F", among others ;-) ] in the first Rambo movie, "First Blood". I suspect the Street and banks need a while to evaluate how to use the facility and its costs. I heard a lending fee 0.33% quoted. Hmmm what does this mean ? Here is a link to the New York Fed that describes the terms of the TSLF:

Let me educe [ ;-) see yesterday's blog for this $10 word ] the economics of this program from its terms. Note this program is a "loan" of securities - a hypothecation - like one does when shorting a stock.

Suppose I own some mortgage securities now yielding 6%. When I "lend" them, I still keep the interest on mine. Assume Treasuries I receive on the loan are yielding 2.5% which I must pay the Fed and that I must put up 110% market value as collateral. So I put up $110 million yielding 6%, receive $100 Treasuries yielding 2.5%, so therefore have $10 equity capital tied up in the transaction. In my bid, I agreed to pay the Fed an extra 0.33% on the loan of the Treasuries to me.

Inflows: $110 million at 6% = $6.6 million
Outflows: $100 million at (2.50% + 0.33%) = $2.83 million
Net Inflow: $3.77 million
Capital Used: $110 million - $100 million = $10 million
Annual ROE: 37.7%

Hmmm that's pretty good. This is a good program for the primary dealers.

This calculation also shows one the huge net interest income now being earned by the banks. They can borrow at 2.25 - 2.5% overnight or for 28 day tems in the TAFfy, or the TSLF now and receive around 6% on the assets they buy/own. The net interest spread of over 3.5% is simply huge. Suppose a bank has 10% capital (primary plus secondary). It's gross ROE is over 35% per annum now. The stocks are trading at book value or less. So that gross return is simply enormous.

You can see why I like my investment in the big banks. It was made on the basis of the Fed doing my bidding eventually and that management of the big four will weather the storm. Obviously there were and are risks. And I screwed up the entry, violating my time diversification principles a bit in the fall. But I like the long term prospects. When the write-offs and losses stabilize, that 37% gross ROE will reap huge returns, in my humble opinion, for owning these stocks at book value. I had better stop or I'll talk myself into buying more ... I have plenty already.

Words of the Day

"Helot" - noun [$10]
Helot means 1. one of a class of serfs in ancient Sparta; 2. a serf, bondman.
Sentence: Do the radical Democratic leaders really repect the freedom of the people, or are they insideously seeking to transform free Americans into 21st century helots in service to themselves as the new nobility ?

"Hedonic" - adjective [$10]
Hedonic means of, pertaining to, or characterized by pleasure.
Sentence: (A) Some dispute the hedonic adjustments made by the BLS and the Fed to account for the positive improvements in a good, such as computer speed. (B) While projecting a public image of puritan morals, Elliott Spitzer lived a hedonic private life beyond legal limits.

"Harbinger" - noun [$10]
Harbinger means 1. one that pioneers or initiates a major change; precursor; 2. something that presages or foreshadows what is to come.
Sentence: Is the recent gold price of $1000/oz. a harbinger of future major increases in inflation, or does it simply represent volatile swings in a long term uptrend caused by limited supply and increased demand in Asia ?

"Halcyon" - noun and adjective [$10]
Halcyon means (noun) a mythical bird having the power to calm winds and waves; (adjective) 1. calm, peaceful; 2. rich, wealthy, prosperous; 3. happy, joyful, carefree.
Sentence: Oh I dream of a return to halcyon days of the bullish, trending stock market !

Thursday, March 27, 2008

More Educing

I'm finally learning that word, educe, a transitive verb which means 1. to draw or bring out: elicit; 2. to assume or work out from given facts. I spend the first hour of my day reading the news online (WSJ, BBC, IBD, Barron's, news), usually around 4 to 5 AM. And what did I see this morning ?

Another hedge fund is in trouble, this one being a redux appearance of John Meriwether of LTCM infamy. His fund is down 28% ytd. Sigh ... why do the dumb rich take such risks for a few % per annum ?

India Internet startups are now targeting ... Indian consumers. That's another fact supporting my concept of the 21st century "Asian Co-Prosperity Sphere" of self-reinforcing consumer economies in Asia.

I also heard a rumor that foreclosure sales are actually drawing surprisingly good bids in auctions. Those with cash are scooping up bargains. I still think the default rates will peak soon - perhaps in a month or two - and the housing market will have, or has, bottomed. Ok, I'm an optimist.

Bank stocks pulled back yesterday ... no surprise, they had run quite far. An analyst hit them again. Expectations are going to be so low for their Q1 earnings.

I need to find a few good stocks outside the bank, energy, mining and tech groups to diversify my Alpha Fund a bit more for the next big move up. Prerequisites: 30%+ upside for one year hold, decent chart, no rotten balance sheets; four letter small caps need not apply. I'll be patient.

Word of the Day

"Gracile" - adjective [$10]
Gracile means 1. gracefully slender; 2. graceful
Sentence: My Kelpie, Sky, is gracile, yet has a muscular build which combined with his fast learning and stock reading abilities, seems to make him an excellent dog for sheep herding. The trainers are quite excited about his prospects for trials.

Wednesday, March 26, 2008

Bailout ?

The press is infatuated with that word, "bailout", and unthinkingly applies it to all sorts of actions. I wrote about the "Unreliable Media" in one of my first blog posts on February 13, 2007. My informal, long term study of the media has proven to my satisfaction that the press/media is almost always wrong on some material part of any story. Their incessant use of "bailout" in the instance of the JP Morgan takeover of Bear Stearns is another.

A reader's question was passed to me privately: Was use of taxpayer money justified in the Bear Stearns case ? Now that is quite an interesting question and is connected to my first paragraph here. Let's review the facts. I've written before about my opinion of Bear Stearns as a firm, so will used the acronym, "BS" for its name. Now first we need to examine if taxpayer money in fact was used to "bailout" BS and who at BS was "bailed out".

1. BS needed a guarantor of its counterparty trades or it would have had to file for bankrupcty to prevent a disorderly liquidation of its assets. So BS called the Fed for help in finding one.

2. JPM was the clearing firm for BS trades and had desires for some of BS businesses, plus had a fine credit rating and reputation for successful acquisitions.

3. The Fed asked JPM to look at buying BS and becoming guarantor of BS trades.

4. JPM said yes, but wanted a non-recourse loan from the Fed for the worst of BS assets.

5. Fed said fine, it would lend JPM that money on a non-recourse basis.

6. Final terms are that BS stockholders get $10/share for a stock that was worth $150/share recently, and even over $80 just a few days ago. AND BS counterparties and lenders get a JPM guaranty.

So who was saved from big losses ? The BS lenders and counterparties. Who are they ? Probably every other big bank, mutual funds, Street firm and pension funds and every other financial institution in the world. Who saved them ? J. P. Morgan bank did, in exchange for buying a firm for a low price and with the Fed non-recourse loan.

Now let's examine that loan. In substance, it appears to be a sale of assets to the Fed as they bear the losses and receive any profits, other than the first $1 billion of losses are borne by JPM. We don't know the price of those assets being "sold" to the Fed, but the impresion is the "market" price, likely the market prices as booked by BS at its end of quarter as updated. So those assets already have a big, big haircut. Blackstone will manage the assets for the Fed and will slowly liquidate them or let them run out as the underlying loans are paid or default and have realized losses. By the way, I suspect those assets are paying interest currently and the interest is a lot more than the discount rate, hence the net Asset-Fed loan is cash-flow positive. Long term reality will determine whether the Fed loses money or makes a profit net of current interest income and the Fed gets that "profit".

So what if the assets eventually lose money, i. e., realize less than the already heavily written down "market" value plus net income ? The non-recourse loan is an asset on the Fed's balance sheet and will have a writedown. How does the Fed - a bank - fund the loan ? The Fed gave a $30 billion balance to JPM as bank reserves which flow into the entire US banking system. Now all profits of the Fed are given to the US Treasury, namely, its income on that huge balance sheet of US Treasury securities the Fed holds in its role as the reserve bank of the US. [The Fed's cost of money is zero as it simply gives out dollars it creates.] So if the Fed eventually loses money on the BS asset loan, it will give less $ to the Treasury. So what happens ? The Treasury sells more T-bills to offset the loss which may in turn be bought by the Fed in its open market operations, hence the "loss" may be monetized. Or others will buy the extra T-bills issued by the Treasury, and it is funded into the US government debt which will never be paid off as the US economy continues to grow. Interest only is paid. Maybe some little bit of taxpayer money some day gets taken, likely indirectly by an infinitessimally small tax increase in the distant future. Or not if the theoretical loss is monetized.

So this is quite complex and the road to the taxpayer's pocket is quite a lengthy and winding one. Another way to look at it is the Fed will eventually monetize any losses on the BS loan.

[This is very different from the original "bailout, viz., Chrysler in the early 1980s, when the Treasury directly guaranteed Chrysler bonds. Even then, Chrysler survived and paid the bonds off and the Treasury made money on warrants it had smartly gotten as part of the package.]

Is the Fed's action justified ?

YES, this is precisely the raison d'etre of the Fed, the reason that it was created in 1913, in response to the Panic of 1907. In that panic, J. P. Morgan, Sr. led the banks to use reserves to save the US banking system with help from John D. Rockefeller. Those two individuals were the giants of the times. Congress rightly decided that the government needed to create a governmental reserve bank to act as a lender of last resort to give the US dollar and banking system more governmental backing and not need to rely on private individuals in times of crisis.

A collapse of BS would have locked up a huge amount of trades, counterparty obligations and loans on a huge swath of the US financial system in a lengthy bankruptcy process at a very fragile time. It would be incredibly stupid and really insane to let that happen now. The obligation of the Fed was to prevent it. So they did. That is their core job. Bernanke did his job correctly ... PERIOD.

Use of the word "bailout" by the press is simply wrong ... again.

PS: Suppose the Fed did nothing and BS collapsed. That would have led to huge losses in the financial system ... and huge tax writeoffs on corporate and individual tax returns ... and hence huge drop in US government tax collections. So the Fed prevented that and likely save the US government, and hence the US taxpayer, huge sums. A very profitable intervention, indeed, for the US taxpayer.

PPS: I added a bit to CVX yesterday.

Word of the Day

"Plangent" - adjective [$10]
Plangent means loud, reverberating
Sentence: The plangent speaking style of many Babblevision, Blabberg and other newscasters drive me to turn them off.

Tuesday, March 25, 2008

Fun with Words

Gosh, Bloomberg announcers must read this blog, too. I just heard the Brit announcer in the 4AM hour say "panicmongers". ;-)

European market are up bigtime, about 3% in early trading. India is up 5%. Hong Kong +6%. Japan closed up 2%.

Yesterday I took some profits on some panic bottom buys I did. I posted them in the comments: sold 1/2 BAC, 1/3 JPM, 1/3 GE. I had really huge postions in those stocks - too much to hold long term. The panic bottom adds helped lower my average price on the LT positions and I had solid profits on those three stocks. Now I have amounts I can hold a year easily.

This is an example of how having reserves lets one make buys when there is blood in the Street. Those panic bottom buys made up for a dumb, "buck fever" add I made last fall. I did use my reserves plus more from part of the gold & silver sales shifted from the Krypto Fund to really load up. Thankfully, Battleship Ben did my bidding [ hehe ;-) ] and kept shelling the bears who are now waving the white flag. Let's see if a trend develops and a strong bullish pattern develops. For now, I'm holding and will take profits on remaining huge positions at appropriate prices. I'm now about 150% long, down from 200% longs at the lows.

I'll be looking for a few good, long term buys if a bull market begins. I like to stay 150% long in bull market, cutting to 100% on sharper moves up, and buying dips to 200% long on significant, beefer-induced dips.

This market has re-taught some lessons on dealing with hard downturns: don't add to a position unless the price is at least 10% below a prior buy, as that amount is needed to make a significant reduction in one's average price of holdings. And don't be too fast to add, as the downturn can go on longer and further that one might expect on rational reasoning as a "panic" is not rational. And don't accelerate time diversification adds - let the time run out.

I hear a Merrill Lynch analyst downgraded BAC. Dumb. The big banks will gain more business in the next upturn, while investment banks are going to be regulated heavily and see their business contract. The big banks are already regulated and know how to deal with this. The investment banks do not.

That's enough of the market. Let's move on to the fun with words.

Words of the Day

"Nomo-" is a combining form meaning custom, law and is used in the formation of compound words related to "law" (based on the Greek root) [$100]
Nomology [noun] means the science of law or laws.
Nomothetic [adjective] means 1. giving or establishing laws, legislative; 2. founded upon or derived from law; 3. (Psychol.) pertaining to or involving the study or formulation of general or universal laws.
Nomism [noun] means religious conduct based on laws.
Now the fun. let's make a new word, "nomite" to mean "lawyer". [It could also be "nomothete"].
Sentences: Those dirty nomites robbed my grandmother of her estate. :-)
Nomothetes are such sharks, they'd sue their own grandmother. In urban-speak asides in court: Those MF nomites are blood suckering bastards. ;-)

See ... words can be fun ! Next ...

"Conurbation" - noun [$10]
Conurbation means an extended urban area, esp. one consisting of several towns and merging suburbs.
Sentence: American conurbations might shrink and break up as high gasoline prices induce families to move to city centers to cut driving times.

Here's the fun. In urban dialects or in locker rooms, "conurbation" might be used as a polite synonym for circle jerks ;-) Or maybe it could be a secret code word meaning same in offices when mangement has internal conferences where all "share" ideas. Lolol Dilbert could use that word in a comic strip safely. :-))) "Sigh ... another management conurbation ... "

I'm just having fun with words. Mrs. B thought I was nuts when cackling about these two word ideas yesterday evening.

Monday, March 24, 2008

Hello Spring

I see a few signs of spring now: the birds are chirping quite loudly and the crocuses and daffodils are perking up ... not bloomed yet, though. Overnight temperatures are still quite cold in the 20F range, but the ground is thawed.

Signs abound that last week marked a low and successful retest of the January lows. Nothing is certain in investing, though. Conditions in credit markets improved. Barron's intermediate grade bond index declined 20 bps from 8.61% to 8.41%, still too high, but that's a reversal from the steady increases for weeks.

Gasoline demand in the US is definitely tracking lower than last year. An article in this morning's WSJ says that ethanol production increases might eliminate the normal seasonal peak in gasoline prices. Lower demand in the US will do that, too. So my thinking for some time that oil prices will simply be flat this year in the $90-110 range is getting some support. That will cut a leg off the inflation-mongers.

Speaking of inflation-mongers, they say the Fed is printing money and pumping it out in a firehose and that will cause inflation to rise hugely. What are the facts ? The monetary base still shows very small increases - 1.2% year over year for this week. That's not even enough to accomodate the economic growth of last year. And M1 shows a fall from this week last year. So the Fed is NOT printing huge amounts of money. They really need to push more money into the monetary base. Maybe this week's reduction in the overnight rate will give them a means to do that.

Unemployment clains were up last week, but those were distorted from the layoffs caused by the strike of the GM supplier.

This spring I think we will see the core PCE fall back to the "comfort zone" and later this year the nominal year over year inflation will fall, too, as last year's oil price increases get dropped from the year over year comparisions.

Stagflation screeches are just armchair generals re-fighting the old wars of the 1970s. The "stag" will evaporate this summer or fall and the "flation", too.

European markets are closed today. I'm holding my positions - the largest are BAC, WB, JPM, C, GOOG, GE, DVN, CVX, and AAPL.

I saw two usages of "Panic of '08" over the weekend. Interesting. I guess that fits rather well - the Street did panic as their excess of many years of peddling garbage products caught up to them. Hmmm and I see GS will lay off up to 15% of its staff, too. That follows cuts at LEH and other firms. I'm not ready yet to throw in the towel on "Rich Man's Panic" yet, though.

I see Barron's has been reading my blog ;-) Here are two quotes from page M1.

"Other adages have clashed: 'Don't fight the Fed' girds the bulls, while 'Don't fight the tape' assures the bears. Could the successful defense of the former lows last week turn the tape positive and foster aphoristic harmony?"
"Striking Price
Financial Fandango
Defensive puts and battered bankers? There's no consensus"

So they are using $10 words now, copying me. Oh well, imitation is the sincerest form of flattery ;-)

PS: Sheesh Cramer reads this blog, too. I just saw him tell the SEC to bring back the uptick rule. Oh well ... imitation is ... ;-)

Words of the Day
"Aphorism" - noun [$10] - no flack, please, compare this word to "adage", "proverb", and "maxim" for the subtle differences in meaning. I did look them up to study them.
Aphorism means 1. a concise statement of principle ; 2. a terse formulation of a truth or sentiment.
Sentence: see above from Barron's for a use of the adjectival form.
Compare to adage which means a short maxim: proverb; to proverb which means a short, pithy and much used saying that expresses a well-known truth or fact, among other meanings; and to maxim which means a concise formulation of a fundamental principle or rule of conduct. Obviously there can be a lot of overlap in the usage of these words.

"Fandango" - noun [$10]
Fandango means 1a. a lively Spanish dance for two; 1b. the music for this; 2. nonsense, tomfoolery.
Sentence: The auction rate securites market was a fandango created by the Street to gain higher fees from greedy, rich investors. That market is now dead.

Sunday, March 23, 2008

Investor's Soliloquy

Today seems appropriate to resurrect an old writing that I've slightly modified to suit the current market.

Investor’s Soliloquy (B):
To buy, or not to buy – that is the question:
Whether ‘tis nobler in the mind to suffer
The slings and arrows of bear raids
Or to make some buys in a sea of red stocks
And by buying join them. To hold, to sell—
No more – and by a sale to say we save
The heartache, and the thousand small hits
The P&L is heir to. ‘Tis a consummation
Devoutly to be wished. To sell, to buy—
To buy – perchance to survive: ay, there’s the rub,
For in that calm buy what dreams may come
When we have shuffled off this bear raid
Must give us pause. There’s the respect
That makes huge gains of low price buys.
For who would bear the whips and scorns of bears,
Th’ hedgie’s wrong, the perma-bear’s contumely
The pangs of despised shorts, the move’s delay,
The insolence of gurus, and the spurns
That patient merit of th’ unworthy takes,
When he himself might hide in cash
With the “Sell All” button? Who would burdens bear,
To sigh and sweat before a blinking screen,
But that the dread of something after selling,
The undiscovered roaring bull, till such end
Much gold is made, puzzles the will,
And makes us rather buy those stocks we like
Than hide in cash that we know gives little?
Thus fear does make sitters of us all,
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprise of great pitch and moment
With this regard their currents turn awry
And lose the name of action. -- Rise you now,
The fair Ms. Market! -- Nymph, in thy prayers
Be all my stocks remembered.

For any Gen-X, Y and Zers, this is based on the famous Hamlet's Soliloquy of William Shakespeare written about 400 years ago. Suitably altered, the soliloquy makes a fine self-reflection for many vital decisions.

Word of the Day

"Contumely" - noun [$10]
Contumely means 1. insolent or reproachful language or treatment; 2. disgrace.
Sentence: Lonely bulls like Bunkerman bear much contumely from the arrogant bears, but the confidence in his mind about the Fed's actions steels him.

Saturday, March 22, 2008

Belated Thursday AM post

True title: "Those Darn Beefers"

This post is truly what I was thinking late Wednesday afternoon and Thursday morning after the beefers all decided to bail out of commodities and energy stocks at the same time. This incessant herd behavior of so much "managed" money is really dangerous for the "common man" investor unless he understands it. That's why I am always reitierating that one must understand their actions and behavior in picking long term investing points.

My first blog post of January 14, 2007 defined "beefer" and amazingly, that description of their behavior fits recent actions rather well. Mirabile dictu !

For a few weeks all we heard about were commodities and energy going to the moon ... parabolic ... hyperbolic ... asymptotic. Your writer posted sales of all his miners (RIO, BHP, FCX, PHU and RTP) and also numerous large sales in gold & silver culminating in Tuesday's last big "quintuple" load at 11:00 AM just before the Fed meeting.

Was I a great technician ? No. I just had a fundamental outlook that oil and the mineral prices had peaked for awhile and would fall, then base. But the beefers ... do they think ? No. They just barge into stocks+commodities and play the "momentum" game. So as the dollar kept going down, I figured the Fed might toss a fig leaf towards supporting the dollar adn start a beefer stampede out of commodities and commoditiy stocks. Hence, I wanted all my sales done before the Tuesday FOMC meeting. They did. And all the beefers bailed at once. Mirabile dictu !

All I had was good knowledge of behavior of the beefers. I've seen them do these idiotic stampedes before.

Here's a ditty I composed and posted on August 8, 2007:

***reprise from August 8, 2007 post***
Song of the times follows (based on the song, "The Grand Old Duke of York") ->

The beefer Duke of Funds
He had ten thousand stocks
He marched them up to the market top
And marched them down again.

Lolol, that ditty gave into my head yesterday afternoon. I sang it in my turret.
***End of reprise***

So that ditty came into my head driving to my hometown on Wednesday afternoon. I wanted to post this Thursday morning, but my Internet connection in Ohio had equipment problems, so I was cut off from the "modern" world.

What to do ?

Wait a few weeks or months ... oil must base for a long while around $100 and other minerals, too, at these prices as clearly price-demand rationing is taking hold. So wait. The oils & miners will be great long term buys again as the beefers liquidate. I plan to add to DVN, CVX and rebuy some of BHP, RTP, RIO and/or PCU later this year, but am in no hurry.

The big banks seem to have bottomed. I have plenty and will wait for the beefers to barge into them in the next few weeks/months then I will lighten up to amounts I can hold for a few years.

Friday, March 21, 2008

SNAFU in Ohio

No post Thursday and Friday as the DSL modem at Mom's house in Ohio was defunct and it seems one can't buy those at Wal-Mart or Radio Shack or anywhere in my small hometown.

Darn, I had some good ideas & thinking about Wednesday, too.

So I will post them Saturday in retrospective.

Wednesday, March 19, 2008

The Day After

Although the Fed did not do my bidding exactly, it was close enough and gave us clear signals that Battleship Ben will continue to shell the bears with vigor. And yesterday's stock market explosion up certainly impaled a few bears. Aw shucks.

Interestingly, based on closing prices the S&P printed a higher low and higher high. The ratio of NYSE up/down volme was a spectacular 20x and for the Nazz that ratio was a still spectacular 12x. So now we have a cluster of two bullish up/down volume ratio days. These technical signals must be viewed cautiously as ETF and program trading distort them. Still, both these days occured on days when bullish fundamental news occured. So good news is now ... good.

GE smashed through its 50 DMA [DMA = "day moving average"] on higher volume and also broke its intermediate term down trend line. I have a large position in GE that now shows a fine profit. That stock is still greatly undervalued in my humble opinion.

Still, one must be cautious as the wounded bears are still out there and will attack again. Buy only on decent dips ... let the bears give you a good price. be patient and use time diversification.

I made the last large gold sale yesterday before the Fed meeting (!) and got a fine price; I also made the last silver sale at a good price, too. My Krypto Fund is now down to its minimum 5% gold+silver asset allocation from a high of 15%. I really am greatly pleased how this diversification has worked. Even though it worked for me in the past, when it does such in rough times like the present, the peace of mind and opportunities those asset classes provide is quite valuable.

I wrote about a month ago how I thought this will end [see blog post of Fedruary 26, 2008]. And it's my opinion that the end of the end to these problems are here in reality, but perception needs to catch up. This bottom should consolidate now into a bullish continuation pattern.

I'm very, very long in both Alpha Fund [a bit under 200% on margin now] and Krypto Fund [39% US stocks, 26% International stocks, 20% real estate, 10% fixed income (illiquid), 5% gold+silver], but I have reserves if needed and will receive fresh cash this spring.

Words of the Day

"Mien" - noun [$10] pronounced same as "mean"
Mien means [ hehe ;-) ] 1. bearing or manner, especialy as it reaveals a satte of mind; 2. an appearance or aspect.
Sentence: In his interview on Babblevision last week, the mien projected by Alan Schwartz, the CEO of Bear, Stearns, was not sufficently confident to assure counterparties of its creditworthiness.

"Educe" - verb, transitive [$10] (I have trouble remembering this 'duce word)
Educe means 1. to bring out or develop from latent or potential existence; elicit; 2. infer, elicit a principle or number from data.
Sentence: When will more investors educe the turnaround from the extant signs and data in the market and Fed actions ?

"Evince" - verb, transitive [$10]
Evince means 1. indicate, to make evident; 2. show that one has (a quality)
Sentence: Statistics from Iraq evince success from the troop surge in stabilizing security in troubled nation. But one wonders why it took W so many years to do what McCain knew from the beginning ?

Tuesday, March 18, 2008

The Sun Came Out

Yes, the world did not end yesterday and the sun came out. I actually experienced a sunny day yesterday here at the bunker, the first in many weeks. So Mrs. B and I took the dogs for a four mile walk.

While away, the forces of light turned back the forces of darkness in the markets, which closed flat to down a bit. The worst did not happen as the design and powers of the Fed were used effectively by Battleship Ben with an assist from Hank Paulson in hammering out a takeover of BSC by JPM. JPM rose 10%.

Today the Fed meets again and a substantial interest rate reduction is expected. I reiterate that over time, these rates cuts mean substantial savings for consumers and banks. The consumers save money on floating rate mortgages and on home equity loans. Small business and small company loans linked to the Prime Rate save money. Commercial banks, particularly those with consumer deposits, will have larger profits as their net interest income grows.

Now that the liquidity issues of investment banks are settled, the fear mongers point to credit derivative books.

Now a "derivative" is not the same as a loan or even a CDO. Loans are not zero sum games, but for every "long" derivative there is a "short". So those pointing to large derivative books as certainly having large losses simply don't understand the nature of the beast. Properly managed, an investment bank or a commercial bank "should" be running a "flat" book of derivatives, making money on a small spread of offsetting risks. Now the monoline insurers or some hedge funds by nature run a directional book, meaning they have one-sided derivative positions not offset by others. We've been through the monoline risks. The hedge fund (beefers = big, evil funds") might have big losses, but who cares ?

So unless an investment bank or a commercial bank was "stupid", they should not have large net losses on credit or similar derivatives. I suppose the fear arises that they are or were stupid. Maybe. I guess we'll see this week if some investment banks were "stupid".

So what else will the fear mongers bring up to fan fears ?

For now, market action seems to point to real buyers picking up cheap stocks slowly. We know of some big names doing this. GE stock chart sure looks better as it closed over its 50 day moving average .

Today I sell move gold & silver. The money will go to buy stocks as I see good buys.

Words of the Day

"Milieu" - noun [$10]
Milieu means environment, setting
Sentence: This seemingly endless bearish milieu for the stock markets might soon change as the Fed policies take root and produce results.

"Ennui" - noun [$10]
Ennui means a feeling of weariness and dissatisfaction
Sentence: Bunkerman's ennui is growing at the endless fearmongering on Babblevision; he turns off that channel and Blabberg, too, more and more every day.

"Manichaean" - noun and adjective [$10]
Manichaean means (noun) 1. an adherent of a religious system of 3rd - 5th century representing Satan in a state of everlasting conflict with God; 2. a dualist; (adjective) of or relating to the foregoing.
Sentence: The excessive monies in trading oriented hedge funds makes the markets appear more and more like a manichaean, commodity-like system rather than an investment, asset based system.

Monday, March 17, 2008

Fascinating Times

So what's an appropriate quote for today ?

These are times that try men's souls.
--Thomas Paine, Dec. 23, 1776

Fasten your seatbelts, it's going to be a bumpy night"
--Bette Davis as Margo Channing in "All About Eve"

JPMorgan buys Bear for $2/share and assumes all the liabilities. JPM also gets a $30 billion put to the Fed for Bear's most risky securites. Obviously this is a great deal for JPM.

The Fed opens the discount window to all primary dealers under a special power for "unusual and exigent" circumstances. Good, finally Battleship Ben must realize that these clever but not fully charged Fed actions just weren't hitting the target. I suspect at tomorrow's open market commitee statement will announce the Fed will make outright purchases of mortgage securities, too.

As the paragon of finance and banking, J. P. Morgan, Sr. reportedly said in the Panic of 1907 when banks were griping about using their reserves, "use your reserves, this is what they are for." [paraphrasing]

Over three decades I've read many books describing financial panics and crises beginning with the 17th century Tulip Bubble, the 18the century South Sea Bubble, the Panic of 1819 [interesting, a land speculation bubble !], all the other 19th century panics, the Panic of 1907, the 1929-1932 Great Depression and the 1960s era Penn central collapse. I lived through the collapse of numerous brokerage firms (E. F. Hutton, Drexel), Penn Square and Continental Bank, Drysdale Securites, the Crash of 1987, the S&L collapse, and LTCM and Russia defaults.

This one is not different. The risky and excessively leveraged firms collapse. I read today that in addition to its excessive exposure to structured securities, that Bear, Stearns had a heavily concentration of hedge fund prmie brokerage. That's a risky client base. And we see it relied excessively on overnight funding. Sheesh, short term overmight funding is really risky in troubled times. I wrote about that firm's leadership culture over the weekend. So this collapse was never beyond possible.

So what to do ? There's blood in the Street. The Fed is doing the right thing ... liquidity ceases to be an issue.

Survive. Protect Yourself at All times. And if you have cash, buy slowly.

I am still selling gold & silver and buying stocks. One good thing about owning physical gold & silver is that it takes weeks to sell a lot. So I get many bites of the apple and the time diversification is wonderful. I will be selling more tomorrow, as I need to give my metals dealer a breather. I posted some Krypto Fund exchanges yesterday.

If you are on margin, protect your best postions. I've sent some more cash to my Alpha Fund accounts ... just in case. Don't get a margin call ... sell a bit of positions that might profit less from the turnaround. Frankly, I'm considering selling my last oil stocks [DVN and CVX]. I wonder how much higher they can go as oil is now at $110. No decision yet but the fact they are stalled not too far from highs is tempting.

Word of the Day

Eidetic - adjective [$10 ! sheesh, I would have guessed at least $100]
Eidetic means (of a mental image) having unusual vividness and detail, as if actually visible.
Sentence: Bunkerman is having eidetic memories from his investment banking and investing career of prior brokerage collapses and financial panics.

Saturday, March 15, 2008

A Few Bits of Information

No Inflation II

I just bought a chicken to roast for dinner and paid $1.49 / lb. for a whole broiler chicken. That compares to the $1.99 / lb. that I paid last week for an organic, all-natural chicken, which were not available today at the butcher shop near my bunker. So my point on the lack of all-encompassing "inflation" is more supported than ever with this data. The BLS data is correct and yesterday's fall in the year-over-year core inflation is very bullish IF reality ruled perception ... or WHEN it does.

Beefers = Big, Evil Funds.

I realize I haven't defined this term lately, so for new readers, see my first blog post of January 14, 2007 for a more complete description and some humorous metaphors for their behavior.

Bear Stearns

No matter what one thinks about the markets and economy, the problems at Bear Stearns are quite sad. Lots of fine people working hard are at risk of their jobs and might be hurt badly. I have friends working there, some very old friends from years past. So I certainly hope a favorable acquiror can be found to maintain the firm's current level of operations.

Is this an example of the Street tossing a virgin into the volcano to appease the gods ? Aka a "fall guy" ?

No, not in my opinion. The better metaphor is Don Juan going to hell after seducing and destroying the lives of large numbers of women - see the fine 17th century play by Moliere.

This is another example of how ruthless, greedy and/or dishonest people can rise high and ruin a firm. That firm's actions over the past 20 years or more created animosity and a cult of greed and cutthroat behavior, earning no friends or support when they needed it. The behavior of the former CEO, Jimmy Cayne, during the LTCM collpase is one example. Another is their destruction of some mortgage REITs and hedge funds in those turbulent markets of 1998 with unfair margin calls - much later they lost court cases and had to pay damages. The collapse of their leveraged hedge funds in early 2007 started this mess. And who knows what they were doing in this crisis ? I also have personal knowledge of despicable behavior by some senior persons (no longer there) from past experience many years ago. But the culture never changed in my opinion, so the amount of toxicity built up by that crowd eventually killed the firm.

Bear Stearns is no virgin being sacrificed ... it's Don Juan going to hell for past evils.

The sad part is the harm that might occur for so many honest, fair men and women.


This morning I scraped every last bit of money market, marketable bond fund and TIPs in my Krypto Fund and moved it into US stocks for close of trading Monday. I can't exchange the 10% chunk that is in nonliquid, retirement long term fixed income, such as Mrs. B's TIAA, to stocks. My asset allocation program also directed me to shift some money from the real estate class [Vanguard REIT index fund] to US stocks, too, and I obeyed.

Friday, March 14, 2008


It's been a long week. Corporate taxes are due Monday, 3/17 and I manage a few that I own part or all. The worst are the state tax returns. These rapacious states are just pirahnas wanting money and forms. Despicable.

S&P must read this blog, as they took up my thinking from yesterday's and some prior posts that this "credit" funk will soon be over. Specifically, they said that the worst is over for subprime writedowns by major institutions and even that some writedowns may be too large. I have written before that all the focus on writedown by public financial institutions is just wrong ... a part portion, perhaps a majority, of troubled securites with future losses are held by pension funds and insurance companies and hedge funds. The first two of that group tend to hold securities to maturity. The hedge funds are being liquidated. So this writedown mess really is about over.

Stock markets should soon start to focus on what to buy for the next big move up. I am very long the big banks [BAC, WB, C, JPM], GE, GOOG, AAPL [I topped off GOOG yesterday and bought some AAPL calls (!) ], DVN and CVX. Other positions are smaller: HDB, IBN, EDU, RIG, DO, CCJ, not in order of size.

Haha, I just heard Kernan on Babblevision refer to negative nabobs. That fits ... the nattering nabobs of negativism ! Spiro Agnew used that term about 35 years ago to describe liberal doomsayers. But it sure fits the punditry that gets pushed onto us from Babblevision and its rival, Blabberg.

The double bottom pattern held yesterday. The reversal up on higher volume was a positive. Perhaps real buyers are adding ? We know that very long term "smart money" like Buffet has been buying heavily. Insiders are not selling rallies. I read in IBD that bearish newsletters are now number more than bullish ones, a rare event not seen since October 2002, which was a fine long term buy point.

I continue to sell gold & silver in large amounts and look to buy more stocks on dips. I want to get my gold & silver holdings in the Krypto Fund down to 5% asset allocation by Monday. I think the potential for a major dollar reversal is becoming likely and want that gold & silver sold before then. I also just saw that supertankers are "slowing down" on the seas. That might mean owners of the oil are using the tankers as storage as their own storage is full. Perhaps demand is slowing. Just guessing.

By the way, IF a dollar reversal/bottom occurs, European and Near East investors will rush to buy US stocks as their prices are very, very cheap.

PS: Don't be too aggressive unless you have sizeable reserves. The big, bad bears are out there, wounded and want blood. They will attack again. Use time-diversification and buy only dips. Keep reserves.

Words of the Day

"Copacetic" - adjective [$10]
Copacetic means very satisfactory.
Sentence: Yesterday's copacetic reversal in the US stock market further strengthens the double bottom pattern.

"Nadir" - noun [$10]
Nadir means the lowest point.
Sentence: The successful recent test of the Martin Luther King low provide further evidence that S&P 1270 marks the nadir of the US stock market in this cycle.

"Nescience" - noun [$10]
Nescience means lack of knowledge or awareness.
Sentence: The profound nescience on the US-based programs on Babblevision and Blabberg must be mortally wounding to the financial knowledge of Americans.

Thursday, March 13, 2008

Thoughts on a Thursday

Hmmm ... Asia markets down big [3%+], Europe opening down 2%-, US futures down about 1.5% early.
US Dollar drops to 100 yen, first since 1995 as the yen carry trade is dead. The yen is strong in a period that the Japanese government can't agree on a BoJ head. Wierd. But beefers do wierd things.
Carlyle Capital being liquidated. They had leveraged to about 25x. Who told me in 2006 that LTCM type risks won't happen again and that "no one" gets hurt from hedge funds ?
Caterpillar raised its outlook ... whither recession ?
Big UK hedge funds offers to invest own capital in a WM recapitalization ... guess they think it's OK..

Oil up on higher US inventories. My opinion is that US inventories don't matter ... the big oils choose how much they want to keep in US inventory based on the forward curve, etc. With imports flexible and demand weakening, that probably temporarily affects inventories. But the price of oil is set nowaways in the world, not the US although it's priced in dollars. The marginal demand is from China, India, etc. Supply is roughly fixed. So the value of the marginal barrel of oil to a business in CHINA sets the price THEY will pay for that barrel. And nowadays that marginal barrel comes from US usage reductions via conservation, etc. So the microeconomic decision is this: what price will a business in China have to pay to get a US consumer/business to cut back one barrel of usage ?

Let's think about the new Fed policy. Did you notice that it actaully takes effect March 27 ? That's an interesting date, being a few days before the end of the first quarter. So the Street can liquidate all those hedge funds speculating in mortgage-backed securities, position the paper as they sell it and then have the certainly they can give the remainder to the Fed in the TSLF program before the end of the quarter when they'd have to show it on their books. Nice fit, no ?

How can this all end ?

I have always thought about the macroscopic future using Richard Feynman's path integral approach to quantum mechanics which does form the basis for the fundamental understanding of elementary particles. In my gedanken thinking [ hmm, that's redundant ;-) ], all possible future paths are added up in a giant integral where their amplitudes and phases interfere and amplify. The most likely path is the one where the phases correlate to create a peak "probabilty". Now since humans really do have free will in my belief, this is a true "most probable" future path, not a certain, determined one. Humans can mess it up.

The apocalyptic crowd sees a future financial armageddon. Mort Zuckerman, Jimmy Rogers, and many others on Babblevision and Bloomberg can tell you their thinking, but when examined one sees logical inconsistencies. That's for a later blog.

Here is my "vision" of the path of the future:

The housing bubble was mostly caused by speculators and liars, not real homeowners except for the marginal buyers put into poorly crafted mortgage loans. The large early wave of defaults is surprisingly large due to the early washout of the specualtors and liars and the worst part of the marginal buyers. Soon ... perhaps in the spring ... that defaults will peak. Home prices will cease falling late spring, likely ending at a level comparable to a few years ago. So most homeowners will NOT be underwater on either their first mortgage or their home equity loan.

Hedge fund liquidations will be mostly done by the end of March. Normal tax refunds hit in April. The Federal stimulus money hits in May. People will restart buying homes this spring. Consumer demand will be OK as the US consumer always spends every dollar available. US jobs will roughly stabilize without much further decline. Q1 GDP growth will be zero. Q2 GDP will be positive. No formal recession will occur.

US oil consumption declines - summer driving will be cut back - will help stop the oil price declines.

The Fed, though the TSLF and perhaps outright purchases upon expiration in late April of the inital TSLF auction, will stabilize the mortgage markets. Real lenders - pension funds and insurance companies, not hedge funds - will be buying these record spreads and yields to meet their long term liabilities.

The Fed will cut overnight rates to the range of 2 or 2.5% and then stop, and direct further efforts in the TAF, TSLF and outright purchases of mortgages. This will stop the decline of the dollar and the price of oil will stabilize around $100. The dollar will begin a major rally that will be prolonged as the US current deficit will continue to narrow through export strength. Inflation will be less than expeced this year as oil will cease going up. Most commodity prices will fall or stabilize this spring and summer after the wave of insitutional "investment" in that sector will be done by end of Q1.

The US stock market will begin to explode up this spring when this future path is recognized by thoughtful investors. Gains for the year will be 20%.

Hey, I admit I'm an optimist on humanity.

I'm still selling gold & silver and looking for good buys. I'll post any I make.

Words of the Day

"Credulity" - noun [$100] and "credulous" - adjective [$10]
Credulity means a willingness to believe or trust too readily without adequate or proper evidence; gullibility. Credulous means 1. too ready to believe, gullible; 2. showing such gullibility.
Sentence: The credulity of Obama's supporters is vexing Hillary as she tries to raise questions delicately about his competence. Can Obama expand his support beyond his credulous current support enough to defeat McCain ?

"Retradition" - noun (rare) [$1000]
Retradition means the action of handing back.
Sentences: A. [from OED 1875 example of usage] "The retransfer of dominion follows without any retradition or reconveyance by the interim proprietor." B. Some title problems in real estate are cured by retradition through a quitclaim deed and then reconveyance with a corrected deed or survey. C. Is this morning's decline in stock futures prices just overnight volatility or a portent of retradition of Tuesday's large gains ?

Wednesday, March 12, 2008

The Salvo from Battleship Ben

Battleship Ben Bernanke showed quite a bit of flexibility and aggresiveness with the Fed move yesterday to create the Term Securities Lending Facility. The size of the move was quite significant at $200 billion, which is about 25% of the monetary base of the US now usable for funding mortgage securities. That's not a niggardly application of medicine. Also, this might take some pressue off the dollar as extremely low overnight rates may not be necessary now. At this time, less dollar pressure might mean stabilization of oil prices.

My thinking is that 2% to 2.5% is a good place to stop for the overnight rate. That's plenty low enough to give lots of cash flow relief to all with adjustable rate mortgages and home equity loans. Also, I would prefer for the Fed to actually buy mortage securities outright as a permanent policy. That market is really huge, bigger than the Treasury market. Over the long term, I think unduly concentrating the Fed's balance sheet in the Treasury market has caused some distortions. A story in the WSJ says the Fed chose not to buy those outright now, as they feared distortions. And that's true as individual mortgage securities issues are relatively small. Perhaps the Fed can buy pools of mortgage securities by simply taking down some of the mortgage collateral for the TSLF when the loans mature after 28 days. That would not distort the mortgage market for individual issues.

The WSJ had a story about an explosion in FHA lending. That is good. FHA is a fine program that was neglected for years. FHA needs expansion and modernization, but even now it is helping large numbers of the "common man" get a fair mortgage loan. I remember a song from the late 1930s-early 1940s with the theme, "Will You Still be Mine" about love lasting a long time. One of the humorous lines was "When we have finally paid our FHA note". So that program giving fair fixed rate, long term loans to the "common man" has been around a long time.

Also, GOOG received approval from the EU on its Doubleclick acquisition and that closed yesterday. That's good news.


Yesterday was a huge move up reminiscent of August 13, 1982 when the Fed cut the discount rate triggering a big move up and started that great bull market from 1982 to 2000. NYSE up to down volume ratio was 9:1, which was an old Marty Zweig bullish signal. It's been distorted some due to program trading, but in my mind the coincidence with a major policy move adds to its significance. And I hear lots of skepticism. Good.

The S&P shows a double bottom formation now and is setting up a "W" bottom pattern. A grinding climb to the 1390-1400 area and two closes over that level would created a bullish bottom pattern.

I am still selling gold & silver and buying stocks. I'd like to add to GOOG now on a dip, but have a lot already. I have a lot of the banks now but would add some BAC and JPM at a good price. Also, I'd like to add to AAPL. But I'll be patient and let the beefer bears give me a good price. They are out there. A wounded bear is quite dangerous. Be patient and careful. But the news is good and can get a lot better into spring.

Words of the Day - reprise of some 'duces and one more.
[You can guess I have trouble remembering these $10 words ending in "duce"]

"Adduce" - verb, transitive [$10]
Adduce means to offer as an example, reason, or proof in discussion or analysis; alternatively, it means to cite as an instance or as proof or evidence.
Sentence: Bunkerman adduces the 9:1 up to down volume ratio that a bottom might have been set for the stock market.

"Conduce" - verb, intransitive [$10] (followed by "to")
Conduce means to lead or tend to a particular end usually desireable result: contribute.
Sentence: The Fed's TSLF conduces to more liquidity in the mortgage markets.
[This verb provides an active voice alternative to the common passive voice usage, "is conducive to"

"Congeries" - noun, plural [$10] (the "g" is soft, as in "jury")
Congeries means aggregation, collection
Sentence: Yesterday's congeries of the Fed policy move, double bottom and 9:1 up-to-down NYSE volume ratio provided strong indication that March 10 was indeed the "Spitzer Bottom".

Tuesday, March 11, 2008

Spitting Distance ?

Cool title, no ?

Is this the Spitzer bottom ? Is Ms. Market within spitting distance of a bottom ? Time will tell, but that's my thinking. No need to be a hero, though. Be patient. Plenty of profits await the survivors. Follow the boxing adage: "Protect yourself at all times". Don't get stomped by the elephants searching for a new waterhole.

I write what I do or like. I don't "recommend" unless I know one's total financial situation. For example, I am selling much gold & silver to buy US stocks. Now if you don't have profits on old gold & silver investments, you need to think if buying US stocks makes sense. Maybe you already have enough. If so, wait ... be patient ... let the beefers play in the mud ... wait for them to head to the next waterhole and your existing holdings will go along for the ride. Don't get top heavy and risk falling off the elephant. I have to buy more US stocks to meet my asset allocation goals. You might not be in that situation. Or you might not own much. If so, consider making some buys slowly.

Far east Asia markets rejected US bearishness, rising about 1%. India also rejected US bearishness, rising over 1%. London is up a bit in opening hours.

So what do we learn from the Spitzer affair ?

Distrust the rich and powerful. Spitzer was a wealthy man who decided he knew better how the common man should live and how others should act. He craved power. He was a ruthless bastard who did some good acts, but obviously for unsavory reasons, mainly to get more power. A knave. Period.

Nietzsche wrote about the "will to power" that exists in humankind. That drive is quite strong in some ... dangerously. So distrusting those who want more power and are ruthless must be an axiom for the freedom-loving person. The US was created by trusting one with power who did not want power, namely George Washington. To me, we must evaluate demand by modern politicians for power on the Washington standard. If they do not show his characteristics of willingness to decline power, use judgment, to "live and let live" and not be ruthless, we should not support them or trust them.

Being a populist libertarian, you guess my attitudes about Spitzer's core actions. I don't even think hypocrisy is the most venal sin that the US press seems to make it. But Spitzer did violate the sworn trust with his wife and the implied trust of his children. That is his mortal sin. And if a public official breaks one oath flagrantly, how can we trust him with his oath of office ?

The 1990s gave us one example of that violation, which led to pardons of drug dealers for bribes. Let's raise our standards and foreswear support for such knaves on principle.

As long as prices hold up, I'll be selling more gold and silver all week. I buy US stocks with the money as I see good long term values.

Words of the Day

"Bathetic" - adjective [$10] from bathos (pronounced with long "a", short "o")
Bathetic means 1. characterized by bathos; 2. insincere or grossly sentimental pathos.
Sentence: Spitzer's bathetic statement yesterday seems to have been a self-serving attempt to do damage control as he did not announce his resignation.

"Bathos" - noun [$10]
Bathos means 1a. an abrupt, unintended transition in style from the exalted to the commonplace, producing a ludicrous effect.; 1b. an anticlimax; 2a. insincere or grossly sentimental pathos; 2b. banality, triteness.
Sentence: Spitzer's bathos at his press conference was surprising on the facts but is also quite suspicious and self-serving as I wonder if he is deferring resignation to await reaction to determine if he can stay in power.

"Panjandrum" - noun [$10]
Panjandrum means a powerful personage or pretentious official.
Sentence: The press delights in the fall from power of a hypocritcal panjandrum.

Monday, March 10, 2008

A Discursive* Monday Blog

That's an alternative way of saying "Monday Morning Ramblings" using one of today's Words of the Day.

Barron's this week had some interesting information, in addition to that insipid** article about the Rich - see Sunday's blog post.

The Fed's balance sheet is published weekly in Barron's. From it we see that free reserves are positive, hence monetary policy is somewhat easy. But as in classical mechanics where both a position and a velocity specify the dynamics of a system, for Fed policy we must also look to the absolute level of the monetary base and money supply. For this I use the year over year comparisons. One year ago the economy was growing. Now it is flatish or growing very slowly. And the monetary base is a mere 1.1% over its value one year ago. M1 is up only 1.5%. As the economy grew much more than that in 2007, the level of the monetary base is too small. The Fed must add more aggressively to the monetary base by purchasing securities.

In today's market, I think large outright purchases by the Fed of GNMA, FNMA and Freddie Mac securites would be most effective. That is one big arrow in the Fed's quiver they have not used. It's time to do it as that is where the stress exists.

The Barron's intermediate grade bond index continues to rise - it's now 8.54% versus 7.58% at year end 2007. That's the effect of the credit default swaps mess caused by the wierd structured products that the Street created and sold to hedge funds. An article on those appears in today's WSJ. The recent collapse of some highly leveraged hedge funds is another sign of stress caused by that nonsense vaporizing. But being derivatives, some entities must be minting money being on the other side of those derivatives. Who are they ? I don't know, but they are out there somewhere. At some point they will "cover" and clear that market.

Today I sell more silver and buy US stocks. I am also selling 1/2 of my Vanguard Precious Metals and Mining Fund and buying the Vanguard Total Stock Market fund with the proceeds. My Krypto Fund algorithm is ordering me to do sell precious metals & related funds bigtime and buy US stocks. I always obey it or fear the trading gods will punish me.

PS: Sheesh, the expert on Babblevision, Doug Dachille, who is really ok, must read this blog. He just reiterated my Fed proposal to buy FNMA, etc., securiteis instead of Treasuries.

Words of the Day

"Discursive" - adjective [$10]
Discursive means 1. rambling or digression; 2. (Philos.) proceeding by argument or reasoning (oposite of intuitive).
Sentence: Today's blog provides a discursive analysis of market conditions and influences.

"Iconoclast" - noun [$10] and "iconoclastic" - adjective [$10]
Iconoclast means one who attacks established beliefs and institutions.
Sentence: Bunkerman's blog post of Sunday was a fine example of how he is a vocal iconoclast with his populist libertarian views, neither worshiping nor envious of the rich, but sees the behavior of many as simply stupid.

"Insipid" - adjective [$10]
Insipid means 1. lacking vigor or interest; 2. lacking flavor, tasteless.
Sentence: see ** above.

"Polydaemonism" - noun [$100]
Polydaemonism means the belief in many evil sprits.
Sentence: Listening to stock and commodity traders speak of the "trading gods", one must wonder if they are adherents to polydaemonism.
Alternate Sentence: Some think Bunkerman's use of "beefers" to analyze stock market action is mere polydaemonism, but they are wrong.

Sunday, March 9, 2008

The Dumb Rich

I've used that phrase often in this blog site and in my comments and replies to commentors. Today I saw more written proof that the 2008 version of the "rich" must ipso facto be stupid. OK, I'm exagerating for the purpose of humor, but hear me out.

Barron's of March 10, 2008 [page 27] has a reprise article of their oft-cited article of July 27, 1998 on "What does it take to be rich in America today?" The original article is available online or is paraphased in several places on the Internet - I have a copy. That article from 1998 was rational and derived concepts of rich from income percentiles and the amount of invested assets needed to realize those incomes at about 5% rate of return excluding a paid-off home - very reasoned.

What does the 2008 version use for a definition of rich? Here is the crucial clause, "... to be seen as rich these days." Notice the "seen as", not "be". Philosophically, Barron's is now using an ontological definition for "being rich" based on perception versus the prior version derived from reality of people's income distribution. Perception vs. reality. The article proceeds to illustrate this perception as the ability to spend money stupidly and frivolously on items such as buying a $200,000 Bentley out of petty cash. "Live the high life with little worrying of running out of money. Pick any private bank you like." Interestingly, their examples seem to indicate one can't be rich unless one's butt is being kissed by a private banker wanting one's account to gouge for big fees. And of course the "rich" must accept such or not be in the "club". This is really hilarious: "you're at the level of wealth where most of the leading private banks will start showering you and your family with attention, including access to hot hedge funds of other exclusive investments." How foolish and hedonistic and decadent ! Absolute levels of wealth mean nothing ... what's important is how many silly "toys" or "experiences" one can acquire, such as "zero gravity flights with astronaut Buzz Aldrin".

My post of August 19, 2007 titled, "Uses of Wealth" fits well here, so I repost a partial reprise here.

*** reprise begins ***
Here's a quote from Thucydides that sparked my thinking - perhaps I first read it referenced in Erasmus' "Praise of Folly". The quote is from the famous oration of Pericles.

"We cultivate refinement without extravagance and knowledge without effeminacy; wealth we employ more for use than for show, and place the real disgrace of poverty not in owning to the fact but in declining the struggle against it."
*** reprise ends ***

America in the 2008, at least for the financial press exemplified by Barron's, seems to use the obverse of Pericles' statement: "We cultivate extravagence without refinement and effiminacy without knowledge; wealth we employ more for show than for use ..."

I'm not an America basher as readers well know, but the expression of our culture in that Barron's article this week is very sad.

Words of the Day

"Reprise" - noun [$10] or adjective as used herein.... I knew this one, but made it a Word of the Day anyway.
Reprise means 1a. (musical) a repetition of a phrase or verse; 1b. a return to an original theme; 2. recurrence or resumption of an action; 3. an annual charge or deduction made out of an estate. Sentence: see above herein.

"Ontology" - noun [$10] ... I knew this one, too, but many do not.
Ontology means the philosophical study of the nature of being.
Sentence: Metaphysics is the combination of ontology, the study of being, and epistemology, the theory of knowledge.

Idiom of the Day

"Ipso facto" is Latin for "by that very fact".

Friday, March 7, 2008

Thank You Sir ! May I have Another ?

Mr. Market gave premature bulls like me another whacking as the beefers played their favorite commodity manipulaltion in breaking a logical support level to run stops and create panic. But the early weakness came from telic selling in Europe, ["telic" means purposeful ] likely by hedge funds there liquidating dollar denominated stocks.

Some heavily leveraged hedge funds received margin calls and a county in Alabama defaulted on the speculative swaps. Shades of Long Term Capital Management and Orange county ! And some mortgage companies are defaulting on margin calls, too. That happened in 1998, too. And I read that home loan default rates are approaching 1985 levels. So this market is showing elements of several prior crises and not following any one model.

All this is part of the bottoming process which is ongoing. I still like the big banks and plan to buy more of their stocks soon. They can borrow from the Fed and are the strong institutions that will do well in the environment that will be created from this restructuring.

Yesterday I sold many miners and smaller energies like SU, MRO, PCU, FCX, VLO, BTU. I think the price increases on their commodities will soon end so they will have trouble rising enough for me to own them. I have kept DVN, CVX, RIG, DO and CCJ. Those have great prospects for deep water discoveries of new oil or service that drilling. CCJ is my uranium play.

I'm selling more silver today and have a lot more to sell provided the prices stay high. My gold & silver sales are now being transferred to the Alpha Fund so I have a lot more buying power. I plan to buy more of my big banks and on serious dips would add to the energy positions I kept.

PS: Did anyone notice that Wal-Mart raised its divdiend yesterday ?

Words of the Day - the "Per's"

"Peradventure" - adverb [$10] or noun (archaic)
Peradventure means (adv.) perhaps; (noun) uncertainty, chance, conjecture, doubt.
Sentence: Will Obama and Hillary peradventure create a unified ticket ? Nahhh.

"Perdurable" - adjective [$10]
Perdurable means very durable.
Sentence: The McCain candidacy has proven itself perdurable as it recovered from both near oblivion and liberal smears.

"Perfervid" - adjective [$10]
Perfervid means marked by overwrought or exaggerated emotion; excessively fervent.
Sentence: The perfervid commentary of the gold and commodity pundits might signal a topping area.

"Perforce" - adverb [$10]
Perforce means 1. by physical coercion; 2. by force of circumstances.
Sentence: The troop surge in Iraq pushed onto Bush by McCain seems perforce to be succeeding in stabilizing that country.

Thursday, March 6, 2008

Gold and Silver II

To expand on my recent post about Gold & Silver investments [see February 27, 2008 post], I keep the asset class percentage between 5% and 10% of my Krypto Fund. During the recent run up in gold and silver prices and concommitant decline in stock prices, that percentage went to 14% - maybe more as I don't check allocations daily. So as posted, I am selling as fast as possible to get that asset class size down. Physical gold and silver must be sold slowly or the weights and $ amounts can overwhelm me for former and the coin dealer for the latter. So I've been selling for weeks while the price continues to rise. That is good !

Thinking about this situation, the fact that gold and silver are now (1) at my long term price objectives, (2) generational highs, (3) and have parabolic charts, I now intend to cut my gold & silver allocation to 7.5% and may cut it to 5%. That means a lot more selling - weeks even at triple loads per week. But at these levels and the news and public interest, my instincts tell me to sell a lot more.

I'll be buying stocks with the money, more banks plus high quality industrials with large export businesses and perhaps some transports. And some municipal bonds if prices are right. But Mrs. B's broker said that the public is waking up to these municipal bond prices. We were going to buy some more, but they were sold before she could give the OK.

Words of the Day - "A" Words

"Ascribe" - verb [$10]; and "Ascription" - noun [$10]
(I read the term "ascription" in my book about Byzantium yesterday and thought I knew the meaning, but did check and neither this word nor "ascribe" was in my card file. I probably knew "ascribe" as a young man, but thought I should add it to the file now as the root of "ascription").
Ascribe means to attribute to a given cause, source, or origin; 2. to assign as an attribute.
Ascription means the act of ascribing; 2. a statement that ascribes.
Sentence: Political advertisements must by law contain an ascription regarding the payor.

"Asperity" - noun [$10]
Asperity means 1a. roughness or harshness, as of a surface, sound, or climate: the asperity of northern winters; 1b. severity, rigor; 2. harshness of manner; ill-temper or irritability.
Sentence: As the race between Obama and Hillary approaches the convention still practically tied, Bunkerman wonders if they will show increasing asperity in their comments on each other.

"Assiduous" - adjective [$10]
Assiduous means 1. perservering, hard working; 2. attending closely.
Sentence: "Marx was quite assiduous in that he was not a philosopher." from "Great Ideas of Philosophy", part 4, notes pg. 33 under Marx.

Wednesday, March 5, 2008

Comeback Kid

Hillary wins Ohio by 10 pts and beats Obama in Texes by two pts. Who predicted her triumph in Ohio ? See my blog post yesterday ! So that's more proof that Bunkerman understands the common man ! ;-)))) This win by Hillary will stop the Obama bandwagon instantly and cause a cessation of superdelegate leaking to Obama. The next big primary is Pennsylvania in late April, about six weeks away. This nomination contest almost certainly will go to the convention floor now. Floor fights over the lost delegates in Florida and Michigan will be likely be intense.

But the nomination swing votes are held by ... the Democratic party bosses ! The last nomination settled on the convention floor was in 1952 for Eisenhower. That contest was decided over delegate challenges. We are going to get a new lesson in party convention and nomination rules and tactics, reminiscent of the lessons we learned in 2000 in that tight election. That was decided by long forgotten clauses in the US constitution. This will likely be settled by a back room deal.

I see Hillary survived by raising million of $$$ in small, online contributions. A commentor to this blog deserves thanks from her. I suspect contributors' email boxes will soon have "personal" letters of thanks from both Hillary and Chelsea !


I bought a double load of C yesterday near the close with some of my gold & silver money. I don't believe the Dubai guy or the rumors. I think the Dubai guy was sticking a needle in his competitors in the Gulf - he has no inside knowledge. Vik Pandit seems to be doing a good job and is smart.

The doomsayers about credit default swaps forget the seller usually puts up collateral, as the article in yestersay's WSJ indicated. That is why the monoline downgrades are a bigger issue. Being AAA they did not have to put up collateral, so those credit default swaps are the problem. Swaps written by hedgies are collateralized. So the loss predictions by the doomsayers are just wrong. And for every seller is a buyer, who gets protection and lower losses. That is inherent in derivatives.

I am selling gold and silver weekly in double loads now and will buy stocks primarily. I am shifting some of the gold & silver profits to my Alpha Fund as I see generationally significant bargains now, suitable for big gains in the forthcoming years.

Costco reports good sales. Uh ... apparently weather does matter, as any thinking person knows.

My favorite four big banks [BAC, WB, C and JPM] are now priced at or close to book value ... WB is at 76% of book. No value is being given to their fine franchises as fear of more losses - after all the prior losses already reported - is driving rationality away. I will buy or each more over time as I sell more gold & silver.

Words of the Day - "L" words

"Labile" - adjective [$10]
Labile means 1. readily or continually undergoing chemical, physical or biological change or breakdown: unstable; 2. readily open to change: plastic.
Sentence: The labile 2008 Democratic Presidential nomination campaign bodes to be a new experience for most living Americans as it surely will now go to the convention floor and then morph again into a backroom battle of party bosses.

"Limn" - verb, transitive [$10] pronouned with a short "i"
Limn means 1. to describe; 2. to depict by drawing or painting; 3. (historical) - to illuminate (a manuscript); 4. (archaic) paint (esp. a miniature portrait).
Sentence: Everyday Bunkerman limns principal events of the day, if any, that affect markets and politics.

"Lugubrious" - adjective [$10]
Lugubrious means 1. mournful esp exaggeratedly or affectively mournful; 2. dismal.
Sentence: Early buyers of big bank stocks, such as Bunkerman, show lugubrious losses so far in them.

"Lucubration" - noun [$10]; also "Lucubrations" - noun, pl. - and "Lucubrate" - verb.
Lucubration means 1. laborious writing or study; 2. pedantry in writing or speech.
Lucubrations (plural only) means 1. a nocturnal study; 2. literay writings - pedantic ones.
Lucubrate means to write in a scholarly way.
Sentance: On a day or two every week, Bunkerman will lucubrate in a scholarly subject, like an aspect of philosophy. He is working one now on similarities between certain concepts in theology and philosophy and in quantum mechanics.

Tuesday, March 4, 2008

Lack of Memory

A major problem with Babblevision and most of the press is their lack of memory when putting pundits on TV to blab.

Dennis Gartman is now being canonized. Uh ... I remember him in the prior copper run to $4 stridently saying that $4 copper would never be seen again in our lifetimes. D'uh ? He's got a big mouth and makes pronouncements that are often right ... and often wrong. Making that prior pronouncement really showed a profound ignorance of the driving factors in the price of copper over the long term.

Maybe he's just a trader. Fine, but Babblevision should put his comments in context ... and then toss out his big mouth fundamental longer term comments. Or run the old tapes of his errors to give the viewer a fair basis to assess him.

I read on Barron's Online he says stocks are not cheap. Hmmm ... that violates my memory violently. I looked for the reasoning in the article and it was crap. Sigh ........

I received a newsletter from Mrs. B's broker. There was actual data [ mirabile dictu ! ] on US equity mutual fund flows. The current period is one of only three periods in the past 20 years with negative net flows. The prior two times were great buys, viz. 1988-1989 and the mid 2002-early 2003 period. I will stick to my own thinking and assimilate the facts.

So far, nothing shows this is other than a mid-cycle slowdown, the Fed easing is bullish and stocks are very cheap. The objective moves are to sell gold, silver, Treasury bonds and TIPs - the "high-priced assets" and buy stocks, municipal bonds and corporate bonds - the "low priced assets. Uh ... that's sell high, buy low.

Tomorrow I plan to sell more silver ... and buy stocks. I'm going to keep doing this [or sell gold]for weeks/months at current prices.

I think Hillary will win Ohio by enough to carry her campaign to Pennsylvania, which she will win and then it's on to the convention in a dead heat with Obama. That is an objective prediction of Bunkerman (not gaming) as she seems to be geting traction in unexpected (and expected) places.

Words of the Day

Today I have three "M" words and one $1,000 word I learned yesterday from a philosophy lecture on audio CD.

"Mendacious" - adjective [$10 - this card has my handwriting from age 16, I think ! ]
Mendacious means 1. given to or characterized by deception or falsehood which often is not intended to genuinely mislead or delude; 2. lying, untruthful; 3. false, not true.
Sentence: Mendacious statements of pundits on Babblevision are so common as they pump stocks they own, but are not actually buying at extant prices.

"Malfeasance" - noun [$10]
Malfeasance means wrongdoing or misconduct esp. by a public official.
Sentence: The malfeasance of the Clinton administration was shocking as Bill and Hillary even sold pardons to drug dealers.

"Mendicant" - adjective and noun [$10] - note this word is NOT related to mendacious/mendacity as they have different roots.
Mendicant means [adj.] 1. begging; 2. (of a friar) living solely on alms; [noun] 1. a beggar; 2. a mendicant friar.
Sentence: A US politician's part - or full - time job is being a mendicant to obtain campaign funds. Mendicant emails even by Hillary's daughter flood the Internet.

"Retrodiction" - noun [$1,000 ! ] also "retrodictive" - adjective; "retrodict" - verb.
Retrodiction means the explanation or interpretation of past actions or events inferred from the laws that are assumed to have governed them.
Retrodict means to infer by retrodiction.
Sentence: A scientific theory is supposed to be both retrodictive, in that it explains how things came to be the way they are, and predictive. [from Great Ideas in Philosophy, Part 4, page 28 notes under Darwin].

I note that the human-causal theories of global warming are not retrodictive, hence are not a vaild scientific theory.

Monday, March 3, 2008

The Good, The Bad and the Ugly

I really like that movie by Clint Eastwood, whihc was the best of the "spaghetti westerns" - so named because they were made by Italian studios and had many Italian actors, but they were really filmed in Spain I understand.

The Good
Krypto Fund - down a mere 3.24% year to date. The gold & silver is really helping with a small assist from the fixed income investments (mostly TIAA annuity of Mrs. B).

The Bad
Alpha Fund is down 17.4% year to date. That would be worse except for the recent rallies of miners and oils like DVN. By the way, that is not my low of the year. In $ terms the pain is quite severe. I suppose the trading gods are punishing me some for my pride from last year's great gains.

The Ugly
I have big postions in WB and C and they really are stinking up my Alpha Fund. My C is down 37% on average and my WB is down 21%. I really bought too much of those two last fall and am paying for that "buck fever".

What to Do ?
For the Krypto Fund I continue selling gold and silver and buying stocks. I might buy more municipal bonds, too, if the prices are good. For the Alpha Fund, I will add more money today and might look for some stocks like the trannies that I sold in January to concentrate in the banks. The Alpah Fund is larger than I want, but these prices seem like generational lows to me.

PS: Warren Buffet agrees with Bunkerman on hedge funds - in the agregate they are losers :-)

PPS: I plan to accelerate my gold & silver sales - I still have as much to sell in $ terms to reach my desired allocation as when I started due to the continued rise in gold & silver prices.

Words of the Day - the '-jures' and more

"Abjure" - verb [$10]
Abjure means to renounce upon oath; to reject solemnly; to abstain from.
Sentence: Was George H. W. Bush lying when he abjured raising taxes with his famous "read my lips" statement ?

"Adjure" - verb [$10]
Adjure means charge or request (a person) solemnly or earnestly, esp. under oath.
Sentence: In a trial in the US, the judge will adjure a jury to do its duty under the law, but in the US, a jury is all-powerful and can deliver whatever verdict it sees fit.

"Conjure" - verb [$10 for this meaning, which is #5 in my dictionary and is pronounced con 'jure forthis usage with stress on the second syllable.]
Conjure as in con 'jure means to appeal solemnly to (a person).
Sentence: Will Hillary conjure voters in Ohio for supporters in a dignified Monday night speech, or resort to the crying that worked in New Hampshire ?

"Sapient" - adjective [$10] (accent is on the first syllable and the "a" is long as in "bay")
Sapient means extremely wise and discerning.
Sentence: In his testimony last week, Bernanke was not sufficiently sapient for the markets, as a sell-off followed.

"Moechian" - adjective [$10,000 ! ]
Moechian means of or relating to adultery. This word is derived from the Greek word for adultery. I saw it in the book, "History of the Byzantine State" by Gregory Ostrogorsky on pages 180 and 187. The usage referred to a divorce and subsequent remarriage by an Emperor which created a religous controvery in the Orthodox faith, called a moechian controversy.
Sentence: I saw a new movie has been made about the affair and subsequent marriage of Anne Boleyn and King Henry VIII of England, which began a moechian controversy that led to the creation of the Anglican Church. This event was quite similar to the 8th century moechian controversies of the Byzantine empire. Analogously, in that situation two Byzantine emperors attempted to become the leader of the faith, as Henry VIII did and succeeded in the 16th century in England. In Byzantium, the attempt failed.

Sunday, March 2, 2008

I've Heard That Song Before

That was the title of a fine big band era song that fits so much of what we hear ... if we have a memory. Bunkerman has a memory.

In the department of "Be careful what you wish for, you might get it", I see some hedge funds were liquidated Friday in the municipal bond and mortgage-backed sectors, helping create more "credit" panic and pushing stocks down. Hence my pain Friday was a bit "self-wished-upon" [a coined word]. I'll bear that kind of pain so this cesspool of hedge funds can be drained.

In the department of "Don't open your mouth and show people you're stupid", Obama's wife said that there was nothing she could be proud of in America until her hubby ran for President. D'uh ? Then she has bashed excessive executive pay, but I see she makes $300K for being VP of "Community Affairs" for Chicago Medical Center. D'uh ? I wonder what a nurse makes ... someone who actually helps and cares for people ? Or a high school teacher ?

And in the fearmonger department now blathering about "stagflation", I read that the year-over-year core PCE deflator was ... 2.2%. Zounds !

In the "buy low, sell high ... or sell high, buy low department", the obvious trade is sell gold and silver and TIPs and Treasuries and buy stocks, municipal bonds, and corporate bonds. I see the pumpsters are saying the opposite: sell loans, buy crops from this week's Barron's.

Gotta give Mrs. B more money ... see, a good husband gives his wife money to invest ;-) .... to buy big companies like KO and BA that have huge overseas earnings components and buy investment grade municipal bonds over 5%. And gotta sell more gold & silver to capture this price spike.

Saturday, March 1, 2008

Words of the Day; the $10/100/1000/10000 Word

I need to explain this practice and the concept of a $10/100/1000/10000 word, etc.

Selection of the "Word of the Day"

I pick "Words of the Day" by several methods.

A. From my large word card file, I pick cards randomly or by groups and think about sentences I can use. If they seem fun or apporpriate, I use them that day as a "Word of the Day".

B. From my current readings or audio or video courses, I might come across a word that is interesting, either a new $10 word or more or one I haven't seen/heard recently. I might use that word for the same or next day.

C. I accept some suggestions from comments to the blog or my email from friends who know my email address.

Word "Value"

I have written and explained this concept in two other blogs. See my post of July 18, 2007 and post of February 5, 2008.

Word Promotions

Now there is some confusion about how a word becomes a $10 word.

First, one person's $10 word might be another's $0 word.

Second, a $0 word might have an old, now archaic/uncommon usage or meaning that will promote it to a $10 word.

Third, I might just have forgotten its precise meaning(s) and upon hearing or reading its use, I need to consult a dictionary to be sure about the concept. In this situation, I add it to my card file. My recent promotion of "felicitous" is an example of that. I heard it used in a DVD of an English murder mystery and wasn't quite sure of its meaning as used (although I had certainly read and used it many times in the past as it is not uncommon), so I went to my card file. Lo and behold, that word was not in it ! So I promoted it.

Here is an extreme example of the first complication. I wrote about "ingerence" which is a $1000 word. After that blog post, a friend wrote me a humorous quip that it was a $0 word, being known. That same friend also knew "latifundium" which is a $100 word to me.

Here is an example of the second complication - "conjure". Now that word is known to most, meaning "to perform tricks by sleight of hand" or "perform marvels", among other similar meanings and is pronounced with the accent on the first syllable. But I was reading "All Cloudless Glory", which is a fine biography of George Washington, and read the sentence below today.

[Page 225, vol I, from a cited letter by George Washinton to a disaffected officer] "... in this great cause, I conjure you to banish from your mind every suggestion of anger ..."

Now obviously the common meaning doesn't fit. From the dictionary, I found this as meaning #5: [con 'jure - accent on second syllable] appeal solemnly to (to a person). That meaning fits ! So "conjure" is promoted to a $10 word.

In fact, this meaning fits neatly with the related "-jure" words such as "abjure", "adjure", etc. which are all $10 words. In some other blog, I intend to compare their meanings.

Words of the Day

Today's words of the day also come from "All Cloudless Glory" on page 218, from a proclamation of Gen. Burgoyne to the American "rebels" [ hehe :-) ]. First the clause:

"[leniency promised to all] ... excepting only ... Samuel Adams and John Hancock, whose offenses are of too flagitious a nature to admit any other consideration than that of condign punishment."

"Flagitious" - adjective [$10]
"Flagitious" means criminal,; utterly villanous

"Condign" - adjective [$10]
"Condign" means deserved, adequate.

Now isn't that clause from Burgoyne's proclamation just perfect usage ?