Friday, August 5, 2011


Yesterday we got another dose of the sloppy markets that the SEC and the Street have created.  Everything is a "trade" and trillions are ensconced on hot money funds that simply trade:  those trillion slosh around seeking profits without making any longer term commitment to an investment.  The managers simply want to collect their management fees quarter to quarter and year to date.  When something happens to put those fees at risk, they all panic at once and sell everything, and then sell short to jump on the trend.

The beef cattle metaphor works rather well.  The beefers mill around, chewing cud and grazing on grass.  When thunder rumbled, they stampede, destroying everything in their path.  Eventually they tire and stop, and start to look for fresh grass and / or a waterhole.

Now they are sitting on negative years, for the most part, and that Ferrari they wanted to buy with this year's bonus is now a phantom.  The world would be a better place if 90% of those hedge funds were simply liquidated, AND if the markets were returned to the early 1980s rules when human beings actually made decisions, not computers.

Then in that golden past, investors actually made investments that might run for 10, 20, or even 30 years.  All trades ran through the human beings.  Investment bankers actually found long term investors for corporations.  All that theoretical "reform" turned out badly. 

What is to be Done?

That's the age old question and for today, the Bunkerman turns to Krypto for analysis and guidance.  The machine has no new orders.  A further stock price drop would bring on orders to buy more US stocks.


1.  Bunkerman's assessment that TIPs (Treasury Inflation Protected Securities) were grossly overvalued bought the dust.  TIPs are now much more grossly overvalued.  Sigh ...  See what can happen when one tries to outthink Krypto & her machine.  Usually I would not do that, but I was thinking about retirement income and the TIPs returns seemed foolish to lock in.  But had I oberyed the machine, I could now be selling TIPs at higher prices and buying something cheap with the gains.  TIPs really do move strongly in a counter-cyclically to stocks, so have great value as diversification tools.  Ms. Market is a stern schoolmarm.

2.  The decision to shift 2/3 of real estate investments to the TIAA Real Estate Fund from the Vanguard REIT Index Fund worked well.  The TIAA RE Fund has held its value well, while the REIT Index Fund got carried along with the stock market panic.

3.  The best place for gold & silver investments is ... gold and silver.  If at all possible, use the ETFs - GLD and SLV - not a gold stock fund.  I got lucky Tuesday, as the gold that I sold was in fact the Vanguard Precious Metals Fund, which I zeroed out.  Gold mining stocks have been behaving much more like stocks in recent years.  I think this is due to both the costs of mining and the stupid moves that management seem to always make.  A gold mining company should pay a good dividend based on their net equity investment gold it is selling.  Instead, they waste the money on acquisitions, so that the value of the company becomes less than the value of the gold they own in the ground.

Word of the Day

[ASIDE:  I have about 50+ words in a stack of index cards that I have come across reading, but not yet used as a "Word of the Day".  Intriguingly, leafing thru that stack I can usually find one appropriate for a day's observations or events.  As I did today :) ]

"Puling" - adjective [$10] pronounced 'pyuling' with a softened p. From "Pule" that rhymes with "mule"
"Pule" - verb, intransitive [$10] literary.  A Mencken word.
Pule means to cry querulously or weakly; whine, whimper.
Sentence:  Undisciplined investors today are a puling lot, milling around wondering what to do.  Obey the machine.


Bud said...

oh man................what a post............reminds me of a saying

'what a bunch of thumping tosh'

Bud said...

what's wrong with computers making decisions ?? computers are used in every field from medical procedures to walmart cash registers to make decisons

Bud said...

what about gold and silver futures ?? i trade can get tremendous leverage

Bud said...

10,20 , 30 years..............gimme a break...........that is such moves so fast

let's say you had a 20 year horizon on something like can you predict the invention of the internet..........what make look fundamentally great 5 years ago can be obsolete fast

30 year horizon lmaoooooooooo

Bud said...

Bman are you drinking this morning ??????

Bunkerman said...

jobs muddling along. Neutral.

Bunkerman said...

you answered your own question, Bud, re gold & silver futures: "trade"

They don't work if one plans to hold the bulk of a position in gold+silver for years.

Bunkerman said...

uh, Bud ... APPL went public in the early 1980s , about 30 years ago.

A factory is built with a useful like of 30 years or so.

Ditto a road or transmission line.

Dito a college education ...

The problem is that the "reforms" ushered in an ear of short term trading and quick rips, etc.

Bunkerman said...

I always have three cups of strong black coffee by 8AM


Bunkerman said...

an era of short term trading

I don't mean by people (individuals), I mean by institutions and big money.

Go watch that great Humprey Bogart movie, Sabrina. At one point Bogie gives a great exposition on investment and growth: long term investment improving the lives of people.

Bunkerman said...

To answer before the inevitable question is asked,

I do NOT think a recession is coming. More muddling thru ...

Bunkerman said...

this is a Euro-beefer panic that is also spooking the US beefers.

Spin-em said...


Spin-em said...

take it easy men