The economic news is abysmal. California is crumbling as its cities and towns enter bankruptcy after years of profligacy [WSJ]. Its state employee pension fund shows one large loss after another on silly, speculative investments such buying raw land with recourse financing. State infrastructure spending is being canceled.
Unfortunately, more pain must be borne there as its multi-decadal mass delusion of endless real estate value increases vaporizes.
Some data:
California median sales price for single family, detached homes was $311,000 in October, down 40% from $517,000 in October 2007. Of course, in a national comparison, that California price is still very, very high. The national median price is just $181,000.
The median income for those filing joint tax returns in California is about $67,000.
What can that family afford ?
Assume a 5%, 30 year self amortizing loan at 80% of value, and that real estate taxes and insurance is 2% of value. Standard mortgage loan underwriting rules provide that 28% of income can go to principal, interest, taxes and insurance. For the median family, that is $1,563/month. The assumed mortgage loan will have monthly debt service of $537 per $100,000 of principal. Some algebra can solve for the affordable home value of $250,000 (rounded) and home mortgage of $200,000 rounded.
So assuming the median income family is the marginal buyer for the median priced home, home prices in California are still overvalued by 20%. Ugh ..
A New Reader
I must welcome Obama or his transition team as new readers. Proof ? His team is now leaking that the economic stimulus will approach $1 trillion, an amount I proposed a few weeks ago in this blog. I don't expect him to acknowledge this, but he's welcome as a non-posting reader. [joke]
Now if only he spends the money as I suggested .... and doesn't waste too much on green crap.
Actions
More stocks for Santa's list: small oils AREX, ME, GPOR, ROSE, GMET (maybe), CRZO (maybe); HWD, WFT, CETV, and FCT. FCT was suggested by a posting reader and looks good.
As of January 1, I will temporarily rename the "Alpha Fund" as the "Obama Fund" as this speculative investment fund can reach its goals only if Obama succeeds in the first two years of his regime.
A note on stock selection: all my stocks are very risky. I eliminated stocks that showed evidence of stupid CFOs who excessively repurchased stock at high prices or made acquisitions for debt at high prices. I chose sectors that performed well in the recovery from the 1974 bear market and selected other sectors since the world is somewhat different now. One obvious difference is the importance of emerging markets and resources.
I have made few purchases yet. I expect to trade quite a bit, rotating in the list. I expect to hold about 15 stocks with good diversification over sectors and time. As the list has about 25 stocks (not final yet), you can see I will maintain some flexibility.
Objective: multiple returns of 5-10x over two years.
Margin: none until a good bull market trend develops. Then I'll go to 150% on dips and return to 100% on recovery to new trend highs.
I reserve the right to change my mind at will.
Word of the Day
"Cacology" - noun [$10]
Cacology means 1. a bad choice of words; 2. bad pronunciation.
Sentence: I suppose I'll be criticized for promoting cacology for the new name for my speculative find, viz., the Obama Fund. But I'm not adulating him. I'm really using his name as a good luck charm. He's the new bull elephant in the herd and I'm hopping on his back to ride to the new waterhole, I hope.
Thursday, December 18, 2008
Wednesday, December 17, 2008
La Fed announce une baisse de taux historique
That's the headline of the story in France's "conservative" newspaper, Le Figaro, online. The front page online provided more: Les taux américains se rapprochent de zéro.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Here's my translation:
The Fed announces a historic interest rate decline.
American interest rates approach zero.
The Fed will now not just increase bank reserves, but will directly lower rates to millions of borrowers on mortgage loans through its purchase of mortgage securities of FNMA, FreddieMac and GNMA. Being willing to let the Federal Funds rate fall to zero was necessary to go to this step.
Millions of homeowners should soon be able to refinance profitably to reduces their cash outlays for housing. And new home buyers in the Gen X/Y/Z age groups now should be more able to form households and do the spending that accompanies that.
And more good news from yesterday (quoting WSJ story online):
"The consumer price index dropped 1.7% last month on a seasonally adjusted basis."
"The core CPI was unchanged last month following October's decline, which was the first in more than 25 years."
"Consumer prices rose 1.1% on a year-over-year basis in November, which is below the Fed's 1.5% to 2% target range"
More excellent news. Disinflation rules !
To quote that great, old Eddie Cantor song from the 1931, "Now's the time to fall in love" -
Potatoes are cheaper, tomatoes are cheaper,
Now's the time to fall in love.
Why, the butcher, the baker, the old candlestick maker
Gave their price a downward shove.
Grab yourself someone to fry your eggs and bacon
She can live just like a queen on what you're makin'
You'll find in some kind o' trouble
You're better off double
Now's the time to fall in love
To paraphrase the Emperor Augustus Caesar, "Get married, buy a home and some furniture."
Battleship Ben just made that a lot cheaper. Gen X/Y/Z-ers - get moving, get married and support the economy.
Japan
No, we are not "turning Japanese" as one can see clearly from my ditty above. The bears and libertarian purists {ptui} will say that because Japan had about 15 years of stagnation while its interest rates were zero, the the US is going down the same path.
That is simply a paralogism (see yesterday's Word of the Day).
1. Japanese interest rates were nearly zero even before their stock and real estate markets crashed;
2. Japan has not had a consumer-driven economy in my adult memory;
3. The Bank of Japan never actually bought bank loans or non-government securities;
4. The Bank of Japan did nothing to increase demand. They didn't even increase the money supply in Japan during the critical 1989 to 1994 period.
5. The Yen was roughly flat from 1989 to 1998.
6. Demand in Japan was pushed from government stimulus on pork projects no one needed.
7. Unless the yen fell, how could Bank of Japan monetary policy help increase demand for exports ?
8. Japan has very gray - aka old - demographics. Little consumer demand and too much saving.
As any can see, the US situation and cures bear almost no relation to Japan, except for that one data point overlap - near zero interest rates.
Markets
The Fed move and the CPI data are very bullish news, but as an erudite British guest on Bloomberg said early this morning, it's a necessary but not sufficient event.
To ensure a new bull market, we need:
1. a large, well-directed plan by Obama; and
2. for Hank the Tank to give a bridge loan to the auto industry to avoid a crack-up in the US manufacturing industry.
Last evening in an interview I heard, Hank the Tank said he will do it once his team figures out the best way to do it. And leaks from the Obama team suggest a larger stimulus plan is on the way - perhaps the $1 trillion over two years that I urged a few weeks ago. Maybe Obama reads this blog ! Obviously, Battleship Ben and Hank the Tank do. Both are now getting grades of "A" as they do the bidding of Le Professeur Bunkerman. [joke]
I have a fairly good notion the two final conditions for a huge new bull market are going to occur.
Actions
Here is my preliminary "Santa's list" of stocks I will start buying on dips:
MOS, KBR, DKS, CAB, MTW, IDSA, MRT, RCKY, SPAR, CLDN, AMCN, TLF, EEFT, HMIN, X, MT, GSI.
I already own some FCX, DRYS, GNK, EXM and SSCC.
I may add MS, CIT and am looking at more, such as IHG, CX, CMI. I like quite a few restaurant stocks, but need a good pullback on them to make the reward sufficient.
I'll write more about my objectives and strategy on this effort later. But in simple terms, it is to make 5-10X on my investments over a 2 or 3 year period. I will trade these stocks a bit and not necessarily just buy and hold. My trading strategy will be simple: buy dips, sell rips, average down. I will diversify a lot over the stocks and over time.
I have a lot more work to do on these. They are very risky stocks - I do not intend to put too much $$$ into any single stock or group.
Word of the Day
"Pother" - noun and verb(literary)
Pother means (noun) 1a. confused or fidgety flurry or activity; 1b. agitated talk or controversy usu. over a trivial matter; 2. a choking cloud of dust or smoke; 3. mental turmoil; 4. a noise, commotion, fuss; (verb) 1. fluster, worry; 2. make a fuss.
Sentence: Those making a pother over the the US and Japanese zero interest rate conditions are completely misguided.
Tuesday, December 16, 2008
Green Jobs, etc.
Woke up late, but from the news, it's SOS.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
One troubling item: the stories about Obama spending billions creating "green" jobs. Maybe true or maybe the well-connected greenies are using their press megaphones to sell their crackpot schemes. "Green" jobs are the greenie equivalent of Krushchev's crackpot schemes to grow grain where nothing can grow, or Lysenko's dangerous theories.
Let me make this simple and direct: everything about "green" jobs and "alternative energy" was discovered, and tried in the late 1970s. It all failed. It fails as the laws of physics and economics still apply on the Earth. Environmental delusions and dreams are just ... delusions and dreams.
Without endless subsidy, green jobs are just make work ... like paying someone to dig a hole and fill it up, then repeat. the behavior.
Markets
Doing nothing .. working on my list.
Word of the Day
Paralogism - noun [$10] a Mencken word
Paralogism means 1. a fallacy; 2. illogical reasoning (especially of which the reasoner is unconscious).
Paralogist means one who practices or acts with paralogisms.
Sentence: Whether the environmental advocates of "green jobs" are quacksalvers or merely paralogists, they try to impose imbecilic ideas on the US government, corporations and the public.
Monday, December 15, 2008
A Wasteland
The path of the financial manager and CFO since the mid 1990s is littered with trash and rotten ideas.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Hedges funds are one of my favorite topics. Today's Financial Times brings more news that they are completely bereft of value. Citadel closes the exit gates, keeping investors' money until March. And innumerable hedge funds and funds of funds have lost money to Madoff's scam. It is simply amazing they never bothered to do any serious "due diligence". The laziness of the greedy and arrogant investment managers, lenders and the investors themselves seems endless. Investment and lending departments of major banks such as BNP and RBS seem to be victims; Man Financial, a major fund of funds plus numerous Greenwich-based funds were defrauded.
The Wall Street CFO shows his ignorance, too. The WSJ reports that Goldman, Sachs spent $26.5 billion on stock buybacks in the four years to the third quarter of 2008, which is not far from its current market capitalization of $27.6 billion. Many, many CFOs were culpable: members of the S&P 500 spend $1.7 trillion on stock buybacks in those four years. All buying at much higher prices than now, virtually wasting that huge sum. Current shareholders bear the burden of that outlay. Imagine the financial strength of those companies if their management had not been so foolishly greedy.
Markets
Charter rates for Capesize vessels jumped considerably as Chinese iron ore demand revived a bit. There were rumors of that last week as dry shipping stocks rose considerably. The rumors were true.
I am still working on Santa's list.
Word of the Day
"Welkin" - noun [$10] poetic
Welkin means the sky, the upper air.
Sentence: Now it is perfectly clear that the sophisticated hedge fund managers, CFOs and investment advisors mostly have simply been selling the welkin, not any sort of reality.
Friday, December 12, 2008
Kill the Credit Default Swaps Market
As usual, the Financial Times leads the way in both news and good analysis. Here is the link to an article that I read this morning at around 3AM ET in Tuesday's paper edition:
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
http://www.ft.com/cms/s/0/8979777c-c591-11dd-b516-000077b07658.html
The title and author are "Put the credit default swaps market out of its misery" by John Dizard. Read it.
The ludicrous commentary on Babblevision and in some financial press about the price of insuring US government debt show how phony that credit default swap market is. Hundreds of billions of $$$ in real cash are being invested in US government bills, notes and bonds at all time record low rates, yet the pundits point to that phony credit defaults swap spread. How stupid !
Who is going to pay that CDS off if the US defaults ? One of the banks who trade it ? How is the counterparty risk distinguished from the credit risk on the named credit ? Those contracts are really betting parlor slips for Wall Street bucket shops. It's time to put those shops out of business.
Events
The US Senate killed the auto industry bridge loan. News reports says the reason was the UAW's refusal for accept immediate wage cuts to the level of its US Japanese competitors. Tough to argue with that demand as a starter. So the last hope to avoid major disruption is a large, $100 billion or more debtor-in-possession financing. Whether DC ruling classes can find the wisdom in doing that is debatable. The battle in DC seems mostly posturing now.
Concern about this is why I have deferred implementing the new "fund" for which I am researching stocks. I was burned in September by thinking the Congress would do the right thing, but it didn't ans the ensuing panic has been quite bad. So we might see a repeat of that mess in the real economy now.
The big problem with a GM bankruptcy is that it will not pay its suppliers, and likely thousands of those businesses in the supply chain will in turn have to file bankruptcy. After that, we'll have a food fight from one bankruptcy court to another. Ugh ....
Markets
Futures are down substantially early morning. Alpha Fund has a lot of cash.
I HATE WINDOWS !!!!!!!!!!!!!!!!!!
VISTA ABSOLUTELY SUCKS !!!!!!!!!!!!!!!!!!!!!!
I JUST LOST 10 MINUTES OF WRITING WHEN THIS PIECE OF SH*T OPERATING SYSTEM "RESTARTED" AUTOMATICALLY TO "UPDATE"
YES, I TOLD IT TO "POSTPONE" BUT IT DID NOT.
I WILL NEVER, EVER BUY ANOTHER COMPUTER USING WINDOWS !!!!!!!
My list of stocks to consider that "could" return 5 or 10x over two years numbers about 70. I'll trim it some today. Many good names appear - it seems one can get some quality in this risky venture.
PS: I never heard of Madoff, but this is just another bit of evidence that one should not trust a hedge fund. Ever. They are just bombs awaiting detonation in one manner or another.
PPS: The Madoff fraud suports my suggestion that all hedge funds over $100 million be subject to the Investment Company Act.
Word of the Day
"Rallentando" - adverb, adjective & noun [$10] musical
Rallentando means (adv. & adj.) with a gradual decrease in speed; (noun) a passage to be performed in this way.
Sentence: The US Senate, misnamed as the "World's Greatest Deliberative Body", has through its inaction sentenced the US economy to endure long rallentando movement in economic activity.
Thursday, December 11, 2008
California Dreamin' ...
The WSJ has an article about the California state government budget deficit growing rapidly. I'd expect that state to get a huge shock on January 15 as estimated tax payments will show a stunning drop. Everyone doing tax loss selling will be able to cut back their payments and will do so at once. And unicnorporated businesses suffering now will have overpaid prior quarters so will cut their payments, too.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
That last estimated tax payment was September 15, just before the panic hit hard.
California home prices are still far above the ability of the bulk of people to afford. Long commute distances and traffic jams waste huge amounts of time and money. The state government is bloated and taxes are already very, very high. Once I was did business in California and can write from first hand experience.
Local governments there are often full of pushy, obnoxious tyrants. And even private groups seems to think they are lords of the manor in telling one how to live. Trendy left wing proto-fascists ... or even crypto-fascists ... are always passing laws there forcing one to conform to their foolish life choices. Again, I have lived there for periods of up to six months, so speak from experience.
Yes, I simply do not like that state. Sure, the weather is nice. Big deal. It's a nice place to visit as a tourist, but to live there ... ugh !
What will they do ? I really don't care. Raise taxes a lot, I'd guess. That's their usual practice. California is an endless ratchet of emergency tax increases that become permanent. Home prices must still fall substantially. Hollywood fools will bloviate [*Word of the Day] about "investing" in alternative energy and climate change. If one place will become a desert again under climate change legislation, it's southern California.
Markets
The resource stocks and dry shippers ripped again, so I flipped more stock I bought at very low prices when I "averaged down". Those worked out very well. I have FCX, DRYS, GNK and EXM. I still have a bit too much of each, but for now, it's not excessive. I try trading around to lower my average cost and cut the size down a bit more. I do seem to have retained some trading skills.
I did more research on stocks to buy soon and found a long list of good prospects. I need to go through more closely. My intent is to invest modest amounts in 10 to 20 of these and hold for a couple years. Objective: not a "return of my money" but a "multiple on my money". My target is 5 to 10x total return by some time in 2010.
Obviously these will be beaten down, lower priced stocks and quite risky. Interestingly, though, I find some high quality names, too.
Word of the Day
"Bloviate" - verb [$10] an old one from the file
Bloviate means to speak or write verbosely or windily.
Sentence: Does anyone bloviate to such lengths or with so little factual substance as an alternative energy advocate ? They try to convert the gullible, but are truly quacksalvers as to make their policies work without subsidy, both the laws of economics and the laws of physics must be violated concurrently.
Wednesday, December 10, 2008
Economic Stupidity Increasing ...
I see a headline on Babblevision [aka CNBC] that the Federal Reserve is thinking of "selling its own version of government debt". Hello Mr. Booboise ! Open your wallet and look at that cash - it says, "Federal Reserve Note" above Andrew Jackson's portrait on the $20 bill. Well, the article does mention this fact. But aren't bank reserves held on deposit at the Fed really a form of debt of the Federal Reserve, too ? The Fed pays interest on those reserves now. So that is electronic debt of the Federal Reserve in electronic form. The reporter seems clueless.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
Cash is zero percent government debt. I suppose the Gen X/Y/Z-ers have an excuse, since they probably don't use cash, being addicted to using a debit card for that cheeseburger. Baby boomers have no excuse.
And then I see a Wall Street Journal; article about the "asset class" of commodities having problems due to the recurring losses on the commodity futures' contract rolls. Golly, I guess those consultants and pension fund advisors never really looked at exactly what they were buying. Almost none of them "invested" in true commodities. They took long positions in futures contracts and derivatives, not actual commodities. Those contracts aren't real assets. For every long, there is a short. The net value in those is zero. How much does one doing "asset allocation" allocate to a "class" with zero net value ? Zero is what Fischer Black taught me at MIT about 30 years ago.
So now they see they are just speculating perpetually in commodity futures, paying large costs in the roll. Sigh ....
Buying timberland is investing in a true commodity asset. So is buying a cattle ranch or farmland growing corn or investing in farms in Brazil growing soybeans. And buying oil in storage is also truly buying an asset. Buying gold in physical form or through the GLD ETF is buying a true asset. But buying a derivative or a commodity future or a commodity ETF fund that uses derivatives or futures is not investing in an asset. It's just speculating in a net zero value, paper market.
Markets
Down yesterday. The dry bulk shippers were very strong. I can find no news except a report that a Tier 1 firm found increased shipping activity coming out of China. If true, it's bullish.
I read AIG has lost $10 billion "insuring" the value of some derivatives for the Street. This isn't insuring defaults on actual mortgages, but just "insuring" the value of paper. This is just outrageous. That firm should just be liquidated, letting its existing business run off and selling the true insurance subsidiaries. Management is completely without credibility. And obviously they have been defrauding investors in disclosing the nature of their business.
This is one more example of the need to eliminate the "credit default swap" from financial markets. That whole market is a fraud and no more than an electronic betting parlor.
Actions
I flipped a bit of DRYS over 10 - part of the shares I added to my position under 4. I'd sell some more [some more shares I added around 4] IF it gets to 12.5 or so. At that point my position would be well sized for a long term hold.
I spent some time researching stocks yesterday and, like Santa Claus, I'm working on my list.
Word of the Day
"Nescience" - noun [$10]; and "nescient" - adjective [$10]
Nescience means lack of knowledge or awareness, ignorance.
Nescient means lacking knowledge, ignorant.
Sentence: Without a doubt, both the writers of most newspapers and the writers and faces of financial TV suffer from acute and chronic nescience of the topics on which they write.
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