The situation with General Motors can provide an illuminating case study of what the value of a corporation actually is for stockholders. That corporation has existed in one form or another for 100 years. Suppose one held his shares the entire time. What did stockholder receive for the equity investment in common stock ? That only tangible value received is the dividends paid.
What did stock buybacks do for him ? Nothing. Stock buybacks subsidize the sellers of the company's stock at the expense of the long term holders.
This downturn shows that all stock buyback plans are a bit of a scam. Now, just when stocks prices are very low, the companies are cutting back on stock buybacks. And many banks are issuing new shares at very low prices after buying back stock for years at much higher prices.
Dividends benefit long term investors. Stock buybacks benefit traders, hedge funds and speculators at the expense of investors.
What should a company do with its excess cash flows in good times ? That is quite easy. Pay down all short term debt due within 10 years or less. Raise its dividend to a level payable even in poor environment After all, with less debt, more cash flow can be used to pay dividends. Also, overfund the pension fund to give it a cushion for downturns.
In good times a company should have paid down all its short and intermediate term debt and funded all long term assets with a conservative mixture of long term bonds and solid equity. Then it can survive a severe downturn and have resources to make favorable investments then at low prices.
CFOs need a refresher course in corporate finance.
Word of the Day
"Rowel" - noun and verb [$10] - a Mencken word
Rowel means (noun) a spiked revolving disc at the end of a spur; 2. (historical) a circular piece of leather, etc. with a hole in the center inserted between a horse's flesh and skin to discharge an exudate; (verb) 1. to urge with a rowel; 2. (historical) to insert a rowel in.
Quote From "The Impossible H. L. Mencken", page 591 from his Scopes Trial coverage referring to the Scopes jury: "... a trial before a jury of men who have been roweled and hammered by those opponents for years ..."
Sentence: The very highly paid "managers" of US corporations are about to be given a hammering by politicians roweled by an angry public seeking retribution, who in turn were roweled by those managers who cut the pay and benefits of the common man while paying themselves colossal sums for "good management" now seen as a lie and scam.
Friday, November 28, 2008
Wednesday, November 26, 2008
Thanksgiving
Here I reprint the annual Thanksgiving editorials from The Wall Street Journal, that every year seem to have meaning even though the same editorials have been printed annually since 1961.
See http://online.wsj.com/article/SB122765706006858171.html
And http://online.wsj.com/article/SB122765723215458175.html
The Desolate Wilderness
Here beginneth the chronicle of those memorable circumstances of the year 1620, as recorded by Nathaniel Morton, keeper of the records of Plymouth Colony, based on the account of William Bradford, sometime governor thereof:
So they left that goodly and pleasant city of Leyden, which had been their resting-place for above eleven years, but they knew that they were pilgrims and strangers here below, and looked not much on these things, but lifted up their eyes to Heaven, their dearest country, where God hath prepared for them a city (Heb. XI, 16), and therein quieted their spirits.
When they came to Delfs-Haven they found the ship and all things ready, and such of their friends as could not come with them followed after them, and sundry came from Amsterdam to see them shipt, and to take their leaves of them. One night was spent with little sleep with the most, but with friendly entertainment and Christian discourse, and other real expressions of true Christian love.
The next day they went on board, and their friends with them, where truly doleful was the sight of that sad and mournful parting, to hear what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye, and pithy speeches pierced each other's heart, that sundry of the Dutch strangers that stood on the Key as spectators could not refrain from tears. But the tide (which stays for no man) calling them away, that were thus loath to depart, their Reverend Pastor, falling down on his knees, and they all with him, with watery cheeks commended them with the most fervent prayers unto the Lord and His blessing; and then with mutual embraces and many tears they took their leaves one of another, which proved to be the last leave to many of them.
Being now passed the vast ocean, and a sea of troubles before them in expectations, they had now no friends to welcome them, no inns to entertain or refresh them, no houses, or much less towns, to repair unto to seek for succour; and for the season it was winter, and they that know the winters of the country know them to be sharp and violent, subject to cruel and fierce storms, dangerous to travel to known places, much more to search unknown coasts.
Besides, what could they see but a hideous and desolate wilderness, full of wilde beasts and wilde men? and what multitudes of them there were, they then knew not: for which way soever they turned their eyes (save upward to Heaven) they could have but little solace or content in respect of any outward object; for summer being ended, all things stand in appearance with a weatherbeaten face, and the whole country, full of woods and thickets, represented a wild and savage hew.
If they looked behind them, there was a mighty ocean which they had passed, and was now as a main bar or gulph to separate them from all the civil parts of the world.
This editorial has appeared annually since 1961.
And the Fair Land
Any one whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.
This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.
And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.
So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that hangs everywhere.
For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.
His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far-off corners of the globe.
How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places -- only to find those men as frail as any others.
So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?
Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.
But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere -- in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.
We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.
And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.
This editorial has appeared annually since 1961.
Word of The Day
"Sacerdotal" - noun [$10] and "Sacerdotion" - noun [$10]
Sacerdotal means 1. of the priests or the priestly office; priestly; 2. (of as doctrine) ascribing sacrificial functions and supernatural powers to ordained priests, claiming excessive authority for the priesthood. Sacerdotion means the institution of the church and priests; compare to the imperium - the Emperor - in the Byzantine state.
Sentence: Hearing this morning another technical trader talking about yet another "retest" of the lows, I thought that as a group they must be a kind of stock market sacerdotal institution - a sacerdotion - as for them the real economy does not matter at all. Of course, both perception and reality matter; but over a long term, only reality matters. That can be a long time, though, viz. over a year.
See http://online.wsj.com/article/SB122765706006858171.html
And http://online.wsj.com/article/SB122765723215458175.html
The Desolate Wilderness
Here beginneth the chronicle of those memorable circumstances of the year 1620, as recorded by Nathaniel Morton, keeper of the records of Plymouth Colony, based on the account of William Bradford, sometime governor thereof:
So they left that goodly and pleasant city of Leyden, which had been their resting-place for above eleven years, but they knew that they were pilgrims and strangers here below, and looked not much on these things, but lifted up their eyes to Heaven, their dearest country, where God hath prepared for them a city (Heb. XI, 16), and therein quieted their spirits.
When they came to Delfs-Haven they found the ship and all things ready, and such of their friends as could not come with them followed after them, and sundry came from Amsterdam to see them shipt, and to take their leaves of them. One night was spent with little sleep with the most, but with friendly entertainment and Christian discourse, and other real expressions of true Christian love.
The next day they went on board, and their friends with them, where truly doleful was the sight of that sad and mournful parting, to hear what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye, and pithy speeches pierced each other's heart, that sundry of the Dutch strangers that stood on the Key as spectators could not refrain from tears. But the tide (which stays for no man) calling them away, that were thus loath to depart, their Reverend Pastor, falling down on his knees, and they all with him, with watery cheeks commended them with the most fervent prayers unto the Lord and His blessing; and then with mutual embraces and many tears they took their leaves one of another, which proved to be the last leave to many of them.
Being now passed the vast ocean, and a sea of troubles before them in expectations, they had now no friends to welcome them, no inns to entertain or refresh them, no houses, or much less towns, to repair unto to seek for succour; and for the season it was winter, and they that know the winters of the country know them to be sharp and violent, subject to cruel and fierce storms, dangerous to travel to known places, much more to search unknown coasts.
Besides, what could they see but a hideous and desolate wilderness, full of wilde beasts and wilde men? and what multitudes of them there were, they then knew not: for which way soever they turned their eyes (save upward to Heaven) they could have but little solace or content in respect of any outward object; for summer being ended, all things stand in appearance with a weatherbeaten face, and the whole country, full of woods and thickets, represented a wild and savage hew.
If they looked behind them, there was a mighty ocean which they had passed, and was now as a main bar or gulph to separate them from all the civil parts of the world.
This editorial has appeared annually since 1961.
And the Fair Land
Any one whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.
This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.
And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.
So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that hangs everywhere.
For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.
His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far-off corners of the globe.
How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places -- only to find those men as frail as any others.
So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?
Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.
But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere -- in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.
We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.
And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.
This editorial has appeared annually since 1961.
Word of The Day
"Sacerdotal" - noun [$10] and "Sacerdotion" - noun [$10]
Sacerdotal means 1. of the priests or the priestly office; priestly; 2. (of as doctrine) ascribing sacrificial functions and supernatural powers to ordained priests, claiming excessive authority for the priesthood. Sacerdotion means the institution of the church and priests; compare to the imperium - the Emperor - in the Byzantine state.
Sentence: Hearing this morning another technical trader talking about yet another "retest" of the lows, I thought that as a group they must be a kind of stock market sacerdotal institution - a sacerdotion - as for them the real economy does not matter at all. Of course, both perception and reality matter; but over a long term, only reality matters. That can be a long time, though, viz. over a year.
Tuesday, November 25, 2008
Ruling Class Looting ...
The list of techniques the ruling classes have used for 15 years to raid and loot companies puts any blackout rioter to shame.
Let me count the ways:
1. Golden parachutes. Today's WSJ story about Wachovia executives collecting after running the bank into the ground is a simple proof.
2. Stock options. Every single stock option issued for "performance" and "incentive" is proved to be a lie, as they merely reward poor behavior such as stock buybacks.
3. Insane pay for CEOs, etc. ... approved by their buddies on the compensation committee.
4. Private equity ... is merely as way to loot in private, sucking good assets out of companies and paying themselves big dividends and high fees. See the WSJ story about Mervyn's today.
5. Financial firm pay .. ignores the use of the firms capital and its risk. Traders get huge pay for risking the firms money to make "profits", which are not properly charged a fair cost of capital. Of course, it's a "heads they win, tails the stockholders lose game"
6. Hedge funds. Ditto. That scam is now laid bare.
7. CFOs ... many are obviously incompetent and overpaid. They financed their companies using commercial paper and now must pay huge rates to refund it into long term bonds. Financing long term assets with long term debt is Finance 101, as I learned it 25 years ago. I guess they flunked or cheated in that course.
8. Class action lawsuits ... enrich lawyers turned pirates and do nothing for consumers or stockholders.
9. Stock buybacks ... nearly single share of stock bought back for the past 10-15 years is proven to have been a very poor use of corporate funds. The management prefers stock buybacks as those prop up the value of their stock options.
10. Thinking ... Does anyone have a tenth ?
Markets
That glorious, efficient, rational and liquid market show itself well yesterday [ that's sarcasm ! ], putting in another wild move.
The bears might re-attack soon. Some recent Thanksgiving holidays have given them easy targets in low volume on the Friday after Thanksgiving.
Actions
Today I can do a bit of re-allocation in Krypto Fund, but stil must wait until late next week for most of it. I am tied up by the interplay of tax rules for wash sales and mutual fund exchange rules. I wonder if I should open a brokerage account in my main retirement accounts to enable me to use ETFs to sidestep those rules ? Thinking ...
I am thinking of investing some Alpha Fund money into a package of small, beaten up stocks the might go up 5 or 10x in a new bull market. That will require some selection. Just thinking for now.
Word of the Day
"Copyhold" - noun [$100]
Copyhold means 1. (formerly) a type of ownership of land in England, evidenced by a copy of the manor roll establishing title; 2. an estate held under such ownership.
Sentence: Stockholders need to stop being mere copyholders and start act as real owners exercising their powers to approve stocks options plans, director and other corporate actions. And they should lobby for new laws for secret voting in proxies, rights to elect the compensation committee directly, and to nominate directors themselves.
Let me count the ways:
1. Golden parachutes. Today's WSJ story about Wachovia executives collecting after running the bank into the ground is a simple proof.
2. Stock options. Every single stock option issued for "performance" and "incentive" is proved to be a lie, as they merely reward poor behavior such as stock buybacks.
3. Insane pay for CEOs, etc. ... approved by their buddies on the compensation committee.
4. Private equity ... is merely as way to loot in private, sucking good assets out of companies and paying themselves big dividends and high fees. See the WSJ story about Mervyn's today.
5. Financial firm pay .. ignores the use of the firms capital and its risk. Traders get huge pay for risking the firms money to make "profits", which are not properly charged a fair cost of capital. Of course, it's a "heads they win, tails the stockholders lose game"
6. Hedge funds. Ditto. That scam is now laid bare.
7. CFOs ... many are obviously incompetent and overpaid. They financed their companies using commercial paper and now must pay huge rates to refund it into long term bonds. Financing long term assets with long term debt is Finance 101, as I learned it 25 years ago. I guess they flunked or cheated in that course.
8. Class action lawsuits ... enrich lawyers turned pirates and do nothing for consumers or stockholders.
9. Stock buybacks ... nearly single share of stock bought back for the past 10-15 years is proven to have been a very poor use of corporate funds. The management prefers stock buybacks as those prop up the value of their stock options.
10. Thinking ... Does anyone have a tenth ?
Markets
That glorious, efficient, rational and liquid market show itself well yesterday [ that's sarcasm ! ], putting in another wild move.
The bears might re-attack soon. Some recent Thanksgiving holidays have given them easy targets in low volume on the Friday after Thanksgiving.
Actions
Today I can do a bit of re-allocation in Krypto Fund, but stil must wait until late next week for most of it. I am tied up by the interplay of tax rules for wash sales and mutual fund exchange rules. I wonder if I should open a brokerage account in my main retirement accounts to enable me to use ETFs to sidestep those rules ? Thinking ...
I am thinking of investing some Alpha Fund money into a package of small, beaten up stocks the might go up 5 or 10x in a new bull market. That will require some selection. Just thinking for now.
Word of the Day
"Copyhold" - noun [$100]
Copyhold means 1. (formerly) a type of ownership of land in England, evidenced by a copy of the manor roll establishing title; 2. an estate held under such ownership.
Sentence: Stockholders need to stop being mere copyholders and start act as real owners exercising their powers to approve stocks options plans, director and other corporate actions. And they should lobby for new laws for secret voting in proxies, rights to elect the compensation committee directly, and to nominate directors themselves.
Monday, November 24, 2008
A Monday in a Holiday Week
Should be calm, right ?
Hahahaha .... surely you fantasize !
European markets are up about 5% today as they catch up to the late Friday PM rally in New York.
This morning's WSJ had a story about the crisis at Morgan Stanly in September. The hedge funds, credit default swaps and rumors combined to cause the panic. Hedge funds and even the Street itself would buy credit default swaps and short the stock. They say they were "hedging".. Sure.
That credit default swap "market" really needs to be shut down. There really is no natural insurer of credit in size, except one who actually buys the debt for cash.
All exotic derivatives - derivatives on indices of thinly traded exotic securities - need to be eliminated. That includes derivatives on volatility. No derivative that is not traded in a central exchange should be permitted.
Hedge funds need a massive dose of world-wide regulation to stop them from being the financial Vikings - raid, rape, pillage in the world markets.
Short ETFs should be banned. They are just a loophole from stock borrowing rules via market maker exceptions. Stock borrowing rules should apply to market makers including ETFs.
Overall, the markets need to return to reality, and away from casino gambling in "notional" products.
French
I ran across an interesting usage in my French lesson yesterday:
"Le sauve-qui-peut" comes from the verb, 'sauver', meaning to rescue, save. Le sauver-qui-peut means the panic, stampede, mad rush.
Hmmm ... so le sauver-qui-peut de riches means panic/stampede of the rich.
French is fun.
Actions
I await the expiration of mutual fund transfer limits so I can re-balance Krypto Fund.
For Alpha Fund, I am thinking about putting together a package of single digit / battered stocks to buy that might give me a 10x return over a year or two. Just thinking for now. No rush.
Word of the Day
"Bodkin" - noun [$10] used in Hamlet's Soliloquy by Shakespeare
Bodkin means 1. a blunt, thick needle with a large used esp. for drawing tape etc. through a hem; 2. a long pin for fastening hair; 3. a small pointed instrument for piercing cloth, removing a piece of type for correction, etc.
Sentence: Aftermarket analysis of events in this crisis is showing that mobs of hedge funds gang up on targets to each stick a bodkin into its body, hoping to hide in the crowd.
Hahahaha .... surely you fantasize !
European markets are up about 5% today as they catch up to the late Friday PM rally in New York.
This morning's WSJ had a story about the crisis at Morgan Stanly in September. The hedge funds, credit default swaps and rumors combined to cause the panic. Hedge funds and even the Street itself would buy credit default swaps and short the stock. They say they were "hedging".. Sure.
That credit default swap "market" really needs to be shut down. There really is no natural insurer of credit in size, except one who actually buys the debt for cash.
All exotic derivatives - derivatives on indices of thinly traded exotic securities - need to be eliminated. That includes derivatives on volatility. No derivative that is not traded in a central exchange should be permitted.
Hedge funds need a massive dose of world-wide regulation to stop them from being the financial Vikings - raid, rape, pillage in the world markets.
Short ETFs should be banned. They are just a loophole from stock borrowing rules via market maker exceptions. Stock borrowing rules should apply to market makers including ETFs.
Overall, the markets need to return to reality, and away from casino gambling in "notional" products.
French
I ran across an interesting usage in my French lesson yesterday:
"Le sauve-qui-peut" comes from the verb, 'sauver', meaning to rescue, save. Le sauver-qui-peut means the panic, stampede, mad rush.
Hmmm ... so le sauver-qui-peut de riches means panic/stampede of the rich.
French is fun.
Actions
I await the expiration of mutual fund transfer limits so I can re-balance Krypto Fund.
For Alpha Fund, I am thinking about putting together a package of single digit / battered stocks to buy that might give me a 10x return over a year or two. Just thinking for now. No rush.
Word of the Day
"Bodkin" - noun [$10] used in Hamlet's Soliloquy by Shakespeare
Bodkin means 1. a blunt, thick needle with a large used esp. for drawing tape etc. through a hem; 2. a long pin for fastening hair; 3. a small pointed instrument for piercing cloth, removing a piece of type for correction, etc.
Sentence: Aftermarket analysis of events in this crisis is showing that mobs of hedge funds gang up on targets to each stick a bodkin into its body, hoping to hide in the crowd.
Sunday, November 23, 2008
Great News ...
Ohio State 42, Michigan 7. :))
COLUMBUS, Ohio (AP) — Ohio State has never dominated Michigan the way it does right now.
In the rivalry’s most lopsided result in 40 years, the Buckeyes won their fifth straight over that hated school up north for the first time, ending a dreadful first season for Wolverines coach Rich Rodriguez.“I’ve been here for one of them,” Rodriguez said. “That’s the only one I can really comment on. They have one in a row on us from what I see.”Ohio State (10-2, 7-1) used five big plays to win by the biggest margin in the rivalry since Woody Hayes was prowling and growling on the sidelines in a 50-14 rout of Michigan in 1968.
COLUMBUS, Ohio (AP) — Ohio State has never dominated Michigan the way it does right now.
In the rivalry’s most lopsided result in 40 years, the Buckeyes won their fifth straight over that hated school up north for the first time, ending a dreadful first season for Wolverines coach Rich Rodriguez.“I’ve been here for one of them,” Rodriguez said. “That’s the only one I can really comment on. They have one in a row on us from what I see.”Ohio State (10-2, 7-1) used five big plays to win by the biggest margin in the rivalry since Woody Hayes was prowling and growling on the sidelines in a 50-14 rout of Michigan in 1968.
Friday, November 21, 2008
The Panic Continues ... II ( or is that LX ? )
More of the same, as the liquidation train wreck goes on.
Congress has shown itself incapable of doing anything rational in a timely manner. so this slog will likely continue now into December or when the new Congress is installed in the first week of January or maybe even until Barry takes office.
This drop seems like a replay of the late September fall when Congress first could not act quickly on the TARP. This time it's their inability to provide the auto industry a bit of relief. When one remembers that they can waste $25-50 billion on earmark every year, their inability to provide some relief to help prevent turmoil that could endanger huge numbers of good paying jobs is quite stunning.
US Treasury bonds are at record low yields in recent times, as I suspect all that money flowing to buy fixed rate life annuities is going to buy long dated Treasuries. Why should the insurance companies take risk on those ? They'll pay a low rate and invest in Treasuries for now.
At this point, perhaps Congress should just consider providing the auto industry with $100 billion of "debtor in possession" financing so their looming bankruptcy will be an orderly reorganization, not a liquidation. That is super-senior, so the unemployed taxpayer might not "lose money" ... his job, Congress seems willing to let go to the wind.
By the way, is a bit of "inflation" really so bad ?
Actions
The bloody morning drop worried me with more insane swings in fine stocks like RIG, so I sold the oils and some miners on the minor bounce. I had written that when the bears keep knocking - kicking - on that support level, they would likely get through. And they did.
Alpha Fund now just 50% long, holding only FCX and the small shippers DRYS (ultra-risky), EXM and GNK. I bought some more of all of those yesterday and might buy more. Those stocks, IFF they work out, have huge upside.
I am waiting for some deadlines to pass so I can do a re-allocation in Krypto Fund.
The markets are like a wild brawl - or shoot-out - of drunken gangsters. Watch out, don't get hit. Protect Yourself at All Times. Big profits await the survivors.
Word of the Day
"Ennui" - noun [$10] This is an old card from my file - I can see that my handwriting - perhaps from 35-40 years ago. But since this morning I learned the French words from which it derives , I thought to use it today.
Ennui means a feeling of weariness and dissatisfaction.
Sentence: The constant wildness of the markets have been ongoing so long that "investors" must now feel ennui and certainly resignation of a long wait for recovery.
Congress has shown itself incapable of doing anything rational in a timely manner. so this slog will likely continue now into December or when the new Congress is installed in the first week of January or maybe even until Barry takes office.
This drop seems like a replay of the late September fall when Congress first could not act quickly on the TARP. This time it's their inability to provide the auto industry a bit of relief. When one remembers that they can waste $25-50 billion on earmark every year, their inability to provide some relief to help prevent turmoil that could endanger huge numbers of good paying jobs is quite stunning.
US Treasury bonds are at record low yields in recent times, as I suspect all that money flowing to buy fixed rate life annuities is going to buy long dated Treasuries. Why should the insurance companies take risk on those ? They'll pay a low rate and invest in Treasuries for now.
At this point, perhaps Congress should just consider providing the auto industry with $100 billion of "debtor in possession" financing so their looming bankruptcy will be an orderly reorganization, not a liquidation. That is super-senior, so the unemployed taxpayer might not "lose money" ... his job, Congress seems willing to let go to the wind.
By the way, is a bit of "inflation" really so bad ?
Actions
The bloody morning drop worried me with more insane swings in fine stocks like RIG, so I sold the oils and some miners on the minor bounce. I had written that when the bears keep knocking - kicking - on that support level, they would likely get through. And they did.
Alpha Fund now just 50% long, holding only FCX and the small shippers DRYS (ultra-risky), EXM and GNK. I bought some more of all of those yesterday and might buy more. Those stocks, IFF they work out, have huge upside.
I am waiting for some deadlines to pass so I can do a re-allocation in Krypto Fund.
The markets are like a wild brawl - or shoot-out - of drunken gangsters. Watch out, don't get hit. Protect Yourself at All Times. Big profits await the survivors.
Word of the Day
"Ennui" - noun [$10] This is an old card from my file - I can see that my handwriting - perhaps from 35-40 years ago. But since this morning I learned the French words from which it derives , I thought to use it today.
Ennui means a feeling of weariness and dissatisfaction.
Sentence: The constant wildness of the markets have been ongoing so long that "investors" must now feel ennui and certainly resignation of a long wait for recovery.
Thursday, November 20, 2008
The Panic Continues ...
The Panic of the Rich continues.
I suspect the common man is panicking, too. Anecdotally, I was speaking to my old insurance agent in NYC, who caters to quite a gilt-edged clientele (much more than me). He told me that stunning numbers of them had, or were, going to all cash and buying fixed rate, life annuities in huge amounts.
From my 100 year wall chart of stock prices and economic indicators, the great bear market of 1973-1975 might be a good model for this bear market. Roughly, the broad averages were down about 45% from the prior year's high. The selling continued into the end of the year, then a powerful rally occurred in 1975.
A friend sent me an interesting histogram showing annual returns of the S&P from 1825 to 2007. The worst year of all was 1931, an outlier with a drop in the range of -50 to -40% Year to date, 2008 falls in this exclusive club.
To me, it seems like the bears and panic-mongers want to push for new lows. Knocking so hard on the support levels for so long usually breaks through. If there are enough of them, they can do it.
Actions
Doing nothing. I can't even re-balance Krypto Fund due to tax loss and fund exchange restrictions. Quite frustrating. I might put more money into my Alpha Fund before year end or in early 2009.
Word of the Day
"Monism" - noun [$10]
Monism means 1. any theory denying the duality of matter and mind; 2. (philosophical & theological) the doctrine that only one supreme exists; 3. a metaphysical system in which reality is viewed as unified whole.
Sentence: A propos the stock markets, one could characterise both pure fundamental and technical analysts and adherents as believers in a form of monism: denying the duality of perception and reality. Today, clearly perception rules, as it does in extremes of fear and greed. But at some time, a panic will burn out as the fuel is consumed. The lurch to reality will then begin.
I suspect the common man is panicking, too. Anecdotally, I was speaking to my old insurance agent in NYC, who caters to quite a gilt-edged clientele (much more than me). He told me that stunning numbers of them had, or were, going to all cash and buying fixed rate, life annuities in huge amounts.
Yesterday was no doubt more than tax loss selling, but it's clearly there, too.
A friend sent me an interesting histogram showing annual returns of the S&P from 1825 to 2007. The worst year of all was 1931, an outlier with a drop in the range of -50 to -40% Year to date, 2008 falls in this exclusive club.
To me, it seems like the bears and panic-mongers want to push for new lows. Knocking so hard on the support levels for so long usually breaks through. If there are enough of them, they can do it.
Actions
Doing nothing. I can't even re-balance Krypto Fund due to tax loss and fund exchange restrictions. Quite frustrating. I might put more money into my Alpha Fund before year end or in early 2009.
Word of the Day
"Monism" - noun [$10]
Monism means 1. any theory denying the duality of matter and mind; 2. (philosophical & theological) the doctrine that only one supreme exists; 3. a metaphysical system in which reality is viewed as unified whole.
Sentence: A propos the stock markets, one could characterise both pure fundamental and technical analysts and adherents as believers in a form of monism: denying the duality of perception and reality. Today, clearly perception rules, as it does in extremes of fear and greed. But at some time, a panic will burn out as the fuel is consumed. The lurch to reality will then begin.
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