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Tuesday, October 26, 2004

Monday, October 18, 2004

scer mars and venus

Screw mars and venus. As usual the psuedo pundits have the game all wrong. The planets have little or nothing to do with eternal situation.The truth of it is simple..men are stocks. Women are bonds. A simple look at the evidence will prove the correctness of this statement. Stocks represent a claim on the current earnings power of a corporation and the possibility of future earnings as well, but for the most part a stocks price reflects its current situation. What determines a bonds value…sort of depends on what hour of what day of what week during which phase of the lunar cycle doesn’t it?

When we talk about stocks, we talk about earnings, cash flow, assets, book value, current ratios…all fairly straightforward stuff. We have blue chip stocks, like your grandfather, a little stodgy, smelling of old pipe tobacco and mildew, driving safe cars, old fashioned but damned good to have around in a crisis…we have the sold middle class guy, REIT stocks, construction stocks, the countless solid companies that do not ever achieve the spectacular but deliver results over time, we have the flash in the pain guys, the dotcomers with nothing to offer but a song and a flash, the kind you spend 18 years trying to teach your daughter not to date and your clients not to buy…the aggressive merger companies looking to acquire their way to success, the real lounge lizards of the equities world. There are of course, many types of stocks as there are many types of men..domestic stocks, international stocks, growth stocks and value stocks…but one measures the underlying value by the same metrics…independent of outside variables, stock prices care about earnings, assets and future potential of each with the relative importance of the criteria shifting in importance relative to the current operating environment….as men, absent of outside variables care about food, beer and sex with the relative importance of each shifting based on the current operating environment.

Now bonds and women…harken back to older, less interesting days…bonds were the easier safer investments that prudent men held to provide safe, stable returns. Women were objects that prudent men held to bear ones children and keep ones house. Safe, stable objects that were held peaceably for long periods of time. Now, add a free-floating currency and a sexual revolution and the picture begins to cloud a bit. Once can calculate a stocks intrinsic value with a handheld calculator of the simplest variety. With bonds however we must think about things like convexity and duration, things calculated only with a deep understanding of algebra and perhaps even a little physics wouldn’t hurt. There are of course many types of bonds as well..The seemingly safety of a government obligation with its guaranteed payouts…complicated by maddening almost impossible price swings. As Henry Kaufman once pointed out no one can determine the direction of interest rates over a long period of time. Any male walking who claims to understand the thoughts of even this steadiest of types is simply a liar. There’s the girl next door bond, high grade corporates,as with govies usually steady but subject to wild swings based on the movements of rates and rising or falling credit ratings. There’s junk bonds, the wild dance all night in the local bar redneck chick, a type of bond that either delivers beyond your wildest dreams or leaves you hung over in the gutter with the worst hangover of your life, and of course the siren allure of the femme fatale of the bond world, defaulted bonds…all types of bonds and each needing its own special form of higher math to calculate risks ,rewards and values, each with payoffs altered and diluted by a maddening range of possibilities….

The moods, motivation and mental condition of your average man can be learned in less than 10 minutes over a drink. The mood, motivations and mental condition of a woman may never be properly learned as they change constantly on an ever-widening range of conditions. There are two major determinates in valuing a stock. Their current condition vis a vis earnings and assets multiplied by the appropriate multiple. This multiple of course is determined entirely by the behavior of the bond market. There are those who say that men are the captain of their own souls, that more matters in the course of a mans life than a woman. Like wise there are those who claim that stock prices are determined by economic growth. Lovely thoughts both but entirely incorrect over the long run. Growth in GDP has a negative correlation over long periods of time with stock prices. Interest rates however have almost perfect correlation. If rates fall, prices rise.(thanks to the always astute Mr. Crossman for first pointing out the fallacy of gdp,rates and stock prices).It is not a perfect correlation on a day-to-day basis but does hold true over the longer term. Equity markets will occasionally decouple from bond prices and go on a wild ride regardless of rate direction. A man may go to Vegas with his buddies for a month long blow out and never once think of what a woman thinks of his actions…but at the end of a cycle, rising rates will kill a rally, falling rates will stop a decline and when the plane has landed and our hung over hero is home, he will again begin to care about the presence or absence of a woman in his life. The converse however is not true. It is a very rare event that stock prices determine any long term movement in interest rates…Bonds measure a myriad of influences and the buying patterns of a remote Chinese industrialist may well be a bigger factor in the movement than any action of the stock market. Many times we don’t have a clue what drove the bond markets movement until well after the fact. A chance comment by a co-worker may well have a lot more to do with a woman’s mood than the rose you did or didn’t buy her. Extreme movements over the short term in the market..ie crashes..may influence the bond market as appallingly bad behavior may change how a woman’s reaction to you over the course of a few days. In the aftermath however they both go back to measuring innumerable variables before deciding whether to aid or annihilate the equities market. When the bond market changes direction, the direction is changed until new variables enter the equation. When bond prices plunge, they stay plunged. Equity markets plunge and will almost always attempt to rally time and time again before falling further. Many of us making a living trading this almost inevitable attempt to return to glory. A man is never truly over an ex..we carry some trace of each of them with us for all times and there is not a man alive who has not made some variation of the you mean miserable**** you ruined my life, please take me back” 2 am phone call. When a woman decides she is done, after ingesting all the variables and global conditions…the man for all intents and purposes ceases to exist( of course if we had engaged in any spin off activity there will be continual margin calls).

Of course derivative have been introduced to try and measure and lessen the volatility of both markets. This works until it doesn’t. It stops working because stocks are stocks, bonds are bonds. Interestingly the formulas for deriving stock derivative prices include a bond component. Bond derivative models have no equity component. As always, the mood, direction and tone of the equity markets, including all derivatives must include a bond function. It doesn’t work without. Whatever influence equity prices have on economic conditions is but one of many variables on bond derivative structures. Most of complete and total wipeouts in the hedge fund world have been the result of bond derivatives. Many of the colossal mistakes of human history have been the result of a woman’s influence over a man. As of course have many of the achievements. It is not mistake the spectacular equity market records of lynch, Robertson, the lamentable sage, have been recorded during a period of generally declining interest rates.

Mars and Venus? I don’t think so. Stocks and bonds. We complement each other when all is done correctly and it is difficult for one to exist without the other, although there could be a bond market without a stock market but I doubt the reverse is true. Bonds have more influence over stocks than stocks ever will over bonds. Don’t like it? Neither does I. take it up with god. But one has to admit, that having the interest payments hit the ledger help an awful lot when stock prices are falling and don’t hurt even when they re rising…much as good woman can carry man through the worst of times and add in the best…. whereas when bond prices are falling, so are stocks and are little helped and when bond prices are rising, so are stocks. I all assume you can draw your own correlations from the preceding system and excuse me as I have to go buy some bonds…. maybe a nice junk bond with long blonde hair and dancing green eyes this time……

Monday, September 27, 2004

from sunday morning

we saw the end of an era of sorts last night, carried live into our living rooms. Roy Jones Jr, the best fighter of his generation was knocked senseless in the 9th round by Glen Johnson...a decent fighter but surely not a giant kiler capable of ending the career of one of the greats. Jones was literally knocked senseless, taking over 4 minutes to get up off the canvas.Jones had held belts in the middleweight,super middle, light heavy and even for a brief period the heavyweight division..just a year ago there was talk of a fight with lennox lewis. He had incredible hand speed,was a ferocious finisher and in the regular pound for pound rankings he had headed the list for 10 years....what happened to turn from a lightening fast, hard hitting champion to a fighter who looked almost sluggish last night?

simple..he finally lost a fight. last may, antonio tarver hit jones a solid shot last may and knocked him out. Jones had beaten tarver in a close fight previously but everyone expected him to come back in typical jones fashion and dominate the rematch. Instead he lost a big fight for the first time in his career. Now instead of looking fior way to dominate his opponent he looked for ways to avoid another blow like the tremendous left tarver knocked him out with in may....the left never came but a right did and jones night and career are likely over.....the fear of loss kept him from being the great fighter he once was...he had outpunched and out fought 40+ men, never knowing the crush of a defeat or the pain of thunderous knockout punches he gave his opponents..now he knows the pain and the fear keeps him from fighting the way he knows how. Its almost a cliche in boxing..very few fighters come back from the first knockout loss to regain greatness....ali did, joe louis did it but they are the only ones who come to mind...tyson may be a horrible human but he was a GREAT fighter until buster douglass showed him the feeeling of the canvas....duran walked out of the ring when leonard began to beat him,,,hagler left the sport for good... it takes something very special to come back and fight to win after realizing how much a knockout loss hurts physically and mentally.....
\ \the market correlation here is simple...those that play to lose, the fear of a blow up dominating the day are destined to lose....like boxing very few have ever gotten up from a devastating loss instead leaving the field for good, never to be heard from again.....it is interesting that several on the list have suffered the knockout and got back up and still play to win.their advice and experience is valuable because they are unique...trading is a difficult way to earn your living....being a winning trader dominated by fear is impossible..if you dwell all day on the possibility of loss, you will find that the market will indeed deliver an overhand right and the left you were scared of never shows up...but you re still on the canvas in the corner waiting for the smelling salts the market correlation here is simple...those that play to lose, the fear of a blow up dominating the day are destined to lose....like boxing very few have ever gotten up from a devastating loss instead leaving the field for good, never to be heard from again.....it is interesting that several on the list have suffered the knockout and got back up and still play to win.their advice and experience is valuable because they are unique...trading is a difficult way to earn your living....being a winning trader dominated by fear is impossible..if you dwell all day on the possibility of loss, you will find that the market will indeed deliver an overhand right and the left you were scared of never shows up...but you re still on the canvas in the corner waiting for the smelling salts .....

Saturday, September 25, 2004

book reviews

a quick look at two investment books....first the new andy kessler, running money..I was fully prepared to not like the book,the title page and blurbs made it seem lightwieght, but it was on sale at the outlets so i picked up a copy..surprise, in spite of plugs form cramer and michael lewis(who I would vote off the island except for moneyball...I hate the guys other stuff but that is a must read) I liked running money..a good look at the tech run of the late 90s the vc deals, ipos, bad ideas and ridiculous valuations..he does a nice job with the concept of price elasticity ion technology..the counter intuitive idea that falling prices actually leads to higher profits...the comparsonn of the development of the intellectual property economy to the industrial revolution is well though out and well presented....the ideas on margin surplus,IP exporting and trade deficiets is thought provoking.....some interesting theores and views on tech investing with some hilarious stories of the boom days thrown in..an easy fun read that still challenges.....its not going to change your life but it might brighten up an evening or two.......

also rather than reproduce the world I ll just reprint the review of the new book on julina robertson, tiger in the land of bulls and bears

when one thinks of the big three investment superstars of the 80's and 90's, there are three names that come to mind..soros, steinhardt and robertson. you can't turn around in a book store with hitting something by or about soros, steinhardt wrote a book detailing his years on the street but little information was available about the man who captained the tiger funds to such an incredible run.Until now I thought the author did a good job of giving a balanced view of robertson, showing the investment success but also the mistakes that led to the funds closing. Robertson has been a very private man and we get a look at him from the viewpoint of past employees and associates that wasnt really available before now. the trasition form pure stock picker to global macro investor and the problems associated with the transition are fascinating reading.I give it 4 stars, an easy read that gives new information on one the greates investors of his time.the fact that robertsons style and viewpoints, so out of favor when toger closed in 2000, have been thoroughly and completely vindicated in the last 5 years makes this a very timely release

Friday, September 24, 2004

week in review

market was down about 1% on the sp for the week,running out of steam at the 1130 area..a long way from the 1140-50 area I thought we would get to before topping out..interest rates and oil continue to be the twin fears keeping a lid on prices along with the break below the much fabled and feared 200 day moving average that has the chart boys all atwitter.......as oil continues to become more volatile its worth exploring oil and gas trusts as trading vehicles ...(right now they are pretty elevated levels and i would not be a buyer.)... thats on the agenda for the weekend, along with restoring the apartment to a normalized condition.Nothing really new to add this week ISSI hit the buy point but I am already choking on semiconductors(and donuts)..for income oriented accounts pja and cei hit buying levels and both yielding in the 10% area are decent buys.....selling puts on deep value stocks was just about breakeven for the week with the overall value declining in our favor about 2%....it has been correctly pointed out to me that we should be long calls on some of these as well so as to profit from any increase in volatility in addition to upward price moves.....on the large cap side pfe and aig look like interesting trades at these levels...pfe has now closed down 8 days in a row,sliding 10% over that period..aig is down 4 days in a row,slipping a little over 5%...

looking at next week I think we hold near the round of 1100 (oh hell lets just join the merrill, mr e chorus and call it 1104) and have topping in the 1135 neighborhod...1140-45 looks to be a serious level to watch on the upside from a longer perspective with 1080 on the downside being what I would think would be the stopping point for any serious selloff.this is all with the usual dont know crap about timing cavaet but making (un)educated guess only

favorites are capa..quickly becoming one of my man i really like this stock favorites, matrix on any kind of sell off,lens and mosy

portfolio news this week

pep boys got trimmed by goldie today

4:10 (Dow Jones) Goldman Sachs analyst Matthew Fassler lowers his 3Q estimate for Pep Boys - Manny, Moe & Jack (PBY) to 22c from 27c and his 4Q forecast to 12c from 13c. Fassler keeps his 2005 estimate at $1.20 and maintains his in-line rating. Pep Boys is working to stabilize its service business, but it's a challenge given the tough environment and the recent shift in its cost structure toward hourly installers - a fixed cost - versus commissioned technicians - a variable cost, Fassler says. (DJH)

they presnt at the weisel conference on monday and that may light a little fire to reverse todays goldie induce 8% sell off

a decent business week piece on the dreaded damn donut stock that shall haunt us endlessly:

BusinessWeek OnlineWhy Krispy Kreme Is Worth A BiteFriday September 17, 3:57 pm ET Are doughnuts poison? You might think so, from a look at Krispy Kreme Doughnuts' (NYSE:KKD - News) stock chart. Under $12, the stock's off 77% in 13 months. Yet few on Wall Street see an opportunity. Indeed, the stock is nearly inedible to investors, who fret over the low-carb craze, not to say Krispy Kreme's own many blunders.
Although you might call me the Will Rogers of doughnuts (never met one I didn't like), Krispy Kreme's shares never tempted me. Way too rich. Yet now I'm wondering: Is all the bad news already reflected in the stock? Investors are giving Krispy Kreme a market value of $750 million, putting it 24th on the list of restaurant stocks, well below even such careworn names as Panera Bread (PNBA.). Are they overreacting? INDISPUTABLY, THE STOCK presents some glaring risks, starting with the Securities & Exchange Commission's probe into how Krispy Kreme bought back franchise rights in such markets as Dallas. Whether the SEC ultimately will force Krispy Kreme to account for these deals differently is a question mark. Another is future profit growth. Krispy Kreme first said it expected earnings this fiscal year, ending January, of about $1.17 a share, a 29% gain. In May, it revised that to $1.05 or so. In July, when Krispy Kreme disclosed the SEC's inquiry, it noted that the agency also was questioning the lower estimate. On Aug. 26, it quit forecasting earnings. Hardly an alluring outlook. Just the same, these worries may pose less danger to investors than to management's credibility. Take the SEC. Although the agency does not discuss its probes, Krispy Kreme described the inquiry as informal. Let's say, though, that it turns more serious, and Krispy Kreme ends up restating its books. That might prove humiliating for Chief Executive Scott Livengood. He is not talking now, but in July he declared: "We are confident in our practices." For investors, however, it would hardly spell fresh financial trouble. If Krispy Kreme had to take the extreme step of writing off all of the $124 million in reacquired franchise rights that it booked as intangible assets in fiscal 2004, it would post a huge special loss and slash shareholders' equity, to $4.98 a share from $6.94. But even in this drastic -- and highly unlikely -- event, cash flow would be untouched: The dough Krispy Kreme spent to buy those franchise rights is long gone. It's history. A bigger imponderable to me is Krispy Kreme's future profits. In August, the company told analysts it would slow its expansion, which took it to 427 stores now from 218 in February, 2002. One aim of the more tepid growth plan is to focus on widening margins at newer stores. Another is to use capital more sparingly via more modest stores, which rely on smaller machines to produce fresh, hot doughnuts. What might these moves produce? Better cash returns. In this year's first half, Krispy Kreme posted operating cash flow of $50 million, up from $38 million the previous year. Suppose the company can match fiscal 2004's full-year cash flow of $95.6 million. Then, because Krispy Kreme now is spending less on expansion, it could wind up with substantial free cash flow -- that is, cash after capital spending and acquisitions -- for the first time since going public. Don't expect Krispy Kreme to regain its status as a cult stock. Yet the shares have room to rise. The Street's bearish consensus on earnings is 69 cents a share this fiscal year and 81 cents in 2006. That means the stock's price-earnings ratio is less than 0.9 times its expected growth rate. The average comparable figure for other restaurant stocks is 1.3 times. With apologies to Will Rogers, who once quipped that if a stock "don't go up, don't buy it," Krispy Kreme is a buy.

mylan and ichan continue to mix it up over king....


speaking of ichan he increased his stake in westpoint last week:

Icahn ups WestPoint stakeBy StaffHome Textiles Today -- 9/24/2004NEW YORK — Clearly seeing value in a company, and an industry, that others have walked away from, high-profile financial engineer Carl Icahn has reportedly increased his stake in WestPoint Stevens as the textiles titan gets ready to emerge from bankruptcy, possibly by early next year. Icahn bought a chunk of WestPoint's second-lien bank debt in May, and is now said to have taken an even larger position in the company, buying about a third of its first-lien bank debt from Q Investments, a private investment firm based in Fort Worth, Texas. The move would put Icahn in a position to engineer an outright takeover of the company as it emerges from Chapter 11, swapping his debt for shares in the reorganized company. Holders of secured bank debt, as opposed to bond holders, are first in line when it comes to getting something in a bankruptcy restructuring, usually exchanging their bank debt for common stock. Mary Gilbert, managing director of Imperial Capital, a Beverly Hills, Calif., investment firm which tracks the company, said WestPoint's first-lien bank debt totals about $456.7 million, which would value a one-third stake at about $162.2 million.


Monday, September 20, 2004

value options

sell

matrix jan 5 puts.... $.70
mosy jan 5 puts....1
pby jan 12.5 puts.....$.55
atml jan 5 puts......1.30
dhm mb jan 10....1.50
kg jan 12.5 puts....$.65
cnxt jan 2.5 puts...$.80

Friday, September 17, 2004

friday

not much movement in the market at all this week..10 point range in the sp500 for the week,22 in the nazz.....I added postions in matix servies, monolithic systems and concord camera on weakness during the week.the much vaunted Ivan didnt wreck the refineries but did bring many off line, perhaps allowing matrix to accelerate their earnings turnaround as long delayed maintenance is contracted,,,also in line for wok on lng's natural gas plant..trading below book the shares seem to offer outstanding value and the potential to work back towards 10 during the year..the stock jumped some 21% on monday but has drifted back about 40 cents since.gets back down to 5 and I ll buy more... MOSY a broken deal from earlier this year...in the wake of the failed takeover they collected a 10mm breakup fee and are refocusing on the basic semconductor cap equipment business...watching capa very closely,,,showed up in the tiget tech fund as a large postion..primarily in document delivery for mid sized comapnies, a sparkling balance sheet and some very smart folks in the stock..trades slightly above book and almost half the share price in cash..free cash flow positive....they also have 11 million left on their buyback after buying in 3. 9 million last qtr...some insider buying as well.... semiconductors very choppy on the week,closing down slightly versus last friday but their were strong day to day moves all week..atml is even on the week but cnxt was up almost 5%..kkd was up on the week for the first time since august..just 1.2% but we ll take what we can get in this one...its turned out to the dog of the year and a lesson in not violating basic principles..theres no way I should have been in this stock until it got into low teens...having said that the recovery potential is strong enough to hold for now..the stock could get back into the high teens by year end giving as nice return from the current level...mea culpa, mea dumbass for reversing the short so soon..pby,ttn and kg continue to jus muddle along at current price levels with no real action either side....pcr. and fcfco continue to creep higher....the market has run about 5% since mid august and looks a little tired here...the 1140-1150 area looks like it may present a challenge..of course this comes with the cavaet that I dont know shit about market timing....

rain is forecast for much of the wekend here but a full schedule of football and of course the first of the final 10 race for the chase shall occupy my time , along with a huge stack of books rescued from the librarys discard sale table and a couple of interesting research projects...

Friday, September 10, 2004

its back

Its back. Football. As much as we all hate to see summer with its glorious sunny days,we now in the air mixing with the banana tropic suntan lotion and shrimp on the barbie is the odor of fall….fresh pigskin and brats roasting on open fires.I love football. Growing where I did , in the house I did it was inevitable. Sunday morning mass, a morning of visiting with the divine deity, then rushing home in time to see the Immortal Beloveds, Led by St John of Unitas stride forth to rid the world of the evil caused by the packers of Green bay and Bay Starr or the Cleveland Browns Of Jim “holy s** cant anybody tackle that guy?” Brown.. We needed a new TV after Super bowl 3, the old one being rendered useless by the careful and timely insertion of my stepfathers foot mid screen when Johnny U’s last pass fluttered on broken wings to the ground with less than a minute to go…..Time stood still when the Baltimore Colts took the field and I have many memories of brisk fall and winter days watching the mighty horseshoes while Mom burnt that weekends roast into some form of barely edible leather( I love her but the woman simply cannot cook)./And really..whats not to love about football. I like all versions of the game. The carefully orchestrated operatic orgy of violence, sex and point spreads put on by the NFL each week is like crack cocaine to a self professed would be member of the decadent depraved set( I d love to be a full time member but true depravity would seem to take more time and money that I can devote to the cause).Where else can one watch a fellow human being knock the living dog snot of another followed by a close up camera shot of 22 belly button flashing in synchronized harmony? And get free whiskey for six months from friends who are seemingly clues to the machinations of the point spread? Is this a great country or what? The game itself with the basic 3 yards in a cloud of blood and spit filled dust, followed by moments of deep threat exhilaration, bad bounces,shanks,lucky tips and seemingly impossible plays is not a bad metaphor for trading and the market, but I wrote that piece last year….

I like college ball even more. To have OUR band of genetic misfits, impossible large,faster than nature intended,capable of hurling a piece of inflated pork hide sixty yards on a perfect spiral and trajectory march onto the field on Saturday afternoon to pummel YOUR bunch of equally mutated youngsters for the honor of the school, the state and God his own self if Notre Dame is playing? I know all the things wrong with college athletics and that it has become very much a big money sport..but the vast majority of the kids you see on the field will never make it beyond the NFL scouting combines and are playing for a love of the game, and for a dream. No hot dogs getting 77 bazillion dollars to miss a tackle here. For the most part they play with heart and effort..at the higher level of the college game every snap, every play is an audition for the riches of being drafted. The fans are deeply loyal (to say nothing of completely blotto on the cheapest beer available), enthusiastic to a fault ,the bands are usually awful and the only boobs in the half time show are on the fat guy from delta house who stripped when it started snowing……

Now, I usually watch the games from home. The concept of sitting outside, in the cold later in the season in the midst of 50000 stone drunks, wearing a good portion of the guy behind mess 18 dollar beer, taking out a mortgage for a hot dog and standing in ankle deep puddles to avail oneself of the facilities is just not that high on my overall list of really fun stuff to do. I could not afford at a stadium my usual course of football fare, large hunks of flame roasted cow, oysters on the grill until they steam in their own salty juices, chili with my super double top secret sneak up and kick you in the @@@ blend of death peppers…. and a glass of dancing bull zinfandel (hereby recommended for red wine drinkers. not only is it a very good reasonably priced red, the bottle and name are perfect for us speculative types) or slight tipple of famous grouse sprinkled softly over ice cubes would cost more than my car at one of the modern corporate edifices in which our gladiators ply their trade…to say nothing of puddle free restrooms, instant replay and the ability to change the climate on a whim…Football, food and the couch go together well in my mind…For this reason alone Thanksgiving remains my favorite Holiday.No presnts to buy, ungodly amounts of food and non stop football. I always cook, not because I wanted my relatives to come by. I get no familial satisfaction out watching people I am associated with by the accident of birth gobbling all my food and drinking themselves into a coma on expensive booze they are too cheap to have ever purchased themselves…No, its so I and I alone control the leftover supply.3 days of frenetic pigskin bacchanalia, leaving the couch only to prepare the holy of holies for post turkey day football. the Kentucky hot brown There are fancier ways to make it but the recipe I learned was pretty simple,,,slice of bread,turkey,gravy, topped with a mixture of parmesan and mozzarella cheese into an bubbling pile of ooey gooey gastronomic delight. I have long forgotten the women who taught me this dish..although I seem to recall a very sexy little gap in her smile and long legs that climbed up to..but I digress.Her name has long escaped me but the memory of the soft southern drawl and the recipe for football feast nirvana has long stayed with me.Football,couch,Tim. They go together like mickey and Minnie,beans and rice, scotch and..well scotch.

Once in awhile, early in the season I, when the weather is still warm and the possibility of frostbite doesn’t enter the equation, will go to a college game. There is something special about attending a college game and you get to experience the carnival atmosphere of big time college football. Where else can you witness that amazing almost eerie perfect coordination of tens of thousands of Maryland fans chanting obscenities in perfect unison grown men In NC State red and white doing wolf howls on public streets with no fear of imminent arrest? Or a Notre Dame game where bright students, steely haired alumni and somber men of the cloth all spending the afternoon praying to touchdown Jesus and the evening to the porcelain god?So, when the touchdown club here in Annapolis had a tailgate party at the navy home opener last Saturday, given the glorious mid 70’s temperature I rousted myself from other activities and attended.

College football is great. Navy football is special to me and always has been. When I was younger we lived near the stadium. The local newspaper ran a contest every week giving a way tickets to deserving students. My mothers then second husband worked for the paper and saw it a s a perfect way to get a couple of kids out of his house every Saturday. ergo my older sister and I always won without ever filling out an entry. I sent a lot of afternoons watching the mids of the late 60s and early 70s get pummeled by the likes of penn state ( the team of lydell Mitchell and franco harris beat them 70-6..both backs had over 100 yards..at the half, Notre Dame, Michigan et al. They almost never won but that didn’t stop us from cheering for them.Theres pomp and circumstance all served up in military fashion.The march on of the brigade, f-15 flyovers, more brass and braid than a san diego consignment shop,the drum and bugle corp. The football is special as well. These are true student athletes. No special courses for athletes, no exemption for mandatory intramural sports, not break from PT..they take the same rigorous engineering, physics, econ and military classes the rest of the brigade takes..and they have to pass them. To flunk out after the start of junior year means your service requirement if fulfilled as an enlisted rank.Same military discipline,same curfews and regulations as every other mid. No genetic mutants here either. The academy has upper limits on height and weight. Watching the mismatch of one of navys 250 guards try to block another schools 350 behemoth is a sight to see…it took years for Navy to find a coach who could design a game plan to take advantage of Navys better physical condition overall and use speed and complexity to allow the team to win..The current coach Paul Johnson seems to have done that and navy football now has a bonus…they can actually win a few games.

As I sat in the touchdown club tent last Saturday munching on a burger cooked to post nuclear holocaust consistency (no chez tim level cuisine here) the brigade marched right by us. As I watched this flow of approximately 4500 young men and women come up the road towards the stadium entrance I was struck by one overwhelming thought. They seemed so young, so carefree, tossing the traditional candy to youngsters along the street, laughing joking, looking forward to an afternoon of football and fun…this years graduating class were all plebes on sept 11, 2001. They passed the mid point of last day of sophomore year, the drop dead point to leave with no service obligation, and stayed knowing they would be joining a war time military when they finally pinned on the bars of a navy ensign or marine corp 2nd lt. The other three classes?..They entered the academy post 9/11. These kids are the best of the best academically; you have to be to get into a service academy. They could have gone anywhere..Harvard, Stanford,4 years of partying at florida or Miami. They entered Annapolis knowing that their 34 years would be followed by 5 years minimum serving in the armed services of a nation at war. True, it’s a great education and no cost in terms of dollars. But their tuition is 4 years of military discipline, rigorous demanding schedules, a severe limit on typical university parties and hijinks followed by 5 years of their lives, and possibly their life itself in the service of their country.They knew it going in, from the minute their hair disappeared into the enormous pile of horn locks on plebe day. I have nothing but the utmost respect for the young men and women who make up our service academies and was somewhat in awe of the sacrifice they made upon choosing to attend.On this last weekend of august I watched them as they passed, forming into tight orchestrated brigades to enter the stadium knowing that the next wave of marine officers, navy pilots and military leaders who would be sent into harms way t defend our nation passed before enjoying the afternoon of football but aware of the duty that loomed. I was impressed to say the least.
As a topper to the day, my tickets ended up being dead center in a section full of the class of 1954 celebrating their 50th reunion. I looked around at a group of men , all retired now but most with the bearing still of lifelong naval officers. Up in the stands they had served..Korea, Vietnam, the cold war, many of the battles that are emblazoned on the stadium walls. They , along with serving officers on ships around the world, military bases in god forsaken places, stood at kickoff to cheer those who would serve soon. Soon the torch would pass..for now they play football, they cheer on the blue and gold, the plebes do push-ups in the end zone for every navy point scored..its game day and time for football.

I love football. Go Navy


Monday, August 23, 2004

monday

every time the group gathers in chicago, the following discussion nee argument arises between the old school option traders..semi directional, little attention paid to the greeks...and the new school.. all greek, all the time...as to which methodology is better...while I think there is probably some cyclicality involved here related to the amount of capital chasing one approach or the other, I cannot help but wonder what would happen if we started with individual company analysis..ie good companies that are cheap on valuation metrics or bad companies that are overpriced on same..and then applied the greeks, seling overpriced puts and buying under priced calls on our fundamental buys and selling overpriced calls and buying under priced puts on our fundamental sells...as my poor brain holds only the valuation side of the equation and just enough option knowledge to get into seriously deep poo-poo when left to my own devices I hope to discuss and explore this with minds greater than my own in the days ahead...


we are off to a very good start this week, helped along by positive mention of kkd and kg in barrons this week with both articles pretty much echoing the positions taken in above post. the cable and broadcasting groups continue to be very week...with olympic and political revenues starting to flow in their direction it may be time to add some of these names as they continue to hit new 52 week lows....won, cvc cmcsa all are interesting idea and i will explore further during the week. the market was way too optimistic on these stocks coming into the year..naturally because of aforementioned extra revenue sources but soured quickly when the first qtr was weaker than expected....if they continue to seel down they will be like a cute girl in a short skirt doing shots of jaeger...just too compelling not to take a shot at.......

Thursday, August 19, 2004

Thursday

Who gives a shit what I think? In all likelihood no one and I comfortable with that. I ll use this as a trading/research journal as well as posting reviews of bars, joints,taverns and eateries that I come across just for the hell of it. Perhaps when induced to think overly deep thoughts,inspired by generous helpings of the illustrious grouse, I shall record them here for later perusal...to see just how how stupid my great idea sounds when not aided by liquid self awareness.

As for current market thoughts...the volatility trigger fired back on the 6th and it was also the 4th down day for the sp500. This signal has been bullish historically with excellent 10 and 20 day gains..I guestimate the near term range as 1050 low and 1120 high for next week or so..we re right in the middle soI remain fairly bullish right now,especially on semiconductors. Naturally this group has been battered like a trailer park wife with the insensitivity to allow the pbr supply to dwindle and has continued down in an orderly fashion. Im underwater in them in a big way but with a focus on companies that provide chips for consumer goods..pcs,dvds,autos,cell phones right down to washer/dryers, Im confident that is virtually impossible for the economy to recover without group participation. With the back to school and christmas electronics seasons looming, I think the recovery by year end will be dramatic,. They all trade at the very low end of historical price to book, price to sales etc and I m long cnxt and atml particularly heavy. In typical melvin fashion they have plunged well below my entry points. I also picked up shares of pep boys on the earnings miss sell off. trading near book and 11 times earnings the stock is cheap and has decent franchise value to drive future revenue gains....we re up nicely in a short period here, better than 11% in last week. Dog of the year remains krispy kreme..what the hell was I thinking? Im not sure there was much to the low carb scare...my field research shows a whole lot of don't eating fat people remain in the world and they do love their krispy kremes...the franchise amortization issue weighs on the price as well but even should they restate and change their accounting practices its not a huge hit to earnings. I was early by 7 and a half tons but at 12 times sp's conservative estimate and 1 times sales for a company still growing at better than 15% we hold for the eventual recovery. If we run out of fat people I ll consider selling.

In the arb/semi arb world, the king deal is trading poorly on news that ichan is picking up shares of mylan. there seems to be a thought that he will vote to block the deal. arbs getting bbq ed on this right now as myl up sharp and king not following along. I f deal falls apart I see king dropping some but not overly so..the female viagra type drug they are working on has blockbuster potential...women may not be enthused but I m willing to bet this stuff ends up in every medicine cabinet in America..Probably in the aspirin/midol bottle so she ll take them by mistake but their nonetheless. Im playing this one by just being outright long king shares. malan is getting ready to convert to a liquidating trust..with price at 5 and value near 6 worth buying if you can accept the illiquidity of the trust shares over next year or so.still think titan is likely to be taken over by another suitor in a year or less and continue to buy any dips in the stockselling jan puts on strong down days in stock not a terrible idea either..continue holding eidsy shares as near term offer extremely likely..wish I had bought a ton more when it moved down last month.We continue to bid for shares of perini pfd and carriage service pfd..both are dep in arrears on dividend and are improving their financial condition. Potential payoffs are large but they are hard to buy.....also fcfco now that they have paid off arrears and are rapidly improving financially, the 9.95 yield is attractive.

As usual I got bullish way too soon and have to accept the draw down that follows as sure as day follows night. I f I use the old mason hawkins trick of computing market price to assessed value I come up with a ludicrous figure of .40 on the dollar of valuation..one of the lowest ever. i doubt the market will rally enough to capture the move back to full value, a move to more normal levels of .70 to .8 would be a double from here..I ll take half that. the wild card for performance right now is the westpoint stevens bonds...they trade anywhere around 3 cents to a nickel but sine I entered my position both ichan and whitmans have entered the position. Along with lampert at esl, already a holder, I m having a hard time seeing these 3 taking the kind of beating current prices represent. They cannot get paid without paying us so we either lose the last few pennies we have in it or it will be a monster performer from here..I suspect an equity payoff for us in the reororg and with no debt...this thing will print money. Time will tell but as always I am cautiously optimistic.

so if we have a model pertfolio it looks like this..

king...12.21
titan..12.82
kkd....13.37
atml...3.85
cnxt..1.60
pcr pfd...32
fcfco...21
westpoint bonds.....04
eidsy..2.12
malan..4.95
pby..15

bidding for csvsp at 36..last 38