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Saturday, December 17, 2005

Gmail is now blocked from our office computers as it consumes toomuch bandwidth, so it was not until I arrived back at my abode I foundthe ridiculous email being circulated entitled 50 things girls need toknow about guys..A veritable laundry list about whatsecretly,sensitive touch feely types men really are, who could neversurvive without the aid of a woman.I was so inspired by this genderblending pyscho-babble, I decided to share my true feelings and listmy own version of things women need to know. Being male and able tostate a point without useless verbage, heres the 25,down from 50,things women really need to know:

1. be naked often
2. bring scotch
3. make sure its the right brand
4. no talking during the game unless its a request for wild sex
5.I dont want to know your friends.
6. my friends dont like you but I dont care as long as you zealously practice #1
7. You re still not coming with us when we go drinking.
8. Inviting me to one of your family gatherings is an invitation todisaster..unless they are all literate drunks as well
9.No, I dont think I drink too much.
10. If you dont like the fact that I smoke, the door is at the bottomof the stairs. Please give your key to the next girl
11.If you hear me talking about margin calls the proper response is tostrip and make me a drink.
12. same with getting kings cracked by aces.
13. I dont care if your mother likes fact I d prefer she didnt.
14.Yes, you look fat in that dress..take it off and get over here. not put light beer in my refrigerator
16.If Im re on top
17.there is no such thing as too much sex.they dont wear out ya know.
18. Acording to the actuarial tables, I only have around 11,315 moredays to go.Why are you still dressed?
19.Please do not invite your sister and her newbaptist/mormon/temperance union founder over for dinner.It wll not endwell no matter how nice a guy he is.
20.Yes, I really bet the house.get busy packing would you.
21.Oral sex is not yucky or for special occasions. It is mandatory and now would be a good time to start.
22.Yes, in fact I am having another drink.
23.When my friends call drunk at 2am, I am going to answer it. I do itto them all the time.
24.If you suffer from PMS,please go visit friends until it passes
.25.The proper way to discuss your feelings and our relationship is to be nude and proffer a drink before commencing.That way I can stare atyour nether parts and drink enogh to drown out your whining.

Thursday, December 15, 2005

Growth versus value..buying high pe justifiable? Great question. lets look at a real world example.For the high pe component I ll use the current darling google. Google trades at a market cap of 123 billion dollars and produces 2.7 billion of operating cash flow. The consesnus analyst survey for goodles forward growth rate is 30% a year for the next 5 this rate the cash flow grows to 10.02 billion giving us an earnings yield on our original investment of 8% not too shabby. Except that if we focus on just buying good companies at great prices, at todays price for google we can buy all of:
American eagle outfitters..aeos
helen of troy...hele
temper-pedic ...tpx
chesapeake energy...chk
ftd florists...ftd
valor communication...vcr
barnes and noble..bks
international game..igt
charlotte russo...chic
bebe stores...bebe
h and r block...hrb
harley davidson...hdi
career education...ceco

this portfolio of comapanies from the start generates over 13 billion over operating 5 years of growing at just 10%..and all of them have a consensus estimate of that or better, in 5 years they produce over 20 billion of operating cash earnings...twice what the rapid growing goole is producing, an earnings yield of 19% on orginal investment. Looking further out if google continues to grow at 20% a year and our portfolio of finance, energy, media,insurance,education,retail,motorcycles,persoanl services,gaming and technology companies slows to 5% a year, the eranings crossover where google outearns the cheapies occurs in the 11th year. This assumes that none of the 10 billion or so of excess operating earnings was reinvested profitably over that period of time. a most unlikely suggestion in my alos implies that no new competotor to goole such as CRUSTY slows google growth rate.

Wednesday, December 14, 2005

the grinch

Every spec
down in specville
liked trading a lot
but the grinch
who lived just north of specville
did NOT

The grinch hated trading
The whole market, each and everyone
He didn’t even think it was fun
It could be he had bought up some losers or a flamer
Perhaps he had been trading on tips from old cramer
Maybe he had a socialist daddy and mommy
But mostly I think he was just a damn commie

But whether it was his purse, or just his mind that was a wreck
He stood there before the open hating each spec
Deep in his cave he hated each one he could see
And dreaded the open of the NYSE
For he knew that the specs down in specville below
Were ready to trade and try to prfit from order flow
And they re checking their charts and running their stats
Look at them trade the filthy damn rats
He snarled to himself that this really must stop, they must trade no more
I must find a way to keep those trades from reaching the floor

For at the open he knew

All the specs, the girls and the boys
Would holler and yell, and make all that noise
They would yell and they would holler as they keyed up a trade
Or as the market moved, Mozart and cole porter would be played
The noise, the noise, the noise, the noise He could not stand
They were just too loud as they picked and they panned

And after they would sit down to plot the next day
Each of course doing it a different way
They would count and they’d plot, they would graph and they would chart
10qs and 10ks,stats and TA would be taken to heart
they would talk and they would chat and beat each idea to death
the grinch would hate traders until his last breath

but what he hated really the most of it all
was the buying, the selling of both large cap and small
trading of options and futures and forex and grain
winners bought smiles and losers bought pain
but they bought and they sold, they sold and they bought
all day long each other and the markets they fought

they would trade! and they would trade! And they would trade!
Every damn day the trend they would fade
The more the grinch thought of the specville and specs
He knew these markets he must wreck
For centuries he thought I ve put up with it now
I must stop traders from trading!..but HOW?

The he got an idea
An awful idea
The Grinch got a wonderful awful idea

I must dress up and get into town
I ll tax and I'll regulate and close them all down
I ll write movies and books, and even tv shows
And show all the people that capitalism blows
I ll talk and the talk and look just like a spec
And from inside their system I ll wreck

So headed for Dc to wreck the whole fed
While passing through MD he saw two specs,Tim and old fred
Sitting in a dock bar arguing about stuff they had read,
Talking about stocks and girls and swilling down beer
The grinch snuck around the two quickly with fear
Thinking “though Im the grinch my livers not strong
Starting with those two would really be wrong”

On his way to Chicago to give the merc and the cboe a whammy
He ran into another spec of some note, little spec pammy
Nothing to see here he said, no need to even look
Run away now, little spec pam, and perhaps I ll have andy beal write you a book
He saw them all there,Jason and ryan and brian and all the other chi town speculators
They were all there, the breakout boys , the arbs, and even trend faders
He closed the cboe,closed the board of trade, even the merc home of the spooz
He closed them each, he closed them all,now they cant trade, they cant win, they cant even lose

Now to new york to close out them all, the nyse,amex and even the pits that trade oil
There was no one, not even one spec who could the grinchs grand plan foil
No more of this trading, no more of this buying, none of this selling
No more screaming in the phone, no one in the pit yelling
I ll take their computers, their charts and their graphs,why..I ll even take their stats
Ill take their colorful trading jackets, flaming pink pants and even their lucky trade hats
No more systems or averages, I ll leave nothing not even a candle stick or even a band
There will no more trading, we ll remove all the profit and all will be grand
No one, no man, no woman or spec these markets will be saving
Why,Not even krisrock with all his ranting and raving

I ‘ll close them all all over the land, and do without a single care
Even in Weston, I ll close down the bold one they call chair
And even spec steve and Duncan and doc, the dude and young tim
From the east to the west, Europe and even the pac-rim
I ll stop all this trading and close all the markets I find
No more of this profiting from your courage and mind
No more coaxing reward from great risk
Because all the markets,all of them, away I will whisk

And the specs will fall quiet all over the land ,no trading no more
Not even carstens or florida dan,no on the wire , not on the floor
Not even the two professors, not ross and not the bbq voodoo
nothing even the gambler or the listmaster can do
From rollert to sogi, from Nigel to ari and lackey back to young ott
From zussman to rudy, fromm north to south, east to west how silent they will have got

Back to his cave toting his load went the grinch
Closing these markets was really a cinch
I have the numbers,their charts and their q’s, theres nothing to count anymore
I ve taken their systems and books,closed the web and even the nyif store
No more brokers,buyers or sellers, no funds neither mutual nor hedge
No breakouts ,flags, stochastics,%r flags or patterns..not even an ascending nor descending wedge
No roe, roi,,current assets,debt to equity,no ratio of p over e nor value of book
No trading slips, no order screens,trading desks, all the these I closed or I took

He looked down from his cave at Specville as morning was breaking while evilly humming
Because soon the specs would rise and see no trading day was forthcoming
They are just waking up and I know just what the will do,they will stand their and sob
Now they cant trade, they cannot sell nor buy..they might even have to get a real job
And that’s sight and a noise I must hear,So he stood with his hand to his ear
It started out low and started to grow,first a slight murmer but now near a roar
Bbut the sound wasn’t sad, there was no sad sobbing, and the grinch shook to his core
Because all thos psecs down in specville were

How can this be thought the grinch, how can they put in an order
There are no electronics, no internet, no brick,and no mortar?
I took their charts, their graphs,their stats and fundamentals
There are no markets, not stock, not bonds, not oilt not even grains nor even lentils
But the sounds of the market across across the land, a thousand bida t a half, sell the jan sevens
The specs of specville were buying and selling, the sound rose to the cave and beyond to the heavens

How can this be he pondered for hours,that trading goes on withoutall their stuff or their places
And then it dawned on the grinch as clear as the focus on spec faces
Perhaps trading wasn’t just noise and pointless selling and buying
But perhaps about the courage of specs to take risks, risk falling but keep trying
Perhaps trading was about providing markets to feed one and to feed all, a way to earn profits, to learn and to grow
That all the specs in spec land had learned to love risk and studied their craft with great care
Learning that the meaning of life,was just perhaps, about the courage to live and the courage to dare
That spec bet on the markets was really a bet on themselves in ayn randish type fashion
That these specs of spec ville lived unlike most others, they lived with great passion

They say the grinch burned his communist manifesto that great day
And rushed right down the mountain and entered the fray
Sold a few bonds, bought a little oil and went long a few spooze
He learned out to trade, he learned how to win and he learned how to lose
He learned how to arb, which trend to follow and which trend to fade
Into the trenches he learned the meaning of life and learned what it meant to TRADE
He learned to never quit searching nor trying,That living was learning
That traders,especially in specville, use their heart and their wit to do all their earning
He would have highs and he would have lows, win great victories and suffer great blows
Somedays flush with piles of cash, others having to count his fingers and toes
But our grinch learned that day, and went on to a life spent as a hard working trader
Out of his cave to a mansion he moved and thought that all in all nothing could greater!!!!!!!!!!!!!!!!!!!
Lacks brilliant post this morning started many of the wheels turning in the Melvin noggin today,especially the need to be aggressive yet patient. It would seem to me to be one of those ah-ha statements that contains several layers of truth.In markets, in poker and in just about every area of life I can think of, its is aggression that wins the day.but unchecked aggression also contains the seeds of sudden and complete annihilation. One of the places where aggression is the order of the day for victory is of course, Military warfare. But then I think of the civil war and all the battles lee and longstreet won by playing great defense and aggressively defending their position on the high ground. It was only on the attack they were beaten, first at Antietam and then again at Gettysburg.Again, some historians suggest that had Lee listened to old pete and swung around to the high ground, abandoning Gettysburg but blocking the union army from the capital, the north may well have sued for peace. In the revolutionary War, Washington and the colonials nipped at the heels of the British, only attacking when they had clear advantage and surprise. Had he met them full scale on the battlefield early in the war, he would have beaten resoundingly and all the founding fathers hung in the courtyard of Independence Hall. In World War two it was the pure attacking aggression in both Europe and the pacific that won the war for the allies. But not until the gears of the US war Machine were at full force, with factories spewing out machines and ordinance did we retaliate in any strong fashion. The first landings in North Africa were almost a year after Pearl harbor. The first counter attack in the pacific was in August of 1943 at Guadacanal, nine months after the Japanese surprise attack. We were aggressive, but on our terms, at times and places of our choosing with the strength to back our play.As for agression unchecked with no plan or patience..well just google “custer, general george”. The new craze of televised poker features the pure aggression needed to be a winning poker player. They show the check raises,all in bets and stunning calls that are the hallmark of a great poker play. What they don’t show, however is the 500 hands the great ones folded to get into position to make the aggressive play.It takes not only aggression but patience and buttocks of iron to make a great poker player. Ed Gross wrote a brilliant piece on this subject called overlay?play(I think its in the archives and it is a good piece to read) on the list a few years back outlining how he sized up the room and looked for the edge before he played. I have hung around just enough casino card rooms in my time to see the new tv poker fanatics walk in thinking they can play like Layne Flack or daniel Negreneau and sit down at a table way above their limit and get crushed by being loose aggressive and trying to make good tv instead of playing winning poker. We ve seen in markets a thousand times. A guy tries to get too big and crashes and burns. Regardless on underlying trends, valuations, stats they plunge in up to their necks thinking what they learned in B-school or the success they had being accidentally long in a bull market(please see 1995-1999) meant they actually knew what the hell they were doing. I see guys trying to squeeze the last juice out of extended markets such as high yield and emerging market debt and levering it to the sky to make it work rather than waiting for the spot.hedgies are laying 10 times leverage on risk arb deals with a 1% spread trying to get back the juice of bygone years on this overtraded market. They may want to check in with the convert arb guys and see how that worked for them.In my mind one of the smartest plays out there is to sell puts on an individual equity you would like to own at the lower price. It does not make sense to just sell the puts any time but on down days when the volatility and pricing of the puts is at its highest( I am far from an option genius. Vic, Phil and many other here are MUCH better at options that I could ever think of being.but this DOES make sense to me overtaxed little value guy brain). In other words, wait for the spot and then be aggressive. How do most people put on this trade? Pretty much any old time regardless of price and rather selling as many puts as they are willing to own stock, they sell them to limit of their margin balance. Improper aggression applying a good idea at the wrong place and time and its “hi, uncle , Ned..I ah have a slight problem here…couldya help a brother out?” I don’t think time frame matter here either. Those of us who have been in the Weston trading room have marveled at how Victor sits and waits, and waits and waits…when it hits his spot, however he is as aggressive as anyone I ve even seen..lessons learned as Lack pointed out, From 40+ years of studying markets.There was reference earlier this moth to studies of whether waiting until the market has a down month or not matters concluding that the difference was so slight as to not matter. True enough on the face but irrelevant if your holding period is less than a year as I suspect is true of most on the list. In individual stocks there are countless studies show as the works of charles brandies and joseph piotroski that buying shares of reasonably financially strong companies after a large decline has a dramatic positive impact on returns.If your time frame is a week, buying after 5 straight up days might not be such a great idea..likewise selling after straight downs is probably not a well though out move. My point..yes be aggressive but know your market, your time frame and your entry point. Being aggressive isn’t maxing out your margin level on every trade but only doing so when you have the clear cut, well defined edge for it to make sense. One must also realize that there is a time and place to realize that waiting and aggression isnt working. You were wrong on the trade. If theres an ace on the board and someone re-raises you it might be far wiser to fold those pocket queens instead of pushing all in.Likewise, slow playing a strong position with the thought of building a pot gives an opponent a chance to draw out on your aces. Just as many times I ve bought a few shares of a stock I knew was a good selection with the thought of adding more later only to have it taken over at a massive premium and I miss a chance to really score.If you have the edge and you know it, get your money in.If it becomes clear you re wrong at some point. Get as much back out as you can. Swing around and take the high ground,rebuild your strength until the next opportunity comes along.It always does. This simple aggressive..but wait until you have the clear edge would seem to apply to all areas of our lives(and I mean all areas, anyone wishing to have a discussion of the ill effects of the aggressive pursuit of the wrong woman need only stroll to the seedy dock bars of Maryland and purchase the author a tumbler of fine irish for a PHD level education in the subject. For the reverse, and the many benefits or aggressive pursuit of the right woman I suggest talking to Jason Thompson,lackey or Kevin Depew. Jason will take scotch but kevins to his discredit will want bourbon. Lack doesn’t drink so I think you may get off cheap there). Every move forward I have made in my life has been because I saw the chance and took it,like cortez burning my ships on the beach so that was in fact no retreat.Most of my regrets have to do with opportunites I let slip and didn’t pursue hard enough as soon as I saw them thinking the window would be open forever.It didn’t. Many thanks Lack for pushing these thoughts to the forward in my feeble brain.