Monday, October 22, 2007
life markets and the damn red sox
Ah! Sweet Autumn, with falling temperatures, crisp breezy afternoons..my ass. There is no fall here to speak of so far. Temperatures continue to be up near 80 and after only the briefest of respites the air conditioner continue to growl along in a cash consuming frenzy. I now spend more a month to make sure that the wayward sons Asian princess of a girlfriend is comfortable and doesn’t suffer from seating or having her toe polish run than I used to make in a good year. Weather aside we have moved in the autumn sports time of the year. Like the weather it has been something of a disappointment. In proof that there is no justice, divine or otherwise in the world, the scum sucking red Sox and their owner have defeated, nay crushed the brave Indians (Brave my rear end. They folded up like French Soldiers who heard rumors a German coughed in the night). The Trend follower continues to suck up tens of millions a year from unsuspecting investors and use it fund the teams bloated payrolls and the obnoxious fans feverish frenzy for all things red Sox (How a trend follower can continue to lose money when stocks, commodities, bonds and oil trade at continual highs is beyond me but he does. At least he is consistent.) If there were any justice in the world Congress would declare nuclear war on the red Sox nation. As usual, I digress. The ravens have been exposed as a below average team. The alleged offensive genius running things has avoided using his running back (lowest average carries per game among top five rushers but tops in average gain per carry) in favor of a passing game directed either by the weak armed starter or the weak minded back up. The bills! The average Pop Warner 150lb tem could give the Bills a solid run. Not the ravens. Navy continues to play well but was perhaps a tad too optimistic in their scheduling. It is brutal this year. Still, they are winning overall and actually have a chance to beat a truly awful Notre Dame team. Although not a fan, I cannot help but admire the juggernaut that is the New England Patriots. They don’t beat other teams. They annihilate them. Tom Brady could order Chinese take out form the pocket and have time to finish the fortune cookies. The defense is evil in cleats. Why they cheated with the tapes I have no idea. These guys can beat anybody. The Patriots-Colts game this year could one of the true classic if the game. Basketball madness has come and gone and very soon now we can get college hoops with all its intensity. Maryland does no look to stack up well in the ACC but they didn’t stack up well the year they won the title either. North Carolina remains a beast, Georgetown looks strong again and the Gillespie era begins under high expectations in Kentucky. Should be a good year and perhaps take my mind off the inevitable win by the damn red Sox in the series. They are too good and I strongly suspect the Colorado fairy tale ends next week. The World Series at Chez Melvin shall be one of hurled epitaphs and whiskey glasses as I forced myself to be subjected to the vile course of events and somehow endure the pain.
The evil, foul souled entity known as the stock market is finally showing an inability to digest the ever-growing bad news from the financial sector. Virtually every large and midsize financial institution has reported markdowns form a portfolio of cancerous loans and rancid mortgages. MTG, RAD C, BAC, BSC. They all have it and I suspect it gets worse. They reported the losses they had to hoping they go away by next quarter. They will not. There is continual talk of a Bernake put in the form of another rate cut. It remains my opinion that dropping rates will be both inflationary and disastrous for the US dollar. It may give impetus to a short-term rally but the long-term impacts could well be disastrous, resulting in stagflation. It took almost a decade to beat back this huge appetite to of the slovenly beast the last time we faced it, and I fear it could take as long if we allow it to reemerge. Volatility is picking up and ranges widening in the SP 500, two factors I have found predictive in the past of a market change in the offing. I see SP 1420 as the next important downside level.
I continue to own the staples. Low price to book beauties ADPT, EIHI, GNCI and WSCI remain good buys. I am adding to the commercial REITS, my favorites being NFR, CSE, GNV and JRT. I like and am buying or selling puts on tech favorites SYMC, MOT and ATML. I was put shares of CHIC and am selling class against my position. Severn Savings (SVBI) continues to fall and very close to making the gotta buy it list. I am not adding any new names here but I will continue to add stocks as I find them On the short side, both myself and some of the smartest traders I know agree that shorting FXI, the china index ETF is one of the greatest ideas we have ever seen. It has doubled sine August. OF THIS YEAR. It has gone form the 100 area to over two hundred in less than two months. We also agree equally it is going to lead to our total financial meltdown resulting in all of us living in a tent along the concrete banks of the Chicago River. I argued for a tent relocation to Key West or Naples but we eventually agreed we needed to be in the windy frigid city in order to access the type of fast paced financial info that out us there in the first place!
I want to reinforce a central idea of all this. The economic outlook was bleary. Oil prices were at all time highs. We were mired for much of the decade in a senseless costly somewhat imperialistic military conflict. We had a succession of idiots who were either corrupt, stupid or weak as Presidents through the decade. There was a continual stream of scandals among our legislators. The euphoria of the late 1960s had ended up with the result of financial vomiting. Stock prices fell; there was inflation, a weak economy (holy shit-this sounds awfully familiar). The negative attitude remained all the way up until l the hostages were freed in Iran on the day of Ronald Reagan’s inauguration in 1980). However stock prices bottomed in 1975 and is was one of the greatest opportunities of our or any other lifetime! If we do continue to cut rates, debase the dollar and knock the stock market down I think e will be positioned for the same opportunity. Financials, particularly small banks will offer incredible risk reward opportunities for long-term value investors. There will be chances to pick up great companies at great prices and a chance to build large amount of wealth going forward. In the interim we own a lot of good companies at rock bottom prices and are enjoying a great dividend flow. Goes to hell in a hand basket? GREAT. We are going to get rich (er) over the coming years. Doesn’t? GREAT. We already own cheap stocks with tremendous upside and little risk of permanent capital impairment due to healthy balance sheets.
The island continues to slouch towards winter. Despite the warm weather most boats are put away or scheduled to be. Only the USS Greenberg (a 42 foot cruising craft of great beauty with a safety record only slightly better than the Titanic) to spent the winter in the water for sunny day cruising. The fast boats don’t really have that option and are on lifts anxiously awaiting the firs warm day in May. Sunday football gatherings are marked by equal amounts of beer drinking and Billick cursing, except among the Redskins fans who are celebrating the fact that their team is actually winning and looks like they might have actually know how to play the game. For the first time in several years, the red and gold can gloat over the fallen beaten bodies of the purple and black. So far I have had a decent football year. I have been to a Redskins game and went with the Chicago bunch out to Iowa for the Iowa Illinois game. It was an interesting drive with much conversation about how bad the market is, what’s wrong with the world at large. The highlights were an unscheduled stop at Ronald Reagan’s boyhood home and a great time tailgating at 7 in the morning with Mike Ott and his fellow Iowans. Have to confess all those acres and miles of corn a little creepy and was waiting for Joe Pesci and the children of corn to emerge from the fields with shotguns and hoes to wreak havoc on mankind.
A friend and I had a chance to discuss such heady ideas as the meaning of it all. In the end we decided that like Baudelaire we thought the answer probably had something to do with wine and a passion for life. My friend confessed however that the questions of how, what and why still troubled them. In closing I leave you my answers (doubtlessly wrong but I thought I would take a shot at it.)
for all its aches, pains, confusion and messiness, life at its core is more than we think it can be. For every heartbreak there is a first kiss, for every loss there is a gain, for every death a birth. Most people will avoid the fear and the pain and thereby miss the beautiful and the sublime. They will spend their lives in nice safe jobs to avoid risk. They will watch endless hours of insipid dramas and ridiculous sitcoms rather than read and possibly discover truths about themselves and he world they live in.
Life itself. Mozart, John Lee Hooker and Stevy ray Vaughn. A kiss, making love, walking hand in hand down a country road or city street. Life is Beethoven and Shakespeare. It is Robert Parker and randy Wayne White. It is a look across a crowded room that suddenly is occupied by just two. It is a child’s smile and a friend’s tear. It is the taste of wine on lover’s lips. It is a sunrise, sleeping in on a rainy morning. It is loud rock and roll on a Saturday night. It is mathematics; it is literature, Led Zeppelin and Handel. It is a cup to drink from lustfully. As renowned drunk, author and liver of life Charles Bukowski once wrote "We are here to laugh at the odds and live our lives so well that Death will tremble to take us.” Life is vibrant, romantic, seductive and full of so many possibilities that we often cannot contemplate them all without offering thanks to whatever god we worship in thanks for it
It should be lived with great zest and little fear. To live in a such a way that we race into deaths waiting room bottle of win in hand, lipstick smear (location entirely dependent on gender) light up a cigarette and declare loudly to the timid souls " DAMN! That was fun. What’s next?
Because you are human. Alone of the earthly creatures you have been given the capacity to think to read, to reason. You have the capacity to love and the ability to be intimate for reasons other than procreation. Because you have a big brain and opposable thumbs. Whether by divine decision or evolutionary aspects you and you alone are designed to appreciate and enjoy all that sits before you.