Deep Value Letter - Banner Ad / Email Capture

Friday, December 14, 2007

live form the new world headquarters in chicago

As I sit here in my new temporary office space (why all these people keep calling it Starbucks instead of the new world headquarters of Tim inc is beyond me) on Rush Street in Chicago I take a few minutes to reflect on the world, the markets and the state of things in general. There is a lot going on in the world this December as we rush headlong into the Holidays. The markets are roiled, the economy is confused, yet the lights sparkle and friends shout Holiday Greetings and the world rushes on.

The George Mitchell baseball report is out and it seems every body used them the starts, the failures, the whole damn league down to the bat boy was going for the whole small penis bulging biceps approach to the game. The game is tarnished and will need a much stronger and smarter commissioner than Bud Selig to recover from this fiasco. What frustrates the shit out of me is apparently all of the Orioles were on the stuff except Ripken and we still cant win a damn baseball game. The ravens just flat suck in spite of a strong effort in one game against the patriots. Had they played like that all year they would be in playoff contention again this year. A very lack luster season indeed. Navy has lost its coach but I suspect the Hawaiian assistant head coach who was promoted is up to the job. He has been with Paul Johnson a long time and knows the spread offense as well as anyone on the planet. We will find out next week when the Mids take on Utah in San Diego. I had the pleasure of going to the Army navy game this year and it was an exciting team to watch. Maryland basketball team is young and so far just a step or two away from being good. Gary Williams tends to excel with these type teams so the late part of the season could be interesting. Lets hope.

The markets are interesting. Both the PPI and CPI are up strong showing signs of inflation even while other indicators point to the possibility of a recession ahead. Oil prices are off their highs a bit but remain above 90 a barrel. Interestingly the PPI was up a lot more then CP which in my limited little brain might indicate a possibility of margin pressure as manufacturers were unable to pass their higher cost on to consumers in their entirety. Large financial stocks are just screwed here for awhile In 1998, long term capital threatened the economic system when their leveraged bets turned bad threatened to wipe out its 4 billion of equity. Right now a write down of 4 billion of equity due to bad levered bets is a slow morning. I move ever loser to the opinion that one must have two portfolios to survive and thrive in the environment I see going forward. First is the 5 year and forget about them stocks. The commercial high yield reits such as JRT, NRF and CSE belong here. SO does Severn Savings. Your AMCC’s and ADPT’s as well. Buy them forget about them. They are too cheap and most will recover and thrive going forward. Changes in business conditions and outlooks might matter to these type of classic ben graham stocks but day to day market fluctuations do not. However in the type 70s style gyrating markets I see in our future I think a trading component needs to be added. I do agree with navellier and others that growth will supplant value for the next few years. The lack of buyour financing and pressure on financials will weigh hard on the value guys. But most of the growth names I think are trading stocks, not owning stocks. They tend to feature sharp moves in both directions. I have learned a lot form all the fantastically talented and weird friends in Chicago, New York and Deltaville the least 7 or 8 years and am working diligently to add these techniques to my arsenal. At the moment I still like the idea from FISJM’s long Swiss franc against the euro trade. I think Crossman is right that the carnage in large financials and mortgage insurers and am looking to sell bounces though puts and risk reversals in those situations.

Next year promises change. Changes I have been threatening to make for years and just never got around to pulling the trigger. Now, the opportunity is on the table and my bluff has been called. More details on all this later as the situation progress but it promises to be an exciting, interesting year. I find myself looking forward to the New year more than usual this year. All my life I have advocated taking more risk and not being afraid to fail. Time to live up to that pithy little saying.

Sitting here in Chicago I am again reminded that there is nothing quite like a major city during Christmas. The decorations and the lights sparkle and shimmer. The Prudential center is topped with red and green festive lights. The hawkish winds blow in off the lake and the street side lights jump and twist in the wind turning the streets of Chicago into a winter festival. Shoppers rush up Michigan ave bundled with packages of all sizes and colors. Holiday music floods the stores and clubs and you can start to feel a little Christmas in the air. Last night the Chicago contingent met for dinner at maggianos on canal and grand for a night of too much food , too much wine and too much conversation. The whole gang was there. The publisher and her builder husband with tales of puking newfies and new books in progress. The adventure traveling Eurodollar trader was there preparing for yet another trip to a part of the world where most of the inhabitants are devoted to the cause of killing Americans. FIJSM Thompson was there with stories of a the anguish and pain of only being up 17000% for the year. I feel his pain. Tonight we meet again with the stated intent of making sure the Eurodollar kids liver and blood stream are imbibed with enough alcohol to allow him to survive the trip to the booze starved Middle East.

More on this trip later as we have already produced a story or tow by crashing the Christmas party of US Scrap metal corporation at Prado’s last night and I havent even been here 24 hours yet. Parties abound and we shall slip through the frozen streets of Chicago in search of adventure and misadventure and as usual I suspect we shall find plenty of both

Signing off from the world headquarters of Tim Inc where you can worthless advice and a double mocha latte pretty much on request

No comments: