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Tuesday, November 22, 2011

That Time of Year

Ah yes it is upon us once again. That magic marvelous time of the year. Over the turnpike and through the six mile long security line to grandmother’s house we go. Today and tomorrow are the two biggest travel days of the year and highways, airports and choo-choo trains will be packed to the absolute gills with happy travelers heading home for Thanksgiving. Nothing says the holidays like being stuck on the New Jersey Turnpike or DC Beltway with a car full of kids and their twerping, beeping electronic devices and loud arguments over battery chargers and seat space. Nothing, and I mean nothing, invokes the Holiday spirit like inhaling the delicious seasonal odor of exhaust fumes tempered with McDonalds and full diaper from the nether reaches of the back of the minivan. A body scan and a strip search get the holidays started off the right way. It’s the most wonderful time of the year.

But it is worth to gather with loved ones and make memories that last a lifetime. Remember last year when Aunt Ethel got shit canned on Gin gimlets and wondered constantly throughout dinner why Cousin Mary, a Lesbian rights activist, had not found some nice boy and settled down? Or the year Uncle Frank, reeking of burnt hemp and stopping only to shovel in the Fritos, insisted on telling the little ones all about his ear collecting adventures in The Republic of Viet God-damned Nam? Maybe your younger brother can show up in an Armani Suit and new 5 series Mercedes again this year and the whole family can go batshit crazy comparing all his great achievements to your piddling efforts. If you are real lucky he will also once again pull you aside later and ask to borrow a few grand until his next deal settles. No big deal, just needs to get the credit card companies off his back for a bit. Perhaps you will once again wonder how in the hell your Mom can cook such an incredible dinner when she starts drinking white wine about five minutes after the first guests show up and stays in the kitchen in order to avoid the madness as long as possible?

We here at Chez Melvin decided long ago that we were not traveling ANYHWERE over the Thanksgiving Holiday and we have a tightly controlled guest list. All are welcome until you screw up. This policy makes for the type of fun, loud, laughter filled Holidays we prefer. Thanksgiving is my slam dunk, winner by a wide margin, favorite Holiday. There is plenty of food, lots of booze, great wines and of course pie. Lots of Pie. There is football to watch, stories to tell and I do not have to buy one single damn gift for a soul. No bow, no ribbons, no bells. Just food, drink and good times. I get to spend a couple of days cooking and prepping and no one will complain too much about the mess I make in the kitchen. Did I mention Pie?

In the midst of all this we really should stop and take time to give thanks. Even if you have had a shitty year and are a victim of the non-recession we are experiencing, there is a lot to be thankful for. Look around the table . If you are surrounded by friends and loved ones enjoying the day you still have a lot of good things in your life. If you are at a Dennys by yourself with the Turkey Platter (and yes I have done exactly that) special, you are still alive and at least they were open. Even when it sucks, life can be like a poker tournament. As long as you have a chip and a chair you still have a shot. If you have the basics it is time to be grateful. Most of us have far, far more than that and should be extremely grateful for all we have. This year has not gone as planned but when I look around the table at my wife on our second Thanksgiving together and all the kids, family and friends gathered there I will be blinking away silent tears of gratitude for just how spectacular life can really be.

Every year at this time I give thanks for the country in which we live. Most of the time we have a sort of semi democratic capitalist society, that in spite of the best attempts of those with good intentions, can still offer us the opportunity to chase and reach our dreams. They will tax you, regulate and discourage you every step of the way but they have not yet figure out how to take away the chance or dim, much less extinguish, the brightness with which a dream can burn. The United States is not perfect and may appear to be less so every day but it is still the land opportunity and if you squint and peer deeply into the fabric of America you can still see the outline of the bright shining city on the hill that we are still capable of becoming.

On cannot be grateful for the land in which we dwell without expressing our thanks for those who have defended her and kept her free to stumble towards that which was intended by the founding father. Every man and woman who has put on the uniform of the United States of America from Valley Forge to Fallujah deserves our gratitude. Our peaceful dinner gathering is won for us by hard men and women willing to commit extreme violence on our behalf. I do not always agree with the reasoning the half brained self-proclaimed genius fuckwads inside the beltway use to send our best and brightest into harm’s way but I am grateful that they are there and willing to defend the hard earned freedoms we enjoy in this country.

I am grateful for books. They teach, inspire, educate, entertain, inform, relax, inform, inflame. My love of reading has been responsible for any measure of success I have enjoyed in this life. I love great books, bad books, technical books, funny books, sad books, whimsical books and lyrical books. Every book you read from the thickest text book to the basest novel contains some kernel of information and knowledge. Books make my life better. I learned to invest, to write, to cook, to drink, to be a better father, to not kill the puppy, to value a company, to laugh at my own humanity, all from books. To everyone who ever stuck a pen to paper or finger to keyboard and bled their thoughts, knowledge laughter and tears onto a page, I am grateful.

There is so much in today’s world for which to be grateful. Car Seats that warm your ass cheeks on a January morning. Cable TV Channels with 24-7 baseball coverage even in the offseason. The world of information available at your fingertips. Wireless technology that allows me…oops I mean You, to pretend to be at work when you are really on the beach. Cell Phones that allow you to be in touch around the clock. The off button on cell phones. Libraries. A world of music on a little box that fits in your shirt pocket. Microwave ovens. Wine. Pennant races. Flat screen TV’s for less than a decent radio used to cost. E Readers. Look around you and this amazing world we live in and you have to take a second or two to be grateful for it all.

Most to fall of course I am grateful for my family. My daughter who has through sheer determination and will overcome the difficulties of health problems and constant setbacks to fight her way towards her dreams. One semester left and she will joined the ranks of the chronically over worked and underpaid and become a teacher. She tells me she wants to keep going and eventually be a professor of literature. I know she will achieve it, talking too loud and laughing too much all the way. My son the businessman and well on his way to executive son. He has a drive and determination to succeed that never fails to impress me. The little shit refuses to read but he soaks up knowledge like a sponge. He has turned into such a great young man I am glad I didn’t beat him to death all those times in his teens when I was sorely tempted. My hyper intelligent stepdaughter with her runaway imagination and creative spirit absent mindedly stepping along the path out of childhood and into, dear god and sweet Jesus protect us all, the next stage of girlhood. She is 8 going on 19 and has an extraordinary future ahead of her. My wife, my partner, my best friend. I never expected to find a partner especially one like Erin who is just the perfect fit for my life. She is my other half and makes me believe in things I never did before. I never knew how much I missed having someone who makes my life whole until I found her.

I am not an idiot. There is a lot about life that sucks right now. Bailing out dishonest bankers . Now it looks like we will use the IMF to bail out Europes dishonest bankers in an act of sheer stupendous stupidity. Taxing away productivity. Shitty little misguided wars in stupid little countries we should just bomb into fucking oblivion and forget about or ignore. Democrats. Republicans. Hangovers. The Boston Red Sox and Pittsburgh Steelers. Traffic jams. BCS Rankings. Foreign aid when we are technically broke. High frequency trading. Hybrid cars with bigger carbon footprints than conventional cars. A reliance on political dogma instead of common sense. Peter Angelos still owns the Orioles.

Heres the truth of it all. There has always been a lot wrong in the world at any given point in time. However there is usually far more right than there is wrong. No matter what time period in which one lives the thing to be most grateful for is life itself. Be it a divine plan or accidental biological collision of groins that produced you, you are alive. You are here for however long to taste the tears, feel the kisses, breathe the air, read the books, hear the music. No matter what else you are hear and alive with a chance to succeed, to fail, to make love, to get your heart broken, to fall in love to walk in the rain and sit in the shade. We are alive and there are people who love us, people who like us and we get to share this with them, this being alive. Sometimes it is glorious and sometimes it hurts like hell but we are alive. For that and that alone we should be grateful. The rest is a huge bonus.

On Thursday I will lift my glass and give thanks for being alive, being with the ones I love and who love me , or at least tolerate me most of the time, for all the adventures, for the laughter, the kisses, the books, the music and the opportunity to be . And for Pie.

Happy Thanksgiving my friends.

Wednesday, November 09, 2011

Diminished Circumstances

Diminished circumstances. A fine turn of a phrase that means I fucked up big. Just once I would like to get carried out of the building covered in piss and blood while long 137 car loads of S&Ps while the market crashes; or stuffed up to my ears with a short bond position on POMO day collapsing in a beaten battered heap screaming Viva la Revolucion! Something dramatic and gritty that will make the autobiography more interesting. This is not my lot in life. The markets have been good to me and I expect them to continue to be for some time to come. This type of financial market weirdness is in my wheelhouse and I am not leveraged so I get no grand and glorious ending worthy of a late night CNBC special. A huge cut in compensation from my largest free lance deal and a few nasty grams from the scum sucking bottom feeding government tit sucking bastards at the IRS and here we are. Diminished circumstances.

It has not been a lot of fun but it is really not all that bad. We moved off the island and now live in the close in Baltimore burbs so it’s more of a return to my roots than anything else. At least that’s how I am selling it. I hated leaving the Island but it may have been past due. I have contemplated leaving several times in the past but I had more palm trees and less late night sirens involved but thems the breaks. The memories and friendships developed over the past 15 years will be with me always. I am sorry for all the bartenders who will now have to struggle to pay for their kids college education and Cadillac payments but we all have our difficulties in life. I swear I heard my liver sigh in relief when I crossed the bridge for the last time.

To its dismay there are plenty of bars and liquor stores here as Baltimorons are the drunkest prayingest people in the world according to my late father. Every few blocks has a bar, a liquor store and a church. I am not much on church but the other two may come in handy. I have already talked one understanding liquor store operator close by into stocking my brands of wine and cigarettes so all in all the move is survivable. I hate taking the hit in this manner but I still have my books, my wine and people who love me. My wife has been a rock through it all and made the circumstances far less diminished than they would have been otherwise. My kids have been understanding, albeit sick of helping dad move shit between the house and storage facilities we have spread out all over Northern Anne Arundel County.

I am not going to sit here and blame the evil government or satanic bastards at the IRS for my DC (diminished Circumstance) issues. The government in its current form is evil and the IRS is indeed the devils tool but the truth is all fault lies in the mirror. If you are aggressive enough that the IRS calls you to task, you made a bet and you lost. Even if you do not want to pay them or think that you do not really owe the money they have the laws and the guns to take it. To avoid them entirely means allowing the government to take far too much of your money over your lifetime. I made what I thought was the right decision. They humbly and with all the legal tools at their disposal  disagreed. I picked a fight I couldn’t win. My bad.

I should have had a more diversified revenue base and built up the money management operations sooner to avoid reliance on one contract. I should have developed my own web presence and newsletter service some time ago. The money was coming in, waiting until manana was the easiest path. Godot may not ever show, but tomorrow always does. I can regret that but the truth is I had a grand life for years. I am paying for all the boat rides, ball games , late nights, stiff drinks and long trips at the moment but I am not sure I would not do it exactly the same again. I view it as living like Travis McGee and taking my retirement in chunks while I am young enough to enjoy it.

I do not want to down play it all. I took some good hard shots and have to do some serious rebuilding. My family has been through a tough month of downsizing our dwelling and lifestyle. As with anytime you experience DC I have lost some friends. There is probably some bitterness among some acquaintances for deals that collapsed when I could no longer afford to play the game for now. I regret it that but I sure as hell can’t change it. I have been left holding the short end when others had bumps along the road and chalked it up to the business of life. That’s the case here.

In the grand scheme of things I do not feel like my circumstances are really all that diminished. I go to sleep each night and wake up each morning next to my best friend and partner. My wife has been a rock and a joy during this past month. All the things that make life wonderful , the books, the friends, the wine, the music, my incredible children, are all still here. I will be able to regroup and rebuild rather quickly and as I do the reduced expense load will allow us to stockpile cash to take advantages of the opportunities offered by the current economy and stock market. Not one ounce of the knowledge or wisdom I have gained over the years has been lost. I have merely added to my list of stories for when I am a grouchy curmudgeon telling stories at my combination bar and book store on a southern beach.

Let’s move along. Not much to see here anyway. Looking at the stock market I see some incredible long term opportunities. Right now I am trying to focus on those areas where if they do not make me rich the world will have totally absolutely once and for all collapsed and it won’t matter very much. Banks and real estate certainly would seem to fit that definition. They trade at valuations that are fractions of what they are worth in better times. If we ever see boom times again in the next decade (and history tells us we will) many of these stocks will be minimum ten baggers. If they do not improve to more normal times at some point over the next ten years, our money would be far better off in bullets and canned food and I am still more optimistic about the future that that .

When I look at real estate I see that some of the premier operators once again fetch premium valuations. However when I look at smaller operators I see bargains. Hotel operators like Sunstone (SHO),Felcor Lodging (FCH) and Red Lion (RLH) trade are ridiculously low valuations. Quality shopping center operators like Cedar Shopping Centers (CDR) and Kite Realty (KRG) not only pay fat dividends the share price is far less than any reasonable estimate of their real value. Suburban consumers are wounded but unless the Walking Dead (GREAT TV SERIES!) becomes a true story and zombies eat up the entire customer base these REITs will see much better performance and much higher share prices over the next five to ten years. Commonwealth (CWH) has some management conflict issues and has issued too much stock in the past two years but the shift from suburban office properties to urban center high grade offices should pay off brilliantly. If the stock just trades to book value you double your money and the 10% dividend yield pays you for your time waiting. Real estate, especially among lower tier REITS and real property in your local marketplace is just cheap if you have a long term perspective and can handle some volatility.

Banks are in the same boat for all the same reasons. In reality the weakness in real estate is responsible for the weakness in smaller community and regional banks. I am starting work on a new project ot produce a book outlining all the ideas for the trade of the decade so I won’t name nay new bank names as I expect you all to pay for them when I am done. However I still like the private equity infused banks like Central Pacific (CPF) United Communities (UCBI), Sun Bancorp (SBNC), and even Hampton Roads (HMPR) . Hudson City (HCBK) is still a quality high yielding bank name that I like quite a bit. Among larger regionals Key Corp (KEY), Fifth Third (FITB) and even Huntington Bancorp (HBNK) are worth buying on declines. First Interstate (FIBK) and Renasant (RNST) are worth consideration. If you are not looking into smaller banks in your region and talking ot the community bank executives in your town you are making a huge mistake and leaving huge dollars on the table. The book will be out shortly and I will disclose all the names and possible strategies for the Trade of the Decade.

The other either works or we are all good and truly fucked investment area is infrastructure. We have delayed spending the money as municipal finances are strained and federal money disappears into bureaucratic black holes but we better figure out how to raise it and spend it soon. The electrical grid is a mess especially in the northeast. It seems a vigorous wind is all it takes to knock out power for days at a time. Water systems all over the country are years behind in repairs and updates. Roads and bridge repairs have been delayed to the point of being dangerous in many areas of the country. I favor turning most of this over to private hands and let them raise and spend the money but I am not naive enough to think any government official in the nation is that smart so we may have to wait for the economy and tax revenues to improve but if we wish to avoid slipping further towards third world infrastructure this has to be done soon.

Infrastructure stocks should be in your portfolio and on your watch list. I think you can but stocks like Muller Water (MWA), Gencor (GENC) and Pike Electric (PIKE) right now. Others like LB Foster (FSTR), Flour (FLR), Foster Wheeler (FWLT) Granite Construction (GVA) and Sterling Construction (STRL) should be on your list of stocks to buy in a broad based decline that makes valuations more attractive. This is if not when money. I think that at some point in the next decade these stocks will be a boom sector of the market and I want to own them before this happens rather than chase them.

Moving along the Orioles have hired a new GM. Peter Angelos’ deal with the devil is firmly in place as the only one who would take his offer has been out of the game for almost a decade. Still, I am an optimistic idiot when it comes to baseball and the guy did build a winner in Boston falling just short of the World Series before the trend Follower fired him and replaced him with a certified fucking genius in Theo Epstein. Epstein has moved onto the Cubs and after he finds the appropriate sacrifice (Soriano burnt at a stake at home plate?) to appease the goat I think the Cubs will head for the series sooner rather than later under the new GM. Can Dan Duquette and Buck Showalter combine to work the same sort of magic for the Orioles? We shall see but just in case I am keeping a Cubs jersey in the back of the closet if they fail and I need to find a less desperate team to call my own next year.

I keep saying I will write here more frequently and almost never follow through on the threat. I am going to have a book to promote endlessly and am keeping an eye open for new money management clients and writing opportunities so perhaps this time I will follow through. I might, although I find that I have many books to read and write, many moments to spend enjoying the company of my wife, large blocks of time scheduled to annoy my kids as well as to talk baseball, college hoops, markets and swap tall tales with friends all over the country. I shall do my best.