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Thursday, September 15, 2011

Birds and Markets

The major question today is which fetid stinking pile of crap I want to examine first. The markets are confusing, Europe is on the constant verge of collapse, the political situation in the US would be laughable if I could just stop crying, unemployment is high and real estate just refuses to get better. But I have put it off long enough. I have to begin this time with a review of the Baltimore Orioles and the season that sucked worse than last. I had high hopes coming this year. I say that every year but with a new manager and some new bats I thought, I hoped and prayed that a .500 season was in the cards. Once again the Gods of baseball laughed at my pretensions and answered my prayers with a sound and resounding “fuck off little man.”

Painful as it is let’s take a look at the team. I cannot lay any of this on Buck Showalter. The guy is a proven winner if you give him some talent to work with. That makes Andy McPhail a fail, much as it pains me to say. We never made the moves or got the players we need to have a chance to win. Rumor has it he will move on at years end and the next victim of the Angelos curse will move into the warehouse as GM. I think you could put Bill Beane and Brain Cashman’s love child in that office and they will fail. We are cursed. Angelos traded not his soul but the Orioles hopes to satanic forces in return for the riches of asbestos and tobacco settlements. There is no other rational expectation.

On the field one of the biggest problems is that Brian Roberts again spent most of the year off the field. Robert Andino did a more than adequate job of filling in for him but he is not the driving force and team leader that Roberts has been over his years. I have doubts that Roberts can ever again be the straw that stirs the drink in Baltimore but no replacement for him has stood up this year. We need that sparkplug leader on this team and right now we just do not have it.

Offensively the Orioles are not that bad. We were 6th in the AL in terms of team batting average. We have four players with more than 20 home runs, a claim only premier teams like the Yankees and a few others can also make this year. We average about 4 runs a game which should be enough to win more than 59 games we have through last night. The problem once again is pitching. Its horrible. It’s not even a good triple AAA staff. It is the worst pitching staff in all of the major leagues. You have to have pitching to be competitive. We do not.

The worst part is that one of the most reliable pitchers we have had here in the past few years is poor damn Jeremy Guthrie. The guys has good enough stuff he would be a third of fourth starter and win 10 to 15 games a year anywhere else in the majors. Instead he is on track to lose 20 games. When trade rumors were swirling at the deadline he had to be secretly hoping they traded him anywhere for anything to get the hell out of Baltimore. He will give 200 innings again this year but he is snakebite in this town. It would be an act of mercy to trade him at this point. The rest of the staff has been a circus of flash in the pans and almost theres. Some of these young guys have to live up to their potential if we are ever going to have a chance to win.

On the field it was nice to have Vlad Guerrero here. He did okay hitting .286 but that’s not why we got him. 12 home runs and 54 RBI is not why you sign a one and done guy. I love Derrick Lee but was glad to see him go. Signing old guys in hopes of a year of resurrection has never worked for Baltimore. Stop doing it. It is a waste of money. This is Baltimore. There are no miracles in Camden Yards. Find and sign younger talent that can be here a few years and make a difference

It can be done. One of McPhails greatest achievements is going to be the long term signing of JJ Hardy. Give me 9 players like him and I’ll make the playoffs every year. He is gritty no nonsense ball player who shows up to work every day. 26 home runs and reliable defense from the shortstop position does not suck. I like this guy and am glad we signed him to a contract extension.

Nick Markakis had another decent year hitting in the .280+ area. He is an outstanding right fielder and has one of the best arms in the game. When he first gam up I thought he would be a genuine super star but he has never developed the power I anticipated. Still he is a solid reliable everyday player an if he ever had real lineup support we might see that power and RBI potential show up one season.

Adam Jones has also had another good year and is on the verge of being a great ball player. Right now he is very, very good and it is a short leap to the next level. He can easily be a steady .300 and 30 guy in my opinion.

Matt Weiters is the best defensive catcher in baseball. Once again this year he has started to show power in September. We need that to make an appearance in July sometime. He can hit better than .260 and needs to settle in and hit to his potential and he will be one of the greatest catchers in the game. My guess is that will happen when his contract expires and he goes to New York or Chicago in a few years.

Move Mark Reynolds to first base or DH and keep him. If he hits 30 or more home runs every year he is a keeper no matter how often he strikes out. The man has 108 hits this year and 68 of them are two bases or more. If we could runners on ahead of him he would have a 100 RBI’s. Whatever you do get him off third base.

We need power on the corners and we need pitching. Pitching than can go out day in, day out throw at least seven innings and keep the team in the game. Of course we have needed that for 14 years now and have been unable to get it. The bright side is that once again we get decent draft picks again this year. High draft order has not worked as a strategy yet but I am always hopeful. For Now it’s back to rooting for ABB (anybody but Boston).

Now let’s address the markets for a moment. We are in some seriously uncharted waters. We have zero interest rates and ZIRP will be a reality for some time to come it appears. Europe is just a train wreck and that’s not helping any sort of global economic recovery. China is gleefully buying up the world’s debt at pennies on the dollar and I just cannot think that’s good for anyone but China in the long run. Job creation is non-existent in real terms and real estate just keeps getting worse, albeit not as fast as before. Given all the uncertainty if anyone tells you they know where the market is going and give you a high confidence prediction of stock market movement the rest of the year you can pretty well figure they are idiots and move on. One can have hopes for the market and a scenario they think may play out but there is no certainty in this market at all.

Stocks, especially financials, appear cheap but now we have to see what happens as the FED moves to push down the long end of the bond market. The steep yield curve was allowing banks to arb their way back into decent shape by borrowing short and lending long in a risk free transaction. Now the decline in long yields is supposed to force them to lend. The problem is that collateral values are still declining and most bankers are very reluctant to take on risk here. I can’t blame them given the state of the economy and the ass whipping they took in 2008 and 2009.

John Templeton got his own island by having the courage to buy at the point of maximum pessimism. I think that applies to European financials right now. I like Royal Bank of Scotland (RBS) and Aegon (AEG) here as the European financial stocks most likely to survive and thrive at some point. I can make you a hell of a case for owning Bank of Ireland (IRE) as an undated call option in Europe as well. Buy it here around buck and forget about if for the next decade. You will either lose the money or make a ton. Ireland will be the first to get it together among the troubled PIIG nations and I think making a ton is a good bet. I still think Japanese banks are a buy as well for similar reasons and reaming long Mitsubishi UFJ (MTU) and Mizhou Financial (MGF)._

The trade of the decade keeps shaping up here as well. It may take banks awhile to dig through all this but owning names like Key Corp (KEY), Fifth Third (FITB) and Capital Federal Financial (CFFN) among the larger regionals will be incredibly rewarding over the next 10 years. I also have high hopes for my little portfolio of private equity infused banks. Hampton Roads (HMPR), United Community Bank, Flagstar (FBC) and Sun Bancorp (SNBC) all have issues and at least one of them will probably go bust. Anyone that actually executes a successful turnaround with the assistance of private equity and distressed investors will make me enough money to more than offset the losers in the long run.

Be smart whatever you are doing in the market. There is no need to go all in or over leverage here. That’s a great way to leave the arena on your shield. Financial stocks are so cheap that you can take your time and scale into positions. When volatility spikes it makes sense to sell puts and back into some of these stocks as well. Time and uncertainty are on our side. Be patient and be smart.

I am not going to touch politics this time around. Why should I? I am in a good mood right now. I will address my views on the current clusterfuck of politics the next time I have a shit eating beard burning stomach churning hangover to talk about it. That’s about the right mood for what I see happening right now. Moving on.

It’s a great time to be alive. There is football, both college and pros. The Ravens crushed the Steelers and this is always a happy event. Navy looks good and Maryland is off to a good start going into the big test game against West Virginia this weekend. There are some interesting pennant races going on and playoffs are right around the corner. A lot of good books have come out and the fall release season is almost upon us. My wife and I just celebrated out first anniversary and as proof that she loves me she has not killed me in my sleep yet. I am married to one incredible woman and our family is doing well. Hell, I even have a damn puppy. We have wine, we have music, we have books and incredible friends and family to share them. It’s a good life.