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Tuesday, May 15, 2012

The 3 W's.

The birthday has passed and is now behind us by almost two weeks. The number was 51 this time so I am well into my second half century of life, a shocking accomplishment by most accounts. I suppose I could do one of these reviews of the year that was, but given all that happened this past year why in the fresh fuck would I choose to do that. Let’s just call it the year of the IRS rectal reaming (IRR), insert a hypothetical tampon and move the fuck on. There are many things of more interest and entertainment on which to focus and concentrate.

 There is one aspect of the past year that needs some discussion as it has been on my mind of late.
In the aftermath of the IRR I fear I turned into something of a shitty friend. I am usually a pretty social guy but I have also always had a highly developed hermit gene. If the joint is stocked with enough wine, cigarettes and books I can go days or even weeks without seeing the need to leave the house. In the past year I find that this gene has moved to the forefront and I’m pretty content to just not do a damn thing but read and watch baseball.  I have not reached out to friends the way I used to in the past (although to be fair to myself there is a shitload of folks who lost my number when the proverbial fecal matter hit the fan). Over the years I have developed a great circle of friends and I need to do a better job of staying in touch during my 52nd year of life. With all the social media means of communication, ever present cell phones email and texting there really is no excuse even for a curmudgeonly hermit in training.

The other significant discovery of the year is that I have the greatest family in the history of the civilized world. One bonus of living near the city (oaky that’s a grandiose term for Baltimore but it will have to do for now) is that both kids are within a few minutes and I see more of them than I would if I still lived on the shore. My wife has been a rock and a true best friend and partner. We have spent a fair amount of time running around the Burn finding new places to go and things to do. She has kept me from becoming the crazy old man the neighborhood kids that kids fear and parents use to strike fear into their offspring. I will probably get to that eventually anyway but she has delayed the process by some manner of years. How she puts up with my grumpy lazy old ass I ll never know but I am eternally grateful that she is be able to do so.  Erin really is my plus one and the only woman on the planet who could put up with me without seriously contemplating murderous nocturnal projects.

When I sit down to write these meaningless epistles I prefer not to dwell too much on the past. My friend James Altucher is an expert at tearing down every past mistakes and misadventures  with horrifying and entertaining detail at times. Given the long list of stupid endeavors and the fact that I am not up to snuff on the various statues of limitations on all of them I prefer to keep most of those stories where they belong- in the past. I may from time to time drag one or two of the more ridiculous or hilarious takes of Tim up during a good session  of drunken story telling but I will be damned if I will commit most of them to paper for the world to see and reference at will.

I prefer to focus on the here, the now and the future. Life is still a grand adventure and something of a romantic comedy in my view. Like any good adventure story there will always be plot twists that put out hero in danger but without slings, arrows, rolling boulders and evil bureaucrats it’s not much of an adventure is it? It would be easy to sit around and bitch about all the problems and difficulties life brings our way but I find that neither productive nor fun. I would rather ruminate about the cool little bar the wife and I discovered with the cement floors, lopsided pool tables and a killer little beach out back. Life has enough bullshit, traffic jams, shitty bosses, stubbed toes and taxes. I would rather focus on books still to be read, music I haven’t heard yet, soft kisses with morning coffee, road trips that need to be taken, the smiles of my wife and kids, good report cards, wine at sunset on the patio, and other things I find far more important and interesting.

Speaking of interesting let’s talk a little baseball shall we? So far the Orioles have surprised everyone including yours truly. Dan Duquette’s pitching experiment is working better than anticipated so far. We have at least three pitchers, Wen, Arietta and Hammel have been dependable so far although Jake has struggled a bit of late. The bullpen does not entirely suck and Jim Johnson has turned into an honest to god closer. Up the middle with Weiters, Hardy and Jones we are one of the best teams in baseball right now. Markakis needs to start hitting but is still an outstanding outfielder.

However there are some weak spots. Chris Davis show occasional signs of brilliance. He also shows signs of being young and inexperienced. Setting aside his pitching spectacular in the Boston marathon he is error and strikeout prone and exactly the wrong moment in games. As much as I liked Mark Reynolds last year tis may be an experiment that need to end. He is not hitting the way he needs to and the poor defense is a huge liability. Andino is respectable but we need more form the second base position that he can give the team. Left field is a science project so far. Odds are we fade down the stretch but for now the Orioles are in first place and I will just enjoy that for as long as I can.

So far this year we have some cool stories around major league baseball. Josh Hamilton is on a tear and he’s just fun to watch right now. Bryce Harper is as advertised and has the tools and temperament to be the next really, really big thing in the game. Albert Pujols is the highest paid sub 200 hitter in the game to the joy of St. Louis and its surrounding suburbs. Dylan Bundy is yet to give up an earned run in Single A. The scum sucking rat bastard Red Sox are struggling. Crossman’s Indians are in first place. Matt Kemp is playing like he is pissed about last year’s MVP award. Jeff Samardzija is pitching well for the Cubs. Derek Jeter apparently discovered the fountain of youth. I have MLB TV on the phone so I am now a mobile baseball fan. Live baseball on a cell phone goes down as one of the great technology achievements in the history of mankind. It is shaping up to be an entertaining fun season of baseball.

Now let’s move onto that bitch queen whore of a stock market. The market is in one of those dead zones where it lingers much of the time. There is not a ton of cheap stuff around to buy but it’s not really time to sell everything or get short either. There is a lot that can wrong with a mess in Europe, instability among the large banks in the US, a continued better nut not good economy that is struggling to gain traction and continued high level of short term trading dominating the stock market. However politicians around the globe are determined to hold off the day of reckoning and do whatever they can to prop up equity markets and kick the can all the way down the road.

The most disturbing thing I have noticed so far is that both Seth Klarman and Kyle Bass sold enormous amounts of stock during the first quarter. I am still in the early stage of 13HF reviews but these two really stood out so far. These are two very smart guys with strong records so when they exit the stock market in a meaningful way it is food for thought. If I still had the same asset level I had prior to IRR I would probably be trimming. As it is I am focusing on owning the best of the cheapest and building my position in community banks at substantial discounts to book value. I am holding these along with my British and Japanese banks as well as shopping center and hotel REITs no matter what the market does over the next five years or so. I am considering hedging against disaster arising out of Europe or the US banking system with deep OTM puts but have done nothing yet. I also sold puts on a vol spike in Radio Shack (RSH) and SuperValu SVU) and expect to get put the stock if we do not rally between now and the third week of June.

The other thing I have noticed is the level of smart money, including Messrs Bass and Klarman , who are devoting a larger percentage of their assets to mortgage securities. Bass recently told the SALT conference he expects real estate price to stop going down over the next year and if that’s the case mortgage securities at a discount could offer meaningful returns. If we get some bond market gyration that gives us a lower entry it will make sense to add to mortgage REITs like Invesco (IVR) , Ellington (EFG) and Annaly (NLY).

It is a good time to be alive. I am blessed with a n incredible wife, great children and many loyal friends who tolerate my grumpy ass. No idea why the do but I am happy about it!  The old adage of life being a journey is very true and like any journey it is what you make of it. The bumps and turns in the road are part of it and I prefer to ride them out with a one arm around my wife, a drink in my hand and the radio blaring. Over the past few years I have swapped books, broads and booze for wife, words and wine and it was the best decision I have made so far in a half a century of eccentric living.


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