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Thursday, August 16, 2012

Mandels and Alligators

We are finally pretty much settled into the sunshine state at last. They really should call it the “sunshine interrupted by a few hours of intense end of the world type thunderstorms” state. It is of course summertime in Florida and it is hot during the day and just about every afternoon you get a low budget end of the world movie type thunderstorm to shake things up. We really hit the neighborhood lotto given that we negotiated everything from Maryland and had a friend check the place out for us. The Summerport neighborhood of Windermere is as close to sitcom perfect as you can get. Lots of kids, friendly neighbors so far, trails for walking and biking, countless lakes and ponds in the area, a great pool and just about everything else we hoped to find.

To sum up, I fucking love it here. My northern friends worry about the heat of summertime. Who gives a sht. Yes it is hot and humid but so is the Mid Atlantic in the summer. You will never hear me bitch about the heat. I will sit on the lanai (Floridian for screen in porch) and read a book, smoke cigarettes and drink iced tea in the middle of the day. I take the dog for several long walks a day regardless of temperature. The upside there is that I lost about 10 pounds since we got here without giving up grease or gravy. I love this shit. I will love it when there is a foot of snow on the driveways of my “can’t handle the heat “friends up north. No one ever shoveled sunshine. Getting me back north of the border may turn out to be impossible. I should have moved here when I first started thinking about ten years ago. I can take all the old people move to Florida jokes. Fuck you I am getting old and I live in Florida. I have mandles and a sun hat. Kiss my happy ass.

One of the cool things about this development is that they have kept a ton of open space and left large pockets of undisturbed nature. In this case this means lot of lakes and what was once a swamp apparently. Every day on my walks I see a shitload of wildlife and birds. Now, herons, cranes, armadillos and lizards of various stripes are interesting but I am absolutely fucking fascinated by alligators. I see one or two a day at least lurking with their nose and eyes just above the waterline in the various ponds and lakes around here. Most of them are smallish but we did have about a five footer swim over to take a look at us one day. They are just stealthy fucking death machines and cool to watch. I am told that when they get over six feet or so or become aggressive they are removed to less populated areas and I have to admit I cannot fucking wait to see a gator capture on one of my walks.

Now lets move on to more interesting topics. The market continues to befuddle and bewitch most participants. Old traders and investors as just confused as shit these days. All the old patterns, statistics and told that worked for decades just are not worth a shot right now. The macro guys are getting screwed like a hooker holding a two for one sale at a Viagra clinic. There are almost no carry trades left with the developed world holding firm to ZIRP and money printing. The macroeconomic fundamentals are just fucking horrible but the central banks keeping throwing the markets treats in the form LTRO and money printing so shorts get just crushed in spite of near depression levels of economic activity. To make it worse China has discovered a new source of enjoyment in screwing traders with rhetoric. Gonna ease, shorts get crushed. Growth slowing, longs get crushed. I suspect they are just making this shit up and then watching the carnage they create in the markets.

It is no better domestically. Jobs still suck. Real estate is being talked up but there is another wave of foreclosures to come in many areas of the country so I doubt we have a true bottom yet. The first guys to call a bottom usually get crushed and I suspect that happens here. The introduction of hedge fund money into the rental real estate market is probably going to create an excess of rental single family homes while simultaneously driving purchase prices up at the same time. If I was sitting on a shitload of cash I would get in front of the funds right here and accept some downside pricing risk on rental homes. You can get a better price and pick up a much higher term rental yield that the funds will be able to when they all rush into the local markets.  I would become best friends with the officer of every bank in town that has OREO on the books and offer to take it off their hands at a reasonable price. We are not at a bottom but we are close enough that a shitload of money can be made, especially if hedge and private equity money begins to distort valuation over the next few years.

The stock market has worked higher even as the fundamentals worsen. Revenues this earnings season were just awful. Margins held up and are still at historic highs as corporations fight to control costs and caught a break from lower material costs in the quarter. We have seen many of the mo-mo stocks get crushed in here as a result of revenue shortfalls, earnings misses and lowered guidance. The sluggish economy is catching up with many of these stocks and this is usually a warning sign.

If you dig deep enough into the market there are still opportunities. I like the long term outlook for commercial real estate and think REITs like KRG, CDR, CWH, NRF and ABR will pay off huge for patient investors. Gradual improvement sin both commercial and residential real estate are going to help the banks improve their balance sheets and I like regionals like KEY, HBOS and HBAN. Smaller banks are facing higher regulatory costs and many will have to be sold to larger acquirers. I have a list of about 100 banks that trade below tangible book value, less than $1 billion in assets and excess capital. I expect to make a lot of money off these names. I am watching the 13d filings of bank activists like Joseph Stillwell and Lawrence Seideman for cheap banks with a potential catalyst.

 My energy names have all rallied well. Stocks like PTEN, NBR, PVA and HES have done extremely well. I am not going to chase them here nut I am not selling any either. I would be a buyer of EXCO on any weakness. Natural gas prices have improved but they are still very low historically.  Coal stocks have seen a dead cat rally but more problems lie ahead for these companies. The debt side of the coal picture is much more attractive than the equities right now.

I don’t really have a clue what the stock market is going to do. Neither does anyone else. Anybody with a strong conviction about the next 6 to 12 months in the market is a fucking idiot in my opinion. The market is not particularly cheap at a 16 trailing multiple and a Schiller PE well above the long term averages. The economy remains weak and it shows in corporate revenues. We are seeing cracks in market leaders. The fiscal cliff is looming. On the flip side sentiment readings are pretty neutral and indictors from the options market are actually bullish over the short term. Zero interest rates policies will be with us for two more years at least and this pushes money into stocks. We have never seen this type of global central bank activity so it is almost impossible to know what will happen. I am sticking with a policy of reacting rather than predicting and buying what is safe and cheap.

It is an election year so I guess I should comment on politics. Here is my comment. We have two groups of people telling us how much of our money they will steal and exactly which freedoms they will curtail and the great pool of idiocy that is the public is actually arguing which is better.  I swear to god if the republican would just say freedom means free and in addition to lowering taxes and creating jobs we no longer care who you fuck or what you do with your body they would never lose another election. They are just too fucking stupid. The libertarians say it and Gary Johnson is the best candidate they have ever had but the party has too weird an image to gain ground with most Americans. A quote in the Orlando Sentinel today sums it up. People like to vote for names they recognize. You fucking idiots are getting spoon fed pure shit from two sides and arguing over which tastes better.  Having said that I think that Mr. Obama has been an unmitigated disaster and has to go or we face real problems in the US. We cannot afford his brand of big government solutions. There is at least a hope that Romney will use more lube while fucking us.

Any politician who talks about anything but jobs and education is just another form of thief and liar. Quit relying on sound bites and ask yourself if you really want to pay for your neighbors at the point of a gun. Do you really want someone else determining who you can marry? Should a politician be in charge of your healthcare? Your personal habits? Your sex life?  Do you want your children dying to keep the peace in some far off land that even Sally Struthers won’t visit? I do not. Both parties are selling a version of lies that has nothing to do with freedom, liberty or prosperity. Provide a background where the economy can grow and provide jobs and the local infrastructure to give my children a world class education without the latest per theories and concepts fucking up their little brains. Beyond that Mr. Candidate and office holder take your good intentions and shove them up your ass. I really do not need you to run my life.

Now onto more interesting and important stuff. It is mid-August and the Orioles are still relevant. We are six games behind the Yankees and in a dead heat for the wild card right now. We are playing impossible ball and winning in spite of terrible stats. We have a huge negative run differential. We are 23rd in the majors hitting just .244. it is sure a s shit not small ball as we are dead fucking last in stolen bases. It is not defense as we are also dead fucking last in fielding percentage. It’s pitching with the fifth best team ERA and the long ball as we are fourth in the majors in home runs. It has to be management as the team is not looking any different than years past but we are winning and the bull pen is delivering like it has not in years. Whatever it is I will take it. The team is fun to watch and we matter in August. That is a lot more than I could have hoped for in April.

On the football front I have to pick some new teams. I will still cheer for the Ravens but I will only see their prime time games down here in Florida. Besides football is more fun when it’s local. I am going with Buccaneers since they are closest, the Jaguars suck and I spend too many years hating the Dolphins to cheer for them now. On the college side it was a bit more difficult. I could have gone with Miami as the U has been a great football school over the decades but they are too far away and the team looks like they will suck. FSU is a team I have rooted against forever. I am going with the University of Florida Gators. Gainesville is closer and I am fucking fascinated by alligators. With my sunhat, mandels and the cool ass blue shirt with an orange gator on it I am going to one stylish motherfucker all season long.

Life is good. The kids are all good. The wife is fantastic. The sun is one bright shining warm ass son of a bitch. I have palm trees and alligators.

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