Value Or Growth?

                                                                          

Recent Real Money Columns on the Subject:

That age old argument raised its head around Chez Melvin yesterday. Do I buy the best or the worst stocks? Do I want the high PE stocks that everyone talks about or the low PE stocks? Do I want to own the most exciting companies with sext new products or stocks of which none of us have ever heard? Which works better, value or momentum. I have addressed in this past and better minds than mine have also tackled the subject. The research section at LSV  Asset Management’s website (www.lsvasset.com/research/research)  is full of scholarly articles on the  subject. Well known super quant invest Cliff Asness has done some spectacular work on the value versus momentum conundrum available on his website at www.aqr.com.

Both of these approaches work and have worked over long periods of time. I am of the optinion that if you tell me about your personality, goals and the time frame in which you chose to operate I can probably tell you which school of though you should favor. If I know you and your approach to life I can probably tell you which type of stocks on which to focus on your trading and research effort. The argument comes up so often and value and momentum types tend to argue about the topic like Red Sox and Yankees in a tight pennant race I thought I would share my definitive thoughts on the subject.

If your time frame is one month or less you really are not an investor, you are a trader. Fundamentals like earnings, sales and profit margins do not matter so much for you. You need to be aware that in this time frame market direction is a huge factor in the stock selection process. Trading individual stocks in this time frame is simply trying to gain some excess return above and beyond the stock market. If you are bullish of the market in general you want stocks that will rise a little farther than the indexes. If you are bearish you want stocks that will fall a little farther than the market. If I were trading this time frame right now and was bullish my trading universe would contain names like Apple (AAPL), Google (GOOG) and Cisco (CSCO) that were near or at new highs and had strong momentum. If I was bearish I would be looking to short stocks like Alliant Techsystems (ATK), Baker Hughes (BHI), or Ancestry.Com (ACOM) that are flirting with new lows and lagging the market in general.

If I am trading from the long side in the 1 to six month time frame I am a pure momentum guy.  I want stocks that have strong price momentum, earnings momentum, improving margins, exciting new products and a sexy story. I am looking for stocks that have super strong fundamentals and I do not care what price I pay for these gems. They need to be growing and growing fast. I want institutions to be net buyers of the shares as I need their buying pressure to push my stocks higher over my time frame. I am looking for stocks that are at or near short term highs in price as well. My trading universe contains names like LuluLemon (LULU), Coinstar (CSTR), Under Armor (UA) and Chipotle.  I want great companies with strong price momentum. If the fundamentals start to slip or the price rolls over, I am out of the stock. In this time frame I am just surfing the sweet spot.

If I am bearish I look for the opposite.  I want to short stocks with horrid fundamentals and a lagging stock price. My universe would probably include stocks like Lexmark (LXK), Sony (SNE) or even Skechers (SKX). I want to find stocks with poor fundamental and prices that are weakening. When trading in this time frame you want to keep in mind that predicting the direction of the stock market is still very much part of your decision. Determining market direction correctly will be a large component of overall return.

Successful practitioners of this approach tell that occasionally they get a stock in their portfolio that stay in buy mode for an extended period of time. Fundamentals keep improving and the stock keeps showing positive price momentum. Stocks like Apple and Priceline (PCLN) might be an example of one of these stocks. They can be tremendous wealth builders but my friends tell me that they are always long (or short) all of their stocks, including the big winners, from last night. The fundamentals need to keep improving (deteriorating) each quarter and the price needs to continue showing strength (weakness) measured against the broader market.

As we move out in our time frame into the 6 to 12 months segment of the markets I think we need to change our approach somewhat. In this time frame momentum is still very important but valuation starts to become more of a factor. The problem with super high momentum stocks is that when the mo-mo stops it gets ugly quick for those stocks with high valuation multiples. If I am looking at a longer holding period I want to consider adding value to my momentum approach. I am still surfing but I am surfing using stocks with solid fundamentals and lower valuations that are less likely to collapse if the market stumbles along my journey. I want to look for value stocks that have started to improve and the market is noticing or growth stocks with lower PEG ratios that have not risen to unstable heights.

When I started in this business in the age of Quotrons , ticker tapes and paper stock guides the one to two year neighborhood was just about everyone lived. Investors bought stocks and started thinking about selling after the one year capital gains period was reached. For right or wrong this was the most common holding period for the investors I met and worked with in the good old days. Even mutual funds were sensitive about turnover and taxes back in the olden days. Very few people live in this area anymore as most of the focus has become short term in nature.

The absence of heavy competition makes this a pretty fertile area in my opinion. If this was primary time frame I would be looking for fallen angels, turnarounds and undiscovered growth stocks exclusively. The approach of buying Value Line Stocks ranked 1 or 2 priced under $10 works very well. These are stocks that have fallen out of favor with Wall Street and the rankings are indicating some signs of a turnaround. Right now stocks like JetBlue (JBLU), Micron Technology (MU) make the list as turnaround stories that could easily rise by 50% or more over a 12 to 24 month time frame in my opinion. I also think undiscovered growth stocks with low institutional ownership like Eastern (EML) and Orchard Tissue (TIS) work very well in this time frame.

Crash buying of blue chips is in this time frame as well. When everything goes to hell and no one is buying stocks the one to two year investor should be buying with both hands. Wall Street is the only place where the 100 year statistical storm hits every three or four years. When it looks as though the world is going to end and the commentators on the financial networks look hung-over in the morning, buy the big names like Disney (DIS), Johnson and Johnson (JNJ) and Microsoft (MSFT) with the idea of selling them when the sun comes out on Wall Street once again.

When you move out over two years you are now in my neighborhood. This is the neighborhood of owners. It does matter if we own 100 shares or a million we think or ourselves as owners of the underlying business. I look to buy attractive assets at fire sale prices and own them until the full value is realized. I kick over rocks looking to buy companies in a good business at desperate prices. I am also looking to be the buyer of last resort in distressed situations where panic and fear is in the air. I have no stop loss or exit strategy when I buy a stock. In most cases I will own it until something changes for the worst and I think that any hope of the comonay being fixed is gone, the company fails, the company is taken over or is discovered by Wall Street and valuations soar to what I consider to be overvalued prices. I focus on safe and cheap and with an occasional venture into longshots with a risks and rewards highly skewed in my favor. I do not care how long I own a stock. I am very comfortable owning a company for five years but I am not upset when one gets taken over at a premium a year or two in either. I want to buy extremely cheap and sell extremely dear and time is not that much of a factor.

There is no sense to arguing value versus momentum. They both work. The discussion needs to be about time frame, desired outcomes and personality.

Just a Baseball

                                                                                                   

In the top drawer of my dresser there is a baseball. I have no idea where this particular baseball came from and there is nothing really special about it. It has the look of a stadium or fast food giveaway ball as it has both the Orioles Logo and Bank of America stamped on it. I’m pretty sure my stepdaughter gave it to me but I could be mistaken. It is just a baseball. It is a regulation ball made by Rawlings. It has a cowhide cover over a cork center weighing about 5 ounces. It is 9 inches in circumference and has 108 red double stiches holding it all together. The baseball has never been winged around the diamond or smacked off the outfield fence by an enthusiastic bat. There are no scars or scuffs on my baseball. It is just a baseball that lives in my dresser drawer.

Sometimes, like now, I take my baseball out. I grip it like a pitcher and try recreating the grip for a fastball or the curveball I could never throw. I even grip it like a knuckleball and toss the ball up for a bit to see if I can get the motion correct. I flip the ball into the air and catch it and just generally goof around with my baseball. I have always loved the fell and the look of a new baseball. Sometimes I take that baseball out and just toss it up and down while I am working and that baseball and I go drifting back.

We drift back to a dusty filed in the Eastport section of Annapolis. It is nine in the morning on a summer day and already groups of boys are gathering in that field. It’s a grubby collection of boys ranging from 8 to maybe 12 years of age. They are wearing whatever jeans were on sale on Britts Department store, JC Penney or Sears. There are no cleats or fancy shoe wear and PF flyers and Ked’s rule the day on our little field of dreams. I am there with my dirty old glove and trusty bat. I am enthusiastic about the game and love playing it. I am not very good at this game but I do love it so. I can’t hit for shit although since I am ambidextrous I am equally awful from both sides of the plate. If I get a pitch right in the sweet spot of my swing when batting left handed I can drive a ball a little ways so no one ever throws it there.  On the rare occasion I pitch the game turns into home run derby time. I can play the field without embarrassing myself and I’m pretty fast for a little guy so I am not a total liability. We will be in that field until dark if our parents let us.

On  days when there were not enough kids to get up a game a few of us would grab the Wiffle Ball gear and head for the back of the Harbor House Apartments. Off the wall was a home run and only one kid could hit it. He hit it every time he came up to bat. Needless to say that kid was not me. None the less we played until the folks down the third base line had to be sick of the sound of a plastic ball whapping off the sliding glass doors and little boys arguing strikes and foul balls.  When there was no bigger game in the filed we were behind the projects playing a version of baseball with rules and quirks know only to us.

The feel of that ball in my hands with fingers properly aligned for my lightning fast 25 mile an hour fastball and I can recall as if it was yesterday being in the back yard with a pitch back net. The net was stretched on an aluminum frame with springs and had a strike zone stitched in the middle. When no one else was around, or far more likely I was grounded for some nefarious crime against parenthood, I would spend hour upon hours pitching to that machine and chasing down the returns. I was Palmer, Ford, Gibson or McNally on the release and Brooks, Belanger and Mantle on the return. I have no idea what my mother spent on that damn thing but it was the best deal she ever got on a toy.

Tossing my pristine baseball gently into the air watching the spin of the seams through the air and I am carried back to my basement room in the house on Boucher Avenue. I can almost feel those little white plastic earplugs on my highly prized hand held transistor radio. I would lay on the bed and listen to Chuck Thompson call the game aided by legendary stadium announcer Rex Barney. Those earplugs drowned out the sounds of a marriage that never should have happened coming to its harsh ending over a period of a couple of years. The sounds of the Orioles whipping the snot shit out of the Tigers, the Yankees, and the hated Boston Red Sox frowned out the yelling, the tight voiced arguments and occasional breaking of dishes or whatever else Mom chose to wing at her husband that night. Listening to the White Sox, The Indians, The Angels and The A’s go down in ignoble defeat could help you forget your sister was in the hospital with yet another asthma attack. You could escape it all as Buford , Blair, Robinson F, Boog, Robinson B, Johnson, Etchebarren/Hendricks, and Belanger used superior fielding skills and fierce bats to smote the evil opposition. Palmer, McNally and Cuellar befuddled and dispatched the opposing batters and Eddie Watt would close it out of they got tired from tossing all those strikeouts. I wasn’t supposed to stay up listening to those games but my mother let me have my little escape from it all and at some point during the night she would take those plugs out of my sleeping ears and place that little radio on the dresser. That radio had the most amazing batteries too. I had it for years and the batteries always worked and never needed changing. One suspects Mom had something to do with that as well.

As I recreate the motion of throwing across the diamond to nip the runner at first with my baseball I can remember the first time I went to a game. My friend Billy’s dad took us and no supplicant ever approached the altar of St Peters in Rome with the reverence and awe which I entered Memorial Stadium for the first time. The grass was breathtakingly green and the stark white of the baselines is etched in my mind still. Right there on the field in front of us were the Gods, legends and heroes of my youth. Andy Etchebarren hit a home run and Palmer outdueled Louis Tiant for the win against the Indians and I do not think my feet touched the ground for a month.

My baseball and I can fast forward too. We can go all the way up to 1983 to the one and only baseball game my father and I ever went to together. We were estranged for many years and not reunited until I was in my late teens. My own travels and misadventure kept us apart for several years as well but I was back from my travels and misadventures and living in Baltimore. Dad was pretty sick by then and didn’t get around so good but he scored tickets to a game that season of Orioles Magic. We sat in the first row of the upper deck and watched the Orioles come from behind in the bottom of the ninth with six straight singles to win the game. It was the only baseball game I ever went to with my dad and I still remember it well.

A few months later as Cal Ripken caught the last out to vanquish the Phillies and win the World Series I reached for the phone to celebrate with my Dad. He didn’t answer and my joy of the victory was tempered by the fact that he never would again. He had died just a few weeks earlier and we would never go to another game or talk baseball while catching a game on the television. But I have that one game and I will treasure it forever.

My baseball and I like to visit 1984 as well. My daughter was born of May of 1984 and a more unprepared scared shitless,”what the fuck to do I do with this thing” father you have never seen. Fortunately there was a bus that stopped right outside my east Baltimore row house that dropped me right at the stadium. I packed that stroller up many times and just took her to the game, diaper bag in tow, to watch the Orioles. It was on such an adventure that I learned that no matter how exciting the game you cannot just give the baby more bottles in the heat and sun when she cries. Bad things happen when you do that and then pick the baby up after the game. The upside is that when you are covered in baby puke in the heat finding a seat on the bus is not much of a problem.

We can fast forward some more to the little league fields of Arnold Maryland watching my son play ball. He was so much better than I ever was and I loved watching him play. He was all legs and elbows but had the range and glove to play shortstop like a little Belanger. He could pitch a little too when called upon. He was a tad erratic. When he was on he was a strikeout machine. When he was off he hit every batter he faced. On the upside he rarely walked anyone. Tommy wasn’t a great hitter but he was far better than his father ever was at the plate. Eventually girls, video games and other distraction of the teenage years took him away from the game but my god I did love watching my son play baseball. In my mind’s eye I can still see his bony lanky form drifting over to snag a grounder at short and start the double play.

I made my daughter play softball one summer as well. She had a skill set a tad below her brothers. She couldn’t hit, was afraid to catch the ball and ran like a very slow turtle. But Lisa tried and even made a few plays and accidentally got a base hit once. The other girls on the team were incredibly supportive and I can still see her with her multicolored braces and early teen awkwardness in her Arnold Orioles uniform giving the game a try for dad’s sake. She declined the opportunity to play the next year.

My baseball sparks more recent memories as well.  I think about taking my wife and stepdaughter to a game right before we got married. Maeve still wasn’t too sure about this whole stepfather thing but she had a ball at the game and just maybe figured out that the whole thing wouldn’t be so bad after all. Anyway she stills has the bright orange oversized foam finger around here somewhere so it was not an entirely horrible experience. She and my wife have learned to tolerate my addiction to the worst baseball team in the American League East and try not to laugh too hard at me when I am watching the games during the summer.  I am pretty sure Maeve even gave me this baseball I sit spinning randomly in the air while sitting at my desk and  she made me the Baltimore Orioles Build a Bear that sits on the bookshelf. Perhaps I am not the most evil stepfather in the history of the world after all.

Tommy and I catch a game or two together every season these days as well when time allows. He is busy climbing the ladder of success out there in the world it is nice to slow things down for a bit on a sunny summer’s eve and head to Camden yards. It is a chance to knock back a couple of years and enjoy the bonds that baseball has built between fathers and sons over the decades.  Lisa comes along once in a while but she I suspect she doesn’t have the love of the game her brother and I do and is merely indulging us for the price of free beer. Erin and I have caught a game or two over the past two years, although again she is mostly indulging her strange little husband’s love of the silly damn game.

It is just baseball I keep in my dresser. Sometimes I take that baseball out and toss it around and grip it like the major league ballplayer I never was except in the backyard with my pitch back net. I think of the lessons of the game that have translated to my life. Practice often. Run out grounders. Don’t spit in the dugout. Always hit the cutoff man except when you a play at the plate. Watch for the signs. Sometimes a bunt is better than a home. Sometimes it’s not. Keep the ball in front of you. Know the pitch count, how many outs there are and what base the runners are on. Back up first.

As I grip that baseball I think of that little boy in torn dungarees and the amazing journey his life has turned out to be. I think of the people I love and the moments we have shared along the way. I recall the joys of being at a game with friends, enjoying a few beers and the greatest game in the history of the world (in my opinion anyway). I think of my kids and my wife who indulge my baseball addiction and all we still have to experience together as a family (including the Orioles World Series games we will be attending together very soon) and how blessed and lucky I am to have them in my life. As I watch my little baseball roll across the desk after my latest error I think of all the magic of life and the pure joy that being alive can bring.

It just a baseball I keep in my dresser drawer. There is nothing special about it at all.

 I think I’ll keep it.

Leprechauns and Businessmen

                                                                                   



Saint Patrick’s Day once more is upon us. It is time for the annual Wearin O The Green and beating of the Liver. It is a day when normal people try to drink like me with all the usual unfortunate social consequences. There is no better people watching experience than a bar stool on the 17^th of March. The metamorphosis that causal drinkers experience during the day is fascinating to watch. They go from normal fun loving folks to wretched drunken zombies staggering around the bar losing friends and acquiring instant partners at a sometimes stunning pace. As bad versions of Irish classics are pounded out by a less than sober bar band your average St Pats pub goer shall swing from dancing on tables to crying over the permanent loss of 15 minute old friendships. The green beer shall pour freely and eventually be puked in an even freerer fashion. Tis a Grand Old Time Indeed. Naturally I shall be out And about again this year to take in the festivities. The Plan calls for heading to the Stil in Timonium. See you there and if you are not a big drinker bring your own puke bag and attorney. Odds favor needing one or both by nights end.

Unfortunately we are still progressing deeper into election season. The level of partisan politics that I am seeing on both sides of the aisle is a source of dismay. People of both persuasions just seem willing to accept what they are told by their party leaders in the form of TV commercials and sound bites. I really do not think that anyone reads what their chosen candidates or elected officials actually believe or do. If they did we would not have Barak Obama as a President and Rick Santorum would not be a viable candidate for any elected office anywhere, much less President. Politics have gotten dumber since campaigns started being televised and we the people appear to have stopped thinking for ourselves.  I see people on both sides blindly parroting the party line and it scares the hell out of me that they never for one second stopped to think of just how truly stupid the bulk of these ideas actually are in the harsh light of reality.

You can blame lots of people for this sad state of affairs. You can blame the politicians and their handlers for creating all the slick ads. You can blame the media for their sound bites and their bias for one side or another. Why don’t we just blame the ones really at fault? Look in the damn mirror. It is us and our apathy that is to blame to the current political situation and chaos. We voted for these idiots based on 30 second commercials and one minute sound bites. We cast our precious votes without ever investigating these peoples history, voting records or reading their speeches or position papers to garner so much as a fucking clue what they really believe . We are more worried about the sex lives and peccadillos of our candidates that their ideas on the economy, the tax code, foreign affairs not involving Brazilian supermodels, education or energy. Our government is pathetic because our people (that’s us folks) are overly apathetic.

One of my favorite memes these days is that it all the big bad business peoples fault. It is true that the big Wall Street Banks behaved badly leading up to the credit crisis but do you seriously think they did that in a vacuum? It was the government, boys and girls led by that champion of liberal theology Barney Frank, who pushed to extend homeownership to all regardless of circumstance. He and those who voted with him are largely responsible for the wild expansion of what used to be a tiny subset of the mortgage market called subprime. If pension funds and other large investors were not such yield whores in an a attempt to make up for overly optimistic assumptions no one would have ever bought those pieces of shit paper Wall Street pushed out the door. Anyone who ever read a prospectus or took the time to learn the structure of these deals would have never put their own or anyone else’s money into them. I can remember reading  Frank Fabozzis excellent book on fixed income and mortgage backed securities back in the 1990s and concluding that anyone who ever bought a derivative of mortgage backed securities should have their head examined. This was well before they even invented the more toxic offspring’s of mortgage backed securities that almost blew up the world. A little thought along the lines of this person cannot afford to buy a home now, or I do not understand this bond so I am not buying it and the credit crisis would have died before it could be born.

All of that activity was the big banks and financial institutions but the brush of blame and same has extended to all business people and that’s just foolish. I just love it when someone wearing Nike’s and J. Crew attire tightly clutching their IPad and IPhone that is hooked up to Verizon or ATT wireless lectures me on the evils of business. The truth of the matter is that for the most part businesses make your life better and their desire to make a profit actually benefits you. Apple did not become the largest company by market cap because they are soft fuzzy people who want to buy the world a coke. They are creative, ruthless business people who want to make products you will buy and allow them to dominate the marketplace. Oil companies are not the evil empire they just want to find oil and natural gas and process the stuff into products they can sell you to run your car and warm your home.  The bank on the corner just wants to take in deposits and make loans at a profit. They are quite content to let Goldman Sachs, Bank of America and Citigroup have the franchise on fucking up the world.

Harvard Business School just did a survey of 10,000 graduates on the outlook for America and our competitive state in the world. The survey is available at www.hbs.edu and you should take the time to read it as it is very enlightening. What I want to focus on is the business leader’s suggestion to improve our condition. You would expect these greedy evil bastards to say just throw out all regulation and do away with taxes and it will all be fine. They didn’t. Most of them didn’t even say lower taxes. They said simplify the tax code. They want a more sensible immigration policy to do away with the underground economy and expand the pool of legal consumers and workers. They want to see the erosion of the quality of the US Education system stopped and reversed. One might suggest that less spending on bureaucracy and a focus on the classroom might help here. The want to see government fill its proper role and improve the logistical (highways, airports and such) and communication (broadband, fiber and wire) infrastructure. They want to see the regulatory environment reviewed so they make sense for the country from a cost/benefit standpoint. Big, bad evil business just wants a level playing field that makes sense so they can make the products you use every day of your life and provide jobs. Those evil fucking bastards!

Those of you who think business is pure evil and lack compassion should take a few minute to read. Specifically read the donor list of all the major hospitals and universities in this country. Study who sponsors the symphony halls and opera companies across our nation.  Who is paying for most of those programs on NPR and public television? Whose name is on those little league shirts  and soccer jerseys as the team sponsor paying for the equipment and uniforms? Businesses.

I have some more news for those of you who think so policy wonk in Washington has the answer to our countries problems. You are dead wrong. The answer lies in four kids in a garage messing around with computer chips. The answer lies in a lab where someone is working on a way to burn our abundant coal supply in a cleaner more efficient manner, to lower energy costs. It is in an engineering office where some geeks are working to convert autos and trucks to natural gas on a widespread basis that makes economic sense. The answer is a farmer who is sitting at his kitchen table figuring out how to grow more food cheaper thereby increasing his profits and lowering your food costs. The answer to our economic problems comes from the business community not from government buildings, union halls or think tanks.

The real solution to all our problems comes from we, the voter. We, the voters, need to tell the people who run for office that we do not care so much who sleep with who or who wants to get married. We, the voters, need to tell government to do what they are supposed to do and no more. We, the voters, need to insist on a simplified tax code. We, the voters, need to insist that out government quit deploying troops to solve the world’s problems and not commit so much as one solider, sailor or marine without a declaration of war. We, the voters, need to quit asking our politicians for the solution to our individual problems and desires and ask only that they offer us the conditions to succeed (or fail) on our own merits. We, the voter, need to understand that if we elect idiots we get idiotic government.

We, the people, need to stop accepting sound bite politics. We the people need to take care of the disadvantaged in our community and quit asking the government to do the job. We the people need to stop being so damn narrow minded and judgmental. We, the people. need to stop insisting everyone else look, think and act like us. We, the people, need to embrace the outdated ancient concept of personal responsibility. We, the people, need to once again act like American and not chickenshits who can’t wipe their own ass without government assistance and instructions.

Now Saint Patrick’s Day is upon us. Like a good American consumer I am off to the bar owned by a business man who shall sell me intoxicating beverages at a fair price in an effort to earn a fair profit.

                                                                                            

The Art of Doing Nothing

The hardest thing to do is nothing. I don’t mean that personally of course because as the butt indentations on the couch will attest I am a pro at the weekend nothing. I can sit like a statue with a book and a ballgame for hours and accomplish a glorious rousing round of not a damn thing. If I smoked inside and could train the dog to fill a wineglass I could do nothing for entire days without a second thought. I have never been one of those who thinks every moment of every day must be filled with some productive activity. After all as Nietzsche warned us excess productivity can bring the most gifted man to madness. In the interest of maintaining sanity, I loaf. If loafing with no particular intent was a sport I would be an all-star.

However in the stock market many of us find it impossible to do nothing. After all the markets is open, I should be do something. I am getting tweets about fantastic trade set ups and my Facebook page is full of incredible cannot miss ideas. The talking heads on TV are raving and ranting about undervalued stocks, earnings expectations and squiggling lines crossing over scraggly ones. There is all this madness swirling about and I AM MISSING IT. Victor Niederhoffer has often told me of studies that show that the average investor, much like the average gambler loses far more money or underperforms far more than they statistically should. The inability to do nothing when nothing is called for is chief among the reasons for this excessive failure.

Right now is a prime example of the time to do nothing in my opinion. If you were paying attention you were buying when the market sold off in August and September. We  were buying some of battered foreign banks like Royal Bank of Scotland (RBS) as the market was in mini meltdown mode. We bought shares of Granite Construction (GVA) when it traded below book value. I added heavily to our private equity bank plays as the prices cracked across the group. I was a scale buyer of shopping center REITs like Kite Realty (KRG and Cedar (CDR). Hotels got cheap so I added to Sunstone Investors (SHO) and Felcor Lodging (FCH). I had below market ordersI on microcap net- net stocks like Lakeland Industries (LAKE), Gencor (GENC) and Air T (Air T) that were filled. The news was universally bad and people were panicking out of some stocks creating what I felt were safe and cheap opportunities.

Back then the news was universally bad, Europe was in shambles, the mid-East was in full disaster mode, and there were still a few folks in nice suits talking about a double dip recession. Volatility was rising for much of the time period and the VIX index traded between 30 and 45 for most of that time frame. Selected stocks were cheap and option premiums were fat so it as a time for a value guy like me to be buying stocks and selling puts. Although I probably retched over the garbage cans a few times as I entered the orders I was doing just that. It was a time to be busy, a time to do stuff when you sat down at the desk in the morning.

Fast forward to today. The economic news is better and stocks have rallied sharply off the lows by more than 20%. The deep value stocks I was buying them are up a huge number almost across the board with gains of 25%, 50% and in a few fortunate cases even more. We had a flurry of takeover activity in December that made me look a lot smarter than I really am.  Buyers have emerged in the market and things have calmed down quite a bit. The volatility index has been in a steady downturn and as my good friend and technostat geek extraordinaire Tim Collins points out is now barely old enough to drive at 17 and change. Just six months later as far as the stock market is concerned it is a whole different world.

So we should sell right? God knows I could give you a host of reason to do that. Europe is still a mess. The economic news may be better but it is still not good. Earnings are marginally okay at best. The Mid East is a hot mess with multiple balloons trying to go up. Oil is over $100 and that will be a drag on the economy no matter what economists who live in the city and haven’t owned a car since they sold their Edsel have to say on the matter.  The election rhetoric is heating up and it is going to get worse before this debacle is over in November. The market has risen sharply and deep value stocks have led the way with huge gains over that time. If I was hedge fund manager I would probably close for the year, book the fee and head for the islands.

However if we look at the market since the first of the year it is in a nice tight orderly uptrend. Central banks the world over are flooding the financial markets with excess liquidity and in any country that you might consider lending money, interest rates are very low. That does push cash into the market. When I crunch the numbers on most of my stocks they still trade below book value or have very low Enterprise Value to Ebitda ratios. We are in that middle zone of the market where it is too late to buy and too soon to sell. The hardest thing to do is to ignore the tweets, the posts and the talking heads and just do nothing but that is exactly what you should be doing right now.

Since the first of the year I have been refining my art of doing nothing. The only real activity I have engaged in besides working with limited success to sell a few (hopefully) overpriced puts in freshly rebroken stocks like Radio Shack (RSH) and SUPERVALU (SVU) is in the natural gas sector. Even that activity has been limited. I picked up a little Penn Virginia (PVA) because in spite of some fleas and bugs on the company it is stupid cheap. If management can successfully transition to more production from oil and liquids and hold the shuttered gas properties as a natural gas call option  the stock price could easily rise by several multiples over the next few years. I also added a little more EXCO Resources (XCO) on the dip. This is a Wilbur Ross stock and I have never lost money in a Wilbur deal in more than 20 years of following him into stocks. I have puked a few times along the way but I have never lost money buying a deal Ross was involved in when the shares traded below book value. Add in the fact that Howard Marks’  OakTree Capital is in  the stock and Boone Pickens is on the board and two things are obvious. The stock is cheap and I really must make it a point to go to the annual meeting with this cast of characters involved. Beyond those nibbles I am doing my best to do nothing.

While I am doing nothing I am spending a lot of time thinking about natural gas. This could be the next big inverse bubble. The price of natural gas is at the lowest level in many years and prices have fallen quicker than the Orioles in August. I talked to some friends about the situation and its causes  in an effort to learn more. The best technical answer is that we used to have a shitload of gas in storage and in the ground and we now have about ten shitloads of the stuff. There are a variety of reasons for this ranging from weak demand due to a weak economy to innovations such as fracking that allow gas to be produced in means and locations formerly not possible. Many leases which have been signed in recent shale fields require drilling activity be continuous or you lose your lease and investment. In some cases gas is a byproduct of drilling for more profitable oil and liquids and you choices are to store it or burn it off. The bottom line is that there is a lot of natural gas and this is going to keep prices low for now.

The flip side of that is that low prices will eventually spur demand. Utilities that burn coal face increasingly stiff regulations and costs. Using coal to provide power is about as popular as herpes and  LeBron James in Cleveland  right now. Many of them will simply turn to gas as a generating fuel. Power plants for other large scale industrial operations re going to increasingly turn to natural gas a power source as well. Low price often creates its own demand. At the same time low prices can and does curtail production. Many companies are cutting back gas drilling operation to the bare minimum and concentrating on the more profitable oils and liquids drilling activities. At some point in the future the lowered production and higher demand creation will meet on one of those curvy lines economists love to draw and prices will begin to firm.

This is starting to show up in some of the natural gas exploration and production company stock prices. These firms are losing money in the current environment and investors are starting to exit stage everywhere. I am not yet seeing a plethora of companies in the space trading below tangible book value yet  but I expect to as we get further into 2012. I mentioned EXCO and Penn Virginia as two I have already purchased and I expect the list to grow over the next several quarters. This is going to be another one of those long term takes forever “holy sit we had a bumpy ride but made a lot of money” investments but for right now it is very early. The right thing ot do here is watch learn and do nothing.

The other thing, what it with being almost Spring, that I spend my nothing time thinking about is the Baltimore Orioles.  They have taken an interesting approach to their pitching problems this year employing something I like to call the Bear Stearns approach. Much as the late lamented firm did with mortgage backed securities they have taken some low A rated pitchers , some B ratings with upgrade potential, some unrated foreign hurlers, thrown them all in a pile with the hopes of emerging with a AAA rated staff that can compete in the AL East. I doubt that it will work but it is probably going to be fun to watch. If Arreita ,Matusz and Britton can bounce back and turn their rare moments of brilliance into sustained solid pitching and the kid from Taiwan  can pitch in the Majors they may be able to fight towards break even.

We have a lot of question around the rest of the diamond as well.  How long will it take Markakis to heal from abdominal surgery? How does the Brian Roberts saga play out this year? Does Mark Reynolds offseason weight loss lead to a higher average and better fielding or does he still strike out a lot, suck in the field and just lose a crucial 10 feet from his power swing? Does Weiters finally turn into a .300 and 30 hitter with 100 RBIs  in addition to being one of, if not the best defensive catcher in the game? Can Chris Davis really play this game and be the power hitting first baseman we need?

The team will probably be just as bad as years past. I am not going to make my usual predictions that we get to .500 this year as I am just plain old fucking tired of being wrong about this team. I will still be a die hard fan, I will go to games. I will enjoy watching guys like Wieters, JJ Hardy and Adam Jones play great baseball. I will watch the games every night I can on TV to wife’s dismay.  I will probably show up for Opening Day if its possible around my schedule these days. I love the Orioles and always will. I just am not going to expect much from them this year.

We continue to settle into new life in The Burn and being close to downtown has its benefits. For one thing it will now be a lot easier to go watch the Orioles lose games. Little Italy is just a few minutes away as is the Capital Grille. The Book Thing (http://www.bookthing.org/) is now a pop in the car away and not a half a day endeavor.

We have found some great places right around the house as well. Mikies and Willies are both first class dive diners with all the fine tasting grease, gravy and great service an aficionado of such establishments such as myself could want. We like Two Rivers Steakhousea lot but as Yogi Berra once observed “that place is so crowded nobody goes there anymore.” We are HUGE fans of the Mutiny Pirate Bar http://www.mutinypiratebar.com/  ) here in Glen Burnie. Great food, a variety of fresh oysters from different locales, fantastic servers,  a commitment to having Orioles games on TV, a world class list of rums from around the world, a wide selection f Caribbean beers like Kalik and Presidente as well as a dead pirate with a drink in his hand at the bar. It is everything I need in a local joint.

All is well with the world at the moment. The kids are good, the son was promoted to a new store, the daughter is soon to graduate at long last after scoring in the upper upper 90 percentile on the Praxis certification exam and my stepdaughter is acing school and planning the birthday, although after an unfortunate bathroom episode she has developed what she informs us is “lockedinaphobia.” The wife must still love me as she has not killed me in my sleep yet. All is good and getting better.

I swear I will get around to the book reviews soon but for now I am perfecting my success as an investor. I am practicing what I preach and doing nothing. The couch awaits.

Valentines Day Observations

Okay I will say it. This whole Valentines thing is one whacked out holiday. In fact although am sure I will get in trouble for saying it, it is fucking ridiculous. We take some obscure Catholic saint and turn this into a windfall for candy and greeting card companies. Bars and restaurants love the holiday as well as they are either serving the left over shit in the walk in as a high priced prix fixe dinner for lovers or serving drinks to singles who were fine yesterday but now incomplete because they haven’t found their Valentine yet.  Of course we excel at making stupid holidays out of nothing don’t we? Take St Patrick’s day, again a minor saint,whose feast day is used to prove that all races, religions and ethnic groups can puke green beer and rail Irish whiskey just like a real Irishman. Cinco de Mayo is another great one where we all drink beer made in St Louis in a brewery owned by a European company to celebrate a minor victory by the Mexican Army. For gods sake they beat the French so its not like they even beat a real army. But we do excel at producing a holiday from minor stuff and turning it into a celebration of excess. But Valentines Day takes the idiotic stupid fucking holiday crown.

It is not enough for all of us to take this day and force romance on our partners to the point where the search for the perfect card of gift becomes so stressful we don’t love anybody by the time its done. No, that is not enough. We take all this stress and pressure and shove it down our kids throats. My poor wife sat at the table last night stuffing treat bags and valentines cards into bags for her daughter to give to the 30 some kids in her class. We take this day and use it to teach our kids how not getting a card from some kid you wouldn’t say hello to yesterday can ruin your whole damn day. They give little cardboard love notes to other kids, many of whose last names they could not spell on a bet. Your entire social standing becomes related to what kind of cards and candy you give. Just to make sure its not exclusively painful to the kids they send us home notes to bake cookies and cupcakes for the absurd over the top unnecessary celebration of a day none of the poor kids even begins to understand.

Its not that I hate romantic.  I guess its for my wife to judge at the end of the day if I am romantic or not but I like to think so. I come across as a cynic at times but I often take an overly romantic view of the world. I love sunsets, soft jazz and walks on the beach and all the other stuff that is thought of as romantic. I love the romantic moments of life, I just am not sure they should or can be scripted or scheduled. I am also aware that romance is one of those things that needs to be practiced and appreciated every day of your life or it doesn’t mean a hell of a lot. If your courtship of your spouse or significant other comes to down to one frenetic day of searching for the perfect combinations of mylar balloons and recycled greeting cards you have problems deeper than the special dinner at Mels diner is going to fix.

Yes, romance is sailing ships and knights in shining armor. It is magical kisses under the moonlight. Its dinner on the beach at Casa Marina in a soft Caribbean breeze. Romance is shimmering moonlight on crashing waves and wishing upon a late night star. Romance is dawn in the keys at a little motel on the beach. It is candlelight and roses with Mozart softly in the background. It’s all those things and more.

But romance is far more than that. It is not stabbing your husband in his sleep when he snores. It is walking your wife’s dog although you are ambiguous on dogs in general and vehemently opposed to picking up steaming piles of shit first thing in the morning. It is taking your turn with the crying child in the middle of the night. It is letting your husband sleep in even though you have been up since six am and cant for the life of you understand how that lazy bastard can sleep until 9:30. It is making the coffee the night before so it is ready when your significant other gets up . Its Mac and cheese for dinner because there is a recital at the school and only half an hour to get ready. It’s not getting too mad when he stayed at the bar far longer than the game was on. It’s an oil change in your spouse’s car .It is loading the dishwasher. Its sharing the remote. Romance is all the moments of all the days you spend together living and enjoying life. It is all the little things we do and say each and every day to let our partners know they matter to us and we care about their day, their life, their thoughts and feelings. Romance can be magical moments frozen in time .It is also the everyday lived in the moment with each other. I do not need Hallmark to remind me to tell my wife I love her. I try to find some way every day to show her. That is romance.

Of course I participated in the day. I love my wife too much for her to have to spend the day explaining that her cynical mean ass husband doesn’t give a rats ass about Valentine’s day. I sent flowers and a teddy bear to her office. I was going to make a special dinner but true to her Texas roots she requested steaks on the grill. I will love our evening together. But I will love our evening together tomorrow when there is homework to get done and the dog is chasing the cat to hell and back , the dinner dishes need to get done ,my daughter is cheating at words with friends again and I want to watch Finder but my bride is hooked on the Food network just as much.

Moments are nice. Life is better.

Another Year Gone By

Okay let’s get it out of the way. A lot of bad shit happened this year. The IRS came calling with a vengeance, the reorg at my biggest contract cut compensation, the Orioles sucked, Gary Williams was forced out Willie Don died, Kentucky lost in the final four, the Fed continued its horses ass economic policies, the troops are still in Afghanistan since nobody in the defense department has actually ever bothered to read a history book or Kipling novel, Navy football had a losing season (even though Corban and Mr. Earle you will note that we did beat Army AGAIN), I didn’t make it to Chicago or Lexington all year, the drink tax passed in Maryland, Arab Spring became a Muslin extremist nightmare, Obama is still President, people still care about Lohan and the Khardashians, Christopher Hitchens, Joe Frazier and Al Davis died, there are no more Harry Potter movies and there is a Justine Bieber singing toothbrush going off in my house every morning. You could add all that up and say that 2011 was a less than wonderful freaking year.


Except it really wasn’t. Any year that ends with most of us still here is a good one. Truth be told viewed through the lenses of experience it was a pretty good year. For reasons unbeknownst to me my wife still loves me and has been a rock as I dealt with some of the weirder things that fell down on us this past year. My kids are all doing well and moving forward with their lives and occasionally grace us with an appearance on weekends. Both are working hard towards what they want out of life and for the most part succeeding. There was wine, there were books to enjoy throughout the year. There has been music and food to savor. There is love, family and friendship, magic moments and contented days of doing nothing. There have been setbacks and disappointments but that’s just life. It happens. You can whine or you can live.

Had enough of the syrupy stuff? Me too. Let’s now move on to some of the important stuff like sports markets, books and maybe even politics as we roll into years end. I ll start with sports and Maryland basketball . Forcing out Gary Williams was criminally stupid. The guy is justifiably a legend and belongs on the bench calling the X’s and O’s. They should have gone out and hired two or three great recruiters to offset Gary’s weakness in that area but as usual the powers that be neglected to seek my advice in the matter. What we have now is a lot of raw undisciplined talent (the kind Williams excelled into making into winners) that is struggling to beat the small schools and stands a significant chance of getting their boy parts kicked through their earlobes when ACC play starts next month. It is hard to watch so I have not so far. Thank god I picked up a liking for Kentucky basketball. I will add that to the list of favors owed to Colonel Depew. Omid and I tried to offset our sports pain by becoming Knicks fans but the early season has me questioning that decision. Go Big Blue is my motto.

The Orioles have done it again. They raised my hopes and then exceeded even the lowest expectations you could have possibly had for the team. The change in general managers does not make me much more hopeful looking forward to 2012. Our position players are not bad at all and JJ Hardy is a diamond in the rough as far as I am concerned. A decent shortstop with power is a blessing in baseball and the guy plays with heart. Weiters is the best defensive catcher in all of baseball and the bat is getting better. When his rookie contract is up the guy will become a legend in pinstripes. Jones and Markakis get the job done day after day. I love Reynolds all or nothing approach to hitting and it works for him. The team is one more big bat away from being a real team. That is if you don’t have to have pitchers. The mantra every year is that the young arms will get better. Every year the young arms sink to depths that would make Jacques Cousteau blush with envy. I will still root for them since that blood does indeed run deep but damn it can’t anybody around here throw a fucking strike that stays in the ballpark?

We will find out what we need to know about the Ravens tomorrow. They have been great at times and at times looked like they forgot what game they were playing. Much like me without a few cocktails this team just does not travel well. If they go on the road and beat a desperate Bengals team they have a real shot at the Super Bowl. If they don’t then figure they will get an ass whipping on the West Coast in the first round and head off to practice their golf game. Either way it’s an 11 win season at least and a lot of fans in other cities would kill for that.

This is of course the time of year for stock market and economic predictions. I love it when the pundits and other assorted idiots make such confident predictions about the next 12 months. These shit heads are never right but they are loathe to let a little thing like inaccuracy stop them. No one knows for certain what the market will do next year. This year is probably worse than others for making predictions. You have some serious wildcards out there in the form of Europe and the Mideast that could change the game in a blink of any eye or detonation of a really big bomb. The political and fiscal situation here at home is muddled to say the least and none of the real negatives are fixed.

The two things to focus on are jobs and real estate and both are still weak. I love those who cite the reduction in the unemployment rate as a sign it’s getting better. Unemployment has improved by about 10% or so this year. Surprisingly that’s just about the number of folks who said screw it and quit looking. Reducing your work force is not really an effective job creation tool in my opinion. Reading over the releases and the Beige book this year it looks to me like job creation is anemic with a few signs that it may get better next year providing nothing else happens to derail the economy. You can cite all the stats you want all day but the fact of the matter is that demand for food banks and other relief agencies is rising and that’s not happening because of robust job creation. Call it anecdotal if you like but I see a lot of people out there who cannot find jobs that do not involve smiley face name badges and an inquiry as to your preference for fries or not.

Real estate has pockets of strength in areas like Washington DC, Boston and New York. The financial services industry in the form of big banks and bigger government is cranking along on all cylinders and that has propped up real estate in those areas. However the most recent Case Schiller report shows that housing prices are still falling across the nation. As the robo signing and other legal issues are settled we will see a wave of previously stalled foreclosures take place early in the New Year and that is going to increase pressure on prices as well cause a spike in the supply of distressed properties. The good news is that this could finally put a bottom in place for housing prices once this new wave of properties finds a market clearing price level. On the commercial side the Moodys REAL CRE Index is bouncing along the lows as well as firmer pricing in apartments has helped commercial values. Hotel, retail and industrial property pricing is still very weak and is not going to improve much until the jobs market and economy begin to improve markedly.

The good news here is that this is great news for us vulture investors. I have ben suggesting many real estate securities over the past year and I think that these can still be bought. 10 years from now the real estate that you buy today in the form of publicly traded securities can change your life when the economy improves. I have been buying shopping center REITs like Kite Realty Group (KRG) and Cedar Real Estate (CDR). We are paying a fraction of book value of these two operators of grocery store anchored shopping plazas and enjoying decent dividend payouts while we wait for the world to improve. I like hotel REITs as well and think names like Sunstone Hotels, (SHO) , Chattem Lodging (CLDT) and Chesapeake Lodging (CHSP) are worth owning as a long term play on a recovery in the hotel industry. For office and industrial properties I am a fan of Commonwealth (CWH) as they move from suburban of urban properties in their portfolio mix and Prolodgis (PLD), a global owner and operator of industrial properties. Be smart and patient with buying real estate through the exchanges. Buy when the news is bad and the market is down to gain a long term edge.

In mortgage REITs I like the idea of owning best in class Annaly Capital (MLY) along with research driven non agency mortgage buyers like the Wilbur Ross advised Invesco realty and the hedge fund like Ellington Financial (EFC). Be double smart buying these REITs. They are seeing pressure on their spreads as fiscal policy keeps long rates artificially depressed and the headlines and short term results could pressure prices. When everyone hates em, you buy em.

Let’s move onto international banks. Either the world ends or they recover. I have no intention of buying the problem children of Italy Spain or Greece but I do like Royal Bank of Scotland (RBS) and Bank of Ireland (IRE) among European banks. I am also a fan of Aegon (AEG) the Dutch insurer. I like and own two Japanese banks that sank in the aftermath of the nuclear disaster in that country .Fears of a total write-off of Tokyo Electric bonds and a weaker economy pressures shares of Mitsubishi UFJ (MTU) and Mizohu Financial (MFG) to a point where I consider them too cheap not to own. Please keep in mind that unlike some who claim to be, I really am a long term investor in these situations. I hope to own them for a decade and only sell them at many times the current quote to fund my semi-retirement.it will be a bumpy ride and if you care about the day to day or quarter to quarter quote you may not have the stomach for these.

This bring us to US banks. The smaller regional and community banks are as cheap as I think you will ever see them If you are not friends with your local bankers and getting the low down on who survives and who doesn’t you are making a he mistake. Many of these trade at less than 75% of tangible book value and new regulations and expenses will force them to put themselves up for sale in the next few years. This will occur at a multiple of book value, not a discount as they trade at the current time. I don’t give my names away in this space (although I will happily sell them) but if you were to assemble a portfolio of banks less than $100 million in market cap trading at less than 80% of tangible book value and tangible equity to asset ratios above 10 along with Non performing loans less than 3% of total loans you will be a very, very happy camper in 5 years. Do your own work or send me a check.

Speaking of cheap I also like some net net and net cash stocks as we head into the New Year. These bunny hop stocks tend to be very boring little companies until they get taken over, reorg or management decides to unlock the value of the balance sheet as a result of family needs or activist pressure. It’s a diverse little group of companies. Envirostar (EVI) is in the laundry business. Air T is in the air delivery game with a long term contract with Fed Ex. GTSI (GTSI sells IT products to the Feds. Gencor (GENC) is in the asphalt and highway construction game. TSR (TSRI) is a computer programming outsourcing company. Lakeland Industries (LAKE) sells safety garments. These stocks will bore the hell out of you until the day they do not. They are not really long term holds either. When they pop up 50% or so its usually best to sell them and move on to the next. There are, of course exceptions to that rule but for the most part these are just okay businesses selling at really great prices.

There is going to be some other stuff to do next year as well. Microcap risk arbitrage especially in the small bank sector looks like it is going to be fun again. Eventually we will see a selloff in junk and bank loans that makes that a worthwhile activity once again. Tracking private equity moves into the banking sector should also be a profitable activity. We should see activist begin to clamor after all that lovely cash on corporate books in 2012 as well. We will talk about those when the time is right, For right now I am a cynical optimist going into the new year and only want to own the stuff that is really, really, not really cheap.

I am just going to do a drive by on politics for now. There will be lots to talk about in 2012 as the election will be hard to escape. As it looks now the republicans have blown the opportunity to unseat the current President. Rather than forming ranks behind a young(er) candidate without a long history in the inside the beltway like Huntsman, Santorum, Johnson or Jindeau they have turned into an 8 way circus. Rather than going after the president they have turned on each other and attacked like a pack of wolves in a room full of fat chicks wearing Gagaesque meat suits. Note that I am not dissecting the merits of any of these gentleman, just noting that was the way to win. They should have put Obama on his heels and kept him there. As it is now they are merely giving some very street smart Chicago Pols around the President ammunition to stuff down their throats in the fall.

In Congress I expect the partisan bullshit and bickering will get worse not better The only upside of the current mess is that it moves us ever closer to that time when Americans set don’t the Bud Can, turn off the Simpsons and recognize that we truly are going to hell in a hand basket at almost every level of American politics. I have no idea how many more gas tax increases, per drink liquor taxes, eat the rich wealth destroying measures, or dead American men and women lying in the sands of some god forsaken hell hole but it comes ever closer. Until then we can only wait and endure the foolishness that is modern American politics.

So, tomorrow marks a new year. You don’t know what will happen in the next 266 days and neither do I. There will be disappointments, there will be tears. Shit will go wrong. There will be disasters and losses. The Orioles will suck. Some trades will be losers. But there will be good times too. There will be family and friends gathered around the proverbial table with wine and laughter in equal parts. There will be romantic nights and lazy afternoons. There will be new books that entertain and educate (yes I know I didn’t cover books or music here. There was so much good stuff and new discoveries this year I will do a separate piece in the next few weeks). There will be afternoons at the ballpark with cold beer. Some of your portfolio companies will get taken over at a stunning premium.

This year , like any other year, will be what you decide it will be. You can enjoy the amazing things life has to offer and enjoy all the really great shit about being alive or spend all year bemoaning the little things you don’t like and bitching about the people you do not like. You can, as Baudelaire advised, be drunk in life, on wine, on beauty or you can be just another dumbass teetotaler shuffling towards the grave. I made my choice a long time ago deciding that I would stumble into deaths waiting room proclaiming the joy of the ride rather than bemoaning the misery of it all. You choice is up to you.



Good trading, smooth seas and Happy New Year to All.

Regrets? Too few to mention.

What do we regret as we lie on the proverbial bed awaiting the last gasp that marks our passing from this realm? It is a great question and one I have spent some time thinking and reading about over the years. How do we live our lives to minimize the regrets as we anticipate the end of our earthly experience? Is there some magic formula we can all use to make sure that we pass this live with as few regrets as possible?


A few years back I read an interview with a hospice worker on this very subject. In her many discussions with those about to pass through the door of life she found that most people regret the things they did not do far more than the things they may have done. Regardless of their crimes and misdeeds throughout their life their regrets were about not taking that trip, not kissing the girl, not chasing their dreams and not being who they wanted to be as they took their journey.


It is quite correct to point out that the whole wishing you spent more time with family and friends and other greeting card sentiments is probably a cliché of sorts. While there are not many headstones that say I wish I spent more time at work it is also true that very few of us actually pick our own epitaph. I am quite sure that many do pass those last hours wishing they had been better husbands, wife’s and parents. I am also sure many spend their last hours wishing they had done more with their careers, their business and professional life. We are all different and as much as we live different lives we will have different regrets as we approach our individual deaths.


The real regrets come from the fact that far too many of us do indeed live lives of quiet desperation. We are born, go to school, get married, have a family, get divorced, work at jobs we hate, raise kids we don’t understand, settle for less than we dreamed and do what we think we are supposed to do along the way. Our lives get shaped by television and pop culture and we drift along on a sea of conformity and apathy. I see it every day and I am sure the rest of you do as well. We all start out with dreams, hopes and desires and somewhere along the way let go of them to get along as best we can. I have yet to talk to a recent college or high school grad who told me they were going to get a job they hated, have a couple of kids who would stop talking to them in twenty years, spend thirty years drinking bud and watching Survivor reruns before dropping dead mowing the lawn in a house they hate while their ex-wife spends their hard earned retirement funds on a cruise to Cancun. I have however talked to a lot of folks my age whose life has played out exactly that way.


How the hell does this happen to us? We start out full of fire and hope. I never met a lawyer who planned to spend his years getting his soul crushed as a mid-level associate or a doctor who planned to spend a few decades doing colonoscopies at the VA clinic. We all want to change the world, to get rich, to create great art and chase big dreams as we start of the path of adulthood. None of us start out to become what so many of us do.


Little boys dream of being the star center fielder and or the hot gloved third baseman with the big bat not the backup utility infielder. Little girls want to be the prima ballerina or the singing star with the big hair and bigger voice, not the back up chorus singer. We all have the big dreams and hopes as life begins. That of course is much of the problem. We cannot all be the star we hope to be. If that was true I would currently be managing the Orioles after a long career as the much loved replacement for Brooksie on third base. I am not. I love baseball but I am about as athletic as a door stop. Never mind a curve ball I couldn’t hit a little league non fastball. Cant sing, cant dance and the only thing I can do with a paint brush is make a mess. I was never going to be a star ballplayer or artist no matter how much I dreamed.


This can be crushing. We get into the world and find out bills need to be paid, food costs money, bosses will work you into a nub of yourself without so much as a thank you or a fuck you. The world does not care about you or your dreams and no one was sitting around anxiously awaiting your arrival on the scene. You take a job to get by and next thing you know you are sitting in La-z- Boy bud in hand noticing that the only thing more absent than your hairline is your happiness. It is too easy to let live dictate you instead of you dictating life. You have to be vigilant to protect your passion and your dreams.


I can dream with regret of not being the hot handed third baseman and the world’s greatest baseball manager or I can love the fact that I can be a fan and sit in the stands on a summer day with a cold beer and a scorecard. I can bitch and moan about not going to college and maybe going to work for Goldman Sachs or even better the New York Times or I can love the fact that I am a pretty good writer and decent manager of investments and have managed to build a life around those two facts. I can spend my days wishing this or that or I can love what my life is and the fact that I have chased my dreams and made pretty good headway towards achieving parts of them.


Often life is just not going to go the way we want and wish. This does not mean that life cannot still be magical and absent of regrets for the most part. Even if life has forced you into circumstances you never wanted and instead of being the accountant that saved the world you are an IRS auditor does not mean that all the things you love and desire about life are gone. IRS auditors can still listen to Beethoven, watch sunsets, fall in love (just not with my daughter please) and appreciate the beauty of life. Just because you are selling Fords instead of driving one to victory at Daytona does not mean that life is not capable of being a beautiful and wonderful experience. There are still books, knowledge, music, art, and other parts of life that can produce great passion and meaning.


Life is precious and as far as we know we can only have one of them. We have to protect our passions and no matter what life deals out stay focused on what we love about living. We will all screw up along the way and it is probably not going to work exactly as hoped as we crossed the stage to pick out diploma. That does not mean we need to just lay down and accept what comes along the way and miss out on the adventure. So having kids kept you from going to Tibet and contemplating the navel of a Yak in search of the world’s great answers. You can let that beat you back into the chair and take in Snookies latest adventures or appreciate and love the fact that you have the chance to mold the spirit of adventure, love of beauty and learning in your kids and share the adventures with them as they grow. So you are not Clarence Darrow and the superstar of the legal world but to those you help on a day to day basis you just might be.


The problem with many of us is letting fear dictate our actions, or more accurately our inactions. Just because we got divorced or had a bad relationship does not mean we should harden our hearts against the possibility of love in the future. Just because our Fried Liver Chips franchise idea failed does not mean we should never explore another opportunity. If your first novel is rejected you have joined than ranks of just about every author who ever lived and it’s not a reason to set down the pen and turn on the TV. If you are not the star learn to appreciate and live the fact that most people never even make it to the chorus. Chase you dreams, your passion and enjoy where it takes you.Life will give you a lot of choices and paths along the way. I promise you life will give lots of chances to just quit. You will not be able to hit the curve ball. You voice will sound like amplified sandpaper scrubbed on cement. You will not promoted to department head. Someone you love will not love you back. It is not all going to go your way. It will be easy to quit. If you do you will spend those last days and hours thinking of all the things you did not do and struggling to remember who was the last one voted off the island.


I think the key to no regrets is to embrace the romance and beauty of life and to chase your dreams and your passions. You may not get all you want but there is a good chance you will get the life you want. Read the book, turn up the music, kiss the girl, take the chance. You will win some, you will lose some. But the dream come true really is the journey and adventure of it all. Don’t, as they say, sweat the small stuff because its all small stuff. If you want to spend more time with your family then do that. If you want to spend more time building your company, then that’s how you should spend your time and energy. It is your life. Live it. Then perhaps you can be able to die without regretting the choices you made along the way









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