Yes Virginia, there is a spec list.Your little friends are wrong. They have been affected by the mindless prattle of the media and the hordes of salespeople pushing inferior products and approaches to markets and life. They do not believe what is not from the lips of maria or cramer. They think that nothing can be which is not spoken on television or delivered in 4 color glossy brochures. They would have you believe, Virginia that all minds are little and that eagles are earthbound. Unfortunately in this great universe of ours, with virtually limitless knowledge available merely for the price of exploring, there are way too few willing to invest the effort and time to develop the intelligence needed to even begin to grasp the wonder,beauty and magnificent nature of the world we live in. There are a few groups of men and women who investigate, read learn explore, test, count and celebrate their discoveries.The spec list is such a place.
Yes, Virginia, there is a spec list.
It exists as surely as the market opens at 9:30 and bob prechter is bearish. The open discussion and exploration of markets, of books, of music, horse racing , math of a higher nature, and of course BBQ. How dreary the world would be if we didn’t have such discussions, if we didn’t count out our theories and swap ides with some of the best minds of the day.It would be as dreary as if there were no virginias or victors. There would be no boundless optimism, no randian faith in ones own ability to achieve ones dreams, or to recover from whatever disaster life might throw our way..as dreary as if there were no voodoo profs with bike rides and bqq lessons, no yale with silly jokes and beautiful stories, no mr e with ice cold logic and liberal baiting, no wizz with constant technical advice and back door one liners...no crossman to drink with and tell stories late at night, no omid to assess the middle east for us,no david hillman to laugh at my stupid jokes and look like kenny rogers, no jack to bring his years of experience to bear as the prez of the club...no book ideas, or musical suggestions, no trading and investing discussions, ..no bbq recipes from higgs and mcnabb...we would have no enjoyment and learning save what we found on our own The eternal light with which the search for knowledge fills the world would be extinguished.
Not believe in the spec list. You might as well not believe in ben franklin.You might watch for us and not see us, but that doesn’t mean we dont exist. At the soldiers and sailors club at 37th and lex, the starbucks on rush street, the shanty on the edge of the chesapeake, the inside rail at keeneland, in the university libraries, on the squash courts and football fields,atop floats in the mardi gras parade,hunched over chess boards and checkers games, in front of bloombergs and pcs, we are there.Just because we are not on morning squawk or paraded through barrons every Saturday does not mean the list does not exist. The lack of full page ads touting the spec list in technical analysis of stocks and commodities does not mean the speculators of the list are less real.....just that they toil and explore out of the public eye with no desire to tout their success.
You can explore the meaning of life and markets and never discover it if you stay among the accepted readings and viewings. The writings of the abelsons, the magees, the oracle of omaha and other such, along with the talking head prattling of cnbc, cnn , the false gods of technical analysis and friendly trends are places where many search for the rhyme and reason of it all. They ignore louis l amour, patrick o brien, francis bacon, they setle for the background noise of endless disagreeing commentators instead of beethoven, bach, gershwin,coltrane. They look for life’s secrets in tuedays with morrie and dr phil, ignoring cervantes, shakespeare and galton. Only faith in ones self, an unending quest for knowledge, an appreciation of the beauty , wonder and romance that is life, a belief in the markets and a free society to unlock the secrets of it all. An open mind, a searching heart, a hunger for knowledge, a desire to succeed and an ability to get up from life’s little failures are the hallmarks of the spec list. Is it all real?..Ah, Vrginia, there is nothing more real abiding and meaningful in the world than the quest for knowledge in the company of friends.
No spec list? Thank whatever god you do or don’t believe in that there is and those of us fortunate to belong have expanded our knowledge, gained friendships to last a lifetime a source of inspiration, poetry, market knowledge, poker and horse racing strategies, music and literature..and of course BBQ. We probably cannot claim the 10 times 10,000 years the new york sun granted santa, but hopefully it endures as long as minds search and hearts hope for a better, more meaningful life. So long as knowledge is discovered and shared, music inspires, books enlighten and bbq is eaten, there will be a spec list.
Happy holidays
Each year at this time, I take a shot at warping yet another holiday tale into a speculative fable, and this year shall be no different. We have in the past twisted the night before Christmas and yes Virginia there is a Santa clause with mildly amusing results and so the tradition continues.This year we shall look a the holiday classic ‘it’s a wonderful Life”. As you surely recall in the classic film, george baily in utter frustration over the trials, tribulations and broken dreams of running a small savings in loan in Bedford falls decides to end it all by leaping off the snow covered bridge into the turgid icy water below. At the moment before his final, fatal leap, Clarence the angel shows up to save him, showing him how much better the world was with george a part of it, and the difference he made in so many other lives….
Join me now as journey to the bridge, a lonely speculator, staring into the icy waters, contemplating the leap. Tired of the long hours, the pressure, the constant stress, the loneliness of fighting the market mistress, he takes one last long gulp from the Maalox bottle in his jacket pocket and climbs the rail to take a final plunge….enter our angel one Clarence ( Dow). Unlike the movie angel, our Clarence(dow) isn’t looking for his wings but reenters the earthly realm with hope of a nice 23 claret and perhaps another shot at business machines inc in the teens as his reward for saving this poor struggling soul….
Before you jump, my good lad, implores our angel, twirling his cold tipped cane to emphasize his words, lets look at what the world would be like without you, what kind of world would exist if you didn’t spend all your days buying to early and selling too soon, churning up stomach acids being long vol in a low vol world, what kind of world would endure if you didn’t continue selling the crack spread, buying cheap debt or sweating out expiration date short the 1190 puts as the market collapses closer to your position…..it is not just you my good man who suffers if you choose to end a life in front of quotrons and spreadsheets, but countless others..to say nothing of my own shiftless descendants who need the dividends from dow jones stock to keep them in caviar and champagne…..come with me now and peer into a world with no speculators, no one to risk capital to provide liquidity, price risk and capital for new innovations…
A farmer out in the heartland of America comes in at days end in early spring, tired from plowing, planting and overseeing his operations. He sees that corn is selling at near record prices. He knows that if he can sell the corn he just planted at such a price, he can pay off the debts accumulated over prior years bad crops..he leaps to the phone and calls Chicago to forward sell his crop but in the pits at the board of a trade a few lonely brokers stand staring at each other, picking their teeth with trade cards and discussing the cubs game..there is no one to take the other side of the poor farmers trade..he wants to sell. None of the other commercial interests have instructed their brokers to buy…who wants to buy at record prices? There are no locals, no speculative off floor traders to buy his crop in hopes of breakouts…the farmer shall have to pray that he gets a good crop, but not so good that prices fall to record lows over the next 4 months…..
A young couple goes into the bank to discuss a mortgage. They have good jobs and are embarking on hat they hope will be a long and joyous adventure together through this mystery called life. They enter the Potter Savings and loan, hoping to negotiate mortgage on the perfect little house on the edge of town. They are expecting their first in a short time and wish to have extra room and a yard for junior to play. The bank would of course love to accommodate them, with the standard 20% down payment, no prior credit lapses and a nice high interest rate. There’s no way for the bank to continually expand its lending capability and profits by selling off loans into the speculative market for it simply doesn’t exist….Mr Potter knows that he will have to keep this loan on the books for the full mortgage term and needs to maximize his return and minimize loss potential by squeezing as much rate and collateral out of the young couple as possible..So much in fact that their dream of home ownership must be abandoned. This scene is played out all over America and apartments flourish, Clarence (dow) shows our speculator, where he recalls single home communities with playing fields and lovely homes full of hopeful young families. There is a certain relationship between deposits and loans available and with no secondary market to sell off mortgages, lending is constrained to only the very best risk with the highest down payments…..The government has set these guidelines to ensure the safety of the banks and there is now around them..
A pension fund manager of one of the worlds largest corporations reviews his portfolio and knows that if he can find a way to increase his exposure to equity, he can earn a higher return than on the bonds and bank cds he holds. He can offer higher retirement benefits to tens of thousand of loyal workers, the men and woman on the front lines, on the factory floor, the sale floor, the mailroom..he can offer a better way of life to these thousands of people. To do this he needs to offset the risk off being wrong so that in his desire to help, he doesn’t harm….at the merc the phones rings in cavernous silence..there is no one there to take the other side of his trade,,,the building is but a large empty warehouse on lasalle street, gull of cobwebs and discarded patches of red and yellow trading jackets no longer needed in a world free from speculation…the retires will have to make do with whatever benefits he can pay from holding treasury bonds until maturity
Speaking off the government…these fellas have some problems in our brave new world as well. Without the wild eyed speculative boys from Chicago, debt issuance is pretty limited as the only buyers are those willing to buy and hold paper until maturity. They have been forced to sell off all those lovely assets. Yellow stone national park now features over 2million acres of parking, condos and resorts, all to allow visitors to the wholly owned theme park, a subsidiary of Disney and dream works inc, to witness the amazing animatronics recreation of bears, wolves, ride the amazing old faithful water ride that has a scientifically recreate splash effect from an engineered geyser….next year they will be opening the Yosemite rock wall experience where you will be able to climb actual recreations of half dome in miniature scale,,the real half dome long ago be leveled off and turned into a unique condominium complex…one department of the federal government prospers in this brave new world of no speculation,Clarence(dow) points out to our friend…the IRS is in over drive seeking new funds, collecting back taxes and creating new ones to keep the government afloat.
To the mall off this brave new world..there is of course a sears, a montgomery wards ..wait wards they went bankrupt….not in a world of no speculative capital to finance new stores and new ventures or expand old ones..there is no saks, no abercromie and fitch..no borders, no barnes and noble,,, certainly no circuit city or blockbuster..therefore there is no price competition to eliminate older unproductive enterprises. You may shop at sears, at monkey wards or a few mom and pops…but all the stores have pretty much the same stuff at the same prices. There is no need for an electronics store…there was no venture capital to create ipods, video games,dvd’s or vcrs. You can get a nice TV, perhaps a hi-fi to play your record albums. With no speculative capital to create new ventures and products, there is no need to expand creativity to hold market share, the consumer is locked into very limited choices….
Look around this world with no rooms full of specs wheeling dealing, buying and selling at lightening pace. Personal computers re limited to very high end IBM machines..they saw no need for computers for the masses and there was no money for bill gates or steve jobs to prove them wrong..who after all but a speculator would take a chance on two potheads in a garage building a computer for everyman? There is internet beyond limited academic and government use as it required billions of dollars of pure speculation to get the internet where it is today…phones are limited to ATT…there was no junk bond money to finance Mci or sprint ..without the access to capital (speculative) that milken made available to steve wynn, vegas stops at the old desert inn. In new york, there is no financial district, just the bowery and waterfront. The museums are dark and empty, unfunded by wall street grants…Chicago is just a brutally cold city of stockyards and shipping docks, no downtown, no rush street…companies that stumble are dead as there is no base of capital investing in distressed turnarounds..great ideas go unfunded as there is no IPO market, much less venture capital.
Enough of the world at large Clarence(dow) says to the dejected speculator. Without speculation what becomes of your old friends the spec..let us visit them in the new world…the chair is of course, a college professor in new England somewhere, dismayed that there is no tennis in the long cold winters, the wizz is seen homeless wandering Harvard square punching endless sequences of numbers into a tattered calculator, muttering incoherently of deviations and sequences….crossman is an overweight sporting goods salesman in Peoria with a wife of gargantuan proportions and 7 kids..mcnabb has been forced to actually get a job,,haag is teaching 7th grade music and looking forward to conducting the annual holiday concert, mr e owns a combination haberdashery and burger stand in Newark….Depew a lonely race track tout wandering the back roads of Kentucky looked for a mispriced exotic...george zachar, the world's most overeducated nanny,ross miller teaching business math at chino state community college and penal facitlity,larry williams an out of work volunteer emt and firefighter in moose fist montana,pam editing in children’s book in a suburb of Detroit, forced to have a few smallish poodles rather than the collection of beautiful newfies you yearns to own…carstens a truck driver for an Oregon paper mill, lackey a bicycle mechanic and part time Sunday school teacher in east armpit Georgia(he wanted to go to florida but ran out of money before he got to the sunshine state…) and Melvin..poor Melvin, tending bar in a strip joint at the edge of town, trying to read the latest hard case novel by disco light reflected off of flashing sequins, pouring drinks for hard men who want to drink hard liquor and get drunk fast so as not to reflect on the lack of means and method to chase their dreams…..(in a prime example of the law of unintended consequences famous grouse scotch in so longer available in the us but rebel yell bourbon at 3.99 the gallon flourishes)…
No, my speculative friend, come down off the rail..the world is a far better place when it contains you and your like…those who wish to offset their risk my sell it to you, you provide the risk capital to make ideas realities, to rescue firms in distress, to create jobs, invent markets..as george benard Shaw so eloquently put it “All progress is unreasonable..therefore all progress is the result of the actions of unreasonable men”..and you my brave young speculator are the prime example of the unreasonable…you risk your capital and your thoughts on an idea, you provide liquidity and price discovery where there is none, industries where only dreams were….the world is far better for your existence…now please my good man, begged Clarence(dow)..if nothing else before Melvin gets too comfortable at the strip joint and refuses to rejoin reality…..our man, invigorated and gals to find himself again part of the world reaches in his pocket and finds,,,yes..its zuzus trading slip..with triumphant shouts of joy we hear him run off..Hello Wall Street, merry Christmas merc, happy holidays you miserable old cboe……..
And every time a bell rings, good old Clarence ( dow) enjoys yet another sip of his 23 claret
Happy holidays specs……
the grinch
Every spec
down in specville
liked trading a lot
but the grinch
who lived just north of specville
did NOT
The grinch hated trading
The whole market, each and everyone
He didn’t even think it was fun
It could be he had bought up some losers or a flamer
Perhaps he had been trading on tips from old cramer
Maybe he had a socialist daddy and mommy
But mostly I think he was just a damn commie
But whether it was his purse, or just his mind that was a wreck
He stood there before the open hating each spec
Deep in his cave he hated each one he could see
And dreaded the open of the NYSE
For he knew that the specs down in specville below
Were ready to trade and try to prfit from order flow
And they re checking their charts and running their stats
Look at them trade the filthy damn rats
He snarled to himself that this really must stop, they must trade no more
I must find a way to keep those trades from reaching the floor
For at the open he knew
All the specs, the girls and the boys
Would holler and yell, and make all that noise
They would yell and they would holler as they keyed up a trade
Or as the market moved, Mozart and cole porter would be played
The noise, the noise, the noise, the noise He could not stand
They were just too loud as they picked and they panned
And after they would sit down to plot the next day
Each of course doing it a different way
They would count and they’d plot, they would graph and they would chart
10qs and 10ks,stats and TA would be taken to heart
they would talk and they would chat and beat each idea to death
the grinch would hate traders until his last breath
but what he hated really the most of it all
was the buying, the selling of both large cap and small
trading of options and futures and forex and grain
winners bought smiles and losers bought pain
but they bought and they sold, they sold and they bought
all day long each other and the markets they fought
they would trade! and they would trade! And they would trade!
Every damn day the trend they would fade
The more the grinch thought of the specville and specs
He knew these markets he must wreck
For centuries he thought I ve put up with it now
I must stop traders from trading!..but HOW?
The he got an idea
An awful idea
The Grinch got a wonderful awful idea
I must dress up and get into town
I ll tax and I'll regulate and close them all down
I ll write movies and books, and even tv shows
And show all the people that capitalism blows
I ll talk and the talk and look just like a spec
And from inside their system I ll wreck
So headed for Dc to wreck the whole fed
While passing through MD he saw two specs,Tim and old fred
Sitting in a dock bar arguing about stuff they had read,
Talking about stocks and girls and swilling down beer
The grinch snuck around the two quickly with fear
Thinking “though Im the grinch my livers not strong
Starting with those two would really be wrong”
On his way to Chicago to give the merc and the cboe a whammy
He ran into another spec of some note, little spec pammy
Nothing to see here he said, no need to even look
Run away now, little spec pam, and perhaps I ll have andy beal write you a book
He saw them all there,Jason and ryan and brian and all the other chi town speculators
They were all there, the breakout boys , the arbs, and even trend faders
He closed the cboe,closed the board of trade, even the merc home of the spooz
He closed them each, he closed them all,now they cant trade, they cant win, they cant even lose
Now to new york to close out them all, the nyse,amex and even the pits that trade oil
There was no one, not even one spec who could the grinchs grand plan foil
No more of this trading, no more of this buying, none of this selling
No more screaming in the phone, no one in the pit yelling
I ll take their computers, their charts and their graphs,why..I ll even take their stats
Ill take their colorful trading jackets, flaming pink pants and even their lucky trade hats
No more systems or averages, I ll leave nothing not even a candle stick or even a band
There will no more trading, we ll remove all the profit and all will be grand
No one, no man, no woman or spec these markets will be saving
Why,Not even krisrock with all his ranting and raving
I ‘ll close them all all over the land, and do without a single care
Even in Weston, I ll close down the bold one they call chair
And even spec steve and Duncan and doc, the dude and young tim
From the east to the west, Europe and even the pac-rim
I ll stop all this trading and close all the markets I find
No more of this profiting from your courage and mind
No more coaxing reward from great risk
Because all the markets,all of them, away I will whisk
And the specs will fall quiet all over the land ,no trading no more
Not even carstens or florida dan,no on the wire , not on the floor
Not even the two professors, not ross and not the bbq voodoo
nothing even the gambler or the listmaster can do
From rollert to sogi, from Nigel to ari and lackey back to young ott
From zussman to rudy, fromm north to south, east to west how silent they will have got
Back to his cave toting his load went the grinch
Closing these markets was really a cinch
I have the numbers,their charts and their q’s, theres nothing to count anymore
I ve taken their systems and books,closed the web and even the nyif store
No more brokers,buyers or sellers, no funds neither mutual nor hedge
No breakouts ,flags, stochastics,%r flags or patterns..not even an ascending nor descending wedge
No roe, roi,,current assets,debt to equity,no ratio of p over e nor value of book
No trading slips, no order screens,trading desks, all the these I closed or I took
He looked down from his cave at Specville as morning was breaking while evilly humming
Because soon the specs would rise and see no trading day was forthcoming
They are just waking up and I know just what the will do,they will stand their and sob
Now they cant trade, they cannot sell nor buy..they might even have to get a real job
And that’s sight and a noise I must hear,So he stood with his hand to his ear
It started out low and started to grow,first a slight murmer but now near a roar
Bbut the sound wasn’t sad, there was no sad sobbing, and the grinch shook to his core
Because all thos psecs down in specville were
TRADING!!!!!!!!!!
How can this be thought the grinch, how can they put in an order
There are no electronics, no internet, no brick,and no mortar?
I took their charts, their graphs,their stats and fundamentals
There are no markets, not stock, not bonds, not oilt not even grains nor even lentils
But the sounds of the market across across the land, a thousand bida t a half, sell the jan sevens
The specs of specville were buying and selling, the sound rose to the cave and beyond to the heavens
How can this be he pondered for hours,that trading goes on withoutall their stuff or their places
And then it dawned on the grinch as clear as the focus on spec faces
Perhaps trading wasn’t just noise and pointless selling and buying
But perhaps about the courage of specs to take risks, risk falling but keep trying
Perhaps trading was about providing markets to feed one and to feed all, a way to earn profits, to learn and to grow
That all the specs in spec land had learned to love risk and studied their craft with great care
Learning that the meaning of life,was just perhaps, about the courage to live and the courage to dare
That spec bet on the markets was really a bet on themselves in ayn randish type fashion
That these specs of spec ville lived unlike most others, they lived with great passion
They say the grinch burned his communist manifesto that great day
And rushed right down the mountain and entered the fray
Sold a few bonds, bought a little oil and went long a few spooze
He learned out to trade, he learned how to win and he learned how to lose
He learned how to arb, which trend to follow and which trend to fade
Into the trenches he learned the meaning of life and learned what it meant to TRADE
He learned to never quit searching nor trying,That living was learning
That traders,especially in specville, use their heart and their wit to do all their earning
He would have highs and he would have lows, win great victories and suffer great blows
Somedays flush with piles of cash, others having to count his fingers and toes
But our grinch learned that day, and went on to a life spent as a hard working trader
Out of his cave to a mansion he moved and thought that all in all nothing could greater!!!!!!!!!!!!!!!!!!!
Here we are, Early December. That can only mean one thing. That’s right dear readers it is time for Tim's annual holiday classic. Each year, for some twisted reason know only to myself..Well to be honest I don’t even know why I do it, I bastardize, plagiarize as just generally rip off some well known beloved Holiday yarn giving it a speculative, capitalist, libertarian and just plain weird spin. I of course insert characters from the spec world and sometimes from the real world to make it entertaining to all..or just because I think its funny. I like to do this early in the month so everyone has time to print it off in time for holiday bedtime reading. Surely even Mr., brooks needs a holiday classic to read this time of year eschewing those classics his kids love, the NRA manual and Bambi-He's What's for Dinner. The quest for a new story gets harder every year..We have done Yes, Virginia, It’s a Wonderful Life, naturally the night before Christmas and my all time favorite of them all, last years immortal yet easily forgettable rewrite of the grinch who stole Christmas. This year, I shall tackle the Granddaddy Christmas tale of them all..A Christmas Carol. And stand it firmly on its head
Our hero, Ebenezer Speculator sits at the end of the trading day, marking to mark his current positions. Good day for his egg nogg crack spread (long one, long one milk, short two bourbons) broke even on his march candy Cane short but as always the long Fruitcake trade settled heavily on his p and l. It seemed to him that he had been doing this forever and the watching of green and red blips fall across the screen seemed to be a non productive way to spend his days. I should be ding something productive with my life, something that adds value to the world, he thought to himself.” Feeding the poor, promoting world peace, teaching white men to dance, something that would add real and permanent value to the world. Sure, I am making money and all that and I employ a few people and helped others learn the tricks of the trade and make money. But what real value do I add to the universe sitting here greedily racking up profits for my own benefit while others fail and starve around the world. Surely, I could be a more productive member of society is some way.” At that point his nephew Fred burst through the door in his Cleveland Indians baseball cap, excited with the sprit of the season. “Quick, Uncle” he cried, “ housing starts are down, mortgage defaults are up and the world is awash in debt. We must short, we need to sell calls. Tis the season for economic collapse and profits all around!” Ebenezer look at his nephew and chided him for thinking only of profit for himself and not the plight of the poor around the world.”Bah Humbug. I am tired of all this buying and selling, selling and buying for no purpose other than to fill my own purse.”
The thoughts stayed with our hero as he made his way through the streets. He noted the homeless with their dire condition. He gave generously to the faux Santa’s ringing bells over little kettles, giving freely of his cash so they could continue the good work of forcing winos and degenerates of all forms to sing hymns to get a chicken supper and providing child care so the crack mamas could get to the corner and not worry about the fate of their little ones. He noted all the dregs and depressing things of the human condition. Of course had he lifted his eyes from the gutter he might have seen the towers of steel and glass that provided jobs for literally millions, the apartments full of people who earned their living through productive effort and cared for their families and raised their children to understand the value of education and hard work. He didn’t see the procession of cabs, buses and trains that provided cheap transportation to the public at a profit, or the store windows full of consumer goods, clothes, electronics and appliances that were sold at a profit to give us entertainment sustenance and make out lives easier while providing jobs for millions around the planet. That of course would negate the need for the rest of the story so he trudged homeward, eyes cast down not seeing the triumph of efforts and capital spread before him.
As he took his supper along with a generous glass of Irelands finest he read over the headlines of the evening papers. War here, war there, hunger, pestilence, disease. He knew that he must somehow find a way to make a difference in the world.
He awoke with a start to the clatter of chains and a soft moaning that grew increasingly louder. He recoiled in horror at the sight of a ghost, the ghost of his old trading partner when he first struck out on his own, the ghost before him was that of none other than Karl Lenin Marx Marly. They had separated after a few very profitable years when Jacob driven by the guilt of his wealth and desire to save the world. He had died in Outer Somalia when he was fried and eaten by a pack of savages who vastly preferred deep-fried ex day traders to the food presented by the various aid agencies. They were horrible fat(this was 2001. there was a excess of deep fried ex-day traders around) little men who dispatched of our crusader in quick order with a nice merlot on the side.“Karl,” cried our hero,” you have been dead now these many years. Why do you torment me at this hour? I must sleep as I have many fundraisers to attend this weekend for many liberal charities with heavy overheads and bizarre cost structures.”
“I am here Ebenezer to save form the mistake you are near making, the same fatal mistake of mistaking charity for a productive use of your time and effort..The type of mistake that leads to one being served up with a nice merlot deep in the darkest parts of the world.”
What chains are these you wear?
“The chains of every stupid do good welfare handout, government inspired relief programs that squelch the natural instinct of man to improve himself that I ever supported. The chains of every relief program that I ever collected money for only to have the cash sucked up in more fundraising drives and salaries for those who told us we were saving the world while what damn few supplies we ever sent to the poor were seized by roving warlords and midlevel bureaucrats. Tonight you shall be visited by three ghosts each with a lesson and warning for you. Take heed Ebenezer, take heed, lest you share my fate. The first shall be upon you at the stroke of midnight.”
As the ghost fade, or hero blinked in disbelief and swore he must be hallucinating. It must have been bad oysters or too much whiskey, a dream, nothing but a bad dream .Not as much of a nightmare of any his marriages, but still a bad dream. Back to bed, back to sleep he told himself.
At the stoke of midnight the first visitor did indeed arrive. Clad in pink slacks and a teal sports coat, he roused Ebenezer by smacking him firmly over the head with a copy of dimson marsh and stautons triumph of the Optimists, a most weighty tome capable of rousing one for sleep or knocking one back into it as the case demanded. “Come and see the past, of the profound impact on world history that speculators and investors have made.” With a flash they were gone into another time and another place. “But that’s me, as young man sitting at the ancient quotron cold-calling strangers to get business. Me, with no gray hair, no bifocals. Look at me so young and foolish thinking of nothing but making money.” And he watched himself as time and space compresses as I can do because its my story, watched himself in those first few years as a young salesman peddling stocks and bonds for companies no one had ever heard of, Golden Nugget, MCI, Microsoft, Amgen, Netscape. He watched as he helped raise money for companies that transformed the world with their technology and their medical devices and drugs. The specter whacked him now with Stigler Statistics on the table and they sped though days past seeing whole new industries, airlines, automobiles, computers created. Created with money raised in financial markets made possible by the liquidity provided by traders and speculated. Men who speculated to raise their standards of living and endowed educational institutions and libraries that made it possible for others to expand their knowledge, not with a hand out but an opportunity. He saw the million per cent a century return of the capital markets raise standards of living virtually around the globe and for the first time he began to realize that maybe, just maybe business and capitalism did far moregood than harm. Another smack to the head with a copy of Galtons Art of travel and he saw the history of other approaches, the complete and total failure of communist and socialist systems over the years and around the planet.
With a thump they land back in our hero’s apartment. “Why show me these things spirit. Surely in spite of these things I saw, I can still do more good acting out of charity than avarice.” With another smack of the optimist tome. Our spirit departs leaving Ebenezer crumpled to the floor.
As the clock strikes one, the second ghost, the ghost of speculative now shows. He looks disturbingly like Kenny Rogers and is wearing some sort of cheese apparatus as headgear with a twinkle in his eye like David Hillman might have if he ever did actually find someone incredible to actually agree to marry him..Oh wait that did happen and Hillmans been twinkling ever since. The spirit yanked Ebenezer from the floor, stuck a gin and tonic in his hand and off they went.
First to nephew Fred’s where he sat around with his boon companions and fellow traders Jason and Ryan. Jason sighed wearily: this market is killing me. After today’s trading debacle I m only up 913% for the year. I tell you I’m getting desperate..” Ryan was quick to agree ‘ If this keeps up next year I ll only be able to go to outer Mongolia and the north pole. I may actually have to skip paying a fortune to slip into communist dictatorships that are sworn enemies of the US. The horror of it all!”
“Guys”, said Fred, I am worried about Uncle Ebenezer. Why just yesterday I went into his office and showed him some great housing shorts and an ingenious way to be short stocks and long volatility at the same time. He didn’t pay any attention. He was too busy writing checks to the sierra club and the feed Sally Struthers s foundation! He’s losing his drive and mumbles all day of doing good.”
“Enough of the gloom” shouted Jason. “We shall go now to Melvin B’s and drink copious amounts of beer and then gather around a brightly decorated cell phone and call Chesapeake slim and berate him for his nefarious bad habits of drinking, smoking,and gambling, to say nothing of chasing women with Kentucky accents and only buying stocks under book value. It is after all, a holiday tradition.”
With the splash of a lime in a fresh G&T they were off again. They looked upon the voodoo prof and Elena living in Deltaville, va living a life of trading teaching and boating, said aforementioned Slim on his island, wring strange documents and perusing vague financial documents, mandatory glass of Famous grouse at his side enjoying the benefits of a capitalist society that allows a man to marry as many times as he likes and still figure out a way to pay for it, they saw the wiz and the Weston crew, trading and living lives, raising families, gaining knowledge as well as profits that enabled them to enjoy the fruits of their efforts, they passed over Hawaii where Mr. Sogi continues to trade and dabble in business enjoying the companionship of his incredible wife and the Pacific surf, Scott brooks , stalking profits all week and innocent fuzzy animals all weekend. All of them trading and investing in the markets, using the profits they reap for the betterment of themselves and the ones they love.
Thump back into the apartment, the spirit snatched way the gin and tonic mumbling about being in a hurry to get back and make dinner for Paula and departed. Before Ebenezer could compose himself the clock struck 2 and the last spirit appeared. With an I pod full of Cajun rock and roll tunes, a U of C bobcats sweatshirt and smelling of small town Chesapeake breezes he hurled Ebenezer into the future, a future where capital markets failed, there was no innovation. The poor die first and frequently as there are no innovators figuring ways to ever cheapen the cost of food and clothing, disease was rampant as the government stepped in and removed the access to capital markets and the profit incentive, no new drugs were discovered and those that remained were expensive. Energy costs were prohibitive as there was no capital to develop new alternative source or search for new discoveries of oil and gas. There were no new jobs created and the taxes collected to support the ever-declining system ensured that business could not expand and create new opportunites. It was a bleak world, one without the hope for improving the lives of ones self and loved ones. There were no traders or investors to put money into new ventures, no speculators to provide liquidity or generate profits that create jobs and support families. The only wealthy folks were those that worked at charities paying themselves fine salaries to collect what little money remained to dispense to those less fortunate..Which of course is everybody but you and I.
“This my friend”, spoke the spirit as he sipped a rare 30 year scotch from some obscure Scottish village” is what happens when there are no markets and no traders.” And he was off, back to fight the battle of the neighbors light pole.
“What a fool I have been” cried Ebenezer.” Thinking of my self as non-productive because all I did was trade an invest. How could I fail to notice that I have provided jobs for dozens of employees, taught many to make money in the market and support their families and put their children through school, or that the money I invested helped to create new technologies and industries, providing jobs and opportunities for literally thousands.”
He dashed to the window and cried to a young boy passing below.” You boy. What day is this” Saturday said the boy, Christmas eve” “Thank the gods I haven’t missed it..Boy do you know the newsstand around the corner. Take this 20 bucks and run round there and fetch me today’s Barron’s, FT and NY times. I must prepare for the next weeks trading.” Of course this being modern times and not dickensian London the kids was never seen again most likely spending the twenty on cheap booze and porno. We can only stretch our fiction so far. later our hero had to go to the newsstand himself to obtain copies and make his way over to starbucks to sip a large (grande,venti my butt. It’s a large coffee) coffee
An Ebenezer spent a nice Christmas with good friends and family, chatting with Jason, Fred, the voodoo prof and all the specs about trend and trades in the market, ready to return with a new zeal and new appreciation for the life of speculation.
“Heck,” he though to himself.” I may even call Slim and see if he’s got any of those weird little cheap stock ideas. It is after all the holidays.”
Best early wishes to all for a wonderful Holiday season and a may you trade well and learn much in the new year.
Tuesday, December 04, 2007
Friday, November 30, 2007
the foreward to the auotobiograpy I never got around to writing
So as sit here wondering if gazing back though time to discover just exactly how the fuck I ended up here, daily fighting the tides and fates to not resemble a caricature of a mid 40’s oft divorced, smoke too much, drink too much, always falls for exactly the wrong girl kind of guy. I poke gingerly at the corners of history to see if the story is worth the telling. And perhaps it is.
It is, if nothing else, an interesting story, full of sordid moments and overcoming ones own stupidity. I am never sure if the high points of my life were when I was a so-called solid citizen or those moments when I drunkenly consorted with women of a certain morally casual attitude. More and more I suspect the latter. It was Wilde who said we are all in the gutter, but some of us are looking at the stars. I have been in the gutter and at times I have glimpsed the stars. I enjoyed both equally as each inspires a different sort of passionate reflection on life. I suppose somewhere in this mixed up collection of memories and lessons learned as well as forgotten there is a story to tell. I doubt that I will be able to deliver it in traditional time line fashion as my brain rarely works that way.
I look into some of the mixed up memories that are pulled form the grab bag and pause even now to savor them, mary jo porter in a hotel room in Akron fucking Ohio, she of the ungodly long legs and born to give head pouty lips; that shit smeared hell hole of a jail cell in Albuquerque new mexico where I spent 36 fucking hours waiting for the bail money to arrive; my first wedding on a frozen house day in Minneapolis, looking at my bride to be thinking, this is some stupid shit you re doing right here ,tim. Problem was she was one of the leading salespeople in our little company. I had to follow through on my drunken promises or lose the revenue. At the time, God knows we needed the revenue. Might have run anyway if she hadn’t been knocked up. Trading yen futures in my office at the crack of dawn while puking last night’s good whiskey into the can under the desk in the little desert wasteland town of Merced to raise a stake to get back on the right side of the world. Unfortunately, the bitch followed me.
Hiding in a shower stall in Blythe Arizona when the cops were trying to find me for passing bad paper (not my checks but check given to us by customers. We had developed masterful talents at passing these gems onto local merchants) all over town while my female co-conspirator of the time, wrapped in only a towel explained to the nice officer that I had left and returned to LA.then she backed the car up to the door and I jumped in the trunk and left town, quickly heading east. Walking snow blind down rush street with the great Mr. Crossman in Chicago at three in the morning accompanied by a sweet little girl from Kentucky with a melodious voice and wondrous ass; the piss and blood feeling a real honest to go someone is not walking away from this street fight, the pain numbing elation when it was me that walked away, the pain numbing morphine from the nice nurse lady when it wasn’t; Driving a purple pt cruiser already drunk out of our minds to find ourselves in a skin head bar in Louisville, Kentucky; poker hands, whiskey bottle, tumbling horses ;a chubby redheaded girl on a boat deck at sundown.
Then there is of course my grand tour of the jail cells and holding tanks of all the grand American cities and towns, the aforementioned Albuquerque. Lubbock, Texas, Hattiesburg Mississippi (a true hellhole with dirt floors and a kitchen trustee with gangrene. I was there 4 days and then spent two days on Bourbon Street drunk as blind, one legged billy goat to chase away the memory), Annapolis and of course the waxters juvenile detention center, my prolonged stay in the Albany state penitentiary at the kind invitation of the state of new york, Mars, Pennsylvania, Los Angeles, Reno, Blacksburg, Virginia, corpus Christi, Dallas (I have a love-hate relationship with the state of Texas. They loved locking me up, I fucking a-well hated it.) Boulder, Colorado, the nicest jail I have ever been in with real carpeting and macramé classes. I am sure I have left some of the fine facilities where I have whiled away the hours off the list but memories fade over time and I just cant recall all of them.
There have been the more socially acceptable memories as well. The birth of my children, of course. But for those who want to make that out to be this wondrous thing of great beauty it s a actually a bloody nasty brutish mess of a thing to actually watch, but to hold my daughter the first time and have those huge brown eyes looking at me, knowing who I was somehow, my son pulled out by c-section and taking his first piss all over the poor doctor lady; watching my daughter at age 12 playing out in the waves during a beach vacation dancing with graceless and timeless beauty as the waves lifted her, the crashing sea pushing her long thick hair forward to frame her face as she rose with the tide, floating along in a oceanic fantasy dance all her own, till the wave crashed over leaving her once again a slightly clumsy pre-teen finding her way in a gravity bound world; my son at third base moving to his right with a fluid grace his father never had, looking like a 10 year old Brooks Robinson; high school graduations, prom nights. My kids have been a grace and a blessing and I just hope I haven’t screwed them up too badly.
And the women, my god the women. Some I loved, some I liked, some, I just fucked. Others I would have liked to have loved or fucked but they were way too smart to get anywhere near me. I would be so much better off without my endless pursuit of the great two-legged North American vaginal support system but, alas, I have never been able to do so. Their look, their touch, their feel. I live for that shit.The chase, the catch, the way their eyes shimmer in the candlelight. The way the look in the morning in the unlikely event I woke up before whoever last nights she was. Hotel rooms, bedrooms, stairways, back seats, the amphitheatre stage of the Fresno zoo. So many places and memories. A plethora of memories of mammories, and the women attached to them. There have been magic moments of falling in love, star lighted nights of romantic bliss and a soft tender kiss. This, of course, being before the fucking hammers comes down and there are myriads of lawyers involved.
There has to be some talk of the stock market in any recall of my short stay here. I have toiled at many things in life. Dishwasher, cook, door-to-door salesman, car salesman and even an insurance agent. But I didn’t begin to come into my own until I realized I was spending more time trading options at the local EF Hutton office than I was selling insurance and sought gainful employment as a broker that I came into my own and started developing into the person I am today. I love the markets and have from day one. I have been privileged to have met and learned from several of the greatest investors and traders alive today, starting with a fellow broker in the Modesto, California dean witter office, a quiet unassuming ex nasd investigator who is a master at the art of value and distressed investing and to this day has the greatest ongoing track record of anyone I have ever heard of. He taught me the ins and outs of this business and although he is content to this day to work as a broker and makes his millions in his own account, eschewing the fund or hedge fund life for the quiet one he has, I consider one of the giants of the investment game. The free wheeling math genius in Weston, the inheritor of the Ben Graham legacy in new York, the car racing high performing value guy in LA, the growth stock guru from Lake Tahoe, the aged almanacer, the shaggy haired new yorker who married a beautiful boxing writer and has done more than okay in the markets, the inventor of the bands, the how I made a zillion trading this crap and moved to the virgin islands, all these and more I have met and learned much from all of them. So naturally we will have to talk some in this discourse on good trades, bad trades, epiphanies and outright fucking stupidities. In the midst of dumping the wanderings of an amorous and avaricious mind onto pages, do we dare discuss such mundane things as stock valuation, using quantitative methodologies to uncover value situation, the creative use of options to enhance returns on stock portfolios, societal and economic trends that affect the stock market and out likelihood for investment success. We must, dear reader, we must.
The friends must enter the picture here as well. From the kids I ran around with in my misspent youth, fighting, drinking, stealing and just trying to get dead or imprisoned before we could figure a way out. Sad to say the number that did not achieve even that very unlofty goal is too high to contemplate too regularly. I look at this mix of friends I have today and its a true mystery how in one mans ramble through life he could have picked up such an eclectic and wonderful group of friends. A semi retired options trade of notoriously regular habits. A tire shop owner whose affection for adult libations and naked women may surpass my own. A fast boat loving fellow broker who has become a fast friend and boon companion on many misadventures the past year or so. An Iranian Jewish futures trader who is so young I have shoes older than he is.but he is smart as hell and a damn good friend. A backhoe operator. A restaurateur. Traders of virtually every stripe in Chicago and new york. Guys from the old office in California I still talk to every day. Couple of doctors. A few nurses. Computer geniuses. Gamblers, lots of gamblers.A cloth shop owner in Kansas, A futures trading geologist. A publisher. Even a couple of lawyers. Ceos, Cfos, plumbers, builders, accountants They are here in Maryland, in New York, In Chicago, Cincinnati, Wisconsin, Florida, California, Virginia, conneticut,new jersey, Arizona,Kansas, Lousiania. Next to my children the biggest blessing in my life has been my friends.
There will be stories. Some will be hysterical. Some almost fucking tragic. Some lessons learned, many mistakes repeated. There will be no long drawn out boring discussions of what I learned at sainted ivy university. I didn’t fucking go. Could have. Was too busy being a screw up. Stories of how life on the road forced me to grow up a little and learn how to live. Of true love and failed marriages. Stories of my love and pride for my children, stories of being almost normal for a few years before the hedonistic madness sets back in. Of good trades and bad trades, champagne celebrations and hiding form the margin clerk whole vomiting in disbelief at how fast that went against me. Will there be stories of redemption. Unlikely but one never knows.
Having reviewed this, dear reader, should we write it?
Why the fuck not?
Thursday, November 29, 2007
savage beatings and football
Thank Christ. A break in the latest project as the somewhat twisted gold bugs have decided for the third time that we are changing direction on this book and we have to start over from scratch. With the outline I asked for the first day naturally. Ah well so I was three quarters done. I can use the break for fiscal crisis and financial meltdowns. Screw it, the check cleared. So I can take this brief break to write something of my own for a welcome change. We are deep now into fall marching to the precipice of winter and so far it is pretty uneventful. Except of course that sick sick, twisted weekend in Ocean City of which I have only the vaguest memories of long wavy hair, handcuffs, too many Manhattans (is there really such a thing?) shaky’s demented drunken laughter and some incident involving a one-string guitar. It must have been a hell of a time judging form the bruises and police reports.
College football has developed into an interesting year. What should have been an absolute coronation of USC and LSU as football dynasties has been turned into a very tight BCS race with Missouri and West Virginia the highly unlikely 1 and 2 teams in the standings. Maryland has been average with sophomore quarterback Chris Turner being brilliant when facing top ranked teams but woefully less so against run of the mill ACC teams. It does bode well for next year however to have a QB coming back as a junior. They are bowl eligible but does anybody but alumni really want to see this team play again.?I find it doubtful. Navy has been an outstanding offense team but ludicrously bad defensive team. They won what is now the highest scoring game ion NCAA history and finally beat Notre Dame after 43 years of losses to the Irish. Of course the Irish have not been this bad in 43 years but the win still looks good to the Navy faithful. All that’s left is Army-Navy this Saturday.
I know I comment on this game every year and I will try to be brief but I am going to do so again. This is not just a football game or even just the oldest rivalry in college football. Each and every young man on that field was a scholar athlete in high school and had a wide range of choices for higher education and athletics. All of the members of the brigade and the corps made a choice to enter the service if their country after 9/11 and after the start of the Iraq war. They know they are entering wartime service after they graduate. They chose to serve. That defensive tackle lowering his shoulder to take out the halfback of the opposing team may well find himself calling that guy for fire support next year. The safety who has clobbered the quarterback on a blitz is likely to be counting on that guy to fly air support as he slogs through the twisting desert sand as he chases insurgents. Opponents on the field and brothers in arms off it, these men deserve our support regardless of our feelings on the war. Looking at te resumes of past service men tells us that these young men on the filed, and the men and women on the field are the future of our nation. They are smart, they are brave and deserve out applause. GO NAVY!
ACC basketball is starting and the Terps look good. We are cursed with having North Carolina who is good enough to spank the shit out of many pro teams and the always good goddamn dukies in the conference but Maryland is young and coachable. They have played well against top teams this year including hanging in against #1 UCLA and beating Illinois last night in the big ten challenge. It is doubtful they can win the conference but they should be highly entertaining and win enough to get into the dance in march There will be some good college basketball stories this year. The Billy Gillespie era unfolds down in Lexington and we find out Saturday just how good he is when the cats take on Carolina and that phenomenal roster of freakishly good ballplayers. For now, Tennessee has replaced them as the toast of the SEC and if he expects to survive being lynched by the faithful he better be on track and soon. Racing season doesn’t start until April in Lexington and these people have nothing to do but drink heavily and watching Kentucky basketball. Everyone in town knows where Billy lives and if he doesn’t win he can expect to see a brutal pack of bourbon soaked blue-faced savages on his lawn before the winter ends. Memphis is playing a high paced game that leaves viewers winded never mind their hapless opponents. They may be the only team that truly challenges Carolina down the stretch. Going to be fun. Grab a beer and some hot browns and settle in.
Pro football. We aren’t talking about pro football. The freaking ravens are so bad they would struggle in Pop Warner for gods sake. No offense to speak up, no quarterback who has mastered the deeply complicated and complex skill of simply not dropping the fucking football six times a game and grasping the idea that you only thro the ball to people whose shirt is the same color as yours. They face the inhuman New England Patriots team on Monday. The line is 20 points and I think it might be too low. With the exception of a por outing against the Eagles last wee the Patriots have disassembled and disemboweled other teams this year and expect Belichick’s boys to be looking to improve over last week. $0 points might not be enough. The Colts are good but nowhere near the level of New England. This week also goes us Dallas against Green bay for bragging rights in the second best conference. They are both good and are probably playing for the rights to get their asses royally kicked by New England in February.
The stock markets continues to be a violent place with the mortgage and credit problems exploding across the financial markets with a diarrhea like splattering of asset write downs, loan loss provisions and earning reduction. The FDIC reported yesterday that write offs and losses at banks were at historic proportions unmatched since 2002 and 1987. The dollar is going down like a cheap tart in search of diner at Denny’s and if the Fed continues to cut it will continue to do so. I suspect the cuts will continue until fed funds trade unde 30-day tbills, which could have the effect of heightening inflation. The government continues to insist that with the exception of food and energy everything is fine. So out house prices are going down and the cost of eating, driving and staying warm are up. Sounds Perfect.
UI do think stock prices are rather steeply oversold here and may find a way to rally to year end. With that in mind, ad vol at good levels, I like the idea of selling puts on stock we like BGP,ICO,SYMC and CSE look like candidates to pick up premium and if the stock get put to me, I am comfortable owning them here. Along with my studious libertarian anarchist friend from Chicago I like the idea of being long the Swiss franc. Also I think that Eurodollar guy has a worthwhile idea with the money transfer stocks. I will be looking at these with the idea of selling puts to build a position.
In the long run, community banks are setting up a chance to make two and a half shiploads of money over the next few years. Many of what I call Jimmy Stewart banks are at or below book value and historically this has been a great place to buy them for large profits. I still dislike the money center and regionals but the tinys are appealing for the long run. SVBI is under book and a buy.ANNB is getting close. There are hundreds of these little banks across the country and if you get them near book and less than 10 times earnings it’s a steal. These are local guys; they don’t trade Cdos or other toxic derivatives. The only subprime loan they have is the one they made to their shifty cousin Leroy and that can be collected rather simply. One phone call to Aunt Ethel and she will administer a savage beating with a drumstick at the next family dinner until the worthless bastard, stinking of blood and day old gravy, shuffles in to make the loan whole. It’s a low risk business and what I think is a very low risk, high potential investment.
So we stand now on the brink of December the last bright month of the year before we descend into the despicable, dreary and dreadful crappy day of January and February. Soon enough the bay will likely be covered with a sheen of ice and nasty cold crap will fall from the skies and the damn wind will hit harder and quicker than Flay Mayweather ever dreamed of doing. But for now the bright lights began to sparkle across lawns and Giant Blow ups of Santa Clause and goliath size demented looking reindeer and elves dot the landscape. The bright call of the holiday rent the sky. Hey fuckhead get out f my parking spot” What the hell do you mean you don’t have any hooker barbies left. What the hell am I going to tell little Erlene!” Yes the holidays. An orgy of lights, visits from relatives we never really liked in the first damn place, shopping for stuff that will break by new years, Holiday parties where you accidentally end up in a closet with the chubby secretary form accounting and all the blessed events that make up the Christmas season. Here will be parties, bashes in the Chicago and this year’s inaugural bash for the Island of misfit toys. The tire man is getting married this month and one suspects the hangover will be felt by teetotal ling virgins in the woods of Minnesota after that one. I love this time of year as much as I hate it. Too much food, too much booze and just plain too much. I can hardly wait.
It is this time of year when one stops to ponder over ones life. Is it finally the time to admit that one is too old to continue reeling through life, scotch in one hand, cigarette in the other, one eye on the stock ticker, the other roving in search of Ms. Right or her twin sister Ms. Right now? Shouldn’t one be living a more serious, sober life as we head into the second half of life? Oddly enough I always arrive at the same conclusion. “Are you fucking kidding me?” Life is here; it is now. There are friends to make, love to fall into, lips to kiss, books to read, scotch to drink. Sunsets, Jazz, rock and roll, Beethoven and Coltrane, late nights, long talks, laughter to the point of unconsciousness, learning, loving, living and breathing. If this means that I eventually arrive at the pearly gates with my rock hard liver in a wheelbarrow and my lungs bleeding out my ears, it seems a very low price to know that while I was here, I lived ferociously. So bring on the holidays, light the tree, ring the bells and lets get on with it.
College football has developed into an interesting year. What should have been an absolute coronation of USC and LSU as football dynasties has been turned into a very tight BCS race with Missouri and West Virginia the highly unlikely 1 and 2 teams in the standings. Maryland has been average with sophomore quarterback Chris Turner being brilliant when facing top ranked teams but woefully less so against run of the mill ACC teams. It does bode well for next year however to have a QB coming back as a junior. They are bowl eligible but does anybody but alumni really want to see this team play again.?I find it doubtful. Navy has been an outstanding offense team but ludicrously bad defensive team. They won what is now the highest scoring game ion NCAA history and finally beat Notre Dame after 43 years of losses to the Irish. Of course the Irish have not been this bad in 43 years but the win still looks good to the Navy faithful. All that’s left is Army-Navy this Saturday.
I know I comment on this game every year and I will try to be brief but I am going to do so again. This is not just a football game or even just the oldest rivalry in college football. Each and every young man on that field was a scholar athlete in high school and had a wide range of choices for higher education and athletics. All of the members of the brigade and the corps made a choice to enter the service if their country after 9/11 and after the start of the Iraq war. They know they are entering wartime service after they graduate. They chose to serve. That defensive tackle lowering his shoulder to take out the halfback of the opposing team may well find himself calling that guy for fire support next year. The safety who has clobbered the quarterback on a blitz is likely to be counting on that guy to fly air support as he slogs through the twisting desert sand as he chases insurgents. Opponents on the field and brothers in arms off it, these men deserve our support regardless of our feelings on the war. Looking at te resumes of past service men tells us that these young men on the filed, and the men and women on the field are the future of our nation. They are smart, they are brave and deserve out applause. GO NAVY!
ACC basketball is starting and the Terps look good. We are cursed with having North Carolina who is good enough to spank the shit out of many pro teams and the always good goddamn dukies in the conference but Maryland is young and coachable. They have played well against top teams this year including hanging in against #1 UCLA and beating Illinois last night in the big ten challenge. It is doubtful they can win the conference but they should be highly entertaining and win enough to get into the dance in march There will be some good college basketball stories this year. The Billy Gillespie era unfolds down in Lexington and we find out Saturday just how good he is when the cats take on Carolina and that phenomenal roster of freakishly good ballplayers. For now, Tennessee has replaced them as the toast of the SEC and if he expects to survive being lynched by the faithful he better be on track and soon. Racing season doesn’t start until April in Lexington and these people have nothing to do but drink heavily and watching Kentucky basketball. Everyone in town knows where Billy lives and if he doesn’t win he can expect to see a brutal pack of bourbon soaked blue-faced savages on his lawn before the winter ends. Memphis is playing a high paced game that leaves viewers winded never mind their hapless opponents. They may be the only team that truly challenges Carolina down the stretch. Going to be fun. Grab a beer and some hot browns and settle in.
Pro football. We aren’t talking about pro football. The freaking ravens are so bad they would struggle in Pop Warner for gods sake. No offense to speak up, no quarterback who has mastered the deeply complicated and complex skill of simply not dropping the fucking football six times a game and grasping the idea that you only thro the ball to people whose shirt is the same color as yours. They face the inhuman New England Patriots team on Monday. The line is 20 points and I think it might be too low. With the exception of a por outing against the Eagles last wee the Patriots have disassembled and disemboweled other teams this year and expect Belichick’s boys to be looking to improve over last week. $0 points might not be enough. The Colts are good but nowhere near the level of New England. This week also goes us Dallas against Green bay for bragging rights in the second best conference. They are both good and are probably playing for the rights to get their asses royally kicked by New England in February.
The stock markets continues to be a violent place with the mortgage and credit problems exploding across the financial markets with a diarrhea like splattering of asset write downs, loan loss provisions and earning reduction. The FDIC reported yesterday that write offs and losses at banks were at historic proportions unmatched since 2002 and 1987. The dollar is going down like a cheap tart in search of diner at Denny’s and if the Fed continues to cut it will continue to do so. I suspect the cuts will continue until fed funds trade unde 30-day tbills, which could have the effect of heightening inflation. The government continues to insist that with the exception of food and energy everything is fine. So out house prices are going down and the cost of eating, driving and staying warm are up. Sounds Perfect.
UI do think stock prices are rather steeply oversold here and may find a way to rally to year end. With that in mind, ad vol at good levels, I like the idea of selling puts on stock we like BGP,ICO,SYMC and CSE look like candidates to pick up premium and if the stock get put to me, I am comfortable owning them here. Along with my studious libertarian anarchist friend from Chicago I like the idea of being long the Swiss franc. Also I think that Eurodollar guy has a worthwhile idea with the money transfer stocks. I will be looking at these with the idea of selling puts to build a position.
In the long run, community banks are setting up a chance to make two and a half shiploads of money over the next few years. Many of what I call Jimmy Stewart banks are at or below book value and historically this has been a great place to buy them for large profits. I still dislike the money center and regionals but the tinys are appealing for the long run. SVBI is under book and a buy.ANNB is getting close. There are hundreds of these little banks across the country and if you get them near book and less than 10 times earnings it’s a steal. These are local guys; they don’t trade Cdos or other toxic derivatives. The only subprime loan they have is the one they made to their shifty cousin Leroy and that can be collected rather simply. One phone call to Aunt Ethel and she will administer a savage beating with a drumstick at the next family dinner until the worthless bastard, stinking of blood and day old gravy, shuffles in to make the loan whole. It’s a low risk business and what I think is a very low risk, high potential investment.
So we stand now on the brink of December the last bright month of the year before we descend into the despicable, dreary and dreadful crappy day of January and February. Soon enough the bay will likely be covered with a sheen of ice and nasty cold crap will fall from the skies and the damn wind will hit harder and quicker than Flay Mayweather ever dreamed of doing. But for now the bright lights began to sparkle across lawns and Giant Blow ups of Santa Clause and goliath size demented looking reindeer and elves dot the landscape. The bright call of the holiday rent the sky. Hey fuckhead get out f my parking spot” What the hell do you mean you don’t have any hooker barbies left. What the hell am I going to tell little Erlene!” Yes the holidays. An orgy of lights, visits from relatives we never really liked in the first damn place, shopping for stuff that will break by new years, Holiday parties where you accidentally end up in a closet with the chubby secretary form accounting and all the blessed events that make up the Christmas season. Here will be parties, bashes in the Chicago and this year’s inaugural bash for the Island of misfit toys. The tire man is getting married this month and one suspects the hangover will be felt by teetotal ling virgins in the woods of Minnesota after that one. I love this time of year as much as I hate it. Too much food, too much booze and just plain too much. I can hardly wait.
It is this time of year when one stops to ponder over ones life. Is it finally the time to admit that one is too old to continue reeling through life, scotch in one hand, cigarette in the other, one eye on the stock ticker, the other roving in search of Ms. Right or her twin sister Ms. Right now? Shouldn’t one be living a more serious, sober life as we head into the second half of life? Oddly enough I always arrive at the same conclusion. “Are you fucking kidding me?” Life is here; it is now. There are friends to make, love to fall into, lips to kiss, books to read, scotch to drink. Sunsets, Jazz, rock and roll, Beethoven and Coltrane, late nights, long talks, laughter to the point of unconsciousness, learning, loving, living and breathing. If this means that I eventually arrive at the pearly gates with my rock hard liver in a wheelbarrow and my lungs bleeding out my ears, it seems a very low price to know that while I was here, I lived ferociously. So bring on the holidays, light the tree, ring the bells and lets get on with it.
Wednesday, October 24, 2007
Supposedly tonight will be the first game of this years World Series. The Boston area weather report casts some doubt upon that with an 80% chance of rain, but still it is timefor the fall classic. This years series has some great story lines. American leaguer versus national league. Junior circuit against the senior circuit. Good versus evil. Those scum sucking no good rat fink bastra..oop.. I mean the Boston red Sox with the best record in baseball against the unlikely Colorado Rockies. Boston's dominance of the league and of Colorado record breaking 20 wins in 21 games to get into the series. The Rockies were thought to be out of it as September rolled around. The Red Sox almost blew a 7 game lead with three weeks to go in the season. It has the making of, well lets be honest it has the makings of a boston blow out. They are too good. I hate them. I detest their trend following fleecer of the public owner. I wish Josh Beckett was an Oriole and that Curt Schilling would take his damn bloody sock and go back to the national league. I wish David Ortiz would get sucked into some magical vortex that made him disappear for the next week,. I wish, like Sampson, Manny Ramirez would get a haircut and lose the ability to hit a baseball. But, all of that is unlikely. They have the hitting, the starting pitching and as long as they keep Eric gagne away form the mound, the bullpen. Although Paelebon will probably have to get his era down. After all in the post season it ids a lofty 0.00! I hate them. I will be rooting for the Rockies. I suspect I will not like the outcome of this series. My only hope is that Big Poppi cant be DH in the National League Park. The man can hit but give him a glove and interesting things happen. However, the rat bast..I mean the Sox have home filed advantage so thats not really an edge. More of a delusion.
So tonight the field at Fenway Park( another reason to hate the Sox. What a great stadium!) will be draped in the familiar red and white and blue bunting. A celebrity of some sort will throw out the first pitch. It will be the world Series in all its glory. Except it wont. Today the SUper Bowl looms much larger across the sports landscape. SO does the NBA finals and the Daytona 500 for that matter. Baseball is losing its lofty perch as Americas pastime. Today we prefer the NFL with alls its violence,pageantry and barely dressed cheerleaders. MUch as ROmans eschewed chariot racing for Gladiators we have traded the stately game of baseball for the rock and roll fest of football. Please don't get me wrong. I like football. But I still have that decade long love affair with baseball. Not that , with my track record I have any knowledge of this, but I think baseball is alike a long term spouse for me. She's is perhaps fading with the years and to others she is not a s beautiful as she once was. But I look at her and see only the beautiful smiling young woman she once was.
I think back as I sit here to the first World Series I can remember. The Dodgers-Orioles of 19966. I was 5. I didnt know the combination of Drydsdale-Koufax were supposed to wipe the birds off the face of the earth. I just knew all my friends Dads were worked up about it and spent a lot more time playing catch with us and talking about the Orioles. I did not know it was considered something of a miracle that the Orioles won in 4 straight. I didnt know that it would be the last time Sandy Koufax would explode form the mound, curling and hurling his entire being into an exploding fastball or devastating curve ball. I just knew that my friends and I were enthralled and entranced by each and ever pitch. I fell in love with the game.I remember 1968 with the glorious matchup of Gibson and Lolich. Unfortunately I can still recall 1968 with the powerhouse Orioles being dropped in their tracks by the mets. 1970 with Brooks becoming inhuman to the point of godliness on the third base line, the return of heartbreak in 1971 with Roberto Clemente almost single handidly beating the Birds. The ,ong haired brightly colored Oakland teams of the mid 0's. Reggies three home runs to become Mr. October. I still cant hear We are family without recalling our second los to the pirates in 1979.Cal Ripken catching the final out of the 1983 series just days after my father passed away. One of my most vivid memories is reaching for the phone to share the moment with him before I realized he was no longer there to take the call.Th earthquake series when I lived in central California. There are literally too many to recount here.
Life has changed a lot since then. It was, I suppose, the legendary oft cited simpler time. We played baseball from sun up to sound down back then Kids play today but usually in organized little league and the game takes a second place to soccer and lacrosse here in the mid atlantic.No organized ball for us. In the street, the field across the street, the common area of the apartment complex. We didnt care where. We played with baseball cadged and cajoled from parents for the dollar was a big deal for a new ball. We played with tennis balls liberated from the courts of the upscale development across town. We played with wiffle balls and duct taped them when the splintered until the resemble silver orbs hurtling through the afternoon sky. Gloves were carefully oiled and wrapped each night.If it was raining on a Saturday we watched Joe Gargiola and the NC game of the week to watch teams from across the league play. We fell asleep with transistor radios under the pillow to listen to the RObinson Twins, Belanger, Powell, McNally, Palmer and Cuellar restore justice and righteousness to the universe in the form of 3 run homers and blistering fastballs.There was no umpire and balls and strikes were argued wit the intensity of the Mccarthy hearings.Baseball. We loved, played it, watched it, listened to it, talked about it. A simpler time.
Today, it moves too slow for most. The NFL and the NBA are the dominant sports. if kids play pick up games its probably hoops. Little kids dont get to watch in breathless wonder as the home team takes the filed in a blaze of popping flashbulbs against the red white and blue backdrop of the first game of the series. They are long in bed by the time the first pitch takes place. Life has changed. I look at the world around me populated with taxes,bills,ex-wives, ex-girlfriends, wish they were girlfriends, wanna be girlfriends and miss those days when all you need were a couple of friends, a battered mitt and dirty much abused rawlings to experience the sublime. I look at my son and feel a little sad that he never had a passion for game not involving a TV and controller.life has changed. hell, look at the markets. back then you had the American League and the national league and you had stocks and bonds. Today we have futures, options, options on futures, swaps, stradles, hedge funds, fund of funds, CMs CDO's and virtually every other derivative and contrived trading instrument you can think of. It is a small wonder that faster paced sports have replaced the timeless game of baseball. Still. I miss it.
I will sit this week and watch the games. I shall cheer, perhaps in vain, the Unlikely Rockies. I will curse the Red Sox. I will think back to a much simpler time. In all likelihood I will cook some hot dogs to watch the game. Instead of the cola in a paper cup of my youth it will be scotch in lead crystal glass. But a t some point I will, I hope reconnect with that little boy who held his breath as the teams took the field and the game got underway. With the teenager who could still be captivated away from teenage cynicism when Brooks Robinson stopped your heart with his spectacular play.With the young expectant father who missed his own. With all the moments and times and stages of my life when in October baseball was king and the World Series was serious.
Monday, October 22, 2007
life markets and the damn red sox
Ah! Sweet Autumn, with falling temperatures, crisp breezy afternoons..my ass. There is no fall here to speak of so far. Temperatures continue to be up near 80 and after only the briefest of respites the air conditioner continue to growl along in a cash consuming frenzy. I now spend more a month to make sure that the wayward sons Asian princess of a girlfriend is comfortable and doesn’t suffer from seating or having her toe polish run than I used to make in a good year. Weather aside we have moved in the autumn sports time of the year. Like the weather it has been something of a disappointment. In proof that there is no justice, divine or otherwise in the world, the scum sucking red Sox and their owner have defeated, nay crushed the brave Indians (Brave my rear end. They folded up like French Soldiers who heard rumors a German coughed in the night). The Trend follower continues to suck up tens of millions a year from unsuspecting investors and use it fund the teams bloated payrolls and the obnoxious fans feverish frenzy for all things red Sox (How a trend follower can continue to lose money when stocks, commodities, bonds and oil trade at continual highs is beyond me but he does. At least he is consistent.) If there were any justice in the world Congress would declare nuclear war on the red Sox nation. As usual, I digress. The ravens have been exposed as a below average team. The alleged offensive genius running things has avoided using his running back (lowest average carries per game among top five rushers but tops in average gain per carry) in favor of a passing game directed either by the weak armed starter or the weak minded back up. The bills! The average Pop Warner 150lb tem could give the Bills a solid run. Not the ravens. Navy continues to play well but was perhaps a tad too optimistic in their scheduling. It is brutal this year. Still, they are winning overall and actually have a chance to beat a truly awful Notre Dame team. Although not a fan, I cannot help but admire the juggernaut that is the New England Patriots. They don’t beat other teams. They annihilate them. Tom Brady could order Chinese take out form the pocket and have time to finish the fortune cookies. The defense is evil in cleats. Why they cheated with the tapes I have no idea. These guys can beat anybody. The Patriots-Colts game this year could one of the true classic if the game. Basketball madness has come and gone and very soon now we can get college hoops with all its intensity. Maryland does no look to stack up well in the ACC but they didn’t stack up well the year they won the title either. North Carolina remains a beast, Georgetown looks strong again and the Gillespie era begins under high expectations in Kentucky. Should be a good year and perhaps take my mind off the inevitable win by the damn red Sox in the series. They are too good and I strongly suspect the Colorado fairy tale ends next week. The World Series at Chez Melvin shall be one of hurled epitaphs and whiskey glasses as I forced myself to be subjected to the vile course of events and somehow endure the pain.
The evil, foul souled entity known as the stock market is finally showing an inability to digest the ever-growing bad news from the financial sector. Virtually every large and midsize financial institution has reported markdowns form a portfolio of cancerous loans and rancid mortgages. MTG, RAD C, BAC, BSC. They all have it and I suspect it gets worse. They reported the losses they had to hoping they go away by next quarter. They will not. There is continual talk of a Bernake put in the form of another rate cut. It remains my opinion that dropping rates will be both inflationary and disastrous for the US dollar. It may give impetus to a short-term rally but the long-term impacts could well be disastrous, resulting in stagflation. It took almost a decade to beat back this huge appetite to of the slovenly beast the last time we faced it, and I fear it could take as long if we allow it to reemerge. Volatility is picking up and ranges widening in the SP 500, two factors I have found predictive in the past of a market change in the offing. I see SP 1420 as the next important downside level.
I continue to own the staples. Low price to book beauties ADPT, EIHI, GNCI and WSCI remain good buys. I am adding to the commercial REITS, my favorites being NFR, CSE, GNV and JRT. I like and am buying or selling puts on tech favorites SYMC, MOT and ATML. I was put shares of CHIC and am selling class against my position. Severn Savings (SVBI) continues to fall and very close to making the gotta buy it list. I am not adding any new names here but I will continue to add stocks as I find them On the short side, both myself and some of the smartest traders I know agree that shorting FXI, the china index ETF is one of the greatest ideas we have ever seen. It has doubled sine August. OF THIS YEAR. It has gone form the 100 area to over two hundred in less than two months. We also agree equally it is going to lead to our total financial meltdown resulting in all of us living in a tent along the concrete banks of the Chicago River. I argued for a tent relocation to Key West or Naples but we eventually agreed we needed to be in the windy frigid city in order to access the type of fast paced financial info that out us there in the first place!
I want to reinforce a central idea of all this. The economic outlook was bleary. Oil prices were at all time highs. We were mired for much of the decade in a senseless costly somewhat imperialistic military conflict. We had a succession of idiots who were either corrupt, stupid or weak as Presidents through the decade. There was a continual stream of scandals among our legislators. The euphoria of the late 1960s had ended up with the result of financial vomiting. Stock prices fell; there was inflation, a weak economy (holy shit-this sounds awfully familiar). The negative attitude remained all the way up until l the hostages were freed in Iran on the day of Ronald Reagan’s inauguration in 1980). However stock prices bottomed in 1975 and is was one of the greatest opportunities of our or any other lifetime! If we do continue to cut rates, debase the dollar and knock the stock market down I think e will be positioned for the same opportunity. Financials, particularly small banks will offer incredible risk reward opportunities for long-term value investors. There will be chances to pick up great companies at great prices and a chance to build large amount of wealth going forward. In the interim we own a lot of good companies at rock bottom prices and are enjoying a great dividend flow. Goes to hell in a hand basket? GREAT. We are going to get rich (er) over the coming years. Doesn’t? GREAT. We already own cheap stocks with tremendous upside and little risk of permanent capital impairment due to healthy balance sheets.
The island continues to slouch towards winter. Despite the warm weather most boats are put away or scheduled to be. Only the USS Greenberg (a 42 foot cruising craft of great beauty with a safety record only slightly better than the Titanic) to spent the winter in the water for sunny day cruising. The fast boats don’t really have that option and are on lifts anxiously awaiting the firs warm day in May. Sunday football gatherings are marked by equal amounts of beer drinking and Billick cursing, except among the Redskins fans who are celebrating the fact that their team is actually winning and looks like they might have actually know how to play the game. For the first time in several years, the red and gold can gloat over the fallen beaten bodies of the purple and black. So far I have had a decent football year. I have been to a Redskins game and went with the Chicago bunch out to Iowa for the Iowa Illinois game. It was an interesting drive with much conversation about how bad the market is, what’s wrong with the world at large. The highlights were an unscheduled stop at Ronald Reagan’s boyhood home and a great time tailgating at 7 in the morning with Mike Ott and his fellow Iowans. Have to confess all those acres and miles of corn a little creepy and was waiting for Joe Pesci and the children of corn to emerge from the fields with shotguns and hoes to wreak havoc on mankind.
A friend and I had a chance to discuss such heady ideas as the meaning of it all. In the end we decided that like Baudelaire we thought the answer probably had something to do with wine and a passion for life. My friend confessed however that the questions of how, what and why still troubled them. In closing I leave you my answers (doubtlessly wrong but I thought I would take a shot at it.)
what
for all its aches, pains, confusion and messiness, life at its core is more than we think it can be. For every heartbreak there is a first kiss, for every loss there is a gain, for every death a birth. Most people will avoid the fear and the pain and thereby miss the beautiful and the sublime. They will spend their lives in nice safe jobs to avoid risk. They will watch endless hours of insipid dramas and ridiculous sitcoms rather than read and possibly discover truths about themselves and he world they live in.
The what
Life itself. Mozart, John Lee Hooker and Stevy ray Vaughn. A kiss, making love, walking hand in hand down a country road or city street. Life is Beethoven and Shakespeare. It is Robert Parker and randy Wayne White. It is a look across a crowded room that suddenly is occupied by just two. It is a child’s smile and a friend’s tear. It is the taste of wine on lover’s lips. It is a sunrise, sleeping in on a rainy morning. It is loud rock and roll on a Saturday night. It is mathematics; it is literature, Led Zeppelin and Handel. It is a cup to drink from lustfully. As renowned drunk, author and liver of life Charles Bukowski once wrote "We are here to laugh at the odds and live our lives so well that Death will tremble to take us.” Life is vibrant, romantic, seductive and full of so many possibilities that we often cannot contemplate them all without offering thanks to whatever god we worship in thanks for it
How
It should be lived with great zest and little fear. To live in a such a way that we race into deaths waiting room bottle of win in hand, lipstick smear (location entirely dependent on gender) light up a cigarette and declare loudly to the timid souls " DAMN! That was fun. What’s next?
Why?
Because you are human. Alone of the earthly creatures you have been given the capacity to think to read, to reason. You have the capacity to love and the ability to be intimate for reasons other than procreation. Because you have a big brain and opposable thumbs. Whether by divine decision or evolutionary aspects you and you alone are designed to appreciate and enjoy all that sits before you.
note to a friend dealing with fear
I wish I could help you with this but ,unfortunately we must each deal with and face fear in our own way. There have been a lot of studies that show that most humans are more motivated by fear of loss than by possibility of gain. I find this interesting and think it in large part accounts for the state that thoreau calls quiet desperation. Everyone gets afraid. Including me. Every time I lever up my account to put on a big trade, push all in a poker game, sign a new contract or look into a womans dancing sparkling eyes and realize that not only am I strongly attracted to this woman,that we have so much in common we could be best friends as well as lovers, and just enough differences to keep it interesting, I get that pinch of fear that runs up the spine and makes the stomach flip like a circus bear on steroids. The mind calls up images of times in the past when the when result was not so good. I have gone broke from bad trades and I have been heartbroken. And guess what? I didnt die. It sucked but it didnt last.
I try at such times to focus on the fact that most of the trades have worked to the point that I can live comfortably and afford all my wonderful bad habits and addictions, keeping the book shelf full and the liquor cabinet stocked. I think of all the nights and times of wonderful experiences I never would have had if I had not taken the leap of faith in myself and the romantic nature of the universe. The biggest question is to figure out the probabilities of success and focus on that. If I have a 7-2 unsuited I should probably fold the hand. If the numbers are wrong in any way I should probably forgo the trade. If the woman is not literate,not adventurous,not sensual or romantic I should probably walk..or perhaps run...away. But if the odds are in my favor, and conditions exist for profit be it monetary or just perhaps the anticipation of nights dancing to blues bands under the stars, of quite nights of good food, wine, conversation and intimate moments and thoughts....then fear needs to be pushed aside.
To allow fear of loss, of death, or heartbreak is to lose our ability to live. I would rather die broke and heartbroken in the gutter than to fail to embrace all the incredible possibilities some benevolent deity scattered in front of us....
or to put it more succinctly
Fuck Fear
Friday, September 21, 2007
5 year plan
It was Warren Buffet who once commented that he invested as if the stock market would be closed for the next 5 years. I am amazed how often I hear this remark repeated by alleged value or relative value investors/. I am both amused and amazed be hearing these guys talk about holding stocks three to five years and then find in the Morningstar report they have 150% turnover in their fund. As for individuals, much of the research shows that investors hold the average mutual fund less than three years, never mind individual stocks. But, if we are buying stocks as a business and not just speculating on short term price movements, that is exactly the approach we should be using (I am not knocking short term speculation. I like it as much as the next guy and frequently write about using options to trade value but that’s not what THIS article is about).
Right now it looks pretty ugly out there. Thanks to the bernake bust up, the dollar is falling, interest rates are rising, energy costs are climbing and the backdrop for the US economy is just frugly. It is easy as investor to get paralyzed when we consider all that can wrong out there. However I decided to take a look at this as if today was it for the next five years. After today the stock market is going to close and not reopen for trading for five years. There will be no further daily price updates and the only idea of how you were ding was how well the business itself was doing. This means that getting the price and the business right is going to be crucial for success. Pretty much leaves out the big growth names. At 40 times earnings you can not uy a shorter-term glory shock like Apple. The chance that someone comes along and upstages them in the IPOD or IPHONE markets over 5 years is too risky. Goldman. Maybe. But what if rates keep rising and decimates their private equity and debt trading platforms? Five years is a long time in the trading business. A lot can go wrong and kill the value of our franchise.
So what to do? Lets find some great companies at a good price and a few good companies at fire sale prices. Seems to me that that is the best way to profit over the 5-year pal. First, I say lets grab up a few shares of COMS. The beleaguered networking stock trades today at $3.55 and about half of that price is in cash. They have exposure to both china and on line video, two huge growth areas over the next five years. Next, more tech in the form of ADPT. The data storage company trades at 3.78 has a book value and has over 3 bucks a share in cash. Further Steel Partners is the single largest shareholder with over 15% and Warren Liechtenstein and friends have a pretty good history of unlocking value in stock. I would also add share of EDCI. Decent company in a crappy business. CD’s and DVD’s are pressured more everyday by online content. However we have a stock at 1.35 or so over a buck in share in cash and total book value of 1.50. They also have 4 dollars a share of NOLS that can be used going forward. Chapman Capital and Third Point two activist investors of some note are aware of the value of this situation and are large shareholders.
One thing the bernake Bust has done is steepening the yield curve and I suspect he will cut again to make it steeper still. This should allow the major banks to capture the net interest margin and earn their balance sheets healthier. One major beneficiary of this is going to be the small banks that didn’t really have a problem to start with. Many small banks share have started trading down near book value and historically this has been a great place to buy. First a couple of local guys. Severn Savings, SVBI, is consistently ranked of one of, and frequently the best savings institutions in the country. These are smart local guys. They know the real-estate markets, they know all the builders and developers, where to lend and when to say no. Further they are expanding their commercial loan business to insulate against too much real estate dependence. The stock is just under 1.5 times book and although I might normally let prices come off a bit, the hypothetical market is going to be closed and these guys should prosper over the next five-year. Selling at just 9 times earnings it seems a great inclusion to the five-year plan. Same with Annapolis National Bank (ANNB) at 1.3 times book value. The Annapolis area is unique in that we have lots of real estate demand from turnover in State, Local and federal government and of course, we have the only Chesapeake Bay right at our doorstep. It is a very vibrant are that has escaped real estate collapses in the pat. With the steeping of the curve local banks should thrive and prosper. From the slightly larger city of Manhattan comes BERK. This a 900 million in assets bank that trades at book value and does business primarily in Manhattan, an area also seemingly insulted from real estate woes based on demand.
From the grab bag lets add shares of GNCI. The infrastructure roads and bridges in this country are going to need massive repair and rebuild in the next five years. Trading at book value with solid earnings, this manufacturer of heavy equipment for highway construction and environmental control equipment should benefit handsomely. EIHI is just a high quality well run insurance company. Offering primarily workers comp and group benefits, the stock trades below book value, 10 times earnings and has a small dividend of 1.3%. Since I think coal becomes more and more of a player in the energy arena I will also add shares of ICO. The bonus ere is that the majority owner is Wilbur Ross ands he ahs a long tradition at magnetizing his assets over time. In the 4 dollar area the stock is cheap and appears to have a good future.
In the area of larger companies that are good business at good prices I like CHIC. The retailer of ready to wear for the younger set has a 20% return on equity, 87 million in cash with no debt and generates over 88 milliohm more every year. I also like Motorola here. The company has struggled off late but it is still a player in mobile technology. Also betting the Carl Ichan gets paid off over the next five years strikes me as a god bet. Energy will continue to be an issue going forth and at less than ten times earnings, driller PTEN should be a beneficiary. FSS, the maker of safety and security systems, fire apparatus industrial vacuums and street sweepers seems very cheap here and the heavy insider buying would indicate I am not the only one who thinks so.
So there we have it. Some stocks that I would be thrilled to own at these prices, tuck away and forget about for five years confident that we paid a low price for a portfolio of good business that will be worth more than they are today by a significant sum. In addition they all have great balance sheets, very little debt and there’s a greatly reduced risk of permanent loss of capital over time. I have talked to some bulls who say that the rate cuts and 4th quarter earnings will drive us substantially higher. I have talked to bears that think the parties are over and we are going to have a huge sell off soon. The stock market is party mode, the bond market and the dollar look like newly divorced guys under a neon moon so they are so pessimistic. Who’s right? I don't really know. My suspicion is they both are. We ll get a continued rally off the rate cuts, earning for the third quarter will be okay and we ll go a bit higher. However the bill in the form of inflation and reduced economic strength will get paid early next year. However, no matter what happens in the short run I think this portfolio of stocks will be much higher 5 years from now. If I am investor and conducting myself in a business like fashion that should be all I care about. Day to day and week to week don’t matter as long as we have great balance sheets and are able to improve the underlying business over the years.
Next time I ll look at the current environment form a trading angle and see what conclusions I can draw. You can be both you know. A five-year portfolio and a trading portfolio. That way if you blow it all out trading you know the five-year plan will bail you out over time. If you do well trading..BONUS!
Right now it looks pretty ugly out there. Thanks to the bernake bust up, the dollar is falling, interest rates are rising, energy costs are climbing and the backdrop for the US economy is just frugly. It is easy as investor to get paralyzed when we consider all that can wrong out there. However I decided to take a look at this as if today was it for the next five years. After today the stock market is going to close and not reopen for trading for five years. There will be no further daily price updates and the only idea of how you were ding was how well the business itself was doing. This means that getting the price and the business right is going to be crucial for success. Pretty much leaves out the big growth names. At 40 times earnings you can not uy a shorter-term glory shock like Apple. The chance that someone comes along and upstages them in the IPOD or IPHONE markets over 5 years is too risky. Goldman. Maybe. But what if rates keep rising and decimates their private equity and debt trading platforms? Five years is a long time in the trading business. A lot can go wrong and kill the value of our franchise.
So what to do? Lets find some great companies at a good price and a few good companies at fire sale prices. Seems to me that that is the best way to profit over the 5-year pal. First, I say lets grab up a few shares of COMS. The beleaguered networking stock trades today at $3.55 and about half of that price is in cash. They have exposure to both china and on line video, two huge growth areas over the next five years. Next, more tech in the form of ADPT. The data storage company trades at 3.78 has a book value and has over 3 bucks a share in cash. Further Steel Partners is the single largest shareholder with over 15% and Warren Liechtenstein and friends have a pretty good history of unlocking value in stock. I would also add share of EDCI. Decent company in a crappy business. CD’s and DVD’s are pressured more everyday by online content. However we have a stock at 1.35 or so over a buck in share in cash and total book value of 1.50. They also have 4 dollars a share of NOLS that can be used going forward. Chapman Capital and Third Point two activist investors of some note are aware of the value of this situation and are large shareholders.
One thing the bernake Bust has done is steepening the yield curve and I suspect he will cut again to make it steeper still. This should allow the major banks to capture the net interest margin and earn their balance sheets healthier. One major beneficiary of this is going to be the small banks that didn’t really have a problem to start with. Many small banks share have started trading down near book value and historically this has been a great place to buy. First a couple of local guys. Severn Savings, SVBI, is consistently ranked of one of, and frequently the best savings institutions in the country. These are smart local guys. They know the real-estate markets, they know all the builders and developers, where to lend and when to say no. Further they are expanding their commercial loan business to insulate against too much real estate dependence. The stock is just under 1.5 times book and although I might normally let prices come off a bit, the hypothetical market is going to be closed and these guys should prosper over the next five-year. Selling at just 9 times earnings it seems a great inclusion to the five-year plan. Same with Annapolis National Bank (ANNB) at 1.3 times book value. The Annapolis area is unique in that we have lots of real estate demand from turnover in State, Local and federal government and of course, we have the only Chesapeake Bay right at our doorstep. It is a very vibrant are that has escaped real estate collapses in the pat. With the steeping of the curve local banks should thrive and prosper. From the slightly larger city of Manhattan comes BERK. This a 900 million in assets bank that trades at book value and does business primarily in Manhattan, an area also seemingly insulted from real estate woes based on demand.
From the grab bag lets add shares of GNCI. The infrastructure roads and bridges in this country are going to need massive repair and rebuild in the next five years. Trading at book value with solid earnings, this manufacturer of heavy equipment for highway construction and environmental control equipment should benefit handsomely. EIHI is just a high quality well run insurance company. Offering primarily workers comp and group benefits, the stock trades below book value, 10 times earnings and has a small dividend of 1.3%. Since I think coal becomes more and more of a player in the energy arena I will also add shares of ICO. The bonus ere is that the majority owner is Wilbur Ross ands he ahs a long tradition at magnetizing his assets over time. In the 4 dollar area the stock is cheap and appears to have a good future.
In the area of larger companies that are good business at good prices I like CHIC. The retailer of ready to wear for the younger set has a 20% return on equity, 87 million in cash with no debt and generates over 88 milliohm more every year. I also like Motorola here. The company has struggled off late but it is still a player in mobile technology. Also betting the Carl Ichan gets paid off over the next five years strikes me as a god bet. Energy will continue to be an issue going forth and at less than ten times earnings, driller PTEN should be a beneficiary. FSS, the maker of safety and security systems, fire apparatus industrial vacuums and street sweepers seems very cheap here and the heavy insider buying would indicate I am not the only one who thinks so.
So there we have it. Some stocks that I would be thrilled to own at these prices, tuck away and forget about for five years confident that we paid a low price for a portfolio of good business that will be worth more than they are today by a significant sum. In addition they all have great balance sheets, very little debt and there’s a greatly reduced risk of permanent loss of capital over time. I have talked to some bulls who say that the rate cuts and 4th quarter earnings will drive us substantially higher. I have talked to bears that think the parties are over and we are going to have a huge sell off soon. The stock market is party mode, the bond market and the dollar look like newly divorced guys under a neon moon so they are so pessimistic. Who’s right? I don't really know. My suspicion is they both are. We ll get a continued rally off the rate cuts, earning for the third quarter will be okay and we ll go a bit higher. However the bill in the form of inflation and reduced economic strength will get paid early next year. However, no matter what happens in the short run I think this portfolio of stocks will be much higher 5 years from now. If I am investor and conducting myself in a business like fashion that should be all I care about. Day to day and week to week don’t matter as long as we have great balance sheets and are able to improve the underlying business over the years.
Next time I ll look at the current environment form a trading angle and see what conclusions I can draw. You can be both you know. A five-year portfolio and a trading portfolio. That way if you blow it all out trading you know the five-year plan will bail you out over time. If you do well trading..BONUS!
Tuesday, September 18, 2007
move to fall
As measured by the REBC(Red Eye’s Bikini Clock) summer is officially over. We had one of the worst and best rides of the summer this weekend so it was a fitting ending. On the way to Baltimore we hit turbulence from ships exiting the harbor and quickly turned from boaters to small airborne craft pilots. At one point I looked back to check on our passenger and he was in the fetal position of the boat begging for mercy from the boating gods. Which was granted in the form of flat waters all the way back across the bay and we had three boats running flat our all the way back in the best ride of the summer. As we sat later at the bar of Lisa’s small plate attempting surgery on my finger from the latest and last of summers injuries with tweezers, a paperclip and scotch, The Tic-Tac kid and I shared a toast to a great season with lots of boating, a sprinkling of pretty girls and liberal doses of good times and good friends. So, away go the flip-flops and shorts; trade the red for white, gin for scotch, break out the tennis shoes and blue jeans. Baseball is headed to the stretch and the genetic misfits known as football teams capture our fancy as we head into the early days of fall. It was a great summer but given the injuries sustained in the Squirrel Wars of 2007, the the curious incident of the whiskey and biting dog incident, and now the holy god not only is that the biggest splinter I have ever seen that’s all the way under you nail accident (FYI-Doctors lie.4 Novocain needles in your finger is not a little stick. It is a big painful evil,nasty mother of all sticks) and other assorted missing nails, banged bones and torn bits of flesh another couple of weeks of summer may have well been the death of me.
Which brings us to the stock market. It makes less sense than my personal life at this point. At least there I understand the cause and effect of what happens (Basically, I am an idiot and set in my ways. As I have been given to understand I am also arrogant, obnoxious and condescending. And they say it like it’s a bad thing!). But I confess to being a little confused by the market and its seeming disconnect form the real world. As long as you do not eat or use energy, there’s no inflation. However a trip to the grocery store shows me that food prices are the highest I can recall seeing. Oil is at a new high. Back out auto gains driven by model year discounting and rebates and retail sales in Augusts back to school period were down. The consumer has depended on the housing ATN for the last several years, but with the credit dry up and in some areas declining values, that bank is closed. But everyone now expects the Fed to cute rates later today. This allegedly will reaffirm consumer confidence. But it also has the impact of bailing out banks and funds from the consequences of stupid decisions. Apparently takes risk and win. Great! Take risks and fail? No worry that’s what the fed is for. Unless you are an individual who took a jumbo two or three year Arm with a teaser rate and are going to see you mortgage rate double in a few months. You are just screwed. In the face of this the stock market is within 4% of all time highs. Lehman creates earnings in excess of estimates by changing their tax rate. Rally time in spite of the fact that revenues fell 47%.
Most of the activity I am seeing is in the indexes, leading me to believe that short tem money continues to dominate stock market action. The focus is on how will we react to the fed today, or ABC ‘s revised earnings SWAG. 4: 15 IS long term. Great company trading at book profitable pays a dividend, buying back shares and insiders buying the open market. Who cares? Special situation with a high-annualized yield? Sold it to pay margin calls on debt positions. Convertible preferred paying over 10% with strong management. No interest. Index baby. Bid em.
I have heard convincing arguments from Louis Navellier and even Jim Cramer of late that we are going to move into a market that favors value over growth. Here a shocking statement coming fromm me. I think I agree with them. Value has outperformed growth for over 7 years, a pretty much unprecedented run. Usually the periods are much shorter. This run has been fueled by falling rates and rising housing prices that have pushed traditional value industries forward and allowed for easy takeovers and refinancing of under performing stocks. Companies were bought on credit at stupid multiples of assets and earnings and launched the prices of cheap, undervalued stocks. Those days I think, are over. Having said I agree with the statement, now we have to look at where does this growth come form. It is not going to be tech unless corporate America gets a lot looser with the cap ex checkbook. We have already seen by the IPOD price cuts that consumers aren’t going to pay up (as they did in the past for new toys. The toy budget is already pretty stretched.) I think areas like heavy construction rebuilding the country’s badly stretched infrastructure perhaps. I like GNCI here and it sells at valuations I like. Coal should be a growth industry in years ahead as we look for ways to get away from foreign energy. Coal to liquid technology could play a big part in making coal a growth story. I like MEE, CNx and ICO here. Growth will come from new areas not yesterdays growth story. We will have to look for them. My other problem is that I think we have a few years of downright sloppy markets ahead. I don’t see how we cant. We have priced stocks for perfection in an imperfect world. It’s going to be tough to deal with and take some innovative and adaptive thinking to not just survive but earn good absolute returns. How do we do this? Selling put options on market sell offs on stocks we like. (A caveat here, I think it will be necessary to add some trader think to our methods and be willing to own the stocks put to us and use covered calls to trade around the positions and exit at a profit. I am kind of anti buy and hold here; also don’t post minimum margins. Post the full price of the underlying stocks). I think trading the value line 1 and 2’s under ten, buying on sell offs in the overall market and selling the next rally will work. The Dorsey Wright high low indicator has been successful in the past at timing shorter-term entries and exits in the stock market. We need to watch it closer. I remain very impressed with Navelliers Portfolio grader pro service that’s spots institutional buying in individual stocks. Paying attention to the grading of our stocks could materially improve our entries and exits and therefore on profits. It is going to be harder to make money for the next few years. When we run our screens finding stocks with profits and dividends trading below book, we are probably going to have watch our market entry point as well as institutional activity in the stock a lot closer than years past and be quicker to trade than we used to be. Further we should try to focus on areas that offer earnings growth because I think that’s where the money will flow. Just cheap isn’t going to be enough anymore. It’s going to have to grow as well. The idea isn’t to beat the market. If stocks are down 20% and I am only down 10, it is not a win. It’s a loss. You cannot eat relative performance.
So we move into fall now and look forward to crisp days and cool nights, breaking out the blankets and wamr socks. Sweatshirts are going to replace tee shirts and its just about time to shut the pool and clean the chimney in anticipation of crackling fires ad good red wine. After a wandering summer, the Great Girlfriend Hunt of 2007 begins in earnest (although hopefully out the (mostly self inflicted) weirdness of the 06 hunt). The Yankees and Boston are keeping it interesting; Detroit refuses to go quietly into the September night. The ravens beat the hated Jets, The redskins are surprisingly 2-0, and navy is not as good as years past but still fun to watch. Of course, there is the downside of Notre dame being truly horrible but we have to take the good with the bad. The leaves will turn here in the Mid Atlantic in a few weeks as well as all over the northeast with a spectacular splash of colors, giving us an injection of color before the gray of winter sets in. There is much to like about fall with the only real drawback being the women wear so damn many clothes!
We are going to get a rate cut today. I just do not think we are going to like it as much as current sentiment thinks we will.
Monday, September 10, 2007
an oldie
found this one lurking in some old files
My what a wonderful week we have had around these parts. We have learned al about dow theory. We have learned that it works almost all the time..except that it really doesn’t, it isn’t really a trading strategy and its kind of sort, just maybe a little. Or perhaps even a lot subjective.We have learned that denny mclain and pete rose were bad people who did bad things but it might not have been their fault because its well done that pitching too many innings or playing hard on the diamond makes one make bad nets on clubs,spades and even athletic contests.We have learned that phd students don’t like when phd holders makes jokes at their expense. To everyone’s shock and horror, we discovered that retail comp numbers don’t tell us much about where the stock price is heading.(kudos where due..)that was a nice piece of work). It was deeply disturbing to discover that a number cherished and admired by wall streeters was worthless.it was revealed that Americans and british don’t have the same sense of humour.apparently george carlin is not as sophisticated as monty python…just funnier.they do however think homer simpson is an okay guy.
However I must take great issue with the discussion of American beer as a poor product and American women as..what was the phrase..stroppy? As the lists in house expert on American drinking habits, along with my dedicated colleagues drs crossman and Hillman..although it is my understanding that dr Hillman is retiring from the active research field his contributions must be noted and appreciated…..and American woman and their relative levels of ..umm//stroppiness, I feel I must intervene to correct some misunderstandings and wrong assumptions in the data collection and analysis process.
Dr millers, whose work in finance,gambling and now drinking and womanizing I much admire and look forward to all his contributions, suggestion of a field trial is indeed a wonderful thought. However he has structured his control group in such a way to almost guarantee disaster. First, NEVER use fosters as a control. It is a good beer, however its US based advertising campaign is full of blond Australian surfer types and outdoor crocodile killers. The image that this creates in our quarries mind will be rather difficult for your average khaki and polo shirt type to overcome. If you are in one of the Dr Melvin under the bridge hall of fame establishments and proffer a fosters, the can is entirely too large. Far better to have the young lady bounce a 12 oz off your head for offering her some namby-pamby foreign crap in a funny looking can.As for the use of Colt .45 40 ouncer, this is fraught with peril. If it is accepted, you are on the wrong side of town and death is imminent. If the lovely of your intention accepts the cold 40 - one suggests you slam your own drink down and begin the process of hail marys or whatever archaic pre death ritual your religion practices.The French champagne may in fact be the worst of the bunch..if like so many of us you consider out right rejection and public humiliation to be worse than death.You see, we Americans have trained our women to understand that the proffering of expensive bubbly liquids and the acceptance thereof is an binding contract for immediate and prolonged sexual activity. Should you offer this to a lovely as a first drink, it would be considered extraordinarily forward and you can expect to find yourself red faced and wearing the remains of whatever watered down sucky American beer she was drinking.
When examining the drinking happiness and stroppiness factor of american women, one suggest the following control groups. The best test is of course the lovely with two empty miller lite bottles in front of her and a third on the way, accompanied by empty shot glasses of jaegemeister. It is preferred that she have the ring tan or other indicator that suggests the recent departure of a significant other.This is a young woman in a decidedly non stroppy mood who is drinking beer for the purpose we Americans use it for…to other more sophisticated overseas brethren we leave discussions of hoppiness and after taste..over here we use the stuff to lubricate the good times and unleash libidos.This young woman will consume enough watered down American crap beer and foul german rocket fuel to forget her troubles and begin making up for lost time having good times. The other worthy prey..I mean field subject is for course the cosmopolitan drinking female. If she is over 35, she has long ago decided what she likes and wants and you will know where you stand 30 seconds after you offer a drink….if she is under 35, she is a sex in the city junkie and feels a social contract to drink too much and have sex with relative strangers….not a bad character trait for our research studies. To be avoided at costs out the fruity umbrella drinking flocks…these are girls night out types and like herds of wildebeest in the wild they band up to protect the gaggle form invasion by predators. To attempt research here will soon exhaust the funds available for the project as they will accept all the 9 dollar fruity concoctions you offer but you will never get close enough to discuss trans continental stroppiness. White wine drinkers also make a poor choice as they tend to be settled, centered types and there’s probably a protective alpha male somewhere near by. Now the whiskey drinking woman…here is a woman with so many virtues that the great redneck troubadour Toby Keith recently penned a tribute to her and all her sisters nationwide…but no point looking for her..odds are she left with me an hour ago
My what a wonderful week we have had around these parts. We have learned al about dow theory. We have learned that it works almost all the time..except that it really doesn’t, it isn’t really a trading strategy and its kind of sort, just maybe a little. Or perhaps even a lot subjective.We have learned that denny mclain and pete rose were bad people who did bad things but it might not have been their fault because its well done that pitching too many innings or playing hard on the diamond makes one make bad nets on clubs,spades and even athletic contests.We have learned that phd students don’t like when phd holders makes jokes at their expense. To everyone’s shock and horror, we discovered that retail comp numbers don’t tell us much about where the stock price is heading.(kudos where due..)that was a nice piece of work). It was deeply disturbing to discover that a number cherished and admired by wall streeters was worthless.it was revealed that Americans and british don’t have the same sense of humour.apparently george carlin is not as sophisticated as monty python…just funnier.they do however think homer simpson is an okay guy.
However I must take great issue with the discussion of American beer as a poor product and American women as..what was the phrase..stroppy? As the lists in house expert on American drinking habits, along with my dedicated colleagues drs crossman and Hillman..although it is my understanding that dr Hillman is retiring from the active research field his contributions must be noted and appreciated…..and American woman and their relative levels of ..umm//stroppiness, I feel I must intervene to correct some misunderstandings and wrong assumptions in the data collection and analysis process.
Dr millers, whose work in finance,gambling and now drinking and womanizing I much admire and look forward to all his contributions, suggestion of a field trial is indeed a wonderful thought. However he has structured his control group in such a way to almost guarantee disaster. First, NEVER use fosters as a control. It is a good beer, however its US based advertising campaign is full of blond Australian surfer types and outdoor crocodile killers. The image that this creates in our quarries mind will be rather difficult for your average khaki and polo shirt type to overcome. If you are in one of the Dr Melvin under the bridge hall of fame establishments and proffer a fosters, the can is entirely too large. Far better to have the young lady bounce a 12 oz off your head for offering her some namby-pamby foreign crap in a funny looking can.As for the use of Colt .45 40 ouncer, this is fraught with peril. If it is accepted, you are on the wrong side of town and death is imminent. If the lovely of your intention accepts the cold 40 - one suggests you slam your own drink down and begin the process of hail marys or whatever archaic pre death ritual your religion practices.The French champagne may in fact be the worst of the bunch..if like so many of us you consider out right rejection and public humiliation to be worse than death.You see, we Americans have trained our women to understand that the proffering of expensive bubbly liquids and the acceptance thereof is an binding contract for immediate and prolonged sexual activity. Should you offer this to a lovely as a first drink, it would be considered extraordinarily forward and you can expect to find yourself red faced and wearing the remains of whatever watered down sucky American beer she was drinking.
When examining the drinking happiness and stroppiness factor of american women, one suggest the following control groups. The best test is of course the lovely with two empty miller lite bottles in front of her and a third on the way, accompanied by empty shot glasses of jaegemeister. It is preferred that she have the ring tan or other indicator that suggests the recent departure of a significant other.This is a young woman in a decidedly non stroppy mood who is drinking beer for the purpose we Americans use it for…to other more sophisticated overseas brethren we leave discussions of hoppiness and after taste..over here we use the stuff to lubricate the good times and unleash libidos.This young woman will consume enough watered down American crap beer and foul german rocket fuel to forget her troubles and begin making up for lost time having good times. The other worthy prey..I mean field subject is for course the cosmopolitan drinking female. If she is over 35, she has long ago decided what she likes and wants and you will know where you stand 30 seconds after you offer a drink….if she is under 35, she is a sex in the city junkie and feels a social contract to drink too much and have sex with relative strangers….not a bad character trait for our research studies. To be avoided at costs out the fruity umbrella drinking flocks…these are girls night out types and like herds of wildebeest in the wild they band up to protect the gaggle form invasion by predators. To attempt research here will soon exhaust the funds available for the project as they will accept all the 9 dollar fruity concoctions you offer but you will never get close enough to discuss trans continental stroppiness. White wine drinkers also make a poor choice as they tend to be settled, centered types and there’s probably a protective alpha male somewhere near by. Now the whiskey drinking woman…here is a woman with so many virtues that the great redneck troubadour Toby Keith recently penned a tribute to her and all her sisters nationwide…but no point looking for her..odds are she left with me an hour ago
Wednesday, September 05, 2007
endless summer? I don't think so
So now we have slipped past the dog days of autumn and begin down the slippery weeks of summers end. Labor day has passed, a wonderful weekend with a poker game to kick it off and some great boat rides blasting up the Chester River under clear blue skies enjoying the company of friends and all the great things that make up this last three day weekend of summertime. In the interest of editing we will leave out the part of the story that involves whiskey, ex-wives and angry dogs (who knew dog bites hurt that much or got that infected? My leg has colors in it that were never part of any rainbow I ever saw). Only two summer weekends left (keep in mind we are on the red yes calendar around here. Final bikini contest. End of Summer). Thoughts turn back to work and markets as volume returns to the street and begins to reassess exactly where we are as far the direction of the economy and stock market.
It remains a pretty mixed picture as of this moment in time. In the beige Book released today the fed stated that there was little economic turmoil outside the real estate markets. That’s like saying outside of those very large fang marks on it, your leg is fine, Mr. Melvin. What it doesn’t say of course is that the real estate market is huge in this country and the source of most people’s personal wealth. To say nothing of all the real estate agents, mortgage brokers, and associated jobs that will be lost in a real estate slump. Of course there is still the 800-pound gorilla of all those mortgage resets coming up. Even if many of these borrowers could qualify for a loan in the new environment, they could never afford the new payments.
Sounds bad doesn’t it? Maybe we need a rate cut to soften things up a bit, make a few more bucks available to smooth things out. But Wait. There’s more. As any person who eats food, buys gas or clothes or any other type of goods can tell, prices are rising across the board. Pretty much most raw materials are up near new price highs. We are a service economy so pretty soon service providers will raise the prices they charge so they too can continue to buy food, gas and all the other fun stuff we need to get through the day. The dollar is in a free fall against just about all currencies right now (this is causing me particular distress as the price of scotch has jumped 20% in the last month). Higher raw materials and energy costs? How can we lower rates in the face of these events?
Glad I am not fed Chairman right now. If he doesn’t act, he will disappoint the financial markets and cause stock prices to fall. If he does, he runs the risk of creating a stagflation scenario. Somehow I do not see the markets embracing that very fondly either.
So what now? First admit that I probably should have bought the 1380-1400 are on cash SP 500. The few market-timing factors I like showed it as a buying point. But I felt then as I do now that the risks of such a move were not worth the potential return. My monthly price chart shows 55 months of rising prices. Do we really have a one-month sell off those retraces150 points of a 700-point move? We have risen 100% off the lows but a 20 day 10% decline is all we get. A fed injection heals an economy that had all the loose lending and bad deals that mark a frothy economy? Did think so then and don’t now. Caution makes a lot of sense to me.
I did pick up shares of mortgage concerns and reits that make commercial and business loans a few weeks ago. They had fallen, were well below book value and had real loans on real property that had not been diced and sliced into derivative securities. I felt that they could ride this wave out and corporate insiders agreed with me. Yields were north of 10% on all of them and they have risen slightly since. I think BRT, CSE, GSC, JRT and NRF are probably still buys. Can they go lower in the short term? Of course. Will they be a lot higher in three years? I think they will and I ll be collecting some fat dividends along the way. I picked up a few shares in FMAR. This fast growing bank in Baltimore trades below book as a result of their own mortgage mistakes but they have a good CEO who is buying stock. ADPT is still a net-net worthy of purchase as well. I think you also can still buy BERK, BHBC, EIHI and ESST.EDCI is too cheap not to buy given the NOLs lurking on the balance sheet waiting for someone to figure out how to turn them into real money. Those inclined to sell options should be having a blast right now as huge moves in volatility make for a lot of trading opportunities.
Let me reiterate that I am not a long-term perm bear. In fact I think the real estate issues are going to take some time to work through the economy and the stock market. When it is time to buy I think it will resemble 2001 and 02 as an incredible buying opportunity that generates a lot of long-term wealth. I look forward at that time to being a lot more aggressive, employing strategies like the value Line 1 and two under 10 dollar list, the yield and return on equity strategy. As a bonus as the lending markets churn, with wall Streets all too reliable habit of throwing out the baby with the bathwater, small local banks will get very cheap. Historically buying these little gems has been incredibly profitable when you get them below book and ender 10 times earnings. We are close here but not just yet. I am watching insider buying in this sector very carefully looking for a sign to increase my buying here. The time to jump in with both feet is coming. It is just not here yet.
So, summers gone and the flowers are indeed all dying. Or soon will be. But this gives a fall to look forward to. This just might be a good thing. Lets be honest, a few more fast boat weekends with the tic-tac kid and my knees and liver would both sue for damages. There is no better time to be a sports fan. College football, that glorious pageant of sport where one group of twistedly mutated young men takes on another and an entire states pride rests on the outcome of the contest. Already we have seen one of the greatest upsets in all of college ball history when Michigan was upset by tiny Appalachian State (search youtube for their recruiting video to understand just how small this school is. I have made better films on my phone. My phone, btw doesn’t have video. That’s how bad it is) We have determined that my Beloved Notre Dame is not very good. Okay, they are actually very bad and I am dreading the amount of crap I ll have to take from beachclub Boy Saturday when we play his Penn sate Nittany Lions. I hate my bet even with the 17 points. Pro ball starts tomorrow night with what should be a barnburner between New Orleans and The Colts. I have to say that the over at 52.5 looks like a good bet from here. The ravens look very good and there are some great story lines though out the league. As a bonus we can now watch football on ESPN and not have to listen to Michael Vick stories. There is something grand, glorious and uniquely American that encourages eating and drinking excessively while watching violent powerful men do violence to one another whilst slightly dressed beauties dance among them sinning sings of praise. Goes to Tim’s central theory of life. All things are better with partly to mostly naked women in attendance.
Baseball races are heating up. The Red Sox look to be waltzing into the playoffs, the Yankees have to play in against the mariners but this will be tough with the roughed up pitching staff. The orioles might avoid last place (although I would not bet much more than a can of warm Schlitz on this), the cubs are prime to break hearts again with their lead in danger now and the Brewers charging forward like hopped up Dartmouth freshman on a panty raid, Crossmans Indians look like a lock for the playoffs. There does exist a very strong possibilities of the only two truly evil baseball teams on the planet meeting in the world series and I will be faced with the prospect of having to spend the last week of October snarling and hurling savage curse at the screen as the red sox play the mets. Still it is a great time to be a sports fan. Hell, even NASCAR has the race for the chase coming. No Junior though so no one south of the mason Dixon line will watch it.
The pipe, the pipes are calling, from the docks and to the games.
Caution in the markets, sports on the tube. Green label Bushmills on order. No dogs in the immediate vicinity. Life is good.
Wednesday, August 29, 2007
I could be early. I usually am. but here are 5 names that are commercial lenders with very little exposure to the residential mess. They tend to hold their loans as opposed to trading, they have been beaten down in price worse than the orioles against texas last week and there is massive insider buying in the shares.All yield well north of 10% at current levels. While continued problems may cause some dividend cuts, I think most of them will continue their payouts at these levels.
CSA-Capital Source
Operates as a commercial lending, investment and asset management company that
focuses on the middle market. The company provides senior and subordinated
commercial loans, invests in real estate, engages in asset management and
servicing activities, and invests in residential mortgage assets.
STARS Ranking: **
2008 EPS estimate $2.37
2007 EPS estimate $1.90
2006 Reported EPS $1.65
Text JER Investors Trust ---(S&P) 08-13-07 Sym JRT
JER Investors Trust, Inc. (JERIT) operates as a specialty finance company in
the United States. It acquires and originates commercial real estate
structured finance products.
GSC Investment ---(S&P) 07-13-07 Sym GNV
Seeks to generate both current income and capital appreciation through debt
and, to a lesser extent, equity investments, by primarily investing in private
middle market companies. It has elected to be treated as a business
development company under the Investment Company Act
NORTHSTAR REALTY FINANCE ---(S&P) 08-09-07 Sym NRF
Operates as an internally-managed commercial real estate company that makes
fixed income, structured finance and net lease investments in real estate
assets. The company intends to qualify as a REIT.
STARS Ranking: ***
2008 EPS estimate $0.93
2007 EPS estimate $0.70
BRT Realty Trust SBI ---(S&P) 08-08-07 Sym BRT
BRT Realty Trust operates as a real estate investment trust in the United
States. It primarily engages in originating and holding for investment senior
and junior commercial mortgage loans secured by real property.
Announced 2Q EPS $1.88 vs. $0.48 and 6 mos. EPS $2.91 vs. $1.09. Results
exclude gains of $0.04 for 6 mos. '07, and $0.04 & $0.03 for 2Q & 6
mos. '06, from discont. opers. Results for 2Q & 6 mos. '07 include a
one-time gain of $15.3M from the sale of securities.
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