Where we are now

As usual I have taken entirely too long to come back and update this space. I always seem to have the best of intentions but after doing the daily writing and various investing and household activities I just do not seem to get as much time as I think I have. We are moving into spring here in the Mid Atlantic and the warmer weather beckons on the occasional teaser day we have experienced so far this year. Baseball season has started with the usual high expectations and low delivery for the Orioles but we will touch on that later in this epistle.

I will start with the markets. The most powerful lesson learned is that o interest rates trump everything. Never fight the fed when your opponent pulls out a bazooka. Low interest rates mean more than troubled real estate markets, stagnant economies, high unemployment, geopolitical turmoil and natural disaster. There have been literally dozens of valid reasons to worry about the stock market. There has only been one to be bullish. The bulls have won a resounding victory so far. Money has been literally, and by the Feds admission, forced into stock the stock market. Much smarter traders than I have recognized this and used valuation neutral ETFs and black box trading to lift offers in the market and create a self feeding frenzy pushing prices still higher.

The other thing that the last two years have proven true is my philosophy of always buying stocks that are too cheap not to own regardless of my macro views. I was literally forced to be a buyer of cheap stocks back in 2008 and 2009 and it has paid off with some big winners. The Forest City debentures (FCY) have gone up six fold over that time. Hardinge has doubled as has West Marine. Capital Source and Tech Data has doubled in value as have a whole host of hotel REITS that were picked up at the height of the panic. Had I relied on my world view instead of valuation I might have hid in a closet sucking on a bottle of scotch but the “too cheap not to won” concept carried the day. A usual my stock picking is a hell of a lot better than my macro thinking.

With that thought in mind I am pretty much going to ignore the current macro environment. If you own a TV or read my RealMoney column (please subscribe btw) you know what’s going on out there. I have no idea when the zero rate policy stops forcing the mass asset allocation trade. Some say it will be when QE2 ends in June. It’s a pretty safe bet that so many expect that result that it is almost impossible for it to be the case. Perhaps today’s downgrade of US government debt to negative status will be the straw. I do not know and I suspect on one else really does either. I do know there a few cheap stocks around worthy of our attention.

Hilltop Holdings (HTH) has been on the cheap stock list for some time now. I have no idea when Gerry Ford will make an investment or strategic move to unlock the value of this company. I see that he just did a deal for an ownership stake in SWS Securities at a favorable price so that may be the catalyst. I do know that the $50 million he invested does not even put a dent in the almost $650 million cash stockpile he has available. I also know the stock remains not only cheap but safe trading below net cash levels. TSR (TSRI) is still trading for less than cash and receivables. The business has struggled but it is still profitable and has been for 10 years. It is just an okay business in a crappy industry. But it is safe and cheap and management is a big owner and will have to monetize their interest in the company at some point. Heavy machinery and as[halt plant manufacturer Gencor (GENC) will someday see a huge surge in business from infrastructure spending. That day is not today and the company trades for less than cash on the balance sheet.

I have a toe or toe in the mortgage backed securities market as well. I think that aggressive investors can own some of the high yielding mortgage back REITS right now. I favor Invesco Mortgage(IVR) and Chimera CIM with 19% and 14% yields respectively. I also like the public partnership Ellington Financial with its hedged fund approach and 22% dividend yield. The caveat here is that there is a lot money getting ready to move into this market. A bunch of companies including giants like TCW and PIMCO are planning IPOs of mortgage backed funds. Several companies including Invesco are doing secondary offerings to take advantage of the messy pricing in this market. This could push prices higher between now and the end of the year and its going to be necessary to exit a pop in these things. Too much money in a sector is always bad news. The good news is that when they push it too high the weak ends will get flushed when the market cracks and we can do this all over again.

We continue to move into the small bank trade as well. Here I am playing a barbell approach. I like the higer quality banks like mutual conversions like Capital Financial (CFFFN ) and FoxChase Bancorp (FXCB). I still like Shore Bancshares here on the Eastern Shore of Maryland. I am also taking the long shot picks in the industry. I am trying to invest alongside the private equity money going into the industry. Hampton Roads Bancshares (HMPR)), Sun Bancorp of New Jersey (SNBC) and United Community Banks (UCBI) are among the names on this list. I am also mining the recent filings by noted bank activist like Lawrence Siedman and Joseph Stillwell for potential big return troubled bank stocks. There is a long list of stocks like Renasant (RNST) in the South and First Interstate (FIBK) in the Upper Midwest that I want to buy when the market finally does stage a decent pullback. They have great balance sheets and pay decent dividends. Now we just need an acceptable discount to tangible book value.

Now onto baseball at last. We added bats that are not hitting. Out team average and home run count can be generously said to suck like a hungry hoover. One would hope that changes soon. On the plus side the young arms seem to be doing about what they were expected to do. They are not great but they have great moments and don’t get blown out too early. They have however developed a disturbing tendency to give up the long ball and fall behind hitters. This has to improve or it will be another long losing year. Matt Wieters is starting to drive the ball with authority but not enough are falling in or clearing the fences yet. He is one of the best defensive catchers in the game. I just hope his bat gets as great as it can be before his contract is up and he is out of here. On the plus side the Red Sox look like crap and that is always a happy thought. It is a long season so here’s hoping they stay awful and we get better as the weather warms.

I have to stay away from the politics this time around. I am so sick of the twisted corrupt assholes on both sides of the aisle I want to puke. I don’t have time to spend an hour or tow vomiting away the sour taste of stolen dreams and leveraged futures. My wife will take it badly if I kick the cat in frustration at budgets, taxes, lies and empty statements. So this time around I ll skip discussing those twisted souls and thieving minds that have conspired to push our nation into a morass of political and monetary bullshit. Don’t worry. It wont be long before one of these $1000 suit wearing corrupted mentally frigid assholes pisses me into a rant of Thompsonesque proportions. But for today we will skip it

Summer is indeed just off the horizon. Every once in awhile you catch one of those gusts of heated air that smells of boat engines, barbecue pits and suntan oil. If you strain in the evening you can almost hear the crash of the surf and the band at the dock bar. It was not a bad winter around these parts just a long one. Now the days are just a little longer, the air is a little warmer and its almost time to get excited about all that summer has to offer on the island. Not yet, but almost. Life is good.Unlike years past I have someone to share the goodness with and that makes it even better than I had imagined it could be. And I have a good imagination!

Ramble On

I meant to write a variation of this rambling for some time now but just have not had the time or inspiration necessary to sit down at the keyboard for what was sure to be a long ramble. Fueled with new thoughts and periods of demented musings it will now be an even longer one. Now that I am back from Key West and ahead of the day on Monday I will endeavor to get all this down in as coherent a fashion as I am capable of doing. As I have not written in this space in a bit I will eventually get to important stuff like baseball and markets but for now let’s tell the story that has been in the back of the brain for a few weeks now.

It all starts in the kitchen with a glass of wine. That’s where almost all my stories that don’t start at Red Eyes begin so that not unusual. I was cleaning up after one of our family dinner gatherings and talking with the sister in law while my wife put the little one to bed. I forget what the subject matter was but at one point I commented that I just did to worry about this kind of thing. She paused for a moment and said “I get the impression you do not worry about much.” I thought about that for a second and realized that I really do not. Worrying is a waste of time in my opinion. I am all too well aware that bad shit can happen but to sit awake at night or waste one minute of one day stressing over it is a waste of life and time.

To those who know me only as an investor that may seem to be a contradiction. I enter every investment by asking what can go wrong? Once I have the answer to that I begin to calculate the upside potential. If I like both answers only then do I enter into the proposition or security. This allows me to sleep at night and hopefully earn enough profit to keep chugging along. I approach a lot of life like that as well. What can go wrong? Can I handle that? What’s the upside? I think it is the second question that screws most people up. They badly underestimate what they can handle in my opinion.

I think fear keeps many of us from being who we could be and living the life we should. I know people who sit awake worrying about shit that may or may not happen and crap that probably will never happen. Bad shit can happen I know that. You could lose your job; your business could go under. If it does the sun will rise the next morning and it will be time to start over. It might not be the most fun you ever had but you can do it. I know far too many of trader friends who went bust, drank it off and went back to raising a stake or rebuilding their bankroll. It has happened to me before in the aftermath of a divorce and a market collapse. I could barely afford my bar bill. It was not a hell of a lot of fun but I rebuilt, survived and thrived. It did not kill me, make me uglier or shorter and I moved on. Bring broke did not make music, books, sunsets friends or anything of the other things that make life so spectacular go away. They were still there.

There is all sorts of stuff to worry about if you choose to do so. The economy still sucks and job growth is so anemic it makes a snail look like Richard Petty in the backstretch at Daytona. The Middle East is in full revolt and we may get a democracy or two but that’s not the way to bet it. It started out that way but there’s a whole bunch of well-armed nuts over there so the outcome is very much in doubt. Gas prices are rising. We have mortgaged our future and it seems to me that we have done so for all the wrong reasons in all the wrong ways. Our two major political parties strike me as institutionalized insanity at this point. The tax code is absofuckinglutlely ridiculous and unfair to anyone with an ounce of ambition or thrift. The list goes on and on into an infinity of worries. You can work yourself into a right good frenzy of worry if you so choose just on geopolitical and big picture stuff if you want.

Then there’s the personal stuff. Things did not go so well at work today ,this week, this month this year. Business is slow and my customers are not buying what I sell. My son/daughter/cat/fish is not behaving the way I want. I owe too much money (um..this one’s easy. Quit fucking borrowing money). My parents/siblings are crazy .I need a new transmission. I hate my job. My pinky toe hurts. My 401k is down. I weigh too much. I weigh too little. I have a pimple. My kids might not get into the college I want them to attend. My house is worth less than I paid. All of these may be legitimate concerns but they are not worth worry or stress. Nothing that does not involve the imminent death of a loved one or yourself is worth worry in my opinion.

Stress kills. It kills faster than anything else on earth. Faster than drinking, smoking or any other of a host of bad habits. I think you can literally worry yourself to death. The very worst part is that you can worry yourself to death years before your body has the common sense to join you in death. Worry and stress can take every last millisecond of enjoyment out of life and that my friends is a tragedy. There is far too much beautiful and wonderful about life to ruin it with destructive worry and soul sapping stress.

Here is how to handle sorry and stress. Look at the situation that is a worry. What can you do to change it? Go do that. Is there any way to protect myself and the ones I love from this? Go do that. Can I profit from it in some way? If there is a way, Go do that. Once you have taken the steps that you can take relax. Go put some Coltrane on the stereo, pour a libation, read a book, play with your kids, kiss your wife. Live your life. What happens happens but you have done what needs to be done and you can handle the consequences.

The other best method for eliminating stress is to eliminate the ridiculous comparisons. Sam made more money than me. So what? Are your bills paid and do you have what you need? Jill has a nicer car. Who cares? She probably has a bigger car payment as well. I was not the best trader/salesman/mime this month or year. Again so what? Are your customers and clients happy? If not apply the questions above and make them happy. As any gunfighter or gambler can tell you there is always somebody better. Be as good as you can be and that’s more than enough.

None of this should be taken to mean that bad shit will not happen. You will stumble bumble and fall. You will make some mistakes that in hindsight will be stunningly stupid. You will lose money at some point. You will get your heart broken. All that and more will happen to us along the way. That danger of loss is more than offset by the good stuff that can happen. You can fall in love and find forever. You can find that dream job. The good stuff far outweighs the bad in this twisted little journey of life. Keep in mind that no one gets out of here alive. This is a one way trip to the best of our knowledge. Experience it all, live it all, love it all. Quit worrying, buy the ticket and take the ride.

My friend James Altucher recently wrote a nice piece on stress and reduction that I enjoyed (by the way if you are not reading his blog, Altucher Confidential, you should be. Entertaining useful and funny.) In one area we disagree. He suggested no alcohol to reduce stress. I disgagree.100% of all experts named Tim Melvin agree than wine reduces stress. Orange crushes at sunset reduce stress. Fruity rum drinks on the beach reduce stress. Cold beers with a two run lead in the seventh reduce stress. You can look it up.

I find myself in agreement with Baudelaire on this one. Be drunk. Be drunk on wine, virtue, poetry, love, sunshine, laughter. Be drunk on anything and everything. Drink deeply and sloppily of life, deep thirsty draughts of your children, your partner your friends, music, books, starlight, thunderstorms, fast boats, slow kisses, rainy mornings and sun drenched afternoons. Quit worrying and start drinking of life.

Now on to recent travels and adventures. We recently took a delayed honeymoon voyage to the Keys. We flew into Miami ,rented a car and drove down the Overseas Highway. If you have never done it, book the trip now. It is one of the most breathtakingly beautiful drives in the country. You can feel the tropics seep into your soul with each passing of a mile marker. If you get a chance stay overnight in one of the little resorts (no hotels o motels in the Keys, just resorts) in the Upper Keys. We stayed at the Drop Anchor in Islamorada one night and loved the place. The door opened right onto the beach and the ocean. Just a spectacular little place to spend a night or a lifetime. Furthermore if you can stay stressed strolling down Front Street with a drink in your hand and the sun in your eyes you need an extended stay in the Maynard G. Krebs Reality Rehab and Finishing School.

My next observation is that Jimmy Buffett should be horsewhipped. Don’t get me wrong. I like his music and used to organize bus trips to his shows in my younger days. He has some great tunes and I love the lifestyle he espouses. But the corporatization of the whole things he has done is just distasteful. We were on Duvall Street watching the upper middle aged sunburned set standing in line to get into Margaritaville with overpriced cheeseburgers and other standard Mid America fare. Two doors away Jakes was almost empty and we dined on conch ceviche and shrimp that was wonderful at an almost empty bar (note to Key West and the rest of the south. Quit boiling the damn shrimp. Buy a steamer). The whole concept of Parrot head clubs who think they are pirates for drinking three coronas while wearing loud shirts at Harrys Caribbean bar in Milwaukee is silly. There is no such thing as an organized casual lifestyle. Hippies, pirates, roustabouts, layabouts, dreamers, outlaws and drinkers of rum do not have an elected board of directors or a federal tax ID number. While we are on the subject if you insist on having such a club quit giving money to Jimmy charities and spend a little money and effort in your own backyard. I am pretty sure there are hungry or illiterate people in your little town that need the money far more than whatever corporate cause Jimmy advocates these days. Jimmy has lots of money to give his causes. Find your own and give deeply and often. Also Listen to some different music. Buffett’s okay but check out some Solomon Burke, Jerry Jeff Walker, Lyle Lovett, the Drifters and such.

Of course books will make an appearance in these ramblings .I stumbled across a book call Life Lessons of a Legend by Brad Manard and Captain Tony Tarracino. First I will say I liked it and you should buy it. Furthermore you should buy it at Voltaire Books on the corner of Simonton and Eaton in Key West. It is a great little book store whose owners went out of their way to be helpful when my wife was looking for a particular book to bring home to the small blonde child. Having said that the author is a member of a Midwestern Parrotheads Club and also looks at Tony through glasses of a deep rose color totally ignoring what Tony himself called his inner bastard. It is understandable I suppose. The last Brad from the Midwest we run across in culture was last seen wrapped up in a sexual embrace with a transsexual transvestite in a fright wig and fishnets. Manard spent some time with Captain Tony in the last years of the legendary Key West icons life and he came away with some pretty good stuff that makes for a good read.

One thing that is mentioned frequently in the book is Captain Tonys advice to look for the jewel within. Translated this means to look for the good in all. This is great advice for reducing stress. I have a lot of friends many others think are asshats, assclowns or simply assholes of the highest nature. I myself am frequently told I am like whiskey, an acquired taste. A lot of people have wrappers that have nothing to do with who they really are. Insecurities fear, and a whole host of other entirely human factors lead them to put a shell that is not entirely pleasant. If you see through the bullshit there is usually a pretty good person within. While it is true that there some folks who fit in the WOS (waste of Sperm) classification most people I meet are actually pretty decent humans just trying to figure it all out. Look for the jewel within is pretty damn good advice and the concept is pretty well presented in the book.

The other lesson Brad from Iowa gets from the gambler, hustler and saloon keeper is that compassion is the most important word in the dictionary. This is something that those of us who call ourselves libertarians fuck up beyond belief. While I deeply believe that government redistribution of wealth, uneven taxation and handouts is wrong this does not mean that there should be no compassion. Believing in myself and taking responsibility does not excuse me from giving a shit about those with whom I share the planet. I should not have an obligation to give my money to anyone I do not want to. However I should want to help some of those who have struggled along the way. If life has smiled on you why not help those who feel frowned upon right now.

Why not give money to help spread literacy? We have far too many people in our own country who never learned to read. What contribution might they make to the world or their own life if we open that door for them? Is giving the mentally handicapped the chance for a job or the ability to take some measure of direction over their life a handout or a hand up? Do you know what horrible circumstances led that mother and child to be homeless? Are you so perfect you get to judge? The five bucks you give her might go to the crack pipe, that’s true. It might go to feed the child for a day. Since you tip more than that for an overcooked burger and a beer at the Parrothead meeting why do you give a shit? The chance she feeds the baby is worth taking the risk in my feeble mind. You are right. I do not owe it to anyone to help them. I owe it to myself.

I have one last observation from Key West. This is one of the more diverse little towns you will ever find. You will not hear the word diversity there very much. No one seems togives a shit if you are red, black white yellow or any other shade. No one asks which flavor of groin you favor or what religion you choose to practice. The real question is did you show up for your shift on time and do your job? You do what you want and be who you and be sure to tip your waiters and waitresses. I will do the same. I love that attitude. Let’s do away with societies and association to advance fill in the blank people. Let’s start to new one called the Society for the Advancement of People. As long as we still use the word diversity or request special treatment based on skin color, religion, groin preference or some other feature or habit racism and discrimination will survive. You be you, I’ll be me and none of the rest really matters all that much.

Cleary I lied. Baseball and markets will have to wait for another day

Safe Cheap and Skeptical

I wrote a variation of this article on RealMoney recently but of course I am somewhat more constrained and correct in those pages than I am here. The upshot of it all is that I am done apologizing for my economic and market outlooks. I have often found myself apologetic for taking a stance that is contrary to folks that have Ivy League degrees, white shoe firm pedigrees and a shitload of initials behind their name. I have none of those. Far from having fancy degree I was actually a high school dropout. To be fair kick out is a far more accurate term. I was not a well behaved youth and had spent a fair amount of time behind bars lng before I was old enough to be in bars.

I do not apologize for that either. I eventually graduated at the age of 17 by going to night school while washing dishes, busing tables and cooking at a dive in downtown Baltimore. For a while there I cooked at the drug and alcohol rehab where my father was a counselor while polishing off my diploma. While it was not a perfect path, nor one I would recommend or allow my kids to follow, I have to say it was an education in and of itself. I know that at some point I should have gone back and gotten a degree but the truth is that there is just been too much life to live, too many adventures to have and far too mnay other interesting things to do than sit in a classroom.

I learned what I know through books. Of course I have read all the graham Books, Klarman’s book, Marty Whitman’s and every other significant piece of literature related to value oriented investing. I have read all the important technical books growth bools and just about everything I could get my hands on about markets over the years. In addition I found time to work in Adam Smith, Milton Freedman, Hayek, Keynes, Marx and Mises. I didn’t learn it all in a classroom but I think I have a pretty good handle on the subject.

I often find myself defending my current position. There is no doubt that forcing money into the market is good for stocks and fanfuckingtastic for Wall Street. With rates at zero there is no other place to put money. Of course that’s going to push stock prices higher. I do not think the market is particularly cheap as earnings achieved through cost cutting, inventory management and accounting measures are not growth. There is very little top line growth going on in the US right now. Let’s say the idiot, I mean analysts are right and we will indeed achieve Nirvana this year and hit $96 in earnings on the S&P 500. In real terms the growth rate of our economy is roughly zero. A zero growth rate according to everything I have ever learned deserves a multiple of 8.5. That gives us a fair value of about 816, a far cry from yesterday’s close of 1283. There will be some who tell me I am wrong about the zero growth rate and cite government stats and other horse crap about why we have this great recovery. To which I reply if we were growing we would be seeing JOBS created. We are not nor do we appear likely to do so. Repositioning is not growth.

I also take a little flack for my long term structural view of the economy and markets. While easing measures have bailed out bond traders and stock jockeys we have not done much to repair the country. In fact I think we have harmed it deeply. I fail to see how we grow enough to deal with the deficits we continue to pile up. These measures are not creating jobs; all the cash thrown in the markets have not healed the real estate markets. We have allowed those that created the problem to prosper at the expense of those who suffered. I am not talking about the idiots that borrowed too much money for too much house or used their house as an ATM. They are as much to blame as anyone. What about the poor ass that paid his bills, lived within his means and was unfortunate enough to buy the stocks as the best long term choice mantra and invested his kids college fund and his 401K accordingly. That poor bastard got hosed. Now he is going to be stuck with a higher tax bill to pay for this mess.

They told us that all kinds of bad things would happen if they did not bail out the banks.so what? Is my reply. Sometimes the piper has to get paid and this was one of them. Yes it would have been a mess and some of the big guys would have failed. Again, so what? I think banks like BB&T, M&T and even Wells that did not have the mess the giants had would have filled the void. There’s a good chance that JP Morgan would have made it through. is the world really a better place because we saved Goldman, B of A and Citi? I do not necessarily think so.

Here is where are now. State and municipal fiancés are mess and probably going to get worse. Real estate, income and sale taxes are the lion’s share of most state revenues. With real estate down, a 20% real unemployment rate of 20% and justifiably scared consumer I question how quickly these recover. The federal budget deficit is out of control and the debt is rising at an alarming rate. The stock market is higher but the bulk of the volume is form algorithmic traders and there is very little long term investing going on right now. ETFs and indexes are distorting valuations and the retail investor has left in disgust. Our capital markets look like casinos without the benefit of showgirl and free cocktails. This is a party that has to end at some point and there will be a hangover.

The upshot of all this is that I am even more cautious than usual. The emperor not only has no clothes he has a tiny wee-wee. When this becomes apparent I think the market will price a lot lower. It might not be in 2011 as the free lunch provided by liquidity and forced asset allocation holds sway. But it is going to happen and I do not want to be the guy paying the bill when the party ends. You cannot borrow your way to prosperity. Smart phones cannot be the basis of an economy as you cannot text your way to prosperity either.

Two things have given me a greater deal of confidence in my views of the markets and economy. First as I mentioned in my Real Money article I am finding that an awful lot of smart people with degrees and letter have almost exactly the same viewpoint I do. I am not some lone voice in the desert preaching doom and gloom. I am actually in well-educated experienced company in my views. The other factor is that historical record of my ramblings. I have been cautious about the markets and limited my buying to only the cheapest names for several years now. There are warnings on the foolishness in real estate as far back as 2006. Throughout I have remained cautious and openly skeptical of government involvement in the markets. It has worked and I have to my surprise been right far more than I have been wrong about the outcomes.

I shall openly and proudly confess that my biggest missed call was 2009. I badly underestimated the markets ability to recover. The impact of the printing presses surpassed anything I could have imagined. I failed to see how powerful the Fed could be in influencing the direction of the stock market. I will also say that following the discipline of buying what was too cheap also worked far better than I could have ever imagined.

I am not always right. Nor am I always wrong. I am however done apologizing for being cautious. The first question I always ask is what can go wrong with this? Right now I see a lot of things that can wrong with our fiscal policies. Unlike 2008 and 2009 I do not see a lot of cheap assets that I should buy no matter what I think the economy is going to do. That sends up a huge red flag for me. I think we have fiscal and structural issues that could be problematic for us and I think stock prices are too high given what’s going on in the rest of the world outside the beltway and the rivers.

Right now I am content to drift along buying the occasional super cheap stock and waiting for things to adjust to my perceptions. I think they will. Then there will be sufficient cheap assets to get more heavily invested. I’ ll continue to track and buy thrift conversions as that is one area of the market that I think has extraordinary potential If you have a mutual thrift in your town go now and deposit a few bucks to get at the head of the IPO line. I do not feel the need to chase the market or attempt to out trade the black boxes and ETF traders that currently control the landscape.

I am at heart an optimist about this country. I always have been and always will be. I have no idea what the catalyst will be to correct the current fiscal missteps I see. At some point we will figure it out of that I am sure the 70s lead to Reaganomics, Mike Milken and a sustained 25 year burst of prosperity. It won’t be the same path to a brighter fiscal future but a path will open and the right person will hopefully emerge to take us there. I have a suspicion that this time the path is a combination of reduced assistance to Wall Street and infrastructure spending that creates real jobs and expands payrolls and the tax base but the jury is still out on that. I would like to think it was a return to hands off economics that lead us out of the wilderness but we may have passed the point where that would work. But if we are going to spend money let’s spend it on rebuilding the nations electric and water systems as well as transportation infrastructure in a way that creates job and leaves open a return to Austrian methodologies down the road.

When it comes to governments and markets I will never again apologize for being cautious, critical and suspicious. It has served me well for a long time now and probably will for years to come. Safe chaep and skeptical shall remain my mantra.

My country tis of thee, what the fuck have you done? I sit here day by day watching the news scroll across the screens and I often cannot believe what I see. Mr. Bernanke tells us he is not printing money but not to worry anyway because whatever you call it is working. His evidence of this is that the stock market is higher. Now I work around the edges of Wall Street and I love it when the market is higher. In spite of my cautious view of things I own quite a lot of stock and the market rising is very good for me. The merger activity created by the lack of real economic growth makes my inner arbitrageur want to sing sally sunshine songs. However when I look at the real world I see a problem. Unemployment is still bad and real estate is not getting better by any stretch. We had over 1 million foreclosures last year and more than 2 million folks got at least one foreclosure notice. Now the foreclosure process is bottlenecking in the courts and there is still a large shadow inventory of homes out there. Unemployment claims are consistently high and the terminally unemployed number is growing. When I talk to friends who own businesses I find that business is better but still a long way from great. All this means is they are no longer draining their bank account to stay afloat. It does not mean they are anywhere close to adding jobs.

On top of it the price of the stuff we use every day is going higher. All that lovely money we did not print but nonetheless put into circulation is driving the prices of the commodities higher. In a really jarring nte around Chez Melvin coffee is up over 60% and that’s just a hardship. If I still drank scotch the rise in grain prices would just be insulting. Crude oil is up 15% and gas is back over $3 a gallon. Cotton alone is up almost 100% in the last year and this is driving apparel costs higher. While all Americans may not own stocks we all do eat, use energy and with the exception of certain celebrities we like to go about fully dresses. The cost of all this is adding up at a time when many are still looking for jobs and trying to hang onto their house. The gap between those inside the beltway or between the rivers and the rest of the country is growing and that really is not good for the future. A large disparity between Main Street and Wall Street simply is not good for the country and may spark enough discontent that people put down their remote and take action.

Or not. Illinois just passed a whopping 70% tax increase without cutting any government expenses. Here in Maryland they are talking about raising the gas tax and adding a drink tax on alcoholic drinks. California is a just a hot mess and even peace and love space trooper Jerry Brown says that costs must be cut. The states are such a mess as sales and real estate tax revenues decline and across the board are suggesting cuts in service and higher taxes. Yet, nobody seems to give a shit. At both the state and federal level the mantra seems to be that those with more should pay more. Here’s a news flash dumbass, we already do. Someone told me yesterday that is was fair that I paid more since I made more than they did. Um NO! Fair is we both pay the same percentage. I ll still pay more but it will be fair. A-Rod hits better than most. Should we tie one arm behind his back to make it fair? Right now my total tax bills add to more than half what I make. How the fuck is that fair?

Enough of all this. It’s a 1970s style mess and I do not at this time see a Reagan rising to turn the tide. However at heart I am optimistic about the US and think we will muddle through and find our way out of the morass. It may just take a while longer than I like. In the meantime there is still stuff to do to make a few bucks. Cheap stocks are thin on the ground but there are some around and hopefully they will continue to keep me afloat until the world gets better.

Avatar Holdings (AVTR) is trading at half of a book value and as long as people prefer Sunshine over snow land value in Florida and Arizona will eventually recover. In the meantime management seems to be doing a great job of managing the balance sheet and adding properties at distressed values. The grocery business sucks with tight margins and gladiator like competition but Winn-Dixie’s (WINN) stock price more than reflects the state of the industry. At less than 60% of book and no debt they have to be on the takeover radar screen. I am in total agreement with Mike Milkens position on education. We have to focus on this area to remain great and this should provide favorable trends for LeapFrog (LF) eventually. Presidential Life (PLFE) and Kimball International (KBALB) are stupid cheap at less than half of book value. As a bonus they are profitable and are seeing insider buying.

The thrift conversion trade is going to be exciting. As mutual thrifts are forced to convert to stock ownership we will see some incredible bargain in solid smaller banks. I have already bought Fox Chase (FXCB) and Capital Financial (CFFND) and there will be more. It’s the closest thing to free money on Wall Street. I also still own Shore Bancshares (SHBI) here on the Eastern Shore and think I will be well rewarded for doing so over the next few years. The small bank trade could easily be a get rich investment over the next decade and I continue to track the sector for additional bargain issues.

With real estate so depressed I think you have to have some presence in that market. I like Commonwealth REIT at yields over 8%. They own high quality properties and you can buy them at half of tangible book value. I also continue to like the fractured mortgage back securities market. I like Invesco real estate since Wilbur Ross’s research team advises the REIT. At today’s price it yields 17.50%. You can also buy Chimera (CIM) yielding over 16%.Start small with these and add on sell offs.

I am staying short treasuries as well. In addition opt the commodity inflation I see the simple fact is that on the long end we are not a good enough credit risk to pay less than 5%. Our budget and balance sheet are a mess and getting worse. I own TLT puts and intend to for some time to come. I am also looking to buy puts on the various high yield ETFs. Junk spreads are stupid low and that market will implode sometime this year in my opinion. A small position in the puts could have a large pay off.

Okay enough business. Onto to things that really matter like baseball. The orioles have added some power on the corners and that has been desperately needed. Slowly but surely the lineup gets better. If mark Reynolds can strike out less than 200 times and take advantage of the short porches in the yard he could be a home run and RBI machine. Derek Lee is a steady presence at first and again the short fences could allow him to rebuild his power numbers. The youngsters on the pitching staff will hopefully get better. Kevin Gregg improves the bullpen one of our glaring weak spots. The club played a lot better under Buck Showalter late in the season they could be fun to watch next year.

It is January so I am an optimist. The realist in me looks at what the Red Sox added and my heart sinks. That is a very good baseball team right now. Speaking of the Red Sox I have been forced to deal with a dilemma regarding this team. I have long hated the Beantown Boys. I am not a fan of their trend following owner John Henry. He sucked enough money out of unsuspecting retail investors with fee laden commodity partnerships over the years that its impossible for me to cheer for his team (in addition to 49 years of other reason to hate the damn Red Sox). Now Seth Klarman has bought part of the team. Klarman is a man I admire and respect. He is one of the greatest value investors of this or any other generation. After some soul searching I came to the conclusion that I will always root for Seth in life and in the markets. In the American league East however we shall be enemies.

The Ravens so far are doing what the Ravens always do. They make it more interesting than they should but they win. If they play every game like the KC beat down last weekend they can get to the big one. However the Steelers are in the way this Saturday and that is a formidable obstacle. Any fan of old school football has to love a Ravens-Steelers game. They don’t track touchdowns as much as they do causalities when these teams meet. It should be a great game and with a little luck and blocking on the long haired freak we will hopefully win the game and move on. I find I have to root for the Jets this weekend as well so we can get a home playoff game and avenge 1969.

The world moves on and changes abound. If you felt the planet shift on its axis on September 10th 2010 the answer is simple. I got married. His time last year I had pretty much given up on the idea of finding love and any sort of marital bliss. Once I determined to move on in a flurry of books and scotch it found me. I knew by the second date that something special was happening and by the end of the third I knew Erin was the “One”. Describing the way I feel when we are together is impossible even for a wordy bastard like me. Suffice it to sat I am incredibly happy. A year ago I could not imagine not being by myself. Today I cannot imagine not having Erin at the center of my life.

This will of course mean less tales of alcohol fueled rampages on Second Avenue and Rush Street in this space. Darryl’s ditch is probably safe from future damage as well. Trust me dear reader this is a good thing. I am sure I will slip in one or two over the years but full throat stupidity will no longer be an every weekend addition to the story. Once the stiches came out and the ribs healed it was a lot of fun most of the time and some of the stories were hysterical. This is better. I am far happier (to say nothing of safer) on the couch with my wife with a glass of wine than I can remember being.

And so on we go. There is a lot wrong with the world but there is a lot right as well. If we have learned anything from history is that the forward march of man finds a way to work through problems and that the US has too many entrepreneurs, innovators and economic heroes to not overcome the current stupidity. In the meantime we have friends and loved one to keep us inspired and mentally healthy; we have laughter, music and book to keep us from drowning in insanity. There so many special moments that make up a life, rather they be quite nights with the one you love or nights of well-fed friends and family enjoying too much wine and each other’s company to ever take it all too seriously. After all not one of us gets out alive so we might as well enjoy the ride. Like quickly, love deeply and drink up my friends. The adventure as always continues.

The year ahead, markets version

Ah the years end prediction exercise. It is of course a mostly useless exercise since not a one of us can predict what shocks, positive or negative, the world and the markets could see in 2011. I find it crack up laugh out loud funny that some pundits come out and offer up earnings estimates, GDP growth assumptions and interest rate guesses to give a precise level for the year end S&P 500 price. You might as well pick numbers out of a bag and rearrange them by lottery to come up with a year end number. In a world where we are fighting two wars, a hostile government holds the majority of our debt and several sovereign nations continually teeter on the edge of oblivion it’s pretty much ridiculous to assume what could happen in the year ahead. Having said that, as my son’s favorite WWE wrestler when he was a little guy used to say “It’s time to play the game!”

Ill start with bonds. I have owned puts on the long term treasury market for two years now. I gave some back in 2010 after a huge gain in 2009 but am still slightly ahead. Ill roll the position forward and buy January 2012 puts and stay short. When I look at bonds I hear some folks talking about rising basic commodity prices and worrying about inflation. They are of course correct. This is happening. I hear some other really smart folks talking of weak real estate, high jobless rates and the potential for falling back into recession. Naturally, they are also exactly correct. So I will predict the one thing no one else is. We are on the verge of good old fashioned 1970s style stagflation. Commodity and basic needs prices will accelerate as QE2 has at least stimulated demand from emerging markets by allowing these wonderful credits to borrow money cheaper than a school teacher with a 750 FICO score. Bonds go lower as rates spike. Our economy and balance sheet are a mess and we have governments run by men in tin hats lecturing us on fiscal responsibility. "How low will they go Tim?" How the hell do I know? I just think they go lower by enough for me to profit.

Nor can I tell you where the stock market will go this year. I suspect we have had it too good for too long for no reason so I think we get at least one spectacular gut wrenching, vomit inducing sell off during the year. Much as lower than expected profits exposed the silly valuations of the new paradigm stocks I think that the darling group, retail , will spark a selloff in the stock market this year. Sales will be up a little bit but except for Tiffany’s (TIF) and that luxurious ilk margins are horrific. Discounting started early this holiday season and grew from there. They will get steeper now that that Santa Claus has given back my credit card and returned to the great white north. The earnings season will see a lot of missed estimates and lowered forecasts and that could well pop the bubble. Once it starts the HFT boys and girls should make sure it goes lower than anyone expects.

Here’s the thing about my prediction. It is no better than anyone else’s. In other words I am talking my book and predicting what I hope will happen. Having learned this lesson over the years I have alos learned that when it comes to market timing and market direction I am probably the dumbest guy in the room. Because of that I have trained myself to always buy the stuff that’s too cheap not to own and hold it regardless. After the rally since September truly cheap stuff is a little scarce on the ground but I have found enough to be about 40% long going into the year. I have a watch list as long as a taller persons right arm but most of it hover above truly cheap.

Here is what I own going into the year and think is still cheap enough to buy. I like Winn Dixie (WINN). The grocery business sucks right now. Wal mart has crushed margins industry wide. That aside WINN trades at 60% of tangible book value and at some point their 514 stores in the Southeast will attract attention from investors. A takeover here would be less than shocking. I will add Presidential Life (PLFE) to the list. This stock is also at 60% of tangible book and I expect to see a lot of M&A activity in the insurance sector this year> this should raise valuations across the board. I like Miller Petroleum (MILL) with their drilling presence in Alaska and the shale field soft Tennessee. This one trades at 70% of tangible book. I'll add Imperial Sugar (IPSU), Syms (SYMS) and Micron Tech (MU) and Avatar Holdings (AVTR) to my list of cheapies and move on for now.

I am going to start building my small bank portfolio this year. Eventually this group becomes the "Fuck you walk away money" trade of the decade. As real estate losses work through the balance sheet and some measure of stability returns to the financial system, perhaps toward the end of the year, the small baileys savings and loan type banks should start to recover. We will also see a mind blowing M&A wave as larger banks look to gain not just market share but healthy assets to put on the books. Right now these names trade at a fraction of tangible book value. They will reach a multiple of that in a recovery or takeover scenario. Right now I own shares of Shore Bancshares (SHBI), a local bank trading at 80% of book value and a reasonably healthy loan portfolio. I have some other mini microcap banks as well that shall remain my little secret and not used to figure how my predictions work out. I mention them because if you have a mini micro bank in your community you should go meet the bankers, review the books and consider investing if it trades below the magical tangible book value and has excess capital. Flagstar Bancorp(FBC) is my super longshot undated call option on the economy and real estate markets.

I will also play the thrift conversion game heavily this year. With the elimination of the Office of Thrift Services under the new financial regulation many of the benefits of being a private or mutual thrift are going away. There are a ton of mutual savings banks that will now convert to publicly traded banks. A lot of these deals will be priced below the pro forma book value that is created by adding all that lovely IPO cash to the balance sheet without a corresponding increase in the shares outstanding. Right now I have Fox Chase Bancorp (FXCB) and Capital Federal Financial(CFFN). There will be more. Deals are happening every day right now and again I would keep an eye out for local deals that you can take advantage of in the next few months.

I also think that 2011 will be the year of the activist investor. These folks took a beating since 2007 but this should be their year. There is a ton of cash on corporate balance sheets but lots of underperformance in the current economic environment. We will see activist drive takeovers, restructures, and special dividends this year in my opinion. Recent filings of interest include strong activist positions in Surmodics(SRDX), SeaChange International (SEAC), and Energy Solutions. Tracking activist portfolios and 13D filings should be a very profitable activity in 2011.

I have been looking at some interesting new stuff with options as well I am not going to give most of it away just yet but I ll give you one stimulated by a recent list discussion. H and R Black is highly likely to go into a private equity portfolio next year. Management has made every mistake you can make and the loss of RALs is a big problem for the company. However the brand has real value. I do not want town the stock just yet but I like the idea of selling the January 2012 at $.70 to $.75. If you cash secure the put it’s a 10% or so return if the stock stays above the strike. If it falls below I’ ll be happy to own the stock with a 6 handle net.

Back in 2008 everyone anticipated a huge default wave to hit the high yield market. Thanks to federal stimulus money pumping programs it did not happen. However in the spirit of "sell the dog food the dog will eat at the given moment" the hedge fund world raised an enormous amount od distressed debt money. Thanks to this high yield spreads are far too low. CCC paper in particular is priced at absurd levels. These things trade like money good paper and much of it is not. Extend and pretend has helped but if the economy stays weak and interest rates rise rolling over the tsunami of paper due over the next few years becomes nigh onto impossible. I am going take small position in puts on the various high yield ETFs. If I am right they will explode when that market implodes. Continuing to talk my book I hope this happens. Among my nightly prayers is “Please God just one more two year period of asset rich companies with current payments having bonds trade below recovery value and I promise not to piss the money away this time. Amen. PS. If you add in risk arbitrage spreads of 30% annualized returns along with this I would not object. Love, Tim.”

I can’t tell you what the markets will do. I do know that I want to own some safe and cheap stocks, some well capitalized small banks trading below book and participate in activist situation. I will be underinvested in equities going into the year hoping my watch list becomes my buy list in market stumble. I will have put positions on long T-Bonds and high yield hoping for a large asymmetrical payoff.

Other than that I am clueless.

Christ in Christmas

A well meaning perhaps, but closed minded, soul wrote this letter to a Maryland paper today.

Editor:

I am responding to the announcement I heard regarding Wachovia Banks decision not to place Christmas trees in any of their establishments because they may be offensive. Offensive to whom? I am suggesting that all Christians remove any and all accounts from Wachovia Bank, because if anything is offensive, it is their Christmas tree decision. It is time that Americans stand up for what they believe and not allow our traditions to become moot because they may offend someone in the minority. This country was founded on the belief of freedom of religion, not freedom from religion. The Christmas season is time for peace and acceptance of all faiths and beliefs - not the time to try and take Christ out of the season.



There was of course no way in hell I was not going to respond once this was bought ot my attention. I doubt they run by my reply was as follws

Editor:

In response to the recent letter by xxxxxxxx I can tell you as a Wachovia customer and stockholder in Wells Fargo, Wachovia’s parent company, her assumption is simply incorrect. It is the choice of each branch manager to display a Christmas Tree or not. I would also like to make the point that our country was founded on the principle of freedom of religion for all religions, not just yours or mine. Even if her assumption was true, to call for a boycott of a business based on their recognition or lack thereof of your particular religion is completely and totally un-American. Should we boycott the Jewish establishment because he does not put up a Christian symbol? Should we avoid doing business with atheists, Hindus, Buddhists or any other merchant or service provider who does not display artifacts of a particular faith?

We would do well to recall that religious freedom extends to all faiths, and even to a lack of faith. We may choose to do business with whom we wishes but to call for a boycott of any business based on their shared participation in your particular holiday runs against every single value upon which our nation was founded. Christmas is not a time of faith and belief for all religions. Celebrating the birth of Christ is uniquely Christian. Instead of asking for a boycott of a business we should practice some of the tolerance that is one of the hallmarks of Christ’s teachings.

I rather suspect in a world torn by war, poverty, hunger and disease God has more on his mind that where you keep your checking account. Perhaps those of us who call ourselves Christians should focus on those issues and let others bank where they wish without religious interference.

Before you ask, I have a great big honker tree in my house and celebrate the holiday with zeal. I also think that businesses and municipalities should be free to place symbols of the holiday wherever they so choose. They should also feel free not to without fear of boycott or discrimination from those of us who celebrate Christmas. That’s the American way I was taught and believe in to this day.

I am off to Wachovia to open accounts for my kids as an expression of the real meaning of freedom of religion. Merry Christmas!

Tim Melvin

Annual Thanksgving Malarkey

So at long last the Holiday season is just about upon us .I know the malls and stores started playing Muzak versions of Rocking Around the Christmas Tree before we even sent the little ghosts and goblins out to extort candy from the neighbors but to me the Holidays start with Thanksgiving. It is one of the most perfect of holidays with excessive amounts of good fattening food, oceans of wine, lot of laughter and of course football in the extremis. I am not a fan of the retail rush to Christmas. In fact I hate it. There is no evidence it increases sales or profits and in fact it irritates me to the point I want to slap the crap out of fat guys with beards and short people wearing green on general principle. It’s just annoying. As my old partner in the door to door book business used to point out the rest of the year I’m just a grouchy a-hole but this time of year I become some sort of happy-happy ho-ho mother something or another.

I write this every year a day or two before the actual day occurs. Tomorrow is Thanksgiving Eve and generally I start cooking the night before. The stuffing gets made and there are onions to sauté, celery to chop and sausage of several varieties that need to be fried and mixed into my savory creation .There will be butternut squash to whip and sweet potatoes that cry out for roasting and smashing. Others will be getting their junk touched by aggressive TSA officials at the airport, or perhaps posing for suitable for framing portraits of their nether regions in one of the new scanners, as the travel back to hearth and home for the occasion. Many others will be enjoying the spectacle of lights a twinkling…brake lights that is as they endure the back up of turnpikes, beltways and interstates on their way back to the bosom of family and friends. Still others will be jammed into trains and buses as they head home for the company of those they could not wait to escape when they left home in the first place.

It can be a special time. It is a chance to renew acquaintance with the obnoxious cousin you have pretty much hated since birth. We share apple pie and the opportunity for Mom to suggest we need to lose weight and change our hairstyle or pester us about grandchildren we have no intention of bearing. Doubtless Aunt Juniper will pass out in the rocking chair again this year have consumed too much of her the fruit of her namesake berries and it’s a safe bet Uncle Herb will pinch your wife on the ass again this year in an annual ritual of shameless buttockal groping. Its a magical time to eat drink and remember exactly why you never liked your second cousins third husband and rediscover all the ways your particular family puts the fun un dysfunctional.

All joking aside it is a time for families and for gratitude. We have a bunch of family and friends coming to Chez Melvin this year and we would not have it any other way. There will be wine, there will be pie, a giant turkey bird and all the trimmings my warped little mind can think of to enjoy throughout the day. There will be football.Above all there will be gratitude for all we have and the life we are so lucky to live and share together. We find much to be grateful for this time of year and here is just some of my list.

How can we not be thankful for the magic that is life itself? We lose track of it all someday but life brings so much to love, to savor and to enjoy. It is critical that we do not let the day to day garbage makes us lose sight of all that makes life so simply wonderful. There are full moons, sunsets and as I have discovered thi year sunrises you can see without staying up all night (more on that later). We live in a world that has books full of knowledge, adventure dreams, hope, answers, questions, poems, relaxation and inspiration. We have music from the soul solacing sounds of Mozart and Beethoven to the gut crunching guitar licks of Stevie Ray and JJ Cale, We can enjoy the melodical pattern woven by John Coltrane and the lyrical twisting of a Lyle Lovett (how can you not love a line like “I’d ride my pony on my boat) song. There is food of every description from steaks on the grill done to a sizzling perfection to seafood fresh from the bay and everything in between for us to enjoy and fuel our journey through the days.

More than ever I am grateful for friends of all stripes. We live in a land of slow breezes, fast boats and quick laughter here on the island and I have been blessed with incredible friends. The mix of people I am fortunate to call friend ranges from the married up tire guy to the Mr Clean look alike firefighter, form the goat and the shacked up freeloader to the bread man, from tic tacs and meatballs to cupcakes and wedding planners ,crack babies to shaky electricians and just about everywhere and everyone in between.

Friends goes beyond the island as well. There is everyone from the irascible curmudgeonly options trader to the cheese head and they have all added much to my life. The world’s only Iranian Jew was just here for a visit just before he went into viral celebrity for a brief but good visit. The handicapper is in NYC running stock market cartoons and projecting some sort of lines on charts, the spread trader stops his fun filled journeys to war torn nations and famine stricken banana republics long enough to check in from time to time. The Wiz and the Professor are still doing exactly whatever it is they do to hammer on the markets and the chairman still does his best to deflate ballyhoo and avoid hoodoos of all stripes. The counter count, the chartists chart and the opinionated opine and I am happy to call them all friend. They have added much to my life and my world.

Of course I am grateful for my children even when I am contemplating locking them in a dank dungeon full of James Joyce novels and leaving them in there until they can rationally explain Ulysses to the average person. My son’s twisted sense of humor and sarcastic mannerisms hide a sharp mind and a kind heart. I probably do not tell him enough but I am proud of him and the success he has already begun to achieve in his short time here on the planet. His mind naturally grasps the concept of business and profits and he is wise far beyond in 22 years in the ways of commerce. My daughter still has her too loud infectious and a voice that climbs a decibel with every sip of wine. She is adamant about being a teacher and has shown a perseverance and determination to reach the goal she set for herself. She has vercome the five years of being sick, worked her way through the first few years of school and is now at 26 finally a full time student closing to reaching her goal of being broke and happy as an elementary school teacher. I am plotting to get Tim Hewson to immigrate and marry her so I don’t have to pay the extras for the rest of my life. I figure it we are going to have an Ayn Rand loving libertarian school teacher in the family we might as well add an Irish trader with good taste in booze and books. I love watching the two of them continue to grow and learn to love life. Now I f I could just get my son to read a book.

There is an addition to the list this year. There is now a seven year old step daughter in the mix and the madness here at Chez Melvin. This energetic young Mensa candidate is either going to keep me young or wear me out in short order. She is a blonde haired, earlier rising sweet heart of a girl named for an Irish cattle stealing Queen and she is a welcome addition to the family. As a sign of her extraordinary intelligence he adores Lisa already, is getting used to her step brother and is altogether unsure about myself. Told you she was smart! She is a reader, with a sharp mind and loving heart who adds much to our family mix.

With a stepdaughter of course comes the person for whom I am most grateful this year. After giving up on the concept of ever finding someone who could put up with me it actually happened this year. I met the one person I really think I was destined to be with for life and maybe even beyond. I will spare all..okay some..of the romantic sappy stuff but when I look into Erin’s eyes I am sure I have had my last first kiss. We met in May, married in September and I cannot imagine my life without her ever again. She is everything I never thought I would have in my life. I was not looking anymore but the universe put her in my life and she has become my world. Above all this year I am thankful for my wife and the love we share and the grand adventure of life we have before us.

Life has its bumps and bruises. Almost nothing is going to go as planned. Life is unpredictable. Quit bitching about it and enjoy the journey. No matter your circumstance of current situations there is much about life for which to be grateful. There are raucous nights and quiet Sunday mornings. We have grand symphonies and party time rock and roll. Here is knowledge to be gained and lessons to be learned. There are bright sunny days for play and majestic rolling thunderstorms to watch in awe. Life is here like or not. Learn to embrace it, to enjoy it and above all to be thankful for it as this holiday of gratitude comes upon us this week.

I will lift my glass to you my friends on Thursday. I wish for you to have laughter and love, a thirst for knowledge, a zest for life and above all a sense of gratitude for the many wonderful moments that make up our lives and I thank you all for being a part of my life.

I am off to pour a glass of wine and begin to slip into my happy happy ho-ho state of mind

Election Eve Thoughts

So here we are the day before election. I am sitting here with the tube on a business channel and the internet running as on any other business day. Over the weekend I watched some football as well as a little bit of the World Series. The news is all about the election and the run of hate and demagoguery filled commercials have become quite taxing on the old brain. This election cycle appalls me. I hate what I am seeing. I love politics but hate what I am seeing develop around me. The overriding question in my mind is simple. What the fuck have we done to our nation?

Everyone is divided along party lines. The Dems adhere solidly to their platform and party leaders statements and beliefs. So do the Republicans. The Tea Partiers are pissed off but a lot them have no clue exactly why they are pissed. Everybody is repeating the party line and it does not appear that anyone is actually thinking.

Here is the problem as I see it. The GOP thinks that we should have more freedom for business and less taxes. I agree. However their definition of freedom applies only to those who think like they do. While deregulating commerce they want to control my personal life. I struggle with why you can support one freedom but not another? You want my business practices to be outside government control but think you should be free to regulate who consenting adults sleep with or with whom they choose to spend their life. The Democrats get a lot of the individual stuff right but think there should be a surcharge on success. The Democratic definition of fair means taking my money to pay for your lack thereof. Freedom means free folks. The logic of both sides has holes a five year old could drive a Tonka truck through with relative ease.

Which brings us to the Libertarians and some elements of the Tea Party. They have a lot to say with which I agree but I have a question. Why is that every time I listen to a libertarian candidate and talk to hard core party members I am left with the impression of a bunch of fucking goof balls who think freedom is best expressed by getting high on whatever is available and doing whatever you want regardless of the consequences. Look people I get legalizing pot. However legalizing crack is just fucking stupid okay? It should be obvious even to a stoner that free speech and free press does not apply to kiddie porn .No laws is not freedom ;its anarchy. Your freedoms end right where they hurt me and mine. Take your basic platform, add some common sense and we can talk.

Lets start with assumptions of what freedom means. First start with a basic. I do not owe you shit and you don’t owe me shit. What your daddy did to mine, or the color of our skin or religious practices do not incur a debt on either of our parts. If I fuck up, lose all my money and end up living under an underpass its not your fault or problem. If, out of the kindness of your heart, you choose to extend a helping hand I appreciate it. But you do not owe me anything. If your parents had more money than mine at the time of our birth it just means that I have to study harder, work harder and make my own way. All we are owed is a level playing field. If you have nicer uniforms and better equipment that’s life and I have to deal. That may not seem fair at first. However glance at the back of your birth certificate. There is no fairness guarantee. Freedom means you have a choice to do what you can with what you have to make your life what you wish. It does not mean fair in all things. Life is inherently unfair. Make the most of it anyway.

Lets now talk about business. My conservative friends think that business should be unrestrained. Basically I agree. However this does not mean that corporations should be able to do whatever they wish. Make a profit by all means. Invent, innovate, produce and add to the worth of the nation. However if you treat your employees like shit or make products that harm ,you should not be allowed to prosper. If you are dumping crap into stream and rivers that kill people I am kind of thinking you should be punished for this. If you lie to sell poor or unhealthy products this should not make you rich beyond your wildest dreams. If you want freedom and less regulation you have to accept the responsibility that goes along with this.

If you bet on red and it comes up black do not appeal to your personally purchased legislators to bail you out with money that came from my neighbors and I. You bet wrongly, thank for playing, you lose go, the fuck home. If you make a product that is not as good as a competitors or another country can produce it cheaper do not ask for my money to keep you in business. It’s not my problem. You are in business and have to accept the risks and responsibilities that come with business.

This responsibility extends to consumers as well. Use a little common sense and quit suing or seeking to punish corporations for your dumb ass mistakes. Coffee is hot okay? If you spill it in your lap its going to burn a bit. Giving a bite size toy to a toddler is just fucking stupid so act accordingly. Guns are dangerous, particularly if you leave them loaded where kids can find them. Fast food will indeed make you fat if you eat the crap every day. Booze and cigarettes are not good for you. I am an enthusiastic user of both and would haunt any family member who sued the cigarette companies of vineyards after my death. It’s a choice I made with an awareness of what I was doing and the risks I was taking.

This next is a big one. Lets take the handcuffs of apathy and dependence on government off the invisible hand of Adam Smith. A basic tenet of free markets is that bad companies with poor or obsolete products will be driven out of existence by the marketplace. Hey folks. WE are the market. You and I. Set aside the question of bank bailout for a second. All of us are pissed off by the banking crisis aren’t we? The why do any of us have checking accounts or other products at banks like Citi and B of A that were at the very heart of the mortgage mess? All of us profess to want to shop at local stores rather than Wal Mart but none of us are willing to pay higher prices to do so. We all bemoan the childhood obesity problem but most of us will hit the McDonalds drive through to get the kids six greasy nuggets and a bag of fried potato goodness along with a giant cup of flavored sugar water to wash it down when we do not feel like cooking. I have news for you. If we keep buying their products and using their services then the end result is not the fault of big evil corporations. It’s ours.

Listen people, corporations are not inherently evil . They make most of the stuff we use everyday. They create jobs, invent stuff that makes our lives better and in general do more good than harm. They are not a piggy bank to tax to pay for all your pet projects. Taxing capital and investment income is stupid and non productive. Now corporations keep in mind that along with the freedom to make money comes a responsibility to both consumers and the folks who work for you. Business works best when all three, capital, labor and consumer benefit. If you lose sight of this we reserve the right to quit buying your stuff and laugh as you go out of business. If you really lose sight of it we reserve the right to petition the courts and throw your ass in jail.

Now, politicians, listen up for a minute. The gross domestic production of the US economy is not you personal checkbook. It is our money. We need it to feed our kids, educate our families, build businesses and create jobs for our community. We need the money to invent new products, find new innovate ways to produce. We need it so we have a way and means to create art, write new books and play new music. We need it to do whatever the hell we want. It is our money NOT yours.

While we are at it lets get a few things clear. You have no right to tell me how to live my life. As long as it does not harm someone else leave me alone. I do not really give a shit what my friends and neighbors think about what I read, what I drink or who I sleep with. I do not want to hear that this insults some segment of the populace. I especially do not want to hear that this is not as God intended. GOD IS NOT RUNNING IN THIS ELECTION. I will settle my differences with God at the appropriate time but since I doubt your ability to interpret the wishes of an omnipotent and omniscient creator is any better than my own please quit telling me what he or she thinks of my life. That’s between God and I and doesn’t really involve you.

Next our tax code is an abomination. What the hell are you thinking? Our tax code only serves the purpose of keeping legions of lawyers and accountants in nice cars and good scotch. Lets just have a nice little flat tax and a national sales tax. Not only is that fair its transparent as hell. Nowhere for your eventual successors to hide new taxes the way you can now. Moving the national sales tax up a couple percentage points is something a second grader can understand. Now I realize that take a whole bunch of power away from you and gives it to the voters but if I may : THAT’S HOW IT IS SUPPOSED TO WORK! It is government of the people, by the people for the people not a bunch of politicians using the fucking tax code to get what they want and cover up their mistakes.

Speaking of mistakes lets talk about war for a second. No one likes war. I am however aware that people being the idiots they are it is occasionally necessary. Let’s review something for a second. War has to be declared by Congress. Lets stop sending troops in harms way without a declaration of absolute war. We keep sending our young men and women off with asinine rules of engagement and then are shocked when we get our asses whipped by enemies who do not care if they kill 100 as long as one of them is an American. War is neither limited nor politically correct. If you are not willing to fight total unlimited war with all our resources and total victory as the only objective let’s just stay home next time. Those are our sons and daughters you are killing. Please show as much concern for them as your do the cousins of our enemies or the inhabitants of a nation hostile to the United States. I know they are faceless names on a casualty list to you but they are our children, friends and loved ones. Declare and destroy or please just do not bother. After conferring with both liberal and conservative friends on how to destroy society instead of sending young people to bleed and die just send the offending nation the following and allow them to self destruct from within:
1. Rap records
2. Pornography
3. Video Games for their Kids
4. Jerry Springer DVD’s
5. Do it yourself Incorporation Kits
6. Ayn Rand Books
7. Michael Moore Movies

It is real simple. I want to live in the land of the free. More importantly I want my kids and their kids as well as so forth and so on to live in the land of the free. We, as individuals, corporations and legislators need to accept both the freedoms and responsibilities of freedom. We need to tolerate each others freedoms. If you are opposed to gay marriage, don’t marry a gay person. If you are opposed to right wing versions of Christianity do not bother attending Sunday Services at Liberty Baptist Church. Do not abuse your freedom by doing things that hurt other people. You should have a right in the privacy of your own home to guzzle all booze you want. You do not have the right to get behind the wheel afterwards. You have the right to believe what you want. You do not have the right to force me to believe the same. I will die for your right to think and believe as you wish. I will kick your ass if you try to get me to accept them as my own against my will.

When asked the result of the Constitutional Convention Ben Franklin famously answered that we have given you a republic if you can keep it. We can. Take a deep breath. Forget the rhetoric and political bullshit. Get your hand out of my pocket and your version of morality out of my home. I do not owe you and you do not owe me anything. Any assistance we choose to give each other is of our own choosing. Government does not have the answer to our problems. We do. To truly be the land of the free requires an acceptance of the responsibilities that accompanies that freedom. It requires that we tolerate others choice in life as long as they do not harm us. I don’t give a shit if they offend you but as long as they do not harm you to be free we have to be tolerant. It requires you accept responsibility for your actions. The success and achievements are yours to celebrate but so are mistakes and bad choices yours to endure.

You take care of you and yours and I will take care of me and mine. We will let business do business as long as they accept their responsibility to the consuming public and their workforce. A little responsibility and tolerance and a decreased dependence on those power hungry idiots dumb enough to run for federal office and the republic can be saved, and more importantly preserved for those who follow us. Quit indentifying with a particular party or group, take a good look around at what we have done in the last fifty years to our nation. Partisan politics on both sides have taken us to the brink of losing what our forefathers gave us so many years ago. Take it back before it’s too late.

Happy Fourth 2010

Let Freedom Ring indeed. Let it resonate across the land and down the valleys of this great nation as once again celebrate the birth of our nation. Let the smell of freedom mingle with the wondrous odor of hot dogs and burgers and the grill and fill the skies across the United Sates this weekend. Let the sound of freedom ring out in the sound of boat engines firing, fireworks booming and rock and roll bands rocking the dock. Watch the celebration of freedom explode across the towns and cities of America and high school bands and politicians (yeah it’s an election year. The hacks will be out. Guard your babies , they may be contagious) along with American Flags and tasteless floats of all varieties shall block up the streets for a few hours.

America, that great shining city on the hill ,is 234 years old this year. What changes we have seen as we have grown! We have welcomed generations of immigrants who have helped remake our nation, usually for the better. Too many times we have seen our sons and even our daughter grab their rifles and head off to protect our life, liberty homes. We have gone to battle to preserve our ideals and to aid the world in retaining their freedoms as well. This nation has been the source of the industrial revolution, the technology revolution and been the driver of economic global growth for decades. We have risen from a small nation yearning to be free of taxes and religious restrictions to what I truly believe is the greatest nation in the history of the world in less than 300 years.

We have not always gotten it right. There have been missteps and errors along the way. Just in the last few years we managed to export enormous piles of toxic financial crap to send the words economy reeling. The Marx Brothers could not recreate our tumultuous and almost always incorrect steps in the Middle East. We have developed a nasty tendency to elect our politicians on sound bites and some kind of mythical ideology. Yeah, I admit it, we gave you the Shah of Iran, leading to the Ayatollahs, Jimmy Carter ,George Bush the Second and our current President Dum-Dum. Slavery was a horrendous stain on our national soul that took far too long to eradicate. We also gave you Ronald Reagan, FDR and Abe Lincoln as well as a free Europe and the exported economic wealth in unheard of degrees so I think we are still way ahead of the game. The good we have done far outweighs our historical contributions. I will always be proud to be an American and celebrate the Fourth with a vengeance and ice cold cocktails.

In this year’s misguided missive on the joys of freedom and liberty I want to examine some key thoughts expressed over the years. The first comes from HL Mencken a fellow Marylander and enthusiastic imbiber of a wide variety of distilled beverages. Mencken observed that most people want security in this world not freedom. Coupled with Benjamin’s Franklins observation that they that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety and we find the most important threat to liberty we shall ever see. We were told for example that social security would give us safe and secure retirements. Instead it has turned into the largest Ponzi scheme in the history of the world and threatens the economic freedom of each of us.

Providing for the security of my family and myself is MY job not the governments. Get your hands out of my pocket and we will be just fine. I am not your responsibility and you are not mine. Leave me free from your ponderous taxes and my kids will eat well, go to college and achieve their dreams. I will retire or not as I so choose. That my friends if freedom. Do not I beg you allow freedom to vanish in the name of some mythical security the government can NEVER provide you, me or anyone else. Freedom comes from taking responsibility for your own life chasing your own dreams and controlling your own fiancés and destiny.

It was Supreme Court Justice Louis Brandeis who observed that “The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding. I get it. Feed the People! Save the Whales! Whip Inflation now! All that is well and good except that when you take money from me to fund your cause be it homes for the poor or a study of saving the microscopic weeping wood zit of Outer East South Cleveland it is theft at gunpoint. Think it’s not at gun point? Trying not paying taxes for a few years. I promise the agent that shows up too politely discuss the matter WILL be armed.

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the Blessings of Liberty to ourselves and our Posterity do order and establish this Constitution for the United States of America. That is the preamble to the constitution of the United States constitution and outlines rather clearly the job of the federal government. Note that it says promote the welfare of the people not provide. The job of the Federal Government is to provide for defense and promote commerce in the eyes of our founding fathers. It is in my eyes as well.

The rest of the stuff that make up our lives was supposed to be in the hands of states and local communities. We along with our friends and neighbors were supposed to set community standards for education (anyone want to argue that the establishment of the Department of Education as a cabinet position in 1980 led to a quantum leap in the quality of education on the United States?), living and working conditions and social rights and wrongs. The road to hell is indeed paved with good intentions. So too is the road to serfdom as Hayek pointed out years ago. With cumulative tax burdens on the most productive members of society well north of 50% can we say that were free?

I really do not want to come across as a ranting right winger. I am not one. In fact over the years I have been very generous with my time and my money to assist those less fortunate than I. In fact if you would stop taxing me and put down the gun I would do a lot more. So would most of us. In addition I believe in all freedoms. I really do not give two halves a shit who you sleep with, what substances you ingest or who you marry. As long as your actions do not infringe on me or mine I do not care what you do or who you are. The land of the free has to mean everyone is free to define the happiness they choose to pursue in my opinion.

Celebrate this weekend. At some point raise that frosted cocktail class to the skies and praise all those who defended that freedom and in some case died for her. Say a silent prayer of thanks for the men and women who built her with their labor and their genius. Be grateful for the steelworkers, the farmers and the business people who provided her literal and economic backbone. Scare the living shit out of neighborhood pets with the most over the top display of pyrotechnic devices your warped mind can conceive. Gather your loved ones close and light the grill. Skip over the waves at excessive speeds and dance your ass off at the dock bars. Splash in the pool and don your red white and blue. Celebrate this grand experiment 234 years in the making of freedom and individual rights. It should be celebrated with much noise, many imbibings and all the excess that earmarks being American.

Indeed celebrate the United States of America. However keep in mind the debt you owe to all those who came before you to protect and preserve the freedoms they worked, struggled and even fought to pass along to you.

God Bless the United States of America.

Memorial Day

From an article originally posted in 2006

But at sometime this weekend I will raise my glass in a silent toast to the reason for the weekend, those who gave their lives in the service of their country. They fell on the green at Lexington, at Trenton on Christmas Eve and in the snow at Valley Forge. They gave up their very lives in the peach orchard at Gettysburg, the cornfield at Antietam, the wilderness outside Petersburg and at Shiloh and Chancellorsville. They left their future behind in the Beleau woods, at Château Thiery and at Ephey. They lie fallen on the beaches of Anzio, Normandy, Guadalcanal and Tarawa. They died at the frozen reaches of Korea at Chosin and Pusan. They paid the ultimate price in the jungles of Khe Sahn and Da Nang. They are buried in Arlington and veterans cemeteries all over the country..or in graves in France, Belgium or some obscure south pacific island.

They are the reason I have the right and ability to work hard and play hard. Because of them and the blood they shed, we all have the right and freedom to work for own destiny, to be that which we would aspire to become. Because of them we can trade for a living, write books, study numbers. It is their sacrifice that allows us to enjoy our lives and our loved ones. And Although I suppose this is more so for those of us in the United States, their sacrifice made it possible for many other nations to enjoy unprecedented levels of freedom and democracy. Memorial Day. Remember them as you celebrate the start of summer. Some enlisted willingly. Some were drafted kicking and screaming. But in the end they wore the uniform of their nation and died fighting under that flag that we may continue to be free and prosperous. I raise my glass to them in a salute of their honor and the sacrifices a grateful nation can never repay. To fallen comrades. We remember you.

The words may be a few years old but the sentiment remains as strong as ever. This weekend the haze of backyard BBQ grills smoking as an endless supply of burgers dogs, chicken and other tasty dead animals will dominate American skies in the ritual of the unofficial first day of summer. Here on Kent island the skies willl fill with the sound of music form the dock bars and the growl of high performance engines let losse for the first time of the year. The pack of fast boats will doubtless run to Tilghman island for the bash at Captain Buddy’s that has been a Memorial day ritual for many years (This year broken rib Tim will remain firmly terra firma). There will laughter, music, fiends, excessive aduly distilled beverages and a general damn good time. Enjoy the weekend but at some point recall why we are celebrating.

A bunch of us went out to see the blue Angels the other day as they put on the annual Naval Academy Graduation air show on Wednesday. I could not help but think about the graduates the air show honors every year. They all signed up in 2006, five years post 9-11. From the very first time they raised their hand on the first day of plebe summer they knew they were entering a war time military. Those who choose the marine option on commitment day last year were well aware they were probably going to face combat during the five year commitment. Those who similarly tossed their caps in the air early this week also knew that they would probably see duty in Afghanistan or Iraq in the next five years. Yet they joined anyway. Most of them could have gone to any school in the country. They chose to serve their country.


I think of the enlistees. Regardless of their individual reasons for joining they have volunteered to serve and if necessary fight for their country. They are all too aware what they are getting into. They are over worked, underpaid and they go to serve anyway. As you party and enjoy the comfort of family and friends this weekend, take a minute to honor them and think of those young men and women who have joined the ranks of those who gave all for our country over the centuries and decades.


The bravery and honor of all those who have ever put on the uniform of the United States of America deserves nothing less.

Almost

It is almost here. Occasionally we have dreary rainy days with the death throes of winter on the edge of the air but summer is almost here. But there are days like this past weekend when the sun is overhead and the breeze carries a savory olfactory hint of the season to come. There is a hint of the mix of sub tan lotion, high octane gasoline and fermented and distilled adult beverages of a wide variety. Here is a far off rumble on high performance engines and outdoor rock and toll that comes in on the wind foreshadowing the good old days of summer. Wine drinkers are starting the annual switch from wine to perfectly chilled whites and scotch is retired for good old G&T’s and orange crushes. The smoke of a thousand grills and the poolside laughter of children will soon fill the air all over the island.Summer is almost here.

Unfortunately for us baseball fans, summer also means the Orioles have already dug so deep a hole that it is highly unlikely they have even an outside shot at the playoffs. From here they need to win almost 60% of their games to be a .500 club and with their current sparkling .300 win percentage the chance of that are about on par with a tax reduction this year. This cannot be blamed on the front office as in years past. Andy McPhail put a better team on the filed in terms of talent. Unfortunately that talent has been playing like bumbling idiots. Missing signs or the cut off man, getting caught in rundowns ad hanging a curve ball to the leagues best hitters is just stupid baseball. I still watch and root for the Birds but it can be physically painful.

The kids birthdays are next weekend and find it hard to believe they will be 22 and 26 this time around. I have been informed that I am cooking a spaghetti dinner on Sunday for however many show up as their celebration with an request, or perhaps demand there be lost of vino available. Ill bitch and mumble as usual but will actually be delighted to do it. The house will be filled with their friends and a few of mine with lots of laughter and food, and of course the aforementioned vino. I often wonder what happened to the little girl in the pom- pom get up and the little boy with bloody knees and dirty face but time stands still for no one. Still does the son of a bitch have to sprint? It is not all bad of course. They have turned into to amazing adults who are a pleasure to be around. Now if I could just get Tommy to stop going into the tire shop in his PJ’s.

The adventures of the island have been accelerated this winter at an unusually weird pace. I thought I had seen everything but we hit new lows this year. The breakups that some of our merry little band experienced hit new highs on the really fucking strange o meter. I saw things happen between various couples happen this year (including me of course just to get the season of what the fuck just happened off to a roaring start but at least mine was early enough I had drank it pretty much gone by Christmas) that would not even be believable as Monday night ABC sitcoms. Still we made it though and the summer is starting to show signs of better times ahead for all. The abnormalities of the past harsh bitch queen of the past winter is fading as temperatures rise for which I merely say thank god. Summer is almost here at long last and the perhaps the oddness will be behind us all now.

The markets have been even more volatile in recent weeks. The problems in Europe have made trades jittery and we are seeing downside action again. In spite of today’s snap back rally which smelled of serious short covering to me I think the market may have finally run out of some of the steam that pushed it up. I suspect some of the HFT guys have cut back after being blamed for the mini crash of last week and want to leave less of a footprint on the markets. The flight to quality rally is offering a great chance to re-enter or establish a short bond position as a long term trade. It looks and smells like agrat trade to me offering outsize returns without much risk to me. I saw today that Wilbur Ross commented on the other trade of the decade. He thinks banks will struggle for some time to come as a result of coming turmoil in bonds and commercial mortgages. As investors begin to realize this bank stocks are selling off. Eventually these stocks, especially smaller community bank stocks will reach levels that make them a must buy for long term investors.
All in all it’s a pretty good life. I am listening to Oscar Peterson and looking forward to tomorrow night and the weekend ahead. The kids are well, the friends are incredible and in spite of the fucked situation in the country today there is much that is right in my life. There are good books, good wine, great music in the future and best of summer is almost here.