Did you know?

Here's a post that from Bill Cara's blog (it's mine, I just posted there first).

Through some genetic deficiency, I was perusing FRED's (Federal Reserve Bank of St. Louis) website a couple of days ago. I admit that I'm experiencing an unhealthy preoccupation with loan loss reserve trends. They have a wealth of schedules that report on such (in total, by region, by bank size).

Loan loss reserves are at historic low points (and they only show commercial and total losses, no consumer losses insofar as I can see). Anyway, I may just do something really geeky and start tracking these losses by bank size and region. If there is a credit problem as some have suggested, we should see it creeping in these numbers. It will be a bellweather of sorts. We'll see what develops.

One thing I found truly interesting is that from 1984 to 2004 the number of banks in the US fell by 53%. I understood about consolidation (indeed that was one of my investment thesis that paid off in the past), but I've not seen this number. I thought it intriguing. My friends and colleagues can always count on me to pull a "Did you know?" thing out of my pocket. I pulled this one out today. The person I shared it with was kind enough to pretend to find it interesting. Enterprising readers may want to use this in their arsenal should they be in cocktail conversation and find that their erudition is challenged. Keep this handy, it may serve as a needed deflection. Trust me, someone will be impressed that you know this...and surely your banker will be impressed.

http://biz.yahoo.com/ap/061028/america_the_bankrupt.html?.v=4

David Walker, US Comptroller General, who brings credit to my profession so sullied by the mischief of CFO's of Enron, WorldCom (and others), is doing a fiscal wake up tour. This is worth a read for any who wish to have an overview of some important issues.

I’m particularly interested in the Medicare part of it, most particularly the bolus of baby boomers heading toward Medicare. Having spent a few years in the disease management industry, I will tell you that the increasing incidence rates in chronic diseases is horrifying. Why does it matter?

It’s important to know that other people’s illness affects your pocketbook. Insurance companies spread the risk; they do not absorb the risk. And when risks are spread through the system, healthy people have to bear the burden of increased costs. Mind you, the risk is not pro-ratably spread, but it is spread nonetheless.

There are 6 major chronic diseases: diabetes, coronary artery disease (CAD), congestive heart failure (CHF), chronic pulmonary obstructive disorder (COPD) and asthma. Two additional conditions, hypertension (high blood pressure) and hyperlipidemia (high cholesterol) are also on the rise. Among the 8 conditions, there is high co-morbidity—meaning folks with multiple conditions. A person with coronary artery disease may also have diabetes, hypertension and hyperlipidemia. The prevalence rates (the % of people who have the disease) varies among the conditions and there is and varies among geographic area. For example, the Midwest has a notably smaller prevalence rate of asthma than the South.

Did you know that lifestyle is a major contributor to the increasing incidence rate (the number of NEW people who have the disease) of chronic diseases? Yep lifestyle. You can see it by going to the mall or the beach and looking at the bulging waistlines. The big three lifestyle variables are exercise, weight and smoking. Each of these lifestyle components is controllable by individuals. Other factors include age and genes, neither of which we can control.

The 80/20 rule is alive and well in health care spending. 20% of the folks will drive 80% of the costs. Here’s a couple of tables that lifted out of a paper that you can find here. http://content.healthaffairs.org/cgi/content/full/hlthaff.w3.603v1/DC1

In Exhibit 1, it is notable the differences between the top 20% and the top 1, 5, 10% respectively. The very sick are very expensive.

Now look at Exhibit 2.

Of the top 5% in spending per beneficiary, 47% have CHF and 35% have diabetes. Chronic diseases are acetylcholene to health care costs.

We hear so much about all of the other national problems that we cannot control as individuals, that it is time that we hear, and, more importantly, heed problems that we can control. We can significantly influence the amount of future healthcare costs that threaten this nation’s future economic stability by doing three things: (1) Eating right; (2) exercising adequately [those two mean controlling our weight!]; and (3) screening for age/gender/risk appropriate risks (prostate, mammography, diabetes etc). If we can arrive to our golden years in golden shape, we will have done our part to reduce our nation’s health care ticket.

The numbers are so large, that small changes yield big payoffs.

Some recent transactions

My best results (remember, I'm an amateur at best!) have come from picking up stocks that are taking it on the chin or are slowly rising from a TKO. My current portfolio is mostly cash and puts. Given that the indices have gone straight up my puts look terrible though in june/july they were up 150%.

Lesson 1: Never let a 150% gain get away...particularly if you have options.
Lesson 2: If you are buying puts, you ought to be hedging something other than a cash position.

I've been poking around for some long opportunities. Last week, I bought 500 shares of MIND (Mitcham Industries) @11.16 (including fees) They lease seismic equipment to oil exploration and had been beaten down pretty well. They were on my watch list, and I saw that they were improving.

Today I purchased 200 shares of IVGN @ $56.30 for my retirement account. It's a stock that I've followed for a while. They are getting beat up today on disappointing earnings, BUT, I had marked support in their chart (last earnings disappointment) and that level was not breached. I figured that I had a low risk entry point. As I write it is at $57.25. We'll see how this holds.

Friday's Trustee Sales

In looking at the numbers this week, I feel that it would be useful to have three breaks: <$90K, $90 - $180K, >180K. There were 6 > $180K this week. Very unusual.

Capex

I've been a frequent blogger naysayer on the role of capex in stepping in and taking over from the consumer. I'm feeling some vindication of that view with Walmart, Intel and Amazon giving their capex budgets the good ole "Marie Antoinette".

Business Cycles

I had mentioned in a previous post about the importance of understanding macro cycles--never you mind of course that no one can agree where we are in the business cycle. Regardless of such disagreement, it's still important stuff. G. Dagnino has a terrific overview here.

http://peterdag.com/s_files/mLcn829S3eP2.pdf

I'll also add that George has nailed this cycle within his by-weekly newsletters.

On the forced feeding of services

I'm a long term Verizon Wireless customer. Yesterday I visited the Verizon Wireless store. My son's phone fell victim to a dramatic situation that resulted in its being tossed out the bus window. My husband's phone has suffered some abuse as well, but still usable as opposed to my son's MIA phone.

I picked out my phones which had the characteristic $50 rebate and the 2 year contract. I was then told that they would have to include a one month free trial of Vcast. I said no thank you, I didn't want it. The sales associate replied. "Okay, then, your phones just went up in price by $40."

I said, "This is nuts" and I walked out of the store. Why should I have to accept something that I know that I will not use and that requires me to "act" to avoid charges.? I'm still angry this morning. So much so that I'm tempted to buy my contracts out and switch to another service. Verizon has made a fortune off of me, and I find such "force feeding" of services poor customer relations. I'll complain to them today.
-------------------------

Heart pounding drama huh! I've concluded that my issue was due to being at an "authorized reseller". the location changed from a company-owned to an AR. I went on line, merely clicked "decline VCAST" and all was right as rain. Now, my son has to wait a few days before the phone comes but (1) I did not have to wait; (2) transaction took 5 minutes as opposed to 50; and (3) no rebate to hassle with; it is instantly given. Love it.

Steelcase

Here's Steelcase. The other "big three" is Hayworth. I believe that it is private. Good for them.

This is my BIL and his red drum. May your investment success feel like snagging one of these!

I'm just experimenting here on loading charts. The chart is from MetaStock's program. I use a screen capture (HyperSnap, which is a great program for my use).

The stock is Herman Miller, a top 3 furniture manufacturer. Notice that they had a torpedic advance. There was also a 15% short position at the time of their earnings announcement.

Having spent 10 years in the furniture business (at a dealer for HM), I have painful professional experience that commercial furniture always gets kicked in the stomach first when there's a recession. When no political or economic figure was talking recession in 1990/1991 my organization saw it's backlog decrease. Trust me that it is no fun sitting down with your banker and talking about recessionary pressures affecting your business when NO ONE else is speaking the "R" word. The response? No one is calling for a recession (meaning, you must really suck at your business to have this far a fall off). "They" finally did call a recession, and it cost the nation a president's re-election and me a bank loan. The good news was I lost the 10 lbs that all women claim to want to lose, and I was awarded a set of steel balls from one of the owners for my leadership during that time. Unless we have some aberration, we'll use Steelcase and Herman Miller as bellweathers for the economy. I'll do a weekly chart on their stock prices and post any useful news. We'll see what develops. We'll have a recession watch.

Oh well.....I don't have any technical mumbo jumbo to offer on this, but all of the momentum indicators are moving down in the upper chart. I've not worked with these indicators much. I don't claim to be a technician nor do I play one on TV, but I'm a student of it--a stinking amateur. Here's another look using the default format that I like to use.

I'm toying with shorting this stock. I'll post what I decide to do. So far, being short in this market has been painful. More in the oft promised mea culpa post. I'm generating testicular fortitude for that post, and I'm not quite ready--maybe a testosterone shot will help.

This chart tells me that HM is overbought. We'll see what happens next week.

A Watch List Review

Here's a list (click to enlarge) of stocks on one of my "watch" lists. The list includes a hypothetical share quantity based on a "purchase" of 04.24.06 and values through yesterday's (10.17) close. Many of these stocks came from the ValueLine small/mid cap picks. It is sorted through largest % loss to date. Picking any one of these (unless it was Pemstar which was bought out, but performed extraordinarily well) could have been devastating to a portfolio. Buying all of them would have resulted in a small loss.

My worst stock purchase mistakes were where I did not do any "due diligence" (or homework). I've realized my best performance from doing my homework. I did homework on BUCY, LUFK, OS, NEU, SMDI , NSS and made money on these. Reading 10-Q's/K's (Edgar.com) and listening to conference calls are two critical homework assignments. You learn a lot about a company through the conference call. The personality of the executive team, for good or naught, comes through. Also, hearing commentary on their industrial outlook is important. Caution: don't expect conference call material presentation to be the Rosetta stone. You are still being "fed" information. Listen to the analyst questions and the response. As always, treat the executives as you would in a cross examination with your teenager: what they do not say is often more important than what they do say. Companies with superb leadership weather temporary storms, and every company experiences blips--some major, some minor.

While some may not consider fast growth and profitability blips, they are. Exponential growth creates an enormous strain on company resources (financial, infrastructure and people). Unbridled growth can create large implosions. Therefore, having a smart, agile executive team is key. Listening to their conference calls is one way to gauge smartness and agility. It's important, though, to not let charismatic personalities fool you into thinking management is smart. Having said that, it is best that the team doesn't put investors/analysts asleep on the call.

For those that have time, researching attractive sectors and the company leadership in those sectors builds a strong foundation in understanding the thesis for why you want to buy an individual stock. If you are not willing to do this research, you will not have a good understanding of the risks. The risks are illuminated in red above.

For individual investors compelled to make their own decisions, lack of work will translate into lack of results. Not only do you have to pick the right sector and the right stock, individual investors need to develop a keen awareness on when to hold 'em and when to fold 'em. It's not a skill that I've mastered, and I'll post some mea culpas on this.

This Week’s Market Perplexions

That the market continues to go up is perplexing. As I understand it, the market has four theses to support its strong rise: (1) the consumer is still strong; (2) the Fed is done; (3) in the event that thesis (1) is wrong, then corporations will fill the gap with cap ex spending; and (4) price to earnings ratios are low.

Generally, scientific method requires a (hypo)thesis to be subjected to the rigors of empiricism. Slap evidential matter data garnered to support your thesis against the wall of scientific skepticism and see if it sticks. I’ll offer my personal and amateur observations regarding theses 1-3. Thesis 4 has too many oddities. And there should be a Thesis 5, Global Growth (which really has some merit). But 4 and 5 make my head hurt, so I’m being lazy and cowardly in ignoring them both here. Warning: Remember, I’m representing my point of view (POV) as that of a layperson.

Let’s tackle thesis (1): The consumer continues to be strong. Here is Econoday’s Retail Sales report:

Released on 10/13/06 For Sep 2006

Retail Sales, M/M change
Consensus 0.2 %
Actual -0.4 %

Retail Sales less autos, M/M change
Consensus 0.0 %
Actual -0.5 %




Retail sales missed by a large differential from consensus expectations. In my off-line life, if I miss something by that wide a gap, then it’s an alert to me that my thinking was wrong. Slapping these numbers against our thesis wall result in a puddle on the floor. They don’t stick. But if they don’t initially stick, you can keep changing them and throwing them until they eventually stick. Here’s a lifting from Mauldin’s free letter which you can find here http://frontlinethoughts.com/.

“September retail sales posted a rather weak headline number. Expectations were for a rise of 0.3%. Mostly, the high expectations were because of the drop in gasoline prices. Economists assumed consumers would spend their energy "savings" on other items. The actual number was down 0.4%; and just as important, August sales were revised downward from 0.2% to a final 0.1%. It is important to pay attention to the direction of the revisions, as they will sometimes be a harbinger of trends.

So, are we finally starting to see a slowdown? Not if we look at the action of the stock market, which is again posting new 52-week highs as I write. Dow 12,000, here we come! And why can the market shrug off slowing consumption? Because the immediate spin was that the underlying data was really quite strong.”

Unpacking these numbers led to a number of “positive” increases. One such positive was that furniture purchases were strong (up 1%). Strange news to hear on the same day that that Lazy Boy warns.

There are other matters balled up into this consumer thesis that center on the role of housing, debt and negative savings. I’m not going to tease those out. But it seems to me that (1) the consumer has been on a spending spree and (2) the source of funds can come from two places, (a) income and (b) debt. Income increases have not been high enough to sustain the current level of spending, so that leaves debt. Given the proliferation of mortgage equity financing over the last few years AND given the pressures in real estate and the potential for price deflation, we could only be looking at incremental gains here. My conclusion is that the consumer will continue to flounder.


Let’s tackle thesis (2): The fed is done raising rates and will reduce them in the near term. There are a few Fed heads out there stating with continuing emphaticalness (yes, this is a word, and I think that it should be emphaticism, but alas it is not a word) that inflation is a worry—more of a worry than a slowing economy. There is a paucity of public discussion about real interest rates. I’m not qualified to host one here, but it’s a concept that deserves a brief airing. What are real interest rates?

Real Interest Rate = Nominal Interest Rate - Inflation
If inflation is positive, which it generally is, then the real interest rate is lower than the nominal interest rate. If we have deflation and the inflation rate is negative, then the real interest rate will be larger.

Source: http://economics.about.com/cs/macrohelp/a/nominal_vs_real.htm

Let’s say that our nominal interest rate equals the fed funds rate, currently at 5.25%. If inflation is 3.25 %, then our real interest rate is 2.25%. To slow inflation, one has to have a high enough delta between the fed funds rate and inflation to serve as a brake to the careening car we call our economy. Remember those folks (much maligned I might add) calling for 6% Fed funds rate? Those were the folks who understood that real interest rates were too low to forestall inflation. I would posit, then, that the thesis that the Fed is done, doesn’t stick when it is slapped up against a wall either. Two strikes.

To use baseball vernacular (and I’d rather have needles stuck in my eyes than watch baseball), I really need a strike three to achieve any sort of climax here. Strike three is thesis 3, In the event that the consumer stalls, corporations would step in and fill the gap.

There are not too many folks more fiscally conservative than corporate CFO’s. So I’ll ask you, that if you were a savy CFO and believed that the economy is slowing (less revenues, less profits), are you going to go on a capex spending spree to get rid of your excess cash? If you didn’t say no, I would surmise that you’d be out of your CFO position soon—but it would be a less ignoble departure than that of those CFO’s participating in options scandals. To maintain (or mitigate a slide in) profitability in a slowing economy your margins are pressured. Margins are pressured because sales dollars are down (due to volume and pricing pressure). If your top line is pressured, you don’t load up on depreciable assets.

I would welcome seeing some credible numbers on how these capex numbers are going to mitigate the consumer slowdown. I have a feeling that we’ll just vacillate between the camp saying that consumer is not slowing down (by spinning the numbers) to the camp that says yes the consumer is slowing down but corporate capex will save the day. I’m in the third camp—saying that both will defy the current expectations. But my camp is a lonely one.

So all of this “stuff” is perplexing. To be true to valuing empiricism, I have to ask how might I be wrong. Global growth would certainly be an answer. But this post is already too long. Though I’m tempted to say that the market has a mind of its own, the market has no mind. The market is really a shower faucet. The knob on the right is hooked to endorphins, and the faucet on the left is hooked to adrenalin. Right now I think the faucet on the right is wide open.

If you have a weak plumbing system (and I think that the market’s plumbing system is weak given the theses points) if you’re showering in a comfortable temperature, singing away until someone does something unexpected in another part of the house (starting the washing machine or dishwasher, or maybe flushing a toilet) you will experience an unwelcomed rapid change of temperature—you’re gonna be freezing or scalded—neither is fun.

Friday's Trustees Sales

On Commodities

I've always been perplexed by the price of commodities. It appears to me that there ought to be a bifurcation in the price: one part fundamentals, one part perceived value. I was lamenting on Bill Cara's website that I wish someone would dissect the price into these two parts. He stated that

Most commodities are actually futures (financial) contracts
with no intent to actually trade the commodities -- so the commodity
fundamentals are not nearly as important to the major capital pools as the
money flows from one currency to the next.

For a nascent student of capital markets, this was an "AHA" experience. I certainly understood that money flow is intrinsic to all asset classes and their valuations, but there was this underlying intellectual neediness to understand how one would parse between the two (fundamental v. technical) and come up with some definitive amount for the two. This question is precisely the type of question that someone with my background would ask (and go perpetually wanting) and really expect a logical answer. Job Cost accounting (blech...I hated it in school, and I still hate it, but I have to use it with my clients) teaches us to tease out discrete bits of activity and assign some value to it. But to tease out a fundamental value (demand/supply of the good) v. a technical value (demand/supply of the commodity from an investment attractiveness--meaning money flow!) is not going to happen.

I'm going to coin a new word: perplexion. It's like a contagion--it's an agent that causes perplexity! At first I was giddy thinking that I was clever and found a new word. While not in dictonary.com, I did a Google search, and look what I found (synchronicity at work). .

PERPLEXION

"The emotion experienced when comparing an image as seen by a camera,
with that seen previously through a viewfinder."

Totally irrelevant, but do take a look. http://www.perplexion.com/home.html Some cool pics.

I'll just co-opt the term for my nefarious purposes, and I stick with my original definition:

PERPLEXION

"An agent that causes perplexity."

It also strikes me as an intriguing name for a book or a band. It might also serve as an accurate name for important people in your life (spouse, partner, child, boss, colleagues).

Tool Box

Whatever you are doing, you need the right tools in addition to the right perspective. The photo below is that of a few tools one needs when fishing (yes, including the beer can!). I snapped this picture just this week while on a guided fishing trip on Cape Hatteras sound. We were searching for the elusive red drum. We snagged exactly one during our afternoon trip. Essentially the guide looks for "unusual" activity. We spotted some "unusual" activity--an area of ripples going against the wind direction. There were hundreds of these beautiful red/gold fish (think about water locusts). I'll skip the picture of the fish and get down to the point of this post.

I've been assembling my investor toolkit over the past year and a half. I'll tell you why it works for me. Yours may be different due to the amount of time or background you might have to understand the information. At the very least, you want to ask some intelligible questions about your investments--at least so that the person who is managing your money will feel some periodic accountability to answer those questions.

I consider the "toolkit" to be an amalgamation of interface (I use Fidelity's Active Trader Pro), investor perspective and information. There's an abundance of information as one can readily see by perusing bookstore shelves, internet sites (both free and paid) and periodicals. Sifting through that information is tricky. It's like wading through dark water, and if you are not careful you will have leeches hanging off of you. In fact, I have a few leeches--subscriptions that I need to cull through because their value is suspect.

About perspective: I'm a global learner--which means that discrete pieces of information do not mean a damn thing to me unless I understand the entire picture. Therefore, my perspective is a top-down one. Traders do not care about that sort of thing (at least from what I can tell from the blogs that I read), but I do. Why? I think that understanding the macro picture helps one understand the risk in the market. So if you didn't know that housing was starting to get into trouble in Q4 of 2005 (and I consider that macro view), then you didn't redeploy your capital in time to avoid the exodus. Bottom line: understand which asset classes you want to be in depending where we are in the economic cycle. It sounds simple....unfortunately, experts cannot even agree with where we are in the economic cycle. But knowledge will be your divining rod--cultivate your knowledge base.

Here are a few tools (I'll call this the de minimis toolbox) that I'll mention quickly.

• Peterdag.com: This is George Dagnino's website. Now, I do not mention this for any reason (no compensation or anything untoward) other than it provides comprehensive economic information. Check out the website. There some great free stuff on market cycles. Every investor needs to understand market cycles. Make sure that you have a good enough foundation in macro economics to understand cycles when you hear someone talking about it. Rather than enroll in a university program, you can get fully digested and understandable information through this service. The newsletter is bi-weekly. I also recommend George's book: Profiting in Bull and Bear Markets.

• Billcara.com: More macro view stuff. If you do nothing else, look at his week in review and his comments. Well worth your time.
  

• Stockcharts.com: It's worth developing some foundation in technical analysis. Go here to learn some basics.
  

Richmond VA Trustee Sales

Each Saturday I will load the Trustee sales (TS's) for the Friday--that way there will be no duplication. I have a totally arbitrary cutoff of $90K as the line of demarcation. My expectation is that the higher frequency and the percentage of TS's over$90K, the more deeply felt the housing concerns. Note that just 6 months ago, this percentage in my area, Richmond, VA, was 10% or less. I take no joy in providing these statistics. Excluding personal health issues and those of loved ones, one's house is the insulate from the difficulties of life. When one's house becomes one of those difficulties--e. g. goes into foreclosure--it's affect on the psyche must be tremendous.

The Housing/ Consumer Conundrum

It appears to this perplexed investor that that there is a tremendous amount of unsatisfying commentary regarding the state of the housing market and the strength of the consumer. When in doubt, it is useful to be one’s own personal Sherlock Holmes. I’ll offer up my own amateur observations.

On interest rates: My home equity LOC began with an interest rate of 5.5% in June 2005. Now it is October 2006, and the rate has increased 45.5% to 8%. I thumb my nose at this increase because I’ve not a nickel borrowed against it. But if I had, then I’d be paying 45.5% more each month on top of any principal I was repaying. On a $100K balance, that’s an extra $200 per month, just in interest.

Outside of the conversation regarding about the effect of housing on the economy, this discussion has mostly been narrowed to primary mortgages. What I’ve not seen is any discussion about the number of folks who have second mortgages subject to this steady march of increasing rates. A house is still in the event of a default on ANY obligation for which the house is proffered as security. Keep a look out for any of these statistics and please share them if you see them.

You know that you are getting old when you read the obituaries and the foreclosures. I’ll accumulate foreclosure statistics from my weekly paper (the Richmond Times Dispatch) as an informal barometer of what is going on in at least one locality. I will say, though it is anecdotal, is that the % of notes >$90K is much greater in the last three months than it has ever been. Specifically, maybe 10% of the note balances were in this strata—now it is 40-65%, depending on when you look. I don’t know that I will have the time to strip out the duplicate running of notices, but I’ll at least provide a compilation of this breakdown.

From an investment perspective, I had this thesis that the Fed was not done as there was still real inflation in the system. I also felt like consumer and mortgage exposure in the larger banks was not being discounted. I had puts on BAC and WFC. Let’s just say that my opinion was not held by the larger investing public. I’m still awaiting their capitulation to my way of thinking! It’s often difficult for me to determine when I’m lacking in conviction vs. when I’m just plain wrong.

On the consumer: Let’s just say that the consumer may remain strong against all the perils that they face (high oil, slowing economy), but in the end, the consumer remains stupid. (I’m not trying to sound harsh). Consumers are spending their way into poverty. I recently heard that 52% of the population will be over 55 by 2012. Couple that statistic with not enough of us saving for retirement we have a brewing pot of economic mischief in the offing. I suppose that deferred pain is the mantra of the US consumer, and I'd be a liar if I didn't fall into that category at one time or another in my lifetime. Currently, we are in the parsimonious category--but we do eat well! I'm also adding a wine bar to my blog to show showcase a few discoveries that I enjoy and feel worth sharing.

If we can conclude anything about the consumer from this week’s retail numbers, the Wal-Mart strata of our populace is hurting and the middle to upper strata is doing okay judging by Target’s and JCPenney’s numbers (in addition to a host of other better-than-expected numbers). Nevertheless, the investment glee over retail stocks escapes me.

Inaugural Post

What better time than the end of the third quarter to post my first blog. Perplexed? You betcha. Economic data is divergent--Philly is sinking; Chicago is rocking. I cannot wait to see the national numbers.

In May of 2005, I figured that it was time to get serious about understanding the financial markets. Since graduating from college (1982)—yes, I’m starting to feel old--I've been working my potookus off in addition to being a mother and spouse, seemingly in my spare time. So there was little time or energy to devote to the market study. I figured a few well-placed mutual funds would do fine. Not so.

With an accounting/financial background, I figured (naively) that the process would be both quick and straightforward. Hah! Now, 15 months into this odyssey, I've moved from that dangerous stage of not knowing what you don't know to the queasy stage of knowing what I don't know. While still an uncomfortable stage, at least it's less dangerous! While I'll keep my confessions of stupidity to a minimum, I'll offer up that all of the aphorisms that you read about I've violated in some way or another. There's a reason for those aphorisms--so if you are starting out, heed them.

The very first thing that quickly became apparent at the onset is that there are some very smart people who are very giving of their time (and opinions) about all aspects of investing. That's a true act of generosity, so if you are visiting those places and have comments, understand that it's like your kids' little league coach...they're volunteering. Meaning...play nicely.

The very second thing is that all of these very smart people have very divergent opinions about what they think the market was doing and was going to do. I would recommend that everyone read Ed Young’s Seven Blind Mice. Yes, it is a children’s book—a delightful one at that. If you have children in your life procure it and enjoy reading it with them. In my view it describes very accurately the value and context of the mélange of market commentary that you hear and read everyday. For those not familiar with the story, it’s about seven blind mice that are crawling over an elephant and trying to figure out what the heck it is. One goes down a leg and thinks it's a Roman column. You get the picture.

Bottom line: We are all blind mice trying to figure out how some discrete knowlege/understanding in our possession fits into the mosaic that looks like an elephant. In reality, it will look like a tiger, a gazelle, or even a platypus before any of us realize it's an elephant--and we will have placed our bets accordingly. Moral of the story? In the market, if it looks like a gazelle, but it is really an elephant and you do not recognize it as such, you will be eaten by a lion. To lose the jungle metaphor....the market will beat you up and take your lunch money. Wahhhhhhhh!!!!!!