Saturday, December 29, 2007

Genius!!!!!!!!

I mentioned that I was clearing cobwebs. I started with a bookcase. It's a lovely antique bookcase that I found in a shoppe in Toano, near Williamsburg. It is now closed. I have bought some nice pieces from them over the years. This bookcase is Victorian. It is solid walnut with two doors of framed glass. I made a deal to buy this along with a late 1800's server that is gorgeous. I keep my liquour and some serveware in that lovely piece.

Back to the the bookcase......As I was cleaning it out, I found one of my favorite books: How to Think Like Leonardo Davinci: Seven Steps to Genius Everyday. Ahhh.....who can resist the call of accessible genius--daily no less! I surely cannot!

Since I'm going through those cobwebs--a personal process surely--I plan to write about tidbits here over the next couple of weeks. I'll not finish this process by NY's--that's okay. I don't mind taking the time to revisit some things. As I share some of this "stuff" with you, keep in mind that I'm not trying to evangelize you in any way. Rather, I want to introduce you to some "stuff" that you may not have run across.

Selfishly, it's also a good way for me both to document and systemize my process. In other words, I'm bringing you into that process should you wish to come along--but I'm doing it for selfish reasons! The beauty of the internet is that you can merely click and escape!

There's the pre-amble. Now I bring to you



The Seven Davincian
Principles

Curiosita—An insatiably curious approach to life and an unrelenting quest
for continuous learning.

Dimostrazione—A commitment to test knowledge through experience,
persistence, and a willingness to learn from mistakes.

Sensazione—The continual refinement of the senses, especially sight, as the
means to enliven experience.

Sfumate (literally “Going up in Smoke”)—A willingness to embrace ambiguity,
paradox, and uncertainty.

Arte/Scienza—The development of the balance between science and art, logic
and imagination. “Whole-brain” thinking.

Corporalita—The cultivation of grace, ambidexterity, fitness, and poise.

Connessione—A recognition of and appreciation for the interconnectedness of all things and phenomena. Systems thinking.

How to Think like Leonardo da Vinci: Seven Steps to
Genius Everday
, Michael J. Gelb, p. 9.

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I've been incubating a thought about how I wanted to structure my NY's resolutions. I must admit that I made no resolutions last year, and it was not a bad thing. Nevertheless, I wanted to be very businesslike about it. Leisa, Inc. was going to have a balanced scorecard--to list goals in about 5 areas that would ensure that I brought some balance into my overall improvement efforts. I'm still working on those categories, but you can be sure that I will be incorporating some of this.

I'm also a big fan of mind mapping. I still have on my wall one of the one's that I did for work. It really is terrific. I like Tony Buzan's, The Mind Map Book.


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T Minus 2 Days

Here is my second T Minus 2 days post. The year slips through our hands like water, don't they? I suppose we are to drink from our hands before all the water slips away.

For the first time in many years, I am not having NY's dinner at my home. Rather, one of my regular guests will be hosting this year. So we will be guests. There will be the same group of us, 8, as last year. It is a comfort to see the New Year in with people that we know and love.

With the thin trading in the market, I've spent most of my time building my chart lists in StockCharts. I find it helpful to look at stocks in sectors and to be able to look at a glance how stocks are doing relative to each other in the same group.

Tim Wood, a technician that I've mentioned here who is interviewed regularly on FSO and writes for them as well, wrote an interesting post on the 12.28.07 market wrap (you may have to get to it from the archive if you click on the link to far from today's date. I hope that you'll take time to read it. In it he discusses his feeling that we've not yet seen the cycle lows for this 4 year cycle.

"The
bottom line is that the market can do anything it wants and only a fool
would say that he knows for sure what is going to happen. But based upon
the fact that 90% of the previous Dow theory, bearish primary trend
changes have been significant market developments along with the ongoing
statistics and indicators surrounding the 4-year cycle, all appearances
are that the 4-year cycle low still lies ahead. Also, in accordance with
Dow’s three movements, the advance out of the November low has been a
counter-trend “Secondary Reaction” in opposition to the Primary
Trend change that occurred on November 21st."
I like Tim so much because he brings great discipline to his work. I always feel like he speaks from the position of facts--as he constructs and interprets them--rather than from ego and emotion (a la Kudlow, Cramer).

I still have Martin Armstrong rattling around in my head. I'll reference you to my 04.07.07 post on Armstrong. You will remember that on 02.27.07, the market made a swan dive. Uncannily, it was one of MA's "market top" calls. The market then went on to make a much higher high [Dow] (February break (not high) was ~12,600; market high of 14,187 for a 12.6% gain). Given that discrepancy, I'm not sure that the Armstrong model and the market peaks and troughs work outside of the 02.27 oddity. However, the next trough on the Economic confidence model is 03.26.08. I'm not speculating on any of this, merely resurrecting the model. But it's worth noting that the Dow troughed on 10.09.2002 and the model shows the bottoming of 11.08.02. I guess, then, that the next real dilly of a bottom would be in the 2011 time frame with our having a dip and and a bounce within that time frame. I surely don't know; and I recognize that my fascination with the model is grounded in neither knowledge nor objectivity.

Some numbers out this week show that the European economy is slowing as well as that of Japan's. Both are marked by increasing inflation--similar stories to our own. I'm seeing more doubts expressed about the theory that the BRIC economies have decoupled from our own. I do not believe that we will have any confirmation of the theory's being accepted by the market place until we see commodity price ease and inventories build. Nevertheless, the strongest sectors have been commodities (to include solar) and the defensive sectors (consumer staples, healthcare, tobacco).

While the September 30 quarterly earnings season was important due to its being the first reporting period post the credit market blow up in August, December's quarter end will be important as well. It's year end, and with that there will certainly be some more cobweb busting in the recessed corners of companies' balance sheets. We may also get confirmation of some of the slowing economic numbers.

I'm doing a bit of that cobwebbed corner cleaning myself. It's a natural time of the year to do it.

My best to each of you in the New Year. May it bring you good health, prosperity, wisdom and more importantly may it enrich the relationships with your family and friends.


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Tuesday, December 25, 2007

Christmas p.m. post


The full moon was on December 23. I would have thought it was the 24th, as it was so luminescent. As many of my longer term readers know, a year ago on January 6, I lost my English Setter, Lucy. She was almost 14/ Later that July, I lost Greta. I remember with great clarity last December walking Lucy, Greta and Macy (then about 6 mos old) under the light of last December's full moon. I marvelled at our crisp, long shadows we made as we walked down the road. It was cold, and quiet. The dogs made not a sound. I could hear the intake of my breath and every exhale in a lovely synchopation with my steady, rhythmic stride. Lucy was in the lead--her usual place. Greta was closely behind with Macy following. I was in the rear, but all three were keenly aware of my position. Their predominantly white coats reflect the moon's brilliance in that monochromatic nightscape. How precious that memory is to me.

Winter evenings and winter mornings are special times to me. There is something ethereal about being up and outside while the balance of the world slumbers. As we stare at the ancient light passing through the galaxy and bouncing off our retinas, it connects us with our ancestors. The rich tapestry of myths were woven by those ancient star gazers. Their aim surely was modest. They were merely trying to make sense of it all. The space between observation and understanding was filled by imagination--and imagine is the foundation of all myth. More importantly, imagination is what gives life it's magic and inspiration. Imagination is the root of all innovation.

I imagine the winter skies were the most watched. Surely the summer months were spent toiling in the fields. When the stars made their debut, bodies and minds were numb from hard work. In contrast, in winter, the fields were barren. Hunger was likely a constant, nagging companion. Gazing at the stars fulfilled our human propensity for seeking patterns and then explaining. The simplicity of a twinkling star was transformed into story when imaginatively group with other stars. In those patterns the basic archetypes of our humanity were born.

Orion is one of my favorite constellations largely because I can recognize it easily by the signature three-star configuration of the belt. Is it any wonder that Orion would be the hunter traveling across the winter sky with his two hunting dogs Canis Major and Canis Minor? A man and his hunting dogs is assuredly grounding in the austerity of winter. There is no bounty in the field; one can only pray for bounty in the hunt.

Until I pass from this life, I will eagerly observe Orion's measured path through the sky. He starts in the East. By April, his winter pilgrimage has him firmly stationed in the western sky. The seemingly immeasurable expanse of galactic time from a human life-time perspective give Orion and his dogs immortality. My dogs and I have neither. I'm not jealous. Rather, I'm grateful to Orion and his hounds for being a reminder of constancy in the face of change. I think that is good backdrop for thinking about the year ahead.

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We had a wonderful Christmas. My stepmom fixed and beautiful dinner of tenderloin accompanied by tantalizing side dishes. I hosted everyone for brunch today. I elected to forego the fried potatoes--I just didn't have it in me to do one more thing! The bloody mary's were wonderfuly I grated fresh horseradish root into the pitcher--and a couple of pinches of cayenne. Good vodka (Grey Goose) and crisp celery ensured a refreshing eye opener beverage. Daisey and Macy were well behaved. Macy even showed off a few of her ball tricks!

After our guests left, I decided to be celery-like and vegetated in front of the television!

I hope that your day, however you celebrate (or not!) was wonderful.

Sunday, December 23, 2007

T Minus 2 Days

Christmas will be here in two days. It seems like it was just Christmas with the years zipping by too fast. My children are almost grown. And with each passing year, our Christmas has transitioned from one of frenetically trying to wrap, or worse, assemble, their gifts after they went to bed, to one more muted.

We do not have waist deep gifts under the tree. Never have. I try to pick out one or two thoughtful gifts that will endure. My son likes to hunt, so we've bought him guns--quality pieces that he can give his son or daughter (we responsibly have a gun safe). I tend to buy my daughter quality pieces of jewelry that I think that she will enjoy wearing. She has some nice things that she will be able to keep for years. I don't buy stocking stuffers or knick knack stuff for them. Just one or two solid gifts.

One of the things that we've done in the past is buy gifts for children from families in need. This practice was one that we enjoyed for many years and that my children from a young age participated in with me--carefully choosing the gifts and helping to wrap them. I've always instilled in my children the importance of looking beyond their own comfort and to see the unmet needs of others.

The spirit of generosity--so exemplary at Christmas--is one that I've tried to cultivate throughout the year. We live in a rural county, and the school system has the entire spectrum of socio-economic groups. When there were field trips requiring a fee, I always sponsored (anonymously) students whose parents may not be able to come up with the fee. It was a small thing to do, but it meant a lot for a child who otherwise would not be able to go. There many opportunities in your local school system where some extra dollars (tax deductible, too) can make a difference.

Christmas Eve to me is the most special part. My mother (deceased since 1988) would always make Christmas Eve dinner. Afterwards, we'd sit around the tree and were able to choose and open one gift. It was so exciting--I can still remember the heart thumping anticipation. As we became older and more cunning, we would go on a whole house search for our presents. It didn't matter if they were wrapped. We had razor blades and scotch tape. We could expertly open and re-wrap the present without any being the wiser. An Academy Award should have been granted to each of us for our feigned surprise! Even though we got craftier each year, so did my parents--and they'd always outsmart us by at least one gift.

That cunning DNA seems to have been passed down to my own children. Luckily, I've been able to outsmart them (the DNA didn't mutate into anything stronger!) most years. The trick is to hide the gift without really hiding it: to put it in something where they'd never expect to look (such as their own closet under their own junk or underneath their bed!). One year, I hid their gifts in my old VW SuperBeetle. That year, I really stumped them.

My step mom who is German, has a very rich tradition for Christmas. My father, a Jehovah's Witness (converting after they were married), is bah-humbug about it all. My SM prepares a lovely Christmas Eve dinner--I particularly appreciate that since it is a continuation of the tradition that I grew up with. My Mom died when Hannah was 18 mos old; my kids, then, only know my SM as their maternal grandmother. She has been a very loving and generous grandmother to them. After dinner, my Dad retreats to the basement harrumphing about the pagan holiday tradition, and we exchange gifts. It's a shame he cannot be more graceful about it.

My MIL normally cooks a Christmas day dinner, but she is unable to now given her health. I don't have it in me to cook a Christmas dinner--I'm still recovering from Thanksgiving! But I will have a Christmas day brunch where we'll have family from both sides and a friend or two. You didn't think I would get through a holiday post and not mention food did you? Here's what we'll have:

Citrus salad with yogurt dressing (it called for gingered yogurt, but the crystallized ginger probably costs as much as pure heroine, so I elected to pass and use candied lemon peel!)

Sausage/grit/cheese/egg breakfast casserole (make it the night before and pop on the oven--it has been a mainstay of our xmas breakfasts for more than 20 years)

Overnight pecan rolls (these are divine--a yeast roll that you let rise once; fashion into rolls and then put them in the fridge. You take them out in the morning for the second rising and then bake. I'll make some pans for a couple of my neighbors, too. This year is year 2 for this "tradition".)

Fried potatoes (I bought some jalepenos for added zip)

A pitcher of Bloody Mary's!

Juice selections for the abstainers and underage!

The rest of the day is for relaxing. I'll probably get started on my NY's resolutions. I'll post more about that later.
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Whatever your tradition (or not), I wish you the best of the Season: good food, conviviality with friends and family, good health to you and your loved ones, prosperity in all of its munificent forms and peace & tranquility.

Monday, December 17, 2007

Foreign ETFs and other Stuff


The investment advice du jour--9/10 commentators it seems (unofficially) is calling for folks to invest outside of the US due to the declining USD. These markets are very volatile, and I wanted to provide for you a list from today of the losers and the magnitude.

As I've stated here before, in the event of a US downturn (and I believe that we are downturning), these markets would not be immune. Here's a chart of EPP:

The composition of this ETF includes BHP, which is the highest weighted stock in addition to financials. If you are going to invest in ETF's, do ensure that you know the composition--highest weightings by individual stocks as well as overall industry representation.

Here's my Ameritrade account. You will recall that I posted in the comments section that I culled through this and dumped most things--good thing as they all fell hard.


Though most of my accounts are mostly cash, I do have the SMN and DUG here. My thesis is that I believe that the economy is slowing and basic materials and oil (despite the admonitions that there's not enough) will go down. Nevertheless, I believe that both are in a secular bull market--I see some warranted slowness for the near term. I've consciously elected to be more cash-centric as opposed to be overweighted in a short position.

I closed profitably some SLB puts JAN 90 Puts that I bought on Friday. SLB fell hard today. I left money on the table--but I'm okay with that. I had a 60% gain for a one day hold. That's fine. I also closed out my HRB DEC 17.5 puts. I left money on the table, but expiration week makes me nervous. I'm not ashamed to scalp small gains, particularly in a market such as this. However, having said that, I will tell you that I have an important lesson to learn: I need to discipline myself to hold onto stock longer. But I'm mindful that the last 14 months I've been wary of the market altogether, so my paranoia has prevented my holding longer. It will be a habit that I need to break.

Sunday, December 16, 2007

More than You Know: 1: Be the House: Process and Outcome in Investing

Here's a chapter that categorically denies the validity of "the end justifies the means"--particulary if the "means" is absent or deficient! I found this chapter to be a very good start to the book. The tenet here is that a good process will provide consistently better outcomes. A sloppy process can still yield success, but not consistently so.

M points out that, "The goal of an investment process is unambiguous: to identify gaps between a company's stock price and its expected value." (p. 10) Sounds simple enough. He goes on to note, "A thoughtful investment process contemplates both probability and payoffs and carefully considers where the consensus--as revealed by a price--may be wrong." (p. 11)

M quotes Robert Rubin's Harvard Commencement Address, 2001. He notes four principles for decision making:

  1. The only certainty is that there is no certainty.
  2. Decisions are a matter of weighing probabilities.
  3. Despite uncertainty, we must act.
  4. Judge decisions not only on results, but also on how they were made.
(pp. 11-12)

I was quite struck by these as these are the tenets that I've used in my business decision making over the years. I will also tell you the ONE that I've always grappled with is using probability distributions to create an expected value. Why? To create these distributions with any accuracy you have to be able to (1) anticipate the correct population of outcomes and (2) assign the correct probabilities to those outcomes. I've been pretty comfortable with identifying the population of outcomes, but assigning probabilities is not always easy if there is little or no historical information to inform the probability assessment. Frankly, this is the venue in which you can essentially "massage" the probabilities to get to your desired result (meaning: managing the outcome).

With respect to investing, I'd have to ask the question as to how much information does the average investor have to provide a credible construct of an outcomes probability table? That difficulty notwithstanding, it is a useful discipline. If a company's fortunes depend on their getting a drug approved, a permit issued or a successful conclusion of thorny lawsuit this is still useful information.

If you have NuevaPharma (fictitious), that is trading at $10 per share, and the investment community is waiting for the FDA to determine if its cancer drug is going to be approved one could construct the following table:


You see everyday where these types of FDA decisions either launch a company into the stratosphere or cause a meteoric crater from its crashing and burning. Here's an example where there is probably decent information regarding the $ potential of a "yes" decision--and that would be your guide to assigning the Price Appreciation percentage. How you would have any confidence about the percentage probability to assign the outcome is tough.

There is a key piece of information that is not in the table. What do you think it is? It's the hurdle rate--the line in the sand that you need to clear in order to get to a "Yes" decision. In order to take such a risk with your money, you have to assign what YOUR minimum expected payoff would need to be in order to do the all important Number 3--TO ACT.

Let's get back to the tenet of the chapter which is process. Let's suppose that two people were making a decision: You and me. Let's say that you went through the above process, but it did not meet your hurdle rate of 25%; accordingly (and appropriately), you passed on the opportunity.

Let's say that I engaged in NO process, and I made a "What the hay" decision. It looked "interesting" for no other reason than it caught my fancy. I invested on a whim, and the stock took off like a rocket--doubling within minutes of opening after the FDA's morning announcement. You got the whole thing wrong. The probabilities were wrong, and the price appreciation was cockeyed.

Was I the better decision maker because I had a better outcome? The answer is categorically NO. I was lucky. The investor that engages in a disciplined process (expected outcomes, fundamental analysis, etc) will have better consistency of good outcomes than a willy-nilly approach which is founded upon dumb luck.

Even though I wrestle with the assignment of probabilities, even when many decisions are binary--it will either be approved or NOT--assigning probabilities quantifies my risk and my payoff. The hurdle rate is a combination of the magnitude of the outcome and its probability. Constructing a table helps one understand this important dynamic and at least requires one's assigning some confidence to the model. Whether one makes a multi-million investment decision for one's company or a multi-thousand investment decision for one's portfolio, one is accountable for the outcome.

I will tell you that in business, a screw up with a good process is much better tolerated than a screw up with no process. If you the outcome differs, you can go back to your decision making model and determine where the breakdown occurred. That's how one learns from mistakes and improves future decisions.

The above is the lesson of Chapter 1. (These are my examples, not the book's).

To reinforce the importance of acting, I also ran across this from Richard Russell's website. I hope that you'll take a minute to read it.

More Than You Know


More Than You Know, by Michael J. Mauboussin has been sitting, quitely ignored, on my nightstand during my illness. I'm revisiting it. What I wanted to do here is talk about some of the themes of the book--similar to The Zürich Axioms.

My immediate thought in reading the synopsis of the book was the similarity in precept to that of E. O. Wilson's Consilience. One of the benefits of being in a book club, is that you read outside of your normal patterns. I've always had eclectic reading interests, and I find an amazing thread that often runs through seeming disparate subjects. One example was our recent reading of Spell of the Sensuous. I was reminded of Eliade's scholarly work on shamanism. I've included a bit of a blurb. You may think it an odd reference, but if you seriously want to understand the genesis of religious thought and ritual rather than just take your own faith/belief practices as de facto whatever, then you endeavor to be a student of ritual and belief practices over various cultures over time. What you'll find are similarities that are seemingly startling--and I think that's a good foundation for cultivating a broader perspective that leads to real understanding.

"First published in 1951, Shamanism soon became the standard work in the study of this mysterious and fascinating phenomenon. Writing as the founder of the modern study of the history of religion, Romanian émigré--scholar Mircea Eliade (1907-1986) surveys the practice of Shamanism over two and a half millennia of human history, moving from the Shamanic traditions of Siberia and Central Asia--where Shamanism was first observed--to North and South America, Indonesia, Tibet, China, and beyond. In this authoritative survey, Eliade illuminates the magico-religious life of societies that give primacy of place to the figure of the Shaman--at once magician and medicine man, healer and miracle-doer, priest, mystic, and poet. Synthesizing the approaches of psychology, sociology, and ethnology, Shamanism will remain for years to come the reference book of choice for those intrigued by this practice."


I don't say any of that to sound preachy, but rather to provide a illustrative point regarding the cultivation of our perspectives and the interdependence of various disciplines--to include our role in the values and beliefs that we bring to whatever it is that we are tackling whether it is religion, investing, parenting, etc.. Here's the Wilson quote from Mauboussin's book:

A balance perspective cannot be acquired by studying disciplines in pieces but through the pursuit of the consilience among them. Such unification will come hard. But I think it is inevitable. Intellectually it rings true, and it gratifies impulses that rise from the admirable side of human nature. To the extent that the gaps between the great branches of learning can be narrowed, diversity and depth of knowledge will increase.


A long winded lead end, eh? Mauboussin's book is divided into several parts:

Part 1: Investment Philosophy
Part 2: Psychology of Investing
Part 3: Innovation and Competitive Strategy
Part 4: Science and Complexity Theory

So I'll hope that you join me as I tackle pieces of this book. Having read just a couple of chapters already, I would recommend that you add this to your investing bookshelf.

Saturday, December 15, 2007

Plott Hounds

This interesting dog is not a breed that I've ever heard of. If you wish to read about this magnificent dog, you can read about it here. It is the official state dog of North Carolina. Apparently it is only one of four breeds originating in America. I'm not quite sure which other breeds there are, but I'll guess (1) American Bulldog and (2) Catahoula Leopard dog (State dog of Louisiana). Here's a blurb from the referenced link:

"The Plott Hound is the only American hound without British ancestry. The breed's designated name honors its American founders and family tree. Seven generations of the Jonathan Plott family, beginning in the 1750's, bred their dogs exclusively within the family. A mix of bloodhounds and curs reportedly comprised the original stock. The dog's working claim to fame is coldtrailing bear and raccoons in the Appalachian, Blue Ridge, and Great Smoky Mountains of the Eastern United States. The Plott Hound is American through and through. The Plotts family have only rarely put these dogs on the market; so while the breed was officially recognized in 1946, it is still rare outside the southern states. Its is most efficient in the search for coyotes, wolves, and wildcats. They are extremely hardy and have superior hunting instincts. The breed has been carefully developed to be stronger and more persistent. They can make a good family companion but are seldom kept as one. Most people get these dogs for the hunt."



The Catahoula is quie an interesting dog. I was not familiar with the breed until I transported and neat little girl about 4 months old. She was both loving and lively. She was red and gray. Interesting mix. This is the state dog of Louisiana.

You'll of course remember that my Macy is part American Bull Dog. Our local SPCA has a part Calahoula and part pit bull. Beautiful dog.

Anyway, I wanted to introduce you to a couple of breeds of dogs. Party time is upon us with the holidays and asking people if they know the state dog of either NC or LA would be a terrific icebreaker. Kids, dogs, and weather are safe conversational topics.








Saturday Miscellaney

For the first time in two weeks I ventured out to forage for food for my family (two legged and four legged, human, canine and feline). I was literally out of all dog/cat food. Not a crumb left. A desperate situation to be sure. I wouldn't put gnawing on our bones past our hungry vermin.

I went to BJ's. I rarely shop at the supermarket. The prices are just too high. I was surprised how lite the store traffic was as well as the traffic in the vicinity. There were police to direct non-existent traffic. We'll see how that translates into holiday sales.

I've a small Christmas list. Kids are done. Mark and I do not exchange gifts, largely because we get what we need when we need it. Frankly, we do not need anything. This year, I'm going to do the unthinkable and ask for NO gifts next year. There is nothing that I want, and nothing that I need. BUT there is much need out there. My preference would be to direct generosity toward those who are on that ragged line between making it and not making it.

Had I had the presence of mind to stumble upon this sooner, I WOULD have had this under the tree for Mark: a watercolor of Lucy. I was perusing the Illinois Bird Dog Rescue site, and saw where a watercolor artist had donated a work. Ah Hah! So, I'm commissioning a work (it is quite inexpensive) to have my beautiful Lucy transferred to canvas. I'll do the same for Greta as a present to myself. So there's an idea for you if you are looking for an unusual, unexpected but wholly welcome gift---your pet in watercolor.

After posting my speculative account, I immediately made changes to it. I sold everything except RTK and SMN. I added DUG. Some of those sold items may zoom to great heights. I'm okay with that. These small caps have been in a tough environment. As you can see from that post, it is quite easy for them to lose 20-30% of value quickly. Too much psychic energy looking at that red.

I have a fistful (5) of HRB and SLB puts in one retirement account (my ONLY two holdings). Hardly bold. I sold my WCG calls for a nice 130% gain. But it was a small holding, but it adds incremental value, and I'll take that. I've been very careful with managing my option positions. I've been buying small and taking gains when I have them. More importantly, I'm limiting losses as I did with my PAY calls. I was too early on those, and the market environment is rather poor. I closed out just in time. I made enough money on the common to "cover" the loss that I had. The stock fell even more after my selling those, so the timing was good.

I have a couple of weeks of cleaning to catch up on, so I had better get started. Christmas will be here in 10 days. Where does the time go?

P. S. The Pink Floyd album cover had an interesting design, so I included it's image for no other reason than that!

Friday, December 14, 2007

A Return to Regularly Scheduled Program

I believe that my brain cells have rejuvenated themselves. Bathed in fever and pain, they did not work very well. Cogency and coherency were the first victims. Until the last couple of nights where I actually got a good night's sleep, I didn't realize how sleep deprived I had been. Mark and I agree that "this" was one of the worst maladies we've had. Thankfully, neither of our children became ill--largely due to the fact that NOT spending time with us is something that they practice regularly. I was most concerned about my daughter who had college exams this week.

Santa Claus came early to my home. A friend sent me The Black Swan which I look forward to reading. I'm woefully behind on my reading given that my eye-brain connection was cut with impunity. Rather that feel the "need" to go back through my periodicals, I just tossed them. It was a freeing moment.

Roger Nusbaum has overtly stated that he thinks a bear market may be upon us. You can read about it here. The post is titled "Send in the Bears." The funny thing about bear markets, is that they are very much like recessions: They can only be seen clearly through a rear view mirror. I note that more and more commentators are now mentioning recession coupled with steeper odds.

While there is still much discussion about recessions and bear markets, it's worth noting again that it has to be worrisome that there is so much financial dislocation in the market. Remember that the financial markets are the lubricant for the financial engine. Well the oil drain plug has been removed and the engine is quickly running low on oil. Vince Ferrell, Jr. of Scotsman Capital Management stated that this was the greatest credit event in his lifetime. I believe that. As I wrote this, I decided to visit Scotsman's website. They are value investors, and you can find some information there that may be worth your time. I find Vince Ferrell to be one the most gracious and informed guests on CNBC. If he ran for office, I'd vote for him!

I feel like this dislocation has been under reported from its inception. For such a great event such as this, the opportunity for some really good EARLY financial investigative journalism was lost. This lack of credible coverage has cemented my view regarding mainstream financial media--which is that of providing us with watered down pablum. Here's my speculative account. It had touched just past $23K before I got cutsey with it with some ill made decisions (YHOO/RIMM puts in addition to what you see below)! My initial goal for this account was $20K by year end. At this rate, I'll be lucky to hold onto $20K.

Retirement accounts are mostly cash. So what you see here is the bulk of what I have "invested". One of the greatest reasons for my being mostly cash is due to the timing of when I received my qualified money. It was in January of 2006, and I felt then that we were getting close to a top in the cycle. I didn't feel compelled to keep it invested--particularly if I were buying at the top of a cycle.

I know, for I've read them, the admonishments of very bright minds and successful investors about staying fully invested. In a true bear market, few things escape, and even the most well diversified portfolio will fall to the its perils. I think that one of the most important things that an individual investor can learn how to do is hedge for those eventualities. And hedging requires as much consideration and diligence as crafting a portfolio. The inverse ETF's making such hedging more accessible to individual investors.

I don't feel compelled to stay fully invested particularly when I feel like the risks are high on a relative basis. I say relative basis for there is always risk in the market. But I sincerely believe that the economic cycle has topped, and the financial markets' distress is (to me) the clearest tell of that. For the life of me, I do not understand why it is glossed over by many.

That dim view does not mean that there are not still opportunities. There will always be opportunities. That sounds so simple, but it is deceptively powerful statement. If one thinks that there will NOT be further opportunities, one may be tempted to be hasty and reckless in action rather than patient and deliberate. I've been hasty and reckless with the poor results to show for it. You have too I'm sure at some point. I'm cultivating patience and deliberateness, and the mantra of "there will always be opportunities" is very foundational to that cultivation. I do not find holding cash a problem. It means that I have firepower for when opportunities present themselves. I'd rather wait for them to be more plentiful with a higher risk/reward ratio.

Wednesday, December 12, 2007

I'm moving back into the world of the living. When I get sick like this, I'm grateful to living in the age of antibiotics. Otherwise, I'd surely be dead by now. My flu went into a secondary sinus infection. I've only been fever free for a day or so. After 9 days, it does wring one out!

A dear friend called me during the Fed announcement. I didn't realize the time when I picked up the phone, but given the import of the call, I'm glad I didn't realized the time, for I may have elected to not pick up.

One position I've been in and out of is FMD. I wanted to share an update of the chart.


I consider FMD a well run and profitable company. It happens to make it's living in the the market's equivalent of a brothel (loan securitizations). You'll recall that I wrote about it here.
I was worried about $29.50 being support. As you can see from the above, it was not. In the financial services area, this is not an unusual chart.

I liquidated that position. I later re-entered at $16.37--doing a little dumpster diving. It went up in advance of the Fed decision, as did many other financial stocks. It was pummeled, and it closed below that price yesterday. My thesis is that student loans are not going to go away. In fact, when the economy slows down, many folks re-enter higher education. I would expect that FMD would be an attractive target for someone looking to add student loan capababilities (front end, securitization and servicing). I realize that I'm swimming upstream. I never expected to see FMD at these levels. Accordingly, I'm glad that I did not ride it down the $15.

I'm still of the mind that the Fed discount rate will help banks shore up there income statements by reducing increasing their net interest metrics, but I do NOT believe that it will increase liquidity overall for reasons that I've stated here before. Again, these are not the musings of an expert, but an ordinary investor. Nevertheless, common sense is always an good antidote for excessive analysis and irrelevant facts.

I've seen a couple of things bandied about regarding "what else" the Fed can do. One was to reduce the reserve requirements for banks. That certainly would add liquidity. Another was to extend the time frame for the repo agreements, as per the August 17 release:

"The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained."

I do tire of the Fed bashing. I think that John Hussman did a very good job of noting their irrelevance in his weekly article here. As I write, the Fed has made a statement about new swaps to provide permanent liquidity. The market loved it, and futures are up almost 200 pts.

I hope you have a good day today.

Sunday, December 09, 2007

Down but not Quite Out

Still recovering. I drove 470 miles yesterday on a dog transport. I felt well enough to do it, but today was a different story. I'm sorry for the sparse posting--but fever and achy bones aren't conducive to lucid writing.

A couple of snippets. Both Frank Barbera and Tim Wood were on FSO's Saturday broadcast. Both are looking at a bearish setup, though s-t bullish. It seems to me that their technicals have closely followed the actual market. I do not find them perennially bearish nor bullish. Gary K says that IBD is confirming that we are in a confirmed rally. Colin Twiggs is looking at a 2:1 chance of bear market, and Richard Russell has noted the Dow Theory sell signal. I would note that in my nascent understanding, the market rallied while the Transports were late for the party. So if one waited for the Dow Transport confirmation a good bit of the rally would have been missed.

I wished I could right more. I hope that you stay well.

Friday, December 07, 2007

Proshares Inverse Foreign ETF's


I'm sure that you've seen these already, but if not, you might want to keep them handy.

Wednesday, December 05, 2007

More Than You Know

I ordered and received the following book: More Than You Know: Finding
Financial Wisdom in Unconventional Places by Michael Mauboussin. If any of you've read and have a comment, please do.

I
forget now where I saw the book listed (someone's blog), but I was immediately interested in the the "Finding Financial Wisdom in Unconventional Places." When I read a description of the book, I was immediately reminded of E. O. Wilson's "Consilience". I think that I posted this on BC's website within the last week or so. I was surprised and amused
to see that there was a page with an E. O. Wilson quote.

Unfortunately, I'm too sick to read. This flu was apparently only doing a warm up on Sunday. On Monday, I felt good. I guess it was a health head fake! Yesterday, I became progressively sicker , and today I'm just down and out.

I'll not be making any big stock decisions.

The futures are up. It will be interesting to see how strong a close we have.






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Monday, December 03, 2007

Whither Goes the Market

Bull market resumption? Bear market counter trend rally? Pick one! Pick none! My head hurts. My body hurts. Flu has hit in Leisa-land. Posting will be sparse. Facts, insights minimal. I'm not nearly has sick as my husband, but uncomfortable nonetheless.

A poster asks about Pivot Points. Fidelity's Active Trader Pro has pivot points that one can use. I've used the 1 day/1 minute time frame. A wonderful contributer (trader) on Real Money who goes by "Pokerface" suggest for day trading 2 day five minute. I will warn that when the trend changes, you will get false buys and false sells. So those green arrow buys and red arrow sells can cost you money. I guess if it were so easy a monkey could do it--and we all know that the market is never that easy or obvious. My memo to self is to use Mark Fisher's pivot point discussion in his The Logical Trader. In combination with Fidelity's shorter term pivot points. I've not worked through that, yet though.

Exercise caution during this flu season.




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Friday, November 30, 2007

Positive Futures and Stupid Stock Tricks

I'm waking up this morning to a positively giddy Larry Kudlow and very positive stock futures. Gary K will be looking for today to be a follow through day so long as the performance (% rise) and volume patterns are good.

Though I try not to look back at trades that I made, I couldn't help but look at these two:

The circled amount is where I sold. I referred to this investment as a stupid stock trick. Yeah, I did my research, and I liked the story. Earnings did not come up to snuff (another good reason not to buy before earnings which I rarely do unless I feel like I have a really solid hunch), and the stock was sold unmercifully down on a downgrade. But I held on. The stock then was upgraded by another and hence the positive move. (Also a heavily shorted stock!)

Here's another. ASIA. Sold unmercifully down. I noted where I sold--I sold with impunity here.



As you can see, I have a real knack for picking the bottoms. ASIA also had heavy short interest.

The lesson. Remember, you have to respect your style, and you shouldn't MIX your styles half-way through. For my style, I should have had a reasonable stop loss (for these stocks, 8-10%) so that I wouldn't get to the disgust level (as you see here) and hit the eject button. Both of the above stocks were in my E-Trade cum Ameritrade account (my license to speculate account). It is a hair less than $20K after briefly grazing just above $23K.

Now I could have bought and held on with a much better result. However, what am I doing with that statement? I'm critiquing past actions with full information in the present. The information that I have today is not the information that I had at the time. Accordingly, I can only judge my decision based on the information that I had at that time I was making my decision. GaryK would refer to that as his "strict disciplines".

On these two items, I did not have strict discipline. I mixed styles with less than desired results. I should have either limited my original loss with a predetermined stop loss, OR I should have bought and hold. What I ended up being was a white-knuckled buy and holder that then capitulated. I think that it is like black jack. You have to be consistent about taking a hit on 16. If you sometimes take it and sometimes down, you skew the probabilities to your detriment.

Thankfully, I had the good fortune to have a little better discipline on this stock, SEED:


Rather than selling at the nadir, I sold at the apogee! That's not to say that this stock will not return to such heights. But the rise was nothing less than meteoric, and there were no fundamental reasons for such a huge move so I sold. On the contrary, I could have said that there were no fundamental reasons THAT I KNEW OF AT THE TIME, other than investor disgust, for MGPI or ASIA to be sold down. The trouble is, you and I will never know all of the fundamentals, for we will never have access to all of the information. Therefore, for my style, the stock price action speaks for itself. As Bill Cara is fond of saying, "we trade prices".

It is not lost on me that the meteoric rise in SEED was pure, dumb luck. You'll remember, I was moaning about selling too soon. I sold two tranches at $10 only to see it go up to $15 by the end of the day. My last tranche was sold at ~$14. That $10 that I was lamenting, looks pretty good compared to the current share price! It does look like it is carving out a bottom, though.

Yesterday I sold my UYG (double long financial). It was a very small position. I'm certain that I'll wish that I still had it in hand. But Bernanke could have delivered a lump of coal yesterday! I do have some Tyson (TSN) $12.5 Jan calls and some Wellcare (WCG) Jan $40 calls. Here's TSN. With grain and energy prices so high, the costs of these protein producers have increased.

Here's WCG. You'll remember that WCG had its headquarters raided by Federal officials. I bought some of this at $24 and flipped it at $40. I re-entered at $34 or so and flipped it again for a modest profit. I decided that I didn't want the common stock exposure, but I wanted exposure to the stock. Therefore, I bought these calls three days ago when the stock was at $36. There was news of renewed contracts, so the stock jumped again. (I'm having good karma on this one!).



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Today I will be driving to Charlottesville to visit The Barboursville Winery, most specifically Palladio, their wonderful restaurant. I'm going up there with two of my very good friends--former KPMG colleagues. I've known them for more than 20 years. We always have a good time together--laughing until it hurts at times!. I'm sure today will be no different.

So I'll miss most of today's market activity which is not a bad thing. Mark is in the bed with a mild case of the flu. Hopefully, I'll escape that malaise.

I hope that you have a good day.

Thursday, November 29, 2007

The Seduction of Numbers or the Scooby Do Rally


Yesterday was an amazing day in the market. Powerful, explosive! Was anything different yesterday in fundamentals than it was different two days ago? No. For the most part durable goods was weak. That everyone was in a lather for a Fed rate cut and anticipation a great wall of liquidity washing over the market always makes me laugh. Don't fight the fed is a mantra that some use, but others have said that the market has fallen X% of the time even when the Fed is cutting rates.

But market psychology in the short term always trumps fundamentals (galling isn't it!?)--whether the mood is manic (greed) or depressive (fear). None of this was lost on readers who left comments on the last post. Such moves are not indicative of a healthy market, but rather an emotional market. My little book "The Psychology of the Stock Market" helped me so much in understanding some of these basic market tenets. If you are mostly short, you're going to go into a buying frenzy that you saw yesterday. Watch charts from 9:30 to about 10:15. You often see stair stepped increases only to level off. I attribute that short covering--when it is in stocks (or overall positions) that are heavily shorted and some news catalyst causes a Scooby Do "Rut roh!" moment. So yesterday was a Scooby Do rally!

The lines in this chart had been drawn for a while. It's the Dow. I found it incredibly telling--and I do not believe that it is coincidence--that the lines turned back almost exactly at 13325.

But there is such a seduction in such moves. Fear of being left behind, particularly when your paycheck depends on your outperforming, is very powerful. You and I are not driven by that fear--if we are, we should reconsider, for it means we've been seduced. I think that one of the most powerful concepts is that no matter what the market, there are always opportunities. If you missed yesterday's move, there are going to be sectors and stocks in sectors that will allow you to participate. But, if you are merely and indexer, then that is not the case.

I like to draw lines in charts. I don't profess to be good at it, or an expert, but I get by. For the most part, they have served me well--guideposts if you will for when I'm getting ready to screw up (or get screwed!). I showed you this on FMD in this post. The stock actually went lower than that. Breaking support is a big thing. Just because a stock is at a support or resistance level doesn't mean that it will hold--but if it doesn't, money can be made (if piercing resistance) or lost (if breaking support) that one could have reasonable fair warning. I did unload my position at a loss. Had I hung on longer, it would have been much greater.

But fundamentals always win in the end. If we are going to slow down, the time tested business cycle rotation will always play out regardless of what the fed is or is not doing. I would consider myself underinvested, but that does not cause me any trouble. My retirement account is up 18.5% ytd. I'm 92% cash now. I'm fine with that. I'll be quick to say that I underperformed the market last year because I was expecting this action a year ago! Oh well.

Tuesday, November 27, 2007

On Hunting Dogs, Bulls and Bears

The following quote was posted by Isaiah64v4.

George Soros quote, “Economic history is a never-ending series of
episodes based on falsehoods and lies, not truths. It represents the
path to big money. The object is to recognize the trend whose premise
is false, ride that trend, and step off before it is discredited."


That quote really resonated with me. In fact, it appears to me to be the basis of the entire market.

I'm only now hearing some pasting of labels on this market as a bear market. Gary K is openly calling it a bear. He's not done that on the other two corrections. On the contrary though, Robert McHugh on Saturday's FSO thought that there was a bullish non-confirmation of Dow Theory. And, there's Richard Russell who is now calling this a bear market in his letter dated 11/23/07 to his subscribers. Jeffrey Saut relayed these comments here. I urge you to read--indeed print--them. There's a bit of irony in these comments in that Richard Russell who was initially calling for a correction earlier this year (as the bull market was long in tooth) initiated a "it's different this time" and capitulated believing that the bull could run forever. So pick a person and pick a position and act according to your pain tolerance!

If you want something that can run forever, get a hunting dog--they are built for endurance and exhaust their prey by persistent pursuit. Bulls aren't built this way, neither are bears. Neither goes on forever, though it is both seductive and dangerous to believe that they will.

All of the "things" that are now bringing this market down were known more than a year ago. That's how long it has taken the market to come to grips with the swirl of problems. It certainly was an important lesson for me to learn--and I think that is why the Soros quote resonated so loudly with me.

Just a hair over a year ago, I wrote this post about Marty Zweig's definition of a bear market. You might find it an interesting read.

I'm also reading some noise about stock buybacks. I hope that you will read Mish's article. I always thought it odd that company's would buy back their stocks at the top of the cycle when their share prices were at their highest. I've never believed that buying a stock back really helps shareholders. As a shareholder, I'd rather have a dividend--money in my pocket at a tax advantaged rate. Personally, I think that the stock buybacks were to manage earnings forward giving a slowing rate of growth. I would not be surprised to see some litigation around these stock buybacks.

Futures are up as I write. As Gary K states, a signature bear market is strong open and pitiful close! There's nothing wrong with being the hunting dog--be steadfast, keep your eyes open and nose to the ground. You'll find out if it is a bull or bear soon enough with your patience and caution--it cannot outrun you, but it can run over you.


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Monday, November 26, 2007

Credit Card Companies as Tony Soprano

For many, many, many years, my husband and I used to watch 60 Minutes religiously on Sunday nights. At some point in time--and I'll guess that it has been easily the last 7, maybe 10 years, we've not watched it at all. In general, we don't watch much TV. I suspect that our lapse in 60 Minutes coincided with a lapse in one of our favorite follow-on shows. A long introduction into telling you that we watched it last night.

I was particularly struck by the segment on credit card safety and the stupidly easy way that hackers can get your credit card information. How? Wireless networking. The hackers can get rather easily obtainable software (which the safety expert driving Leslie Stahl around was able to do) and read the information through lurking in the parking lot. WAP is a safety protocol that has long been infiltrated by hackers. There's another protocol that is safer, but it is expensive. TJX's Marshall's stores was breached in a big way.

The Shakedown: This thought occurred to me last week, but it cemented with this 60-Minute segment. Your and my sensitive credit information is kept by third parties, yet somehow WE collectively are responsible for checking for breaches. Moreover, we get the privilege of paying for credit protection and identity protection due to information collected and mishandled by others.

I don't know about you, but I feel like it is THEIR responsibility to protect for this sensitive information, and THEY ought to offer such informational reporting (credit history) and PROTECTION at their cost, rather than making us responsible for it.

I certainly will be very selective about where I shop and what I use after seeing this segment. I'm beginning to resent the power of the financial services industry.




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Sunday, November 25, 2007

CCH

I was going through my charts today and I found this one that looked like an interesting short position. Hah! A few shares short, no?

Friday, November 23, 2007

Morning After

I've not even seen the stock futures, and it is 7:30 a.m. Our Thanksgiving was terrific. I hope yours was. All the dishes turned out well. I managed not to burn or cut myself, so that in itself is a feat. I have a raised counter in front of my gas cooktop. My stepmom and SIL kept me company as I put together the final dishes. My SIL said that it was liking watching Emeril. Hah! My SM said that I should go into the catering business. I pointed at the clock and told her that I would get fired. I had expected to eat at 6 p.m. and it was already 6:30!

I mentioned that I had purchased a "natural" turkey. My husband and I agreed that we thought it tasted more flavorful--but we would really need a more rigorous study to confirm that conclusion! Nevertheless, the bird was beautiful. That 15 lb turkey was done in less than 3 hours. I never buy a bigger bird than that. It was plenty for 11 people. The ham was succulent. I had ambitions of making a glaze for it, but those were dashed on the rocks of reality of time and energy left.

My SIL said that her two favorite dishes were the potato and turnip gratin and the scalloped oysters. As I was prepping the dish, my SM and SIL ooh'd and aahh'd over the beautiful turnips that V_6 had brought. You would have thought I was pulling diamonds out of the bag! I also had collard greens/turnip greens with bacon and onion--a simple dish, but one of full flavor from fresh greens. My dad thought he had died and gone to heaven! (He's a Southern boy--GA and then worked his way north to VA!)

After dinner we lingered a bit with our guests. I put together a few plates for folks to enjoy something later. I just let the plates sit. I stuff what I can in the dishwasher--but that is generally full from the prep dishes. After the our guests departed with full bellies, we lingered with my two kids along with my daughter's BF. I had a glass of wine and my feet propped up. But it was nice to be in conversation with them. At 10:30, though, my body was crying out!

I went to bed but was really too tired to sleep. But, it was worth it. I'll not do any cooking for the next three days. We'll eat every scrap of leftover--then we'll go out to eat some Mexican food.


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Thursday, November 22, 2007

Happy Thanksgiving


Happy Thanksgiving. This holiday is my favorite, for it is about giving thanks, not giving presents. We are complex beings. On this day, gratitude is highlighted. It's a time to reflect on our blessings--no matter how bountiful nor how meager--and being grateful.

We seldom think about what it means to truly celebrate a meal. A meal represents a successful harvest or a successful hunt. Our everyday lives are filled with working to earn money to pay for food and shelter or leisure time filled with digitized content or the enjoyment of activities that produce delight. Nothing wrong with that at all--it just represents how far we've distanced ourselves from life's hard edge. Many do live on life's hard edge. From that we must draw our own conclusions and act or not as we will.

We are far removed from when our own shelter, food and clothing were products of our own hard work. The quilt to keep us warm, the barn built with the help of friends, the successful hunt for a deer, rabbit, or game bird, the harvest of corn to feed the farm animals through a hard winter--each of these things were critical to survival. Each of these things could be withheld through the whims of nature.

However, you celebrate this day, I wish you great happiness.

Wednesday, November 21, 2007

FMD


I mentioned that I had sold my FMD because it was getting very near the support line. It cut through today. I'm not sure if $29.50 is support or not, but I did not want to be along for the ride to find out.

Short day ahead

I awake this morning to see that the futures are in the toilet (I've been writing this post since early a.m. so who knows what it will be once I hit "publish"). I had only a couple of short positions: DUG and SMN. I closed them yesterday expecting a bounce, and expecting to re-enter. I'm at least glad that I closed out my dog positions. I'm basically all cash. Whichever way this market goes, it will go without me in the next couple of days.

Yesterday the market looked like an acrobatic flyer, though there was nothing elegant about the maneuvers. As I've come to learn, the market seldom conforms to anyone's expectations--yours, mine or opinion makers. I do have a few observations:
  • Bear or buying opportunity? There are not many folks calling this market a bear market. Gary K is calling it such, and I've heard two traders on CNBC calling it such. That's 2 in the gaggle of folks paraded around saying that it is a unprecedented buying opportunity. Gary K is fond of saying this: "In a bear market you will get no help from Wall Street." His comment is true, I believe. Crystal ball? Bear markets are like recessions--they are only clear in hindsight. I don't know if it is a bear market or not. However, I suspect that the probability that it is a bear market is greater than the probability that it is not. I'm reminded of Young's excellent book, Five Blind Mice, where many mice are climbing over the elephant and conclude 5 different things based on what each is able to tactilely determine). Same for the market. Once can look at a discrete piece of it and conclude something very different from reality.
  • Bernanke as Sampson? How funny when Bernanke started and it was perceived that he would be accommodative to Wall Street he was much heralded. Now he is much maligned. From hero to villain. How fickle the emotions of crowds! I suppose that he is Sampson like in his positioning himself between the two pillars of the "Fed Put" and liquidity and is pushing them down. All of the derivative instruments have produced synthetic liquidity that has emasculated the Fed.
  • The Fed and Dante's Seven Circles of Hell: I think that the Fed will serve as purgatory for these CDO's that need a place to stay and receive a little cleansing and redemption--redemption in the literal and figurative sense. Literally, because the institutions have to redeem this garbage. Ben Bernanke is calling, like in that classic movie, Monty Python and the Holy Grail, "Bring out your dead!". The institutions are slogging through the mud of the credit markets, laboring under the weight of these huge burlaps full of CDO's--some of them dead, and some of them not quite dead yet! Ben takes the load, throws them a few pence and takes the stuff to do penance. Who knows how these institutions are going to repurchase this stuff. But the point of purgatory in the figurative sense (in Leisa-land!) , is that redemption will be found. In time the credit markets will calm down (well, maybe), and the pricing mechanism lubricated so that they start working again without the fear of locking up. At that time (should we live so long to see it!), the institutions can repurchase. The institution's ability to repay will determine how much you and I've purchased with our taxpayer dollars!
  • Yankovich on CNBC (bearish trader) is looking for Dow 12K.
  • Oil: I still expect this price to crash. Much like Dow hitting 14K, oil hitting $100 will be a psychological climax, after which there will be a deflation and a cigarette or two smoked afterward. I think that it is the last flailing of the commodity bull run prior to an intermediate correction--just as we saw happening in the China stocks.

Tuesday, November 20, 2007

Venison Tenderloins and Squirrel

Today was a very busy day. I always shop on the Tuesday before T-G. Of course, I always forget or was unable to obtain something (I'm still 2 quarts shy on oysters) and have to send someone out on Wednesday. But in general, it is a gnarly day to shop.

I started early today and polished off my list. But the very first thing that I did today was prep the venison tenderloins that Valvoline_6 was so kind to bring to me. I couldn't find my last recipe which I loved so well, so I winged it a bit. I combined red wine vinegar, Yoshida's Gourmet Sauce (soy based sauce), about 4 large cloves of garlic mashed with knife, some Grey Poupon mustard and a generous sprinkling of Kosher salt. I ensured the tenderloins were covered and let them marinate (in fridge) for what turned out to be 12 hours. I had a visiting neighbor. He's single. I often invite him to eat
with us or give him leftovers so that he'll have something easy to
fix. I gave him a portion of one of the tenderloins for his dinner.
No mess, no fuss, just slap that baby on some heat.

I cut the silverskins (the muscle encasement) off and then sliced the tenderloins into 1" pieces. In a small saucepan, I combined about 1 cup of water and beef base and 1 cup of wine. I also threw in a couple of sprigs of Thyme and about 1 TB of red currant jelly. I reduced it by 1/2.

I salt and peppered the venison medallions and pan seared them in just
a bit of olive oil. I used my cast iron skillet. I cooked them to
rare with warm center. They were exquisite. If I hadn't prepared the
meat with my own two hands, I would never have imagined much less
guessed that it was venison. The marinade really infused the meat with a wonderful flavor (in addition to drawing out blood) and the wine sauce was the perfect accent.

The wine is what I enjoyed with the venison a 2000 Chateau Fonseche (Haut-Medoc). Total Wine Warehouse these great coupons for $5 off on Bordeaux wines. I did my homework and bought well-reviewed wines right at the price point cut off! None of the wines cost more than $22 per bottle. $5 in wine puts you into a very different level--so coupons such as this get you alot. They've never run that $5 coupon again insofar as I can tell. This wine could age a bit more, but it was very pleasant. I raise a glass now to toast Valvoline_6!
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The squirrel portion of this post has nothing to do with food, but everything to do with today's market! Gap up, plunge down, torpedo up and settle modestly, but importantly above Dow 13K. Banks stocks were pummeled.

I closed my FMD. It was getting too close to a cliff. The cliff held, but not with me hanging on it. I also closed my stupid stock trick MGPI. That darn stock can go to $20, and I'll be happy not to see it. I also closed WZEN. I did close DUG and SMN. I think that we'll bounce, and I'll re-enter those positions.

The financial stocks may be carving a bottom. FMD still has good fundamentals, but this is a case where owning a good stock in an out of favor sector is painful.

I didn't spend much time with the market, but I did a 5 minute flip of RIMM profitably. Poco profit, but profit.

I hope that your day was good.






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Monday, November 19, 2007

A Small World

I just had the pleasure of meeting one of the blog readers and contributer, Valvoline_6. He is practically a neighbor living just a few miles away. He also knows a couple of my long-time neighbors. He was the bearer of gifts: some beautiful deer tenderloin which will be dinner tomorrow night, and the most beautiful turnips I've ever seen. I've never been able to grow them so well as these.

I have this dish that I like to make a Thanksgiving. It's a turnip and potato gratin with a horseradish cream sauce. The turnips and potatoes are sliced very thinly. You place alternate layers of potatoes and turnips with salt/pepper/nutmeg. Then a sauce of chicken broth, cream and horseradish goes over. I think it is topped with Fontina cheese. I'm sure that some of you are turning up your nose. Trust me it is delicious. (But I don't trust people who tell me that "their" beets and "their" okra are delicious--so if you really hate turnips, you can throw trust out the window. I still cannot eat either beets or okra--my dad grew both and I have many unpleasant memories of being forced to eat them.)

Now, if you've never mashed turnips and potatoes together, I hope that you'll consider giving it a try. Turnips had a sweetness and cuts the starch a bit in the potatoes.

Such a small world that we live in. And what a treat to meet a reader in person. (I won't spoil it and talk about the market!)

I'm getting ready to go into T-G prep mode. I have to perform an EPA cleanup of my home and shop for and prepare a 'passle" of food. There will be eleven of us. Modest size compared to some gatherings people do!

Feel free to share your own T-G plans, memories foods. It's my favorite holiday. I have much to be thankful for.

Saturday, November 17, 2007

Dogs, Cars, Kids


Above is a picture I took this a.m. It is the creek behind my home. I think the beavers have built this small, partial dam. Unfortunately, the light was not very good, but, it's a decent enough picture to share.

I've been bit by the dog-transport bug! One day, I'll actually take my camera along and post some pictures for you! On Saturday, I drove from Richmond to Springfield. I had two kittens who already have an adoptive home. I also had Sparky, an Australian Shepherd/Husky mix. He was about 1 year old. A sharp looking fellow, I tell you, and a sweetie pie. He's the type of dog that should go to a single guy, for every female will be oohing and aahhing over the dog!

I also had Maizey. A beautiful lab mix, though a bit smelly. She had just weaned her puppies, and she was off to a foster home. Both Sparky and Maizey were wonderful, loving dogs. Maizey was particularly needy--wanting closeness. At Springfield, Sparky met his adoptive parents. He would have gone with Charles Manson. Luckily, they screen folks well on these adoptions, so Charles Manson would likely not get approved. (Somehow all of these pet names end in the "ey" sound!),

It was a bad karmic day for me though. We have a bit of a car lot here. I have my 1996 Oldsmobile Aurora. I love that car. It has a Northstar, small block V-8 with dual exhaust. And, it is so beautifully appointed inside. A really nice, luxurious, high-performance car. It's the first car I ever bought used. I will drive it until it can no longer hoof its way down the road. As I was loading up the Oldsmobile, I got in to find that my keys were not in it.

I live in the country. If you want to come and steal one of my cars, the keys are in all of them except my daughter's. She hoards hers in her purse. My daughter had to use my car because her 2001 VW Jetta VR6 was in the shop. So naturally, as is her hoarding way, she put my keys in her purse, and she happened to be at work. I was left with my Thunderbird--2 seats. The other two suitable vehicles were in use by my husband and son. The t-bird is not much good for transporting dogs. I also have more women come up to me and tell me how much they love my car. I laughingly tell them it is my boob job and face lift--meaning my "middle-age crisis car"!. I also get older men who come up to the car because it reminds them of the T-birds of the 50's. It's very sweet, and I really enjoy talking with these nice people.

My daughter's Jetta is really nice: it's quick, handles fabulously, and there are no blind spots. it has leather interior and premium sound system. We try not to spoil our kids. We're ordinary people. My deal with my kids is that I'll match whatever they save towards their car. This car was much discounted. It's a salvage rebuilt. A salvage rebuilt is a car that has been bought from the insurance company (which labeled it as totaled), and it has been repaired. It has a title, and the title very clearly states, "salvage rebuilt." A very lucrative business. So we bought this car with 27K miles for $11K and the book value was about $18K. So we received a pretty good car for not alot of money. We took it to our friend who is a mechanic. He said we would not be sorry to own this car. Unfortunately, with a SR title, it voids the warranty. And VW's seem to have a ghost in the machine and every repair and part is quite expensive. Because this car needed a new transmission, that ordinarily would have been covered under the warranty, we've spent enough in repairs to eat up the price difference. The new transmission cost about $5K. I've NEVER spent that kind of money on a repair.

So I drove my T-Bird to my daughter's work and handed her the keys with clear instructions that she was only to drive home. The Jetta was an able dog transport vehicle. But I was getting off to a bumpy start and had to hurry a bit so I wouldn't be late. At my destination in Springfield, I managed to lose my distance glasses. I think I had taken them off to read something and tucked them in the front of my shirt, as I generally do. I'm sure they fell off when I was bending over and handling the dogs. I looked and looked. No glasses. Luckily I had my prescription sunglasses, and it was still light.

But I arrived home safely and happy for having done a good deed. I hope you had a relaxing weekend. As you can see from this post, I'm refraining from market commentary for this weekend.

Thursday, November 15, 2007

Economic and Market Musings

Economic: There's an interesting article in the FT. You can click on the title. You may need a subscription to view the article in full. I did at least include the title and the first paragraph:
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China fears impact of US slowdown

By Jamil Anderlini in Beijing

Published: November 15 2007 20:15 | Last updated: November 15 2007 20:15

China’s commerce ministry warned on Thursday that a slowing US economy would trigger a drop in Chinese exports that would mark a “turning point” for China’s rapid economic growth.

--------------------------------------------------------------

The market is much like a soap opera--the story line is ever evolving! As I've mentioned here before, I did not believe that the global economy--most particularly the Asian markets which so heavily rely on the US consumer--has de-coupled from the US. The article above (I'd be pleased to e-mail it to you) lays that out more clearly than I've seen it to date.

You'll remember, of course, that the ongoing themes of (1) global economic boom; (2) liquidity, liquidity, liquidity; (3) the unflagging American consumer; (4) low interest rates; (5) low inflation have been systematically taken to the woodshed and shot. Here's the scene of the crime.

I regret that I've not benefited more from this market downturn; though I'm grateful that I was not more heavily invested. GaryK is using the "B" word for bear market. Given the steady cracking of the pillars that have kept this bull market alive, I have to believe that we are in for more pain. I suppose the good news is that there are sectors that have already had their personal bear markets such as homebuilders and some retailers.

I kept my FMD, which is much underwater (I bought it at $37, and it is at 30 and change). I think I became emotionally attached to it. I know better. But knowing and acting are two different things. I knew that there was risk, but it has good earnings, good growth. I think that because I had so few longs, I felt that it was okay to hang onto it.

Gold stocks are getting pummeled. Our friend, MarkM, foretold that. (MarkM, we are keeping that woodshed cleaned out). I did sell all but a smallish position in WGDFF into strength. I still have my speculative KRY position. I sold SFD today. The food stocks are getting hit so hard with rising input cost issues. Even though SFD has come down over the last few weeks and then climbed a bit, I really didn't wish to have too much exposure. The loss was only about 2%--less than if I had sold it last week. My bright idea on MGPI was another money loser! I closed my RIMM puts out last week. I hate holding beyond the Friday BEFORE the week of expiration given the time value deflation. Those were $100 NOV puts. When it was trading at $118, and I still had some value left, I closed it out. I didn't think that it would get any closer to $100. Wrong! Sigh. It was still the right decision to sell. I have the benefit of hindsight now.

I did pick up a DUG (Ultrashort Oil and Gas) earlier last week and SMN (Ultrashort Basic Materials) this week. Small positions-200 shares each. My thesis is that commodities would be the last to fall. They would likely fall due to slowing 1st tier nations slowing and that would lead to BRIC slowing. I still agree with the commodities supercycle--who doesn't? And because of that there are lots of folks to sell to, but who is really going to buy now and these valuations?

I do not believe that the Fed's injection of liquidity will do much to float boats, but rather bail out boats. I think that there is a distinctive, not nuanced, difference between the two.



There seems to be a souring in the reception of Ben Bernanke. I can think of no worse nor no more difficult job to have.

On Gadgets

While I'm a kitchen gadget person, in general, electronic gadgets hold no allure for me. When I exercise, I don't like to listen to music--I find it distracting. I have a "regular" phone. I refused a Blackberry at my other job, because I always had my laptop with me if I were traveling. Other than that, I spent so many hours at work, I did not want to feel tethered by an electronic gadget.

Recently we bought a Garmin GPS. It's terrific. So much so that Macy chewed the antennae and rendered it inoperable. We had to get another one. As we were using it this weekend on our trip to the Outerbanks, it occurred to me that this ought to be integrated into phones. I read this Bloomberg article that notes the same thing. So navigation, web browsing, music and just plain ole talking will all be resident in phones.

It will be interesting to see how all of the players (Nokia, Apple, Rimm, Palm, MS) integrate these essential tasks into their products.


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A Sweet Treat

As promised, I'm providing the Maple Pecan Chocolate Tart Recipe. This recipe is from Bon Appetit, though they do not have it on their Epicurious website. I found a similar recipe here. I recopied the recipe from a crashed program, and I omitted the eggs. I used 4 last time I made this and all was perfect. Serve with ice cream. The crust is persnickity (very rich, hard to handle). Make sure that you cool it as noted and handle it quickly. It is worth the effort. Enjoy!


Maple Pecan Chocolate Tart

Pecan Pastry

½ cup butter, well chilled, cut in 8 pieces
5 tbs cold water
2 tbs sugar
2 tbs ground pecans
1 egg yolk
½ tsp salt
1 ½ cups unbleached flour

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Filling
3 ounces unsweetened baking chocolate
3 tbs unsalted butter
3 tbs water
1 tsp instant coffee crystals
1 cup light corn syrup (substitution ½ c maple & ½ c light corn syrup)
1 tsp vanilla
4 eggs
½ tsp maple extract (consider omitting and replacing with maple syrup)
pinch of salt
2 cups of pecans, coarsely chopped
2/3 cup sugar
16 large pecans

For Pastry: Coarsely chop butter in processor using on/off turns. Add water, sugar, pecans, yolk and salt and blend using 5-6 on/off turns. Add flour and mix just until dough comes together; do not allow dough to form ball. Gather into ball; flatten into disc. Wrap in plastic and refrigerate at least 2 hours (put in freezer for quicker processing). Can be frozen up to 1 month.

Roll dough out on lightly floured surface into circles 1/8’ thick. Fit into 11” tart pan with removable bottom. Trim edges, leaving 1: overhang. Fold overhang to form double thickness on sides. Press dough into pan, extending crust ¼: above edge. Flue edges. Pierce bottom and sides using fork. Refrigerate 30 minutes. Position rack in center of oven and preheat to 400F. Line shell with foil and pie weights. Bake until shell is set: 12 minutes. Cool crust completely before filling.

For Filling: Melt chocolate and butter with sugar, water and coffee crystals in a double boiler (or microwave). Cool to lukewarm. Preheat oven to 400F. Blend eggs, corn syrup, vanilla, maple extract and salt in large bowl. Stir in chocolate mixture and chopped pecans. Pour into crust. Arrange 10 pecans around edge and other six in middle. Bake until filling is puffy and set: 25 minutes. (Can be prepared 2 days ahead. Place in cool oven and heat 300F 15-20 minutes)



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Wednesday, November 14, 2007

Stunning Realizations and a Lament on Lack of Control

We take many things for granted. Have to. Couldn't function otherwise. Until something "bad" happens, you do not realize that your assumption/presumption about this or that was founded on nothing but complacency. I wanted to share with you a couple of my recent "Ah-Hah's!"--an awakening from a complacency stupor and slapping myself on my forehead. These investigations began with my concern about the composition and safety of my money market accounts.

First: When I was questioning Fidelity about the default for my retirement brokerage accounts, the automatic default is FDRXX--Fidelity Cash Reserves. With all of the dubious investments to goose interest rates, I became very concerned about the quality of what is in these Cash Reserves. Here it is from the prospectus. I've highlighted the investment risks. These are all things that can lose you money.
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Investment Objective


Cash Reserves seeks as high a level of current income as is consistent
with the preservation of capital and liquidity.


Principal Investment Strategies


· Investing in U.S. dollar-denominated money market securities of domestic
and foreign issuers and repurchase agreements.


· Potentially entering into reverse repurchase agreements.


· Investing more than 25% of total assets in the financial services
industries.


· Investing in compliance with industry-standard regulatory requirements for
money market funds for the quality, maturity, and diversification of
investments.


Principal Investment Risks


· Interest Rate Changes. Interest rate increases can cause the price
of a money market security to decrease.


· Foreign Exposure. Entities located in foreign countries can be
affected by adverse political, regulatory, market, or economic developments in
those countries.


· Financial Services Exposure. Changes in government regulation and
interest rates and economic downturns can have a significant negative effect on
issuers in the financial services sector.


· Issuer-Specific Changes. A decline in the credit quality of an
issuer or a provider of credit support or a maturity-shortening structure for a
security can cause the price of a money market security to decrease.


An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.

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To be clear, I'm not suggesting that losses are imminent, but I did want to highlight these risks to what you think might be "safe" assets.



Second: When I called Fidelity, unfortunately I talked to someone on the trading desk that knew less than I did. That was not comforting. I received two pieces of patently wrong information.

  1. I was told that the NAV (net asset value) would never decrease below $1. That's not true, as you can see from the risks above. In fact, it says this very clearly in the window on my screen as you can see here.
  2. After I pointed out the error, I was then told that SIPC would protect me in the event of a loss. SIPC (and I urge you to read about SIPC here). I informed him that SIPC was only to protect me in the event of institutional failure.
I then had this moment of clarity that turned to disgust. I'm unable to own cash in a retirement account. "So what?", you say. The financial services industry is taking YOUR money and investing it in "stuff" (see risks above) without your really having much of a say so. You have to opt out and incur expenses. I have to make a specific trade, wait the required amount of time and incur a trade fee to choose something else. They expose your assets to risk, skim a fee. And the realization that I CANNOT HAVE CASH, has left me very angry. These are my assets, and I do not have control over them.

My conversation with Fidelity is a reminder that you MUST educate yourself. Whether it is a health, financial, personal, legal matter, you absolutely MUST become familiar with the issues. I've worked with professionals (insurance, lawyer, accounting) my entire career. Though they were the "experts", I was the business-side expert--and I had to have a command of the prevailing issues to educate the professional as to my business. YOUR business, IS your business. Educate yourself about your risks. When you interact with a professional, you will get a much better outcome.

Now, regarding brokerage failure. With the E-trade scare about solvency issues due to their foray into subprime, I'm electing to move my account. I learned about this fear while watchint CNBC at the beach. I was very concerned, but I knew about SIPC protection. But when you have securities held in a margin account, you have a lesser claim position. I need to study further the same link that I gave you to understand my exposure. I'm not futzin' around. I opened a TD Ameritrade account. Hopefully, I will have no issues with this transfer.


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