Specialty Healthcare Watchlist

I had indicated that I was going to create a specialty healthcare watchlist. I created this on 01.16.07. It's fictitious 100 shares in each company with apurchase price at the close of 01.16.07.

Of the stocks on this list, I'm familiar with DVA and HWAY.

I'm most interested in watching for the moment. As you can see from the gain/loss % these are pretty volatile stocks.

MIDD

Today I elected to short MIDD. I have had odious success--or should I say spectacular failures-- with shorting. I'm working on technique, and my losses have been small. I have an average cost of $110.26 in this stock. It runs pretty wild on a daily basis because it is very illiquid--which can work either for me or agin' me.

Did you know?

Today's did you know segment is on the corn refining process. It comes to you courtesy of Iowa Corn: http://www.iowacorn.org/cornuse/cornuse_7.html.

Now what is important to understand about corn, is that its essential nutrients (niacin) are unusable unless there is lime present. NPR did a radio segment many years ago. I don't remember much about it other than this:

1. Some people were going through starvation even though there was plenty of corn available. (Though I'd like to leap and say it was the US, I'm pretty sure that it was not, but rather a European country).

2. Scientists were perplexed because there are several civilizations in which corn is a stable, and starvation was not an issue (think South America).

3. A black scientist posited that he thought the starvation was happening because the nutrients in corn were not being unlocked; specifically, the milling of the grain on millstones with a composite of lime by the ancient civilizations likely enable the release of niacin.

4. Well, because he was black his opinion did not hold much weight. Later his contribution was noted after many people continued to starve.
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Of course, you never know when you might be on a game show. I've not seen (nor will I) the show asking if you are smarter than 100 people. I wouldn't want to be on a show that wondered whether or not I was smarter than 5 people...but I digress. So if there are any questions about corn processing, you just commit the following to mind.

Seriously, it does show the production of ethanol, which for any of you interested in that as an investment theme (and let's also remember that corn is at a 10 year high--so all of your favorite corn products--and grits are a staple in my house--will be rising. )

Here's a paper (propoganda?) at the same site noting the energy inputs v outputs for ethanol.

http://www.iowacorn.org/ethanol/documents/energy_balance_001.pdf

(click to enlarge)

My Current Perplexions

I realize that I have a dangerous bias--one that gravitates toward the calamitous. I'll credit my work experience with that as I have largely had to envision the worst and prepare for it. While a useful skill in doing turnaround work, I'm not sure how helpful it is in investing.

That the market climbs a wall of worry is something that I understand more fully now than I did as much as a year ago. I admit that I have this absolute dread of being caught fully invested in the next downturn. Though a distinctively unsuccessful strategy for me was to bet on the much anticipated decline as opposed to being hedged against it.

I cannot help wondering if my increased understanding (though still bumbling and nascent) of macro issues has done anything more than render me incapable of making prudent investment decisions. Nevertheless, I'm going to continue to process information as well as I can, and be devoted to my continuing tutelage. And I firmly believe that this is an important time to try to figure out how the winds are blowing, as it is my belief that there is some shifting of gears regarding the economy.

I was listening to Jim Puplova, and there were a few things discussed that I found interesting.

• Volatility: increased volatility will cause credit contraction.
• Dollar is mostly tied to whether or not foreigners want to hold USD's. Why would foreigners want to continue to invest in a slowing economy? Also, to affect the dollar, they will only need to make changes at the margin.
• We've not had a consumer led recession in more than 10 years.
• Central Banks have lost control over money supply (I also note that Don Coxe said this as well 05.29.06). Hedge funds are their own bank--anyone can borrow @ Fed funds rate.
• Fed will counter contraction that affects consumer (through lower rates).

I still do not believe that housing issues have shown up in the employment numbers--and I continue to believe that is due to undocumented workers. That would result in an understatement in unemployment claims as currently reported.

I do not believe that loan loss reserves have yet been hit with any credit degradation in their loan portfolios. I still find this odd, but I don't think my worry is wrong, it is just early! I have a very small position in Firstfed Financial Corp (FED). Here's a recent release:

"Amortization, which results when unpaid interest earned by the Bank is added to borrowers' loan balances, totaled $215.8 million at December 31, 2006, and was $62.6 million at December 31, 2005. Negative amortization increased by $38.0 million during the fourth quarter of 2006 and $153.2 million for the year ended December 31, 2006. Negative amortization has increased over the last two years due to an increase in short-term interest rates.

A $3.0 million loan loss provision was recorded during the fourth quarter of 2006, the same as the third quarter of 2006 and less than the $4.0 million recorded during the fourth quarter of 2005. A loan loss provision of $12.4 million was recorded for the year of 2006 compared with $19.8 million for the prior year. Net loan charge-offs totaled $90 thousand and $190 thousand for the fourth quarter and year of 2006. This compares with net loan charge-offs of $36 thousand and $1.4 million recorded during the comparable periods in 2005. The ratio of non-performing assets to total assets was 0.21% at the end of 2006 compared with 0.05% at the end of 2005."

I truly found the loan loss reserve decline surprising. However, note that the ratio of non-performing assets to total assets increased 4 fold (though these rates are still historically low). So either the worst is behind us or there is more to come. I'm in the more to come camp.

I'm keenly aware that I may be letting my bias interfere with the processing of the evidential matter before me. I was right regarding interest rates all of last year, so I'm holding that one insight (but an essential one that much smarter people were taking the other side of) out that I'm not a complete dunce.

Roger Nusbaum had a nice segment on patience. (And Nona, I pulled out my 18th Century Lit book with a section on S. Johnson and one of his Rambler quotes on patience--it's unintelligible to modern readers, so I'm not even going to quote it!) . I was inspired by Roger's counsel on patience. Accordingly, my goal is to cultivate greater confidence in my thinking. I have undermined my confidence through my failing to be patient in allowing what I expect to unfold happen in its due time. The snippet from FED is not yet showing (except for the non-performing assets ratio) any stress fractures. And even though the non-performing asset ratio is increasing, for all financial institutions, this ratio is at historic lows. You'll remember that I posted a graph from FRED here that shows this ratio. We'll continue to watch this. And by June 30, I will expect to engage in either a minor gloat or a confessional on my continuing foolish thinking.

Idiot Savant

Here is a frame that I saw for the movie Pan's Labyrinth. I immediately connected this frame with a film called The Devil's Backbone. In 2001, I badly sprained my back water skiing. I worked throughout the week, but on the weekend's all I could do was lay in bed with ice, heat, muscle relaxers and pain medication.

I ordered lots of movies from Netflix which at least helped me pass the time and forget about the pain. The Devil's Backbone was movie that I fell in love with. It was a beautifully shot movie--and wonderful story. My son and I watched it twice together (and given that he was probably 12/13 at the time, and it was English subtitles that he followed wonderfully, that was a feat). I watched it one more time in regular mode and then a final time listening to the director's (Guillermo del Toro) commentary.

One of the things that he discussed was his deliberate use of lenses to create particular scenes to set the mood. One such lens was a chocolate colored coating to soften the light. I have no idea whether or not the above frame is using that lenses, but it was the distinctive look that I remembered from The Devil's Backbone. Guillermo del Toro is the director (much acclaimed, I must say) of P's L. I was both surprised and delighted (a wee bit frightened too) to see that my brain made that connection. So I've decided that I have some latent idiot savant talents in this area. A useless talent, certainly.

If you've seen the movie, please let me know what you think. I'm on a mission to see it this week, even if I cannot rustle up a companion.

The Blogosphere

I suppose that I'm a voyeur at heart. I found a "Random Blog" site which I've placed under my info mosaic section. I managed to click on it a few dozen times before running into some sexual chicanery.

But I did find a website (that had a cycling snip from The Onion) that reminded me of a childhood story that is investment related. When I was about 5, I was riding my bicycle down the hill of the street that I lived on. My parents were watching. For some still unknown reason, I decided that it would be fun to show my parents that I could ride my bike with no hands (though until that moment I had never, ever done so). A face plant in the road and a few stitches provided the needed merit badge with reality.

Fast forward 41 years. I decided that it would be fun to show myself that I could trade options--I had been so successful with stocks, I could just turbo charge my results. Another face plant.

Roman Aquaduct - Segovia

On Death and Dying

Am I turning morose? Perhaps. I'd like to think not. I'm reading Sogyal Rinpoche's classic The Tibetan Book of Living and Dying. Like a baby deer swallowed by a python (boa?) so moves the bolus of baby-boomers moving through the age demographic of not only the US but the world. {Horrible metaphor, but I'm not feeling terribly poetic}. Though we have the fortunate circumstance that many third world nations have death rates high enough that old age an infirmary are not a problem, just malnutrition and pestilence--largely out of the view of westerners. {Satire, in case you missed it}.

About two years ago, I had a very interesting conversation with some colleagues (health care) regarding services to the terminally ill. They are paltry. Our doctors on the whole are not trained in providing services to the terminally ill. They are trained to write 'scrips and order procedures, although the utility of either is nil in the end. We each left the meeting with high hopes of doing something, as we were all executives in a position to do so--but our regular duties weighed us down and then attrition took its toll. But the desire to address this important issue remains.

If you were to look at the health costs of over the continuum of one's life, they increase exponentially in the last week or so of one's life. Now take those last five days and apply them to a burgeoning population that will be dying on government dollars (Medicare). I promise you that there will have to be some rationing of care as the system will be overwhelmed.

Personally, I'd like to die well--meaning I'd like to have a choice in accelerating my demise to avoid the pain and expense of a long-debilitating death. I'm training my kids to know without hesitation that "in the event that" ...they know my wishes. Of course, there are those Monty Python flashbacks of the poor wart-encrusted woman being carted off kicking and screaming, "I'm not quite dead yet!" There's a risk with everything, isn't it?

There's a huge difference in bringing a child into this world (and I'll spare you my personal stories on that)--the ritual, support and available information to SUPPORT you in this event-- v. assisting a family member transitioning out of this world (and I'll spare you those stories as well). The former is something that we are well attuned to--and happily engage in. The latter is something that we shuffle through with dread and uncertainty. Why aren't there "What to Expect when You are Dying" books on the shelves like the "What to Expect When you are Expecting" books? We need those books, for we're going to have more people dying than giving birth. The other difference? People are going to be dying on the government's (Medicare) nickel.

So, I'm looking forward to my reading of Rinpoche's book. I'm going to commit this year to educating myself on this issue. I think that it is important. And I'd really like to be able to make decisions on my own behalf rather than have others make them for me.

Now, as the new year continues to unfold, I want you to think about your own demise. At the very least, get your paperwork in order so someone doesn't have to piece together your financial dynasty while being peppered with requests to pay your past due bills. It's perfectly okay to have a moribund folder entitled "My Demise", with all of your bank accounts, passwords, insurance documents and all the other things that might be helpful to the person in charge of taking care of your stuff. Also, if you want folks to write a fairly accurate account of your life, why don't you do them the favor of sketching out your obituary--and what you might want shared. If you've harbored any desire to have some special music played at your funeral or a naked girl bursting through a cake--jot that down too.

And finally, if you have any of those "odd" things stashed away that would bring devastation upon your family if they were to be found, get rid of them.

Friday Trustee Sales

One greater than $500K, one greater than $275K in the above numbers.

Notes on Notes on a Scandal

Last evening I had one of those rare girls night out to see Notes on a Scandal.

The acting was brilliant. But there were several scenes where my discomfort level was quite high (higher than watching the poor weatherman that Tim Knight posted on his blog last night and higher than running across the sexual explicit blogs that I encountered on my sojourn through the blogosphere).

Judi Densch's character is truly frightening and disturbing. In fact, I cannot remember any female character in any movie that was so chillingly deliberate.

See it for the acting; but this ain't no happy story line.

Big News Tomorrow! Watch Closely!

I hate getting this crap in my mailbox.

Random Thoughts

I posted this on Bill Cara's site

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I am still of the mind that it is dangerous to compare market malady similarities from year x to year y, largely given that the N is so small, there can be no real confidence in either the correlation or the timing of such events. Weather people have the advantage of having vastly more data points, and accordingly, can assign some better probabilities to observable conditions. Therefore, we heed their warnings when they call for a gathering of ominous clouds along with a falling barometer and the blowing of ill winds. And though they bear our watching, they may not lead to bad weather.

I've being reading quite a bit, and I don't pretend to understand it all. But something that repeatedly strikes me is that most market downturns occur not due to failure in the economy, but rather the failure in the credit system. (The Depression was a credit failure, not an economic failure). Economy does well; market does well; increased liquidity encourages investment and suddenly you have asset prices that have gotten ahead of themselves—but it’s not recognized as that, but rather people point to “it’s different this time”.

There can be NO argument that there is a real estate bubble. When an asset class is priced out of the reach of the average profile of a homeowner, as opposed to speculators, then there is a problem—an incontrovertible one. For that reason, and that reason alone, I believe that there has been too much emphasis placed on “subprime” mortgages as being THE problem. It’s the symptom of the larger bubble—it’s not just real estate, it is treasury markets, with artificially low rates because the system is awash with money and will look for a home, despite its providing a paltry return. It’s commodities, though we may be seeing some cracks there. It’s emerging markets.

I’m left to wonder ,then, that it isn’t the stock market that accurately forecasts the demise in the economy, but rather it is the fallout from these excesses that doom the economy. Maybe that sounds stupid, but it has some merit. An over-leveraged system when it receives a shock clamps down. A clamped down credit system has no juice to lubricate the economy, and the gears wind creakingly down.

So if excessive speculation, which leads to excessive leverage, is the root of all financial market evil (and I'm beginning to believe that it is), then the question really isn't whether or not we'll have a hard or soft landing. Rather, it is whether or not market participants will continue to have confidence in the underlying financial structures. Currently, it looks like money is falling out of one asset class into another (e.g. commodities, into tech). But when there is a stumble and a scraped knee, the other side of liquidity, as Bill reminds us, is the debt that is created. And once the perception of the asset is one of declining value (whether stocks, bonds, real estate, commodities), then that debt is going to get satisfied to maintain appropriate debt/asset ratios. To be satisfied, the asset class must be liquidated, and prices must come down. And that is the prick in the balloon. So the question is not a hard landing or a soft landing. The question is whether or not it is a pop or a hiss. If we get a pop, we will have a hard landing. If we get a hiss, we’ll get a soft landing.

But I don't know a thing, and all of this represents a view rooted in ignorance and inexperience. But this is how I make sense of the incomprehensible.

Captionless Cartoons

Though I'm a hopelessly Southern gal, replete with an accent that would make most New Yorkers sniggle, I thoroughly enjoy The New Yorker. I'd like to say it was for the brilliant writing, but it is mostly for the movie reviews and the cartoons.

The magazine sponsors a little contest each week. Essentially it is to take a captionless cartoon and solicits from readers a caption. Three captions are picked and then a final vote is cast. Normally, I do not have a clue. For this one, I submitted "For 10% more we were able to supersize." What would your caption be?

Friday Trustee Sales

This took a few times to upload. Interesting drop.

Zugzwang

"The position that arise when your next move, any next move, is liable to lead to disaster."


I found this penned next to my nightstand. I have no idea what book I lifted it from. I know it is a chess term, but I don't read chess books. I think it was an investment book. THAT would be appropriate! I'm sure that many men are familiar with this term--it's certainly a place many find themselves in arguments with the female persuasion. ; >

The point of the post is not to tell you about Zugzwang (but you can work it into conversation at your next social event), but rather to highlight the importance of writing odd bits that you encounter throughout your day/night that engage your intellect or quite simply amuse you. Pen/paper by the bed is enormously helpful. Keeping some means, be it digital or manual, to write down those things that "strike" your fancy is important to this process. If you don't do so already, then I would challenge you to try this discipline for a week. Then put your written bits away for a week. Then look at it later. You might be surprised. I will guarantee you will have written something down that is no longer part of your conscious thought.

Have you heard of the book How to Think Like Leonardo da Vinci: Seven Steps to Genius Every Day by Michael Gelb?

http://www.amazon.com/How-Think-Like-Leonardo-Vinci/dp/0440508274/sr=8-1/qid=1169352141/ref=pd_bbs_1/002-0475505-6236832?ie=UTF8&s=books

Lifted from Amazon:

Gelb says there are seven critical principles that need to be followed for success, whether you're learning a new language, studying to be a gourmet chef, or just hoping to be more effective on the job:

• Curiosita: An insatiably curious approach to life.
• Dimonstratzione: A commitment to test knowledge through experience.
• Sensazione: The continual refinement of the senses, especially sight, as the means to clarify experience.
• Sfumato: 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 ambidexterity, fitness, and poise.
• Connessione: A recognition and appreciation for the connectedness of all things and phenomena; "systems thinking."

If you are looking for a book that will give you another way to think about YOU and how to develop some of the above, I would recommend this one. In fact, it was this book that inspired me to always have pen and paper in hand (though it has become a fetish...and I know where all the pen and paper fetish sites are on the internet!).

Why not give it a try?

My Goodness!

As I'm sitting here listening to Gary K and sipping on some wine, I thought I would take a tour in the blogosphere simply by clicking the next blog. Well, I'm not sure how these damn things are arranged, but the neighbor three of four blogs away has some pretty graphic sexual stuff on her blog. I guess if I run out of material to write, I could steal a few things from her.

Employment by Economic Activity

This table comes from the link that Russell kindly provided. http://management.curiouscatblog.net/2006/04/07 . I have one quibble with the author though, and that is that this table would have been more informative had a column for the % change been included.

Interesting stuff. Thank you Russell.

Best Investment Advice

George Dagnino

http://peterdag.blogspot.com/

I see that George Dagnino has his own blog (I just read about it in the most current newletter.)

Today's Activities

I've taken a much needed break from client work today. I'll do so again tomorrow. I've been working too many hours.

I elected to close my IVGN and KB positions for modest gains. The reaction to the AAPL report had me perplexed--super terrific report, it just fell short of expectations. And I think that expectations have been somewhat extended (like stock prices in this market). Remember when all of the bad news was good news last year? Well, now the good news is bad news and the really crappy news will cause mayhem. Plus, we have oil traveling the river Styxx down to $50 and then maybe more. I imagine that has more than a few twitchy. I added to my MZZ position which I have been building since the beginning of December. I'm fractionally under, but I think that will remediate soon.

I have a position in KRY. That stock is getting whipped about in the oddest fashion with "news" from Venezuela, but each of these dips are bought hard. YOu can see a discussion on KRY on Bill Cara's blog http://www.billcara.com/archives/2007/01/sec_investigation_needed_thurs.html#more

I had really expected (remember that expectation is from a position of fully acknowledged general ignorance) that the market would not need to labor so hard with the expiration of 2006. Given that thesis (a reasonable one I think), I was surprised by the strength in the first two weeks. The Stock Trader's Almanac states that the January expiration (tomorrow) "Dow Down 7 of Last 8 with Big Losses." I guess we'll see. But they were wrong about everything else last year. The widely predicted much anticipated 4th year of a Presidential year combined with harmonic convergence of sunspot activity with Pluto/Saturn ingresses into cardinal houses (okay, I'm engaging in hyperbole), was widely a bust. Perhaps tomorrow there will be some redemption.

It is an interesting book though, pack full of stuff, and I'm glad to have it on my desk. You can check it out here: http://www.stocktradersalmanac.com/sta/home.do

I also supported the economy by going to my favorite place, levenger.com. I needed a desk pad, and what I really wanted was the horn trimmed which was sold out because I did not act quickly enough. But I found a style that I liked well at significant discount. So I elected not to delay.

So I'm mostly cash. MY &*^#@%#&&*#$ WFC 32.5 puts are expiring worthless tomorrow. Did I mention that I was not going to buy options this year? All I can say was that I was a major dumb a$$ last year.

I did create a new watch list for specialty healthcare. I'll upload it later.

IBM is getting sent to the woodshed after hours. Tomorrow will be interesting. Hang onto your hats (and your cash!)

Capacity Utilization (FRED)

Here's the graph on capacity utilization. THE question of 2007 is whether we will be in a recession or not, soft landing or not. I've not looked at this graph before today. I do find of note that our capacity utilization post 2001 recession peaked at right about the same level 82%. I wonder if the capacity utilization as a whole is lower than in the 1990's due to mfg===>service sector migration. I regret that I do not know prior to posting this, but as time permits, I may nose around. Do you have nay ideas? Please offer them.

From Colin Twiggs

Colin Twiggs closes each e-mail with this refrain which I think is quite honest and relevant.

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Technical Analysis and Predictions

I believe that Technical Analysis should not be used to make predictions because we never know the outcome of a particular pattern or series of events with 100 per cent certainty. The best that we can hope to achieve is a probability of around 80 per cent for any particular outcome: something unexpected will occur at least one in five times.

My approach is to assign probabilities to each possible outcome. Assigning actual percentages would imply a degree of precision which, most of the time, is unachievable. Terms used are more general: "this is a strong signal"; "this is likely"; "expect this to follow"; "this is less likely to occur"; "this is unlikely"; and so on. Bear in mind that there are times, especially when the market is in equilibrium, when we may face several scenarios with fairly even probabilities.

Analysis is also separated into three time frames: short, medium and long-term. While one time frame may be clear, another could be uncertain. Obviously, we have the greatest chance of success when all three time frames are clear.

The market is a dynamic system. I often compare trading to a military operation, not because of its' oppositional nature, but because of the complexity, the continual uncertainty created by conflicting intelligence and the element of chance that can disrupt even the best made plans. Prepare thoroughly, but allow for the unexpected. The formula is simple: trade when probabilities are in your favor; apply proper risk (money) management; and you will succeed.

Easy Come. Easy Go.

Easy Come. Here's a chart of the Middleby Company (MIDD). The rocketing that you see of their stock is due to their "rocket fryer" which investors are betting will be foremost in the minds of restaurants making the switch from transfats that kill us to other fats that kill us.
(Click to enlarge).

You can read a bit more about it here.

http://biz.yahoo.com/ibd/070111/newamer.html?.v=1

Easy Go. Here's a picture of ANDE that caught investor's fancy when ethanol was all the rage. I made a very quick trade on ANDE. It went up $10 in 2 days and I quickly exited. I could have rode it for a few more of those $10 increases, but it was a trade. Period.



I'm really fascinated with technical analysis. While I understand that it is not a be all end all, I do believe that it helps reduce risk in making investment decisions. So my personal challenge is to monitor MIDD and look for changes in the trend--to try to hone my skills. I'm going to use this stock as a thought experiment. My goal is this: by the end of this year, I want to have group of indicators that I am familiar with and can use facilely so that I can have MENTAL MUSCLE MEMORY on any chart that I view in order to...

• view and skip
  
• view and pause--and if promising put on a watch list to
  
• ultimately to WATCH and ACT.

Water and Oil

Water: Yes, I think that it will be a scarce, therefore precious, commodity, but that is not what I'm writing about. I'm confident that I have spend enough at Costco (formerly Price Club) over the years to buy a couple of homes. I also used to have a Sam's card but I came to the point where I didn't want to pay more fees. I also have a BJ's card, because it is 15 minutes closer to my home than Costco. Warehouse clubs could be the subject of a whole 'nother post. My subject is different.

The real kicker for warehouse clubs is that each trip there will be one magpie item. You know, something that is flashy and catches your attention in such a way that you are convinced that you cannot live without it. Worse, you know that if you do not act on it, it will be forever gone. My tabletop water fountain was one such item. I finally put it together, and it is in my office. It really does a nice job of providing some "white noise", though Mark and I agree that we still find ourselves with a momentary thought of a plumbing problem. It's not copper and not real slate, but for $40 it was easy and attractive. So if you've ever longing look at one of these, they are a nice addition to your office. If you are feeling particularly creative, you can make your own.

http://www.hgtv.com/hgtv/gl_containers_pots/article/0,1785,HGTV_3562_1382821,00.html

When we designed our home, we started from the get-go with a room designated as an office. It's a sizable room, 14 x 12. It's right off the kitchen and the great room--with a door into each--so even when I'm ensconced in work, I'm close to my family. The downstairs half-bath is off this room. I have fairly nice office furniture so long as you don't look too closely! I worked in commercial office furniture, so I picked up a nice wood desk, and wood 2 drawer lateral file. I have a printer table that serves as my computer table. I have a lovely Brayton leather Spinz chair that I have had for several years. The sad truth that I learned some years ago is that there are not many executive chairs made to fit women. I tried about a 1/2 dozen chairs before I settled on this one. This one works nicely, and if I ever go work for another corporation, I will take my chair with me as I have for the last two jobs. If you are going to spend 10 hours a day someplace, you need to be comfortably seated. Eveything is within reach--printer, computer, desk and files. A cockpit if you will.

The unfortunate thing, is that my office is so comfortable, that I spend too much time in it. It also has a piano and a 1929 Victrola. My grandfather (an immigrant) bought a Gulbransen electric player piano (with copper scrolls) and an RCA Victrola for $1,000 in1929. The Victrola is walnut and sports a large footprint taking up about 12 sqf and about 4 ft tall. I still have the original box with the needles. The turntable and arm are solid brass. It took 4 people to move it from my Dad's house to here.

The Gulbransen is still at my dad's; my piano is an upright Baldwin. I taught myself how to play (terribly I might add) on that the Gulbransen. My mother would play, and as I taught myself to read music, I would mimic her play cadence. Muscle memory is a terrific thing if you learn how to finger a piece correctly. It's a terrible thing if you learn a piece incorrectly. But I've always played for myself. I even took piano lessons as an adult, but with working and children, it was not something that I could fit in. I would go to my lesson feeling guilty because I had not devoted enough time to practice. After a while I eliminated the guilt by eliminating the lessons.

So here I sit with my water fountain, piano and Victrola--with food and elimination facilities closely at hand! Now onto oil. Do you read John Mauldin? He has a terrific piece today on oil. I found it timely as I had just written about the commodities and how declining oil may not be such a good thing. Of course, he expounds upon that theme more lucidly than I, and you can find it here.

http://frontlinethoughts.com/index.asp

My ERF recovered some on Friday. Most of the oils bounced well. I will decide this weekend at what point I'm going to exit. I bought it right, and I don't know that I have a lot more downside exposure. KB recovered and IVGN continue to act well.

Friday Trustee Sales

RTD Trustee Sales
	Total	>$90K	% >$90K
6-Oct-06	28	15	54%
13-Oct-06	28	9	32%
20-Oct-06	37	17	46%
27-Oct-06	35	23	66%
3-Nov-06	30	16	53%
10-Nov-06	32	13	41%
17-Nov-06	38	19	50%
24-Nov-06	39	26	67%
1-Dec-06	26	19	73%
8-Dec-06	25	14	56%
15-Dec-06	24	14	58%
22-Dec-06	24	13	54%
5-Jan-07	32	19	59%
12-Jan-07	40	23	58%

Some Quick Thoughts

I'm still underwater with year client work but I wanted to post some quick thoughts.

I discontinued my J. Murphy subscription as I was culling through some of my outflows. However, one of his points that still sticks in my head is that commodities peak after the stock market.

Given what we are seeing with commodities, I think that it is safe to say that commodities have peaked. I think that the reasoning is straightforward in that commodities will sell off when INVESTORS believe that the economy is slowing. Now, I'll remind that the treasury markets for the 75% of the year had the FED wrong. It's the same dynamic, just a different venue (bond markets v. commodity). Who's to know until the future is a little more clearly seen. What dissipates the fog is one thing: data.

I think that we are currently in a point of indecision. Money is just moving from commodities to stocks. But if the commodity drop is due not to money sloshing from one venue to another (sector rotation), but rather because there is a real feeling that the economy is going to buckle, then I suspect we'll see (1) greater movement into defense stocks--a continuing move that started late summer; and/or (2) a gradual (if not heated!) exit out of the stock market into bonds/cash.

If I remember correctly, there's never been a recession that has not seen a rather pointed (30%) drop in the market. I don't have any prediction, and if I did it would be worthless. My ERF is still down, KRY has recovered nicely and IVGN is breaking out. KB has recovered a bit, and I'm watching it closely. I still have MZZ, and it is down 2.27% from my purchase.

All in all, who can argue with a record high?

Year End

January is a casualty in my profession for it coincides with "year end". So I'm up to my eyeballs in client work with little mental physical energy to post.

My portfolio has suffered a few bumps: KRY, ERF and KB have all declined: KRY spectacularly on the Hugo Chavez nationalization platform; ERF due to commodities sinking; and KB as it is just plain volatile and there was a requirement for increasing reserves etc for consumer loans. I have been building a position in MZZ to hedge.

Naturally, there is lots of yammerin' about the "as goes January, so goes".....

Though I did not act on it, in looking at some charts and I had an alert set for LSCO when it broke above $9. I didn't act because I think that the overall market is feeling weak and this is a thinly traded stock. I'm going to do more of chart looks, since I have had the best success with stocks that have carved out their bottoms and are starting to rise. But I'm not interested in speculating on stuff in this tide.

Not for Arachnophobes

I'm in the process of consolidating some of my photos. I had done a pretty good job of culling out my favorite photos of the many horrible ones that I've taken until my hard disk crash undermined my efforts. They are all on poorly cataloged cd's so I'm consolidating them on my external hard drive.

The beauty of a digital camera is that you needn't spend hundreds of dollars developing all of the bad stuff. The truly good stuff you can keep. For example, you could make this picture into a note card for expectant Moms. I doubt that many would appreciate your sentiment no matter how heartfelt.t I snapped this picture after I found this spider under one of my plants (I ran to get the camera. That egg sac served as a great drag on mobility (like being pregnant). More evidence as to why you should use gloves gardening.

My Beloved Lucy

Here's a photo of my beloved English Setter, Lucy, taken a couple of years ago. She's in the great bird-hunting grounds of the beyond. She would have been 14 in May. Last night we had to have her euthanized after she began violently seizuring. Thankfully, my son witnessed it and was able to call us downstairs. It was just after 11 p.m., and we had just gone to bed.

(Though much was disturbing about the evening, hearing the fear and anguish in my son's voice was almost as terrifying as watching my dog in a violent fit.)

(I textured the background as there was sidewalk garden hose in the background.)

I write today's blog to rejoice this special dog's life (not to grieve her death), and to share some of that joy with others who also are animal lovers.

One Christmas, my husband gave me this AKC book. It was one of those gifts that you open and you say to yourself, "Why did he get me this?" (You think that you are saying this to yourself, but your displeasure is clearly apparent). I have subsequently read that book cover to cover. Every breed that the AKC recognized (at the time of their 19th edition), I have read about. What became apparent to me was that our surviving was very dependent on the relationship that we have with these extraordinary animals who have been bred over the years to have very specific traits.

Strip away your modern conveniences, and think about if you lived 100+ years ago. If you lived on a farm, you'd have to hunt, fish and farm, otherwise, you wouldn't eat. A dog was a helpmate and loyal companion. With their nose and ears (I don't think their eyes are much better than ours), they'd alert you to danger before it pounced on you. They'd point, burrow, track or bay their way toward securing you a meal. Likely they warmed many a family during bitter cold nights. They would defend you with their lives instinctively (even if you were a curmudgeonly niggardly soul who didn't deserve it). You'd depend on them to walk with your kids to the school house and know that they would be protected.

So my puzzlement over the gift turned to wonderment (after pausing briefly in the chasm of embarrassment for my initial ingratitude). If you love dogs, its a neat book to have to read about the other breeds. We find that when we have people over, it invariably comes out. The first English Setter recognized by the AKC was "Adonis" in 1878. This was also the year that the Gordon and Irish Setters were recognized ("Bank" and "Admiral", respectively in case you are asked in a game show). Here's what the AKC says of the English Setter:

"The English Setter has retained its popularity since its introduction to this country primarily because of its usefulness and beauty. As a result of intelligent breeding it has been brought to a high state of perfection. . . The mild, sweet disposition characteristic of this breed along with the beauty, intelligence, and aristocratic appearance it makes in the filed and in the home has endeared it both to the sportsmen as well as lovers of a beautiful, active, and rugged outdoor dog. A lovable disposition makes it an ideal companion; it is, however, a dog that requires considerable exercise and therefore is better suited to ownership in the suburbs than in the city."

"General Appearance: An elegant, substantial and symmetrical gun dog suggesting the ideal blend of strength, stamina, grace and style."

(How I wish that someone would ascribe the above description to ME--though I think that my husband finds me useful and beautiful.)

Lucy was all of those things and more. My husband described her last night as we got into the bed the second time after returning at 2. a.m. that she was the best friend he has ever had (and he has many friends, and I was not insulted by that statement). She came from a line of "some-bodies"; her mother's name was Pretty Girl. We paid $50 for her to cover her shots. The man who owned her, Denver, worked with my mother, so we received this gorgeous dog for a pittance.

We had the ideal home for her with 6.5 acres, and other nearby acreage where she roamed free, as a great dog such as this should do. We have this creek bottom in the back (it's covered with ferns in the summer and if you are scared of snakes like I am, it is a terrible place to be), and her beautiful coat was always sullied from the fine silt from her hunting grounds back there. Her elegantly feathered tail and legs always matted from mud and burrs. But she was happy. She was happiest when adorned in her mud she was also resting peacefully on the sofa. No matter how often we disciplined her, she would always sneak up there. When she was young, she could lithely jump off as she heard us get up to come downstairs. As she was older, she could only stiffly get down and was always half on/half off when caught. Over the last year or so, she had been mostly off the sofa, given that she was stiff and couldn't get up. However, two nights ago, Mark caught her up there (disciplining her was long ago abandoned).

Her best dog friend in life was my neighbor's collie, Dusty. They were inseparable, until Dusty's death. Even with our other dogs, she was never "close" just dominant. Occasionally, Cleo, a basset hound from "across the way" would swim across Tim's pond to play with Lucy and Dusty. Cleo was hysterical...she'd been running ferociously with her low center of gravity, baying BA-ROOH, BA-ROOH. As she would make sharp turns, her ears would drag and she'd step on them causing her to take a hilarious tumble or two.

I still remember when she came into heat--a surprise. Dogs I have never, ever seen in my life were all around. We had to create a barrier to the deck, for dogs were jumping over the gate. The barrier was effective, but dogs were literally chewing on it. My daughter ran upstairs "Mommy, Mommy, there's another dog hurting Lucy. " It was a gorgeous boxer who had jumped the deck gate. Lucy did not look like she was in any pain, and of course I had to explain it. I had her spayed soon thereafter. She had nine puppies in her womb. I cannot even begin to imagine what parentage--I cannot fathom what a boxer-bird dog would look like.

Once, she was run over by Toyota truck. It was her fault--chasing it and then running right in front of it. The poor people were very upset. We assured them that it was not their fault. I took her to the same vet as was her final visit. She was suffering from shock, bruised heart, and a dangerous hematoma under her front arm pit. She survived, but we always joked that she looked a little wracked. Another time she managed to get a treble hook stuck in her mouth. She was at out neighbor's pond, and the next thing you know there was this horrific yelping. She came immediately to us dragging a fishing rod. By that time one barb was fully embedded. She sat patiently and allowed us to cut the other two barbs prior to going into the vet.

English Setters have two speeds: stop and go. There is no in between. When I used to run on the fire-break trail behind my home (my concession on turning forty and trying to transition the gap between being a nerd to being a partial athlete), Lucy and Greta (setter mix) would run with me. Lucy would always run ahead and continue to double back to ensure that she could always see me. I was grateful for her going ahead because of snakes. I figured she'd scare them or at the very least be snake bait. On warm days, they would find a muddy puddles along the way and flop down like canine crocodiles biting at the water and cooling off. We'd scare up deer and wild turkeys on occasion. I always admired their easy gate and elegant carriage, as I labored along with heavy legs and heaving chest (I pegged my heart rate monitor on that trail!).

It's been about 4 years since I stopped running, but I would still walk the trail. When she'd see me get my trail shoes on she would shake all over in excitement. Nothing was more dear to that dog than going on the trail. Recently, we took a few trail walks with Macy (the Chumenator) and my neighbor's dog, Lacey. (Lacey, Macy, and Lucy...go figure how they could distinguish their names). The two younger dogs (5 & 6 months) would follow behind Lucy who still at her advanced age could jog effortlessly. She was clearly the lead dog, and the youngsters were cherishing their romp on the trail with her.

Last evening, before her terrible seizures, I had given each of my dogs the last bones off of the rib roast from New Year's. I made sure that hers was laden with meat. In fact, my husband was grousing about the mess that it was making on the floor. I literally said to him..."she's not going to be with us much longer (due to her age, I was not having any premonitions), and I'll clean it up." Within five hours she was gone.

I'm grateful that we were able to have her as part of our lives for almost 14 years. Last night was considerably hard on my son who turns 16. This is the dog that he has known almost all of his life. He was in the back seat with her, comforting her as best he could, as we raced to the vet which was 30 minutes away. It's nice to have Macy, who is a bouncy youngsters (not that it isn't nice to have my other dogs, but they are geriatric as well). All she wanted to do when she came as a new member to this house was snuggle up to her "big dog friends".
Lucy was none too snuggly, but Macy was persistent and managed to sneak a snuggle as you see here.





















Our youngsters help buoy us when the old-timers pass whether we are talking about dogs or people.

Shots over the Bow?

The anxiety is beginning to creep into the print commentators. Gary Kaultbaum is sounding a bit worried. You can get this table at this lind from the WSJ. You probably ran across it in some of the same places I visit. http://online.wsj.com/mdc/page/marketsdata.html?mod=djm_eMailMDCBAR&refresh=on

If you don't listen to Gary consider tuning in. I think that he does a terrific job of giving the daily overview of what is going on in the market--what he thinks is working what's not. Next week should prove interesting.

Friday's Trustee Sales

There was a one week hiatus, my daughter cleaned up and I lost my data source.

Manufacturer's New Orders (from FRED)

A Deeply Personal Story but an Investment Story

This post is very pertinent to investing, but it is also deeply personal. For whatever reason, I was moved to post this story. I may regret it. But I'll resolve not to delete it because I think it is important. I would also like you to share it with someone that you think might benefit. And let me be clear, this post is not meant to be dramatic. I'm not trying to draw attention to myself. I'm trying to draw your attention to you. It is meant to be honest and coldly objective. If you ever find yourself in this position, I hope that you remember reading this post. It's tragically true, and one of the most deeply moving experiences of my life.

Nearly 17 years ago my brother committed suicide. He was 32. In February of 1990, my father, sister and I went out to Colorado Springs (my mother had died of lung cancer the previous November) to await the why's and wherefore's of my brother's death. It's a horrible space to find one's self in. He had a wife and two young daughters: 2 years old and 5 months. It was heartbreaking to see my 2 year old niece cry Daddy, Daddy, Daddy to every headlight that beamed down the road. She didn't understand that her Daddy would not be coming home.

He had put all of his things in order--to include his income tax preparation. I will not go into all of the underlying reasons why I thought my brother (estranged) chose suicide, but the catalyst was that he lost everything in the stock market. Everything. There was $300 in his bank account. They were arrears in their rent. His wife had no idea. He had sold his home in CA with a significant gain. Moved to CO and was renting a beautiful, expensive home. The sizable gain on home? Evaporated. Nada. Zippo. He had the one thing that was of financial value: a sizable insurance policy (he sold insurance).

He did the penultimate financial fuck up--he lost EVERYTHING in the stock market. The real pathos of the story is not that he lost his money, but that he thought that the insurance policy was more valuable to his family than his life. Amaranth and Mother Rock are titillating stories. But, there are real people behind those stories. Why am I posting this? BECAUSE I DON'T WANT ANY OF YOU TO EVER CONFUSE THE VALUE OF YOUR BANK ACCOUNT WITH THE VALUE OF YOUR LIFE.

I have little to offer people who stop by to read this modest blog. But I assure you that today's message is the most powerful and incisive that I could ever offer--one that you will NOT get from any paid subscription. Sure, investing is a provocative subject: it's sexy, it's intellectual and it's instant, provocative conversation. But in the end, it is your financial health. But I want to tell you, bluntly, that if you fuck up, it is not your life. It is never your life. You start over. You dial back to being in your 20's again--poor but idealistic. However, never, ever is it your life. (Of course the underlying message is to NOT to screw up (no more than 2 f-words in a post!).

I don't know what 2007 will bring. I don't know a damn thing but this: You are not your bank account. You are not your annual return. You are not your annual salary. You are a spouse, a mother, a father, a friend, a son or a daughter, but you are never a dollar.

So whatever decisions that you chose to make about your life--whether it's a stock purchase, business venture, financial investment, love interest or employment decision--you do so with conviction that should it blow up in your face, you can face the next day with the stain of embarrassment on your cheeks or a "how could I be so stupid" slap to the forehead, but you continue to be a part of the lives of the people who know and love you. And all of these things I feel well qualified to tell you.

Selection Bias steeped in Disengenuousness, Year End Performance

I will tell you now that this is one account. I wish my other accounts were as successful as this one. Accordingly, I admit that I'm being very disingenuous (selection bias) by showing you this account my E-trade account that held my ESOP from a former employer and not my other accounts. This year, my investment resolution is to refrain from investing in options.

How investing is like cooking and football

While I will not say that investing is easy--remember I am a novice--but like most things it is broken down into manageable parts. But there were a couple of analogies this weekend that reminded of thematic similarities among different subjects. So here are a couple of examples as they relate to investing (at least in my mind).

First cooking. I've never cooked a standing rib roast before. At $105 dollars, I sure didn't want to ruin it. I read about 5 different ways on how to get to the same result: a perfectly roasted piece of premium meat. Do you want a crust on your roast? Then you must roast it at 450-475 (different opinions on temp) for more than 30 minutes and less than 1 hour. Then you cut the oven back (some say 325, some say 350, some say 375). I opted for 325. Was there any unanimous and incontrovertible advice? Yep, there is--you must have a perfectly calibrated, digital instant read thermometer. Would I have been dissatisfied with using one method over the other? No. It was all noise--as each method had identical endpoints. There are many investment styles (e.g. growth v. value), and more than one can yield the same result which is portfolio appreciation at manageable risk.

Second, football. I attended Virginia Tech, so I had great interest in the game--Peach Bowl now the Chick-filet bowl. VT was leading--convincingly, seemingly indomitably--through second half. Outcome? GA 31...Tech 24. How is that similar to investing? Past results do not guarantee future results. Every play, maximize your yardage and minimize mistakes. You can play quite well, but if you have costly turnovers--and you don't need many--you can lose the game.

Financial Sense Online Headline

U.S. Markets Closed in observance of National Day of Mourning
for late President Gerald Bush

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I did e-mail them and ask them to change it.

Amazon.com

I know that Amazon gets plenty of kicks as a stock, but as a book buyer, it is nirvana. I have some Barnes and Noble gift cards burning a hole in my pocket. One book that I wanted to get was $70 at B&N website and $44.10 at Amazon. This discrepancy was one of the largest.

I think that I'll just use my gift cards when I go into the store and find things on sale that are one of a kind. A $26 difference, even when it is a gift card, does not strike me as well spent at B&N.

Another huge plus at Amazon are the reviews. I regularly read the reviews of stuff that I'm planning to buy. I find the reviews a huge value-add. A random vent to start the New Year.

On Religion and the Occult (Eighth Major Axiom)

Major Axiom VIII

"It is unlikely that God's plan for the universe includes making you rich."

Minor Axiom XII

"If astrology worked, all astrologers would be rich."

Minor Axiom XIII

"A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place."

Speculative Strategy: "To expect help from God or from occult or psychic powers is not just useless bu also dangerous. It can lull you into a an unworried stated. . . In handling your money, assume you are entirely on your own. Lean on nothing but your own good wits.
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I had a client where in the board minutes (a theological institution) where the president declared that they had a new financial tool: faith in God. Luckily, the finance chair who was a committed religious man, but also president of a bank. Thankfully he had good wits and moved swiftly to right the ship.