Saturday, June 30, 2007

It's not the snake you see. . .

--Non market post-------

well I had planned to have a picture here of the snake that I just saw. It's blackberry time. I had just picked one blackberry (quality test) and was turning the corner when I saw the silky black sheen of a black snake entwined in one of the bushes that I was passing by. I came in to get my camera and snap a picture to impress you with my bravery and pushing aside fear for the sake of art and entertainment.

He was gone within the 3 minutes it took me to fetch my camera. I wasn't going to go search for him/her, for surely I wanted to avoid being surprised. If you know what wild blackberry brambles look like, you will know that they are quite overgrown with all sorts of things. This particular area was no exception.

One of my favorite things to do is make fresh fruit cobblers: plums, blackberries, peaches, cherries. What better way to herald in summer than a warm cobbler with vanilla bean ice cream. Perhaps it is a Southern thing, and to that I plead guilty. Two summers ago, I did my own test kitchen "thing" combining this recipe and that to find the best homemade biscuit topping for cobbler--even experimenting with putting the topping on the bottom. There was nary an unedible result, but biscuits made with cream and White Lily flour (or any type of lighter bisquit --NOT BISQUICK--flour) will do.

Side note on waffles---For any of you waffle lovers out there, consider making waffles from scratch during the weekend and freezing them. Then when ready to eat, defrost them slightly in the m-wave and then pop them into your toaster oven. It will be a lovely way to enjoy a fresh breakfast--top them with fresh fruit. Here's a recipe for you to try. It's one of the few waffle recipes that do not require your separating the eggs and beating the egg whites.

Printed from COOKS.COM

2 1/2 c. flour
1 tsp. baking soda
2 1/2 tsp. baking powder
1 tsp. salt
3 eggs, beaten
2 c. buttermilk
1/2 c. salad oil
In large bowl, combine all dry ingredients. In small bowl, beat eggs and buttermilk. Add to large bowl and beat together. Slowly beat in 1/2 cup salad oil.

Here's a neat substitution. Substitute 1/4 cup of the flour with cornmeal--either white or yellow. It provides a crispier waffle. This is also something that you can do with your biscuit topping for cobblers. You could also add some oat/wheat bran (experiment with amounts, but start with 1/4 cup), to beef up the fiber.

On Becoming a Lurker

A bit of a variation on a previous theme. I think that this will be a longish, rambling post, so I'll apologize in advance for being a wind bag.

Banker notes that these markets have not been easy and 2nd_ave notes that he has become less rational with better success. As the market is frequently (perennially?) at odds with what any of us thinks, our efforts need to be re-directed. There is a common market aphorism that the market can stay irrational longer than you can stay solvent. Well, I’m arrogant enough to be unable to check my noggin and all of its (yours too!) extraordinary powers of perception, deception, cogitation, agitation and realization at the door. Rather, I’m going to adopt the persona of a lurker. Though being a lurker suggests benign activity (and didn’t I just post about thinking v. doing?), I’m going to suggest that lurking is more appropriately channeled activity. Let me explain.

Nothing is more illustrative of the delayed reaction in the market than the subprime issue. All that is coming to pass (BSC/UBS hedge fund blow ups) you have read about here and other places. We were cutting on teeth on that realization back in mid-March, 3 1/2 months ago. Did the market care? Hell no. I was expecting the market to have it's epiphany and have an "Oh $hit" moment then in April/May. Not so. It is only beginning to happen now. Why so? Because there is evidential matter--hedge funds blowing up--that is making a shadowy fear in the market psychology more of a stark (and scary) reality. This delayed reaction was also manifested in the homebuilders—the market did not react to its misconception that a bottom had formed until the evidential matter of asset write-downs, wrong and then withdrawn guidance acted like the proverbial smack in the forehead. This issue is but one example, but it is a useful example for explaining the benefits of being a lurker.

What/who is a market lurker? It’s going to be me. I’m going to be a shadowy figure peeking into alleyways, jiggling doorknobs and peering in windows (insert your own lurking behaviors here). Lurking is a way to channel and satisfy my hand-ringing, nit-picking, weeping and wailing tendencies. I’m going to revise my view of my investment notebook, and I’m going to retool it a bit. First, I’m going to rename it my Lurker Log. By taking my lurking findings and documenting them in my notebook, I’m creating a basis for informed action.

Do you not have a notebook? Get one. Every genius keeps a notebook, and you should to. Make daily/weekly observations of what you read/hear and reduce these to some thought on how you might be able to make money on that idea. My notebook is about 18 months old. Your notebook will help you distill your thinking and that of others. It will help you create an investment theme--the context for making your investment decisions. Also, it will help you capture your thoughts for you to later evaluate with the benefit of hindsight.

This process is critical to your developing trust (or realizing that you need to cultivate your insights more). When you travel back through your notebook with the benefit of hindsight (or foreknowledge), do so equipped with a highlighter/colored pen and make notes. Stocks to watch—note the price when you thought about it and when you go back put the current price. Is the price action what you expected it to be? Why or why not? If you do this, I guarantee that you will amazed you how well this process will cultivate your insights. You will also see how fallible many of the experts are when you do this process, and it will help you not misplace your confidence in the prognostications of others or even yourself.

To translate this concept into a workable process, first, get a notebook (I know that I’m repeating myself). Second, consider creating a watch list of those stocks that you think will benefit or suffer if your prognostications (theme) come to pass. I generally do this starting with a stock and then looking at all of the stocks in the sector. For example, with subprime, you would create a list of the subprime lenders. I use Fidelity, and S&P's Compustat (Reuters does the same), generally lists the other stocks in that sector/sub-sector. I use that list to create a watch list in StockCharts. You could also look at the ETF's that represent these sectors. Personally, I like to buy stocks rather than the ETF's, but the ETF's are a good way to analyze if your time/expertise prevents your performing a more detailed analysis. In your notebook, you could simply create a section of stocks to watch.

For those of you who pooh-pooh technical analysis, I believe that you are depriving yourself of an important tool in your stock/sector evaluating arsenal. Technical analysis gives you an objective tell on where money is moving through price and volume patterns. Call it voodoo if you like, but ultimately, return is based on price and volume. By the time you hear about it on TV or your favorite paid subscription(s), you will have missed some of the easier money. I have had my VERY BEST success using this process. I, like you, read a lot of opinions by others. But it is YOUR money; accordingly, you would do well to develop a process to inform, develop and evaluate the quality of your opinion. At the very least, make a list of the stocks that fit your investment theme, and watch them however you wish to do it, and decide WHAT criteria need to come to pass that will move you from lurking to acting. This stock/sector watch is the penultimate method in evaluating your investment theme, developing acumen and developing trust.

If you've done your homework, worked on increasing your investment skill, then you have to trust your work. The single most difficult factor that I have to contend with is lacking trust in my thesis. You could call it lack of conviction. While strong conviction can make you money, MISPLACED conviction can lose you a lot of money. The trouble is we are bombarded with the concept of "smart money" (the proverbial "THEY"). So if the smart money is not talking about our idea, it's hard (at least for me) to hang onto that idea when there seems to be no interest. It's like when you throw a rod into the water, and you are waiting for a bite. There could be tons of fish below the surface that WILL bite, eventually, or it could be a dead hole. You just don't know for sure which it is--but therein lies the concept of risk v. reward.

Here's a coulda, shoulda, woulda story that will bring a tear to your eye. Last year I was one of the few people who owned TNH. It was a teenager at about $18. It only traded less than 20K shares per
year day. I was scared out of it because (1) it was very thinly traded and (2) NO ONE was talking about it. I was early in my investor education and very thin on trusting my work. I think that it closed over $125 this week. I owned 1,000 shares of that baby. A perfect example of my not having trust in my thesis. Now, it could have gone the other way, certainly. The antidote? For your investment decisions, document your theme, your risk reward and the catalysts that you are looking for to have that investment belt out a song that will have the house standing and clapping.

I want to close this post with a cautionary statement. It is about the proverbial "THEY" which Selden notes (click for link), to whom we confer omniscient, omnipotent powers. For a moment, let's think about this notion of "THEY" affects OUR PSYCHOLOGY. We can have two reactions. First, we can believe that despite all of our efforts we will be thwarted by "THEY" who we characterize as something dark, evil and emanating from Mordor (Lord of the Rings reference) under the Dark Lord, Sauron, intent on parting you from your money. Well, there may be some truth to that! But conversely, we can adopt another view where we are content with being a parasite on Sauron's corpulent body-so we can be tick-like (hey it's summer in VA!) and get fat.

I sincerely believe that too much hand-wringing over the “they” results in investment inertia. It has been for me at least, and I’ll be honest and not project that unfairly upon others. But I do observe that behavior, and I know that you do to. I’m not suggesting throwing caution to the wind. But I sincerely believe that transforming my investment notebook to a Lurker Log with specified action (as opposed to sinking into thinking without doing) and documentation of objective evidential matter against my investment thesis will enable me to overcome some of the obstacles that I’ve created for myself over these last few months. My apologies for sounding pendantic in this post. I don’t wish this to come off as telling you what to do—most likely you know better than I--but rather as it is…a confessional of sorts of my own continuing evolution as an investor.

Friday, June 29, 2007

June 29, 2007

Here's a chart of today's Dow. Who needs to go to a theme park and ride a roller coaster when you can view one from the comfort of your own home? I bought some DIA 136 puts yesterday before the FOMC at market. I never buy at market. The price was $2.35. I unloaded them today at $3.20. The highest price for the day was $3.40. It closed at a $2.35B/2.7A. Pretty wide bid/ask range.

I had also purchased (pre fed) some DXD at $49.99. That tanked early and I unloaded, then I reloaded. I closed that position almost at the bottom of the Dow (meaning profit!!!).

This week has been a terrific week for me in the market. I don't say that to brag, for I'm not an arrogant or boastful person. I've had plenty of blah and blech weeks--too many of late. To be frank, psychologically, I needed this week's success. Everything that I did this week was golden (which is unusual). I'm really embracing my thinking v. doing mantra. More importantly, I'm realigning my activity with my time horizon. What am I saying? I'm simply saying that I'm not looking short term at some of my longer term holdings. Oh, of course I'm LOOKING, but I'm going to quell my urge to ACT so long as I think that the underlying reasons for entering the transaction remain intact. I'm not saying that I will not continue to trade some short term positions. Using some of the 2x +/- ETFs on trending indices is a good way (for me) to do that. But I don't plan to hold these overnight. Those gap ups/downs (depending on your leaning) can really dampen your results.

The other thing that I did this week was rely more on my instincts. This week was one of the few times that I let my intuition have a greater rein. I also watched the technicals very carefully. I know some of you who read pooh-pooh technicals. That's fine. But if you are trading something like SPY, DIA, QQQQ, you really cannot do it on fundamental merit.

My goal for next week is to ensure that I keep the same discipline and not allow this week's success to allow for sloppy decision making next week. I'm also acknowledging that this week's success has more grounding in luck than skill. Accordingly, I will enter next week with the pride of graduating as a Conscious Incompetent!

Most important of all, a good friend of this blog, Nona, had to undergo surgery today for a broken leg sustained in a car accident. Please send healing thoughts her way.

Thursday, June 28, 2007

June 28

I had a mixed day today.

The Good: My MLHR puts had a 200% gain today. The stock opened stronger than I expected so I had a momentary dissappointment. But, I've watched this stock on earnings before, so I waited. The high for the day was $3.50; I sold for $3.40.

Watching CNBC today they were talking about STZ, a stock that I've owned before (dead money). But the stock took off because they did "less worse". I went to the short interest site and saw that there was a large short position. I picked up 1,000 shares at $24.43. I sold it at $25--my target. It went up to $25.52. Better to leave the party with money in your pocket. I then took my gain and bought July 25 puts. I'm thinking that the euphoria is going to end.

I bought DXD and DIA JUL 136 puts just before the FED news. There is only more fear, uncertainty and doubt, plus I think that there will be a market denoument after quarter end 'window dressing'.

I do have some languishing longs--my UNG position is down 15%. I'm believe it will recover as soon as some spinning winds hit the radar. But, I've been wrong!

The Bad. My 10 year old bird dog, Greta, has been on medicine for a bladder infection. She's on course two (27 days) without any improvement. Last night I was up with her, and she seemed to be in pain. I took her to the vet. She either has some terrible urological cancer or an antibiotic resistant bacteria. It will take 3-5 days for them to culture. I'm thinking that it is the worse diagnosis. So next week may be a downer.

I hope that you had a good day today.

Wednesday, June 27, 2007

Thinking V. Doing

There is a very distinctive difference between between thinking v. doing. Thinking for thinking's sake is really not terribly productive. Thinking in preparation for doing is productive; however, when coupled with making a stock transaction decision that productive decision may or may not result in a profitable transaction.

I've found myself doing more thinking than doing over these last couple of months. Given that I was ill for three weeks, it is probably best that I've not done too much doing, for there surely was no productive thinking.

Today I closed out early my DXD (double Dow -) for a profit and entered DDM (double Dow +). I closed DDM too early today, but it was a profit (but I could have doubled it), and I was happy with the combo transaction. I try to be careful about coulda, woulda, shoulda conversations. Those conversations can lead to inertia. Though, there is still much about this market that I do not like and that I think is above and beyond the general "wall of worry", I nevertheless, am trying to find some short term opportunities--either short or long--to "earn my keep".

Yesterday I listened to SCS's (Steelcase) conference call. I had previously shorted the stock and closed it out yesterday for a profit. There's a huge short position underneath the stock and a renewed buyback, so I didn't wish to continue to tie up the capital. Furniture orders are definitely slowing. After dithering and watching carefully MLHR's (Herman Miller) action today, I elected to buy some JUL 35 puts, as they were reporting AH today. The stock dropped from $34.97 to $32.80 in AH's. Hopefully this will hold through tomorrow.

Now what I describe is more trading v. investing activity, but in the end regardless of what one chooses to call it, one has to earn a return for one's capital and one's time. I'm not recommending this activity to any of you, but I'm merely sharing what I've been doing.

Monday, June 25, 2007

Short ETFs

Here are some short ETF's and today's performance sorted by performance. Click to make larger.

Moral Hazards, Kitchen Hazards and Swimming with the Big Dogs

I started this post this a.m., but am only getting around to it now (for reasons that will become more clear).

Friday was certainly an interesting day in the market. I'm still trying to balance my long and short positions rather than just retreat to cash entirely.

Moral Hazards. Bear Stearns may become a poster child for moral hazard. Looks like they got bit by the hand that was feeding them, but their investors are truly the ones who have been sucker punched. If I were an institutional investors, I would chose my investment banker much like I would chose a certified financial planner--fee for advice, not fee for products. With the push for fee revenue, I'm not sure that I would "trust" the advice of someone that had a menu of products that they were SURE would be right for me. There is a terrific article on Bloomberg regarding the BSC hedge fund demise...if you're looking for a dose of schandenfreude mixed with a bit of poetic justice, do read this.....

Kitchen Hazards. Jacques Pepin (above) ( famous chef, handsome devil) said that you should keep your knives very sharp so that when you cut yourself it will be clean and heal quickly. Yesterday I cut the right corner of my left index finger off. I'm able to type a little, but I'm fading fast here. At least it was a searingly sharp knife, and my finger is healing, but naturally I've managed to bump it about 4 times today with unhappy results.

Swimming with the Big Dogs. Yesterday I took Macy (The Chumenator) for a swim in my neigbor's pond. My neighbor has two other dogs both of whom love me as they do their owner: Lacy (a lab/beagle/bird dog mix--she's 1 month older than Macy who just turned 1 year old) and Ginger (a 100+ lb Golden Retriever), who also enjoy this activity. I throw things out and Ginger and Macy fetch them in. Lacy jumps in and drafts on Ginger--something that she has done as a puppy by latching onto the base of Ginger's monstrous tail and swimming behind. Unfortunately, she tries to do this with Macy who is ill-equipped in every way to do this. (I will try to get some photos and post to include another dog, a yellow lab of one of my neigbor's friends--to watch them all swim, fetch and play is wonderful, and there is some beautiful golden light in the evenings).

Well...I decided to launch the kayak so that Macy and Ginger could swim along with me while I FETCHED the things that they failed to pick up. It was quite pleasurable until Lacy jumped Macy and sent her under water. Macy panicked and desperately tried to get into the kayak. I did succeeded in getting Macy into the kayak only to promptly flip it. WE both went under water but bobbed up quickly. I suddenly found myself with about 220 lbs of dogs and their damaging feet ripping at me. I was momentarily terrified. I managed to fend the dogs off. It took me a little time to get underway so that I was actually moving with Ginger, the overturned kayak my shoes and the oar very slowly toward shore. I was reminded how old and out of shape that I was.

I have three horrible bruises on my left arm from being raked by somebody's claws. (I hope that I'm never mauled by a dog--even when they are not trying to harm you their exuberance can leave marks!). Naturally I was tired after the incident and from continuing to recover my massive 3 week sleep deficit. But after lying down, I realized that I was too hungry to sleep. So I went into the kitchen and found my husband opening tuna fish. Immediately I pulled out shallots and celery and began cutting away. But I was tired and not paying attention (and I really have no good form in cutting where only one's knuckles are exposed) and sliced a good sized divit out of my index finger. Plenty of blood and pain that extended into the balance of the evening. Joey, it must be something with those moon-vibes over this last month! Bad moon for me, for sure!

Lesson: No knife work while tired.

Saturday, June 23, 2007


For those of you who were kind enough to follow me through CDO's in my series of posts (as well as those by Calculated Risk), you are not surprised, and more importantly, you are knowledgeable about the issues being discussed. I know that I feel better prepared to understand the issues. And if you are hearing "this is contained to BSC" that's BS of the lowest sort. HSBC already had a hedge fund in this area blow up and now BSC. These are hedge funds attached to very well-capitalized firms.

There are hedge funds with bank, insurance, pension fund and other private-held funds that are certainly exposed to these areas. The insurance companies, AXA, HIG also have exposure. Will this be the great unwinding? I don't know, and I'm not trying to engage in hyperbole. But remember the housing recovery? It ain't happened yet--but like the second coming of Jesus (no offense to the devout--my Armenian grandmother predicted every year for that event) it has been oft predicted to be just around the corner. Sub-prime contagion contained? Nope. We later found that Alt-A had similar problems.

I'm out now to enjoy the weekend. It's been three weeks since I've felt well enough to have some fun.

Thursday, June 21, 2007

Gary K's June 20th Show

I would recommend your listening to Gary K's show for today. He gives a comprehensive list of sectors that are starting to roll over.

My personal investment style is to be in sectors that are more favorable for the current economic cycle. I'm a big believer that if you pick strong stocks in strong sectors then you reduce quite a bit of the risk of making the wrong stock choice. Regardless of what the market is doing (topping, ramping, declining) there will be sectors that will experience various degrees of benefit/detriment commensurate with that cycle. I'll remind you again of George Dagnino's business cycle (at you can see that in my info mosaic section.

Wednesday, June 20, 2007

CNBC Fantasy Portfolio Update

A winner still has not been announced. This is what is posted at their site. Had I not been a contestant (I say that only in the loosest of ways!), I'm not sure that I would have known about this stuff. How sad that this challenge has been marred in this way.

"We have an update on the CNBC Million Dollar Portfolio Challenge. As CNBC first reported on May 30, we were contacted by several contestants alleging unusual trading in violation of rules of the contest, which ended on May 25.

As CNBC said at the time, we immediately launched a thorough investigation of the contest and we are now focusing on three specific areas of concern.

We are investigating whether one or more finalists wrote and executed computer program scripts to bypass the contest's security measures.

Additionally, one or more contestants were able to change their trades after the markets closed at 4 PM ET, but before the trades were processed by CNBC. That way, a contestant could have executed trades after hours, and have the trades priced as of that day's market close.

CNBC has retained two leading consultants in the information security industry to investigate these two computer programming related issues.

In addition, there have been allegations that one or more contestants may have engaged in illegal market manipulation to affect actual prices of stocks represented in their contest portfolios.

We have engaged an independent securities expert to determine whether such activity took place.

As we said previously, the rules state that CNBC has until July 8, 2007 to declare a winner. Although CNBC hopes to announce a winner before that date, it is more important to ensure the individual awarded the Grand Prize is in compliance with the rules.

Integrity is paramount to CNBC. We are taking all allegations of improprieties very seriously. CNBC will provide updates on the air and on as they become available."

June 20 FSO Market Wrap by Frank Barbera

I like Tim Wood and Frank Barbera, both market technicians that seem to be very data dependent regarding their views on the market. I always enjoyed listening to the two of them on FSO's Saturday morning installment, though the recent format changes has their visits alternating.

I thought that Frank's recent market wrap, which you can find here was excellent. I suggest your taking time to read it, and I think it is worth the paper/ink to print.

Tuesday, June 19, 2007

Retail Estimates

From Bloomberg

"Best Buy Net Falls 18%, Trailing Analysts' Estimates (Update1)

By Mark Clothier

June 19 (Bloomberg) -- Best Buy Co., the largest U.S. consumer-electronics chain, said profit fell 18 percent on sales of less profitable laptop computers and lower prices for flat- panel televisions. The company cut its annual profit forecast, sending the shares down 3.9 percent."


Retail has been surprisingly resilient. I'll remind you that last month, most of the retailers were reaffirming their guidance. In fact, CNBC and others were going out of their way to make that notation after May sales came in and underwhelmed. Only a handful of retailers stepped up to the plate and revised their FY07 forecast downward. I found it a bit funny that these folks could unequivocally affirm guidance when there were still eight months or so of unknowable consumer behavior.

I'm sure that many of you know this, but it bears repeating. Executives/managers do not have a crystal ball on the economy that is any more accurate than that of anyone else's. Remember the homebuilders' guidance. They reported a crappy quarter but forecast smooth sailing ahead. In fact, they did that at least twice before the incontrovertible evidence that declines would continue had to be publicly acknowledged.

My friends, retailers have the SAME CRYSTAL BALL as that of the homebuilders. Perhaps more accurately stated, they have the same MOTIVATION to hold out for the rosiest view (affirmed prior guidance) just prior to the evidential matter of declining prospects becomes so overwhelming that they have to capitulate and say that they were wrong. This is PRECISELY what EACH one of the homebuilders did. Now the consumer may still prevail. But I would hazard a guess that Best Buy is a pretty accurate bellweather for the gadget heads' appetite for jiffy cool neat-o stuff.

My point is simply this--Always be skeptical of guidance from management, particularly when that guidance seems at odds with observable data. The timing could be askew--that I know well. But never look at management's guidance as a salve for any misgivings that you may have for a company's future prospects.

Position: I do own some RTH July 100 puts that are not doing so well. These were up as much as 30%. I broke my own rule on options--to sell at 30% gain--but because I thought the retail decline would be complete by now, I elected to be greedy and wait. I managed to mitigate the pain by going long on RTH and getting a nice pop when it bounced. So, I'm not crying or anything. But you make your rules for a reason; and it's best to be consistent in following them.

Sunday, June 17, 2007

Happy Father's Day

Sorry for such parse posting of late. I experienced a relapse in my condition, so last week went downhill fast. Brain power and energy were seriously compromised. I still have not read the Henry C K Liu article. So much for "feeling like myself again"! Well, it did last a day.

Luckily the drugs (prednisone) and antibiotic number 2 kicked in, and I could attend a wedding last evening. So before the prednisone, I couldn't breath and couldn't sleep. With prednisone, I can breath but cannot sleep. I'm trying to contain my sleep-deprived crankiness to those who love me most.

Today, I'm making an old fashioned chocolate cake for a Father's Day (FIL) dinner event. It's a bit of a production. I saw it on Cooks Illustrated. I may not be remembered for much when I die, but I will be remembered for the desserts that I've made--honor enough for me.

For all of you fathers, my best to you in your special day. I hope someone made you a special dessert.

Wednesday, June 13, 2007

New Article by Henry C. K. Liu

I regret that I've not read this article yet, but it is about real interest rates. There are two parts; I've linked the first part only. As you know, interest rates have been foremost on the minds of investors--eliciting a negative reaction yesterday and a positive reaction today.

I'm not sure if I'll get a post out of it or not. Today, I'm just starting to feel like myself, so I'll have a little brain horsepower if there is something there that inspires me to tackle it.

June 12 Market Close

Market top? Rest before rocketing higher?

I surely don't know, but you know that the airwaves, internet connects will be jammed with opinions that play to our fears and uncertainties.

Tuesday, June 12, 2007

Horizon Offshore

I've had the fortunate experience to own two oil services companies that have been purchased. First was THE, purchased by HERO. Today, CalDive is buying Horizon Offshore of which I have 500 shares. I had also picked up HERO when it tanked after the news of the purchase. I actually made more money on HERO than I did THE. I also sold THE too soon. The purchase price was a combo (like CalDive) of stock and cash, so part of THE's purchase price was tied to HERO's. So I could have doubled my pleasure by holding both, but there was risk in that, and I didn't want the double jeopardy either!

There's been speculation of consolidation in the oil services area, but much of that has focused on the larger names. Both THE and HOFF have been under the radar. Lehman publishes some excellent industry reports, and oil services is no exception. I always do my own due diligence, and I picked up HOFF based on that work.

Monday, June 11, 2007

It's not the snake you see that bites you. . .

is the lead in to Jeffrey Saut's excellent market commentary. Of course, with my garden encounter this weekend, the aphorism resonated particularly pointedly!

If you are not a regular listener of Saut, you may wish to add him to your resource list. I thought today's commentary was particularly good. His commentary is not daily, but you can count on him for 3 or so days. The written transcript is available the following day.

I hope that you'll take time to listen to today's commentary.

REITS and Interest Rate Hedges

I cannot help but wonder what the real interest rate exposure is for this asset class. Given the burgeoning of interest rate derivatives, you'd have to wonder how much of their interest rate exposure (to rising interest rates) was already covered.

Sunday, June 10, 2007

Market Respite

This week should prove interesting for the market. I suppose that this will provide some affirmation or either cast aspersions on Friday's indices relaunch (which Gary K reminds was on lower volume). I'm not sure what to think. Admittedly, I've not done too much thinking these last few days other than my being reminded how grateful I am to be born post discovery of antibiotics.

We've been suffering from hateful hot/humid weather, but such are the character of VA' s summer days. The doctor says that the Spring was the worst one he's seen for allergy sufferers, and even those who've NEVER had problems. It was not comforting news, but it certainly explained a good bit of my misery.

It feels good to be on the uptrend rather the downtrend. I figured it was time to stir around a bit, and worked in the garden. We have this wonderful loamy soil. Everything grows well in it, including weeds. So I took a hand cultivator and worked around a few things. It was quite enjoyable until I disturbed a snake in the ground. He literally jumped out of the hole at me causing me to shriek and jump back. He then coiled up under my sage plant ready to attack. He didn't appear poisonous--likely a garter snake. I was surprised by his aggression (and by HIM)--I'm sure he was as startled as I was. He had his tail just a twitchin' and there was a tiny crimson protrusion that was flashing. He wasn't very big, maybe 18-24 inches. I lost my appetite for hoeing and decided to switch to the watering can. I am happy to report that there were no further incidents.

Friday, June 08, 2007

Trustee Sales

(CTML) As trustee sales have moderated in the past 60 days, I've not posted them. However, today, they were markedly higher. They were the highest since January AND 11 of the listings were more than $200K--unprecedented. Three of the properties were the same last name, but different first names. I'll surmise, then, that they were flippers.

Thursday, June 07, 2007

Behavioral Finance--Fundamentals

I found this article on behavioral finance that, for those of you who have an interest in the essence of what it is about, will find an interesting read. Here are the particulars. Click on the title to view the paper.

Behavioral Finance
Jay R. Ritter
Cordell Professor of Finance
University of Florida
P.O. Box 117168
Gainesville FL 32611-7168
(352) 846-2837
Published, with minor modifications, in the
Pacific-Basin Finance Journal Vol. 11, No. 4, (September 2003) pp. 429-437.
This article provides a brief introduction to behavioral finance. Behavioral finance encompasses research that drops the traditional assumptions of expected utility maximization with rational investors in efficient markets. The two building blocks of behavioral finance are cognitive psychology (how people think) and the limits to arbitrage (when markets will be inefficient). The growth of behavioral finance research has been fueled by the inability of the traditional framework to explain many empirical patterns, including stock market bubbles in Japan, Taiwan,
and the U.S.

Today's Market Close


I hope that your portfolios weathered this storm. Here it is June 7, and all of the things that I expected that any reasonable investor would understand about the market and the economy is now coming to full realization. I have no grand insights. I'm like Day 10 into this ^$#!#$^ sinus infection and Day 4 into my antibiotics after my own system failed me miserably! So thinking viscous has been replaced with non-thinking viscous (now where else would you ever read it portrayed that way!).

My portfolio was actually up today, but I'll confess that I've missed out on a big piece of the gains in the market. Trying to time the market is a fool's game. I know that. When you look at the charts and you have the benefit of hindsight it is all so clear. But what you do not have is the asynchronous view of what people were fearing when (collective handwringing, and you've seen it on these pages) v. when the market reacted.

My Portfolio Challenge is still a ????

I wanted to see how I finished in the last round of the CNBC portfolio. Now, I didn't expect to win anything, but I was just curious which strata I ended up in. Here's the message:

The CNBC Million Dollar Portfolio Challenge ended May 25th. CNBC has been contacted by several contestants alleging unusual trading in violation of contest rules among some of the 20 finalists. Once these questions were raised, CNBC immediately launched a thorough investigation to determine who may have violated the rules.
As the rules state, CNBC has until July 8, 2007 to declare a winner. Although CNBC hopes to announce a winner before that date, it is more important to ensure the individual awarded the Grand Prize is in compliance with the rules.

Thank you again to everyone who participated in the CNBC Million Dollar Portfolio Challenge. We will email everyone when final results are available.

Wednesday, June 06, 2007

Today's Market Close

I've been keeping a low profile, as I've been under the weather. Above is today's market close. I've not posted it in a while since we've been up, up and away.

I would encourage you to listen to Gary K's show this evening (I'm listening He's being measured in his discussion of today's market. Here are his numbers to watch for potential breach:

Dow 13423, if breached watch for 13210
S&P 1505

He's not giving numbers yet for Naz or Russell 2000.

Monday, June 04, 2007

Coal Stocks Update

I've been a little under the weather, so thinking much less posting has been a bit strained. But I can operate Hypersnap, so I took a picture of the Coal Stocks as of market close today. Do click to make larger (CTML)

Overall, this hypothetical group has done well, gaining 18% since April 5. I've always believed in the power of the sector in stock valuation. I identified this sector first through my own work first, and then noticed that more folks were writing about them (there is a behavior attributed to this--like buying a white car and then noticing how many white cars are on the road). stock purchase outcomes have always come from doing this sort of winnowing through the stock universe.

It is important to note, though, that with cyclical stocks such as these, while the recoveries are attractive, when they hit their demise, the red ink can flow pretty heavily. The reversals in these sectors can be quite stark--as in 40-50% reversals. I don't like to hold through such reversals, but there are certainly tax considerations if you hold stocks such as these in a taxable v. deferred taxable account. If you have such accounts and you've not thought about allocating different types of holdings among the two, perhaps talking with your financial advisor would be prudent. As they's not what you earn but what you keep.

Friday, June 01, 2007

Retail Pessimism?


Look at the increase in short interest in the RTH--it increased from ~43% from April. I have puts on RTH (Jul 100's). They are not doing so well. I elected to keep the puts, and I bought RTH to soften my short position. Below is today's picture at 11:30 a.m. I'm going to hazard a guess that the buying interest is short covering rather than confidence in the consumer and confidence in the retailers. I elected to close my long position @ $107.63

Addendum:....WMT's recent news is driving this. Their chart shows this identical uptick. Nevertheless, the shorts get squeezed in RTH when good news for a beast such as WMT erupts.