Tuesday, July 31, 2007

A Little Levity

For those of you with nothing better to do, you can find this ad at Calculated Risk. One has to be careful with these ad. Roger Nusbaum had a very suggestive ad (buxom (as in surgically enhanced boobs about 4 standard deviations from the norm) saying that she liked d_ _ c k) but it was an ad for some trading website. Now I clicked on that ad to alert Roger. I did not click on the above ad (which is just a picture).

I'm at the age now where finding the name of my perfect lover is the least of my priorities. Now finding the name of the perfect chiropractor or canine trainer would be something that would interest me!

Today's Market Close

Well, I think that Chicken Harris was in the markets today! I'm listening to GaryK now. He thinks that we are in a bear phase. Make sure that you catch his show.
A couple of days ago I wrestled about whether or not I should send a note to my friends. I've been expecting this market to crash for the last year, so I didn't want to unnecessarily alarm my friends or look like a fool. I elected to send the following note to my friends (yes, I have a few (sic's) in there--but they know that I can spell and am a decent grammarian, so they'll not discount my message based on that:

I'm sending this note to each of my friends with the following large qualification: I’m no market expert.

Nevertheless, I did want to alert you that the credit markets have become all out of sorts lately. I’m not making any prognostications about the market, and Thursday’s and Friday’s weakness in all of the world markets (except for the Chinese Shanhai which is in it’s own world) are reflecting the concerns of a widening of credit spreads. The market typically corrects when the credit market contracts-and it has contracted in a big way. How much it corrects and/or how long it takes to recover is a fool's speculation. I'm not engaging in that or am I tryin to be a Henny Penny. But, I can encourage my friends to ensure that their portfolio can weather such a contraction. I think that it would be worth your time to take a minute to look at your investment allocations and talk with your financial advisor within the next couple of days.

I elected to send it because I would rather look like a fool than NOT give my friends a heads up. Did any do anything? I doubt it, but my conscious conscience (perhaps I'm not even conscious) was clear. Now at the beginning of today I was thinking, "Leisa, you are going to look like a fool." Naturally with the close, I felt less stupid.

Today's Lament: Why the %$!#%$^!$%&&% heck did I sell my MTG puts? I sold because despite all of the long, hard work I put in, I let others (the market pundits) talk me into thinking that I was wrong. Of course, the price action in the stocks supported that I was wrong. I did the prudent thing, and I closed my position--but at a modest profit rather than the obscene profit that could have been mine, mine mine! (maniacal laugh). I also had some terrific ALL, LTR and HIG puts--all of which I should have hung onto. But hindsight is 20/20. Heck, if you lack the conviction, you lack conviction--sometimes one's conviction can lose you money!

Today's Smart Thing: I shorted SRCL @ $49 (watch them get bought out!) because there was a short squeeze on July 27. I've not had the best of luck shorting, but I'm getting better at it. I figured it will be ripe for a fall. I also bought some QID. Both in my taxable account. My non-taxable accounts are mostly in cash (80%). I do have some Sep MDY 152 puts. And small positions in ROG, SEED and QUIX. I had more short positions, but I closed them out profitably before the bounce. I'm sure that I'll wish that I had them.

Good luck to you in these turbulent times.

Sunday, July 29, 2007

Commerce Thrives in the Most Unlikely Venues

The Economist has this provocative, if not grisly, story in this week's magazine. You can find the article here. It is named, "Wet Goods and dry goods".You may need to be a subscriber.

The title of the story is a bit misleading. The goods, as it turns out, happens to be fresh corpses (wet) v. not-so-fresh corpses (dry). We can always appreciate that capitalism will (1) fill any niche that suffers from a supply and demand issue, and for which circumstance once can be handsomely compensated and (2) always prove irrepressible for it speaks to the very essence of our nature: greed. Secondarily, we are alerted to a new place where inflation has cropped up. Here's an intro to this unusual commerce:

"Chinese tradition demands that husbands and wives always share a grave. Sometimes, when a man died unmarried, his parents would procure the body of a woman, hold a “wedding” and bury the couple together.. . .

The practice is most common in the northern provinces of Shanxi, Hebei and Shandong. This is China's coal-mining heartland. In mountainous Shanxi, pit accidents kill many men too young to marry. Compensation to the family is spent on giving their son a wife in the afterlife."

Inventory for such pairings has traditionally come from hospital mortuaries, funeral parlors and body snatchers. Four years ago, fresh merchandise would fetch only a few thousand yuan; however, now such merchandise commands a rather lucrative price of 30-40K yuan equating to $4-5.3K. For that price, more assertive entrepreneurs have resulted to more aggressive grave robbing in addition to murder.

Oh, the cultural binds that tie us! Does it remind you of kidney snatchers?

Here's a little story from my past. I have no idea if it is true or not. My immigrant Armenian grandparents had a store at 28th and M Streets in the 1940's. It is an area called Church Hill--one of those previously exclusively black neighborhoods that within the last 10 years or so recently undergone a renaissance of sorts where now you have to be rich to live there.

My grandmother would tell us about "Chicken Harris"--a black man feared by his community. Why? Apparently he supplied the Medical College of VA (MCV) with bodies for cadavers. As my grandmother would tell us, on Friday and Saturday nights when his fellow black men were engaging in revelry which generally involved imbibing too much alcohol, Chicken Harris would roam the streets in a horse-pulled hearse gathering up those who were too drunk to resist.

I don't know if it is true or not. But hearing this story as a child scared the bejeebers out of me.

Saturday, July 28, 2007

Country ETF performance for the week ending 07.28.07

I have a list of ETF's that I keep. As I composed the previous post, I thought it would be a worthwhile use of my time to show the performance of each of these ETF's as compared with the US indices as a matter of developing of broad view of the global markets. You will need to click on the graphic to make larger.

You'll forgive my laziness (I hope) in not putting in the names of the ETF's.

Reflections of Friday

With a storm last evening, bringing with it some much needed rain, this post is a little late.

One of the things that I’m grateful for is having had the opportunity to be a market observer over the past 18 months or so. I’ve had pockets of having very little time to observe and longer periods, such as recently, that I’ve been able to watch more intently.

I do not know what is to come to pass over the next few weeks as the market grapples with the issues that have nibbled along the sidelines that are suddenly coming to the fore. I keep CNBC on, but it is in a room adjacent to my office. Though I have lots of beefs with CNBC, and I’ll not air them here, I do get some benefit even if it is to provide a counterpoint.

One thing I found of interest was their “Trillion Dollar” survey. All of them dismissed that there was a correction underfoot and believed that we were just undergoing a bull market correction. And I’m not dismissing their view….but it will be interesting to watch how this unfolds and be mindful of who says what so that later one can evaluate the quality of the guidance. I’m certainly not giving any guidance. Though, I still find Gary Kaltbaum one of the best commentators out there. Better yet, his show if FREE.

I believe that many investors have been lulled into a false sense of security through their diversified investments across the globe. I keep a list of ETF’s, and over the last couple of days, I think that every one of them has been in the red. Given that my internet access is kaput, I cannot provide fast facts, but I believe that EZA was down as much as 8% yesterday. This would have been on top of Thursday’s loss, which was likely in the 3-5% range.

I think that in general there is a distinction between diversifying country-specific risk v. global risk. The former you can diversify away; the latter is inescapable, so long as you are in equities. I believe that the dynamics (in so far as I can claim even but a rudimentary understanding) among the currency and debt markets—they are inextricably linked—have created a global risk environment that I do not believe the average investor appreciates.

It is the interplay of these dynamics of currency inequalities and risk complacency of the debt markets that have fueled the incredible rise of all of the world markets.

Now you have heard the same reasons as I have heard.

  • There’s a global economic boom—Agreed, but if all of the central banks are curbing capital expansion by increasing interest rates, why do any consider that NOT to be a reining in of some of that expansion. There is a lag effect, and that lag eventually bites one in the arse.
  • There’s a global liquidity boom—Agreed, but lenders have been complacent about risk. When that complacency is shattered then credit spreads (the difference between sovereign debt and other “stuff”) widen. When credit spreads widen, you lose liquidity. Since writing this on Word, my internet has come up and John Mauldin explains the “dry up” rather well. Do look for it.

And these reasons are REAL reasons, but after a while, real reasons start to lose their connection to reality. Martin Goldberg has the most terrific post on Financial Sense on Line for Thursday, July 26, 2007(Financialsenseonline.com). I hope that you will check it out. He speaks specifically about the discounting of information by the market. It really resonated with me, as the effectiveness of the market’s discounting of information has been a rubric to me. Here’s a quote

Discounting Mechanism? Not Near Market Tops!

A bull market “climbs a wall of worry,” and such is the case with this bull market. However, there is equal wisdom in the saying, “the stock market is a discounting mechanism that discounts the future.” It is this saying that suggests we are close to a market top. Why? Because today’s stock market not only doesn’t discount the future, but it barely discounts the present. This is evident by the amount of significant moves that are occurring the day of quarterly earnings announcements. Tuesday’s Amazon.com quarterly results are especially reflective of a market that not only doesn’t discount the future, but barely discounts the present. It was up over 20% on Wednesday’s trading. Similarly, one of the most visible and scrutinized companies in the word, Apple Corp., was up about 10% in after hours trading based on its after hours quarterly earning report.

A more accurate view of the stock market as a discounting mechanism is that at market bottoms, the market is extremely forward looking as it begins to move higher. The discounting window moves to shorter and shorter term time frames as the bull market ages, until finally at the top, very little if any of the future is discounted. The recent behavior of these large and visible companies to trade instantly and significantly higher based on what is announced the day of quarterly earnings, is a sign of a market that is not discounting far into the future if it is discounting the future at all.

Thursday, July 26, 2007

Today's Market Close

What a day! My portfolio was actually up as I was hedged. So some of my formerly pukey puts perked up remarkably today. I had shorted EPP and I closed that position out today in my taxable account. I could have collected more dollars as I was not expecting quite the sell off that we got. While I left money on the table, I still had money in my pocket. I have no positions in my taxable account as of the close today. So I've plenty of gun powder.

While I lamented my letting my ALL puts and my GE calls get away, today I was not mourning the GE calls that I thought I had sold "too early".

It's worth noting that gold weakened today as well as the myriad of gold stocks. I know that at some websites gold is held out as the panacea for all that it is ill in the market. However, when liquidity is taken out of a market, that reduces inflation fears as well as clips the speculative excesses. It is no more a safe haven than a rattlesnake nest.

I hope that you and your portfolio fared well today.

It's Starting to Matter

Over the past few days, the market has been hesitant. Will it capitulate? I surely do not know, but today is not shaping up to be so hot.

There are two things that have stuck in my brain over these past few months, and you've seen me mention them here.

Thing 1: One of the key contributors of fueling the market is liquidity. When that liquidity dries up, be it through the carry trade unwinding or the hesitancy of investors to buy debt at paltry prices, the party ends.

Thing 2: Market corrections trigger recessions.

Before going to sleep last night I was reminded of the discussion on hedge fund risk, and that the highest probability of hedge fund failure was due to the fixed income market. You've seen at least 4-5 My friends, what each of us has witnessed unfolding is the constriction of the credit market. The great funding sphincter has now girded itself up. Remember when the media was telling us that it was a "subprime" problem? It was never a subprime issue, as you know. Rather, it was a matter of money that was too cheap chasing yield--and that chase was so focused there was no regard for being compensated for risk. Now the LBO kings are having trouble funding their deals.

The news as it has been unfolding, which in my view has been one of the most irresponsible plying of the journalistic trade as it pertains to mainstream media, is now starting to confirm the nascent fears regarding the overall credit market. But you know that, because you have been looking at the sites (such as Bill Cara, Barry Ritholtz, Calculated Risk, John Hussman) that have illuminated these problems and have looked askance at the ebullience of this market.

So we've gone from the ghetto (subprime) to the palace (LBO Kings) but neither are far apart. They both reside in the neighborhood of greed. And, everything that we've heard about the irrationality of what would seem reasonable fears to normal people such as you and me (decline in housing, consumer weakening) was merely pablum.

Wednesday, July 25, 2007

Food Inflation

Mark and I used to watch 60 Minutes as a matter of religion for many, many years. I still have some images in my head from some of the reporting, none more graphic than this one:

A food market place in China that had cages containing cats, monkeys, dogs....stuff we would consider pet-like but in China is considered food.
Now, this image is more than 20 years old. The story, of course, was that it was difficult to feed x-billion of people of China on a daily basis. If memory serves, as GDP goes up, birth rates go down. Nevertheless, as we look at milk and fish and agrarian products, there is no question that the simple price elasticity of supply and demand for food stuffs will make it more and more expensive to eat. It already has.

(I also have an image of their doing an expose of a chicken processing plant. It happened to be while we were eating dinner--a dinner of chicken. We do not watch TV while we eat anymore!)

I suppose that rather than euthanize the hundreds of thousands of unwanted animals in this country, we could merely ship them over to China--or wherever else--as a tasty treat. When you are hungry, I suppose the notion of food changes. Mark and I were talking just the other day (yes, I know that this will sound morose) that if Macy were really hungry, would she attack and eat us. (This did happen in an Innuit village during the flu epidemic in the early part of this century. I think that the villagers had already died; and the animals, dependent on humans for food, were merely trying to survive. But that is different than attacking and eating).

We also asked the obverse question. If we were hungry, would we eat her? Of course, these are stupid questions to ask, because until you are in such a situation you really do not know what you are truly going to do. I'm hoping that neither we nor Macy ever have to make that choice.

Anthony Bordain who is a chef, writer and TV personality wrote a book called . I picked up the book after hearing his being interviewed by Terry Gross on "Fresh Air". It was a remarkable interview. He spoke about how intimate the act of cooking your best and offering it to the guests in your home was. Of course, food offerings are culturally dependent. So if you were in China, Fluffy or Buster might be on the menu. In Peru, they serve guinea pig--it is a delicacy.

His book, The Nasty Bits, is titled after what one views from the fresh kill of a seal by the Inuit. What struck me about the interview was his reverence for the ritual of offering food--no matter what it was. Moreover, he spoke about the graciousness on the part of the receiver for consuming this fare---no matter how dissonant it might be from one's own eating habits. In fact, he stated that it was the ultimate exercise of arrogance, the ultimate offense, to refuse to eat what one was offered. I've referenced this interview before on my blog. So forgive my repeating it. Like the visual image, this radio interview is an auditory memory that I hope that I will always have.

I was reminded of the interview (and the book which I bought based on the interview) by seeing a snippet on "No Reservations" (his TV show) day before yesterday. I've never seen his show previously. He happened to be in Peru eating.....guinea pig.

Tuesday, July 24, 2007

Today's Market Close

I'm having some difficulty uploading the market close from the WSJ. I"ll insert it later.

Do listen to Gary K's show for this evening if you haven't. Market leadership is getting trashed a bit and that is cause for concern.

I was looking at a group of food stocks. All down today except one: SYUT. It's a US company in China that makes infant formula. Here's the chart:

I had some DXD that I purchased day before yesterday as well as some DUG (double inverse oil/gas). Just a feeling. I did close out of DXD. Those double inverse funds are ugly on gap ups (I had one recently and it cost me about $3K). Of course we may have a gap down tomorrow--but I'll not lament.

Sorry for the placeholders!

Monday, July 23, 2007

Today's Market Close

While it is easy to be entranced by the DOW and it's stupendous rise, it's worth consulting the advance/declines. I think that the WSJ did a terrific job adding their market data center. Stupendous.

I do have a confession that I must make. I had $40 calls on GE for August. I let them go on Friday. They are back up nicely today. Hindsight is always a miasmic perspective. Frankly, I'd rather lose the future gain than have the calls be worthless. Here's a picture of GE.
My testicular fortitude failed me on Friday. I did have some gain, so it wasn't a bust. But there is a fine line between conviction and foolishness, and I don't pretend to be able to divine between the two with the best batting average.

Grave Diggers!

The only thing worse than a gold digger is a grave digger. Today I nabbed two. Yes, you know them....Lacy and Macy!

The nice thing about being both a woman and a Mom is that you have these well developed instincts--spidey senses. Though I have no idea why, something made me get up and gaze out the front window of my office. Even without my glasses, I spied Puppy #1 and Puppy #2 (my pet names for Lacy and Macy; I'm not sure who is #1 and who is #2) under the red-bud tree. I went out there and discovered to my horror that they had almost succeeded in digging up my beloved Greta. I could see a portion of the quilt that one of them had pulled up and ripped. Had I been 15 minutes later, the sight would have been much worse. I shudder at the thought.

Our soil is quite loamy. So it makes it easy to dig. And I suppose that with their keen noses that they were able to catch some odiferous wafting some 3.5 ft below the surface. Naturally, I got a whiff or two since that 3.5 ft had been breached by the miscreants. So I repacked the grave; yelling at both of them and working myself into quite a lather. AFter Lacy tried for round 2 of digging, I took Lacy home and locked her in her garage--after round 2 of yelling. Macy retreated out of site. I then looked around for materials to secure the grave (for no sooner had I repacked the soil than Lacy (neighbor's dog) started going for round two. Ugh!

So I found some solid bricks--not pavers which would have been lighter--that I gingerly put into the wheelbarrow--4 trips worth. Why gingerly? As you know, my track record with personal safety has been a bit spotty of late. Wasps came out of the crevice between the stacks, so I suspect that there is a largish wasp nest somewhere in those bricks. I was pretty careful, for among snakes, wasps and spiders there is no shortage of things that can hurt you around a brick pile (or wood pile for that matter). Thankfully, the brick pile was a non-event.

Now I have a lovely brick pattern atop the grave. It was also a good physical work out that I'll likely remember for a day or two.

July 23, 2007

We had a rare weekend in July where there was no humidity. Perfect weather: sunny, beautiful cloud formations-the prettiest I've seen in a long time--and a slight breeze. On Saturday we invited two couples to voyage down to the Chippokes State Park...by water. We put in at the Chickahominy and motored to the James. Chippokes is just east of and across the river from Jamestown.

I've created a link above for any interested, but here's a blurb

Chippokes Plantation, a 1,400-acre farm located opposite Jamestown Island, has been the site of an active agricultural operation for nearly four centuries. Unlike many large plantations along the James River, it was never a family seat during the 17th or 18th centuries, but changed hands frequently, serving as a secondary plantation managed by overseers or farmed by tenants. Named for Choupocke, an Indian chief friendly to early English settlers, early owners of Chippokes included Governor Sir William Berkeley, who acquired the property in 1671, and the Ludwell family, who owned the property from 1684 to 1824. Chippokes Plantation consists of 20 historically significant buildings and structures, including two plantation houses. The River House, the oldest dwelling on the plantation, is a vernacular frame building that was doubled in size in the 1840s. Architecturally, the River House illustrates the continuation of a Virginia Tidewater vernacular tradition, whose beginning can be seen in earlier frame homes, such as Belle Air and Kittiewan.

The park is open all year, but annually, they host the Pork, Pine and Peanut Festival. It's an amalgamation of arts and crafts as well as food that includes barbecue, pork loin or pork chop sandwiches, peanut pie, and fair-food such as blommin' onions, elephant ears and such. The barbecue is always wonderful.

They also have entertainment. Our last visit, there was an Elvis impersonator and some guys playing banjos on a small platform. This year, The Marshall Tucker Band was the featured musical event. The place was mobbed! There were about 3 times as many folks there this year than my last visit.

Lots of folks like ourselves went by boat and anchored in the shallow waters to wade in. Mark said there were about 500 boats, but it looked like half that many to me. However, I do not pretend any skill in estimating crowds--of people or boats. The ride was a wee-bit rough as the wind was blowing a bit. But it was not bone jarring. The day was just one of those wonderful weekend activities that totally takes you out of your element and allows you to be with friends and other people.
My posting of late has been sparse, largely due to my not having any real focal point to write about. I'm trying to find a more balanced perspective about the market---meaning I'm trying to find the right way to weight the obvious hand-wringing items with the obvious possibilities. I know for a fact that I've overweighted the hand-wringing items. While these worries are real, they do have an incubation time by the market.

Here's my mental model:
  • Worries are identified (subprime, recession, overvaluations, fill-in-the-blank).
  • Average investors embrace these worries; seasoned investors commit capital in knowing that the worries are real, but early.
  • Market carries along with no manifestation of the "worries" in stock prices or performance, but the average investor still harbors the worry and stays on the sideline. Seasoned investors continue to commit capital.
  • The average investor begins to question validity of his/her worry, but this is the time that the seasoned investors know that the worry is coming to fruition.
  • Average investor is "in" the market, worries abated; seasoned investor is out of the market because the worries are now manifesting.
I'm going to work on ensuring that (1) I understand the worry (so far I've done a good job of this); (2) I refrain from letting the worry dominate my thinking and activities (grade D); (3) I do not lose sight of the worry, but outline what I would need to see to know that market activity is now reflecting the worry (the arrow that points forward).

I'm sure that this is so straightforward to many of you, but it was not straightforward to me. And, in fact, I've not seen that anyone has really stated it this way. But it makes sense to me.

Tuesday, July 17, 2007

Bear Stearns

No doubt by now you've read the update on the two beleaguered BSC hedge funds. If you've not been updated, here's a blurb:

"The preliminary estimates show there is effectively no value left for the investors in the Enhanced Leverage Fund and very little value left for the investors in the High-Grade Fund as of June 30, 2007," according to the letter. A copy of the letter was obtained by Reuters.

Separately, a source familiar with the funds said the net asset value for the High-Grade Structured Credit Strategies Fund is about 9 cents on the dollar.

There are two critical questions. There both obvious, so you're not getting anything new or insightful here, but it bears repeating.

  • Question I: WHO IS invested in these funds? Since pension and retirement funds have become more adventurous, and since the insurance companies (I went back to HIG's 10-K and looked at their investments in MBS/CDO's). I'm sure that we'll see this stuff popping up. Interestingly, I've not seen any press talking about the WHO (e.g insurance companies, etc). I find that odd. Wouldn't that be good investigative journalism?
  • Question 2: Which other hedge funds are invested in this stuff? There are two things at work. First, you have people who knowingly invested in these instruments. Second, though, people people invested in hedge funds but did not understand the types of investments (activities) in which the fund were in engaged. There will be an interesting parsing out of these two groups in the weeks and months to come.
In the end, I think that we'll have (1) some surpised investors; (2) a call for greater hedge fund transparency; and (3) a lawsuit or two due to misrepresentation of investment risks etc.

Friday, July 13, 2007

Rev Shark/Jim Cramer on TheSreet.com

Jim Cramer interviews Rev Shark at The Street.com.

I keep my subscription to Real Money largely due to Rev Shark's column and that of other contributors. His focus is on market psychology and building awareness around that for both yourself and that of others. There are several videos, I referenced one for your convenience. I hope that you'll take time to view them.

Thursday, July 12, 2007

Today's Market Close-WOWSA

(Click all images to make larger).

From the WSJ's Market Data page:

All I can say is wow. Surprising? I don't think that I've ever witnessed a relief rally first hand. The shorts were murdered. I closed out of some of my positions early a.m. JogyP asked if I were in DXD. I wasn't when he asked, but I started a position yesterday. Thankfully, I had the presence of mind to close out early. Yes, it was a loss, but that loss would have only become worse. I still have my 136 puts.

In my E-trade account, I re-established my WZEN position. (Oh, it is worth noting that DEPO went up again today--but who really knows what a stock is going to do?). Anyway, I had a little bit of money left, so I bought some EGO-Eldorado Gold. It was smashed today on what may be a temp closure on a Turkish mine. Here are my current holdings in this account:
RTK is so up and down!

My Chinese stock (that I found that weekend I spent with the Halter Index), SEED, broke out big time today. I have 1000 shares of this in a retirement account. I bought early June....one lot on June 1 and another lot on June 8.

Here's a one year chart.

I'm not giving you any advice to go buy this stock. They report next week. But what is interesting about this stock is that there is a reduction if not elimination of subsidies that the Chinese gov't has been giving on hybrid seeds. Now this makes for some interesting market dynamics. I also surmised that this would be a nice target for someone like Monsanto. I was doing some research and I saw that someone had written this very thing more than a year ago. I don't typically buy stocks for takeover; I bought this stock because it (1) appeared to be coming out of a base; (2) had fundamentals that I could understand; and (3) had the added kicker of being an attractive target. I will hold this through earnings, and I realize that might be dangerous.

I hope that you had a good day in life and the market--they are two different things.

Wednesday, July 11, 2007

Stock Stuff

Last week I did a "thinking" out loud on Bill Cara's blog about the SLM deal private equity deal. Specifically, with the amount of debt that had to be raised, the waning appetite for bond investors for high risk without higher compensation (meaning that the costs would escalate) it would not be surprising to see this as a failed merger.

Yesterday's news (Flowers' stating that current gov't legislation may derail the deal) brings some confirmation of that out-loud musing. Every now and again I have an idea that pans out. I own FMD--I'm long the stock and I have some SEP $45 calls. I bought those calls with the profit on my $40 calls. So, I'll call it "free money". Basically, it allows me to leave it alone an play out my thesis which is as follows: FMD would (1) be bought out by a larger bank who wanted to add FMD's product to their overall loan portfolio; and/or (2) something would happen in the SLM deal. In fact, just last week, upon writing my on-line musing on BC's site, I was looking at buying some puts on SLM, but decided that they were too expensive.

Personally, I think that the buyers are using the congressional proposed legislation as a red-herring. That legislation has been a known quantity. I think that the buyers are caught in a deadly bond sandwich (a pooh-pooh sandwich!). Bread Slice 1: The bonds that they have to sell to fund the buyout are likely going to be expensive and/or investors' appetite has waned for such. Bread Slice 2: the bonds already issued (to fund the loans) are going to get more expensive with downgrades. Neither slices are bread are palatable. Both are being pooh-poohed by investors.

I also have to wonder if the bond holders for already issued debt for securitizations have some sort of recourse. I'm not expert, and I've not read any underlying docs to possess an informed opinion. But in general, when you issue debt instruments, the debtor has obligation to not do "stuff" that would harm bond holders. Accordingly, you have to wonder if the very act of selling out to private equity and potentially impairing the interest of the bondholders could possible prompt some sort of suit. I may have to see if I can find some information on this.

I sold my WZEN. The stock may be consolidating, but I cashed out. I bought some DEPO on their crash. I bought it at $2.00 and flipped it for $2.31 the next day--a 15.5% gain for 24 hours. It actually went as high a 2.47, but I was happy with the gain. My account is now at $15,379. I broke the $15K barrier!

RTK had some odd activity--run up--toward the end of the trading day. It will be interesting to see what caused it. I didn't see any news.

BAS, my oil services holding is being quite stinky. But I like this company and I'm going to hang in there. The 6.5% loss, though, is an oucher. But, I'm going to ignore it. This is a well run, high quality company.
The Financial Times reports about credit derivatives, and I'm lifting a quote which I found disturbing:

JPMorgan observed that swings in derivatives prices were so extreme they implied “scenarios in which the core of the global liquidity system suffers a serious assault”. But it stressed “the meltdown in the credit indices seem completely at odds” with trends in the real economy, implying it should be reversed.
If you'd like for me to e-mail you the FT article, you can e-mail me at leisa-va@cox.net


The above picture was taken on 04.04.07 and I posted it on my blog. Pulling it out made me realize just how quickly Greta (right) had gone downhill in her health from that photo until now. She was still active and pain free. In fact, I didn't know anything was wrong with her.

Last night I was up wrestling with the decision of going 2 weeks to try a drug therapy. I came to the conclusion upon awakening, that I should not. My decision cemented after hearing her make a sharp bark due to pain--a new development. So I got up and dug a grave under the red bud tree shown in the blog post. I'll not post it again here.

I called the vet--warning them that I likely would be unable to finish the conversation. So I took her in (my daughter drove). I had to pick her in and out of the car, and that process was painful to her. But the procedure was quick and painless--for both her an I.

So now she is in permanent repose under the redbud. I have Lucy under another redbud. My two beautiful bird dogs are gone, and I cannot quite believe it. I now have two dogs. Macy, who you see above, and Chloe, a miniature poodle. It's been many, many years since I've only had two dogs. I think Macy (1/2 American Bulldog: 1/2 houndish mix) will make up for it.

Thanks for following along with me and your expressions of kindness.

Tuesday, July 10, 2007

For Wine Lovers

I'm listening to Gary K, so can you tell that I'm engaging in a bit of free-form blogging. Sorry if it seems self-absorbed; I'm not really that way.

But, if you have not treated yourself to a rose wine made from 100% grenache (or garnacha) grapes, then please go to your favorite wine store and treat yourself to a bottle. My current beverage is a 2006 Las Rocas. I think that you will fall in love with a Spanish, grenache rose. Allow yourself a little romance this summer! There are some wonderful French rose's, but try a Spanish one--very dry, strawberry overtones. You'll love it, love it, love it!

Short ETF's --Today's performance

Here are the Short ETF's sorted by daily performance.

A Sundry Post

Greta: The ultrasound confirmed our worst fears, that Greta had a tumor. She has a mass at the neck of her bladder. The worst possible place. There are no real options. One of her groin lymph nodes is swollen which means that it has likely spread beyond the bladder. I'm going to try a therapeutic treatment for 2 weeks that has shown some success. If her quality of life does not improve (meaning more energy and movement) then we'll have her euthanized. I hope that if and when I get some sort of debilitating, untreatable condition that I might have that choice. (This is not an invitation to debate the subject, but merely an expressed wish).

The internet is a wonderful thing, for I was able to read about the options prior to talking to my vet. It made the conversation more productive, as I felt that I could ask specific questions and draw conclusions. What I've learned, took, is that the incidence of bladder cancer in dogs has increased. It is attributed to herbicides and insecticide usage. And....Scottish Terriers have a many-fold rate higher than other breeds. Likely because their lawns are manicured. But it's worth noting if you have animals and you use the likes of Chemtreat or an EPA-banned substance to give you a beautiful green lawn or to rid your lawn of pests.

Dryer. Our dryer stopped working. Well, though I'm religious in cleaning the filter every darn time, there was a huge blockage--both in the vent external to the machine as well as the machine itself. Please make a note to yourself to check your dryer's external vent and ensure that it is clean. Such a blockage, particularly on older machines that do not have an automatic shut off (as my machine did), can cause a fire.

Asia Market: Will watch carefully to see the response. There is higher trade deficit news, weaker dollar, higher oil, concerns about sub-prime and the consumer (to include the warnings by HD and SHLD). No real good news, frankly. Those Asian Markets pay close attention to those issues. I believe that if the Asia markets take our market performance in stride, then we may have a chance to bounce. Otherwise, we may just be catching our breath on the way down further.

May your portfolio and your sanity weather whatever the market brings.

Monday, July 09, 2007


It seems that all of the bear holdouts are capitulating, beginning first with Richard Russell. I listened to R. McHugh (on Saturday's FSO broadcast) and whose "jaws of death" chart I still have. (We have since cleared the highs then predicted prior to the potential great plunge; he stated on Saturday that he expected the market to reach higher highs). One of my favorite bloggers, Tim Knight, is not registering a blip on the market fun-o-meter.

I have no idea what the market will do. I found it interesting that Bob Pisani seemed to be priming the earnings pump with the "lowered expectations" comment. I'm not sure how 4% earnings growth is terribly positive given the valuations as a whole. That's merely a CPI adjustment to your contracts rather than any true organic growth. Even if earnings growth comes in at 7%, that's still modest if you factor in inflation. I'm just not buying these "good news" stories.

AA's earnings were in, and the reaction was negative then neutral in AH. I don't follow the stock. They kick off earnings season, as I'm sure that you know. With the market at all time highs, I would surmise (not prognosticate) that the market will be a wee bit nervous. Personally, I'm watching the banks most particularly for revision to their loan loss reserves as well as writedowns.

I did note that Fitch is warning of downgrades to SLM's bonds given the amount of leverage required to do the proposed buyout. I have to wonder (1) at what point do the bond investors begin to turn up their noses; and (2) with lowered bond ratings that beget higher interest rates, what will that do to SLM's financial metrics. As risk gets repriced into the market, that repricing (if it operates the way I believe that it does) has the effect of reducing liquidity. Liquidity is what has fueled this market; reduced liquidity will wash it away.

Sunday, July 08, 2007

Post Holiday Post

Things have been a bit muted around our household. On Friday, I received unfortunate, but expected, news about my dog, Greta. They were unable to grow a culture from her urine sample--that means that even though she has pus in her urine, it is not from a bacteria that can be treated. (Apologies if I'm grossing any of you out). Tomorrow I take her for an ultrasound that will likely confirm that she has a tumor. It could also show (here's the hopeful news) that she has something treatable like kidney stones, but that is a lower probability (I should say low probability) prognosis. She's on some kicked-up pain pills, so that is helping her. It is likely that you'll see little in the way of substantive market posting by me next week as I deal with these difficult issues. But, that is part of the business of having dogs whose life expectancy is a fraction of our own.

Just to keep things spicy around here, I'm finding new ways to injure myself. Mark and I took Macy out for an inaugural boat ride yesterday. The last dog that was on our boat was my beagle, Suzy. She's been dead for more than 15 years. I'll say that have a 20lb dog is quite different than having a ~60lb dog. But Macy did beautifully, and we'll take her again. Thankfully we have a top for the boat. It would have been hateful otherwise. While we were waiting at the boat ramp to put our boat in, I settled under the shade of a largish boat (probably a boat in a perennial state of repairs) on jacks. This was a nice respite from the sun. Unfortunately, I was not paying attention and when I stood up, I cracked my head on the v-edge of the bow. While I didn't not knock myself out, I'm still suffering a rather nasty headache and of course have a nice sore spot on my head.

My husband, though sympathetic and solicitous, expressed amazement (and amusement) over the various maladies and injuries that I have subjected myself to over these last few weeks. I generally have an uneventful life. I hope that I'm not soon telling you that I'm pregnant.

I did not make any advance plans for the 4th given Greta's fragile health. But at the last minute, I invited my BIL/SIL over. We had delicious hamburgers with blue cheese and bacon, homemade potato salad (courtesy of my SIL, it was her Nana's recipe) and squash casserole. I made this wonderful German Blueberry cake, which is more of a tart than a cake for you foodies out there. Thank goodness for the food processor. I literally came home at 3:30 and was able to have dinner ready by 6:30--that includes doing some of the EPA cleanup necessary to make our home presentable to outsiders (even if they are family!). We were able to eat out on the deck and be grateful for our great nation's independence.

Squash is the preeminent vegetable in my corner of the world. It is running out of everyone's garden here, though ours is just getting started to bear. I just attempted to make some squash bread. I monkeyed with the recipe, and despite extended the time, I still managed to end up with underdone loaves. Oh well. I've also monkeyed with a squash casserole recipe. This time, I'm using blue cheese (only because I have no more cheddar, and I have blue cheese left over from July 4 that I do not wish to spoil). I also elected NOT to scrape out the seeds of the jalapenos (from our garden). This is likely to be a spicy concoction. But, you gotta experiment in the kitchen--it will keep you from experimenting other places that are likely to get you in trouble or arrested.

I did dig up some potatoes out of the garden. Thankfully, I was not attacked by any serpents, but my head hurt from bending over, so had any serpent shown itself, it likely would have been a surprise ingredient in my squash casserole.

Oh....our weather is not turning to be the hateful kind of summer weather you'd expect in Virginia. I think that it hit 100 today.

My beautiful, beloved Greta has had the most wonderful life that a dog could have. She has also been the most wonderful companion for me. She is MY dog. She has never bonded with either of my kids and she tolerates my husband. She adores me. But with that, she comes up to me truly expecting that I can help her. Alas, I'm not much help. I do lay with her on her dog bed, and comfort her as best I can which in truth is not very much at all.

Please don't read any of this as any sort of lament. I take all things in stride. And this is one of more sad moments that punctuate each of our lives. I'm fortunate to have so many other blessings that manage to tilt the scale to the green. I'm well aware that so many have scales tipped the other way.

Tuesday, July 03, 2007

Play Doh

Here's a YTD performance of one of my accounts. It's an old employer account they used to manage stock options, employee stock purchases. I started with about a $5,500 remainder balance in this account about a year and a half ago. Rather than close it out upon my leaving, I elected to keep it open and consider it purely speculative money. It has been fully invested all of this time. My current positions are RTK, WGDF and WZEN. As you can see the account performance has been rather heart stopping good and bad. It now is valued at $14,600.

Given that it was such a small amount of money there were only just two options: (1) have one holding; (2) buy lots of shares of <$10 securities. I've employed both. Now I don't show you this to brag or make any claim to genius or special knowledge. But rather to introduce the concept of speculative money. No fear money. Money that you can lose. And have the discipline that if you lose it, you give yourself a mandatory time out before having a speculative carve out. Whatever the amount you choose, it should be an amount that you are prepared to lose. And if you lose it, give yourself a moratorium on having any more speculative money at risk. Remember, I'm not recommending anything here. No one could be less qualified to make any recommendations than I. But this is a real account, with real money and real performance. And, don't think for a moment that when the account dropped in March that it didn't give me some pause. Here's the account detail:
RTK is a coal to liquids company. I'll tell you that I bought it completely wrong.
WGDF I picked up from Bill Cara's website (after doing DD). It sat and sat for some time and then broke out. Here's the chart.

WZEN is a stock that I found on my own. I've had it on a watch list. Here's the chart. As you can see it has gotten jiggy over the last three days. I was watching the saw tooth pattern carefully as support was holding. Had it broken, I would have sold.

Anyway, I wanted to give you a little voyeurism for the speculative portion of my portfolio. I'll give periodic updates--even if it turns ugly--as there will heuristic value in that. Each of these holdings could turn ugly fast.

Have a great 4th of July. I'll likely not be posting much.

Sunday, July 01, 2007

Picture Time

__Some pleasant images from my pleasant life___

This is Lacy, Macy's best friend. Lacy is 1 month older than Macy. Macy just turned a year old on June 29. When my daughter brought "her" dog home at six weeks, we had three geriatric dogs. They wanted no part of Macy. At the time we had Lucy (deceased), Macy and Lacy which made for difficulty in calling out names. Lacy would come over every day to play with Macy. We had to supervise at first, for Lacy would grab Macy by her ear and drag her. Macy quickly started to hold her own. The photo below is one from last year when they were both babies. The stuffed baby still exists. It endured many a trip from our house to our neighbor's home. Lacy would playfully steal "baby". Macy would reclaim it.

It's really neat that they are such good friends. My dog, Lucy, used to be best friends with Tim's (Tim is my neighbor and owner of Ginger and Macy Lacy (I really had to make this correction!)) dog , Dusty, a beautiful collie. Both are deceased, with Dusty dying sooner by a few years. Lucy was quite affected by Dusty's death for a short while.
(Lucy/Macy and stuffed Baby)

One of the terrific things about where we live is that we have had the same neighbors (mostly) for the last 22 years. That's a long time. I was but a wee lass at the time. So we have "grown up" together during this time, though there are some age differences. My kids have grown up with Tim's kids. It's really special to have that sort of closeness with your neighbors. They become your extended family.

Below are photos of Macy (L) and Ginger (R) on a joint fetching mission. I had two bumpers, but Macy was so excited to get it she chewed the end off of one of them. I attempted to use it anyway. It sank, but no surprise. Ginger is the "big dog" I mentioned in my post. I call her Gingus Khan.

The pond is Tim's. My kids have spent many a summer day swimming there. It is also stocked with fish. My son had two embedded treble hooks one summer--one in his calf, one in his head. Emergency room visits required! Lucy (my English Setter) also had an embedded treble hook in her mouth-- Lord only knows how. We heard her yelping, and she came home dragging a pole with a hook lodged in the back of her mouth. We clipped the two showing barbs that we could. That act alone is a testament to the extraordinary trust that English Setters have of their owners and their calm disposition. Lucy went to the emergency room for the balance of the hook removal. Oh how I miss her!

What's funny is that just a month ago, Macy wouldn't even swim. We were not sure that she even knew how. For any of you saying, "All dogs know how to swim", the folks on Myth Busters said just the other day (per my son) that saying is a myth. Some dogs do not know how to swim. I'll say that once Macy confirmed that she could swim, she's been an addict. Ginger swims all day long. Lacy is a good swimmer, but likes to draft. She grabs G's tail and G pulls Lacy along. Lacy tried that with Macy. That's how I ended up tipping the kayak and swimming with big dogs I mentioned in my previous post.

Below are the "goat people". That's what I call them. Jack, the black and white goat, is ancient--about 13 years old.

Here's a picture of pure joy--getting a little assisted scratch.

Now you might find the start of my post an odd thing to say. But two years ago, on a beautiful Sunday like today, I would be in my office (at job) slogging through all the stuff that built up during the week, so that I could face Monday without tearing my hair out. Or, I'd be in an airport. So my life is so much more pleasant now. But that pleasantness brings with it a certain level of sadness of all the beautiful days such as today where I never romped with my kids, dogs or goats. However, if I had to do it over again, I'm not sure that I would make any different choices. I've not caused my husband or kids any harm, or even myself for that matter and was able to enjoy a career that afforded me the luxury of having a more flexible schedule now after so many years of inflexibility. Perhaps I enjoy these things all the more now because of then.

The point is. . . living in and truly being in the present moment, whatever that present happens to be, rather than wallowing in the past or fretting about the future, is really an art form. I cannot say that I've perfected it, but I'll say that the pictures above are a tangible reflection of my doing that and feeling great joy. I'm not trying to sermonize, rather share with you a moment of my personal reflection.

I hope that you did something fun and relaxing over the weekend.