Sunday, September 30, 2007

Bank Earnings Reference

As a followup to my earlier post, please read the above by Mish on bank earnings if you have an interest AND MOST PARTICULARLY, if you have an invetment.

Saturday Dog Transport

12 puppies in 7 carriers.
They whimpered.
I sand to them "the puppy song" (1)
They slept.

Even when I had to lock up the %#@ brakes and all of the transports lurched forward, they were quiet.

Two dogs were unable to make the transport due to lack of volunteers. They were euthanized. A fact of life. An unfortunate fact of life for unwanted animals. Unwanted, unsponsored people generally die a slower death from hunger and disease.

If a civilization is to be judged how it treats its most vulnerable members--all living things--I fear that we will be judged harshly. Deservedly so. And sometimes, I find the shame overwhelming. That, my friends, is always a call to action.

(1) this is a silly song that I sing to my own dogs. Feel free to use it with real babies or your furry friends.

Yes I am a baby,
little baby.
The sweetest little baby,
little baby.
A bu, bu, bu, bu baby,
little baby.
The sweetest little baby,
bu, bu baby.

Where is your money?

Federal Regulators closed down NetBank on Friday. Why? Loan losses from subprime mortgages reduced the bank's capital below requirements. Take for granted the FDIC guarantee requirements? Look at this from the Financial Times:

The FDIC said NetBank had approximately $109m in1,500 deposit accounts that exceeded the federal deposit insurance limit. These customers will have access to their insured deposits but will become creditors for the their uninsured funds.

Saturday, September 29, 2007

Doc and Stock

This is a long post. I'm feeling chatty today. I have another dog run--I'm driving to Springfield today for a double run due to the great need. Plus, I have book club. So I will not be checking in prior to tomorrow.

Our fence is almost finished, and our marriage is intact for the moment. Already, we can see that the dogs are not very interested in change strange vehicles. A white van passed through yesterday and nary a look was given to it. Generally there would have been some energy expended toward it. No positive energy. I'm sore this a.m. from tamping posts. I only tamped three, but these aren't muscles that I use in the ordinary course of business!

Yesterday I had to go to the Doc (annual exam that I last had in 2000). That frequency is on the level of locusts visiting you! I have a distorted since of the past. I would have guessed that it was 4 years. The Dr. L delivered my two children. He's probably just a wee bit older than I am. I adore him. He has a heckuva practice having left one to the larges ob/gyn groups.
When I became pregnant with Hannah, my current GYN was just that. No obstetrics. He was too old, and it was too much liability. So he recommended Dr. L. He never took on a another doctor. So he's had a lot of years of being on call. He doesn't look any worse for the wear.

After more than 20 years with an office in the hospital's medical office building, and his literally being just a few dozen steps from the labor/delivery room, he is now about 1/2 a mile a way. I laughingly said, "So have they built a tunnel for you under the road?". "You know that they have for me?", he said slyly. "A Segway". This is essentially a two wheel motorized scooter. After completing my appointment, running a couple of errands with an end bounty of wine and note cards, and having lunch with the person who took my last position, I drove past Dr. L's offices. Sure enough, that handsome devil was on his Segway on the way to the hospital. The road that he must travel is quite busy. He has no helmet. I see not good in that.

Second, the Stock part. My day started off with a grand surprise. About 3 months ago, I lost a gold bracelet. It's an Edwardian (1910) bangle, hollow core bracelet with etching. It's about 1/4" wide and oval. It clasps, without a safety chain. That bracelet has opened on me and fallen off several times. I took it to a jeweler to see about getting a safety chain. He said that he would not alter the bracelet. I purchased the bracelet on E-bay. I don't remember what I paid, but it was not quite $200. I've bought several pieces of estate jewelry off of E-bay (same dealer).

I was upset about losing the bracelet. I wear it 24/7. So when it went missing, I felt a sense of loss. I was gassing up the T-bird and while the pump was going, I was picking up miscellaneous trash off the floor, and there it was. Under the left hand side of the passenger seat. As it was open and tilting upwards, when I grabbed it I thought it was a piece of plastic trash. No gold or glint could be seen. My heart soared at being reunited with my bracelet.

"Now what the heck does this have to do with stock?" you may reasonably, if not impatiently ask. Well, when I returned from my cornucopia of errands and look at my E-trade which houses my gold stocks, I was pleasantly surprised to see that they had gone up. I did lighten my position in WGDFF, by selling off 800 shares at $3.24 earlier. But, my account is now over $18K (you remember when it went down to $13.8K?) Quite a bounce back! Of course, it could come crashing down at any time.

Banker asks of the amnesiac quality of the market. Subprime seems but a bad dream. Well, the come-to-Jesus discussions with stockholders when the great kimono is opened for the September 30 earnings releases is just around the corner. Perhaps October is such a volatile month for the market because it coincides with 3rd quarter earnings releases. Whatever ills are facing the economy and the market, they can be shrugged so long as there is no empiricism (earnings releases etc) to substantiate the fears. To this observer, at least, that is what I gather.

While the 09.30 kimono opening will provide disclosures on markdowns on loans due to market valuations, the bad debt writedowns will be ongoing. I'd bet that you will see a bifurcated mix. One thing that you may not know about Sarbanes-Oxley is this. (I don't pretend to know much--my subsidiary was immaterial to the whole organization, but they spent LOTS of time on my contract reserves as we had 100% performance guarantee contracts--meaning we could lose ALL of our revenues on a contract, if we did not meet promised milestones. God it makes me shudder. But reserving TOO MUCH under SOX is just as bad as reserving TOO LITTLE.

As you've seen me write here before, some of the disclosure language on the loan loss reserves were specious. Management was basing reserves based on historical performance. Historical performance was PRIOR to the crappy loans being made. It's mixing avocados and porcupines (there so different you cannot even stay in the same genus!). I imagine expectations of future losses may have been realigned a bit. BUT, know this, those expectations are going to continue to evolve as reality gets reconciled with expectations. Route 1 would be reserving as possible (within regs) as investors are already expecting it. The future surprises will be minimized. Route 2 would be de minimis writedowns (oh, they can make it fit guidelines, and they were careful about how they stated that in some of the 10-K/Q's to give them wiggle room) now and death by water torture as continuing (and surprising) future writedowns are made.

Has the market forgotten? No. But it is party on until the clock strikes midnight. That the market took a quick dive yesterday after Poole's comments tells me there are some nervous folks out there. I think that there is a large contingent of the market that thinks that there will be so much liquidity from the infusions that the market will go straight up. We still have the Fed discount window securities buy-backs. Have these firms proffered the funds to buy back the tainted securities that they proffered? I don't know. Seems like there is a bit of silence on that.

I'm not sure that I'm buying the Bernanke put. But that is why this blog is called "The Perplexed Investor" not "The Intrepid Investor". And it is the divide between being perplexed and being intrepid that all of us need to conquer in order to become exquisite investors. And I'm sincerely trying to find that middle ground.

I'm pressing publish without really proofing. I need to load up the car with my transport stuff. Enjoy your day.

Tuesday, September 25, 2007

September 25 a.m.

It will be interesting to see how this week unfolds. It is the end of the quarter, and there will be some powerful motivation to keep the markets up. Yesterday seemed to be a bit of post-Bernanke euphoria hangover. Lots of chatter about how the markets will blast off into the stratosphere because of central bank infusion and contrary chatter that the sky is falling. Naturally, what we experience will be somewhere in between.

John Mauldin had an interesting letter about Black Swan's and mentioned in detail Talem's book, The Black Swan: The Impact of the Highly Improbable.

Our friend, Russell, is so well read on all of this stuff. I don't think that I've mentioned a book (either market related or otherwise) that he has not had some passing experience with. In a nutshell, there is an "accepted" body of knowledge based on what is derived, divined, devised from what one can observe in a Gaussian Curved universe. If you wish to see a number of different Gaussian Curves, please click here. I've lifted one for you. I chose it for beauty and functionality, and you will recognize it instantly as the "bell curve" . There's an equation, too, that's the functionality!

But, and the but is a big one, in the tail of the these curves are the events that have small probabilities, but could have a big impact. In pharmacy it's the renal failure or cardiac event caused by a medicine. Sure, they might be low probability, but when they happen, they are literally life changing.

The Black Swan attribution comes from the thought that all swans were white. In the observable universe, which at the time did not include Australia, each and every observation--by those chronicling and opining on the nature of swans was white. Then trekking to Australia, those c'ing and o'ing on the nature of swans found a black one. Now, finding the black swan was not akin to suffering a cardiac event, but it was a shock to one's perception on the color of swans.

While in real life, in order to accomplish a thing, we have to systematize and build a structure of understanding that fits neatly under the curve. One cannot live his/her life fearing the black swan. Nevertheless, it is a useful to think about your endeavors and what the nature of the black swan that might paddle into view on that serene pond or lake that you call your life.

Sunday, September 23, 2007

My Saturday Dog Transport Experience

I wanted to share with you my volunteer experience from yesterday.

When I adopted Daisey, C. did my home visit. She's a terrifically interesting person, and I'm so happy to have met her. She's on her second career, going to nursing school after serving in a challenging career in environmental work. Obviously since she does home visits, she is an animal lover. She also participates in dog transports. She was telling about dog transporting when she was visiting, and I offered to help sometime. Well that 'sometime' was yesterday.

These animal transports, consisting mostly of dogs/puppies, but some cats/kittens as well, are designed to get animals from point A to point B--with point B being a foster or forever (adopter) home or a breed-specific shelter. Many of these animals were rescued from pounds that would otherwise have euthanized these animals. In fact, my recently adopted English Setter, Daisey, was rescued from a pound. She was in her shelter (where she was well cared for) for nine months. She went to a permanent home. She was returned because she was digging in their yard. (I hope that you are rolling your eyes and saying, "Oh Pleeeeeezzzzzzz").

The I-95 corridor (east coast) is one of the main routes. Saturdays are transport days, and there are many different transports. Several transports use the same drop off points. In Fredericksburg, my end destination, I saw at least 3 other vehicles awaiting their charges from other transports. The transports are divided into legs, and a number of volunteers must be gathered. It is an effort to organize, and ours seemed to be planned with the precision of a successful military campaign. If we were to dial back about 150 years, these are the same types of folks that would have been organizing the underground railway for slaves.

When the crappy stuff happens and you see the nutty folks in the news that make you think that humanity has fallen off the cliff, I hope that you'll slap yourself back to reality and realize its the nutty folks that make headlines and sell newspapers. The people who work day in and day out for a cause that speaks to their passions--such causes that make this harsh world a bit easier for this earth's inhabitants (people, animals, environment)--do so under the radar screen.

Our transport was as follows:
  • 15 dogs (unbelievably sweet, hard-to-imagine-they-do-not-have-a-home dogs)
  • 7 legs
  • 11 volunteer drivers--that doesn't include the other folks organizing and other help along the way
  • 526 miles from NC to NJ
  • 10 hours
Along the way, the dogs have to be exercised, watered and relieved. Because of the commonality of these drop off points, great care must be taken to ensure that puppies are not exposed to the ground where horrid illnesses could be lurking. Moreover, each adult dog is watered independently in separate bowls. Naturally, all feces is picked up immediately. Newspaper, water jugs, paper bowls, paper towels, hand sanitizer and baby wipes are part of the tool kit. Patience, love and a dexterity go a long way in helping these animals have a pleasant journey. A biscuit or two provides a welcome treat for the long ride. But, too many biscuits could spell trouble!

I had the privilege of transporting these two sweeties, Betsey and Zana.



They were unbelievably well-behaved. I removed Betsey from her transport, as she was clearly stressed to go back in (baying!) after being walked. She settled down immediately on my front seat, nestled in her gray, microfleece blanket. Certainly softer than the transport. Zana settled quietly in the back seat. Both were securely tethered to the handles above the door (that people would use if they needed some extra stabilization during scary driving). No one has had to use those handles in my car, and I am glad to find a use for them. I turned up the air conditioner, so they would be comfortable. My toes were a little cold, but I wanted my guests to feel pampered.

Now, did you notice those Liz Taylor eyes on little Betsey? Well she looked at me soulfully with those eyes during the drive before settling in. I had my right hand on her, scratching her ears and rubbing her body. She was very well cared for, as her fur was clean and silky soft. Before she settled into "winkie land" (sleep) in the front seat, she groomed a bit. To my delight, she then started making what I call "monkey faces"--where a dog takes both paws and reaches behind her ears and rubs forward on her face toward her nose. Greta used is the only dog that I've had that ever did this, and she did it when she was happy. She would also make a happy, low vocalization when doing this. She taught Lucy (that old bad girl!) how to do it. It's funny how dogs model each other's behavior--for good or naught! While Betsey was doing this she was playfully biting on her right ear. It was quite cute, and I fell in love with her at that moment.

Zana was equally sweet, but she was in the back seat. She was a young dog, 10 months old. She was interested in sleeping and did so immediately. Both had impeccable car manners and were a joy to be with.

Also this week (how timely) I caught a bit of a documentary called Shelter Dogs If you are interested, you can learn about this film here. It was a very intimate portrait of the staff at this shelter and the difficult decisions that they must make regarding the fate of their charges. You may need a hankie.

Whatever your cause and passion, I hope that you'll take a moment to renew your commitment to it in a way that suits your time, energy and pocketbook. What I did yesterday was a small commitment of time, but it was one of the most rewarding few hours of time I've spent doing something for others. And if you are an animal lover, and think that you would enjoy doing something like this, I'm sure that you could contact your local animal shelter to get hooked up with an opportunity.

Thanks for stopping by.

Thursday, September 20, 2007

Upcoming Anniversaries

On October 1st, I have two anniversaries.

One year anniversary of this blog: I began this blog with this first post

I wasn't quite sure that I would find enough to say, or that even anyone would care to read it. Over the course of the year, I've written 511 posts (this one will be 512) and enough people have cared to read it for me to feel like I'm not writing in black space. So I thank you for visiting me periodically and for leaving your comments--all of which I cherish.

25th wedding anniversary. One of the comics I enjoy is Speed Bump. The timing was almost impeccable:

Mark and I are putting up a fence to keep our bad dogs at bay. They like to chase cars and motorcycles. For some reason, this project has been a source of contention, and my input has been categorically dismissed. I'm going to make my husband a card with this on the front of it.

Of course, part of being married is like being a parent or a good team mate. You have to be very choosy about the battles you pick. I'm choosy about my battles, but I'm also tenacious if I choose to enter one.

Interestingly enough, on the front page of the paper, there is an article about 25th wedding anniversaries. It was courtesy of New York times and you can read the article here. It's really about depressing statistics about the number of people who reach this time of marriage that is equivalent to one's reaching young adulthood. Less than one half the people married who would have been eligible to reach this anniversary will not. It is the first time this statistic has dipped below half.

While I'd like to say that it has been easy. It has not been. In fact, the advice I give young people is to be prepared to endure periods that are not so pleasant. I'm not talking abuse in any form, but just not getting along. I was 19 when I met my husband. He was 24. Now I'm 47, and he is 52. Well, everyone goes through transition in that ensuing time. And the space between the two of you expands and contracts. Relationships do not always adjust easily. Ours didn't; but we got through it. Are we in it for good? Who's to know? We are going to try to.

One of the best things that I've ever heard that helped ME deal with my issues is this. It was by Joseph Campbell from his Man and Myth series. (It should also be noted that he had a reputation for being a womanizer. Albert Einstein, too). Campbell speaks of the importance of compassion in a relationship. Also he emphasized that many of the problems in relationships (ex out abuse for this) is due to NOT what the other person does, but rather how WE react to it.

I think that many people get into relationships thinking that the other person needs to change. I'm not saying anything new here. But the object of change is not the other person, but ourselves. And if we really articulate what it is that bugs us about the other person (oh and I have my list as does he), there is not one thing on it that speaks to anything but something that is an irritant to the other person that could be cured by that person changing. So when I find myself irritated, I try to look first to myself prior to my getting out my let-me-make-you-change wand. That doesn't mean that I don't brandish the wand. Trust me, it is useful and people DO appreciate it when you get it out (right!). If you are going to brandish a wand, you must do it with compassion.

So there is my story. I don't think most people would have bet that we would have made it this long. At times I'm surprised, as is he. We built a house together, have almost finished raising two kids and now are trying to build a g-d fence @#@%#@#^%. But even during the worst parts of our marriage, we've with few exceptions treated each other with respect. I can count on one hand the number of times that we've breached that. I've seen couples treat each other badly.

Now, for people who get a divorce and remarry, the time span is 3.5 years. And, second marriages that end in divorce last about 8.6 yrs for men and 7.2 years for women (don't ask me why they are different). I'm going to be like the Fed and do a one and done on the marriage thing.

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$17K Mile Marker

I post this with trepidation, for all could change tomorrow! The surge is due to gold stocks which have done very well. Remember, this is a speculative portfolio. I was tempted to take some money off the table, but I'm going to keep this as my USD hedge.

Here are 10 day charts on both:

The Funny Pages

I'm not a big fan of newspaper articles--journalistic writing is generally frustrating to me. Our local paper is the Richmond Times Dispatch. I find the editorial pages (now that Molly Ivins is gone) unbearable to read. They're leanings are far right, and I tend to be more liberal in my view. But I've been incensed enough to write a few letters to the editor. All of which they publish and most of which earned me "Correspondent of the Day" status. I wrote a letter to Barron's, too; and they published it (to my delight!)

When I was regularly in McLean, VA, I used to get the Washington Post which I loved (even the articles). I mostly loved it because of the better selection of comics. I LOVE comics (though I don't read comic books). I read them all. I don't like them all, but I read them nonetheless. In fact, that is the only thing that I read in the paper as most of the news is stale given the internet's instant access to important stuff. And it is the comics page that brings me to my post.

Funky Winkerbean is one of my favorite strips. It is written by Tom Batiuk. He tackles some very difficult story lines. The one most currently is Lisa Moore's battle with cancer. I almost wrote unsuccessful battle, because surely she will die. But I took out unsuccessful. She has very successfully battled cancer through her grace and courage and using her disease as an agent of change (through her trip to Washington, D. C.) as well as through her continued engagement with her life and loves despite this ravaging disease. Should I have to face such trials, Lisa's example will be one that I hope that I'll emulate her. If you wish to read some background, click on the Funky graphic. After reading some of the negative feedback about this morose, to some, story line, I wrote this:

I was writing in my blog today how much I enjoy your strip, particularly the sensitivity and humor in which you are evolving Lisa's story line. As I was writing my blog, I thought that I would do a search and came to this page. Because of the negativity reported in the bio/interviews, I wanted to take a moment to let you know that I'm a huge fan of your strip. I've been reading it (as has my husband) for many, many years. We feel like these characters are part of our life.Thank you for tackling the issues that you do--they are important, and sometimes the medium of comics is a way to gently get people to think about their own perspectives regarding such difficult subjects. More importantly, though, giving them a counterpoint to their perspective by offering a different, often gentler, more humane view is how one engenders change. I admire your intelligence, energy and humanity in which you bring about such change.

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Tuesday, September 18, 2007


Beetlejuice! Beetlejuice! Beetlejuice!

In the movie (1988) you could say the above three times and summon Michael Keeton playing Betelgeuse. I'm not sure what happens if you say it now. Clearly, something should be said three times.

I would say that I was positioned neutrally ahead of this. About 60% cash, 30% long and a 10% impetuous, foolish short which I quickly covered with no real harm done. EGO and WGDFF, my gold stocks have done quite well.

I don't think that the Fed being so compelled to move is good. Yeah, I've heard the the same stuff that you have about the stock market soars when the Fed starts cutting. Is that true when the Fed is cutting to prevent the banking system from grinding to a halt or to keep homeowners from jumping out of the window. The PREMISE for this rate cut to be positive has to be that it will provide stimulus to the economy. Here's what I think for what it's worth:

  • The Fed cut provides triage to the financial system and homeowners. I do not think that this will be stimulative.
  • The dollar is toast--it fell today so look for higher commodity prices.
  • Higher commodity prices put the kabosh on the consumer in many ways.
  • Food inflation which hits everybody's pocketbook is only going to get worse.
  • If the economy is in danger to the extent that the Fed thinks to bring about this double bowed gift (1/2 point decrease in Fed Funds and 1/2 point decrease in Fed discount), then look for pressures on corporate earnings. Earnings will decrease but stock prices are rising! John Hussman is going to love that given that he thinks that things are already overvalued.
Having said all of that, I think that as the dollar strengthen from whatever bottom that it is or will make, our stock markets will be attractive.

I also think that this massive movement had the explosive feel of a short covering rally (I still remember the fellow on CNBC saying he would short hand over fist into last weeks's rally. He must be crying now.) Surely some boats were floated that were not deserving.

I sold my 800 FIG shares into this strength. It shot up and I closed out at $19.40. It settled at $18.91. Oh, it may go higher, but I bought this on a technical basis, so I was happy to exit it and lock in some gains. I also sold the last 200 shares of my UNG today.

I noted that USAP went up 15.5% today. They had a big short position--you might want to watch it. I'd watch it for a potential short.

I hope that your day was good. Certainly, if I were more fully invested, I would have had a greater gain, but I've been happy with my portfolio performance relative to my risk exposure. I've trade 1 account that amounts to about 1/3 of my total portfolio and I squeezed out an 18% gain over the last 30 days. It has been arduous trading. That percentage was 25% until I had a couple of unfortunate Friday and Monday. Easy come, easy go. But it really never is easy!

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Sunday, September 16, 2007

September 16

The above is a photo (not a good one) of my neighbor's water wheel taken in April.

This week was a positive week for the market--particularly strong TH and FR, but on light volume. As you've heard ad nauseum, Tuesday--09/18) will be a critical day. I'm quite sure that there will be something to both delight and disappoint a great many. I do not pretend to know what it is. I found Jeffrey Saut's commentary interesting. Why don't you listen to it? See link in Info Mosaic.

Gary Kaltbaum and others are fond of saying that it is not the news but the REACTION to the news that matters. While this makes perfect sense, I think that you have to modify your interpretation of that action through understanding whether or not the market participants are net long or net short. I've mentioned this here before because of my surprise at counter-intuitive moves in stocks. Just keep in mind that if in a stock (or a market) participants are net short expecting negative news to cause negative price action and the news somehow smells more fragrant than expected, then you'll get short covering. Short covering provides massive upward thrust in prices. Watching short covering rally in a stock is as exciting as watching July 5 fireworks.

In order to ACCURATELY gauge the temper of that reaction, you have to know if people (professionals) are net long or net short the market or the particular stock that you are following. Crappy news IS crappy news, but if the crappy news isn't odiferous enough, you'll witness a rally that will make you scratch your head. The key is to watch for subsequent action. Much of this week's positive action was due (purportedly on CNBC, but it makes sense) was due to short covering. There was one fellow saying that he would be shorting hand over fist this (last) week into the Fed decision. I'd be a little afraid to do something like that. Most of the short positions I have taken were just during the day--I'm too much of a weeny to hold overnight.

I must say that SEED and MIND have been very poor performers. I'm hanging doggedly on. I expect MIND to recover. SEED, I'm not sure about, but I'm holding. Selling seeds to hungry Chinese seems like a good bet long term.

I read with interest about the gold carry trade which I must embarrassingly admit to not knowing a thing about. I know that many follow with great interest all aspects of gold and fiat currency and the like. Personally, I like have a Fed, and it seems that de-linking currency from gold has enhanced global trade. I'm not disputing all of the ills that can go with it--but in all likelihood it isn't going to change. Nevertheless, much energy seems to be expensed in the dispute of the ills, of the current system. To this uneducated eye, it seems to be more of a good thing than a bad thing. I'm not inviting discussion, just voicing an opinion that I don't have the energy to be disabused of!

If you have time, do listen to FSO's 1st hour. There is a discussion about the gold carry trade which you can also read Michael Kahn's article here if you are a Barron's subscriber. Essentially, central banks would lease their gold out to dealers who would then sell it. The dealers give the banks money which the bank then invests in income producing assets. The dealers then sell the gold (which they are leasing, not owning) which is a short sale--similar to your borrowing shares from your broker to sell short. At certain points in time, none of them opportune, your broker may ask you to cough up the shares.

Like most carry trades, when there is stasis, everyone is comfy and things work in accordance to the expectations of all parties. But stasis is never a lasting thing be it love or money, and this situation is no exception. Now that gold is starting to ramp, then a bank who has leased it at, say, $500, would most likely like to have it back so that can least it at $700 (or whatever the price might be). Well, I'm not sure how much gold has been leased, but if the bank comes knocking on the doors of the dealers/short sellers then guess what happens? There's a buying frenzy. And whenever there is a buying frenzy that means prices go up. But when the buying frenzy subsides, prices go down UNLESS, there are sustained fundamentals to justify the new price.

I think that one of the most useful things I've ever read is that both upward and downward moves are often overdone. One can arbitrage that in the short term, because in the long term, price always gravitates to fair value. You might want to try to develop a practiced eye for (1) identifying candidates for short term ramping or dumping; (2) quickly doing some recon to determine the reason for it; (3) reviewing the subsequent price action; and (4) making some evaluation probes with some of your speculative money to take a short term position--either shorting or buying to arbitrage the over-reaction. Being familiar with a bevy of names to understand their business and basic stock action goes along way toward tilting the odds of success in your favor. But you must be both knowledgeable and quick and of course being lucky helps too!

A bone or two for you to chew on:

HERO seems to be breaking out of a price channel. I like this stock. They purchased TODCO which I owned. Lots of insider buying, good fundamentals and good technicals. You might want to put it on a watch list. I own this stock in my non-taxable account.

I did pick up some Fortress Investment (FIG). I have no idea what this will do, but it looks like more upside than downside. At the very least, the shorts appear to be getting squeezed! (Lots of shorts in HERO too).

I'm off to enjoy this beautiful day. I walked/ran with my puppies--for about 3 miles which is good for me. They love these walks/runs so much, it provides me with a good incentive to get moving. The weather makes it easy to shrug of lethargy that settles in when it is so hot outside is saps you of all your energy. I love to be out--even when it is very cold. I'm a big believer in high-tech fabrics--both for hot and cold weather activities. One has much more flexibility in moderating his/her comfort when it is cold than hot.

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Wednesday, September 12, 2007

Various Ruminations

Dollar Index: Roger Nusbaum had a post regarding another's prediction that the dollar index could go to 66. Kind of scary when you think what it would mean for oil. If the USD were to tumble to this level (17.5% decline from current levels) then that would portend higher oil at $91 per barrel (assuming all other things remain constant).

Bernanke surely has a sleepless night or two himself. The dollar vs the economy--surely feels like a King Solomonesque decision. Sacrificing one or the other is tough. Oil at $91will likely have bigger effects on the economy than leaving interest rates unchanged. I still cannot believe the increases in simple things such as milk (50%) and bacon (25%)over the past year. Events and information will unfold as they will. Makes me glad that I'm a minion.

Daisey: What a joy it has been to bring this dog into our lives. She is thriving in her new home. It has been good for Macy to have another dog in the house that interacts with her. My previous geriatric bird dogs did little interacting with Macy. Macy's main canine companion was the dog next door, Lacy. While some of the interaction between Daisey and Macy looks like a Michael Vick exposition, in general, they are very playful and loving with each. Those dog-dominance "work-outs" are a bit unsettling. I did notice a small tear on Daisey's ear, but it was already healing. One time my dog, Heidi, got into a smackdown with a neighbors very nasty, mean labrador while we were walking on the road. It was unprovoked by Heidi. She held her own but ended up with a very large (1.5") in her ear that required stitches.

Macy continues to sleep on the bed. Daisey sleeps beside the bed, though, she gets in the bed in the a.m. to "snuggle". Housebreaking continues. Daisey seems to get up in the middle of the night to piddle. I will likely tether her to my bed so she doesn't wander (this is why professionals recommend crates!). She gets taken out at night, but she slurps galoobs of water. I don't like to limit water, but those midnight piddles are not welcome. Thankfully, number 2 deposits have been quelled. I have no carpet in my home. Carpet and animals do not mix.

I've been taking them for walks. I ordered and received my second Flexi-leash. If you have dogs, a retractable leash is welcome. Spring for the more expensive Flexi-leash. Terrific quality. Pet Mountain has them at a discount. Unfortunately, my right shoulder has been injured, so it is hard to walk these dogs with an injured wing. They are pretty good about not pulling, but I have to pull them in when cars come by (though not many).

I simply cannot walk Daisey during the active butterfly time. She is mesmerized by them. The stark contrast between breeding of Daisey (English Setter) and Macy (Am. Bulldog mix) is amazing. Every fluttering insect attracts her gaze. And these dogs go immediately into stealth mode. They instantly freeze and point. Then, step by step, inch by inch they move in slow motion. It's like watching a cat. Then they go into fast forward mode! Macy could not care less about butterflies, but boy does she like to chase motorcycles.

My BIL/SIL have invited my husband and I to Hatteras the second week in October. The weather will be perfect (unless there is a storm brewing). We are trying to figure out what to do with these dogs. My kids are old enough to fend for themselves (under the watchful eye of my neighbors who will look for odd things--like cars and parties!) for a few nights. But these damn dogs are like children. Mark and I also have our 25th anniversary (and I've not planned a thing yet!) on October 1. I guess we'll figure something out.

Earthquake in Indonesia: 7.9 magnitude earthquake the day before Ramadan. Tsunami alert. 230K lives were lost in the last tsunami that hit Sumatra and surrounding area.

Tuesday, September 11, 2007

E-Trade Update

I've finally surpassed the $16K mark. Just a few weeks ago, it went down to about $13.8K. I was steadfast (though my sell finger was twitchy!). My $5K account about 18 mos ago. I call this my "speculative" account. With gold's surge, my two gold holdings have done well. SEED, on the other hand, has been whacked. I have it in my retirement account at a higher basis than you see in this account.

I'm going to take GemmaStar's tack and just hold this. My MIND was whacked --I'm down almost 15% from my purchase.

As you can see from the above graph, the ride has been bumpy!

Saturday, September 08, 2007

Curb Your Enthusiasm

My husband is a huge race (NASCAR) fan. He has traveled to see quite a few races. He and I went to Las Vegas with another couple to see that race. It was my first and last race. This weekend (as it is two weekends each year) the race is in Richmond, VA. He, along with two of his friends, have tickets in the newer section. So my son and husband went to the race. My daughter was out with BF. I was at home enjoying some wine and the company of my puppitos. Oh, and the TV which brings the title of this post into play.

HBO was showing Curb Your Enthusiasm in back to back episodes. I've not seen the show in a while. If you are not familiar with the show, the main character is Larry David (of Seinfeld producer/writer fame and played by himself). His character is basically an asshole--but I think a well meaning one, which I don't think provides absolution! If you remember any of the Seinfeld episodes where you cringed wondering how any sane person could say or do the things that those characters repeatedly did, then you get the gist of Curb You Enthusiasm.

Curb You Enthusiasm is precisely what happened in the market yesterday. You've heard the same Wall Street "experts" (I'm beginning to think that with the exception of a small handful they are idiot savants) as I telling us that the "economy is strong", "liquidity is high", and "the global growth story is intact"--and all of these things would be intact for as far as the eye can see.

Economy is strong: Yes, it has been. But the housing weakness could NEVER be contained for it is too much a part of our base economy. Lesson: Be patient (I know that I wasn't). Cause and effect is a universal principle, but the timing is what always gets you! You can have your thesis--just don't act on it so soon (you'll lose money!) and wait for the numbers to finally percolate through until you do act. You've seen me say in this space of my continual surprise how long it seemingly takes for the effects of whatever observation to finally take hold both in the economy as well as in the market psyche.

Liquidity is high: Yes, it has been stratospherically high. Again, you've seen all of the admonitions that I have in other blogs about the asset bubble that has been created. Lesson: Too much liquidity creates asset bubbles, and bubbles are not immune to the prick of reality. Reality is a prick, and the asset bubble always ends badly.

A corollary that you will hear about the current liquidity crisis is that the Central Banks around the world will turn on the liquidity hose and pump things up again. Well, they have and they will. But I think that this pumping will only cure the prior ill. To have continued asset price appreciation, they would have to kick it up a few notches more--and that would have disastrous results. The real remedy is for us to take our medicine. There's nothing wrong with recessions. They are endemic to the natural economic cycle. Without them, you end up with bad endings.

Global Economic Growth is High: Yes, but one has to make the nuanced distinction between emerging and developed nations. All of the developed nations are experiencing a slowdown. Japan has already reported weak numbers, and Germany recently reported a slowing of manufacturing. We know that the US is slowing. Europe, too, is downshifting. (The IMF warned yesterday of a global slowdown). These developed countries still account for quite a bit of consumption--so it is foolhardy to think that emerging markets can fill in the gap in the short term. Long term the story is intact. However, rather than spending their money on capital goods, I think food inflation, which emerging countries are struggling to deal with (also warned of yesterday), may end up diverting a few dollars from baubles to something more tangible to sating one's hunger.

So there's an interesting irony for you. All of our capitalistic economies looking for fresh producers (to make their goods cheaply) and fresh consumers (to sell their goods to) will likely create a class of people that will gobble up all of the world's food making food too expensive for all the world's people. The cardboard sign held up by the real or pseudo homeless of "Will work for food" may as well be plastered on a tee shirt for all of us to wear. I'm starting to open my eyes about sustainability issues, but what I've just written is as fully a formed thought as I have on the matter even that even marginally so.

All in all, the phrase of the day is "Curb Your Enthusiasm" for the market. Naturally the media will be consumed with the questions of "Will the Fed Cut and by how much?" from now until September 18 (though there will be endless speculation as to whether they will do it sooner. I don't share the enthusiasm that a Fed rate cut is good for is if it engenders growth. Remember, companies are flush with cash---and the best deployment opportunity that many of them could find was to buy back stock (and if they had only waited a bit!). We've not had a consumer led recession in a while, so we may have to settle in for this one. I surely do not know; but I'm feeling a bit more confident in my recession call for next year.

I still have a goodly amount of cash. I did start a small position in FIG (Fortress Investment). I reinitiated a position in HERO, which seems to be holding a firm bottom (but always subject to change). I bought some MIND ahead of earnings, which seemed smart for all of two days. It is down about 11% from my purchase. But I'll hold it--they should benefit from decreasing rates. And, I have added to my UNG and SEED positions. EGO and WGDFF have revitalized. My E-trade portfolio (which I'll post later) has rebounded nicely largely due to gold prices resurging. I have my gold stocks in that portfolio. I purchased some DUG. If the economy is slowing down, oil prices (which are at a high) are going to come down--though the cross current with the USD will have to be navigated (oil price is denominated in USD--if the dollar falls oil and gold prices rise).

I hope that your portfolio is weathering the storm. My greatest hope is that in my worst moments I'm still a better person than Larry David's character in CYE.

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Friday, September 07, 2007

Today's Market Close

Geez! What a day. Am I surprised by the numbers? I'd be lying if I said no. I've been looking for a larger decline in the numbers given all of the things that we've talked about here. I suppose that my surprise in the strength in the numbers up until now was conflated. Though, these numbers (job gains/losses, and other bloggers have noted the problem with the BLS statistics) have been so squirrelly for so long, you have to wonder if even THIS number is correct.

Sunday, September 02, 2007

September 2

Above, Daisey is in the woods. Much better than the concrete kennel.
Can we take that again? My eyes were closed.
I'm queen on this deck.

I couldn't come up with a title for this hodge-podge post, so I settled for a date. It's hard to believe that it is September already. Yesterday was one of those bright, clear days that demands your being outside. I spent most of the day outside. The above are not great photos in any sense of the word, but I think that they capture my happy puppitos. I've been pulling burrs and "dead man's lice" out of Daisey's tufted ear hair. She stands patiently. She has settled in well into her new home. Macy's coat is so short, not a burr attaches itself.

The credit crunch now seems a bit like the garter snake in my garden. When it jumped out of its hole beneath the roots of the pineapple sage plant, it scared the bejeebers out of me, but upon further inspection deemed to be a benign threat. I'm of the opinion that the true threat has not been fully disclosed. I think that there are some real liquidity issues afoot. I'm still waiting for the other shoe to drop. However, to be fair, I've been waiting for that shoe for sometime--so perhaps it is just my own personal paranoia. Personal paranoia aside (or, here's proof that one can always find evidential matter to sustain--even nurture--one's paranoia), I found the following on Mish's Global Economic Blog, but he lifted it from Minyanville. Here's the reference from Minyanville

"3. A Strange and Terrible Comment on Potential Systemic Risk

A little over a week ago the Federal Reserve suspended the limit on the percentage of capital that Citigroup (C) and Bank of America (BAC) can lend to their affiliated brokerage firms. What does that mean, and why should we care?

  • The exemptions are from section 23A of the Federal Reserve Act and the Board's Regulation W.
  • Section 23A and Regulation W limit the amount of "covered transaction" between a bank and any single affiliate to 10% of the bank's capital stock and surplus, and limit the amount of covered transactions between a bank and all affiliates to 20% of the bank's capital stock and surplus.
  • Both Citigroup and Bank of America petitioned the Federal Reserve for the exemptions in order to extend short-term liquidity (in excess of these caps) to finance "certain mortgage loans" and related assets.
  • Well, hey, that's' well within the Fed's mandate, right? After all, they are to provide liquidity and help ensure the stability of markets, right?
  • Sure, after all the Fed must have some leeway in determining when to grant section 23A and Regulation W exemptions in order to fulfill those objectives.
  • In researching this we stumbled across a Chicago Federal Reserve comment paper on Regulation W that discusses, among other things, , .
  • The comment paper offers some helpful suggestions on Reg W exemptions, among them this important paragraph:
    "Broker/dealers actively use matrix pricing to validate the price of a fixed-income securities portfolio for SEC reporting and capital allocation purposes. In fact, matrix pricing is an accepted pricing convention for most fixed-income securities. Perhaps a distinction needs to be made between matrix pricing and idiosyncratic internal pricing models. In its simplest form, matrix pricing involves comparison of a security to other securities of similar credit risk profile and tenor to determine an appropriate spread to a reference Treasury security. Simple non-complex bond math is then applied to calculate a price. These spreads are tracked and disseminated through a number of widely used independent pricing sources (Bloomberg, Reuters, etc.). In contrast, internal models are used to price more complex instruments that often involve imbedded optionality, contingent cash flows, or other subjective pricing assumptions. As a result, common sense warrants limiting matrix pricing
    for the (d)(6) exemption to relatively “plain vanilla” transactions such as investment-grade corporate bonds and commercial paper. This would effectively exclude most structured notes and mortgage-backed securities where the ultimate price is highly dependent on prepayment and rate volatility assumptions
  • So much for that suggestion."

I heard not a murmur on TV about this (I keep CNBC on in the background in another room), and I'd think that it would be an reportable event in mainstream media.

Foreclosures: While foreclosures are being "talked about", I do not note any increased activity in the foreclosure listings. Longer term readers will note that I used to publish these numbers weekly. After several months of not seeing an appreciable change, I stopped monitoring. Certainly the listings continued at stasis, AND stasis was more elevated in terms of (1) number of foreclosures and (2) the dollar value of the notes than previous. But currently that stasis is running between 20-30 per week. I still count them once a week, but unless they fall out of that parameter (either high or low), they'll remain dormant in terms of my reporting them.

GaryK sounded downright righteous the other night. I'm not sure if we are in a bear market or not--I think that we've met the criteria for IBD to have had a follow through day (albeit on lighter volume). The leading stocks are going back to being just that. I've been very active in this market in the last 30 days, largely on the short side in very short term trades. The gaps up and down are impossible to forecast, so I stay away from inverse (and 2 x inverse) ETF's. I've had fairly good luck with individual stock picks on the short side (DE, FAST, HWAY, GRMN, WLT, FARO, TUP, SRCL). I do not have any short positions now.

Today promises to be another one of those brilliant days. I hope that you are enjoying the long weekend.