Monday, March 31, 2008

Cast Off; Cast Away; Liberation and Viva le Pied

My Doctor's appointment was at 1:20. You can tell by the title the news. Last night as I was reviewing my schedule, and thought that I could meet my girlfriend for lunch. Both she and the lunch place were close to my doc's office. So I had a loverly lunch at The Peking prior to getting this wonderful news. It's been a good day!!!

At the doc office, he examined my foot. It still looks horrible. Swollen--I've a cankle--a calf and ankle that blend together. It would probably look less worse if my poor calf were not shriveled. I now know why the skin of the elderly becomes so flaccid--it's not the skin, but the atrophy of their muscles. I know that I'll still have flaccid skin, but I have a wake up call for taking better care of my musculature. A glimpse of things to come no doubt.

I asked the doc if the swelling was normal for six weeks past the injury. He said yes, and it was hard to tell when it would go away. Great. He did xray it, and he told me that the cuboid tends to be a rather painful break (ligament separated and pulled the bone asunder). Indeed. Roger that.

But, I'm off with my boot. He was going to recommend physical therapy. I mentioned that I have to co-pay and that I would only go to one or two and then do the exercises at home. He said that all he really wanted me to do was bear full weight and get the foot moving. I felt that I could do that.

I stuffed my foot in a shoe. It's not closed. It has many pressure points, but it is in there like a great sausage. Though, I should note that I can walk on my foot (with some crutch support) without the pain I had in the boot. I suppose the support helps. Now, to be sure I have great stiffness, and I've great numbness in my foot (the tingling is very burning), but I'm moving, baby, and boy does that feel good. My greatest fear is having my weak ankle roll again and re-injure the spot. Having this fear probably makes this a more likely event. I'm going to be careful--but I know that I've much further to go before normalcy sets in.

Thank you for following along with me on my injury and your good wishes throughout.

CSS Tab Designer and Other Resources for Amateur Hour on Blogger

My regular readers will want to skip this post.

For folks who are coming to this post from a search, my point is to do three things:

Thing1: Ensure that you know about CSS Tab Designer
Thing2: To describe how this amateur adapted it to Blogger.
Thing3: Describe some of the tools that I've used.

First, a bit of background. I know nothing about web design--I'm an executive financial person. Okay, I'm a bit of a nerd and very curious! I wanted to be able to provide some personalization of my blog, so it would not look like other blogs. The blog that you see here is a Blogger blog. I uses Doug Bowman's Minima Black. I've managed to do some customization. Trust me, I did it the hard way! But here are some things that you can do if you take a bit of time--naturally, I'm expecting my post audience to be someone with little to no experienced--same as me!

You have to understand that Blogger templates are just that, templates. You can customize them, but you have to be take your time and think about what you are trying to accomplish. It's like building a house--and if you change the design/measurement of one component, you have to look at see if that component affects other areas. This post is not about how to design, but rather to give the amateur blogger a sense of possibilities. Perhaps you are much smarter than I am and understand this stuff so intuitively. I had to make a rudimentary pass at CSS design. There are some great resources. I found this resources to be very helpful (click on image):



You will learn some basics about CSS language to help you with "stuff". Some "stuff" that you can change on your design:
  • Colors--text colors, background colors, post headers, date footers etc.
  • Size of the areas. There's an outer wrapper, an main wrapper (where you blog) and a side bar wrapper (maybe 2 if you have a 3 column blog). All of these areas to including padding have to add up to the outer dimensions.
  • Text: size, style, margins, indention and of course color!
  • Header image, list images (dots, bars, etc), sidebar header images.
  • Borders
  • Third party functionality through widgets.
You can make these changes by going to the layout of your blog. I'll warn you though, that you'll need to be viewing your blog and then chose "customize" in the upper right hand corner in order to add new page elements. Otherwise, if you go to layout, you can change existing elements but you cannot add because the add element widget does not show. I'm embarrassed to say how long it took me to understand why I saw it sometimes and other times I did not.

Also be warned that if you expand your space (outer/main wrappers), when you go to layout, you'll lose the lovely sliders. You'll think for a moment that you've lost the ability to get to those out of reach spaces to the right. You haven't. Just use your directional keys to scoot over there.


--------------------------------
See, everything is cut off to the right, and you need to get to that stuff! Up/down, right/left arrows will get you there.











Now I'm going to segue into using CSS tab designer in a Blogger template. I hope that I have not sacrificed simplicity for thoroughness. You could use all of this code without using the CSS Tab sheets, but you'll need the graphics. Plus, the tab generator makes generating the list easy. Here's the overview.

Part 1: Get the Software and plan your list.
  • Download the software. You can do that here.
  • Plan what type of list you want, and any external links required.
  • Review the styles available (they are so well done, you'll find one that you like!)
  • Create the list using the downloader software in the style that you like.
  • Print out the HTML text (it will help you in following along).
  • Find the graphic for the menu item you've selected. You will need to search for *.gif--inserting the menu item name for *. There may be more than one. You will find them in this directory: C:\Program Files\CSS Tab Designer 2\styles\Tab Menu 12 with the last backslash containing the file name that you are looking for.
Part 2: Modify your blog.
  • Make a copy of your current template.
  • Do not skip the above step.
  • Create an Element (see below) for your new tabbed list.
  • Copy code into the Element--this is the WHAT you want listed.
  • Copy the code into the HTML of your blog. This code will tell you HOW to display the information in your element.

I would suggest that even though you've copied the your template, if you are really an amateur (like I am), that you create a test blog. I did (you can see it HERE). This is where I fearlessly tried new techniques with no regard for the consequences. If only we could have an alternate life where we could do that! In fact, you'll see where I was experimenting with lists. This example is "new menu list"


To begin with the end in mind, here's the list that I created.
As you can see, I've still not got it lined up right!











Here are some things that I did not fully understand in the beginning.

  • Custom (and hopefully interesting) design elements (look at my side bar headers for example, though you may not find it interesting) are images that are being pulled in. I use box.net for my image hosting as well as to upload stuff for my readers. There are other places, I just stumbled upon this one first.

I'm not endorsing them over any other, but it's a place for you to start looking. Click on the image to be transported there.

  • Your images must "fit" your application, otherwise you will have to repeat them, and some repeating images look odd.
  • You may want to create an image--to do that you need to have a program that will allow you to manipulate the size and style of the image. I have Adobe Photoshop CS2. Most people have the Free "elements" and you can do quite alot with that. There are also images that you can find on the internet for free.


For the menu item shown above, the software creates an HTML code. I uploaded a Word document with the menu code that you can find here. Because this is code, if I insert the code here, it will present what the code is programming.

Note, all images that I present here can be clicked to make larger. My comments are in blue. As a reminder, you are doing three things:
  • Thing 1: You will have to change your HTML text in your blog document. Make sure that you save your template first. REALLY--save it.
  • Thing 2: You are creating a new "element" to provide your customize menu of whatever (it can be a list of wines you like, websites you visit or music. (see below)
  • Thing 3: You have to search (on your computer) for and find the .gif for the designer template for the menu graphic that you want to use AND upload it to a host.
I will note that there might be an easier way to do this. But this is the only way that I could get it to work for my blogger template. It's a high probability that you are more adept at this than I am.

Figure 1: Are you unsure how to add elements or which type? View your blog; click on the "customize" link in top right and then choose "add element". You will then see this page of choices:






Choose the HTML/Java script. You'll use this for any third party widgets where you are cutting and pasting code. It's nice to know how to do this. Call it Menu 1 for the moment.














Figure 2: Here's a picture of the top part of the HTML text that the CSS template software generates when you complete your list.. Your blog template (that you've already downloaded, because you are never going to make changes to it without saving, right?) is a larger document. You want to ensure that you have not conflicts. If you were to insert this text into the element, you will have some problems with your blog. To avoid these conflicts, you are going to 'snip' pieces of this style sheet code and put it in different places in your blog's code and element, as I will illustrate:



















Figure 3: Here's the very next part that you will encounter in the code. We want to skip over this for the moment. We want to create the content or the WHAT, so that when you insert this code into your HTML, you can click preview (without saving changes) to see if you've messed up.

This section represents the 'division' for this menu. It's the section in your HTML document that gives all of the "orders" on HOW to display the content. You will insert this portion of the text in your HTML doc as noted in the blue box in the Figure.

You will want to check the width. If your sidebar is narrower than 200px, you'll want to change the width to something less. Ensure that you know how your main template is sized and the space in which you have to insert these images.

The code is telling web browsers HOW to display the text and the image three ways: (1) as a link; (2) in a hover or mouseover state and (3) as a visited link.

You'll want to use the "Preview" option BEFORE you save changes. You may need to preview many times. Again, PLEASE consider using a test blog.











Figure 4: The next bit of code you will not need so either delete it or ignore it. Go to the next image.





















Figure 5: This is the part of the document that you are going to "snip" and place in the element that you created. All of the content is what is created in the tab designer--or you could type it yourself. This is an unordered list (ul) which has a link and a label. the li and /li signify the beginning and the end of a line in your list.

Make sure that you do not include the last two lines of text and delete as noted.









Figure 6: This is what your final code in the element you created should look like. WE snipped the top out of Figure 4 and the bottom out of Figure 5 and now we have Figure 6. Repetition can be good.

The div id-"menu" corresponds to the #menu style code that you inserted in you HTML doc. (Though I changed gears on you and we want to do this now since you've created the WHAT! If you elect to have more than one menu list (a list of music you like, and another list with other style elements for websites), you will have a #menu1 and a div id="menu1" and so on.

Again, the tab designer software will place the text and/or links that you want. You can also copy and paste within here if you are feeling intrepid and it's not hard to do so, but you have to get all of the tags correct. Plus, it can get a little messy, particularly if you have long website labels.

Figure 7: MY final element using my example.

Here's what my list looks like on my test blog in my element section called, "New Menu Test" and with real links. You can visit my Test Blog here.







Figure 8: Now we are going to go back to the HOW--which is Figure 3.. I want to tell you a bit about the mechanics. Remember, this is the final presentation--but for this chronology, you've not done this yet. This is where we go back to inserting the code in the HTML doc in Figure 3. A reminder that the code in Figure 3 tells browsers HOW to display the graphics. Your "element" work tells it WHAT to display and WHERE (the 'elements' are movable from sidebar, to bottome to top).

In this example, my subheaders are images that I created in Adobe Photoshop. I uploaded it to box.net. The web browser knows to go there, get the .gif put it on the page as noted. My element tells the browser the content, or the what.

So what you see to the left is nothing but directions. The menu graphics (which I thought were neat--yes, I realize that they don't go with my blog, but I was trying to get something specific to work) are something that you'll need to search for on your computer, save and uploaded.

Figure 9: Here's my FINAL code in the HTML document that I inserted. Once you are done with inserting your code, you will want to use the preview button to see how it works (or doesn't).






















I hope that you have found this helpful. If' I've something wrong, please leave me feedback. Remember, I'm an amateur, and there may be an easier way.

Customizing your own blog and giving it your own look and fill can be very rewarding. I want to leave you with a few resources.

  • Help with colors: IF you are interested in seeing a super color wheel and to get colors that make sense go here (click on graphic)














  • Blogger Buster: Amanda's site for help with different things.
  • Screen Shots: As you blog and want to share things with your readers, you'll want a great screen capture tool. I highly recommend: Hypersnap from Hyperionics.

Sunday, March 30, 2008

Size Matters (and Style)-- A look at the Russell

Yesterday I spent a little time at the Russell site. It is very informative. You can create and download a myriad of reports by specific indices. (Of course you know that I did that!) What I was taken by is the disparity in performance among different indices. Before I go more into that, I want to outline some of the breakdowns of the Russell indices.

Remember, I present this information to you as an average investor, so these are not professional insights, but I think they are worthy insights nonetheless. The Russell indices slice up the market in various ways. I presume that more than any other index, it can be considered broad market, though we have a tendency to focus on the S&P, Dow and Nasdaq.

Russell has the following populations that they follow not only in aggregate, but split between "growth" and "value". It is the disparity of performance among these that I found telling. I'm not quite sure what the difference is between the 3000E and the 3000 (though I'll look) or the Small Cap Completeness v. Microcap. You can go to the site and get a pdf that contains all of the names in each index. For orientation purposes, I wanted to list the indices sliced/diced:

Russell 3000® Index
Russell 3000® Growth Index
Russell 3000® Value Index
Russell 3000E™ Index

Russell 1000® Index
Russell 1000® Growth Index
Russell 1000® Value Index
Russell Top 200® Index
Russell Top 200® Growth Index
Russell Top 200® Value Index
Russell Top 50® Index

Russell Midcap® Index
Russell Midcap® Growth Index
Russell Midcap® Value Index

Russell 2000® Index
Russell 2000® Growth Index
Russell 2000® Value Index
Russell 2500™ Index
Russell 2500™ Growth Index
Russell 2500™ Value Index
Russell Small Cap Completeness® Index
Russell Small Cap Completeness® Growth Index
Russell Small Cap Completeness® Value Index
Russell Microcap® Index
Russell Microcap® Growth Index
Russell Microcap® Value Index
-------------------------------------------------------------
I did not plot all of the indices for you, but I did want to show the relationhsip of size (large, small and all cap) and style (growth v. value). Size and syle do matter. The 8 year chart show that differencs most markedly. As always, click to make larger.



Interesting, midcap value outperforms at the 8 yr, 5 yr marks but underperforms rather markedly at the 1 yr mark.

Quarter Review on Resolutions

In two days, one quarter of this year will have passed. I'm looking at
my resolutions, which I keep by my desk. It's on a bulletin board by
my desk; otherwise, a horizontal position will relegate it to a pile.
Here's a bit of a "confessional" on my resolutions. I posted my mind
map on my resolutions HERE. My injury has derailed me a bit on some of these, nevertheless....



Time Management: B. I've been using FreeMind(1) as my 'to do' list, and it has worked very well. Plus, because I like
looking at it, I find the list to be more inviting than something I dread reviewing.. I've organized my time and my tasks. To get an A, I will need to
reduce my computer time (computer time is too much of my time largely
due to my lack of mobility. Still, I need to be fair, I could easily
be reading a book). I'll confess, though, that time management has been
a lifelong struggle for me. When you are a conceptual rather than a
concrete person, this difficulty is a common one.



Service: A. My blog and my dog transport were my two areas. I've
re-vamped my blog, have included some useful information for readers to
easily access and I'm exploring a service opportunity (board member)
with an organization dedicated to helping people.



Space: B. My home projects are literally gathering dust due to my
injury. I've at least committed them to paper (on the To Do List).
I've been cleaning my desk off weekly and that includes processing the
20lbs of mail I get every week. I'll never be a daily desk cleaner.
One has to be reasonable about his/her aspirations! Autos are fine.
Garden is fine (I even ordered my garden seeds and a newspaper pot
maker). I do need to add something about getting rid of clothes that we do not wear. Somehow I have clothes that are as old as teenagers.



Fun: B. Injury has dampened that a bit--though I could have
compensated. I've at least planned a dinner party which I told you
about. I've not been to any musical concerts or festivals for obvious
reasons. I could have listened to some music that I've not heard
before. In fact, my husband has some CD's that a friend made for him.
I'll listen to those and upgrade that item. Like time management, fun
is not something that I do instinctively. Now don't get the wrong
idea. If we were at a party you wouldn't meet me and say "Oh, what a
stick in the mud." We'd have lots of fun talking. My goal would be to
talk less and let you talk more. One of my struggles. Art--I've
included some art on my blog, so I feel like I've done some outreach
there that I would otherwise not have found had I not put this on a to
do list.



Mind: B. Oh, I' got an A on the develop end of it having tackled CSS
and Photoshop BUT, I have a D on the Settle piece of it. No rest,
meditation or reflection. I suppose I could cheat and say that my
vicodin pain pills helped with that for a few weeks from my pain
management from my injury. That would be cheating. Had I had some
great epiphany, then I would claim it, but alas I did not. I did at least read two book club books fully. I'm going to tackle Taleb's Black Swan book. I still have to organize my books. I've also have Mauboussin's books, More than You Know, languishing in some forgotten spot.


Body: B. I started to put down a D, but as I wrote, I realized that I performed a little better. First, I have not killed
myself on the g-d crutches. That's worth a few gold stars! Second, I have great strength in all parts
of my body that do not involve my poor little atrophied left leg. No cardio--but rather I've huffed an puffed a bit on the steps and hoofing it on crutches outside. Flexibility--well, yes, my injury
has caused quite a bit of flexibility. Nutrition has been pretty good,
but not at the level I had planned. Once I can shop more frequently
that will improve. We eat healthy entrees--because I cook, but not
enough fruits and green vegetables. Nurture--I have been really honoring my body--most particularly my foot. I just upgraded my C to a B.

Relationships: A. Very good work here. I've been doing outreach for those with whom I've been out of touch, and I've been improving my "in-touch" relationships.

Finances: B--We are modest people. My 'trading' has been dormant during this period of uncertainty, so no augmentation there. At least my retirement balances and my spec account is at or near its highs.

Parking lot: Empty as it should be--the above is enough to think about.

Tomorrow I go to the doc. It's been six weeks. Wiggling my toes is met with sharp pains around the break. I don't know if this is normal or not. During the last week I can keep my foot down for longer periods of time without the water balloon feeling. I do plan on following the doctor's orders for rehabilitation. I will add that to my resolutions.

While I've not A's on all of these, I'm still happy with the results. I wanted to treat my resolutions as a balanced scorecard--and I feel that I've achieved that. Plus doing this cursory 1/4 year review has been helpful in renewing some energy toward goals that have been shoved a little to the side.

I also have a confession. I watched Blades of Glory with Will Ferrell and Jon Heder and laughed with great energy--several times. One of those unbelievably stupid films that are hilarious to watch. Having a 17 year old son gives me license to do that! (Actually, he is 16 but turns 17 on Tuesday-an April fool's birthday!).

Yesterday I did a little work on index returns off of Russell indices. Very interesting--I'll share later.



(1) FreeMind is the free mind mapping software that I used to do my Resolutions. I also used it to outline the book.

Saturday, March 29, 2008

Lucky? 13 and Spec Account update.


That #%#@$%^ market summary is wrong. Geez. I'm getting rid of it.

Above is my spec account. It's been pretty static, though at one point it was briefly over $23k. These double short positions can move against me pretty quickly.

I've been remiss in providing the Lucky 13 (from the Barron's article). It has repaired some of the damage. The loss was as much as $8.5K Only one position, ROH, is in the green, and this 'portfolio' has a 8.7% loss.

Here's a snapshot of the YTD performance for all of the sectors.


There has been no profitable place to hide, though there have been less painful places to hide such as basic materials, consumer goods, industrials and industrials.

-------------------------------------------------------------------
From Financial Sense Online. Technical view of the market with Tim Wood

  • JP: Fundamentally, is there any bad news that we do not know about?
  • TW Looking at the market technically, we are at a very very critical juncture.
  • We have legitimate DT non-confirmation that has occurred. That warns of a possible trend change. We do not know that, and we have to wait for confirmation.
  • ON the one hand we had an engineered bottom. Retest of minor lows on March 10. If those lows can hold we just maybe at the "creamy filling" (in JP's oreo theory).
  • My expectation is that this can last a number of months, and into the summer--before we have the bottom.
  • Energy and gold: Gold was extremely overbought and cycle lows coming due. Finally broke all at once. Think that there might be more downside before lows are reached. L-t cycle lows are due ideally in the June time frame.
  • Big pivotal point in commodities, one way or the other (up/down). Thinks all, including oil, are a little heavy. If the commodity front gets re-ignited, could set up one heck of a move up. If they fail, it is going to confirm some longer term tops.
  • JP talking about lack of inventory for ag/metals--fundamentally supporting continued move.
  • TW reverts to his statistics/technicals: Three year cycle in the CRB generally marks a significant top. Approaching that top this year. If we do not see that, we are going to be in a big move.

------------------------------------------------------------------
Barron's has an article in this week's edition,

Commodities: Who's Behind the Boom?

about the role of index funds in driving up commodities prices. Readers who do not subscribe to Barron's can e-mail me (see profile) and I'll e-mail them the article. For $129 per year, you can get the WSJ/Barron's on-line editions. It's a worthwhile subscription. I've discontinued my paper sub to Barron's, but I would miss not having its information.

Something that I'm coming to appreciate is the role of market mechanics in affecting stock prices. For example, with the proliferation of index funds that allows folks like you and me to invest, this funneling of money is like gavage. We all know what happens when prices become artificially high and outstrip the fundamentals.

A constant perplexion for me is being able to separate the true fundamentals from the 'spun' fundamentals. I listen to FSO because of the technicians. I could script for you everything that Jim Puplova is going to say about energy and gold. I don't say that to be derisive, but it is a monoline, and it does not offer me NEW information.

'Spun' fundies to me are the "global liquidity," global economic boom" and other such stuff that if you look carefully you will see gets eroded with every economic report. These 'stories' start out sound enough, but at some point in time they become an urban legend to support more and more stretching of asset prices until...the goose get's slaughtered and it's fattened liver is removed for fois gras. Only, you and me, the ordinary investor, do not get to eat this treat. Likely the goose's carcass has been sold to us under the pretense of being fattened with great promise but without the liver and certainly without any golden eggs.

Friday, March 28, 2008

GaryK 03.28

On another blog there was some interest in CALM, which is reporting sometime soon--maybe Monday, maybe Tuesday. There is a huge short interest: about 87% or so of float. I did a spreadsheet on the institutional holders which you can view HERE.

I'm only going to give the opening remarks of GaryK. There is more, but you'll have to listen. His first comments are always the meat of what he says. Towards the end he has names. I don't know that I'll listen for that--so I leave you, dear readers, to that on your own.

l------------------------------------------------

Nothing good to report today.
Until the financials stop melting down, the market does not have a chance.(He cycles through the financials that are down (Amex, MER, C, etc).
I have to make note that Meredith Whitney thinks worse before better. (Your editor believes that there should be a smackdown between Whitney and D. Bove!).
JCP lowered numbers substantially.
Everything in unison in the retail area went down.
In spite of a new follow through day, it ain't happening.
Take your time, be patient, protect your capital.
Listen to the news, watch the news, but watch the market--that is where your money is.
Wall Street wants to keep you invested.
Looks like a top in gold of unknown price and duration.
GLD, a move below 89.78, there is another move to the downside. I think longer term gold and commodities are in a bull market but they do have corrections.

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

I'm going to eat some Mexican food now. Enjoy your evening. I'll update the sector spreadsheet over the weekend-so look for that. I'm doing to keep the dailies (perhaps I'm anal, but I like seeing the daily trends). I'll find something that I like. Personally, this sector spreadsheet is helpful to me. I'm happy to see that it is downloaded. Note that I CANNOT see who downloads these--so do not think that you're compromising your anonimity by downloading.

In my spec account (still north of 20K, but not by much), is in DUG (300shs) and SMN (100Sshs) and the balance cash. I'll post that along with the Lucky 13 which I've been remiss about posting.
Enjoy your evening.


Thursday, March 27, 2008

PM Post: Gary K, Updated Sector spreadsheet

I've updated the sector spreadsheet. You can find it here.



GaryK (mix of quote/paraphrase, but all included in the quote box). I missed the first couple of minutes:

Doesn't like what he sees.
Distribution today in the market so soon.
Leaders are breaking down.
Great time to sit back and protect your capital.
The way the market is acting; I'm not sure that we've seen the bottom.
Bigger problem--very bad bar--ugly sell at 3:40p.m. Not pretty at all.
If the financials are getting in trouble; there is not chance that the overall stockmarket will continue higher.
I've never seen real bull markets without the financials.
Calls this a nascent rally. (your editor's comment: He's proud of the word, but mispronounces it--says it like the first syllable pronunciation in NASA. Should be nay-scent. I look it up on Dictionary.com--they have one entry showing that to be a alternate. I've never heard or used it that way. I quell urge to e-mail. Another does, and he corrects. All is write in the English language now!.)
Leadership names are getting in trouble.
Happening so soon after a f-t day is not good.
He's very wary of this confirmed rally.
Fed bashing--(your editor omits)
No body knows what tomorrow brings. All you can do is control how much you don't lose.
-----










The Woodshed

The woodshed is a place where some of us go for either forced or voluntary exile. Activities generally include smokin', drinkin' and cussin' at old people and unruly children. No one has ever been taken behind the wood shed to be dispatched to the Netherworld. It is after all a sanctuary, a place of non-violence--a place contemplative activities such as reflecting on our behavior. But smokin', drinkin' and cussin' (all in good fun and moderation) are more fun.

What is remarkable is that EXACTLY a year ago, I had a post about the woodshed--you can see it HERE. I said there that woodshed activities promote civil discourse and social cohesion.

Wednesday, March 26, 2008

Photos from Canoa


GAry K 03.26.08

I've also updated the weekly sector spreadsheet for the daily activity for the last three days. Note that coal stocks are breaking out again (along with the rest of the sector). You can find it here.

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


Here is a summary of Gary's comments from 03.26.08 show.

He's doing some self-flagellation. HE was wrong on his "oil is going down call" on Fox's Sat. TV cast. (This is why I like Gary so well--if he screws up, he tells you. He's an honest commentator).


Opening Remarks.
  • Be wrong quick, be wrong fast. Acknowledge it and move on.
  • Lessons learned:
    • On buy outs--if you are in a stock that is getting bought out, take your money.
    • Laments about the WSJ talking bullishly about ORCL knowing that it was reporting after the market + a couple of analysts saying own it before earnings. Calls it a silly bet.

  • Goes through the market action (oil up/financials down).
  • USD--another day of swoonage.
  • Not a pretty day. Strength in oil, steel and commodities with the USD falling.
  • Up down volume putrid.
  • Do not treat this market as a monolithic day.
  • We are on a follow through. He dips his toe into the water because that is part of his strict rules and discipline.
    • There will be a point in time that when it works we will have a grand, glorious bull market.
    • Not every follow through has led to a bull market, but every bull market has had a follow through day.
    • If I lose a 1% or 2 probing into a follow through day, it will be offset big time.
    • Even though I've been pretty correct, it has not been easy; it is no fun.
    • Anyone that tells you that a bottom has been put in is guessing.
  • Protect capital!
-----------------------------------------------------------------------------------------------
Caller asks about C. He's negative on C.

2000-2015 - discusses the article about WSJ stocks tarnished by lost decade. He talks about his mentioning this in 2001 and having caught a lot of flack about it.

The Little Book That Builds Wealth

Wiley has a series of books in in their...."Little Book Big Profits"
  • The Little Book that Beats the Market/Joel Greenblatt
  • The Little Book of Value Investing/Christopher Browne
  • The Little Book of Common Sense Investing/John Bogle
  • The Little Book that Makes you Rich/Louis Navellier
  • The Little Book that Builds Wealth/Pat Dorsey
There is one thing that I've come to learn is that these books are definitely folks "talking their book". I don't say that in a derisive way at all. There are many types of successful investing, and understanding the various cornerstones of different modalities is useful in helping one find his/her own style.

I wanted to share with you some comments on the most recent book in the series, The Little Book that Builds Wealth, by Pat Dorsey of Morningstar.

The hook for the book is the importance of looking for economic moats of companies. He chooses the categories of intangible assets, customer switching costs, the network effect and cost advantages. Even more telling was his describing what IS NOT an economic moat--things like great products, size, management and execution. There are some very cogent gems in this book. For example: " A company's value is equal to all the cash it will generate in the future. That's it." Sure, I knew, that but seeing it written so starkly was refreshing AND a good reminder.

The book is very accessible. It is well organized, clearly written, chapter "bottom-lines" with plenty of tangible examples. I was glad to see that there were chapters on right buying and right selling. Too often the entry and exit guidelines are glossed over at the expense of investor returns. Nevertheless, Dorsey is an advocate of long term holding--years, not months.

What am I going to do differently in my own investing approach having read this book? I'm going to make a concerted effort to identify moats AND appreciate their contribution to a company's valuation. In fact, in looking at a few of the examples, I was struck that MY FAILURE to recognize economic moats resulted in my thinking a stock was too richly valued, when in fact the economic moat was being appropriately valued more richly than counterparts. Accordingly, (and I recognized some of these companies about which I thought this) this recognition of economic moats (that goes beyond what we generally think as the thing that generates the premium--great products etc.) allowed me to resolve that perplexion.

I created a Mind Map of the book which you can find here. Would I recommend the book. Yes, I would for investors not traders.

Tuesday, March 25, 2008

GaryK's 03.24.08 comments (Day late, dollar short!)

Gary K comments, quotes/paraprhases

A good day in the market.
Notes the last 1/2 hour of his show gets pre-empted during baseball games beginning next week.
Don't treat the market as being monolithic.
I'm not bearish anymore.
No longer 100% in cash. I'm buying some things.
Trust factor is 5 out of 10--might as well be 0.
I'm taking it day by day.
We're on a follow through day.
Some leadership today.
No new leadership. Old names showed up.
Take your time.
I don't want you short the market; but I don't want you to think that the we're in a gigantic bull market.
I think that there will be more news-driven financial information.
He's still suspect and dubious of the action. Take your time.
Does not trust financials.
-------------------------------
Dell computer: insiders selling at the lows.
Gold and silver up then reverse. Bearish on g/s. Stay away. (L-t bullish; s-t bearish. Not saying sell).
Dollar strong; yen trashed; bonds trashed.
Still bearish on insurance and financials; semiconductors; oil fertilizers; ag. It's not throw the dart time.
If this is to be something that lasts, it will be something that takes time.
This market has no willingness to make anyone happy.

Food Inflation; Our Inner Magpie; Feed the Pig.

File this under projects that I wished I had started two years ago. . . I wish that I had created a shopping list of basic staples: coffee, sugar, milk, butter, bacon, eggs, flour, cereal, chicken, turkey, beef and pork. (I'm purposely leaving out vegetables.) On this list, I would unitize the staple (per pound, per dozen, per gallon), and chronicle the cost change quarterly. Oh well.

If I were to put my futurist hat on (its made of tin foil!), I would say that food inflation has the potential to be one of the most serious, global social/economic issues that we will likely face in the future.



From the BLS, you can create this chart--or any chart on specific prices--by following the BLS link in the sidebar. You can see this how this chart is produced here:

If I'm reading the above chart correctly, farm product prices have increased 39+% since Jan of 2006. Of course, you know that, because your food bill has gone up.

Grain price increases are far reaching as you know: beer, cereal, flour, tortillas, livestock feed. Further, these grains are the nutritional base for foreign hunger programs. While so much of Wall Street is enamored with the notion of more middle class consumers (for goods), these middle class consumers need to consume food. A marvelous poetic justice (a nice retribution for the avarice that William B notes in the comments section of the previous post) for our business tycoons will be our newly minted consumers dealing with extraordinary food inflation taking away precious dollars for trinkets.

I think that the most significant thing that I'll see in the final third of my life is our country's declining political and economic hegemony. I've mentioned it here before. I grew up when America's might and right was unparalleled.

We talk much in this country about our love of freedom. (Warning: I'm working up to a point) Mark and I have been watching the HBO series, "John Adams". I read McCullough's excellent biography. I read Adams' and Franklin's biographies back to back, with full expectations that I would enjoy the Franklin biography better. That was not to be. I was captivated by Adams. I also remember vividly the crappy politics that were played--another reminder that nothing ever changes.

The production (which I can proudly say was filmed in our beautiful Virginia, capitalizing on the Williamsburg) with its wonderful actors (Paul Giamatti and Laura Linney) reminds me of the incredible weight of the deliberations to assert independence--and the extraordinary uncertainty of the outcome. It does give me comfort to know that whatever befalls humanity, we have an amazing capacity to dig deep and find what is best in us.

My point. I'm developing this gradual awareness that we've jeopardized our country's economic freedoms (hard deliberated, hard fought and hard won by our independence patriots) through our constant strivings to sate our desire for bigger, newer, shinier, pricier. . . . We've done that through borrowing--not through true wealth creation--at least not on behalf of the consumers. NG notes the media as playing a role in shaping our views. I'd amplify 'media' to include the barrage of advertisements. The media assaults us daily to shape our role as consumers and creating these 'ideals' of how we should look, dress, live, eat and leisure. Nothing is more efficient than advertising in finding your and my inner magpie and seducing it with the lure of shiny objects.

I'm sure that you've seen the "Feed the Pig" campaign.

I just researched it and was happy to learn that it is sponsored by the AICPA. We've squandered so much of our wealth in our consumption beyond our means. Our current crisis is a credit crisis. We have debt without adequate underlying asset values or means to repay. Rather than having net assets (assets greater than liabilities) we have net debt. You know that equation. Somehow that hole gets filled--and the filling of it generally means lost jobs and loss of owner/shareholder value.

My point is not to be dark and pessimistic, but at some point in time we have to realize that we need to ignore our inner magpie and feed the pig. It is a sea change, and such a change in behavior will (1) take time to take hold--unless it is forced through a shock which may well be the case; and (2) will have long lasting ramifications for industry, both ours and the worlds.

The Bernstein article touched on that a bit. I hope that you take time to read it.

Monday, March 24, 2008

Ecuador

My neighbor, who Valvoline_6 knows, is traveling tomorrow to Ecuador, where his son, R, is doing an internship. As you know, I like to provide pictures, and I'm the grateful recipient of the link where some of R's travel photos are posted. I'll post some of these along with my blogs this week. Here's the first.

PM Post

John Mauldin has sent out his "Outside the Box" missive. It features Peter Bernstein's letter (PB of Against the Gods) which talks about the current state of things. I want to tease you with two paragraphs--they are his closing paragraphs, but I don't think that this is a spoiler!

The central message of our analysis is not that the origin of today's difficulties is uniquely in the household sector or that the residue of these difficulties has scrambled the whole credit structure in the financial markets. Everybody knows about these troubles.

On the other hand, too few observes have noted how the consequences of these developments are going to require an extended period of time before the blockages they impose have been eliminated. But that is not all they have missed. This extended period of difficulty is going to bring about a new economic régime, different in many aspects from the experience of most people alive today. Along the way, we will have to pass through a transition period that harks back to an unfamiliar past in both the financial system and in the household sector.

I found these comments so spot on, and have ruminated about the same here in this space. Not as cogently as Bernstein, most assuredly. The dynamic tension is one that from bad springs better--and it comes upon you without your realizing it.

Market Close

Sector performance (from DJ). Note that the indices that capture this information also capture all preferred shares as well.


Market data from WSJ. Click on image to go the the WSJ market data page--one of the singular BEST places to get consolidated market information.

A Blog as One's Backyard

I did not want to relegate this sentiment to the 'comments' section.

I began this blog in 10.01.06. It was my attempt to sort of publicly hash out my private machinations of becoming a more savvy investor. I wrote for more than 6 mos before I linked my blog to my name in any of the public areas that I posted. My dear Anon--I'm not a financial services executive, but rather a Executive Financial (CFO) person. So, I bring no depth of experience as you have to investing and markets.

For the most part, there were only three places that I posted: Barry Ritholtz's, Bill Cara's and Roger Nusbaum's blog. I consider thoughtful, honest communication important--both in person and most particularly on-line. I've tried to model that value in my posts both here and in those places. I'd be lying if I said that I don't get pi$$y from time to time, but I've never written a regrettable post. I have Bill Cara to thank for two things:

  • Thing One:for his introducing me to 'his way' of investing--which for average investors like myself is both approachable and executable. It is his passion.
  • Thing Two: In his being supportive of my own blogging efforts. It meant so much to me. It still does.

While a blog is a public place, it is also a place where the host sets the parameters. It is his or her right to do so. I've only deleted a couple of comments in my blog--I think that they were spam--hawking products under an alias. My comments section is generally a quiet place, so I've not had to set any real parameters. And when there are comments that make me uncomfortable (I was called a recessionista in a very derogatory way), I say so. I'm uncomfortable with spillover from another blog entering here--even when they are made with good/supportive intentions--when such comments are critical of another's blog, another's policies or another blogger. There are times for private correspondence (which is why I have an accessible e-mail) and time for public comments. One blogger mentioned in one of the comments is one of my valued readers and commenters and one with whom I've enjoyed participating on Bill's blog.

Though a blog is not a business, there is a similarity. The blog host is the CEO. I was CFO for a long time. I guess, I still am; I'm just dormant. As a CFO you have to have a very clear understanding of one's role. Specifically, I feel that one's role is to not be a cheerleader for the business, but to be an advocate for the business. That means that every business decision should be evaluated on the merits of what is best for the business--not what is going to ingratiate one in the eyes of the CEO or stockholders or whomever. Rarely are any decisions in life or business black or white. While I always gave my counsel and my reasonings for such, it was always the CEO's decision to accept it or not. I never was unclear about that. Further, I am no any less unclear about Bill's or any other blog host's rights for shaping participation. If one finds that such shaping is not to his/her sensibilities, then the decision to opt out of the discussion would be a reasonable path to consider.

Bill has inspired many investors--myself included. He has both my
respect and admiration. However, that doesn't mean that have to agree
with his decisions or his policies. Those are decisions that are his
and his alone to make.

So I'm declaring MY blog backyard "Little Switzerland" and am raising the flag of neutrality!



Sunday, March 23, 2008

Did you know?

Did you know that the WSJ provides two reports that you might find interesting.
These reports are down loadable into Excel.

I have updated my weekly sector spreadsheet. With finding the better capabilities of WSJ's sector information, I have included a sheet that shows ALL OF THE SECTORS over the time periods in addition to the leaders/laggards. I think that you'll find that very helpful.

If you see any issues with the spreadsheet, please let me know.

Saturday, March 22, 2008

A Week without Words



More Blog Technical Stuff

To get any of these "background" images to show, you have to create and upload the image. The "home" and "about" buttons are created "background images". The sand in the very background is an uploaded image, as are the sidebar headers, the title and the date header backgrounds.

You have to ensure that the image matches the expanse--height and width. Otherwise, it repeats (though you can tell it not to) or truncates. You probably do not care, but it's a bit interesting to understand what is under the hood when you look ant someone's blog.

I've one more thing to add to the blog--and that is a tabbed menu. I'm not quite ready to tackle it yet. Adding the "home" and "about" buttons required some synapses burning. Anyone who makes their living doing this stuff surely has to laugh. I don't suppose it is really that hard, but when you approach it haphazardly, it ain't so easy!

I watched today Harold and Maude. I've never seen it before. How funny to hear the Cat Steven's music. My brother had all of his music (and that of The Doors). I can still recall the lyrics to every tune for both. Interesting how music/lyrics are so easily burned on the brain. We take music on demand for granted. I think about hearing a favorite song and imagine being born during the time of Mozart, Liszt, Beethoven, Wagner or any of the other greats. You might hear a song a dozen or so times in your lifetime (if that unless you were wealthy).

I also watched last night (my husband had a neighbor visitor last evening, so I seemed to be on my own, which was fine. I always find things to do), Fur, an imaginary Portrait of Diane Arbus.
I cannot really say if I really liked it. I do think that Nicole Kidman is a very gifted actress. I saw her recently in To Die For . I thought it a wonderful black comedy when I saw it before.

As part of my "Connessione" practice, I've been routinely researching the movies/TV shows that I watch to understand more about either the topic and/or the actors. I'm not a celebrity follower in the least. And perhaps my even saying that I'm doing this is causing a chuckle or two among readers. But, I've found by doing so, I'm enriching my experience rather than just watching something without awareness.

Speaking of awareness, our next book club selection is: A New Earth: Awakening to Your Life's Purpose by Eckhart Tolle (Author) . Perhaps after reading this book I may go off to join the circus. I don't know that our last selection, Water for Elephants, was well received by other members. I really enjoyed the book, though others felt that it was too romanticized. I cannot quibble with that assertion However, given the gravity of the reading that the club as well as myself were doing, it seemed to be an oasis of entertainment. I think, too, that given my lack of mobility and my frustration with my physical limitations--in addition to the real danger of falling that traveling one's ordinary courses brings while navigating on crutches--reading about an elderly man's own struggle with gnarled hands, weak legs and wobbly balance was something that I identified with in a very intimate way.

I've mentioned here before what an eye-opener it has been to have to fall upon the support of arms and remaining leg to bear up under additional duress due to an injured left foot. Mine have not been up to the task--though I'm getting there (you should see my arm/shoulder muscles; I'm so proud!). Given some of the pain that I've had in my left foot with only partial weight (the doc said I could do 1/2 weight from the git go, but my foot was too swollen and painful to do that), I cannot imagine that I'll be walking on this foot when I get this cast off. I've 9 more days.

Time to get ready for Easter Meal #1. Tomorrow will be Easter Meal #2.

I was going through my Spain photos. I've posted this one before, but it is one of my favorites.

Tim Wood on FSO today

I'm listening to FSO now. Tim Wood is hosting for Jim Puplova. I'll include some snippets below.

I'm done futzing around with my website. I've been using my down time to (1) learn Adobe Photoshop and (2) to learn how to customize CSS (cascading style sheets). CSS is the programming codes that describe how to display items. It's been very interesting for me to learn how to create and upload the images as well as how to have them displayed properly.

If you find the new colors on the type hard on your eyes, please let me know and I'll soften them. You would be surprised how time consuming it is to pick colors--both background and text to contrast in a way that is readable rather than harsh. My goal is to find the balance of aesthetically pleasing without compromising ease of reading. I want your experience here to be pleasant. Not torture on your eyes. I've got another tweak to do on my date header--to take the beveling out of part of it. Otherwise, I think that it adds enough distinction between date posts.

Here are Tim Wood's comments--a mix of quote/paraphrase. I've mentioned before that I think that he and Frank Barbera are terrific:



The Fed engineered double bottom. Looked like we were on the brink. We were on the edge, looking over the brink. We were ready, I felt like, for a meltdown. How long this engineered bottom lasts, I do not know.

Dow theory non-confirmation (transports/industrials). Joint low together in January. Since then, the transports have performed much better than the industrials. If you back up to the next level, we have the primary trend which is still bearish. Question is how long does this bottom hold. Does this non-confirmation tell us this is a longer-term intermediate bottom.

Cyclically we've not seen a washout. I don't believe that the engineering and manipulation will last forever. Need a good solid foundation for the market to build.

I'm very suspicious of commodities. How is the manipulation going to affect gold and silver. I'm nervous about how far does this rally go? Few weeks, a few months. If we penetrate the January lows, it will be bloody.

Friday, March 21, 2008

Have you seen about 10 different headers today?

Yes, I was at it again. Idle legs are the devils workshop. I wanted a better blog header, so here we go. I like it, but if you think it sucks, I'd value your feedback. The bubbles are to give it a water feel! I also experimented with some other stuff on the test blog--most particularly with lists. For the amount of time that I've spent figuring this stuff out for myself, I could have taken a class. That would be too easy.

Fed Questions and Gary K recap

The Asian markets received some relief from their relentless down turn. With the Fed's offering the window for more types (read lesser quality) securities, an unprecedented but necessary move, I have to wonder if we are not pimping out our country's balance sheet. Unless the credit markets sort themselves out in some meaningful way, how does this get resolved? You know what I'd like to see? I'd like to see (1) who is going to the window; (2) what they are swapping; (3) how they close their transaction in 28 days. It's public money, so I don't feel that they have any right to privacy.

Forgive my crudeness, but if feels like we are pimping out out our country's balance sheet. Since we are a debtor nation, how do such actions give our foreign bond holders more comfort? I suppose that with the USD strengthening, that makes them feel a bit better, and they will not clamor for higher interest rates.

I'm listening to Gary K's show from yesterday. I've summarized some of his comments at the bottom of this post. His website is in the Info Mosaic.

The WSJ's market data page has a much better sector performance than the Big Charts page. It gives one day performance. I've included the link under 'stock/economic' research sidebar heading.

Many of you know of, and I've mentioned a few here, the Ultrashorts and Ultralongs. These can be very lucrative or very brutal vehicles. I wanted to show you yesterday's brutality:




Gary K regarding yesterday's market (quotes/paraphrased quotes):

  • The market (DOW) had a follow through day, 8 days from the low; Follow through days are simply a characteristic that takes a market that is in a downtrend and turns it into a confirmed rally. This does not mean a new bull market has started. It does mean that every bull market was presaged by a follow through day. But not everyone of these works (7-8/10 work). We've had 2 follow through days in this bear market;
  • The other side of the thesis is important. Leading stocks and leading groups breaking out on heavy volume. There is hardly anything. IF this is going to be meaningful, it will take some time.
  • We've had two follow through days in a bear market.
  • If we get distribution in two days, I'll let you know.
  • Am I in? No.
  • Does not mean that the worst is over or that we do not fumble around.
  • All the commodities have topped; that is one of the reasons why the market will do better.
  • Not a good time to be short.
  • I'm off the bearish stance. (L note: that doesn't mean that he's bullish).
  • Here are some leaders to put on your watch list--he's got caveats most all of these, so listen : MA, WMT, RIMM, PRGO, Urban Outfitters, TJX, BKE, CMG, ISRG, KEX, Priceline, LKQX, R, LSTR, FLS, NKE, OI,
  • You cannot have a bull market with without a ton of leadership.

Thursday, March 20, 2008

Whew!

That damn stock market widget is still wrong. I deleted it. If there is going to be any misinformation on this blog, I'd prefer that it come from ME rather than a third party!

The financials blasted off into space. I'll remind that they were among the most heavily shorted of all stocks. It will be interesting to see what next week brings after the shorts have covered to see if some real buyers come in. It is good, though, to see these early cycle sectors (financials, homebuilders) with some strength. But if it is artificial--due to de-leveraging--that could suck alot of folks into the market only to have buying interest shrivel up.

I have to admit, though, my distrust of the charts due to my distrust of the fundamentals. Did we have a relief rally from the better than expected news from the investment banks combined with the Fed commitments. I'm still expecting more news--but perhaps that is my own fear and emotion.

Here are the homebuilders:


I sold my SMN and EEV at the open today. Smart move. I ended the week in the green, but I'm woefully under-invested. I now that Gary K will be looking for a follow through day after today to see if we get into a confirmed rally. I'll probably listen to him in the a. m.

Regarding my reticence when I see moves that are counter to what I think, John Murphy stated something interesting in his missive today. Specifically, that the homebuilders were showing strength, though the fundamentals were dismissed by Wall Street. He noted that when they were degrading materially in 2005, Wall Street failed to take note.

I've not yet learned the fine art of reconciling what I 'see' in the charts against what I 'think'. I have a tendency to over-think things. I take solace in that Cat is confused. We will likely need a consult with Russell's TA kitty to find out sock positions, though she may have grown out of that habit which means we are all lost!

If you celebrate Easter, then I wish you a happy one. I'm feasting on Saturday and Sunday. My payback for doing the Thanksgiving gala, is that I don't have to cook for any of the other holidays!

This time of the year, like fall, offers some crisp sky backdrops. I'll try to hobble about with my camera. My red-buds are soon to be blooming. You'll remember that MarkM suggested a Forest Pansy redbud which I secured. I've check on it this Spring, and it appears ready to burst forth with something! My mature redbud, too, is ready to bloom.

De-leveraging and the 28-Days of the Helicopter

I neglected to mention another important factor in the commodities volatility. De-leveraging.

Hedge Funds account for ~55% of daily trading volume. Many of these HF's are leveraged; and fixed income funds are very leveraged. If you are a nervous banker facing your own leveraging issues--you have to start weaning your clients from the leverage bottle to reduce risk and shore up your own capital ratios. To de-leverage, longs must be sold; and shorts must be covered. Every banker is revisiting his/her credit risks. I'm sure that they are reviewing their HF client's holding and making some decisions about asset and credit quality. From that they are issuing directives.

I'm always intrigued and a bit suspicious of other comparisons to other market events. Perhaps I should set aside my suspicions and remember the subtitle of Selden's book: Human impulses lead to speculative disasters. We are certainly see a speculative disaster unfolding before us! Personally, I want to see greater regulation of HF's and investment banks. In my view, there is something fundamentally wrong with an investment bank (GS) that is marketing a product on one side of the house and shorting it on the other side of the house. It is indefensible, in my opinion. I'm sure that statement will be tested, as I'm confident that lawyers are lining up.

Cat raises the specter of deflation. This is what BB studied and believed that it contributed to the Depression. One still has to wonder if adding liquidity to shore up faltering banks' balance sheets, ever really gets to stimulative uses. I talked about it here in this space in addressing some comments made by Tim Wood and Frank Barbera of FSO. If leveraging bids prices up (housing, commodities, bonds), then de-leveraging certainly must bring asset prices down. I suspect, though, that US Treasuries prices increase are not the product of leveraging, but rather the flight to quality. I would surmise that the "tell" on when to get out of Treasuries would be by watching the financials' recovery. Let's remember that the financials make up 30+% of market cap. So the flight out of financials was met by a flight to quality: treasuries, commodities, and PM. Now we are rotating out of commodities and I guess treasuries, unless money is being stuffed under mattresses.

Apparently CNN had something on last night comparing US to Japan. I did not catch it. I also promised here that I would do some research, which I've not done.

Something to be aware of, and I've not seen anyone really discuss it, is these Fed term loans. These are the "bring out your dead" where CDO's of questionable value are swapped for pristine Treasury securities. The term if 28 days. What process of discovery and/or repair is being undertaken to remove the need to swap these securities?

I cannot help but be bothered that 25% of our country's balance sheet has been pledged to support these species loans. Now, I'm don't wish to sound like a wild-eyed left winger, but we have Social Security (in addition to other programs) that's not funded. They took my contributions and those of my employers over the years and used that money elsewhere. Now the US has pledged their assets to shore up a credit debacle (which I believe was an imperative). At what point in time do these actions impugn the value of Treasuries? Where, then, is the remediation/credit stabilization that will happen in the next 28 days? And, at what point does the US say, this window is no longer open to you, come up with plan B? Hmmm...as I write, perhaps the mandate was, I'll take these securities, you go de-lever and come back in a month.

I don't pretend to fully understand the magnitude of these issues well enough to know if my concerns are misplaced. Nevertheless, I believe these to be reasonable questions.

Jobless claims are up. Who's surprised?

P. S. After I posted, Art Cashin is affirming the banks de-leveraging the HF's. It helps affirm that I'm not deep in the weeds.

Wednesday, March 19, 2008

Market Ground Hog Day

Seems like the market saw it's shadow today and turn and ran. Readers know that I'm a huge fan of Gary Kaltbaum. His show was interesting today--more in a minute.

Because I'm so underexposed on this market, AND due to the stupendous day with the financials (I think that I can call that a relief rally), I figured that I would step in with some exposure. I bought some EPP. It was up this a.m., reflecting the rebound in the Asian markets overnight. And then it dripped down along with everything else. The smartest thing I did was buy some EEV as a hedge. By the end of the day, I had scaled out of my EPP and kept my EEV.

I've stated here that I thought that commodities should top for the following reasons:

  • fundamentals are declining (recessionary pressures picking up) , though the emerging markets are 'talked' up--I considered it a tired, old story--though I agree that the long-term picture is still that we are in a super cycle.
  • USD$ may be finding a bottom--but it promptly fell further. My thesis is that with all of this CDO crapola, that European and Asian banks would not have as strong a CB response as the US. Accordingly, the US would be seen as a safer haven due to this strength and market transparency.
  • commodities had a large speculative run up--these stocks have been run up like the technology leaders (GOOG, RIMM, GRMN, AAPL).
Both bonds, as MarkM notes in the comments, and commodities (including precious metals) have been considered 'safe havens'--the proverbial flight to quality. But at some point in time the safe haven becomes risky due to the asset prices being driven up.

Now, back to Gary. He believes that gold and commodities have topped. There was severe breakdown in the commodity stocks today. He did not like the action today as you might have guessed. I almost feel like we need another floater or two in the financial arena. Any rally that we have without having those floaters is likely to be skittish.

Gary notes that with commodities falling, there is no market leadership--oh, I guess bonds are leading, but that's not a a good thing, I don't think.

The Indices in the Sidebar list are Wrong.

The DOW closed down 293--not 270 as it is currently showing. When I go to their website, it is showing the right data. But not here in Leisa-land. I'll try to figure out the problem. It is also an end of day--so if you visit during the day, keep in mind that it is as of the most recent close. Sorry for any confusion

Tuesday, March 18, 2008

Today

I'm listening to Gary K now. He's feeling like that there may be a short term bottom in. John Murphy posted this as well. Thinks short term (2 weeks), USD has bottomed; gold has topped.

Housekeeping:
  • I created a new widget on the markets. You can click on them to see the graph. I think that you'l like it.
  • I've updated my weekly sector spreadsheet. Go to the sidebar to click on it.
  • I've updated my quote box (I had to create an apostrophe image--part of my CSS learning).
I bought some EPP today. I think that the world markets will rally a bit after our good day today. It's important to note that neither the economic or inflationary commentary in the statement were positive. I'm not longer grousing about selling DUG or my CNI puts. I still have SMN. I'm expecting commodities to come down. I did sell my UYG yesterday (yeah, I panicked).

I hope that you had a good day.

Your Vocation as Part of a Diversification Plan

On CNBC, they noted that 1/3 of the stock is held by employees. People who thought that their retirements or college educations were paid for were staring at an incredulously low $2 offer. The stock was trading hopefully north of $ 4 and change.

Your vocation as an asset: It's too easy to overlook your vocation as an income producing asset, but it is. Depending on your level you may have any of these:
  • stock options ;
  • stock grants;
  • 401(k) with company stock choice;
  • employee stock purchase plan (generally at a discount e.g. 15%);

Each of these benefits are wonderful, but they are not without risks as Enron and BSC and any finanical stock whose stock price has plummeted in price shows.

Stock options are granted at a strike or grant price. They only hold value to the extent that the company's stock value exceeds the grant price. Often options are given as retention tools; accordingly, they vest in future periods and have expiration dates. (Of course, you remember the scandals on stock options where they were post dated and the "grant" price was given at ridiculously low prices.) The stock is granted at a price of X. The future price, at the time you are considering exercising, is Y. If X is less than Y you get the gain of Y-X multiplied among your option pricing. You buy the stock at your option price and then sell it. You could elect to buy the stock at the reduced priced and HOLD it.

Look at healthcare. Look at the financials. I can assure you that there are alot of stock options that were immediately rendered worthless. To the extent that folks were not vested in those options, they never had a choice on whether or not to exercise. But if you had a choice, and elected to not exercise your option, the option is currently worthless. Of course, the stock may come back prior to the option's expiration. But that did not happen at MCI, Enron, and it surely will not happen at BSC.

So whatever your situation consider, if you have these accoutrements, consider how your wealth might be effected in a downturn. I'll tell you flat out, that I had ALL of my 401(k) (I had other retirement accounts) in my employer's stock PURPOSEFULLY. It paid off handsomely when my company was purchased. I discussed the risks with my husband, and we both agreed that the risk reward was acceptable. And if we were wrong, we could recover. But it was a white-hot industry with risks that could quantified.

The point is to make considered judgments about your diversification of lack of diversification risks. You don't want to find yourself in a position of having your stock-centered (therefore valued) benefits become worthless, and your vocation--your job--in jeopardy.

I was fortunate to be a recipient of stock options, and I always agonized whether to take them or not. My financial planner reminded me of diversification. I took my partials, and I never looked back.

Monday, March 17, 2008

A Frustrating Day

I should keep some sort of journal on the market action with respect to expected, unexpected or a WTF? I don't think that there is either a word or an emoticon that would describe my feelings on the market today. I will say that since starting this blog, I've never once been tempted to change its name--so perhaps that is saying plenty about what I thought about today. I guess that most days, I'm still perplexed. Sigh!

I closed out of my DUG this morning given the initial strength in OIH. Here's a coulda, woulda, shoulda for you: I think that I should have waited until about 10:15 a.m. I don't know if this is true or not, but that point appears to me to be the point where shorts have covered and if there are no "long" buyers, then the early strength might be seemingly anomalous. Though profitable, I did not optimize my exit, and I left $4 per share on the table--$1200 in gain that I could have managed better. On my $20K spec account, that is material. It is currently all cash. I'm waiting like a praying mantis to strike at something.

I also closed out my BNI APR 80 puts out for the lowest price of the day. BNI was strong like bull given CSX's good report today. I should note that my rail thesis seems to be wrong. CNI, which I closed on Friday, opened poorly. Together, I made a few bucks, but I could have done better. I'm not whining. So money left on and under the table all the way around. Oh well. I've avoided the bulk of the market's demise, so I shouldn't complain.

Sunday, March 16, 2008

Bear Stearns cum Two Buck Chuck

JPM is buying BSC for $2 per share. I guess they are the new "Two Buck Chuck" which, if you didn't already know, a $1.99 bottle of Shiraz that is carried at Trader Joe's. I've never had it.

I think that one of the spookiest things is this: If on Friday, BSC had a book value of $85 per share as reported on CNBC and it only fetched $2, that places some serious pressure on the other investment banks.

The overseas markets are falling hard as you might imagine 4-5%.

John Hussman

John Hussman writes a weekly market letter. Last week's letter was titled:

March 10, 2008 Recession, Far More Foreclosures, and Eventually, Commodity Weakness

You can find the full text of it here. I wanted to lift two paragraphs (within JH's quotation parameter) to pique your interrest:

Finally, on the commodities front, the CRB (a broad index of commodities process) has hit fresh highs in recent days, but Friday's weak employment report has spurred questions about the sustainability of the runup in commodities. If you look at long-term commodity charts, you'll quickly become convinced of one thing – commodity prices are cyclical. They don't necessarily overlap economic cycles, but it is dangerous to believe that the cyclical dynamics of commodities prices have been forever changed by China and India. The price levels may very well be higher in the future than they were in the past, but cyclicality is something that should be expected in both commodities and the stock prices of companies that produce them.

It is accurate intuition that commodities are generally stronger in economic expansions than they are in contractions, but that intuition can fail when U.S. real interest rates are negative. At those times, the heavy downward pressure on the U.S. dollar tends to be supportive for commodities. Given that commodities have already had an extremely strong run, it would be overly speculative to take positions here on the expectation that the run will continue, but the evidence suggests that we should expect a serious break only when the rate of inflation breaks.


I read JH every week--though clearly I'm a week behind! He serves as a welcomed antidote for the perennially sunny forecasts of most market pundits. All issues are good, but this week was chock full of gems. I hope that you'll check for yourself.

Bear Stearns Redux

I thought this e-mail from Vince interesting about Bear Stearns. I had forgotten the story (though it was resurrected when Bear's HF's were in trouble--and it's worth noting that these were the first HF's to fall in this CDO crisis) about Bear's failure to participate when LTCM failed.


From:
vince farrell
Sent: Sunday, March 16, 2008 1:16 PM


"No man is an island, entire of itself..." John Donne didn't mean Bear Stearns when he wrote that ,but it's applicable. When Long Term Capital Management failed in 1998 (see Roger Lowenstein's "When Genius Failed", a superb book), the NY Fed gathered the heads of the Families in a room and said figure it out boys. The hat was passed and, as I remember, about $300 million apiece was the ticket and the system was saved. Except Bear Stearns. Bear walked out. The Bear has always been edgy. But when two Bear Stearns hedge funds failed in this credit cycle, and Jimmy Cayne, the CEO, was found to be playing bridge or golf while his section of Rome was burning, the companies fate was sealed.
Wall Street has a long memory. Bear had no friends. While it is true that in Wall Street terms if you want a friend, get a dog, it helps to have "relationships." Cayne's indifference set Bear off "entire of itself" and when calls were made for help last week there were no takers. Alan Schwarz, the new CEO, is a competent, really good guy. But he had no institutional depth in this market having been a banker his whole career. He probably has a golden rolodex for investment banking deals, but no relationships in this new world. He also made a dramatic misstep. Walter Bagehot, the 19th Century British financial journalist wrote "Every banker knows that if he has to prove that he is worthy of credit, however good may be his argument, in fact his credit is gone." (Thanks to the NY Times for the quote.)
That's why this will be a one-off situation. The WSJ had a good analysis Saturday on Wall Street's liquidity positions. On November 30, Bear had $17 billion in cash and owed $102 billion via secured financings. The $102 billion were loans made by "counterparties" and secured by assets Bear had on its balance sheet. If those assets declined in value, Bear would have to put up more collateral, or margin. Turns out the cash reserve was insufficient, and, and this is the big AND, the counterparties were no longer willing to make the loans, and the loans were all short term.
Lehman is a big bond player, like Bear,and was much mentioned last week as a firm that should be watched carefully. But Lehman has a much larger pool of liquidity at hand. It has $182 billion in secured financings but only $28 billion come due in the next 12 months and the firm has a liquid reserve of $35 billion. While the cash is 19% of its total secured financings of $182 billion, similar to Bear's 17%, very little of the debt is due in the next year, let alone right away. Additionally, LEH has $60 billion in liquid assets that could be sold and just last week close a $2 billion UNSECURED credit line. So, LEH has total liquid assets of close to $100 million, or some 54% of its collateralized financings. This is better than Goldman (38%), Morgan Stanley (39%), and Merrill Lynch (34%), and those firms also have a more diverse business mix.j
Lehman, and the other firms, have something Bear did not. They have relationships forged in the recent history of financial chaos, where they stood next to one another. Dick Fuld runs Lehman. He knows not just the other Family heads on Wall Street, but you can bet he knows the counterparties that Lehman has borrowed from. If Fuld, or Blankfein of Goldman, or whoever, had to hit the phones, the calls would be answered.Bear and Cayne were never there for anyone else, so turn around was probably fair play.
What an interesting week it was. Bear liked to be a maverick which is all well and good, but you better not tell too many people to screw off and you better be on the job and not at a bridge tournament.