Thursday, July 31, 2008

AM Post

Gary K reminds that we had a follow through day on Tuesday. Not every follow-through day leads to a new bull move, but every new bull move has a follow through day. Danger to short.

I signed up for a monthly trial of Marty Chenard's Stock Timing Advance Service. I'll let you know how I like it. If you've not subscribed to his free service, you might want to check it out. See the sidebar for link. I still believe that GaryK is one of the best FREE and honest market voices out there.

Dan Fitzpatrick is a wonderful chartist. You can get his free chart of the week here.


Wednesday, July 30, 2008

Greed and Fear


Prosperity
Sally Cairns


Sun-Tzu:

11. What the ancients called a clever fighter is one who not only wins, but excels in winning with ease.
12. Hence his victories bring him neither reputation for wisdom nor credit for courage.
13. He wins his battles by making no mistakes. Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated.
14. Hence the skillful fighter puts himself into a position which makes defeat impossible, and does not miss the moment for defeating the enemy.
15. Thus it is that in war the victorious strategist only seeks battle after the victory has been won, whereas he who is destined to defeat first fights and afterwards looks for victory.
Our friend, 2nd writes: "leisa- i often wonder if we would be more successful traders in the absence of fear and greed (mental or chemical means may exist to blunt/extinguish these impulses)...somehow i think not.."

Had I not recently reacquainted myself with Musashi, Sun-Tzu and Menenori, I would have agreed. In these texts we have war--fighting between men and among men--at its most basic level: that of survival. (Of course perhaps the reasons for going to war are fear, greed and power mongering). YET, these books reduce it down to A, B, C and D in terms of how one faces the enemy. In truth, these are books on how one faces death.

The admonishment is first to know ourselves, for our victory or defeat lies within ourselves. Second, we must learn the "art" of war--those skills that are necessary to practice until we can do without thinking. And last, when we meet our enemy knowing ourselves and equipping ourselves with the requisite skills, we can meet the enemy without fear. If we are lacking in skill in any of these--not knowing ourselves, failing to acquire the requisite skills, or bring emotion into the decision making process then we are likely to kill our capital in the market.

For me, it is a useful mental model. I think that the market is oftentimes depicted as a benign venue where one can safely put there money and have it multiply manifold. If one believes that, then one doesn't need to heed any of this ancient advice. You just put your money in and it will grow without your doing a thing. There are times in the market's cycle where that is true. I don't think that this is one of those times.

And when we think about how much of the market stories play upon our emotions--fear, greed, trust, etc--to the extent that we can control these emotions, then we become the warrior that is well equipped emotionally and physcially: beyond manipulation, who sees the field clearly, controls his/her action in accord with unfolding events.

Naturally if trading is your vocation you have to make money---but I believe that if one is trading without a real passion for the art and skill of it, like most pursuits where one is ill-equipped and poorly motivated, success is not likely to come. I thought the Sun-Tzu quote above (I think I've used it before) is appropriate.

Tuesday, July 29, 2008

A Picture is Worth a Thousand Words

Here's a picture of yesterday's market courtesy of FINVIZ. I generally like to find a pic and quote to share, but sometimes we need to step out of our rhythm.

I read a statement from a utility company, CH Energy (CEO quoted):

“During the second quarter, several challenges combined to depress our results. First, there were fewer degree days than last year. Secondly, we had much more storm activity and higher costs to restore electric service following storms. Third, higher energy costs induced our customers to use less energy. Fourth, the weakening economy has further induced our customers to use less energy and has also caused us to increase our allowance for doubtful accounts. . . the impact of high energy costs and the weakening economy are likely to continue and even perhaps intensify over the rest of the year and into 2009. As a result, we believe it is necessary and prudent to take two actions. First, we are reducing our earnings guidance for 2008, and second, we are filing a utility rate case to bring our revenues into line with the costs to serve our customers.”

I still reflect back on the interview in Barron's (I could not find it, but I did see my April 2008 post where I warned about warehouse clubs), by a money manager who was concerned about a consumer led recession. Also, there is a J. Mauldin "Outside the Box" about de-leveraging. I've been surprised that in all of this 'talk' about where we are, that we've not seen MORE discussion about the two "C's", Capitalism and Consumerism that got us here.

Now, this post is not a knock against capitalism--but when you hear the arguments about how important a free market is and how awful regulation of any sort is, I think it would do us all well to remember that what we are experiencing now is capitalism run amok. And run amok it will because of its ruthless efficiency in finding return. It's that efficient, predatory nature that makes it especially good at funding innovation and the like--but along the way it can takes some nasty turns.

And capital would likely not run amok so much if it were not for our collective consumerism. Isn't it the appetites of the many that gets us to this point as well? There's plenty of blame to spread around. Nevertheless, while we want to point the finger to Greenspan, the government, the HBB's, and any others that may have a glancing culpability, would it not be a worthwhile reflection to consider our individual contribution?

Saving v. Spending? While the virtues of saving over spending are very apparent, dollars in circulation--NOT dollars in the bank is what creates commerce and spreads wealth more broadly. Individuals are not any different than banks other than individuals and businesses are at the front end. It's a pyramid of leverage--and individuals and businesses are the support.

If there is broad over-leverage at that level, it only gets magnified as one goes up the pyramid levels. The banks used to be the gatekeepers of that leverage--ensuring that money did not get lent beyond reasonable expectations of repayment. If we can be comforted by any notion, it is this: it will get worked through. The question, though, is how much pain will be experienced.

I suspect that even though our inter-relatedness with other markets may have amplified the problem, that inter relatedness will garner a great interest on the part of many of getting it solved. I don't consider myself an irrational optimist--but rather a pragmatist. Households get combined; communities pull together and strengthen their bonds; gardens get planted; firewood gets cut and burned. People will eat, will be sheltered and kept warm--they just might be doing it under different guises.

Is that the end of the world? Most assuredly not.

Monday, July 28, 2008

Bankers, Investors and Men of Affairs


Peacock
Sosen


Everywhere one hears the belief expressed that the "big money" is made on the short side, and that the greatest inside speculators are Bears. This view is entirely erroneous. One of the favorite arguments of the public bear element is as follows : the public generally buys, and the public generally loses money. Therefore the buying side is the losing side and the short side is the winning side. By this absurd and wholly unfounded deduction many bears are created.

Now, the fact of the matter is that the fortunes made on the short side of stocks are few and far between, while those accumulated by judicious operations on the long side are legion. The public loses its money, not because it purchases, but because its purchases are made at the wrong periods and its methods of operation are bad.

The Pitfalls of Speculation BY Thomas Gibson

I wished I had made more money on the short side of this market; but I'm grateful that I've kept my capital relatively intact. The financials were treated rather savagely today. The price discovery in this arena is likely to leave many wounded on the battlefield. UYG is trading below $18.70 after hours. I sold mine at $19.87--but I was remorseful that I didn't hold on a tad longer. But I met my reasonable objective, and I did not want to be a wounded on the battlefield.

Perennial bottom callers abound. It seems as if the news gets worse each day--just when you think that it cannot get worse. We've a collected mess. Moody's Bankers, Investors and Men of Affairs sure pulled a number on us, huh?

Sunday, July 27, 2008

Untitled
Ando Hiroshige


Another class of retrospective speculators base their operations on seasons, or even corresponding weeks and months, forming their opinions on insufficient research, or on nothing at all. If there were in truth any certain period of the year or month from which movements would occur, the whole world would know it, and such knowledge would reverse expectations by the rotten technical conditions it. (p 88)

Thomas Gibson
Pitfalls of Speculation


In Summer of 2006, I sent a note (after much teeth gnashing) to all of my friends to urge them to talk to their financial advisor regarding strategies that they could employ to protect their portfolio in the event of a bear market. I had lunch with a friend recently, my friend indicated that most of his stuff was down 30-40%. My friend had called Fidelity and the comment was you are well diversified we would not suggest your changing anything.

I still conclude that the average investor is poorly served by the investment community. We are encouraged to keep our money invested while the smarter money is selling (or short selling). There's so much moaning about taxes and its purported redistribution of wealth, but no one talks about the redistribution of wealth that happens periodically in the market downturns.

Yesterday I downloaded all of the tickers from Fidelity and put them in Stockcharts. I then reviewed the charts. Many of the funds have more than one iteration (I had about 400). Too many, but I did look at all of them. Subsequently, I then just pulled all the sectors, some of the country funds, leaving the other stuff (bonds funds etc) alone. There are three charts that are above their 30 week moving average: FBIOX (Biotechnology), FBSOX (IT Services, barely and on a bounce), FSMEX (Medical Equipment)

To be fair, many of these funds experienced an extraordinary rise. And many of these funds have experienced an extraordinary loss; you can guess the sectors: banking, real estate, homebuilding/construction. And while market timing is anyone's guess, a periodic review and reallocation of funds among sectors/asset classes makes sense in order to lock in gains of over performing sectors. My lament comes from this: most average investors (folks with qualified money through an employer plan) are not well equipped to do this analysis. Worse, the financial services industry on the whole does not proactively advise in this regard.

The quote: I pulled this quote because it reminded me that if everyone is looking for the same thing, then the opposite is likely to happen. And while I know there is a preponderance of evidential matter that speaks to monthly rhythms, seasonal trends, presidential cycles etc....I also understand that the market is likely to do the opposite with just enough regularity to trip up a person or two. So the oft-called advice of buy the dips and sell the rips on this bear market is going to work until it doesn't.

I listened a bit to Financial Sense Online. I enjoy listening to the technicals. After listening a bit and reading Mauldin's latest missive, I think that I should turn my attention to subsistence living.

Saturday, July 26, 2008

Financial Institutions; Attachment

Butterfly South
Richard Ivy



Sun Tzu said: The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy.


I don't read Jim Jubak often, but I ran across one of his columns that you might find interesting about the financial institutions. You can be transported to it by clicking below.

Jubak's Journal7/25/2008 12:01 AM ET 5 big losers in the banking crisis

IN the article, he lists these five financial institutions that could be hardest hit: AIG, C, MER, WB, WM. WB just recently lost their CFO. One of the criticisms by analysts was that the fella was not perceived as being able to say no to the CEO. It was always a surprise to me that WB bought Golden West Financial. I had spent a little time with their financials--in fact they were one of the first one's that I had looked at to understand and see the scope of the problems. FED was another institition whose financials I looked at closely and helped shape my thinking early last year.

I suppose both BAC and WB wanted to get into the mortgage business. I'm reminded that when we see these 'deals' --and we can include Sam Zell's selling of his real estate business in that one--we should be instructed by them. These are founders and builders of businesses that even with all of that energy and time spent in constructing them, they were able to sell it and get the best price.

If they were not too attached to sell when the market was at its pinnacle--when the news and prospects for unlimited returns--then why do we get too attached to our own holdings which involve nothing but our putting in a sell order? I think that it is something constructive on which to reflect.

Friday, July 25, 2008

A Picture from the Past

Asian Mist
Nadine Rippelmeyer

Moody's Magazine
The Monthly Review
for Investors, Bankers and Men of Affairs
Edited by Byron W. Holt


It is designed to serve the investor, the banker, merchant and man of affairs in an attractive and popular, but not superficial way. In this respect it is original and unique and occupies a formerly unoccupied field. Briefly, it gives, in plain, simple language, the gist of all important news; it looks inside and outside of reports; it does not suppress or color information; it is the organ of no corporation or interest; it does not publish advertisements as news matter; it does not sell its editorial columns to its advertisers; its editorials are fearless and truthful, but not malicious; it is independent; it has no private pull rope from the business office to the editorial desk; it is fair and honest with its subscribers and advertisers, and it deserves the support of all honest investors.


The above is from the advertisement page of a 1906 book called the The Pitfalls of Speculation by Thomas Gibson. You could have subscribed to this quarterly for $3 per year.

My neighbor, JS, came by this evening. He lives across the street. When we moved out here, he and his wife were in their early to mid forties. We were in our twenties. That was 23 years ago. His mother, Mrs. S., lives a couple of doors down from JS. She's very elderly. She's cleaning out her photos and had one of Lucy and Greta. Ms. S loves dogs, but once her own lab died, she did not get another dog. So she 'adopted' my two in a way.

Mrs. S always had treats for the dogs--much of it stuff that I would most likely not give them. Lucy would walk my son down to the bus stop (about .25 miles away), just in front of her home. Lucy would then go to my Mrs. S's home for a treat. She would then go to the B's for a treat--it was a ritual. Greta, on a different schedule,would go visit Mrs. S. for the day. JS told me this evening his mom had a bed fixed up for her. I didn't even know it for the longest time. My kids would tell me that she would come from that direction every day around 4 p.m. I was quite moved to see the picture of my two beloved, departed dogs. I'm glad that Greta gave this sweet woman such pleasure.

I'm glad that it is the weekend. Seems like the banks are still in their price discovery mode. What a mess.

A. M. Post:

Teal Lily
Carol Robinson



1. Sun Tzu said: The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy.

2. To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.

3. Thus the good fighter is able to secure himself against defeat, but cannot make certain of defeating the enemy.

4. Hence the saying: One may know how to conquer without being able to do it.

5. Security against defeat implies defensive tactics; ability to defeat the enemy means taking the offensive.

On Insight: In this week's New Yorker, there is an article called The Eureka Hunt (abstract here) regarding the timing of good ideas. There's an interesting dichotomy that must take place. First you have to focus the brain's attention on the problem. Second, you have to back away from the problem to activate a particular part of your brain's cortical area (anterior superior temporal gyrus (aSTG). It's the part of your brain that searches for consilience!

Because of that "space" needed, one generally has insight upon the early part of waking or in the shower. I'll add blowing drying hair to that. It was interesting to read this yesterday, as I typically have insights precisely at these times. In fact, in working through thorny issues at work, it was important to me to have enough time in the 'process' (from start to deliverable) to subliminate on the issue as sometimes these insightful moments are ones where you really that you were faulty in your thinking on some matter.

A Modest Proposal: To NG's point about the bonuses...I had this thought upon waking this morning. It would seem reasonable to me for the government to levy a special 'assessment' on principals of a firm if through their mismanagement there is a required 'intervention'. In fact, if I were a stockholder, I would insist upon there also being some sort of assessment in the event that capital requirements are endangered. How would that work? (Warning--not well thought through)

  • Bonus pools would be different for principals/non-principals with the qualification that if you are a non-principal, but your bonus is in excess of X% of the bonus pool, you would be considered a principal for these purposes.
  • The bonus pool would have a 5 year look-back. In the event that capital requirements of the institution were to fall below statutory limits OR if the financial institution were to go aground and require government intervention, then the bonus pool would be tapped before the FED intervened and before the existing shareholders were diluted.
How would you ensure that the bonus dollars are available in such an event? These are financial geniuses right? There are a number of ways (these are not mutually exclusive):

  • The principals would guaranty it;
  • They could do holdbacks or treat it as deferred compensation;
  • They could purchase a surety bond;

Thursday, July 24, 2008

PM Post

The Tree of Life
Gustav Klimt


From our friend, G. C. Selden, :

the typical speculative cycle, which
runs its course over and over, year after
year, with infinite slight variations but
with substantial similarity, on every
stock exchange and in every speculative
market of the world and presumably
will continue to do so as long as
prices are fixed by the competition of
buyers and sellers, and as long as human
beings seek a profit and fear a loss.*


I was out for a lunch engagement today with a friend. The DOW was down in excess of 100 pts upon my leaving. Energy complex very wild. I've no big bets either way and my two DUG/DIG positions, though on the short side was winning when I left is dead even upon my return.

NG notes the amount of WS bonuses. The advice that is given is for hard working folks to "stay the course" and invest in the long term. It is merely advice to keep us in the market so that they can trade around the speculative cycle above and take our money and put it in their pockets. When it is in the form of compensation than they can take it home and keep it safe.

I see that GE has a lawsuit against SemGroup (thanks NG) for misallocating funds. Geez. I'm sure there is much to say, but not from me. I'm going to take the dogs for a swim.

Tomorrow is another day.

A. M. Post

The Tiger
Franz Marc

I cooked my first "flap steak" last night. I saw this cut of meat for the first time at BJ's. I had no idea what to do with it. With the power of the internet, the next time I went to the store, I was already armed with an idea of how to fix it.

I'm also rather intent on using stuff out of the garden. I elected to marinate this flap steak and serve it with grilled vegetables wrapped in a tortilla. It was remarkably delicious. I had to grill in the pouring down rain, but I was grateful for the precipitation given that our yard is taking on dust bowl characteristics.

CNBC reported, yesterday, that there was a hedge fund (oil/gas) that blew up. I didn't hear a name but apparently it was $3B in size and was forced to file bankruptcy. Apparently they were on the wrong side of the market in oil and were responsible for a good part of the run up. I've speculated about that here given the precipitous run up in prices, for I remember well Amaranth and Mother Rock in the natural gas space. That precipitous run up (lauded by all of the fundamental reasons as to why it should be so) ultimately ran out of the jet fuel (short covering) that propelled it so.

Despite our incessant efforts to find them, there are no sure things in the market--and the short in oil was the 'sure thing' with a slowing economy etc. I dipped my toe in with the buying of DUG calls, but nothing extreme--though the calls were not cheap as they were Sept calls that I purchased in Apr.

And in the space of 2 weeks we saw a deflation in financial stocks through unmitigated fear and then an equally astounding short covering rally--both seemingly 'sure things'. Here's a chart of UYG (2x financials).

It's gone from 69 to 24--that's a 65% drop. So when you hear the astounding jump off the bottom, even with that, the amount of loss is still substantial. The WSJ online had a very interesting article (click on title below)

Ellison's New Position: Cash Hoard

Money Manager,
Tired of Pummeling,
Dumps His Stocks
By DIYA GULLAPALLI
July 24, 2008



About HF manager David Ellison's (FBR Large Cap and FBR Small Cap Financial Funds) large position in cash, 50% and 38%, respectively. What I found interesting about those large positions is that these are sector specific funds. I often hear about the fund mandates of staying invested even in protracted downturns. It was refreshing to read about this manager.

Wednesday, July 23, 2008

P. M. Post

Title: Fox, c.1913
Artist: Franz Marc

As NG indicates (and I really appreciate his insightful commentary) it is a strange market. The HMO's today turned out to be like the banks---the news has been so dire that there was only one place to go: UP! It's constructive to take note of that.

Though I had been watching them, I passed on taking a position. Costco disappointed today. I was looking at both COST and BJ and thought they looked toppy just a couple of days ago. No action. I'm not doing a CWS (c/w/shoulda). But I did look. I've written in some space that I thought that the big ticket items at these wharehouse clubs, which you know is where they have the most margin, would likely get squeezed. Plus, there is a fair amount of dissembling, if you will, in the reporting of their numbers by the media--largely because gas sales are huge and we know what the price of gas has done.

I bought some GE AUG $30 calls today for .20 they went as high as .38 today. My Sept 35 calls are about a nickel, though I paid about $1.19 or them. It was my attempt to have some long exposure. HAH! DUG calls turned green, but on a net, net basis, my DIG position hurt. I'm still higher than I was at the beginning of the year but....(winsome thoughts).

My spec account is all cash. I've just let it sit. It's at $16.5K. Went as high as $23.5K Buit I started with $5 -7K so that's okay. I'll wait until I have a realy good idea! I don't know if I mentioned that I took a position in the double short utility ETF (SDP). Most of the utility stocks look a little weak to my eye. I bought a position about 3 days ago. Today, John Murphy notes that there is a long-term H&S. When I see a confirmation of an observation, I'm always heartened. Yesterday, though, there was a bit of a bounce which put it in the red, but I didn't see any real strength overall.

If you want to look easily at utility stocks...head on over to FINVIZ. You can see the charts here. If you want to narrow by type of utility, go to the 4th column and click on foreign utility, diversified....etc. If you also want to see a 'profile' choose that from the horizontal menu (look right) that serves as the chart header.

Miscellaneous: I didn't tell you that I closed Daisey's tail in the door last Friday p.m.. She was slipping out of a very narrow crack in the door (against my wishes). She pulled her skinny hips through and the door which was under pressure from me. When she slinked her hips through (which I was not expecting she could do), the door closed partially on her tail--enough to make it appear as if it were broken. She ran upstairs and jumped in my bed. I'm 10 minutes from the vet and 10 minutes before they close. Thankfully they were able to see her. Her tail was back in business when I got her out of my bed, but she was in pain. The vet gave her a steroid shot. Now she pees everywhere frequently--I make sure she gets out of the door quickly in the morning.

My neighbor is on vacation. I've been taking my dogs over there for a swim midday and endo of day to engage their left behind canine buds Ginger and Lacey. Their family will be home Friday, but they miss them. They are so happy to see me and all 4 dogs have fun. I do too. I've been kayaking at the endo of day. Ginger (golden retriever) always swims with me. Daisey gets in the water, but hasn't figured out if she can swim. She gets her entire body under the water though. Macy is intent in out fetching Ginger. She can now out-swim Ginger. But Macy is 2 and Ginger is about 8.

Ginger and the water are one. Now if we, as investors or traders, can be one with the market, then we'd have something going on!

I'm still asking the What's Next, Where's Next question. I'm thinking Utilities is not going to be part of that answer.

What Next, Where Next.


Puppies
Walt Otto


I remarked on another blog about the notion of too big to fail with respect to banks etc. It is bandied about with little regard to the magnituded of the underlying problem which in my view goes beyond the ability of a single gov't to step in and triage. Given that BSC's rescue came at the expense of 25% of our Nation's balance sheet being pledged (if Maria B of CNBC is to be believed), then if we've other institutions, large and deeply in trouble, I'd posit that we have some institutions to big to save.

This notion of too big to fail and some banks being too big to save morph's into a broader issue that the US has become too big to fail. Our bonds and GSE debt are all over the place, and in hands that care if rates soar or currency plummets due to the impact on their investments. I suspect that there are many meetings with other countries.

There is almost a collected sigh of relief in the financial sector; though I cannot believe that this black cloud has passed. Our good friend G. C. Selden (Psychology of the Stock Market) has some terrific insights:
.
Historical parallels are likely to be misleading. Every situation is new, though usually composed of familiar elements. Each element must be weighed by itself and the probable result of the combination estimated. In most cases the problem is by no means impossible, but the student must learn to look into the future and to consider the present only as a guide to the future. Extreme prices will come at the time when the news is most emphatic and most widely disseminated. When that point is passed the question must always be, "What next?". (p. 54)


I think that a very interesting statement ending with a very elegant question of "What next?" If capital is scarce, I suspect that interest rates will go up so long as there is a demand for it. Perhaps we need a "wink, wink, nod" approach to bank capitalization as was done with Latin American debt crisis (not an original thought by me, but one that I've seen expressed by Jim Cramer and someone else (though I don't look to Cramer for credible guidance on anything)). And the of course, we've money on the sidelines, in gold and in bonds that is itchin' to deploy. So in a sense, the "what next?" is "Where next?"

Also, Martin Pring has a free report out. I really like Martin Pring. Though he is one of the technical luminaries that was very early in calling a bear market. You can find his "Reason for Optimism" here: http://www.pring.com/pdfs/ptgletter.pdf

Tuesday, July 22, 2008

Evidential Matter

Evidential matter of the consumer is systematically being reported. Why would any be surprised by AXP's report? I'm no longer surprised by this surprise--a point of evolution in my dispelling some of my perplexions! But the market is a half-assed discounter of information--but when it gets some empiricism, it acts quickly.

I was reading Selden's Psychology of the Stock Market--yes, again. I continue to be struck by its relevancy. In one section he was discussing the general money conditions--availability of of money--and how when those conditions deteriorate, so does the market.

A source of frustration to me, is my lack of clear-sightedness regarding the effect of all of this 'stuff'. I rightly believed that the pundits who continually chirped incessantly about the the deluge of money that would flow from the Fed were misguided. It's a situation where one takes a historical precedent (increase money spigots = increase in the stock market) and MISapplies it to the current situation. Simply put: the failure to understand the difference between solvency v. liquidity.

The Fed's actions so far only help re-solve the banks so they can meet current capitalization requirements for loans they've already made. That's filling a hole--not spilling over to flood the waterways of commerce to float everyone's boat.

I'm beginning to rethink my thesis on oil services. I bought a little DIG to hedge my DUG calls. What we may witness is the market accepting a higher earnings multiple on these historically low p/e's: a sector p/e multiple shift if you will. It's something to keep in mind--particularly when you look at the technology and retail and the rather poor prospects of banking.

I'm not sure what is going on in utilities. I've a double short position (very small), but the last couple of day's, utilities have been perking up. Though they were oversold earlier.

So to keep in mind Selden's thought on the state of the money supply, personally, I don't see that picking up markedly. I think that conditions deteriorate before they get better--we'll see more defaults; more unemployment. And if things are going to get better in the latter part of year, I want someone to name some names--what sector is going to do that? If you know, chirp it up!

Monday, July 21, 2008

FINVIZ Feature Highltight: ETF's

Hornet's Nest
Gregg Robinson


You can look at the universe of ETF's by going here: http://finviz.com/map.ashx?t=etf

You can go to the top of the right hand column and choose different views. It's a great visual as well as data display.

Sunday, July 20, 2008

Collected Wisdom

I frequently share with readers quotes, aphorisms and other 'stuff' that I run across. I occurred to me today to treat this as a "Permanent Post" to serve as a ready reference. This is a an ongoing list. If readers have favorites, please post them in the comments to included the source (title, author, publisher, date, page number), and I'll upload them here.




Psychology of the Stock Market G. C. Selden (available for free on Google's Books online); 1912, Fraser Publishing Company 1965;

  • Our big capitalists are seldom entirely out of stocks. They merely have more stocks when prices are low and fewer stocks when prices are high. (p.16)
  • To a great extent we train our judgment to lend itself to our selfish interests. . . . We cannot work for our own interests as in other lines of business--we can only fit our interests to the facts. . . To make the greatest success it is necessary for the trader to forget entirely his own position in he market, his profits or losses, the relation of present prices to the point where he bought or sold, and to fix his thoughts upon the position of the market. (p.57)
  • The great cause of loss in times of panic is the failure of the investor to keep enough of his capital in liquid form. (p. 71)


~~~~~


Historical parallels are likely to be misleading. Every situation is new, though usually composed of familiar elements. Each element must be weighed by itself and the probable result of the combination estimated. In most cases the problem is by no means impossible, but the student must learn to look into the future and to consider the present only as a guide to the future. Extreme prices will come at the time when the news is most emphatic and most widely disseminated. When that point is passed the question must always be, "What next?". (p. 54)
~~~~~
The main point of their argument is that the state of mind of a man short of the market is radically different from the state of mind of one who is long. Their whole study, in such a conversation, is the mental attitude of those interested in the market. If a majority of the volatile class of in-and-out traders are long, many of them will hasten to sell on any sign of weakness and a decline will result. If the majority are short, they will buy on any development of strength and an advance may be expected." (p. 9)




The Book of Five Rings
Miyamoto Musashi
Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books

~~~~~
Two essential elements of ancient martial and strategic traditions:
  • The first of these basic principles is keeping inwardly calm and clear even in the midst of violent chaos;
  • The second is not forgetting about the possibility of disorder in times order.
~~~~~
Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

~~~~~

  1. Think of what is right and true.
  2. Practice and cultivate the science.
  3. Become acquainted with the arts.
  4. Know the principles of the crafts.
  5. Understand the harm and benefit in everything.
  6. Learn to see everything accurately.
  7. Become aware of what is not obvious.
  8. Be careful even in small matters.
  9. Do not do anything useless.
I found this on line link to another translation which you can find here: http://www.samurai.com/5rings/


The Book of Family Traditions on the Art of War
Yagyu Munenori
Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books



There is a science to the use of arms. If you try to kill someone without knowing the science, you will probably get killed yourself.


~~~~~


When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new." (p.46)





On Becoming a Leader
Warren Bennis
1989, Perseus Books

How can you best express you?

The first test is knowing what you want, knowing your abilities and capacities, and recognizing the difference between the two.

The second test is knowing what drives you, knowing what gives you satisfaction, and knowing the difference between the two.

The third test is knowing what your values and priorities are, knowing what the values and priorities of your organization are, and measuring the difference between the two.

The fourth test is - having measured the differences between what you want and what you're able to do, and between what drives you and what satisfies you, and between what your values are and what the organization's values are - are you able and willing to overcome those differences. (pp 123-127)





Here's a quote from George Soros that I first published in November of 2007 courtesy of Isiah 6:4

“Economic history is a never-ending series of
episodes based on falsehoods and lies, not truths. It represents the
path to big money. The object is to recognize the trend whose premise
is false, ride that trend, and step off before it is discredited."




In the time of war
Raise in yourself the Mind of Compassion
Help living beings
Abandon the will to fight
Wherever there is a furious battle
Use all you might
To keep both sides' strength equal
And then step into the conflict to reconcile.

Vimalakirti Nirdesa


Full Faith and Credit--A Bygone Era?

Journey
Fabrice De Villeneuve


My father tends to be a "this-is-the-end-of-the-worlder" type of person. I do try to not engage in such proclivities, as I believe that being overly pessimistic nearly always dampens the search for effective and creative solutions.

I've discontinued my Economist subscription. At some point in time when you have a buildup of unread magazines, you have so stem the pileup. I'm sure that I'll subscribe again. I can rely on my father to provide me with periodic e-mails that point out the most dire 'stuff'. Much of it I do not read--it's the same groups espousing the same stuff. But I find the Economist pretty balanced. They do not appear to be in the white-eyed, hair on fire brigades.

The FNM and FRE episode this week is one of grave concern to all of us. I thought that this article from the Economist gave a pretty good summary of what is at stake. I had remarked in another space earlier in the week the amount of investment 'stuff' on their balance sheets, and see that it is addressed here. I think it worth you time to read.

The article (click on below to access)


ends with this ominous sentence--and it is something that has been noodling about in the darker corners of my mind:

Perhaps it is no surprise that traders in the credit-default swaps market have recently made bets on the unthinkable: that America may default on its debt.






I wonder if we are to be the equivalent of the Latin America debt of yonder times? I'm dismayed that we've somehow taken "the full faith and credit of the United States" and reduced it a statement at which the world is likely to snicker--or worse--against which to rail.

FINVIZ--Redux

I'm discontinuing my worksheet of the DJ Industry performance. Not because I've become frustrated with having to change the spreadsheet, but rather, I found something that gives an even better breakdown. I'd rather both of us spend our time looking at more flexible data than the data that I was providing!

I've mentioned FINVIZ in this space before. TimKnight was the first to mention it. In fact, when I first visited it the website, the initial page was not very inviting. But this website is very powerful, and I cannot recommend it more highly.

While I still rely on my Stockchart charts, I'm finding that FINVIZ is one of the most well designed screeners I've ever seen. (Though to be fair, there may be other sites that have this power, but I've not seen it).

If you are looking for an extra tool for your toolkit, then take a little time and do the site tour. The sector breakdown that is a catalyst for my abdicating the DJ Sector report is this report that you can find here: http://finviz.com/groups.ashx?g=industry&v=210&o=name You can also use the additional views to see the information in other way. What are you waiting for? Go take a look!

Saturday, July 19, 2008

FDIC ---Know your limits; they might be greater than you think

Dragon Fly II
Alan Hayes


I set up a UGTMA account for both my son and my daughter some years ago. I would put money in it periodically. They would as well. My "deal" with my kids was that we would match up to $5,000 to go toward their car. Somehow, the lines became a little blurred, but in general it worked as a nice incentive.

Now that my son is driving and working, he needs more access (plus he has his car now). AT the local bank, I asked the young woman if people were concerned about the safety of their deposits. She said they were, and they were fielding many calls. She then said this: We tell people that they are protected up to $100K for each beneficiary of the account. So you would be protected up to $400K (not that it was a worry mind you!). That did not sound right to me. You'll remember I had a smiliar experience with a Fidelity person giving me what I knew to be incorrect information regarding the protection of money market funds. He told me that it could never go below $1--that was was SIPIC protected against. I set him straight on the matter, and then complained to Fidelity regarding the egregiously wrong information that I was given.

I didn't pick an argument at the bank, but I did check out the FDIC website. As it turns out: I WAS WRONG!!!. Shamelessly, pig-headedly wrong. There is coverage for beneficiaries when there is a paid upon death provision (POD). Anyway, it's worth your understanding how this works. You can spend 10 minutes at the following link and have any blanks filled in on accounts (to include IRA's which have higher limits).

http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html

In my next life, I hope that I'm less pig-headed. At any rate, I hope this post passed along some useful information.

Friday, July 18, 2008

Feeling Snarled up?

Prosperity Scroll
Jane Bellows


I've been strangely compelled to forage through my book stacks. Perhaps it is a inner niggling that I've not completed my book consolidation and organization project.

My slim volume of Musashi's (Book of Five Rings) and Munenori's (The Book of Family Traditions on the Art of War) work has several 'Post-It' flags in it. Putting my hands on this book as well as Sun Tzu's The Art of War.

It's been an indescribable joy to read these. I've been pouring a glass a wine and retreating to the deck in the evening to read this. The kittens, Minnah and Wyatt join me. Naturally, the dogs pester for a ball toss.

There's a passage in Musahi's work that I think is very important.

When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new." (p.46)

The applicability of the above thought to so many contexts (work issues, interpersonal issues, and of course, investing) makes it a rather durable concept. For me, one of the most difficult aspects about investing is the rather high batting average of being wrong. Further, there is a rather distinctive disconnect between cause and effect at time. Good companies (insofar as we can tell that they are 'good') don't always go up and bad companies do not always go down. Psychology also plays such a big role in addition to other dynamics.

Yesterday, my thinking was that if you were wrong that often in business you'd be out of business. But I've modified that thinking. My first reaction was from that of making strategy decisions. However, if you think about it from a customer acquisition perspective, you have to make many calls to gain a few really good customers--that is the more appropriate way of equating business and investing. As resources are limited (as is capital) you have to know when a prospective customer will never turn into a good customer.

So if prospective stocks/laggard stocks are tying up your mental and physical capital--that keeps you from developing a really good stock that will give you better rewards. We all need mental models to help us operate within a framework that makes sense. For myself, this seems to be a mental model that helps with this evaluation AND provides a chance to 'become new'.

I have lunch with friends today....that will help me along the way!

Thursday, July 17, 2008

PM post

Bamboo and Orchids I
Ives Mccoll


I closed out my UYG today. Dan Fitzpatrick at Real Money said something (but from another trader) that stuck with me. It had to do with reasons to sell. One of those reasons was when the stock has moved too far too fast.

I believe that that much of the financial sector's EPIC move forward had to do with the SEC's announcing that they would enforce naked short selling rules. You do know that if hold stock in a margin account (as opposed to a cash account) that you do not own the stock, don't you? Also, if you hold dividend paying stocks on margin, you get credited with the dividend but you may not get favorable tax treatment.

If you hold stock on margin, then those shares can be lent out to people who short--a lovely irony is it not? You hold long in a margin account and they lend the shares for someone that wants to take you down. I've never seen such an advance in my life. Perhaps it keeps going tomorrow: financials up, oil down and technology is one of Dante's Seven Circles of Hell.

Utility stocks are looking a little weak to me. I bought a smidgen of SDP the double short of the utility index. My WX continues to do well; but I've not added here. I'm still very underinvested, but I'm adding slowly. My DUG and SUN options are nicely green today. I've been nursing DUG along for a while. I bought these in APR (for OCT expiration) thinking we'd have been there, done that already. Oil and gas has now gone negative for the year. Massive sector rotation. But if the Nigerians eat a big bowl of Wheaties and start to feel frisky, who knows where the price of oil will be.

I hope that you are fairing well through all this stuff.


Wednesday, July 16, 2008

Bear Bull Brawl in Financials: Life Imitates Art

Bear Bull Brawl
De Rooy


It was a bull bear brawl in the financial complex today. WFC had a quarter that exceeded expectations and trapped a bunch of shorts. I don't think that I've ever seen anything like it. My UYG finally went green, but it went to sickening depths yesterday. I mentioned that I had hedged it and had closed the hedge yesterday. Lucky timing. A reminder of what happens when a trade looks like it will print money indefinitely drawing too many moths to the flame.


My OCT 35 DUG calls finally went green today. I've had them for a little while. Energy and financials--lots of volatility. But we've seen this all before. I still think that the banks have much to work out. We will see some things that will still surprise. My main objective with UYG is to have exposure to the financial sector which I knew had been beaten down. It was under the theory that you can rarely buy at the bottom, nor sell at the top. It is a very small position--but when a small position moves +/- 20% in a day, it can wreak havoc.

A simple tax break and bank bail out plan from Leisa-land


Fire, 1566
Giclee Print
by Giuseppe Arcimboldo

I awoke this morning with a somewhat foolish thought in my head. In order to shore up the banks and give some tax breaks the government should have merely done this: Suspend or reduce the capital gains tax (or give preferential treatment to s-t capital gains) for people who liquidated their investments and then placed those proceeds into banks that needed some shoring up. Basically, provide an incentive for people to put money out of one pocket and into another. Naturally, there would need to be some brain in the center so that the infusion is not so willy nilly that it would be useless.

Lots of other caveats I'm sure, but I truly wonder why I awoke with this odd thought clearly at the forefront of my mind.

I hope that you will click on Arcimboldo's link above and see some of his other innovative collage paintings.

Tuesday, July 15, 2008

PM Post


Zen Iris
Fine Art Print
by Pamela Gladding

I'm still mostly cash. I'm finding my UYG entry.....search for word....'regrettable' springs to mind. Oh, I fully hedged it with SRS which I closed near the top today. And I did my sell almost automatically. I tend to overthink things. So I "funded" the current loss that I'm holding (in retirement account). The current close in UYG is $3 below my entry point of $17.60 or so.

A friend of mine with whom I'm having lunch of Friday (I never buy stuff on expiration day), said his contacts (at a very large money center bank) see no lending, particularly in the capital markets area. This dovetails with what V_6 mentioned in the comments area recently. Also, that credit markets will likely not normalize until late 2009. It's hard to imagine how much lowest some of these names can go.

I bought some more WX. I'm working on reversing a previous habit--that habit being averaging down. I'm going to learn how to average up. It had very good volume today. It could all go to hell, but this sector is benefitting from the meltdown in the others.

I'm still very underinvested. But I don't mind. I think that this market has much gnashing of teeth, fire belching, and other disgusting machinations to go through before the end comes in a whimper. I think that we need another bank failure to come. Oh....my friend (retired) mentions that his contacts see 90+ failures.

I think that there is more bad news to come. What will be key is to watch the market's response to that bad news. And it is important to note that in times of uncertainty, no news=bad news, as the vaccum creates all sorts of fabrications of the worst sort. That is at least my business experience.

The Killing Sword


Untitled
Fine Art Print
by Ando Hiroshige


This de-leveraging feels like a bad colonic. I've never had a colonic, though, so my analogy is not based on any personal experience. But I did see Johnny Nashville (of Jack Ass fame) get one on TV.

They say 'Cash is King'. I don't like to worry about my cash. I'm worried about my cash. I remember the last bout of money market scary stories. One money manager said to buy stock in good companies. Hard to know who is a good company any more--and even the good companies have been bruised and beaten.

GaryK is fond of saying that in a bear market 'You will get no help from Wall Street.' Never has anything resonated so truly as that simple statement--that simple fact. Even Jeff Saut's advice seemed a little risky to me, and I've always considered him an honest and objective commentator. Oh, my opinion hasn't changed, but he noted that it was time to buy again--but responsibly and in 1/3 tranches. Here is part of his July 7 post:
For us, this week represents a critical week. Today is day 33 in the selling-stampede, and unless we are in “crash mode,” our belief is that we are making a “raindrop bottom” on a trading basis.


Even Doug Kass and Dennis Gartman were saying that the financials were looking attractive. Gartman said he was long financials and short the S&P.My question is this: What if we are in crash mode? (I'm not saying this with the whites of my eyes showing).

In the early part of the year, we were told that these financial institutions were at epic buying opportunities. Now so many negative points later, we are in what type of epic? Surely one written by the Waylan or Farley brothers. I saw where the big mutual funds were mouthing support of Fannie and Freddy debt--buying more even. What can they say, really? To say otherwise, they might as well fall on a sword or throw themselves over a bridge.

None of these credit problems should have been a surprise to any. I would have surmised that our leadership would have had a contingency plan in place. I know that I would have. You do the thinking, hand-wringing, analyzing and planning when you can reflect. If bad shit happens, then you calmly pull out your plan and act in accordance with your plan-changing it as needed, for you can never plan it the way it will ultimately happen.

But we are living and breathing the stench of a world-wide systemic risk event. Larger than anything that we've seen. I dare say larger than the events in 1929--I'm sure we've created more wealth since then. It all seems tainted. This is what happens when independent oversight is essentially like a toile drawing. It looks real, but it isn't. The regs are written in lockstep with the industry that they are regulating. That's the benefit of lobbyist. Yes we are in the best democracy that money can buy.

There is this passage in Munenori's book that speaks of rhythm. And there are many natural rhythms in the market which work until they don't: 4 year cyles, presidential cycles, lunations, Mercury retrogrades, overbought, oversold etc.. I'm reminded that most market surprises come when that rhythm is broken: oversold does not yield a bounce; overbought becomes a feeding frenzy.

Accordingly, you will see rather immediately my fascination with Munenori's discussion of rhythm in his book, The Book of Family Tradions on the Art of War. It's a slim volume in which there are three chapters:
  1. The Killing Sword
  2. The Life Giving Sword
  3. No Sword
In the Killing Sword there is discussion about the rhythm of the sword. Specifically, he speaks of three rhythms:
One rhythm is a simultaneous strike. Another is to close in and strike when the adversary's sword is raised. The third is to cross over and strike when the adversary's sword is lowered.

Here's what really resonated with me:

Matching rhythm is bad, incongruous rhythm is good.

When we are in seeming rhythm with the market, it is these times when the market tricks us. An oversold bounce is a rhythm--as well as it's overbought sister. And when we anticipate too much, the market sticks its foot out and tricks us, the oversold bounce evaporates into another leg down--which is what we are currently witnessing.

Perhaps I'm being too dramatic considering money in the market as part of Killing Sword rhythmic interplay--but it provided a nice metaphor for me, and I wanted to share it with you.

Monday, July 14, 2008

PM Post

Michelangelo fresco ceiling atmosphere
Photographic Print
by Christian Simonian

This is a nice Armenian name.

My UYG was a nasty acquisition. Such a bounce from such skittish shorts. I bought some SRS to hedge.

The insurance companies, where I assure you that HERE is where you read about them first (I despise making prideful remarks, but I'll go to my grave being proud of that call), are getting whacked. How it took so long is a constant reminder of my being too anticipatory--a deadly sin in investing I've determined. Nevertheless, I waved the flag--and that is worth your lingering here a bit, I think.

HERO. I like this chart. I had JUL 30 calls that I let go (expecting an implosion in the OIH) with a modest gain. I then bought common and my stop loss was hit on the last decline. There really needs to be a decisive break above the dotted line. You might consider putting it on a watch list. Today's jigginess came from Bush lifting offshore drilling bans (unilaterally I might add, but I'm not going there).

I think that I do a pretty decent job of finding opportunities, but I've concluded that I don't manage my positions terribly well largely due to my letting my biases color price/volume movement. I take a small gain when I could get a very large gain. Some times I cleave losers to my breast as if I could somehow resuscitate them! I still have my DVR Oct $15 calls. Ask me how that is goin'!

I have a small, recent position in WX. I note that Warburg Pincus has disclosed today a position. They also recruited from PFE a former co-head of joint ventures. I find these two events auspicious. WX is a Chinese pharmaceutical research company. You can read about them here on FINVIZ. I note that it could easily fall to 15 and change. I'm going to watch tomorrow and see the reaction to the W-P news.

This market is reminding me that conventional buy and hold, dividend and value-play wisdom can get you murdered. Dividend plays--most particularly with the banks--have been murderous. A 4% dividend doesn't help you much when a stock is in a free fall. I've always voiced skepticism about rigid buy and hold methodology. We've had entire industries decimated in this environment. As we've watched our stalwarts fall, it is a reminder to me that you have to account for the macro environment's effects on good companies. Good companies in bad sectors get mowed down. Cisco and Oracle are examples of terrific companies that NEVER came close to kissing their old highs.

If you are in a sector that is out of favor--such as homebuilding and financials--dollar cost averaging down is a ticket to the poorhouse. There's no question that these will come back, but selling (or reducing exposure to) sectors as they peak and buying (or increasing exposure to) sectors as they bottom (not while they do the Acalpulco cliff dive) sure seems to be the smartest strategy from my vantage point.

What is difficult in following such counsel, and it is not lost on me, is that there is a miasma at the top and a miasma at the bottom for most but the most clear-sighted. I note that Capital Research and Management is the largest shareholder for FNM and FRE. Legg Mason has a big position too. I'm sure that is a huge headache for a money manager. I can imagine no more stressful a job than to be a long only manager in this environment.

When I think about some of the "stupid" stuff that I do, I remind myself, that I'm far ahead of the indices, and the 'smart' money is not. I don't mean for that to sound like hubris in the least. I try to act and write in a hubris-free zone. Nevertheless, sometimes we lose sight of the incredible alacrity that we enjoy as small investors, as we are frequently reminded that we are 'dumb' money.

Did You Know? Spyder Quicksheets

You can download the Spyder ETF Quicksheet which has all of their ETF's organized nicely. I highly recommend your having this readily accessible. You can download and save the doc as well as print it out.

If you've never accessed the website, you will likely need to register.

Sunday, July 13, 2008

Misc. Rambling Post

This weekend was one of much needed diversions, which of course I plan to bore you with. I did NOT spend much time at my computer which means I have not fixed my sector spreadsheet. I had also planned to look at the market cap changes from an old Yahoo sector spreadsheet that I had prepared. That too did not get done.

Saturday we took the boat out. We boat on the Chickahominy River. It is about a 30 minute drive to this beautiful freshwater river that empties into the James River. Next weekend we will be visiting Chippokes Plantation, home of the Pork, Pine and Peanut festival.

The marina from which we embark--and have for all of these multitude of years when I was but a young lass--was virtually empty. And an empty marina, means an empty river. We thought our daughter was coming with us, but she came home and then went out without a word. I tried to call her; no answer. So we left.

On the way to the marina we encountered a broken trailer. Broken. Snapped behind the tongue. A terrible site. A wrecker was there. I've never seen that. Once on the river, I get a call from my daughter. "I'm with Matt and Britney and the motor blew up". Well, I thought the motor to her car had blown. Heck, I didn't even know where she was and her voice was alarmed and I had howling wind in my ear. As it turned out, she was on the water with friends. Luckily we were close by. It turned out to be a rather dramatic time for these young people: testosterone, alcohol and stupidity--all things in ample supply with young men--combined for some foolishness.

I'm not sure exactly the 'story' but it involved an ex-girlfriend and 'some other guy'. Somehow there was a tussle. One of them tried to break it up. He received a fist to the face which rearranged several of his teeth an a not so eye pleasing way in addition to hurting like hell. Of course another has to 'step in and help his buddy'. He has a large sore knuckle on each hand and a sore jaw. Another had a cut on his eye.

In the 'getaway' the motor blew--and managed to start a small fire (hot spark plug on boat carpet). After the necessary panic, it was extinguished with a beer. I was able to collect my daughter (who is quite level headed and she was sober), and the rest of them made their way back. We did offer to take one who needed medical attention with us, but he declined (we also know him well). We were never 'young' that way, were we?

But it was a beautiful evening on the river. We had dinner at the marina--simple fare: cheeseburgers, fried oysters. We also ran into a long-time friend. He had to be towed in. Lots of bad boat karma, but not for us.

~~~~~~~~~~~~~~~~~~~
Last year at this time (07.11.07), I had to have Greta euthanized. The approach of this date has weighed heavily on me, and I'm not really a maudlin person. Perhaps it is because I've a geriatric, incontinent, now-not-eating poodle to make a decision about. I also have a 17.5 year old cat that I have to euthanize this week. He looks like walking death, but up until this week, his spirits have been good and he eats, poops and pees. Now he cannot even keep food down. My dad is not doing well either. He's not feeling well and his liver enzymes are out of whack. At his age, once you get knocked down by something its hard to get up. To add insult to injury, he upgraded to Vista. He's finding that his scanner is not supported and is getting used to many other things.

I'll be 48 in August, and I can tell the difference in 'things' from just a couple of years ago. My goal is by my 50th birthday to regain age-appropriate fitness level that I had in my early 40's. When I turned 40 I started running. Then I sprained my back (water skiing) at 42 and change. Then everything went downhill from there! But I'm not dreading turning 50, particularly having this goal in mind.

~~~~~~~~~~~~~~~~~~~~~~


I had a low key day today. I transported two beautiful well-behaved English Setters. The slept the entire way. It was an early pickup, 8 a.m., so I missed egregious traffic. Nevertheless, I was surprised coming back from Springfield, that the traffic was not heavier. Demand destruction just like the boats. There's a couple of gian RV retailers on the way. I just shuddered when I passed their acres of RV's.

~~~~~~~~~~~~~~~~~~~~~~

This week in the market promises to be an interesting one. I'd be lying if I said that I wasn't worried about my 'cash' in my retirement accounts which is in money market due to Fidelity default option. I ranted about this before. At the very least, you should be mindful of the FDIC insurance levels.

Saturday, July 12, 2008

Transport Passenger

I'm not doing my mixed breed rescue today, as I'm driving tomorrow from Richmond to Springfield. I'm driving this handsome fellow, Byron, along with another English Setter who has yet to join the caravan. Also in tow are a couple of spaniels (they look like K. Charles to me). They get off before my stop.

Byron looks just like Marnie, the gorgeous girl I shuttled about a month ago. This tri-color setter is called a Llewellyn. I'm not sure why my husband and I have such a fond place in our hearts for this breed. This color is the type that my husband would like as it is similar to Lucy (who was a Llewellyn, but did not have the mask. Personally, I'd prefer no mask.


My current English Setter, Daisy, is white and orange. Mark calls her "goofy dog". She is a goob, and I've never seen another dog run like her (I think that she is part deer). She's so thin she looks like she has been starved, but she burns an extraordinary amount of calories. I'm now adding lard to her food to give her more concentrated calories.


I think that 1/3 of her body weight must be her tongue. You can see it hanging out. She's also a very slobbery dog because when she drinks water she sloshes her whole head in it as if it were shovel. The picture here is recent. It was the first time she had submerged herself in my neighbor's podnd. She still will not swim, but that she waded in and stuck her head under the water like a duck was a good thing.

She also is sparsely haired--I call her my Rogaine dog. Her special talent is playing ball with Macy. I've never had an English Setter catch a ball or play ball in any way. I'm sure we'll get another Setter before too long. But both Daisey and Macy are very active dogs--I don't need any more excitement!

Looking to Nature for Remedies

When you think that you've had a bad day, think of this fellow. Long-time readers will recognize this picture. It is a tomato hornworm (from my garden and my pic). If you've grown tomatoes you will know that this is a ravenous fellow. He works quickly with great intention and can strip a tomato plant overnight.

Nature is clever in her bringing great balance to her purview. A predator of the tomato hornworm is the braconid wasp. The wasp stings the hornworm and lays eggs. The larvae feast on the insides of the hornworm and then create cocoons, the white things that you see in the picture, when they are ready to pupate. As you can see from the holes at the end of these cocoons, the cocoons have sprung their inmates.

We've had the equivalent of HBB's who have served as ravenous money caterpillars gobbling up the capital of their clients. I hope that we can create the equivalent of a braconid wasp in our regulatory and/or justice system.

Friday, July 11, 2008

Sans Accoutrements

Catharsis



My pics--a sunflower using Adobe CS2 to provide different filters. Taken today in the waning sunlight.

I found great beauty in the imperfection of this sunflower.












Dictionary.com defines catharsis as follows:

ca·thar·sis Purgation, especially for the digestive system.
  • A purifying or figurative cleansing of the emotions, especially pity and fear, described by Aristotle as an effect of tragic drama on its audience.
  • A release of emotional tension, as after an overwhelming experience, that restores or refreshes the spirit.
  • Psychology
    1. A technique used to relieve tension and anxiety by bringing repressed feelings and fears to consciousness.
    2. The therapeutic result of this process; abreaction.
  • ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    My family has abandoned me this evening. The men folk have gone to something that involves racing cars. My daughter is doing who knows what.

    Today is a very important day for me. Hopefully, you'll not think I'm a nut. First off I'm pissed off beyond anyone's (even my own) ability to measure. Why? Because here we are on July 11, 2008 and we've not been deprived of an honest objective opinion about the depth of this credit crisis.

    When I saw Jim Cramer on CNBC as some supposed "expert" I totally went over the edge. First, he failed to see any of this coming. He was extolling the virtues of WFC and WB for quite some time. I turned the TV off. I've so disgusted with him and his clown antics, I have no plans to renew my Real Money subscription though I adore the folks on Rev Shark's blog. Another TH, Second, Diane Swonk, who is repeatedly trotted out on CNBC (though I think that she's very smart and articulate) was positively patronizing about the breadth and depth of the credit crisis last Spring-I've still not forgiven her--and why she is still a "go-to" person despite this error is a mystery . Don't even get me started on Larry Kudlow. And Paulson and Bernanke pegged the losses at no more than $50B--I think that we'll ring the bell and go beyond at $400B. Whose got a ticker for this mess. Where is there an objective, credible opinion on any of this? (I realize that I did a first, second and become sidetracked).

    I'm outraged--spittingly, cussingly, hissingly, outraged, that a firm such as Goldman Sachs can (1) underwrite and sell these CDO's to investors with

    • donor money such as not for profits, church and educational institutions;
    • municipalities to include public works;
    • public pension plans;
    • privat pension plans; and
    • other qualified investors.
    I'm sure that there are others that I've left out, but you get my point.

    I try not to be a whiner. I find whining unattractive both physically and intellectually. Accordingly, this is the last whiney post on the matter that you will see from me. BUT.....I plan to figure out a way to devote my time and talent toward ensuring that this sort of thing is not perpetrated upon innocent investors.

    You expect the people advising you about your money--we are talking about deep fiduciary and trust issues here--to be working on YOUR behalf--NOT on the behalf of lining their filthy, bulging pockets with additional fees at YOUR expense.

    Many are shuddering about taxpayer bailouts etc. "Let them fail" is the chant. My friends, if they are allowed to fail it imperils stuff you expect to be safe: your retirement, your bank relationship, your money market, your Social Security, your Medicare.

    I can honestly say that I've NEVER been more angry nor more moved in my life. (But is that such a bad thing?!) Hence, I've entitled my post as Catharsis. I had it today. Angry, pre-menopausal women are very dangerous when provoked! (But some of you may already know that!).

    Morning Post

    Pressed Flower Art - Balance
    Giclee Print
    by Shelley Xie

    As I have no feel for this market, unwilling to make any upside or downside bets, I've been mostly on the sidelines. In anticipation (that's a really nasty word I think!) of a bounce, I let go of my DIA SEP $125 puts as well as my BWA JUL $50 puts).

    Under the guidance of M. Musashi's rule #9, "Do not do anything useless", I've been spending time going through charts--perhaps too much time as my eyes and neck remind me.

    Over the past few days, the HMO stocks have gathered some strength. Yesterday that strength was punched away due to some changes in the Medicare Advantage Bill being passed. For all of the big HMO's, there is no one left to buy. Accordingly, growth in membership is tough unless you find a new pool. That new pool was Medicare. The bill that passed ended up to be a shark in that pool.

    The point that I found interesting is that the run up almost seemed a bit of a feint. Here are thumbnails. It might be worth watching to see if these prices hold.

    I've been enjoying getting re-acquainted with The Book of Five Rings. I did put my hands on Sun Tzu's The Art of War (Trans. J. H. Huang). It was languishing in my son's room--and I do mean languishing. It was stuffed in the bookshelf with the cover and about 10 pages folded over backwards. Half of the book is the translation, and the other half of the book is comments on the translation. It was odd to see my penned notes in the margins as they related to business strategy. The applicability of these texts to investing/trading is extraordinary.

    There is a natural rhythm to everything, and these texts reminded me of that. In the translator's preface, Sun-Tzu's quotation as follows is highlighted:


    "Not battling" is a form of strategy.