Checking In

The Peplexed Investor is now the absentee investor. The DOW totters on a precipice. Two months ago, I would have been watching every tick. Now, consumed ....a digression.

I almost wrote 'subsumed', and it occurred to me that I really did not know the meaning of that word. Naturally, I looked it up. Looking up words that I don't know is something of a habit. And in looking up subsumed, I found colligate. I found colligate in Wicktionary: To formally link or connect together logically.

I've had to do a good bit of colligating of late, so my rapturous contemplation of the Dow's limbo dance with 7,000 has been interrupted by things of a more mundane nature. It's the mundane, though, that matters, for the market is ultimately a reflection of the mundane.

Now that I'm working long hours again, the market seems like a very distant and foreign thing. But that I had the opportunity to become its intimate (seems like I should insert something about not getting screwed to badly), helps me look at passing data---interest rates, commodities, gold and other sector performance and have a reasonably clear sense of it all.

I often abbreviate Jose Ortega y Gasset's name a JOYG. Reading this lovely book, Meditations on Quixote has brought me much JOY.

He who wishes to teach us a truth should place us in a position to discover it ourselves. (p.67)

Rollbacks

It looks like the stock market is channeling the ebullient, sunny-faced Walmart cartoon figure and is rolling back prices with a vengeance. I see that we are back to 1997 levels in the DOW. So much for our perennial bottom callers who were so certain that THE bottom (v. A bottom) was in.

I secretly marvel at the hubris that it takes to make such statements with such certitude--largely in that I have some painfully embarrassing moments in my life where I've been most wrong where I was most certain. It is also one thing to be certain about your opinion of the market when it comes to your own money; however, to express these opinions so that other people's money will become entangled in your arrogantly held views on the market is another thing indeed.

Book club was at my home this past Saturday. It was nice to be with everyone. We discussed the book The Ascent of Money. I do recommend your treating yourself to this book that provides an interesting historical context for today's events. There really isn't anything new under the sun. And our market and credit machinations are just one of a long series of busts. The only question is of what magnitude and duration.

I'm embracing a new book: Meditations on Quixote by Jose Ortega y Gasset. I've mentioned it when I acquired it. The first 36 pages were introduction that I read. I'm 45 pages (9 of the author's) into this slender 165 volume. There is considerable here to grasp. I hope that I'm up to it!

"We should be on guard against rigidity, the traditional livery of hypocrisy."

I find JOyG's writing to be full of phrases, sentences and paragraphs that are quote-worthy--much like his fellow Spanish philosopher, George Santayana.

"Man reaches his full capacity when he acquires complete consciousness of his circumstances. Through them he communicates with the universe". (p.41)

"I am myself plus my circumstance, and if I do not save it, I cannot save myself." (p. 45)

I know that this book has come into my hands at an important juncture in my life and the circumstance of the world---the circumstance of MY life. I think that this man's thoughts will help me build some perspective that will tie in a number of things that have been flopping around in my brain. And as I read what he is writing and reflect on it in a wide-eyed response to it as if I had opened a little blue box with some glittering inside, I realize that there is something of a moral imperative for each of us to acquire complete consciousness of our circumstances. I've never thought about it that way before.

Perhaps it is the wrong approach to take as I slip back into interested reader mode--wrong in that it may bias my understanding by placing a filter between me and his writing. But our filters help us make sense of things. I'll be on guard to ensure that my filter does not subject me to the sin of rigidity that he warns against.

Book Club Day

My book club comes to my home today. As usual, EPA cleanup duties abound. We are reading Niall Ferguson's, The Ascent of Money.

I thought I would print for them my Spring 2007 series of Hedge Funds and Systemic Risk. I ran across this paragraph, that I thought would bear repeating:

I wanted to provide a bit of a backdrop of hedge funds (HF's). You may not be a qualified investor and may never will be, so HF's funds may never be in your investment horizon. Nevertheless, they are in the same financial arena as you competing for returns. And the whole point of my writing about this is that if they screw up, it can cost you money.

Let's reflect a moment on the basic tenets of the paper.
· HF's have proliferated;
· They have a high attrition rates;
· Risk profiles (due to leverage and investment styles) are unavailable;
· Operations are not transparent; and
· Non-correlated dynamic strategies can correlate into phase locking during periods of market stress.

Welcome back Nice Guy.....the markets are writhing like a worm on a hot sidewalk. I stay mostly on the sidelines with just enough in the market to feel some pain/gain!

Another Fleecing Exposed

So the Stanford Financial Companies (to include the ubiquitous Stanford Research that appears in so many of the tickers has having issues a research report) is the very latest to have been exposed as financial charlatans.

No shortage of those. If we were in a more primitive society, they would be ground up as chum and fed to fishes who would then feed the hungry. Now that would be poetic justice. BRKR a holding was up yesterday in the carnage. WH, my Chinese tubular steel maker, did not fare well.

I sure wished I owned more gold! I was looking for a file and found my worksheet on the gold stocks that I did over the Thanksgiving holiday. I still have my CEF which I bought on 11/21/08. I try not to judge past decisions on current information as no one has the clarity of prescience, merely educated guesses PLUS miasmic probability distributions. Oh, those are just dressed up hunches and given the aire of respectability by making it look substantive.

Sort like our financial charlatans.

Valentine's Day

Valentine's Day offers two opportunities: Opportunity 1 is to get out of the dog house. You can guess Opportunity 2 easily as it is the obverse: getting into the dog house. Hopefully my male readers have availed themselves of all means to embrace Opportunity 1.

Yes, I realize that saying that is a wee-bit on the gender biased side of the scales. There does seem to be more obligations for our men on this day than for women. But in men are the wooers still no matter how far women have come in trampling over some of the evolutionary roots of human courtship.

I had a dog run today. It ended up being a longer day than planned. When I arrived on the lot to get the Ford Freestyle, it was blocked in the back by a pickup truck and trailer. In front it was blocked by a trailer. I managed to pick up the trailer an move it out of the way to pull frontwards. To say that my body still has a vivid memory of that event is an understatement.

But, I accomplished my mission and had 8 puppies (in a large crate), 3 cat crates 3 lab girls sisters and a hound dog. The lab girls were NOT cat friendly, and I had to cover their crates, though they wanted to play tug of war with the sheet. Thankfully they settled down, and we had a quiet drive.

A New Leash on Life: A reader, RW, was most kind to suggest that I find a Chinese supplier. He provided a link. And.....it does look very promising. I'm doing some exploratories with different contacts to see if this looks like something to pursue. A dog's lead is very symbolic of their deep connection with us and us with them. I did a trial pitch to one of my former colleagues who was VP of Sales and Marketing. (I always want to abbreviate that to S&M, but it just never looks right, though I would say that there are likely many shared characteristics with the darker suggestion).

I showed him my leash, and he was amazed that I had made it. I'm not sure that it said so much for the leash as much as it may have said about his surprise at my skills to produce one. Anyway, it was good conversation over a martini!

I asked the bartender how business was. He said weekends were just as busy, but weekday traffic has lessened.

As I write this, my husband has come in (from making a dog 3-board dog fence extension) to tell me that he has not done too well. Apparently he has charged by daughter with procuring a box of chocolates. She, unilaterally, decided that spending $30 on a box of Godiva chocolates was more than I deserved. She did not bother to tell my husband this until it was too late.

Now, my husband's confession is a bit of paradoxical. Here is a man who has spent the better part of his day (and another day) to dig post holes and cut and nail boards to keep our dogs safely contained. This particular extension is to keep Chumbalina (a/k/a Macy and Fat Monkey) from terrorizing the mail person, the UPS man and any of my neighbor's other guests when they have to drive into HIS driveway. That Macy sees it as her duty to do this is unacceptable. As my husband and Tim are such good friends, a considerable amount of thought went into the gate latch.

We want an enclosure to keep our dogs from chasing vehicles that can hurt them. We do not want an enclosure to keep our friends from visiting. I find that value to be enormously more than a box of chocolates. For my own part, I'm grilling lamb chops. Simple dinner of grilled lamb chops, salad and baked potato and good bread. Accompanied by some Greg Norman Shiraz. I'm having a $120 (including tip) restaurant dinner for about $25. And there's not much effort involved. I normally have crab cakes with spicy avocado sauce, but that's more effort than the energy I have available.

I hope that you enjoyed your time with your special someone.

The market?.........ahh....love is more important than money. We'll save that conversation for another day.

Bonds v. Equities

Bloomberg provided this informative graphic (nice muted colors too) on equities v. bonds. You can click on the graph to be transported to the original post entitled: ‘Cult of Equity’ Is Under Attack, Citigroup Says: Chart of Day

For so long, we've been told that in all instances stocks outperform bonds, and it has been the rallying cry to invest in equities using bonds to soften some of the volatility in stocks. Are we a awakening, then, to a new day where bonds are now exciting rather than staid and boring? Will equities now languish as unattractive investments due to their 'last in line' status in uncertain times? The fullness of time will answer that.

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

Ray Dalio is interviewed by Sandra Ward in Barron's.

Recession? No, It's a D-process, and It Will Be Long

Ray Dalio, Chief Investment Officer, Bridgewater Associates

By SANDRA WARD

Click on the title and you'll be transported. If you are not a subscriber to Barron's you can e-mail me (leisa-va@cox.net) and I'll be happy to e-mail you the link.

P. S. A reader offered this link to a PDF on Scribd.

A New Leash on Life

The Perplexed Invetor has morphed into a second-rate, piece rate seamstress. Trust me, I'd starve if I had to make my living this way. But after the equipment failures on our dog rescues, I was determined to find a way to make some high quality leashes by buying the webbing and the clasps wholesale.

I do know how to sew, and I pulled out the trusty Bernina. My prototype did not go well. But in Henry Ford fashion, I managed to improve my productivity with each lead.

It is hard to find discount pet products. I knew last summer I had hit the jackpot at Big Lots, when they had a bunch of beautiful Aspen Pet leads for $1. I bought every one that they had, for I could not even buy the buckle for that. I parceled them out to my volunteer friends and to me. They are all gone but one. Ever since, I've been looking for a deal. There were none to be had.

Over the last few transports, we've had more tethered dogs. Big, strong dogs who pull. We've had 'D' rings break, choke chains break and the clip shank break. It's no fun handling a dog and have an equipment failure. So here I am with a goal : A New Leash on Life.

By spending a small amount of my time (about 10 minutes per lead), I can give a dog a new leason on life. S/he gets a high quality leash that helps him/her as well as supports the volunteer handling/caring for the dog. Leashes of this quality sell for about $12-15. I can save about 75% making them without a big investment of time ( Seems like the best I can do is make these leads for $3 a piece--or about 25% of retail price. ). I'm trying to work out a better deal from the supplier, so I gave him my inspirational story. We'll see what happens.

PRGO

This chart has been in my rifle scope. I believed that it was in distribution and had formed a top. I bought some FEB 25 puts at a whopping .25. It was a bit of a flyer, and I even bought some of the stock to pick up some uptick. I had fully funded puts that I just left. Oh, it was not very much mind you....a handful. But I sold them for $2 yesterday. I consider that a dividend. They traded as high as 2.90---but I was busy at work, and looked in after I saw they reported yesterday morning. Good historical numbers but reduced guidance. Huge gap down. I didn't overstay.

Here's an inverse chart for WH--my Chinese tubular steel maker (for oil services). They announced some good news and sold off a bit yesterday on about 1/2 volume of the day before. I remain long in a small position.

I remain very conservatively positioned.....I don't feel that the market has priced in all of the bad news----largely due to the rather serial nature of the bad news, meaning that it is keeps coming with no relief. It appears to me that the market is expecting some good news around the corner.

The healthcare sector has been enjoying a resurgence of interest. If you are looking for areas to find some action, you could look there. Here are a few names that I found with Stock Fetcher--13 day moving average moving above the 34 day moving average on in 2x increase volume in the 5 day v. 10 average volume: