Tuesday, April 29, 2008

The Oracle has Spoken: Confirmation and Validation

In Ancient Greece, some were believed to have the unique power of seeing the future. Kings, nobles, and government officials consulted the Oracle on many occasions. The Oracle at Delphi was even said to influence government policies, marriages, and wars. On Monday, the Oracle of Omaha spoke as well. During an interview on CNBC, Warren Buffet shared some market insight with the viewer audience (1). Here is a summary of the interview:
1. We are currently in a recession.
2. The recession will last longer than most people think.
3. Current trade policies will continue to weaken the U.S. dollar.
4. An over-active Fed has damaged the financial stability with the bail out financial institutions. (2)
5. The Fed should re-evaluate decisions about further rate cuts.

Buffet's market foresight, uncanny ability to read market conditions, and insight to develop winning strategies has earned him the prestige of America's most prized investor. Hopefully we can all learn from him! Mr. President, Congress, and the Fed should pay particular attention on this one. Unfortunately, I smell politics on this one. (3) Congress will slow additional moves so the winner of the Barack and Hillary show has a chance against McCain.

Confirmation and Validation
As the stimulus package reaches families throughout the country, the President is anticipating a recovery, or at least temporary relief. It becomes suspicious when the government hands out checks which will go to one of three areas:

1. oil companies (6)
2. financial institutions in the forms of various credit cards
3. banks and mortgage companies (4)

The last point deserves additional remonstrance. If you live in a thriving metropolis like Denver, there is a good chance that the neighbor living to the left or right of you has either a home equity loan or is on a ARM loan. That's right, almost 30% of people in that town are in over their head. I wonder what that factor would look like if they threw in the revolving debt gauge like credit card default rates...now that would be interesting. Maybe the name of that city should be changed from the "Mile High City" to the "City of Drowning Debt."

At the end of the day, maybe it is the government's wish to give the average American a hedge bet on a wave of inflation that we are bound to see sooner than later. I wonder if I could request my money in gold or silver...now that would be a real gift! Let's see how much of this money is either saved or pumped back into the stock market? My guess is that figure will be less than 5%. (5)

New Financial Plays
COF 1/50s
INP Exposure to a non-dollar stock

On the Radar Screen

DE +, ADM +, ZEUS +, and IOC +, PBRA +, APA +, KMG+, RKH-, SRS +

I've Been Published...Click the link below...
My Domino Effect article received a number of reviews. Approximately 40% positive 40% negative 20% additional questions or neutral.

Help for the Tribe...
Sure the season is early...and the Tribe has made up quite a bit of ground over the past week. I would like to see more consistency on batting and base-running. Also, the bull-pen needs a bit of help. I would like to see the Tribe build a .500 record with the idea of finishing May with a move into the division leader spot.

Sources Cited:
1. http://www.247wallst.com/2008/04/warren-buffett.html
3. http://www.13wmaz.com/news/national_story.aspx?storyid=51821
4. http://promo.realestate.yahoo.com/worst-cities-for-homeowner-debt.html
5. http://www.nber.org/releases/
6. http://www.gravmag.com/oil2.html

Godspeed Officer Kevin
Keep Officer Kevin in your thoughts and prayers. His unit has been called up for over seas duty in Iraq.

Saturday, April 26, 2008

The Domino Effect...and Deflation...A Crashless Depression...Mega-Trend Losers and Winners: Staying Ahead of the Curve.

Domino One:
As home prices continue to fall there are several grave concerns that are facing the U.S. economy. One is a continued theme of the over-extended consumer. For years, the U.S. economy has considered consumer spending as the cornerstone for economic growth. At one point, consumer spending (1) was said to account for nearly two-thirds all economic growth. However, soon the consumer will be reigned in, and a price must be paid. Most of the consumer debt is self-inflicted. As the old adage goes, people have spent money they didn't have, to buy things they didn't need, to impress people they didn't even like! Now it is time to pay the piper. The rebate stimulus plan will not pull the U.S. consumer out of the tailspin...there is no quick fix. (2)
1. For years, consumers have treated their homes as nothing short of an ATM machine. Not only have they borrowed against the equity of their homes, but they have even borrowed against the anticipated rise in property value.
2. As a new round of ARMs are set to expire, another segment of American consumers are sweating bullets. Trying either to unload a house that they shouldn't have bought in the first place or borrowing from a 401K plan to bail themselves out.
3. As the U.S. economy continues to shrink still a third portion of consumers are hitting the wall with job loss.
4. Gas prices effect every aspect of the economy. Therefore, it is only logical to conclude that the consumer will have less disposable income.
5. Last, as mentioned in earlier blogs, the easy credit in credit cards has given the consumer yet another avenue to over-spend.
Domino Two:
Most lending institutions will continue to stay under pressure for the foreseeable future.
1. Bank and other lending institutions have over-extended credit in the real estate market.
2. Banks are now need blood transfusions to stay afloat.
3. Auto finance companies will be the next to feel the pressure.
4. Eventually, credit card companies will realize that a credit risk needs more than a pulse for credit.
Domino Three: Deflation...and how it will impact EVERYONE!!!
It is becoming increasingly apparent that U.S. financial markets are at a tremendous risk for deflation. Everyone knows that investments which move sideways...or move down are already losing money. However, the reader's attention should not be focused on investments are earning anything less that 10-20 % a year. Bonds are bombs right now waiting to shatter any true gain. According to the CPI calculator (3) (an extremely conservative gauge on inflation), $100,000.00 in 2006 is the equivalent of $105,916.67. Factor in oil, consumer prices including basic living expenses, health-care, a FED that is over-printing (4), and a Congress that is satisfied being the LARGEST DEBTOR in world history (5), it is easy to see that these CPI numbers are a farce. The investor should not be lulled to sleep in this dangerous predicament. And this is the real story that is not reported on CNBC, MSNBC, or Fox Business!
Domino Four: A Crash-less Depression
The investment community has become keenly aware of the terms "crash", and "bust". It is the contention of this article that those things will not happen during the next depression. Many of the 'lessons-learned" by the Fed, government and investment community have in-fact created shell games, Ponzi schemes, and other artificial stimulus plans which prop up the economy by creating liquidity. One need only view the policies of Greenspan (6) and Bernake (7) to understand the real goal of the FED (8) , which is to manipulate monetary policy to avoid the natural outcomes of the boom and bust cycles. However, the manipulation comes at a price. Everyone who holds dollar-based assets will suffer the same fate. While is appears that stock market increases or at best stays the same on paper it appears that everything is o.k., when in fact, deflation has under-minded all investments. This is not to say there will not be winners on Wall Street, but more importantly to underscore the fact that most investments will lose long term!
The U.S. Dollar, and those who have dollar based assets.
Regional Financials which are largely over-exposed to an ailing economy i.e. RKH
Housing sectors. i.e. XHB
Real Estate i.e. RWR
Entertainment and Recreation Vehicles i.e. WGO
Green Energy bubbles i.e. FSLR
Banks with heavy domestic credit card exposure: V, MA, COF
Real Estate shorts i.e. SRS
Domestic Oil i.e. PQ
Oil Equipment i.e. HAL
International Oil i.e. BP
Infrastructure i.e. ABB
Technology i.e. MSFT
Foreign Specialty Chemical i.e. RPL.NS
Farm Equipment i.e. DE
International Tobacco i.e. PM
Green Technologies i.e. VLNC, TAN
Gold Short DZZ

Sources Cited:
1. http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=

2. http://articles.moneycentral.msn.com/Taxes/Advice/SeeWhenYouWillGetA

3. http://www.bls.gov/cpi/

4. http://www.nowandfutures.com/fed_watch.html#all

5. http://www.brillig.com/debt_clock/

6. http://www.dailyreckoning.com/Featured/Mampilly021306.html

7. http://bigpicture.typepad.com/comments/2006/07/bernanke_the_ma.html

8. http://www.clevelandfed.org/research/data/tips/index.cfm

Monday, April 21, 2008

Move Over Fed...Here Comes the Bank of England...Ron Paul...Tribe

Monkey See, Monkey Do!
Several weeks ago,it appeared that the U.S. financial sector was taking on water. NCC Last Price: $6.03 Change: -2.30 (-27.61%) reported that it had a massive amount of write-downs, and BCS Last Price: $10.39 Change: -0.17 (-1.61%) was facing out-right bankruptcy. Since then, new banks have announced losses and future write-downs of what we can easily term as "non-performing assets." WB Last Price: $26.43 Change: -0.81 (-2.97%) placed itself over the barrel last week, and it appears that BAC Last Price: $37.61 Change: -0.95 (-2.46%) is in a similar state of affairs. In a dog-eat-dog world of finance, we might expect the law of Natural Selection to take over. After all, in the wild only the strong survive. The weak and stupid are consumed by those who are stronger and more intelligent. That would have been the case 75 years ago. Business was business. However in 2008, the Fed has made itself a lender of last resort, and has done almost everything possible to prop up financial markets that are otherwise in need of a good old-fashioned beating. If the Fed is there to back-up institutional bailouts, then it must be safe right? Not that I truly want to see anyone lose their job, or wide spread financial panic but, heck who would be there to bail one of us out if we ever fell upon hard times? Unfortunately, there will more than likely be a part two to this story. (1)

Our British cousins, who maintain the closest of relations with the United States, is also suffering from a bit of a credit crunch as well. Things have gotten so bad between banks that many of them are outright LYING about the rates on inter-bank loans known as LIBOR. (2) With the tremors of the U.S. meltdown fresh in the minds of London, the Bank of England announced today that it is extending up to $100 billion dollars in loans to British banks. It was once said that the British Pound was the envy of the world. Or that the British Pound was as "Good as Gold." I'm sure whoever said that would be rolling over in their grave today. In essence, the Bank of England said they will be the backers of loans, and sell bonds to off-set the institutional loans it will make. It sounds as though the printing presses in England will be working over-time as well...printing out British Pound notes, and deflating their currency as well.

Golden opportunities lie in shorting the British Pound at this juncture. Find the right vehicle to do so is now the key. I am open to suggestions.

Ron Paul
Ron Paul is still running for President of the United States. With the gutsy style of a Ross Perot, he has not folded in his campaign yet. Ron Paul (while not always right) at least engages Americans on some of the "real" issues at hand. I think it is amazing when a candidate who has no BIG BUSINESS types is able to speak his mind as opposed to pandering to the special interests. Hopefully, Ron Paul will be involved in this election process to the end. George Washington and the rest of our Founding Fathers would have wanted it that way! (3)

Byrd pitched a gem of a game yesterday. The bullpen lost the game...I guess. But the offense needs to come alive to support the team when push comes to shove. I am looking for Casey Blake to come roaring out of his slump any day now. When C.C. gets out of his Funk, and the rest of the starters pitch like they have WATCH OUT!

1. http://www.moneymorning.com/2008/04/21/rising-tide-of-level-3-assets-a-disaster-waiting-to-happen/

2. http://www.moneymorning.com/2008/04/18/libor-sends-another-shaky-signal-to-the-global-financial-markets/

3. http://www.ronpaul2008.com/

Saturday, April 19, 2008

A New Kid on the Block.. Oil Addicts...The Body Electric... If You Can't Beat Em' Join Em?

A New Kid on the Block?
Google saw one of the most incredible bumps in recent memory, screaming up 90 points in Friday's trading. For a while, I was troubled to see Google sell-off after sell off in this one-time bell-weather. Two points are clearly demonstrated in this jump. Wall Street is extremely hungry for a winner... Secondly and more importantly, technological innovation will continue to drive the market. My hope is that the rumored debut of a Google type auction house will be rolled out sooner than later, which should put a tremendous amount of pressure on Ebay. Ebay will be forced to create a more customer friendly business! Speaking of Google, a start-up named Cuill will be the most innovative search engine to hit cyberspace. The "New Kid on the Block" will utilize two former Google system designers to build a larger, and more effective system of searching the web. (1) This may be a IPO to watch for in the future. I would welcome additional information to be published about his future listing.
Oil Addicts...
I wondered if there would be more drug addicts in this country if 1. Drugs were cheaper. and 2. If drugs were regulated by the government. I would tend to doubt it... Drugs are simply appealing to certain types of people who either do them or don't. Oil is much the same way. I am not so sure that cheaper oil (While leaving more money in the consumer's pocket) will weaken our addiction. While filling up the other day, I asked a fellow customer if they ever thought they would be excited to get gasoline at $3.25 two years ago... The reply was...it sure as hell beats $3.50 or $4.00. We are addicted to our driving machines and will still buy this liquid gold until it truly hurts us. Presidential hopeful McCain speculated about a gas-tax holiday(a.k.a. government involvement). I guess this too would make consumers temporarily happy by depriving the nation of much needed tax long-term tax dollars, while giving consumers a temporary fix. The real problem is we have all become too accustomed to cheap gas. One play to consider in the UGA ETF (2)which rises of falls on the price of unleaded gasoline. My belief is that gas will hit an all-time high this summer, and back down during the elections so Presidential hopeful McCain can receive his coronation from the Big Oil companies that put Bush into office. No one will address the real problem with oil...the simple fact that our deflated dollar buys less oil!
The Body Electric
While Green Energies will be pushed by the Democratic hopefuls and their left-wing allies, there are simply too many of these companies. It reminds me of the .com bubble where ANY company that had a .com phrase in it became poised for high-oribit IPO's. There is no doubt that our leaders need to make some difficult energy policy decisions (sooner than later); there is no way that all of the new Green Energy start-ups can make it. The time for due diligence has arrived. The real question becomes...which of these companies will really make it. And of those...which will be able to market a credible product that actually makes the cost of electricity cheaper? Recycling hog dung does not count! (3) Regardless of any Green Energy, oil is here to stay. Just ask the Federal government if they have a vested interest in keeping the United States as oil addicts... I believe the figure is 18.4 cents per gallon. (4)

If You Can't Beat Em' Join Em'
Myself along with a number of fellow investors have made it a point to learn, study, and analyze financial market trends. And for the most part, it has been financially beneficial to do so. However, it is becoming somewhat apparent that the RICH and POWERFUL have an agenda that most middle class folks just can't quite figure out. What I would give to be a fly on the wall in a Fed meeting. It appears that Wall Street financials have a direct line of credit to the Fed. The Fed will pick and choose which of the investment banks receive welfare type loans (loans of last resort) and who will not. It is almost as if the Fed is able to play God. So maybe...just maybe...there are some financials that are worth looking at. However, I believe RKH (5)is still a long loser as well as RWR (6). I CAN'T WAIT TO HEAR NCC EARNINGS ON 4/21. Either a convincing case must be made to Wall Street or Good Night Irene!

Sources Cited:

1. http://seekingalpha.com/article/72518-under-the-radar-news-wednesday

2. http://moneycentral.msn.com/detail/stock_quote?Symbol=US%3aUGA

3. http://mark.asci.ncsu.edu/SwineReports/2002/koger.htm

4. http://www.gaspricewatch.com/usgastaxes.asp

5. http://moneycentral.msn.com/detail/stock_quote?Symbol=US%3aRKH

6. http://moneycentral.msn.com/detail/stock_quote?Symbol=US%3aRWR

Question of the Day?
Will C.C. Sabathia finish the season with an ERA under 5.0? (Over/Under)

Tuesday, April 15, 2008

GOING, GOING, GONE...Stock Moves, and Confesions of a Spend-Thrift Part II

Going, Going, Gone...
Boom and Doom called it several days ago...and after ANOTHER blown save last night, it was confirmed today, that Indian's Closer Joe Borowski is hurt. He was hiding or pitching through an injury.Borowski was placed on the 15 day DL with a strained tricep. According to a reliable source, the scouting report suggested that Borowski was actually injured last week when he gave up the walk-off grand slam against Anaheim. I could care less if the Indians are playing the "World Champs" of baseball. The tribe had these characters on the ropes last year in the ALCS and missed a golden opportunity to make it to the BIG SHOW. Last night was just a nice opportunity to tweak Boston's nose a bit. While the Tribe has traditionally been slow starters, it is apparent that help is needed in the bull pen. The bats should...should come alive in time. Best wishes for a speedy and full recovery to Joe Borowski.

This link is will take you to videogoogle:

Stock Moves
National City Bank (NCC)
crossed into ITM territory on the 10/8s put, and will undoubtedly return there soon. In my heart of hearts, I would hate to see Cleveland lose a business that has in some way shape or form been a part of the community for well over a 100 years. Like so many other U.S. companies...blame the management...or should we term them the MIS-MANAGEMENT! As long as the upper crust of this fine organization plotted a collision course with bankruptcy, it is only logical to profit from it. While the old CEO still has a reasonable chunk of change tied up in the bank...he got out when the getting was good. The X-CEO still holds $8,ooo,ooo in NCC stock...this could be a hedge against potential law suits or possibly a true sign of character...sadly something we have become less and less accustomed to in the corporate world of caviar and corporate jets.

PetroQuest (PQ) is on the radar screen. It is a stock that I have been tracking for a couple of weeks now, and it appears to be poised for a peak oil break-out. This little winner is all about building long-term cash flow, not the Jedd Clampit "Strike it Rich" mentality. PQ also trades at the low end of similar companies making it a natural fit for the value investor. Management appears to have a strong and long outlook for building this one into a winner! 10/20s@2.60 already up 10% today!

Still watching a few others (winners/losers) which will be mentioned when the blog is updated again as of Thursday. Still reeling in pain every time the WGO ticker rolls by...today closing at $15.02!

Confessions of a Spend-Thrift
One man's mission to beat the credit card companies at their own game became a source of amusement.
At one point in time, I carried $6,000.00 of a 0% interest on Citi Card then rolled it to a Chase Card from 2006 to the present. According to the very conservative numbers of CPI, I have already beaten the credit card companies. The amount of $6,000.00 in 2006 is the equivalent of $6,300.39 in April of 2008. And it hasn't cost me a dime! Naturally, I do not plan of carrying this debt forever. This year I plan on paying half of it down. I will roll this debt one more time to a card that allows 18 months of 0% APR. To me it is part of a personal war I have waged against the new loan sharks of the 21st Century...credit card companies. I wonder if Visa and Master Card can take the hit?

Sources Cited:




Saturday, April 12, 2008

Paulson Party Politics, Ordinary People, Stock Analysis, and Testimony of a Spend-Thrift...

Paulson's Party Politics:

This weekend Secretary of Treasury Henry Paulson again reminded members of the G7 that the Global Economy would be"more difficult" than recent years, with "headwinds coming from adjustments in the U.S. economy, financial market stress, and higher than desirable inflation." This sounds like a well-crafted set of words...maybe even poetic... However, let's get to the real message of this statement at G7. Translation of Paulson's comments: Our out of control government spending has put the United States, Congress, President Bush, and the Fed behind the eight ball. We would like to apologize for those of you who have continued to hold our debt because we are now paying you back in the form of deflated dollars. This was the only way we could combat the massive amounts of imports that are hitting our shores from the Pacific Rim nations and the Iraq War. While we both know the US dollar is deflating and inflation is much higher than the U.S. government will report...please keep accepting our dollars. By the way we (the United States) would like a little more control over this IMF so we are better able to manipulate the world's financial systems. As of now, this is a risky situation that can only be remedied by printing more money...sorry!

Ordinary People Yesterday and Today:
Before the Great Depression, the ordinary person did not have a ton of money in the stock market. While a number of individuals were on margins (stocks bought on credit) when the market crashed, many were immune (or at least thought) they were immune to the credit crisis. In the Depression, when people did not have enough money they did not buy things...or saved until they could buy those basic necessities. However, in 2008 the story has changed. Instead of saving for purchases, as they did during the Depression, now people are able to purchase desired items on a whim with credit cards. The problem is this. In 2008 if people do not have money, they simply resort to credit cards or home equity loans. The more they need the more they spend, the more they spend, the deeper it gets. The Bible refers to the Debtor as being a SLAVE to the Creditor. (Deut. 15: 1-2) However, the creditor now appears to be at risk as well.

Stock Analysis
GE missed profits and sent a tremor through Wall Street last Friday. More negative reports can be expected this coming week. It will continue to add a more somber tone to Wall Street. It is still not too late to short the dollar via an ETF. Anticipate a tug of war on Wall Street between the bears (the un-patriotic forces so dis-liked by CNBC) and the bulls (who will more than likely digest any negative numbers...call a bottom, and say the worst is over once again.) It is my belief this will put added pressure on the financials...and maybe even the homebuilders who are far from out of the woods. While many U.S. financials are asking their accounting departments to preform David Copperfield type tricks, do not be surprised to hear a few more stories released slowly...as if the powers that be are in damage control mode. While Wall Street is poised to pound their chests on the TAX REFUNDS which are scheduled to be sent out next month as a rallying point, the vast majority of that money will service debt, be spent on gas, higher groceries, or blown at Walmart.

Testimony of a Spend-Thrift:
I must admit that I am conspiring against the credit card companies of the world. It is easy to document their method of making money...extend credit, count on consumers to over-spend, and charge APR's that will make their toes curl. Well I decided to beat these characters at their own game... What would happen if you used the credit card companies against each other?

My Experiment:
In my house we live below our means. (We are sure to have money left at the end of every month beyond savings.) However, I wondered how I could abuse credit card companies...you know...beat them at their own game. So I charged some graduate class on a Citi Visa which ran at a 0% APR for 18 months...once that expired I opened a Chase Card with a similar offer and did the same thing all over again. My hope is to one day pay these companies back...but in dollars that are more worthless than the original ones that I borrowed. Some may call me crazy, or others may say I am a bit sadistic. Whatever! While this money could be paid back tomorrow, I am enjoying a high degree of levity knowing that I am beating these characters at their own game. Statistics to follow next blog!

Sources Cited

Holy Bible
or Torah Book of Deuteronomy 15: 1-2




Thursday, April 10, 2008

Money to Burn: When the Fat Lady Sings.

As Good as Gold
In the old days it was said the the dollar is as good as gold. However, it is becoming more and more apparent that the dollar is more like a hot potato.

Paulson Visits China
On April 2nd our Secretary of Treasury went with hat in hand to Bejing to calm China's fear of the deflating dollar. While Paulson did his best to smooth over a tenuous situation, he also reminded our trade partner that there was still more economic pain to come. Since the Chinese are such large holders of U.S. debt, I wonder how they feel holding dollars that are depreciating by the minute???

The Fed stopped M3 reporting in 2006. This was a vital statistic showing any rises in money supply. While there was always expected to be "some" rise in the money supply, any unprecedented sign of spending would be a true sign of dollar weakness. At that point it was on its way off the charts. While the Fed is only a quasi-arm of the Federal government , and its spending machine, it also at some point in time was known as an inflation fighter. Continuing to report M3 would have thrown that theory right out of the window.

Click this link for the chart:

The United States is the largest debtor nation in world history. While there are plenty of people to point fingers at, two real causes can be cited as the problem: 1. Out of control government spending including wars and now the latest trend, bank bailouts. 2. An administration that purposely desires to drive the dollar down...for reasons that people like us can't quite figure out.

No country has ever truly brought economic prosperity to its people by debasing its currency. Currently, U.S. foreign debts are increasing at a rate of 1 trillion dollars every 15 months! Bernake's decision to bailout the mortgage industry (big banks) as in Bear Sterns has opened a new Pandaora's Box in spending. At least in Pandora's Box there was always hope...it appears that the United State's box may be empty as in BANKRUPT! And the government will hold a bunch of non-performing assets as collateral. Since the government is now in the mortgage industry, I wonder if Bernake would also find it wise for the government to enter the car and credit card business as well. Heck, I am sure if things got bad enough they may need to be bailed out as well.

As middle class type of guys, we have always understood that debt is should be used as a tool. You know, a method of extending leverage for purchasing power. Most of us have handled that responsibility well, and serviced our debts. After all, that is part of our middle class psyche. So we become concerned (justifiably so) when we see the government's spending go out of control. But that is rational thinking being applied to irrational times. Unfortunately, the rules in the money game have now changed. Common sense suggests that people who have saved...have bought dollar-based assets...are at risk in this environment.
1. There are a new set of rules that have been forged.
2. It is our responsibility to understand what is going on, and create a united front as to the best method of countering this paradigm shift in basic human logic.
3. Long-term we should all short the dollar...or find vehicles that beat the 20% mark on a consistent basis.
Remember this is the slippery slope first started under Greenpan. Bernake has simply accelerated the process. Let's beat the trend...before the fat lady sings.

Sources Cited:




In stock action, AKS is now at another 52 week high...still a buying opportunity for the three TITANS mentioned in my last blog entry! Look for BP to break out as it is closer to paying off all the Russians, and getting business done as true oil people have done for years. Will someone give me a kick on WGO!

Can anyone give me a rational explanation as to why the home builders are still seeing a positive movement in stock price?


Tuesday, April 8, 2008

Tribe...Winnebagos...and Three Titans...

Dear Readers,

Talking Tribe...
I am still shaking my head about the Tribe and their closer Borowski. Talk about a closer who leaves you on the edge of your seat. Too many times he had put himself into jams...and some way shape or form, pitched himself out...or gotten lucky with good defense. Last night, fate caught up with him, and he left the field giving up a walk-off grand-slam to the Angels. I'll consider myself an arm-chair coach...manager...quarterback today. However, I would like to see a bit more dominance in an Indian closer if they are to make a run at the pennant this year! Let's see what the Indians Skipper Wedge has worked out with the rest of the Cleveland brain-trust.

Today was met with disappointment and hope. Last week I bailed on my 7/17.50 put on WGO. While I believe the rationale is there for it to be a long-term loser, it crossed an investment threshold that told me to dump it last Friday. Today, I see that WGO has now moved South across the Mason-Dixon line once again. We'll see how this one pans out. It may be hard-learned lesson in options trading.

Three Titans
AKS, ZEUS and CLF have been on the radar screen for quite a while now. Hesitation can kill a winner...and save one from a loser. In this case these three Supermen (metal products) have CRUSHED the market in terms of performance. AKS appears to be winner that still has legs. After battering its union in several lockouts, AKS appears poised to make another run well past its 52 week high that was reached today $64.80. I am currently exploring the 9/70.00 call which is trading a bit rich now at 7.30. I'll keep readers posted as if there is still opportunity to board this ship. I look for the price to hit 85.00 by September. ZEUS was off mildly today, I do believe it will test its high once again. Quite possibly as soon as Friday. We'll know by then whether that ship has left port... Last week I told myself to buy CLF at 135...and before I knew if this train kept on rolling to another all-time high of 147 now that is just crazy. Interestingly enough, my students noted in class that PETROLEUM and IRON ORE are the two most sought after natural resources on the planet. CLF is the world leader in iron ore production. Heck, even Cramer jumped on this bandwagon. The only question is how much of a pull-back will it get when CLF splits in May? Shrug off the latest breather in this sector!

National City Bank
The hope of the NCC put and call play is looking better all the time. While I have been advised by several sources that these waters may be more difficult to navigate, it appears that NCC will dump on more bad news...bump with a sale of company assets...and the rest will be left for dead! It appears that the Cleveland Federal Reserve will work with other regional banks at this point to mull over the pieces parts of this institution, and preserve as much of the bank (even through sale) as possible. A complete bank failure in a Midwest market would be devastating.

At this point I am also consider 10/65 BP $4.0...this stock has been lagging and should benefit from the last summer of Bush's Presidency!

Question of the Day???

Take the over/under on this. Joe Borowski has added or taken away five years of life on the average Indians fan?

Sunday, April 6, 2008

The Fed Part III and the Victim Mentality...

I would like to draw readers to the U.S. Constitution. Article I states that "Congress shall have Power...to coin money, regulate the value thereof..." Congress should to this day be in charge of coining our money. Once that important job was passed on to another entity, and that entity was given free reign as to the amount of money to put into circulation (with a minimal amount of Congressional oversight), then our dollar would be a giant, as opposed to a shadow of its former self. (A $5.00 bill from 1963 has the equivalent buying power of $34.00 in today's money!) That's just SCARY!

However, coining money was not too difficult because coins of the day carried a degree of precious metal. There were coins made of copper, silver, and yes even gold. Simply put, if the government did not have the silver or gold to put in a coin, then new money could not be placed into circulation. While coined money was bulky, and often cumbersome in which to do business, it always had value. All paper money at one time needed to be backed up by an equal amount of gold or silver. Without that reserve metal, the paper money was WORTHLESS.

That is part of the reason our Founding Fathers required that all states , if they were to coin money , must be done in silver or gold. The fact was that the Federal government would not allow a state to print paper money. Under the Articles of Confederation the United States faced a serious crisis because every state had the power to print money. This practically destroyed interstate commerce not to mention the credit of the United States in our nation's infancy.

I only bring up these two points because the United States government does not even report the amount of money it has put into circulation anymore. Those figures quit being reported by the Federal government well over a year ago. With an administration that doles out BILLIONS of dollars for Iraq, and a Congress that can't say no to entitlement programs...we should all consider our financial future...and hope to have a degree of precious metal in it.

Currently Congress is in the midst of debating how they should deal with the financial debacle facing the United States. The debates focus around two groups: financial institutions who "over-loaned" money and the consumers who "over-borrowed" money. Unfortunately, a number of our fellow countrymen fall into one of these two categories. It looks as though the American tax payer will be picking up the tab on this mess as well. My greater concern is that America is currently going through a cycle where people see themselves as victims as opposed to OWNING up to their bad financial decisions. This same mentality permeated the United States when thousands of people who had played the stock market on margins (money they borrowed) and lost. That ushered in a time period known as the Great Depression.

My parents always told be to "Think before you spend." "Money does not grow on trees." "If something is borrowed, then it should be returned to its owner in a timely fashion." These are simple lessons that everyone in their heart of hearts knows. However, the problem ownership does not bode well in election years. It is much easier to have government solve the problem nad make everyone happy...at least temporarily.

Sources Cited:



Stock Ideas:
I believe NCC will be split into pieces parts. This will cause several bumps in the stock price as the vultures swoop in to feed off the vital organs which are profitable. However in the end, NCC and its mortgage business will be a carcass that is left for dead.

I am liking a put on CLF, Zeus, and a call of RKH. I will keep readers posted.

Will Cliff Lee replace Paul Byrd in the starting line-up?
Will the Tribe go back to a five man rotation?
Did Indians skipper Eric Wedge gain over 10 pounds of under 10 pounds in the off season?

Tuesday, April 1, 2008

Origins of the Federal Reserve Part I I and other observations

Part II

The Bank of the United States was chartered for a 20 year period. Once the charter had expired, and the debts were serviced, there would not beat a need for the bank. Once the charter actually did expired, the United States suffered a financial panic in the early 1800's. In order to stave off the panic, a Second Bank of the United States was created. Once again, this allowed the United States to pay down debts accrued during the War of 1812.

Andrew Jackson noted that members of the Second National Bank had become too rich, too powerful, and too self-serving. Jackson's corruption inquiry into the Second National Bank practices provided evidence of an abuse of power including election tampering. With this in mind, Jackson dissolved the bank (before its charter expired) because he saw the concentration of wealth as a threat to American liberties. After this bank was folded, banks returned to a more private venture. This was part of the National Currency Act of 1863 allowing banks to use one nationalized currency. However, there were two problems: 1. A lack of liquidity and 2. A currency that was viewed as inelastic.

After the Panic of 1907, Congress began floating measures that would sure up the economy. The most notable was the Federal Reserve Act of 1913. The United States based its system on European-Central Banking Systems in general, and specifically the German banks. The Act passed Congress in 1913 along partisan lines. Democrats who supported a quasi-state controlled institution, and Republicans who favored a private institution controlled bank. The new Federal Reserve now had the power to print money and control monetary policies.

The goals of the Federal Reserve are:
  1. To address banking panics
  2. To serve as the central bank for the United States
  3. To strike a balance between private interests of banks and the centralized responsibility of government
    • supervising and regulating banking institutions
    • protect the credit rights of consumers
  4. To manage the nation's money supply through monetary policy
    • maximum employment
    • stable prices
    • moderate long-term interest rates
  5. Maintain the stability of the financial system and containing systemic risk in financial markets
  6. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
    • facilitate the exchange of payments among regions
    • to be responsive to local liquidity needs
  7. Strengthen U.S. standing in the world economy
While the Federal Reserve has done more good than bad, American should always look at it with a high degree of scrutiny. The Reserve's policies must be economically sound, and consider the best interests of the American people.

Other Observations:
Beware of the sucker's rally. As Wall Street posted record type number on this trading day, I wanted to remind all readers that more banks will write down debts. A number of ARM loans are still in the process of resetting. While the Fed did infuse a large amount of cash to increase liquidity, one must consider the longer term effects of gas prices, job reductions, and inflation. The consumer is still tapping out of credit. Credit cards are being used for necessities like gas and groceries...and balances are being kept on those credit cards. It may be well that history will record this period as a blip on the downward trading cycle. However, the fundamentals of the economy have not changed for the better. A bad bank in one quarter is still a bad bank in the next quarter. However, I believe the FED has played an important role by allowing BIG BANKS the credit line to sort out Wall Street's financial problems. It appears that the powers that be believe the rebate stimulus and FED overhaul will be enough to stave on a massive financial meltdown. AS of now, the best place to put cash is either under your mattress, or into a business that you have direct control of.