Friday, October 24, 2008

Buy American, I Am... A Trip to the Capitol... I See Red...

Buy American, I Am...

America's favorite investor Warren Buffet has been pumping American stocks. Last week, he opined a piece in the New York Times titled Buy American, I Am... For years, the legendary Oracle of Omaha has enjoyed the clout of a baseball slugger with bases loaded. Many times, Buffet and his creation Berkshire Hathaway have benefited from his value investing model, and his wit in turning around company management. Buffet's latest article reminds readers of this policy. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." This may be part of the reason that Buffet has bought positions in GE, GS, and BSF. The GE deal clearly demonstrates that even Buffet's value model has flaws. Currently, Buffet has options to purchase GE shares at $22.50 ... yet the stock price is $18.80. After all, no one is perfect right?

Greenspan's Hot-Foot
If anybody is suffering a case of burns today, then it is Alan Greenspan. He delivered testimony to members of the House Financial Services committee. It was almost as if the members built a fire, and held Greenspan's feet to it. The most disturbing portion of the testimony came when Greenspan disclosed that "those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief." Alan Greenspan is an intellectual... however, this statement clearly demonstrates that his strong intellect of understanding financial markets has been clouded by a basic misunderstanding of human nature in general, and Wall Street in particular.

Not to be out-done, the Senate had members of Treasury in for a similar hearing. During the hearing Senator Dodd noted that the entire Bailout Package of $700 Billion will, in his humble opinion, be a waste of tax payer money if the housing crisis is not addressed. At this juncture, there are several conclusions that can be drawn regarding bailout monies. 1. Bailout monies will be used only for financial institutions. 2. Monies will be used to provide working capital. 3. Monies will increase the amount of liquidity among financial institutions allowing businesses and individuals access to credit. Beyond that, if Dodd is looking for an end to the housing crisis then it will need to come after Election Day. By that time, there will be a new President. More importantly, there could be a wide enough Democratic margin in the Senate to overcome Republican filibusters. The last time in history that happened was under the Johnson Administration. And we are still dealing with broken social policies from that time period! However, note that there was considerable improvements in civil rights legislation. Should the filibuster majority come to fruition, then expect a BIG Housing Bailout Plan that could hurt the standing of our U.S. dollar... but all will agree... that have to do something.

I See Red...

I see red
it hurts my head
guess it must be something
that I read

it's the colour of your heartbeat
a rising summer sun
the battle lost --- or won
the flash to fashion
and the pulse to passion ---
feels red
inside my head
and truth is often bitter ---
left unsaid
said red red
thinking about the overhead ---
the underfed
-- couldn't we talk about
something else instead?
Words by Neil Peart, Music by Geddy Lee and Alex Lifeson of Rush (1)

No matter where you look, world financial markets are at meltdown stage. Recessions are not contained to one country, or even one continent. This is one great big financial meltdown which is encompassing every continent. Even the cash-rich OPEC states have seen a 50% drop in the price of crude oil. Aside from financial instability, the other unfortunate and often-times long-range problems deal with political unrest in nations which are most effected by turmoil. Specifically, developing nations whether in Europe, Asia, or South America may see drastic changes in the way governments do business. As noted in a previous blog "A Look at Charts", to simply call market behaviors recessionary is like saying the Titanic had a small leak. However, there will be life boats available for most this time. My biggest concern is that the United States may (through an eventual weakening of the U.S. dollar via over-spending) may have a diminished role as a world power. As of now, ever nation on earth is hoarding dollars as the currency of strength... Conversely, gold has taken an unfair beating. Should the U.S. reach a "Day of Reckoning" due to a compromise in our AAA bond rating, there will be a day of reckoning which will debase all currencies. Prior to WWII the British Pound was the currency of choice. However, the post-war era saw the U.S. dollar take over that position.

What to Do?
Stay short consumer discretionary spending... WYNN still has TREMENDOUS homerun potential. I have puts of 3/35s. DDE is another consideration.
Commercial Real Estate could only be a matter of finding the "biggest loser" VNO and SPG are two favorites here. VNO 3/60s SPG 1/35s
China FXI 4/16s
CNK 3/10s
BBW 5/10 5s
I also have a number of bids out including FXB (British Pound), RYL, WSM, DRI, DDR,

BAC 12/25s... As I am expecting the plan to position Bank of America... They are now too big to fail, and will benefit immensely from political "traction" on Capitol Hill.
AU... I am getting beaten like a red-headed step-child on this one. The ONLY thing in my favor is time!">href="">

1 comment:

Andrew said...

Hi Tiger Coach,

I'm emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight.
Website Manager
Banking & Finance Division
Asia-Pacific Region Pty Ltd
P: (+617) 3368 2666