Sunday, November 30, 2008

We had to Destroy the Village to Save it... Black Friday... My Actions... A Christmas Carol

The Old Skin-flint Ebeneezer Scrooge was transformed in the Christmas Carol by Charles Dickens...

"We had to destroy the village to save it."
During the Vietnam War, the United States found itself not only battling a shadowy force of Viet Cong, but more importantly an ideology and thinking that was almost imposible to fight. Our attempt to "win" the Vietnamease over through give-aways, acts of kindness, and even fighting their war for them proved to be folly. Communist inflitration became so heavy that one officer at Ben Tre commented "We had to destroy the village to save it."

The rationale befuddled many Americans during the Vietnam War. Destroying the village to save it... Ironically, this week Congress will discuss whether it will "Destroy" the Big Three in order to "save" them. As previously noted, a failure of the Big Three will send a giagantic shock wave through the economy from line-workers, executives, middle management, and secondary suppliers such as out-sourcers. A Big Three failure will effect every single American in one shape or form. Congress would not be destroying the automakers. Quite simply, by doing nothing Congress would allow the Big Three to whither and die... They would be forced to file bankruptcy. Bond and shareholders would have worthless shares, and all contracts would be null and void. If Congress allows the Big Three to fail, then there would be an opportunity to re-organize the manufacturers into a 21st century organization, as opposed to retaining the failed industrial model. To allow another life-line and cash-infusion in the end, would be folly. Under a bankruptcy plan, executives, line-workers, bond-holders, and speculators would be ones on the hook for the financial loss. Congress may well have to destroy the Big Three in order to save them.

Black Friday...
Bargin shopping... That is what happend the day after Thanksgiving. Nothing more, nothing less. Cash strapped consumers were out spending... and they are not spending friviously. They are looking for bargins. It is a sad commentary any time shoppers trample another human being to death for a couple of low-priced items... Ironically, the main consumer in our house noted that "The stores were very busy in the morning, but everyone had gone home by noon." Many people are going in to conservation mode... expect hellacious retail numbers within the next two weeks.

The recent run-up in stocks could well be another opportunity to re-short commercial real estate. The story of the week on several TV stations was how commercial real estate was taking a terrible hit. To be precise, chain stores specializing in apparel will be the ones that take a hit. Ironically, I do believe some stores will hold their own. As I have mentioned to fellow reader Boom and Doom, certain specialty retailers will always hold their own. Sports apparel will always have business due to the nature of their product, and the demographic of the clientele. Jerseys and hats become part of a person's persona.

Restaurants, furniture, and jewlery are on the board as well as a few specialty selections from AX that can be found at:

My Actions...
Two weeks ago I sold positions in SPG and VNO puts the day before the big rally started... 180 % profits!!! It was more luck than genius... but something should be said about profit taking... profit is never a dirty word in this trader's book. Still, I am in the black on several other positions. I am continuing to hold WYNN, CNK, BBW, FXI, and RYL since the earliest of those contracts expires in March. I also added MCRI into this rally. Thank goodness it was a low-ball bid or I would be down 25%. One thing is for certain, there is more bad news to be had. It is obvious that unemployment will be heading into double digits before this is all said and done!!! Aside from stimulus checks for basic survival skills, I believe most will curb their appetite for extras like gambling. I am convinced that we are getting a nice "feel good" effect from the Obama administration... after all there is always a honeymoon phase. Just remember, the same reporters that are heaping the laurels and celebrating the arrival of a new President could well be the same ones who write vicious words. If we develop protectionist tarrifs akin to Smoot-Harley, then we will be in for a looong sloooow doooown.

Keeping Christ out of Christmas...
Whether you are a Aganostic, Hindi, Muslim, or Jew, there is nothing to gain by taking Christ out of Christmas. As my wife and I journeyed 15 miles down to the State Theater in Cleveland, paid for parking, and bought tickets for Charles Dickens "A Christmas Carol" we were treated to a dumbed down version of the play. Scrooge's tortured old soul was supposedly changed through visitations from four ghosts. Scrooge it supposed to be redeemed in mind, body, and spirit on Christmas morning. However, there is no redemption without the birth of Jesus... and that is something that would have Dickens rolling in his grave. In an age of political correctness and multi-culturalism we should genuinely appreciate the aspects of everyone's culture... not destroy it! Taking liberties with stories can destroy them, and the author's true intention. I am not sure whose version of a Christmas Carol was shown last night, but it was not Charles Dickens!!!

Friday, November 28, 2008

Everything Else is Negotiable... The Negotiable...

Everything Else is Negotiable...
Abraham Lincoln had it right. He was the President who made Thanksgiving a Federal Holiday. Maybe it was Honest Abe's ability to think positive during a time of national crisis (the Civil War). Thanksgiving was a simple call to remember the sacrifice and misery of our Puritan-Separatist forefathers. In 1620, the Pilgrims left England for good. They left to escape religious persecution from the Church of England. The Puritans were different, and had such a deep commitment to God that they left their mother country England, and set up for Virginia Colony. (Jamestown, VA was the first successful English Colony started in 1607.) As fate would have it, the Mayflower was blown off course and they landed in Cape Cod. In the first year of settlement, the Pilgrims saw one-half of the original settlers die. In spring, there was considerable discussion as to whether they should abandon Plymouth and return to England. Then one day, an English-speaking Indian walked into Plymouth. Samoset, Squanto, and the Wampanaog Tribe taught the Pilgrims new world survival skills. In spite of the many hardships, the Pilgrims recognized that they were truly blessed with health, prosperity, friendship, and an opportunity to worship. In the fall, the Pilgrims celebrated a great feast with their Indian brethren, and the first Thanksgiving was born. Like the Pilgrims, let us remember the important things on Thanksgiving... health, happiness, and friendship. Everything else is negotiable.

The Negotiable...

As of late, the stock market has seen a pop due largely to President-elect Obama's brain trust of cabinet members. Obama brings an upbeat-pragmatic attitude that has given the American people in general, and Wall Street in particular, a belief that help is on the way. To call Wall Street's recent upturn to be anything else than a "feel good" rally is a mistake. As I was sitting in the barber shop the other day, I over-heard one client say that now has to be the time to buy... I simply smiled and asked him "Why do you think we should buy?" He said "Because it has to go up from here." Simple enough...

$800 Billion or the 800 Pound Gorilla?

The Fed is using some of the same implied powers delegated to it during FDR's New Deal. The latest move showed that the Fed was going to purchase up to $600 Billion dollars worth of mortgage backed securities, you know the ones that are guaranteed by Freddie Mac and Fannie Mae. As we know, the Fed is not in the business of purchasing its powers to purchase these loans. With several key strokes to a computer, the Fed "created" additional fiat currency...(at this point I will no longer call it money... money always has value.) Prior to the credit crisis in August of 2007, the Fed's balance sheet stood at $850 Billion. As of last week, it is now at $2.2 Trillion dollars. The sincere hope of the Fed is to create liquidity... an atmosphere where banks are not afraid to loan to businesses or consumers. Aside from inflation which is an issue the Fed is willing to kick down the road for now, their real concern is to oil the credit market.
If credit was the drug, then it is obvious that we have an addiction. It is more than obvious that those who have maintained their credit, lived below their means, and serviced current debts will always have credit. A good portion of the credit crisis originated from those who could not service their debt. As the saying goes:

"There are those who buy things they don't need, with money they don't have, to impress people they don't even like."

To continually offer credit to this portion of the credit market is a monumental mistake. If anything, there should be a nationwide program to teach people about the dangers over over-consumption, not encourage it. While credit markets could use a thaw, I would hope that lenders would be older and wiser as to whom they extend credit. It is always a bad idea to give a drug addict more drugs... Hopefully we are not creating another 800 pound gorilla.

Monday, November 24, 2008

"Too Many Pigs, Not Enough Tits" to Nurse Them -Abraham Lincoln

Abraham Lincoln once commented that those seeking political appointments were aggressive and numerous. "Too many pigs, not enough tits" to nurse them... Wall Street would definitely fit the bill here. With big pigs like Citi, and the three little pigs (Big 3 Auto Makers), rest assured, everyone will get their milk!
The Bottomless Pit?
The United States finds itself center stage in the world financial crisis. The rest of the world has come to expect the United States to be the leader in developing a system to thaw credit markets. With Citi Bank hitting an all-time low, the Treasury had little choice than to dole out more TARP funds to the beleaguered banking giant. Paulson and his cronies are stopping just short of playing God, and allowing institutions like NCC to get purchased for a mere pittance, while allowing Citi to receive a $306 Billion dollar Federal backstop! The government has now pledged over $7,760,000,000,000.00 in tax payer funds to keep the credit ball rolling. This figure equals approximately half of the nation's GDP for one year!!!

However, a conservative think tank known as the Heritage Foundation believes that the government is over-involved in the TARP program. While Paulson said that he needed flexibility to deal with the ever-changing credit crisis, "Not only are there serious questions about the need for these specific actions, but--and perhaps more importantly--the uncertainty created by yet another game plan for the rescue casts doubt on the financial rescue plan as a whole, its administration, and the prospects for its success."(1) The Heritage foundation has cited Paulson's concern with consumer credit markets as a tipping point. As Paulson alludes to the systemic nature of damaged consumer markets, there is a suggestion that companies holding consumer and mortgage debt could well be the next beneficiaries of TARP funding. Interventionist policies could well stop markets from freely functioning, and more importantly allow the ever important price discovery when a bubble is popped. What the markets truly need is time and flexibility to function, not over-involvement.

Re-Rerun Ron...
While many of Ron Paul's political notions may fall left of center. It appears that Paul does have a gauge on the economy. Paul, better than anyone else echoes thoughts from Main Street. Governments have two ways of raising money: inflation or taxation. More importantly, Paul recognizes that government has the responsibility to be stewards of taxpayer monies. Thus far, we have heard that one bailout after another should be the "end" of bailouts. Still though, there always seems to be another piglet's mouth at the hog's tit. Businesses should be allowed to compete, evolve, and if necessary die. A rebirth is often more glorious than the fall. Innovation has always been the cornerstone of American business. To discourage failure it to discourage innovation. To discourage innovation is to destroy the very fabric that makes us winners.

Tiger Calls it Quits...
Everyone knows that hard times have befallen General Motors automotive company.
To add insult to injury, Tiger Woods has quit his celebrity endorsement of GM. Details of the breakup were not known with the exception that the two parties agreed to a parting package. The amicable terms were undisclosed. The world's greatest golfer and GM appear to be moving in opposite directions.,tx14_paul,blog,999,

Saturday, November 22, 2008

Don't Drink it's Poison!!!

21 Year Returns on the SP 500..."Dump it All in the S&P are a guaranteed winner in 25 years!!!"That's the advice one of the pundits gave viewers on Fox News Taking Stock... One investor calculated the return on an invesment if he would have Dollar Cost Averaged 1 share of the S&P 500 since 1987. "During that time, I would have purchased 251 "shares" of the S&P 500 and I would have spent a total of $215,301.93 purchasing those "shares." On November 20, 2008, the S&P 500 closed at $752.41. That means my 251 "shares" would have been worth $188,854.91. That equates to a net LOSS of $26,447.02. The return on my investment would have been a NEGATIVE 12.28% for the past 21 years."

If one did not get their fill of hemlock from the 21 year return, then look at what has happened over the last 10 years. That is when I was first approached by a "Fianancial Advisor" . After all, what the heck did I know? After a year of investing with American Funds, I shifted gears to another company that did even worse for me. Finally, I started investing in Vanguard Funds which are for the ivdividual investor. Still, I only received marginal gains. It was only after I started following the markets that I made a few well placed investments, which made my 403 B plan a winner. When I saw the looming market meltdown, that money was moved into T-Bills that are currently yielding approximately 1.3% interest... which sure as heck beats the DRUBBING most others have taken on their retirement accounts. As of the fist of the year, I am contemplating whether I should be putting any money into a 403B Plan. I am certain I can beat whatever their return is... plus that money is tied up FOR-EV-ER! Remember folks, no one will take care of your money like you will!

10 Year Returns on the SP 500
"If I would have started investing on the last trading day of November 1998, I would now own 120 S&P 500 "shares." I would have spent $147,544.63 for those 120 shares. The value of my portfolio on November 20, 2008 would have been $90,289.20 giving me a net LOSS of $57,255.43 and the return on my investment would be a NEGATIVE 38.81%."

I sent a letter to one of the fellows who were combing the halls looking for news 403B investors. I am certain he did not expect a series of questions that he got from me. I am positive that the response was just about as evasive as the high pressure salesmen on TV...

Brian: How are your funds performing?

Advisor: I typically use the 403(b)7 mutual
fund accounts for my clients. Overall, the funds are down.

Brian: Could you please indicate what your best performing fund is year to

Advisor: U.S. Gov. security fund or Fixed accounts

Brian: Do you believe that buy and hold strategies are a good decision?

Advisor: I believe it is a good idea if one is diversified. Most people buy and
sell at the wrong times which drives down long-term performance in ones

Brian: Does dollar cost averaging always make sense?

Advisor: Depends on your time frame and what the money is needed for.

Brian: If I would have invested $100,000.00 with you last January, would I
be up right now?

Advisor: Mutual funds, NO. Fixed strategy and some bonds, Yes

I've been handling my own investing for a while now... but I am always
open to solid financial advise!

My Strategy...

Look for trends, and follow them!!! Consider getting long on Gold... Find companies that are under stress in the current financial crisis... Last, bottom fishing could be hazzardous to your investment health... The only place I have lost this year has been on the call side of transactions... More to follow!!!

Sources Cited:
Tom Sesny Letter On 20 and 10 years Returns
Converation with Financial Advisor

Tuesday, November 18, 2008

Ken Lewis and Jerry Lewis... A Death of a Thousand Cuts... Staying Short...

Jerry Lewis or Ken Lewis... Is there a difference?

Long-time comedian Jerry Lewis must have a long-lost brother by the name of Ken! While Ken runs the Bank of America, it is obvious that he is working on a stand-up routine. Ken Lewis has continued to tickle the funny bone of people on Wall Street... and for some, this is just what they needed to hear... for others, it is what they wanted to hear. One thing is for certain. Ken Lewis does not have a reputation for being a straight shooter, but more along the lines of a snake oil salesman. Some of Ken Lewis' quotable quotes have been "We have no need to downgrade our earnings forecast." Bank of America downgraded earnings two months later. (1) Then there is the issue of dividends. "I see no need to cut the dividends." Months later Bank of America cut dividends. (2) Now Ken Lewis is tauting that the United States should "see an economic recovery by the second half of next year (2009). But, it may feel like a recession until then." That's just like saying it feels like it is raining, but you are not getting wet! (3)

A Death of a Thousand Cuts
The Big Three testimony on Capitol Hill this evening should be one for the history books. Senators grilled the auto giants for well over an hour. It has been a while since I have seen grand-standing like this take place. Here are some the questions I remember from the testimony.
"If business is so bad, why are you building plants in Russia?"
"If you are truly global companies why don't you use profits from divisions that are making money?"
"Is it true when you make a plant idol, 80% of the workers still show up for work...and get paid?"
I am certain that some type of arrangement will be worked out. They will get their money this time. And I will bet anyone that the Big Three will back at Congress with their hats in their hand once this money is hemmoraged!

Keep the Shorts...
As I recommended last post, commercial real estate could well represent the last bastion where prices could potentially tumble into nothing!!!! Retail is in for their worst Christmas in 30 years. Since a number of retail businesses are on their way to financial oblivion, it triggers issues in commercial real estate as well.
Tiger Coach likes Puts on the following:
1. Ryland -12.75 EPS is UGLY... Homebuilder, Mortgage Finance, and Home Design sets this play up as a loser!!!
2. Simon Property Group EPS 1.74 and FALLING! This lovely specializes in commercial real estate property. This company has the distinction of owning 168 regional malls, and premium outlet centers. To make matters worse, they also
have exposure to Europe...
3. VNO 4.07 EPS and shrinking... 30 million square feet of property in NYC... Short this stock and you short Toys R Us for FREE!!!


Saturday, November 15, 2008

The Difference Between Rally and Fally: A Closer Look at the PPT, A "Short" List of Retailers, Mr. Kucinich

You know it! I know it! They know it!!!

Over the last year, the government has become "over-involved" in market manipulation. We have come to accept little "fudges" on GDP, unemployment, etc. That was always done for the good of the market. After the 1987 Crash, Ronald Regan issued Executive Order 12631. The Working Group a.k.a. Plunge Protection Team (PPT)consists of:
1. The Secretary of the Treasury, or his designee (as Chairman of the Working Group)
2. The Chairman of the Board of Governors of the Federal Reserve System, or his
3. The Chairman of the Securities and 4.Exchange Commission, or his designee.
4. The Chairman of the Commodity Futures Trading Commission, or her designee.

So the next time you sit in wondered-amazement as to how the market could rally over 500 points like it did on Thursday, consider government manipulation. Rallies starting for no reason or for reasons that are already known. Rallies starting after chart support is broken with the market becoming vulnerable to a much bigger drop.
Rallies taking place at politically convenient times, can all be linked to the PPT. It is becoming more evident that the United States government in some cases is not on only the Lender of Last Resort, but also the TRADER of LAST RESORT. I wonder if the PPT can be linked to the $2 Trillion Dollars that is unaccounted for from the Federal Reserve. (3) This does not include the over $2 Trillion dollars that it will eventually cost the United States Treasury in this bailout. As UBS Analyst David Havens put it "You're in for the dime, you're in for the dollar." (4)

A "Short" List of Troubled Retailers...
I hope readers can appreciate a bit of humor. However, if you are in the fluff retail business this is not funny. One report suggests that retail is worried about survival, that they may not even hire seasonal workers. While it may be too late to nail a few of these "dandies" with put options, I would ask that readers consider commercial real estate as a the current play against the retail industry. I currently hold puts on VNO, SPG, and RYL. (5)

Linens ‘N’ Things – closing 120 of 589 stores. Filed for chapter 11 bankruptcy protection in May.

Disney Stores – closing 98

Foot Locker – closing 140 of the 3,785 stores in addition to the 274 stores it closed last year.

Wilson’s Leather – closing 160 stores.

Home Depot – closing 15 stores.

Ann Taylor – closing 117 stores.

PacSun ‘Demo’ Stores – closing 154 stores in addition to the 74 stores it closed last May.

Lonestar Steakhouse – closing 27 locations.

Zales – closing 105 stores. Will have 2,145 locations open.

Pier 1 Imports – closing 25 stores. Closed 79 in 2007.

Friedman’s Jewelers – closing 120. Closing stores and laying off employees as it goes through bankruptcy proceedings.

Dell – closing 140 stores.

84 Lumber – closing 140 stores. Directly impacting by the nation’s housing market. Closed 12 stores in December.

Sharper Image – closing 90 stores. Filed for bankruptcy protection.

Pep Boys – closed 31 stores in November.

Ethan Allen – closing 12 of 300+ stores.

Rite Aid – closing 28 stores.

Sprint/Nextel Corp – closing 125 stores.

Movie Gallery – closing 400 of 3,500 stores.

Saks – closing 1 store.

CompUSA – 103 stores will be shut down or sold.

Kirkland’s – closing 30 to 130 stores.

Fashion Bug, Lane Bryant and Catherine’s – closing 150 stores.
Market moves down... Comparison...

Mr. Kucinich v. Mr. Kashkari...
Dennis Kucinich is a cult-hero of epic proportions on the West Side of Cleveland. His brash and pointed aproach to politics has gained his stature as a champion of the down-trodden. Yesterday, Dennis Kucinich had his chance to tweak the nose of Neel Kashkari (Asst. Treasury) on the PNC buyout of NCC. Kashkari's Capitol Hill testimony to the House subcommittee claimed that NCC never had a chance of securing Federal TARP funds due to its weakened state. According to Kashkari "he claimed that "Congressman, we only review applications that regulators submit with their recommendations." According to Kucinich, "National City Bank was pushed off a cliff." Do not be suprised if the House Banking and Finance Committee will redress this issue before it is all said and done! (6)

Sources Cited
6. Cleveland Plain Dealer, Saturday November 15, 2008

Sunday, November 9, 2008

Conscience Doth Make Cowards of Us All? How Much is Enough? Obama's Priorities

Conscience Doth Make Cowards of Us All Hamlet Act III Scene I
Conscience is supposed to be the little voice in our head that tell us when we have done something wrong... Our conscience beckons us to return to the ways of honesty... Yet it seems as though a good portion of people in government have lost their conscience, or at the bare minimum have forgotten the difference between right and wrong. Bailouts for instance... sure, a parent may bailout one of their kids when they get behind the eight ball... But we really have to scratch our head when the government bails out businesses like banks, then other organizations like the Big three line up like hogs at the through. Anyone who has a mortgage with Fannie and Freddie now have the option of repaying their adjusted loan. Thirty-eight percent... no current mortgage holder will exceed 38% of their take-home pay. Not too shabby of a deal especially for those who were hit with a balloon payment coming off the 3-5 year ARM.

If their was a degree of conscience on Wall Street or Capitol Hill, I would expect the credit card bailout to lose traction immediately. As I write, there is an uncanny alliance forming between credit card companies and consumer advocacy groups. According to the latest Federal Reserve statistics, there is an estimated $900 billion in consumer credit card debt. According to June Shelby, who had filed bankruptcy several years ago, she believes that all debts should be repaid. There should be no such thing as a free ride! And most of us would tend to agree!!! (1)

How Much is Enough?
I heard John F. Kennedy's speech where he posed "Ask not what your country can do for you, But what you can do for your country! Evidently, the help me and help me now attitude has always existed. In a recent letter to Congress LaTourette, I expressed my concern about the lack of Congressional recourse on the Treasury TARP. AIG has already tapped the table requesting additional operating funds. Housing will undoubtedly look for more monies before it is all said and done. The question becomes "When do you draw a line?" Bloomberg has filed suit against the Federal government so it will disclose where $2 Trillion dollars have gone! The real story here is the continued weakening of the U.S. dollar, and accountability. Congress must get answers, and the responses must be made public. After all, every single person who does business in dollars is at risk. From retirement accounts, pension plans, and your little kid's piggy bank! (2)

President Obama's Top 10 Priorities

1. Continue fighting the War on Terror...albeit different means to an end.
2. Develop a plan to remedy the housing crisis while not punishing responsible homeowners.
3. Address government transparency, that all aspects of Treasury and The Fed have accountability.
4. Energy Independence... Electric, Solar, Natural Gas, and Coal
5. Health Care...
6. Education (Maintaining the best parts of No Child Left Behind...and scrapping the rest. Concentration on Math and Science... directed toward energy independence.
7. Restore America's role as the world leader of Democratic Ideals.
8. Keep China and Russia in check as both will seek to expand power and increase their spheres of influence.
9. Figure out who is going to purchase Treasury Bills as it is increasingly apparent that China, Saudi Arabia, and Russia will be "less interested."
10. Keep the U.S. Dollar the "World's" currency.

Long Looking for exit points on GE and BAC... preserve remaining capital before it is too late!

Look for other options to the U.S. Dollar.. and consider shorting the dollar as the big spenders are in charge, and they can print all the money they need!!!


Saturday, November 8, 2008

The Future of U.S. Auto-Makers...

I'll be frank with readers... I do not like to see these companies whithering on the vine, and asking the government for more monies to restructure. We've all heard the stories of plant shenanigans and workers milking the Big Three dry... But I have not heard of those stories for years! I would officially lay the fault of this one at the feet of management. These companies are failing... Now what? Pragmatic thinking is essential. One might ask... when did it become the job of government to ensure the success or failure of these institutions? Are these institutions too big to fail? Is it necessary for these companies to fail? I am curious to see how the Barack Administration will handle this one. Union support was a key element to his victory... The Bush Administration thus far has balked at further "Bailout" monies, as those are reserved for the financial and housing crisis. Please share your comments and ideas!!!

Pros of Bankruptcy=No Bailout Money
A. They need major... major restructuring...
B. Benefit obligations have impacted the possibility of these companies ever becoming profitable.
C. The Unions are becoming leaner...and meaner... getting rid of the dead weight... yet there are a lot of safe-guards protecting those who would have been fired from any other job!
D. There would be an option to sell of profitable divisions...
E. Certain parts will always be part of our National Defense structure... i.e. jeeps...hummers...
F. Allow the companies to rise from the ashes like a Phoenix

Cons of Bankruptcy=Bailout Money
A. Failing means the loss of anywhere between 1-3 million jobs.
B. Workers will lose benefits...
C. Stock and bond holders will take a bath!
D. Will more than likely have a ripple effect through the markets and economy... secondary suppliers... steel industry... etc.
E. Allow foreign competition to become more embedded into the U.S. market...
F. Human cost of workers... families... etc.
G. Effect on municipalities tax revenues...
H. Good paying jobs in the economy will be reduced if not eliminated.

Sources Referenced

Sunday, November 2, 2008

Our New Export, The New Brenton Woods... Mr. President...

Our New Export...

In a recent conversation with a dear friend, we discussed what America's number one export was. We discussed industries such as as defense, technology, and even infrastructure materials. Other ideas were foods, medical devices, and banking. Jobs seem to be one of the most popular export items. With unemployment erupting to a near 7% mark, there is a reasonable case here. However, after the recent agreement between the Fed and Korea, Singapore, Brazil, and Mexico, it appears that the U.S. dollar is our best export. The Fed has gone to great lengths to insure credit markets in those countries. Could the dollar be as "good as gold?" How easy it is to control other governments and policies when you run the printing presses. The only other export that compares to this Treasury's efforts is U.S. debt. And that could well be the biggest of the exports. (1) The real concern should be who is holding the debt. He who prints the money makes the rules. Yet, he who holds the debt will have their say!

The New Brenton Woods...

If you are looking for a few extra bucks, there's always the jewelry party. Invite your friends over to your house. Remind them that they are supposed to bring all of their leftover or unwanted gold. Sell the gold, get some cash, and everyone is happy! According to one representative, "People love the idea of coming to a party and making money," said Janine Cosek, from the The Gold Janine averages approximately $5,000 per party of which, she kicks back approximately 10% to the hostess of the party. Sounds like a great way to fleece and lose your friends! (2)
Maybe these folks know something. Great Britain's Prime Minister called for a "new" Bretton Woods Conference. The original Brenton Woods Conference established the U.S. dollar as the world's currency. All other world currencies are pegged to the value of a dollar. If the dollar gets too high, or too low then central banks would step in to deliver the respective medicine. Gold was supposed to back the U.S. dollar. There was supposed to be stability, and everyone would be happy. However, it appears that there is increasing discomfort with the status and future erosion of the U.S. dollar. In essence, the U.S. has thus far avoided economic disaster by exporting devalued dollars all over the world. But this trend will not let continue.
If the dollar is replaced by the Euro, or some other currency, gold will take off like the space shuttle. It's been said that is increasingly difficult to find gold bullion, and coins in local retail type shops. The U.S. Mint has "temporarily" discontinued selling gold coins. Yet, central banks have kept pressure on the price of gold. Today, its spot price closed at 741.00. Yet, an ounce of gold is selling close to $1,000.00 on EBay. Something is not right!

The New President...
Congratulations President Obama!!! The people have spoken. It is time to get behind the new President of the United States. I believe Obama will bring an upbeat and pragmatic administration to D.C.. Obama's attitude and vision for America deserve our support. Obama is a reformer and will have a welcome opportunity to challenge the status quo. More than ever, we need fiscal responsibility and reform. Most of all, we need leadership. Let us pray for him and his administration!!!


Saturday, November 1, 2008

Mr. President.. Irrational Exuberance... Living and Learning...

Mr. President...
Most Americans are excited to get this Presidential Election over with. Both candidates pose as change agents. Barack symbolizes a combination of angst and pragmatism. Voters with a high degree of angst see Obama as a genuine break from the Bush administration. But beyond the "NO more Bush attitude", American voters see Obama as someone who actually seems to care for the underdog. The people like an upbeat attitude and a sense of self-confidence that seems to permeate Obama. At the bare minimum, he appears to fit the "image" of a President.

John McCain does have the battle scars to prove that he is a change agent as well. I do believe that he could have... and should have been the President of the United States instead of George W. Bush. But soft money donations took care of that... And big money ruled the day, McCain was left out in the cold. McCain a bit older, and now a bit wiser. He lacks the Presidential image or grace of Barack. Yet, more Americans will agree with McCain's platform as opposed to Obama's. A survey was conducted on Friday, where a test group of 150 individuals voted for the President. On appearance Obama won hands down. However, the same 150 individuals completed a survey based on political platforms, and most found that they agreed with McCain. Truly interesting!!!

Both candidates bring innovative ideas to the voter. While a number of polls suggest the election is already over, I am anticipating a dog-fight on Election Day. Regardless of the out-come, I believe that both of these candidates can move this country forward. Barack could well find himself in the same position that Bush had in his first term. Ownership of the House and Senate. This could well move his agenda along. By the same token, McCain who has a track-record of working across the aisle could position himself as a champion of bi-partisan change. Whoever it is, they will have their work cut out for them. On a side note, Representative Steve LaTourette is visiting schools in Solon and Twinsburg, Ohio. The fact that he is taking time out of his busy schedule to deliver speeches on Democracy and the Importance of Voting to kids who can't vote yet tells you what kind of a guy he is! I only wish I knew where to get his sign for my front yard!!!

Irrational Exuberance...
Former Fed Chairman Alan Greenspan coined the phrase "Irrational Exuberance" during the 1990's Bull Market, explaining why companies who had negative earnings but, had a .com attached to them, doubled and tripled in value. I wanted to remind readers that companies like, Sunrise Technologies, Microvision, and Iomega are a few companies where the following epitaph might read: "Easy Come, Easy Go... Where the earnings came from, We did not know... They gave us money, for our stock. And we watched it drop, just like a rock." Yet, investors and speculators piled into stocks with no real reason, with the exception that stocks kept going up. The last time investors had piled into useless stocks was during the wireless radio revolution of the 1920's-30's!

Earnings drive companies, and companies that cannot demonstrate clear revenue now, or in the near to medium future should be punished. For instance, LVS is the ticker symbol of Las Vegas Sands Casinos. As we speak, they have no earnings... none! The EPS of LVS stands at a negative .08 cents per share. While the market cap reflects $5.04 Billion, companies are only worth what people are willing to pay for them. This week, analysts rewarded companies that require discretionary spending from a beleaguered consumer. The general belief on Wall Street must be that people will attempt to gamble themselves out of debt... or at least, win back their depleted retirement savings!

Cinnemark (CNK)is another loser. Not that I don't mind catching a movie. But when it comes to buying stock on this dead horse.. forget-about-it! While we are sure to see a new salvo a Christmas time movies (or if you prefer the term Holiday movies), expect box office numbers that are well-below expectations. With earnings of -.53 cents a share, and a high likeliness of global recession, this one should be avoided like the Bubonic Plague!!! Companies like WMT and D make much more sense!

On a positive note, reduced gas prices could well keep consumers in their houses... and hopefully service a portion of debt... but in terms of additional spending, it is just not going to happen. Moreover, I do not think that GM will actively pursue the next generation of Hummers until new gas mileage standards are developed. San Francisco Fed Chief Robert Parry suggested additional "downside risks" even after the .50 rate cut announced earlier this week. The bottom line is that a triple whammy of rising unemployment, tightening credit, and shrinking wealth are at work as major de-levereging forces. From the peak of housing boom, national housing prices have dropped -17%.

Living and Learning...
The realm of trading options is new to me. While I have had stunning success (profits of over 40%), I am living and learning. As a rule of thumb, when stocks hit a 100-200% profit, I believe a prudent strategy might be to purchase a covering position to lock in a higher degree of profits. Technical rallies have cut deep into profit margins that would be otherwise OUT OF THIS WORLD!!! The covering could well be a contract that is only a month out... and cheap. While I was a big winner of COF, XLI, and XLY, I have learned that covering positions could well be a reasonable strategy. A reminder should always be that profit is never a dirty word. I am currently holding calls on BAC, GE, and AU. Put positions include WYNN, FXI, VNO, SPG, BBW, and CNK.