Wednesday, December 9, 2009

Taking the Bull by the Horns... Told You So... Not So Fast...

I have never been one to get in another person's grill. However today I will make exception. Let face it, we knew the TARP was a sham in many respects. It was rushed to the floor of both houses... signed quickly by the President... and no one ever got a chance to read all 1100 pages of it. Show we really shouldn't be surprised when a report came out that said the TARP has fallen short of its goals. According to one source TARP:

What TARP did Do...

1. Put a lid on the economic panic that was brewing last year...

2. Capitalized banks... whose names appeared on the right list...

What TARP did Not Do...

1. It has not kept credit flowing to consumers and small businesses.

2. It has not stopped smaller bank failures... (I believe this actually is causing a round of merger mania... or maybe it is better described as buzzards picking over the skeletons of non-TARP banks).

3. Removing toxic assets from bank balance sheets

4. There is speculation that TARP related programs have saved approximately 10,000 homeowners from losing their homes.

Maybe the more troubling factor in the threat of removing government support from a market that is still wobbly. While banks have used tax-payer funds in their trading rooms to make "easy money" in this market. It was easy pickings for a while, but now with the possible audit of the Fed appearing to be a more ominous sigh to the financial elite, there appears to be a counter-measures shift that will have the market sinking or swimming by the end of December.

Not So Fast...

It is interesting that banks are now lining up to pay back TARP funds before the government is able to slap them with additional regulations. According to some accounts, banks have or are ready to pay back $70 billion dollars. However, that is only 10% of the money that was loaned out under the TARP program. If you are smelling something rotten in the state of Denmark, then you are not alone.

We are not really seeing any reform that is so desperately needed on Wall Street. My belief is that the perpetrators of this financial debacle would do it all over again if they had half the chance.

Market Watch
I am considering a covered call strategy with the market. I have several long positions. I am willing to place them in the options arena and allow the sale of options and a more steady method of profiting in the options market. A bird in hand is worth more than two in the bush.

Saturday, November 28, 2009

Hush... Hush...

Hush... Hush...
If you have not heard by now Dubai hit a proverbial bump in the financial road... According to sources, Dubai has asked creditors to forestall a 60 billion dollar loan repayment scheme until spring. This really wasn't new news. The story was out on Tuesday to be exact. And there was little to no reaction that day. So the day before Thanksgiving, I flipped on Fox News, and there was a heightened sense of fear with Dow Futures indicating a 232 point drop at the opening.

China was first to react by claiming the Chinese creditors had little to no exposure.. or should we say minimal exposure to Dubai... Later, banking analyst sensation Dick Bove followed suit claiming that U.S. financial interests had little exposure to Dubai as well.

This leads us to the next point. Maybe just maybe international banks do have less exposure to Dubai. But no one is asking whether Dubai has exposure to our markets. For instance, Dubai's sovereign fund was specifically mentioned in the bailouts of Citi and MGM's City Center in Las Vegas. Is there a correlation? I don't know but let the record state that something it rotten in Dubai... and I believe it is their investments in a few American interests. If this is the case, the specter of systemic risk will again rear its ugly head just when we thought the markets were well on the road to recovery.

Hush, Hush, Helicopter Ben and Tim Geithner will undoubtedly knock on the right doors to keep our market floating. However, Ron Paul's push to audit the Fed easily made it out of conference committee, and will soon head to the House floor for a formal vote. This alone could do a considerable amount to rattle financial markets. However, I am certain the Senate will derail this bill. Come what may, the Senate is not as closely linked to the citizenry, and that will make it much easier to ignore a reactionary movement on Main Street, and bow down to pay homage to the powers that be on Wall Street.

Tuesday, November 10, 2009

Inflation... Inflation... Everywhere...

Inflation... Inflation... Everywhere...

My children have a kiddie pool. When we are not at the community pool, we fill the kiddie pool with the hose, and let them play. We will the pool with toys, squirt guns, and sponge balls. One time my daughter turned the hose back on and filled the pool to the rim. The pool filled so high that water started running over the sides, but it was such a slight over-flow that all the toys rose to the rim of the pool.

I think the equities market is a lot like that pool. The government has turned on the spigot and allowed Treasury to continue pumping money into the economy to avoid a depression. Loans are cheap, money is readily available (to those who qualify), and Obama et al. have parlayed a recovery to easy money and government spending. Trading volume of this "rally" is still low compared to 2007. And it would appear to any outsider that Wall Street has utilized the easy Fed. money to create a rally in which they have been the primary beneficiary. All that money flowing through the economy has also created an effect just like the kiddie pool. Equities have risen right along with inflation. However, one must note the continued deterioration of the U.S. Dollar and conversely the rise in metal prices in general, and gold in particular. When there was a gold standard this could never happen... Benton Woods has opened up Pandora's Box.

While the auto industry has reported signs of life with quarterly profits from Toyota and Ford, neither are willing to say that the red ink is over. Sure Cash for Clunkers gave them a profits jolt, let us understand that adrenalin injection is over. Sure reports are trickling out that Ford and Toyota are revamping plants to meet the anticipated recession end, most experts agree that non e of the manufacturers are out of the woods yet. Tom Libby who is President of the Society of Automobile Analysts believes that "even though the auto companies have done a good job cutting costs, that won't be enough to produce sustained profits unless there is a significant increase in demand for vehicles worldwide." It might be a good time to consider a short position on one of the automakers like Hyundai which saw record numbers during Cash for Clunkers.

John Williams makes a few assumption on the "real" state of the economy, and it is not good. His site entitled Shadow Government Statistics paints a rather grim picture of the real employment picture. According to one of the charts he has created, Williams suggests that "real" unemployment should be rolled into a number based on a collection of those who are 1. currently unemployed, 2. those who are unemployed and benefits have run out and 3. the under-employed. Williams' number reflect a 22.3% figure which even if moderately accurate belies a more troubling figure. That being said, it appears as though Williams' opinion is not important when it comes to rolling with this market. No news has been bad enough to derail this rally. However, should the inflation-equities factor through a tightening of rates, or a sopping up of dollars by Treasury, or a slower than expected recovery, they John Williams will be able to say "I told you so."

Wednesday, November 4, 2009

One for Me... One for You...

One for Me... One for You...
I guess I have always thought people from Ohio to be a little smarter than most others... Maybe in part due to the images from places like Texas, Nevada, and California... Maybe it is just a bit of the Midwestern common sense... Our work-ethic... Our lifestyle... Whatever it is, it just seemed like people from Ohio just had it together more than most other states... The Reverend Thomas Grey from NCALG told me ten years ago that Ohio is too smart to allow casinos into the state... Evidently, a lot has changed over the last 10 years.

Yesterday constituents from the states of Ohio voted to allow casino gambling in Cleveland, Columbus, Cincinnati, and Toledo. That in of itself is bad, but the average voter doesn't realize that the state constitution will now be amended for the the best interests of two private entities... Dan Gilbert (see Quicken Loans and The Cleveland Cavs) and Penn Gaming (see gambling operation in Pennsylvania). Sure there's the promise of jobs, tax revenue, and entertainment...but let's face it... the casino interests are only rich and opportunistic millionaires trying to become billionaires at the public's expense.

I explained to my students that Ohio has granted Dan Gilbert a piggy bank in Cleveland and Cincinatti that is guaranteed to take in more than it pays out... And that Gilbert and his casino cronnies were willing to spend more on this campaign than Obama did to win in last year's election. I wonder why anyone would spend $35 million on a campaign...

I'm not just a bit bitter about this whole thing... I am actually pissed off. This thing is a loser for the people of the state and it is another tear in our moral fabric. There are a couple of options:

1. Contact your State Congressman to support a ballot measure that would tax these institutions into oblivion.

Ohio House Ohio Senate
2. Do not go to these casino in hopes that they go belly up.

3. Support grass roots efforts for another referendum to strike casino gambling from the state.

A lot has changed in Cleveland over the past 100 years. In 1909 Standard Oil and John D. Rockefeller brought business and wealth to Northeastern Ohio. This created good jobs and many secondary businesses sprang up as a result. One hundred years later, we have replaced Standard Oil with a business doesn't give to Ohio, but only takes away. One thing is for certain, Gilbert is no Rockefeller.

Economic Watch...

Ax is right... This is one crazy market which really does not seem to have a real direction. Gold continues to inch up and silver is going along for the ride. But there really is no leader in the market anymore. I do note that China, India, and Saudi Arabia are hedging their bets in equities and the dollar by loading up on gold. (India finalized a purchase on two hundred meteric tons of gold from the IMF!!!) While this move could be good for India as a future hedge of inflation, let us not be fooled that it can also be seen as a hedge against future erosion of the U.S. Dollar.

I will look to enter into PQ calls again... 1/8s are sounding pretty attractive right now. As reports of China's oil consumption rose 14% yoy, the report was rather quick to brush off any suggestions that China would have little to no impact on global demand. Still though, if pundits are still preaching a recovery, then demand will automatically go up. I say this because there is no coincidence that Buffet's market saving announcement to purchase BNSF was done as a hedge against higher oil prices... somethng that inflation will naturally egg on!

I am counting on a dismal employment number Friday... followed by a further slash in consumer credit. Obama et al. may be looking for banks to start lending... the question is to who? For the full Economic Calendar click here.

Thursday, October 29, 2009

Ride the Wave? Reality Check...

Keeping up with this blog has been a challenge. I am back in season... that is transitioning from soccer season to wrestling season. Demands on time limit my opportunities to write the blog. However, that is no lack of observations on this end.

First and foremost, I have traded out of PQ... and traded back into to it the other day. The former garnered me a 300% + profit.... I have limits on all of my options as of now... and allowed this trade to execute. I entered back into to OTM calls on PQ now hoping that the few cents that I wagered will in fact role into a nice bankroll just in time for me to make another go at the housing market this spring.
I was also able to reap a 75% profit on CLF puts which I knew were in for a sell-off. Still though, LVS and a few other January puts could be what the doctor ordered.

I find it interesting that the market was selling off on interest rate worries yesterday, and today phony GDP numbers (laced with stimulus and cash for clunker dollars) paved the way for a 200 point rally. Maybe another component of the rally deals with increased demand for American products due to a weakened dollar. Regardless, this is the market we have... and it is the one we have to play.

Reality Check

If my wife and I are and indication, then Generation Xers are definitely living in a state of denial if not complete oblivion. My wife and I visited the STRS counselors on Wednesday evening. We are doing a bit of retirement planning... and retirement planning these days is like trying to catch a speeding bullet with your teeth. The counselor said that we are the youngest couple she has ever seen at one of these retirement meetings. If this is the case, then I will assume that most people really do not put much thought into retirement until it is too late. My wife and I are both kicking around small business ventures that will generate passive residual income, while not compromising our family life. My suggestion is that all followers of this blog should see a financial professional sometime int he future if for no other reason than to plot a future.

Sunday, October 11, 2009

Issue 3 and the License to Steal...

Issue 3 and the License to Steal...

I have always been one to enjoy a friendly wager. A football game here... a poker game there... all in the sport of playing the odds. It is, in its most basic form, a source of entertainment.

However, I do not like Issue 3 for Ohio. Maybe it has something to do with the fact that Ohioans have voted down casino interests on four... FOUR separate occasions. Maybe it is the fact that Ted Strickland and the state legislature attempted to do the old end-around and by-pass voters and legalize gambling in state racetracks through the legislative slide of hand. I know one thing for certain, that whoever wins in the casinos, the real loser is Ohio. Here are some reasons why Ohio should vote NO on Issue 3!!!!

Gambling increases crime, poverty, drug and alcohol abuse, child neglect, bankruptcy, divorce, and suicide. Quite a mouthful huh? Every entity that promotes gambling will fail to mention the human impact of casino gambling. According to one source, the state of Utah alone could have up to 88,000 problem gamblers in their state alone. "Dr. Michael Kalm, president of the Utah Psychiatric Association, believes that gambling can be as real an addiction as cocaine or alcohol." (1) Addictive behaviors suggest that the harmful effects of gambling can lead to compulsive and obsessive behaviors as well. Chances are that 1-2% of people who enter a casino become compulsive gamblers losing everything that they have. Will the casinos be there to pick these people up when they crap out?

To say gambling is good for the economy is like saying that a leech is good for your body. Casinos drain away precious economic resources from the daily lives of people. Chances are that gamblers who lose will be less likely to spend their money in a local establishment like a pizza parlor. Casino do not create any product. In the most basic form, casinos are involved in the transfer of wealth from patrons to casino operators. Casino operators see themselves as businessmen. However a local business like a grocery operates on a 5-6% profit margin... casinos are more along the lines of a 30-35% profit margin. They are nothing more than cash cows for those privileged few who own them. Rich and opportunistic millionaires trying to become billionaires on the public's dime.

Finally, and maybe the most troubling aspect of Issue 3 is the fact that the government is supporting casino interests. On four occasions Ohioans have voted against legalizing casinos in Ohio. Now, it appears that maybe people in our own state government are willing to cannibalize fellow Ohioans for a few bucks in tax revenue. Gambling makes losers out of people. Chances are that parents will not hold casinos up as the model to become a successful and productive human being. Why then would we allow the government to push these interests? (2) Quite simply, when the government stops looking out for the best interests of its people, and starts making sweetheart deals with those who would do us harm, then it is a government that must have lost its moral authority to rule by the people.

In closing, arguments abound as to why we should have gambling in Ohio. New York has it, Pennsylvania has it, West Virginia has it, Michigan has it, and Indiana has it... and we are losing billions of dollars in economic revenue. But I like to think along the lines of Warren Buffet who used the analogy of a dog that fouls up every one's yard. If gambling is fouling up everyone else's state, does it make sense to allow that institution to come to Ohio? I encourage all readers to vote No on Issue 3.


Saturday, October 10, 2009

College Football Selections...

College Football Selections
S. Carolina -10 KY
West Virginia -10 Syracuse
Wisconsin +16 Ohio State

Tuesday, October 6, 2009

Economic Trends and Bends... Stock Watch... College Football Results...

Stock Market Trends and Bends...
Gold reached another 52 week high today, and silver moved in close concert. Metals in general have been on the move as more and more countries speculate on the death of the dollar. There is a concerted effort among several nations to stop using the dollar as the world's reserve currency. Oil of course would be the first item switched. This fear alone has caused a dramatic rise in oil and precious metals. But, I would like to warn readers that there is another part to this scenario. Let's just call it the "what if" scenario. What if the Federal Reserve decided to raise interest rates in a rapid succession... to give the dollar legs once again. What if, the world government's move to abandon the dollar goes afoul, and there is no other currency that can be used as effectively. What if the Fed, in some way, shape , or form is able to reign in inflation without leaving the debtor nations holding shopping bags full of useless American dollars. This is not so much a warning, but more or less an argument as the Devil's Advocate and why the dollar is... and still remains the world's reserve... and why gold could be ready for a correction.

But let's face it. There are a lot of problems the United States must work out before the dollar regains its good as gold status. To think that the like of FDR, and Truman worked like the Dickens to make the dollar the envy of every nation, only to let it crumble under the weight of excessive debts and entitlements that would make anyone dizzy... Congress as well as every American should be put on notice... This is not a good thing!!!

Several years ago I looked at a couple of rental properties. I liked the idea of owning a piece of land... having someone else pay ti off for you... and of course the tax write-offs. Yet, the more I looked at rentals, the more I noted that many of the "deals" that were out there would have me supplementing the renter's property. This is not good. I think the government is the only entity that has found supplementing someones property a good idea. And trust me, I don't have deep pockets like the government. If a rental deal was to be had, then I believed that the property had to (at the bare minimum) stand on its own two feet. It if could not meet that basic requirement, then it was not an investment nor and investment.

I bring up this anecdote because it appears that the government has embarked on a variety of programs. Each and everyone discourages people from standing one their own two feet. From TARP, TALF, Cash for Clunkers, stimulus packages, and health care public options... in almost every scenario we are heading down a path that discourages people to take care of themselves. Instead, we are creating more and more of a nanny state. My point is quite simple. At some point in time in the future the government will have to remove many of the stimulus programs. And the economy will have to stand on its own two feet... and if it is not able to do so, then we have in many ways caused a degree of our own long-range problems.

The super-rich... those who have $500,000,000.00 in assets or above are feeling a bit of discomfort these days as well. Before you start to laugh, he are reminded that America needs a rich class. the are often the course of financing and innovation that stimulates the rest of the economy. However, it appears that the rich are particularly worried about government intervention in the financial system in general, and the impending commercial real estate downturn. Many of these lovelies are thinking of playing it safe these days... thinking more like middle class people and not like the meat-eaters that created the original wealth. Regardless of whether you like this class of folk or not, we need them... their greed... and their innovation to keep capitalism alive and well in the united States.

Stock Watch

Let's start with the loser...

LVS is now down 20% from my original purchase price... yet as I expected the stock to get punished once again, I noted that the put options were unchanged today. This suggests that many other market players are looking for a sell-off between now and the end of the month.

PQ has been the story of the month thus far. In after-hour trading PQ breached the 7.00 mark driving the 1/7.5 calls toward grand-slam territory. The real question I may have is whether to make the money and run... milk the time-frame of the calls out a bit more... or even exercise on the options... If I choose the later, it will require a small fortune... and balls of steel to ride this one out. If... if this scenario were to playout, I wouldn't need a visit from Santa at Christmas... and rest assured, the Salvation Army would get a little gift from me in their kettle!!!

College Football...
2-1 is nothing to beat your chest on. However, after the pathetic run I have had, I will take it. This runs my current season record to 6-11... If I was in Vegas playing those games, I might be looking for the casino to give me a complimentary bowl of soup...

Saturday, October 3, 2009

College Football... Stock Trades...

College Football...

I am not sure if any reader at this juncture would/should follow my college football selections since I have have managed to go 0-6 the last two weeks. However, I will look toward vindication, as I have never had a losing season in football selections. This week I like:
S. Florida-6.5
C. Florida-7

Stock Trades...
I entered into 1/7.5s calls on PQ at .35... It was... was.. on a terror until the Purchasing managers report on Thursday left off a bit of steam. News that three more rigs will be on line soon. Couple this with a weaker dollar and this one should have a decent run.

I entered into LVS 11/13s puts... and was immediately rewarded with a 10% loss in the option value. However, I look for a rather bleak economic picture to take a bit of sap out of this tree.

NEOP reached a 52 week high of 1.40 before selling off a bit. Should make another run at 1.50

Saturday, September 26, 2009

College Football

TN -22
Army +10
GA -12

Saturday, September 19, 2009

Stock Watch

Stock Watch
This time someone else got left holding the bag. I was able to dump shorts of FAZ and SRS at the beginning of the week thus, letting some other dope hold those worthless options. Unfortunately, I missed my opportunity to take profits on C, and was left with nothing on that one. But that's ok... Even Babe Ruth struck out a few times. The key will be to capitalize big on my hits just like the Babe did when he took those balls out of the park!!! Chances are that I may replay FAZ and FAS shorts again since it appears that this market will rip past 10,000 this coming week.

SLV continues to be the mainstay of my current portfolio. While it started off as a place to hold cash while I prepared more ways to short the market, it turned out to be a bit more of a hedge. I like GLD, but believe SLV has yet really made its move. I do however want to remind readers that SLV and GLD are no where near their all time levels of the 80s. We can remember when the Hunt Brothers made their move to corner the silver market... and almost lost the Kansas City Chiefs in the meantime. Adjusted for inflation... if you would have bought gold at the top of the market you still would be down over 50%.

I do not believe there is any type of a concerted effort to corner any of the precious metal markets these days. However, between advertisements about turning your gold into cash, and even better the bullion centers that will sell you Gold Eagles or bars I was prompted to take action. So I called these Bozos and asked two simple questions... How do I buy gold? (That was the easy question)... The real question I had was... How do people sell their gold once they buy it. That was a bit more of an uncomfortable question. This is where I was told about using a mailing service to mail in whatever gold bars I would have purchased... insured them... and hope that they arrive when gold's price is still up. There seemed to be enough hols in this guy's plan to sink a battleship.

I entered into 1/7.5s on PQ which was one of my darlings during the oil boom. I believe this one could be a home run as well due to the dual production of oil and natural gas. Plus, they are located off the coast of Texas and Louisiana and it thus far appears to have been a more mild hurricane season... I still look for a tightening of of production which will drive prices. Secondly, as the U.S. Dollar appears to be under more pressure, commodities are a natural defense.

I am considering a covered call strategy where I would actually purchase common share of the stock, and place my shares up for options. This is where many of the big dogs play. And, while I do not claim that I am in the same league as the big dogs, I do believe there is a portion of my portfolio that can be used for this strategy.

Call it irrational exuberance, or just plain dumb. Whatever it was, I noted the explosive movement of WYNN and LVS this week. The former could make a reasonable argument for its move through the spin-off of the Maccau operations coupled with a concerted effort in the United States to cater to the more affluent gambler. I am Sheldon Adelson's house is made of cards These stocks will continue to rise as long as the mirage of economic improvement persists. I am sure Vegas will be back on its feet in no time. One footnote is that HArrah's gaming purchased a dilapidated racetrack in North Randal, Ohio once the governor and legislature sold their souls to the devil on slot machines int eh race tracks. I am certain the sale is contingent upon the state winning the lawsuits against several conservative and pro family organizations in the Buckeye state.

Opps... College Football Selections...

Due to circumstances beyond my control the last blog did not publish in its entirety. I deleted it and will republish later...

College Football Selections:
Bowling Green -3 Marshall
Northwestern -3 Syracuse
B.C +6.5 Clemson

Saturday, September 12, 2009

Lessons from Standard Oil... Big Banks New Power... College Football... A Conservative from a Conservative State...

Lessons from Standard Oil...
Nearly a century ago, the oil fields of western Pennsylvania gushed think black crude oil. Derricks were placed almost on top of one another, and oil ran so thick that it flowed out into the streets and local streams. Boom towns like Titusville and Oil City sprang up over night. However, it took an Ohioan by the name of John D. Rockefeller to reign in the awesome power of oil by controlling the only aspect of production that truly mattered... refineries.

Rockefeller was able to mater the refinery business... and use almost every crude by-product imaginable. He was also master of pinching pennies. As the story goes, the hands-on leadership of Rockefeller had barrel makers experiment with the number of soldering drops used to seal a barrel. Rockefeller calculated that if two drops of solder could be saved on every barrel, he could amass a fortune in savings.

Trust-busters and other progressive candidates like Teddy Roosevelt claimed that Standard Oil had become too big and too powerful. Later, the Federal government broke up the Standard Oil Company for uncompetitive business practices under the Sherman Anti-Trust Act. This created a number of smaller oil companies including Exxon, ARCO, Conoco-Phillips, Standard Oil, and British Petroleum.

It is interesting how times have changed. We are currently witnessing the creating of trusts in the financial sector. Smaller local and regional banks are being squeezed out. Yet big banks like Citi, Goldman Sachs, PNC, Morgan Stanley, and Bank of America continue to get bigger. Yet, we are more focused on health care issues which while a major component of every day life, will pale in comparison to the power that is being wielded by big banks. Should this course hold true, banks will emerge from this crisis with new found powers, and more importantly added leverage on Capitol Hill. (2)

As I have reminded readers, Founding Fathers like Thomas Jefferson warned against bank interests claiming "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Later, Andrew Jackson took the entire bank lobby to task. Even after he did not renew the charter of the Bank of the united States, Jackson claimed " I have always been afraid of banks." Not only did he fear the power of banks, and their ability to manipulate finances but more importantly, he knew that banks could also manipulate politicians and policies as well.

You heard it here first. Should Congress continue to press the Federal Reserve for an audit, there will be another financial panic... and you can take this one to the bank!

College Football

I kicked myself. Sure I went 1-2 with neither East Carolina nor Missouri covering. I was more disappointed with the fact that Missouri really should have been Boston College, as I wrote down the wrong selection for my reader. Regardless, I am currently at 4-2 for the season.

Jim Tressel played the last quarter of the game not to lost, as opposed to playing to win. I just knew that USC would score on the final drive... I have seen in happen too many times to teams like the Browns where one of John Elway's drives... an Ernest Byner fumble... a Brian Sipe interception to Lester Hayes... or whatever... My point is that the Browns are not the kind of comparisons I want to make to any team I follow unless you are the Bad News Bears.


College Football... Have We Learned Our Lesson? Liar...

College Football Selections
East Carolina +7.5
Michigan +5.5
Missouri -17

For the latest line (Click Here)

Have We Learned Our Lesson?
If the goal of the U.S. government in general and Wall Street in particular was to re-inflate the bubble, then it is working. Sure, the markets might have been overly beaten down last March. Sure, pessimism was at its highest in March. But what has really changed? Are we as a nation doing business any differently? Is Wall Street more cautious today than they were in March? We all know the answer to those questions.

However, after every recession and economic downturn there are always a clear list of winners and losers. Whether it was a successful business model. A great product. Pure innovation. Access to government officials. Or, quite simply a premonition that a major shakeout was on the horizon, one thing is for certain. There are a number of sectors and businesses that will emerge stronger and more efficient from this crisis. Yet, we know that a number of losing businesses were saved as well. Stupidity, excessive risk taking, and lobbying kept a good portion of companies that should have failed into the pits of bankruptcy. Trust me, no one wants to see American businesses succeed more than I do. However, we are reminded that aide and propping often times do more long-range good that bad. (See McKinley's tariffs on textile imports... when the business was on its way out of the United States.)

According to Tim Geithner, there is a major re-structuring of Wall Street that is in the works. Dare he say the word reform? However, I believe most of the proposed reforms will be phoo-phooed by the likes of Barney Frank, Chris Dodd and friends. In the end, the true reforms will be lost somewhere in the Congressional Offices in D.C..

In a recent Townhall Meeting, Representative Steve LaTourette suggested that the Healthcare Bill will have a provision which allows coverage for illegal immigrants. I believe LaTourette is telling the truth. And while the Democratic Party is currently running the table in D.C., it is likely they will have their way in ANY kind of legislation.

The question is should a Congressman call the President a "Liar" during an address to Congress? If we were in Great Britain where Parliament meets, I would say yes. (Click Here for a snap shot as to the way the Brits. run their government meetings.) However, we are Americans. The Republicans do not have the same access to media outlets as the Democrats. I am certain it is a source of frustration. There is desperate need for fairness (an ideal of any democracy prevails at all time.) Yet, if you agree with the President or not, there is a time and place for everything. The truth must be told... The 5-10% of Americans who actually pay attention to political debate... those digest legislation... and those who can make an informed decision must stay connected to these political debates.

Sunday, September 6, 2009

GMACs Candid Response to "The Rest of Us." ... China Syndrome... College Football Results...

GMACs Candid Response to "The Rest of Us."
Since our house is on the market, I thought it a good idea to call GMCA. This fine institution holds our mortgage. I was curious about our payoff figure if and when we sell our house. After that vital information was shared, I had a few questions I needed answered:

Question: If my house does not sell, am I privy to the government refinance programs?

GMAC's Answer: If you are referring to the Obama Loans (as we call them at GMAC), you must meet three criteria.

1. You must submit a letter requesting loan modification.

2. You must submit financial information which demonstrates economic hardship.

3. Our underwriters must agree that your unique financial situation qualifies for the Federal Loan Adjustment Program.

Should that be the case, there was little or no reason to carry this conversation any further. My credit score is in the 800s. While my income is not as high as some of the charlatans applying for the help for homeowners program, I was certain that I have no chance meeting the underwriting standards for loan modification. It seems as though the deadbeats are getting rewarded here, while they are in many cases keeping a home that they never should have bought in the first place... Go figure. Yet, I do see this as a plan aid banking and mortgage companies.

The China Syndrome
China became a bit more intriguing as the Communist country announced that there will a shut down of specialty elements. These are the same elements that are used in ceramics, cell phones, etc. Should China continue this degree of politics, you can rest-assured that this move will hurt China more than the rest of the world.

Since China is responsible for nearly 99% of rare earth mining, it does put those companies who specialize in those products subjects of interest. China will create pricing pressures on these materials. As a result, ceramics to cell phones will increase in price. Maybe it is time to consider a few companies which specialize in this mining area. As for the rest of China, FXI is probably the best way to short them. A "sluggish" growth prospect for the rest of the world means China will have to sop up their extra demand... or concentrate massive wealth reserves on infrastructure.

College Football
To those who followed my college football selections were treated to a 3-0 sweep.
Notre Dame was an easy cover. Connecticut did what it took to cover the spread against Ohio University. (Why does the MAC even have football?) And Army was an outright winner against Easter Michigan.

I hope to list three more complementary picks buy Friday.

Saturday, September 5, 2009

G20... The Spanish Armada...College Football

This weekend's G20 Summit will meet a background of recovery. After all, world markets have rallied off lows, unemployment in the U.S. seems to have peaked, and many are tauting the effects of economic stimulus. Not completely convinced that stimulus is completely working, leaders will be a bit squeamish to turn off the spigot as of yet. Still though, there will be mild cause for celebration.

However, the collective group will address bank capital requirements just in case this "era of good feeling" wears off as soon as the stimulus money is gone. Lena Komileva, head of G7 market economics at Tullett Prebon, said officials will unite over the need to keep fiscal and monetary stimulus going for now, and "coordinate exit strategies later." Some media reports indicated there is friction among officials on those points.

"Amid ongoing uncertainty about the sustainability of the current concerted global upturn, focus will revolve around proposals for higher capital standards for banks and curbs on executive pay and bonuses." (1)

One needs only to look towards Spain, the sick man of Europe for a dose of economic reality. Spain has seen wave after wve of stimulus packages that are designed to build bank credit, improve infrastructure, and revive their economy. However, it appears that nothing seems to work unless you are a financier playing the market. As one blurb from Marketwatch suggested "Judging by the amount of road work clogging up Spain's capital city currently, with Madrid practically being unearthed, you'd be forgiven for thinking you were in the midst of a dynamic and growing economy.

However, that's anything but the case. Public works programs have been going on across Spain under the government's so-called "PlanE" bid to stimulate the bleakest economy in Europe, where the jobless rate hit 18.5% in July and is expected to top 20% in 2010 as a decade of growth driven by the now-collapsed housing market painfully unwinds.

Spain is in its fourth straight quarter of recession, with output dropping a sharper-than-expected 1% in the second quarter. Future growth prognosis range from cautiously optimistic at Moody's Investors Service to the downright catastrophic: "Spain is a disaster waiting to happen," says a note from Variant Perception, an institutional research house based in London." (2)

Spain has not been right since 1588 when the Spanish Aramda attempted to invade England and replace Elizabeth I. A great empire ebbed away until even the United States in its colonial period whisked away Cuba and the Phillipenes. With 18% unemployment, see Spain for what it is... a patient on life support.

Could the U.S. be in the same boat? Probably not. However, let's not kid ourselves that everything is peaches and cream as well. Place new capital requirements on banks, and I can almost guarantee that a tightening in credit will continue. Yes, enjoy the enthusiasm of this market... date it... milk it for all that it is worth... but do not marry it.


College Football
Conn. -4 to Ohio
Army +5.5 to E. Michigan
Notre Dame -15 to Nevada

Wednesday, September 2, 2009


Sherlock Holmes does not work at the SEC. The questions is who does? Today a blistering report was released that pointed out how security regulators missed red flags. According to Inspector General David Kotz "Despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff's trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme." (1) Now investors and Wall Street alike are facing a government that may want to go into punishment mode, or use financiers as a election scape goat for their own political short-comings. Of course, the real concern should now be that the government would over-regulate... As of now, I believe government officials are afraid to touch Wall Street do to its volatility... so tongue lashings and grand standing may have to suffice in the near term... down the road many reforms may get conveniently swept under the rug.

Interesting that the market has reacted so poorly the last three trading days. Monday, it was speculation that the market has come too far too fast. I believe the Tuesday theme ran something along the lines of the ripple effects from an over-valued China. Today, worse than expected employment numbers coupled with lower than expected factory orders put the market on its heels once again. I find it interesting that no news was bad enough to stop the market rally from March to August. Now it appears a more rational approach is besetting the markets.

Downward pressure on the financials has influenced both by C 9/5 calls as well as FAZ puts. Should the employment numbers be within reason... or better than expected, we could see a sharp move up.

SRS I own common and have considered adding positions to this one since it is trading so low. I ran a hedge with puts as well and will need a meltdown reminiscent of Chernobyl to make this one work out. However, I will maintain the approach of calculated risks for calculated rewards.

I am looking for downward pressure on UNG, SLV, and a may even look at BAC should it breech $15.00. It is not that I am cracked up about the market right now. I am not. I do think that successful trades can me made, but only if due diligence is done and individual stocks can make a run. I am certain that SP 500 funds will be in a holding pattern for a while.

Shorts are starting to look more attractive again. WYNN is hitting resistence as is AMZN and FXI. Keep those birds on the radar screen.


Thursday, August 27, 2009

Blowing off a Bit of Steam...

Greetings Readers,

Again, I took a hiatus from blogging due to a number of technical difficulties with my computer and then my monitor. They were remedied by the purchase of a new tower from Later, I discovered that I needed a new monitor as well. This purchase was made at Dell where I was able to find a 19" flat screen monitor for $94.00 with taxes. Shipping is always "free."
It is good to be back, as I have missed updating this blog.

The market has been simply amazing. But, the economic data that seems to be fueling market sentiment is even more amazing...almost as if it is too good to believe. I do believe that a portion of that data has been manufactured... or at best analyzed through some of the rosiest colored glasses that are available. But who am I to argue at this point. I have taken a few lumps on the short side of things, and can truly appreciate the education I have received via Wall Street University.

I have a few shorts that expire in January... I will continue to see these as the "downside insurance policy" for the next three and a half months or so. I had at various times convinced myself that this rally was too good to be true, and in some regards have had to pinch myself when companies like AIG rally $11.00 in one day. I need not remind readers that this one was and still is on government life support. At best, this is a clear indication that Wall Street sees the worst is behind AIG... and let's face it, if there is another meltdown to come, Uncle Sam will be there to plug the hole of this sinking ship with more taxpayer money.

Hey, who am I to complain? I did make a few plays to the upside in C (currently up 50% from my purchase price). I also scored well on SSO... and let a couple of down days in early August spook me out of some even more significant profits... but heck, as the old saying goes, profit is never a dirty word.

Now, I am keeping my fingers crossed that the 9/9s on SSR and the 9/23s on FAZ puts can finish strong for me. In both cases I actually looked for some of the most volatile and financially sensitive ETFS, and saw opportunity with low risk loss... and possible home run potential upside. I will need a bit of help... Maybe Congress will back off the plan to audit the Fed... maybe anther Wall Street darling will have "better than expected earnings" or better yet, "narrower than expected losses."

President Obama may suffer his first political setback as it appears that his Health Care Bill... or whomever this bad boy belongs to these days could be in some serious trouble. All along my position has been one of economic responsibility... sure up Medicare and Medicaid... and help create a more efficient medical community. I am concerned that Pandora's Box will be opened with the current attitude in Congress. In one of his town hall meetings, Representative LaTourette admitted that the political climate in D.C. is the most frustrating he has encountered since becoming a Congresssmen over 10 years ago. He specifically noted the TARP, CAP in Trade, and now the Health Care Reform bill as points of frustration... and that the momentum of "Get-er Done" politics has been both irresponsible and outright dangerous. Additional amendments to bills of 1000 pages (see TARP) and a over 300 pages (see Cap in Trade) echo pork barrel spending in its most vile form. It is kind of funny to write about ridiculous spending bills. This evening I sat down with my daughter to read a school story about the Statue of Liberty. There was actually a collection between public and private owners taken to pay for the pedestal. Something that all Americans joined hands together to accomplish. When is the last time we have heard a whisper of working together... or saving in Congress?

Enough pontificating for now. I will return by Sunday with another article. I hope to return to a more scholarly format of quoting sources and analyzing economic trends.

Saturday, August 8, 2009

Dollars for Dummies, The Las Vegas Experiment, Las Vegas Real Estate, Culture and Moralism 101

Dollars for Dummies
To call the Cash for Clunkers program a success is an understatement. A wildly popular program that takes gas-guzzlers off the road in lieu of newer fuel efficient cars has middle America buzzing with excitement. To be frank, I hadn't paid much attention to the program until two of my neighbors decided to trade in their "clunkers" for a new cars. defines a clunker as a decrepit car. For those of you who want to get technical, decrepit is defined as worn and broken down by hard use. If that is the intention of the Cash for Clunkers program, than neither of my neighbor's cars fit the description of a clunker. Rather each car was less than seven years old... and neither had rust. However, each "clunker" got less gas mileage than the car that was purchased. I would not call the program a boon for automakers, while Honda, Hyundai, Toyota, and Ford have seen an uptick in sales, all automakers are well below their 2007 numbers. Scrap dealers such as Alcoa (AA), Metal Management (MM), or Steel Dynamics (STLD). Some grumblings echoed of Smoot-Hawley claiming that monies should only be spent on American made cars. Can anyone really name a car that is totally Made in America? Sorry GM and Chrysler, you will not be enjoying this feeding of public dole.

The Las Vegas Experiment
About 50 years ago, the mob financed Buggsy Siegel's experiment that became known as Las Vegas. It was a city that was built is the desert... a place which under any normal circumstances would be seen as valueless land.
Today Las Vegas is known as the most entertaining city on the planet... A city dedicated to hedonism... the good life... fun... and over-indulgence. Still though, everyone I spoke to in Las Vegas cited a marked downturn in revenue. It's not to say that the casinos are not making money... the casinos are simply making less which is requiring many cash-strapped organizations like LVS to seek any financing arrangements. Casinos are all vying for the high end gambler. This is the guy who thinks nothing of dropping a $100,000 on a game of blackjack. Here is a list of casinos who are completing for those gamblers and shoppers:
Mandalay Bay, The Palazzo, The Wynn, Belaggio, and Mirage
While the recession has really hit all social classes in the United States, we were reminded that companies like WYNN seem to be less prone to losing gamblers... Should the recession receive two or three indications of bad news, I believe any one of these can be shorted near their March lows.

Las Vegas Real Estate Market

I have friend who teachers school in Las Vegas. Clark County Schools pays him well. There are no property taxes. The state pays 100% of his retirement. During the latest real estate boom in Las Vegas, he purchased a home for $275,000. A three bedroom cement slab with no grass located in the desert. Today, his home is worth $125,000. A mortgage broker who bought a home across the street paid $349,000 for his and has seen a loss of nearly $200,000 in equity.

But there is a plan to take care of everything. The mortgage broker is going to do a "short-sale" on his home... and bailout on his mortgage note. He is actually talking to my friend to do the same thing on his home. Don't ask me how, but this could be the way that homeowners attempt to crawl out from under the mortgages of homes which have lost over 50% of their value.

In areas further from the Las Vegas Strip, the term "Suburban Ghetto" now strikes a chord as homeowners and speculators alike are finding someone...anyone to live in the properties... In some cases, homes that were purchased for over $300,000 are now part of Section 8 housing.

Culture and Moralism 101
Middle class values are simple when it comes to education. Work hard in school. Get good grades. Get into a good college. And get a good job.

According to one teacher in Las Vegas, those values can be thrown right out the door. "The kids in my class have parents who deal blackjack and earn $80,000 a year. A valet at the right hotel can make an easy $100,000. The average parent in a city like Las Vegas does not stress education because it is more about the hustle than it is about the brains. Street Smarts are what you need to survive there. Save the books for those who earn money to visit.

KO System
I gamble more for entertainment...but let's face it... I also play to win. Here are my success and failures in Las Vegas:
Sports Betting: 4-2 in

Blackjack: I lost more than I won. In each case, I was AHEAD in my winnings only to give them back to the house with aggressive play. I used the KO Card Counting System along with basic BJ Strategy. In Single Deck BJ a +3 count is the time to get aggressive betting...from raising the bet to doubling down. And that is where strategy failed me. I will re-evaluate my victories and defeats in BJ and look to ammend methodology that failed me.

Wednesday, July 29, 2009

Big Ben is Bumming

Dear Readers,

The long established checks and balances system has to some extent been
tested in the latest financial crisis. A test of the Checks and Balances system is in essence a test over of our democracy. As duly noted, Thomas Jefferson and Andrew Jackson were extremely suspicious of the financiers of the United States. They believed that if this class of individuals were given too much power, they could manipulate, and in essence run the entire country. According to the U.S.
Constitution, Article I Section VIII gives Congress the power to “To
coin Money, regulate the Value thereof.” However, after the Financial
Panic of 1907, Congress agreed that an institution should be created
which would “could provide a ready reserve of liquid assets in case of
financial panics and would also provide for a currency that could expand
and contract as the seasonal U.S. economy dictated.”

Glass-Stegal Act of 1933
It is important to review some of the safeguards that were put in place regarding the awesome power of the Federal Reserve in general, and the financial sector in particular The Glass-Stegal Act of 1933 went to great lengths to limit the power of financiers and their influence. Later this century, a growing number of lobbyists saw the act as antiquated and limiting. Two separate groups underscored positions on Glass-Stegal.

The argument for preserving Glass-Stegal (as written in 1987):
1. Conflicts of interest characterize the granting of credit - lending
- and the use of credit - investing - by the same entity, which led to
abuses that originally produced the Act.

2. Depository institutions possess enormous financial power, by virtue
of their control of other people’s money; its extent must be limited
to ensure soundness and competition in the market for funds, whether
loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such
losses could threaten the integrity of deposits. In turn, the Government
insures deposits and could be required to pay large sums if depository
institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk.
Their managers thus may not be conditioned to operate prudently in more
speculative securities businesses. An example is the crash of real
estate investment trusts sponsored by bank holding companies (in the
1970s and 1980s).

The argument against preserving the Act (as written in 1987):

1. Depository institutions will now operate in “deregulated”
financial markets in which distinctions between loans, securities, and
deposits are not well drawn. They are losing market shares to securities
firms that are not so strictly regulated, and to foreign financial
institutions operating without much restriction from the Act.

2. Conflicts of interest can be prevented by enforcing legislation
against them, and by separating the lending and credit functions through
forming distinctly separate subsidiaries of financial firms.

3. The securities activities that depository institutions are seeking
are both low-risk by their very nature, and would reduce the total risk
of organizations offering them -- by diversification.

4. In much of the rest of the world, depository institutions operate
simultaneously and successfully in both banking and securities markets.
Lessons learned from their experience can be applied to our national
financial structure and regulation.[7]

This Week...

Big Ben Bernanke is struggling with Congress' new interest in his powers, and the far-reaching influence of the Federal Reserve. While Bernanke would like Congress to allow free-wielding power, it is Congress who has increased its scrutiny. According to Bloomberg News, "Bernanke is trying to deflect a bill, co-sponsored by 276 members of the House of Representatives, that would require audits of central bank operations, including monetary policy decisions, by the Government Accountability Office." While Ron Paul and others in Congress desire a Federal Reserve with accountability, Bernanke warns that giving too much over site... or in this case too many audits of Federal Reserve books, could lead to the loss of independence that gives the bank such flexibility.





Friday, July 10, 2009

I wouldn't necessarily call it a return to the Smoot-Hawley Tariff of the 1930's, but readers should clearly digest the impact of G-8 leaders, and their push on green energies, and eco-friendly regulations... As it stands, there appears to be a growing rift between industrialized nations, and the rest of the world. As Obama led G8 countries in a push to adopt strict regulations on global warming, it was clear that the industrialized camp (those countries who are heavily industrialized... have a higher standard of living... are unionized... and produce industrialized products at a much higher cost) are competing against the up and coming countries like Brazil, China, and India whom for all intensive purposes would like to take the place of the industrialized nations. It is easy to demonize the non-G8 nations... and paint them into a corner as being the cause of higher green house emissions. Understand though, wealth and power are at the root of this discussion. And if people cannot read bwtween the lines on this one, then shame on them!!! while most research shows there is such a thing as global warming, and its consequences are dire, thi also stands as a clever way of setting up future trade barriers, and placing new stringent regulations on those nations who are growing the most rapidly...and sapping the wealth of the united States, and countiries in the Euro zne. At the end, I believe greed, power, and money will win out.

Debt for Sale

It worked for the United States under the Washington Administration... but will it work for California? This is the question that financial experts are wrestling with today as California was granted SEC clearance to sell their debt as a securities... A promise that if you loan the state of California money now, they will pay an investor back some time in the future with interest. The question becomes, is the purchase of California debt considered an act of investment or speculation? Consider the fact that the state of California is broke. True, it is one of the largest economic regions in the world. And in many ways, it shows an uncanny ability to leverage itself in ways that has created tremendous opportunities for wealth. However, the years and years of excessiveness is now being seen in massive deficits and budget short-falls. Excessive risk taking on one end, and excessive spending on the other has put California in a financial hole that it will not soon climb from. The question becomes whether it is smart to invest in California's debt. As an investment I would say hell no...however, if and when California debt becomes so excessive that it is no longer viewed as an investment, but more along the lines of a speculation, it may be time to consider that opportunity. A lesson from history would suggest that the Federal Government in some way shape or form will bail them out. Alexander Hamilton used this argument to start a national debt back in the 1788, and we have carried a debt ever since. If push comes to shove, the Feds will bail Arnold and friends out on this one!!!

Readers should not confuse Thursday's job report which showed a better than exected number with reality. The only holiday of the summer definitely threw off that number, and to be sure there were more pink slips waiting when people went back to work this week. For instance, some amusement park workers were laid off due to lower than expected attendance this summer. While we have been told that employment is "always" a trailing number in recessions, I believe we are well served to consider several other variables including a continuous job claims number that was over 6.5 milion. Throw into the mix a statistic that shows credit card default rates at a 35 year high, tapped out consuers who are now late on home equity loans, and emerging consumer driven problems for our neighbors to the North in Canada, there is no quick fix lurking around the corner. Please don't let the snake oil salesmen on CNBC convince you of something different. Aside from stimulus monies, the emperor has no clothes.

Interestingly enough, an article by Blomberg suggests that the recession will be over by 2010, and we will be in recovery mode thereafter. The report went on to suggest that there are signs that the housing industry has bottomed, which means there will be an opportunity to raise interest rates from 0%, to a 1% mark. When asked about the recent dip in stock prices “I think the market got a little bit ahead of the economy,” Fed Bank of St. Louis President James Bullard said yesterday in a Bloomberg Television interview. “I do not think the recovery is faltering. If you look at the projections that were made in December of last year, we’re right on track.” I'll let you be the judge on this one... another reportthis morning contradicted this sentiment...

Stretching the Dollar
I did want to mention a way to save a few bucks on health insurance deductibles. When you get a bill from a hospital, and call to question some of the charges or the rate to which the primary insurance company covers the bill, I have found customer service representatives to be more than ready to wheel and deal on deductible amounts. At the end of any conversation I have had of late, the last question I ask is "Is that the best you can do on the deductible charges?" On one bill the customer service representative knocked 15% off the bill. Another konocked off 20%. Evidently, these folks have been instructed to get money and get it now. This approach alone saved my family over $100.00 last month!!!

Sunday, July 5, 2009

Oreos and Iran... The Emperor's New Clothes...

Still the Greatest
Dear Readers,
As we celebrate our country's Independence once again, I wanted to remind readers of all the things that make it great... perfect...of course not... but the simple things we take for granted such as the unalienable rights which Thomas Jefferson mentioned in the Declaration of Independence Life, Liberty, and the Pursuit of Happiness. Governments are created by the people, and get their legitimacy to govern from the people. Any government that does not seek the people's will... or the legitimacy of those that the government is supposed to represent is no better than oppression by tyranny... Let's look around the world for a moment... China is a great economic power to which to one can deny. However, the people have no true freedoms. The government censors their internet, represses any mention of Tenimen Square, and often times dictates what the people will do as opposed to what they wish to do... At the end of the day, the majority of Chinese will push for the same freedoms that the west has...
According to Jefferson "That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed." An amazing statement if you thin about it. i would like to think that every time we hold an election in this country, we are in fact holding some type of peaceful revolution...

Iran and the Oreo

Make no doubt about it, the leadership in Iran is feeling a bit of heat. If it is the state of protest that still exists in the country (albeit underground protests),there is also a sense of illegitimacy that is increasing tension among the ruling elite. Throw into the mix a fledgling democracy to the west, and another to the east. To be sure, this is probably one of the most under-reported, and under-recognized stories in the media, if not only on Main Street. To be sure, the future of the Middle East may lie in what happens in this region over the next two to three years... Godspeed to those who are creating democracy. I also want to remind readers that the most unhealthy part on an Oreo in the creamy center... made up up factory created fats known as hydrogenated fat... Kind of reminds me of Iran...
The economic significance would be a long position on oil and gold in this scenario. i would also look specifically for companies who draw their oil fro reserves other than this area of the world.

The Emperor's New Clothes
I always laugh when I hear the story of the Emperor's New Clothes. Maybe it is the naivety of the Emperor... maybe it is his arrogance... I know part of it is the swindle that has taken place. the best part of all, is the fact that the emperor is parading himself in front of the people with nothing on...

Like fund manager Kirby Daley , I believe that stock market rally is a lot like the emperor's New clothes. Aside from the stimulus money that is currently pumping into the economy, there is no real growth (unless you are counting the unemployment line).
A sustainable rally,just like a sustainable economy is built on growth of legitimate businesses not simply emergency government spending. With all the positive spin on the economic recovery, no one has really that of the scenario where the worst has yet to come." (2) Daley is also considering low interest rate investments where a hedge in taken against inflation... and the loan can be paid back over time with worth-less (as opposed to worthless) dollars. He considers a 30 year mortgage on distressed property to be a legitimate idea.

Daley is also mindful of crumbling consumer confidence. Not simply an unemployment rate that is hoovering near 10%, but people who are starting to find a knack for thrift. I even met a doctor who is talking about fixing things in his own house... something that was unheard of two years ago!!! For instance, if the Cash for Clunkers program were to gain passage in Congress, it could create a new revenue stream for car manufacturers. Let's face it, a company like Toyota who will eventually pick up some market share from the GM and Chrylser bankruptcies in the future needs real help in the here and now. Facing an unprecedented loss (the first in 71 years), TM realizes that credit markets in the United States, and a desire for their product have created current losses at $1.6 billion through March, and could eventually hit double digits by year end. (3)

CSTR Last blog I mentioned my Red Box experience. I even made reference to Red Box Killing the Video store. on our trip to Tennessee, I noted a Red Box in a McDonald's. Now it is next to impossible to get anything into a McDonald's. However, upon further research we have found a business relationship between the two entities. A Red Box in every McDonald's would mean MASSIVE leverage.

However, I am always mindful that innovation in the information age comesquicky... And when it hits... it is often fast and lethal in the business world. I believe the day of DVD rentals is approaching a rapid end. More than likely, we will witness on-line video stores via cable or satellite. Maybe even via the internet. That would turn the lights off on Red Box, Blockbuster, and any other brick and mortar business.
at $25 per share of CSTR, this might be a short candidate, especially it the stock hits $30.00 via half-baked speculation.


Friday, June 26, 2009

Michael Jackson and the Federal Government... Coming to a Town Near You...

Michael Jackson and the Federal Government
O.K., I'll admit it. I grew up in the 80's and listened to some of Michael Jackson's music... How couldn't you? Michael Jackson in the 80's was like Elvis in the 50s, The Beatles in the 60s, and The Rolling Stone in the 70s. But enough of the stardom talk. After all singers come and singers go... and while each have entertained us in a unique and revolutionary way, there is always another star waiting to take the spotlight.

We can make several observations about Michael Jackson:

1. MJ had a name the preceded him; and a brand name has a value unto itself.
2. MJ owned a considerable amount of property rights from artistic property (see Jackson Five, Beatles, and Michael Jackson)... and a ton of other collectibles.
3. MJ was on the verge of bankruptcy because his liabilities far exceeded his assets... Most reasonable assets list his debt at $500,000,000.

To be sure, there is a long list of creditors that will be left holding the bag once Michael Jackson's estate is settled. Undoubtedly, someone will own the Neverland Ranch, someone else will own the property rights to Billy Jean, and who knows what will happen to the Beatles music. But that is part of the problem when you are in debt... your creditors are not necessarily your friends... and in the end, their need to collect on a debt will supersede any final wishes Jackson had for his estate. One of his creditors went as far as to book a 50 date tour for Jackson that was to start in the near future... Only having insurance on 10 of the 50 dates as no shows, these speculators will be at the bottom of a very long list.

The Office of Accounting released a statistic today that the United States will exceed 100% of GDP by 2023. That means that our country will be officially broke by that date. Some of the more hawkish figures have the date moved up approximately three years to 2020. During WWII, we sold War Bonds to help raise money to pay for the war. This time around, we are in way over our heads, as governments like China, Russia, and Saudi Arabia are holding our debt. And just like Michael Jackson found out, your creditors are not always your friends... and in the end, they own you!!!

I do however, believe that there are workable solutions to our problems... tough decisions, no doubt. Hard decisions, absolutely. Painful choices, for sure. And to be quite frank, I am not so certain that Congress nor the American people will have the stomach to make the necessary changes until a crisis actually hits... By then, a lot of the difficult decisions will be made out of pure necessity. Hopefully, we can all learn a lesson from Michael Jackson.

Coming to a Town Near You...
According to the National Coalition Against Legalized Gambling, the United States is experiencing its third great gambling wave. The first wave took place during the 1840s to 60 with the opening of the Wild West, and riverboat runs up and down the Mississippi. The second great wave took place from 1910 to approximately 1929 where mafia families pushed numbers rackets in factories, and gambling halls in speak easies. Now the 1990's to 2010s marks the third great gambling wave in the United States.

I write this from the view point of an Ohioan who has voted against legalized gambling on three separate ballot issues. It is not that I do not like gambling, it is more that I do not like gambling in my back yard. Look at the states that have legalized casino gambling, and at the root of every casino you will find rich and opportunistic millionaires trying to become billionaires on someone else's dime.

In Ohio, Governor Stickland who was once a minister, social worker, Congressman, and now governor is trying to pass legislation that will have the state legislature create a slots in race track bill and simply sing it into law. This is the equivalent of political suicide. The governor recognizes that casinos are not good for the state, but he is desperate to find money... any money to keep Ohio away from the time of fiscal meltdown that is taking place in California.

Fellow blogger Ax ( observed the impact a casino in Philadelphia will have on Atlantic City. The impact will be devastating. Yet, I will also remind readers that any government that is reliant on seeing its citizens lose money in casinos, is a government that is doomed to fail. Call me a conservative... call me a do-gooder... and yes, call me a guy who does not mind a game of chance... But a casino on every street corner is not the American Dream.

WYNN and MCRI still very much remain on my short list. MCRI in particular lost approximately 9% of its value today. EFU, SRS, and TM still remain on the short list.

SLV and D are long. Possibly FAZ when it breeches 4.5.

Monday, June 22, 2009

Reality Check... Flight to Quality?

In psychology, the Theory of Cognotive Dissonance describes the psychological battle that exists between two competing views. Often times, it suggests that people can live within their own fantasy world, with little to no interaction with the real world. As long as the individuals... or group of individuals are willing to accept their beliefs, and disengage themselves from reality, then the charade and continue. The danger lies in the way an individual or group returns to reality. In a best case scenario, rationality and common sense take over. In worst case scenarios, individuals and groups can react through extreme measures and violence.

I write these words to describe several situations that have occur ed lately:

1. Iran "Elections": The people of Iran are finding out that their really is no such thing as democracy... freedom... or anything that resembles choice as election results and government actions repress the voice of reason. A government that represses its own people is a government that must be gotten rid of, and to be sure this is not the last we will hear of protest inside of Iran. This is the same government that held a symposium on whether the Holocaust took place... And in many ways, Iran represents a Islamo-facist regime similar to some of the most radical in history. There are a growing number of people inside Iran who are disillusioned with their government. Life, Liberty, and the Pursuit of Happiness... Not in Iran.

2. Why is the Market Dropping?: This was a headline from Bloomberg today, as another 200 points were peeled from the Dow. As many of us scratched our heads as to why the market went up so drastically over the past four months, we now know that Wall Street insiders are heading for the doors en-masse. And the saps who believed it was safe to jump back in, will be left holding the bag as the market will test March lows. Note that the same bankers who helped inflate this latest rally were able to pump, then dump their options courtesy of TARP Funds. While the rally that has brought Wall Street off its 6,500 mark from March is nothing to sneeze at, one must ask the simple question... "Is the rally sustainable?" Not with tightening credit standards, increasing unemployment, and large pull backs in consumer spending. I met a doctor who is actually talking about repairing items in his house instead of calling someone to do it for him!

Popular Culture
3. Jon and Kate Plus Eight: No folks, I do not spend my evenings watching this pseudo-reality show. But anytime parents have eight children to raise, their work is cut out for them. And a TV show where the mother and father earn a combined 175,000 per episode started off as a ten show series, then a 20 show series, and now has bloomed into a 40 episode series last year alone, we know that there is more to the story then simply providing for your family. The mother (Kate) now has a book, and is also enjoying the spotlight, whereas Jon wants to get these outside people out of his family's life... One thing is for certain, if there is no parent relationship... then there really isn't a family... and in the end it may be a bit of greed and stardom that kills the goose that lays the golden egg.

Flight to Quality?
If we were to base the market on rational outcomes we would assume that:

1. Oil, natural gas, gold, silver, and other precious metals would be trading at all-time highs as of now... but they are not.

2. Commodities such as beef, soy beans, corn, and wheat would be trading at all- time highs... but they are not.

3. Inflation would be the word of the day based on Federal Reserve Loans, Treasury Policies, and no real measure of M3 Money Supplies.

4. The Dollar flexes its muscle as the only game in town?

5. Commerical Real Estate will look for its own bailout in the near future...

6. Healthcare Reform is an issue that each and every medical lobbyist in DC will call in a favor to their favorite Congressman... and the end game will be more gridlock.

What are your thoughts?

Monday, June 15, 2009

The South Will Rise Again, Pardon Me Pandit, Red Box Killed the Video Store

The South Will Rise AgainThe trickle of migration from the North to the South continues. I well expect Ohio as well as PA, IN, MI, WI, MN, and IL to lose population once the census is tallied. Steel, cars, finance, and raw materials had made the Midwest the belt buckle of industrial production in the United States. Take Northeast Ohio at the beginning of the 20th Century. Rockefeller's Standard Oil was head quartered in Cleveland, the tire industry was founded in Akron, and Ford Motor used production sources throughout Ohio. Secondary manufacturing and industrial applications grew as well. For instance Sherwin-Williams Paint, Glidden, and even companies like Eaton, TRW, and Timken rose to stand alone...or what we thought were stand alone businesses. Today, Ohio's credit rating was lowered by Moody's. It is not the end of the world, but it is a shot across the bow that Ohio must transition and transition quickly. Sweet Home Alabama

At the end of the Civil War, a popular phrase among Southerners was "The South will Rise Again." After Sherman's March from Atlanta much of that non-sensical talk was beaten out of the South. However, with the advent of electricity... closed shop states... and the Civil Rights movement, it appears as thought the South could rise again... and with the economic rise... there will be a political rise as well. Not the same type of rise the Confederates has hoped for, but a rise that will eventually lead to increased power in Washington D.C..

However, I am reminded of a fellow colleague who taught in the South for a number of years. She described her situation as terrible inside the public school systems... many of which still lack critical funding and cultural idiosyncrasies that would leave many of us scratching our heads. In the school where she taught in Central Florida, there were 13 different languages spoken in her high school alone. She literally kissed the ground of Ohio the day she moved back... and that is the truth.

Pardon Me Pandit

Here are a list of comments made by Citi's CEO. Candid...yes... honest...maybe.... Revealing... definitely.

1. “There is a clear trade-off between saving more and stimulating the economy in the short term to achieve stability."

2. “We too were very credit-dependent and relied too greatly on non-core, or wholesale funding sources, including securitization and other aspects of the shadow banking system and we suffered from imbalances in the economy.”

3. “We have too much leverage as consumers and as a financial system.”

4. “It is not hard to envision a significant gap in the availability of credit.”

5. "There is a clear linkage between credit creation and [gross domestic product] growth. Again, the implication is lower growth."

Red Box Killed the Video Store
Again, I walked into Video Update and received a pitch from the dopes behind the counter. This time it was a membership to their video club that would allow me to watch a certain number of videos a month...with no late charges. Without the pre-paid membership it would cost me $5.74 to rent a video for three days. If I wanted to be a good husband a give my wife a selection and pick two choices, we'd be talking $10.00.... heck we might as well see the movie at a theater. I placed the videos down at Video Update, and walked up to the Red Box and selected two videos for $2.14. The end of video stores is at hand.

Saturday, June 13, 2009

Going, Going, Gone

To say that the Federal Reserve is between a rock and a hard place could well be the understatement of the day. Treasury's sale of bonds do not go as well as the powers that be had expected. Let's face it, countries are not as interested in purchasing our debt anymore. So, interest rates went up almost an entire point. Fellow blogger Boom and Doom called this move approximately 8 months ago. He also predicted that CD's (which are as close to safe money as possible) will become more and more attractive in the future in part, due to the interest rate Treasury will have to pay to attract bond sales. However, this move begs several questions:

1. Will the U.S. Government raise interest rates in a time of deep recessions?
2. Will an increase in interest rates cause the consumer lending market to collapse?
3. Will businesses re-hire/hire anyone in a tight credit environment?

I would tend to say no to all of these questions. Right now, it seems as though the here and now are taking precedent over the future. And let's face it, the here and now is still a bit more serious than anyone is willing to admit!

I had the good fortune of running into a banker who is part of a diversity in the workplace initiative. He shared with me the good news that he and his organization received approximately $15.8 in stimulus money. The gentleman told me that his instructions are to crate as many jobs as possible. Sounds like fun right? His real concern is that the stimulus monies are only creating temporary work. Work that will last no more that three to five months. More importantly, he conceded that stimulus money does not constitute real growth... He raised the basic questions as to "What am I going to habve these people do?" "How well do you train a temporary worker?" Which leads us back to square one; where will growth come from? However, he did suggest that most banks in the United States are on solid financial footing... I will let readers digest whether an estimated $5 Trillion dollars in off balance sheet losses constitute solid financial footing.

Consumer discretionaries, particularly casino stocks continue to take a beating. MCRI closed under the $7.50 mark on Friday. WYNN another one of my short list members slipped below the Mason-Dixon Line to 37 and some change. That trade in particular appears to be best made in the 40-37 trading range.

Green shoots? I don't buy it. Amusement park attendance is down... way down. Some of the shops at Dollywood in Eastern Tennessee have even gone as for as sending workers home because they are so slow. Consumers are becoming fearful too of gasoline that is nearing the $3.00 per gallon national average.

The grilling that Ken Lewis (pronounced Loo-eth)took on Capitol Hill was only secondary to another drubbing Treasury took from the House Financial Services Committee. While I am schocked that Barney Frank is still allowed to handle the gavel at those meetings, equally concerning is Congress' lack of direction and lack of cohesion. But I am reminded that our great nation was founded on the basic principle of compromise... A footnote, BAC's stock moved above 12.00 this week, and appears poised to make another step to the upside... You can "bank"that Wall Street will accept whatever revisions in in over-sight, derivative trading, and accounting. LOn second thought, let's nix accounting standards. Maybe these new rules will be worth another 1,000 points to the upside.


In this blog, I have found an outlet which has allowed me to place reason and logic to a world that in many ways is senseless. As of late, many things just don't add up politically or economically. But I am still convinced that we live in the greatest country in the world.

Tribe Talk

Fausto Carmona and Jake Westbrook should be back in the big leagues within two weeks. This will add valuable arms to a beleaguered pitching staff. Yet as the cliche often goes, if it is not one thing it is another. Today, our bats took the day off giving St. Louis a game that should have invariably ended in another Tribe victory. Haffner is outright irritating, and Martinez should not be expected to carry the team. It is nice to see the bat of Choo come alive as well.

Grande Tirino
I would rate this movie two thumbs up. Clint Eastwood plays a crotchy old Archie Bunker type on steroids. The destruction of an old neighborhood, generational strife, and a basic human decency that we either share or do not share for one another. And it is this human decency that separates us from the other animals on this planet.

Friday, June 5, 2009

He's Baaaaack... The Golden Boy... Conventional Wisdom... Market Watch...

He's Back...First and foremost, I would like to apologize to my readers for not updating the site since May 22nd. As fate would have it, my computer came down with a case of the Swine Flu... While it was not fatal, the flue did cause a severe disruption in the ability to function properly. It is good to know people who are good at computer stuff. A special thanks to Yorg, who had the right perscription for the ailment...

The Golden Boy...
I like Barack... and when I was in Washington last week, I could not help but think that this country will eventually recover. This is not to say that there are not more than a few bumps in the road ahead... (These are acknowledged by the President himself) But, Barack seems to have an uncanny aire about him that clearly separates him from many of his predecessors. Unlike W. Bush, Barack has a vision for the future and more importantly an aura of confidence that clearly suggests that better days are ahead. Time and time again it appears that our nation has been blessed by a sense of "right person" at the "right time". I do not buy into the fact that the media favors Obama. However, I believe that Obama has almost a sixth sense about him when dealing with the media. Matter of fact... like it or not... Obama is able to clearly articulate a future beyond the current crisis... I was able to see a more human side of the President as he and his daughters walked their dog at the White House. While many disagree with the way that the Administration has handled TARP, TALF, Chrysler, GM, and a plethera of visions for America's future, one thing is for certain, Obama has the political capital, and he is spending it wisely. I would like to remind readers that Bush was in a similar situation early in his administration, immediately after 911.

Conventional Wisdom...
Recently, Nouriel Roubini cited an article by Edward Harrison who gave cause for the recent market run-up. On almost a continual basis the market has escaped the jaws of death on almost a daily basis. Information that is bad is often times leaked early. Or better yet, there is other good news that trumps the bad. Even though the good news is based on a "not as bad as expected" scenario, one is only left to believe that a high degree of market manipulation is taking place. It is almost as if the PPT (Plunge Protection Team) is reading from a closely orchestrated script. I'll be curious if the market rallys on 9% employment...

Edwards cites a "Short-Covering Rally" as another potential explanation for the market. While many shorts have jumped from one week tot he next... and now one month to the next... the destruction of short positions are taking away the negative ebb of teh market tide, and more importantly adding momentum to the upside where there is little to no credence for an upside swing.

Last, Edwards made reference to a Paul Kudrosky interview which considered the current market rally as the new beginnings of a bull market. While the current rally is based on a late 2009/early 2010 recovery, even Kudrosky does not totaly buy in to it. Kudrosky acknowledges the bulls current hold on the market. However, he reasserts the systemic risk to the downside. "How much longer can central banks prop up the market?"

Market Watch
For me, I will have to pound my chest over the small victories I have gainned in the face of bull market onslaught. I have built a cash position, and licked a few wounds. In other cases, I have simply let some of my options roll...especially those with longer x dates. Trust me, I would much rather be betting on a Dow 20,000 scenario... I just don't buy it now... at least not yet...

SLV, D, and NEOP have been winners for me.

I will look to capilatize on a recent market run-up on those stocks which depend on consumer discretionary.