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.