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.