Wednesday, June 30, 2010

Remember when a house was a shelter?

As part of our move away from Western Financialism we must undertake skeptical review of widely held beliefs, and thoroughly debunk and debase false fiscal sentiments held by unsophisticated people that we may buttress the foundations of our capitalist system.

I briefly alluded to this idea here:
If secondary schools made the effort to blend focus on life skills like personal finance (balancing checkbooks, credit card interest policy, how mortgages work) with esoterics like higher order mathematics I submit that we would be empowering a generation of doers capable of anything and structurally buttressing the future economy.
From the time of the cavemen until some point in the last few decades a house was nothing more than a shelter from the elements.  Having a properly sized shelter meant that precious daylight hours could be optimized between hunting, trading, trekking, and searching for firewood.  If a shelter was on a north facing hill in Montana during November, that firewood search became a lot more important than hunting.  Likewise, having a well constructed, efficient house (square footage, insulating properties, etc.) today means diverting climate conditioning and cost to own per square foot dollars to more important fiscal needs.

I never figured out why companies got into pushing 401k programs so hard, but speculate that the management companies give fee kickbacks to upper management.  Did you know that it's allowable to own property in tax deferred accounts?  Bet you never heard "corporate" telling you to pick up a rent house on the cheap, finance it for 4% in a tax deferred account and let renters pay your asset off, did you?  The managers want you indexed by risk profile so they can run you and your money down the sluice, dropping your fees in their pockets along the way, no matter how poorly they do over time.

Invest in yourself.  Invest in your future.  We need to encourage fiscal stability.  Cut up the credit cards, get a house that meets your needs, and start paying that fucker down.  In this way one is not tied to the stock market or the economic idiocy forced upon him by politicians with no concept of a real world future without a government pension.  It doesn't matter if every bank in the country implodes, if one or both jobs are lost, or if gold becomes the only currency by which to conduct trade, the value of a home comes from the knowledge that the owner will always have a place to keep his tailfeathers out of the rain.  Assessing sheltering value simply, as the delta between present and future selling price is near-sighted, greedy, and stupid.

Besides, after fees, even with matching, should an unsophisticated investor expect to realize more than 6% compounding returns in a Kmart brand 401k program?

Notes from the Minervini Webcast

Twitterer @MarkMinervini, his blog site here, did a free webcast last evening last evening in Q&A fashion, with listener questions randomly selected by one of his sidekicks.  Below, find a bulleted list transcript of my notes in the same random order.

Disclaimer.  Since the webcast was free, and since he went out of his way to invite everyone on Twitter at least half a dozen times, I feel like Mr. Minervini would not mind me writing this with the sole intent of passing along information.  He currently sells a trading class and alluded to an upcoming book.  I have nothing to do with either of those, and none of the things he talked about last night seemed proprietary.  Indeed, much of that discussed should be known already, but he's quite succinct, and the consolidation of genuinely passed, truthful information made this webcast particularly golden.  Finally, the list below is a typed copy of my handwritten notes from an 80 minute long conference call.  The sentiments conveyed may or may not be what Mr. Minervini was trying to communicate.  These notes are answers to questions that did not get written down due to the pace of the call.  Any application of context is solely the responsibility of the reader.

  • generally, relative volume is an especially important indicator on small to mid-cap stocks because they are less affected by HFT -
  • for pilot trades (think weather balloon or windsock) start with a quarter to half position size -
  • look for accumulation on the major averages -
  • the second wave of pilots is when you expect follow through before ratcheting up [position sizing, leverage] -
  • the most favorable stock/entry point will have technicals, fundamentals, and market tone aligned -
  • keep a pulse on sentiment - question widespread agreement -
  • STICK WITH YOUR STRATEGY - know it inside and out - know the strengths and drawbacks -
  • erratic price action right of a base is indicative of distribution -
  • generally would buy within 25% of a 52 week high, not much more pull back acceptable because the trend could be broken -
  • mainly buys in the direction of a trade - (ie - adds to longs on breakouts and upticks) -
  • buy leadership and buy in order of breakout -
  • it's the sign of a professional to be emotionally detached - some of the best trades have come after getting stopped out 3 or 4 times -
  • not losing, not making big mistakes, consistency are the most important aspects for beginners to focus on -
  • keep a tight reign on risk - a good stock will give you several opportunities to get in - wait for the lowest risk entries -
  • BUY IN ORDER OF BREAKOUT (this was mentioned several times - i starred and bolded this in my notes to add emphasis because it seems like a key tenet of his strategy)
  • get over large losses by accepting small losses -
  • sell when risk outweighs reward -
  • looks for stocks in a long term uptrend and then medium to long term consolidation -
  • non-negotiable stock screening criteria:  long term technical action, tight base, volatility depression - referenced a mental reward-to-aggravation ratio vis a vis volatility -
  • buy with the trend -
  • generally, strong volume on the up days and low volume on the pull backs are what you want to see -
  • generally, he avoids gap trades because they are not a part of his core competency - he reinforced that you need stick to what works and not jump strategies all the time - if you play gaps and they work for you, roll with it - otherwise find your core competency and exploit it relentlessly -
  • stocks are his broad market indicator - if there are a lot of stock setups developing or in play it indicates to him a healthy market ahead -
  • novice shortfalls:  overtrading, not sticking to one functional strategy - success in this game takes time and discipline -
  • first assessment before entering a position:  "how much can i lose?" - advocates using stops - by choosing high probability entries, can keep losses in the mid-single digit range -
  • there is no money to be made in predicting trends (broad market, political, economic landscape, etc.) -
  • "i buy stocks that setup, and if it isn't what i want, i don't buy it" -
  • respect risk -
  • you have to sacrifice other things to focus on one thing - emphasized distinction between traders and investors -
  • predictions make less flexible traders -
  • the forces behind stock trading haven't changed [supply and demand] even though cost of a trade and speed has changed -
  • "i don't want to hear or read anyone else's opinions" - emphasized honoring his strategies and methods, not allowing his judgement to be clouded or questioned due to the success patterns and back testing -
  • trading skill is more important than the stocks - discussed a strong trader would likely do better with mediocre stocks than a mediocre trader with strong stocks because the strong trader is adaptable and disciplined -
  • preference to limit position exposure to 25% -
  • prefers to trade small companies because that's where the pricing inefficiencies are greatest -
  • mid single digit losses are pretty much all that is acceptable - think about a strategy having a success distribution - limiting losses while maximizing gains extracts the most value from the strategy -
  • using new highs and new lows profiles -
  • uses screeners for technical action, then uses technical, quantitative, fundamental analysis to further limit this list of potential trades - usually keeps 8 or 10 on watch and emphasized buying the breakout - must honor the system and not let ego, or love for a name preclude you from making money -

Tuesday, June 29, 2010

Quick and Dirty Market TA for 6.29.2010

Last time I did one of these, here, I speculated that we were in for a long consolidation period with 9800 as a basing area.  Since then things have more or less gone as planned, but dude, things are happening much faster than expected.  As such, I have been all over the fucking map on my trade executions.

Exorcising the past.  After making calls in CSE, STI, RCL, CSTR over the past four weeks, I have left tons of money on the table by not picking good spots on the in or out and by organically scaling like a ham-fisted cunt.  Also, by trading in the middle of the range, and breaking my own options trading rules, I managed to lose some money in GS options when the underlying performed over 6% due to decay and overnight futures jamming.  If all that weren't awesome enough, China returned some Western Financialist fuckery courtesy of UTA placing shares the very same night that I put a late afternoon trade on hoping to get some pin action from CTRP.  I have been burned by the Chinamen twice now, the first one in 2008 for a healthy sum, this time, not as much, but healthy enough to maintain a prolonged bitterness.  The distance to China is too great to overcome the greed inherent in human enterprise.  Fuck China.  Respect China, but fuck China.  And just yesterday I had a gem of a gem in DYN, as one of my trustiest patterns failed me for 5% due to an overnight sell off precipitated by ... when you figure that out, let me know.  As such, I have been mostly cash for the past couple of weeks aside from these and other strings of short term train wrecks interspersed with actionable genius.  

I await clarity before longing to hold.

Two distinct possibilities.  The first would be a continued horizontal consolidation period, taking many quarters, at least four to six.  If this be the case trading ranges are presently set.  Count on defensive dividends but range trading should be good enough to make benchmarks.

However, as discussed here, I have been fighting a growing sentiment that is very, very bearish.  Based mostly on indicators that cannot be charted, such as a mix of analyst sentiment fades, trusted bloggers, corporate patterns of behavior, and things like that, the best way to describe the basis for this sentiment would be like "tape reading" the real world.  The immediacy of time frame and inadequacy at planning by corporate leadership never fails to impress.  After accurately predicting that COF would release a bunch of reserves during the first quarter of 2010 and indicating at the time that it was a stupid fucking move, while also criticizing HD for raising their dividend, this sentiment must be trusted, but vetted thoroughly.  If this scenario shall come into play look for a close in the low 9700's and anything in the 9600's to spark implosion.  At that point nothing would be safe.

Post script.  As an indicator of just how bearish a sentiment your humble correspondent combats, know that for the past week I have been constructing a device capable of distilling water 5 gallons at a time operating only on solar power.

Good luck.

Debt Crisis: A summary.

Found the snippet below in the comment section on the Economist website, here, and for my money, it doesn't get much more succinct than this.  Also consider that the words "retiring population" could be substituted for many other counter parties:  municipal debt holders, union pensions, government employees, to name a few.  Also, to make the sentiment a bit more poignant, may I point out that "their own governments" should actually read, "their own tax pool."  In this way you can see that those who can't pay are actually the Worker times two.  Doesn't make the welfare pig look very good when painted in that light, huh?  Make sure to take a minute to read the underlying article, too.

Monday, June 28, 2010

The Theory of Modularity

Fractals.  The Golden Ratio.  Fibonacci Sequences.  Phi.  Each a mathematical trick composed on paper, each found in nature.

The Theory of Modularity.  After enough time and case evidence there came a point around 2004 where I realized that every experience, every idea, everything tangible and imagined exists as a module of something greater.  Also, similar modules can be interchanged, copied, and resized.  Like a scrap of paper torn from a sheet, that came from a ream, shipped in a box, and composed of pulp, formulated by atoms, built of yet smaller particles, all that exists can be contemplated as parts of a system boundless by size, yet universally applicable.

Never waste a thought.  It will be useful, though the application may not be understood today.

For your consideration:  Every Black Hole Contains a Universe?

The Frailty of Reason

reason (noun) - a rational motive for a belief or action

An anecdote.  Last week a person aged a hard 35 years to possibly 55 years old, who I did not recognize, rode their bike up the opposite sidewalk and came to a stop in front of my neighbor's house.  The aforementioned party disembarked, leaving the bike on the grass immediately adjacent to the sidewalk and proceeded toward the front door.  Knowing the people who reside in the house, and the relativity of their friends (ages, clothing styles, hours of interaction, etc.), this situation already had four red flags and he hadn't quite reached the porch yet.  As soon as this stranger mounted the steps he reached for the handle and turned it.  At this point I am 100% confident that if the door opens, ill-intent will be brought upon my neighbors.  They were home and likely did not see the situation unfolding.  Note:  I had no access to 911 at the time.

Personal Reason.  Given the above statements and the degree of potential danger, I felt and continue to feel that in an unencumbered situation I should have applied overwhelming force not only to stem this encounter, but also to prevent him from possibly carrying out a similar action against someone else.

Real Reason.  The real reason that I waited for him to be rebuffed by the locked door and ride off is because I understand the fiscal, legal, and opportunity cost ramifications that such an encounter potentially includes.

Were I to have known the sheriff and judge in this town, personal reason would probably have been enough to allay the risks associated with how the interpretation of legal words, crafted by individuals years ago and whom likely never contemplated such a situation, could affect my future.

At this point I am struggling to communicate the payoff in this story, and that goes to the heart of the matter of the American effort to legislate right and wrong using finite language.  It also indicates the weakness in our systems for relationships to supersede intent, and therefore, the metamorphosis of reason into irrationality.

Instead of scrapping this post fragment with no punchline, I will leave it up and hopefully revisit the topic later with better clarity ... perhaps after a martini or three this evening.

Wednesday, June 23, 2010

One lonely sector worth owning.

If I had to pick a sector to long right now it would be big pharma for the dividends, and small pharma with catalysts for the return.  Cash on the balance sheet and other buzzwords always fit the bill and now that los petroleos own the litigious spot light, any bad news should be kept off the front pages for a while.

There does exist one concern, though, about this baby Tylenol issue that JNJ has been facing.  Word is that that little problem could turn into a big one swiftly.  Definitely worth keeping an ear to the rails there.

Lately, the sector has seen some strength, but widespread deployment into fox holes doesn't appear to have occurred just yet.

Sidebar:  Buttercup and I shall be visiting the Emerald Isle for a couple weeks this fall.  Neither of us have been before so we'd love suggestions for places to visit, pub musts, or any other kind of "I can't believe you went there and didn't go to..." spots.  We enjoy mixing it up with the locals, as opposed to bus tours and spas, but a B&B most definitely won't be out of the question.  Please hit me on twitter or at if you have a recommendation for such quality to-do's.  Thank you kindly.

Freeform Ruminations

Having felt a decent clarity over recent history, I am now confronted with the feeling that my sense of market orientation is in some form of perpetual swirly.  Ongoing issues as listed below suck the life out of my will to deploy capital long, while the idea that somehow we always pull through completes the leg sweep.
  • Coming elections;
  • Unfunded pensions;
  • Precious metals strength;
  • Efficacy of financial reforms;
  • Uncertainty re: healthcare reforms;
  • Questionable international FX policy;
  • Sovereign political rifts (USA vs. et al);
  • Increasing potential for state bail-outs;
  • Ongoing trend of political ineptitude;
  • Potential strengthening of unions;
  • Swelling food stamps rolls;
  • Rising consumer credit;
  • Increasing tax rates;
  • Weakening jobs;
  • Insider sales.
A blogger and twitterer I follow, @ReformedBroker, wrote a piece today, here, indicating that perhaps a horizontal market with specific winners and losers would be the path of maximum frustration and thusly, the most likely route in the coming term.  In the past I also subscribed to that theory, here and here.  Today, though, I face a great sense of uncertainty because the past weeks have brought me to question the seemingly slim possibility of a new broad market take down.  Our system of Western Financialism now faces increasing skepticism, both from within and outside the confines of our oceanic borders, as referenced here, and no stock would be immune from a coordinated attack on the infrastructure of our economy.

If the US markets have re-entered consolidation with the 9800 level (or a moderately up-sloping trend) as support, the futures jammers will have relinquished control to stock pickers.  Alternatively, should the above concerns wash over the markets like the endlessly rising tides of an incoming tsunami no stock of quality or speculative nature would be safe.  Hints at the rising number and price points of VIX bets surely cannot be discounted, but of course, we can never know they whys.

It occurs to me that between bubbles and busts, tax credits, refinancings, and all other manner of subsidies meant to enhance belief in this broken model, the American people have been run down a sluice dropping their wealth on the way.  How many times can the tailings be reprocessed before nothing's left?  The morals and morale yet erode daily, beginning at the top with government and corporate leadership thrust onto the platform of media coverage, only to disappoint with a heart breaking constance.  These numerous examples serve to explain away unsavory behavior by a growing populace of amoral scumbags.  A race to the bottom.

We can never forget to be at our best when no one is watching.  It is the only way to reclaim spirit from the tailings these past decades have saddled the country with.  It is our best chance of reaching that "somehow we always pull through."

Tuesday, June 22, 2010

Bad, Bad Idea: Making Enemies of Friends

As previously discussed here, here, here, and here, disenfranchising allies, whether long-standing or potential, for local political aspiration stinks of desperation, lack of fortitude, and ultimately, questionable confidence in the ability to judge between right and wrong.  President Obama and his band of gypsies, particularly the tax-allergic Timothy Geithner, have set a course of alienating virtually every major trading partner from China to Britain to Germany and even sovereigns with whom we don't trade, but need for stability, a la Iran.

Zerohedge opined from a Bloomberg article that I missed about Merkel openly mocking America's Keynesian policies here.  All of this perception matters a great deal, and the pick up in news coverage serves as our harbinger that the situation should come to a head in a nearer time frame than widely thought.  If the enemy of my enemy is my friend, then my friends who became enemies are causally aligned, and in this case potentially numerous and definitely powerful.  Bad news when the parties in question are diverse, organized, and possess that which is needed.

I posited over the weekend that:

Perhaps China will not act alone in denying the dollar, but with a precision and coordination of other powers.  I remain an inflationista, and combat that notion with guns, ammo, and remote, arable land.  Sovereign gold would be the only way to stave off a combined attack on the USD.

Monday, June 21, 2010

Bearish Blog Post

Sentiment is running high, stupid shit like cruise lines and Florida regional banks are running on the supposed yuan news, and we are nigh to right shoulder resistance levels around 10600-10650 as called here.

I am looking for blowoff action in piggish stocks like the ones mentioned above (debt, industry news, deteriorating consumer credit), and today could well have been that action, but honestly, I don't think today's the day.  Tighten stops in this area and batten the hatches for the start of a pre-pre-season football shakedown which I feel could bring selling back into the recent 9800 level over the next few months.  Do not expect the take down to be as powerful as the recent counter-trend up move because institutional sellers will be looking to induce max pain in the dip buyers.

STI is a new recipient of my ire, and RCL remains a soft target, in my view.

Monday, June 14, 2010

Bond Market Jenga

As any experienced corporate leader knows, assuaging an already disinterested employee with money fails to resolve their conflict, rather, it marginalizes their concerns and effectively buys them off for a while.  Interestingly, rookie corporate leadership does not recognize this and will often times pat themselves on the back for what appears to be a problem solved.  The next year, as working conditions haven't changed, the original concerns return to the table, only this time, the leadership has lost the initiative and so the individual controls the house.  At some point, again presented with the two options:  more money, or find a new guy to stomach this horse shit, leadership finally recognizes, that the "fixes" from before were actually just patches, and something must give.

The above anecdote seems especially salient during and after reading Free Markets Show U.S. Has Tamed the Bond Vigilantes on Bloomberg.  So how did the US, in its infinite wisdom, tame the vigilantes?
While investors punish European nations from Greece to Spain for deficits by pushing up bond yields, Treasury rates of all maturities have fallen to an average of about 2 percent from 2.75 percent a year ago even as the amount of marketable debt outstanding increased 20 percent to $7.96 trillion.
The market’s advocates of fiscal discipline are being placated as Bernanke keeps benchmark interest rates at a record low, allowing them to profit from the gap between short- and long-term yields with inflation at a four-decade low. Bill Gross, the manager of the world’s biggest bond fund, said as recently as March that “bonds have seen their best days.” On June 4, he called Treasuries “attractive.”
Central banks by keeping rates near zero have basically covered the bond vigilantes in duct tape,” said Edward Yardeni, who coined the term in 1983 for investors who protest inflationary monetary or fiscal policies by selling bonds and driving up government borrowing costs.
“They have stymied them from expressing their displeasure over runaway government deficits and social welfare spending,” Yardeni said. “We are not getting any votes of protest from the bond vigilantes in the U.S. because short-term rates are so low.”
U.S. debt is forecast to about 90 percent of the economy in 2020 from 53 percent currently, according to the non-partisan Congressional Budget Office. The White House budget office projects a $1.55 trillion deficit in the year ending Sept. 30, up almost 10 percent from last year’s record.
Investors are piling into U.S. government debt, supporting President Barack Obama’s recovery efforts, because they can profit from buying longer-term government debt funded by short-term loans at lower rates in carry trades. The Fed has kept its benchmark rate for overnight loans locked in a range of zero to 0.25 percent since December 2008.
To summarize with less verbosity, the US is supporting bonds by encouraging leveraged purchasing of long term debt with free money.  They compound the underlying concerns, while buying nothing but time.  Borrowing doesn't get any cheaper unless the government paid investors to borrow money to purchase long term debt, which can only mean one thing, one day the disgruntled employee is going to come looking for that raise and the leadership has to tell them that there's no more money to give.  Then what?

Please see older blog post:  On Confidence.

Ruminations on BP

I wonder what the United States government response will be to lines of questioning regarding well-head and safety inspections, should BP end up in a trial.  We've got NYC crane inspectors, the SEC, the IRS, and now these guys from the Department of the Interior, a dubious list that doesn't paint the efficacy of public inspection in a favorable light, good thing the average salary + benefits of a public sector worker has reached record spreads against the private labor pool.

All that aside, I do not believe there exists any legal basis for the United States to litigate BP, a British company, should the worst case scenario arise, but haven't seen any good news coverage of the fact.  Part of this assumption lies in the fact that I believe Obama is attempting to try the Company in the court of public idiocy rather than keeping his cards close to the vest.

From the beginning BP came out and indicated that they would assume all costs for the remediation of the spill.  In spite of this, Obama and the hippies started saddling the company with operational demands ranging from cancelling dividends to escrowing funds, all while shutting in other GOM development, one of the sources of funds with which to pay these demands.  Yes, the tripartite base of tail-wagging-dog politics:  over-react, accuse, deny supports a pyramidal top ... disenfranchisement by hypocrisy.  We saw that disenfranchisement last week with John Napier penning a decidedly "back the fuck off" toned open letter saying what most normal free-thinkers, here and abroad, feel.  Quoted from Sky News, here (bolded text mine, for emphasis):
Dear President Obama,
Please forgive this open letter but your comments towards BP and its CEO as reported here are coming across as somewhat prejudicial and personal.
There is no doubt that BP, as a UK PLC, is totally committed to do everything possible to contain the oil leak and meet all its obligations in the USA.
The existing CEO is the best person to deliver that effort and has made that personal commitment and made himself available in the USA.
In your words, "he has taken the heat" and not hidden in his office. The real response has been total. You could argue a poor PR performance, but BP are not alone in that.
There is a sense here that these attacks are being made because BP is British.
If you compare the damage inflicted on the economies of the western world by polluted securities from the irresponsible, unchecked greed and avarice of leading USA international banks, there has not been the same personalised response in or from countries beyond the US.
Perhaps a case of double standards? Deep sea oil exploration was pushed forward as part of a USA oil security strategy as have a number of foreign policy initiatives in key areas in the world where we are standing shoulder to shoulder.
Whilst we all recognise the seriousness of the situation there is a need to put some balance back into the situation.
Many of us applauded your promise of a new approach to politics, USA foreign policy and world leadership.
Both you and the CEO of BP are caught up in the resolution of issues dealing with the emerging risks of strategies that you did not necessarily determine.
The immediate issues are very challenging but are best solved working together in a more Statesman like way.
The leak may take time to fix, and it will be, but Afghanistan and Iraq will take much longer.
We can all agree that the first and absolute priority is to stem the leak. Perhaps the second one is to ensure the reputation of the Presidency outside the USA is seen as objective, balanced, able and capable of taking the heat when under pressure.
We liked the Obama we saw at your election, can we have more of it please.
Yours sincerely,
John Napier
The one group of comments I received from a lawyer centered around CISG law.  However, England never became a participating member in CISG.  Therefore, if we don't witness more humble rhetoric from the top, I doubt that there's anything that the US can do with BP aside from seizing their local assets.  And then what, selling same to others for quarters on the dollar, and having the government assume leadership of the clean up operations?  More inefficient, ineffective government, great ... The cost to BP of America doing so may be under review anyway, but given the escalation in forcefulness from political leadership, their hand may be forced.  The risk of BP doing so poses a great systemic risk to our "recovering" economy and could force them to cozy up to other nations, further alienating us to outside countries, and reducing fuel to our "engine of growth."

I believe that the United States has already caused nations like China (yuan peg, carbon emissions), Germany (debt spending over fiscal conservatism), and mainland Europe (sovereign debt raids) to question Western Financialism and its harbor.  Hastening skepticism with loud-mouthed Cowboy Diplomacy benefits no one, and the stink of desperation hovers over news coverage in each political article published over the last four months.

Here's hoping against hope that sensibility stages some miraculous resurrection in the minds and mouths of political leadership in these trying times.  In keeping with hope, though, hedges.

Wednesday, June 9, 2010

They don't build statues of committees.

Disclaimer:  Language filter has been flipped to the off position to enhance understanding of the level of frustration felt.  I actually care about these things very deeply and can't understand why more folks don't, as well.

They don't build statues of committees because it takes balls, leadership, pathos, and caring to get anything done.  He who conquers the committee, who gets the purest, most unmolested result, and whose result meets the need finds himself a hero.  Most of the time committees mire in tedium as each individual puts forth his idea and the rest shape it to get the most of their idea into the original.  Whether or not the final product suits the original goal matters not because each compromises their morality equally for the ego stroke to say that they got something done.  I believe the Founding Fathers used committees to make impinging on liberty purposely hard, but never fully imaged what a cluster fuck of sellouts this Country could manufacture from such hard working, hard fighting stock.  I believe that rather than passing bad legislation, they thought that quality ideas would pass through on merit while stupid, agenda-centric ideas would get hung up to rot on the vine of time.

Tactical warfare, meaningless oppression and a future of alienated nuclear ambition.  How many books must be written about warlords being on the map, with definitive patterns of terrorist activity, yet allowed to continue because they do not represent a direct threat to the United States?  In Hunting the Jackal Billy Waugh talks about spending months in an over watch position of one of Bin Ladin's training camps in Khartoum during the Clinton administration.  There existed, at the time, no political willpower to take out the threat, yet somehow that willpower got found when 10 nutjobs fell through the cracks, boosting planes and going jihad on our sovereign soil.  Now read this snip from a Washington Post article, here:
TEHRAN, Feb. 5 -- Iran ended voluntary cooperation with the International Atomic Energy Agency on Sunday, saying it would start uranium enrichment and bar surprise inspections of its facilities after being reported to the U.N. Security Council over fears it is trying to develop nuclear weapons.
Make that February 5, 2006.  Let it sink in.  A little more.  That's right, 4+ goddamn years ago.  What does it take for practicality to stage a return to the world?  Can it not be agreed through some direct diplomatic channels that every country shall agree to IAEA inspections in equal part just to ensure the security of all?  If there is a threat, take the threat out.  (Read between the lines.  Yes I am aware of the implications, but have also seen the movie Swordfish, and agreed with the premise.)  Otherwise, let these people proceed with securing electricity for their God forsaken corner of the world.  Who knows, if the motherfuckers put some A/C in their homes maybe the chicks would show more skin, the dudes would hammer more poon, and they'd work out their angst over a post-coital Klondike bar.  Why does it take four years of time to elapse between an event and a response?  Committees.  What is the response?  "Sanctions."  FUCK ME.

After all this time, they've been building (with French guidance) a nuclear program without IAEA inspections and now there are sanctions coming down the pipe.  Must have been a top priority over those $200 steaks on the UN expense account, of which America funds the preponderance.  In short, we pissed off a nuclear power with extremist leanings, allowed them to continue unabated for half a decade and then punished them with sanctions.  Chalk up another victory for group-think.  FUCK ME, SQUARED.

This United States needs to get its shit together, pronto.  We no longer bear the mantle of economic preeminence.  That has been passed to China.  No matter if they experience the economic boom/bust growing pains inherent with any early stage super-power, those folks have the will, population, and tools to get it done for a long, long time.  They also own enough of our debt to make World War III with paper and the people in the trending topics on Twitter wouldn't know a thing about it until their food stamps no longer bought them $30 bags of Doritos.  China hasn't been too soiled by the ways of Western Financialism (yet) which means two things:  when they do they will be a material drain of epic proportions, and, we need to start kissing their ass, or at least try being a friend-of-a-friend with them before they realize what a huge staff of power they wield.  The early spring Carbon Emissions summit already indicates to me that they are becoming aware of their stead in this world, a dangerous position for the United States to find itself in unprepared, arrogant, and pushy.

New globalism means that clique politics must be shelved in order for harmony to reign.  Shove idiocy up the asses of the committees and do something ... or do nothing.  If the former it better be timely, functional, practical, favorable, and useful.  (As an exercise, consider those tenets against Obama's decision to shut in all GOM wells, fail to reach out for experienced advice, and pile onto the BP bashing bandwagon after they had already indicated that they would take "full responsibility" for the ramifications of the spill.  More on this in a future post.)  If the latter, thoroughly emasculate the United States government, the UN, the IAEA ... everyone, as the useless money waste that they are, and let the people return to honest living through hard work.

Good evening.

Tuesday, June 8, 2010

Getting Bulled Up

It's gotten pretty harsh out there over the last 6 weeks, but the market behaved in line with my Two Week Outlook from May 27th, here, and now some charts are starting to come around.  Last afternoon I tweeted:

About 5 minutes later the sellers pressed and boom, volume picked up nicely as bids got hit.  I have a trading rule that does not permit me to purchase options more than 15 minutes before the end of a day if using said naked option as a short-term trade (unless there is major, market moving news that is single stock-based).  Frequently, though, by tuning in early you can get a gauge on tomorrow irrespective of what the underlying stock price is doing.  I saw favorable activity last afternoon and the futures are presently shaking off a Euro-zone shanking at the hands of some comments from Fitch related to the UK's tough times ahead.

I think we could be in for a nice little run here, with my target being 10600-10650 over a period of 5 to 7 weeks.  This target locates the middle of some heavy volume candles and probably a bit of overshoot of a confluence as the 50 dma continues down-trending.

The best price action should be in names like GS and V where the price has disconnected from "reality" enough that the sitting-on-cash contingent, hungry for brand recognition, awaits the all-clear.  I continue to avoid stocks in the realm of middle class consumerism, and view yesterday's consumer credit report as a dangerous indicator that a brutal, sustained hardship for lower and middle America is here to stay.  Double-dip?  I think the possibilities are underestimated by the "pundits" whose rose-tinted opinions are picked by TV producers so as not to offend the largest segment of their audience ... The Cramer Crowd.

Tighten up the stops in short positions with large short interest, if everything goes to plan better opportunity should arise in a month or two.

I had high hopes for David Faber's lunch show "Strategy Session" but, admittedly, tuned out after about 10 minutes.  Why does CNBC have to trick everything up so much?  All those market depth indicators in the background distract from the reporting going on in the foreground, and the apprentice camera men obviously know that Obama's not going to shake anything up on the union front because they're terrible, but obviously the best there is since CNBC is "where the world turns for business."  Finally, using an overhead camera to zoom on a screen in the desk?  Is there no middle ground anymore?

Saturday, June 5, 2010

On Incentives, Creation, and a Cultural Shift

Buttercup stepped into my office a minute ago saying simply, "You know, everyone shouldn't feel like they need to go to college to make it in the world."  Can it be said any more directly?  The current administration complains bitterly that we do not produce and export enough, yet they still feel like everyone should be entitled or even required to go to college.  What if folks don't want to?  What if the opportunity cost of doing so means missing out on four unencumbered years of concentrated effort in their desired field?  Does not going to college somehow besmirch the accomplishment of their goals?  Should they feel required to accumulate debt in order to have a degree that might be useless in practicality?

This conversation reminded me of a NY Times article from late May, see full text here.  Quotes below to emphasize points that follow:
Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college ... Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt ... She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies.
The above summarizes the situation that many middle class Americans experience.  They desire to better their standing and are conditioned from an early age to believe that going to college is the only way to do so.  Forgetting for a moment that this willingness to accumulate debt goes directly to my case for the United States as an exemplar of the worst of Western Financialism, let's consider that Ms. Munna likely had no real desire to become a life-long scholar of Religious and Women's Studies.  Rather, she felt that having a diploma from a well recognized institution like NYU would somehow bring greater wealth as she pursued her desires in photography.

Propagating the myth of a college diploma as a key to success in life leads to an imbalance in the population between those who create (those who do), and those who manage.  Using the military as an analog, an individual is either commissioned or enlisted.  The structure looks like a pyramid.  There exist clear limitations on the quantities of commissioned officers versus the body of enlisted men.  Are the enlisted any less successful than their commissioned leadership?  Plenty of anecdotes exist that indicate that non-commissioned officers (NCO's) garner the respect of the rank-and-file, not because they were bestowed with a title as officers are, but because these leaders were selected as the best from the ranks, and began at the beginning just like the men and women they lead.  Whereas baby-faced commissioned officers rely on their NCO's for practical advice to counterbalance their book learning, so too do crew foremen advise young college graduates in the construction field about schedules, milestones, and frankly, what tasks simply cannot be done the way that the book-learned would plan.

Our get-rich-quick culture has come to rely on attempting to short-circuit the apprenticeship culture that sustained generations before us.  Perhaps the time has come to recognize more fully that effort and desire cannot be taught.  Our schools should not fail students who don't give a rip for literary studies if they show real interest in metal fab.  In order to make a philosophical return to the system that had worked for so long, our education system must present higher education as only one option in a sea of opportunity.  If secondary schools made the effort to blend focus on life skills like personal finance (balancing checkbooks, credit card interest policy, how mortgages work) with esoterics like higher order mathematics I submit that we would be empowering a generation of doers capable of anything and structurally buttressing the future economy.

Every child doesn't want the Nobel.  Why should we educate them as if they are a failure for not desiring one?

Stasis.  Sustainability.  Desire.  Ambition.  These tenets could drive our civilian population to new heights of local thought and physical creation.  If one thing is for certain, our economy has turned a corner now that China is soon to assume the mantle of economic preeminence.  In order to find our place in the new reality, we must allow any success to be judged as successful, not as a caveat in some feudal ruse.  Hope is the light that guides.  Let us never willfully or unknowingly squelch that light.

Chris Christie on NJ school unions.

When the main-stream media catches on to what Governor Christie is doing, every union, from sea to shining sea, within government and without, shall recognize that their (lack of) results have spoken, and that their money can no longer buy aloofness from politicians whose practicality is for sale in increments the length of each elected term.

What a great day for America!

Please watch the video with a mind for:
  • the CalPERS retirement endowment from the State of California;
  • the spread between public and private sector employment wages and benefits;
  • the Dreamliner plant being moved to South Carolina from Washington;
  • the success of Toyota at manufacturing in America;
  • begging China to lift the currency peg;
  • the GM pension scandal;
  • Grecian protests.
Yes.  The movement is alive.  Thank you, Chris Christie, for reminding us that pragmatism is not dead in the United States.  If we can crush unions, if only for their monopolistic, extortionist, politically corrupt, and morally bankrupt ways, then perhaps there still exists hope that we can return to a more stable economy.  Not until parity exists in the work pool can wage disinflation occur, and at such point the clamor to expatriate jobs may be stemmed long enough to return the economy to its historical roots as producers, inventors, farmers, and capitalists.  Hope is alive.

What is Western Financialism?

Over time in this blog I have deployed the term Western Financialism to describe an economy like the one we have in the United States. But what does that mean? To me, Western Financialism, focuses on consumer spending, particularly in the middle class, a la "middle class consumerism," over production and exporting, and to finance such spending, debt.

Western Financialism means running an economy in the least sustainable way possible, by relying on population growth, unaffected demographics (not yet indoctrinated in WF [China, India, South America, etc.]), and inflation as fuel for the continuation of growth. Maddeningly simple, and yet hyped as complexity, this kind of economy ticks not like an engine of growth, but like that of a bomb set to explode.

Western Financialism never seeks stasis, but always looks for fresh victims in order to sustain its ravenous feeding cycle. Western Financialism is a virus. Fresh off a trip to China to "encourage spending and decrease economic reliance on exports," please see older blog post here, Tim Geithner now speaks to the G20. While the Europeans seek to control their budget deficits in light of the current meltdowns of their member nations, Mr. Geithner, the current mouthpiece for economic recklessness has this to say:
"Stronger domestic demand growth in Japan and in the European surplus countries is needed," Geithner said at a separate press briefing in Busan. Spending in both areas is “relatively weak,” he said.
What is the European sentiment against which such a retort was drawn? (both above and below quoted from Bloomberg article, here)
While Geithner echoed the view that fiscal consolidation is needed, he said it should be done over the “medium term.” European officials said today that budget tightening needs to come next year, and German Chancellor Angela Merkel said that growth can’t come at the price of high state budget deficits.
So in keeping with his policy of fighting fire with fire, debt and spending against a backdrop of wealth destruction brought about by debt and spending, Geithner pledges his mind and diplomatic sway toward the ruination of others for the benefit of ... who?  Politics and economics are inexorably linked.  For this reason no man or woman has the balls to stand against this hypocricy and self-start a sort of economic Middle-ages where the tumult of times past are digested before an economic Renaissance could be born. For shame.

A dude I follow on twitter, @Dasan, wrote a book report, here, on The Big Short by Michael Lewis. He (Dasan) selected a few favorite quotes from the novel.  A bit out of context, but give this quote, my favorite, a try:
After a meeting with Ken Lewis, CEO of Bank of America: “I was sitting there listening to him. I had an epiphany.  I said to myself, Oh my God, he’s dumb!  A light bulb went off.  The guy running one of the biggest banks in the world is dumb!”
When will that day come for the nations who listen, and are coerced into agreeing with, the complete economic nonsense bandied about by these politician-economists who fail to make tough economic decisions at home? Maybe that day has already come?

I wonder what America will look like as a 2nd World country. I think I will find out before my time passes.

Friday, June 4, 2010

Notes to El Presidente (2)

Here we are again, getting all grumpy and hot under the collar, and then writing to the White House. Who even knows if anyone over there reads these things, but President Obama put the website up and so I write. If you want to write to President Obama, and I encourage you to do so, click here.

Tonight's letter as follows:
President Obama -
If Greece and California aren't education enough, then perhaps your advisors are not advising you properly about how labor unions are ruining this country.
As you know being president means making untenable decisions.
I resent your policy of going to China, and particularly of letting partisanship become involved in threatening the new economic world leader, and indeed, our sole source financier (Treasury excepted) with "currency manipulator" prior to making tough decisions at home.
It is past time to call labor onto the carpet and let the free market determine what fair wages are.
It is not the government's job to retire people who worked 9-5 at 55 years old with life long pensions.
Neither is it a corporate responsibility to do the same. With the today's job report, Greece, CalPERS, the auto industry and so many other examples of how the extortionist policies of labor have injured their parent companies and economies why is it that you continue to pretend like nothing is wrong?
The Lord helps those who help themselves. Let not the government act in ways that individuals should not, namely, going overseas acting tough before fixing the problems at home.
To let partisanship stand in the way of conversation and change relegates you, as others before you, to being a marionette for the money that supported your campaign.
Have a good weekend.

Tuesday, June 1, 2010

Corporate Webites: Spend the Money

Let it be said right now that any company whose website looks like shit, doesn't work properly, or is out of date makes me grumpy.  How can you justify a hundred million plus dollar market cap and not spend five grand on a slick website?

A company's website is its primary marketing tool.  It does not sleep, it never bitches about its wife, and you always know what it's going to say to your prospective clients and equity partners.  Would you want some fat schlub in your employ going into a board room unprepared, unshaven, and with busted shoes?  If you wouldn't have that circumstance talking your shop then understand that your corporate website will normally be the first "face" people look at when beginning to explore a potential relationship.

To any apologists who say that it's more important to perform than to pay attention to something as simple as a website I salute you ... most of the time right after summarily executing the idea of investing in the company.

Minimum Requiements:
  • Surfable, normally with tabs or an index pane;
  • Description of how you make money;
  • Corporate Structure, diagrams are ideal;
  • Share/Debt Structure,
    • Authorized, outstanding, preferreds,
    • Maturities, quick debrief of terms (esp. if convertible);
  • Thorough descriptions of principals and board members;
  • Name of IR point of contact;
  • Full index of past PR's;
  • Link (minimum) to SEC website for filings, Index preferred.
It's hard enough to find and maintain interest in speculative stocks.  Why waste opportunity, or worse yet, sully your image without uttering a word?