The Finer Living Segment (1)

As I sit here enjoying a vodka martini mixed Trocktini Style, I recount all past entries into The Finer Living Segment, including:

• .270 WSM ammo;
• Monopolowa Vodka;
• Vizio Razor products;
• ErgoHuman ME7ERG.

If you love yourself, and if you have earned it, please take care to enjoy the finer things in life.

Trocktini Recipe

• 1 ea. low ball tumbler;
• 6 ea. full sized ice cubes (or equivalent volume of ice);
• Monopolowa Vodka to cover ice (ice should barely float);
• 1 tbsp. Manzanilla olive juice;
• 4-6 ea. Manzanilla (bar olives) with pimentos;
• 1-2 ea. drops Martini & Rossi dry vermouth.
• Directions:  Place each ingredient, in order, directly into tumbler and swirl upon final addition, using wrist-action.  For best results, let rest for one to two minutes to let ice melt balance flavoring.  Swill at leisure, and at length.

Disclosure.  All credit for the Trocktini goes to the one and only Trock.  The Trocktini does not recognize any other than Monopolowa Vodka.  Any substitutes to the recipe cannot be guaranteed for tastiness.

Bulletin Board Skepticism

For anyone that doesn't know by now, I came up through the Bulletin Boards.  Most folks with a formal education and dedicated careers, and trading with an ethical bent, avoid the OTCBB and Pinks with the kind of physiological aversion developed by girls after spending months on the school yard hearing ghost stories.

Everything you hear about these exchanges are true.  They are the wild west, they are illiquid, they are scummy, and they are scammy.  These exchanges are also exceedingly honest.  If you're looking at a stock and it stinks, you're going to go broke holding too long.  If you're looking at a stock and it seems too good to be true, it is.  Effectually, these exchanges contain the unfiltered truth behind every stock seen around us, because the leadership most likely hasn't been indoctrinated into the Wall Street culture, and therefore, infrequently understands how to maintain a ruse longer than a couple of capital raises.

Trading over-the-counter sharpens what should be an already innate skepticism toward the world for people who deploy their own money.

If I could prove that someone sponsored Monsanto's recent multi-million dollar insider buys then I'd be able to short without regard for price action, however, that's simply not the case.  On the other hand, one has to make sense of the information given.  Namely:

1. Management has been completely caught off guard by the patent expiration of RoundUp;
2. The tone of the most recent conference call sounded confused, and uncertain;
3. The company remains heavily involved in anti-trust and patent litigations;
4. The company has committed to buying back shares.

Those are some big cannon balls to dodge if one's going to buy shares.  Item 1 goes to the case of single minded, institutionalized, management.  Item 2 is purely a developed sense that I trust.  Item 3 never looks good for future price action based on unreasonable expectation of stability.  And Item 4 never happens except with the express purpose of trying to arrest share price declines, assuage analysts and large institutional holders, and/or goose CNBC into giving some Kramer Koverage.

You can't put all your faith into balance sheets anymore, the convolution of rules has made it next to impossible to stay ahead of all the ways to find the fraud they hide.  On top of that, the government passed legislation all but requiring banks to irresponsibly under-state the loss risks they face.

This short post isn't meant to bag on MON in particular, there are plenty of other righteously overpriced doo doo equities out there (STI, RCL, COF ...).  No, I would like to emphasize that folks should look past the ties, slick hair, SAT words, and seemingly good news in order to locate logic, knowing for certain that corporate executives care about one person alone, themselves.

Good luck.

Disclosure.  I passionately dislike all stocks mentioned in this article, but own none of them long or short as of the time of this writing.  I have traded them all short at various times over the past 3 months with varying success, and will likely continue to do so.

Editorial: Missing the Point

Mortimer B. Zuckerman (does anyone know or care who that is?) became the latest corporate scumbag to ascend the media soap box yesterday in an Op-Ed piece entitled Obama Is Barely Treading Water.  Who doesn't derive great joy from bourgeois pontifications about serfdom sentiment, right?  But after Mr. Zuckerman states obvious point after obvious point and statistical "fact" after statistical fact with no punchline at all, one is left to wonder his angle?  Below, a sampling:

A year and a half ago Obama was walking on water. Today he is barely treading water. Then, his soaring rhetoric enraptured the nation. Today, his speeches cannot lift him past a 45 percent approval rating.

There is a widespread feeling that the government doesn't work, that it is incapable of solving America's problems...They are outraged and feel that the system is not a level playing field, but is tilted against them. The millions of unemployed feel abandoned by the president, by the Democratic Congress, and by the Republicans.

The American people wanted change, and who could blame them? But now there is no change they can believe in.

The fundamental problem is starkly simple: jobs and the deepening fear among the public that the American dream is vanishing before their eyes...Some 6.8 million people have been unemployed in the last year for six months or longer. Their valuable skills are at risk, affecting their economic productivity for years to come. Add to this despairing army the large number of those only partially employed and those who have given up their search for work, and we have cumulative totals in the tens of millions.

Millions cannot make minimum payments on their credit cards, or are in default or foreclosure on their mortgages, or are on food stamps. Well over 100,000 people file for bankruptcy every month.

Some 25 million jobless or underemployed people now wish to work full time, but few companies are ready to hire. No speech is going to change that.

The promise of economic health that might salvage industries and jobs, and provide a safety net, has proved illusory. The support for cutting spending and cutting the deficit reflects in part the fact that the American public feels the Obama-Congress spending program has not worked.

Apparently, Mortimer's unfamiliar with the common corporate party line that one should not complain unless one has suggestions on how to fix it.  Had Mort embraced the notion of our crumbling structure based on Western Financialism, made a few salient suggestions, or even plead a cause it may have been excusable for an elitist purveyor of "Class A Properties" (from Boston Properties' website) to appeal to the masses in the manner undertaken, yet he did none.  For the above reasons this writer must believe that the piece was constructed solely for the purpose of snuggling up to the incoming Republican Congress with hopes of getting into the negotiations on how commercial real estate can be saved.

Populism for profit, nothing more.

Should Gold be Compared to the Indicies?

The following musings relate to James Altucher's WSJ blog post from today, Why Gold is the Worst Investment Right Now.

First, and most importantly, I respect James Altucher's opinions even if not always agreeing with them.  He has made some incredible calls over the past 18 months, not the least of which was identifying Genworth as a potential 20 bagger when it traded for a dollar and some change.  However, I do not believe one can accurately compare a single asset like gold to the Dow, an index of companies regularly rebalanced in order to insure that the quality of the underlying meet the standards of the name.  As long as there is money in the game the Dow performs as a self-fulfilling response to belief in the confidence that underpins the equity markets, and indeed, our entire economy.  Further, forecasting from historical performance analysis inherently reduces the bleakest outlier risk metric to zero since there came no events large enough to completely wreck the system.  If gold were only a rock, an asset naked of inherent value, it would have held, or decreased in time adjusted pricing over the quoted periods.

In the past I have described my sentiments toward gold as "insurance against the insurance."  You can buy stocks or bonds, and you can buy CDS or option strategies against them for protection, but what happens during a world-wide strike against confidence in the buying power of paper currency?

We, he and I, can agree that gold seems silly when compared to arable land, survival skills, or well preserved food in the above instance, however, if philosophizing about end-times I charge that one should consider the operant conditioning associated with trading in currency, rather than straight-up barter.

To James gold may be the worst investment right now, but I speculate that the pace of information flow correlates to the speed at which civilizations rise and fall.  With fiber-optic cables we now move information worldwide at the speed of light, where in 1972, radio waves over concentrated areas were the first source of news.  According to my own logic then, outlier risk is actually increasing while Mr. Altucher makes the case against the metal.

If given the choice between a wholly owned house and hunting skills, or four-score bars, give me the former, but let me know who took the bullion ... just in case.

A Bit of Fatherly Advice

Dad and I maintained a "business relationship" throughout childhood.  A sort of pseudo-boss whose tutelage centered around an affinity for parsing action with skepticism, and perpetual armchair quarterbacking.  He inspired detailed cause/effect analysis and successfully passed forward a none too subtle disdain for group think.  We used to joke a bit, but there never came a time when our roles got confused ... until the day he dropped me off at college.

We took separate vehicles and caravaned.  Just the two of us.  For four hours I now like to think that the road over which our trucks passed were the first miles traveled under banner of a more complex relationship.  Having arrived, a sort of stoicism strained our two emotions, both knowing that nothing would be the same.  Dad's home would no longer be my home.  A First Mate had taken command of his own vessel armed with the practical knowledge that only a salty old sea farer could teach.  Yes, the training wheels were coming off.

We labored to carry everything up stairs, and ate a late lunch heavily steeped in bilateral feelings of uncertainty, and of change.  After moving everything into the room, Dad and I scoured the vehicles for any forgotten items, audibly rehashing a checklist of essentials:  computer, towels, cellphone, wallet.  Just a few more minutes to spend together, each second cementing the gravity of our mutual milestone.

I remember the spot where Dad shook my hand and passed into one of those handshake slash one-armed hugs that two dudes do so as not to be too emotionally showy.  Then he put a hand on the outside of each arm, just below the shoulder, and looked me square in the eyes.  After a brief pause meant to re-engage my role as concentrating pupil, he stated, 

Before you go off and do something stupid, always make sure to check out her mom.  She'll end up looking and acting just like her in the end.

I laughed a deep, hearty laugh as the weight of the day's emotional taxation briefly lifted.  He smiled and then did something he had never done before, resting a right paw open and to the side of my neck.  Another deep stare.

You're ready.

Challenge your kids, cherish your kids.  Show them the bedrock.

Market Psychology Diagrams by Nigam Arora

While organizing some desktop files just now, I came across two screen caps from Nigam Arora's website, The Arora Report, detailing his perception of the five phases of market psychology on the long and short sides.  Nigam is a sometimes Twitterer using the handle @TheAroraReport, but when he posts his moves, it's worth the time to take have a look.

Disclosure.  Through the above linked website Mr. Arora sells services, none of which I have used, nor is this post intended to promulgate the efficacy or quality of his products.  It's all about the pretty pictures, baby.

Operational Cash Flow per Share

Twitterer @smallcapanalyst came through with another nice read, here.  The piece linked indicates how operational cash flow per share can give a more accurate read on the health of a company than the typical earnings per share reported.

As a barometer of a company's health, OPS is more reliable than earnings per share (EPS), which can be too easily massaged, the brothers contend. A company either has cash or it doesn't. And, as Dartmouth business professor Rajesh Aggarwal notes, operational cash flow "does make adjustments for things like depreciation and amortization, and it takes into account changes in working capital."

Specifically, the gentlemen interviewed in the article, David and Mark Markowski, use the metric to try to predict the early stages of company-specific inflection points.

...a particular anomaly: negative OPS despite a company's reporting of "record" positive earnings. The phenomenon, which Mike Markowski calls "the EPS syndrome," often is the "first indicator that a company may be in trouble," David says.

Make sure to check the article, and if you're not following @smallcapanalyst already, do so without delay.