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Today’s Blog  Happy Anniversary   February 22, 2008 (posted 9:00 AM, updated 4:10 PM)

I may as well be the one to bring it up. I doubt that anyone else has been keeping track, except perhaps for my wife, who consistently wonders what moronic drivel I’m working on.

Now, its been about 1,100 typed pages later, which, coincidentally, seems to be the typical intra-day swing in the Dow, as well.

However, since I use short paragraphs, that 1,100 pages may be the equivalent of about a 10 page typed report.

Double spaced and with wide margins.

Since the clock is ticking on my www.tombclock.com customized prediction, I suppose that today is as good a day of reckoning as you can get.

Besides, weather notwithstanding, I’ve got lots of errands on my “To Do List”, so I may not be as glued to the screen as I would have liked”.

For the early readers, you may remember that we actually kept a daily scorecard of the day’s performance, comparing the outcomes f the Szelhamos Portfolios compared to the professionally managed ones.

After about 6 months, I got tired of doing the math each day.

There was also a chart that followed the “2 week performance” of every stock or option that I mentioned. But as there were getting to be fewer good buying opportunities, I found that my predominant trading was in covered options, sometimes with holding periods of less than 2 days, much less 2 weeks.

All of that call options writing was just a sign of decreasing optimism about the direction of the markets. After all you don’t take out an insurance policy because you’re certain that you’ll live forever.

Besides, that was extra work, too, and I really could never count of my staff. Fortunately, I’ve been able to outsource to Vietnam and now receive a high quality product at reasonable prices. It’s help to finally make my blog affordable enough to be a featured item in Wal-Mart aisles around the country.

Sadly, however, my one time very loyal reader from Vietnam hasn’t logged in this past month. Perhaps I should give him a day off to do as he likes, as long as it includes logging on.

It certainly has been a hectic year.

From the very beginning, I had a very bullish view of the market’s future. But within just a couple of days of starting, we had that 417 point drop.

The only lesson from that quick turnaround was that it would have been a very bad time to switch gears.

As it would turn out, not everything that happens in the past is necessarily an indicator of how the future will play out.

Without a doubt the singular transforming story of the year was the sub-prime crisis. It has turned out to be the only thing that’s actually held our attention for more than 3 days and has now been used to blame everything that’s going wrong.

Dennis Kucinich blames it for his height, but that’s a stretch.

For me there were other memorable events this past year, but I’m not going to prattle on like some of those people that have replaced Christmas Cards with an annual corporate report of what’s happened to the members of their family.

If I have to be told in writing and in great detail what’s happened, I probably wasn’t very close to you to start with. And you can be certain that I didn’t read the end of the year report.

With the pre-open looking very quiet and little to nothing currently going on, this is as good a time as any to look at the numbers. In essence, the Szelhamos Rules End of the Year Report, but without the cutsey stories of what Billy did during his time in the juvenile penal system.

During the past year the Dow Jones was down by 3.17%.

Not a very good year. Too bad the year didn’t end on October 12th.

That would have been a great year.

The combined performance of the professional portfolio managers was a loss of 3.47%. On the surface, not bad, considering that their performance includes a considerable management fee.

However, over the year, you may have heard me sing the praises of Bob Shapiro at UBS.

There was a reason that I had done so. His managed portfolio actually finished the year a few dollars ahead of where it started. In fact, he beat his comparative index, the S&P 500 by nearly 8%. He’s done that for me for more than 20 years.

Not bad.

The other portfolio manager at Smith Barney, whose services will soon be dispensed with, didn’t fare as well. As I micro-analyzed his performance, it especially underperformed during down markets.

That portfolio was down by 9.1%.

In general, retirement account mutual funds usually don’t offer great choices or performance, so my expectations are pretty low for those.

But they actually weren’t horrific, falling by 4.1%. Given that these kind of funds have to work extra hard to offset their administrative fees to even match their comparative index, it could have been worse. Unless you have your mutual funds in a hot sector, don’t expect for anything better. But if you do, make sure you get out of that hot sector before it goes to ice.

Now for the drumroll.

Unfortunately, our entire Musical Department was let go after the buy out financing fell through. Another Bain Capital fallout.

Overall, the Szelhamos Portfolios were up 1.9%. If I would have had the brains to have taken more profits in Google and Apple, those gains would have been much higher,

Would have, could have, should have. Same old story.

Not great, but I am The Man in Black.

So, was it all worth it?

Clearly, the few hundred trades I made this past year kept me off the streets and kept E*trade solvent. Additionally, another good by-product of all of that activity is that it kept me from any meaningful human contact.

I did, however, have some unexpected human contact today, as I spent about 6 hours away from home, ultimately having an unscheduled laser repair of some retinal tears.

When I got home, the Dow was down 130 points.

I was able to take profits on the Riverbed Technology options, but as I was unable to take some profits in my YRC Worldwide and E*Trade options.

The reason? Perhaps in homage to the Szelhamos Rules first anniversary, the Dow turned around and erased the full loss and lots more in faster time than I’d ever seen before. There was a nearly 250 point turnaround in the blink of an eye.

All it took was a little rumor of a bailout of AMBAC.

Had I known, I would have tried starting some of those rumors earlier.

So who am I to complain? The last 30 minutes just helped to make it all a bit more worthwhile

Best of all, though, with over 11,000 hits since the site counter was added and a couple of thousand views of the Szelhamos story, more people have learned about a truly wonderful, funny and quirky person in the years since his passing than anyone could ever have been imagined.

Amazingly, there have been readers from 61 countries and lots of returning visitors.

The only real thought that comes to my mind is that these people need to get a life. But that would be crass of me.

Had we not also let the editorial staff go, the preceding paragraph would have been deleted and replaced with something like:

“And a special thank you to all of the loyal readers over the past years, especially those that have sent their comments and supported this site’s efforts to raise money for some worthwhile organizations.”

But that’ll never happen.

And so, on this anniversary, I couldn’t think of a better way to salute the past year than by falling back to one of Szelhamos’ favorite expressions that he found appropriate for any occasion:

Csokolj meg a Seggem

Follow the link and if you can figure out its meaning, please take it in the spirit in which it was always intended.

But it does bear repeating:

Csokolj meg a Seggem

 

The Man in Black   February 21, 2008 (posted 9:00 PM)

Nobody has ever accused me of being fashionable. There’s a reason why you won’t see my picture plastered over this web site. However, the astute surfer will be able to find some undocumented pages. They’re there. You just have to find them.

But I don’t expect that anyone really worth listening to ever will accuse me of being fashionable.

I may not exercise much editorial control on content and context, but I do have respect for the esthetic needs of the readership, so instead of an occasional glimpse of an unfashionable blogger, you can always see randomly flashing scenery pictures in addition to the Szelhamos Growl.

It’s bad enough that your intellect is assaulted and insulted, I don’t want to do the same for your visual fields.

I did, however, receive a comment about my shoes this week, but I don’t think that it was a compliment.

But in case you don’t know, let me explain, that brown shoes go very nicely with an otherwise all black outfit.

Sure, I could have fooled everyone and worn black shoes, but as Sinatra said, “I sing the songs that make the whole world sing”.

Yes, I know he also sang “I’ve got to be me”, but that was too predictable.

Today, however, someone did take note of my all black outfit. It may even have been a compliment. I’m not really sure since I don’t think that I’ve ever gotten an attire based compliment.

But I didn’t have the heart to tell her that I was in mourning. There was a reason to be draped in black.

I was literally wearing my feelings on my sleeves. And I was sad.

Sad for all of the profits that might have been. Sad for the untimely end to rallies that gave us great hope. Sad for the injustices that bedevil the intrinsic value of worthy companies.

And sad for the world that allows these things to happen.

Especially to me.

Nobody summed it up better than Johnny Cash in his song, “The Man in Black”.

I feel your pain, Johnny. Thanks for appreciating mine.

Given the recent market moves, maybe I should have been in an all red outfit, but I couldn’t find any songs consistent with that theme, although I do own several outfits that would fit the bill. Although its been many years since my pimping days, I’m sure that one or two of those outfits will still fit.

And so at noontime, thanks to a negative Philadelphia Fed Report, we’ve seen another 100 point swing.

As it turns out, it’s harder to be an investor than a pimp.

But I still tried to make a go of it this morning.

During the upside portion of the morning I sold some March $20 YRC Worldwide options and then watched as they quickly became profitable, as YRC Worldwide decided to reverse course with the rest of the market.

Again I was trying to do something with a Riverbed Technology position. I still have one-third of my shares available to write options on, but the stock keeps moving back and forth, too quickly to make moves one way or the other.

Today, turned out to be much like yesterday. Not necessarily in the markets, but for my ability to follow the markets. Once again, the vocation trumped the avocation.

So while I was in my vacuum I didn’t know anything about the Leading Economic Indicators Report.

Another downer.

Just more concern over bad news that all says we are heading into a recession.

Actually, I guess today’s market was like yesterday’s, as well. Maybe it’s best to actually be in a vacuum.

Sometimes there’s reason to envy buy and hold kind of people. You can ignore all of the blips, all of the plunges and you can even skip the exaltation. Maybe the best way about things is to just check the bottom line every couple of years.

As I was heading to the airport in an attempt to beat the impending storm, I got to hear the last hour’s worth of news and just listened helplessly as the Dow just fell further and further.

Luckily, there was other, much more important news to focus on. Even more important than the successful shoot down of the satellite which is certain to inspire objections from any country that views that as a militaristic demonstration of some sort.

Sometimes a shoot down of a broken satellite is just a shoot down of a broken satellite.

But the big news was the New York Times story suggesting an inappropriate dalliance by John McCain and an inappropriate use of his status to gain favor for his dalliance’s firm.

Heady stuff.

Oh wait. That was Bill Clinton. And besides, by modern day definitions, “heady stuff” doesn’t really qualify.

But everyone agreed that he was firm in his denial.

An unfortunate, perhaps intentional choice of words, but firm, nonetheless. At his age, that’s quite an achievement.

With all of the attention going to Barack Obama, this may have just been a little ploy to return some attention to McCain and his candidacy.

It definitely worked for Clinton in the 1992 primaries.

What McCain should hope for is that more than one such allegation will hit the news. For Clinton, it took more than just a single Gennifer Flowers to get the ball rolling.

So to speak.

But back to what bought me to these heights.

The markets.

Tomorrow marks the first anniversary of Szelhamos Rules.

I suppose that if I was really serious about this, I would actually report some numbers tomorrow.

As an investor I always want to be the man in black.

Unlike Johnny Cash’s portrayal, in the investing world, black is where it’s at.

So tomorrow, I will dust off that black outfit and sit by the television screen all day, hoping that some luck and good energy will move the markets up.

Otherwise, its Plan B, executed alongside my lucky friend.

But that plan follows a Bruce Springsteen solo, “Meet me Tonight in Atlantic City”.

And bet the whole portfolio on black.

That’s what I’m talking about.

 

 

 

Faux News du Jour   February 20, 2008 (posted 9:00 PM)

I both like and dislike Wednesdays.

On the positive side, I don’t begin work until the late morning. By that time, the market has already established itself with most of the economic reports having been released. In fact, on Wednesdays I wait until the 10:30 A.M. Oil Reserves Report before I begin to shut down the strategic trading center in my hotel room.

Some people can’t start their day without their coffee. I need my Oil Reserves Report. Most mornings, though, the reports are released by 8:30 AM, so I can have both simultaneously.

Despite Hewlett-Packard’s great earnings report and oil’s fall from the $100 level, the mood was not good this morning. There was more bad news about consumer prices and lackluster home construction statistics. On top of that the 3Com deal was falling through with Bain Capital and KKR announced that it was further delaying paying back some of its debts.

These companies basically make money only when they make deals. As if Bain hadn’t already received enough bad news when its founder Mitt Romney’s dropped out of the primaries, now it found itself dropping out of the deal.

On a positive note, their lost fees were less than what Romney wasted on his campaign.

As if those buyout firms weren’t having enough trouble making money and deals, Blackstone was hitting another new low. At least Cerebrus, after sinking a ton of money into Chrysler, isn’t publicly traded. If it ever does try to go public make sure that you run fast and run far.

But I just knew that today was going to be a bad day.

I knew that after I had hung up the phone this morning having made an incredibly stupid decision.

After 20 years of having responded to every request and opportunity to serve in some fashion when called upon by my professional association, I’ve spent the past 6 years assiduously avoiding any commitments.

That all ended this morning. I don’t know where that moment of weakness came from but I made a 3 year commitment.

So the day, and maybe the next 1095 days, will be less good than they could have been.

Following yesterday’s sell-off that erased the 150 point gain, this morning was pointing toward another 100 point loss. After all, yesterday’s turnaround was based on the fears that the Fed was getting concerned about having to battle a new round of inflation. Since the remedy for inflation is exactly the opposite of what’s needed to fight recession, that makes lots of stock investors nervous.

You might notice the faint tremor in my typing.

So this morning’s numbers just added fuel to that fire as the consumer prices numbers were higher than expected.

As the market opened down nearly 100 points, I thought that it would be a good time to take some profits in some of the in the money Riverbed Technology calls that I had written. It was now about $1 out of the money. That would be a pretty good profit for just a few days.

When stocks around you are falling, sometimes you get a good feeling by taking in profits on those call options. But even though they are profits, they’re really more of a cushion to the stock price falls.

It’s a faux good feeling.

I entered the order and then didn’t have much opportunity to follow up with what was going on in the market.

That’s what I dislike about Wednesdays.

When I finally got a chance to look at the days’ results, I was a little nervous about what I would see, although, once again, to look on the positive side of things, at least I didn’t see a faint orange glowing plume over the horizon.

Another day without nuclear holocaust is a good thing.

I knew that there was no real news expected today, so I wasn’t expecting very much of a change from the early losses. Just more of the same. Lower lows and lower highs during the false confidence building bounce backs.

But that’s where the faux news of the day comes in.

Sometimes when not much is going on, you just need to make news out of something.

Today it was the release of the Federal Reserve’s minutes from the last meeting.

These releases are gone over with a fine toothed comb in an attempt to find the slightest nuance that will give an insight into what these secretive guys are really thinking.

The prevailing interpretation of the minutes was that the Fed would put fighting inflation as Job #2. In fact, though, there didn’t really seem to be any real sense of urgency or concern on the Fed’s part.

The big fear was that if it was Job #1 that would just drive us further into recession.

But that’s all that it took today.

Not only did Riverbed Technology turn it around, so that I lost my chance to buy back those options, but the whole market just took the Fed minute’s interpretation full hook, line and sinker.

And once again it was another 100 point swing kind of day.

Even Google ended the day up a nickel.

If you can afford 100 shares, that would be a $5 profit on your $50,000 investment.

Nice.

It may not seem like much, but you can make it up on volume.

Think big. It could have been $10 on your $100,000 investment.

But you’ll need to get over the giddiness because tomorrow’s another new day.

More real reports, more real news and more faux news.

At least there’s always something to write about.

Otherwise, what else would I do for a living?

 

Dead Castro Bounce   February 19, 2008 (posted 10:00 PM)

Yesterday’s weather in the Mid-Atlantic should have prepared me for today’s market.

It was warm and sunny. Then it was cold, and rainy and even a little hail thrown in, to boot. All within a span of about 1 hour.

I was told at the car rental counter that a plane that landed just a few moments before mine had been struck by lightening.

That’s what today was like by the time the closing bell tolled, except that it was dragged out over a course of about 6 hours. 390 minutes to move a net of 11 points. And there really wasn’t anything remotely similar to a lightening strike.

After this past Friday, when we had the first trading day of the year without a swing of 100 points or more, you just knew that we were due to get back on course. And today offered us the kind of swing that we’ve grown accustomed to.

Following yesterday’s good gains in the overseas markets, there was reason to hope that there would be some carryover into our own markets.

In general, at best, that’s just wishful thinking, because even though everyone talks about the global nature of the markets, we all know that isn’t really yet the case.

It’s still the US market that wags the world. Sure there may be a little spasm in the US when an overseas market melts down, but the US hits stride pretty quickly.

But the news was good this morning.

Wal-Mart reported good earnings before the opening bell.

But the number one news story of the morning was regarding Fidel Castro’s resignation as President and Commandante. He still retains “El Jefe”, but it is mostly a ceremonial title.

Those 2 items were moving the pre-open futures up nicely.

Cynical as I am, I took news of Castro’s “resignation” to be code for “dead”.

After all, how many examples are there in the history of communist regimes when power is transferred without death?

Don’t scratch your heads on that one.Kruschev doesn’t really count, as he was kept in a zombie-like state after his forced “retirement”.

Modern day communists, or as they prefer to be called, “compassionate communists” have a different strategy for ensuring lifelong power. Just look at the way Putin is setting himself up to lead Russia into the 22nd century.

Surprisingly, our own “compassionate conservatives” did not adopt a Putin-like strategy, but only because Jeb Bush got lost on his way to apply for a passport to visit Washington, DC.

But the news about Castro’s exit was welcome news to the markets, for some strange reason. Maybe they thought that the fall of communism in Cuba might help our economy as much as the fall of communism in East Germany helped West Germany’s economy.

That worked out well.

Maybe the thought that Castro was signaling that this is the time to switch to a capitalist mode of existence in the island nation in Florida’s backyard.

“Just renounce communism and accept capitalism and you will receive eternal salvation”.

We’ve all heard about deathbed conversions. Suddenly seeing the light just before the dark sets in. It’s hard to turn down that offer of eternal salvation. I know that I never do.

Years ago, a Castro Convertible was a sign of status. I don’t know if they even make them anymore. Once the market was opened up to competition, Bernadette gave way to Jennifer.

Just like Irving has given way to Ian. And maybe Fidel to Raoul and then to Adam Smith.

Time will tell, but Fidel’s time is running out. And when it does, they’ll be partying in south Florida like it’s 1999.

But like most rallies that come after huge market drops, today’s market gave up its 150 point or so gain, fought back to make it a 100 point gain and then just gave it all up.

A classic “Dead Castro Bounce”.

In the absence of proof of his demise, others are pointing to the bad news that came out during the session.

Oil refinery explosions, oil closing above $100/barrel, sure, those are bad.

Gold, platinum and silver hitting new highs? I guess those are bad for stocks, as well.

But people are driving to Wal-Mart and Castro is dying.

Does it get any more clear than that?

I suppose that the retreat might be blamed on a “Live Castro Bounce”.

By the time the day ended, I was pretty ambivalent. Just like a day last week when the Dow was up very nicely, my shares didn’t do terribly well.

By the time the market gave up about 160 points I wasn’t down much more than before that turnaround started.

I can thank Google, Goldman Sachs and the New York Stock Exchange for that.

Not a very good day for those stocks.

But at least they can bounce back.

Castro? Not so much.

 

Discord on the Board   February 18, 2008 (posted 10:00 AM)

Sigh. Another tradeless day. But even worse, no ticker to train my eyes upon for 3 straight days.

Do we really need to make a federal case out of the birthdays of a couple of dead ex-presidents? Wouldn’t they have preferred that the symbol of worldwide capitalism remained open out of respect for their births?

Although that’s a rhetorical question, I feel obligated to answer.

I think they would have much preferred that kind of homage, rather than knowing that the price of unnecessary appliances has been slashed for 1 day and 1 day only.

Although some of those sales are tempting.

My wife went to Kohl’s yesterday and Saturday. She loves the process of shopping, although not necessarily the process of buying. I think that she just likes being in the stores.

We all have our peculiar rushes.

My is the ticker and the flow of red and green numbers. Hers is the blue light.

Her typical pattern is to go shopping for the kids, rarely in over 21 years bringing them along. She brings the goods home, and if it doesn’t suit them by virtue of fit or tastes, she happily returns to the scene of her purchases.

And so it was on Saturday and Sunday.

Best of all, at Kohls, there was an air of chance. At checkout, a scratch-off determined your President’s Day Sale discounts.

She may have taken over the title of the Luckiest Person on Earth, as she scored a 30% discount. Even better, on Sunday, when she returned some of the items, she ended up getting even better prices on the replacements,

Does it get any better?

Jerry Yang could use some of that luck.

With all of the talk that the corporate boards of publicly traded companies are just stocked with cronies comes news of foment on the Yahoo! Board of directors. It must be pretty bad if different components on the board are retaining their own attorneys.

And, CEO and founder, Jerry Yang appears to be in the minority and apparently doesn’t understand that the board of directors has the responsibility of acting in the best interests of its shareholders, not just its majority shareholder.

Now, first of all, I was wrong. Not that that’s a peculiarity.

I was convinced that despite all of the talk to the contrary, Microsoft’s offer was fully solicited and that all of the pieces of acquiescence would just fall into place.

But that isn’t the way it’s playing out. If Yahoo was a cow, it would be like those poor cows that were just featured in an undercover video that shows their sickly soon to be carcasses being stunned, forklifted and dragged to the slaughterhouse.

A bit graphic, but did the cameraman ever come to any of the cows’ rescues?

Despite the $31 take your pick cash or stock offer, Yahoo hasn’t been able to break the $30 barrier. And no one will be coming to its rescue, either. So you may as well keep sticking the electric cattle prod into it with impunity.

And although I was wrong about the nature of the offer, I did turn out to be right about picking up post-offer shares at $28.50 and immediately selling February $30 options.

Those expired on Friday and tomorrow will hopefully be the time to sell $30 March options which are currently offering a 4.5% premium, on top of last month’s 2% premium.

Sadly, today is not the day, as we are devoutly in the midst of celebration.

Of course, in the unlikely event that Microsoft chooses to turn their back on the deal, Yahoo plunges. But Microsoft’s about face is not likely. It has basically exposed itself and admitted where its vulnerability lies.

It’s not likely to turn back.

If you like to believe in fairy tale endings or the ultimate fight, one potential white knight may emerge from China.

 

Who knows, Yang may even have some long lost distant relative in a position to come to the rescue.

Never the best of friends, Microsoft and China could go to battle over Yahoo!, as China considers its interests in an Ali Baba free from undue influence by the other evil empire, Microsoft. Piracy is one thing, but allowing Microsoft a voice in Chinese search is something altogether different.

As much as I usually can’t wait for Tuesdays during these unnecessary 3 day weekends, today is worse than usual.

Not that there has to be a connection, but word is out that overseas markets are up about 2% today. That would be a great way to start off the new options month, as a little upward volatility will plump up premiums and help to pay for this weekend’s venture at Kohls.

In the meantime, my oldest son was home for a little while this weekend. He’s due to graduate from college in a couple of months and has just started the job interview process, being appropriately clothed thanks to a Jos A. banks gift card.

He will be going back to a second interview at Robert Half, Int.

He really liked the prospects of working there and compared and contrasted a couple of similar places at which he had interviewed.

We actually checked the financials of Robert Half and they confirmed what the interviewer said regarding its profit margins.

Since he is taking a number of economics courses this semester, including one on futures and investment derivatives, we had a good time going through Google Finance and some analyst’s position papers.

It almost makes we want to forget about the DNA.

Who knows, maybe someday I can leave him all of this.

I’ll have to discuss that with the Board of Directors of “Szelhamos Rules”.

Happy Birthday, Madame Chairwoman Dragam.

 

How Did I Miss These?   February 15, 2008 (posted 12:45 PM)

I’ve been listening carefully to the economic news and reports for quite a while now. And month after month you hear the same economic reports and you get to see the knee jerk over-reactions and subsequent corrections.

It’s almost like summer re-run season, except that it’s every month. Given that I could watch the same episode of South Park 2 or 3 times in a day and still react the same each time, should give me some understanding of the repetitive and predictable nature of the market’s reaction to streaming data.

But it doesn’t.

I don’t necessarily understand the meaning of these reports and am never able to predict the movement of the markets after the reports are released. However, the more I think about it the more I realize that all of these reactions, over-reactions and corrections are where the real money is being made. All of that volatility is where the active trader makes it or breaks it, while all of the whipsawing is what makes the typical investor psychotic.

Besides, it’s much easier to justify being employed as a trader rather than as an investor. I probably wouldn’t want to pay someone for just watching the ticker. That’s why I don't pay myself anything.

You pay for value.

I do, however, get to drink as much of the house’s coffee as I would like, although I have to supply my own wooden stirrers. But that will be he starting point for the next round of negotiations.

This morning, the pre-open numbers were mildly negative, but as an options expiration day, there’s often more volatility than usual, especially in the first hour.

But then at 8:30 AM, suddenly the bottom fell out as the latest report numbers were released.

The Import Price Index was up 1.7%, the Export Price Index was up 1.7% and the Empire State Manufacturing Index was down 1.72

Now, I don’t mean to appear to be an idiot, but I can’t remember ever hearing any of these before. Maybe Jim Bunning’s good fortune in the mental acuity arena has been at my expense. Synaptic activity may be a zero sum game.

My bet is that more people are familiar with the Ritz Brothers or Allen and Rossi than they are with these indices.

And, yet, based on the market’s sudden reaction downward, these numbers must be pretty important.

Unless of course you listen to the CNBC senior economic analyst.

As it turns out these are referred to as “second tier” numbers and the Empire State Index that everyone is negatively responding to, is a relatively new measurement tool.

Like we really needed another imperfect measurement tool. We didn’t have enough things to send traders wildly astray and trading amuck. Could you imagine how they would react if this measurement tool actually had a track record?

My youngest son, who has absolutely no interest in sports, or reading for that matter, just received his latest issue of Sports Illustrated.

It happens to be the swimsuit issue.

You know the one. It doesn’t require too much reading.

If he reacted to every page in the same way as the traders react to every single report that comes their way, we’d have some serious problems, of social and physical natures.

My guess is that he doesn’t, because so far we haven’t seen any unusually bizarre behavior. Yes, we see both bizarre and unusual behavior, but that’s typical for a teenager, but there’s been no unusually bizarre behavior.

Although, in hindsight, that may explain the wildly fluctuating chemistry in our hot tub.

He probably looks at each page and layout, assesses it on its own merit and then moves on to the next page, reserving the right to make final assessments until all of the data is in and then acted accordingly.

How boring.

Seems to me, everything should ride on every turn of the page.

You only live and die once.

As I look at the issue sprawled on the floor, I am resisting browsing through its pages, as I don’t believe that it would be a prudent thing to do as I am trying to pass a presumptive kidney stone.

That’s known as restraint.

That’s what some of these guys on the trading floor need and that’s what needs to be built into some of the software trading algorithms.

There are times for self pleasure and then there are times that are less appropriate. But I suppose that it’s much easier to trade repeatedly, especially as you get older.

The Empire State Index just doesn’t have that special aura. I would save my energy for something better.

It will come along.

In the meantime, in a morning of red arrows, the star of the day is Kraft.

I am partial to Kraft, because one of their factories is down the block from the hotel that is my home a few days each week. The aroma of fresh Jello powder in the air is invigorating. Knowing how the Jello powder is made, is not.

I own Kraft only because it came to me after Altria spun it off, almost a year ago. It has done nothing since then.

But today, after news comes out that Warren Buffett has been quietly accumulating an 8% stake, it is now up about 6%.

 

A sign that no one really expects much performance based stock price increase, nor further share accumulation, is that the March call options have barely budged. I thought that I might sell some of those options, just to boost up the yield a bit, but the premiums just didn’t offer enough of a reward, as the message is being sent that Buffett is wrong in his investment.

The greatest likelihood is that he is not, since he is an investor and not a trader. What makes news is those rare occasions when he has been wrong about taking a stake in a company.

It happens as often as when I hit a correct note during my make believe rock star sessions.

Warren Buffett doesn’t have to hit home runs, but he sure does have lots of singles and doubles. Sure, every time Steve Balboni hit one it was exciting, but was it worth all of those strike outs? I doubt that Rod Carew wishes that he had more home runs in his career. He probably never wished that he could be more Balboni-like.

His place in the Hall of Fame didn’t require home runs.

Investors live off of their singles and doubles. Traders live or die by their home runs.

As afternoon was closing in I finally made a couple of trades.

My E*Trade February call option was staying in the money despite the overall market being down, so I decided to buy back the call options, which at this point had intrinsic value but almost no time value. So I made a small profit of about 2%, but then sold some in the money March $5 options at a 11% premium to the current price and nearly 16% premium to the cost basis of the underlying stock.

Based on the volatility of stocks right now and, therefore, the high options premiums, I am likely to concurrently sell in the money call options with any new stock purchases, especially if they’re going to be in the 10% per month rate of return.

As we have passed the noon hour, the market is just slowly slipping away. It is a Friday before a 3 days trading weekend. There still may be some people who remember the meltdown right after trading resumed after the MLK weekend.

Not me. I’ll use the lessons I learned at the roulette wheel.

All of those reds in a row have no relevance for anything other than predicting the past.

Of course, when another red comes up, you wonder how you missed the opportunity.

Hopefully Tuesday won’t be another one of those post options expiration, post 3 day weekend sell-off days that make you wonder how you missed all of the obvious signs.

The only thing predictable is that our issue of Sports Illustrated will have none of its pages missed, although a couple may end up being torn out.

Pass, stone, pass.

 

Cheech and Chong   February 14, 2008 (posted 9:00 PM)

There was a time when there were many great comedy teams.

Back when I was in high school, just about the only discretionary reading that I did was related to the biographies of some of the great teams. There was a time when I knew everything there was to know about Laurel and Hardy, The 3 Stooges, The Marx Brothers, Burns and Allen, Martin and Lewis, Allen and Rossi and others.

There were lesser known ones, as well, but does anyone really pine for The Ritz Brothers?

Allen and Rossi?

But the era of great comedy teams has long disappeared. Besides Cheech and Chong, the closest you can get is Franken and Davis and Cooke and Moore.

Who?

Al Franken and Tom Davis. Peter Cooke and Dudley Moore.

But today, we had Bernanke and Paulson. Oh and there was Christopher Cox of the SEC, as well, but he was sort of like Zeppo or Gummo Marx. He was like the attorney that represented the Mitchell Report at yesterday’s Senate hearings.

How comfortable could that have been sitting in between Clemens and McNamee.

So say hello to Christopher Cox.

Despite the fact that it was Valentine’s Day, there really wasn’t too much love being demonstrated during today’s senate committee questioning of Ben Bernanke and Henry Paulson. Although Chuck Schumer did wear a pink shirt and the aide behind him had a red tie. I wasn’t certain, but it appeared as if they may have been playing footsie during some of the protracted answers.

Actually, it was a fairly civil session, although the cantankerous ex-baseball pitcher Kentucky senator closed his questioning by pointedly remarking that Paulson and Bernanke were late to recognize the housing problem.

Bunning seems to have recovered quite nicely from the claims that dogged him during his last re-election campaign. He doesn’t appear to suffering quite as much from Alzheimers as had been suggested. Most often the C-SPAN cameras seem to take off 20 to 30 IQ points.

But Bunning was probably expressing the frustration of the committee members that it hasn’t seemed as if the key players were taking the various financial issues seriously enough.

They certainly haven’t been ahead of the curve, but maybe they’re catching up.

This was a busy day, as Elliott Spitzer was presenting in front of another congressional hearing on the crisis in bond insurance. But he went solo, much like Clemens and McNamee should have done yesterday.

Spitzer had no problems in the “mis-remembering” area.

The problem seems to be that it is very difficult for Paulson or Bernanke to say anything that’s even remotely humorous and so the markets react accordingly. At least Bernanke may have found some humor in the proceedings, as he did occasionally let out a smirk and then would squirt Paulson with the flower on his lapel. When he did so, the market would briefly make up some of its losses.

Next time, Bernanke should carry a bigger reservoir for his prop.

Just as you can’t go wrong with more cowbell, more squirting could only help.

But by looking at the market’s reaction, in fact, you would think that they were saying nothing but sad things, maybe even doing unspeakable things to cats in front of young children.

The markets hate that.

And so the market, at mid-day decides to end the recent run-up in prices is a thing of the past. Down 100 points and not much indication that these guys are going to be able to find anything laughable.

Although it did come as a surprise when Bernanke admitted that he had injected Henry Paulson with feline growth hormone on at least 2 occasions. Apparently he did so because Paulson was hoping to develop the same shine to his dome as Bernanke had been demonstrating.

At least that helped to explain all of those unspeakable cat related actions.

But we are all aware that Bernanke has long claimed that the shine to his dome was related to a very rigorous regimen of polishing and follicle supplements.

But nonetheless, with Bernanke seeming to indicate that the economy was not terribly robust, the market just gave up everything that it accumulated yesterday.

For me, as past history has shown, sometimes the stocks that I have outstanding call options written against often seem to paradoxically do well when the rest of the market isn’t.

And that explains why E*Trade, Yahoo and YRC Worldwide are all now slightly above their strike prices. So in my usual perverse sort of way, I typically want to see prices fall.

However, as they are all hugging the strike price, they each are offering about a 10% return if March options are sold on them at their current prices.

That’s a pretty good return for one month. Besides, how much lower could E*Trade and YRC Worldwide go?

Yahoo on the other hand can go either way. I doubt that Microsoft will walk, but I also doubt that much will come of any dalliance with Rupert Murdoch.

So in a way that makes me incredibly happy, I’ll be glued to the screen tomorrow.

In between having my head go back and forth watching the endless ticker I’ll think about all of those mystery Valentine’s Cards that are no longer a mystery.

As Hillary used to say “it takes a village” and this was a collaborative effort, but only one person signed and sealed the cards with a kiss.

The only thing I still wonder about is how come no one else noticed that Ben Bernanke wears lipstick.

 

Big Oil the Good Guy?   February 13, 2008 (posted 9:00 PM)

It really must be an upside down world if, even for a moment you can think that big oil may be the innocent victim and not the aggressor.

From a public relations perspective, ExxonMobil still hasn’t recovered from the images of oil soaked penguins or whatever those Alaskan birds were, nearly 20 years ago.

It hasn’t done very well in the public relations arena in anything that its tried. Its congressional testimony a couple of years ago just showed the nation the contempt that the companies seemed to have for the congressional committee, and by extension, the public’s right to know the truth behind oil supply and prices. Remember the uproar when the chairman of the committee deemed it acceptable to forgo the swearing in before their testimony?

That didn’t go over very well. But how else could they have uniformly said that there had been no collusion or price fixing in the gasoline and oil markets.

But yesterday ExxonMobil got a court to freeze about $15 billion worth of Venezuelan assets after President Chavez nationalized ExxonMobil’s private property holdings in Venezuela.

Sometimes it takes a bully to stand up to a bully.

Someone has to be the good guy in that encounter. The difference between the 2 bullies is that one is rational in formulating their strategies and the other isn’t.

I guess in the ideal world, they would both get knocked out, but it only happens that way in movie comedies and cartoons.

Last night came word that Venezuela was going to stop exporting oil to ExxonMobil. Considering that comes after word that Venezuelan citizens are getting a little tired of the economy’s mismanagement and the uni-dimensional political focus, Chavez’s actions make ExxonMobil look like an innocent victim that is going through the proper channels to seek redress and justice.

In the annals of history, Mussolini didn’t look quite as bad as his counterpart.

The lesson is that you should choose your enemies very carefully. They can end up helping you quite a bit, especially in the public relations department.

Prior to this morning’s announcement on the strategic oil reserves, oil is down another $0.41. But now, since Chevron is being added to the Dow next week, there’s even some reason to cheer for the new good guys on the block.

With oil inventories up for the week and refinery utilization rising, despite the cold snap, the news was greeted with a yawn.

What really should be greeted with a yawn is the all important congressional hearings on steroid use in baseball.

It began with Roger Clemens’ statement regarding the recent passing of Tom Lantos. There wasn’t a wet eye in the house as I’m certain everyone was wondering if Clemens had any clue of who Tom Lantos was.

It’s also hard to take the testimony too seriously when in the first paragraph Clemens criticized himself for being too nice to others.

It was a little surreal to see that at the opposite end of the table was the trainer who dragged Clemens into the steroid controversy. Brian McNamee gave his personal statement immediately after Clemens.

They both sounded sincere, but this may be the case of another 2 bad guys. Maybe they will both get knocked out. McNamee certainly tried hard. His big self-critique? Being too loyal.

These guys are just too nice.

Despite very pointed questioning, Clemens repeatedly said that he and Andy Pettitte, whose deposition implicated Clemens, would always remain friends. This certainly gives hope to Chavez and ExxonMobil. Maybe that’s what the market is responding to this morning.

The markets certainly weren’t responding to Clemens’ slaughtering of the English language. Although his prepared text was beautifully drafted, Clemens, upon questioning often “mis-remembered” basic rules of vocabulary.

But on the bright side, at least a portion of congress is too busy to be doing anything else, other than fawning over Roger Clemens and a chance to get his autograph. At least it keeps them off the streets and from voting on bridges to nowhere.

Although some of those bridges could have made it easier to get to those penguins.

The irony.

But following all of the attention paid to today’s hearings was the realization that there was a market begging for attention.

And it did get attention today, but for a good reason. Even without the help of Warren Buffett, the market closed the day just off of its 200 point high.

Today’s rally factor was the retail sales report.

The really good sign about today’s rally is that even though everyone knew that the 0.3% retail sales increase was really illusory and didn’t really reflect consumer activity, they just ignored that part.

It’s like not letting a poorly timed death get in the way of a really great party.

For a change I found myself staring at a sea of green. How odd.

I hadn’t made a trade in a few days and was wondering how it felt.

As I was watching the screen, Riverbed Technology stared right back. It’s price was going up and steadily climbing, even during mini market retreats.

Not wanting to press my luck, I couldn’t help but think of the perfectly executed sales and buybacks of Riverbed Technology February $20 and $22.50 options, as Riverbed’s price just bounced all over the place.

But I wasn’t certain that I wanted to pick up some March options.

As luck would have it, my good friend, who saw me through a kidney stone, must have been watching a Nike commercial.

“Just do it”.

And so I did, but taking a page from Jim Cramer’s advice book, that advocates not buying all of your shares at one time, I used one-third of my shares to sell $25 out of the money March options.

A little later, Riverbed Technology just kept climbing and then I took the opportunity to use another one third of the shares to sell some $22.50 in the money March calls.

For now, I’ll just sit on the remaining one-third.

In the meantime, with February options expiration die on Friday, I’ll be closely watching MasterCard, Yahoo, YRC Worldwide and E*Trade, as they are all within striking range.

I especially want to hold onto MasterCard so that I can squeeze out a long term capital gain. But all 4 of those positions have been bobbing in and out of their strike price.

But all it takes is a couple of up days to make things exciting again. Even Goldman Sachs almost went up. How odd is that?

Almost as odd as Big Oil being the good guy.

Anything is possible.

14,000? Look out.

 

Does St. Peter Like Capitalists?   February 12, 2008 (posted 7:00 PM)

It’s pretty axiomatic that the market doesn’t like uncertainty.

In the realm of things, there’s probably no greater uncertainty than what awaits us when our time on this earth has come to an end.

By the way, to find out when your time is going to expire, go to www.tombclock.com. I can’t personally vouch for the validity of the site but ask me again on June 14th, 2008.

So hurry, because it may be sooner than you think.

The certainty of that uncertainty, however, is often what guides our moral compass. It’s a lot like hedging. Since you’re never really sure what awaits you at the end of that tunnel, you’d better play both sides. I’m sure St. Peter would understand the reasoning behind your Lucifer dalliance, although, admittedly, I’m not a leading expert of St. Peter.

But if I was St. Peter, I might respect your taking out a little insurance, just in case. The contrarians of the world would definitely want to avoid the long line of heaven entry wannabes. With so many wanting to get in, it must not be the right place for eternal security.

Today’s market has already been dubbed the “Buffett Rally” on news that Warren Buffett has offered to guarantee municipal bonds, something that was done quite well by MBIA and AMBAC. Unfortunately for those companies, the sub-prime debacle has sent them closer to their corporate version of St. Peter. Or for those heavily invested in the financial sector, you might want to believe that they are one step closer to that hot, very hot place.

Buffett knows something.

It’s hard not to do well when your business is guaranteeing municipal bonds.

I knew that, too, but I couldn’t find a bank willing to float me $800 billion.

The market liked that idea of finding a source to guarantee some $800 billion of municipal bonds. Never mind that the insurance isn’t really necessary, due to the almost non-existent default rate, but it is required to get investors to pony up for the bonds. Investors sleep easier when there’s insurance.

Give Warren Buffett lots more credit. Whatever good can come of this, and it may be substantial, Buffett quickly pointed out that he wasn’t doing this to get a free pass from St. Peter. He was doing it for profit.

And there’s nothing wrong with that. St. Peter wouldn’t deny entry just because you’re an unrequited capitalist.

If I was AMBAC or MBIA, I might be a little nervous about this offer. Buffett is graciously proposing to cherrypick the only tangible assets that these companies have left. They have no reason to accept the offer, other than the realization that if they don’t, there’s a decent chance that Buffett may just decide to go into the municipal bond guarantee business from scratch.

That sucking sound you hear is the business that’s leaving MBIA and AMBAC.

A few hours after the close, AMBAC announced that it would not accept Buffett’s Reinsurance offer. At the rate AMBAC is going you’d better start shorting now, because you can’t short a stock when it’s down to zero.

But the market also hears only what it wants to hear.

Despite Buffett’s assertion that stock prices are currently fairly valued. The market chose to ignore that opinion. If they would have listened, the market would have taken a dive. Instead, it closed up 133 points, down from its more than 200 point high.

Oracles are apparently imperfect and should be listened to only when it suits your needs.

My portfolios, though, didn’t feel Buffett’s love. Despite great early afternoon numbers in major holdings such as MasterCard and Google, those sunk into negative territory by the close. Put that together with Goldman Sachs miserable performance today and Apple’s difficulty breaking $130 and it ended up just being a slightly positive day.

Still, that’s much better than the alternative that we know all too well.

At today’s rate, however, it would take me another 30 sessions to get back to the October 2007 highs. That would put the Dow at about 16,750.

So I’m going to have to insist that Apple, Google and Goldman start pulling their weight.

St. Peter may not mind capitalists, but I don’t think he tolerates slackers.

And despite the fact that I’ve wanted to offset some of the weakness of these shares by selling options, they have sunk too fast to be able to sell any meaningfully priced options.

But that’s alright. The last time this situation presented itself, it was time to just suck it in and wait for the opportunity. Despite the hideous performance of these shares which have underperfomed the Dow which itself is down 13%, the portfolios are down only 11%.

Still miserable, but less so.

I don’t think that St. Peter will hold the performance of these stocks against me, but you never know.

So guys, a little pop in you shares is not asking too much, but it may make the difference between heaven and hell. I don’t know if indulgences are still for sale, but it would be nice to have something to fall back on.

Besides, the tomb clock is ticking. There’s no time to waste.

 

Don’t Do as the Experts Do   February 11, 2008 (posted 9:00 AM, updated 3:00 PM)

Years ago, when I started getting my first regular paychecks and was actually putting money away for retirement and some for investments, I was an avid reader of Money Magazine. I used to always listen to its editor, Marshall Loeb, when he appeared on radio spots. I’m not sure if it was because of his soothing voice, even in the aftermath of the 1987 crash, or the advice, but he was a calming influence.

I’m not sure if I ever followed any of the advice that the magazine offered, but it seemed like a great place to get an education. And it was tax deductible, back in the days before AMT.

Over the years, my subscription lapsed, only to be renewed whenever a neighbor’s kid would knock on the door peddling subscriptions for their school’s money drives. Once that deductibility was gone, I wasn’t quite convinced that the magazine was worth its weight in paper, especially once Marshall Loeb moved on.

We’d get the magazines for a year and then the subscription would lapse and the cycle would be replayed. A knock on the door, a perfunctory glance through the endless and growing list of magazines, and it would always come back to Money Magazine. Otherwise, it would be the other M and M magazine, Modern Maturity.

But with each cycle, I would look through its pages, less and less, even as the trips to the bathroom increased. If only the pages hadn’t been so shiny, maybe at least they would have had some other utility.

Today, the first issue of this cycle arrived. Thankfully, most of our neighbor’s kids will soon be entering High School, and there’s far fewer fund raising drives in that age group. What replaces the fund drive activity isn’t necessarily any better, but at least they don’t come knocking on the door.

But as I do with every first issue of the cycle, I flipped through the pages to see what was new. The quick article that caught my eye is one that focused on how those in academics that espouse a particular kind of caution in investing often don’t follow their own advice. It was a basic alert for readers not to do as the experts do. In a time when political correctness was not yet invented, they would be accused of speaking with “forked tongue”.

But these experts are not typically the ones that get air time. Their advice is actually sound and focuses on how an individual investor really can’t beat the averages, so don’t even try.

Good advice, especially if you can’t stomach volatility or losses, paper or real.

Not that being an academic is necessarily good. Just look at Ben Bernanke. Although it will still take time to tell whether he is steering us in the proper direction, the intermediate progress report is not great. 

The problem is that the guys getting the air time are certainly not academics, although they tend to have an air of credibility thrown in their direction. The general rule for these guys is very different from Money Magazine’s heed.

Rather than not doing as they do, don’t do as they say.

When it comes to the academics, do as they say. For most of the guys on TV? You may get better investment advice and prognostication on Comedy Central. The issue is that most of the people espousing their views on the various investment talk shows believe that they have proprietary rights toward beating the averages. In that regard, they’re the same as the fork tongued academics.

The guys on television rarely get called on the carpet for their past calls. When they do, they almost always deny what they are reported to have said. Once Joe Kernan of CNBC played back a video clip after Michael Metz categorically denied a specific statement regarding market direction.

Oops. My bad. But Metz still didn’t take responsibility for his own statements. They fell into the “misunderstood” category.

Interestingly, if you peruse the Google Finance pages, the most maligned person in the world appears to be Jim Cramer.

One poster this past weekend claimed that Cramer was wrong 99% of the time.

In the history of television, there has probably never been an individual under the microscope as much as Jim Cramer. There is no shortage of people documenting his recommendations and jumping at the opportunity to knock him down.

With thousands of data points over the past couple of years there should be plenty of opportunity to assess his talents. Unfortunately, no reporter is going to make a name for himself by pointing out how much better and accountable Cramer is than anyone else in the universe. At least those gurus that the public has some reasonable access to.

The reality is that Cramer has a pretty good on-air track record and best of all, he is the first one to be critical of his positions, when warranted.

If guys who make out 70% of the time are Hall of Fame material, Cramer is really in a league of his own.

But even with someone as credible and accountable as Cramer, he would be the first to warn you not to “rashly” do as he says. There’s no substitute for an individual investor taking responsibility for his actions and doing, at least some perfunctory homework before making an investment decision.

Szelhamos loved Cramer, but never got to see him on his own show. We would watch him on Kudlow and Cramer and Szelhamos used to say that “he should have his own show”.

He was right.

Szelhamos was no expert, but usually when he said something, it was worth listening to. In that regard, he had a lot in common with Rep. Tom Lantos, whose passing was announced today. How often do we hear expressions such as “the passing of an era” or “we’ll never see his likes again”?

In the case of Tom Lantos, it’s all true.

There will never be another Holocaust survivor elected to serve in the U.S. Congress. As he said, he was an American by choice and he chose to serve.

Everytime we would see Tom Lantos on the nightly news, Szelhamos would remind me that he was Hungarian and Jewish. But I never minded hearing that over and over again, because I knew the pride that was felt by Szelhamos was shared by many, as Lantos was a man of high principas. Even his political detractors had to admit that in questions of freedom, human rights and dignity, he had unequaled moral authority among elected officials.

As the number of survivors begins to further wane, it is worthwhile to remember their lives. A brief summary of the life of Rep. Tom Lantos, excerpted from The Associated Press, may be found at “Remembering Veruci”.

In the little picture let the talking heads debate the merits of dropping Altria and Honeywell from the Dow Jones average and the meaning of adding Bank of America and Chevron. Don’t bother listening to any of their arguments. Your guess will be as good as theirs, but future moves in the financial and energy sectors will now rock the Dow .

In the Big Picture, Tom Lantos was a giant worth listening to.

 

You’re All on Notice   February 8, 2008 (posted 9:00 AM, updated 3:15 PM)

I’m not a pushover.

I know enough to protect what’s mine, but I’ve learned from eBay that a lot more could be mine, if only I take control.

I’m ready to go on to that next level.

This morning I read an article about how Perfume Bay has renamed itself to Beauty Counter, after 4 years of battling with eBay over its name.

What’s the problem? Well, I can tell you from first hand experience that the problem is insane protection of the brand, to the point of seeking propietary rights to the juxtapositioning of letters in the alphabet..

You see Perfume Bay’s online address was www.perfumebay.com

Strip away the “Perfum” and you get ebay.com

I’m sure lots of people mistook Perfume Bay for eBay. I know that whenever I think of purchasing fine perfume, my first thought is to see what’s available on eBay.

My experience? I have a number of web sites whose purpose is to raise money for various charities by tapping into the world on online retailing. It’s not much, but it makes me feel good and keeps me off the streets when I’m not under house arrest.

My problem? I decided on a theme to unite these disparate sites featuring such items as Judaica, Paintball goods, Gifts, Books and just plain old shopping.

The theme was “On the Bay”, which was a reflection of where I live, near the Chesapeake Bay.

eBay’s problem? Very simply put was my use of the domains www.giftsonthebay.com, www.paintballonthebay.com, www.judaicaonthebay.com, www.shopsonthebay.com and www.booksonthebay.com.

Because once you strip out the obvious you’re left with “eBay”.

Never mind that once you log into those sites you see the full name spelled out as always intended.

By the way, sorry about the shameless promotion, but I couldn’t figure out any better way to illustrate the point, although in hindsight, I would have been much better off with some other topic, metaphor or analogy.

So in deference to the nasty folks at eBay, you can now find these sites at such address as books.upagainstthemall.com. You won’t need a terribly fancy algorithm to figure out the URL’s of the other sites.

As it turns out, if you wanted to pay homage to your Cajun roots, don’t even think of naming your site www.cajunonthebayou.com

I know, because I asked.

For some reason, they have no problem with www.sexonthebay.org

Go figure.

Hopefully, The Mall Owners Association of America won’t come after me, too.

The eBay attack is somewhat ironic, as I went to graduate school with eBay’s Chairman Meg Whitman’s husband. I can’t recall if they were married at the time or if I had ever met her.

Maybe she personally approved www.sexonthebay.com and its mirror site www.eroticaonthebay.com

Lots of that era is in a haze.

We weren’t exactly friends, as Szelhamos taught me that I would never be good enough to speak to anyone whose full name included the suffix “The Third”. That was probably because we could only trace our own family tree back a generation or so. There certainly was no Szelhamos, III.

So you’re all on fair notice. I will zealously protect the integrity of the Szelhamos brand. Don’t even think of trying to cutely disguise the name Szelhamos by surrounding it with other letters.

My attorneys are standing by. We won’t sit idly by as our brand is sullied.

Although I’m now reminded that Szelhamos would have enjoyed a good end around. So go ahead. Knock yourselves out and I’ll tell the attorneys not to let the door hit them on their way out.

You have our blessings.

Lately, as I’ve been watching some shrinkage, its also extended to my portfolios, so I’m considering applying to my own web sites to be considered a charitable organization.

At the rate the portfolios are shrinking I won’t be able to afford any of those products whose advertisements are e-mailed to me on a deluge basis, that promise to resolve the other area of shrinkage. Maybe resolution of that shrinkage could help create a Szelhamos, III.

Although I find that an incredibly large portfolio is a great aphrodisiac.

That fact must be well known, as there’s an equal number of e-mails concerning get rich quick kind of approaches to life.

At the morning’s pre-open, despite some good earnings news from McDonald’s, a buyback announcement from Amazon and favorable debt placement by MBIA, the futures are continuing to weaken and we’re now looking at a 100 point drop at the open.

Imagine what it would be like if there was bad news.

Maybe eBay should consider a buyback. They must have lots of free cash flow. It’s not as if they need to do much R&D. Have you looked at their stock charts lately?

Funny how “Yike” rhymes with “Skype”

I just had to jump the gun on today’s blog as the eBay item was still fresh and there was still rant in my heart.

And now here we are, nearly 6 hours later, with just 1 hour of trading left, and somehow we are right where the pre-open said we would be. Currently down precisely 100 points, it wasn’t always that way. For much of the morning there were actually some modest gains, especially by some of my favorites that had been hit so hard recently.

But even with the downturn, Apple, Google and MasterCard have held on to their gains. That’s some solace, but not nearly enough.

For some reason, even though we don’t have the same revulsion for being in long positions over the weekend as we did just a few years ago, there is something unsettling about finishing a week on a down note.

You know how grumpy we can be on Mondays.

You’ve been put on notice and so have I, but I’m still holding firm, refusing to believe that we will explore still deeper depths.

As my long ago beloved New York Mets used to say, “You’ve Got to Believe”.

Before you know it, I may be wearing one of those sandwich boards proclaiming that the end of the world is near.

At least it’s a living.

 

Let the Destruction Begin   February 7, 2008 (posted 8:00 PM)

I was mentally and emotionally prepared for the worst.

It was promising to be a day of destruction. Not as visually catchy a title and image as Barry Maguire’s rendition of “Eve of Destruction” when he refers to the ultimate doomsday scenerio where “even the Jordan River has bodies floating”, but nonetheless, it was promising to be a memorable day, the kind that is best forgotten.

And the first destructive blow was dealt hours before the official market opening.

But this series of destructive blows didn’t hurt too much.

Instead of the sound of an opening bell, it was the sound of sledgehammers. At 6 AM the demolition crew was already at work at our office place. The dumpster was comfortably parked in the parking lot and all kinds of objects were being heaved from the windows above.

This was a good kind of destruction and we knew that it was coming.

By the time the organized destruction was done, the newly gutted interior space looked great and for the first time we had visions of a bright future.

The other kind of destruction was one that I thought was going to be headed our way after Cisco’s earnings release after yesterday’s close. There was absolutely no reason to believe that this destruction would lead to a bright future.

I was ready for the technology sector to continue taking it on the chin. The way its been going, a single dumpster hasn’t been enough for the carnage in the NASDAQ and the Jordan River isn’t wide or deep enough for all of the casualties.

To add insult to injury, before the open, Wal-Mart came in with bad numbers. The analysts all began their interpolations of what these same store sales numbers said about the economy.

Suddenly Wal-Mart was being touted as a leading indicator of the recession. If people can’t afford to be shopping at Wal-Mart there has to be trouble ahead.

 

With Wal-Mart looking to open down $2 it looked as if we were getting ready to pound in that first nail, with more destruction to come. The entire retail sector was looking more bleak by the moment as the promise of all of those gift card redemptions was starting to seem empty.

Dominos, trickle down, herd mentality, whatever you want to call it, we were all going down, it was just a question of how long anyone was stupid enough to stay on board.

The question becomes when do you decide that it’s time to leave Fantasyland? When do you bite the bullet and move on?

One of the every few things that I learned in public health school, besides the requirements to build a functioning septic system in the dessert, was that you can’t factor in your “sunk” costs. Sometimes your losses are so deep that you have to ignore them, with no hope of making them back and just move on.

I also learned to read the stock tables. But not in public health school. I learned while I was in public health school.

Big difference.

These days, I don’t know why anyone looks at those anymore, if they’re even still printed.

But when do you come to that realization.? During these dead cat bounces it sometimes appears as if what you thought was sinking was suddenly coming up for air.

In the past year the answer, in hindsight, has been to sit tight, but right now it’s getting uncomfortably tight and you get the feeling of a little rope burn around the neck.

But the problem is, that even with all of the talk about looking at things with a contrarian’s perspective, it’s much easier to get caught up in, and buy into, the conventional wisdom.

I know that I still get caught up in the conventional wisdom.

It’s just human nature to think that it tends to be safer in the middle of the herd.

And being human, the first thought is to think just like we are programmed to and to expect the big Cisco fallout.

The fallout that never happened. In fact, Cisco ended up for the day, after being down about 10%.

By noontime, other than the obligatory drop in Apple, it had been a reasonably stable trading session, with the Dow only down 20 points.

On closer examination, it’s rotten Apple’s floating down the Jordan River, and I think I know why.

Today, I met someone that Steve Jobs claimed never to have met. A Microsoft Zune owner. First generation Zune, no less.

But the real clue that the patina is rusting came as I discovered that my son has put his iPod Nano up for auction on eBay. Maybe he’s looking to trade up for a newer model, but maybe, just maybe, he’s heading into Zune territory.

Or maybe he just needs the money for more crack.

Kids!

But Apple notwithstanding, even Google was up, but then again, it was up at that time yesterday, too. The word is that Google and Yahoo were intensifying their discussions about Yahoo farming out its search to Google and in return, Google would place adds on Yahoo and share revenue with them.

How does that pass the anti-trust smell test?

News that the Bank of England dropped their key rate by 25 basis points didn’t really do anything for our market. Maybe it did something for theirs, but I don’t really care. Even with all of the growth going around the world, so far, at most, economic disasters elsewhere are only hiccoughs.

It’s still the U.S. market that wags the world’s tail.

And so as the day wore on, and I had established a new computer beach head to follow the action, the anticipated destruction never came. Although we finished off the best levels of the day, and as nice as that 100 point gain would have been, I was happy to settle for what we got.

In the words of my friend, “a push is better than a loss”.

I have no clue what that means, but I’m sure that’s it’s an appropriate phrase for the situation at hand.

These rose colored glasses are telling me that everything will be alright, so I’ll be perched on my usual Friday lounger watching the ticker, while staring at the back of my palm.

I decided to have my hand stamped yesterday, just in case I wanted to make a return to Fantasyland.

I may as well watch the destruction from there.

 

Fantasyland   February 6, 2008 (posted 9:00 PM)

All it took was those nice earnings numbers from Disney to restart those fantasies of an ever climbing market.

Remember the good old days?

There really wasn’t much other good news today to help account for the early gains. 100 points on the upside wasn’t very much coming on the heels of a 370 point loss, but it was a start. But like lost of other things these days, I have some trouble getting beyond the starting point.

Other than the proverbial “dead baby bounce” there still wasn’t much reason for the early climb. Sure, oil fell $1, but climbing oil prices never seemed to hinder the market.

So it had to all be Disney’s doing. Even though their media earnings may not directly reflect on the economy at large, their cruise line business continues to go great and they are fully booked for the next few months.

That has to be a good sign or at least a last gasp effort to pile some more debt onto those credit cards that were just downgraded yesterday.

Apparantly, somebody neglected to let MasterCard know about that downgrade yesterday, as MasterCard waited until today to have its meltdown.

How long we stay in Fantasyland is anyone’s guess, but there may be an abrupt evacuation as Cisco releases earnings after the bell.

I never liked Adventureland.

The always optimistic chairman of Cisco, John Chambers, is said to be less than optimistic these days, so his words late in the afternoon can return us to reality.

It’s too bad, because no one really goes to Disney for just 1 day.

But the retreat from Fantasyland didn’t need John Chambers. All it took was a loose lipped Federal Reserve Governor to opine that inflation fears would make any future rate cuts less likely. Other than rate cuts, absolutely nothing has had the ability to move the market in the right direction.

So one set of loose lips turned out to be the blueprint that took us from a mid-day 100 point gain to a 65 point loss on the Dow.

Speaking of blueprints, the men with the blueprints came to our office today to begin a 2 month long construction project. The first stage of which was emptying our offices of everything.

The really sad thing about that is knowing that the Maharheeshi Mahesh Yogi will never see the project to its completion, as news came from his home in Denmark that at age 91 the Maharheeshi has been reunited with a higher order of being.

Denmark?

Besides being a place of solace during the hectic moments of the day, that office housed my connection to the outside world. And by the Outside world”, I mean the only outside world that you can count on.

Wall Street?

So I was in an especially tight vacuum today, taken completely by surprise when I learned that the day ended on a real down note.

The icing on the cake will come tomorrow, as the after effects of Chamber’s less than optimistic remarks hit home.

The after hours action points to a blood bath in the technology sector tomorrow. Apple and Google are already shedding more than they deserve, since it’s hard to draw an association between Cisco’s consumer base and those of Apple and Google.

I’m not sure how many iPods are actually in my household, but I do know that even if we buy another twenty, we’re not likely to be in the market for a big money Cisco router. Since data seems to show that cable television subscriptions are resistant to economic downturns, all of those economically distressed households are still going to pop for their iPods and DVR’s.

So still trying to find the silver lining and prolong my stay in Fantasyland, I did take some small advantage of the huge drop in Riverbed Technology, after they released their earnings.

As is lately the case, good earnings were punished.

Riverbed Technology ended the day by falling over $3. Not a bad way to come up with a 14% loss.

But since I had sold in the money and at the money options at $20 and $22.50, getting really great premiums, I took the opportunity to buy back those options. They each returned about a 10% gain for a 3 week holding period.

At any sign of Riverbed moving toward $20 or $22.50, I’d jump at the chance to sell some more in the money options.

But what goes down has lately just been going down even further. Just look at Apple and Google and pretty much everything else.

I don’t know if the fine people at Disney have been looking for another venue, perhaps side by side with Fantasyland.

But if they are, Nightmareland, is a name that comes to mind.

I don’t think that would be too popular, though, since you can pretty much find that one at every corner. Why go to Florida when it can be every bit as close as your nearest television.

Fantasyland?

I’m afraid its closed for renovations.

 

Silver Linings   February 5, 2008 (posted 7:30 PM)

Sometimes it’s hard to find anything resembling a silver lining.

When much of Europe was being wiped out by the plague, there probably wasn’t very much positive that could be said about the experience. Dying may have been better than any of the other alternatives. Imagine being sad to see the Inquisition end. Death was so much better during the Inquisition.

These days, even good news doesn’t have a silver lining.

You can quibble about Google’s earnings announcement last week and read bad news into their great numbers. That’s what everyone did and Google shareholders probably wish that they would have suffered the same fate as those lucky plague victims.

For some reason, Google bucked the trend today. While the market fell 370 points, Google went up about 2%, but that still doesn’t begin to make up for the 33% decline from its recent high. This was an odd day to be picking up shares, but buyers of Google never lost faith, even as the rest of the market was surrendering.

Maybe the fact that an inflatedly priced Yahoo has a P/E 50% higher than Google may have caught the attention of people with some spare cash. That kind of valuation would put Google right back to $750.

But what do you have to do around here to get your stock price higher? Take The New York Stock Exchange and Riverbed Technology.

You may have guessed that I own shares in both. After all, why else would I be starting a rant?

Both announced great earnings for the past quarter. Neither made the mistake of guiding downward. That’s been a unifying theme lately. Good numbers, but lowered expectations for the future have clobbered stocks.

But both of these companies did everything by the book and they got hammered.

The New York Stock Exchange, which has been everyone’s most frustrating position dropped more than 13% today. Great numbers, great prospects for the future and it gets brutalized on a day when everything was brutalized.

Riverbed was no different.

So where’s the silver lining?

It may be coming tomorrow, based on the stability that seems to be forming in the after-hours trading.

We’re always looking for market leaders, especially those companies that seem to shed a good light on an otherwise dreary market.

A couple of weeks ago IBM came out with great numbers and helped the market get out of that steep decline. That is at least until the past 2 days.

But after today’s close, Disney came out with great numbers. After falling even more than the overall market today, Disney has taken that drop and doubled it, except in the opposite direction.

Other stocks that got hit excessively hard today are showing some signs of recovery. Even poor and beleagured NYX is mounting an upward climb.

The news that BHP Billiton is upping its bid for Rio Tinto, after the Chinese and Alcoa had put in a bid has to be taken as a great sign. This is more than just lust for a company. This is about what the Chinese and the various mining companies see regarding future worldwide demand for the building blocks necessary for economic growth.

Why bid up the price if there’s a slowdown on the horizon?

OK. I know that those ISM numbers spooked the markets out today, but that’s just the way it is with every number that comes out. Regardless of how diametrically opposite is the meaning of all of these drips and drops of data as they are released, the market just continues to have convulsions at their release.

When will we ever learn?

How many revisions will it take before sane and rational people take control and realize that every data release has to be suspect?

The only problem is that there continues to be a need for volatility. All of these convulsions create opportunity and ulcers. But maybe at some point in our lifetime, the survivors of the plague will institute a thoughtful process in response to data.

That process will be boring.

For me, the silver lining today was that some of those stocks for which I had written call options due to expire in 8 trading days are no longer at risk for being exercised away from me.

With all of this volatility, being able to hold onto those shares for another month can mean another 10% or so in premium profits.

Just look at Riverbed Technology. At about $19.75, the $20 February contract still has a more than $2 premium.

Not bad.

At those kinds of premiums, the lining may turn out to be gold.

So keep convulsing, keep frothing at the mouth, but don’t give up hope.

Even silver goes on sale. Now’s the time.

 

Do No Evil   February 4, 2008 (posted 9:45 AM)

From the very beginning, Google portrayed itself as something different. From the way it went about its IPO, in a show of egalitarian spirit, to its creed.

“Do No Evil”, is the way Google has openly laid out its strategy to compete in an ever changing and competitive world.

What we found out this weekend is that Google may not openly engage in evil behavior, but they’re not content to let that kind of behavior be foisted upon them. The problem though, is that Google may not know evil behavior when it sees it.

In an official Google blog posting yesterday they made it clear that their strategy to compete with a Microsoft-Yahoo union won’t be on the technology playing field. It will be in the streets of Washington, DC and all of the state’s capitals.

Google will be pushing hard on the anti-trust angle. They are hoping that if they can drag this out until the next administration, they may have a chance of blocking the union at the federal level. If the fast track isn’t interrupted, the combination of Microsoft and Yahoo will definitely receive the blessing to proceed.

In the meantime, there’ll be no shortage of state attorney generals that will be willing to slay the evil giant and make a name for themselves in the process.

After all, you don’t become governor by letting innocent things just happen around you. Everyone is fair game, just look at the trail of carcasses left behind in Spitzer’s carnage of Wall Street.

Guilt has not been one of the characteristics that unites the victims of his aggressive climb up to the state house. But that’s entirely irrelevant. No hard feelings, I’m sure.

And the same may certainly hold here, as well.

Where’s the guilt?

What would be the rationale for blocking the union of the 2 players, that if combined, would be estimated to have only about half of the search business that Google would have? If anything, the environment for search and paid search would become more competitive.

But it’s all about the delay. It’s amazing to think that they may be an entirely different reception to this deal in less than a year. That’s what Google is counting on, as it is trying hard to frame an argument against the deal.

Barry Diller, another player in the search arena, with IACI, has his own problems these days with Liberty Media and John Malone, who are seeking to oust Diller and the entire IACI board. My guess is that when “Jeeves” was pushed out, after years of faithful search service, he moved his significant options and stock holdings over to the Malone camp.

Ah, sweet justice.

Injustice, by the way, would be a Google and Ask.com joint venture. There’s no way that would get through anti-trust scrutiny.

In the meantime, in its first statement after the letter was released, Microsoft has said that it expects Yahoo to accept the offer very quickly. Yahoo’s Yang, himself, has said that they would respond quickly, no doubt trying to get in under the wire, while there is still a friendly anti-trust environment.

Besides, most believe that Yang doesn’t have what it takes to pull up a chair with the really big boys. That’s why they bought Semel in years ago, and now, as of Friday, he’s resigned from Yahoo’s board of directors.

Microsft has never made a hostile bid before, although I continue to believe that what is being referred to as an “unsolicited” bid, was entirely solicited and will be well orchestrated.

Yahoo will wring out a couple of more dollars per share from Microsoft and then be able to claim that they got a great deal from Microsoft. Then Yahoo will proudly announce that its very recent disclosure of layoffs will be the last, now that Microsoft has come to the rescue.

Of course, there will also be some lip service toward maintaining the separate and “unique” culture at Yahoo.

That’s obligatory. It’s almost like the Surgeon General’s warning.

If you look very, very closely around the boarder of a Yahoo stock certificate, you’ll see that is actually written in microprint all around the periphery.

Look for it. It’s there.

What isn’t there is support for Google the company.

Goldman Sachs just dropped Google from its conviction buy list.

Sour grapes, if you ask me, left over from the days when Google dropped Goldman as its IPO leading brokerage house. Goldman also happens to be the lead advisor to Yahoo on the Microsoft deal and caught the winning touchdown pass in yesterday’s New York Giant’s Super Bowl victory.

Could you picture Lloyd Blankfein giving the victory sign and saying “I’m going to Disney”?

Goldman still has a $700 target price for Google, though. They’ll need that kind of a move really quickly though, if they’re ever going to be able to generate enough ticker tape for Tuesday’s parade.

But you still have to add that to the list of failing support for Google. That will end up being a good thing for its stock price. Just wait, if you can still take the pain.

What I think the next step for Google should be is to pour lots more money into their space program initiative.

My understanding from reading the Google bylaws is that corporate evil cannot be practiced here on earth, but they are free to do so once they are released from the earth’s gravitational pull.

Interestingly, they don’t mention that loophole very often, but it is telling that the single most searched term coming from Google’s own offices is “space launched laser systems of destruction”.

This opens up lots of possibilities for it to compete fairly against Microsoft, known to everyone as the “Evil Empire”.

The gloves are off.

 

It’s A New World   February 1, 2008 (posted 1:00 PM)

As a Google shareholder, I haven’t been very happy lately. In fact, I was upset about some of what I considered to be Google’s disregard for its shareholders even when it was approaching $750. Imagine the rants that are going through my mind now that Google is pointing another $40 points lower in the pre-open following yesterday’s earnings release.

Why exactly were we spending money on space shots?

Focus guys. Focus.

I understand why Richard Branson does it, but Google? Is there something to search for on the moon? Maybe they can use the lunar surface to house their servers in an ecologically friendly fashion.

So the word comes out today that Yahoo received a so-called “unsolicited” bid from Microsoft for $31, a hefty premium to yesterday’s close. It will probably take all of 10 minutes for Yahoo’s board to meet and accept this “unsolicited” offer. But just a few short months ago, Yahoo was at $31, without any takeover rumors propping it up.

And with Microsoft offering Yahoo shareholders a choice of cash or stock, I decided to pick up some shares of Yahoo at $28.50 and immediately sold some February $30 call options on those shares.

I’ll never be mistaken for an arbitrageur, but this seemed like free money.

Considering that Microsoft usually gets a free pass when it comes to anti-trust issues, and Microsoft said that the deal is not contingent on financing, this is a done deal.

As far as the European Union goes, who really cares? Microsoft never really even cared about the operating system and browser bundling debacle a few years ago. They’re smart guys with really deep pockets, who could easily figure out runarounds, while paying any imposed fines.

Those are just the cost of doing business. In the old days, it just would have been in the form of kickbacks and bribes.

Jerry Yang is now off the hook. He won’t be among the legions of ill-fated returning hero CEO’s who weren’t able to resurrect their moribund companies.

The question becomes how will two substandard search engines going to do against Google and will Google reflexively buy the 90% of AOL that it doesn’t already own and doesn’t need.

Google shouldn’t and won’t. But the very thought has breathed a little life into the lifeless shares of Time-Warner.

With all the talk about synergy, the ultimate synergy would be Yahoo paying Google to send Terry Semel into orbit. Maybe the architect of Yahoo’s fall into weighless orbit can help establish Google’s first extra-terrestrial colony.

Years from now, when the history of internet search is discussed, it will be Google that everyone will remember, with a few oldtimers recalling something else being around. What was that other one? Ya Who?

Microsoft’s offer for Yahoo is valued at about $45 billion. Based on what Google paid for its 10% share of AOL a couple of years ago, the remaining piece would be worth about $45 billion, as well.

Last week, I thought that Google might go down after Micosoft announced its earnings and I was prepared to pick up some more shares.

It didn’t happen that way, but at these levels, I’m ready to pick up some more Google shares once I give the market 30 minutes or so to get over some of the initial emotional trades.

In the meantime, the pre-open market rally that was being fueled by Microsoft was then killed by the official jobs numbers. Even though the unemployment rate went down to 4.9% from 5%, the revisions were killers and 100 points just evaporated in a couple of blinks.

A decline in payrolls was not exactly welcome news, but the tends to validate the Fed’s decision to drop rates and may also be validating S&P’s call that the recession started 3 months ago.

In the meantime, a few months ago I had written about Rio Tinto, which is one of my longest holdings. I’ve had shares for more than 10 years. Back then, I wrote that the Chinese weren’t very happy about the prospects of a Rio Tinto takeover and a potential stranglehold on the materials that China needs to keep its engine going and growing.

And today China acted.

They’re picking up a piece of Rio Tinto, together with Alcoa, which had also been rumored as a potential suitor of Rio Tinto. Since I also own shares in Freeport-McMoran, BHP Billiton and Lundin Mining, the trickle down effect is welcome new, especially since this sector has really been beaten up over the last month. How nice that at 10 AM Rio Tinto is up $41, while Google is now down $41.

Yin and Yang.

No pun intended.

The only problem is that I have twice as much Yang as Yin.

Isn’t that always the case?

In the new world, the one that will be a post Google-Yahoo union, Microsoft will surge to an Avis like position in the world of search. They will be a strong, but still distant #2.

$45 billion is a lot to pay to be a runner-up. But sometimes, being the runner-up can put you within a heartbeat of being #1.

No doubt that’s what America’s mayor has on his mind. Being #2 to the oldest President in history may have its advantages. There’s nothing wrong with the back door, if that’s what you’re interested in, although I don’t think that Giuliani or McCain will consider legalizing it.

With all of this talk about the Bush proposal for an economic stimulus package, my guess is that McCain and Giuliani are all for stimulating your package in the privacy of your own home, but aren’t totally ready to embrace an entirely new world.

The wonders of internet search back this line of thinking.

A Google search for “stimulus package” doesn’t seem to use an algorithm that identifies many economics related sites. Whereas there is still some debate over the nature of the economic stimulus package that should be created, the online community seems to be in near universal agreement that the stimulus package requires batteries.

Maybe Microsoft and Yahoo will be able to get it right.

 

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