Thursday, November 25, 2004

Where's the camera? Stuff just happens, don't go there Peter ,don't go there

November 22, 2004

Hello Happy Thanksgiving,

OK…What can an out of control fight at an NBA game teach us about investing? Well I guess it pays to have extra security. A new term has been coined an “NBA” moment, but folks don’t think it applies to you and me, you have to make 10 million dollars a year and have a 12 dollar beer thrown on you from a guy sitting in a 3 thousand dollar seat so you too can act like a total irresponsible idiot. And by the way according to the NBA Players Association it is all Bush’s fault anyway. Now that I have cleared that up hey, sh…stuff happens.

So if you’re not making 10 million dollars a year or can’t afford a 3thousand dollar ticket to a game but could afford a 12 dollar beer dollar cost averaging is what it is all about. You may not have the money but you probably have the time. At first it starts up slow and seems like nothing. Over time you can apply the rule of 72; divide any rate of return into the number 72 and the sum gives you the number of years it takes to double your money. So if your return averages 5 % it takes 14.4 years to double your money. It seems long to some but given the fact that Social Security will be bankrupt in less than 20 years it is certainly worth taking a shot and getting going.

Folks investing is more practice, it is doing not talking .Investing is setting a plan and working a plan. For most of us it is more about follow through than about brilliant stock picking. Sure a good stock here and there will your boost returns, but the truth is a couple of mediocre funds or an index fund over time with follow through will breed excellent results. It is all about consistently working the plan, adding money time in and time out.

So what do investors have to be thankful for? Well for one Microsoft is finally going to pay out the 3 bucks, Kmart discovered location, no one raised taxes on dividends, short term capital loses and long term capital gains, tankers ,trucks and trains , just google it but sell it before the lock up ends.


Ps. Again thank you for all the referrals!

Thursday, November 18, 2004

Rio Bravo..a blue light special and Google

November 17,2004

Well it’s not Rio Bravo either, but the market is starting to exude more positives. Compelling valuations that’s what we see and apparently even if some investors are not sold on the value of stock investing; Corporate America has gotten bitten by the merger bug. Dow Jones found value on the internet and Kmart found value in Sears real estate. It is all about location; location, location, location. Speaking of location as you may know I have been cool to this whole “google” thing since its inception. I didn’t like the way the IPO was conducted, I thought the timing of the thing was a day late and a dollar short; I don’t like the capitol structure and I wanted to wait and see for the lock up period to end. Well as you know google doubled in price since the IPO, but recently there has been more criticism of the way the IPO was conducted, including some that suggested that the mishandled road show caused a much lower IPO price leaving a lot of money on the table.

The number of outstanding shares to be freely traded will increase from 22.5 million to a tad fewer than 300 million by February. That is a 10 fold increase! What is a “lock up”? The lock up period is a time period that insiders, original investors, employees and other have to hold stock and are not allowed to trade it freely. Google is not unique in this practice, but the size of the lock up stock compared to the total outstanding stock seems very significant. This is why I remain hands off till I see the lock up end or as they say the “stuff” hits the fan.

Once again inflation has reared it ugly head or has it? Those of you who are regular readers would note that I have constantly swam against the current of the “sky is falling inflation is coming” crowd. Wholesale price increases and consumer price increases have ever so temporary spooked the market again only to be shrugged off one day later. The reason is simple the effects of reflating are not in them selves a trend of inflation. Folks how easily we forget that a little over three years ago we were on a ledge looking straight down at the specter of a deflationary depression. Looking at Japan of the late 1980’s and the Great Depression the FED and the president got together and decided to flood the market with liquidity, with the motto, thanks to P.Diddy “deflate or die”. Recently higher oil prices, which are coming down, a declining dollar and hurricanes displacing the winter food crop, are all contributing to short term price increases. We would need to see several months of data suggesting a consistent uptrend. “Better to devour the data and beware of the dogma”.


Thursday, November 11, 2004

sore flu shot for Santa

November 8, 2004


I think the theme of this weeks email is that as investors what we can learn form this year’s Presidential election, is don’t believe your own B.S. Media created truths don’t win elections or make winning portfolios. It is one thing to tell a good story, it is entirely another to believe it yourself. If it makes no sense, it is nonsense. Reality is reality and no amount of agenda driven lying can change it.

So what kinds of stocks look to prosper in the next four years? At the moment many of the same themes look to be intact in the second Bush administration as the first. There are some issues that can be affected by leadership and there are some issues that are consequence of longer term activity. As investors we attempt to separate the two and act accordingly. First there is Security because of continued terrorism, transportation because of a shortage of rolling stock, housing because of demographics and low interest rates .All these sectors point to continuation of the status quo. I would also add that the internet sector which has finally started to do something it had failed to do consistently in the past; make money. And then there is the policy part; more tax cuts, tort reform, interest rate increases, social security private accounts and judgeships. I think it is better to discuss these as they surface.

At times I have found it very frustrating in my efforts to articulate varying levels of risk with different investment selections. The definition of Risk is the issue it seems. It has come to my attention that most novice investors think of risk entirely differently than professionals. To most novice investors risk is simple; if the stock goes up there is no risk and if it goes down there is lots of risk. If they make money there was no risk and if they don’t there was risk. Most novice investors confuse making money in the short term with a level of risk. Folks risk has almost nothing to do with weather you make money or not. Risk is often entirely independent of investment results and entirely independent of short term investment results. Risk is inherent in a particular investment. Risk has many variables. Risk changes with time and circumstances. Risk is often deceptive. Risk is like an Iceberg, the big part is often hidden under the surface. Certain types of investments have more risk than others. Risk is a combination of volatility, consistency and duration, which means most investors, should think of risk as the velocity of which you could lose all or most of your money. A simple rule of thumb is take the time it takes and investment to double and divide that number in half and that’s the time it takes to lose that gain. The shorter the time the greater the risk.


Thursday, November 04, 2004

he's back......but america was not "cowed"

November 3,2004


They are all back, President Bush is back, Bill Clinton is back, Bin Laden is back. And Hillary is coming back oh my.

Well it is over, yes it really is over including the shouting. Everyone should be proud of them selves, the American people have spoken. Someone asked me if I was happy because my guy won? Remember I am a Yankee fan, so as a Yankee fan I always expect to win. It doesn’t mean I feel entitled to win , “winning” is just a state of mind .You work hard ,do what it takes ,learn from your mistakes and just win baby just win. So all and all I am more or less, “satisfied” with the out come and would say of coarse my guy won I never expected anything else.

So who are the big winners? The American people; for turning out in record numbers to vote and having a good time doing it. George Bush; for getting elected by the largest number of voters in US history. The Republican Party; for picking up even more control of congress. The people of Afghanistan and Iraq ;for getting the full support of the American electorate. The US Military for totally kicking arse. Karl Rove; for making all his detractors look stupid, again. Dick Cheney; for delivering the three electoral votes from Wyoming. Halliburton , because you love to hate them and now you get four more years of fun doing it. Hezbollah; for a successful distribution of Fahrenheit 9/11 thru the Muslim world. Michael Moore; for becoming the most quoted source of international terrorism. John Kerry ;for being the first man to give successful mouth to mouth to a hamster. Theresa Heinz Kerry; for inventing a new cure for arthritis. The Bush twins; for a successful start in the world of public speaking. The “new media” ;for getting so much of this thing right most of the time. Hilary Clinton ;because 2008 is only four years away. Stem cell researchers; for conning California Tax payers out of over 3 billion dollars to do totally bogus research and finally the Boston Red Sox because I simply cant believe they won the World Series and the world didn’t come to an end.

Losing I am afraid is also a state of mind ask any Mets fan. So who are the big losers? Well I bet a lot of pollsters will be searching for new career options. The mainstream media for looking totally clueless, losing all shreds of credibility and by the end got found out for the partisan hacks that they really are. The Democratic Party; which is in a severe state of decline. George Soros; for his failed very expensive bid to buy the US government. Global Elitists of all ilk’s, you know who you are, looking like idiots and we wont forget there follies. John Edwards ;who gave up his Senate seat to become and unemployed trial lawyer ,who often sounds like Forest Gump. Bin laden for backing a loser. Islamofacists; for not realizing President Bush will never campaign again and there for is free to do what ever it takes the next four years. The UN and it policies to promote terrorism, tyranny and global criminality. Hollywood ;for reminding us that beauty is only skin deep and finally Bruce Springsteen ;for reminding us why there are all those jokes about New Jersey.

Finally I just want to say that with the election behind us and a diminished threat of terrorism at home ,a decline in oil prices, a robust economy and a depressed stock market are a recipe for a big upside move in the market in the final days of 2004.


Ps thank you again for all the referrals I very much appreciate the new business…….