Sunday, August 31, 2008

Sunday Shocker

Ben Stein in the NY Times wrote a whole column that I agree with.

"He (Obama) is a fine speaker, and when he talks, he often does so in the nuanced, well-thought-out way that reminds me of my finest law school professors.
But I am a bit worried that his knowledge of economics may not be as extensive as his legal background. In particular, he’s been campaigning with an idea of a second round of economic stimulus to combat the evident slowdown in the economy, to follow President Bush’s first round that is now wrapping up. The first round hasn’t succeeded, and Senator Obama’s ideas aren’t very promising, either.
In that first round, the government has basically borrowed $80 billion to $100 billion and used it to send out checks to most American taxpayers. The hope was that the extra money in taxpayers’ pockets would stimulate consumption."
The focus of the column is not only the ill-advised 2nd stimulus package but also O's reported plan to pay for it but levying a windfall tax on the oil companies, an idea I have written before about (it's stupid).
A liberal newspaper and Ben get it right. Way to go.

Saturday, August 30, 2008

Early Grammy Nomination

By Braaak, of course, who is not a member of any Academy that nominates anyone for anything. Nor am I the most talented singer/songwriter of my generation. I'm also not a music producer.

Song of the Year: Viva La Vida by Coldplay.

If you listen to the radio at all you know this is not a controversial choice. Other than it being a good song, my reasons for picking it may not be so obvious. As follows:

1. This is the 1st Coldplay song that I can remember where they don't sound like they're trying to imitate U2.

2. The violin(s) arrangement is awesome, especially for a pop song.

It may be chick music, as I've heard some say, but I think it's a winner.

Internet Access Pricing Model

Could this be a sign of things to come?

Comcast yesterday announced that it would begin to limit the amount of Internet usage each of its customers is entitled to. Or attempt to.

Their first move is pretty innocuous. Users that transfer over 250 Gigs in a month will get a warning. 250 Gigs is a ton of traffic. 50 million emails. A warning? No big deal.

What concerns me is what may be at the end of this road. With all monthly access priced the same, Comcast has chosen a pricing model that has internet noobs subsidizing the power users in terms of access cost. I'm probably in the middle somewhere, and a Comcast customer. Changing the pricing model is at the minimum an opportunity to raise prices.

I won't be surprised to be paying more for internet access soon, or paying per Meg.

Imagine how confusing a Comcast bill is going to be if they attempt to itemize all uploads and downloads?

Friday, August 29, 2008

McCain is Brilliant

I was playing golf today when the announcement of McCain's running mate, Alaska Governor Sarah Palin, was rolled out so I missed a lot today.

Let me start by saying that it seems to me as if both McCain and Obama are willing to go out of their way to defy conventional U.S. political traditions and thinking. Obama's entire campaign, or most of it, has been run seemingly without regard to the old boy dem network. Heck, he didn't pick Mrs. Bill as a running mate which would have made his ticket a slam dunk. I'm impressed by him by don't like his fiscal and economic policy as stated to date. Whatever.

McCain proved again today that he is marching to the beat of his own drummer. Nobody saw this coming. I don't care that she's a woman although that will carry historical significance if McCain wins. I like the fact that she's an outsider. McCain is setting up his presidency, should it happen, such that he owes almost nothing to the republican machine.

I've mentioned this before, but I'm not American so please don't think I'm stumping for either party. I can't vote and don't care whether you do, but consider the possibility that both candidates may actually be in the position to do what they think is right.

Dell + Banana Peel = Ouch

Dell is trading down over 10% in the premarket after missing earnings estimates last night.

Dell has had a nice move from around $20 to $25+ but it's not like it has been hitting home runs lately. This long-term turnaround story apparently hasn't fully turned around yet.

What is intriguing is that it seems like everyone who cared to comment on the Dell quarter in the last month was expecting upside. No so fast.

The miss and investor reaction highlights the difficulty for both company execs and analysts to predict short-term results for publicly traded companies. Investors naturally have the same difficulty, if not more. I have written in the last 6 months that I am optimistic about Dell's prospects longer term, but the short term is just too hard.

Thursday, August 28, 2008

This is One Strange Commercial

A very Canadian friend sent it to me. I hate Guiness, by the way.

Wrong Again

The futures are popping as 2nd quarter U.S. GDP was revised up from 1.7 - 1.9% not sure of the discrepancy there) to 3.3%. This economy is stubborn, mostly self-correcting and generally user-friendly.

This should bode well for the dollar and retailers all other things being equal.

The inability of the powers that be to accurately measure economic statistics should surprise no one.

Thursday Doldrums

Oil is up and the dollar is down as storm Gustav heads for the Gulf Coast as predicted.

The futures are down a little as Obama will accept the Dem nomination today. Maybe someone will sit him down and explain the economy to him.

Fannie and Freddie continue to be a massive drag on the financials with no obvious solution in sight.

Long weekend ahead. Let's get this week over with without and more casualties.

Wednesday, August 27, 2008

Waxing Poetic

I just clicked through to a site call The Positivity Blog and was reading an entry entitled "16 Things I Wish They Had Taught Me in School".

Rule # 4 is "First, give value. Then, get value. Not the other way around."

I stopped reading after this one.

It goes on to say "If you want to increase the value you receive (money, love, kindness, opportunities etc.) you have to increase the value you give. Because over time you pretty much get what you give."

I could talk about the youth of today but don't need to. As a father of 3 kids, a big concern of mine is that my kids don't/won't get this point. Kids are used to having things given to them. It's structurally impossible for that not to be the case. At what point, even if they're not spoiled, do they figure out that giving, offering, helping is a good thing?

I Have No Oil

Oil is up again as storm Gustav threatens the Gulf Coast or somewhere down south. There are storms every year and almost none of them, in my opinion, have a lasting effect on oil supply. Get over it. As for the prognosticators that view the decline in oil as a signal that global growth is slowing, please consider the fact that people are using less oil when prices are higher. Also, as crude charts are breaking down, financial buyers have less appetite to get long.

If some other asset class begins to outperform commodities, I think we'll see oil below $100.

Tuesday, August 26, 2008

Happy Trails Dopey

I was going through my IE favorites menu today and clicked on His blog is gone. In its place is a link to a YouTube video for the song Happy Trails or whatever it is called.

The anonymous dopeycowboy apparently was a sales trader with a very sarcastic wit and an affection for scantily-clad cow girls.

Someone in his firm probably threw him under the bus. There are all kinds of reasons, compliance and otherwise, that a Wall Street firm wouldn't want an employee publishing anything unauthorized.

Dopey, if you happen to read this, come back soon.

Obama in the Spotlight

Fox News is reporting that these two fine gents were arrested this week on drug and firearms changes in what may have been a plot to assassinate Obama.
InTrade, the online prediction market, still has Obama as a 61% favorite despite some recent polls have McCain puling nearly even.
It's going to be interesting. Let's hope everyone stays safe.

Thursday, August 21, 2008

Short Memory For Sure

Usain Bolt is awesome. His performance in Beijing was awesome. 2 gold medals and 2 world records. He's tall and handsome.

CNBC conducted an informal poll this week, the topic of which was, "What is the biggest story of the Beijing Olympics?"

Bolt is running neck and neck with Michael Phelps. Michael Phelps.

Phelps won 8 gold medals, a perfect 8 for 8. Maybe the best Olympics of all time. The problem is that it happened last week.

The Beatings Will Continue

Until Morale Improves

$2 Billion hedge fund Andor Capital announced yesterday that it will shut down and return money to investors, according to Marketwatch and others.

The fund is down this year, but not by so much that it has to shut down according to the word on the street. Rather, the environment is just no fun. Andor is run by tech investment legend Dan Benton, former Goldman Sachs tech analyst who wrote the legendary one-pager titled "Rules for Technology Investing" or something along those lines.

I have a copy of it somewhere but it contains brilliantly simple concepts such as, "Sell stocks when earnings estimates are going down."

Tuesday, August 19, 2008

No Deaths or Serious Injuries Yet

The Canadian tour continues. We are at our 4th stop, Hamilton, Ontario, returning home tomorrow. It's nice too see that oil is still headed lower.

I'm not sure why everybody is making such a big deal about Lehman selling its Neuberger stake. Two things: Either they need more capital or they don't. Since they're considering they sale I guess they do. After they exit the asset management biz, the investment bank will have to stand on its own. Is that a big deal? Banking might not be as good a business as it was but if Lehman can't cut it they're going to find out sooner or later regardless of whether they own Neuberger.

I had no cell phone service in Northern Ontario the last week or so and didn't miss it. I only checked my email once. The truth is that I refuse to use dial-up Interweb but it felt like a true vacation being away from it all for a while.

One of the highlights of the week was undoubtedly a heated negotiation between myself, my partner in the golf tourney we played and a couple of local guys over a wager we ended up losing.

Athlete-turned-local politician Al French and noted short stop Jean-Guy Chamaillard, despite a wealth of local knowledge and undeniable natural ability, managed to swindle a few strokes from us for the last day of they tourney. As I mentioned, tyranny triumphed and we lost the bet. I have to question what they lost in the process. I remember when I was in Business School and we had a case study project in a Labor Relations class. The assignment was a mock collective bargaining session where two sides negotiate a contract and the results are graded. My team acutally got a bad grade because we got too much from the other side. Familiar territory.

Tuesday, August 12, 2008

Gone Fishin'

The family and I are about to head to Canada for 10 days - and we're driving.

Clark Griswold style.

We me luck. I'll be posting again in 10 days.

Monday, August 11, 2008

Oil Continues to Help This Market

Oil is down again - to $113/barrel from its high of $147 or so.

Anyone who held the opinion that speculators had no role in the commodity's rise are being proven wrong as far as I can tell.

While I still don't think the regulators needed to do anything to curb the rise or the activity of speculators, denying that they were a force was just wrong.

It's a free market. Supply and demand win again.

Getting Sirius

Now that the XM/Sirius merger is complete, CEO Mel Karmazin has big plans.

The NY Post quotes Karmazin :

"We're going to be the most successful company in radio," Karmazin said in an interview with The Post. "We're going to be bigger than Clear Channel because we're growing and they're going the other way."

Sure they're growing, but while they have clearly laid out the next round of cost savings, but they're nowhere near profitable and it's not clear to me how they're going to finance the continued operation.

Or the wild card. If you really had designs on being the largest radio operator, wouldn't you be looking at an acquisition of a traditional radio property? The problem is that with the common at $1.30, there's not a lot of currency there, and the balance sheet needs less debt, not more.

I think it's more likely that another media outlet buys them.

Saturday, August 9, 2008

Is This Really Happening?

CARACAS, Venezuela (AP) -- At least 38 Warao Indians have died in remote villages in Venezuela, and medical experts suspect an outbreak of rabies spread by bites from vampire bats.


It's like a bad horror movie.

This Market May Be OK

The S&P 500 rose almost 3% this week amid more bad news from the financials.

We probably aren't out of the woods, especially with the big banks and brokers, but there are two very important things going on.

The first is that oil has backed off from $147 to $115. There is simply less demand above $4/gallon.

The second is that McCain has been gaining on Obama. I'm not sure whether McCain will be a good president, but I am sure that Obama's tax policies as he has pitched them to date would be a disaster for U.S. business.

Stay Tuned.

Thursday, August 7, 2008

Citi and Now Merrill

Citi and Merrill are making the buyers of auction rate securities whole, even though the product was in no way guaranteed. This whole mess is, well, a mess.

The financials are clearly in the crosshairs as the regulators are breathing down their necks. They sold a too-good-to-be-true deal and the buyers are getting off the hook. Cash is cash. ARS's are not, were not.

The fact that the financials are willing to roll over on this is sad. My view is that the regulators are taking way too much liberty. If it turns out that the brokers lied when selling this paper, then that's another story but I was at one of these firms for years and they never rolled over on anything.

Long MER

Brett Favre

In one of the greatest sports PR moves in a while, Favre signs with the NY Jets. Ding ding ding. It's a slow news week with the Olympics about to kick off so his timing is impeccable.

The Big Apple is going to love him if he can produce.

Wednesday, August 6, 2008

Whither the Fed

The Fed left rates unchanged yesterday and shifted to a neutral bias, i.e. they are no longer inclined to raise rates the next time they move. So goes consensus after yesterday's decision.

I think the Fed is in a no-huddle offense whereas a "neutral bias" would imply that the Fed is playing defense. Bernanke wants to get this right and there is a lot of bad stuff still in the system. The market is self-correcting in the long term but the Fed Chairman is likely to do anything he can in the short term to avoid further damage to the financials and/or the economy.

Absent a better market, I wouldn't be surprised to see lower rates ahead. Could be bad news for the U.S. dollar though.

Tuesday, August 5, 2008

Ends and Odds

Even with oil having gone from $148 to $118, it is not going to be easy for this market to work if oil is going down because the economy is getting worse. It's a positive that consumption is down, though.

Boy oh boy I wouldn't want to be the new CEO of Motorola.

Sirius CEO Mel Karmazin yesterday walked on hot coals, put is head in a lion's mouth and then bought some of his company's stock.

"Someone" has now "broken" the story of "Lehman considering selling Neuberger" about 50 times.

I can't imagine the Fed doing anything this afternoon. I bet they are as confused as we all are.

Monday, August 4, 2008

More on Obama/Windfall Profits

If you have a 401(K) plan or own a mutual fund, you probably own some Exxon or some other oil company. Look out.

If this windfall tax idea gets any traction, you may well lose some real money. I could say that it could be more money than you would save at the pumps, but a bogus windfall profits tax isn't going to make gas prices go down.

Whoever runs the mutual fund that you own owns Exxon, or any company for that matter, with the expectation that it is going to go up. Stocks usually go up when returns available to investors exceed expectations. If those returns are capped, the stocks are going to get murdered.

Required Reading

An editorial today in the Wall Street Journal should be required reading for American voters no matter what party they are leaning toward. (I'm not an American voter).

What Is A Windfall Profit? is similar in sentiment to something I wrote in a previous iteration of this blog. The WSJ version is better.

Tuesday, June 10, 2008
Windfall Profits Taxes are a Bad Idea
Google (GOOG) and Goldman Sachs (GS) should be very worried. Obama again today said that he would if elected impose
windfall taxes on the oil industry.

"I'll make oil companies like Exxon (XOM) pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.

I don't understand why he or anyone else thinks this is a good idea. What he is really doing other than currying favor with voters is punishing Exxon for being big, and lucky to be in an industry that is in tight supply right now.Last fiscal year, Exxon made $40 billion net. Yes, that is a lot of money.GOOG and GS, two fine and revered American companies only made $4 billion and $11 billion respectively.

GS's net profit margin, after all costs including taxes, was 13% last year.

Google's was 25%. Exxon's was only 10%.Economists, but maybe not Obama's economists, would tell you that this is a very silly time to disincentive the oil companies from producing more oil, as I hear happened back in the 1980's. I was young then. Mr. Supply and Mr. Demand are running most of the economy. If the powers that be want to help the market in the right direction, they need to:
- encourage less energy use (demand)
- encourage more production of traditional forms of energy to the extent we don't wipe out the environment (supply)
- vigorously encourage development and production of alternative forms of energy (supply)

Instead, Obama is promising to punish Exxon for being big and fairly profitable and telling U.S. consumers, "Go ahead and use all the energy you want."
Smaller, very profitable American companies should hurry up and figure out a way to make less money.

McCain Getting Jiggy?

PRINCETON, NJ -- According to Gallup Poll Daily tracking from July 29-31, John McCain and Barack Obama are now tied at 44% in the preferences of national registered voters.

I have thought since both candidates were obvious nominees, that Obama's campaign had some holes in it that could be exploited. It looks like McCain has made some real progress even though I didn't/don't think the race is that close.

InTrade, the online prediction market, still gives Obama a huge 60/40 lead.

If You Own a Mutual Fund

That goes up more than 100% in one year, you probably should sell it.

Abnormal out sized gains feel great when you are on the receiving end. The risks one needs to take to get there are significant.

The Wall Street Journal today is reporting the Garrett Van Wagoner, skipper of the Van Wagoner Emerging Growth Fund is hitting the showers. The fund gained nearly 300% in 1999. Even including that year, the fund has lost 10% per year over the last decade.

Van Wagoner narrowly focused, as the name if the fund implies, on emerging growth stock - small, rapidly growing companies, many of them in the technology space. That is a very tough sport. When the market turns against these types of names, the selling can be devastating. Valuations tend to get so stretched on the way up that there is almost no suport on the way down.

I have a buddy we call Dirt who was a Chief Financial Officer type at smallish firms for years. He once told me that he wouuld never work for a pubicly traded company. Probably for lots of reasons but the strain of making estimates quarter after quarter is a big deal.

Friday, August 1, 2008

Happy Friday

I am out of town and wasn't planning on writing anything today but a couple of things struck me.

GM is leaking oil in a big way and the market is shrugging it off pretty well. I think the U.S. manufacturing industry has reached a level of unimportance to all not employed by it that it is going to be easier and quicker for us to pull out of economic downturns.

Sun Micro (JAVA) cannot seem to figure this whole thing out. I'm not sure what's next but Jonathan Schwartz is certainly not delivering Sun shareholders to the promised land.

Enjoy the weekend.