Monday, August 25, 2008

Convention music

Who chooses this music? Who goes to conventions that can clap to these hyper-lite anthems of the '70's and 80's that weren't particularly popular at the time they were current and generally just live on in dentist's offices. This is a non-partisan comment, and I approve of this message.

Convention starts, media focuses on the Clintons

As the Democratic convention starts, the biggest story appears to be debating how badly the Clintons will behave. These two self-centered individuals are milking this moment for everything it's worth, their resentment of Obama's win still visible despite any words they say. They are focusing on 2012 and, let's take any drama out of it, any words they say will be just words and holding back their real support will be the message between the lines.

The media is making hay over this of course. They are finding Hillary voters who say they will support McCain and pretending that there is some movement afoot. The fact is that there is none. Hillary's voters in Pennsylvania, Ohio and Indiana are McCain Democrats, and would likely have been his even if Hillary had won. So-called "voters for Hillary" who can now vote for McCain and therefore more anti-libertarian Supreme Court choices are not real Democrats, not real liberals, not real folks seeking change. They must be just those bitter resentful types who never stood for anything, and who revel in being found by the media. They are not worth wasting time over.

Neither are Bill or Hillary Clinton. They have become embarrassing caricatures of themselves, especially the first man hopeful. He thought he was a shoe-in to be back in the White House, living off the government dole with servants at every corner, forced friends at every turn, and free turbot. He was President, and did almost nothing with his enormous opportunity, and he wanted to be back in his emperor's role. It will be interesting tomorrow to see if he sticks with the agenda or instead just takes over and goes off on an unscripted self-congratulatory rant. If that happens it would be to the Democrat's benefit if the Convention would boo him off the stage. He deserves nothing at this point. Hillary's conniving will continue but she will acquit herself in a way that will be, on paper, unassailable. Her real message will still be clear.

And the convention begins.

Sunday, August 24, 2008

Free Dennis

Free Huey? No it's 2008.

On the eve of the Democratic convention there will be no echoes of the 60's but Free Dennis could be one a strange one. Back in those early 2000's when the authorities that be were crushing the "corporate villians", making reputations and handing out severe sentences, one Dennis Kozlowski was given a sentence of 8 and one third to 25 years for fraud. He was CEO of Tyco. His behavior in general was outlandish and not attractive, but his sentence is what is criminal. It was the Spitzer, northeast Democrat mentality, the one that crushed the securities research industry to great damage and villified legitimate legends on Wall Street for political gain. It was not just New York State of course. The Feds jumped in all over the place, certainly killing the estimable and misguided gentleman Ken Lay in Texas and putting the screws to some other real crooks like Skilling and Fastow(Enron), as well as a former high school basketball coach turned into an over his head accounting illiterate hustler named Bernie Ebbers(Worldcom).

But let's get back to Dennis Koslowski. He was convicted in New York State court and is in Attica, the most notorious prison in New York, home to the worst of the worst. His crime, well, there are two apparently. First, he was convicted of having manipulated salary and bonuses that were too high and that the victims were shareholders. Second, he was convicted of having artwork shipped for purchase to Vermont and then sent to New York to avoid sales taxes. OK, one count---a technical question as to whether the Board of Tyco actually approved or did not approve that he had exceeded his power in compensation(it's clear that he manipulated higher compensation but it could appear that he did so with Board approval, contract law that is questionable jury material), and second count---guilty, New York State tax evasion, but arranged by him?, but let's just say guilty.

His supposed parallel partners in crime, whether the ones mentioned or former Wall Street or folks, are all in Federal prisons, no lavish life but not the notorious Attica. The fact is that Koslowski's biggest crime was acting arrogantly and displaying wealth obscenely, not unlike Donald Trump but within a public corporation that was widely held and not under his absolute control. Trump has a television show and Koslowski is in solitary. Tyco did not fail like Enron or Worldcom or some random dot.coms, in fact it's fine. The employees have their jobs within the normal ebb and flow of corporate culture, split off activity and m&a. The stock price fell as the premium for certain special conglomerates like GE and Tyco was wiped out in the early 2000's but it's still around and being managed, and even today compare the 15 year track record to GE and see what you get. It's fine. Enron and Worldcom are of course gone.

This is one of those prosecutorial victories for ego's sake that no one wants to revisit, and because of Koslowski's over the top behavior there is no benefit for any politico, and in New York the court system is 100% politics above all else, to step forward and correct this injustice.

It is unlikely as the court system is based on resentment and political benefit. But hey, he's in his heart a good man, salt of the earth, went astray but broke laws that should get six months outside of the realm of publicity for the pols, and he should be released now. Put him in a halfway house and give him a job helping to manage a soup kitchen or charity. Within a few months that charity would be running like never before. I'm not kidding.

Free Dennis.

Saturday, August 23, 2008

Looking good

From an Inspector Montalbano Mystery:

"You're looking good," said the marshal, eyeing him.
Montalbano got worried. Often of late that statement didn't sound right to him. If someone tells you you're looking good, it means they were expecting you to look not so good. And why were they thinking this? Because you've reached an age where the worst could happen overnight."

Andrea Camilleri, "The Paper Moon"

Wednesday, August 20, 2008

James Lee Burke's novels

James Lee Burke is one of those crime genre novelists who has created a cottage industry that is obviously self-sustaining as a result of his prolific output and his popularity. He has published 32 books to date, 17 of the Dave Robicheaux series, 4 Billy Bob Holland's, and then his other fictional output which may or may not be of the detective/crime genre. I wouldn't know. This is all new to me.

Last week I entered into his world for the first time when picking up "The Tin Roof Meltdown", a novel set in New Orleans and bayou country at the time of Katrina. My take on Burke is that he is in the top tier of the crime genre with a talent for capturing the atmosphere of places, meaning dialogue/dialect, subcultures, and physical setting. My reason for picking up the book, reading this bayou resident's description of Katrina, was rewarded. His writing may be fiction, but some of this description was not and what he describes is in some instances more harrowing than what we know already, or maybe just painful to take a look at again. The novel itself is pretty much standard fare in that a tough but decent guy who is smarter than he seems at first is set against just absolutely horrible villains plus a few characters who do surprise changes of character as the story develops. If one is in the mood for this type of book, "Blowdown" captures the attention and from time to time has some insightful asides, even a few good enough to be page markers. Like most novels of this genre, however, it just ends when it decides to end and you're left hanging, thinking ok, so that's it. What did I get out of this? In most cases, entertainment or the passing of an airplane ride or sit on the beach. That can be enough.

In "The Tin Roof Blowdown" I got the feeling, even though I had never read one of Burke's books before, that there was a push for greatness. It's understandable. With the legitimate Katrina related hook, there was the chance to get to a broader audience, and expand a literary reputation. Why do I say that. The descriptions in the book of scenery, places and people's faces were elaborately florid, verbose, and at times repetitive. And then there were occasional references to the work of titans of literature, there were quite a few but William Blake comes to mind now, that seemed more than a little forced. Since I was ok with the book in general I decided to test that thought out, went back to the library and picked up another Burke book, this time a Billy Bob Holland, called "In the Moon of the Red Ponies".

To some extent this was a better written book because, my observation based on having now having read 6% of his output, this book had virtually no, maybe none, references to writers of great books and the writing was overall more sparse. Don't get me wrong, Burke loves to exhaustively, or ingly, describe the way people and their faces look and nature's scenery in detail, but it was toned down by half in "Red Ponies". The startling thing, reading the two back to back(the books published in 2007 and 2004), was that the template was almost identical. "Red Ponies" is set in Montana, the author's second home, and has a protagonist with a different name but the set-up and evolution of the story is the same. Of course it's no real surprise. Whether it's a television series or book series, you come back for more of the familiar. I prefer books, but try reading two by the same author in a week.

This has not been meant as a knock on genre books. Crime, mystery, I read my share. And the comment that "it just ends when it decides to end" can apply widely. Richard Price, apparently viewed by the New York Times Book Review as a successful crossover between genre and literature as evidenced by their cover page review a couple of months ago of his new book "Lush Life", does exactly the same thing. The ending of "Lush Life" is a resolution when all story lines are exhausted not unlike the conclusion of "Red Ponies".

Anyway, this post must now just decide to end. In closing, my absolute favorites in the crime mystery genre are books by Donna Leon and Andrea Camilleri. Both write books with a sensibility that leaves me feeling that have I have experienced characters that have an attractive approach to life. They have humor built on life observations and not jokes, and they have good guys and bad guys but don't delight in detailed violence. Those endings though, sometimes they fit the genre but at times they are graceful, especially in the case of Camilleri. Regardless of the close, with either author I still feel refreshed.

Monday, August 18, 2008

NYT's corporate tax editorial

Today's New York Times has an editorial entitled "The Corporate Free Ride" that states that corporations are underpaying their taxes, generally speaking, with small corporates leading the way in this practice. This solution-free editorial comment notes that U.S. corporate tax rates are among the highest in the world, and calls the situation "a uniquely American paradox".

Here's an answer. Simplify the tax code for individuals, small businesses, small and large corporations. There has been and is now no leadership in the executive or legislative branches to do this(one of the few truly bipartisan efforts over the last 16 years). Complex rules lead to complex strategies to minimize taxes paid, as any corporations shareholders want that company to do in a legal way. The NYT does in one sentence heavily imply that many corporations are breaking the law on transfer pricing between countries, but it is a totally unsupported statement typical of the Times general opinion of U.S. business. No doubt a few corporations have hit the chalk line on this, but the great majority hire tax attorneys at sizeable salaries to manage taxes as efficiently as possible, avoiding legal issues.

Could a new President possibly understand the need for simplification, and the next Congress possibly give up the bounty from all of the tax loopholes that they slip into legislation for their constituents. Unlikely, but it would be worth a try. Some economists say that simplification with less loopholes would lead to more compliance, higher receipts, and the opportunity to encourage R&D and capital formation(and jobs) through lower corporate tax rates.

Tuesday, August 12, 2008

Useless, harmful, politicos, Cuomo and Galvin and auction rate securities

In the tradition of the unequivocally awful Eliot Spitzer, Cuomo of New York and Galvin of Massachusetts are using the auction rate securities issue to political and public relations advantage, both with planned Kennedyesque personas, to catapult their careers at the expense of public utility and shareholder rights. They are repulsive folks, but typical of the reason that the Democrats lost control. The Democratic Party, with Obama hopefully, must dump ultimately cleanse the party of these types. I wish them them the best mistresses, prostitutes, and drugs that they can find to continue a recently revived long standing tradition. I mean, everyone wants to be a Kennedy.

The settlements on the auction rate securities(ars's) are just bizarre, the prosecutors not the vendors should be jailed. Just say, for example, probably not too off the mark, that 50% of the dollar value of arc's are held by institutional investors, 40% by investors with over $10 million in assets, and the rest by smaller investors. Cuomo and Galvin to the rescue, with political ambitions so big that no societal utility exists in their minds. "Just Me" is their only thought.

Included in the settlements so far, with a gun at their head, are agreements to compensate institutional investors. That is so f---ing bizarre that it begs reason. CEO's and senior execs at banks make large, some obscene, salaries, some are stupid, but they are public figures, they support charities and show up at multiple events, and operate utilities that help our society function. Institutional fund managers are for the most part anonymous, take pride in their position above normal society, and make as much or more money than the accountable CEO's. They also can coordinate huge campaign contributions..

Also included of course in the settelement are high net worth folks who hire advisors to drive their investments or who know the markets well enough to be in on the higher yield of auction rate securites for more than 20 years. Compensate them too, you big easy target conduit banks and brokers who ultimately must factor these costs into the thousands of branches and millions of customers that they serve, my mug in politics is all I care about, that's Cuomo and Galvin.

Right, there is no doubt people like my 90 year old father who could have had some of this is in their porfolio. He doesn't, but with his portfolio of 2035 bonds and 2014 CD's, plus lots of mortgage stuff that is down 50% it just shows how companies, in my father's case, Citi, can work to manage their customer's assets without explanation, and by any ethical measure in a criminal way. These folks should be held accountable but that doesn't get headlines. Some good attorney generals across the county are doing that, but not the New York and Massacusetts politicos.

The careers of Cuomo and Galvin are now being driven by a huge waste of financial resources at just the wrong time. They are giving huge amounts of money to their low key rich supporters and taking away from the companies that actually do something. They, Cuomo and Galvin, like Spitzer, are damaging to our society.

Monday, August 11, 2008

Harps and Angels, Randy Newman

Music---CD--- listening for those with an appreciation of great lyrics, a big sense of irony, an acceptance of obvious humor despite it all, an interest in historical perspective, baseball, immigrants, young girls, Koreans, newly cut grass, a love of American music(bias New Orleans and Tin Pan Alley and the piano), potholes, and love, but possibly not interesting to those who are not above the age of 16.

This is just a wonderful unavoidable must have CD for anyone who fits this bill. That's an opinion. It can be so insightful that it breaks your heart. That's if you listen slowly, don't rush the pace, relax(easier said than done), it's good. It's right.

Sunday, August 10, 2008

In this market, Barron's top 100 tells the story

Barron's lead story this week, "America's Best Fund Managers", highlights the difficulties of managing in the recent equity markets. While not soothing to the pocketbook, perusing the results of this select group of mutual fund managers is at least a little relief to the ego.

Using a proprietary model in conjunction with Value Line, the ranking takes into account performance over current, one year, three year and five year periods, performance relative to benchmarks for funds with similar goals, and the volatility of performance, among other variables. This top 100 is winnowed down from an analysis of 1008 mutual funds with at least $200 million in assets each, many much more than that. The top four managers all had impressive results across the board. But look at the recent results for some of these other superbly ranked stars of the investment community.
---the #5 ranking went to a manager with negative 6% performance year to date, and one year performance of negative 4%.
---the #6 ranker had negative 8% ytd performance and one year performance of negative 16%
---the #11 ranking went to a negative 15% ytd and negative 20% for one year
---#12, ytd negative 12%, one year flat
---#22, ytd down 15%, one year down 12%
---#30, ytd down 23%, one year down 19%

Go below the top 30 and these types of negative results for recent periods become the norm, and these are the top performers. Absolute performance is not, of course, what they are measured on, relative performance is their metric. For everyone else, however, absolute performance is what catches our attention. Looking from this perspective, the majority of these top 100 didn't come close to dodging the market's bullet. Sobering isn't it, or maybe not.

Wednesday, August 06, 2008

Virgil Goode

The congressman from Virginia's 5th southside district became a nano national celebrity on the Daily Show a few nights ago. He was viewed riding in a Hummer in some local celebration and Jon Stewart and the funnyman's writers then created a Republicans versus Rappers contest. Virgil Goode is an easy target and one that deserves it. His response, in a district that is at least one third black, "I don't know what rap is".

Wiki Virgil, just a politician done good you say but no mention of the fact that his father controlled the Democratic party in that district forever. Then they turned Republican on the race issue, no question about these folks. They do not like black people. The combed back almost duck tailed Virgil with what could be peroxide blonde hair is a late 50's man who is a vestige of the old South in the worst way.

My father, who lives in the district, hates George Bush, hates the Iraq War, gives to every good cause in town, but if I criticize Virgil Goode he goes apoplectic and says "Johnny, he's just a good old boy".

So Virgil sits up in D.C., plays golf, does nothing for his district, is an obvious handy man, and the fifth district gets pride in a good old rep. Even my father does, but if she were around not my mother.

Monday, August 04, 2008

Time for a short squeeze

The stock market recently has been like a bad tire. Slow leak, day by day, can't find the solution, fill it up, and a few days later it's getting really low. Fill it up, and wonder if it's going to leave you stranded one day, stuck in a parking lot late or worse yet on the side of the LIE. It's time for an old fashioned short squeeze. That's a 500 point plus burst out on the upside and it won't be because things are all of a sudden hunky-dory. It will come about because it has just become too easy to be negative, and the outlook too grim.

Well, one could say, what would be the catalyst. The housing and financial issues are not going away anytime soon, inflation is rising, job losses are rising, and the nation has no strong leadership at a time when both presidential candidates are trying to exploit discontent. Bankruptcies, personal and corporate, are rising. That's all true but the market has arguably priced this news in, and more, much more. There are some areas, like those financial companies big and small that have strong balance sheets, that are radically oversold. There is still debate left in this market, or there should be, but it's hard to find---a perfect set-up for a short squeeze.

Oil goes up, the market goes down. Oil goes down, the market goes down. Small cap individual stocks slide down by 15% on no news and volume that's just modestly above average(that's profit taking panic). Large caps report excellent results but prudently refuse to lay out a scenario that doesn't spoon feed the analyst's needs and the stock gets clobbered(that's job security selling throughout the investment community).

It's time. And I would certainly like to be right.