Sunday, October 30, 2011

Snowblower or shovel?

When there is a windy rain and sleet storm yesterday and snow on the ground this October morning, even only an inch or so, after last year it does raise the question -- do we finally buy a snow blower?

My view has always been that snow blowers are a nuisance that require maintenance and often moments of frustration with balky start-up. Then there is the storage issue. Our garage already requires precision parking on either side as it has bicycles, ladders, a refrigerator, firewood, and shelves of all kinds of stuff that we should throw out if we ever took the time to find a safe disposal area, meaning a dump for old paint, etc. One more piece of equipment in there and it will take the Dale Earnhardt of garage parking to get in and out.

Considering all of that, we still need to consider a snowblowing machine. Last year was just amazing, an amazing amount of work. Of course there are a few folks roving around with jeeps fronted with plows or my yard guy's son who for $75 or so will do the job in 15 minutes, but when it snows every other day for several weeks that can really add up, add up into a lot more money than buying a machine.

Of course, if we did buy one that would also make temperate weather for the coming winter almost a certainty. After two years of really significant snow, in 1996 I succumbed to the need for a Jeep Grand Cherokee - did a three year lease since at the time those things began to come to pieces in that amount of time(when we returned it the interior side panels were falling off and any back support in the seats had vanished, among other things). It was a lark though, a rumbling V-8, bought with the excuse that we had young children then and what if one needed to get to a doctor or be picked up from school and that was a valid thought.

Guess what, no snow of any consequence for the three years of the lease.

So what to do? At least this early snow reminded me to turn off and drain all exterior faucets and make sure that the yard guys drain the sprinker system asap.

Sunday, October 23, 2011

Valuation or Volatility

Real valuation analysis seems to be part of history in the last year. Technical market analysis, incredibly technology enhanced trading systems, and an ignorance of how to really value stocks has made this year's daily and monthly market moves almost impossible to predict. Go Vanguard and Pimco and a few other anti-volatility indexers, I guess, you're in your sweet spot, but not every month or even each year it seems in any meaningful way.

What has really grabbed my attention is the sector that I know best. "Once upon a time", a banking concern with multiple business lines could expect a lower p/e on more volatile businesses and a higher p/e on more consistent ones. When I look at JPM this quarter I saw a highly predictable shortfall in its more volatile trading and investment banking businesses(lower volumes, regulatory harassment)) but an improvement in its more predictable, once supposedly higher p/e, businesses like retail, operating services(back office financial) services for corresponding banks all over the world, asset management, and a modest increase in commercial loan growth. What happens, the stock got hit by 6% on the day it reported.

"Once upon a time" a blowout quarter in trading or private equity could have been met by only a 1%increase in stock price despite the addition that they were making to the firm's overall capital account. Now a short fall crushes the stock.

If this type of analysis is endemic to firms in multiple sectors, then no real aggregate of analysis is possible for retail of even mid-sized funds. It's all in the hands of the hedge funds betters, manipulators, and the high speed traders.

Maybe a quarter or more of securities analysis has already been outsourced to Excel spreaders in India or elsewhere to be reported here by small U.S. firms who were anointed by Spitzer and Sarbanes Olxey, another quarter possibly to fulfill mandates to equality and not experience anointed by Congress, and the big firms now are rarely quoted and quite remote due to their fear of getting sued for any miscues.

So who knows what will happen tomorrow or in the last two months of the year? My guess is market up over the next four months, through February that is, barring some economic catastrophe in some other part of the world or some geo-political event that supercedes economic valuation. Is my intuition right, or just a hope.

Enough of this. It's just hope based on the performance of many corporations around the world with sound balance sheets and a focus on expense management. It's also my bet on some small caps in the U.S., tech, materials, and transportation, that could go completely wrong, but TMT. You got nothing on me Mr. 999.

Jim Beam announced tonight that it is inviting an attractive $11.2 billion takeover and at least two firms are interested. Is that good news or bad news for my four month thought - depends on your point of view.

Sunday, October 16, 2011

From 1850

"Fire off a shotgun under a bloated cow such that the animal makes such a desperate spring that the problem in the stomach may out the obstruction and end the problem at once".

That's from a mid-19th century family diary that survived the dismantling of my family's life after my father's death. When my mother died a combination of his obsessive orderliness and his resentent of anything not related to him led to a purge of all of my mother's stored cards and letters of maybe 60 years(impossible for me to believe at the time and still) -- just in the trash before I could get there after her death. My father had some great qualities of resiliance and a love of life. He certainly loved me in the best way that he could, given his background. It's impossible to explain here, as it may be for my children to eventually explain me, not in the same mode I hope.

The quote above is from a "Borden" diary from the mid 1800's that has remedies for everything, books to read, sayings to live by, it's fascinating. These folks ran a barrel making company for apples growers and looked like a fairly poor lot, but were more literate than any average American today. Sixteen days before his death and being called by medical professional friend Renee, doctors, and others, I flew down immediately to be with my father for his last 16 days. He had been in and out of the hospital repeatedly over the past year and always rebounded in an amazing way, with an amazing interest in going out to eat. This finally was coming to an end. He was not in much pain at all. He was 91 and his body just wore out.

When in the hospital under multiple drug regimens, run by so-called doctors called hospitalists, he indadvertantly told me many things that I suspected but did not know for sure, mainly things that he did to my mother when he lost his temper when she misplaced things during her early stage Alzheimers. That was sad to hear, but she had more or less already told me what she was going through. As much as I admire my father and miss my father, I have a little problem with some of the final months of my mother's life that will not really ever be reconciled.

The quote above is from a diary that survived Delta. When returning from Danville I had to pack several bags and my carry-on was full of essential estate and financial documents. In 35 years of domestic and international travel for mostly business and some for vacations I had never lost a bag, but this was the time. A bag filled with photographs of most of my family's life was lost or stolen, and after 8 months of haggling Delta rewarded me with $750 for the few tangible items in the bag, sweater, jacket, etc. There was no amount of money that could have compensated this individual without siblings for the loss of all pictures of my childhood, all pictures of my parents except ones that I already had from their earliest days and their aging days.

One major discovery was immediately lost. That was the photos of my father's shot down B-17 as a Flying Tiger in 1942. He survived obviously, but this was always a blank spot in his comments, WWII, in general, of anything he talked about. I found the photographs and a long time friend of my father's named Bobby showed up at his memorial service and talked about it. I never knew except maybe a little on the edges. Those photos disappeared as well, courtesy of Delta.

I've just written this same post in a different way on Facebook, but here you may expect to see random diary posts from time to time, just maybe titled 1850.

Thursday, October 13, 2011

"For what it's worth"

The suggestion of a "confluence" of the tea party movement with the nascent Occupy Wall Street onslaught is a thought that probably insults both groups. Frustration, resentment, and legitimate gripes are themes of both groups. They have momentum and are changing the political landscape.

For perhaps completely different reasons and mental constructs, the growing uneven distribution of wealth in this country is obvious to both groups. That the national political system, in particular Congress, is dysfunctional is obvious to both groups. That the declining availability of real middle class jobs, with a a wage that could support a family in a modest but sustainable way and has constructive health, job safety, and retirement savings benefits should be a significant tea party issue and may be, but may be in its own way be a more conscious Occupy Wall Street issue if OWS becomes more than just a passing moment. I have no idea how to digest this, but it is a serious issue.

Then there is the incendidary issue that affects both groups, which is the the conspicuous display of wealth by the 1% or really one half of 1% who have really benefitted from the gap in wealth becoming ridiculously wide. This phenomenon is not necessarily completely purposeful, although at times is and it can be seen as spiteful. It is at times just inherited and at times felt as a deserved reward, as in the cases of the laudable Warren Buffett and Bill Gates and their philanthropy or on the other side of the coin the hideous Donald Trump and quite a few members of the hedge fund community(I could name so many). There are almost certainly a very few members of Occupy Wall Street that come from that top 1%, revolting from their heritage but not any consequential part of their wealth. They may have their sleeping bags downtown but they have back-up. Whether some small fraction of the exceptionally wealthy is part of the protest is really inconsequential. The majority of the top group, top one half of one percent, is in general now back to displaying their wealth in Maserati's and an attitude of arrogance and entitlement that merits the Sun King's reign. Enough of this part of the rant, maybe New York City based.

Both groups, tea party and OWS, no doubt have some "thinkers" who have a conceptual constructs of what they want other than change, different types of courses of action, different policies, but neither group has an agenda that is in any way coherent. That may be the way the world works now, making the traditional political parties look out of touch.

The tea party movement has been nurtured and has built steam for almost two years, and it has been able to take credit for some electoral results that have been meaningful. Facts, research, and thoughtful insight rarely seem to have little to do with this amalgam of voters. It's opinion, right or wrong, that rules. It's resentment and it's fueled by the lack of jobs and the constant reminders from all media outlets and most advertising that this is not a fair system. There's also a sense of personal entitlement that does not translate into public entitlement. Then there's the evangelical side of the equation that creates a little righteousness, and then add in a dose of racism. That's our tea party and they are making their mark.

Occupy Wall Street is almost entirely different, other than the broad thematic attributes previously mentioned. It is based on the economy and the economy, the growing absurdity of the distribution of wealth in the U.S. and the feeling that the general public has been financially raped by the titans of the financial industry. Opportunities for the future seem limited for the young, and anyone who already doesn't have a job, young or old. That there is almost no focus so far on the government, some focus on the Clinton and the Bush administration's encouragement of Fannie and Freddie to build home ownership through "community relaxed credit standards" and to the mandate of Congressional oversight committees and leadership to commit to widespread home ownership at any opportunity in order to only approve mergers in agreement(as advocated by such groups as Acorn and accepted by Congress), is not an Occupy Wall Street issue at the moment. The Bush/Clinton SEC "oversight" is not on their party list either. Obama's lack of consequential leadership is ignored. As they grow into a more cohesive group it may be, and this is too early to see, there is the potential for the Occupy Wall Street and its open and more passive supporters to become a counterweight or moderator of the Tea Party's Sean Hannity obliviousness. At the moment OWS is just a strong sentiment that could become disruptive to targeted financial firms which are only one part of the whole deal here.

There is no doubt that Wall Street, a few firms in particular, created completely corrupt products and that some hedge fund managers kept their eyes shut(or wide open) and kept going to the bank. None of these people are respectable. There is no doubt that the government dropped most constructive oversight throughout most of the Greenspan years, and that some did so with the blind zeal of creating a more democratic home ownership society. There is no doubt that the majority of the "refinancing" lending at low or step up pawn shop rates was done by a couple of large thrift regulated banks and the almost totally unregulated brokers(not the major banks) who found certain firms on Wall Street and at a level below top Wall Street that would securitize completely untenable financial and in some case undocumented financial instruments.

For this writer, it is not possible to come up with some coherent summation of all of this, but I do know that "there's something happening here".

Postscript #1 : here in NYC, Occupy Wall Street is part of a deal that is mainly just a party at the moment, hey, 1960's, should I say that I remember that. On Saturday the 8th we were in Manhattan doing some normal shopping in the Flatiron district(Paragon for one, Miramekko or however you spell it for my other) and and after a hamburger and fries lunch at Shake Shack at Madison Square Park we could not succeed in trying to cross the street at huge 23rd and Broadway intersection. There was an unending wave of skateboarding(mostly) and bicycling young people barreling down Broadway ignoring all stoplights, crosswalks signs, and people. ME. Seeing this as a party for Columbia students heading to the rally at Washington Square and after ten minutes of waiting I became tired of waiting, at least 100 people on each side of the street waiting for this barrage of entitled young people to pass, WELL, as in Paris at major roundabouts I just walked in. In that country the idea is just to walk sensibly and predicitably and you are safe. I had to dodge a few and then a young man, maybe 18, with a some since of consciousness or conscience, I think as scared as me, came right at me. He yanked his board left at the last second and lost it, but thankfully kept his balance and did not fall on his face. I twisted my knee. After that at least ten or fifteen people on each side, including my wife, crossed and continued to accept our right to cross a street legally. POINT - - most of this parading young crowd was just having a lot of fun, ignoring people who may even support them even if they were not civil. They had no real cause, other than to show their power and exert their existence and have a good time, "have us a time" as in "Choctaw Bingo".

Postscript #2: Despite the plight of our current economy, there are more opportunties for entrepreneurship in this country than exist in most. Sarbanes Oxley, passed under Bush, did the most damage to this opportunity, and Dodd Frank could be the icing on the cake. Even with these, the OWS crowd has more opportunity in this country than almost any other, in my uninformed opinion. Ridding the immigration code of rejecting foreign graduates of our finest schools for employment here would not only build on this opportunity significantly, and correct an obvious sign of U.S. xenophobia and inbreeding, but would also simply amplify the opportunity that already exists. To further insult others in this post, the OWS crowd often expects to start out doing jobs that meet their skill levels. That was rarely the norm in any past, except for the well connected or silver spoon set. There are so many examples. You work, you have ideas, you prove yourself, and sometimes things work out. There are not guarantees, unless you are part of the OWS crowd from the elite, taking a break from the inheritance that awaits you.

Sure, I await my next challenge or opportunity even at this age. I'm not pointing fingers at any specific group(except maybe FOX). I did ok, as Meschiya might say I was a "Lucky Devil". I admire some of my peers that have reinvented themselves as I have sort of stagnated. Is that society's fault, is it the environment's fault, is it my fault - mine. Doesn't matter really, but a reliable and sound government and an honest business system would at least be a foundation to promote confidence.

Tuesday, October 11, 2011

Earlier post wrong, tonight's debate stayed on track

Tonight's Republican debate was far better and more focused than I had earlier expected. The roundtable forum worked and Charlie Rose and his colleagues did an excellent job. The debate stayed almost totally on topic, jobs and the economy. I have just made these notes before listening to the follow-ups, so here they are:

---The focus on the regulatory burdens of Dodd/Frank, Sarbanes/Oxley, and Obamacare were all worthy of discussion, especially as they apply to small and mid-size businesses. A core debate for the future was almost maturely established as to costs, compliance, and business uncertainty. Were these acts designed to reign in, hold responsible, and in some cases punish big business, but are now handcuffing the real job engines of our economy, community banks, small and mid-sized businesses, and potential creative start-ups.

---The uniform "balanced budget" talk of the last debate was less pronounced, indicating that some of the participants realize that this is not a one year deal, especially as we are on the edge of another recession.

---Romney---may well be the most knowledgeable and even capable candidate but came across as arrogant and chameleon-like. His answers were the ones most designed to be in line with my earlier post of pandering to all. His smirks that at times he made while others made remarks reminded me of George H.W.'s look at his watch in the debate with Clinton. I for one don't like him, although he may be the best of the bunch.

---Cain---I can't believe his continued poll numbers. All he kept saying was 9-9-9 with no real explanation or back-up. What was refreshing to me in the other debate that I saw made him look like a simpleton this time.

---Bachman---this time a much better performance, less stridently self righteous and right wing when scripted to stay on economic issues. She remained unconvincing as a real thinker or leader, but was well prepared and did not pander to the evangelicals as I had expected.

---Perry---really had so little to say of any consequence. Every comment began with a minute of near blather as he collected his thoughts, which always went back to his stories of his "accomplishments" in Texas that would have been even better without any Federal aid. Following a video clip of a Ronald Reagan comment that was an exceptionally slow pitch, he completely whiffed.

---Paul---strange as this may sound, I think that while he is not a viable national candidate he could make some mark in New Hampshire. He remains the most unpredictable and at times interesting participant, even with his answers that for the most part lack viability. He is the one that brought up the Republican's passage of Sarbanes-Oxley being just as damaging to business as the pending Dodd/Frank.

---Gringrich---still just having a good time being there, with an occasional comment of some value.

---Huntsman---I like him but he's just not a player at this point.

---Santorum---his attempt at a conversion to passionate family man from the backstabbing vindictive extreme right wing politico that he was as a Senator just has no chance of working.

That's it from me. I'll see what Bloomberg news and the NYT say tomorrow. Signing off.

Tea party pandering parade, tonight's special

I'm looking forward to tonight's Republican debate. I've only seen one, so it's time for another. It's in New Hampshire, which presents a dilemma for the candidates - certainly not an evangelical state, certainly a libertarian state in some ways, neither openly liberal nor conservative but held at an intellectual captital of conservative intellect, the highly respected Dartmouth College.

Despite that, this nationally broadcast debate will bring out the worst of most of the candidates. It's supposed to be focused solely on the economy and jobs, but let's see how many of the candidates actually can stick to the topic. More importantly, do any of them offer any intelligent defense of their responses to the economic problem, or is it just trust me, or "I know what you tea party folks think so you can hear now what will get your vote back in Iowa and South Carolina".

This morning on a Tom Keane Bloomberg interview with an informed observer and pollster, it was noted that tea party members surveyed believed that 20% of the U.S. budget went to foreign aid. They postulated that this would solve our Medicare issues. The actual number is that less than 1% of the U.S. budget goes to foreign aid. I might add that if you would add our police actions in the Middle East 20% might make some sense, but that most of the tea partiers likely supported these intrusions, even the continuing failure in Afghanistan.

Sometimes, only once or twice really, I wish that Donald Trump had actually run for the nomination as well. The absurdity of it all would have become a potential Monty Python rerun.

Not to be too negative, I admit that all of the Republican candidates are well groomed and well scripted, Perry on the scripted side excluded although tonight he may be under control. They seem serious, and they do represent the thoughts of perhaps even a majority of the people in our democracy. That's why that in the one debate that I saw one of my favorite comments was Ron Paul's, "those fences might just as well be used to keep us in".

Anyway, democracy in action - I never plan these comments but I have one on Obama coming, at least in my mind, soon. He's certainly lost any potency. He speaks beautifully and in many ways sensibly, but when done I can't remember anything that he has said that is new or inspiring. He always seems to have enjoyed himself.

Monday, October 10, 2011

October 10 New York Times --- two front page articles, so different, so similar

Today's NYT had a front page article on China entitled "As Its Economy Sprints Ahead, China's People Are Left Behind". A second front page article focused in the U.S. had the title "Median Incomes Shrank Further After Recession, a sobering new report, overall drop of nearly 10% helps to explain grim public mood".

They are both worth reading if you have access via newsprint or internet. I will only briefly explain. The China article focuses on how middle class families are stressed as they try to save for their children's education and their own safety net. They don't trust the highly volatile stock markets so deposit their money in the state owned banks that pay roughly 3% interest at a time when official inflation rates are 6%(many say this is wildly understated because of the rise in cost of many basic food items). The article explains that the Chinese state banks use the savings to finance major infrastructure projects like dams and high speed rail that are state owned and at the same time are cutting back on personal government "guarantees" like health care and subsidized basic food prices(what was it once called? the iron rice bowl or something like that). The end result is that some state officials, bankers and industrialists are becoming vastly rich while the middle class is falling behind and feeling increasingly vulnerable.

The U.S. article is more familiar. The middle class is spending less and saving more, but for some that savings is partially being used to repay banks for past unwise credit decisions. For what I would guess is the majority of the, and more prudent and educated, middle class those savings are cared for as in the China article. With little faith in the volatility of securities markets, the saved money is put in banks, short term treasuries, and money market funds that pay interest of less than 1%, while the government suggests that inflation is 1.5% or so. As in China, that government figure is generally viewed as significantly understated. There is a sense that the "recovery" is primarily benefitting big bankers, the already wealthy, the entitled elderly, major industrial companies, and Obama's pet projects like green energy and nutrition education that offer new jobs way off in the future, as well as simply subsidizing state and local municipal unions with outsized pensions and rigid work rules. The middle class continues to fall behind but some modest economic growth of 2% is still claimed by government statistics.

I could debate some of these beliefs but that is not the point of the post. It's just pointing out the similarities of two articles that one may not have expected.

Sunday, October 09, 2011

Befuddled and frustrated

Those are the words that have kept me wondering what to write in recent days.

Last night while reading Andrea Camilleri's most recent novel I came upon the following:

"Ingrid's husband was a ne'er do well, so it was only logical that he should turn to politics. The inspector recalled a popular saying from his childhood, which an uncle of his used to repeat: "If you've got no art or trade, in politics you'll make the grade".

Of course that does not apply to all of our "dedicated" public servants, but the phrase appealed to me.