Monday, January 23, 2012

Republican theater night continues

If anyone just watched the first 20 minutes of tonight's Republican debate, they would have seen Mitt Romney crash and burn. His attacks on Gingrich were so out of character and so predictable that they made him look pathetic. Even if his observations were correct, he played into Gingrich's hands and simply looked desperate. Who greased up his hair, by the way. Ron Paul's supporters will not be swayed so easily.

Masochist that I am, watching the entire debate here was entertainment. Romney faired much better in the last hour when most people had probably tuned out. Gingrich stayed steady for the most part, loosing his mind completely only in the last half hour when he took credit for Carter's loss, Reagan's success, and everything possible that any Republican could lay claim to from 1974 to 1998. He went over the top but never raised his voice so perhaps many people did not realize how insane his words were.

Santorum stayed on message, a message that from this perspective is an artiface of contrived but maybe around the edges honest intent. Paul was, in this opinion, at his best. He's the columnist that you don't like to read but can't afford not to follow. He's serious and he did ok tonight.

Paul, of course, has no chance. Santorum is a significant long shot but who knows given the path of this campaign. Amazingly Gingrich is the front runner and Romney looks seriously on the defensive. With unlimited funds from Sheldon Adelstein, the Las Vegas Sands owner, Gingrich has momentum.

What about Adelstein. Old time Las Vegas money and everything that entails seems to go with that package. No media, not even The Nation or some other left leaning periodical, has done an investigation on this well known tyrant. An ardent supporter of Israel, is Adelstein immune from media attention? An admission, buying LVS stock at $1.50 in 2008 was a windfall here because it just seemed impossible that the banks would let him go - sold at a much higher price a month ago.

That's it from this spectacle.

Sunday, January 22, 2012

Year of the Dragon - food for good luck

It's Chinese New Year's Eve. Since some things have worked out well over the last few weeks after having blackeyed peas, collard greens, and pork chops on our New Year's Day(good luck meal and good meal), why not honor the Chinese New Year's Eve dinner with fish and oranges(for good luck, always needed).

Tonight we had sea bass broiled with a light olive oil covering, and sprinkled with a little salt and more than a little, but not too much, fennel pollen(rare Tuscan spice that makes everything taste good, not just fennel but the pollen from Zingerman's). Whatever. We also had pasta with lots of mushrooms, brown rice, salad, and broccoli. Thank goodness the dishes are washed because it makes me tired writing all of this. Grapefruit and oranges came while watching the Giants game.

Who knows if good luck will come, but missing bad luck is good luck so how will we ever know.

Friday, January 20, 2012

Google's earnings miss? from what perspective...

Google stock dropped today by more than 8% after they reported earnings that missed securities analyst's earnings estimates after the close yesterday. With 25% revenue growth and over 10% earnings growth, one wonders what a good quarter would need to look like given the hurdles that are placed before this company.

How did this happen? Google has long been a company that focuses on long term strategic initiatives rather than quarter to quarter accounting numbers. With that focus they have almost uniquely in corporate America not kowtowed to the securities analyst community. They don't give guidance on earnings, they rarely speak to the investment community, and they rarely if ever attend investor conferences - the analysts must catch Google at a trade show where they talk about their products or at an acquisition announcement where Google talks specifically to the deal.

When from its birth until several years ago Google always stunned the analyst community with earnings and revenue growth that none would have dared even imagine, Google's approach to analysts was of no consequence. Now the analysts and the trading segment of the investment community focus on the short term and Google's moderating growth(? see above for growth numbers that almost any company as huge as Google would die and go to heaven for) and paddle ball the stock around on any disappointment. The analysts are begging to be spoon fed.

From another perspective, who are these analysts today and how is the aggregate analyst estimate calculated. Following the castration of the brokerage analyst community by awful Spitzer and the Feds, almost all really smart securities analysts who knew how to do the work found better pay and opportunity at investment managers or straight out hedge funds. What was left were quantitative analysts that could run accounting spread sheets, unqualified analysts that were in the hip pockets of trading hedge funds, simply honest unqualified clueless analysts, and all those people in India who at bargain prices could run the numbers and send the result back to the U.S. to be published by minor research firms with no credibility, mostly equal opportunity fronts.

Gone for the most part, except for areas like retail and commodities, were the type of securities analysts that knew their industry so well that they really didn't need the company to provide any kind of guidance. They researched the markets that a company was in and they tore apart a company's finances for any weak links.

What that means today is - Google's approach cannot be offset by smart people in the securities analyst community doing their homework. In the aggregate they are clueless, but traders and the media still live off of their numbers, just as credit community lives off of the ratings of S&P and Moody's after they were completely discredited.

It is unlikely that Google will change, and let's see if the stock drops a little more in the next few days and the people with a better grasp on the big picture will once again start building up and looking for the next incremental growth in the value of their holdings and the power of this franchise.

I know yesterday's story - margin compression and spending for research and talent. Why is that not transparent to a securities analyst who is well paid and is supposedly focused on only less than a handful of companies this big and this powerful. Not spoon fed - too bad.

Find any company in the world that is this big( in assets) and has 25% revenue growth in a quarter. I'll even give you a quarter for each one you find.

Thursday, January 19, 2012

Just watched another Republican debate...

Brief comments on the participants follow:

Romney - Still the starched shirt and personality - all he needs to do is say that a 15% carried interest tax is wrong but he was simply following the rules put in place by others - he will not do that as he believes in his own brilliance and in his ability to be promoting his latest incarnation as the Mr. Business Conservative. His stage demeanor is controlled but uninspiring.

Gingrich - when he walked on stage at the beginning, William Howard Taft, known as Big Bill, came to mind - he wears a full cut suit. Entertaining himself or entertaining others, he has an agile if totally cynical mind - a legend in own mind. Callista was watching intently and he was for the most part he was well-behaved.

Santorum - Here there was worry that his head would explode at any moment. This self rightious candidate is really full of himself now. His intensity cannot be doubted but as a member of Congress he focused on abusive attacks on segments of the population that did not share his point of view, except when he was leading the pack on K Street contributions and earmarks. He is the only true fascist of the group.

Paul - when Ron Paul speaks, this viewer is all ears. His comments reflect a genuine point of view that is a combination of outrageous, eccentric, and honest insight, some of it unrealistic. The highlight of the debate was when he told Santorum, "I never thought of you at all when I was answering that question. You are just too sensitive".

King the moderator - always have viewed this man as superficial and uninformed, but after being pilloried by the fat man at the beginning, he handled himself relatively well and did not insert himself into the forum in any grandstanding way.

CNN - began the debate with a voice over that among other things said something about the debate being in the South, "the heart of the Republican Party and where people still have values". What a horse manure statement to the rest of the country, and one that ignores South Carolina's rather dismal history.

forecasting financial markets - pitfalls ahead but encouraging signs are around

Over the last week here, there has been a considerable amount of financial work done on planning ahead and final estimated tax to be paid for a joint return and two individual ones.
As that was done it seemed logical to come up with a good estimate of what we spent in 2011 and whether we were making rational choices.

What seems like an easy task is not so easy, and not necessarily so heartening. Across bank accounts, brokerage accounts, and a few other investments that fall into K-1 territory, what happens to our assets is heavily influenced by cyclical, or secular as the proverbial CNBC pundit might add, changes in financial markets. What had the most impact in 2011 was the fall in equity markets from April, then a further fall from July to a plateauing in the last months of the year. It was all incremental as opposed to harsh collapses.

From this distance, most of that slow but meaningful downturn could, by some, be attributed to Washington politics. The budget negotiations over raising the national debt limit were water torture to the markets, if not waterboarding. Almost five months were spent on this posturing, with almost no other substantive progress on important legislative issues. When finally resolved it was a two month solution but it did start a modest relief rally in late November and December, one that has now been meaningfully extended into January.

The issue will get ugly again soon. Why will the soon to be revived issue of the debt limit not be just as painful, as new uncertainty is introduced. Could it be that the economy is really improving?, and could it be that the House of Representative does not want improvement? Dysfunctional is a word that has often been used over the last two years to describe our Congress. Destructive might be a much better word. Caution is required based on last year's experience, at least from this perspective.

To follow on with the improvement observation, the statistics on jobs are slowly improving. The corporate profit picture, while not by any means a bubble and that's good, is showing steady improvement. Dividends are being added or increased at many companies giving those on fixed incomes some way to cope with this insane Fed orchestrated no interest to anyone environment. More important here is that the optics are improving. In late 2008 a post on ENS described the lack of traffic in the four block downtown here, the open tables and empty counter at the long established diner in the center of town, the closing of some small businesses, the extending of hours at some others that decided more work was necessary, and the lack of a need for a reservation at any restaurant in the area.

Today driving through a neighboring town, there was no place to park in the immediate downtown area. That made it click, wake up John. There are not places to park much of the time in our little downtown either. The local diner mentioned over three years ago is packed every evening and the lunch counter is packed at 12:30. That's real, but more real than that is my daughter finding a real job with a growing company three months ago and my wife having acquired one at the beginning of 2011 after many years of purposefully staying home.

There is improvement.

Getting back to where this typically rambling comment started, our expenses have many variables. First, the most important factor in our aggregate financial position will continue to be the state of the economy and financial markets. With an existential view of these financial markets, it is not worth worrying about too much but there is not certainty beyond what one sees today. Diversification is a key, but is it really effective when in any downturn everything seems to be linked. That's just life I guess. Second, our spending is radically impacted by having college expenses. They are extreme as we have no option but to pay what's charged and subsidize the scholarships of the majority of students. We are lucky to be able to do that, but there is no deductibility of any consequence for that opportunity. Third, prices for all services, at least in this area, are through the roof but they must be paid. Fourth, we cook and eat healthy food and enjoyable food. Finally, replacing anything, a car, a bathroom faucet, a front door lock, a double kitchen window, etc. bears no resemblance to prices just 10 years ago. No inflation?, just try to buy something of quality to replace something that originally was but finally wore out.

Financial markets, college costs, eating well, and higher costs in general for goods and services that have quality and staying power are the issues. We could be more frugal, we could be less generous to some, we could cut back in some ways for sure, but it's unclear how easy that is until our young adults are fully launched in a few years. One thing for sure, my clothing costs are not driving up our budget.

Going through it all, I have no idea how it all netted out in 2011. What we spent on specific items is well known here. The ins and outs of a reconciliation would have been a gruesomely tedious exercise. Here's hoping the need for that does not come anytime soon and an acknowledgment that we are fortunate enough to not be pulling out the graph paper yet.

Friday, January 13, 2012

S&P, Michael Lewis, please come to the rescue

Now that S&P has downgraded a panoply of European and other countries it is time for someone to see who S&P is. Why is this company that completely missed, in fact, was endorsing the mortage fiasco, now being a market mover. Why are they now honored as those who have insights. You, Michael, should meet these folks to see what bureaucrats reside there.

They should have been shuttered for incompetence in 2009 along with Moody's and Fitch for gross incompetence, aside Bear Stearns and Lehman on the investment banking side. ------more to come

Student loan time bomb

It was a surprise to me when I read that student loan debt of $860 billion far exceeded existing credit card debt of $655 billion.

Thursday, January 12, 2012

NYT - "Pew Finds Rising Strain between Rich and the Poor"

This was one article in the NYT today that focused on Pew surveys of the conflict between rich and poor in the United States. That was in the National section. In the business section there was "Economic Troubles Cited as the Top Risks in 2012". This one focused on research done in preparation for the annual World Economic Forum in Davos later this month. Their research uncovered "growing signs of discontent" with income gaps.

Both articles mentioned the Occupy Wall Street movement as an example of a catalyst that has caught people's attention in the U.S. and around the world, leading to a more widespread shift in opinion relative to last year. None of this is really news, although the Pew work did have value as it to some extent quantified that shift in this country.

What is a head scratcher here is that the articles, especially the writer of the Pew one on the U.S. only, did not mention the Tea Party movement which preceeded OWS by two years. Does anyone really think that economic conditions were not partially responsible for the formation of this rag-tag party of conservative "thinkers". While there is no real core to the tea party, or to OWS for that matter, this intangible party did heavily influence the Congressional elections of 2010. If one thinks that part of their formation is not economic, consider this. Over 75% of tea party members think that they deserve(are entitled to) all social security benefits, medicare and medicaid benefits, disability payments, and any housing subsidies that they now receive or expect to receive.

If that's not big government what is. Yet they rail against big government and taxation and the elites in government that want to tell them what to do on so many issues. The dichotomy between their entitlements and their resentments underscores the economic underpinnings, whether explicity stated or not, of the tea party movement as one part of the growing conflict between rich and poor, or should it be more bluntly stated as between the rich and everybody else.

Wednesday, January 11, 2012

N.H. primary as expected, with one or two wrinkles

The New Hampshire primary came out much as expected. The big positive news of the primary was that Rick Perry had a vote total of 1,622 which was rounded up to 1%. Arithmatic would have required 2,385 votes to be 1%. Some could say that Perry should be impeached by the Texas legislature when he finally returns from this fiasco, impeached for making a mockery of his proud state. Of course being perceived as cocky and clueless by the rest of the nation is not an impeachable offense, but with his pay to play political record it would not be too hard to find something that is. Where there is a will there is a way.

Other than that the other standout poor performance was that of Newt Gingrich at 9%. Being unpleasant and angry is not often a winning strategy. It's possible that with a new $5 million of Las Vegas money added to his PAC's war chest Gingrich still can go on to more "respectable" showings but his intial focus on running a statesmanlike campaign has turned into roadkill.

Santorum had minimal campaign coverage and no advertising in New Hampshire so his 9% was much more palatable than Gingrich's, and in South Carolina he may find some more supportive voters to siphon support away from Paul and Gingrich. That's good for Romney as anyone who would vote for Santorum would be unlikely to have ever considered Romney.

Those aspects of this primary stood out. Other than that Huntsman did get some payoff from all of his effort in the state, but not enough. Paul's popularity among young voters is notable but it is unlikely that South Carolina and Florida will be kind to him. Romney came away with the victory margin that the polls predicted. That's big, and his only enemy was himself as he still manages to open mouth insert foot at times.

Tuesday, January 10, 2012

Post office mail service deteriorates

Making aggressive moves for "efficiency" has led to a significant deterioration in mail service in our area.

The first move made several months ago was to rearrange the carrier routes. It is unclear why this was done, even to our former mail carrier. She had our route for the last 14 years, our time in this house. She sorted our mail, catching mistakes when someone misaddressed or misspelled something, and delivered it efficiently, often stopping to talk as she did her rounds. Her route was changed such that she now has the part of our street at the bottom of the hill but not our side at the top part.

Now it is unclear whether we have one carrier or multiple ones. We have missed a couple of bills and who knows what else. One credit card late fee, no laughing matter, has resulted and, really, we just wait to see what else we have not responded to or what friend's card or letter we missed(we are old enough to still know people who write letters). We have one of those slots in our front door that require pushing the mail through. Whoever delivers our mail now often fails to fully push it through leaving a draft of cold air if we are not home. That there is seemingly no rationale for the change is troublesome. I still see our former carrier at times as I walk to town and she honestly has no explanation.

The second major change is that magazines that are sent to our post office and until recently sorted there are now forwarded on by our post office to a central processing center somewhere on Long Island for sorting and then sent back to our office with a bar code strip for delivery. Now "The New Yorker" often arrives one week later than it did in the previous 14 years. Yesterday we received the January 9th issue, already off the newstands, and with all club and museum dates in the front opening section related to last week. This is not good.

I visited our post office yesterday to seek an explanation. While asking to speak to the local postmaster, I was met by an assistant. She explained that the central processing center was supposed to be a one day turnaround but acknowledged that it was not working out that way and that only one other local resident had complained, about his "Sports Illustrated". I know that was a lie because our former carrier has told me that many people are complaining, especially about "People".

The assistant told me that the postmaster would call me today and wrote down my phone number. Of course he did not call. Apparently the union has recycled several incompetent postmasters in my years here, but they are all invisible. An office door opens onto the main service floor but it is never open and a knock never gets an answer. The carriers joke that he hides in there with porn magazines. No doubt another door opens into the sorting room so our postmaster can move in and out undetected.

Given that kind of "leadership", there is almost no doubt that some consultants arranged the new system for a substantial fee. Service in now broken.

With the imminent closing of many post offices around the country, especially in rural areas, one has to wonder if the same amount of insight applied here is guiding these closings. That is a disturbing thought.

Monday, January 09, 2012

"Doc", historical fiction by Mary Doria Russell

Westerns have not, for the most part, been part of my reading list since the 5th or 6th grade, quite a few years ago. So how did I end up in Dodge City and Tombstone this past week, entertained and entranced by this well researched but at the end of the day fictional account of the well trod territory of Doc Holliday, the Earp brothers, and Bat Masterson.

Several weeks ago at the end of the weekday PBS News Hour, the fiction editor of Washington Post Book World was interviewed. He detailed his five favorite books of 2011 and "Doc" was one of them. It happened to be sitting on the shelf at the local library and off I went.

The fact that most of the characters in the book actually existed, that the historical timeline and geographic timelines are explicitly honored, and that many of the events that are part of the book were researched thoroughly, gives the book some added credibility beyond just the easy flowing writing and touches of the literate strewn about. There is a humanity to the book that transcends a story of the past, such that there are times that a 2011 sensibility comes through, whatever that is. That's meant to say that there is at times applicability to the present, a nice quality that is representative of good fiction.

Give it a try if you're looking for something different. It didn't hurt me.

Saturday, January 07, 2012

Big banks stocks rally on Thursday -WHY

On Thursday the shares of large "too big to fail" bank stocks had a strong performance, all up more than 5%. Even the Eeyore of this languid group, BofA, was up, and 8% at that. On Friday they gave back some but kept the majority of their Thursday gains. Why?

The instant analysis crowd on CNBC and at Bloomberg had plenty of meaningless answers. My favorite was that it reflected the "Beta trade" of 2012. That's trader talk for a stock that has the ability to change for the positive given that it is so beaten down there is really only one way to move. But why Thursday. My intuitive answer is that it was due to Obama's appointment of Richard Cordray as director of the Consumer Protection Bureau.

That may seem counter-intuitive given that most banking institutions have concerns about the establishment of this new bureaucracy and, under Dodd Frank guidelines, its independence and lack of accountability, as in sort of the Fed of consumer protection.

Until now, the scope of the Consumer Protection Bureau has been limited to banks only, so it has had plenty of time to begin the process of vetting and criticizing the consumer banking practices and loan books of the big banks. With finally the appointment of a Director, the bureau is now empowered to look at non-bank financial institutions that do business with the consumer. That group includes pay-day lenders, check cashing shops, money transfer agencies, independent mortgage brokers, credit bureaus, private mortgage lenders, and maybe even pawn shops. This is a group that, in general, makes the big banks look like saints and will give the Consumer Protection Bureau plenty of new work in an area ripe for regulation.

Maybe that will lead to some breathing room for the big banks. Contrary to popular opinion as reflected by much of the media, the big banks really care immensely about their reputations. That's the first hurdle for success in financial services. They want to use their statistical models to risk price their offerings because otherwise they would just lose money. Even that basic premise of lending is frowned upon by some in political and regulatory circles as biased. Banks are still a business and not a public utility. The majority of the questionable practices found at the big banks relate to businesses acquired in 2008 through bad decisions or under duress - Countrywide thru BofA, Golden West through Wachovia to Wells Fargo, WAMU thru JPMorganChase, with Citi being the one that needed no acquisition to create its own problems.

So on Thursday, maybe there was some promising move in the interbank markets in Europe that led to the move or two or three big hedge funds that decided, coincidentally, to move into these stocks on the same day. Who knows. My intuition may be just as good as these answers.

Thursday, January 05, 2012

Santorum as Lucky Pierre

Santorum doesn't need major money in New Hampshire which is a good thing for him because he doesn't yet have the funds or organization of other main Republican primary opponents. He could be the "Lucky Pierre" of this primary and in South Carolina. Lucky Pierre is the person in the middle of three people sitting on a bench and passing something to share - a bag of Skittles, a bottle of booze, or something to smoke - lucky Pierre gets twice as much.

Santorum has Paul and Gingrich on either side. While Santorum will not be totally immune from attention, the primary focus of their media assault in the upcoming states will be Romney. That benefits Santorum tangentially, and he can ride his performance in Iowa to, perhaps, a respectable if losing showing in the upcoming states.

The media pretty much ignored Santorum until about two weeks ago. All of the focus on him was distilled into the 10 days before the Iowa caucuses. With an alarming lack of homework done, the media stories basically echoed Santorum's description of himself. Anyone with the ability to read a newspaper or watch a television news program got his message, "fresh as a daisy". He does not necessarily now need to have been out shaking every hand in the upcoming states.

At long last, there is now some examination of Santorum's history underway. While there are anomalies in his record that defy an easy label, his incessant pandering to K Street and his relentless exploitation of issues surrounding homosexuality and women's rights in hysterical self-serving fashion were abysmal aspects of his years in the Senate.

For now, Gingrich's highly personal campaign against Romney and Paul's libertarian crusade against "establishment types" like Romney will benefit Santorum. He will not win New Hampshire and will be only a "credible" long shot to do so in South Carolina with Perry splitting the vote tallies even more, but with the ways things have played out he will do better than anyone thought possible just month ago in those two states.

He is a differentiated candidate. Whatever one thinks about it, just the "take the dead baby home" story makes that very clear.

Wednesday, January 04, 2012

"Washington's Assault on American Expats"

This is the title of an article on the Opinion page of yesterday's Wall Street Journal(written by William McGurn who writes the "Main Street" column regularly). It details one of the lesser known aspects of the Dodd Frank bill, lesser known to average Americans but very well known now to U.S. citizens working or retiring abroad. Two of my friends doing so told me about as much as six months ago, but other than an odd paragraph here or there, this is the first full article that I have seen published on the punitive and damaging aspect of the law.

It was inserted into the legislation at the behest of Carl Levin and written by his staff. Already the U.S. is the only developed nation in the world that taxes its citizens on income they earn abroad, income that they have already paid local taxes on. These new laws require detailed reporting of assets by all citizens with more than $10,000 of assets in accounts where they live and work. It also has incredibly onerous requirements for reporting by any financial institution that deals with American expats, replete with penalities and significant fines for those who do not comply with these tedious and intrusive rules. In the interest of perhaps finding the Mark Rich types of the expat class, this law punishes all expats. Many foreign financial institutions are now dropping all of their U.S. clients rather than face the cost and risk of compliance.

The opinion piece in the WSJ details all of this as well as making the case for the productivity and culture carrying roles that these U.S. citizens represent. How do we sell our products and develop new global expertise and opportunities if the reward is a punitive tax and regulatory structure. It's in some ways the mirror image of the immmigration rules that make the U.S. send home highly educated foreign students as they leave our finest institutions, taking their talent and skills with them.

It is a really bad piece of legislation that needs to be revised as soon as possible.

The lingering worry when one reads the description of this minor piece of the Dodd Frank bill is that the Health Care Bill and the Dodd Frank bill, in the immensity of their requirements, are replete with rules that turn on the peccadillos, biases, and resentments of the Democrats that fashioned these bills. These "minor" inserts may serve no purpose in advancing the valuable intentions of both bills, but they were allowed to be included in order to satisfy one politician after another.

The legislation on expats is horrific. How much more is in these bills that serves no real purpose relative to the advertised intent of these bills, and when will it all surface beyond those who are directly affected, penalized, or harrassed?

Tuesday, January 03, 2012

Chinese communist dictatorship tightens controls, adding one more market concern

The Chinese government is going after dissidents(1) in a much more aggressive way in recent months. They have also tightened their censorship of media and the internet as well. It appears that the "Arab spring" has alerted the Chinese leadership to dangers lurking, and they are making every effort to clamp down and get ahead of any thoughts of political activity that could undermine their control. Eventually this may not end well, but government control when they assert it is so unyielding that in the near or medium term any threats will likely be crushed mercilessly, so that may be the meaning of "may not end well" in communist China.

Combining unequivocal political control with a carefully watched but at times corrupt market economy has been China's miracle formula for growth over the last 20 years. Now with inflation rising to levels well above the investment returns available to any member of the rising middle class and with economic growth set to slow down, albeit modestly relative to the rest of the world, the addition of this government human rights and free speech crackdown will not help their reputation generally and will put a damper on their ability to attract investors to their equity markets. That may be the one thing that could catch the attention of these leaders.

On that front here, after owning only FXI(the Hong Kong equity index that includes not only Hong Kong focused companies but ones with significant investments and activity on the mainland) and Baidu through 2010 and before, in 2011 investments were added in six other companies. FXI and Baidu had done well, why not do more than just have a toe in the water. Of those six, I sold four in the September/October time frame due to concerns about inflation, rising wage demands, and a potential slow down from China's exceptionally strong growth rates. The net effect was a small positive with two small losses and two modest gains. Thinking that the one area with unassailable growth opportunities was the internet related stocks, I kept Baidu, plus Sohu and Sina.

Why I ask now? The government was keeping foreign competition out, and the market for cell phones and computer interaction was booming and had plenty of room and plenty of people to expand further. Now my gains in Baidu are significantly diminished, there are modest losses for Sohu, and the Sina position has a substantial loss. I sold part of it last week as it became a candidate for offsetting capital gains and balancing out what I would report on 2011taxes.(2)

With Baidu being, generally speaking, the Google of China, Sina the Twitter of China, and Sohu the interactive gaming and media content leader of China, they have now become vulnerable to more government control. These types of communication vehicles allowed for the organization and message spreading that led to the fall of the Egyptian government and others. How far the Chinese authorities go in further restricting these businesses is unknown but my guess is that they are not done yet.

This series of events, fear of inflation, fear of slowing growth, and fear of more government intervention in publicly traded companies(plus of course lack of transparency in financial statements) has led to an examination of many Chinese companies listed on U.S. exchanges and whether they have legitimate right to be traded in the U.S. There's more to come.

Footnote 1 - dissident is an interesting media word. In communist countries like China, North Korea, and Cuba there are "dissidents". In the U.S., are the tea party or the OWS movement or even Idaho enclaves of skinheads ever called dissidents? No, they are called activists, or protesters, anarchists or bigots, but never dissidents. In the new Russia are there dissidents now? Putin's corrupt judges and thugs "take care" of his business, but people are accused of tax fraud or malicious lying or just beaten to within an inch of life on the street, but the state itself provides at times a course of due process that is at times phony and does not use the word dissident. It's nominally a democracy.

Footnote 2 - why would I seek to balance out capital gains and losses and avoid any capital gains tax exposure when the capital gains tax rate is only 15% for equities held for more than a year. First reason is that there were and hopefully always will be some meaniningful short term gains to cover. Second reason is that when one falls into the AMT trap that catches the modestly to relatively prosperous and misses the really wealthy entirely, all bets are off for any favorable tax treatment. Aggregate income is what gets the AMT "penalty", which is the only word that can really describe it.

Sunday, January 01, 2012

A New Year's Day lunch to bring good luck and more

Following a long southern tradition, that I have never previously followed, today for lunch I had blackeyed peas, collard greens, and pork chops. Southern folklore suggests that blackeyed peas should be eaten on New Year's Day in order to bring luck and prosperity in the New Year. The greens represent money, and if cornbread is available that represents gold. Pork is of course the meat of choice for this type of meal as it flavors both vegetables. I added a little potato salad to my plate so I hope that didn't hoodoo this voodoo.

Whatever it takes, a little more luck is never a bad thing. I enjoy that type of food and my heart can handle it. I do admit to feeling a bit sluggish after such a lunch but the peas are supposed to come as early in the day as possible.

I looked up the origin of this still honored food ritual and apparently it began when Sherman's army trashed the South in 1865. What food in the fields or farm animals they did not want for themselves, they destroyed. Fortunately they ignored the lowly blackeyed pea that was originally grown to feed livestock and slaves, and as a great source of protein it became an essential foodstuff for all at that time. From that time forward this tradition linking blackeyed peas and good fortune took hold. Who knows if that's true really, it's what the search engines tell me.

For what it's worth it was a terrific if unusual lunch, and with good luck no doubt just around the corner it may be worth something as well.

Now to go pick up a Lotto ticket.