Saturday, August 31, 2013

NYT front page article on William Thompson --- reporting or editorial

Today's New York Times has a front page article, top left column, on Bill Thompson, a candidate for mayor in what is generally viewed as an undistinguished group of candidates.  The title of the article, "As Pension Chief, Thompson Gave Work to Donors" connotes a bias from the outset.  The article itself demonstrates no instances of wrongdoing or illegality.

Thompson's job from 1991 to 2009 was New York City Comptroller.  Among his responsibilities in that role was overseeing the City's $85 billion pension fund, now $100 billion.  The article focuses on campaign contributions received from investment managers who were given allocations to manage some of this pension money.  None of the contributions were outside of legally prescribed limits.  It is completely safe to say, that with the amount of money under management and the degree of discretion that New York comptrollers are allowed to have, many more investment managers gave money to Thompson's campaigns that did not receive allocations.  They would have been seeking access or attention and that is normal.

The supposed "smoking gun" in this reporting is an investment manager that Thompson met during his first campaign as he was introduced to him by Russell Simmons, the hip hop entrepreneur.  This money manager specialized in convertible bond investments, an area to which the narrow and boring New York fund had no exposure.  The money manager Tracy Maitland, or "financier" as the NYT calls him, became a supporter of Thompson under all legal contribution limits and eventually in 2008, seven years after meeting Maitland, Thompson "poured"$324 million into his fund.  Since that time the investment has grown on average by 8% annually, an exceptional performance given the environment that we have lived through.  Based on that performance the current comptroller John Liu invested an additional $292 million in Maitland's fund.  The Times states, as evidence of some hallucinated collusion, that Maitland's convertible bond fund has earned more that $2 million from the City.  Based on performance, they obviously deserve it and more.

This article goes almost beyond being outrageously ludicrous.  It notes that Thompson did meet with money managers that he met at political fund raisers.  To quote the Times, "In some cases, he met with those investment managers in his government offices."  Oh my God, not at the end of a urine stained subway platform or a back alley on the lower east side.  To say the obvious it is reasonable to hear pitches from investment managers if one manages a large amount of money.  To listen is not to choose, to receive a legally limited donation in the relatively small sizes allowed is not an arm twister.

Obviously we are in the silly season of a mayoral primary.  The candidate list is not particularly strong, said politely.  The early presumed leader was Christine Quinn who is Speaker of the City Council.  She has been hobbled as the campaign progressed by her close ties to departing Mayor Bloomberg and bluntly speaking, however unfair, I'm not sure that her openly gay status is a big hit with with black and hispanic voters as it is in her council seat district of Greenwich Village and Chelsea.  As she has now fallen in the polls considerably, the viable candidates are Bill de Blasio and Bill Thompson.  de Blasio has vaulted into the lead with a savvy ad campaign and a populist stance against Bloomberg's aggressively successful pro-development activities that focused mainly on Manhattan.  Thompson has a high favorability rating but lags in the polls behind de Blasio.  He still remains a threat as the only black candidate who could receive substantial minority support as the race moves toward a close on September 10, light years in a close political race.

While the Times has not yet made an endorsement, today's article makes it clear that it will be di Blasio.  Currently serving in the low key role of Public Advocate and having once been a city counsel member, di Blasio's breadth of experience could be questioned.  His business acumen is unknown and his ability to deal with the many business interests, especially real estate, in New York City is also an unknown.  He is an ambitious, outspoken, seemingly self-righteous liberal in a mold that the Times would favor and could be a risky break from the successful continuation of world class city building ambitions of the Bloomberg administration, so successful that the Times had trouble finding ways to criticize him and make him subservient to their editorial page.  He basically ignored them, and gave the City millions of dollars of his own fortune to accomplish things that he wanted done but that lacked public funding.

I live in a suburb maybe four miles from the beginning of New York City, the borough of Queens, so am not a voter in this primary and have no particular favorites.  It's not a great field, far from it, and the few debates have been anything but enlightening or elegant.

Nevertheless the NYT reporting today on Thompson is over the line editorializing, or campaigning, not factual reporting in any but the most venal sense.  Sad but true from the so-called "paper of record".

From this less than completely informed perspective and as a non-voter, the Times has now made me a supporter of Thompson even though he lacks notable charisma, any formidable public speaking skill, and has played the political role too carefully.  As a caretaker of the Mayor's role, he could be the best choice.

Friday, August 30, 2013

Obama, NYT, continue constant attacks on JPMorgan

The attacks are never ending.  Obama's vindictiveness shows no bounds.  Jamie Dimon, after supporting Obama in 2008 began criticizing the administration in 2010 for many legitimate and defensible reasons.  He did not do so not in a harsh or disrespectful way.  He mainly fully detailed his concerns in his annual letter to shareholders, which he writes himself and which Warren Buffett refers to as among the best, sometimes he says best, annual shareholder letters in corporate America.  The thin skinned Obama can't take it and uses his significant power to strike back repeatedly.

That is not to say that JPMorgan is a saint and that it has not made some mistakes, one big trading one of course, but the observation by most investors is that they were not malicious mistakes, but just mistakes that happen in many financial institutions.  Broadly speaking, investors generally see JPM as one of the best managed large banks in the country, or in the world(and most profitable), despite the Obama administration's constant public harassment and significant Justice Department and SEC penalties.

Today's New York Times has the following headline on the front page, bottom left --- "For China Elite, JPMorgan Jobs On Easy Track".  The article in fact does not back up the headline.  It does say what is obvious for most major financial firms, which is that they hire well educated and well connected people to work for them, young or old.  It does not cite even one instance of a substantiated business quid pro quo for a hire.  It even notes that with a few exceptions, according to their analysis, all of the younger hires but a few were well educated and qualified for their jobs.

So how does the NYT crack this supposed story.  They have clearly been the preferred outlet for leaks by the Justice Department over and over again.  There is no charge of wrongdoing here, just an appearance of something that may be "unfair", one of Obama's abiding principles.

All financial firms and should I add corporate firms, from the U.S., Asia, Russia, and Europe look to hire not only well educated employees but also well connected ones in China and around the world(this is almost universally not to the exclusion of also hiring well educated and talented people without top tier connections).  While there may be some abuses, and most likely there at various places in the corporate world, in general these are long term decisions, as training and building a relationship with a capable individual and their families can be beneficial whether they stay with a firm short term or long term.  The same story published today by the NYT about JPM could be written about myriad firms, but that would not satisfy Obama and Holder's vindictive natures.

Let me add a short story from the past.  First, as a footnote of sorts, I worked for JPM and predecessor institutions but have not for the last 10 years and while I do have an investment in JPM stock, it is no larger, and in many cases smaller, than what I have in eight other large financially oriented firms.  Now that's out of the way. I have created my own basket of financial equity risk.

When my career began at the ripe old age of 31 at Manufacturers Hanover( there were a number of us older new hires that had finally joined the business world "late" but we were definitely in the minority) there was a normal process of building friendships with a large group of people that were not too senior, at all senior, at the time.  One weekend soon after joining many of us, maybe 20, met at Central Park for a touch football game.  As a pat on the back to myself, they were shocked that this old fart could throw a pass farther and more accurately than any of them.  But here's the point of what may seem like an off topic ramble.

One of the younger guys, maybe 24 and a good friend in my working unit, had been there longer than me and he pulled me aside and said, "Do you realize who we're playing with".  He then rattled off the last names of maybe eight of those playing and said "do you recognize those last names.  They're the real thing."  What he was telling me was that those last names were the names attached to major U.S. companies.  One that he did not mention was a multi-cultural young man(American and European) whose mother was reputed to be the richest woman in the world.  Were these young people at Manufacturers Hanover to immediately bring in new business.  No!  They were there to get a real world education in credit and banking and eventually go back to their family businesses, of course with some contacts at the firm that trained them.  This was common practice everywhere.

Some investment banks, this was back when investment banks and commercial banks were completely separate, took this approach a step further and hired sons and daughters of influential politicians, meaning members of Congress, for summer "internships", giving them "tough" assignments not only in New York but in London, Paris, or other interesting cities, of course on expense accounts while they were contributing their "work" to the firms' benefit.  One firm was particularly aggressive in this practice and, not naming names here, your first guess is probably accurate.  Whether this still goes on is not known here.

The point of all of this is that picking out solely JPMorgan for this story and headline is offensive.  This is not a practice limited to JPM and has been more aggressively used by many other firms, especially certain investment banks of old.  It is not illegal.

It could make one wonder whether Obama has the maturity to make an informed and responsible decision on Middle East policy, now focusing on Syria.  He certainly blew it in Egypt, focusing all support on Morsi by his ambassador, ignoring Morsi's appointments based solely on Islamist credentials and not competence, and having no one in the administration speak up as Morsi tightened the screws on women's rights, and both traditional and Coptic Christian communities.  Why did Obama do this?  He saw Egypt as his "personal" showpiece for the success of democracy in the Middle East.

Now with Syria he could feel slighted as they have ignored all warnings and defied Obama's "red line".  There is no love lost here for the horrific Assad and his Syrian regime, as has been clear in many blogs written here of late.  One can only hope that Obama's decisions and actions related to the current situation are based on thorough analysis and some consensus, and not just on the affront to him personally.

Congratulations to those who have had the interest and tenacity to make it though this unpredictable diatribe.


Thursday, August 29, 2013

Partial repeat of 8/14/06 post, excerpt from Carroll Quigley's last speech

"The idea of Providential Deity has a number of results.  There is no rule of law, there is only rule of God's will... This is not Western, because the Western idea is that God gives man free will, and if men do evil things, they are responsible.  In Providential Monarchy you get the rule of will.  Their slogan became, 'One God in heaven, one ruler on earth'... There are no constitutional rules of political succession in a Providential Monarchy.  There are no constitutional rules of succession in Islamic Civilization, in Byzantine Civilization, or in Russian Civilization---ever."

This was from one of the last lectures of Quigley, the most influential professor at Georgetown, or anywhere, that I ever had.  Please note though that this was from 1976, so the "no constitutional rules of succession" quote is not universally correct today.  In a De facto sense, one could argue that it is still the true nature of the areas that he singles out, and any real understanding of that fact is a core problem with the goals of American foreign policy over the last 30 years.  That today's "rule of will" is often seen as much about power and wealth as it is about religious beliefs does not change the fundamental bias of centuries of a civilization's culture.

Wednesday, August 28, 2013

Syrian accountability on hold

As each day goes by with meetings, debates, and clear equivocation, holding Assad and his cadre responsible for the dreadful chemical weapons attacks becomes more tenuous.  The U.N. and its inspectors are a highly bureaucratic and at times lame organization, and their peacekeepers often do more harm than good(just read about their drunken whoring in Cambodia for two years in the not too distant past to see what they are "capable" of as peacekeepers).  As investigators they are timid, and often reach no substantive conclusions, avoiding any rancor or conflict.  They are a big part of what is keeping any action on hold.

The Arab League was no big help as they condemned Syria for its use of chemical weapons but advocated no action whatsoever, no doubt afraid that any such suggestion would endanger their own privileged regimes.  England and France have convened their parliaments for discussion tomorrow but the results of the debates are not certain to lead to immediate conclusions.  At least they had the seriousness to pull their members away from their vacations to talk, almost unheard of in Europe, especially France.  The U.S. has done no such thing, and while much discussion and debate is underway, the Republicans as usual are carping about their lack of consultation and in fact, except for John McCain and Lindsey Graham who may be too far out in front of the discussion, are acting as if they are impediments to any decision, whatever it may be, that could be made.

Russia stands in the way of everything, and Iran and Hezbollah join Syria in promising widespread carnage if any action is taken to punish Syria for its inexcusable violation of all norms of accepted international behavior.

If it would come to that Syria should keep in mind that the U.S. does not control Israel, and if threatened they will likely bomb Damascus government buildings and the presidential palace with the intent of ridding the country of the Assad family, or at a minimum ruining their charmed European lifestyle that they adore even while running a brutal dictatorship over an Arab country.  What hypocrites they are.

No one wants more war, most importantly no serious participation by the U.S. in another Middle Eastern debacle.  Enough already.  The use of chemical weapons is an entirely different matter that should not be tolerated, certainly not be ignored.  I say, as I said a few days ago, how can anyone accept the denials of Assad and his Revolutionary Guard brother known as the kneecapper when they have already killed 100,000 of their citizens and forced 2 million people into exile.  How can you accept their word when they shelled and bombed the area affected by the chemical weapons for five straight days after the chemical attack.  You can't.

No matter what delayed work the U.N. inspectors do, we are unfortunately moving in the direction of a stalemate that lets Syria off the hook, except in perhaps a minor way.  If that is the outcome, almost universal condemnation of the use of chemical weapons, even now by Iran, could at least lead to more dialogue, more restraint, and tougher sanctions against Syria, but at the moment Syria looks like Humpty Dumpty, which can't be put back together again.  Assad's actions have ruined the country and unfortunately opened the door to Islamist extremists.  Any U.S. action should not open that door wider. 

Financial markets calm down today

Equity markets in particular calmed down today with modest gains, modest gains that in no way offset recent significant losses, especially those of yesterday.  Today's performance should not be viewed in any way as reassuring or indicating a turnaround.

With the Syria atrocity reprisal, possible reprisal should be said with all of the equivocation underway, still looming, investors are staying liquid, meaning low volumes, and they are raising cash on almost every position in modest increments regardless of financial results.  Given the solid July performance they have room to pare down and not overly impact their overall performance.

There are no compelling events to propel the market higher, and potential higher oil prices are not a positive.  The results of many retailers, especially those in the middle, meaning not high end and not bargain bins, seem to be moribund at the moment, so the consumer is not going to pull the market up near term.  The good news, rising from low levels the housing market this year did relatively well but now appears to be leveling off in most markets, if not slightly backtracking.  The accepted rationale for this is the modest rise in mortgage rates that are still at historically low levels.  The truth is more likely that buyers who were in the market have already made their move and consumer "wealth" is such that more buyers with 20% or more down payments are not coming out of the woodwork in any meaningful way.  Then again, sellers want what they expected to get a few months ago and that has slipped modestly to something they won't accept.

The strong run in financials over the past four months appears to be easing, or has stopped, as any geopolitical clashes could cause at least a temporary disruption in global trade and global money flows.  On top of that the Obama's Justice Department just can't get enough joy out of thrashing the banks for events that occurred  six, seven, or eight years ago, as well as interfering in current internal matters in which banks have already taken their losses.  Obama will soon no doubt once again accuse the banking industry of not lending enough at the same time that he and Eric Holder, his faithful executor of both Obama's constructive ideas and his personal vendettas, are trashing the banks' reputations and balance sheets.

While employment data and tapering concerns often dominate the near term market valuation discussion, both are less important than overall economic growth, corporate earnings results and responsible government behavior in Washington.  The reliability of employment data is clouded by many variables as discussed in a post here on August 4 and tapering will, of course, must, eventually become a reality of steady decline unless we are heading down Japan's path of low growth and no return on savings for multiple years. 

For all of the above reasons, one could reasonably expect that the equity market is in a topped out trading range, some days up, some days down, for the near term, and that would be good news.  Things could be worse.    

Tuesday, August 27, 2013

"The Fall of the Stone City"

Ismail Kadare's work of historical fiction, Albanian folklore, mythology, allegory, highly ironic satire and human behavior that is both bleak and communal was a challenging little read here.  It was well worth the effort.

The Stone City is an ancient stone fortress built on the top of a hill in southern Albania, and the town itself, Gjirokaster, is Kadare's place of birth and formative years.  Kadare was born in 1936 at a time when Albania was more of an area of competing fiefdoms and towns than any type unified country, and the current border between Albania and Kosovo and parts of Montenegro was more or less immaterial.  The historical backdrop for this creative novel is the takeover of greater Albania by the Italians(Mussolini) in 1939, then by the Germans in 1943, and finally by the Russian communists in 1945.  It is a period of chaos and brutal uncertainty that takes place while all of the somewhat curious habits, beliefs, bitter rivalries, rumors, myths, and enduring hospitality of Albanian life still continued unabated.

As he was the inaugural winner of the Man Booker International Prize in 2005, I first tried to read one Kadare's novels, "The Accident", two years ago.  It was some sort of love story turned mystery that was impenetrable here and halfway through it was closed, bookmark removed.   Since then that book has been clearly defined as not one of Kadare's finest moments, which led me to try again with "Stone City".  Now I get it, although few could read this book without finding some strange moments of uncertainty and unpredictable fantasy even if ultimately compelling.  Perhaps that is why his work falls under the category of "postmodern fiction"in some quarters.

This saga of an unusual country stumbling through a series of totalitarian rulers and being stuck with perhaps the worst of the lot from their point of view is not one with an ending or explicit conclusion.  It is a series of observations that left this reader with more subtle insight than any true understanding, or is it more understanding with little real insight.  I liked it.  Reality does not always end neatly, even in a novel.

In that sense, this book is far from a message of hope, but a testament to the immutable life of cultures even through significant changes in circumstances.


Monday, August 26, 2013

Remembering Regeneron, and it's sure still around

Sometimes it seems that giving up on an opportunity that turns out to be huge, one that still made some money for you but far less that it could have, is more painful that actually losing money on a poor investment choice. 

Regeneron is one long, that's long, term example.  In the early 1990's a close friend of mine had made an unlikely career switch from being a free lance folklore researcher and writer to being a thoroughly self taught securities broker who of course passed all licensing requirements.  At the time he worked as an adjunct broker to a firm that provided support to independent brokers, which was his only option at the time given his limited experience.  He later became successful at established firms.

We talked frequently at the time, sometimes daily, as my banking role at the time involved working with equity investors as a flack for my firm.  My friend was enthusiastically full of investment ideas in his new profession, often little covered stocks from Southern U.S. areas in which he had lived.  A few of his suggestions were duds, but many had great potential, a few near term that were beneficial to me when working with him, but many that had longer term horizons.  One was Cree, now well known but relatively unknown at the time, and with ultimate patience, perhaps more than he had, it was a great stock here both for gains and for trading activity.  Another was the now famous Regeneron.

My friend regaled me with the talent at this small biotech firm that was working on cures for macular degeneration, colorectal cancer, lupus, and a host of other conditions in ways that were not understood here at all but had linkages.  As understood here, if one cure actually worked the ramifications for it being applied to many other conditions was significant, really significant.

All that was interesting but, as they say, "Greek to me".  What was fascinating was the list of unnamed to me scientists from the most prestigious research colleges in the country.  Regeneron seemed to have an astounding collection of talent.  In the early1990's it was an investment here and certainly with my broker friend, but it bounced around between $4 to $10 for quite a few years.  It missed an important phase 2 trial on its first "breakthrough" drug.  With limited resources here at the time, and limited understanding of the biotech field(still an attribute of my investing "skill", only going now with already proven innovators like Celgene rather than really high potential start-ups).
So by sometime around 1994 or 1995 it was goodbye to Regeneron here.

Around 2000 the stock apparently began to show some life, unknown to me since I no longer followed it, then it dived again in 2005, came back and held up relatively well through the great recession period, but what we are talking about is a trading range from roughly $10 to $50, not bad, until the beginning of 2012.  Then it began to explode, as in explode positively.  It now trades at around $250 and has been as high as $280 a month or two ago.  Obviously some of its breakthrough drugs have broken through.

What did I miss?  My broker friend maybe did too as far as is known here.  Way ahead of his time on that one but, after 18 years, ultimately right in a major way.

While on the subject of pain caused by not staying the course,  among those that got away over time, the recent big one is Chipotle.  Decent money had been made on that one, but the old SNL Dan Ackroyd skit about the scotch tape store, their only product displayed perfectly, kept coming to mind.  How long could this essentially one product eatery go on growing.  While I did ok, $200 later I feel like a dope at times.  The food is a value and I am a fan.  Missed it.

One other big miss that never was benefitted from here is Priceline.  Now I wonder, why if I believed in the Ebay model and have done very well with that, why was Priceline not in my crosshairs.  There was no understanding here of the potential and of management's global ambitions and skills.  Oh well.

Overall, there is not much reason to complain here.  There have been some big gainers here over time that have been maintained and handled well, and from late March 2009 through that year there were more bargains than investable money here.  What could be done was done, much of it harvested prudently over time while holding core positions.

That's all well and good, but the ones that got away still sting me at times.  Oh that Regeneron! 

Postscript:   the header of  Eyes Not Sold has a disclaimer.  Please note that some of this post covers events more than 20 years back, and accuracy may not be perfect.    

Sunday, August 25, 2013

Assad regime to allow U.N. inspectors to inspect chemical weapons assault site

Today the Assad regime gave the go-ahead for U.N. inspectors to inspect the site of last week's horrific chemical weapons assault.  While it is logical and almost certain that the assault emanated from Assad forces, some say at Assad's direct order, the regime claims that insurgents arranged the attack to discredit Assad.  How further discrediting Assad can be done is unclear.

On the bare surface this sounds cooperative and open.  There is no question that chemical weapons were used in the area and that women, many children, and some rebel activists were killed, numbers range from 400 to 1300 dead plus many more sickened.  The purpose of the U.N. inspection is apparently to determine the source of the chemicals and perhaps the delivery mechanism and trajectory of the assault.

There is one huge problem.  On the second day after the assault Assad forces began bombing and shelling the affected area and that has continued unabated for the last five days.  It is highly likely that any useful evidence has been destroyed, and if any evidence is found it will have been planted by the Assad military minders.  The propaganda will then continue, either pointing out no evidence or blaming the opposition.

That the U.N. will even agree to such an inspection under such tainted circumstances is a huge mistake, really  just a scam to placate the Russians and their role on the U.N. Security Council.  The results of the inspection will either be useless or be used for Assad's unholy purposes and Putin's KGB attitude toward international "cooperation".

Friday, August 23, 2013

Gold rise today outstrips other commodities - Middle East uncertainty?

After a significant fall during most of the year, gold has been exhibiting a slow but steady rise of late.  Today(Friday) the rise in gold significantly outstripped other commodities.  Even my beleaguered Newmont Mining equity investment has been showing some signs of life, especially today.  With equity markets rising steadily and providing investments that have yield, with most major hedge funds having liquidated much of their speculative gold positions earlier in the year, with gold hungry India's purchasing power crashing, and the ever accumulative Chinese in an economy that is experiencing slowing growth and has a new prime minister that seems to want to somewhat discourage conspicuous consumption by the ultra wealthy, WHY would gold be on a month long uptick.

Here's maybe a wild guess, maybe not so wild, from this perspective.  The gold market is beginning to anticipate pinpoint strategic joint airstrikes by the U.S. U.K. and France on Syrian military strongholds and expected chemical launching areas.  Turkey, Jordan, Qatar, Saudi Arabia and various other Middle Eastern countries would either vigorously or quietly support such an action.

The personally weak but hideous Assad and his military controllers cannot remain unchecked forever.  Some action against them will be noticed by his main allies, Iran and Hezbollah.  They need to know that U.S. patience is not unlimited and Assad's little obstructionist games with the U.N. will not work long term.

Obama's reticence to do anything, to enforce his so-called "red line", has become a joke.  It is well known that he has a legitimate fear that any action will strengthen the extreme and brutal Islamist factions that have been attracted to Syria after the original indigenous demonstrations were brutally suppressed.  What is the big risk here?  Assad is already doing a great job of attracting the worst Islamists.  Assad's killing of 100,000 of his country's citizens and driving as many as 2 million into exile have opened the door for Al Qaeda.  The chemical weapons attacks will reinforce the tenacity of the extremists and will attract more from all over the Middle East.  It can't get much worse.

Syria is sadly in tatters.  Assad is protecting the government areas of Damascus as well as its wealthy enclaves.  The commercial center of Syria, the city of Aleppo, has been bombed to an almost dysfunctional state.  Assad's unwillingness to negotiate or compromise at all for almost three years has led a peaceful beginning of protests to this dire situation.  Assad's blatantly lying spokesmen are insulting to the intelligence of all people.  How can someone with  Assad's record of atrocities all of a sudden be trusted, with more intelligence needed by other nations before any actions of consequence other than small arms, medical supplies, and refugee help with some risk. 

Syria is an incredibly important strategic country in the Middle East.  Any action against Assad by allied forces will need to be done carefully and with no "boots on the ground".  Other Middle Eastern nations of great wealth and with vast military capability may need to step up to maintain order, namely the still troubled but Shiite ruled Iraq and the lame spoiled Saudi Arabia with its wealth and despite its Sunni roots.

Two other major powers could also play a powerful role in settling this conflict down, forcing some negotiation, however fragile the result may be.  Russia, as a major supporter of Syria, has already at the foreign ministry level, condemned the use of chemical weapons by Assad while tentatively awaiting definitive results.  Resource needy China, which can't burn coal to the point of environmental disaster forever, could step in and play a role that is not just acquisitive but also leverage its buying power into something positive.  It's not all on the U.S., and the American public is not close to accepting any such outcome.

Perhaps gold markets see something going on in the near term that others don't want to acknowledge.  It's entirely possible. 

"Do Not Call" listing

In yesterday's post, the "do not call" listing was mentioned.  In fact we thought we were on that list for a long time but in the last two years it had seemed ineffectual.  So, as part of my "accomplishments", it was mentioned.  Whether our registration had expired or simply does not work was not an issue to the initial robotic responder. It is now reinstated  or listed, supposedly.  Eventually a live person also showed up to talk.  It is supposed to take full effect within 31 days but one can wonder about its eventual efficacy.  The human responder even gave us a complaint number to call and report violations.  This "do not call" mandate is both a New York and Federal rule or law of some limited strength.

What has happened here in the last two or three years is a deluge of unwanted calls.  They have many approaches.  Especially annoying ones are those 877 or other calls that hang up as soon as one answers the phone.  They want to deliver their sales scam to your phone machine and protect their anonymity by having no live person involved.  Then there are the ones that are calling to report a problem with one of your, non-specified, credit cards and then go on with a pitch to consolidate your bills.  One listen and then it's always a hang-up here.  Lately there have been a steady group of calls concerned about our time share.  We have no time share arrangement.  The list of these approaches goes on and on, but one thing that is consistent is that they want information from you but will not even provide a legitimate address or phone number of theirs of asked.  Simply put, these are just predators.

Given the amount of information available today on just about anyone, these calls could likely be targeted to people in our age group or older --- scare tactics to solicit social security numbers, bank account numbers, or other information.  The occasional live person calling is almost always solicitous and seemingly concerned and helpful, but still not forthcoming with any pertinent information about their company.  At times they have distinct foreign accents, maybe from India, maybe from Nigeria, maybe from Russia, or some say Puerto Rico, who knows.  They inevitably make it sound as if your business would be greatly appreciated and helpful to them, or even to their family.  Of course it would be.  The epicenter for the origination of these exploitative or fraudulent calls in the U.S. appears to be Florida.

The final category is local Long Island calls, almost always from a 631 area code which is the neighboring Suffolk County.  Their focus is home repair and maintenance.  "According to our records you are due for your annual chimney cleaning service, periodic rug cleaning work, autumn gutter cleaning", all fake claims delivered by pleasant women.  It goes on and on.  Here on Long Island many of these service people are notorious for quoting one reasonable price, finding some problems, and a $90 bill turns into a $400 one in a nanosecond.  They are all phony sales pitches that can lead to scams.  They are unsolicited calls.

Fortunately we have lived here long enough to have many reliable and reasonable service people, although we may now have a problem with a plumber who started out great but has been sliding.

"Do not call", please work.  At least I now have a state and federal number to report you.

Postscript:  your local phone provider will provide you with a number to call for checking your "do not call" status.

Thursday, August 22, 2013

Little things accomplished here while atavism and entropy are evident in the broader world

Today some bills were paid, a few chores were done, reinstatement to the "do not call list" was hopefully accomplished, healthy modest meals were eaten, the newspaper read, the stock market surveyed, and a book read to near completion.  Those are useful but in a sense mundane accomplishments.  Nothing too exciting, nothing too meaningful.

Meanwhile in the world at large it seems that only on a community or personal level are things moving forward.  All else is moving toward chaos and destruction.  Maybe in fact I did accomplish some meaningful things today, ignoring the second law of thermodynamics while attempting to defy an aging body.  What am I talking about?

Tuesday, August 06, 2013

Time to back down?

With the Fed sending mixed signals about its relatively long lived bond purchasing actions, aka quantitative easing, and nascent pressures on the broad consumer retail market, is it time now for the U.S. equity markets to take a rest.  It may be.

We had a brief 5% pull back in mid- June but July was steadily upbeat -  nothing outsized, just solid.
August and September could be a time when investors take a few gains, reexamine priorities, and just wait, wait, for more clarity from the Fed.  There could always be some backtracking by the broader averages which would offer a better entry point for some investors.

There are those who say just buy in at any time and hold, don't try to price the market since it is generally impossible to do.  Entry points however can affect a holding forever.  Just ask me.  In early 2008 it seemed obvious that the U.S. markets were heading for a period of uncertainty, but the catalyst was $2 billion of distinctly sub-prime mortgages.  In the overall scheme of things that's not a big number but it would cast a pall over the market for some time, so brilliant me(and others) decided to unwind some U.S. index funds and move into non-U.S. funds.  Little did I know, or most of the market know, that $60 billion of credit default swaps were written against those $2 billion of mortgage securities that had been marketed and thus traded all over the world.  Old story now, but what lingers in portfolios here are broad based international index funds that are either still below their mid-2008 price or modestly higher.  Then came March 2009 when there were so many bargains in the U.S. available with a risk/reward that was preposterous.  Entry points are important. 

If the market offers them up in the next few months, that could be an opportunity.  There are many positive developments and potential positive developments surrounding the U.S. economy.  Here there will be a wait, but if there is a retrenchment one beneficiary with dollars here will be RSP, an equal weighted, as opposed to market cap weighted, S&P 500 index fund.  It takes the weight off of the slow growth behemoths at the top and allows for smaller growth companies to make a real contribution to the returns.  The track record of this fund is excellent, the expense ratio is 40 basis points, and it is rated five stars by Morningstar.   We'll see if the opportunity comes to find a good entry point.  If not, so much the better.     

Monday, August 05, 2013

Henning Mankel's latest

These days it seems that we are inundated by popular Scandinavian crime and mystery novels.  For many years there was only one crime writer of that regional genre that was familiar to most and that was Henning Mankel with his Kurt Wallander series, one that was adapted into eight full length television films by PBS.

Mankel's engaging crime novels were as much thoughtful and introspective as they were action packed.  It was quite different from today's prolific generation of crime writers from northern Europe and their fascination was the most perverse types of violence.  Their characters are of this age and the villains often mad.  Some of the writing is still quite good, assuming the translations reflect their work.  As Jo Nesbo is fluent in English, one would expect that his books as translated reflect his intentions and nuance.  Steig Larsson's Millenium series trilogy(The girl with...) was first published in 2005 and seems to have set off this flood of Scandinavian writing bedlam.

Mankel has now moved on from crime to stand alone novels and the latest is a mystery only in the sense of wondering how he chose to write this book.  "A Treacherous Paradise" is based on just the minimal shreds of a true story.  Set in the early 1900's, an uneducated, inexperienced and poor young Swedish woman hired on as a cook on a steamer going to Australia, jumps ship in Portuguese East Asia and falls into a strange and unexpected life.  The area is now Mozambique where Mankel lives part of each year.

This book is just pure storytelling.  It was enjoyed here, but this creative novel of imagination may not be for everyone.  It is essentially a book about the brutality of colonization, and the natural intelligence and tenacity of the young female protagonist.    

Sunday, August 04, 2013

Huge employment issues continue despite rate sliding to 7.4%

The decline in the unemployment rate to 7.4% is good news.  After all, it could have gone up.  Despite the surface improvement there are many issues that remain.  That most of the improvement in the jobs picture came from low paying jobs in retail, food and drink services, and hotels is less than encouraging for overall economic growth.  That the overall labor market shrunk, meaning less people seeking work, also does not contribute to a pretty picture.

The reasons for this have been discussed here and elsewhere.  Among them are: First, structural change as a result of technological advances that lead to less need for employees and the fact that the "great recession" gave companies the defensible opportunity to lay-off many employees who were less productive than others or in jobs that were no longer needed.  Those jobs will not come back;  Underemployment, the term used for those who find jobs now that don't take advantage of their full skill set and pay less that they have previously received;  Predominately low wage job growth as indicated in the opening paragraph;  Part time job proliferation, jobs that require over 20 hours a week but are unpredictable and do not add up to the hours that an employee would like to work.

What are the solutions to these issues?  Some, like the impact of technological change, are here to stay.  These changes will create great opportunities for the American economy but are not the solution to unemployment issues yet, at least not in this generation.  Significant infrastructure spending is an  incremental answer as obvious as the nose on my face, discussed here in a post a week or so ago.  An increase in the minimum wage would help marginally, but the jobs must still be there to have a benefit.  More enlightened companies would help, like those who pay above their industry norms and who provide good benefits --- Costco, Starbucks, Whole Foods, and Chipotle come to mind, all companies that coincidentally have had stellar results and significantly rising stock prices.  Are they able to pay more because they are successful or are they successful because they have hard working dedicated employees?  One could think that these two theses meet somewhere near the middle.

An obvious solution of course would be for the overall economy to be bouncing back at a growth rate similar to all prior recessions post WWII.  The "great recession" was such a traumatic event for both companies and individuals that there is investment restraint in all quarters.  Companies are loathe to risk building up production capacity until absolutely sure that they need it and they maintain, in many cases, major cash hoards in order to be able to weather any unexpected economic downturns.  Individuals who have resources remain cautious as well in general, although the really wealthy continue to be reliable spenders.  What would help this logjam of capital immensely would be a Congress that is not dysfunctional, not tilted to economic nihilism by a large contingent in the House and a few Senators, notably Rand Paul and Ted Cruz.  A functioning stable government could increase confidence immensely.

An immigration bill, fully formed and comprehensive, could be an economic boost by increasing tax revenues and fully recognizing a new contingent of on the book citizens over time.  It's being held hostage in the House, and any hope of progress is often confronted by the tired rant from the likes of Eric Cantor about border security.  Hey Eric, it's there and continues to be built.  The borders are more secure today that they have ever been in history.  There's more to be done but that is a sideline issue and excuse by now.  Show some leadership that's not negative and obstructionist for once.

One solution that is always trotted out by all politicians is job training.  It always sounds positive, because to some extent it is, but it far from being the panacea that politicians want us to accept.  We need more jobs if there are more trained people.  It will not make a 55 year old who has been unemployed for two years any younger,  it will not allow an underwater homeowner to move to another state to find a job, it will not pay moving expenses, it will not take a 21 year old who did not complete high school and has never had anything but a few temporary minimum wage jobs and turn him/her into an attractive job candidate.  They can pass a high school equivalency exam but that is not job training, it is just a minimum credential, a piece of paper.  Job training is of course a good thing but it is far from the answer that politicians pretend it is.  It is of course good for those in the education business.  That is the only certainty.

What is the good news here?  Again, for what its worth, the unemployment rate went down to its lowest level in five years.  Second, in the positive but not positive category is the fact that Americans on the whole are resourceful people, and there is an underground economy that can't be measured, friends working for friends, barter of services, close knit ethnic groups working "informally" within their communities, lots of home health aides working off the books, and much more.  This economy helps sustain consumer spending even if it captures no taxes.  The particular state of our economy has led to an expansion of this activity.  Third, more foreign companies are moving operations to the U.S.  It's not just Toyota, Honda, BMW, and a few other car companies that set up in non-union states, pay good wages and benefits but less than they would in their home country and they are, to boot, close to their customer.  Other smaller companies are moving in as well.  Ikea's Swedewood subsidiary, not so small, has a manufacturing site in my hometown.  The average wage is $14 an hour or $29,000 a year.  They obviously can't pay a low wage like that in Sweden and it just about matches what they pay in Eastern Europe.  Once again they are also closer to their customer.  In a Colbert Report piece, they irreverently referred to my hometown as Sweden's Mexico.  Once again this is in the positive but not so positive category.  Whatever one thinks of all of this however, it is only a pure positive if foreign companies see opportunities here to invest more capital in job producing enterprises.

The real silver lining to all of this is that economists rarely know any more than the lay investor about when an "all things being equal" analysis of the economy is turned on its head negatively or positively.  Positively is stressed here because there is increasing entrepreneurship in many areas of the economy.  Technology is a clear example but there are many others.  Could there be a burst of energy, creativity, and job growth in this country that will come from the ground up and not the top down, something that falls outside of the norms that trap all economists?  Given a few years, that could be entirely possible and everything written above would be wasted words. 

Saturday, August 03, 2013

Buying a washer/dryer set

Appliances wear out.  People do too but that's another issue.  We are now in the process of replacing the 16 year old washer and dryer that we have.  The washer is definitely kaput.  It works, but sounds like an airliner passing over during the spin cycle.  It shakes violently.  On top of that it leaves little bits of lint or something unidentifiable on some of the clothes.  It's done for.

The dryer still works but with its age the reliability is suspect.  We have so many single socks that there could be veritable sock wardrobe stuck somewhere in there.  With more energy efficient dryers made now and the inevitability of replacing it in the not too distant future, we have decided to replace it as well and have a matching pair.  Buyers of our house at some uncertain point in the future may like that.

Buying appliances in the past was somewhat of an exciting experience.  Our first house in a cozy neighborhood was small, needed lots of repairs, built in 1924, and came with a washer and dryer that at first glance could have been of that vintage.  Of course that's ludicrous to say, just underscoring the point that they had to be replaced.  Being a major period of spending money to furnish a house, it was a time to enjoy and know that we were investing for the future.  Being free to spend of necessity can be energizing if jobs are intact and will keep cash flow solid.

Washer/dryer buying time came again in 1997 when we moved into our current house in a less casual much more spread out neighborhood.  It is much bigger and was built in 1974 so needed few repairs.  While the protocol in this area is for the washer and dryer to come with the house, that did not happen in this case.  The wife of the seller was so attached to her set that she had him bargain to take them with her.  They didn't look like much, but I guess she had to be attached to something given how aloof and superior her oncologist husband acted. 

With good fortune in our jobs we were at that time able to choose top of the line appliances and we did.  It was nice not to need to quibble about price versus quality.  They have worked well, through girls who were active and had lots of clothes to keep fresh, and adults who liked to work out, sweat things up, as well as keep everything in good shape for work, shopping or visiting friends in Manhattan each weekday, sometimes each weekend as well.

This time is different.  The purchase being worked on doesn't demarcate some major change.  It is more work than exciting.  With everything now digital, there is a bit to learn.  K and I had a comprehensive explanation of everything about washers today from our salesperson at Gold Coast Appliances, a one store shop that sells good stuff.  About eight years ago we replaced our kitchen appliances, stove, ovens, and dishwasher with products from there not sold in most appliance stores, Diva, Dacor, and Miele.  Needless to say when we showed up she was helpful and not pushy.

"Not pushy" is said because two days before we had been to a regional chain store, P.C. Richard, to survey the appliances and choose what to contemplate.  The salesman was informative at first but as time went on he had all of the characteristics of a bad car salesman.  "Pushy" does not adequately explain his behavior --- "just put 10% down now"(said multiple times until I wanted to throttle him), "you'll need a 10 year additonal warranty", to me "I can tell that your wife really wants to buy that one"(she didn't).  On top of that, based on what we learned today, some of what he told us was not true.  He just desperately wanted to sell something.  We peeled ourselves away from him and I felt like a shower was necessary when we returned home.

This saga will continue and with a couple of high end LG models on sale, we will probably stick with our little shop in Glen Cove.  Could they be a bit more expensive overall.  Maybe, but it will be worth it.

I don't know if this post was just a writing exercise or something of interest to anyone.  Doesn't really matter I hope, as this blog that focuses primarily on markets and politics can really go anywhere it wants.       

Friday, August 02, 2013

JCPenney credit issues?

It is not known here whether JCPenney already has serious credit issues.  Maybe not yet, but even a whiff of a rumor that they do is at least a minor disaster for this troubled company.  The comment floating around yesterday was that factors, mainly CIT, were not financing trade credit of their suppliers(factors buy trade receivables from suppliers at a discount, usually 60 to 90 day paper).  That concern led to a $2 drop in the JCP stock price, more than a 12% decline in one day.  That's huge and troubling.  The decline continued today at a more modest level.

It, of course, forced a response from the company which said that only their smallest suppliers, representing just 4% of their total, had run into some reluctance to finance their shipments to JCP.  The market reaction was "so there is some truth to this concern" and it was not reassured by the company statement.

To the extent that there is an issue, perhaps one cause of the issue is the structure of their credit availability.  In late April, Goldman Sachs led a group of banks that extended the JCP revolving credit facility, increasing it from $2 billion to $2.25 billion and keeping the same terms.  What changed was the collateral required as JCP pledged the majority of their real estate assets to back up the facility.

Factors are essentially taking pure JCP credit risk when they buy short term receivables from trade suppliers.  While these types of these very short term trade credits do not have access to collateral, the factors do analyze the credit condition of the companies whose credit they take on.  It is not far fetched to think that this credit analysis would take into account the amount of wealth under a company's control as well as its ongoing operating condition and its balance of viable inventory and cash against its short term liabilities.  Now, that wealth cushion has been pledged to banks to secure longer term financing.

The longer term financing being in place and secured could be viewed as good news by the factors under normal or even predictably stressed operating conditions, but in a full blown credit crisis it could leave them out in the cold.

Discussion about this is just about the last thing JCP needs at the moment.

Postscript --- see June 29th post here, "JCPenney's Turnadown", for an earlier comment on JCP.