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 Crystal Meth January 31, 2008 (posted 6:00 PM)
I don’t really know much about crystal meth. I’m of a different generation. But I know that I wouldn’t like it.
And this is probably one of those things that a parent would be unlikely to say “how do you know? You haven’t even tried it”. I’m not likely to try it, although I routinely do run my over the counter cough suppressants through a home distillation process in order to remove the impurities.
It’s an elaborate set-up and often prone to flash fires, but is well worth it, allowing me to have the finest non-prescription cold and cough remedies.
But otherwise I’m just not a big fan of frenetic behavior or anything that induces it.
I’d rather be in a purple haze.
Lately, the markets are acting as if they’ve been on crystal meth. Today is the perfect example of freneticism.
Hot off the heels of yesterday’s downgrade of the bond insurers by Fitch, the Dow opened down by 180 points. There’s definitely nothing unusual about that. In fact, it’s probably more unusual these days not to have a triple digit move.
Downright un-American.
On top of the downgrade, the official government jobs numbers weren’t very good. But for no apparent reason, the market made a nearly 300 point turnaround by late morning.
Unpredictable behavior, crystal meth. Need I say more?
Even while the market was at its depths, MasterCard was up about $24 as it just announced great numbers and great prospects for the future. That can only mean that people are spending money. That’s not the sort of thing that you typically expect in a recession.
Never mind the fact that S&P’s top economist said that we have been in a recession since November 2007. He probably pays in cash.
As the crystal meth was beginning to kick in, the market began a “belated Bernanke Bump” and ended the day up over 200 points.
Not bad.
Although, as usual, I got caught being a little pessimistic, since I sold some call options on E*Trade and YRC Worldwide today. I was probably a bit premature in making those sales, but at this age, even “premature” is a treat.
The real turnaround of the day was in Google. Before the crystal meth really kicked in, it was down about $9 in anticipation of the earnings release.
Google has gone down so much over the past month that you really couldn’t expect it to go down anymore. On a P/E and growth basis, it was really getting to be a dirt cheap stock.
And then the stuff kicked it and Google joined the rest of the crowd, finishing the day up about $11.
But here’s the bad thing about crystal meth.
You crash.
Google just happens to fly higher and crash harder than the rest.
Google announced great earnings and the proceeded to get slammed, just like it does every quarter after announcing great earnings. The only difference, at least so I thought, was that this time Google didn’t climb rapidly in the week or two prior to the report, as it has done over the past 2 years.
But as usual, wrong again.
Right now, in the moments after the report that came right at the close of trading, Google was down about $32 points. That only amounts to another 6% or so.
With revenue up about 50% and profits up about 17%, Google posted GAAP and non-GAAP incomes of over $1 billion.
But as usual, not good enough.
Google’s numbers don’t seem to confirm the notion of a recession either. Those dollars are pouring into advertising only because there’s a decent return to be had. They must be selling all of those things that they’re advertising. They’re just not advertising them with Yahoo.
As always, after the post earnings report crash, Google seems to find a way to rebound, as everyone realizes how inexpensive a stock Google really is. But it really is frustrating to see this kind of 2 steps back for every 3 forward kind of thing, when Google just keeps right on doing everything perfectly.
Obviously, when you’re on crystal meth, your ability to have rational thoughts must be compromised. I certainly can’t think of any rational reasons for any of what’s been going on.
Ergo, I am a meth-head.
Once again, Google and Ben Bernanke share something in common. Neither can really catch a break. Google, though, will probably be around a lot longer than Bernanke.
Judging by the action of the markets the past few days, there’s a real split over whether this is a classic “bear trap” and we are certain to head much further downward, or whether this is the beginning of another rally.
I can’t really remember the day to day events surrounding the market collapse in 1987. All I really remember is that my small investment portfolio quickly shrunk, just when I needed the money for a down payment on a house.
Back in those days, you needed 20%. There was no such thing as sub-prime. There wasn’t even PMI. No 20%? No house.
So I don’t really recall the sentiment surrounding Allen Greenspan, who at that time was only in his first year of what turned out to be a record length tenure as Fed Chairman.
Having succeeded the legendary Paul Volcker, who until recently has been quiet about any issues on American soil, Greenspan must have been on the hotseat. You don’t just lose 500 points in a day, when the Dow is at only 2200 or so and not catch a little flak.
But he pulled us through and went on to serve for another 17 years.
Will Bernanke do the same?
I’ll let you know in the year 2025, if not sooner.
What we do know is that the legendary Paul Volcker has lost some of his luster with his recent New York Times interviews, where he broke the unwritten rule regarding slamming any other Fed Chairman.
But he also just came out and supported Obama’s candidacy.
Most pundits have said that Barack Obama hasn’t put together any meaningful kind of economic policy, although he did share the support of Warren Buffett, together with Hillary Clinton.
A few months ago, when Buffett was asked if he would support a Clinton-Obama or Obama-Clinton ticket, he looked at the questioner as if they were an idiot. But he politely said that he didn’t think the combination would be a good idea. That just takes us back to the issue of how many strikes can you have and still win the presidency.
In that case, it may not be the number of strikes, but the quality.
First a Catholic President in 1960, a divorced president in 1980, a woman vice-presidential candidate in 1984, then a Jewish one 20 years later.
Now, in less than 4 years there’s heresy in the air as there’s the potential for a Mormon, a woman and an African American.
Man, what a trip.
We’ve been on crystal meth the past 48 years.
So, I would assume that Volcker’s support is only based on economic issues, so maybe he knows something that no one else does.
Or maybe he’s on crystal meth with the rest of us.
You go, Paul.
Why Bother? January 30, 2008 (posted 9:00 PM)
I’m not sure why anyone was doing any trading today.
At least before the Fed’s decision on rates was made public today.
Despite a slew of earnings reports from the likes of Boeing, Merck and Eastman Kodak, two of which are still potential market movers, everyone knows that everything hinges on the Fed.
The ability to predict the decision just got more difficult in the morning as the ADP job numbers came out and the GDP fourth quarter numbers were released.
Maybe the Fed governors are in seclusion and don’t know about such mundane things. After 2 days of being locked up during their bi-monthly meeting, they probably get pretty gamey and would do and say anything to get out. Although, I think that being in a locked room with a bunch of economists sounds pretty exciting.
In a nutshell, the data coming in before the Fed’s announcement was mixed. The jobs numbers indicated a pretty good economy and the GDP numbers were showing a slowdown.
Now the worry is that if Bernanke announced the 50 basis point cut that everyone had been expecting, it would be a signal that the Fed knows something that we don't and what they know can’t possibly be good.
More mind games.
As becomes increasingly clear, you just can’t win. John Edwards and Rudy Giuliani will attest to that. But at least they were gracious in their withdrawals. Giuliani especially, in immediately throwing his support to one of his rivals.
A McCain – Giuliani ticket would tick off pretty much most conservative Republicans, maybe even enough for them to slow down their future Hillary bashing. In fact, with McCain around, Rush Limbaugh has completely been ignoring Hillary Clinton and focusing on McCain bashing.
But things will soon return to normal.
If you thought that Dick Cheney was an attack dog, just wait until Rudy is let loose on Hillary and Rush will return to the fold. Because there’s nothing like a threesome.
Although some Huckabee victories in next week’s super-Tuesday primaries could be setting the stage for a McCain-Huckawho ticket, Rudy is trying to get that number 2 slot. He could care less about being Vice-President. He just wants a piece of Hillary.
And really. Who doesn’t?
What a McCain – Giuliani ticket does do is to allow for the unthinkable. Because up until this ticket, no one in their right mind would have suggested a Clinton – Obama ticket. How many strikes could you possibly have against you and still have a viable chance of winning?
The answer is “no more than the number of ex-wives in the McCain-Giuliani team”.
In the case of Romney, who carries his own personal strike in the eyes of evangelicals, due to his faith, the answer is “no fewer than the maximum number of wives allowed by the most underground of sects”.
Think “Big Love”.
But politics took a back seat to economics today. At least, we’re supposed to believe that the Fed’s decisions and policies are not dictated by political concerns. But today’s New York Times already had an article about the next President’s decision time frame on re-appointing Bernanke or making him a one term chairman.
But you heard it first on “Szelhamos Rules”.
And I say “heard” it first, because my principal blog reader is recovering from some eye surgery and is currently unable to read. So we have spared no expense in establishing an audio book version of the blog until he is able to stare at a computer screen once again.
While we were all waiting for the announcement, the market just bided its time. We were pretty much stuck in a very narrow range until the clock struck 2:15.
And there it was.
50 basis points. Who would have guessed?
We went from a 40 point loss to a 200 point gain in just a few moments.
Bernanke scores!
But that Fed rally evaporated in the last 15 minutes, after some of the bond insurers were downrated by one of the rating agencies. Why exactly that was a big deal isn’t clear to me. I don’t even understand why there has to be an industry of municipal bond insurers to begin with.
When exactly was the last time a municipality defaulted on their bonds?
But anyway, great timing, Fitch. A-- holes.
Personally, on behalf of my home equity line, I’d like to thank Ben Bernanke. That 1.25% drop in the last week is like a nice gift.
But it really is too bad that those downgrades came when they did. Besides the fact that I saw all of those gains disappear in the closing minutes, Bernanke can’t catch a break. At this point there’s not much more that he can do.
How much lower can he drop the interest rate? At this point he’s likely to become like the rest of us and just be a bystander as we watch the events unfold before our eyes.
Poor guy. And so well groomed, too.
After the market gave up its impressive Bernanke induced gains, Bernanke was probably wondering himself “why bother?”
Tomorrow, there’s not much going on. It’s likely to be another “why bother” kind of day. Of course, that may all change, if the early sell-off in Asia that’s going on this evening gets worse.
The big news starts at tomorrow’s close as Google announces earnings.
Then, on Friday morning, comes the official government jobs numbers, as well as past month revisions.
And then it all starts again.
At some point, the answer to the question will be “there’s really no reason to bother”.
‘Cause No One Knows What Goes on Behind Closed Doors January 29, 2008 (posted 9:00 PM)
The tongues were all busy wagging away today.
That’s because today was Day 1 of the 2 day Fed meeting, with a rate announcement scheduled for tomorrow.
Keep an eye on the ticker at about 2:17 PM.
Up until today everyone seemed to be counting on another 50 basis point cut, but then along came the Durable Goods numbers.
All of a sudden, the economy may be slowing, but it doesn’t look as if it’s in a recession.
What’s the Fed to do?
And there they sit, behind closed doors. Seems like this would be a good time for an intervention.
Maybe they should just stay there and wait until it’s safe to come out. Sometimes the bunker mentality is the right way to go, but after the last 1,000 point loss, it’s a little too late to head for the bomb shelter. The shell shock is not likely to go away.
For Bernanke, it will be safe to come out sometime after January 20, 2009. The plume will be gone by then. At that point, the one thing that we can be certain of is that there will be a new President. It’s pretty unlikely that Bush will be able to pull off a Putin-like power hold. Unless Ted Kennedy is so mad at the Clinton’s that he might champion another constitutional amendment to keep Bush in office.
Four more years. Four more years.
But whoever it is that takes the oath next January, you can be pretty certain that it will be time for a new Fed Chairman, unless Uncle Ben can really pull something amazing out of his hat or beard.
Right now, he’s in another “no win” situation. With the market reportedly factoring in a 50 basis point cut, everyone is already predicting a bloodletting if the Fed comes through with anything less. Of course, with the Durable Goods numbers, there’s one less compelling reason for another big cut on top of last weeks 75 basis point cut.
And so the talking heads are all speculating about what the cut will be and what the market’s reaction will be. The only unifying thread among all of these predictions was that the market would go down after the announcement.
With that kind of unanimity of thought, you’d have to believe that the market will use an entirely different psychology textbook for its interpretation of the Fed’s move. So look for an upward move.
Of course, no matter what the market does, there’ll be no shortage of people with “I told you so” kind of explanations.
With the near universal opinion that the Fed’s decision will be either disappointing or at the very least, fully expected, it’s hard to understand why the market was up today and was able to hold the gains. Why in the world would you bid up stocks knowing that they were going to fall off the cliff?
For me, the near term disappointments were the strongest gainers in 2007. The one that has been increasingly punished, despite the absence of bad news, has been Google.
Today, it recovered about $9, but still ended the day with a nearly $5 loss. However, with the after hours announcement that Yahoo is cutting 1,000 jobs, Google is getting hit as well and is revisiting today’s lows.
That, on top of Yahoo’s disappointing numbers, always paints Google into a corner that it doesn’t deserve to be in.
The thinking usually is that if Yahoo is doing poorly then the entire advertising model of search revenue is failing, thereby putting Google at risk.
Just as a parenthetical note, my advertising on Google has only continued to escalate, whereas I eliminated all of my Yahoo advertising campaigns. Multiply me by a few hundred thousand and you may have the makings of a meaningful trend.
But no one ever believes that Yahoo is just simply losing market share to Google.
I believe.
And do Google falls because of the company it keeps. It’s sector companion, Yahoo, should be considered in the same light of those other one time darlings of Wall Street, whose glimmer was expected to return when their founders returned to right the ship. With the exception of Steve Jobs, no returning CEO messiah has been able to breathe life into a moribund company. Jerry Yang could not be expected to do any better than Ted Waites, Michael Dell or even Howard Schultz.
Sometimes it’s best not to go back home. Peter Lynch knew that.
The simple solution is for Google to report its earnings a couple of days before Yahoo makes its report. Then the investing world could see that Google was king and Yahoo is just a case of promise that never materialized.
Simple solution.
For some reason, and maybe it’s the Yahoo yoke, Google seems to not fare well after it announces earnings, regardless of how great its numbers are.
I think that this time will be different. Google announces after the close on Thursday. Given the nearly 200 point loss in the last month, Google is really ready for an upturn. By every objective measure, it is cheap, especially compared to Yahoo.
In the meantime, I just may lock myself in a room as well,
It’s probably safer in there, although these days, it sure would be a nice touch to add some padding to those walls.
Wasted Efforts January 28, 2008 (posted 6:00 PM)
I’m on my usual Monday morning routine.
The only difference is that my wife is home this morning. She isn’t feeling well.
Seeing my by the laptop this morning this asked if this was “what our retirement would be like, with both of us home?”
Scary thought. Maybe the recent losses in the market weren’t so bad after all. To make up for them, I’ll only need to keep working a couple of extra years.
Problem solved.
Now I can get back to my routine of listening to the pre-open chatter.
It just seems odd to me that an environmentally friendly waste management company would be advertising on a financial business network with a motto of “Think Green: Waste Management”.
If I’m the kind of person that’s transfixed to that crawling ticker, I’m not likely to be thinking about environmentally friendly ways to manage waste at the mere mention of the word “green”.
For me, “green” evokes other images. Not cleansed garbage.
I’m not certain who their efforts are aimed at, but they were certainly wasted on me. I’m not likely to go out and buy and landfill, nor a garbage truck. Not even their stock.
I might decide to get some lemon scented garbage bags later this afternoon.
Another wasted effort came this week as I tried to shop at the new Lowe’s store that open right down the street from the Home Depot.
As a loyal “Homey”, I strayed.
I was trying to find a wardrobe storage cabinet online and found one on the Lowe’s web site. It was perfect.
I ordered it online for in store pickup. I didn’t particularly feel like paying the steep delivery charge and having to wait for the “delivery window”. Besides, I wanted to do the project this weekend.
Since it was a pretty heavy item, somewhere over 100 pounds, my son went along to help.
As directed, I waited 2 hours from the time I received my e-mail confirmation before heading to the store.
When I got to the store, the 2 customer services representatives were speaking to one another and ignored me for about 3 minutes.
When they finally deigned it appropriate to look up, the representative took my confirmation paper and asked me if “I wanted her to get the merchandise?”.
Uh duh.
Instead of the experience that I had at Best Buy, using their online site to purchase an item for store pickup, I waited an additional 30 minutes until they finally bought the cabinet to me. The idea of ordering something on line and just waltzing in and out of the store with package in hand is a nice touch.
Lowe’s has a different take on the process. I would have been in and out of there earlier had I gone directly to the store and made the purchase on the spot.
Although to be totally fair to them, I have not check the latest dictionary updates, to see if the word “convenience” has been recently modified in its meaning.
I got home and opened the package and was actually near the end of the assembly process, when I noticed one odd thing. Hardly any of the pieces had the lamination on them.
I went back to the web site, just to check the picture and confirm that all of the visible surfaces were indeed laminated, as I had thought.
They were.
Following a couple of phone calls, I finally got to the store manager on duty who offered to pick up the item, since I didn’t want to have to haul it back. She would do so only if I would pay the delivery charge.
That didn’t sit too well with me. I wasn’t receptive to splitting the costs, either.
I explained that either the item was defective or it was entirely misrepresented on the web site.
She told me that I should have come into the store to check the item out before ordering it online.
I think I’ll forward her advice to Lands End. Sounds like a good way to run an online catalogue. Hers is an entirely revolutionary idea.
I told her that I wasn’t very happy and would dispute the charge with my credit card company.
She told me that I couldn’t do that because she had my signature saying that I received the item.
Home Depot has nothing to worry about. This “Homey” is coming home.
She finally told me that she would call back later in the afternoon to see if there was anything else that she could do.
She didn’t. So I did.
She offered a free pickup or a 10% discount if I kept the item. She said she could get no others to replace the item and that the store had no others on order, because no one wanted them.
Really?
In hindsight, I didn’t want it either.
Interestingly, she did offer to replace the parts that weren’t laminated if I would bring those to the store. Since that was tantamount to returning the entire package, I politely deferred, although I wondered where she would get the replacement parts if there were none other in stock.
I agreed to the pickup.
The next morning, however, I called back and got another store manager on duty who would not give me the name or number of a regional manager, but he did find another store manager to take the case.
That guy simply said, “How about a 50% discount?”
Finally. A wise man. The 50% discount cost Lowe’s less than having to pick the item up from me.
By the time I hung up the phone, I was already painting the now unassembled pieces.
Wasted efforts. But the project is complete.
The Home Depot store may be more drafty and less well lit, but Comcast and Lowe’s are keeping company. And unlike the drafty aisles of Home Depot, my guess is that where Lowe’s is going, it’s going to be hot. Very hot.
Speaking of which, Verizon, my new darling of a provider, announced great earnings this morning. Probably coincidental, but right after I started my rant against Comcast and made the switch to FIOS, Comcast’s stock price started to tank.
Watch out Lowe’s.
It’s nice to have that kind of power.
I’ll be sure not to let it go to waste.
Oh, I almost forgot.
The market today? It least it was up. I hope it doesn’t go to waste.
I bought some more Yellow Roadway shares today. On Friday it spiked up when it announced that it would be releasing its earnings numbers early. Considering that the stock was beaten down a couple of weeks ago, at which point I picked up my initial shares, on Friday investors took that to be a positive sign
Everyone expected that Yellow Roadway just couldn’t wait to announce better than expected numbers.
And as usual, everyone was wrong. The numbers were not good and neither was guidance. So Yellow Roadway gave up all of Friday’s considerable gains. That is if you call 20% considerable.
What a waste to see it lose all of those gains.
Their loss, hopefully my gain.
Let nothing go to waste.
Telephone Calls Don’t Count January 25, 2008 (posted 5:00 PM)
Once you’ve had a taste of the lucky life, it’s hard to turn back.
My good luck charm was now about 500 miles away. I tried to rationally look at the turnaround this week and firmly came to the conclusion that it was luck. There certainly wasn’t, and rarely is, rational reasons for anything that occur in the markets.
You certainly couldn’t disprove that thesis and it has to have credibility on par with any of the other opinions that are bouncing around from event to event.
Besides, what’s easier to understand? Luck or the re-emerging Yen Carry Trade?
So let’s look at the rational side of things.
Yesterday evening, the combined good earnings reports from Amgen and Microsoft promised to propel the markets forward.
As it is written “and the big boys shall lead them forward”.
Who needed luck when you had good earnings from the big boys? And what better sectors? Pharmaceuticals and technology.
As it turns out, you should never discount the importance of luck, because objective and quantifiable bits of good news didn’t do very much, other than to tease us a little with a strong opening.
Like lots of good things, it didn’t last very long. Certainly not the 36 hours that “Le Weekender” promises.
During that early upside, I sold some February $700 calls on Google. At that point, Google was up by $15. Here we are, just 3 hours later and Google is trying to scratch out a small gain.
I also bought more shares of Riverbed Technology and immediately sold in the money February calls, because there was a 10% premium for a 3 week holding period.
But everything turned around by late morning with nearly a 200 point swing in the numbers. As is most often the case, that swing was in the wrong direction.
How I’ve learned to dread that phrase “and the selling is intensifying”.
If I were to put my contrarian hat back on, with its setting at doubting others, rather than myself, it would have warned me that all of the analysts that suddenly believe that we have turned a short term corner would strongly indicate that we have not.
Got that?
And that’s where the telephone call comes in.
I checked as thoroughly as I could, pretty much on every credible search engine, but nowhere could I find regulations that required that your good luck charm be within easy physical reach.
And so, for a person who really dislikes telephones and the stuff you do with them, I initiated a call. And why not? I already broke some other cardinal rules this week. Breakfast and social conversation. Why not go for it all?
After all, the continuance of good luck was far more important than any self-imposed guidelines regarding social communication and accessory tools to establish lines of communication.
Got that?
So far, there doesn’t seem to be any carry through. But I’m not certain what the waiting period should be. I know that on Wednesday, there was a period of about 90 minutes that we were in the car and did not hear any market related news.
I don’t know if that 600 point turnaround started instantaneously, upon establishing proximal contact with the luckiest man in the world, or whether it took time for that force to establish itself.
I suppose that I could easily check that out by just looking at some charts, but part of me doesn’t really want to know.
Call it the Peter Pan Principle.
But at least the gravity of the situation was just offset by the following question posed by a on air personality of an expert in gold.
She prefaced the question by stating that India, traditionally a large consumer of gold for jewelry was now shrinking away from purchasing the precious metal because the price was just getting too high.
So her obvious question to the expert was “Do you see any other chinks in the metal?”
The expert replied that “The Chinese were never major players in creating worldwide demand for gold, but they were becoming increasingly involved”.
I’m certain that her producer is still cringing and convulsing.
I’m convulsing with laughter. The producer, probably not as much.
I wonder what the e-mails are going to say.
The clear lesson out of this is that every now and then it is worth listening to what’s going on around you.
And that’s especially true when the diversion is much better than the surrounding reality, because with just 2 hours left in this thankfully shortened trading week, we are now down 170 points.
That’s nearly a 300 point swing in case you’re in another state of shock.
But remembering the famous chant, “Torah, Torah, Torah”, I’ll dig deep to find a little more faith.
Or, maybe I’ll try just one more telephone call, just in case.
You Lucky. You Lucky January 24, 2008 (posted 2:00 PM)
It’s 3 A.M.
I already knew what I already knew. I was with the luckiest man in the world. I didn’t need any more confirmation.
But it came.
The ecstatic guy behind my friend, who was taking a break from the roulette wheel, was slumming it at the slot machine aisles. Even though the roulette wheels had been kind to him, especially after a double dose of good omens, it was time for a break.
The good luck started with a roulette spinner named Ruth, the same name as the luckiest man in the world’s mother, and the same name as my mother-in-law.
Maybe that good luck would trickle down.
Then came the live band’s cover performance of “Glory Days”, which is part of the basement tapes collection, to be viewed again only at either of our passings, which for my part, at least, according to www.tombclock.com, is on June 14, 2008.
Given my friends lucky streak, I’m a little more concerned now, particularly since he bet on the “under” side of that date.
“You lucky. You lucky. You lucky.”
That was the cry.
I didn’t think that the third “You Lucky” needed to be in the title, but for accuracy, it was three “You Lucky’s”.
And as my friend now likes to say, as he is communing with the Chosen People, via James Michner:
Torah, Torah, Torah.
Unfortunately, when he said that, the fellow who was proclaiming “You Lucky”, got a bit frightened, as he thought that there was going to be some kind of maniacal backlash against him by someone who was still carrying grudges from World War II.
As it turns out, the “h” in Torah is silent, so I understand the confusion.
But among the quiet, but confident victories at roulette, came the largest of 3 jackpots at the slots.
Torah, Torah, Torah.
At times like this, faith really can pay off.
Considering that there was a convention of preachers going on at the casino hotel as well, it may have been their calling cry also. After all, it all did start there.
We then decided that there are 2 things that now distinguished us from the middle of the week casino low-lives.
First of all, it was now officially Thursday. Do I have to say anything more than that? The riff-raff was now gone, not even allowed to partake in the all you could eat buffet line.
And secondly, he had more money now than when he stepped through the doorway yesterday. Since I don’t gamble on anything other than the stock market, I was only down the cost of a cup of coffee.
However, if I did gamble, I could have gotten that cup of coffee for free.
Today marks the 4th anniversary of Szelhamos’ passing. I know he would be happy to know that I got to spend part of the day with the luckiest man in the world. I think he was broadly smiling down on the scene when those wheels were spinning. He was at his happiest when we took a little 80th birthday party trip out to Las Vegas. I’m sure that he relived some of those moments today, maybe while munching on some of Pittsburgh’s finest popcorn.
Maybe he knows that I’ve recently put this web site up for sale and the first offer has come in after just a couple of days. But he seems to be telling me to let it ride.
Then it occurred to me. The luck was trickling down. Why not let it all ride?
After all, it all started with yesterday’s ride.
My friend picked me up yesterday at about 2 PM. It was after that that it all turned around in the market. 600 points on just a simple action. Driving up to the hotel’s entrance made more of an impact than any stimulus package or any rate cut ever could.
I don’t have any doubt about that at all.
As luck would have it, he didn’t replicate the last time he tried that, when his rental RV tore off the drive-thru’s roof.
Even good luck needs a break now and then.
The luck continued into the morning, as the market opened on the upside.
Unfortunately, I had a plane to catch and barely could take in the early moments, only having enough time to enter orders to write some more call options on Riverbed Technologies, which was moving up nicely. I also put another order in, but I can’t recall what it was, once again proving that in addition to luck, you need sleep.
In a couple of hours I’ll find out whether that good luck left me, as I left him at the casino’s entrance.
But I learned a lesson from his shouts of “Torah, Torah, Torah”.
I, too, must have faith. I’ve had it before and haven’t been disappointed. The only difference is that now, the faith is being tested like never before.
Was yesterday’s 600 point turnaround a false prophet?
As I looked around, I wondered why there are never any preachers around when you really need them.
But there was something else. Another venture that was probably blessed by the luck in timing. Traveling together with a third friend, we came up with a business idea. We’ve already registered our domain names and are in product development and marketing phases. The wheels have to move quickly.
Our model’s good looks aren’t going to last forever.
When luck is with you it would be foolish not to take advantage.
So without knowing how this day is moving forward, I’ll assume that being in the shadows of the luckiest man in the world can only bring good things.
I’m prepared for the best and will just sit back and take it all in, while thinking of how much we all miss Szelhamos. But at least today I’ll be able to leave him one of the Jackpot indicator cards that my friend gave to me.
He won’t even have to fill out a 1099-G.
How lucky is that?
I was Wrong January 23, 2008 (posted 2:00 PM, updated 5 PM)
As time goes on, there’s a greater realization that I’m rarely right about anything. It’s amazing that I’m still above the water. Although, looking ahead, I really do wish that I had gills.
For starters, I didn’t think that Apple would fare quite as badly as its after hours performance would indicate. At noon, Apple is down $25, while the Dow continues to slip and slide away, now down 200 points.
I was also wrong about breakfast.
Despite what I preached to my kids, breakfast was always a meal that I disdained. I paid no attention to all of the conventional wisdom regarding its merit and its relative importance.
Start the day off healthy?
Not me.
I had breakfast this morning.
It was wonderful.
Part of that assessment is that the check was picked up with incredible lightening speed by someone else. When something like that happens it’s really amazing to see the common DNA that we all have, with everyone insisting that the check be sent their way. Part of that common DNA also determines that we’re not really sincere about wanting to pay for that check.
That is what truly distinguishes us from the animals.
That person probably reads this blog and felt sorry for all of the recent personal portfolio losses. A free meal really does make lots of things much better. Especially poetic is that the person who picked up the check ate the least.
Nice.
At the cost of breakfast to decline in the Dow ratio this morning, I think that a free dinner would be worth about 500 Dow points.
With alcohol, maybe 600 points. And don’t forget, I’m a big tipper.
I was also wrong about my relative disdain for social interaction, particularly when it’s of a business nature.
Conversation was a combination of business matters, personal stories and amusing, yet sanitized anecdotes.
As for selling Yellow Roadway call options yesterday? With everything down, Yellow Roadway is up 12%. Wrong again.
Sigh.
I’m beginning to rethink the contrarian approach. I think that I should completely cut out my consideration of any outside sources of information. Rather than moving in a direction that is generally opposite of those opinions, I should move directly opposite my own opinions.
I probably shouldn’t be so critical, since my decline is still better than the indices, and certainly better than the professionals that I also use, but still, it’s very humbling.
And who needs to be humbled?
A couple of years ago I came to the realization that pretty much everything that my wife and I disagreed about, she was the correct one.
That was humbling. But to her credit, she never rubbed that admission in. In fact, she was quite gracious.
Who needs that?
One of the things that I like about Jim Cramer is that he tends to point out his mistakes, and he allows viewers to point them out, as well.
As Cramer likes to say, I did back up the truck and picked up some more shares of Apple this afternoon. I plan on aggressively selling options on the additional shares to try to make up some of the shortfall, a little at a time.
Interestingly, although he has been a big Apple proponent, he did not recommend picking up Shares in Apple, nor Google after their recent nosedives.
I hope to be able to pick up some more Google shares on Friday, as I expect a little further downdraft after Microsoft comes out with its great, but not great enough earnings numbers at the close of tomorrow’s market.
Even though, unlike Cramer, I don’t have a cable television show and I’m not to dependent on ratings,I do care about the number of blog readers. Somehow, those readership numbers continue to go up.
Oh, I also still have all of my hair, as well, although I may start pulling some of it out. So that, and the size of our relative bank accounts, still will easily differentiate us from one another.
And, to top it off, he’s a good writer, or at least is fronted by a good ghost writer.
Clearly the increasing blog numbers certainly can’t be for the good investment advice and it certainly can’t be because of my grammatically correct writing style. Much too many commas, I am told.
I’m also told that I tend to speak very slowly, especially while on the telephone. Commas are just my way of slowing down the reader.
I also doubt that the numbers are due to lots of inadvertent Google searches or mis-spellings of “Szelhamos”.
But I’ve decided to take my son’s advice.
He suggested that I should get a new name for the blog.
Although he adored “Szelhamos”, it’s not exactly a household name or word.
In fact, in Hungary, where it is a household word, very few hits originate to the site.
If you don’t know what “Szelhamos” means, please go to Szelhamos?, and you’ll understand the name chosen for our mirror site: www.windbagger.com
Just as Szelhamos Rules is the #1 Google site for searches on “Szelhamos”, we’re shooting to make Szelhamos Rules the #1 site for searches on the word “windbagger”.
Shouldn’t be too difficult. Just look at the competition.
In the meantime, writing today’s blog early, due to an impending car ride down to the casinos, is keeping me from overly tuning in the market’s activities.
And that’s a good thing, because a quick glance shows that the Dow is now down by 300 points.
I think I’ll pray for no wireless access this afternoon and evening.
I may drown my sorrows in the slots.
That seems to offer a better rate of return than the markets right about now.
Who knows, maybe I’ll be wrong about that, too.
P.S. Great news. Not only is there internet in the hotel, but the market moved up 300 points. Best of all, Apple moved up $12 from where I read it.
Maybe I was right?
All Good Things Must End January 22, 2008 (posted 8:00 PM)
And today it did end.
You won’t see it until tomorrow morning, but Apple came out with its earnings after today’s close.
The only word to describe the report is “disappointing”
And worst of all, it was disappointing on all counts. Macs, iPods and iPhones were all less than expected. Maybe those Amazon statistics a few weeks ago that the Zune was outselling iPod was the first telling sign.
The disappointing Mac and iPhone numbers are surprising, though. Back in late December, when the Amazon statistics were released, the feeling was that surging Mac and iPhone numbers would offset any iPod competition related sales slump. The “whisper” numbers all had great Mac and iPhone sales lifting Apple to another quarter of earnings that would outperform the flagging consumer.
But that’s for tomorrow’s blog, because it will definitely effect the markets tomorrow. Right now, in the after hours, Apple is down about 15% and that’s on top of the losses its had in the past 2 weeks. Its been a long drop from $200 and it will be taking others down for the ride.
On the other hand, word is coming in tonight that Australia’s market is up 6%, Japan 3.5% and Texas Instruments has just reported good numbers. Considering that TI is a serial disappointer, this may be a good omen. But they are nowhere close to being the market mover that they used to be. That honor, for technology stocks, belongs to Apple.
So look out below. It probably won’t be as bad as the $23.50 loss in after hours, but it won’t be pretty.
Unfortunately, I don’t always listen to my own advice. Back on December 27th, I suggested buying puts a day in advance of Apple’s earnings report.
But to be totally fair, I also thought that buying calls in the days prior to the report and then swapping those for puts, would be the way to go. As it turn out, there never was a run up prior to the earnings report, as Apple just got caught up in all of the market’s craziness.
But the whole story today is what didn’t happen.
The way the script has been written, everyone expected that the market would open with a loud thud. The conventional wisdom then had it that sometime in the mid to late morning the market would make a comeback, only to sell off in the last hour, testing the morning’s lows.
It really was a good thing that the markets were closed on Monday. The rest of the world had 2 trading sessions to have their meltdown, while we were all wondering whether the Fed would take some decisive action.
With the futures pointing down by 500 points came word that the Fed was cutting the discount rate by 75 basis points. Whether it was coincidental or otherwise, that was the precise amount that everyone said we needed, yet it was at least 25 basis points higher than anyone thought that we would get.
To top it off, this “emergency” or “interim” rate cut comes before the next scheduled Fed meeting. There are some who think another cut may be in the works. At 3.5%, we’re still way above the lows during Greenspan’s tenure.
Of course, there are those who blame Greenspan and believe that it was those low rates that got us into the whole sub-prime mess to begin with. And now, just as quickly, those people will say that low rates are what’s needed to get us out of the mess.
Go figure.
But whoever thought that in a single day we would believe that the Fed got it right and Apple got it wrong?
The market made up its 500 point loss and for a short while was within about 40 points of a break even. Even beleaguered Apple made up from its 5 point loss, down to about $2, before good sense got the better of the Apple bulls.
The big surprise was that after the Dow’s falling back a little from that level, the last hour sell-off never materialized. That page was missing from the script.
At about 2 PM my son called me. A senior in college, he’s taking a derivatives class. He called me to find out how the market was doing, having heard about the 500 point drop, and thinking that it would be a topic of discussion during this evening’s class.
I read him the script, also fully expecting the last hour sell-off. I told him that in class he could refer to how predictable the last hours’ sell-off was, because it was scripted.
The bottom line? Never trust anyone over 30. We have no clue what we’re talking about.
Sometimes experience leads you down the wrong path. History doesn’t always repeat itself.
As I look at the carnage that so far is 2008, the Dow is down 16.3% from its October highs. I suppose that I can get a little solace knowing that I am down about 12.5%.
Ouch.
And that’s good. On Wall Street, I might be considered a superstar. Of course, on Wall Street, my administrative fee would more than make up for the out performance of the portfolios.
Today, I did do a little trading, but again, only in covered calls. I wasn’t ready to take any losses in equity positions. It’s too early in the year for that kind of stuff.
I bought back some February Honeywell options at a small profit, sold some Yellow Roadway February $17.50 call options, sold some River Bed Technology February $20 call options and finally sold some MasterCard February $210 call options.
All small potatoes, but you’ve got to start clawing back at some point. Based on that 12.5% drop, there’ll be lots of clawing going on.
At least tomorrow I’ll have a little respite from all of this gut wrenching action.
Tomorrow, my gold embracing friend, who is usually right when he tells me “I told you should should buy some gold” and I are going for a day of authentic Native American entertainment.
For some reason it’s not politically incorrect to refer to these bastions of entertainment as “Indian Casinos”.
I don’t understand.
But I do understand that as much as I enjoy the second by second action of the markets, that too, must come to an end.
Except that lately, the market really hasn’t been much of a good thing, so maybe I’ll just wait until it does return to being one.
Until then, the only good things that’s ended have been brainless profits.
A Double Dose of Frightening News January 21, 2008 (posted 4:00 PM)
This was not a very good weekend and I am getting increasingly edgy if I am unexpectedly awakened.
The phrase “don’t worry, everything is alright” is one that I’ve heard too much lately. Somehow, those words aren’t very reassuring.
However, its meaning is really varied, as it has been used all the way from trying to prepare me for Sirloin’s graffiti exploits (see September 17, 2007 Blog and September 24, 2007 Blog) all to the way to an unexpected death, or two.
This weekend, the phrase was used, as my wife’s head was seemingly floating off the edge of the mattress, as she was trying to gently awaken me. My guess is that she is more interested in delaying the collection of any life insurance proceeds than in being able to collect.
Anyway, the floating head didn’t have good news and the end result was one of finality.
But that’s now in the past. Over and done with.
This morning’s awakening was not gentle. It was sudden and with a sense of urgency.
I was disoriented. Because of the darkness, I assumed that it was still very early in the morning. The only thing I knew was that there was no preceding telephone call, this time.
As it turned out, it was about 6:30 AM and there was a mouse caught in the sticky trap I had placed a couple of weeks ago after I spotted a mouse.
It was in the kitchen and my wife told me she couldn’t function with it down there.
So, hero that I am, I went down, and there in the middle of the kitchen floor was the sticky trap, with two, not just one mouse, sinking in the gooey trap that had been set, with just them in mind.
I should have snapped a picture and submitted it to the company. Great for marketing.
But that bad and frightening news was dealt with. A cardboard coffin was quickly retrieved and a prompt “burial” arranged. Simple, yet dignified.
This was much less an expensive affair than we had been used to and the eulogy was nicer, as well.
What I wasn’t prepared for was the next bit of news.
Sure, I knew that today was MLK day. My kid had the day off and the airport was busier than usual. Those are good signs of an extended weekend.
What I wasn’t prepared for was that the markets would be closed today.
For some reason, I failed to remember the extent of MLK day. It’s on par with the biggies, as far as the markets go.
And what better way to celebrate the legacy of MLK than to have the Detroit Auto Show in full gear.
Too bad, because I had a good feeling about today, even though the Asian markets were down overnight. I mean, if you consider a 7% drop to be “down”.
After all, how much lower are we able to go?
12,000 points more to the downside?
But in reality, it’s probably a good thing that we can get an extra day of breathing space.
For me, this is a work shortened week for a different reason.
We are beginning a major construction project at my workplace and will be closed for 2 of the 3 days that I typically work each week. The project will be ongoing for a few months, but the big dig part starts on Wednesday.
We will get a little breathing space as we descend on Connecticut’s gaming casinos for a little respite.
Over engorging in buffet food, it’s not a bad place to go over business, either. Not that we’ll do that, but in theory it would be good.
Being in that environment will just reinforce for me that there should be legalized gambling on the direction of stocks. How different is that from actual investing? In fact, how many people truly do invest, rather than just looking for a way to score some gains?
In fact, some of the people who bet on sports events are actually in it longer term than stock market “investors”.
So I will probably do my usual. It’s not likely that I will make any bets, but I will probably cover a few miles making the rounds over and over again in the casino. I love people watching, especially the low lives that are there mid-week.
The low lives like mean, I mean. I’m sure that there’ll be someone looking at me in the very same way.
But ask yourself, does that person have his own blog?
Probably so.
Well, with nothing else to do, my son and I went out to get an estimate on a car painting job.
The estimate was part of a triple dose of frightening for the day.
The fourth and final dose of fright came as we decided to go to Hooters for lunch.
We actually went for the food.
The Company You Keep January 18, 2008 (posted 6:00 PM)
Remember this phrase. It’s bound to make the list of top 2008 dumb political quotes. It far out dumb’s 2007’s winner “I have a wide stance”.
Drumroll, please.
“Oh, that must be the other one”.
I think that I have a new found respect for Ben Bernanke.
Suddenly, to me, he looks like a genius.
And that’s not because the futures are way up this morning. It all has to do with comparing him to the company he is forced to keep.
We are all second guessing Bernanke.
But at yesterday’s congressional testimony, one of the learned elected officials, in framing her question, referred to Ben Bernanke as having been the CEO of Goldman Sachs.
That was probably an insult. Even though they are the smartest guys in the room, Bernanke is probably even smarter than them. He just doesn’t seem to allow his intelligence to dictate his actions.
Bernanke quickly and politely corrected the congresswomen and said that he was not the previous CEO of Goldman.
She then asked “well what company were you with?”.
Bernake answered that he was the “CEO of the Princeton Economics Department”.
A cute answer. I believe that they used to be traded on the OTC pink sheets.
Amazingly, the congresswoman said, “Oh, that must be the other one”.
“The Other One”?
That’s how much the esteemed member of this committee knows about the Treasury Secretary and the Chairman of the Federal Reserve.
One and the Other One.
At least you should be able to tell them apart on the basis of facial hair and shaved head versus male pattern baldness head.
Is it that hard?
Hank Paulson and Ben Bernanke must believe that they are besieged by a colony of “Chances”, the idiot garden keeper character that Peter Sellers played in “Being There”, whom everyone believed was a veritable genius.
I don’t think anyone has mistaken this esteemed committee member to be a genius.
Not all committee members can actually be like Barney Frank and truly know what they’re talking about. Our expectations are low for their innate knowledge on the topic at hand. We all know that many of the committee members are virtual idiots, but our expectations are that their staffers, who do all of the groundwork and try to prepare their bosses to not look like idiots, are typically very bright and always dot all of there “i’s” and cross all of their “t’s” before sending their idiot bosses into the public’s eye.
Time for a new staffer.
This morning, I had an appointment that took me away from the computer at the opening bell, but I left for my appointment with the knowledge that GE reported good earnings, albeit, heavily waited overseas, and with the futures pointing up 150 points. And better yet, all of my shares were pointing upward in the pre-open.
By noon, when I arrived home, the Dow was down by 100 points and accelerating. And all of those up arrows? Change of direction and color. So what else is new?
I guess that the market was not reacting overly kindly to the announced economic stimulus package. Expectations were probably higher than what was presented by the president.
The talk on the trading floor is that the stimulus package is “a joke”. Well intended but no efficacy.
This afternoon, I heard a radio interview asking people what they would do with their government stimulus check.
I’m sure that the woman who responded that she would put the money into savings in order to make a summertime trip to England was not what the rescue architects had in mind.
I don’t believe that we have “hit squads” in the U.S., but if we did, I’m fairly certain where they would be heading right now.
It seems that “the other one” will be holding a news conference this afternoon, perhaps to add more clarity to the fiscal stimulus proposal, and maybe helping to send stocks a bit higher.
If we can’t count on “the other guy”, who can we count on?
After all, he used to be the head of all of the smart guys. He must know how to massage and nuance the message to inspire confidence in the troops. We certainly can’t count on Bush and Bernanke.
Jim Cramer’s now classic piece on YouTube, with the “They Know Nothing” cry directed at the Fed, rings more and more true.
The Fed had a window of opportunity this morning to announce an interim rate cut, while the futures were still up. That would have sent the market skyrocketing and would have had no materialistic impact on inflation, which is still the Fed’s major worry. Although, in total fairness, had he done that, it would have added some credibility to those conspiracy theorists who were expecting Bernanke to move the markets with the intent of taking advantage of an options expiration Friday.
You can’t win.
Shortly after noontime, Paulson made a brief statement regarding the stimulus package. His prepared words did nothing.
About 10 minutes of question and answer there was a positive note, although the market’s didn’t reflect it at first. As the Q & A proceeded, Paulson did seem to exude a fair amount of confidence in the US economy and the markets began to take notice, even briefly moving into positive territory.
Paulson especially seemed to be confident regarding jobs numbers and he was fairly clear
The real positive note that I heard from the session was that for once, there seemed to be an indication that there was going to be room for compromise on the stimulus package proposal, rather than terms being dictated from the executive branch.
That’s a 3 syllable word that has basically not been part of the administration’s vocabulary. The last time there was bipartisan support for anything, it took a couple of flaming and crumbling towers.
I don’t expect members of congress to start holding hands and singing “Kumbaya” but at least they could learn who the Fed Chairman and Treasury Secretary are.
Maybe if they really kept company something constructive could get done.
What’s Missing? January 17, 2008 (posted 4:00 PM, updated 9 PM)
Yesterday I looked at some market charts that sent a very negative message regarding the direction of the market. At least that’s how they were interpreted by the presenter, who is acclaimed in the art of prognostication.
To me, there were peaks, there were valleys. But the real story was that the peaks were never as high as the earlier peaks, even though the valleys were always at the same levels. What was most fascinating is that the previous 2 valleys were precisely 5 months apart and that we are currently, exactly 5 months from the last valley.
As compelling as they may have been, they really were very abstract and didn’t tell me the story. Someone else looking at the same charts may have come to a different conclusion, regardless of how “compelling” those charts may have been.
What does tell the story to me is what’s been missing, so far.
In the past, whenever we’ve been faced with a downdraft in stock prices, companies have stepped up to the plate, recognizing value in their own shares and announced big buyback programs.
That hasn’t happened, yet.
This morning, a lone voice, Novartis, announced a buyback program, but Novartis is hardly the kind of inspiration that’s needed. There are lots of big buy stocks out there that have been battered and haven’t sent any messages to the investing public, other than fear.
A lot is made of insider buying and selling. Most of the time, the insiders seem to get the direction wrong. But when companies announce their buyback programs, that tends to be a sign that shares are undervalued and the companies are willing to pick up shares at bargain prices.
If this isn’t the right time for that, then we’re really in some rouble.
There probably won’t be too much action in the first 30 minutes this morning, a everyone is ready for Bernanke’s congressional testimony that is scheduled for 10 AM. It’s not very likely that there will be kid gloves worn for the duration of Bernanke’s lame duck appointment.
It’s interesting to listen to some of the conspiracy theorists who believe that Bernanke will make a surprise statement or policy decision right before options expiration just in order to throw chaos into the unwinding of options.
Amazing to think that one guy could be responsible for both the Kennedy assassination and the tumbling of an orderly options market.
But leave it to Ben to prove me wrong.
The market opened higher on some good jobless numbers. The impact was across the board and it was good. That was despite the continued bad news from Merrill Lynch and the added drag from its falling stock price.
But shortly after 10 AM it all fell apart. At noon, with the hearings still going on, the market is now down nearly 200 points.
At the moment, I’m not certain what the stimulus was for the rapid and steep decline.
“Was it something I said?”
No doubt that it was, or maybe it was what everyone thought that they heard, but it’s not clear to me what Bernanke could have said that would have come as a major surprise to the investing world.
I doubt that he would have said something like “Only over my cold and dead body will we lower interest rates”.
That would be an unlikely and completely unexpected comment and might send the markets down.
Might.
As I listen to the hearings, the questions and comments seem to be powderpuff in nature. Maybe the vitriol was at the very beginning, because as we approach 1 PM, it seems like an unlikely lovefest.
He never gave any credence to an impending recession, refusing to even use the “R” word, instead referring to a generic “business slow down”.
I’m trying to remember that old saying.
“If it smells like a duck....”
The turnaround has been incredible. Most notably, Ameritrade has gone from being up by over $1 in the pre-open, on good earnings numbers, to now being down by over $1.
But if you really want to see what turnaround is all about, just take another look at The Mosaic Company.
You might remember the saga.
A week ago there were expectations for great earnings numbers. On that news, I bought puts when Mosaic was at about $95. To make a long story short, the numbers were great, but Mosaic went down, on an intraday level to about $80. During that time, I bought and sold puts on 2 occasions.
By the close of trading on the day earnings were released, Mosaic recovered all the way back up to $90, where it briefly stopped en route to $110.
Barely a week later, Mosaic is back to $80.
What great trades these would have been. Up and down, over and over.
But for everything else, it’s only down.
This afternoon, I fled from work, with the news that it was snowing unexpectedly back home and that my flight was delayed.
I’m currently sitting in the airport, hoping to get onto an earlier flight, that too, is delayed. But their delay is better than my delay.
In the meantime I have the opportunity to hook into the airports wireless so that I can watch the continued crumbling of the market.
Somewhere from the time that I turned the car radio off to the point that I logged into the computer, the market ceded another 150 points. Now, about 10 minutes from the close, even the last remaining stalwart, Apple Computer, has turned negative, as the Dow is down by about 330 points.
Unfortunately, there’s a reason that it seems that we’ve been this way before. The only difference is that there’s not much to be optimistic about.
Maybe that’s what’s really missing. Optimism.
Oh yeah.
That and leadership.
The 10% Solution January 16, 2008 (posted 10:45 PM)
Sometimes you can learn a lot through ignorance.
Admittedly, I am not a well read person. So there’s not much that I can draw from the literary world. With the market beginning the day at a level that was 12% below the October highs, I was searching for an apt title for this days’ blog. For some reason, I just knew that the answer that was awaiting me was to be found in the world of literature.
As hard as I tried, I just couldn’t make a go of “Dick and Jane Visit the Museum”.
“See the market plunge. Plunge market, plunge.”
Or my personal favorite, “See Jane call Dick a worthless piece of trash for investing their retirement account in a Bangladeshi semiconductor company”.
But still, not quite the tone that I was looking for.
Of course. It came to me. The Arthur Conan Doyle novel, “The 10% Solution”.
That title said it all.
I was going to make the parallels between the addictive nature of the cocaine solution that Sherlock Holmes was hooked on and the addictive nature of investing in the markets. And it was all going to be tied into the conventional thinking that 10% represented the drop necessary to classify a market in correction.
Unfortunately, as I tried to check my facts, I learned that I was wrong on both counts. The correct title was “The 7% Solution” and it wasn’t authored by Conan Doyle, at all. I was right about the Sherlock Holmes and cocaine connection, though.
But I did learn that “The 10% Solution” is a widely used expression to mean anything at all. I found references to 10% solutions in health, investing, dieting and even national policy. Google is great for that sort of thing, although it is not really great at maintaining its stock price.
I like those kind of all purpose, but meaningless expressions. It’s almost like saying “a high pressure system is moving in from the west”.
No one really has any clue of what that means. Whether it really happens that way or not, who’s going to know and who really cares?
The high pressure system that was coming our way today had already done its damage to the European and Asian markets and was the same one that raised havoc with ours yesterday.
Every expectation was that it would do the same thing today. And sometimes those expectations make sense. The pre-opening futures were pointing to a horrible open and that’s how it all started.
Although the Dow didn’t fare that badly through the day and only ended with a 35 point loss, there were moments when the Szelhamos Portfolios were getting slammed worse than any previous day that I could recall.
The selling in Apple and Google were relentless, and little else was spared.
Maybe the world just isn’t ready for a thinner MacBook.
But somehow, before the day was over, a big portion of those losses were erased, as perhaps some bargain hunters pulled into town. Still, the S&P 500 finished at another new 14 month low, well below any support level, while the Dow ended up at a 9 month low and the NASDAQ at a 10 month low.
Even then, Apple and Google continued to be punished for no discernible reason. Apple reports earnings early next week. It’s hard to imagine it going down even further after the release of what should be good news.
But common sense has no place in the market’s gyrations.
As if Ben Bernanke wasn’t catching enough heat, the unthinkable has occurred.
In a New York Times Sunday Magazine cover story that will be published on Sunday, the most revered of all Fed Chairman, Paul Volcker, who rarely speaks out on economic policy issues, reportedly has sent some strong criticism in Bernanke’s way. Unless you think that saying that the Fed is not in control is a wonderful compliment. Even I’m not that contrarian.
But any word at all would violate the unspoken rule. Fed Chairman don’t criticize other Fed Chairman. Even Arthur Burns, who may have been one of the worst in US history got a free pass.
Had he not be so bad, by comparison, Volcker would not have been the bigger than life hero that he turned out to be. He may owe his legacy to Burns.
I guess that if you want to put a positive spin on things, whoever the next president turns out to be, their choice for Federal Reserve Chairman will likely take on Volcker-esque proportions of stature. Unless it turns out to be Robert Rubin.
Someone, someday will be saying “Thank you, Ben Bernanke”.
And where does that leave Ben Bernanke? Probably back to the world of academics, only this time, it’s more likely that it would be on the high school level. Maybe indoor track coach.
Not that there’s really any reason to be fair to Ben Bernanke, but it really doesn’t matter what position he would choose to take. No matter where he stands, he will be roundly criticized. All of the characteristics that people thought were great attributes when he was initially appointed are now thought to be major problems.
At this point, everyone thinks that a 50 basis point cut is already built into stock prices. So if the Fed does end up cutting the rate by 50 basis points, it will still look inept.
If it cuts more, it will be accused of causing a sell-off in the market and for spreading panic about the health of the economy.
It must suck to be Bernanke.
But you never know. You can only become the Comeback Player of the Year after you’ve sunk to some unspeakable low.
Right now, that low looks to be more than 10%.
The solution?
Take Rolaids and hang in there.
What a Difference a Day Makes January 15, 2008 (posted 10:45 PM)
King Tut, the Boy King, died at a young age. He had a short reign, but is, nonetheless, remembered and has become the stuff of legends, thousands of years after his death. Every young school aged child now knows about King Tut. He’s a close second to dinosaurs.
Most school aged kids don’t know about IBM, though. Kids are much more interested in Boy Kings and dinosaurs, than in consulting firms.
Yesterday, IBM was anointed. With a tenure of barely a day, IBM’s reign may be one of the shortest in the history of humankind, having been overthrown by the financial market equivalent of the Visogoths.
To make matters worse, as bad as the action in the Dow was today, IBM was even worse. At least IBM was a benevolent despot and shared the glory with the entire market. Everyone was buoyed by IBM.
Of course, who was I to anoint IBM, anyway? In hindsight, I should have consulted with some kids. Among the things that I may be accused of, “kingmaker” hasn’t been one of them.
I’ve always been uncomfortable around royalty.
Often, the true measure of a good leader is what life is like after their tenure has ended. By that measure, IBM was pretty pathetic.
“Pathetic” would be a kind way to describe today’s action. I don’t even want to run my final numbers for the day, I’m really not interested in finding out whether the portfolios set a new single day record.
The one thing I know is that it wouldn’t be the good kind of record. Only my Country Wide puts were up today, and I sold those at the end of the trading session.
The expected “bad news” from Citigroup was originally deemed to be good news. In fact, after announcing another $15 billion in writedowns, more layoffs and a 40% cut in the dividend, the pre-open numbers had Citigroup up by more than 2%.
Everyone’s initial impression was that these were all of the right steps necessary to upright Citigroup. The new CEO was being patted on the back for taking the necessary decisive actions.
That didn’t last very long. Once the bell was rung, the analysts were uniformly blasting Pandit’s plan as not going far enough. He was blamed for not dumping all of the bad news into this most recent quarter.
That’s the strategy that’s typically used. Throw all of the bad news into a single quarter and get it all out of the way. From a manager’s perspective, there’s only a limited amount of time that you can keep placing blame at the feet of your predecessor. So you may as well lay it on heavy and end up looking great, in comparison.
For some inexplicable reason, Pandit chose not to do that. And so, he was roundly blasted and the questions started pouring it regarding his suitability to serve as Citigroup’s CEO. How could he be a worthy CEO if he doesn’t even know how to take advantage of the “free passes” he was given and has no stomach for playing the “blame game”.
That was bad, but it was only an excuse for its trickle down into the rest of the market. The sell-off was really over done.
When people are pessimistic, any news will get a negative spin.
Take A | 
