By , 24 January, 2009, No Comment
ESH9
Another chart that traded well. Though I could not figure out why the market decided to go up in the afternoon section.

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ahh.errm…well….did John Thain really need a $35000 toilet?

By , 23 January, 2009, No Comment

When John Thain became Merrill Lynch’s CEO in early 2008, he hired Michael S. Smith Design to revamp his office suite, spending approximately $1.22 million according to documents….The following is a list of the items in his suite:

Area Rug $87,784
Mahogany Pedestal Table $25,713
19th Century Credenza $68,179
Pendant Light Furniture $19,7514
Pairs of Curtains $28,091
Pair of Guest Chairs $87,784
George IV Chair $18,4686
Wall Sconces $2,741
Parchment Waste Can $1,405
Roman Shade Fabric $10,967
Roman Shades $7,315
Coffee Table $5,852
Commode on Legs $35,115….

Thain also paid his driver $230,000 for one years work, which included the driver’s $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay, documents show. Drivers of top executives are often paid about half that amount

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Highlights from Nightly Business Report with Warren Buffet

By , 22 January, 2009, No Comment

SUSIE GHARIB, ANCHOR, NIGHTLY BUSINESS REPORT: Are we overly optimistic about what President Obama can do?

WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: Well I think if you think that he can turn things around in a month or three months or six months and there’s going to be some magical transformation since he took office on the 20th that can’t happen and wouldn’t happen. So you don’t want to get into Superman-type expectations. On the other hand, I don’t think there’s anybody better than you could have had; have in the presidency than Barack Obama at this time. He understands economics. He’s a very smart guy. He’s a cool rational-type thinker. He will work with the right kind of people. So you’ve got the right person in the operating room, but it doesn’t mean the patient is going to leave the hospital tomorrow….

SG: But I know that during the election that you were one of his economic advisors, what were you telling him?

WB: I was telling him business was going to be awful during the election period and that we were coming up in November to a terrible economic scene which would be even worse probably when he got inaugurated. So far I’ve been either lucky or right on that. But he’s got the right ideas. He believes in the same things I believe in. America ’s best days are ahead and that we’ve got a great economic machine, its sputtering now. And he believes there could be a more equitable job done in distributing the rewards of this great machine. But he doesn’t need my advice on anything….

SG: What’s the most important thing you think he needs to fix?

WB: Well the most important thing to fix right now is the economy. We have a business slowdown particularly after October 1st it was sort of on a glide path downward up til roughly October 1st and then it went into a real nosedive. In fact in September I said we were in an economic Pearl Harbor and I’ve never used that phrase before. So he really has a tough economic situation and that’s his number one job. Now his number one job always is to keep America safe that goes without saying.

SG: But when you look at the economy, what do you think is the most important thing he needs to fix in the economy?

WB: Well we’ve had to get the credit system partially fixed in order for the economy to have a chance of starting to turn around. But there’s no magic bullet on this. They’re going to throw everything from the government they can in. As I said, the Treasury is going all in, the Fed and they have to and that isn’t necessarily going to produce anything dramatic in the short term at all. Over time the American economy is going to work fine.

SG: There is considerable debate as you know about whether President Obama is taking the right steps so we don’t get in this kind of economic mess again, where do you stand on that debate?

WB: Well I don’t think the worry right now should be about the next one, the worry should be about the present one. Let’s get this fire out and then we’ll figure out fire prevention for the future. But really the important thing to do now is to figure out how we get the American economy restarted and that’s not going to be easy and its not going to be soon, but its going to get done.

SG: But there is debate about whether there should be fiscal stimulus, whether tax cuts work or not. There is all of this academic debate among economists. What do you think? Is that the right way to go with stimulus and tax cuts?

WB: The answer is nobody knows. The economists don’t know. All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are. Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this. We don’t know the perfect answers on it. What we do know is to stand by and do nothing is a terrible mistake or to follow Hoover-like policies would be a mistake and we don’t know how effective in the short run we don’t know how effective this will be and how quickly things will right themselves. We do know over time the American machine works wonderfully and it will work wonderfully again.

SG: But are we creating new problems?

WB: Always

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a historical perspective on where the markets are currently price…wow!

By , 22 January, 2009, No Comment

Here are some historical snap shots of the FINANCIAL SECTOR of the S and P 500…as you can easily surmise, we are at lows not seen in decades. Wow! This should give you a pretty good perspective, along with the other article I posted below as to just where are banking system is at present. It is reason of unprecedented concern, and my concern is not whether the banking system will rebound, but….will it survive. Of course, the Fed has been doing triple duty pumping cash into the system, but the question remains whether or not the system is so broken that it might be beyond repair.

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I thought this article by John Berry was fascinating…What do you think?

By , 22 January, 2009, No Comment
John M. Berry writes,
At some point, politicians are going to have to stop pandering to their constituents and show leadership by explaining why the economy can’t survive without a banking system. Hear we go again. We hear a rising chorus of cheerleaders for “recapitalizing” banks. Instead, let me remind readers of the first suggestion I made, way back in September. That is, the regulators should make use of capital forbearance for solvent banks and close insolvent banks.
Are the banks that are in trouble insolvent or illiquid? If they are illiquid, then capital forbearance would keep them going. Capital forbearance means lowering the capital requirements for the banks to remain in business and to continue low-risk lending.
If the banks are insolvent, then throwing more capital at them is the infamous zombie bank strategy. Propping up zombie banks encourages them to continue to lose money, make risky bets, and make it harder for healthy banks to compete.
The regulators may whine that the “toxic assets” are hard to value, making solvency difficult to determine. However, I think that triage is possible. Based on the best estimates of the value of “toxic assets,” classify banks as either healthy, insolvent, or somewhere in between. If they are insolvent, close them. If they are somewhere in between, give them capital forbearance, but put them on a tight regulatory leash otherwise. Limit their ongoing asset acquisition to low-risk lending. When the dust settles, presumably some of these banks will turn out to be healthy. The rest will cost the taxpayers some money, but presumably the tight regulatory leash will keep the banks from adding to their (our) losses.
It may be a bad idea to try to survive without a banking system. Trying to survive with a banking system that consists of insolvent banks artificially propped up by the taxpayers is an even worse idea.
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a little confidence returns to the market

By , 21 January, 2009, No Comment

ESH9

What a pleasant and profitable day to trade. It was if the market was almost normal again, especially the nice steady move we had this afternoon to the upside. The general consensus was the “Obama” effect and some decent news from some of the financials like Northern Trust. Of course, the market has a very short memory as it seems to have decided that Citicorp and Bank of America are of little consequence at this point. It’s a fickle thing this market.
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I just don’t know what to say these days…and Ray is as baffled as I am…

By , 16 January, 2009, No Comment
As a blogger, I am committing to imparting the small amount of knowledge that I possess to people who might find it interesting or helpful. In the past, this has been a joyous and passionate pursuit for me…that is to say, I have taken a general interest and posted with exuberance.

But the last week has just put me in a state of mind where I find it difficult to find optimism in the events that are currently occurring in our country. You see, I am an optimist by habit, and don’t generally like to dwell on things that are pessimistic or negative. I have found this mindset an effective way to deal with the uncertainties that are part and parcel of any market.

But then I run into a series of economic events of the last 18 months that are genuinely distressing. Like these:

Employment figures that are threatening to fall off a cliff….

An believable drop in retail sales.

Unprecedented upward changes in unemployment claims

An unflattering comparison between the current recession and past major and destructive recessions

So, as a trader I have found myself dealing with some of the greatest levels of pessimism I have ever experienced on our economic climate. I’m a bull by choice, but have learned to trade the market and not the economy. (as I have mentioned in some of my earlier posts). With the exception of the little bear market really a week or so ago, I have found myself perpetually short on everything I trade…and I suppose I don’t really mind being short all that much. But our economy, when taken in aggregate, points to significantly worse developments in the coming months. THE IS A DISTINCT LACK OF ANY INFORMATION THAT WOULD LEAD TO A FAINT RAY OF HOPE FOR OUR ECONOMY.

To make matters worse, this entire situation was brought about by greed and ignorance by both Wall Street and our current administration…you may as well through in, for good measure, a goodly number of Congress. And these factors coalesced to form a real estate bubble that shows no signs of waning in intensity or scope. Worse yet, we have found ourselves in a positive to bail out the very business entities and CEO’s who placed us in peril to start with. And the whole situation makes my stomach churn.

You see, this crisis was not about some external factors, like a World War or catastrophic emergency, no, we PUT OURSELVES in the crosshairs of this crisis through sheer greed and lack of government oversight. We weren’t unwillingly thrust into this disaster against our will….no, we waltzed into our economic disaster with eyes wide open and self-congratulatory smiles upon our faces. It is as if, at this point in time, the executives who engineered this catastrophe find themselves unaccountable. Recent congressional testimony unveils a parade of financial executives who find themselves unwilling and unable to assume any sort of personal responsibility for our current malaise. No, it was someone else’s fault….don’t blame the leadership of the country.

Our president, in his last presidential news conference, claimed his presidency was basically an “unqualified success.” Further, he explained, that certain things did not work as he wished they had, but finds himself without culpability in the general meltdown of the stock and financial markets.

Our secretary treasury, handed out 375 billion dollars to the banking community without any meaningful restrictions on what was to be done with the money, and the banks responded by using the money TO THEIR greatest advantage, not the suffering middle class consumer of our country.

I have never reached the level of disgust I current harbor against the people who are in office to serve the people of our great country, not line their own pockets. And ultimately, it will be the working population of our great country who bear the burden of this administration’s litany of incompetence.

Yes, I am still trading everyday, that’s my job. But it just pains me to watch 10′s of trillions of hard working men an women’s 401(k) programs and other retirement assets suffer losses in excess of 50% and, as I have said, all indicators point to a more pain yet to come.

It’s very hard, almost impossible to obtain any measure of joy and excitement in the current economic climate…only the contrary, I find my days trading a process of mounting frustration.

I’ve been talking with my friend Ray Epley about this. Ray is in management in the automobile sales segment of our economy, which has been among the hardest hit part of the economy. He wonders if there is an end in sight….and I don’t have a good answer for him….because I don’t see an end in sight, only mounting problems.

Ray didn’t like my answer, and I don’t blame him. But it’s the hard working guy like Ray that will ultimately bear the burden of this exercise in futility, and that is a sad fact. After all, all he’s done wrong is go to work everyday and work hard.

Where is the personal accountability in our world? Sure we could make Bernie Madoff the object of our scorn, but you will be amazed in the coming months how many Bernie Madoff’s there are…you see, they were all eating at the same hog trough and no one bothered to tell them that what they were consuming was other’s peoples hope and dreams…of course, that admonition paled in importance to the notion that they might well line their pockets full, brimming with money.

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Trade the market, not the economy

By , 9 January, 2009, No Comment

How is this for some dire employment news?
I was talking with my buddy Ray Epley, who is one of my favorite people to bounce ideas off of, and we were struck by the spate of bad news that has flooded the news of late. Some of the news has been absolutely horrifying, and in normal times would cause investors to panic…

Ray says to me: “Dave, Geez with all this bad news you would think that the market would fall flat on it’s face.”
Dave: “I agree with you, Ray…things sound terrible. I was thinking about getting short on some stocks a month ago. I would have been stopped out with a big loss.”
Ray: “yea, how can the market go up? Aren’t these guys looking at the news?”
Dave: “I don’t have any explanation, Ray….”

And Ray is basically right, with such negative reports on the economy, how can the market rally? Unemployment has been spirally upward, consumer spending is tanking…..what gives?
The truth is, I don’t understand bear market rallies other than they occur and you have to trade them accordingly, whether you understand them or not. Trade the market, not the economy. Sometimes when a spate of bad news floods the market I am tempted to automatically start thinking short, and that is a mistake during volatile times like this…trade the market, not the economy.

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