Sunday, July 27, 2008

Stagflation (part 4) Finally taking hold (?)

1. Onset of Recession (August 2007)
2. Inflation (1st Quarter 2008)
3. Reality of Economic Conditions (to be determined)
4. Stagflation (July 20th - 2008*)
5. Depth of Recession to be determined (?)
6. Reconciliation and Acknowledgment - People and Government
7. Capitulation- "The Bottom" (?)
8. Beginning of Recovery (2009 - 2012)

* Inflated prices begin to peak and turn to go down - as demand begins drying up - unemployment goes up - lots of "head fakes" created by the Government - stalling and leading into the bottom and recovery

Saturday, July 26, 2008

Sun Valley, Idaho - The Sawtooth National Forest

I may be here forever, or at least until Labor Day - A beautiful area - somewhere between 5,000 and 6,000 feed in elevation. Temperature here - about 15 Degrees cooler than Boise, Idaho.

The Securities Markets need a rest from me. I am hedged positioned with a substantial short position in the Russell 2000 and Call Options in prime securities - Some Dated January2009 and other Dated January 2010. If the hedge works properly - I will be rewarded by a falling market in the short term (Through most of Fall) and A recovery somewhere beginning in 2009 and increasing thru 2010.

I hope to be exploring This mountainous area by Horseback - The Salmon River by Kayak - a wonderful bicycle system - teaching Tatina to be a good girl, how to ride along with a bicycle, she has the beginnings of playing Frisbie - There is much to see here - leading up into the Sawtooth.

This is almost a dead-end location - until trails and rivers take over. The towns are supported by summer and winter activities - a favorite of people who are not concerned about money.
During the last 15 miles of driving, I must say I was impressed by the Airport (in nowhere) with a dozen or so private Jets - and an equal amount of large private prop planes.

Oh? What about the economy, securities markets, etc. - We're Fu*ked!

I hope to post lots of pictures, If I can remember to bring my camera with me....paul

Wednesday, July 23, 2008

Warren Buffett

Warren Buffett needs no introduction and is an idol for everyone— investor or not.

Folks only look at his successes but forgo his mistakes. Buffett himself is the first one to admit his mistakes and makes it a point to call them out in his letters to shareholders of Berkshire Hathaway. This post is dedicated to the mistakes as acknowledged by the great man himself. There’s a lot of learning to take away for all aspiring investors, like you and me. Call them his mistakes or his mantra for successful investing, I see them as the cardinal rules of investing and trading—value, swing, trend or day.

Cheap’s not good: Buffett realized through his experience that given a choice, a good company whose shares moderately higher prices are much better than a mediocre company whose shares are at a discounted price. Time supports good business and destroys bad business. Do note the emphasis is on ‘moderately higher’ and not ‘excessively higher’.

Bet on the captain or the ship: The classical investor’s dilemma is—should the bet be on the company or its management? According to Buffett, "Good jockeys will do well on good horses, but not on broken-down nags." Good business with good management grows and profits. Bad business with any management eventually fails. Bad management for good business gets ultimately replaced.

Stick to the basics: Buffett’s portfolio lacks the luster and consists of seemingly the dullest businesses around. Instead of hi-tech, Buffett goes low-tech and invests in candies, soft drinks mattresses, shoes, paints, jewelry, possibly insurance etc. His glimpse of the future is around these companies rather than complicated, tech companies, reason being the simpler the company’s products are, the better is an investor’s ability to evaluate the business.

Buffett says, "To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers.". It’s all about the investor’s circle of competence and comprehension. Focus on your strengths

Avoid Greed: Unlike businesses where excess profits lead to futile acquisitions or where egos and rivalries create unnecessary acquisitions and purchases, Berkshire Hathaway (BRK.A) completely eliminates emotion-led meltdowns that impact its investments and business. The focus is only on long-term shareholder returns. Buffett says, "I thought that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn’t so. Instead, rationality frequently wilts when the institutional imperative comes into play."

Investor Trust: Buffett has learned from his mistakes to invest in only those businesses with management that has a high degree of integrity. This is critical for investor trust. He says, “After some other mistakes, I learned to go into business only with people whom I like, trust, and admire. We do not wish to join with managers who lack admirable qualities, no matter how attractive the prospects of their business. We’ve never succeeded in making a good deal with a bad person."

Wednesday, July 16, 2008

The Economy Today

Back in the States, something beyond cognitive dissonance is occurring -- this is full blown case of dementia unfolding in the public sphere. When this era of excess and absurdity is treated by historians in the future, the question I expect to be asked most is not why many of these people weren't jailed for their financial felonies. Rather, I expect them to wonder why so many of these folk weren't placed in protective custody, and heavily medicated, for the only rational explanation for their statements and behaviors is that they have gone so far beyond the bend as to be completely and totally insane.
- Barry Ritholtz

Monday, July 14, 2008

The Stock Market: It's always darkest before it goes pitch black

These are Dark Days for many who have their money in the Securities Markets. Some of us trade on the "Dark Side" and it's easy picking for the moment - There is no need to have paragraphs of discussion - other than to say that the Government Took a Bad Problem and made it extremely worse by spinning, lying, and posturing. They ran out of Bull Shit - but the market still has its destiny - it's called Capitulation. Picture this - a man Jumps off the Empire State Building (August of 2007) as he passes the 44th Floor - May 2008 - they call it a Recession (maybe) now all we have to wait for is Capitulation - you will know it when you see it - Two Eye Balls floating in a pool of Blood on the Street below - October seems to be a good prediction - then it will flatten out on the bottom for 3 to 6 months and maybe we'll have the beginning of a recovery (yes, just a beginning.)

Saturday, July 5, 2008

Pacific Ocean - Coos Bay, Oregon - last days

We have been here for almost a week and a few more days, before leaving toward Seattle. I have decided, not to go back to the Interstate and just drive up Hwy 101 (400 miles to Seattle) along the Ocean - stopping at will, enjoying each small town - I'm going to take a week to do the 400 miles - as I'm not expected in Seattle till July 15th. - Tatina and I have been walking on the beach a few hours a day. The beaches are very serene, hardly being used, there seems to be a sanity - Nothing has changed in the feeling since Lake Michigan - 50 years ago. The Picture above is her retreat after chasing a wave back out only to find one bigger coming in. This is an enormous Park - Beach - Campground lots of vegetation, My site is very private surrounded by fern 6 feet high and then some bushes another 10 feet above. Been eating fish every day - Many people have small boats and come in with lots of pretty large fish - there is someone working at the cleaning station almost all day long

I have 5 Bar Rev A broadband - here and trading has been good in the markets. I trade "The Dark Side" and do well during market falls - which are becoming more frequent and will increase in reaching for a bottom - which is nowhere in site.