Category: Ethics

Six Years at the Aleph Blog!

Six Years at the Aleph Blog!

Posted on by David Merkel

Thanks to all of my readers, whether you read me via RSS, e-mail, twitter, or natively at the website.? But I have a favor to ask… if you read me elsewhere, drop by the site every now and then, because not all of my commentary gets republished by those that reprint my work.? Also, not that we get a ton of comments at Aleph Blog, but I appreciate the quality of almost all of the comments we get here, even if I may disagree with some of them.? If you read me elsewhere and want to comment, come to Aleph Blog and do so, or, just e-mail me.

Now for a few housekeeping items.? 1) People sometimes ask me for books to help explain insurance stocks, and in the past I have pointed to my own writings, especially this one.? My flavors of insurance series helps also.? I’ve also pointed to works from the Society of Actuaries, Casualty Actuarial Society, LOMA, CPCU, and others.? But now, I think this piece could be useful to some readers.? It’s relatively comprehensive, and not that long.? It’s not the way I do it, but it is well thought out.? It suffers from the same problem as one using the models of Aswath Damodaran; it’s too detailed.? I can’t think of anyone that uses such a model — it is overkill.? But maybe readers could what I would do with such a model: boil it down into something simpler.

That is what I am trying to do with my current series on analyzing insurance stocks.? There are three or so more parts left to write, and I should get them out in coming months.

2) Some people ask me how they can read the articles in my Major Article List, and I wish I could read them too.? Trouble is, TheStreet.com has lost them.? They are there, maybe, somewhere in their computer systems, but since they changed the way that they named files, the links to most pre-2008 posts has been lost.

Now, if any of you think you have a way to find those posts, let me know.? There are pieces on that list that are gold, silver, and bronze.? I would at least like to get the gold ones back.

3) Sometime soon, I will create a small website for my business.? It will explain what I do for a living for those that might want me to manage money for them.? I will not link to it here; I try to keep a separation between the blog and my business.

4) I write about a lot of topics, and I tend to go in streaks on given topics.? It’s not what I intended when I started this, but I can understand why I have readers follow me and leave me.? My blog is consistent over a long period, but over intermediate periods it concentrates on one area, then another.

5) I’m not out of things to write about.? Here’s what I am planning for the future:

  • Completion of my work on a new asset pricing model
  • Completion of my “On Insurance Investing” series
  • More posts on the idiocy of US & Global macroeconomic policy
  • Buffett’s Shareholder Letter and Annual Report.? (Note: the letter gets more press, but the Annual Report has more substance.)
  • Commentary on new ideas from the CFA Institute… some good, some bad…
  • More commentary on investments that rip people off.
  • And more, I have a long list of ideas to write about, and many book reviews to publish

6) I would have never expected? it, but February 2013 was my highest readership level at the blog directly, despite the short month.? Thanks to all who read what I wrote.? I try to write good stuff; I do not aim to be controversial, though I know that some of my views are controversial.

7) When I started this six years ago, I would have never dreamed how much I would end up writing.? I thought I wrote a lot for RealMoney.? If anything, I have written four times as much per unit time, which means that as prolific as I was at RealMoney, I have written 4-10x as much here.? And it all started with an extended conversation with readers on Jim Cramer’s “blog,” which led me to do what I had resisted for two years — start my own blog.

As I have developed this blog, I now earn more than I did writing for RealMoney.? That’s not much, but every little bit helps.

8 ) You can’t believe how many people write me asking to do a guest post at my blog.? It happens about 15 times per month.? Then there are the scummy advertisers, who don’t want their advertisements to be labeled as such.? I have a strict policy that all advertising should be identified as such.? Why?? Because I never want to scam my readers.? When you come here, I want you to be comfortable that I am saying what I say for reasons of truth, not profit.? Profit is incidental here.? Truth is paramount.? I know how I could make this place more profitable, and I reject it because I would compromise my message.

9) I began with thanks to readers; I end there as well.? Truth, I treasure all of the emails giving me praise, but my internal response is “Wow, you’ve all been so great to me over the years.? It really gets to me, you know.? I hope I always make you proud.? That’s all.”? (What the Flash said to the citizens of Center City… yeah I know, a little dumb, but you had to see it.? Start it at 8 minutes.)

My main focus is on ethics in investing, and secondarily explaining how things work.? I hate seeing people ripped off by investment firms, or their dishonest governments.

I have no idea how long I will continue this blog, but I would love to do it as long as I live.

Sincerely your friend,

David

How do Promoted Stock Scams Work?

How do Promoted Stock Scams Work?

Posted on by David Merkel

From a reader:

I’ve been following your blog for a little while and appreciate your analysis. I’ve been particularly interested in your coverage on the penny stock phenomenon and started doing some of my own digging. I’ve found a few “companies” that seem to share characteristics with the ones you have highlighted. Digging into the 10-Qs reveals all sorts of red flags around related party transactions, health of balance sheet, past history of management, etc. The question I’ve been trying to answer is how these companies continue to exist? In the cases I list below their sole purpose appears to be to move cash from unwitting investors to the management of the company.?

Would be interested in your perspective.

Wanted to respond to you earlier, but time did not permit.? But thinking about it, I realized that for penny stocks, the most relevant statement to analyze is the Consolidated Statement of Changes in Stockholders’ Equity/Deficit.? You can see what prices they issued stock at.? Proceeds divided by shares gives you the internal valuation of where the company is willing to offer shares.? Few ask, but all should ask, “If the company is willing to issue stock at 30 cents per share for salaries, services, etc., why does the stock trade for $1 per share?”

Sometimes a merger, or a purchase of a business can inject money into a company; sometimes debts are settled for shares. That can temporarily grow the company, and combined with a reverse split, it can give it a share price and a market capitalization that seems respectable.

Number two is the hidden bidding up of the shares through sham transactions where related parties buy & sell at progressively higher prices (netting to no loss, aside from commissions) until some speculators see the microcap stock and start driving it higher, possibly supported by promotional paid research.

But here’s the hard part for me: Sometimes the companies are involved, sometimes not.? Sometimes I can tell how the promoters make money, sometimes I can’t.

This is what I suspect: Promoters have several shell corporations for promotion and trading.? Let’s say one has 4 shells.? When A promotes a stock, B, C, and D trade.? When B promotes a stock, A, C, and D trade.? When C promotes a stock, B, A, and D trade.? When D promotes a stock, B, C, and A trade.?? Then each promoter can say they have no economic interest in the stock mentioned that they are “advertising.”

This is an ugly space.? Supposedly you can get a borrow on these bits of financial trash (in order to short them) through Interactive Brokers.

An Echo, but not Sound

An Echo, but not Sound

Posted on by David Merkel

Time for my penny stock scoreboard:

Ticker Date of Article Price @ Article Price @ 1/24/13 Decline Annualized Splits
GTXO

5/27/2008

2.45

0.040

-98.4%

-58.6%
BONZ

10/22/2009

0.35

0.019

-94.6%

-59.2%
BONU

10/22/2009

0.89

0.074

-91.7%

-53.4%
UTOG

3/30/2011

1.55

0.009

-99.4%

-94.1%
OBJE

4/29/2011

116.00

1.780

-98.5%

-90.9%

1:40
LSTG

10/5/2011

1.12

0.061

-94.6%

-89.2%
AERN

10/5/2011

0.0770

0.0002

-99.7%

-99.0%
IRYS

3/15/2012

0.261

0.015

-94.3%

-96.4%
NVMN

3/22/2012

1.47

0.070

-95.2%

-97.3%
STVF

3/28/2012

3.24

0.600

-81.5%

-87.0%
CRCL

5/1/2012

2.22

0.350

-84.2%

-91.9%
ORYN

5/30/2012

0.93

0.280

-69.9%

-84.0%
BRFH

5/30/2012

1.16

0.316

-72.8%

-86.3%
LUXR

6/12/2012

1.59

0.018

-98.9%

-99.93%
IMSC

7/9/2012

1.5

1.480

-1.3%

-2.4%
DIDG

7/18/2012

0.65

0.085

-86.9%

-98.0%
GRPH

11/30/2012

0.8715

0.428

-50.9%

-99.1%
IMNG

12/4/2012

0.76

0.747

-1.7%

-11.6%

1/24/2013

 Median

-94.4%

-90.1%

You have to admire the consistency of capital destruction among promoted penny stocks.? Tonight’s loser-in-waiting is Echo Automotive.? Here is the bullet points to illustrate the future carnage:

  • Minimal Revenues
  • Negative net worth
  • Negative earnings and getting worse.
  • Management sucking in a lot in salaries.
  • The long list of stock promoters engaged by DH Media LLC.? This is only the email effort.? They paid $1.9 million to disseminate the shiny, colorful 10″ x 14″ “newsletter” via snail mail.??? They paid $25,000 to the tout that wrote the copy, or maybe, spiffed up DH Media’s bullet points. Add in disclaimers in 5-6 point type.
  • Risk factors list longer than you can shake a stick at.
  • Predecessor company “Canterbury Resources” was pursuing mining interests in New Zealand.
  • Predecessor acquirer company “Controlled Carbon” was working on solutions to reducing carbon emissions.? They now own 70% of the combined company, paying four cents a share for their stake. (So why does it trade at near 80 cents a share now?
  • Now the combined company has some solutions that will double fuel mileage on vehicles that use gas.? What a wonder.

If you really had a technology that could double gas mileage, you would set up a joint venture, or a licensing agreement with one of the major automakers, and divide the profits? off of their high vehicle sales.? You would make a bundle doing that.? You would not buy a shell company in a different industry and let costs get out of control.? That looks like management does not have a real technology, but is simply trying to “take something off the top” through salaries and benefits, and perhaps rewarding friends.? After all, in the stub of the third quarter, Echo blew threw virtually all of the new capital that it raised, and for what?

The company might or might not be affiliated with the promoters.? The promoters say the company is not affiliated with the promotion.? In one scam, Luxeyard [LUXR] a different set of promoters did reveal that the company was paying the promotion to facilitate sales of stock.? The proof is in the pudding.? If Echo goes and does a PIPE or a secondary IPO, maybe there was some hidden affiliation.

The promoter also says they won’t trade for 90 days.? Now, the economics of this one is tough, because the parties that owned “Controlled Carbon” own 70% of Echo Automotive.? Dilution at low prices does not favor them, and I don’t see how they could easily monetize a large portion of their stake.

That leaves the remaining 30% of the company to be traded.? The promoter has spent over 2 million to promote the stock.? Unless he owns a big chunk, and sells into this wave, I don’t see how he makes money.? And if he does sell into the wave, and a lawsuit is brought later, that would stand against them in court that they violated their disclosure.? Maybe they take that risk anyway — they are working at the edge of the law anyway.

Except, maybe a lot of scammers work together as in this example from the FBI.? I’ve posited that idea before.? Given all of the non-identifiable shell companies involved, that could be going on here also.? It would be interesting to try to prove the existence of and break a ring like that.

Anyway, steer clear.? The company is horrid, and with promoters around, those that buy and hold for any significant length of time (say 1-3 months) are 99% certain to lose money.? Don’t be one of the pockets that gets picked.

Penny Wise, Pound Foolish

Penny Wise, Pound Foolish

Posted on by David Merkel

Some of the dumbest things I have seen in my life inside corporations revolve around incompetent managers, who don’t have the foggiest idea how to grow value organically, and use a variety of shortcuts or cheats to give an illusion of creating value by doing nothing.? I have given a few examples in these two articles:

Here are some more examples:

Some acquirers tend to despise the employees of firms that they acquire, and assume there is a lot of fat to be cut.? So it was that a client that I managed assets for that was acquired by a British company.? A few months after the acquisition the client firm announced that they were firing half of the accountants, and all of the accountants dealing with investing.? I went to the management of the firm that was a new client of ours and expressed my concerns, saying that they would lose all customization and control of results by outsourcing investment accounting — it could never be as responsive as retaining “in-house” staff.? Also, firing half of the remaining accountants would lose a lot of local knowledge where systems are deficient and need “hand holding’ with regular adjusting entries to make sure the accounting was correct.

In this example, the investment accountants were actually quite good, though their leader did not present well.? I had a good relationship with him and his staff, and helped them find new jobs, much as I hated to see them go.? I did the same for some of the other accountants that were let go, since I interacted with some of them as well.? It almost seemed like the new client wanted to eliminate all of the accountants with special long-term knowledge of the business, and retain the cheaper ones with less institutional knowledge/tenure.

As it was, my dealings with the new heads of financial reporting left me scratching my head, wondering why the new guys were a “trade up.”? They seemed to understand the issues less well than those they replaced, but were advertised to be really bright.? Okay, lost on me.

I relayed my concerns to my bosses, and they said, “Not much we can do.? We have the same ultimate parent company, but they’re not geared toward taking feedback at what would be such a micro level for them.? Let’s just watch and see what happens — if it is as bad as you think, it should materialize in six months or so.”

As it was, my bosses were right, and so was I.? For the first six months after the accounting change, profits were astounding.? The new management team was patting itself on the back, certain that their decisions were leading to greatly improved profitability.? (As an aside, I remember sitting through interminable meetings where new accounting software was being introduced. The old stuff was not good enough.)

Then came the year end audit, and new internal auditor plus new external auditors questioned accruals produced by the new outsourced investment accountants.? I was asked what the right approach was for accruing income on some obscure fixed income security.? Belying their cheap cost, the new investment accountants did not make the correcting entries into the system that the old accountants had, leading to a massive over-reporting of income.? Far from being more profitable than the past, it was far less profitable, despite all of the firings in accounting.

This was the first comeuppance of many for an untalented management team that eventually all got fired, as well as the ultimate CEO of the firm that trusted them, and invested a lot of money into that subsidiary.

Warnings to the wise: always analyze your profit margins in a competitive industry, and if results seem too good to be true, don’t accept them, push back and look at all of the squishier accrual items to see if there is an error.? Bad management teams accept good results without question, and criticize bad results always.? Good management teams criticize unusual results, whether good or bad, but bias income to the low side of fair, allowing small positive surprises to emerge.

Then there was the time where an insurance company that I worked for bought out a smaller company, and the hidden price of the deal was that the new CEO would be the CEO of the acquired company in a year.? Bad move.? The guy was an accountant, and his only means of “adding value” were cutting employees, and skimping on squishy accrual items.? While he was CEO, I kept track of how mach GAAP income outpaced my adjusted Statutory income, which should have been close to GAAP.

The CEO had a fragile personality as he did this, emphasizing that the team he had assembled (loyal, but less competent) was highly ethical.? As it was, the CFO tried to find ways to convert capital gains into regular income for GAAP but not tax purposes, which maximized ROE, which was the largest contributor to management bonuses.? They were even the first ones to try an unusual derivative marketed by Morgan Stanley — bull/bear notes, as they were called. It was a bond that would split in two after a certain trigger, leading to two bonds — one with a premium income that would be held, and one with a discount income that would be sold for a capital loss.

Sadly, the company had a hard time evaluating the offer, until they approached me.? (Here is where ability conflicts with ethics.)? The chief actuary (via the Peter Principle, but true of all of that management team) showed me the derivative, and I said, “Oh, that’s easy.”? I told him I would have results by the next morning, and it was 4PM already.? I took it home, worked on it through the evening, and the next day presented the result.

I told him that the math worked mostly, but that if the US Treasury applied anti-abuse rules, it would be invalidated.? I also told him that I didn’t think the transaction was ethical, because restructuring merely to avoid tax, and change the GAAP statement impact had no economic substance.

He ignored my warnings, and so I found myself a week later presenting before all of the leading managers of the company the details of the transaction to be.? (Before that, I talked to the instigator of the idea at Morgan Stanley, and showed him errors in his spreadsheet.? Do not assume that investment banks are infallible.? Also, don’t assume that actuaries or any quants are infallible.? They are human too, and subject to their own biases.? People often shout the word “science” when they are the most weak.)

I told them that I thought the idea was not ethical, but that it would do what was promised.? They were happy with that.? I was already known to be opinionated, though my results were very good.? That poisoned me with senior management which prized loyalty over truthfulness.

Two months later, I was working with a new firm, and the boss came to me and said, have you ever heard of bull/bear notes?? I roared with laughter, and puzzled, he looked at me and I said, “Heard of them?? I corrected their models!”

It should have been a warning sign because our client (the same as mentioned in the first story prior to the acquisition) was willing to consider such garbage in order to increase operating income.? Good managements don’t go for gimmicks.? Going for gimmicks means you aren’t focused on real organic growth.

So, we started in on a new transaction.? The rep from Morgan Stanley was surprised to talk to me again.? Very easy to do, because I knew the model as well as he did, or maybe better, much as I did not like it.

I went through the same schtick with the new client, but they were determined to do it no matter what.? I still remember being in a dim conference room with my boss, when FASB’s EITF [Emerging Issues Task Force] disallowed the transaction going forward, and required all of those that had done it do disclose the results in a footnote.? (Only one company had done it, my prior employer.)

-==-=–=-=-=-==-=–==-=-

The company that actually executed the bull/bear note eventually sold itself to another firm.? While I was working as a buy-side insurance company investment analyst, I got to meet the CFO of the company that bought them.? I said to him, “Would you like me to tell you the history of how this came to be?”? With a grim face he told me no.? It was a thing of pain, but he did not want to know the truth.? He kinda knew it already, and simply absorbed the loss.

With Epictetus, I can tell you that the truth will set you free.? Lies always constrain.? With Jesus, I can say, “You will know the truth, and the truth will set you free.”? This is far more personal, and useful, because Jesus himself lives to teach and protect his own. He is the Truth.

To all, I say, be wary of management teams that control results overly — this seems to be more common in finance, where results are harder to judge.? Finance is all accruals, which makes results ephemeral.

But good managers of financials are conservative.? That is the thing to look for in financials.? If my two examples above are not enough, it is not wise to buy financials that offer growth, because it often stems from scams, not real growth.

I have seen my share of fakers in this life in financial company management.? Be wary when you invest in financials; there is a reason why they are separate from industrials and utilities.? They are less reliable, particularly in time of stress.

So, to investors that care about what they invest in:

  • Analyze acquisitions — most aren’t good
  • Scrutinize accounting — most of the devils lie in accrual entries
  • Analyze management, if you can — understand their ethics, or lack thereof

I’ve written too long, but consider what I have said for your own good.? It will help you.

Book Review: The Snowball, Epilogue

Book Review: The Snowball, Epilogue

Posted on by David Merkel

After I finished last night, I realized I had a few more things to say.? First I need to correct what I wrote in part two regarding the separation of Buffett and Susie.? Here’s some help from one of my readers:

I do have a bone to pick with your review of the Snowball, part two: in describing the Buffett’s separation and arrival of Astrid Menks, you have substituted your own judgment for that of Schroeder and Buffett, without making it clear that it is your own viewpoint.? I certainly understand your assessment of the marriage and perhaps your desire to defend Buffett, as he is someone you clearly respect (as do I).? But Buffett’s own view, expressed in the book that Susie’s leaving was “99% [his] fault”.? Schroeder also indicates that Buffett was quite difficult, and of course, he was totally driven, and in any case, not terribly emotionally supportive.

The ethical judgments that I made in parts two & four were mine.? They were not those of Alice Schroeder, Buffett, or anyone in Buffett’s family.? That said, because of the role I play in my church, I have had to counsel some people on marriage.? My results have been good, bad, and indifferent.? Usually I think that I have been called in on the late side, when hope is almost non-existent.? Better to call in a counselor on the early side.

I have known many men, and some women who I would call “pieces of work,” where they are very difficult to get along with.? I’ve seen cases where the spouses of such people succeed, and more where they failed.? In marriage, it takes two to make a failure, leaving aside adultery and desertion.

My opinion is this: if Susie could bear with it for 20 years, she could bear with it for 40 or more.? Buffett was maturing emotionally, and was better able to interact with others.? Susie missed the best years of Warren.

As it is, children are affected even if adults when parents separate; they become more prone to divorce.? Buffett’s children had their own marital problems.? It also doesn’t help when you didn’t get a lot of attention from your father when young.

On the Patience of Buffett

Buffett does not have to deploy capital; he does not have to grow.? He can live with a lot of cash on hand, earning zero.? He knows human nature.? As a group, we tend to panic every five years or so.? Buffett picks up a lot of bargains, whether by sector, or across the market as a whole.? He finds good companies that are out-of-favor, and he gives them a good home.? This is very different than how most people invest.

Buffett waits until he sees a return on book capital with reasonable certainty that exceeds his threshold, and then he buys aggressively.? He can do that because he has a balance sheet, and he has simple goals for return on capital.?? So long as he continues to be careful he never has to worry about insolvency — his balance sheet is conservative.

Final note on Religion

Because of who I am, I was interested in how Buffett’s and Susie’s parents viewed religion.? Buffett and Susie were a lot like my in-laws: raised in the church, but turned against God.? There was something in the era, as people sought bad interpretations of the Bible so that they could live their own way, and not God’s way.

Quibbles

Already expressed.? This is a great book if you are looking to read about the life of Buffett, rather than the aspects of Buffett’s investing that you can’t imitate.

Who would benefit from this book:? This book will not help you invest like Buffett, unless you are bright, and know all of the details that lay behind Buffett’s strategies.? This book is the best to help you know Buffett the man.? It is a great book.? If you want to, you can buy it here:The Snowball: Warren Buffett and the Business of Life.

Full disclosure: I borrowed it from the local library.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

If you Want to be Well-off in Life

If you Want to be Well-off in Life

Posted on by David Merkel

I write this because it should be obvious but is not.? I grew up in a house where my Dad earned an average income from his business, but my Mom took around 10% of the income and invested it half in utilities and half in growth stocks.? As my Mom said to me, “My utilities are my bonds.”

Bright lady; my first teacher in investing.? She beat the market for four decades plus.

But the main thing that she did right was to spend less than my Dad earned.? This is critical.? You can’t build capital unless you set assets aside.? This is the most important of the rules.? You must consume below your means, and invest the surplus wisely.? I remember many ways in which she said “no,” to a variety of expenditures.? We didn’t live below the appearances of our neighbors, but we were one of the last on the block to get a color TV.? Good thing, TV is such a waste of time — and I wasted a lot of time there when I was a kid.

The second main thing that she did right was take moderate risk.? Looking at her portfolio, one might ask, “Why so many utilities?”? Or comment, “A lot of boring GARP-y stocks.”? I contrast her with my paternal grandfather, who retired in 1966-7, and sold his business to his two sons, and then lived off the interest income from CDs, etc.? He took no risk in his retirement, though he took moderate risk as a businessman, and as a pool player.? (Rumor is he was Wisconsin state champ at some point… but I can’t prove that.? I played him a kid, and never won.? My Dad, who learned from him, I beat only once, and lost many times to him.)

An investor in CDs will get what he contracted for, absent default.? The investor who is like my Mom will have a more jagged trail, but will earn more.? Even in the late 70s and early 80s, my Mom did not lose confidence in her strategies, even as Grandpa earned 15%/year on his CDs.? Her time was yet to come.

My Mom would hold stocks for 10 years on average.? So long as you pick companies with a sustainable competitive advantage, you will generally do well over longer periods, should you have the fortitude to not trade frequently.

So, my third point is don’t be an aggressive trader.? Yes, have trading rules, but don’t try to make money in the short run.? Try to make money in the long run.

My fourth point would be “do it yourself” if you can.? (Yes, I know I run money for others.? I will say what I believe even if it costs me business.)? But that means you have to learn a lot, like my mom, or me, or my father-in-law, three people all mostly self-taught, with different investing philosophies.? Good investing is like running a business on the side.? It is not easy.

My fifth point is pay attention to taxes, but don’t let taxes dominate your decisions.? There’s a balance here, and for my clients, I try to generate taxable losses on net, while letting winners run.

My sixth point would be that income in investing is important, but not for the reason you might expect.? Income is important because it motivates reinvestment opportunities, not consumption opportunities.? When you are older this changes a little, but in many cases it is smarter to focus on total return, and consume from capital rather than have every stock try to produce income.? That said stocks that pay dividends tend to do better than those that don’t.? 28 of the 33 stocks in client portfolios (of which I am a client as well) at present pay dividends, and the portfolio as a whole has an above-market dividend.? Reinvesting income compounds your gains in new ideas that were hopefully more promising in the new environment.

The seventh point is study investing to the point where you have an intelligent strategy, and once you have that, don’t abandon it.? Too many people flit from one hot idea to another, but never end up with a coherent strategy that that employ for decades.? Even if I close down my investment business, I will keep applying the same investment strategy for myself, it has worked well for me, even if at present it has been middling for clients.

Every investment strategy goes through periods where it works poorly.? That’s life.? If you have a strategy that always works well, that means:

  • You haven’t run it long enough.
  • You’re not running enough money.
  • You’re not taking enough risk.

Survive through your bad times, and prosper during the times where your intelligent strategy is paying off.? Patience is a virtue in investing for the most part.

Okay, there are seven points from my experience, from my Mom, and from my late Father-in-law.? None of us trained to invest in a formal way, myself included.? (Yes, I received a CFA Charter, but I knew far more than the syllabus did before I took the exams.? The academic stuff I learned was not a help when I was in graduate school.)

An eighth point to consider is that money matters temporally.? Eternally, no, it doesn’t matter.? No one can buy Heaven, as Psalm 49 points out.? But you can use your wealth to aid those who are trying but failing.? That’s important.? As John Wesley put it, “Earn all you can, save all you can, give all you can.”? I am fairly certain that the first two were honored more than the last one, but Wesley was correct there.

In general, being willing to give also correlates with prosperity.? Doing well means more than becoming rich; it means living your life for the good of others.? We should not live for ourselves.? Money is merely a means; it is not an end in itself.? Use your money to the best end that you see.? Loan money to a poor but honest friend at no interest.? You will do something really good there, and God will bless you.? I have done that many times in my life, and it has paid off, though I can’t prove that empirically.

One more note, when you are a giver, you become more careful with your own spending.? You begin thinking more broadly about the world, and realize there is little advantage to most luxuries.? If you have enough, good.? Even Warren Buffett (No Christian he) likes his Burgers and his Coke.? He does not look to luxury in consumption, even as he owns jewelry stores.

He is a bit of a miser, but as he has aged, he has handed over most of his wealth to the Gates Foundation.

In closing, take care over your saving, investing and giving.? They are all important aspects of how those who are improving their financial well-being improve their lives.

Don’t be a Fool

Don’t be a Fool

Posted on by David Merkel

When I wrote for RealMoney, I would often write things critical of others, but not identify my target.? Why?

  • I didn’t want to get kicked out, or have a fight that would discredit RealMoney.
  • But I did want to teach general principles.

I maintain that practice to this day.? Typically, I don’t name names.? Again, two reasons:

  • I don’t want to get sued.
  • But I do want my readers to understand what are shoddy practices, so they can avoid them.

Recently, a large investment website has been loosening up their standards for who they will allow to advertise via e-mail.? Here is one redacted advertisement:

A New Strategy With Startling Results

Dear Investor,

A small group of XXX clients are making 20% to 40% in trading profits…PER DAY.

They call it ?Exploiting the Banker?s Market.?

Their trading methodology is unlike anything you?ll find in today?s financial marketplace.

And best of all, their newsletter is totally free.

Honestly, this is the only investing newsletter worth your time.

?Sign up for free now. [link removed for your protection]

Sincerely,

XXX Investing Team

P.S. By exploiting the banker?s market, they just hit winners on 19 out of 22 trades, including gains of 45%, 48%, 56%, and 78%.

Prior to this, they took gains on 30 out of 33 trades. You can achieve these same returns. It’s simple.

As long as the bankers remain in control of the markets (and now that Obama got re-elected, you know they will), this unique trading methodology offers you a safe and consistent way to profit.

If you?re interested in profiting day after day ? even if the bankers and the Fed are working against you ? then do not miss these unique trading strategies.

It?s all revealed to you in this free newsletter. [link removed for your protection]

YYY
30 Forest Ave
Naperville, IL 60540

Note that YYY is a penny stock promoter.? XXX may be decent enough, aside from their willingness to employ YYY.? Investing in options is a ticket to the poor house for most, because the market is not very liquid.? It is very hard to make money trading options.? Most lose money doing so.

But here is another from the same e-mail list:

Dear Investor,

Where were you on August 13, 2012, when tech-stock guru WWW gave the green light on EZchip Semiconductor (EZCH), then trading at $28.36?

Well, maybe it doesn?t matter because very few investors had ever even heard of this red-hot networking chip company.

But on November 8, EZchip reported a huge earnings beat and rallied an incredible 15% to $34.80 in one day, delivering a 23% gain for ZZZ subscribers [link removed for your protection] who bought alongside Sean at the $28 level.

So we?ll ask you some simple questions?

  • Do you want to make money off of hot technology trends that have nothing to do with how the US Fiscal Cliff and European drama play out?
  • Would you like to get in on the hot storage play at which Facebook (FB) and Apple (AAPL) are throwing money?
  • Or the semiconductor producer that is printing money on the global transition to 4G/LTE smartphones?
  • How about the left-for-dead social-media play that is about to rise like a phoenix?

If you answered yes, then we’ve got an offer for you.

We?re giving you an exclusive 30% discount on an annual subscription to ZZZ [link removed for your protection] , WWW?s exclusive money-making tech stock newsletter that will help you do all of the above and more.

For just $447 (a savings of nearly $200!), you?ll receive:

? ? ? ? ?
? ? ? Exclusive access to WWW?s hand-picked portfolio of technology stocks ?
? ? ? ? ?
? ? ? Instant e-mail updates whenever WWW makes a trade or initiates new coverage ?
? ? ? ? ?
? ? ? Expert analysis of the most important tech-industry news ?
? ? ? ? ?
? ? ? Access to quarterly webcasts, where WWW delivers in-depth analysis of the technology industry ?
? ? ? ? ?
? ? ? WWW?s special report: 5 Stocks That Will Gain 50% From Apple TV ?
? ? ? ? ?

But most importantly, with a ZZZ subscription, you will get direct access to Sean, who stands by ready to answer any and all reader questions through our regular mailbag feature.

Sean?s goal is simple: to have your ZZZ subscription pay for itself many times over through winning trades while keeping you up to date on everything that?s hot in tech.

So, do you want in? [link removed for your protection]

Advertisements like this appeal to dopes.? There is no easy money in the market.? Anyone can cherry-pick a record of risky calls and show a bunch of wins.? What of the losses? How many and how severe were they?? Why don’t you show the results of an audited real money portfolio that you managed?? What, you didn’t put any real money behind? these calls?

Look, when advertised results are too high, they usually aren’t real.? Get smart.? Avoid websites that propagate such nonsense.? Anyone willing to sully their reputation for a bunch of cheap advertising revenues is not worth your time.? I get about 10 advertising proposals per week, and I turn almost all of them down.

If it seems too good to be true, it is false.? Avoid reaching for the rare exception, and you will be much better off.

This Election Will Solve Nothing

This Election Will Solve Nothing

Posted on by David Merkel

When I look at the present choice between the two main parties, I am struck with how we are forced to choose between two fantasy worlds.? Romney thinks he can cut taxes further while we have record deficits.? I would be in favor of radically simplifying the tax code.? Bring back Reagan’s TRA ’86 — it was so simple that it starved those that made their living by gaming the tax code.? (Accountants, Actuaries, Attorneys — what is it with these “A” professions?)

Over the last 10 months, I have mentioned Romney in significant ways three times (aside from compilations of my Tweets):

Romney does not factor much into my thinking because:

  • I don’t know what he really believes.? His views have shifted a lot across many years, and in convenient ways.
  • His promises are not self-consistent.
  • Mormons are unusual, and most have distinct views on Israel and the US that make them rigid in their views.
  • If I worry about how a Catholic might respect the Pope, I worry more about how a Mormon respects the hierarchy in Salt Lake City.

But we know Obama, and his actions are at variance with his rhetoric.? He’s had only two significant piece of legislation passed during his term, and neither were good for the US:

  • Dodd-Frank: introduced? the bad concept of legislation via study.? Congress, dumb as it is, is supposed to analyze ideas for themselves, and not outsource analysis.
  • PPACA: Increases health care costs, destroys the ability to control costs.? Really dumb legislation could that only be passed because the rules of the Congress were ignored.

Neither bill was critical to what Americans wanted.? These were the actions of an ideologue that pursued his own misbegotten agenda.? I wrote four significant pieces regarding Obama, here they are:

Barack Obama is a rigid ideologue whose views are well known.? He also does not possess a lot of courage to push his views, aside from two pet projects.? I am genuinely surprised that no Democrats decided to oppose him in the primaries.

So, who do you vote for, the guy who has dumb ideas that are well-known, or the guy who you have no idea as to what he believes?? I say neither.? We need to create a third party to break the duopoly that is strangling US politics.? That is my main message to readers.

 

 

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

 

LIBOR

 

  • Six ways big banks screwed Grandma http://t.co/ltisCJ2P Poorly argued. It’s as if LIBOR could be manipulated without reaction. $$ Jul 28, 2012
  • Fidelity Joins BlackRock in Weighing Libor Action Against Banks http://t.co/9DKR48NY This isn’t as easy as it seems; much 2 prove $$ Jul 26, 2012

 

Eurozone

 

  • Draghi Said to Hold Talks With Weidmann on Bond Purchases http://t.co/SunXLadO If the Buba plays ball, the sky is the limit. $$ #inflation Jul 28, 2012
  • Draghi Says ECB Will Do What?s Needed to Preserve Euro http://t.co/xc4iQ9ji Uncertain that the ECB will buy lots of Italian & Spanish debt Jul 26, 2012
  • Europe Is Cheap?So Why Can?t I Pull the Trigger? http://t.co/yHGHjmoN Wait until things stop getting worse $$ Jul 25, 2012
  • Spanish, Italian Notes Rise on Bets for ESM Enhancement http://t.co/3CBLXOmK ?The idea of making the ESM a bank is a game changer,? $$ #no Jul 25, 2012
  • Spain to struggle to fund 2012 debt crunch http://t.co/iOefCfxz How long until the next last minute rescue? 10-yr yields over 7.5% $$ Jul 25, 2012
  • Europe Stymies Private Equity as Corporate Buyouts Stall http://t.co/QXNGEnQj If the banks won’t lend, private equity deals don’t fly $$ Jul 24, 2012
  • Hollande Transaction Tax Drives Investor Quest for Loopholes http://t.co/hDvZnQfL New trans tax drives investors2use contracts4difference Jul 24, 2012
  • Euro-Zone Government Debts Hit Record http://t.co/o9lXW7f1 Govt debt / GDP 4 whole E-Zone goes from 87.3% @ 12/11 -> 88.2% @ 3/12 $$ Jul 24, 2012
  • Greece Back at Center of Euro Crisis as Spain Yields Soar http://t.co/GLCWfi9e IMF/Core begins to doubt ability to hold it together $$ Jul 23, 2012
  • YIKES: Spanish Yields Are Surging To Record Highs http://t.co/qIQhvlUE Time 4 the Germans to buy summer homes in Spain $$ #evercloserunion Jul 23, 2012

 

US Politics

 

  • There. MMF reform that works, fit into a single tweet. $$ 🙂 Jul 27, 2012
  • Let MMFs keep a stable NAV, pass through losses thru unit reduction if real NAV<.995, reset real NAV @ 1.0025. Runs would strengthen NAV $$ Jul 27, 2012
  • Why Investors Are Dumping Money Market Funds For Short-Duration ETFs http://t.co/TNEpH9F9 My point: treat MMFs like modified ETFs $$ Jul 27, 2012
  • Maryland Governor Defends ‘Millionaires’ Tax’, Denies Job Losses http://t.co/yqfVRYCB Can bend rules, since MD is next 2 DC, which slurps $$ Jul 27, 2012
  • Drilling Strains Rural Roads http://t.co/2tUr6bJY Simple solution: tell energy companies you will not repair roads. They will do it $$ Jul 27, 2012
  • Treasury Eyes Funds Hidden Overseas http://t.co/g38s8z1c IRS goes after foreign trusts, seems 2ba piddling amount of money 2 go after $$ Jul 27, 2012
  • Wrong: How2Break NRA?s Grip on Politics: Michael R. Bloomberg http://t.co/I9vm6KKg The Ethanol lobby is a lot weaker than the gun lobby $$ Jul 27, 2012
  • Estate Tax: Ezra Klein is Wrong! http://t.co/1o5sumfN Never trust anyone whose profession starts w/an “A.” 😉 Accts, Attys, Advisors &c $$ Jul 26, 2012
  • Making the Rich Poorer Doesn?t Enrich the Middle Class http://t.co/fvsUgDfk The govt exists to grow itself until we die. Sad but true $$ Jul 26, 2012
  • The gender wage gap is a myth http://t.co/cNpTi1uZ Diana Furchtgott-Roth makes the same case that many economists have since the 70s $$ Jul 26, 2012
  • New Geithner disclosures further cloud his record http://t.co/heblaDAH Geithner was point man 4the Fed on derivatives. Dropped ball $$ Jul 26, 2012
  • Justice Scalia Disputes Accuracy Of ‘Leak’ http://t.co/OMVCtlAg Wide-ranging interview of Scalia, whose juridical impact may outlive him $$ Jul 25, 2012
  • Former Citigroup CEO Weill Says Banks Should Be Broken Up http://t.co/zftFGEQ6 Good, he changed his view, my view changed on that also $$ Jul 25, 2012
  • 10 Everyday Items That Cost Way More Because of US Taxes http://t.co/KjXUu8Im Interesting list, mostly comprised of protectionist taxes $$ Jul 25, 2012
  • The hidden Mitt Romney http://t.co/rPVcQR7C Romney & Obama have one thing in common: the more you know about them, the less you like them $$ Jul 24, 2012
  • Romney to Attack Obama on Leaks, Defense Cuts http://t.co/hiCrTCtX ?the greatest force for good the world has ever known? US naivete $$ Jul 24, 2012
  • Scalia Offers Up 57 Varieties for Interpreting Legal Texts http://t.co/sSdqUE1m His manifesto on originalism/textualism $$ Jul 23, 2012

 

China

 

  • Lies, Damned Lies, and China’s Economic Statistics http://t.co/Fqpn8YMS I have some skepticism to US statistics, how much more China? $$ Jul 27, 2012
  • Xi Jinping Millionaire Relations Reveal Fortunes of Elite http://t.co/iFz7e6dg Communist Party members have access2loans & IPO allocations Jul 27, 2012
  • Capital Outflows Chime With China?s Bears http://t.co/GIaMbM8g “any currency exchange >$2,000 needs to have a prior reservation made.? $$ Jul 25, 2012

 

Companies

 

  • Alierta Abandons Dividend Penchant to Save Telefonica http://t.co/AHhbFucX Now more interested in $TEF, good cashflow, div shld resume $$ Jul 26, 2012
  • Unilever Warns of Worsening Economy http://t.co/wscXplAV Global economy is weak, even for staple goods. $$ Jul 26, 2012
  • Zynga?s ?Draw Something? Isn?t a Pretty Picture http://t.co/nSrHWTG3 Always be wary of fads that have no balance sheet $$ Jul 26, 2012
  • Sanofi Dengue Vaccine Is Promising http://t.co/7EFL5ioC Good news. Perhaps Dengue Fever may be conquered for the good of mankind $$ Jul 26, 2012
  • Industrias Bachoco Announces Second Quarter 2012 Results http://t.co/n0amblWp Tough read, Q looks good, US acq prob paying off FD:+ $IBA $$ Jul 25, 2012
  • Assurant Reports Second Quarter 2012 Financial Results http://t.co/jdaB09Kh FIring on all cylinders, & shrinking share count FD: + $AIZ $$ Jul 25, 2012
  • Warren Buffett: Great Investor, Lousy Insurance Salesman? http://t.co/4KfZNNP3 Poor article; Buffett is very intelligent insurance exec $$ Jul 25, 2012
  • link 4 last tweet: http://t.co/sj75tC5q You could short the 2.6% bonds and go long default protection for an almost risk-free profit. $$ Jul 25, 2012
  • Someone Is Getting Really Nervous About HP?s Debt http://t.co/Zqj1xEhp If you look at bonds vs CDS, bonds aren’t panicking. FD: + $HPQ $$ Jul 25, 2012
  • Contra: Campbell Chases Millennials With Lentils Madras Curry http://t.co/MBdpXGsJ @ $3/pouch I don’t c a mkt 4 gourmet instant soup $$ Jul 24, 2012
  • Google buys Sparrow for ‘new Gmail project’ http://t.co/q0i3TfZv Sell your company 2 $GOOG 4 $$ . Get new tasks while old technology dies Jul 24, 2012
  • Iraq blacklists Chevron for Kurdish oil deals http://t.co/23opiYYs Not as big as it seems $CVX has no biz in Arab Iraq $$ FD: +CVX Jul 24, 2012

 

Rest of the World

 

  • North Korean Mystery Woman Is Leader Kim Jong Un?s Wife http://t.co/CK8seZPc I find it optimistic that he wants to live a normal life $$ Jul 26, 2012
  • Global economy?s cure is worse than the disease http://t.co/isJuL3rn Indirectly suggests the best policy would be benign neglect $$ Jul 25, 2012
  • Cyber Attacks on Activists Traced to FinFisher Spyware of Gamma http://t.co/ZITxw1bu Practice safe computing; scan for rogue processes $$ Jul 25, 2012

 

Public Radio

 

  • Public Radio International acquired by Boston public broadcaster WGBH http://t.co/Mck9Gx0n Interesting when a non-profit corp gets bought $$ Jul 26, 2012
  • If it is the same, could NPR or the Corporation 4 Public Broadcasting sell out also? Buffett could give them a good home. Or the Kochs 😉 $$ Jul 26, 2012
  • Grew up in the insurance world, so I’ve seen non-profit (mutuals) buy another mutual or stock company, but is it the same w/WBGH buying PRI? Jul 26, 2012
  • Renaming 2 Private Radio International 😉 RT @timjeby: Big Public Radio News: WGBH in Boston to acquire Public Radio International #pubmedia Jul 26, 2012

 

Municipal Bonds

 

  • For further reading consider: Some perspective on the recent California bankruptcies by @munilass aka Bond Girl $$ http://t.co/2jwUeNOX Jul 26, 2012
  • Muni Blues Worry Investors http://t.co/r4VvKP4g Municipalities aiming4 strategic default face challenges in courts; favor bondholders $$ Jul 26, 2012
  • Some perspective on the recent California bankruptcies http://t.co/RFAgUt5u @munilass on how unusual wud b4 muni bonds 2not pay principal $$ Jul 24, 2012

 

Federal Reserve

 

  • Bernanke the unready http://t.co/6ppUDOMl Fed is impotent, but can’t admit it. Bernanke is wrong on monetary policy near 0%. $$ Jul 26, 2012
  • Fed strives to replenish depleted toolkit http://t.co/Yhy4pMy2 Doing the same thing, over & over again, but expecting different results $$ Jul 25, 2012
  • Fed Sees Action if Growth Doesn’t Pick Up Soon http://t.co/2TddWIZz Doing the same thing over&over again&expecting different results $$ Jul 24, 2012
  • Coming: The End of Fiat Money http://t.co/jHhnlPs0 Nice try. Lot of good stuff 2 read here, but no clincher 4 the return of gold $$ Jul 23, 2012

 

US Housing

 

  • By October of 2005 the prices of residential real estate peaked, which led to most of the leverage unwind that was about to happen. $$ Jul 25, 2012
  • Office of Financial Research Annual Report http://t.co/w9Xm4i9J Pp 8-9, first difficulty: by 2005 it was too late to stop the crisis $$ Jul 25, 2012
  • Is This What a Housing Bottom Looks Like? http://t.co/pSwtryX4 Lazy recovery, as people sell when they can avoid losses $$ Jul 27, 2012
  • Wrong: Reverse mortgages as popular as IRAs in 10 years http://t.co/pp7qoG63 Must have equity & creditworthy rev mtge lenders. Complex 2 $$ Jul 25, 2012
  • Home Values Post First Year-Over-Year Increase Since 2007 http://t.co/VHFnG83k Prices rising on the low end; higher priced problematic $$ Jul 24, 2012
  • Subprime Rally Building as Dealers Sop Up Supply http://t.co/s7BVK0v2 Combination of yield lust & rising housing prices drive up bonds $$ Jul 24, 2012

 

Miscellaneous

 

  • Pig Tissue Seen Fixing Injury That Sidelined Lin http://t.co/ys0kWDNb New tech uses pig tissue undoes painful damage from torn meniscus $$ Jul 27, 2012
  • Can a Food for Cows Make Healthier Snickerdoodles? http://t.co/o8vF4h5e Adding some DDG 2baked goods adds protein & fiber, good yes? $$ Jul 26, 2012
  • Closing In on a Cure for Vision Loss http://t.co/QCNZohN7 Testing “gene therapy, stem-cell therapy & a modified version of vitamin A” $$ Jul 24, 2012
  • Will the world’s greatest startup machine ever stall? http://t.co/R1wFzGsM Long interview w/President of Stanford re Silicon Valley ties $$ Jul 24, 2012
  • Breadbaskets of Last Resort See Once-in-a-Lifetime Prices http://t.co/A0AePuJx Focuses on upper Midwest; great time to have good corn $$ Jul 24, 2012
  • MIT Researchers’ `Cool’ Idea http://t.co/SMPitSjO Way cool, allowing 4 cheaper, better milk in rural areas where power is spotty. $$ Jul 24, 2012
  • Contra: The One Capitalism That Dare Not Speak Its Name http://t.co/jaZfeluf State Capitalism more prone 2 bubbles than laissez-faire $$ Jul 24, 2012
  • America’s Energy Situation In 15 Maps http://t.co/lw0vOwnc Refining, production, prices, intl concerns, natgas, crude, coal, solar, wind $$ Jul 23, 2012
  • THE DEFINING DECADE: Why You Can’t Afford To Waste Your Twenties http://t.co/8gl9RqGG Early success compounds; so does early failure $$ Jul 23, 2012
  • Lobbying Works! Big Spenders Reap Big Stock Gains Says Trennert http://t.co/2vsJyEXB But what happens if the US Government has to shrink $$ Jul 23, 2012
  • Who Really Invented the Internet? http://t.co/LkvW1xwM Many did, & they were standing on the shoulders of giants. $$ #ittakesavillage 😉 Jul 23, 2012

 

Market Dynamics

 

  • Fidelity Targets Securities Lending http://t.co/stEvATII The buyside is beginning to fight back against the trust & investment banks $$ Jul 27, 2012
  • Study: High-Speed Trading Hurts Long-term Investors http://t.co/ZhMhkiCG This probably affects those w/higher turnover more $$ Jul 27, 2012
  • Currencies: from Nullifying to Negative http://t.co/lxqwZZKw What is the game? To make money, or avoid losing a lot? Neg int rates a pain $$ Jul 25, 2012
  • Bond Trading Loses Some Swagger Amid Upheaval http://t.co/l93Vp7xL Except 4 the most liquid corporates, need broker2find liquidity/bonds $$ Jul 25, 2012

 

Comments

 

  • Our Olympic Gold in Wit $$ RT @TheLondonWhale: RT take a bow @ReformedBroker: Switzerland tough to beat in gold vaulting Jul 28, 2012
  • “Cultural change cannot be achieved by outsiders, in 1 generation, no matter how much $$ gets spent.” ? David_Merkel http://t.co/5eBdsBlO Jul 27, 2012
  • @brettsimonson Think the direction I would have headed was public policy, which involves a finer view of asset/liab mgmt, run avoidance etc Jul 27, 2012
  • @brettsimonson Hi Brett, no part 2 from what I can see. Very disorganized that week — no power for a week Jul 27, 2012
  • Ditto, well-deserved $$ RT @ReformedBroker: we love you, simone RT @SimoneFoxman: Yay, 5K! Thanks for following, everyone!! Jul 27, 2012
  • @munilass Also, if a kid was disconsolate for a while, before 2AM it was mine. After, it was hers. Jul 27, 2012
  • @munilass When the family was young, my wife & I had a deal. I took midnight feedings, she took the early morning feedings. Jul 27, 2012
  • @munilass My house works like this: I work late b/c it is quiet. My wife who homeschools the kids gets up early b/c it is quiet. Jul 27, 2012
  • @munilass I know many classes of bonds and other fixed income instruments. But I only know enough about munis to be dangerous. Thus I ask. Jul 27, 2012
  • @munilass Decided to review the book “Investing in the High Yield Municipal Market” by Triet Nguyen. If I have Qs, can I ask you? Jul 27, 2012
  • @e_d_sanders Both parties stand for different shades of nothing. They give rhetoric to their bases, do little, and cling to power. $$ Jul 27, 2012
  • RT @Convertbond: Sell the US equity rally hard when Spain’s 2s \ 10s curve starts to re-flatten #Government #Bonds 2 year & 10 year … Jul 26, 2012
  • “”Of course this food is organic. We used Organic Chemistry to create it.”” ? David_Merkel http://t.co/CvYhIQ7p $$ $DF Jul 26, 2012
  • Happy 2b your 1st subscriber $$ RT @SNLFinancial: Follow SNL Financial reporters so you?re always in the know: http://t.co/Rbwi9Jn3 Jul 26, 2012
  • “Why we need to dismantle the Democrat & Republican parties: the national budget slaves for local interests” Merkel http://t.co/gllFMcec $$ Jul 26, 2012
  • A weather forecaster for either WBAL or WTOP said that Maryland gets a derecho once every 5-10 years. Two in one year? Hope not. $$ Jul 26, 2012
  • Just what we need, another derecho $$ RT @BloombergNews: Severe storms, possible derecho forecast for Northeast US http://t.co/XPGdJQoC Jul 26, 2012
  • RE: @bloombergview Not worthy to be read $$ http://t.co/TsRQZdTI Jul 26, 2012
  • RE: Loads of 12% coming out mean that only 88% of the money is going to work for the investor.? Doesn’t matter where ? http://t.co/hJgSPGrT Jul 26, 2012
  • Commented on The Economist | Monetary policy: Bernanke the unready http://t.co/rsqLZm7A Jul 26, 2012
  • “Marriage civilizes, & gives us some hope that he will normalize N. Korea. He lived outside NK 4?” ? David_Merkel http://t.co/uxDl62iM $$ Jul 26, 2012
  • RT @ReformedBroker: RT @jamielissette: *MOODY’S CHANGES OUTLOOK ON 17 GERMAN BANKING GROUPS TO NEGATIVE Jul 25, 2012
  • “For what it is worth, that’s the way Canada does it. Income taxed @ FMV @ death. No estate tax.” ? David_Merkel http://t.co/lQx4RjYN $$ Jul 25, 2012
  • RE: @CSMonitor The book “Hungry Ghosts” documents The Great Leap Forward very well. Worth a read. $$ http://t.co/LQ5dChjQ Jul 25, 2012
  • “It would be cleaner to tax unrealized capital gains at death, and eliminate the estate tax.” ? David_Merkel http://t.co/GqPiMZ5r $$ Jul 25, 2012
  • “Rating agencies are supposed to be behind the curve. They rate over the full credit cycle?” ? David_Merkel http://t.co/z80RTQCv $$ Jul 25, 2012
  • @e_d_sanders He could have included 1 or 2 more words & it would have been crystal clear. I think the ambiguity was deliberate. I cud bwrong Jul 25, 2012
  • “Don’t open suspicious attachments. Use procexp to review processes. Disable processes you can’t?” ? David_Merkel http://t.co/PUaCZKOf $$ Jul 25, 2012
  • “When computers screen applicants, a skills shortage emerges. Computers seek current perfection, not?” David_Merkel http://t.co/HVRm6HOP $$ Jul 25, 2012
  • “A case where so many things went wrong, it is amazing that they almost won. Really, they were?” ? David_Merkel http://t.co/hJcw4tCX $$ Jul 25, 2012
  • @e_d_sanders I’m voting third party; I don’t like the GOP either; it’s obvious that no one man builds infrastructure; not a point 2 make Jul 25, 2012
  • @e_d_sanders It’s not a misquote. Read the two paragraphs in context; he is downplaying individual initiative. Jul 25, 2012
  • @havocp I copied the quote from the WH website. Given what O said in the above that, both interpretations are legitimate. Could b clearer. Jul 25, 2012
  • @havocp and I appreciate your comment. I like those that comment, and even those that disagree with me highly. Jul 25, 2012
  • @havocp Doesn’t matter to me. Concentrating effort is significant and deserves a reward, not condescension. $$ Jul 25, 2012
  • RT @pdacosta: Crisis contained, to inhabited areas. RT @SJosephBurns: “The Subprime Crisis will not affect the economy overall.” – Ben B … Jul 25, 2012
  • RT @ritholtz: WSJ reporting ?Federal Reserve moving closer to action to spur growth” Bond buying, rate guidance, lower reserve rate amon … Jul 24, 2012
  • RE: @bloombergview You’re still going to need LIBOR, however calculated, for existing contracts. Replacement will be ? http://t.co/smOdgXbd Jul 24, 2012
  • “Ethics comes before competence. Doesn’t matter how good you are, if you are unethical. The?” ? David_Merkel http://t.co/6bgcT6nT $$ Jul 23, 2012
  • RT @AmityShlaes: “The post office ought to be self supporting. At present business men are deluged with useless mail.” — Calvin Coolidg … Jul 22, 2012
  • @niubi No, b/c many babies do not sleep through the night @ 3 months Jul 21, 2012
  • If I could ship the rain in Maryland 2 the Midwest, I would. But Maryland farmers r having a good year. Corn looks normal & prices r high $$ Jul 21, 2012
Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Bond Markets

 

  • TIPS 20-Year 3.375 04/15/2032 166-21? / 0.00 -0-02+ / 0.002 15:09; They are trading flat to CPI 4 next 20 years http://t.co/2sJ5NEDK $$s Jul 13, 2012
  • Buffett Says Muni Bankruptcies Set to Climb as Stigma Lifts http://t.co/WBYjoUW1 Buffett’s claim is modest, but current trend is down $$ Jul 13, 2012
  • Indeed excellent RT @munilass: Excellent discussion of CA bankruptcies from @randalljensen http://t.co/iSEudKw5 Jul 13, 2012
  • Big Dealers Sweat as Swaps Face Reckoning http://t.co/iAmp2p4X Interest rate swaps should be vanilla enough to clear on exchanges $$ Jul 10, 2012

 

Politics

 

  • Financial Advice for Presidential Candidates http://t.co/MUqMOWNv Tips from Brett Arends for politicians on how to handle money. $$ Jul 14, 2012
  • Too clever $$ RT @hblodget Here’s One Of The Clever Financial Tricks That Mitt Romney Used To Become Dynastically Rich http://t.co/frz1hkxP Jul 13, 2012
  • Condi for VP? Mitt’s Done It Before http://t.co/ns1Kj6s7 Article makes a good case that MR could pick someone unexpected, as before $$ Jul 13, 2012
  • Chavez Hits Campaign Trail in Bid to Prove He?s Cancer-Free http://t.co/dQCPHEU2 Dream, Hugo; ur dying as your goals on Earth r dying $$ Jul 13, 2012
  • In Kansas, Stronger Mix of Ethanol http://t.co/Iv7LrQpA Economically and environmentally, corn-based ethanol is one big boondoggle $$ Jul 12, 2012
  • Peugeot to Close Plant http://t.co/uUvm4vNK If u make it difficult 4 employers 2 terminate workers, they will hesitate 2 create jobs $$ Jul 12, 2012
  • Social Security Hole Overwhelms Taxes, Cuts http://t.co/DLbk9MgD Analysis right, prescription wrong. Dumb comments by innumerate readers Jul 12, 2012
  • Company to acquire part of Marcus Hook refinery http://t.co/VTXySbbv Spending $75,000/job saved is dumb, even if you lock Braskem in. $$ Jul 12, 2012
  • A New, Improved Draft? No Thanks http://t.co/wH8fcpHx Conscripted labor of youths would be a false economy; work would b poorly done $$ Jul 11, 2012
  • And that leaves aside the constitutional & legal aspects of conscription in peacetime; I do not favor reviving the draft. $$ Jul 11, 2012
  • FBI warned Labor Department data might be leaked http://t.co/KpsZplxo Until DC pays up 4 some good quants, lots of games won’t b caught $$ Jul 11, 2012
  • Helpless President, Hopeless Congress http://t.co/aVq8gq5d Becomes difficult as the # of factions expands. t-party fractures consensus $$ Jul 11, 2012
  • No Sign of Voter Polarization Waning http://t.co/7FXzckao Good smile from Obama; dee red, dey get redder, dee bloo, dey get blooer $$ Jul 10, 2012
  • Obama Intensifies Tax Fight http://t.co/GG0C1Eo5 Looks like a recipe 4 gridlock. BTW, Obama needs2work on his smile, very pouty pics $$ Jul 10, 2012
  • “It is the regulators who require ratings, largely for purposes of measuring risk at financial institutions.” $$ http://t.co/nPGJNhjy Jul 10, 2012
  • America Already Is Europe http://t.co/BCK8nfnI similarities: growing government & equalizing incomes, cronyism, Uninformed electorate $$ Jul 10, 2012
  • LBJ?s Lessons for Obama http://t.co/ILtH9ZH9 Politics is the art of avoiding making permanent enemies & Obama is aloof 2 his enemies $$ Jul 09, 2012
  • States Interpret Ruling to Cut Medicaid Now http://t.co/ArPTMDPp File this under “unintended consequences;” some poor lose some care $$ Jul 09, 2012

 

LIBOR

 

  • NY Fed does not deserve much credit here. They only began investigating after leverage began collapsing… http://t.co/5WHt8Rrt Jul 13, 2012
  • They only began investigating after leverage began collapsing with bank off-balance sheet vehicles. $$ Jul 13, 2012
  • They were more concerned w/LIBOR being viewed as2high as primarily a systemic risk issue, & secondarily as a “is LIBOR accurate” issue. $$ Jul 13, 2012
  • In Libor Scandal, a Push For Criminal Charges http://t.co/eBkV0926 Outside the mainstream here; I don’t think criminal charges will work $$ Jul 13, 2012
  • Fed knew of Libor issue in 2007-08, proposed reforms http://t.co/hHUdUXnP The Fed moves slowly on regulatory issues. Very slowly. $$ Jul 11, 2012
  • Exactly & few say that $$ RT @carney: Running the numbers on March 13, 2006 Libor. I don’t see how Barclays could have manipulated it. Jul 11, 2012
  • So I Need To “Be An Adult” About Fraud Eh? http://t.co/t8owUMbU Yes Karl, being adult means waiting until fraud is proven b4 rash speech $$ Jul 10, 2012

 

 

Eurozone

 

  • Spanish Bank Borrowing from ECB Surges http://t.co/3cIvgaZu Feel sorry for the ECB; politicians do little so they try2do it alone $$ Jul 13, 2012
  • Euro-Zone Banks Still Hoarding http://t.co/3cIvgaZu The ECB can solve it all; just ask them they’ll tell you $$ Jul 13, 2012
  • Euro-Split Case Drives Danish Krone Appeal in Binary Bet http://t.co/tgPPZgKW People r willing to lock in losses 2 avoid bigger losses $$ Jul 11, 2012
  • Euro zone fragmenting faster than EU can act http://t.co/GpqSfYht “Deposit flight from Spanish banks has been gaining pace” $$ Jul 09, 2012
  • German anti-euro backlash gathers pace http://t.co/ZK57rBp3 The compromises hammered together r starting to come apart at the seams $$ Jul 09, 2012
  • Hollande Urged to Deliver Competitive Shock By Executives http://t.co/oZj9D7Jt Strange brew. Socialist pushes labor productivity rise $$ Jul 09, 2012
  • Spain Braces for Renewed Austerity as Tax Take Hemorrhages http://t.co/EIhmTfja I don’t suppose reducing govt size is an option here? $$ Jul 09, 2012
  • Spanish Yield Hits 7%, Stocks Slip http://t.co/QD7icJSX Okay, what new “baby step” toward mutualizing debts will the EZone try now? $$ Jul 09, 2012

 

Residential Housing

 

  • Blackstone, Hovnanian in Land Banking Deal http://t.co/KGx60uQs Too much $$ on the sidelines waiting to play in residential real estate Jul 13, 2012
  • Americans Living Larger As New-Home Sizes Defy Economy http://t.co/KjPRALro 1st ping I’ve seen on improvement for high-end home demand $$ Jul 13, 2012
  • Shadow inventory should also include those inverted on their mortgages, and will sell when prices are high enough. $$ http://t.co/HMT2rdci Jul 13, 2012
  • Housing Passes a Milestone http://t.co/x1rch8KR Lows seen in some areas, in low-end housing, look4those who waited4better prices2sell $$ Jul 12, 2012

 

 

Market Impact

 

  • Hedge Funds Trail Vanguard as Elliott Returns Atypical http://t.co/y91Uboqf Hedge funds seek yield & shun volatility, need fair weather $$ Jul 13, 2012
  • Watch income producing investments w/care RT @stockspot2000: $$ A Big Captain Hook in DividendLand http://t.co/mF9i6wnX $DVY $FED $PCEF Jul 12, 2012
  • Contra: Financial conditions are actually quite normal http://t.co/zSHolTk2 W/long Tsys yielding little, conditions r anything but normal $$ Jul 11, 2012
  • Not surprising in a time of debt deflation $$ RT @sm_sears: Finding a reliable counter party on Wall Street is becoming a rare commodity. Jul 11, 2012
  • Wall Streeters Lose $2 Billion in 401(k) Bet on Own Firms http://t.co/68BGLh8l They should know better $$ Suffering from proximity bias… Jul 09, 2012

 

Pensions

 

  • Common when low funded RT @BobBrinker: “San Bernardino has seen its workers? pension costs more than double since 2006” http://t.co/CLX7jhkC Jul 13, 2012
  • The new retirement age: 70 http://t.co/SdIVhjwE That is, if it isn’t 70+. Too few years to accrue savings vs many to spend over $$ Jul 11, 2012

 

Companies

 

  • Activist Investor Sets Sights on P&G http://t.co/5kGN1m5W $PG too big; Ackman bites off more than he can chew, IMO. $$ Jul 13, 2012
  • What went wrong at Supervalu (plenty) and who could buy it? (um?) http://t.co/9GfsQZZ6 Wonder what $SVU bulls @ Seeking Alpha r saying? $$ Jul 12, 2012
  • Apple Quitting Green Registry Leads to Purchasing Fallout http://t.co/Y4vOZ9Vm Interesting article, but the comments section is rabid $$ Jul 12, 2012
  • Silicon Valley’s Biggest Secret Technology Company — 7 Clues http://t.co/35rQYQuy One more clue: Its name starts with a “V.” $$ $V Jul 11, 2012
  • Billionaire Forrest Leads BlackRock Buying Iron Ore http://t.co/XNP3FGXv Only invest what u can afford2lose 4 an industry in oversupply $$ Jul 11, 2012
  • Patriot Bankruptcy May Leave Peabody Liable for Expense http://t.co/S0Upoai8 W/low natural gas prices, many coal companies suffer $$ Jul 11, 2012
  • Chesapeake retreat ends American energy land grab http://t.co/k7TsqNz3 Fracking creates new energy ecology, lower prices, less coal use $$ Jul 10, 2012

 

Central Banking

 

  • That’s what I thought also $$ RT @Alea_: so employee of Markets Group of the New York Fed doesn’t know how to use bloomberg #brilliant Jul 13, 2012
  • John B. Taylor: Monetary Policy and the Next Crisis http://t.co/9ajScehv Argues Fed kept rates2low in 2000s, leading2current crisis $$ Jul 11, 2012
  • What’s Wrong With the Federal Reserve? http://t.co/JxFpBArR ALLAN H. MELTZER explains y activist monetary & fiscal policies r failing $$ Jul 10, 2012
  • What if the Fed Throws a QE3 and Nobody Comes? http://t.co/kU3N83aX Hussman:”The way out is2restructure bad debt instead of rescuing it.” $$ Jul 09, 2012
  • Dealers Declining Bernanke Twist Invitation http://t.co/ZGVObmE1 Fed eats large % of long Tsys, dealers get into act front-running them $$ Jul 09, 2012
  • Fed Weighs Revamped Monetary Report as Guide to Policy http://t.co/PXGKNfSv No, @federalreserve, ur not unclear 2 us; just bad $$ policy Jul 09, 2012

 

Miscellaneous

 

  • Anne-Marie Slaughter on having it all http://t.co/bz7oQly4 No one can have it all; life is a series of choices 4 men & women $$ Jul 13, 2012
  • The death of cash http://t.co/aCoVfmsP Few technologies die totally; we have phonographs, tube mikes, AM radio. $$ will continue smaller Jul 12, 2012
  • Agreed, cash is a form of freedom RT @DavidBCollum: @AlephBlog Cashless society should be feared. Jul 12, 2012
  • Cocoa Grader: Hard Job, Sweet Perks http://t.co/wn8YXGVt Becoming a cocoa beans grader is ~4x harder than passing the NY State Bar exam Jul 12, 2012
  • A Cut Above: In These Knife Fights, Only Pride Gets Wounded http://t.co/xPvWlxA9 Very American & weird. Very, very weird. $$ #enjoy Jul 12, 2012
  • Wall Street’s Secret Weapon for Getting an Edge http://t.co/UJtMPEJu Testosterone injections to feel great & b dumb as a teenage boy $$ Jul 11, 2012
  • Climate was HOTTER in Roman, medieval times than now http://t.co/cc5fNyyI “cooling effect of orbital shifting on the climate” $$ Jul 11, 2012
  • Congratulations to one of the best financial bloggers still active $$ RT @EddyElfenbein: Crossing Wall Street turns seven years old today. Jul 11, 2012
  • Does This Smell Clean to You? http://t.co/pT1qlfxg There r many new scents giving sense of clean: ginger, hibiscus, greens, jasmine.. $$ Jul 11, 2012
  • Air Conditioning, Blessed Invention http://t.co/TSvTonfJ A most significant invention; no server farms w/o air conditioning $$ Jul 11, 2012
  • Interesting posts at Pepsico blogs in how $PEP is trying to sell snacks in China http://t.co/U6S3rGoT & http://t.co/IpkmsmKL $$ Jul 11, 2012
  • Last Amateur Bannister Is No LeBron Chasing Olympic Ideal http://t.co/Nwi4173U Last of the true amateurs, he breaks the 4-minute mile $$ Jul 11, 2012
  • Living Cells Show How to Fix the Financial System http://t.co/li0tmyHJ Healthy biological systems inspire economics systems $$ Jul 11, 2012
  • How the Mormons Make Money http://t.co/BAi5CF9W Really about how the Mormon “church” has significant businesses that make lots of money $$ Jul 11, 2012
  • Game Written by a 14-Year-Old Passes Angry Birds as Top Free iPhone App http://t.co/fAGtex2A Bubble Ball popular & Mom helps out $$ Jul 09, 2012

 

Rest of the World

 

  • Banks play cat-and-mouse with Beijing to comply with rules http://t.co/Nin3k8xH Banks are the weak link of the Chinese economy $$ Jul 12, 2012
  • Hit at home, China’s ghost fleet sails high seas http://t.co/aGSF13Ue Are there any more ways to increase oversupply of shipping? $$ Jul 11, 2012
  • Canadian Banks Seen Superior by Regulator Surviving Global Shock http://t.co/rKNfUc2M When housing prices fall in Canada will b tested $$ Jul 11, 2012
  • Eric Schmidt: The Great Firewall of China will fall http://t.co/N3vm0IuL You can’t build a sophisticated economy… w/active censorship $$ Jul 10, 2012
  • Norway Banks Under Pressure as Asset-Bubble Risks Swell http://t.co/BcHyayIQ Norwegians have never had such a high % of debt/net income $$ Jul 09, 2012
  • Tokyo Considers Buying Islands China Claims http://t.co/vWUmR6Zr Another potentialflashpoint in Asia, though war is impossible 😉 $$ Jul 09, 2012

 

Economics

 

  • Contra: The problem with ?structural? explanations for U.S. unemployment http://t.co/32zfqXyW Foreign competition limits job creation $$ Jul 11, 2012
  • Low-Paid Grads On Tight Budgets Switching to Discounters http://t.co/v4kEfPMq B4 going to college, ask what future employers might like $$ Jul 10, 2012
  • Murdoch, Moguls Head to Sun Valley as Mobile Shapes Media http://t.co/YFVQcQwm Content is King, can u squeeze dat onto my dinky device? $$ Jul 10, 2012
  • Fracking claims an unusual victim $PCX $$ RT @BloombergNews: BREAKING: Patriot Coal Bankruptcy Filing Said To Come as Soon as Today Jul 09, 2012
  • Patent ‘Troll’ Tactics Spread http://t.co/MECQeMFO Tour through grand diversity of games companies play w/patents 4 offense & defense $$ Jul 09, 2012

 

Finance Companies

 

  • SAC?s Cohen Joins Loeb Starting Reinsurer for Capital http://t.co/8aSjsa3w Adv: Captive $$. Disadv: Can lose $$ if underwriting is poor 🙁 Jul 10, 2012
  • JPMorgan Silence on Risk Model Spurs Calls for Disclosure http://t.co/btmeSkbM Banks should share their risk modelsw/regulators yearly $$ Jul 10, 2012
  • Indentured Students Rise as Loans Corrode College Ticket http://t.co/VvNosGcC Students tricked into debt-slavery “pursuing their bliss” $$ Jul 09, 2012
  • Price of Plastic Going Up? Merchants May Get Surcharge Rights http://t.co/e2wXuCC5 Will make4interesting competition & ppl hold more $$ Jul 09, 2012

 

Comments

 

  • Commented on Banks Defend Against Libor Lawsuits By Asking “Libor? Who Uses Libor, Anyway?” / Dealbreaker http://t.co/oIRzvh72 Jul 13, 2012
  • Fun fact: Take the current $VIX, divide it by the square root of 52. That’s the market’s one standard deviation forecast for the next week Jul 12, 2012
  • RT @EddyElfenbein: Fun fact: Take the current $VIX, divide it by the square root of 12. That’s the market’s one standard deviation forec … Jul 12, 2012
  • “Very low value analysis. Did a computer write this?” ? David_Merkel http://t.co/pUs2DJaj http://t.co/zmt4cMgf $$ Jul 12, 2012
  • “Banks feel more confident to foreclose when they can sell the property for a small loss at worst.” ? David_Merkel http://t.co/z3EUOoRk $$ Jul 12, 2012
  • “?Everyone needs to lighten up.? No, everyone needs to *tighten* up, and respect the rights of the?” ? David_Merkel http://t.co/yVrsu4jc $$ Jul 12, 2012
  • “On the new highs list, look at all the bond CEFs, ETFs, preferreds, etc. Everyone is grabbing income!” ? David_Merkel http://t.co/8ek4vm4E Jul 11, 2012
  • @Royal_Arse @LDrogen definitely think it doesn’t make sense LT, but long Tsy yields could go lower b4 a rather nasty whippy reversal $$ Jul 11, 2012
  • low quality $$ RT @jsphctrl: It’s unconventional, certainly. (Bloomberg:) *Urpilainen: One Collateral Option Is Shares From Spanish Banks Jul 11, 2012
  • @LDrogen with interest, even $JNK made $$, I’m not saying it is the only signal, but $TLT shows a demand4long certain cash flow FD: +TLT Jul 11, 2012
  • @LDrogen 1 yr price return only $JNK -2%, $LQD +7%, $TLT +32%. I would argue that indicates economic weakness FD: +LQD, +TLT 4 me&clients $$ Jul 11, 2012
  • “I think they are dreaming. China overbuilt its steel industry & they are losing $$ now.” ? David_Merkel http://t.co/RyQOw5tD Jul 11, 2012
  • @izakaminska @TheStalwart Problem happening w/Danish bonds also http://t.co/tgPPZgKW Ppl willing 2 lock in a loss 2 prevent larger loss $$ Jul 11, 2012
  • “Because those that are politically powerful in Europe have their own Swiss Bank accounts. Can’t?” ? David_Merkel http://t.co/8F93WNQm $$ Jul 11, 2012
  • +1, we r starved 4 news $$ RT @Fullcarry: FED minutes today probably not that important since BB had a presser after the meeting. Jul 11, 2012
  • Cat bond sales double in H1http://reut.rs/Nm0whV More alternative reinsurance capacity. Diversifies junk portfolios; invites catastrophes $$ Jul 10, 2012
  • @historysquared trouble is, few cat bonds have ever triggered, looks like free $$ to many HY bond mgrs, terms will tighten 2deliver losses Jul 10, 2012
  • When I look at the data for 3/13/06, Barclays actions had no effect on 3M LIBOR. It was excluded from the… http://t.co/gbEPYIXN Jul 10, 2012
  • “Life actuaries reveal their models annually to the regulators, though not to the public. The same?” ? David_Merkel http://t.co/pTqT1F2L $$ Jul 10, 2012
  • @randomroger Congratulations on the AdvisorShares Global Alpha & Beta, Roger! $RRGR $$ Jul 09, 2012
  • ‘ @Nonrelatedsense 4 mkt val measures: Q-ratio, CAPE10, Price-Resources (Michael Alexander), & @eddyelfenbein ‘s stocks as a bond measure $$ Jul 09, 2012
  • “P/E has been an unreliable measure of value for the market as a whole. Why rely on it?” ? David_Merkel http://t.co/B4ZuMOLz $$ Jul 09, 2012
  • Commented on The Economist | The LIBOR scandal: The rotten heart of finance http://t.co/qvSysBKt Jul 08, 2012
  • Commented on The Economist | The LIBOR scandal: The rotten heart of finance http://t.co/Y7JVFkDP Jul 08, 2012
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