Not a Diamond, it is Only Graphite

Not a Diamond, it is Only Graphite

Posted on by David Merkel

It’s been two months since I have written about promoted penny stocks.? Let’s start with how the penny stocks I have written about have done.

Ticker Date of Article Price @ Article Price @ 11/30/12 Decline Annualized Splits
GTXO

5/27/2008

2.45

0.018

-99.3%

-66.3%
BONZ

10/22/2009

0.35

0.029

-91.7%

-55.2%
BONU

10/22/2009

0.89

0.087

-90.2%

-52.7%
UTOG

3/30/2011

1.55

0.020

-98.7%

-92.6%
OBJED

4/29/2011

116.00

1.500

-98.7%

-93.5%

1:40
LSTG

10/5/2011

1.12

0.036

-96.8%

-94.9%
AERN

10/5/2011

0.0770

0.0003

-99.6%

-99.2%
IRYS

3/15/2012

0.261

0.090

-65.5%

-77.6%
NVMN

3/22/2012

1.47

0.210

-85.7%

-94.0%
STVF

3/28/2012

3.24

0.390

-88.0%

-95.6%
CRCL

5/1/2012

2.22

0.430

-80.6%

-94.0%
ORYN

5/30/2012

0.93

0.205

-78.0%

-95.0%
BRFH

5/30/2012

1.16

0.459

-60.4%

-84.1%
LUXR

6/12/2012

1.59

0.041

-97.4%

-99.96%
IMSC

7/9/2012

1.5

1.200

-20.0%

-43.2%
DIDG

7/18/2012

0.65

0.270

-58.5%

-90.7%
GRPH

11/30/2012

0.8715

0.8715

0.0%
?Now

11/30/2012

 Median

-89.1%

-93.0%

And now a little bit of news:

1) Obscene Jeans Corp. [OBJED] did a 1-for-40 reverse split.? Almost no one makes money on reverse splits.? But it does allow the company to reboot, issue more cheap shares, and continue the scam.

2) I was contacted by a lawyer suing Luxeyard [LUXR].? Won’t give most details, but it does not surprise me that the stock has dropped so much in so little time.? The dilution from the stock offering did a lot of it, and losing money is the rest.

3) It is fascinating to me that promoted penny stocks tend to lose value at a 93% per year basis.? That is very reliable.? None of the penny stocks above have gains.? They all lose.? So, why should anyone invest in them?? No one should.

I toss out the idea that there may be some good small-cap companies out there that deserve attention.? Run stock screens, and analyze them yourself.? Don’t trust the pitches of others.? If you must listen to those that pitch small cap stocks, at least stick with someone that has no agenda, like AAII.? Go ahead, invest in their shadow stock portfolio.? It has trounced the averages.

Graphite, not a Diamond

Okay, here is tonight’s promoted stock: Graphite Corp.? At first, I was kind of surprised by the pedestrian nature of this stock, but as I looked at it, I realized, “Okay, yeah, graphite pricing has gone up a lot since the Chinese started to ration their sales, since in the past, they were 80% of the supply.”

But Graphite Corp. has no revenues, negative earnings, scanty book value, and has never mined an ounce of graphite in its existence.? It’s management team is not a top-flight bunch of miners.? It is a development stage company that was once targeted to be a “third party reseller of medical office business solutions.” (see page 5)

This is typical of penny stock promotions.? The promoter spins a great tale, but there is little to nothing there.?? Graphite is produced in mines, but it is also produced synthetically.? The high prices for certain types of graphite may create new technologies that allow synthetic graphite to be produced in larger, purer sheets.? That’s a speculation on my part, but large price moves, like that of high-quality graphite moving up 150%, invites not only new mines, but new technologies.

Okay, but let’s look at the development of this company, and how its stock got issued:

This is the statement of shareholder’s equity from the recent 10-Q.? I have added the last column to show you the prices where stock was issued.? No insider ever received stock at prices higher than a nickel per share.? Ask yourself, why can’t you get stock at a nickel per share, so that you could sell it at 87 cents per share?

Also note the way the share count has ballooned — they keep issuing shares, because they have little cash to pay parties with.? Five years ago, 1.5 million shares.? Today, nineteen-plus times that — 28.7 million shares.? And the company has done nothing aside from raising money, and unsuccessfully speculating.? If we liquidated the company now, we would get 2.28 cents per share, not the 87 cents it has recently traded at.

The only way a company gets that kind of valuation is through promotion/advertising.? And what were the incentives for those that put this in my mailbox today?

The writer had this incentive:

John Person Inc., dba National Futures.com did not receive any direct compensation (other than future subscription revenues, the amount of (which is not known at this time) with respect to the publication of this Advertisement. John Person Inc. has received $20,000 in cash compensation from Greenstone Media, LLC. to endorse this advertisement. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this newsletter as the basis for any investment decision .While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Only invest in monies you can afford to lose.

To their credit, the bolding is theirs.? What incentive did the advertiser have?

Third Party Advertiser/Advertising Agency IMPORTANT NOTICE AND DISCLAIMER: Greenstone Media, LLC., the third party advertiser, has paid $1,179,405 to Diamond Spot Media, LLC (DSM) as of October 24, 2012 for this advertising effort in an effort to build investor awareness. DSM shall retain any amounts over and above the cost of creating and distributing this advertisement which advertises The Bottom-line Newsletter coverage of Graphite Corp. Advertising services include; production, outsourced advertising copywriting services, mailing and other related distribution services and advertising media placement costs. Greenstone Media LLC, the third party advertiser, is a company based in Charlestown, Nevis. Greenstone Media LLC. the third party advertiser, has represented to DSM in writing that it does not own any shares of Graphite Corp. except for restricted stock which Greenstone Media, LLC. has represented to DSM in writing that it will not sell, pledge or hypothecate or otherwise agree to dispose of for 90 days following the initial dissemination of this advertisement. Greenstone Media LLC., has also represented to DSM in writing that neither it nor its affiliates will buy or sell any shares of Graphite Corp. during the period that this advertisement is being disseminated by DSM or third party media vendors.

That’s a weak disclaimer.? “Affiliates” may not mean owners or clients.? My sense is that large owners of Graphite Corp will use this opportunity to sell stock, feeding losses to a gullible public, and they could be the ones that funded the stock advertisement.? Makes a lot of sense, after all, who would benefit most from the advertisement?

As I often say, “Don’t buy what someone wants to sell you.? Buy what you have researched and you know has value.”? With promoted stocks, they are selling financial poison.? Avoid it like the plague, unless you get a kick out of losing 93%/year to scammers.

 

Young People Should Favor Low Discount Rates

Young People Should Favor Low Discount Rates

Posted on by David Merkel

Where should the discount rate for liabilities on a defined benefit pension plan be set?? This sounds like a boring issue that should be solved by bureaucrats or actuaries.? And yes it *is* boring, though nerds like me have a keen interest in the topic.

Here’s the issue, who should bear the costs?? Should it be future generations, or the generation that is receiving the benefits?? I am guessing that most people reading this agree with me, and argue that the generation receiving benefits should bear the costs, and pre-fund their retirements.

But that has not been the case.? Rather, the Baby Boomers and prior generations have pushed costs onto future generations.? How did they do it?? Parties that looked at the incredible returns of the 80s & 90s assumed that equity markets were magic, and always threw off large returns.? These same parties were reluctant to recognize the 2000s? We’ve had a lost decade-plus, which has caused most DB plans to go into deficit.

But the assumed investment rate was high going into it: 8-10%/year.? The is the danger of mindlessly importing returns from the past, without asking the question, “Was there anything special about he past that should lead us to adjust the past returns?”? P/E multiple expansion would mean-revert.? It usually does, and longer-term measures like the Q-ratio and CAPE10 showed that valuations at the peak were severely high.? Since then, the market has treaded water, as the companies in aggregate grow into their valuations.

Financial markets cannot forever outgrow their economies.? Eventually we rely on cash flows from businesses to validate the value of the underlying businesses.? Dividends, buybacks, and mergers and acquisitions serve to distribute the value of what companies do for those who own them.

The high assumed investment rates forestalled corporations and governments from contributing to their DB plans.? Why should they?? After all, they expected to earn a ton of money off their investments.

But imagine for a moment that they had been reasonable, and said “we shouldn’t expect to earn more than long Baa-rated bonds.? That’s still a little liberal for me, but an improvement on most current reasoning.

The effect today would be to have discount rates around 4.6%.? How many firms and governments do that?? (Why do I hear crickets?)

If governments had followed a formula like “use the Long Baa bond yield for the discount rate,” they would not have been as generous with pensions.

There is still time to make some Baby Boomers pay more in taxes (even me).? It would be wise for younger people to urge the boards that run the DB pension plans of their municipalities to adopt a long Baa bond yield as their discount rate.? The underfunding will be horrifying, but if investment return exceed that, contributions and taxes should decline.

Thus I say to the young; lobby for lower discount rates, that there might be more taxation in the short-run, and less in the long-run.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Credit Markets

 

  • Credit Suisse Raises $802M CLO; Prudential Closes Fund http://t.co/RbXDgtPU Watch arb from creation of CDOs & CLOs: clue 2 bond rally end Dec 01, 2012
  • Caisse Thinks Bond Party Is Over? http://t.co/j6lWdJjA Shifting $$ from bonds 2 infrastructure; usually good though liquidity is underpriced Dec 01, 2012
  • Bond Yields May Fall Short of Corporate Pension Fund Needshttp://on.barrons.com/VkWekV Bonds in DB plans r4 risk reduction not just yield $$ Dec 01, 2012
  • My point is that it is difficult to tell whether we will be getting inflation or deflation. My bond portfolios are barbelled: long &short $$ Nov 30, 2012
  • Investors Unprepared for Bond Danger, BlackRock?s Rosenberg Says http://t.co/56kv1CrS B wary of owning 2 much or 2 little long bonds $$ Nov 30, 2012
  • Safe or junk, bonds in bubble trouble http://t.co/Nd5iEYPy Fuss told the summit in New York there was evidence of “a spread bubble” $$ Nov 28, 2012
  • Overnight Rates Surge in Fed?s Operation Twist http://t.co/xwvKCPGb Large supply of short Treasuries raises Repo rates over LIBOR $$ Nov 26, 2012

 

Muni Markets and Pensions

 

  • Bankruptcy threat back on the table in Pennsylvania city as filing ban ends http://t.co/NgMGQs2Z Will b tough to stiff muni bondholders $$ Dec 01, 2012
  • Calpers Seeks to Sue San Bernardino Over Pension Payments http://t.co/xv0OqQV9 Will have2show a place in CA law/constitution reqrng pmt $$ Nov 28, 2012
  • Fierce Debt Puts Pensions at Risk in Puerto Rico http://t.co/w2oGk8YW Future curse: May u starve like a Puerto Rican pensioner! Uh, yeh $$ Nov 27, 2012
  • Proponents of pension reform face steep hurdles http://t.co/n2AYvghT Choose: raise taxes, reduce services, attempt constitutional change $$ Nov 26, 2012
  • San Bernardino?s ?Toxic Politics? Snarl Calpers Debt http://t.co/N4YWPCTD Be careful what you put into your city’s Charter. $$ Nov 26, 2012

 

Market Dynamics

 

  • The Great 2012 Cashout http://t.co/i4lZvD0c Special dividends r coming fast & furious; last call 4 low tax rates; next stop: Caymans $$ Dec 01, 2012
  • Wells Fargo CEO: ‘Bad players are gone’ from finance http://t.co/AwSGY8gz FD: + $WFC | Sadly, false. There may be fewer, but not all gone $$ Nov 30, 2012
  • Nontraded BDC sales on a tear despite closing of first fund http://t.co/ML7oVkIu Poison, beware. BDCs are bad enough w/o the illiquidity $$ Nov 30, 2012
  • Beware the Smart Money: Hedge Funds Issue Sell Signal http://t.co/HXBKD5ZO When fast money is “all in” it just takes a jolt2make mkt fall $$ Nov 30, 2012
  • Home Equity Loans Make Comeback Fueling US Spending http://t.co/3WULRzOO We never learn, we never learn, we never learn, we never learn $$ Nov 27, 2012
  • Private-Equity Managers Make Moves as Tax Increases Near http://t.co/eKKsH5w6 refinancing investments, accelerating gains, etc. $$ Nov 26, 2012
  • The Faustian Bargain between States and Banks http://t.co/gGUHGWIa I lend 2u, u lend 2me. I lend 2u, u lend 2me. What could go wrong? $$ Nov 26, 2012
  • The Manufacturing Boom You Won’t Notice http://t.co/R62nFiae Productivity continues 2 improve -> more mfg in US, but not more mfg jobs $$ Nov 26, 2012
  • Overlooking Overvaluation http://t.co/nWfA1KMe Hussman interacts w/long-term valuation measures. He finds the market overvalued $$ #whatelse Nov 26, 2012
  • Everything You Know About Investing is Wrong http://t.co/v8wAYPg6 Single-vble measures of valuation fail in short-run, some in long-run $$ Nov 26, 2012
  • The prior BB article is a little deceptive, because regulated entities use them under regulation. Many r quite safe, like auto ABS, etc. $$ Nov 24, 2012
  • Shadow Banking Grows to $67 Trillion Industry, Regulators Say http://t.co/houN2uhM Many are SPV securities held by banks & ins cos $$ Nov 24, 2012

 

Companies

 

  • How a desperate HP suspended disbelief for Autonomy deal http://t.co/qv1vIWcQ If $HPQ had been focused on organic growth, wouldnta happened Nov 30, 2012
  • Berkshire Hathaway, CaixaBank Agree to Reinsurance Deal http://t.co/RDQqXhMl Berky hasn’t done well w/Life Re — I would be cautious $$ Nov 30, 2012
  • Google Has Officially Eaten the Newspaper Industry http://t.co/TGqEWK7T $GOOG now has more advertising revenue than all print media $$ Nov 28, 2012
  • Investors Demand CEO Face Time http://t.co/4CPugaAV CEO griping about time spent on investors is wrong; a good CEO is Mr. Outside $$ Nov 28, 2012
  • Global Steel Industry Faces Capacity Glut http://t.co/DhU7BaWa We need to see 20% of the steel industry fail b4 buying steel stocks $$ Nov 28, 2012
  • Lehman Sells Archstone in Deal Worth $6.5B http://t.co/f2V5K7tk Losses taken; Lehman more liquid; Sam Zell lives 2 gravedance $$ $EQR $AVB Nov 27, 2012
  • $AMZN ‘s bond offering will b a bit of a “museum piece.” I.e. unusual issuer unlikely to issue more; should get tight deal spreads $$ yld<2% Nov 26, 2012
  • $ICOA Says $GOOG Didn’t Acquire the Company http://t.co/y3XXagL7 Whoever put out the press release will be an easy target 4 the SEC $$ Nov 26, 2012
  • France to ArcelorMittal: if you don?t like losing money, get out of France http://t.co/gYQ31NOk Invisible foot punishes France 4 bad policy Nov 26, 2012
  • Flowers Foods Sizes Up Hostess http://t.co/4DYwu6p6 Might buy brands, marketing arrangements, factories., etc. Won’t hire unions $$ $FLO Nov 26, 2012

 

Central Banking

 

  • Japan?s Ill-Fated Experiment With Money Doctoring http://t.co/OgCSJ4KB Interesting tale of Asia conquest; what does it imply 4 the US? $$ Nov 30, 2012
  • The death of volatility? http://t.co/04RNO7z1 “Central bank puts have done a great job of removing tail risks.” for now h/t: @izakaminska Nov 29, 2012
  • When the Credit Transmission Mechanism Breaks? http://t.co/HvCddUDh While we r delevering monetary policy won’t work well. h/t: @pragcap $$ Nov 28, 2012
  • The Indiana Jones economy http://t.co/GqjOk5Ql @izakaminska explains how economic transmission mechanisms r short-circuited by hoarding $$ Nov 28, 2012
  • Brazil real jumps as central bank eclipses Mantega http://t.co/xUpU6tE2 Loose developed mkt $$ polcy forces choice: exports or inflation? $$ Nov 26, 2012

 

Politics & Policy

 

  • Mortgage interest rate tax deduction scores political points ? but little else http://t.co/xiaLfUkT Limit to $20K of interest $$ @hnmoore Nov 30, 2012
  • IMNSHO, the PPACA was designed to destroy the parts of the US health care system that worked well, in order 2 move 2a single-payer system $$ Nov 30, 2012
  • Unaffordable Cost Seen for Some Under Affordable Care Act http://t.co/iEPsMhdh When this law goes live in 2014, people will hate it $$ Nov 30, 2012
  • In D.C., Social-Media Surveillance Pays Off http://t.co/XkLcZ3nm What they glean from social media aids service to constituents $$ Nov 29, 2012
  • 10 Things the SEC Won’t Tell You http://t.co/QOfbkvhC 11) U r your own best defense; we can’t help u much if u r stupid, b skeptical $$ Nov 28, 2012
  • Going to college is not of itself a good thing economically. You have to choose something that will pay off if you dare borrow money $$ Nov 28, 2012
  • Federal Student Lending Swells http://t.co/Wvi2d6vT We need to eliminate student loans. They do more harm than good. $$ Nov 28, 2012
  • Time running out on debt ceiling http://t.co/iZ6BLqdP Follows months behind the “fiscal cliff.” Will probably cause as much angst. $$ Nov 27, 2012
  • “Y is the burden of proof on those who want 2 return 2 the proven statutory & regulatory approaches of the past?” http://t.co/GJuNCS1X $$ Nov 26, 2012
  • Disabled parents face bias, loss of kids: report http://t.co/SvW3g3Xn Found this 2b disturbing; govt should avoid meddling w/families $$ Nov 26, 2012
  • A Minimum Tax for the Wealthy http://t.co/THiT0YGK Let Warren pay tax on his deferred gains in $BRK.A shares, & pay the large DTL also $$ Nov 26, 2012

 

Rest of the World

 

  • China?s over-investment problem http://t.co/WJVLvnMD IMF working paper says what China skeptics have said for years: 2 much investment $$ Nov 30, 2012
  • China Mafia-Style Hack Attack Drives California Firm to Brink http://t.co/cmnb4qco Chinese hackers steal software & hack software firm $$ Nov 28, 2012
  • A UK Exit From EU Offers No Promise of Better Fortunes http://t.co/TBmi6as7 EU is a failed experiment; Y should the UK continue there? $$ Nov 28, 2012
  • French jobless total hits 14-yr high http://t.co/NYdjc6Rs Francois Hollande getting costly economics lessons, paid4 by the French people $$ Nov 27, 2012
  • China Wage Gains Hurt by Weaker Profit Damp Consumption http://t.co/tESRToBZ Malinvestment leads2 lower profits, then wages can’t grow $$ Nov 27, 2012
  • China?s nemesis: bribes, banquets and backslapping http://t.co/D7V7yF06 Difficult 2 develop highly when rule of law is not followed $$ Nov 26, 2012

?? Sovereign CDS trading plummets http://t.co/jKBj47bv Will eventually lead discretionary holders to lighten sovereign positions $$ Nov 26, 2012

  • Egyptian Army allowed Morsi in2 power 2 avoid riots & allow him 2 mess up, so that Egyptians would support military rule again. US wins 2 $$ Nov 26, 2012

 

Wrong

 

  • Wrong: Misconceptions 101: Why College Costs Aren?t Soaring http://t.co/nZWYKQSQ Doesn’t square w/the rise in delinquent student loans $$ Nov 28, 2012
  • Wrong: Obama To Meet Romney Tomorrow Amid Fiscal Cliff Talks http://t.co/2VfO7Fxz Doesn’t Obama realize Romney has no power in the GOP? $$ Nov 28, 2012
  • Wrong: Fed’s Easing Yields Hidden Benefit http://t.co/6bJejPB1 1994 is not 2013. The banks/financials/households were in good shape $$ Nov 28, 2012
  • Taleb Mishandles Fragility http://t.co/qIGbLQHl Taleb needs new ideas, but does not perceive that. He is mired in the past. $$ Nov 28, 2012
  • Russell Napier’s “Most Important Chart In The World” http://t.co/XYKdagZm While we’re at it let’s reprise the Nikkei vs Nasdaq charts $$ Nov 28, 2012

 

Other

 

  • THE FUTURE OF DIGITAL [SLIDE DECK] http://t.co/RabKP5EC Good but long piece from BI on the future of digital media $$ Nov 30, 2012
  • Alleged Insider Group Includes Website Editor http://t.co/Llnmz2aE In general insider info is a curse to the upright; ties your hands $$ Nov 30, 2012
  • Texas Feral Hog Wrecks Mark Losing Battle With Animals http://t.co/TMPpFNh6 This is Texas, no one said anything about losing. $$ Nov 29, 2012
  • He Carries On, She Likes to Check http://t.co/4D1Fd5Td Men and women are different when they fly. This explains it. $$ Nov 29, 2012
  • . @izakaminska is a favorite writer of mine. She helps me with the nuances of tightly nested markets, finding the variable that is valuable Nov 29, 2012
  • American Housing Casino Revives After Big Drop: Mortgages http://t.co/lZmmHo9s Setting up conditions for the naive 2 lose again $$ Nov 28, 2012
  • FHA?s Biggest Loser: No-Money-Down Mortgages http://t.co/bJgwTdtV Surprise! Lend2 someone w/nothing 2 lose & they default a lot more $$ Nov 26, 2012

 

Teaching Math

 

  • Helping Parents Score on the Homework Front http://t.co/7FPGjA0n 6-yr olds should not be doing fractions. Parents aren’t the problem $$ Nov 28, 2012
  • The push to think abstractly about math does not work w/kids. You can start with girls around 13, boys around 14; misguided idealism $$ Nov 26, 2012
  • Children learn math best through drill, giving way to problem-solving, giving way to algebra (abstraction), further abstraction Calculus Nov 26, 2012
  • A New Kind of Problem: The Common Core Math Standards http://t.co/VGxxQGqr This is as bad as the “New Math” of the 1960s; utterly idiotic $$ Nov 26, 2012

 

 

Retweets

 

  • RT @prchovanec: Market should be rooting for China to buckle down to real econ adjustment, not hit yesterday’s growth targets with yeste … Dec 01, 2012
  • Would put the fraction at 80%, but I agree $$ RT @GMRobertson: if they are risk free they are solely for risk reduction, IG is about 2/3 so Dec 01, 2012
  • Wow! RT @prchovanec: Chinese company debt climbed to 122% of GDP in 2012 from 108% last year, highest level in 15 years http://t.co/ujKmHpTx Dec 01, 2012
  • Probably $$ RT @merrillmatter: @hnmoore I think eliminating (slowly) the 2nd home tax deduction is more palatable and possible. Nov 30, 2012
  • Blameworthy RT @grossdm: anybody ask boehner about the time he voted for massive new medicare entitlement without a funding mechanism yet? Nov 30, 2012
  • +1 RT @jonsticha: as is mine. Large bets on rates either way are a bad bet IMO Nov 30, 2012
  • RT @MuniTrader: @AlephBlog completely agree. credit risk front end, high coupon quality on the back end. pretty obvious but best way to … Nov 30, 2012
  • RT @PlanMaestro: If you don?t know enough to know about the business instantly, you won?t know enough in a month or in two? ? Buffett H/ … Nov 29, 2012
  • Needs2meet an actuary RT @TheStalwart: James Galbraith is only economist who talks about lowering the retirement age http://t.co/3srMzYX3 Nov 29, 2012
  • Recognizing reality, & verbally shading down fwd GDP $$ RT @carney: What does the beige book change from “moderate” to “modest” growth mean? Nov 28, 2012
  • Thanks, still think Eurozone should dissolve, replace w/mere free trade zone $$ RT @euromoney: Another take (quick): http://t.co/WxSquHKf Nov 28, 2012
  • RT @John_Hempton: Nassim Nicholas Taleb is a humourless git… and his publishers censor the internet. Do not buy his book… http://t.c … Nov 28, 2012
  • RT @munilass: Over 300 drone strikes and 2,500 people killed without a policy in place for when such attacks should be authorized http:/ … Nov 27, 2012
  • To the best of my knowledge, never RT @merrillmatter: do humans ever (in toto, as a society) voluntarily deleverage? Nov 27, 2012
  • Sad but true RT @AppFlyer: we never learn. Nov 27, 2012
  • That’s a big gap w/Moody’s @ Baa1 – S&P looks at balance sheet, Moody’s at Income Stmt? $$ http://t.co/C4wCNzaM RT @jonsticha: AA- @ S&P Nov 26, 2012
  • Rated Baa1 $$ RT @SimoneFoxman: RT @chrisadamsmkts: Amazon is today set to issue its first bond in more than a decade http://t.co/k03iJNi4 Nov 26, 2012
  • That’s why we homeschool RT @Nonrelatedsense: @AlephBlog pull kids from public schools if you can afford it. Nov 26, 2012
  • Bigtime $$ RT @Pawelmorski: Though anyone who thinks Canada is bubble-free might care to follow @garthturner and read his blog. Nov 26, 2012
  • Can we get the PBOC to take Yellen? $$ RT @TheStalwart: I’m definitely on board with this Central Bank poaching/global market place thing… Nov 26, 2012
  • Wow. Whoever published the original release will be an easy target $$ RT @mickwe: @AlephBlog so did all these guys http://t.co/sdUtAnlN Nov 26, 2012
  • AP goofs RT @mickwe: oh… RT @allthingsd: Google Sources: Acquisition of ICOA Wireless Are ‘Not True’ -by @ahess247 http://t.co/aGVCteBf Nov 26, 2012
  • RT @mickwe: That wifi co Google just bought for $400m? Loses $ and ‘Cash and cash equivalents were $10 at June 30, 2012’ http://t.co/PXB … Nov 26, 2012
  • Warranties r usually ripoffs RT @danielckoontz: Anybody who’s ever bot an extended warranty should read this post twice http://t.co/Ryl1AkKn Nov 25, 2012
  • A good guy; I appreciate him $$ RT @PlanMaestro: Retail Industry’s Ninja Mind Tricks http://t.co/DxJfueu4 #biases Nov 25, 2012

 

Replies

 

  • @LSilverspar as @EpicureanDeal says: “Names will be changed to protect the innocent, if we find any.” Few clean hands among banks, S&Ls, etc Nov 30, 2012
  • @Frank_McG Consider it a different way… I think it would b more likely to see a case prosecuted over insider information w/ CDS trading $$ Nov 30, 2012
  • @Frank_McG I’ve never seen a case tried for insider information on bonds, because gains r less, but technically, legally it is possible $$ Nov 30, 2012
  • Congress controls the purse strings, not the Presidency, which is too powerful as an office already. Bad… http://t.co/iGBUVgtw Nov 30, 2012
  • But when she became CEO, she could have paid the ~$100MM breakup fee. She didn’t, so she is partly to blame. http://t.co/N1xiZ0mh Nov 30, 2012
  • @ritholtz Dear Barry, is that a real plus? We have increasing delinquencies there, in the face of nondischargability in bankruptcy $$ Nov 29, 2012
  • @danielckoontz Thank you, dear friend Nov 29, 2012
  • @munilass I’m no expert, but CALPERS would have2 point @ California statutes/constitution requiring the payment http://t.co/UJpO1m3T Nov 28, 2012
  • @williamalden Not surprising. Academics & pseudo-academics r easy to co-opt. Most of the members worked in finance & r its friends $$ Nov 28, 2012
  • @Sir_Strangelove Free trade is a simple concept, & is hindered by Eurocrats. Free trade means fewer laws & regulations, not more $$ Nov 28, 2012
  • @Sir_Strangelove No. The Euro is the worst of it, but nations need to have their own unique rules to function well, not standardization $$ Nov 28, 2012
  • @EddyElfenbein Funny in a way, because at the beginning of his career, his main research tools were S&P and Moody’s stock reports $$ Nov 28, 2012
  • “You have more to say than Taleb. He has not had a useful new idea in 10 years.” ? David_Merkel http://t.co/sSh4Qetw $$ @reformedbroker Nov 28, 2012
  • @JayLeonard So, more like $2.0-2.5T per year Nov 27, 2012
  • @JayLeonard I think they are wrong. Other statistics I have seen indicate the amount is 8% of GDP, or $1.2T plus whatever the current gap is Nov 27, 2012
  • @carney My comment: If you pay $400M to get $500M over 30 years, the IRR is 1.45%. Better to buy a ladder of muni or corporate bonds. $$ Nov 27, 2012
  • @AppFlyer Care 2 clarify? Nov 27, 2012
  • @BryanMortenson Thanks, appreciated. Nov 27, 2012
  • @BryanMortenson Has the latest Financial Report of the US Government come out yet? Due soon. Thought I was on the email list… Nov 27, 2012
  • @carney Best place to look would be Canadian Mortgage bubble articles like this: http://t.co/w1Zk7Uhc Nov 27, 2012
  • @TheStalwart This is why I don’t follow any monthly numbers for my investing: noise/signal is high. Even a year of data, noise swamps signal Nov 27, 2012
  • @richtoscano I largely agree. My main disagreement is that the majority says rates must go up, and for some time, but they don’t $$ Nov 27, 2012
  • @richtoscano They R the best comparisons that we have 2 the current situation. I respect U, Rich, but wht wld B a better comparison? $$ Nov 27, 2012
  • “You may have a long wait. Great Depression & Modern Japan went on over 10 years.” ? David_Merkel http://t.co/YlMSAU9c http://t.co/XVq1wgWO Nov 26, 2012
  • @jonsticha Used 2 manage corporates for Fidelity & Guaranty Life. I only guessed, but big rating gaps mean there r two stories told $$ Nov 26, 2012
  • @japhychron I don’t know. So many things are messed up that it is impossible to say… 🙁 Nov 26, 2012
  • “But Buffett’s tax proposal barely nicks him because he makes little income. His shadow income is?” ? David_Merkel http://t.co/7zWRb4SV $$ Nov 26, 2012
  • @mickwe Basically, $GOOG bot out a penny stock, $ICOA, virtually inactive & broke. Pays a ~nickel/share for something $.0001 Friday. Huh? $$ Nov 26, 2012
  • @BarbarianCap $HOGS Tough company to analyze; doubts as to the reality of assets, financials, according to some Nov 26, 2012
  • @GaelicTorus I’ve been through the social work system five times in my life, each time to rescue a child & adopt him. I am not naive. Nov 26, 2012
  • @Nonrelatedsense I knew that, but I still think that Taleb had great insights in his first book, and has not grown from there. Nov 25, 2012
  • @volatilitysmile A good warning to all of us who put our opinions forthto the public. Nov 25, 2012
  • “Taleb has jumped the shark” ? David_Merkel http://t.co/QNdVE57V Sorry to be so blunt $$ Nov 25, 2012
  • @PlanMaestro I have friends working in South Sudan on that. Bigger problem is a lack of tending the fields; the culture is not aggressive $$ Nov 25, 2012
  • @PlanMaestro One of the most important initial things a developing nation can do is get agriculture right; other things tend to follow $$ Nov 25, 2012
  • @moorehn I liked Taleb’s first book a lot. His insights since then have not increased. I think he is on his 16th minute of Warhol’s fame. $$ Nov 24, 2012
  • @Convertbond Is there a link for that? Investment dept @ ins co in 93 was reaching for yield through duration @ wrong time 94 bad year 4 dur Nov 24, 2012
  • @JamesGRickards If you’re in Baltimore/DC and want to talk, I would be interested in what you are thinking. Let me know. Nov 24, 2012
  • @JamesGRickards Too speculative. We should be happy saying that we don’t know. The Bible does not speak to the issue, nor do the Fathers. Nov 24, 2012

For what it is worth

  • My week on twitter: 51 retweets received, 3 new listings, 48 new followers, 106 mentions. Via: http://t.co/SPrAWil0 Nov 29, 2012

?

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.

On Human Fertility, Part 2

On Human Fertility, Part 2

Posted on by David Merkel

I write about this every now and then, because human fertility is falling faster then most demographers expect.? Using the CIA Factbook for data, the present total fertility rate for the world is 2.47 births per woman that survives childbearing.? Last year it was 2.50, and in 2006 it was 2.90.? 2.10 is replacement rate.? At the current trend, the world will be at replacement rate in 2022.? That’s a lot earlier than most expect, and it makes me suggest that global population will top out at 8.5 Billion in 2030, lower and earlier than most expect.

Have a look at the Total Fertility Rate by group:

The largest nations for each cell are listed below the graph.? Note Asian nations to the left, and African nations to the right.

Africa is so small, that the high birth rates have little global impact.? Also, AIDS consumes their population, as do wars, malnutrition, etc.

The Arab world is also slowing in population growth.? When Saudi Arabia is near replacement rate at 2.26, you can tell that the women are gaining the upper hand there, which is notable given the polygamy is permitted.

In the Developed world, who leads in fertility?? Israel at 2.67.? Next is the US at 2.06, slightly below replacement.? We still grow from immigration.

Quoting from my prior piece, why is this happening?? There are many reasons why the total fertility rate is declining:

  • Educating females makes many of them want to have fewer kids, whether the reason is pain, effort, wanting to work outside the home, etc.
  • Contraception is more widely available.
  • The marriage rate is declining globally.? Willingness to have children is positively correlated with marriage.
  • Governments provide an illusion of support, commonly believed, that the government can support people in their old age, so people don?t have kids for old age support.

The rapidly slowing rate of childbearing will have global population peak in the early 2030s at a level in the lower 8 billions, unless there is some further change to attitudes on children that makes people have more or even fewer kids.

Some of those changes may come from:

  • governments looking to stem a shrinking population that is causing a future problem with their social welfare programs.? (Note: in general, whatever governments offer, people don’t have materially more kids. Once women are convinced that kids are more of a burden than an advantage, they do not easily shift from that view, even if that view is wrong.)
  • Various religious leaders realizing that the women are not with the program of growing their ranks, where contraception has become quietly common.? I am speaking mostly of Catholics and Muslims here.
  • Abortion, especially for sex selection reasons becomes more or less common.? Growth in future population depends heavily on the level of fertile women, and if they are being killed or not at birth in places like China, India, the satellite countries of the former Soviet Union, etc… fewer women means a lower growth rate, and unhappier societies 20+ years out.

As I close, I want to list a few nations that are below replacement rate, that would surprise some people:

  • Bahrain
  • Qatar
  • Lebanon
  • Azerbaijan
  • Georgia
  • Tunisia
  • North Korea
  • Uzbekistan
  • Iran
  • Brazil

And those the are close to replacement rate:

  • Turkey
  • Indonesia
  • UAE
  • Saudi Arabia (Wahabism is less strong than believed)
  • India
  • Mexico
  • Argentina

One last point, because the demographics profession has been slow to pick up on these shifts, if present trends continue, within 10 years, I believe you will see a scad of articles talking about the likely leveling off of global population and even future shrinkage of global population, and the effects thereof.? Always something to worry about…

On Math Education

On Math Education

Posted on by David Merkel

When I was a kid, my life was mathematics.? When I was little, my mom would hand me sheets of addition and subtraction problems that did not involve carrying or borrowing, and I would fill them out for her, and she would give me more.? That’s my earliest memory.? Second earliest is the procession for President Kennedy after his death.? Third earliest might be my Dad changing my brother’s diaper.? My mother once said, “You must have remembered it because of uniqueness.”

Anyway, when I was a kid, before I went into first grade, my mom taught me multiplication and division.? My Dad taught me some heuristic rules around percentages.

So when I came into first grade at age six, I was shocked that no one else could do math.? I was good enough with math and reading that the special education teacher took note of me, and helped give me my unusual education 1967-1969.? Though I was in a normal classroom, I was a “group of one.”? I had my own special reading and math books.? The teachers pushed a variety of enrichment materials to me, but it was like subpar homeschooling.? I was on my own, and no one would correct my work.? For a little kid, I was pretty motivated, but it would have helped a lot to have more adult interaction.

SRA helped on the reading side, and there were later SRA attempts at math though I don’t think that did much.

In third grade, they gave me a programmed instruction curriculum in math, in addition to the ordinary class.? At some points, I acted as a tutor to other students.? The programmed instruction was modeled after the “new math” fad.? I could get it, but at the time, I realized that I was so different from my peers, that I knew that if I could get it, that did not mean that others my age could get it.

Then in fourth grade, they mainstreamed me.? I spent time playing around with how to do square and cube roots by hand.? Tedious, but not that hard to do.

In fifth grade, my Father brought me an algebra book that used programmed instruction.? I puzzled over it, and didn’t get it until I talked to an older friend about it who told that “x’ is a number that we do not know, but are trying to calculate.

There’s more to this story, but I will drop it, lest I bore you…

What I experienced as a child affected me.? I could see the abstraction of math while young, and it amazed me.? But now look through my eyes as I find out that I am unusual.? There is a normal track for math, and a normal way to teach it.? As I tried to tutor my classmates, I realized math was not intuitive for almost everyone else as it was for me.

I became a good math tutor.? Parents would hire me , and ask me what my rates were.? I don’t know how I thought of this, but I said, “Five dollars per sitting.? A sitting could be five minutes or two hours. If I lose their attention span the sitting ends.”? That motivated the parents to motivate the kid.? After one short sitting, future sittings got longer.

As an adult, I married a math teacher.? She admits that I am the better with math, and that I often come up with creative ways to teach concepts that she could not.? She is still quite good with teaching math such that all of our biological and adopted children made progress in their percentile scores in math and other topics as they grew.

I think that I know math, and how to teach math.? I have done it while young, and older with my older children.? I have never taken a course in education, and thus my views of pedagogy have never been sabotaged by what is taught in most colleges regarding teaching children.

Some may think this assessment too harsh, but remember, we had the “New Math” in the Sixties.? It was a disaster.? For me, a math prodigy, thinking about math through the lens of set theory, it was challenging and interesting.? To most students, it was deadening.

So now we have the evil “Common Core Math Standards.” [CCMS] When I was a kid we joked about Communist plots to destroy America.? Well, I think the Communists are pretty weak in general — they don’t understand the nature of man.? But here we are trying to make kids try to make adult judgments regarding math.? That’s just plain stupid, because it doesn’t get the way children develop.

The Holy Grail of Critical Thinking

I don’t think critical thinking can be taught.? If you are smart enough, you will think critically. If not, no.

I say this as one where my wife and I have homeschooled our eight children for 18 years, and as my children get older they disagree with us to varying degrees.? We taught them well.? Sadly, some disagree with our premises.? But, they are all smart and the seven that have gone through standardized testing have all shown significant progress, moving 25% or more in the percentile rankings from elementary school to high school.? My wife teaches very well, and I support her. Please also note that five of the children were adopted, and the same effects happened with them.

But the CCMS flips things on its head.? Children need to learn facts.? They can absorb facts because they are easy for the young? to absorb.? Drill on math facts is a very good thing because it eliminates a hurdle to learning more in math.? Once you know the basics, the mind is capable of absorbing more abstract reasoning.

It is the opposite of what the experts say.? Math should focus on the concrete with young children, and as they get wiser, on to things that are more abstract.? They should not begin with abstraction, and try to move to the concrete.

Think about it for a moment: would you rather hire a guy who understood the basics of your business, or hire a guy who had a theory about your business, but did not understand the basics?? You would hire the former if you were smart.

Understanding the basics is important, and sadly, we have gotten away from it in the last 60+ years in math.? We did much better in the past, and we paid teachers less in real terms back then.? The colleges that teach teachers should be dismantled, and teacher accreditation should be eliminated, because there is no clear value created by accreditation.

We need education to be more like home schools, where teachers train students for many years in elementary grades K-8, where tutoring plays a large role. Understanding the student, and consistent mentoring makes a far brighter student.? Eliminating credentialing would being in brighter, more motivated teachers that ignore the idiocy to the teaching colleges.

Now maybe there is a home and private-schooling cabal, pushing CCMS in an? effort to destroy the public schools, or at minimum, assure that those who go to public schools will be peons to those who don’t go there.? I really doubt that, because those who don’t send their kids to public schools are more upright than those that don’t.? They are putting forth extra effort for their kids, versus people who don’t care.

Practical Advice

I live in Howard County, one of the richest counties in America.? Unique to Maryland, the counties are the school districts.? We homeschool in a county that is one of the best around.? We are evangelical Christians, but most homeschoolers here are secular. Why?

The school districts adopt a variety of dumb ideas like CCMS that hinder reading and math.? If I could vote to eliminate the public schools I would do so not out of ideology, but raw incompetence.

Most parents that we interact with are either hiring a tutor in math, or doing it themselves.? If that is the case, why not homeschool? It’s a lot easier than it looks, and it doesn’t take a lot of effort to outperform the public schools.

The main reason is the two-earner household.? Most could tighten their belts, and have one parent stay at home to teach the kids.? The second trouble is child control/discipline — my comment is if you are firm with them as parents were prior to 1950, you should have no problem, but consult your local statutes to figure what you have to hide from.

With CCMS many families will have to do one of the following:

  1. Tutor their children in math
  2. Pay someone to tutor their children in math
  3. Homeschool
  4. Start a war against those that set the public educational standards

Summary

Children are not capable of absorbing abstraction.? Every real parent knows that.? Fight the educated idiots who are trying to ruin math education with their misbegotten theories that do not understand math or kids.

Recent 13F filings

Recent 13F filings

Posted on by David Merkel

I make changes to my portfolio and those of my clients once a quarter, where I trade out of 2-4 of my ~35 companies, and buy a similar number of new companies.? I have detailed that in this article.

But one thing that I do differently now is where I source ideas.? There are three places:

  1. Articles I read that seem to have good ideas.? I print them out and put them in a folder.
  2. My industry studies.
  3. Scanning the 13Fs of ~75 clever investors.? That’s the new part.

I’m not going to write a lot more commentary this evening.? I’m just going to give you a results dump.? I have already gone through my results and made changes to my clients’ portfolios, save for one stock that is a little illiquid, and will take some time to acquire.

As it is, I want to share the following data with you from my trolling through the 13F filings:

Number of investors adding a new stock:

CUSIP New Ticker Name
026874784

6

 AIG AMERICAN INTL GROUP INC
25490A309

5

 DTV DIRECTV
38259P508

5

 GOOG GOOGLE INC.
50075N104

5

 MDLZ Mondelez International, Inc.
65334H102

5

 NXY NEXEN INC COMMON STOCK NPV
896945201

5

 TRIP TRIPADVISOR INC
37045V100

4

 GM GENERAL MTRS CO
399473107

4

 GRPN GROUPON INC
46625H100

4

 JPM JPMORGAN CHASE & CO
53071M880

4

 LVNTA LIBERTY VENTURES – SER A

 

Umm, Groupon, GM?? Interesting.

Number of investors adding to a stock position:

CUSIP Increased Ticker Name
026874784

13

 AIG AMERICAN INTL GROUP INC
38259P508

12

 GOOG GOOGLE INC.
191216100

12

 KO COCA COLA COMPANY
37045V100

11

 GM GENERAL MTRS CO
24702R101

10

 DELL Dell Inc
742718109

9

 PG PROCTER & GAMBLE CO/THE
172967424

9

 C CITIGROUP INC
50075N104

8

 MDLZ Mondelez International, Inc.
65248E104

8

 NWSA NEWS CORP
741503403

8

 PCLN PRICELINE COM INC
037833100

8

 AAPL APPLE INC
896945201

7

 TRIP TRIPADVISOR INC
125509109

7

 CI CIGNA CORP
78463V107

7

 GLD SPDR GOLD TRUST
68389X105

7

 ORCL Oracle Corp

 

The companies most held by my group of investors:

CUSIP Owned Ticker Name
38259P508

28

 GOOG GOOGLE INC.
037833100

21

 AAPL APPLE INC
594918104

20

 MSFT MICROSOFT CORP
68389X105

17

 ORCL Oracle Corp
026874784

15

 AIG AMERICAN INTL GROUP INC
172967424

15

 C CITIGROUP INC
478160104

15

 JNJ JOHNSON & JOHNSON
931142103

15

 WMT WAL-MART STORES INC
084670702

14

 BRK.B BERKSHIRE HATHAWAY INC-CL B
24702R101

13

 DELL Dell Inc
65248E104

13

 NWSA NEWS CORP
060505104

13

 BAC BANK OF AMERICA CORP
747525103

13

 QCOM QUALCOMM INC
084670108

13

 BRK.A BERKSHIRE HATHAWAY INC-CL A
191216100

12

 KO COCA COLA COMPANY
949746101

12

 WFC WELLS FARGO & CO NEW

 

Number of investors decreasing a stock position:

CUSIP Decreased Ticker Name
38259P508

16

 GOOG GOOGLE INC.
594918104

15

 MSFT MICROSOFT CORP
037833100

13

 AAPL APPLE INC
931142103

12

 WMT WAL-MART STORES INC
68389X105

10

 ORCL Oracle Corp
17275R102

10

 CSCO CISCO SYS INC COM
902973304

10

 USB US BANCORP DEL
084670702

9

 BRK.B BERKSHIRE HATHAWAY INC-CL B
060505104

9

 BAC BANK OF AMERICA CORP
57636Q104

9

 MA Mastercard Inc – Class A
65248E104

8

 NWSA NEWS CORP
949746101

8

 WFC WELLS FARGO & CO NEW
254687106

8

 DIS DISNEY WALT CO
717081103

8

 PFE PFIZER INC
92826C839

8

 V Visa Inc-Class A Shares
931422109

8

 WAG WALGREEN CO

 

Number of investors selling a stock entirely:

CUSIP Sold Ticker Name
25490A101

6

 DTV DIRECTV-CLASS A
594918104

4

 MSFT MICROSOFT CORP
931422109

4

 WAG WALGREEN CO
87612E106

4

 TGT TARGET CORP
032346108

4

 AMLN AMYLIN PHARMACEUTICALS INC
037833100

3

 AAPL APPLE INC
060505104

3

 BAC BANK OF AMERICA CORP
57636Q104

3

 MA Mastercard Inc – Class A
65248E104

3

 NWSA NEWS CORP
871503108

3

 SYMC SYMANTEC CORP
172967424

3

 C CITIGROUP INC
78463V107

3

 GLD SPDR GOLD TRUST
032511107

3

 APC ANADARKO PETROLEUM CORP
53217V109

3

 LIFE LIFE TECHNOLOGIES CORP.
855030102

3

 SPLS Staples Inc
053332102

3

 AZO AUTOZONE INC
086516101

3

 BBY Best Buy Company Inc
64110L106

3

 NFLX NETFLIX INC
844741108

3

 LUV Southwest Airlines Co
256677105

3

 DG DOLLAR GEN CORP NEW
91324P102

3

 UNH Unitedhealth Group Inc
30161N101

3

 EXC Exelon Corp
778296103

3

 ROST ROSS STORES INC
690742101

3

 OC OWENS CORNING NEW
46120E602

3

 ISRG INTUITIVE SURGICAL INC
726505100

3

 PXP Plains Exploration
88023U101

3

 TPX TEMPUR PEDIC INTL INC
382388106

3

 GR GOODRICH CORP
532791100

3

 LNCR LINCARE HOLDINGS INC.

 

As a percentage of market cap, new positions added:

CUSIP New Ticker Name
G5784H106

NA

 MANU MANCHESTER UTD PLC NEW
64107N206

27.49%

 UEPS Net 1 UEPS Technologies Inc
06652K103

27.20%

 BKU BANKUNITED INC
86663B102

26.98%

 SNBC Sun Bancorp Inc
147154207

25.80%

 CACB Cascade Bancorp
584404107

25.36%

 MEG MEDIA GEN INC
09064Y307

23.66%

 BIOF BioFuel Energy Corp.
269279402

14.54%

 XCO EXCO RESOURCES
912318201

12.88%

 UNG UNITED STATES NATL GAS FUND
121220107

12.21%

 BKW BURGER KING WORLDWIDE INC
29788A104

10.06%

 EOPN E2open, Inc.
G0585R106

10.03%

 AGO Assured Guaranty Ltd.
25490A309

9.48%

 DTV DIRECTV
44047T109

8.94%

 HZNP HORIZON PHARMA INC
92343E102

8.74%

 VRSN VeriSign Inc.
57686G105

8.58%

 MATX Matson Inc
896945201

7.58%

 TRIP TRIPADVISOR INC
39530A104

7.53%

 GRH Greenhunter Energy Inc-Restric

 

Increases in positions as a percentage of market cap:

CUSIP Increased Ticker Name
G5784H106

361.97%

 MANU MANCHESTER UTD PLC NEW
64107N206

27.49%

 UEPS Net 1 UEPS Technologies Inc
06652K103

27.20%

 BKU BANKUNITED INC
86663B102

26.98%

 SNBC Sun Bancorp Inc
147154207

25.80%

 CACB Cascade Bancorp
584404107

25.36%

 MEG MEDIA GEN INC
09064Y307

24.24%

 BIOF BioFuel Energy Corp.
912318201

15.09%

 UNG UNITED STATES NATL GAS FUND
269279402

14.54%

 XCO EXCO RESOURCES
121220107

12.21%

 BKW BURGER KING WORLDWIDE INC
53635B107

11.90%

 LQDT Liquidity Services, Inc.
29788A104

10.06%

 EOPN E2open, Inc.
G0585R106

10.03%

 AGO Assured Guaranty Ltd.
25490A309

9.48%

 DTV DIRECTV
896945201

9.21%

 TRIP TRIPADVISOR INC
779376102

9.21%

 ROVI ROVI CORP
44047T109

8.94%

 HZNP HORIZON PHARMA INC
92343E102

8.74%

 VRSN VeriSign Inc.
57686G105

8.58%

 MATX Matson Inc
760975102

7.60%

 RIMM RESEARCH IN MOTION LTD
39530A104

7.53%

 GRH Greenhunter Energy Inc-Restric
07556Q105

7.41%

 BZH Beazer Homes USA Inc
194014106

7.06%

 CFX Colfax Corporation

 

Decreases in positions as a percentage of market cap:

CUSIP Decreased Ticker Name
147154207

-28.97%

 CACB Cascade Bancorp
98417P105

-27.68%

 XIN XINYUAN REAL ESTATE CO LTD
624756102

-27.02%

 MLI MUELLER INDS INC
06652K103

-26.06%

 BKU BANKUNITED INC
64107N206

-24.77%

 UEPS Net 1 UEPS Technologies Inc
86663B102

-21.46%

 SNBC Sun Bancorp Inc
83545G102

-18.35%

 SAH SONIC AUTOMOTIVE INC CL A
09064Y109

-15.81%

 BIOF BIOFUEL ENERGY CORP
014481105

-15.75%

 ALEX Alexander & Baldwin Inc
269279402

-13.78%

 XCO EXCO RESOURCES
007865108

-11.85%

 ARO Aeropostale Inc
205862402

-11.69%

 CMVT COMVERSE TECHNOLOGY INC
G0585R106

-10.38%

 AGO Assured Guaranty Ltd.
499183804

-10.21%

 KNOL KNOLOGY INC
25490A101

-9.29%

 DTV DIRECTV-CLASS A
74165N105

-8.79%

 PRMW PRIMO WTR CORP
760276105

-8.36%

 RJET REPUBLIC AWYS HLDGS INC
359360104

-8.22%

 FFEX FROZEN FOOD EXPRESS INDS INC
440441400

-8.16%

 HRZCA HORIZON TELCOM – CLASS A
647581107

-8.06%

 EDU NEW ORIENTAL ED & TECH GRP I
939640108

-7.94%

 WPO Washington Post
960908309

-7.67%

 WPRT WESTPORT INNOVATIONS INC
871206405

-7.48%

 SCMR SYCAMORE NETWORKS INC
863236105

-7.44%

 STRA STRAYER ED INC
918866104

-7.31%

 VCI VALASSIS COMMUNICATIONS INC
532791100

-7.07%

 LNCR LINCARE HOLDINGS INC.

 

Largest amount of stocks sold out in entire:

CUSIP Sold Ticker Name
147154207

-28.97%

 CACB Cascade Bancorp
98417P105

-27.68%

 XIN XINYUAN REAL ESTATE CO LTD
624756102

-27.02%

 MLI MUELLER INDS INC
06652K103

-26.06%

 BKU BANKUNITED INC
64107N206

-24.77%

 UEPS Net 1 UEPS Technologies Inc
86663B102

-21.46%

 SNBC Sun Bancorp Inc
09064Y109

-15.81%

 BIOF BIOFUEL ENERGY CORP
014481105

-15.75%

 ALEX Alexander & Baldwin Inc
269279402

-13.78%

 XCO EXCO RESOURCES
007865108

-11.85%

 ARO Aeropostale Inc
205862402

-11.69%

 CMVT COMVERSE TECHNOLOGY INC
G0585R106

-10.38%

 AGO Assured Guaranty Ltd.
499183804

-10.21%

 KNOL KNOLOGY INC
25490A101

-9.29%

 DTV DIRECTV-CLASS A
74165N105

-8.79%

 PRMW PRIMO WTR CORP
760276105

-8.36%

 RJET REPUBLIC AWYS HLDGS INC
440441400

-8.16%

 HRZCA HORIZON TELCOM – CLASS A
939640108

-7.94%

 WPO Washington Post
871206405

-7.48%

 SCMR SYCAMORE NETWORKS INC
647581107

-7.47%

 EDU NEW ORIENTAL ED & TECH GRP I
863236105

-7.44%

 STRA STRAYER ED INC
918866104

-7.31%

 VCI VALASSIS COMMUNICATIONS INC
532791100

-7.07%

 LNCR LINCARE HOLDINGS INC.

 

Finally, a list of the largest companies held by my investors where there is still net buying going on:

G5784H106

NA

 MANU MANCHESTER UTD PLC NEW
313549404

94.11%

 FDML FEDERAL MOGUL CORP
451100101

92.72%

 IEP ICAHN ENTERPRISES LP
25388BAD6

51.94%

 DRIV DIGITAL RIV INC
09064Y307

40.95%

 BIOF BioFuel Energy Corp.
63934E108

33.61%

 NAV Navistar International Corp
708160106

31.98%

 JCP PENNEY J C INC
254423106

31.23%

 DIN DINEEQUITY INC
584404107

29.86%

 MEG MEDIA GEN INC
64107N206

27.49%

 UEPS Net 1 UEPS Technologies Inc
06652K103

27.20%

 BKU BANKUNITED INC
86663B102

26.98%

 SNBC Sun Bancorp Inc
76117W109

24.37%

 RFP Resolute Forest Products Inc
92552V100

23.72%

 VSAT VIASAT INC
896945201

23.44%

 TRIP TRIPADVISOR INC
L00849106

23.41%

 AGRO ADECOAGRO SA
549463AH0

22.73%

 ALU LUCENT TECHNOLOGIES INC
405217100

21.86%

 HAIN HAIN CELESTIAL GROUP INC
165167107

20.76%

 CHK CHESAPEAKE ENERGY CORP
615369105

20.32%

 MCO Moody’s
912318201

20.06%

 UNG UNITED STATES NATL GAS FUND
812139301

19.92%

 ZZ SEALY CORP
874054109

18.64%

 TTWO TAKE-TWO INTERACTIVE SOFTWAR
205363104

18.40%

 CSC COMPUTER SCIENCES CORP
92927K102

17.65%

 WBC WABCO HOLDINGS INC
459028106

17.54%

 INTL INTL FCStone Inc
92343E102

17.33%

 VRSN VeriSign Inc.
42983D104

17.30%

 ONE HIGHER ONE HLDGS INC
N7902X106

17.11%

 ST SENSATA TECHNOLOGIES HLDG BV
913837100

16.53%

 USAP UNIVERSAL STAINLESS & ALLOY
194014106

15.31%

 CFX Colfax Corporation
N93540107

15.30%

 VPRT VISTAPRINT N V
760975102

14.96%

 RIMM RESEARCH IN MOTION LTD
269279402

14.84%

 XCO EXCO RESOURCES
806037107

14.56%

 SCSC Scansource Inc
79377W108

14.37%

 SKS Saks Incorporated
M25082104

14.06%

 CKSW ClickSoftware Ltd.
151290889

13.89%

 CX CEMEX SAB-SPONS ADR PART CER
45166R204

13.86%

 IDIX IDENIX PHARMACEUTICALS INC
H84989104

13.58%

 TEL TE CONNECTIVITY LTD
064058100

13.57%

 BK BANK OF NEW YORK MELLON CORP
88033G100

13.46%

 THC TENET HEALTHCARE CORP
53635B107

12.86%

 LQDT Liquidity Services, Inc.
779376102

12.63%

 ROVI ROVI CORP
121220107

12.21%

 BKW BURGER KING WORLDWIDE INC
345838106

12.16%

 FRX Forest Labs
79546E104

12.09%

 SBH SALLY BEAUTY HLDGS INC
00724F101

11.91%

 ADBE ADOBE SYSTEMS INC
65248E104

11.82%

 NWSA NEWS CORP
421933102

11.64%

 HMA HEALTH MGMT ASSOC INC NEW
24702R101

11.59%

 DELL Dell Inc
31428X106

11.54%

 FDX FEDEX CORP
62944T105

11.29%

 NVR NVR INC
741503403

11.13%

 PCLN PRICELINE COM INC
512815101

10.95%

 LAMR LAMAR ADVERTISING CO
84264A102

10.87%

 SSE Southern Connecticut Bancorp
037604105

10.57%

 APOL Apollo Group Inc Cl A
90341W108

10.51%

 LCC US Airways Group Inc
150870103

10.28%

 CE CELANESE CORP-SERIES A
66988K102

10.24%

 NCQ NOVACOPPER INC
191216100

10.21%

 KO COCA COLA COMPANY
20854P109

10.09%

 CNX CONSOL ENERGY INC
14040H105

10.08%

 COF CAPITAL ONE FINANCIAL CORP
29788A104

10.06%

 EOPN E2open, Inc.
12504L109

10.02%

 CBG CBRE GROUP INC
489170100

9.97%

 KMT Kennametal Inc.
871503108

9.90%

 SYMC SYMANTEC CORP
G02602103

9.71%

 DOX AMDOCS LTD COMMON STOCK GBP.00
30226D106

9.59%

 EXTR EXTREME NETWORKS INC
25490A309

9.48%

 DTV DIRECTV
G27823106

9.16%

 DLPH Delphi Automotive PLC
774341101

9.09%

 COL Rockwell Collins Inc.
880779103

9.08%

 TEX TEREX CORP NEW
984332106

9.01%

 YHOO YAHOO! INC
44047T109

8.94%

 HZNP HORIZON PHARMA INC
45031U101

8.88%

 SFI ISTAR FINL INC
447011107

8.68%

 HUN HUNTSMAN CORP
66987E206

8.58%

 NG NOVAGOLD RES INC
57686G105

8.58%

 MATX Matson Inc
003881307

8.54%

 ACTG ACACIA RESH CORP
887317303

8.36%

 TWX TIME WARNER INC
53219L109

8.33%

 LPNT LIFEPOINT HOSPITALS INC
808513105

8.28%

 SCHW SCHWAB CHARLES CORP NEW
751212101

8.16%

 RL RALPH LAUREN CORP
812139400

8.15%

 ZZ Sealy Corp
370023103

7.92%

 GGP GENERAL GROWTH PPTYS INC NEW
171779309

7.86%

 CIEN Ciena Corp.
73172K104

7.73%

 PLCM Polycom Inc
774415103

7.72%

 ROC ROCKWOOD HLDGS INC
07556Q105

7.69%

 BZH Beazer Homes USA Inc
31620M106

7.65%

 FIS Fidelity National Information
39530A104

7.53%

 GRH Greenhunter Energy Inc-Restric
103304101

7.42%

 BYD BOYD GAMING CORP
257559203

7.42%

 UFS DOMTAR CORP
20451N101

7.41%

 CMP Compass Minerals
125581801

7.36%

 CIT CIT GROUP INC.
45666Q102

7.27%

 INFA INFORMATICA CORP
G3157S106

7.26%

 ESV ENSCO PLC
251893103

7.23%

 DV DeVry Inc.
256677105

7.14%

 DG DOLLAR GEN CORP NEW
Y2573F102

7.09%

 FLEX FLEXTRONICS INTL LTD
439734104

6.98%

 HFBC HopFed Bancorp Inc.
20564W105

6.97%

 SCOR COMSCORE INC
302130109

6.96%

 EXPD Expeditors Int’l Wash Inc
95082P105

6.95%

 WCC WESCO INTL INC (this can?t be right)
125509109

6.93%

 CI CIGNA CORP
192446102

6.86%

 CTSH COGNIZANT TECHNOLOGY SOLUTIO
588056101

6.75%

 MERC Mercer International Inc.
232820100

6.69%

 CYT CYTEC INDUSTRIES INC
591708102

6.68%

 PCS METROPCS COMMUNICATIONS INC
90384S303

6.50%

 ULTA ULTA SALON COSMETCS & FRAG I
868536103

6.46%

 SVU SUPERVALU INC
413160102

6.44%

 HLIT HARMONIC INC
204018105

6.39%

 CPBC Community Partners Bancorp
382550101

6.24%

 GT GOODYEAR TIRE &
265504100

6.18%

 DNKN DUNKIN BRANDS GROUP INC
432589109

6.12%

 HSH Hillshire Brands Co
918194101

6.08%

 WOOF VCA Antech Inc
024061103

5.90%

 AXL American Axle & Mfg Hldgs
233326107

5.86%

 DST D S T SYSTEMS INC
58501N101

5.84%

 MDVN MEDIVATION INC
867892101

5.75%

 SHO SUNSTONE HOTEL INVS INC N
143130102

5.72%

 KMX CARMAX INC
073302101

5.42%

 BEAV BE Aerospace, Inc.
026874784

5.34%

 AIG AMERICAN INTL GROUP INC
863667101

5.30%

 SYK Stryker Corp
05615F102

5.30%

 BWC BABCOCK & WILCOX CO NEW

 

That?s all for now.? Comments are welcomed below.

 

Full disclosure: long ORCL, WFC, SPLS, ESV, TEL

Bombing Baby BDC Bonds

Bombing Baby BDC Bonds

Posted on by David Merkel

After reading Jason Zweig’s good piece, “Should You Bottle Up Your Money in ‘Baby Bonds’?” I said to myself, “But what does the prospectus look like?”? So I went to EDGAR, and pulled up the prospectus for Fifth Street Finance Corp’s 5.875% Senior Notes due 2024.

Please understand — I get squeamish with the unsecured bonds of exotic financial companies.? Losses on the bonds of financial companies when they fail tend to be far worse than those of industrials or utilities.? That is a major reason why financial bonds typically yield more than similarly rated non-financial bonds.? They are more risky.

So, looking through the deal summary terms, we learn:

  • At $75 million, the deal is small.
  • It’s a 12-year deal — that’s done to confuse buyers, because it gets priced off the 10-year Treasury, giving the illusion of more spread.
  • Quarterly pay of interest which raises the effective yield a touch.
  • Senior subordinated, but…
  • effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, the $206.3 million of borrowings under our credit facilities outstanding as of October 10, 2012; and
  • structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of Fifth Street Funding, LLC, Fifth Street Funding II, LLC and our SBIC subsidiaries.
  • The bonds are callable at par after 5 years.

The structural protections here are weak.? You are lending to a financial holding company where many of the assets are pledged to other creditors.? More on that in a moment.

The risk factors for a business development company like Fifth Street are significant, and can be found here, all eighteen-plus pages of them.? But the risk factors of the debt are more significant, and can be found here.? Here are the main headings:

  • The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
  • The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
  • The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.
  • There is no existing trading market for the Notes and, even if the NYSE approves the listing of the Notes, an active trading market for the Notes may not develop, which could limit your ability to sell the Notes or the market price of the Notes.?
  • If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Unsecured holding company debt can be weak, because with some subsidiaries there may be regulatory limits or private limits to upstreaming capital to the holding companies.? That puts financial holding companies in a weak position, because when financial conditions get bad liquidity can get very tight.

And with business development companies [BDCs], which own and finance small-to-medium sized businesses, there is a lot of idiosyncratic risk including:

  • Your downside is 100%, but your upside is capped.
  • BDCs tend to be speculative investors.
  • Many of the assets held are subject to third-party security interests, which lessens the rights of unsecured lenders to the holding company.
  • BDCs, life REITs, have to pay out 90%+ of taxable income in order not to face corporate taxation.? That forces BDCs to continually go to the credit markets for financing.? But what if the market is no longer favorable for a year or two?
  • BDCs are placid weather vehicles, and more so the bonds.? One might be better off holding 30% Treasuries and 70% BDC stock.? At least you have more downside protection, and more upside.

So put me in the camp of those that have no interest in BDC debt.? It is a weak instrument, and regardless of what the rating agencies say, they are not investment grade risks.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Politics & Policy

 

  • Was the Budget Deficit Worth the Fight? http://t.co/jDn9r7DC Budget deficits are an assault on the quality of our money & savings $$ @carney Nov 24, 2012
  • None Dare Call It Default http://t.co/4o0lnQoe A nicer term for what’s about to sock the middle class is ‘entitlement reform.’ $$ Nov 24, 2012
  • Judge Pens New Bankruptcy Chapter http://t.co/6V5cUQjS US BK Court Judge Thomas Bennett takes on the Jefferson County, AL Ch 9 filing $$ Nov 24, 2012
  • Banks reportedly lining up against Elizabeth Warren committee spot http://t.co/YRAId5TQ & http://t.co/LFXTCZEb I say give her a chance $$ Nov 21, 2012
  • Globalism goes backward http://t.co/h6kt67Lz As global growth slows, so does its handmaiden, globalization. $$ Nov 21, 2012
  • 2013 Looks a Lot Like 1937 in 4 Fearsome Ways http://t.co/iZjmM1ZA Pre-election spree, post-reduce deficit, class war, prior laws bite $$ Nov 20, 2012
  • FHA running out of money http://t.co/L1M7lRIK ?We take the findings of the independent actuary very seriously…? loss reserves too low $$ Nov 20, 2012
  • Pension cuts could boost state?s Social Security costs http://t.co/61jicHRM If benefits drop below certain level, have 2 pay SS/Med taxes $$ Nov 19, 2012
  • Special Dividends Surge Fourfold as US Tax Increase Looms http://t.co/vPVaLNFU Last chance 2 reward shareholders w/low div tax rates $$ Nov 19, 2012
  • http://t.co/LJnienxh San Bernardino: How California law, police/firemen, CALPERS, dysfunctional politics, & bad pension acctg rules killed Nov 19, 2012

 

Monetary Policy

 

  • Soros Buying Gold as Record Prices Seen on Stimulus http://t.co/pJ5FTplo Gold prices react2cost of carry; neg in real terms now $$ #zoom Nov 24, 2012
  • Paula Broadwell?s Radar Tracks Generals, Not Fed http://t.co/WglEhJFo Bernanke’s/Yellen’s ideas will crumble from stagflation $$ @cabaum Nov 24, 2012
  • Abe threatens to turn BOJ into an unlimited piggy bank for the government http://t.co/LxWwmlyP Eventually the real economy will rebel $$ Nov 21, 2012
  • It’s a Good Bet the Fed Doesn’t Know What It’s Doing http://t.co/zG6mepy0 Couldn’t pick a worse Fed 4 crisis: imagines it knows what 2 do $$ Nov 19, 2012

?

Hewlett-Packard

 

  • Hurdling H-P: Oracle Shows Way in M&A http://t.co/fiJvmT2N Point is $ORCL ‘s older deals have been productive, $HPQ ‘s not. $$ FD:+$ORCL Nov 23, 2012
  • H-P?s Deal Process Bypassed CFO Pre-Whitman http://t.co/WfawtYfh Note that Cathie Lesjak opposed the Autonomy purchase. Smart lady $$ Nov 21, 2012
  • Goodwill Hunting http://t.co/ghFrEDlY @epicureandealmaker takes down a generally cruddy Bloomberg article on $HPQ & Goodwill accounting $$ Nov 21, 2012
  • Note to all writing about Hewlett Packard: the ticker is $HPQ, not $HP, which is Helmerich & Payne, which drills oil and gas wells $$ Nov 20, 2012
  • Ironic in many ways. HP should have been happy with their engineer-driven pre-Fiorina culture. It did a lot… http://t.co/rqXEW5Bi Nov 20, 2012

?

Loose Monetary Policy Harms Fringe Nations

 

  • Debt Burden Adds to Won Gains in Crimping Korea Rebound http://t.co/y6uHfFEw Loose monetary policy creates debt bubble in S. Korea $$ Nov 24, 2012
  • S&P: Australia is Spain in waiting http://t.co/usllSlBt Heavily indebted financial systems can be like the snowpack prior 2 an avalanche $$ Nov 21, 2012
  • Prison of Debt Paralyzes West http://t.co/ofJXWyLu Government debt after a point does not stimulate, but perpetuates unproductive policy $$ Nov 20, 2012
  • Purple Palace Abandoned Shows China Shadow-Banking Risk http://t.co/tmg6jPhy China is like Japan 23 years ago: fearsome & malinvested $$ Nov 20, 2012

?

Rest of the World

 

  • Egypt Presidential Decree Sparks Protests http://t.co/a5YUcvtN Anyone surprised that the Muslim Brotherhood came out on top? State Dept Nov 23, 2012
  • Can Xi Jinping bring about the change China needs? http://t.co/i3XGKZBJ Long article on the new Chinese leader; very tough road to travel $$ Nov 21, 2012
  • Pipeline Would Loosen Russian Stranglehold On European Natural Gas Supply http://t.co/3zPUInTZ Where there is a will there is a way $$ Nov 20, 2012
  • Misconstruing Germany Will Prove to Be Death of the Euro http://t.co/nCJ7rLiZ Germany won’t want a banking union; their banks have issues Nov 20, 2012
  • http://t.co/MSqwtq4u China unlikely to make shift to consumption, b/c it means granting freedom to the people & reducing party cronyism $$ Nov 20, 2012

 

Personal Finance

 

  • After Sandy damage, insurance adjusters may bring more bad news http://t.co/GTAhE9x3 If odds of getting flooded > 1% get flood insurance $$ Nov 24, 2012
  • Tax Moves to Make Now http://t.co/TmoaGOCC Balanced piece; worth a read. Assumes we don’t go over the fiscal cliff: a deal is struck $$ Nov 24, 2012
  • Lenders Rev Their Engines http://t.co/5jz3pt3l Surge in Demand for Auto Loans Spurs Push Into Sector; Subprime Is a Big Draw $$ Nov 23, 2012
  • For ‘Credit Invisibles,’ A Market Takes Shape http://t.co/4l849dmK A blast from the past; using payment histories 2 establish credit $$ Nov 20, 2012
  • apparent mojo http://t.co/lDNmxD1s @researchpuzzler does homework, comes to correct conclusion on a tiny junk fund featured in the WSJ $$ Nov 20, 2012
  • Draining Away! http://t.co/hQAqzE9M Universal life policies suffer from low interest rates. B sure 2 check the gteed minimum rate $$ Nov 19, 2012

 

Miscellaneous

 

  • The Great Thanksgiving Hoax http://t.co/kwbE39ee Strangers were the lazy ones; like the Hutterites the Saints could have made socialism work Nov 21, 2012
  • Archbishop Says Church Lost Credibility on Women Bishops http://t.co/n7XkjfDM The “laity” understands the Bible better than the priests $$ Nov 21, 2012
  • Why One Poll Says 45% Would Rather Skip Christmas http://t.co/zwwqY00R Costs a lot; nativity means much to Christians, Christmas is made-up Nov 20, 2012
  • Windows 8 killed my PC http://t.co/slcTSRVA No operating system should expect 2b equally good touch vs keyboard, tablet vs laptop, etc $$ Nov 20, 2012
  • Kill the Password: Y a String of Characters Can?t Protect Us Anymore http://t.co/jPoLzKpK Long but worth it; multifactor ID is the future $$ Nov 20, 2012

 

Market Dynamics

 

  • Kyle Bass gives it to us with both barrels http://t.co/yZLt36kW Very long. Worth it if you want to see what he is up to in investing. $$ Nov 21, 2012
  • Mismeasurement of Pensions Before and After Retirement http://t.co/DwE869Js The full paper, & you don’t have to pay NBER a cent $$ Nov 19, 2012
  • In a Slow Market, Wait for Compelling Values Says Johnson http://t.co/lf891lb5 Expects 5%-ish returns 2013; unusual 2 get small returns $$ Nov 19, 2012
  • Tech Sets Correction Course http://t.co/ct7yaWcb Largest sector of the market is feeling soggy, which does not bode well 4 the rest $$ Nov 19, 2012
  • Why Mutual Fund Guardians Are Failing http://t.co/UMvk4AAB Old/good article on the flaws of mutual fund governance; skewed incentives $$ Nov 19, 2012
  • Investment Falls Off a Cliff http://t.co/GVqnEdLH US Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty; unstable policy Nov 19, 2012
  • Buy on the rumor, sell on the news $$ RT @BloombergNews: S&P 500 rises most in two months amid budget deal optimism | http://t.co/yyR2uiSi Nov 19, 2012

 

Other Companies

 

  • I know the basics on a lot of companies but is the first time I have heard of Schiff Nutrition International $SHF http://t.co/jxHIdf1v $$ Nov 21, 2012
  • Hostess Judge Sees Return to ?Liquidation Scenario? http://t.co/OeDI3sTX Twinkies will survive, but many who produce them will not $$ Nov 21, 2012
  • Hostess Seen Attracting Bids for Assets From Flowers http://t.co/vAu1o7Wv The brands will get bought; the value is there, not in plants $$ Nov 19, 2012
  • Drillers Begin Reusing ‘Frack Water’ http://t.co/nOiR3sy5 Energy Firms Explore Recycling Options 4 Industry That Uses Water Like Chicago Nov 19, 2012

 

Wrong

 

  • Bad Headline: Wall St Kept Winning on Mortgages Upending Homeowners http://t.co/fuKDx4ss Most tricky mtges not originated by Wall St $$ Nov 19, 2012
  • Wrong: S&P 500 in Cheapest Bull Market Since Ronald Reagan http://t.co/jNJ1x0SU When will they learn *not* 2 use P/E 4 mkt valiuation? $$ Nov 19, 2012

 

Replies

 

  • @PlanMaestro Thanks — missed that. Nov 23, 2012
  • @PlanMaestro I just can’t believe the 1.5 Billion figure for the Earth’s carrying capacity; even the Club of Rome is more optimistic, no? Nov 23, 2012
  • “How many lines can be drawn in a 2D plane such that they are equidistant from 3 non-collinear points?” 3… http://t.co/QQkn7IcR Nov 23, 2012
  • Grantham is outside of his skill set here, and should be ignored. Also, global population will top out at… http://t.co/ZACbqPQO Nov 23, 2012
  • Nothing against Bill McBride. He deserves praise from all of us. There are three missing pieces though, and… http://t.co/Dfs50uGQ Nov 21, 2012
  • . @Dvolatility H-P CDS Curve Flattens on Write-Down http://t.co/9vWEDzcZ Early buyers of $HPQ protection made decent money, late less $$ Nov 21, 2012
  • @Dvolatility $HPQ CDS spreads did forecast the spread widening, but not the magnitude. It also forecast the stock price move also $$ Nov 21, 2012
  • @japhychron @TFMkts @dvandeventer @Dvolatility Or, does the negative tangible book have an impact on modeling? $HPQ $$ Nov 21, 2012
  • “You can count beans and trace them back to their sources, good. But can you adequately question the?” $$ David_Merkel http://t.co/JS3Jbtnb Nov 21, 2012
  • @dvandeventer @Dvolatility Any read on the level 5Y CDS is trading at? Used to have a BBG terminal, but don’t now… Nov 21, 2012
  • @Dvolatility Where does the $HPQ CDS trade now? Nov 21, 2012
  • @qusmablog Much of the world has to go through a “failure cycle” before “normal growth” can reboot. Many entrenched interests don’t want it. Nov 21, 2012
  • @Nonrelatedsense @researchpuzzler Also not good for the WSJ 2 write about a small fund w/short track record… bigger problem $$ Nov 20, 2012
  • @Nonrelatedsense @researchpuzzler Apologies, Chou Income did beat the Barclays Agg since inception http://t.co/VwYvIVYj Carry does it $$ Nov 20, 2012
  • @CEOofmyFUTURE longer term measures like the Q-ratio, CAPE10, Price to resources, & Hussman has a measure also Nov 19, 2012
  • @BloombergNews Who’s in charge of this page: http://t.co/2sJ5NEDK They changed it last week and made it less useful $$ Nov 19, 2012

 

Retweets

 

  • Notable & Honorable $$ RT @Nati2de: Larry Hagman was married to the same woman since 1954. Impressive, especially for a Hollywood actor. Nov 24, 2012
  • Growth comes when capital, labor & resources have fair prices RT @BloombergView: Greece needs growth, not austerity | http://t.co/f620QBRU Nov 21, 2012
  • RT @retheauditors: #1 cause of accounting fraud is revenue recognition issues and #1 industry for accounting fraud is technology/softwar … Nov 20, 2012
  • Gracias, no se habla $$ RT @besanson: #FunAndFinance Interest Rate Swaps and LIBOR in 5 minutes // Thanks or RT http://t.co/zu2LP7Nx Nov 20, 2012
  • Torture data until it confesses something $$ RT @Alea_: Does ?Statistical Significance? Imply ?Actually Significant?? http://t.co/BBTfUThF Nov 20, 2012
  • RT @finemrespice: The Federal Housing Administration stands against all prior biological evidence that primates are capable of forming m … Nov 19, 2012
  • Buy on the rumor, sell on the news $$ RT @BloombergNews: S&P 500 rises most in two months amid budget deal optimism | http://t.co/yyR2uiSi Nov 19, 2012

 

Blog News

 

  • My week on twitter: 75 retweets received, 4 new listings, 50 new followers, 92 mentions. Via: http://t.co/SPrAWil0 Nov 22, 2012

 

Stuffing & Thanksgiving

Stuffing & Thanksgiving

Posted on by David Merkel

Some of my readers might know that one of my hobbies is cooking.? Today I cooked a 24-pound Turkey, 4-pounds of Roast Beef, made gravies for both, mashed potatoes, mulled apple cider, toffee and stuffing, for a gathering of 25 at my house, who brought other foods (salads, some pies).? My kids made pies, Watergate salad, and fudge.? My wife got the day off, which is actually pretty normal at our house, because homeschooling the remaining four kids takes up her time.? The kids and I cook.

One family at the meal has given up on wheat, because of gluten.? They don’t have the celiac disease, but they say they feel better without it.? The pie crusts, aside from one brave attempt to use rice flour, were the only wheat in the meal. (Note: gluten makes a lot of foods possible.? It holds things together.)

But that gave me a challenge: wheat-free stuffing.? Now, my wife has a rule that she employs for when company visits: “Never serve anything that you have never tried before.”? I don’t follow that rule.? I have a different rule: “Taste. Adjust. Repeat as needed.”? I have enough tricks up my sleeve, that if something is not working, I can usually fix it.? Cooking is fairly intuitive for me; I can usually figure out what is needed to make the dish sing.

But I had never run into a stuffing recipe that did not contain *some* wheat.? After all, most cornbread recipes contain wheat.? But when I saw this recipe, and thought it through, I realized that I could create a non-wheat stuffing recipe that would taste very similar to a traditional Thanksgiving stuffing.? So here’s the recipe:

Ingredients

  • 1 cup (250 ml) butter
  • 2 cups (500 ml) cornmeal
  • 6 cups (750 ml) milk
  • 4 large eggs
  • 2 tsp (30 ml) salt
  • 1 tsp (15 ml) sugar
  • 2 tsp (30 ml) baking powder
  • 2 medium onions
  • 2 stalks of celery
  • 6 chicken bouillon cubes
  • 1 tbl (45 ml) parsley (dried is fine for the spices)
  • 1 tsp (15 ml) sage
  • 1 tsp (15 ml) rosemary
  • 1 tsp (15 ml) thyme
  • butter to grease casserole dish

Procedure

  1. Preheat oven to 350?F (175?C)
  2. Melt butter in a pot on medium heat.
  3. Chop celery & onion and add to the pot.? Cook until softened.
  4. Add cornmeal. Stir mixture to warm up the cornmeal.
  5. Add milk and bouillon cubes. Stir until mixture has thickened.
  6. Add parsley, sage, rosemary and thyme.
  7. Beat eggs. Beat in salt, sugar, and baking powder.
  8. Slowly add some of the thickened cornmeal mixture to the egg mixture while mixing to temper the eggs.? (Note: Do not add the egg mixture to the cornmeal. Some of the eggs will cook on impact resulting in streaks of cooked eggs and a heavier stuffing.)
  9. Stir the egg mixture into the rest of the cornmeal.
  10. Pour the mixture into a greased 9×13 inch casserole dish
  11. Bake at 350?F (175?C) for 30 minutes or until the top has browned

A fusion of two dishes, never tried before, and it was a hit.? Everyone liked it. Note that the amounts on the spices are approximations — I added the spices by hand, not spoon. “Taste. Adjust. Repeat as needed.”

So, for those that want to have stuffing, but can’t have wheat, this could be a good alternative.

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There’s something more to say this evening.? My wife came to me after talking with a neighbor who is having difficulties at work because of a tough boss.? In my own life, I have had my share of good and bad bosses, so I can sympathize.

In this environment, the first thing is to be thankful that you have a job.? Second, if you have a good boss, be very thankful.? A good boss is often worth more than a higher salary.? I learned more from my good bosses than those that were negligent.

And, if you are a boss, consider how you can better teach and motivate your subordinates.? I was working for the guy who I regard as my “best boss,” when he came in and said “Sorry, David, you drew the short straw, and now you have to oversee YYY.”? YYY was a problem employee who was quite bright as a programmer.? He was slow to get work done.? I sensed that he was bored.? Being more of a programmer at that time, I had some sympathy for him — eventually, my thought was, “How can I make his work more interesting?”? The commercial internet was still waiting to be born, and so I suggested the concept of setting up a “bulletin board” that could be accessed via dialup for our pension clients to use.

That caught his attention, and not only did he throw himself into that project, but he did all of his more “boring” projects well also.

I’m not good with people, but I did turn around one problem employee.

Back to my main point: if you have a job be grateful, but if you have a good boss, be more grateful.

From the Merkel house: blessings to all of my readers, not only now, but always and ever.

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