Atlas’s Renaissance

When I first got the iPhone in early July 2007, it was a necessary research expense.  Only by sampling the features and, most importantly, its ease of use could I determine the prudence of increasing my AAPL stake.  By testing it frequently using my 2, 4 and eight year olds as test subjects, I knew that Apple would dominate the cell phone market.  So when it was down from $200 to mid $120s in February and March, I quickly bought some more AAPL.

The financial aspect of the iPhone settled, I switch my focus to its suitability for non-tech savvy boomers.   The iPhone is a great product whose features will come easy for any Blackberry addict.  The rub, as with many technological advances, is that you have to read the instructions.  Smartly, Apple has a multitude of great videos that replace the usual written manuals.

That being said, the iPhone learning curve is shorter than a Blackberry, but because more use Blackberrys, for now, it is easier to get hands on help from peers.  

Keep reading →

A new web site I’ve found:  Strange Maps

To paraphrase Imus, are we surprised?

Personal Responsibility doesn\

Just notes I took while reading GRETCHEN MORGENSON’s most recent article explaining the current financial mess: A Window in a Smoky Market.

1.  New Accounting rules set to take effect November 15; conspicuously close to the election.  Sure makes it easier to spin the subsequent crash caused by this rule change as “Election” related.

2.  Simple explanation: Sell one risk but buy another.  The CDS buyer assumes the risk of “seller” defaulting rather then underlying investment defaulting.  In practice, paying Goldman Sachs 1% to sell a CDS backed by Bears Stearns rather then holding a bond backed by GM, Exxon or other company.

3.  The first failed CDS that cannot be settled amicable, will roil the markets.

4. If you owned default protected (a basic CDS) and also owned the asset then you had to disclose the details.  If you don’t hold the asset but are merely “making a bet” for or against a companies default, then no disclosure is necessary.  No surprise the market with non-disclosure grew from “133 billion three years earlier” to more the $2 trillion today (31% annual growth).

It seems I’m not the only one who thinks the NBA is fixing games on an institutional basis:

Via Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601039&sid=aUrZ16kqbll4&refer=home

Overall a great article that hits many of the points I’ve been talking about for years, and adds stats to boot.

A couple of notes though:

a)  The author, Kevin Hassett, must have forgotten the success of professional Wrestling when he states: “If fans suspect foul play, they will presumably stop buying tickets.”

b)  The first few rounds of the playoffs, through tournament seeding, pit the best playoff teams versus the worst.  So there should be even less a likelihood of a home team advantage than in the regular season during the first two rounds.

c)   While he compares home court winning percentage of the playoffs to the regular season, he assumes that there is no benefit for the NBA in fixing regular season game.   Anyone who is a fan of any sport, knows that attendance is directly dictated by whether the home team wins or not.  Who wants to shell out a couple of hundred bucks to watch the home team lose?  Heck many people leave early after spending that kind of money to avoid watching them lose.

Three Rules of Blogs

1. Know your source - verify it with your own logic or a main stream media source
2. Avoid Yes Men Blogging - don’t restrict yourself to those blogs you agree with or you’ll wind up with the equivalent of just “yes men” blogs
3. Read the Comments – just do it and you’ll understand why

1. Seeking Alpha - This is a good general purpose stock research blog that allows you to search by ticker and includes both technical and fundamental opinions on stocks. The articles are from various sources who, for the most part, provide bios that allow you to judge their opinions.
2. The Big Picture - This self described “Macro Perspective on Capital Markets, Economy, Geopolitics, Technology and Digital Media” is from Wall Street vet Barry Ritholtz. It is somewhat of a contrarian site but the comments are choc full of mostly intelligent disagreement that lets you see both sides of a given argument.
3. Calculated Risk – primarily a Real Estate blog but good for breaking down economic numbers/ The comment section is populated by some great opinions as well
4. Jim Sinclair’s “Mine Set” - This is a major gold bug site that makes sense once you understand the Formula that underpins the authors claim to $1650 gold. Also a good collection point for news not in the news. Contains analysis based on both fundamentals and technical trading for gold and gold stocks
5. Naked Capitalism – a great collection blog that pulls marco market info from around the globe. Similar to Calculated Risk in that some of the best info on the site is found in the comments.

This list is just the Top 5 sites that I use. I started the list with Seeking Alpha because it actually led me to the other five sites. All of these sites frequently contain terms or events that I am unfamiliar with so both Google and Wikipedia are indispensable.

The following example applies both to how to be a successful trade and how to use blogs:

I check the blog Trader Mike infrequently due to it brief entries and focus on technical trading. Yet just yesterday I checked it for the first time in a few weeks and found the following link: One Way to Learn to Trade . This took me to another blog, Globetrader, that has my exact philosophy for successful trading (in that there is no exact method). Here is “GlobeTraders” advice:

What do you need to do to become a profitable trader?

“There is no holy grail, there is no secret trading wisdom. It’s all very plain and simple. But you need to find it in yourself. That might sound cryptic, but trading the way I understand it is nothing mechanical, nothing I can reproduce in an automatic trading system. And that means if you want to learn it you will have to invest the time. You can shorten your way by following a path that has lead to success for others. If it is your path only the future will tell. There are a lot of successful trading methods I can’t trade, because I don’t have the money or account size, because emotionally I can’t stand the high number of losers compared to a small but very profitable number of winners.

I followed a master trader, I learned a lot from her and I got my account to new highs only to go nearly bankrupt just 6 months later. The way that true master trader traded, even if it was extremely successful, was not my way. I could not trade that way and it nearly cost me my account to finally understand that. It took another 2 years to find my way, to find a way to trade that is in sync with my understanding of the markets. You will find successful traders on your way as well. You will follow their example and try to emulate their trading. But only if you are able to make it truly your own, will you be successful. “

It is difficult to get a man to understand something when his salary depends upon his not understanding it.  - Upton Sinclair

The following link is worth the time if you want to know what’s going on financially in layman’s terms.

Terry Gross NPR interview with Michael Greenberger of the University of Maryland
http://www.npr.org/templates/story/story.php?storyId=89338743

Highlights

a. Prof. Greenberger compared the major issue right now to banks placing bets on a basketball game and then booking the winnings as assets, even though the game hadn’t even been played yet.

b. Credit Default Swaps are technically insurance but specifically misidentified as NOT insurance to avoid State regulations.  Now I understand why Paulson announced a “federalization” of insurance regulation as part of the “reform” to prevent this in the future.  Sounds like the same tactics as the EPA disallowing California’s regulation of pollution.

c. Problems just starting because the same problems found in sub-prime mortgages also infect credit cards and other debts. Current problem may be the “canary in the coal mine signally and greater problem”.

d. These bets, not only uncertain in their outcome, are not even known because the financial firms are way behind on paperwork. To paraphrase Professor Greenberger, it’s like a bookie taking hundreds of bets but not writing any of them down. Fun huh.

e.  Phil Gramm seems to be at the root of all legislative failures, basically removing regulations, in the late 1990’s that paved the way for these problems (now John McCain’s chief economic advisor’s)

Much much more of course, enjoy and be prepared.

Regardless of any other details, on March 16 the Federal Reserve gave $28 billion dollars to JP Morgan so they would “buy” Bears Stearns.

As the chart below illustrates, a non-recourse loan of $29 billion (the extra $1 billion JPMorgan may have to repay) was given to JP Morgan. To add insult JP Morgan still retains the right to any profits from the Bears Stearns collateral.

Oh…and on the jump from $2 to $10 a share for this bail-out; it reminds me of the scene from “Blazing Saddles” when the sheriff takes himself hostage.

Bear must have said “Give me more money or the Bear gets it“

“In the beginning of a change, the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot.”-  Mark Twain

“Those who stand for nothing fall for anything.” - Alexander Hamilton

NEW YORK (Reuters) - Bear Stearns Cos shares fell nearly 5 percent on Friday after Chairman James Cayne, who was seen as opposing JPMorgan Chase & Co’s acquisition of the investment bank, sold his stock.

This represented $900 million plus in paper losses for Mr. Cayne and is viewed by many as signaling the end of negotiations for a better deal by Bear Stearns.

Since the JP takeover was an all stock deal why not hold the onto your Bear shares until you get the JPMorgan shares; unless of course you think JP Morgan’s stock is going down before the deal closes.

If money talks, then Mr. Cayne’s money is telling us the financial pain isn’t over yet.

Paul O’Neill, the former truth speaking Secretary of the Treasury, had a good analogy to explan why the subprime issue has spread to the rest of the economy (h/t my dad).

To paraphrase: imagine you had ten bottled waters; one of which contained poison.  Without knowing which one, would you take a drink of any?

This would be a good analogy were sub-prime mortgages truly the only issue.  In fact, O’Neill is blind to the reality of much wider problems.

A more accurate analogy would go as follows:

1.  Imagine you have ten bottle waters and you are told by the Federal Water Reserve that one contains poison.

2.  After watching someone pick one of the bottled waters and then promptly die, you then observe another person pick a different bottled water and then promptly die as well.

3.  Would you drink from any other bottles?

All houses are infected with the poison of bubble prices.   Those in the sub-prime category were just the first to become insolvent and the only ones without a PR firm or lobbyists to defend them.