Old Trader

Wall Street Breakfast: Must-Know News

"Hedge funds alive and well."

As stated, a response to the current low return environment. I tend to follow this area fairly closely, not because I have any money in hedge funds, but as a way to see what the "smart money" is doing. One promising change, is that the big institutional investors are pushing for MUCH more transparency, lower fees, greater flexibility in redemptions, etc.

What if U.S. Social Fabric Tears?

Jeff,

A wonderful comment...I couldn't have said it any better myself. When "situational ethics" start replacing "absolute values", examples such as you cite arise.

On Nov 09 01:47 PM JeffDB wrote:

> I think you make a good case for the tearing of the social fabric
> from an economic viewpoint, and I think it is something that should
> be a cause of concern for all.
>
> I do think, however, that you left out a very important dynamic underlying
> the economic one. I think the moral fabric of our country has already
> experienced some serious stresses and tears and that the potential
> breakdown of that moral fabric is more of a threat to our society
> and culture than even a class war type situation.
>
> Once a society loses its sense of morality all bets are off.
>
> I think we've already seen a lot of this lack of morality in the
> financial sector in the form of some of the unmitigated and heartless
> greed, highlighted of course, by the Madoff fiasco. But if those
> are or were isolated instances of just a few miscreants, I think
> a healthy society could survive. But I think the rot goes much deeper.
>
>
> Several years ago I remember listening to a former teacher relate
> a story about how he had been asked to substitute for a day or two
> in a class and agreed to come out of retirement to do so.
>
> I'm not sure how the subject originally came up, but at some point
> in he asked the class a pointed moral question. "If you wanted something
> really really bad and you saw it in a store and knew with absolute
> certainty that you could steal it and not get caught, who would do
> so?"
>
> He said to his astonishment that the entire class raised their hands.
> Taken aback, he asked "But isn't stealing wrong?"
>
> Student after student informed him that many people might think it
> is wrong, and perhaps he did, but neither he nor anyone else should
> impose their own particular morality on others. Because the answers
> were so similar from student to student, and with a little additional
> digging he finally figured out that that was what the school was
> teaching them. That type of "morality" was a part of the curriculum.
>
>
> As an insurance broker, I am required to take continuing education
> courses, and one of the newer requirements is to get some hours in
> "ethics". A couple of years a company offered a little half day
> seminar that included credit for a couple of hours of ethics, and
> included a free lunch so I gladly accepted.
>
> There are a number of issues that come up in our field that provide
> moral dilemmas or at least decision points where we have to do some
> discerning about the morality of choices we face. I was looking
> forward to the highlighting of such choices and a good discussion
> of the ethics involved in confronting them.
>
> I was disappointed, however, when the class turned out to essentially
> be a giant advertisement for Starbucks. They were giving away Starbucks
> books and coffee cups etc. and the instructor was really hyping how
> well their stock was doing and so on. It took a little while until
> the connection to ethics for insurance agents and brokers finally
> manifested itself.
>
> Starbucks' philosophy was one of being a very "green" company and
> also very "inclusive". They had a big emphasis on recycling and
> using recycled products from environmentally aware companies. They
> also made a point of hiring people not only with disabilities, but
> also with alternative lifestyles, such as homosexuals.
>
> I was disappointed of course at this obviously politically correct
> interpretation of ethics, and was also surprised at how much emphasis
> seemed to be placed on how this translated into profits and a soaring
> stock price.
>
> Oh well, I figured I was at least getting a few free credit hours
> and decided to enjoy my free lunch and write off a wasted morning.
>
>
> But at some point in the proceedings someone decided to bring the
> meeting back to what I had expected, the actual topic of ethics.
> Actually, it wasn't bringing it back, it was bringing it up for the
> first time.
>
> Unfortunately, I must have been reaching for a drink of Starbucks
> coffee or something and missed much of the original question from
> the audience. But her response was similar to what the kids in the
> aforementioned school had heard from *their* instructors.
>
> ~ "Well, ethics is a very personal thing, and *your* set of ethics
> might be very different from mine, or someone else's." I perked
> up a little and sure enough someone, perhaps the original questioner
> responded to her answer with another question... "But what if a
> terrorist kicked in the door to this room and started gunning people
> down, don't you think that would be unethical?"
>
> Her answer, which I hope would be astonishing to most people, is
> unfortunately, more pervasive in some areas of our society than many
> would imagine, continued on consistently with her premise...
>
> ~ "Well maybe it would seem unethical to me or to you, but it might
> be quite ethical to those doing so. They might feel they have good
> and valid, even heroic reasons for doing so..."
>
> Unfortunately, the discussion pretty much ended there. I don't know
> if it was just that the participants felt much as I did that it was
> a hopeless cause trying to change her mind in such a venue with such
> a limited amount of time, or if some actually agreed with her, or
> perhaps more likely, that she steered things away from that hot topic
> and back towards her original agenda so we could finish the meeting
> on time and get to that lunch. I think she just didn't call on anyone
> that raised their hand at that point.
>
> When the French historian and political writer, Alexis de Tocqueville,
> came to America in the 1830s to study why the US experiment in democracy
> seemed to be doing so well despite many predictions to the contrary,
> he wrote of his experiences during that study of American culture.
>
>
> He made strong note of the moral character of American culture at
> the time, how the churches were full on Sunday mornings among other
> things that made a strong impact upon him. He did also note that
> he felt there was a strong element of "indifferentism", an acceptance
> of differences of opinion on worship and morality, that perhaps helped
> keep the peace and yet he thought that might be the sowing of seeds
> for future problems.
>
> I think that has been the case, and that that indifferentism has
> spread much farther since the underlying national Judeo-Christian
> moral code permeated American culture due largely to immigration
> from Europe, aka "Christendom".
>
> Now we try to not only accomodate non-Christian ideals and sensibilities,
> into our moral fabric, but even atheistic ones. There have even
> been suits to accommodate satanic rituals in our prisons.
>
> It is my personal opinion that these accommodations are untenable
> in the long run and that will bring about some earthquakes in our
> society and societal structure.
>
> Unfortunately, "the lowest common moral denominator" among all cultures,
> religions and beliefs is pretty close to non-existent. Many/most
> of those beliefs can, of course be accommodated without much difficulty,
> but others are core values that are in diametrical conflict with
> each other.
>
> Whether "The Lord's Day" is on Saturday or Sunday or some other day
> is not all that divisive on a societal scale, nor is the shape of
> the church or which direction it faces, or which songs are played
> or myriad other details.
>
> But whether or not a marriage requires a man and a woman is a pretty
> big issue, as is whether or not it can ever be acceptable to deliberately
> kill innocent human beings.
>
> I think the deterioration in our moral fabric has progressed further
> and faster than many realize. I've read a number of stories about
> how police and judges are amazed at the complete lack of sorrow by
> those committing even quite heinous crimes.
>
> I remember one where a young boy, probably 6 or 7 years old had pushed
> a much younger child off a balcony to her death. He felt no remorse
> or compassion and in fact felt quite justified, since she had grabbed
> one of his toys.
>
> Another was a teen who had shot and killed store owner he was robbing.
> Even though the man had several small children, the young man said
> he wished it didn't have to happen, but he was completely justified
> in killing him. He had after all told the man not to move, but he
> moved a bit and that worried him so he "had to kill him".
>
> I read another study where students, presumably in an inner city
> environment, were asked about what their response should be if someone
> "dissed" them. The overwhelming response was that person deserved
> to be killed. No one blinked at the question or felt there was anything
> wrong with killing that person in cold blood. That was just their
> own particular moral code.
>
> Similarly, psychologists who studied the history of the leader in
> the Columbine killings came to the conclusion that he was a psychopath.
> He had no moral conscience. Neither killing, theft, murder, torture
> or anything else bothered him any more than wiping someone out on
> a video game would have. It was a phenomenon that they had tracked
> back through his history all the way back to his early childhood.
> Their conclusion was that it wasn't an issue of "bullying" as made
> out in the media, but of a complete and utter lack of morals and
> of a conscience.
>
> I remember a lawyer who wrote after a shooting somewhere about the
> fever in the media to outlaw guns. She noted that when she went
> to high school, the vast majority of the boys drove pickup trucks
> to school and virtually every one had a gun rack hanging behind the
> driver's seat. She said they periodically had fights, but that no
> one would have ever even considered running out to get a gun. It
> was a non-issue.
>
> Since then, our courts have mandated taking prayers out of schools,
> taking down any postings of the 10 commandments, including the admonition
> that "Thou Shalt Not Kill" and people are astonished at the growth
> in lawlessness throughout the land. That tearing of the moral fabric
> is not fixed by putting more metal detectors at the doorways and
> guards in the hallways.

Wilbur Ross: Commercial Real Estate Is Next (Manageable) Shoe to Drop

While its good news that CRE is much smaller than residential, I hope its not like a boxing match, where when the first hard punch (RE) puts the fighter (the economy) on his back, the second one (CRE) needn't be nearly as hard to put him down for the count.

Wall Street Breakfast: Must-Know News

"Lending standards loosen. A smaller percentage of banks tightened lending standards in Q3, according to the Fed's loan officer survey, but credit conditions remain far from a comfort zone."

More "less bad = good"? Where have I heard this before?

Industrial Production Is Growing but Where Are All the Products Going?

I believe it was Bloomberg that carried an article a couple of weeks back, showing that, surprisingly, France led the way in economic growth for the month, within the EU.

As far as the Chinese consumer goes, I wonder if the Chinese government isn't realizing that there are limits as to how long they can grow their economy by flooding the rest of the world with cheap/inexpensive products, without suffering a backlash. Hence, a conscious decision on their part to stimulate the consumer side of their economy.

The Reluctant Bull: My Portfolio

Chancer,

I'm encouraged by your long term holding of KMR. They really seem to be sharp operators in the segment ( I mean that in a positive way).

I've got a tiny stake in DHT, which also skipped its last dividend, and caused the stock to plummet, unfortunately (its around 1% of the portfolio, which is why I didn't list it). I'm looking to add more in the shipping sector and have FRO on my watch list.

As you might detect from my holdings, I normally don't invest in ETFs....the reason I own GIM and TEI, is that I don't have the knowledge to properly evaluate debt, and Templeton (the managers of both) have an outstanding long term track record. Having said that, CGW might be interesting. I tend to agree with those who suggest that water may be the next "oil", and over the longer term, CGW could work out well.


On Nov 09 04:24 PM Chancer wrote:

> Old Trader:
>
> I have held KMR for years. During Fall meltdown, I added (for income)
> KCAP, PFF, and TICC.
>
> I also added to my FRO holding- which disappointed; and IRE, which
> suspended dividends, but price has gone up nicely.
>
> I would like to know what you think of:
>
> DDI (industrial)
> DKA (oil)
> CGW (water)
> DGG (telecom)

The Reluctant Bull: My Portfolio

svosavvy,

It certainly sounds like you've got your bases pretty well covered. Great call, as far buying in March! That'll certainly put a spring in your step. Do you ever use LEAPs in your options trading?


On Nov 09 02:23 PM svosavvy wrote:

> Old Trader:
>
> Yes indeed very valid reply, and options are generally not for the
> overly conservative. I become more conservative by the year, but,
> at 32 I fancy myself more of a cowboy. That or a mouse that thinks
> it can take on an elephant (an excerpt from a book my kiddies love).
> I hold pvx in my IRA as well so any shorting in there takes place
> as a put/buy. I do short in my brokerage acct. I have a healthy
> stack of 5 puts in my IRA, I bought when the stock broke 6. Some
> expire in dec some in mar, I am pretty much underwater on these
> nickels and dimes, however, what they represented for me was the
> option to continue being long the stock (and collecting the dist.).
> I was highly interested in selling at 6. I had carried a small position
> into the crash but I backed up the truck in march becoming titanically
> overweight, buying around the 2.50 mark and as a value investor not
> believing my eyes. Basically, I throw a little party every time
> my puts devalue because it means I get to keep the stock I think
> is irrationally high here and if it falls I would sell the purchased
> puts for proceed to cushion my oversized butt instead of exercising
> them. Anyway I think the theme here is a person who is balanced
> or hedged in approach generally tends to sleep better at night.
> Then there's ones in my brokerage acct like AA I've got 10 put/sales
> 17.50 call/sales and the proceeds go toward the underlying position
> which I have no love for. Hedged long pvx aa aci. naked long ed
> ge pwe silver and actual TIPS not the etf. Nakeds hedged with 25%
> cash.

The Reluctant Bull: My Portfolio

Alex,

You well may be correct (about it being a wonderful week, I mean), but as the market keeps climbing, I get increasingly nervous, LOL.


On Nov 09 12:49 PM Alex Bernstein wrote:

> I think that today's bull market rally should convert you from "Reluctant
> Bull" to "optimistic bull". We are for very wonderful week. There
> is nothing in a horizon to take us from bull market course until
> this Friday. Look for JP Morgan move 2 to 4% this week.

Is Fiat and Chrysler's Pullback on Electric Cars Bad News for A123 Systems?

Leaving the whole battery issue aside, since I'm neither a scientist, nor an electrical engineer, perhaps the bigger problem is that the Fiat/Chrysler hook-up is a marriage of two weak sisters.

It seems that, like Chrysler did, here in the US, Fiat, in Europe, continues to lurch from crisis to crisis. VW, and to a lesser extent, Ford, is eating their lunch in most markets.

So You Want to Run a Hedge Fund?

I would tend to agree with ValueInvestor, that in the case of a fund with an AUM in the $100M range, the 2% management fee doesn't result in the fund principals living "high on the hog", in the lfestyle depicted/chronicled in the media.

To Peter Mycroft, I'd suggest that "results" are what would justify the 2/20 structure. If an RIA can provide comparable returns, why shouldn't he/she charge similar fees?

Finally, if I were to invest in a hedge fund, I'd be interested in knowing if management has "skin in the game"...always a decent "tell", imho.

Watching the USD Drop? Here's What You Should Really Be Watching

As you and Mr G point out, above, FX is traded in "pairs"...one compared to some other. It appears the US and Japan are in a "race to the bottom", and the carry trade will swing back and forth between the 2 currencies.

One way to take advantage, without attempting to dive head-long into FX trading, would be to visit the Everbank website. I checked it out a few months back, and one can purchases CDs denominated in foreign currencies (makes for some great yields).

Disclosure: I have no connection whatsoever with Everbank.

New Head Coach; Same old play book

jimboy,

In the short term, at least, you're probably correct (about the end to loose money policy), unfortunately. I'm afraid TPTB might well push us to the brink yet again. And I DID say that Alan's "confession" was reluctant..

Bernanke: Same Old Play Book

Moon,

Unfortunately, you're correct in pointing out the differences between the US and Japan's experience with zirp.


On Nov 08 10:55 PM Moon Kil Woong wrote:

> I see no difference between Greenspan and Bernanke aside from the
> fact that Bernanke seems even more economically accommodating towards
> fast, free, easy money. To that, I'd say we will be at zirp until
> our economic hell freezes over similarly to Japan but without the
> thrifty population, positive trade surplus, and social safety net
> Japan had going into their lost decades.

Bernanke: Same Old Play Book

Jeff,

Exactly what I'm thinking. It seems the ECB is already "priming" the markets with Trichet's latest comments about tightening up a bit.


On Nov 08 11:09 AM JeffDB wrote:

> I personally think it would be a good move and would still be consistent
> with their promise of interest rates that are "exceptionally low"
> for "an extended period."
>
> It would unsettle the markets, but there has to be some sort of exit
> strategy and taking baby steps now might hopefully reduce the possibility
> of more drastic steps later.

The Reluctant Bull: My Portfolio

svosavvy,

Thanks! I'm not terribly knowledgeable when it comes to options, and option strategies. Because I'm trading/investing within 2 IRAs, shorting is not an option for me. In addition...maybe its just me, but I think that as hard as it is to pick stocks with upside potential, its a LOT harder to pick those that will collapse, LOL.

My other criticism of options (again, possibly a "quirk" on my part), is that they require one to be right "twice"...first, directionally, then within a specific time horizon. I realize these "criticisms" don't apply to an investor such as yourself that is writing covered options.


On Nov 08 10:48 PM svosavvy wrote:

> Thank you for sharing your thoughts/positions. Fellow pvx'er, I also
> follow a weighting strategy through options call sales against a
> portion of my core holdings when I think they are overpriced and
> put sales when I think it is a yard sale out there. I think dividends
> are about the only way to fly right now as we may be in for an extended
> period of non growth despite the hoi polloi of the last few months.
> This "young" trader thinks you're alright. I also like ED (bit pricey
> right now) despite what the almighty goldman has to say. Betting
> my beer money on PRGN. I like your hedge with SDS you weight 5% and
> get 10% (daily rebalanced) hedge (in theory) with a defined ultimate
> downside as opposed to an outright short which could ruin someone
> who doesn't have their gameface on 24/7. Way to be a man for all
> seasons.